新世紀能源 (NEE) 2008 Q3 法說會逐字稿

Good day, everyone and welcome to the FPL Group third quarter 2008 earnings release conference call.

Today's conference is being recorded.

At this time, for opening remarks, I would like to turn the conference over to your host, Jim von Reisemann.

Please go ahead, sir.

Thank you, everyone.

Good morning.

Welcome to our third quarter 2008 earnings conference call.

Lew Hay, FPL Group's Chairman and Chief Executive Officer will provide general comments on recent market events and discuss our earnings expectations.

Lew will be followed by Armando Pimentel, our Chief Financial Officer who will discuss the specifics of our financial performance.

Also joining us this morning are Jim Robo, President and Chief Operating Officer, of FPL Group, John Stall President and CEO of Florida Power & Light Company and Mitch Davidson.

Following our prepared remarks, our senior management team will be able to take your questions.

Our comments today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any statements made herein about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from such forward-looking statements.

A discussion of factors that could cause actual results or events to vary is contained in the appendix to our presentation and in our SEC filings and now I would like to turn the call over to Lew Hay.

Lew?

Thanks, Jim and good morning, everyone.

I'm going to begin with a quick overview of FPL Group's results for the quarter before turning my attention to the larger economic climate in which we find ourselves operating these days.

I'm pleased to be able to report solid performance by FPL Group for the third quarter of 2008.

Despite some powerful economic undercurrents and adverse weather conditions at both businesses, our adjusted earnings per share increased about 2% year-over-year.

Despite some poor weather, FPL Energy had another strong quarter with adjusted earnings per share growing on a year-over-year basis by 18%.

Underlying the results were contributions from New Wind and our Point Beach nuclear facility as well as our [EPL] assets and ERCOT fossil assets.

We remain confident that 2008 will be another record year for FPL Energy in terms of adjusted earnings and correspondingly another record year for FPL Group.

For its part, Florida Power & Light held up well in the midst of Florida's continued housing and economic slowdown.

Florida Power and Light's EPS contribution decreased about 4% year-over-year, which was mainly attributable to lower electricity consumption by our customers, both weather and usage related.

In the short term, we expect little customer growth and lower customer usage compared with our historical results.

Over the longer term, we remain extremely bullish on Florida's growth prospects.

Now, somewhat paradoxically, the current economic disruption in Florida, which is primarily driven by an excess inventory of new homes makes us more confident of Florida's long-term growth prospects.

While economists had continued to forecast extremely strong long-term growth for Florida, our big concern was whether Florida's real estate prices had reached such a level that retiring Baby Boomers would choose to go elsewhere.

With the major readjustment of housing prices, this is pretty much a non-issue going forward.

Despite a number of negative factors including some that are a direct result of the financial crisis affecting Wall Street, we continue to believe that our 2008 earnings will be within the range we initially provided on the third quarter 2007 earnings call.

We expect adjusted earnings per share to come in at the lower end of the $3.83 to $3.93 expectations given normal weather and no further material decline in the Florida economy.

A full list of our earnings assumptions is contained in the appendix to the slides.

As has been the case for a number of quarters now, better than expected results at FPL Energy are offsetting the negative effects of the Florida economic slowdown.

With that, I'd like to spend a few minutes providing a broader perspective on the unprecedented financial events in the past few months.

As I survey what's taken place in the world markets recently, I'm reminded of the old Chinese curse.

May you live in interesting times.

What began as a low rumble in a corner of the US housing market exploded into a credit crisis that shook the foundations of our economic system.

My sense is that we will be feeling the tremors for some time to come.

I must say, however, that we believe we will be feeling them less at FPL Group than elsewhere.

Our long-term focus has always been on maintaining financial strength and discipline, which our strong balance sheet demonstrates.

FPL Group is one of the most highly rated debt issuers in the sector, carrying an A rating from all three credit rating agencies.

In aggregate, our credit facilities are the second largest in the industry, at $6.75 billion, and we have manageable amounts of outstanding debt maturing in 2009 and 2010.

Moreover, we have moderately reduced our planned capital expenditures for 2009 and we have plans in place to make additional reductions if conditions deteriorate further.

In short, we believe we are well positioned to withstand the current market environment.

We are no less equipped to prosper over the long run.

As I have said numerous times, our environmental profile puts us in an enviable position for a carbon constrained world.

Just this month, FPL Group was recognized by the Environmental Protection Agency as one of the seven companies to reach its goal under the agency's Climate Leaders' program.

In our case, by reducing our greenhouse gas emissions rate by 21% per kilowatt hour from 2001 to 2007.

While undoubtedly, climate legislation will be taking a back seat to actions required to shore up our economy, the issues of global warning and energy security are not going away.

Just last week, the leaders of the Democratic party reaffirmed their commitment to pass environmental legislation in 2009.

While this date could slip, I strongly believe the United States will have legislation in place to coincide with the expiration of the Kyoto agreement in 2012.

A big part of FPL's success in establishing a low emissions profile is attributable to our decision to invest in significantly cleaner, more efficient generation in Florida, everything from plant modernizations to nuclear up rates to the first commercial-scale solar projects in the state, these investments not only reduce greenhouse gas emissions but enhance our energy security.

Just as impressive, we have been able to build the cleanest generation fleet in Florida while also keeping our customer rates among the lowest of all electric utilities in the state.

Two other factors give me confidence in FPL Group's long-term growth prospects.

The first is what I expect will be a period of tightening reserve margins.

In our industry, whenever there was a credit contraction or economic downturn, new generation projects grind to a halt.

This will be more pronounced given uncertainty on the environmental front which in turn will result in in a stronger rebound in power prices and spark spreads.

When population growth and energy usage once again prompt the need for new development, FPL Group will be poised to take advantage of those opportunities.

The other is my belief that over the long run, America will reassess its relationship with the internal combustion engine and embrace plug-in hybrids as a principal form of transportation.

If this turns out to be the case, the implications for the electric power industry, not to mention the environment and our balance of trade will be significant.

With all of that said, FPL Group faces some near term challenges that we cannot ignore.

The biggest is the Florida economy.

FPL actually experienced a small net reduction in the number of customers in the third quarter and the rising number of inactive meters and very low usage customers indicate that many Florida homes are sitting empty.

The good news is that history tells us these negative trends are not sustainable.

In time, we believe Florida will resume its role as a magnet for many in the country, just at it has after previous economic difficulties.

Moreover, we are just at the beginning at the retirement of the baby boomers.

We don't know when the turn will come.

However, we believe the economic and demographic fundamentals indicate that it will.

In the meantime, we are taking action to reduce operations and maintenance expenses and capital expenditures in areas that do not impact the Company's ability to deliver safe, reliable electric service to our customers.

