Florida Public Service Commission
Tallahassee, Florida
Application of
Florida Power & Light Company
For Authority to Issue and Sell Securities
Pursuant to Section 366.04, Florida Statutes,
and Chapter 25-8, Florida Administrative Code
Address communications in connection with this Application to:
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Paul I. Cutler Treasurer & Assistant Secretary Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 694-6204 |
Eric E. Silagy Senior Vice President of Regulatory & State Governmental Affairs Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 304-5206 |
R. Wade Litchfield Vice President & General Counsel Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 691-7101 |
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The date of this Application is September 27, 2010.
APPLICATION OF
FLORIDA POWER & LIGHT COMPANY
FOR AUTHORITY TO ISSUE AND SELL SECURITIES
PURSUANT TO SECTION 366.04, FLORIDA STATUTES,
AND CHAPTER 25‑8, FLORIDA ADMINISTRATIVE CODE
A. Applicability.
This Application is filed in accordance with Section 366.04, Florida Statutes, and Chapter 25‑8, Florida Administrative Code.
B. Contents of Application.
1. Name and Principal Business Office Address.
Florida Power & Light Company (FPL)
700 Universe Boulevard
P.O. Box 14000
Juno Beach, Florida 33408
2. State and Date Incorporated.
· State of Florida – December 28, 1925
· Also qualified to do business in the States of Georgia and New Hampshire[1]
3. Persons Authorized to Receive Notices and Communications.
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Paul I. Cutler Treasurer & Assistant Secretary Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 694-6204 |
Eric E. Silagy Senior Vice President of Regulatory & State Governmental Affairs Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 304-5206 |
R. Wade Litchfield Vice President & General Counsel Florida Power & Light Company 700 Universe Boulevard P.O. Box 14000 Juno Beach, Florida 33408 Telephone (561) 691-7101 |
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4. Capital Stock and Funded Debt.
4(a)(b)(c) Information responsive to description, amount authorized and amount outstanding: These items are contained in Exhibit C Statement of Capital Stock and Debt as of June 30, 2010.
4(d) The amount held as reacquired securities: At June 30, 2010, none. 4(e) The amount pledged by applicant: As of June 30, 2010, none.
As of June 30, 2010 FPL was the obligor on $633,270,000 aggregate principal amount of outstanding unsecured pollution control revenue bonds, solid waste disposal revenue bonds, and industrial development revenue bonds issued by certain political subdivisions of the State of Florida which presently pay interest at a variable rate. FPL has the option to cause the interest on the variable rate bonds to be paid at a fixed rate. If FPL exercises this option, except as otherwise permitted by the applicable bond documents, FPL presently is required to pledge an equal aggregate principal amount of its first mortgage bonds (or other credit enhancement in accordance with the applicable bond documents) as security for the payment of principal and interest on such fixed rate bonds.
4(f) The amount owned by affiliated corporations: At June 30, 2010 all of the common stock of FPL is owned by NextEra Energy, Inc., and FPL has no preferred or preference stock outstanding.
4(g) The amount of capital stock and funded debt held in any fund: None.
5. Proposed Transactions. FPL seeks authority to issue and sell and/or exchange any combination of the long‑term debt and equity securities described below and/or to assume liabilities or obligations as guarantor, endorser or surety in an aggregate amount not to exceed $6.1 billion during calendar year 2011. In addition, FPL seeks permission to issue and sell short‑term securities during the calendar years 2011 and 2012 in an amount or amounts such that the aggregate principal amount of short-term securities outstanding at the time of and including any such sale shall not exceed $4.0 billion.
The long‑term debt securities may include first mortgage bonds, medium-term notes, extendible commercial notes, debentures, convertible or exchangeable debentures, notes, convertible or exchangeable notes, or other straight debt or hybrid debt securities, whether subordinated or unsubordinated, secured or unsecured, including renewals and extensions thereof, with maturities ranging from one to one hundred years. FPL may issue long-term debt securities by extending the maturity of short-term securities. FPL may enter into warrants, options, rights, interest rate swaps or other derivative instruments. FPL may also enter into debt purchase contracts, obligating holders to purchase from FPL, and obligating FPL to sell, debt securities at a future date or dates.
