Wind Tour 2004 Wind Energy Business Overview FPL Energy Wind Tour 2004 Waymart Energy Center, PA.

Wind Tour 2004

Wind Energy Business Overview

FPL Energy Wind Tour 2004Waymart Energy Center, PA

2Wind Tour 2004

Agenda

I. Wind Industry Update Mike O’Sullivan

II. FPL Energy Pat Caramante

III. Wind Forecasting Andrew Garrad

Wind Tour 2004

Mike O’Sullivan

Wind Industry Update2004 and Beyond

4Wind Tour 2004

We are neither hunters nor gatherers. We are wind developers

5Wind Tour 2004

Wind – A Real and Growing Business

• Most competitive renewable technology

– with PTCs, a typical wind facility competes favorably with a combined cycle project’s output at gas prices above $4 mmBtu (non-firm energy only)

• Public policy trends support renewables

– Renewable Portfolio Standards in 12 states– IRS Section 45 production tax credits

6Wind Tour 2004

Attractive Business Profile

• Long-term contracts (15-25 years) with creditworthy off-takers – Significant value in addition to PTCs

• Attractive returns– Accretive in first full year

• Limited recourse senior debt financing is achievable for well structured deals – Validated by the FPLE American Wind financing, July

2003

7Wind Tour 2004

Then and Now“Old” Oak Creek Wind Farm, CA

60 KW turbines, 1984Solano County, CA

Vestas 1.8 MW turbines, 2003

1980 1990 2003

12 39 70 +

50 500 1,500+

60% 90% 98% +

Rotor diameter (meters) kw per turbine Availability Wind energy PPA (¢/kWh) 40 10 2-5

8Wind Tour 2004

U.S. Wind Market Share (mw) Pre 2001 2001 2002 2003 Market Size

Total New Capacity Installed 2,578 1,697 410 1,689 1 6,374 1

FPL Energy Contribution 576 843 201 2 812 2 2,719 3

FPL Energy New Contribution % 50% 49% 48%

FPL Energy Total Market % 22% 33% 37% 43%3

FPL Energy 43%

Competitors with less than 50 MW (<1%) each 18%

Competitors at

~1 to <7% each 39%

1 AWEA estimate as of 1/22/042 Excludes 123 MW of acquisitions in 2002, and 164 MW of acquisitions in 20033 Total FPL Energy 2,719 mw with acquisitions; includes Enron California (106MW)+LG&E (34MW)+PA (24MW)

US Market Share

9Wind Tour 2004

Not A Niche Industry Anymore

-

400

800

1,200

1,600

2,000

81 83 85 87 89 91 93 95 97 99 01 03-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

81 83 85 87 89 91 93 95 97 99 01 03

U.S. Wind PowerCapacity Additions

(mw)

U.S. Wind Power Cumulative Capacity

(mw)

Sources: DOE, AWEA, FPLE Estimates

10Wind Tour 2004

FPL Energy - 2003 Highlights

• 2,719 MW on Dec. 31, 2003 (total wind portfolio)

• We built in 2003, and now own and operate, 49% of all new U.S. wind installed

• 975 new MW added in 2003– Includes acquisitions (164 MW)

• Approximately $2.3 billion net-investment in wind at YE 2003

11Wind Tour 2004

2004: Key Issues We Face in the US Market

• PTC renewal uncertainty– Potentially dampens demand

• Adequate on site wind data

• Transmission and/or interconnection

• Creditworthiness of counter parties

• NIMBY, avian and environmental acceptance

12Wind Tour 2004

Our Wind Energy Focus in 2004 and Beyond

• Greenfield

• Late stage greenfield

• Acquisitions

13Wind Tour 2004

Key Factors for Success

• The right site– Land use and landowners

– Transmission and interconnection

– Wind data

• PPA with the right entity, at the

right price

• Good financials

• Public acceptance– Local community

– State-level political support

14Wind Tour 2004

The Right Site/Topography

15Wind Tour 2004

Wind Data

• Established wind regions

• Solid on-site data– 18-24+ months

– Strong correlation to long term reference tower data

• Rigorous examination of wind data– Outside consultants

– In-house meteorologist and statisticians

16Wind Tour 2004

Where the Wind Blows

Source: Pacific Northwest National Laboratory

17Wind Tour 2004

Finding Offtakers: FPLE’s Primary Focus

• Identify PPA customers

• Determine interest• Size (MW)

• Price (cents/kWh)

• Timing (2004, 2005, etc.)