FPL reduced its third quarter O&M expenses by $22 million in the prior year's comparable quarter and is reducing capital expenditures for the full year 2008 by $475 million, versus its original plans.

In addition, FPL plans to reduce 2009 capital expenditures by approximately $400 million, for projects associated with system growth that is no longer expected.

At FPL Energy, we face a different set of financial issues.

Although our project pipeline remains very attractive, we are not immune to the credit crisis affecting the markets.

We expect that the banks and other financial institutions that have been terrific partners in financing our of growth at FPL Energy may need some time to recover from the recent turmoil, and though we believe that both public and private financing for good projects will continue to be available, it appears that the number of financial intermediaries with the appropriate risk appetite for project financing has declined in the short term.

Until confidence returns to the credit markets, we believe financing will be available for only the best projects and even for those, the cost of credit will be higher than we have seen in the recent past.

As such, we are reassessing our growth plans for FPL Energy for 2009.

Given current market conditions, we are prudently analyzing which projects will move forward.

Our goal is to maintain our financial strength even under the most adverse economic conditions and that includes adjustments to capital expenditures where appropriate.

We previously indicated we would build more than 1,500 megawatts of wind projects in 2009, but today our base case plans call for revising that number downward to approximately 1100 megawatts.

The revised plan will reduce our forecasted wind capital expenditures for next year by close to $1 billion.

Our plan is to remain quite flexible as we move through the end of 2008 and into 2009.

And we will endeavor to maintain all options that allow us to quickly increase, or decrease the number and amount of future investments.

Do these changes reflect a loss of confidence in the renewable energy business?

Not at all.

As I mentioned previously, our country's desire to address climate change will not disappear simply because America suffers an economic downturn.

Over the long term, we expect to see tremendous demand for renewable energy and we intend to be the Company best positioned to meet that demand.

Moreover, one of the reasons we want to be vigilant on capital expenditures is to be in a position to seize market opportunities should they arise.

The fact is, some of the weaker competitors in the renewable energy space are likely to face great difficulties.

They will not only have trouble accessing the capital markets which will drive up their costs, but they will also have trouble finding buyers for their product given the uncertainty they will likely face in bringing projects to completion.

This will leave competitively stronger companies well-positioned to pick up -- to potentially pick up market share.

In short, we are prudently modifying our short-term plans to reflect the current economic realities.

We have contingency plans in place in case the situation worsens.

Nothing we are doing will have a material impact on our long-term growth prospects, of which we remain optimistic.

With that, I will turn the call over to Armando Pimentel, and I'll come back at the end to provide some additional comments.

Armando?

Thank you, Lew, and good morning, everyone.

The third quarter of 2008 FPL Group's guided net income was $774 million, or $1.92 per share, compared to $533 million, or $1.33 per share during the 2007 third quarter.

FPL Group's adjusted 2008 third quarter net income and EPS were $506 million, and $1.25 per share respectively, up approximately 2% from last year's $494 million and $1.23 per share in the comparable quarter.

The difference between the reported results and the adjusted results is a positive mark in our non-qualifying hedge category, which I will discuss in more detail later in the call, and the exclusion of other than temporary impairments or OTTI, that affect FPL Energy's results.

Please refer to the appendix of the presentation for a complete reconciliation of GAAP results to adjusted earnings.

FPL Group's management uses adjusted earnings internally for financial planning, for analysis of performance, for reporting of results to the Board of Directors and as input for determining whether certain performance targets are met for performance-based compensation under the Company's employee incentive compensation plan.

FPL Group also uses earnings expressed in this fashion when communicating its earnings outlook to analysts and investors.

FPL Group Management believes that adjusted earnings provide a more meaningful representation of FPL Group's fundamental earnings power.

Overall, the third quarter for Florida Power & Light was challenging as the Company continues to be affected by Florida's economic slowdown.

We entered 2008 with significant uncertainty on the revenue front, owing to slowing customer growth and lower usage patterns.

Through the first three quarters of this year, the slowdown in both has been more pronounced than we had originally expected, and the risk has increased that the slowdown could last longer than we had originally anticipated.

I'll discuss these topics in more detail later.

On the cost front, O&M expenses were lower than last year's comparable quarter and also less than our plan.

We indicated on the first quarter call that we were taking action to curtail our costs given the reduced revenue outlook.

Cost cutting and re-evaluating the timing of some of our spending programs have helped.

Despite this, incremental short-term O&M savings will not be enough to fully offset the revenue shortfall that we expect this year.

We have also been successful in removing approximately $475 million from our non-generation capital expenditures for this year as a result of slower than planned growth in our service territory.

In addition, we are taking action as a result of the slowing growth in 2009, as Lew mentioned earlier.

Continuing capital expenditures at FPL are needed to ensure that we are able to deliver important benefits to existing customers such as increased fuel efficiency and reduced emissions in the short term and enhanced fuel diversity over the longer term.

There investments will also ensure that we are well positioned to meet the needs of our customers for affordable, safe and reliable energy, when Florida's growth profile again accelerates.

I will have more to say on this and how we are progressing in just a minute.

For the third quarter, Florida Power & Light reported net income of $314 million compared with $326 million in last year's third quarter.

The corresponding contributions to EPS were $0.78 this year, compared to $0.81 last year.

I would like to now spend a few minutes updating you on what we are experiencing in terms of customer metrics.

Let's look at the two graphs on the accompanying slides, starting with the right-hand side first.

As I indicated earlier, customer growth remains roughly flat and while our customer count is now at a level last seen in July 2007, perspective is in order.

The percentage of inactive and low usage customers continues to increase.

Low usage customers are defined as residential customers using less than 200-kilowatt hours per month, while inactive accounts are those where a meter is installed but there is no customer name or account associated with that meter.

As you can see in the accompanying chart, since year end 2007, the number of inactive accounts has increased by 44,000 to 288,000.

While customer movements into and out of our service territory naturally cause a nominal level of low usage in inactive accounts, the increases we have experienced over the last year in both of these metrics are indicative of the deteriorating housing situation.

If the number of inactive accounts for the quarter was closer to our historical averages, FPL's EPS results would have been higher by about $0.03.

Inactive accounts are not included in our total customer accounts of roughly 4.5 million.

We believe Florida Power & Light's customer growth continues to be significantly affected by the housing slump.

Florida housing starts in August were 8% below their August 2007 level versus a 35% decline nationally.

Housing starts in Broward County increased 45%, due to an increase in multi-family starts while the decline in starts in Miami-Dade and Sarasota Counties surpassed the national rate.

As for existing home sales, which is shown here, August home sales suggested that the rate of decline in existing home sales was slowing.

Although the rate of decline varied by location.

Median single family home prices have dropped 12 to 27% and South Florida's largest counties since August of last year.