In addition, FPL may enter into forward refunding or forward swap contracts during calendar year 2011. In conjunction with these forward contracts, FPL may issue and sell long-term debt through December 31, 2011, which FPL would commit to deliver under these forward contracts. Moreover, FPL may enter into installment purchase and security agreements, loan agreements, or other arrangements with political subdivisions of the States of Florida, Georgia or New Hampshire, or other states, if any, where FPL becomes qualified to do business, or pledge debt securities or issue guarantees in connection with such political subdivisions’ issuance, for the ultimate benefit of FPL, of pollution control revenue bonds, solid waste disposal revenue bonds, industrial development revenue bonds, variable rate demand notes or other “private activity bonds” with maturities ranging from one to forty years, bond anticipation notes or commercial paper. Such obligations may or may not bear interest exempt from federal, state, or local tax.
Contemplated to be included as long-term or short-term debt securities, as appropriate, are borrowings from banks and other lenders under FPL’s credit facilities and
other loan agreements, as those may be entered into and amended from time to time. Also contemplated to be included as long-term or short-term debt securities, as appropriate, are borrowings by a wholly-owned, special purpose subsidiary or subsidiaries of FPL from banks and other lenders under loan agreements or other arrangements, as those may be entered into and amended from time to time, with the proceeds of such borrowings to be used solely for the benefit of (1) FPL’s Florida utility operations, and (2) FPL’s customers. On May 10, 2006, FPL entered into a $250 million five-year resetting revolving term loan facility expiring in May 2011, which FPL is currently in the process of extending to May 2014. On April 3, 2007, FPL entered into a $2.5 billion five-year revolving credit and letter of credit facility, due April 3, 2012, with banks and other lenders. The revolving credit facility provides for, in addition to direct borrowings thereunder, the issuance of letters of credit for general corporate purposes. Effective April 3, 2008, lenders with commitments aggregating approximately $2.48 billion consented to the extension of their commitments to April 3, 2013 with one non-consenting lender's commitment of $17.0 million maturing on April 3, 2012. Effective May 28, 2009, the credit commitment of $26.9 million by Aurora Bank FSB (fka Lehman Brothers Bank FSB), which was scheduled to expire April 3, 2013, was terminated, thereby reducing the amount of total commitments under the revolving credit and letter of credit facility to approximately $2.47 billion. The aggregate principal amount of loans and letters of credit at anyone time outstanding under the revolving credit facility may not exceed the aggregate amount of the commitments. Borrowings under the revolving credit facility are available for general corporate purposes, including support of FPL's commercial paper program and other short-term borrowings and to provide additional liquidity in the event of a property loss, including a transmission and distribution property loss. On May 4,2010, FPL entered into a $500 million three-year revolving credit facility, due May 4, 2013 with banks and other lenders. The credit facility provides for the funding of loans up to an aggregate total of $500 million, which are available for FPL's general corporate purposes, including to provide back-up liquidity for FPL's commercial paper program and to provide liquidity in the event of a loss to FPL's operating facilities, including transmission and distribution facilities.
In addition, FPL has established an uncommitted credit facility with a bank. The bank may, at its discretion upon the request of FPL, make a short-term loan or loans to FPL in an aggregate amount determined by the bank, which is subject to change at any time. The terms of specific borrowings under the uncommitted credit facility, including maturities, are set at the time borrowing requests are made by FPL. Borrowings under the uncommitted facility may be used for general corporate purposes. Additionally, debt securities may be issued by FPL or its affiliates or subsidiaries in connection with one or more facilities secured by accounts receivable or involving the sale of accounts receivable or interests therein.
The equity securities may include common stock, preferred stock, preference stock, convertible preferred or preference stock, or warrants, options or rights to acquire such securities, or other similar rights exercisable for or convertible into preferred or preference stock, or purchase contracts obligating holders to purchase such securities, or other equity securities, with such par values, terms and conditions and relative rights and preferences as deemed appropriate by FPL and as are permitted by its Restated Articles of Incorporation, as amended and as they may be amended from time to time.
FPL may also enter into financings, whereby FPL would establish and make an equity investment in one or more special purpose limited partnerships, limited liability companies, statutory trusts or other entities. FPL, or a wholly-owned subsidiary of FPL, would act as or appoint the general partner, managing member, sponsor or other members of each such entity. The entity would offer preferred or debt securities to the public and use the proceeds to acquire debt securities from FPL. FPL would issue debt securities to the entity equal to the aggregate of its equity investment and the amount of preferred or debt securities sold to the public by the entity. FPL may also guarantee, among other things, the distributions to be paid by the affiliated entity to the preferred or debt securities holders. Payments by FPL on the debt securities sold to the entity would be used by that entity to make payments on the preferred or debt securities as well as on FPL's equity investment. Consequently, in the event of such a financing, to avoid double-counting, FPL would only count the total amount of debt securities issued to the entity, and would not count the equity securities issued by the entity to FPL, the preferred or debt securities issued by the entity, or the related FPL guarantees against the total amount of proposed long-term debt and equity securities.
