Edgar Filing: FPL GROUP INC

form10q1q2009.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

Commission File Number	Exact name of registrants as specified in their charters, address of principal executive offices and registrants' telephone number	IRS Employer Identification Number

1-8841	FPL GROUP, INC.	59-2449419
2-27612	FLORIDA POWER & LIGHT COMPANY	59-0247775
	700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4000

State or other jurisdiction of incorporation or organization: Florida

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) have been subject to such filing requirements for the past 90 days.

FPL Group, Inc. Yes þ No ¨ Florida Power & Light Company Yes þ No ¨

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

FPL Group, Inc. Yes ¨ No ¨ Florida Power & Light Company Yes ¨ No ¨

Indicate by check mark whether the registrants are a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.

FPL Group, Inc.	Large Accelerated Filer þ	Accelerated Filer ¨	Non-Accelerated Filer ¨	Smaller Reporting Company ¨
Florida Power & Light Company	Large Accelerated Filer ¨	Accelerated Filer ¨	Non-Accelerated Filer þ	Smaller Reporting Company ¨

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No þ

The number of shares outstanding of FPL Group, Inc. common stock, as of the latest practicable date: Common Stock, $0.01 par value, outstanding at March 31, 2009: 410,792,960 shares.

As of March 31, 2009, there were issued and outstanding 1,000 shares of Florida Power & Light Company common stock, without par value, all of which were held, beneficially and of record, by FPL Group, Inc.

¾¾¾¾¾¾¾¾¾¾¾¾¾¾

This combined Form 10-Q represents separate filings by FPL Group, Inc. and Florida Power & Light Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to FPL Group, Inc.'s other operations.

Florida Power & Light Company meets the conditions set forth under General Instruction H.(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

TABLE OF CONTENTS

		Page No.

Forward-Looking Statements		2

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

Signatures		42

FPL Group, Inc., Florida Power & Light Company, FPL Group Capital Inc and NextEra Energy Resources, LLC each have subsidiaries and affiliates with names that include FPL, NextEra Energy Resources, NextEra Energy, FPL Energy, FPLE and similar references. For convenience and simplicity, in this report the terms FPL Group, FPL, FPL Group Capital and NextEra Energy Resources are sometimes used as abbreviated references to specific subsidiaries, affiliates or groups of subsidiaries or affiliates. The precise meaning depends on the context.

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance, climate change strategy or growth strategies (often, but not always, through the use of words or phrases such as will, will likely result, are expected to, will continue, is anticipated, aim, believe, could, should, would, estimated, may, plan, potential, projection, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on FPL Group, Inc.'s (FPL Group) and/or Florida Power & Light Company's (FPL) operations and financial results, and could cause FPL Group's and/or FPL's actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of FPL Group and/or FPL in this combined Form 10-Q, in presentations, on their respective websites, in response to questions or otherwise.

FPL Group and FPL are subject to complex laws and regulations and to changes in laws and regulations as well as changing governmental policies and regulatory actions. FPL holds franchise agreements with local municipalities and counties, and must renegotiate expiring agreements. These factors may have a negative impact on the business and results of operations of FPL Group and FPL.

·	The operation and maintenance of power generation, transmission and distribution facilities involve significant risks that could adversely affect the results of operations and financial condition of FPL Group and FPL.

The operation and maintenance of nuclear facilities involves inherent risks, including environmental, health, regulatory, terrorism and financial risks, that could result in fines or the closure of nuclear units owned by FPL or NextEra Energy Resources, LLC (NextEra Energy Resources), and which may present potential exposures in excess of insurance coverage.

The construction of, and capital improvements to, power generation and transmission facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful or delayed, the results of operations and financial condition of FPL Group and FPL could be adversely affected.

·	The use of derivative contracts by FPL Group and FPL in the normal course of business could result in financial losses or the payment of margin cash collateral that adversely impact the results of operations or cash flows of FPL Group and FPL.