Which, as Lew previously mentioned, is a positive sign in terms of affordability.

The table on the accompanying slide summarizes the drivers of retail kilowatt hour sales growth at Florida Power & Light, which were down 4.3% versus last year's third quarter.

Usage growth associated with weather decreased 1.5% quarter-over-quarter.

We have also experienced a decline in retail usage per customer when compared to the third quarter of 2007.

For the quarter, underlying usage declined 2.8%, and year-to-date, it is 1.7% below last year.

We believe this decline may be related to two fundamental drivers.

First, worsening economic conditions have led customers to seek ways to trim their expenditures, including their electric bills.

Secondly, we may be experiencing the impact of longer lasting efficiency actions taken by our customers, including the installation of more efficient appliances.

Analysis of the customer and usage trends support our view that the downturn is primarily residential and likely housing and economic related.

While we have experienced the slowing in the growth of commercial customers, it remains positive through September and weather normalized usage is essentially flat to last year.

Over the longer term, economists at the University of Florida forecast annual population growth in Florida of 1 to 1.5%, and we would expect to see the growth in underlying customers and sales rise commensurately with the population increases.

Before moving on, let me address a topic of our bad debt and accounts receivable exposure.

While certain credit metrics have deteriorated since last year, our days of built sales and customer receivables remain roughly consistent with the prior year's metric, and although our accounts receivable greater than 60 days past due have increased about 17% compared to last year's comparable quarter, that only represents and increase of approximately $4 million of customer receivables.

As we've indicated in the past, our net write-offs as a percentage of revenue is the lowest of the utilities.

We remain very focused on this issue and have added additional resources and processes to actively manage our aged accounts receivable.

In the last two months, FPL has received several regulatory decisions that will help position the Company for the future.

In early September, the Florida public service mission approved our need determination for the new West County Energy Center Unit Number Three as well as the modernization of the Cape Canaveral and Riviera plants.

This approval allows us to add approximately 3,650 megawatts of highly efficient generation at a cost of $3.3 billion.

The addition of these three facilities to our portfolio will be beneficial both to customers and to shareholders with a slight increase in base rates, largely offset by the fuel savings arising from the incremental efficiency of the new units.

In mid-October, the Florida PSE also approved their first petition in the annual cycle of the nuclear cost recovery rule.

Among other things, the commission approved key items, related to actual and estimated recovery of preconstruction costs for upgrade program and new nuclear expansion plans.

In early 2007, this rule was adopted by the Florida PSC for recovering prudently incurred nuclear costs.

As a reminder, under Florida's nuclear cost recovery rule, we are allowed a cash recovery of all preconstruction costs and subject to annual prudency reviews over the construction costs as they are incurred, a base rate increase when a new capacity comes into service by way of a simplified procedure.

We are entitled to earn a return on equity on these investments through the capacity clause currently set at 11.75%.

In mid-July, the PSC approved cost recovery eligibility for our proposed 110 megawatts of solar generation which should be in service by year-end 2010.

The total cost of the three solar projects is expected to be approximately $700 million.

Through the environmental clause, we will earn a return on equity on this investment which is currently set at 11.75%.

We continue to make good progress with our West County Energy Center generation expansion.

Two identical natural gas units of approximately 1,220 megawatts each are currently under construction.

Both facilities are expected to be placed in service in 2009, the first in June, and the second in November.

These units will be among the lowest emitting and most efficient fossil units anywhere in the world and will have the effect of displacing older, less efficient generation capacity, as well as supporting expectations for service territory growth over the long term.

As a reminder, the revenue requirement associated with these two facilities falls under the application of the generation base rate adjustment or GBRA, which subject to a streamlined administrative review, allows FPL to increase base rates for the cost of the approved new generation facilities placed into service prior to the end of our current rate agreement in 2009.

We are also focusing our efforts on wholesale opportunities.

Historically, we have not been an active participant in the wholesale markets.

In fact, in 2007, our wholesale revenues were less than 1% of our total revenues.

In 2007, we entered into an agreement with the Lee County electric co-op which is one of the largest co-ops in the state of Florida serving about 190,000 customers.

We have two contracts with Lee County, one is a transition contract that provides for up to 300 megawatts of power from 2010 through 2013 and the second contract which begins in 2014 we provide the full generating requirements of Lee County which will have an average of peak load over the life of the contract of over 1,000 megawatts.

The contract is structured so that fuel is a direct pass-through and it has a negotiated return on equity set to 11.75% for the life of the contract.

FPL also recently entered into a seven year wholesale power sales agreement with the Florida load serving entity.

This 200-megawatt transaction will begin in 2014 and represents an additional step in growing the wholesale power business in Florida.

And finally, as we finalize our 2009 budget, we are mindful that 2009 also corresponds to the termination of the current rate agreement.

While there is much regulatory work ahead of us over the next few months, we believe that having the lowest rates of any investor owned utility in the state is a good position to be in.

The table on the accompanying chart summarizes the drivers of earnings growth for Florida Power & Light which netted to a decrease of $0.03 per share.

In the interest of time, I will not read each number to you.

For those of you without immediate access to the slides, they are available in the investor section of our website at www.FPLGroup.com.

To summarize, Florida Power & Light's earnings were largely where we expected them to be after taking into consideration the trends that I've just discussed.

Let me now turn to FPL Energy.

FPL Energy had a very strong quarter.

Driven primarily by contributions from new assets, both new wind projects and the December 2007 acquisition of the Point Beach facility.

As well as strong contributions from our NEPOOL assets and our ERCOT fossil assets.

The net weather impact in the quarter was poor.

Although on the one hand, we had good hydroconditions for our main units, the wind resource in virtually all of our regions was poor.

In fact, it was the lowest recorded wind resource in our database, dating back to 1973.

As for the wind build for all of 2008, we expect to add approximately 1300 megawatts.

We are well hedged for 2009 and 2010.

For 2009 we are essentially fully hedged the first order impacts of natural gas prices and are significantly hedged against other price movements including spark spreads.

90% of FPL Energy's 2009 expected gross margin for existing assets is protected against price movements.

The equivalent figure for 2010 is 88%.

I will discuss more on the characteristics of our revenue at FPL Energy in a couple of minutes.

During the quarter, Congress extended the production tax credit for wind investments through 2009 and passed an eight year extension of the solar investment tax credit.

FPL Energy's 2008 third quarter GAAP earnings were $483 million, or $1.20 per share, compared to $220 million, or $0.55 per share in last year's third quarter.

Adjusted earnings which exclude the effect of non-qualifying hedges and other than temporary impairments or OTTI, were $215 million or $0.53 per share, compared to $181 million or $0.45 per share last year.

Which is an approximately 18% increase from last year's comparable adjusted EPS.