In connection with the issuance (i) by FPL of long-term or short-term debt securities or preferred or preference stock or (ii) by an affiliated entity of preferred or debt securities, in which FPL, or the affiliated entity, is permitted by the terms of such securities to defer principal, interest or other distributions for certain payment periods, FPL may agree to sell additional equity securities and/or long-term or short-term debt securities and to use the proceeds from the sale of those other securities to make principal, interest or other distributions on such securities. In addition, in connection with the issuance (i) by FPL of long-term or short-term debt securities or preferred or preference stock or (ii) by an affiliated entity of preferred or debt securities, FPL may covenant, pledge or make other commitments in favor of holders of such securities, providing that the securities will not be redeemable or otherwise satisfied, discharged, defeased or otherwise acquired in certain circumstances unless the securities are redeemed or otherwise satisfied, discharged, defeased or otherwise acquired with the proceeds from the issuance of a security or securities satisfying the provisions set forth in such covenant, pledge or other commitment.
The exchange of FPL's securities may be by way of an exchange of a security of FPL for another security or securities of FPL or of one of its subsidiaries or affiliates, or the exchange of a security of FPL or of one of its subsidiaries or affiliates for the security or securities of another entity.
The manner of issuance and sale and/or exchange of securities will be dependent upon the type of security being offered, the type of transaction in which the securities are being issued and sold and/or exchanged and market conditions at the time of the issuance and sale and/or exchange.
The short-term securities will have maturities of not more than twelve months and may be secured or unsecured, subordinated or unsubordinated. FPL may enter into warrants, options, rights, interest rate swaps, currency swaps or other derivative instruments or other arrangements relating to, as well as contracts for the purchase or sale of, short-term securities. Consistent with Securities and Exchange Commission "no-action" letters, FPL may issue and sell commercial paper without compliance with the registration requirements of the Securities Act of 1933, as amended, subject to certain conditions.
The short-term securities are issued to provide funds to temporarily finance portions of FPL's construction program and capital commitments and for other corporate purposes. Significant parts of FPL's construction program may be financed temporarily through the sale of short-term securities from time to time. Also, during the 2011-2012 period, FPL may need short term financing for seasonal fuel requirements, for contingency financing such as fuel adjustment under-recoveries or storm restoration costs, and for the temporary funding of maturing or called long-term debt or equity securities.
The interest rate that FPL could pay on debt securities will vary depending on the type of debt instruments and the terms thereof, including specifically the length of maturity and whether the debt is secured or unsecured and subordinated or unsubordinated, as well as market conditions. On June 30, 2010 it is estimated that a new issue of a 3D-year first mortgage bond of FPL would have carried a yield to maturity of approximately 6.41 % (with such estimated yield derived from the June 2010 Blue Chip Forecast). The dividend rate for preferred or preference stock is similarly affected by the terms of the offering. On June 30, 2010 it is estimated a new issue of preferred stock of FPL would have carried a dividend yield of approximately 6.875%.
In addition, FPL may from time to time issue instruments of guaranty, collateralize debt and other obligations, issue other securities, and arrange for the issuance of letters of credit and guarantees, in any such case to be issued (1) by FPL or by one or more of its subsidiaries or affiliates for the benefit of FPL's utility operations, (ii) by non-affiliates in connection with FPL's utility operations, (iii) by FPL or by or on behalf of one or more of its subsidiaries or affiliates in connection with FPL customers' installations of energy efficiency measures, and/or (iv) in connection with other financings by FPL or on its behalf. To the extent that FPL issues instruments of guaranty, collateralizes debt or other obligations, issues other securities or arranges for the issuance of letters of credit or guarantees by or on behalf of FPL or by or on behalf of one or more of its subsidiaries, affiliates or non-affiliates to benefit its utility operations, FPL will clearly demonstrate such benefits.
FPL will file a consummation report with the Florida Public Service Commission (the Commission) in compliance with Rule 25-8.009, Florida Administrative Code, within 90 days after the end of any fiscal year in which it issues securities.