FPL Group's competitive energy business is subject to risks, many of which are beyond the control of FPL Group, including, but not limited to, the efficient development and operation of generating assets, the successful and timely completion of project restructuring activities, the price and supply of fuel and equipment, transmission constraints, competition from other generators, including those using new sources of generation, excess generation capacity and demand for power, that may reduce the revenues and adversely impact the results of operations and financial condition of FPL Group.

·	FPL Group's ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including, but not limited to, the effect of increased competition for acquisitions resulting from the consolidation of the power industry.

·	FPL Group and FPL participate in markets that are often subject to uncertain economic conditions, which makes it difficult to estimate growth, future income and expenditures.

·	Customer growth and customer usage in FPL's service area affect FPL Group's and FPL's results of operations.

·	Weather affects FPL Group's and FPL's results of operations, as can the impact of severe weather. Weather conditions directly influence the demand for electricity and natural gas, affect the price of energy commodities, and can affect the production of electricity at power generating facilities.

Adverse capital and credit market conditions may adversely affect FPL Group's and FPL's ability to meet liquidity needs, access capital and operate and grow their businesses, and increase the cost of capital. Disruptions, uncertainty or volatility in the financial markets can also adversely impact the results of operations and financial condition of FPL Group and FPL, as well as exert downward pressure on the market price of FPL Group's common stock.

·	FPL Group's, FPL Group Capital Inc's (FPL Group Capital) and FPL's inability to maintain their current credit ratings may adversely affect FPL Group's and FPL's liquidity, limit the ability of FPL Group and FPL to grow their businesses, and would likely increase interest costs.

·	FPL Group and FPL are subject to credit and performance risk from third parties under supply and service contracts.

FPL Group and FPL are subject to costs and other potentially adverse effects of legal and regulatory proceedings, as well as regulatory compliance and changes in or additions to applicable tax laws, rates or policies, rates of inflation, accounting standards, securities laws, corporate governance requirements and labor and employment laws.

·	Threats of terrorism and catastrophic events that could result from terrorism, cyber attacks, or individuals and/or groups attempting to disrupt FPL Group's and FPL's business may impact the operations of FPL Group and FPL in unpredictable ways.

·	The ability of FPL Group and FPL to obtain insurance and the terms of any available insurance coverage could be adversely affected by international, national, state or local events and company-specific events.

·	FPL Group and FPL are subject to employee workforce factors that could adversely affect the businesses and financial condition of FPL Group and FPL.

These and other risk factors are included in Part I, Item 1A. Risk Factors of FPL Group's and FPL's Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K) and investors should refer to those sections of the 2008 Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and FPL Group and FPL undertake no obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

Website Access to U.S. Securities and Exchange Commission (SEC) Filings. FPL Group and FPL make their SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on FPL Group's internet website, www.fplgroup.com, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information on FPL Group's website (or any of its subsidiaries' websites) is not incorporated by reference in this combined Form 10-Q. The SEC maintains an internet website at www.sec.gov that contains reports, proxy and other information about FPL Group and FPL filed electronically with the SEC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FPL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(millions, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2009			2008

OPERATING REVENUES	$	3,705		$	3,434

OPERATING EXPENSES
Fuel, purchased power and interchange		1,811			1,726
Other operations and maintenance		618			642
Storm cost amortization		19			11
Depreciation and amortization		390			333
Taxes other than income taxes		284			279
Total operating expenses		3,122			2,991

OPERATING INCOME		583			443

OTHER INCOME (DEDUCTIONS)
Interest expense		(211	)		(199	)
Equity in earnings of equity method investees		7			14
Allowance for equity funds used during construction		15			5
Interest income		27			15
Other than temporary impairment losses on securities held in nuclear decommissioning funds		(53	)		(7	)
Other - net		15			8
Total other deductions - net		(200	)		(164	)

INCOME BEFORE INCOME TAXES		383			279

INCOME TAXES		19			30

NET INCOME	$	364		$	249

Earnings per share of common stock:
Basic	$	0.90		$	0.62
Assuming dilution	$	0.90		$	0.62