The after-tax impact of the non-qualifying hedge category was an after tax gain of $285 million, primarily as a result of declining power and natural gas prices that positively affected the value of the derivatives that we use to hedge our power output.

As always, we have provided more detail on these hedges in the appendix and we continue to believe that FPL Energy's current period performance is best understood by excluding these amounts, whether gains or losses from consideration.

Additionally, gains or losses in this category will turn around in future periods as the underlying contracts go to delivery.

Our adjusted earnings also include an adjustment to GAAP results for the effect of other than temporary impairment losses on our investments in nuclear decommissioning funds at FPL Energy.

Continued losses in these funds' performance as a result of the large decline in equity prices during the quarter required us to record $17 million in net losses.

FPL Energy's third quarter adjusted EPS contribution increased $0.08 when compared to last year's comparable period.

New investments, primarily new wind projects and the addition of Point Beach accounted for a $0.14 improvement in quarterly results.

The majority of the incremental adjusted EPS improvement came from Point Beach.

As we have previously discussed, the nature of our contract on this facility produces a disproportionate share of earnings in the third quarter.

During or after the third quarter of last year, we have added about 1,455 megawatts of new wind generation.

The poor wind resource that I mentioned earlier resulted in lower earnings in our new wind projects compared to our plans of approximately $0.04 in adjusted EPS.

Contributions from various segments in the existing portfolio were mixed.

Overall, the existing portfolio lost $0.04 per share relative to a year ago.

The existing wind portfolio came in below last year's comparable quarter, owing primarily to a lower wind resource in ERCOT and in the Midwest.

Had the wind resource come in as expected, the contribution from existing wind assets would have been increased -- would have increased adjusted EPS by about $0.05.

Our existing NEPOOL and ERCOT merchant assets benefited from market conditions.

Specifically, our NEPOOL fleet experienced the combination of better pricing and improved hydroresources with Seabrook Nuclear Facility contributing roughly one-half of the improved results in the market.

We had good hydroresources for the quarter.

Which increased adjusted EPS by $0.02 compared to our plan.

Our ERCOT fossil assets also performed well.

Our retail business, Gexa, lost $0.01 a share incrementally.

On a combined basis, our existing ERCOT assets were about $0.03 per share better than what we had planned for the quarter, excluding the poor wind resource that I mentioned earlier.

As a reminder, we look at our entire ERCOT operations under a single portfolio and we were quite pleased with our overall contributions.

Contributions from our existing non-wind contracted fleet declined $0.03 a share compared to last year's comparable period, but there is nothing there that is remarkable to point out to you.

Certain market conditions and opportunities for our physical assets were beneficial to our wholesale marketing and trading operations and the contribution of this business increased by $0.03 per share compared to the prior year's quarter.

As a reminder, we try to manage these elements of FPL Energy's business to grow roughly in line with overall income growth of the entire portfolio.

Our marketing and trading group's primary focus is on optimizing revenues and fuel costs for FPL's Energy's merchant portfolio and high volatility experienced during the current quarter provided a number of significant opportunities, particularly in ERCOT.

All other factors had a negative $0.05 impact on the quarterly comparisons.

This was primarily due to increased spending to support future growth which impacted results by $0.03, with the balance for incremental interest expense associated with the growth of the asset base.

During the quarter, we saw continued volatility in commodity prices.

As this chart shows, the 10 year natural gas strip declined about $3 per MMBTU since the end of the second quarter, which is consistent with the gain in the non-qualifying hedged category that I mentioned earlier.

We are well insulated from commodity price movement with our expected gross margin highly hedged in 2009 and 2010.

Although the short term trend in commodity prices has been negative, with the 10 year strip correcting to levels seen at the beginning of the year, we continue to like the inherent long position of the FPL Energy portfolio relative to natural gas and spark spreads in New England and Texas.

Our clean portfolio of renewable and highly efficient gas plants is well positioned to prosper from higher natural gas prices.

Our market liquidity through 2009 has generally been unaffected by the recent financial turmoil.

The number of transactions being cleared through ice and NYMEX, however, appears to be increasing and that could be a result of concerns over counter party credit exposure and I will have more to say on counter party credit exposure in a minute.

In the past, we have discussed our wind index in great detail with you.

You may recall that we said that the wind index was a reasonable approximation of the underlying resource available to our projects, based on easily verifiable data from public reference towers, but that the correlation between the index and the actual output of the portfolio was not perfect.

We have endeavored to refine our thinking to provide you with a better tool for determining contributions from our wind portfolio, and have created the wind resource performance report which is what we show here on the slide.

Simply put, the slide is the weighted average of what we actually produced during the period versus what we expected to produce based on long-term expected averages.

As I indicated a few moments ago, the wind resource was the worst it has been in 35 years.

We will replace the current wind index with this data in future earnings calls, as well as update our website monthly with the data.

To summarize the third quarter, on an adjusted basis, FPL contributed $0.78, FPL Energy contributed $0.53, and corporate and other was a negative $0.06 contribution.

That is a total of $1.25 per share, an approximate 2% increase over last year's third quarter results.

The market turmoil has raised questions about our industry's liquidity, credit and counter party risk, cash flow and earnings sensitivities.

I will provide greater detail on each of these topics that will lay out our strong credit position, financial strength and financial discipline.

Let me first begin by saying that FPL Group has one of the strongest balance sheets and liquidity positions in the industry.

We are anchored by two mature businesses that provide consistent cash flow, have continued access to the commercial paper markets as an A1P1F1 issuer and have available $6.5 billion of credit facilities that for the most part mature in April of 2013.

In addition, the FPL Group companies have some of the highest long-term debt ratings in the industry, which have afforded us continued capital markets access.

For the nine months ended September 30, 2008, FPL Group produced about $2.4 billion in operating cash flow.

In April of this year we extended our five year, $6.5 billion corporate credit facility an additional year to 2013.

We have been told that our credit facility is one of the largest in the industry, and has the greatest number of banks participating.

Of the total, $2.5 billion is dedicated to FPL, and $4 billion is for FPL Group capital.

38 banks participate in our credit facility, with no bank providing more than 8% of the total credit facility.

In addition to our $6.5 billion syndicated facility, we also maintain a $250 million credit agreement for FPL that goes through May of 2011, further supporting the utility's needs.

Specific details on the credit facilities can be found in the appendix for this presentation.

We believe our maturities in 2009 and 2010 are manageable.

In 2009, excluding amortizing principal payments, we have approximately $950 million due, consisting of $225 million of Florida Power & Light first mortgage bonds, and $725 million of FPL Group capital debt.

In 2010, we have approximately $200 million due, other than scheduled principal amortization payments.

The average maturity of our outstanding debt is over 15 years.