6. Purposes of Issues. It is expected that the net proceeds to be received from the issuance and sale and/or exchange (if there are any net proceeds from an exchange) of the additional long-term debt and equity securities (with the exception of the proceeds of the issuance and sale of any pollution control revenue bonds, solid waste disposal revenue bonds, industrial development revenue bonds, variable rate demand notes or other "private activity bonds" or similar securities which will be used for specific purposes) will be added to FPL's general funds and will be used to finance the acquisition or construction of additional electric facilities and equipment, as well as capital improvements to and maintenance of existing facilities; to reacquire, by redemption, purchase, exchange or otherwise, any of its outstanding debt securities or equity securities; to repay all or a portion of any maturing long-term debt obligations; to satisfy FPL's obligations under guarantees; to repay all or a portion of short-term bank borrowings, commercial paper and other short-term debt outstanding at the time of such transactions; and/or for other corporate purposes. Proceeds, if any, may be temporarily invested in short-term instruments pending their application to the foregoing purposes. During the period 2011-2012, approximately $95.6 million of FPL's long-term debt will mature.
FPL maintains a continuous construction program, principally for electric generation, transmission and distribution facilities. As of June 30, 2010, FPL estimated that capital expenditures under its 2011-2012 construction program will approximate $5.7 billion, including Allowance for Funds Used During Construction (AFUDC) (see Exhibit B).
Anticipated construction expenditures in the 2011-2012 period (see Exhibit B) include four projects that required a determination of need. Preconstruction expenditures and potential construction expenditures relate to a fifth project that also required a determination of need, and although identification of projects involving preconstruction expenditures is not required by the applicable rules, the fifth project is identified herein for the sake of completeness and transparency. The first project that received a determination of need is West County Energy Center Unit 3, a 1,219 megawatt (summer) natural gas-fired generating unit. The need for West County Energy Center Unit 3 was approved by the Commission in Order No. PSC-08-0591-FOF-EI issued on September 12, 2008. The estimated construction cost for this project is approximately $864.7 million including AFUDC and transmission interconnection costs. As of June 30,2010, development, design and construction costs, including AFUDC and transmission interconnection costs expended on West County Energy Center Unit 3 were approximately $671 million. The second project that received a determination of need is the addition of approximately 400 megawatts of increased generating capacity at FPL's existing Turkey Point Nuclear Generating Station and St. Lucie Nuclear Power Plant (each an Uprate and collectively, the Uprates). This increased capacity is scheduled to come in service in 2011, 2012 and 2013. The need for these capacity Uprates was approved by the Commission in Order No. PSC-08-0021-FOF-EI issued on January 7, 2008. The Florida Department of Environmental Protection Final Order for the Site Certification was issued in September 2008 for the St. Lucie Nuclear Power Plant Uprate and October 2008 for the Turkey Point Nuclear Generating Station Uprate. The non-binding cost estimate range for the Uprates is approximately $2.05 billion to $2.3 billion, including AFUDC and transmission interconnection costs, and the updated estimate of increased generating capacity is approximately 450 megawatts. As of June 30, 2010, the total design and construction costs, including AFUDC and transmission interconnection costs expended on the Uprates were approximately $467.7 million. The third project that received a determination of need is the Cape Canaveral Energy Center, a 1,210 megawatt (summer) natural gas-fired generating unit. The need for the Cape Canaveral Energy Center was approved by the Commission in Order No. PSC-08-0591-FOF-EI issued on September 12, 2008. The estimated construction cost for this project is approximately $1.12 billion including AFUDC and transmission interconnection costs. As of June 30, 2010, development, design and construction costs, including AFUDC and transmission interconnection costs expended on Cape Canaveral Energy Center were approximately $54.2 million. The fourth project that received a determination of need is the Riviera Beach Energy Center, a 1,212 megawatt (summer) natural gas-fired generating unit. The need for the Riviera Beach Energy Center was approved by the Commission in Order No. PSC-08-0591-FOF-EI issued on September 12, 2008. The estimated construction costs for the Riviera Beach Energy Center is $1.28 billion, including AFUDC and transmission interconnection costs. As of June 30, 2010, development, design and construction costs, including AFUDC and transmission interconnection costs expended on the Riviera Beach Energy Center were approximately $3.6 million. The fifth project that received a determination of need is the addition of two nuclear units at FPL's existing Turkey Point Nuclear Generating Station (Turkey Point Units 6 & 7) that, for planning purposes, are projected to be brought into service between 2022 and 2023. Each of the units is projected to add approximately 1,100 megawatts of firm capacity. The Commission approved the need for Turkey Point Units 6 & 7 in Order No. PSC-08-0237 -FOF-EI issued on April 11, 2008. The non-binding cost estimate range for Turkey Point Units 6 & 7 is $12.8 billion to $18.7 billion, including AFUDC and transmission interconnection costs. As of June 30, 2010, total development, design and preconstruction costs, including AFUDC and transmission interconnection costs expended on Turkey Point Units 6 & 7 were approximately $106.2 million. A more detailed description of the five projects described above in this paragraph can be found in the Ten Year Site Plan on file with the Commission.