Dividends per share of common stock	$	0.4725		$	0.4450

Weighted-average number of common shares outstanding:
Basic		402.3			399.1
Assuming dilution		404.8			402.0

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements (Notes) herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FPL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(millions)

(unaudited)

	March 31, 2009			December 31, 2008
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant in service and other property	$	41,867		$	41,638
Nuclear fuel		1,345			1,260
Construction work in progress		3,252			2,630
Less accumulated depreciation and amortization		(13,411	)		(13,117	)
Total property, plant and equipment - net		33,053			32,411

CURRENT ASSETS
Cash and cash equivalents		276			535
Customer receivables, net of allowances of $23 and $29, respectively		1,281			1,443
Other receivables, net of allowances of $2 and $2, respectively		327			264
Materials, supplies and fossil fuel inventory - at average cost		871			968
Regulatory assets:
Deferred clause and franchise expenses		66			248
Securitized storm-recovery costs		65			64
Derivatives		1,309			1,109
Pension		19			19
Other		4			4
Derivatives		641			433
Other		295			305
Total current assets		5,154			5,392

OTHER ASSETS
Special use funds		2,829			2,947
Prepaid benefit costs		935			914
Other investments		939			923
Regulatory assets:
Securitized storm-recovery costs		679			697
Deferred clause expenses		-			79
Pension		105			100
Unamortized loss on reacquired debt		32			32
Derivatives		16			-
Other		145			138
Other		1,417			1,188
Total other assets		7,097			7,018

TOTAL ASSETS	$	45,304		$	44,821

CAPITALIZATION
Common stock	$	4		$	4
Additional paid-in capital		4,876			4,805
Retained earnings		7,058			6,885
Accumulated other comprehensive income (loss)		61			(13	)
Total common shareholders' equity		11,999			11,681
Long-term debt		15,099			13,833
Total capitalization		27,098			25,514

CURRENT LIABILITIES
Commercial paper		646			1,835
Notes payable		-			30
Current maturities of long-term debt		1,294			1,388
Accounts payable		1,058			1,062
Customer deposits		588			575
Accrued interest and taxes		438			374
Regulatory liabilities - deferred clause and franchise revenues		16			11
Derivatives		1,544			1,300
Other		1,059			1,114
Total current liabilities		6,643			7,689

OTHER LIABILITIES AND DEFERRED CREDITS
Asset retirement obligations		2,314			2,283
Accumulated deferred income taxes		4,216			4,231
Regulatory liabilities:
Accrued asset removal costs		2,163			2,142
Asset retirement obligation regulatory expense difference		433			520
Other		215			218
Derivatives		218			218
Other		2,004			2,006
Total other liabilities and deferred credits		11,563			11,618

COMMITMENTS AND CONTINGENCIES

TOTAL CAPITALIZATION AND LIABILITIES	$	45,304		$	44,821

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FPL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)

(unaudited)

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	364		$	249
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		390			333
Nuclear fuel amortization		60			47
Recoverable storm-related costs of FPL		(7	)		85
Storm cost amortization		19			11
Unrealized (gains) losses on marked to market energy contracts		(75	)		36
Deferred income taxes		(18	)		138
Cost recovery clauses and franchise fees		266			86
Change in prepaid option premiums and derivative settlements		47			(4	)
Equity in earnings of equity method investees		(7	)		(14	)
Distributions of earnings from equity method investees		-			1
Changes in operating assets and liabilities:
Customer receivables		162			169
Other receivables		31			13
Materials, supplies and fossil fuel inventory		97			15
Other current assets		(8	)		(9	)
Other assets		(30	)		(71	)
Accounts payable		(130	)		128
Customer deposits		13			9
Margin cash collateral		(185	)		129
Income taxes		45			(115	)
Interest and other taxes		72			79
Other current liabilities		(100	)		(60	)
Other liabilities		(3	)		4
Other – net		40			58
Net cash provided by operating activities		1,043			1,317