At the end of the third quarter, our available liquidity was approximately $4.9 billion.

The accompanying liquidity table provides a breakdown of how we calculate our liquidity position.

The letters of credit we have issued in support of certain activities at FPL Group capital reduce our liquidity position but only modestly.

To facilitate daily cash needs, FPL Group maintains commercial paper programs for its two main businesses, FPL, and FPL Energy by way of FPL Group Capital.

Both of these issuing entities are rated A1P1F1 by S&P, Moody's and Fitch, respectively.

As the commercial paper markets have tightened during the current credit crisis, both companies have had continued access to the commercial paper market.

Management has always believed that maintaining a strong balance sheet is important in our industry, and the current credit crisis supports this position.

While we have had continuous access to commercial paper markets, we have seen a demand by investors for shorter maturities and an overall increase in short-term rates.

As of September 30th, the average maturity of FPL's commercial paper and short-term notes was approximately 23 days, with a weighted average interest rates of approximately 2.83%.

And FPL Group Capital's commercial paper had an average maturity of approximately 30 days, with a weighted average interest rate of approximately 3.2%.

In addition, we have taken the added precaution of building short-term investment balances to offset any effects from further deterioration of the commercial paper markets.

As of September 30, 2008, FPL had $1.6 billion in commercial paper and short-term notes outstanding, offset by short-term investments of $808 million for a net short-term debt balance of $742 million.

FPL Group Capital had had $1.5 billion in commercial paper and short-term notes outstanding as of September 30th, with short-term investments of about $690 million for a net short-term debt balance of approximately $800 million.

The majority of these short-term investments are included in the cash and cash equivalent section of our balance sheet.

Approximately 93% of short-term investments are held either in treasury backed repurchase agreements or treasury backed money market funds.

Carrying this additional cash during the third quarter resulted in a negative interest spread over our short-term borrowing rate.

Including that negative carry, the credit turmoil had total estimated impacts on our company, primarily as a result of investment losses recorded in adjusted earnings, of approximately $0.01 a share.

We believe that our strong balance sheet supported by a large and diversified credit facility positions FPL Group to meet the current credit challenges.

We continue to monitor the situation closely, and we'll take the necessary steps as appropriate to maintain the financial strength of the Company.

Approximately 93% of our potential exposure to FPL Energy's power marketing business is with investment grade counter parties.

The breakdown of our counter parties can be seen on this slide.

That said, we manage our exposure on a daily basis and are constantly evaluating our counter-party credit exposure.

When we identify that our counter party's credit is a concern, we take proactive steps to neutralize our positions.

Virtually all of the non-investment grade exposure that you see here is associated with one domestic rate regulated electric utility that is rated BB plus and which we are comfortable with our exposure.

In his opening remarks, Lew mentioned some potential revisions to our CapEx plans for 2009 and I would like to take a moment to summarize these.

At FPL we have taken actions to reduce CapEx by approximately $400 million from our original estimates.

These reductions are in projects primarily associated with system growth that we no longer expect in 2009.

For reasons that Lew already mentioned, our generation CapEx at FPL has not been revised.

At FPL Energy we have reduced our original CapEx plans for 2009 by about $1.3 billion.

Besides the reduced wind CapEx that Lew mentioned, the reduction includes a number of projects that we can defer without significantly diluting our earnings estimates.

Our revised plans reduce our original CapEx plans for 2009 for the two companies, from approximately $7 billion to approximately $5.3 billion.

Our comments today obviously raise a question of our commitment to add between 7,000 to 9,000 megawatts of wind from 2008 to 2012.

Although we have a pipeline of approximately 29,000 megawatts of very attractive wind projects, our guiding principle has always been to build only those projects that make economic sense, and that can be market financed.

We have always demanded that before a project can be internally approved, that we are confident that it will pass the market test.

That is, that it can be third party financed on terms that are accretive to our shareholders.

We have not and will not build for the sake of building or protecting market share.

At this time we are not adjusting our target to add between 7,000 to 9,000 megawatts of wind from 2008 to 2012, but we'll continue to monitor the market and we'll update you on our fourth quarter earnings call.

Before turning the call back to Lew, I want to spend just a minute discussing the earnings profile of FPL Group.

46% of FPL Group's EBITDA comes from FPL.

As for FPL Energy, at times, when I speak with investors, I am struck by the fact that our FPL Energy business risk position is not always well-understood.

Importantly, our risk profile is very different from some of our merchant peers.

In 2009, we expect that 24% of our consolidated EBITDA will be attributable to earnings associated with assets that are under long-term power purchase agreements at FPL Energy.

The weighted average remaining contracted term of those assets is approximately 15 years.

And in many cases, those contracts contain escalating revenue adjustments.

In addition, 17% of 2009 EBITDA at FPL Group is expected to come from FPL Energy assets whose revenues hedge with either bilateral agreements with investment grade counter parties or with forwards from a regulated exchange.

This portion of our EBITDA includes Seabrook and our main hydroplants as well as our wind assets that are not under long-term power purchase contracts.

The remaining FPL Energy generation based EBITDA is almost entirely related to sparks spread sensitive assets.

In the hedging tables that we provide to you on a quarterly basis you can readily determine the percentage of expected gross margin that is hedged on those assets which are primarily in NEPOOL and ERCOT.

As we have indicated before, although we are comfortable with the long natural gas exposure that most of our assets possess, we endeavor to hedge a significant amount of our expected gross margin at least two years out.

Investors have told us that they would like some certainty in near term earnings and we would agree that it serves us very well.

The remaining EBITDA is associated with other portions of our business which I haven't specifically discussed.

So in summary, 46% of FPL Group's EBITDA comes from Florida Power & Light.

At FPL Energy, nearly 80% of FPL Energy's EBITDA comes from long-term contracted wind, gas and nuclear assets.

These earnings are arguably less risky than even a regulated utility as they are diversified across companies and geographies, and they are not subject to rate case risk.

So in total, approximately 87% of FPL Group's EBITDA is coming from businesses that have a conservative business risk position.

This business mix did not come about by accident.

We have been very disciplined in what businesses we choose to be in and in what proportions.

We have always been and always will be very mindful of the mix of business we undertake at FPL Group.

Our previous 2009 and 2010 adjusted EPS target ranges of $4.05 to $4.25 and $4.50 to $4.90 respectively remain unchanged, although our plans for CapEx next year are now less than originally planned, we remain comfortable with our earnings expectations.

I would also like to provide a quick comment on our goal of providing for an average adjusted EPS growth of at least 10% through 2012 from a 2006 base year.

As you will recall, our 2006 adjusted EPS was $3.04.

While we never promise that the earnings growth would follow a smooth path year by year, simple math would suggest that our earnings for 2010 would be in the ballpark of $4.44 per share.