Under future market conditions, the interest rate on new issue long-term debt or the dividend rate on new issue preferred or preference stock of FPL may be such that it becomes economically attractive to reacquire a portion or all of certain of its long-term debt securities or equity securities, providing an opportunity for FPL to reduce interest or dividend expense even after accounting for such other considerations as the (i) reacquisition premium, (ii) other associated reacquisition expenses and (iii) related income tax effects. This reduction would be beneficial to FPL's customers and, with proper regulatory treatment, would not be detrimental to FPL's common shareholder. Other important considerations in making such a decision would include an assessment of anticipated future interest and dividend rates and FPL's ability to raise enough new capital to finance its construction program while concurrently pursuing any refinancing opportunities. FPL might also consider reacquiring a portion or all of certain of its long-term debt securities or equity securities for reasons other than interest or dividend expense reduction. The forward refunding contracts would be for the purpose of refunding long-term debt (including but not limited to refunding pollution control revenue bonds, solid waste disposal revenue bonds and industrial development revenue bonds) which may be issued on FPL's behalf and which can be callable. Under federal tax law, the refunding of pollution control revenue bonds, solid waste disposal revenue bonds and industrial development revenue bonds with tax-exempt bonds issued more than 90 days prior to the redemption or retirement of the outstanding issue is heavily restricted. However, through a forward refunding contract, FPL could lock-in prevailing tax-exempt fixed rates for refunding pollution control revenue bonds, solid waste disposal revenue bonds and industrial development revenue bonds which would be issued 90 days prior to a call date of the outstanding issue. Alternatively, FPL could enter into a forward swap contract, to become effective on a call date of the outstanding issue, to lock-in prevailing tax-exempt fixed rates. Under future market conditions, it may be economical to enter into forward refunding or forward swap contracts, and any anticipated savings generated by such forward transactions would be spread over the combined life of the outstanding bonds and the refunding bonds starting with the execution of the forward contract.
FPL has an affiliate that promotes the installation of energy efficiency measures by contracting with customers to guarantee the anticipated energy savings. To facilitate FPL's customers' installations of energy efficiency measures, FPL may issue instruments of guaranty, collateralize debt or other obligations, issue other securities, or arrange for the issuance of letters of credit or guarantees to promote energy efficiency savings contracted for by FPL or FPL subsidiaries or affiliates with FPL customers.
7. Facts Supporting Legality, Necessity or Appropriateness. In addition to the reasons shown under "Purposes of Issues", the proposed issues are consistent with the proper performance by FPL of service as a public utility, will enable and permit FPL to perform that service, and are necessary and appropriate for such purpose and other corporate purposes.
8. Name and Address of Counsel Passing upon the Legality of the Proposed Issues. It is expected that one or more of the following counsel will pass upon the legality of the proposed issues:
Hogan Lovells U.S. LLP
555 Thirteenth Street, NW
Washington, District of Columbia 20004
Attention: Richard J. Parrino, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Thomas P. Giblin, Jr., Esq.
Sidley Austin LLP
555 California Street
San Francisco, California 94104
Attention: Eric D. Tashman, Esq.
Squire, Sanders & Dempsey L.L.P.
1900 Phillips Point West
777 South Flagler Drive
West Palm Beach, Florida 33401
Attention: Thomas R. McGuigan, Esq.
9. Other State or Federal Regulatory Body. If required, a Registration Statement and/or prospectus supplement with respect to each public sale or exchange of securities hereunder subject to the Securities Act of 1933, as amended, will be filed with the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549. In addition, certain state securities or "blue sky" laws may require the filing of consents to service of process or other documents with applicable state securities commissions in connection with a public or private sale of securities.
10. Control or Ownership. There is no measure of control or ownership exercised by or over FPL by any other public utility. FPL is a subsidiary of FPL Group, Inc., which is a holding company as defined in the Public Utility Holding Company Act of 2005.
11. Exhibits.
Exhibit Number
* A(6) Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and Form 10‑Q for the quarter ended June 30, 2010.
B 2011 and 2012 Sources and Uses of Funds Forecast and Construction Budget for Gross Property Additions.
C Statement of Capital Stock and Debt as of June 30, 2010.
· As permitted by Rule 25‑8.003(1)(a)(6), Florida Administrative Code, FPL is satisfying the requirements for Schedules A(1) through A(5) by submitting its Annual Report on Form 10‑K for the fiscal year ended December 31, 2009 and Form 10‑Q for the quarter ended June 30, 2010 in conjunction with this Application.