• Does this plan “fit” with customer’s long-term plans?

• Competitive with their other wholesale choices?

18Wind Tour 2004

PPA Pricing and Credit

• Must be competitive– 2-5 cents (2003 national range)

• Should reflect realities of wholesale marketplace

• Captures value at wholesale and retail levels– Often includes green credits

• Buyer must be a “third-party financeable” entity

19Wind Tour 2004

Are The Financials Right?

• IRR

• ROE

• EPS

• Wind resource analysis

20Wind Tour 2004

Three Key Financial Drivers• PPA

– 15-25 years– 2.5-3.5 cents often with escalators

• PTCs– 1.8 cents plus inflation

escalators– State incentives important

• Other Tax Benefits– 50% Year 1 bonus

depreciation (expires YE ‘04)– 5 year MACRS

21Wind Tour 2004

Today’s Wind MUST Attract Non-Recourse Financing

• Reliable, diverse technology

• Better understanding of wind resource

• Long term PPAs with credit-worthy entities

22Wind Tour 2004

Today’s Wind Also Must Have

• The potential for “non-recourse” and limited recourse financing for future wind projects

– Bank financing– Private placements– 144A– Tax-driven structures

23Wind Tour 2004

As Well As...

• Construction expertise

• Timing

• Economies of scale• Transmission/

interconnection

• Credit-worthiness

24Wind Tour 2004

FPL Energy Wind – Our Competitive Advantage

• Business scale – U.S. and world leader

• Project development track record

• Quick to market – 3 to 6 months after permitting

• Tax appetite

• Creditworthy

• Efficient third-party financing access

25Wind Tour 2004

Tax Credit Renewal Spurs GrowthUS Annual Installation of New Wind

Capacity (mw)

Sources: Cambridge Energy Research Associates/ AWEA/FPLE

PTC Expires; Renewed Five Months Later

10 60170

357442

183 13447

(7)

12950 9 6

13545 24

(114)

220

602

52

1,707

447

1,660

80 82 84 86 88 90 92 94 96 98 00 02

PTC Expires

Energy Policy Act Creates

Production Tax Credit (PTC)

Expiration of Original Tax Credit

PTC Renewal

PTC Expires

(12/31/03)

26Wind Tour 2004

PTC LATERPTC NOW

27Wind Tour 2004

“Here it is--the plain unvarnished truth.”

“Well, varnish it!”

We NEED The PTC Extension

28Wind Tour 2004

Waymart Energy Center

29Wind Tour 2004

Waymart Site Information

• 43 GE 1.5s Wind Turbines– 64.5 MW

• 5 month Construction– October 2003

• 100% to Exelon Generation– A- / Baa1 rating

• 860 acres– 9 private landowners

• GE Wind O&M provider– 2 year agreement

30Wind Tour 2004

Wind Rose

Waymart Percent of Energy by Direction Rose

0.0%

10.0%

20.0%

30.0%

40.0%N

NNE

ENE

E

ESE

SSE

S

SSW

WSW

W

WNW

NNW

Percent of Energy

Waymart Percent of Hours by Direction Rose

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%N

NNE

ENE

E

ESE

SSE

S

SSW

WSW

W

WNW

NNW

Percent of Hours

31Wind Tour 2004

Wind Project ConstructionWind Project ConstructionManagement & OperationsManagement & Operations