If we were to be on track to meet our 10% plus growth in EPS.

Based on our current plans, and taking into account the earnings assumptions that are included in the appendix, we continue to feel comfortable with that earnings trend.

As for years 2011 and 2012, we remain optimistic about achieving our targeted growth.

We have a very strong and attractive pipeline of projects at both FPL and FPL Energy.

Those projects, along with long-term forecasts of economic activity provide us the path to meet our longer term financial goals.

However, much will depend on how long and severe the current economic and credit situations last, particularly if accompanied by essentially inaccessible credit markets.

Now I would like to turn the call back over to Lew, who will provide some additional comments.

Thank you, Armando.

I'll take just a few moments to provide some additional perspective.

There is no denying we are in the midst of a difficult economy that may be with us for a while, but we believe FPL group is well-positioned to withstand the current market.

We've always been a company that focuses on ensuring our fundamentals stay healthy and that is no different today.

We are controlling costs, analyzing our investment opportunities with extreme diligence, and preserving our strong balance sheet.

We are very mindful that in the current environment, our plans may have to change quickly depending on any number of events.

As such, we have contingency plans to deal with several economic scenarios that may play out during the next 18 months or so.

While we are comfortable with the plans we have discussed with you today, we are vigilantly monitoring our situation and may have more to report to you in our fourth quarter earnings call.

What will not change is our disciplined approach and our commitment to investing where we see good opportunities that make economic sense.

Economic times such as these present both risks and opportunities and we are keeping our eyes open to both.

We also remain optimistic that despite current market conditions, over the long run the country remains committed to a clean energy future.

There are no other sustainable alternatives.

In order to address global climate change, policy makers will eventually have to put a price on carbon and few companies are he better positioned for that outcome than FPL Group.

Has a long history of building shareholder value.

We do not believe that the recent turmoil in the market should obscure FPL Group's ability to continue to deliver exceptional shareholder value over the long term.

Through financial discipline, superior execution and strategic investments, we maintain our commitment to delivering long-term shareholder value.

I want to thank you for joining us today, and for your continued interest in FPL Group.

With that, I'll turn the call over for questions.

Yes, certainly.

The question-and-answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS) .

We will pause for just one moment to assemble the queue.

We'll take our first question from John Kiani with Deutsche

Good morning.

Good morning, John.

A few questions for you.

First of all, I know you provided some color, but can you talk us through some of the offsets that allow you to maintain or reiterate 2009 guidance with the capital spending cuts, specifically more on the FPL Energy side?

Sure.

For the most part, John, as has been the case for the last couple of years, when we build new wind plants at FPL Energy, many of those wind plants come into service late in the year.

So this year we have built our total goal of 1300 megawatts, as an example, 499 of that is in service at the end of the third quarter.

So as you can see, a large amount of that would be placed into service in the fourth quarter of 2008.

2009 is very similar to that, very similar trend.

So as you push back or reduce your CapEx for wind at FPL Energy, it does not significantly affect the EPS for that year.

And I'm sorry, Armando, I also meant 2010 guidance as well then.

And so for 2010, the difference between what we were going to build, which is 1500 what we've currently announced of 1100, continues to place us in the range of $4.50 to $4.90 that we have provided.

And you can take that a couple of ways.

You can say that we -- we're much more comfortable with the higher ends of those ranges for 2010 than we are now.

That's not what I'm saying.

But we feel comfortable based on the scenario analysis that we've run with different sizes of CapEx that $4.50 to $4.90 for 2010 remains very reasonable.

Okay.

So if I'm reading you correctly, it sounds like without putting words in your mouth, that maybe conservatism is what you're saying allows you to stay within that range, not necessarily indicating a particular area of the range?

It's nice to put words like conservatism in my mouth but for FPL Energy, the fact that we're going to put in approximately 1100 -- and by the way, as Lou mentioned, those plans can go up or down depending on what happens with -- particularly with the credit markets but our plan right now for 1100 megawatts for 2009, that makes us feel very comfortable with '09 and 2010 guidance.

The other part of this, which I'm sure you know and you've picked up on and we talked about is Florida Power & Light, although they've got some reduced customer usage trends here in the last year, the fact that we've got those two gas plants that are going up in 2009 and we've got solar and nuclear up rates for which we get 11.75% returns on, all things that are very, very good for our customers, are also very good for our shareholders.

Now, you should also know that although I did not mention it specifically, that we are planning to reduce and have already put plans in to reduce some expenses so that we can make sure that what we're doing internally on the expense front matches with what we see on the CapEx front.

Okay.

That's helpful.

Then one other question, Armando, does the $1.7 billion CapEx reduction for '09 mean that you won't need equity financing as originally planned for 2009?

You ask that question in different ways every time and you're going to get me one of these times to commit.

But clearly, when you bring down the amount of CapEx it certainly changes the mix that we have planned.

As I've said before, the last time that this company announced issuing equity was 2002.

And that equity was issued in 2005.

That company has grown quite a bit since that time.

At some point in the future, in order for for us to maintain our ratings which are from today's message, hopefully that remains very clear, that's very important to us, we will issue equity or equity-like instruments again.

Whether that's this year, next year or 2010 will remain to be seen.

Obviously, we're cognizant of the fact that with our share price trading at what it is today, issuing equity is not necessarily in the short-term best interest to our shareholders.

But any time that we look at CapEx plans, we look at what's available in the market, the cost of what's available in the market and we dial that in.

Okay.

Thank you very much.

All right, John.

Moving on to Greg Gordon with Citigroup.

Thank you.

Good morning.

When you look at the -- when you look at building the plants, the wind plants specifically, you talk about sort of looking at a capital markets test.

Given the cost of capital as you see it today on the 1100 megawatts that you're planning to build next year, is it still reasonable to presume the historic rule of thumb that you view historically that you earn about a $0.015 per share for every 100 megawatts of wind projects that you can successfully build?

Well, a couple points.

One, was we said is a $0.01 to $0.015, not $0.015, and we said that in the first full year of operations, which would be 12 months.

Having said that, I think -- I know you know that, Greg, but just for others on the call so there's not any confusion.

Having said that, our expectations would be, I'd say a little less than that at this point.

If in fact what we're seeing in the current credit environment plays itself out over a long period of time.

But as I've mentioned to others, although internally we've done a bunch of scenario planning to make sure we understand what's reasonable for the next 12 to 18 months, it's, as you know, very difficult to put together a long-term plan based on what's happened in the credit markets over the last four to six weeks.

But it's -- I wouldn't say it's a penny and a penny and-a-half for the first full 12 months of operations at this point.

We will update you on that in the future but I wouldn't necessarily say it's much less than $0.01 either at this point if you're looking at long-term fundamentals.