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures of FPL		(575	)		(585	)
Independent power investments		(422	)		(544	)
Nuclear fuel purchases		(70	)		(59	)
Other capital expenditures		(9	)		(5	)
Sale of independent power investments		5			-
Proceeds from sale of securities in special use funds		875			375
Purchases of securities in special use funds		(892	)		(402	)
Proceeds from sale of other securities		17			35
Purchases of other securities		(26	)		(42	)
Other – net		1			39
Net cash used in investing activities		(1,096	)		(1,188	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt		1,508			1,099
Retirements of long-term debt		(359	)		(593	)
Net change in short-term debt		(1,220	)		(174	)
Issuances of common stock		49			8
Dividends on common stock		(191	)		(178	)
Change in funds held for storm-recovery bond payments		11			19
Other – net		(4	)		3
Net cash provided by (used in) financing activities		(206	)		184

Net increase (decrease) in cash and cash equivalents		(259	)		313
Cash and cash equivalents at beginning of period		535			290
Cash and cash equivalents at end of period	$	276		$	603

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FLORIDA POWER & LIGHT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(millions)

(unaudited)

	Three Months Ended March 31,
	2009			2008

OPERATING REVENUES	$	2,573		$	2,534

OPERATING EXPENSES
Fuel, purchased power and interchange		1,469			1,457
Other operations and maintenance		340			378
Storm cost amortization		19			11
Depreciation and amortization		232			196
Taxes other than income taxes		251			248
Total operating expenses		2,311			2,290

OPERATING INCOME		262			244

OTHER INCOME (DEDUCTIONS)
Interest expense		(77	)		(86	)
Allowance for equity funds used during construction		15			5
Interest income		-			4
Other – net		(2	)		(3	)
Total other deductions – net		(64	)		(80	)

INCOME BEFORE INCOME TAXES		198			164

INCOME TAXES		71			56

NET INCOME	$	127		$	108

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FLORIDA POWER & LIGHT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(millions)

(unaudited)

	March 31, 2009			December 31, 2008
ELECTRIC UTILITY PLANT
Plant in service	$	26,694		$	26,497
Nuclear fuel		672			613
Construction work in progress		1,996			1,862
Less accumulated depreciation and amortization		(10,308	)		(10,189	)
Electric utility plant – net		19,054			18,783

CURRENT ASSETS
Cash and cash equivalents		96			120
Customer receivables, net of allowances of $13 and $19, respectively		703			796
Other receivables, net of allowances of $1 and $1, respectively		272			143
Materials, supplies and fossil fuel inventory – at average cost		534			563
Regulatory assets:
Deferred clause and franchise expenses		66			248
Securitized storm-recovery costs		65			64
Derivatives		1,309			1,109
Derivatives		8			4
Other		122			125
Total current assets		3,175			3,172

OTHER ASSETS
Special use funds		2,083			2,158
Prepaid benefit costs		987			968
Regulatory assets:
Securitized storm-recovery costs		679			697
Deferred clause expenses		-			79
Unamortized loss on reacquired debt		32			32
Other		156			133
Other		171			153
Total other assets		4,108			4,220

TOTAL ASSETS	$	26,337		$	26,175

CAPITALIZATION
Common stock	$	1,373		$	1,373
Additional paid-in capital		4,393			4,393
Retained earnings		2,250			2,323
Total common shareholder's equity		8,016			8,089
Long-term debt		5,789			5,311
Total capitalization		13,805			13,400

CURRENT LIABILITIES
Commercial paper		461			773
Current maturities of long-term debt		265			263
Accounts payable		582			645
Customer deposits		583			570
Accrued interest and taxes		284			449
Regulatory liabilities - deferred clause and franchise revenues		16			11
Derivatives		1,317			1,114
Other		509			598
Total current liabilities		4,017			4,423

OTHER LIABILITIES AND DEFERRED CREDITS
Asset retirement obligations		1,766			1,743
Accumulated deferred income taxes		3,287			3,105
Regulatory liabilities:
Accrued asset removal costs		2,163			2,142
Asset retirement obligation regulatory expense difference		433			520
Other		215			218
Other		651			624
Total other liabilities and deferred credits		8,515			8,352