Pat Caramante

32Wind Tour 2004

Topics to be Covered

1. FPL/FPLE Project Portfolio2. Wind Project Construction

– Organization– Sample Project Details

3. Wind Project Business Management / Accounting– Organization– Responsibilities

4. Wind Operations– Organization– Results

33Wind Tour 2004

A Leading U.S. Generator

OperatingUnder construction/ advanced development

3,037Wind

31,647Total

80Other

365Hydro

23,881Fossil

Generation Portfolio mw in operation 1

1 As of 1/31/04. Represents FPL Group’s gross mw in operation.Numbers may not add up due to rounding

160Solar

4,124Nuclear

34Wind Tour 2004

FPL Energy – Wind Management

• Largest Manager of Wind Generation in the World

– Manage over 3,000 MW

– 42 projects in 15 states

– Approximately $2.3 billion net-investment in wind at YE

2003

– Most experienced large scale owner/operator of wind

farms

35Wind Tour 2004

FPL Energy Wind Business

Dedicated Teams

• Development

• Special Valuation: Wind

• Construction

• Business Management

• Operations

• Accounting

Support Teams

• Finance

• Tax

• Environmental

• Legal / Real Estate

• Procurement

• Information Management

Not a Niche Business

36Wind Tour 2004

Wind Construction Organization

Steve ReuwerSenior DirectorWind Projects

Collie PowellDirector

Wind Projects

Donald MillerManager

Wind Projects

Joe MarcheseDirector

Wind Projects

Ken TalovichManager

Wind Projects

Robert HurtManager

Wind Projects

Guy HammondManager

Wind Projects

Kurt BeichelManager

Wind Projects

37Wind Tour 2004

Waymart Wind Energy CenterProject Details

• Foundations– 43 foundations

• 30 ft to 45 ft deep

– Excavations made using 15 ft diameter auger

– Approx. 50 yards of concrete and 9.25 tons of reinforcing steel per foundation

38Wind Tour 2004

Waymart Wind Energy CenterProject Details

• Weights– Turbine Nacelles - 125 tons

each– Blades - 7.25 tons each– Towers - 125 tons each

39Wind Tour 2004

Waymart Wind Energy CenterProject Details

• Roads– 23.5 miles of roads

• Collection system– 21 miles of 34.5 kV cable

connecting each WTG to the substation

• SCADA System– Starts/stops turbines– Turns turbines/blades

40Wind Tour 2004

Wind Business Management Organization

Bryan FennellVice President

Business Management - Wind

Jim KuteyBusiness Mgr

StatelineVansycle

Sunanda BeharaBusiness Mgr

CabazonGreen Power

Chuck GorsuchAssoc. Bus. Mgr.

North DakotaSouth Dakota

Wyoming

Rebecca PerreeSr. Assoc.B Mgr.Altamont Power

AIC, WPP90,WPP91, WPP93

Nancy Schilling Administrative

Assistant

Rohit ChibBusiness Director

BadgerLake Benton II

Bill HaydukBusiness MgrGRS / GRP

WPP 91-2 / 92High Winds

Henrietta McBeeBusiness MgrBackbone Mt

PA WindWaymart

Eugene CrossAssoc. Bus. Mgr.

MeyersdaleMill Run

Somerset

Tim CurleyBusiness Director

West TexasPecosUpton

Ed BullingerSr. Assoc B. Mgr.Cameron Ridge

RidgetopPacific Crest

SR / VG

John GoodwinSr. Assoc. B.Mgr.

Delaware MtIndian Mesa

NM / OK / Sooner

Glenda WrightAssoc. Bus. Mgr.

Cerro GordoGray County

Hancock County

Scott Scovill Assoc. Bus.Mgr.Mojave 16/17/18Mojave 3/5, TPC

41Wind Tour 2004

FPL Energy - Business Management

• 12 Business Managers dedicated to wind

– Each Project has a dedicated Business Manager

– Manages financial and commercial aspects of the projects

– Direct project P&L responsibility

• Responsibilities

– Project Management

– Contract Management

– Budget & Forecasting

– Asset Optimization

42Wind Tour 2004

FPL Energy- Project Accounting

• Independent from Business Management and Project Development

• Ensures adherence to internal controls, accounting policies & procedures, and GAAP

• 13 controllers focused on wind facilities– Average of approximately 11 years of experience– Most CPAs with national CPA firm experience

• The controllers for wind are directly and indirectly supported by approximately 45 systems, financial reporting, and processing support personnel