On the regulated side of the business, at FP&L, we look at the surveillance filings that you file every month at the commission and ROEs obviously given the economic earned ROEs on a regulatory basis have been declining.

I think they're now, last time I check, off 11%.

Can you give us an update on what the surveillance reports show your LTM regulatory ROEs are and if that is the assumption that you're building in to the expectation for the rate case?

For the rolling last 12 months, at September 2008, our ROE is 11.2%.

Okay.

Certainly, there's an expectation for that to go down.

I wouldn't expect that number to go down significantly for the rest of this year.

By significantly, I mean as you remember, our rate agreement indicates that if it goes down below 10%, that we have the opportunity to go back in and rediscuss our situation with the commission.

Certainly don't expect that this year.

Next year, we are going to be filing paperwork as you know for new rate agreements, starting in 2010.

That does not necessarily preclude us from going in and discussing just 2009 and we see significant difficulties in 2009.

But the reality is that that probably won't be the case, unless it's just a really, really, really bad time, which that happens, there will be other issues to deal with.

And by that I don't mean at the company, I mean worldwide.

I mean, the good news is that the rate base is growing quite rapidly, given the commitments that you've made with the regulators in the state to add infrastructure.

I guess the question is what's the presumption you're making in terms of an expected return on equity on that in your 2010 guidance?

Oh, okay.

You have to ask your question three times before I figure out exactly what you were shooting for, huh?

We have not, as you might imagine, Greg, we have not provided what -- to outsiders, what we are expecting in a new rate agreement.

The commission and the staff have been very fair in regulatory dealings with us and I think if you go back historically, could see that as Florida, all the Florida utilities have done very well, both on a range of ROE and agreements with the commission and also more importantly, on what they've actually realized.

So I think if you go back and you look at -- I'm sure you know this, but for others on the phone, if you go back and look at what's happened over the last 12 months, you can see that the regulatory ROEs have kind of hovered around the mid-10s and maybe a little higher.

I would expect that the conditions over the last six to eight weeks would suggest that those numbers might go up.

But that's just a suggestion based on what I see.

Thank you.

We'll take our next question from Dan Eggers with Credit Suisse.

Hey, good morning.

Good morning, Dan.

I was wondering if I could ask you to shift gears a little bit.

I'm sure I'll have more questions on this but kind of looking at -- we've had two fairly significant M&A activities occur or attempt to occur in the sector and over the last quarter.

I don't know if you guys could share some thoughts on how you guys looked at those transactions and two, how you're thinking about prioritizing capital between maybe some of these businesses on sale, relative to reinvesting in wind and some of your internal projects right now.

Dan, this is Lew.

I'll try to take that and I will say up front, probably won't be very satisfied by my answer, but first and foremost, as a policy, we don't comment on specific M&A transactions.

So I'll leave that at that.

But as I tried to say in my remarks, that it wouldn't surprise us that there could be some interesting opportunities to come down the pike.

First, as always, they would have to pass the strategic test.

They'd have to fit with our strategy and the business mix that we're shooting for.

Secondly, I would suspect that most of the things that we would find interesting would be at the asset level, as opposed to the company level, but I'm not going to rule out anything.

It's just, you all know our history and we know all too well the difficulties of getting large business deals approved and integrated and all that kind of stuff, whereas we've had a quite successful track record on assets.

And, you know, I would also comment, when we look at business type deals, we look at skills that we would be acquiring relative to skills that we think we need and I think I can say for the whole senior team, we're pretty comfortable with the full range of skills that we have at this point.

There's not a lot of things that we're looking at where we see any kind of a deficit that we need to fill or that could be filled through a corporate type transaction.

Having said all of that, these are truly unprecedented times and preserving your financial strength and preserving liquidity are of paramount importance when we look at things and now would not be the time to stretch our balance sheet, risk our credit situation in order to do something that is financially or strategically interesting, shall we say.

So we'll be opportunistic but we're also going to be mindful of what I just said.

Okay.

That's fair.

One other question, when we look at kind of the wind development pipeline, are you guys -- because you're probably going to be one of the few people that has the financial flexibility to build in much scale for next year, are you able to get better deals or are you seeing better terms on contracts today as you go back to people offering projects or as you choose which projects win, IRRs going up in that business?

Dan you were fading out a little bit on me there but I think it's too soon to tell.

If your question is do we think our wind projects are going to be better because there's in essence, there's less competition, less people are financially able to do projects next year, you know, we really haven't -- this gets back to Greg's comment about what's the profitability, the first year of a wind project and clearly our decisions are based a lot more than what the first year profitability would be.

But without a doubt, we are -- we're raising the bar in terms of the financial hurdles that we're being to be looking at for improving projects.

We've made that clear to our developers who in turn will be making it clear to counterparties and customers and that sort of thing.

We're looking at every element of the cost structure to see if there's ways that we can reduce the costs, whether it's capital costs or ongoing operating costs.

It's too soon to say how all those puts and takes will balance out but I'm confident that we'll be able to find some opportunities there.

Okay.

Thank you.

We'll take our next question from Steve Fleishman with Catapult Capital Management.

Yeah, hi, guys.

Good morning.

Couple questions.

First, on your balance sheet, the debt-to-capital is now I think around 60% and the adjusted is about 48%, up from 42.

Where do you want to have that number or what -- have you generally told the rating agencies that number should be in a range of?

Two things.

You're referring to a schedule that's attached to our earnings release.

Correct.

Yeah, that's just for everybody else's benefit.

That schedule has two calculations on it.

One is essentially the GAAP balance sheet and the other one is an adjusted balance sheet.

What we -- just for some context, what we try to do on the adjusted front is based on direction that we get from S&P and from Moodys and from Fitch, we try to put together an adjusted column.

That's not necessarily the adjusted column should one of those other rating agencies put it together.

Some may be a little bit better.

I'm sorry, some may be the same, some may be a little bit worse.

What we actually do, Steve, is we gauge all three of them.

I can tell you that that adjusted column that's sitting right now at 48% for September of 2008 is right around the ballpark where we would want to be.

I'd say somewhere between 46 and 50%.

That to us, it's nice and it's important to look at the GAAP one, which is sitting a little bit higher now, but it's really important to look at the adjusted one and the main different there is the project debt which has been so essential to our growth in the past.

I'd say 46 to 50% unadjusted is where we would like to be.

One other question on the wind resource because I know you're talking about changing the metrics used now but on the metrics you used to use, it looked like your wind resource at least for the first two months was above average and the production ended up being as you mentioned the lowest in 35 years.

Could you just better explain why that difference and is there something going on between resource measures and actual production from the wind project that is causing a disconnect?

No.

Well, no.

The answer to the latter part of your question was no and the former, yeah, I will explain, not that I won't explain.

