Fitch Affirms FPL Group, FPL Group Capital, and FP&L Ratings; Outlook Stable

Business Wire, Dec 14, 2007

NEW YORK -- Fitch Ratings has affirmed the ratings of FPL Group, Inc. (FPL), FPL Group Capital, Inc (Group Capital) and Florida Power & Light Company (FP&L), affecting approximately $9 billion of debt. The Rating Outlook for all three entities is Stable. A complete list of ratings is set out below.

FPL's Issuer Default Rating (IDR) of 'A' is based upon its strong financial condition, ample liquidity, and the strong business positions of its subsidiary FP&L, the largest utility in Florida, and its indirect subsidiary, FPL Energy, a developer and operator of non-utility power facilities. FP&L provides the core or anchor of the consolidated group, and thus the IDRs for the two entities are closely associated. FPL Energy produces significant tax benefits that enhance the Group's consolidated FFO. Over the past several years, FPL has stepped up its investments in FPL Energy's business while maintaining a relatively high level of ongoing capital investment in FP&L. FPL Energy's net income is estimated at approximately 40% of consolidated adjusted 2007 net income, up from roughly 20% in 2004.

The ratings of FP&L reflect the integrated utility's strong financial profile, large and growing customer base, and historically constructive regulatory environment. The Florida Public Service Commission (FPSC) has consistently authorized recovery of fuel and purchased power costs as well as storm recovery costs for electric utilities in the state. This supports the utility's credit-worthiness, since FP&L will be increasingly exposed to natural gas commodity costs, and its service territory is a storm-prone coastal area. FP&L's base tariffs were set in 2005 under a rate settlement that is in effect through December 2009. The retail tariff adjusts annually to reflect projected fuel and purchased power costs and under- or over-collections from one year are trued up in the following year, while other riders adjust for new assets placed in service and costs of environmental compliance, certain taxes and franchise fees. Credit concerns include: uncertainty as to the future Florida regulatory environment, as a result of recent turnover in commissioners and gubernatorial administration; and potential political or regulatory backlash to rising customer bills.

Group Capital is an intermediate holding company which owns FPL's unregulated businesses and serves to raise financing for unregulated operations. There is no direct debt at the FPL parent entity. Group Capital's ratings are supported by the guarantee of all debt obligations by its parent, FPL. Subsidiary FPL Energy comprises the vast majority of Group Capital's business and financial results.

FPL Energy's competitive business is managed in a manner to reduce risks to the consolidated financial profile. The company's focus on a low-carbon emitting generating portfolio positions FPL to profit from state or federal carbon and renewable energy mandates. The company's contracting and hedging practices are designed to stabilize cash flow. In 2007, FPL Energy acquired the two-unit 1,023MW Point Beach nuclear facility from WE Energy, and in 2006 the company acquired 70% ownership interest (423 net MW) in the Duane Arnold plant in Iowa, and in both cases, the purchase was subject to a long-term, unit-contingent contract to sell power to the former owners. Growing investment in FPL Energy has been funded with a mix of non-recourse project debt secured by individual projects or by portfolios of wind or hydroelectric projects, combined with a large component of hybrid securities ($1.7 billion of deferrable junior subordinated debt issued in 2006-2007) to provide financial flexibility. Risks associated with increasing investment in wind generation are mitigated by FPL Energy's experience in site and equipment selection and by the size and scale of a portfolio of assets in diverse locations.

Given the high level of capital investment planned for both its utility and non-utility businesses, ratings are unlikely to improve from the current levels. Ratings could be unfavorably affected by: major debt-funded acquisitions or other increases in debt leverage; an unfavorable change in the Florida regulatory or political environment affecting FP&L or a more speculative approach to the non-utility generation business.

FP&L is a vertically integrated, retail rate-regulated utility serving approximately 4.5 million customers in southern Florida. Group Capital is a holding company for all of FPL's non-regulated activities, the largest of which is its non-regulated electric generation business (FPL Energy). FPL Energy owns approximately 15,400 net MWs of generation of diverse fuel types and is the largest developer and owner of wind power in the U.S. Group Capital also owns a small telecommunications subsidiary (FPL FiberNet) which leases wholesale fiber-optic network capacity and dark fiber to FP&L and other customers.

Fitch affirms the following ratings with a Stable Outlook:

FPL Group, Inc.

--IDR at 'A'.

Florida Power & Light Company