43Wind Tour 2004

FPL Power Generation Division Organization

Sr. Vice PresidentSr. Vice Presidentofof

Power Generation DivisionPower Generation Division

Tony RodriquezTony Rodriquez

Jim Keener

Vice PresidentVice PresidentWind Operations, PGD Wind Operations, PGD Start-up Assurance and Start-up Assurance and

CommissioningCommissioning

Vice PresidentVice PresidentFPL OperationsFPL Operations

Al AlfonsoAl Alfonso

General ManagerGeneral ManagerProduction AssuranceProduction Assurance

General ManagerGeneral ManagerBusiness ServicesBusiness Services

Sr. DirectorSr. DirectorCentral Central

MaintenanceMaintenance

Vice PresidentVice PresidentTechnical ServicesTechnical Services

Vice PresidentVice PresidentFPL Energy OperationsFPL Energy Operations

Jim KeenerJim KeenerBob FritzBob Fritz

Pam SonnelitterPam Sonnelitter Bill BrannenBill Brannen Pete KiernanPete KiernanKeith HardyKeith Hardy

OperationsOperations

SupportSupport

44Wind Tour 2004

FPLE Wind Operations Organization

Robert P FritzVice President

Bob A TrianaManager

Electrical Ops

Dan MandliGeneral Manager

New Business

Thomas KelleyPlant ManagerAPWRA & V80

Dean LandonGeneral Manager

V-47 & M750

Fernando StalkerMgr - Bus. Svcs.

James CoakleyGM - ProdAssurance

Pat CaramanteGeneral Manager

GE 1.5 & M1.5

Michael BarriosGeneral Manager

Z750 & KVS33

45Wind Tour 2004

FPL Energy – Operations

• Largest wind farm operators in the world– Operate and maintain over 6,000 WTGs– Operations Team with over 200 personnel dedicated to

the Wind Business (not just a small part of a gas group)– Fleet Teams and Project Assurance Engineers that

specialize in turbine technologies– Dedicated SMEs for each discipline including civil, wind,

turbines, electrical, and transmission

46Wind Tour 2004

Leveraging Technology to Improve Performance

• Monitors real-time and historical power plant data• Provides live video and audio links• Provides for real-time benchmarking performance

among similar components across the fleet

Fleet Performance and Diagnostic Center

47Wind Tour 2004

Quality Focus Enabling Us to Deliver Results

• Process mindset

• Utilizing quality tools and techniques ingrained in culture

• Replicating and adopting best practices across the fleet

Pe

rce

nt

- 100

SHAFT

FAILURE

D. Assembly

Possiblecause

Effect

B. T urbine Location

B1. windy ridge

C. Design

E. Incorrect Operation

E2. Power production

E1. Past Operations

Ran wind 1989 season @125KW

A1. Poor Quality Control

Surface flaws B2. Tower wake

D1. Blade Calibration

D2. Proper Power Lock torque

Incorrect Radius C4. Locking Device

SKF taper lock

Power lock

C1. Shaft Diameter

C2. Material spec

C3. Load Model

procedure

tool calibration

Control system problemallowed negative pitch angleoperation

Run @110 KW vs. rated 100KW

A. Manufacturing

YBO YBS YBI MMBMFW

Loss of Machine Assembly Pareto 1998-2002

WT

G L

oss

es

- 00 -

72 -

n=72

4003002001000

380

370

360

350

340

Blade Number

Unb

alan

ced

Bla

de W

eigh

ts

RB 146, Unbalanced Blade Weights, 4/26/03

1 1

1

Mean=357.1

UCL=373.7

LCL=340.5

USL=375

LSL=335

N=383

48Wind Tour 2004

FPL Energy - Operations Results

• Best in class availability results for wind farm operations– Fleet wide availability of greater than 96% across 6,000

WTGs– Newer WTGs operated at greater than 97% availability– Operate over 2,000, 15+ year old Kenetech WTGs with

over 92% availability

• Apply best practices and economies of scale to reduce O&M costs to lowest in industry

49Wind Tour 2004