At least for the last maybe just since I've gotten here, and I've looked at the wind index, I think what we tried to do before was the right thing to do.

We wanted to make it easy for investors to be able to go on the web, find reference towers and airports that were kind of close to our projects and they would get that public information and then we provide what the correlation between the public information and our wind towers are and so on.

But we just continued to have difficulties with that wind index.

The reference towers that you could find publicly are just not right by our wind plants.

They're at a different height than our wind plants.

And we have better data.

We actually have anemometers at our wind sites.

We actually know what's flowing at our wind sites and so I, especially after the last quarter, I sat down and I said look at, if we can't give investors a wind index that they can actually do something with, in other words, if a wind index is 107 and that doesn't actually mean it's a 7% improvement from what they would have -- from what our results would have been or if it's at 94% then we should see a 6% reduction from what we have planned, then we need to find a better metric.

And now the metric is pretty simple.

The metric is this is how the wind did, and this is how we planned for it to do and we're going to give that information to you on a monthly basis, on our website and there at the bottom of the slide we've actually provided a metric that should the wind blow more or less than what we had expected, that the results, our RPS results would be different.

So I actually believe this is a huge improvement in the data that we're giving investors.

Okay.

Thank you.

We'll take our next question from Annie Tsao with AllianceBernstein.

Go ahead, Annie.

Your line is open.

Hello, can you hear me?

Yes, yes, I can, Annie.

My question's been asked by Steve on the wind resources.

Your question was --

The same question.

But I do have another question.

I just want to clarify when you talk about your liquidity on the short-term average maturity, you say you have -- it's 2.83% interest rate, right?

And in the commercial paper, it's 3.2%; is that right?

Right, Annie, you're referring to the average interest rate for Florida Power & Light commercial paper which is the lower number and the higher number, 3.2%, was FPL Group capital.

Those were the numbers at September 30th.

Okay.

So does it mean, then, you have to refinance the current rate, that's going to be much higher, then?

Should we assume that for '09 then?

Your interest costs will --

Let me give you -- let me just give you, based on was we had seen as of last week, that number for Florida Power & Light commercial paper had actually gone down a little bit.

And the number for FPL Group capital had actually gone up a little bit.

But this is just a short-term commercial paper market, and at least our view would be that over the next several months, as some of these programs that the government has put in place finally start to get some traction, that you'll actually see the short-term commercial paper market rates come back down to where they were before the last four to six weeks.

I can tell you right now that at Florida Power & Light that the utility, the rates that we are seeing as of last week were essentially the same commercial paper rates that we were seeing before this latest credit turmoil.

The FPL Group capital rates are a little higher but the Florida Power & Light rates are right back to where they were before the last four to six weeks.

Also on your 2009 EBITDA contribution, can you elaborate your 5% in other portion, what's in it?

Yeah, the 5% other really includes, it's other, other, so it includes corporate and other is in there.

It includes all the other FPL Energy businesses, so as an example, it includes our wholesale marketing and trading operations.

And it includes -- I hate to even mention it because we haven't received a fiber net question in a long time, but it includes our fiber net operations which is a very small piece of that.

I just have to say which includes a lot of long-term contracts.

At fiber net, yes.

Thank you.

All right, Annie, we have time for one more question.

We'll take our next question from Paul Patterson with Glenrock Associates.

Good morning, guys.

Hey, Paul.

Quickly, the 2009, 2010, what is the economic outlook right now?

Are you guys assuming a recession in that or just in general how should we think about what the impact of a recession might be vis-a-vis your guidance.

I'm afraid whatever I say will end up in the newspapers so it's better not to say anything.

Let me just give you a couple of comments.

We have -- we've done scenario planning in-house.

I think it would be inappropriate at this point to kind of point out how long we believe the current economic slowdown is going to last.

I feel comfortable, though, in saying that we believe it will at least last through the latter parts of 2009.

Okay.

And in terms of the 2010 guidance, just to make sure I understand the impact of the CapEx change, I guess it's because of the conservative nature of your guidance, the O&M reductions and approvals of projects at FP&L, that's what's helping you overcome the impact of lower CapEx in 2010?

Yeah.

It's actually -- it's that, but it's also what I mentioned earlier.

I think it was to Greg's question.

Our wind build at FPL Energy, most of that wind build actually goes in towards the latter part of the year, and the example I gave was 2008 this year.

Although we expect to add about 1300 megawatts of wind, we only have 499 that have been added up to this point.

So large amount of that goes in towards the latter part and since you have such a large amount going in towards the last part, the CapEx reductions, and you mentioned specifically of wind for 2009, would not significantly affect our 2009 guidance.

But for 2010, is that because it's basically deferred into -- into the early part of 2010, the $0.13 billion.

Let me try to tack a different tack.

Hopefully this will help.

If not, I'll let Armando keep struggling with it.

It's hard to explain without walking you through all the numbers, but for our 2009 wind build which would normally have some positive impact on 2010, we're cutting it back at this point in time by 400 megawatts.

If you take what we were talking about with Greg Gordon earlier, and call it a a $0.01 to even a $0.015 per hundred megawatts, you're talking about $0.04 or $0.05 out of a range, I forget whether it's a range of $0.40 or $0.50, but it was a fairly big range.

It's just not that big of a deal.

It has virtually zero impact on '09 since these projects tend to come in at the latter part of the year and it will have an incredibly modest impact on 2010.

I want to point out that these are not projects that are being cancelled.

We're going to continue developing projects.

We're going to be putting them up on the shelf.

Building a backlog of good projects for when conditions improve which they will.

Okay.

That's great.

Guys.

Let me just -- Paul, let me just add one thing because I mentioned this earlier when Greg asked the question.

But we need to keep in mind that it's -- Florida Power & Light, although we are expecting some reduced customer numbers for 2009, the fact that we are getting those two gas plants up and running in 2009 as part of our generation base rate adjustment, that's adding significantly to our revenue in 2009.

As are the solar projects in 2010 that I also mentioned and the nuclear upgrade projects that I also mentioned.

So we don't -- we haven't -- you know, it's almost a gloomier forecast, when we talk about customers for Florida Power & Light but we need to keep in mind here that what we've been doing here for several years is doing great things for our customers, absolutely terrific things for our customers and good things for our shareholders.

We're shifting the amount of fuel that our customers otherwise pay to rate base.

So it's good really for both.

So although we're talking about FPL Energy and wind and certainly that's part of the story for the day, let's keep in mind that at Florida Power & Light there's a lot of good things going on.

That's great.

I really appreciate the clarification, guys.

Thank you, everyone for joining us today.

That concludes the call.

Again, ladies and gentlemen, that does conclude today's conference.

Thank you for your participation and have a wonderful day.