Business Development ……Where To

From Here?

FPL Group Bank Meeting

September 21, 2004

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FPL Energy: A DisciplinedWholesale Generator

• Moderate risk approach– diversified by region,

fuel source– well hedged portfolio– emphasis on base-load assets

• Low cost provider– modern, efficient, clean plants– operational excellence

• Industry leader in wind generation

• Conservative, integrated asset optimization function

• 10,7951 net MWs in operation

1 As of 8/20/04

FPL Energy operations

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Northeast

17%

11,539 Net MWs in Operation

Mid-Atlantic

24%

25%34%

West

Regional Diversity

Central

Wind

Fuel Diversity

Gas57%

24%Other1%

Hydro3% 6%

Oil Nuclear9%

Diversified Portfolio at FPL Energy

Year-end 20041

(Projected)

1 As of 8/20/04

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Wind – A Real and Growing Business

• 2,746 MW

– More than 6500 turbines

• Own and operate about 50% of all new U.S. wind the last 3 years

• More than $2.3 billion invested

• 43% U.S. market share

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FPL Energy’s Competitive Advantage in Wind

• Business scale

– U.S. and world leader in wind, 6,500 turbines in our fleet

• Project development track record

• Can utilize the tax credits

• Creditworthy counterparty

• Third-party financing access (over $630 mm in 2003)

• Quick to market

– 3 to 6 months after permitting

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Wind’s Promise Partially Delivered

• Still many challenges and opportunities exist

• Boom/bust cycle still with us (PTC linked)

• 2004 likely to be under 300 MWs in U.S.

• 2005 may exceed 1500 MWs in U.S. if PTC enacted 4Q 2004

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Today’s Wind Challenges

Major Issues:

• Transmission/Interconnection

• Energy bill and tax credits

• Deregulation/Re-regulation

• Competitive Pricing/PPAs

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Transmission Issues Persist

• Constraints will continue to limit wind development for the foreseeable future

• Transmission & Interconnection– Wind will be minor in the national dialogue– Political process can not be ignored– Regional differences remain large

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PTC NOW PTC LATER

PTC Delays…………….

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But Not a Likely Replacement for Fossil Fuels

• The U.S.’s demand cannot be met by wind– But wind can supplement it

• There should be a place for wind as part of a portfolio of energy sources

• Important political decisions will drive wind’s future in the next few years

• Lack of “firm” capacity hurts its competitive positioning

• High natural gas prices increase demand for wind in some parts of the U.S.

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What the Wholesale Customer Seeks Drives the Business

– Size (MW)– Price (cents/kWh)– Timing (2005, 2006, etc.)– Does wind “fit” with the

customer’s technical needs (system)?

– Is it competitive with their other wholesale ($) choices?

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FPL Energy’s Value Proposition• Construction timing and cost risk with

FPL Energy

• Long term wind resource/energy production risk on FPL Energy

• Life of project O&M and G&A expense exposure on FPL Energy

17Source: Cambridge Energy Research Associates/FPLE

The Industry Must Sustain the:“Development Value Chain”

ProspectorProspector Pure DeveloperPure Developer Long Term Long Term Strategic Strategic

Developer, Developer, Owner, OperatorOwner, Operator

O&M O&M ProviderProvider

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2004 and Beyond: Key Issues For Wind Remain

• PTC renewal

• Financeability

• Transmission/interconnection

• NIMBY, avian issues

• Wholesale competitiveness

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What’s Next?

• PTC extension will spur renewed growth, remain necessary for foreseeable future

• Technological advances will enhance turbine performance, reliability, and build customer confidence

• Financing will become easier for “big players”, remain challenging for smaller developers

– Track records will be critically important

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What’s Next? (continued)

• Larger is not necessarily better (machines)– Size has its logistical and cost limits on-shore– Beware of the QF/IPP dilemma of believing scale is always

cheaper and better

• Learn from the lessons of the QF era– Government incentives can have good intentions but

promote poor business decisions if taken to extremes– PTCs, not Federal RPS, provide the right commercial

balance and overbuild protections

• Meet customer expectations: Low Cost Power• Growth expectations in the U.S. and the world

are ahead of commercial and regulatory realities

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Business Development Focus

• Wind – build on our U.S. and world

leadership position

• Asset acquisitions– regional emphasis– opportunistic– nuclear

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FPL Energy Acquisition Focus

ContractedFossil

PartnersNuclear Wind

FPL EnergyFocus

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FPL Energy Asset Acquisition Criteria

• Strategic

• Fits the portfolio

• Largely hedged/“Deep in the money”

• Financeable

• Operational upside

• Attractive economics

• Immediately accretive to earnings

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Nuclear Acquisition Drivers

• Industry consolidating

• Single unit operators potentially disadvantaged

• Scale matters

• Opportunities for significant operational upsides

• Handful of bidders

• Attractive economics - e.g., Seabrook Station, AmerGen

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Strategic Fit

Turkmenistan

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Summary• Current market conditions remain mixed

– nuclear/wind still attractive– contracted fossil currently “over bought”– merchant opportunities not attractive

• FPL Energy very well-positioned– leverage existing position, particularly in nuclear, wind, and with our

partners– disciplined approach– experienced, seasoned deal team– good pipeline of opportunities

• By nature, must be opportunistic

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Questions?