COMMITMENTS AND CONTINGENCIES

TOTAL CAPITALIZATION AND LIABILITIES	$	26,337		$	26,175

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FLORIDA POWER & LIGHT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)

(unaudited)

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	127		$	108
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		232			196
Nuclear fuel amortization		32			25
Recoverable storm-related costs		(7	)		85
Storm cost amortization		19			11
Deferred income taxes		183			153
Cost recovery clauses and franchise fees		266			86
Change in prepaid option premiums and derivative settlements		(1	)		2
Changes in operating assets and liabilities:
Customer receivables		93			94
Other receivables		55			16
Materials, supplies and fossil fuel inventory		29			38
Other current assets		(16	)		(14	)
Other assets		(16	)		(49	)
Accounts payable		(70	)		105
Customer deposits		14			10
Margin cash collateral		-			92
Income taxes		(320	)		(49	)
Interest and other taxes		65			73
Other current liabilities		(61	)		(6	)
Other liabilities		6			5
Other – net		-			33
Net cash provided by operating activities		630			1,014

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(575	)		(585	)
Nuclear fuel purchases		(43	)		(48	)
Proceeds from sale of securities in special use funds		516			282
Purchases of securities in special use funds		(524	)		(308	)
Other – net		-			1
Net cash used in investing activities		(626	)		(658	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt		493			589
Retirements of long-term debt		(20	)		(24	)
Net change in short-term debt		(312	)		(502	)
Dividends		(200	)		(50	)
Change in funds held for storm-recovery bond payments		11			19
Net cash provided by (used in) financing activities		(28	)		32

Net increase (decrease) in cash and cash equivalents		(24	)		388
Cash and cash equivalents at beginning of period		120			63
Cash and cash equivalents at end of period	$	96		$	451

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2008 Form 10-K for FPL Group and FPL.

FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The accompanying condensed consolidated financial statements should be read in conjunction with the 2008 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period generally will not give a true indication of results for the year.

1. Employee Retirement Benefits

FPL Group sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of FPL Group and its subsidiaries. FPL Group also has a supplemental executive retirement plan (SERP), which includes a non-qualified supplemental defined benefit pension component that provides benefits to a select group of management and highly compensated employees. The cost of this SERP component is included in the determination of net periodic benefit income for pension benefits in the following table and was not material to FPL Group's financial statements for the three months ended March 31, 2009 and 2008. In addition to pension benefits, FPL Group sponsors a contributory postretirement plan for health care and life insurance benefits (other benefits) for retirees of FPL Group and its subsidiaries meeting certain eligibility requirements.

The components of net periodic benefit (income) cost for the plans are as follows:

	Pension Benefits						Other Benefits
	Three Months Ended March 31,						Three Months Ended March 31,
	2009			2008			2009			2008
	(millions)

Service cost	$	13		$	13		$	2		$	1
Interest cost		27			26			6			7
Expected return on plan assets		(60	)		(60	)		(1	)		(1	)
Amortization of transition obligation		-			-			1			1
Amortization of prior service benefit		(1	)		(1	)		-			-
Amortization of gains		(5	)		(7	)		-			-
Net periodic benefit (income) cost at FPL Group	$	(26	)	$	(29	)	$	8		$	8
Net periodic benefit (income) cost at FPL	$	(18	)	$	(21	)	$	6		$	6

