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16 Apr 2002
MOODY'S INVESTORS SERVICE PLACES THE DEBT RATINGS OF FPL GROUP CAPITAL, INC. AND FLORIDA POWER AND LIGHT COMPANY ON REVIEW FOR POSSIBLE DOWNGRADE
Moody's Investors Service has placed the debt ratings of FPL Group Capital, Inc. and Florida Power and Light Company on review for possible downgrade. Moody's has taken this action in response to the higher level of debt incurred at FPL Group Capital to finance its growing unregulated generation portfolio. Consolidated debt to capital at FPL Group has increased from 41% at 12/31/99, to 47% at 12/31/00, and again to 52% at 12/31/01. It will likely increase further as a result of yesterday's announcement that FPL Group will purchase 88.2% of the 1,161 MW Seabrook Nuclear Generation Station for $836.6 million. The purchase price includes $516 million for the plant, $233 million for nuclear decommissioning funds, $62 million for nuclear fuel, and $26 million for spare parts. These financial obligations are being undertaken at a time of heightened uncertainty in the merchant generation market overall. Moody's notes that the company did issue $575 million of equity security units during the first quarter of 20
02 and expects to issue approximately $125 million of equity annually through its employee benefit plans, mitigating the increased leverage to some degree.
Under review are FPL Group Capital's A2 senior unsecured and P-1 commercial paper ratings, Florida Power and Light Company's Aa3 first mortgage bond and senior secured medium term note ratings, A1 issuer rating, and A3 preferred stock rating. Also under review are the ratings for the shelf registrations for the issuance of FPL Group Capital senior unsecured debt, (P)A2; and Florida Power and Light Company senior secured debt, (P)Aa3 and preferred stock, (P)A3. Florida Power and Light Company's P-1 commercial paper rating is confirmed.
Over the last several years, FPL Group Capital has issued nearly $2.0 billion of debt to finance the growth of independent power projects at its FPL Energy subsidiary. Before the Seabrook purchase, the company had expected to double its unregulated generation portfolio from the current 5,063 MW's to approximately 10,000 MW's by the end of 2003. The Seabrook acquisition will increase the company's current capacity by over 20% and significantly accelerates and broadens this expansion program. It is the first nuclear plant acquired by the company, although the company does operate two well running nuclear plants at its Florida Power and Light subsidiary. The plant was acquired on a fully merchant basis, with no new power purchase agreements between FPL Group and any of the former owners of Seabrook included as part of the transaction. The company intends to contract approximately 75% of the output of its entire Northeast unregulated generation portfolio into the NEPOOL market by the end of 2002.
Because parent FPL Group guarantees the obligations of FPL Group Capital, increased leverage at the subsidiary puts pressure on all the rated entities within the FPL Group, including Florida Power and Light, its operating utility subsidiary. The utility is engaged in a large capital expenditure program of its own to meet capacity needs in Florida and must also manage a four-year $250 million annual rate reduction approved this month by the Florida Public Service Commission. While the rate settlement reduces regulatory uncertainty and includes incentive-based revenue sharing mechanisms which FP&L can take advantage of, the rate reduction may reduce the utility's traditionally strong coverage ratios going forward.
As part of our review, Moody's plans to meet with senior management and will focus on FPL Group's future independent power project development strategy, its financing plans for both this expansion and for growth needs at Florida Power & Light, and the extent to which the utility can mitigate the negative effects of the rate reduction.
FPL Group is an energy company based in Juno Beach, Florida
No Related Data.
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