2. Derivative Instruments

FPL Group and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the commodity price risk inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated with long-term debt. In addition, FPL Group, through NextEra Energy Resources, uses derivatives to optimize the value of power generation assets. NextEra Energy Resources provides full energy and capacity requirements services primarily to distribution utilities, which include load-following services and various ancillary services, in certain markets and engages in energy trading activities to take advantage of expected future favorable price movements. Derivative instruments, when required to be marked to market, are recorded on FPL Group's and FPL's condensed consolidated balance sheets as either an asset or liability measured at fair value. At FPL, substantially all changes in fair value are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel and purchased power cost recovery clause (fuel clause) or the capacity cost recovery clause (capacity clause). For FPL Group's non-rate regulated operations, predominantly NextEra Energy Resources, essentially all changes in the derivatives' fair value for power purchases and sales and trading activities are recognized on a net basis in operating revenues; fuel purchases and sales are recognized on a net basis in fuel, purchased power and interchange expense; and the equity method investees' related activity is recognized in equity in earnings of equity method investees in FPL Group's condensed consolidated statements of income unless hedge accounting is applied. While most of NextEra Energy Resources' derivative transactions are entered into for the purpose of managing commodity price risk, and to reduce the impact of volatility in interest rates stemming from changes in variable interest rates on outstanding debt, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective in offsetting the hedged risk. Additionally, for hedges of commodity price risk, physical delivery for forecasted commodity transactions must be probable. FPL Group believes that where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis. Generally, the hedging instrument's effectiveness is assessed using regression analysis for commodity contracts, and nonstatistical methods including dollar value comparisons of the change in the fair value of the derivative to the change in the fair value or cash flows of the hedged item, for interest rate swaps. Hedge effectiveness is tested at the inception of the hedge and on at least a quarterly basis throughout its life.

At March 31, 2009, FPL Group had cash flow hedges with expiration dates through December 2012 for energy contract derivative instruments, and interest rate cash flow hedges with expiration dates through December 2023. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income (OCI) and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings. See Note 5. The ineffective portion of net unrealized gains (losses) on these hedges is reported in earnings in the current period, and amounted to approximately $11 million and $(9) million for the three months ended March 31, 2009 and 2008, respectively. Settlement gains and losses are included within the line items in the statements of income to which they relate.

FPL Group's and FPL's mark-to-market derivative instrument assets (liabilities) are included in the condensed consolidated balance sheets as follows:

	FPL Group						FPL
	March 31, 2009			December 31, 2008			March 31, 2009			December 31, 2008
	(millions)

Current derivative assets (a)	$	641		$	433		$	8		$	4
Noncurrent other assets (b)		375			212			7			2
Current derivative liabilities (c)		(1,544	)		(1,300	)		(1,317	)		(1,114	)
Noncurrent derivative liabilities (d)		(218	)		(218	)		(23	)(e)		(1	)(e)
Total mark-to-market derivative instrument liabilities	$	(746	)	$	(873	)	$	(1,325	)	$	(1,109	)

¾¾¾¾¾¾¾¾¾¾

(a)	At March 31, 2009 and December 31, 2008, FPL Group's balances reflect the netting of $104 million and $60 million (none at FPL), respectively, in margin cash collateral received from counterparties.
(b)	At March 31, 2009, FPL Group's balances reflect the netting of $5 million (none at FPL) in margin cash collateral received from counterparties.
(c)	At March 31, 2009 and December 31, 2008, FPL Group's balances reflect the netting of $205 million and $33 million (none at FPL), respectively, in margin cash collateral provided to counterparties.
(d)	At March 31, 2009 and December 31, 2008, FPL Group's balances reflect the netting of $71 million and $25 million (none at FPL), respectively, in margin cash collateral provided to counterparties.
(e)	Included in noncurrent other liabilities on FPL's condensed consolidated balance sheets.

At March 31, 2009 and December 31, 2008, FPL Group had approximately $49 million and $66 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets. These amounts are included in other current liabilities in the condensed consolidated balance sheets. Additionally, at March 31, 2009 and December 31, 2008, FPL Group had approximately $97 million and $98 million (none at FPL), respectively, in margin cash collateral provided to counterparties that was not offset against derivative liabilities. These amounts are included in other current assets in the condensed consolidated balance sheets.

As discussed above, FPL Group uses derivative instruments to, among other things, manage its commodity price risk, interest rate risk and foreign currency exchange rate risk. The table above presents FPL Group’s and FPL’s net derivative liability positions at March 31, 2009, which reflect the offsetting of positions of certain transactions within the portfolio, the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral. However, disclosure rules require that the following tables be presented on a gross basis.

The fair values of FPL Group's derivatives designated as hedging instruments for accounting purposes are presented as gross asset and liability values as follows:

	March 31, 2009
	Derivative Assets		Derivative Liabilities
	(millions)
Commodity contracts:
Current derivative assets	$	95	$	1
Current derivative liabilities		54		4
Noncurrent other assets		48		-
Noncurrent derivative liabilities		62		12
Interest rate swaps:
Current derivative liabilities		-		39
Noncurrent other assets		26		-
Noncurrent derivative liabilities		-		60
Total	$	285	$	116

For the three months ended March 31, 2009, gains (losses) related to FPL Group cash flow hedges are recorded on FPL Group's condensed consolidated financial statements (none at FPL) as follows:

	Commodity Contracts			Interest Rate Swaps			Total
				(millions)

Gains (losses) recognized in OCI	$	152		$	(5	)	$	147
Gains (losses) reclassified from accumulated other comprehensive income (AOCI)	$	24	(a)	$	(9	)(b)	$	15
Gains (losses) recognized in income (c)	$	11	(a)	$	-		$	11

¾¾¾¾¾¾¾¾¾¾

(a)	Included in operating revenues.
(b)	Included in interest expense.
(c)	Represents the ineffective portion of the hedging instrument.

The fair values of FPL Group's and FPL's derivatives not designated as hedging instruments for accounting purposes are presented as gross asset and liability values as follows:

	March 31, 2009
	FPL Group				FPL
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(millions)
Commodity contracts:
Current derivative assets	$	1,087	$	435	$	8	$	-
Current derivative liabilities		1,851		3,612		6		1,323
Noncurrent other assets		453		147		9		1
Noncurrent derivative liabilities		505		769		1		25
Foreign currency swap:
Noncurrent derivative liabilities		-		15		-		-
Total	$	3,896	$	4,978	$	24	$	1,349

For the three months ended March 31, 2009, gains (losses) related to FPL Group derivatives not designated as hedging instruments are recorded on FPL Group's condensed consolidated statements of income (none at FPL) as follows (millions):

Commodity contracts:
Operating revenues	$	112	(a)
Fuel, purchased power and interchange		27
Foreign currency swap:
Other - net		(12	)
Total	$	127

¾¾¾¾¾¾¾¾¾¾

(a)	In addition, FPL recorded approximately $525 million of losses related to commodity contracts as regulatory assets on its condensed consolidated balance sheet.

At March 31, 2009, FPL Group and FPL had derivative commodity contracts for the following net notional volumes:

Commodity Type	FPL Group(a)			FPL(a)
	(millions)

Power	(36	)	mwh(b)	-
Natural gas	976		mmbtu(c)	882	mmbtu(c)
Oil	2		barrels	2	barrels

¾¾¾¾¾¾¾¾¾¾

(a)	Volume amounts include fixed and index priced derivatives applicable to commodity and basis exposures. Amounts presented are for derivative contracts only and do not include other commodity contracts for which the normal purchases and normal sales election has been made, or which do not meet the definition of a derivative.
(b)	Megawatt hours
(c)	One million British thermal units

At March 31, 2009, the estimated fair values for FPL Group's interest rate and foreign currency swaps were as follows:

Notional Amount		Effective Date	Maturity Date	Rate Paid		Rate Received		Estimated Fair Value
(millions)								(millions)

Fair value hedge – FPL Group Capital:
$	300	June 2008	September 2011	Variable	(a)	5.625%			$	21
Cash flow hedges – NextEra Energy Resources:
$	57	December 2003	December 2017	4.245	%	Variable	(b)			(4	)
$	19	April 2004	December 2017	3.845	%	Variable	(b)			(1	)
$	189	December 2005	November 2019	4.905	%	Variable	(b)			(21	)
$	459	January 2007	January 2022	5.390	%	Variable	(c)			(60	)
$	147	January 2008	September 2011	3.2050	%	Variable	(b)			(5	)
$	373	January 2009	December 2016	2.680	%	Variable	(b)			(4	)
$	124	January 2009(d)	December 2023	3.725	%	Variable	(b)			-
$	74	January 2009	December 2023	2.578	%	Variable	(e)			-
$	22	March 2009	December 2016	2.655	%	Variable	(b)			-
$	7	March 2009(d)	December 2023	3.960	%	Variable	(b)			-
Total cash flow hedges										(95	)
Total interest rate hedges									$	(74	)
Foreign currency swap – FPL Group Capital:
$	141	December 2008	December 2011	Variable	(f)	Variable	(g)		$	(15	)

¾¾¾¾¾¾¾¾¾¾

(a)	Three-month London InterBank Offered Rate (LIBOR) plus 1.18896%
(b)	Three-month LIBOR
(c)	Six-month LIBOR
(d)	Exchange of payments does not begin until December 2016.
(e)	Three-month Banker's Acceptance Rate
(f)	Three-month LIBOR plus 2.14%
(g)	Three-month Japanese yen LIBOR plus 1.75%

Certain of FPL Group's and FPL's derivative instruments contain credit-risk-related contingent features including, among other things, the requirement to maintain an investment grade credit rating from specified credit rating agencies and certain financial ratios, as well as credit-related cross default and material adverse change triggers. At March 31, 2009, the aggregate fair value of FPL Group's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $3.0 billion ($1.3 billion for FPL).

If the credit-risk-related contingent features underlying these agreements and other wholesale commodity contracts were triggered, FPL Group or FPL could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL Group Capital’s or FPL’s credit ratings were downgraded to BBB+/Baa1 (a two level downgrade for FPL and a one level downgrade for FPL Group Capital), FPL Group would be required to post collateral of less than $1 billion, substantially all of which relates to FPL. If FPL Group Capital’s and FPL’s credit ratings were downgraded to below investment grade, FPL Group would be required to post additional collateral such that the total posted collateral would be approximately $2.4 billion ($1.8 billion at FPL). Some contracts at FPL Group do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or credit-related cross default triggers. In the event these provisions were triggered, FPL Group could be required to post additional collateral of up to approximately $632 million.

Collateral may be posted in the form of cash or credit support. At March 31, 2009, FPL Group had posted $0.7 billion ($0.6 billion at FPL) in the form of letters of credit in the normal course of business which could be applied toward the collateral requirements above. FPL and FPL Group Capital have bank revolving lines of credit in excess of the collateral requirements described above that would be available to support, among other things, derivative activities. Under the terms of the bank revolving lines of credit, maintenance of a specific credit rating is not a condition to drawing upon these credit facilities, although there are other conditions to drawing on these credit facilities.

Additionally, some contracts also contain certain adequate assurance provisions where a counterparty may demand additional collateral based on subjective events and/or conditions. Due to the subjective nature of these clauses, FPL Group and FPL are unable to determine a value for these items and they are not included in any of the quantitative disclosures above.

3. Fair Value Measurements

FPL Group and FPL use several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured on a recurring basis. Certain derivatives and financial instruments are valued using option pricing models and take into consideration multiple inputs including commodity prices, volatility factors and discount rates, as well as counterparty credit ratings and credit enhancements. Additionally, when observable market data is not sufficient, valuation models are developed that incorporate FPL Group's and FPL's proprietary views of market factors and conditions. FPL Group's and FPL's assessment of the significance of any particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

FPL Group's and FPL's financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:

	As of March 31, 2009
	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Netting (a)			Total
	(millions)
Assets:
Cash equivalents:
FPL Group		$	118		$	-		$	-	$	-	$		118
FPL		$	56		$	-		$	-	$	-	$		56
Other current assets:
FPL Group		$	-		$	17		$	-	$	-	$		17
Special use funds: