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FPL Energy is one of the nations leading independent generators of electricity. Dedicated to generating clean energy, 80 % of its capacity is fueled by clean and renewable resources. The United States is the nation with the largest generator of wind energy, and it operates the two largest solar fields in the world. FPL Group, with annual revenues of more than $ 8 billion, is one of the nation's largest providers of electricity-related services. Its principal subsidiary, Florida Power & Light Company, serves approximately 3. 9 million customer accounts in Florida.
FPL Energy, LLC, and FPL Group energy-generating subsidiary, is a leader in producing electricity from clean and renewable fuels. 2. Historical Overview FPL Group is a far different company today than the one Jim Broadhead joined in January of 1989 when he became president and chief executive officer. FPL Group was then engaged in a number of businesses unrelated to its core electric skills, including insurance and financial services, real estate, cable television, and agriculture. The company's principal subsidiary, Florida Power and Light, was considered a well-managed utility with an emphasis on quality. However, the utility's spiraling costs had resulted in electric rates among the highest in the Southeast. Today, FPL Group is nationally known as a high quality, efficient, and customer-driven organization focused on energy-related products and services.
With a growing presence in more than a dozen States, it is widely recognized as one of the country's premier power companies. FPL's rates are among the lowest in the industry, due primarily to a decade-long emphasis on reducing costs. At the same time, the utility's performance is vastly improved with productivity and reliability at all time highs. The transformation of FPL Group from a traditional, old-fashioned utility to a proven winner in both regulated and deregulated markets began soon after Mr. Broadhead arrived.
Based on his experience in the natural resources and telephone industries - and taking into account the mood of the nation regarding competition - Mr. Broadhead thought it likely that the electric business would follow other industries previously deregulated. To ensure the company's long-term success, Mr. Broadhead asked employees to focus on four areas: cost-effective operations; a commitment to quality; strong customer orientation; and speed and flexibility. In 1991 FPL underwent a top-to-bottom restructuring and re-staffing.
The entire organization was streamlined, layers of management were reduced, and bureaucratic procedures eliminated. That same year the sale of the Colonial Penn insurance subsidiary launched the beginning of the company's divestiture program and confirmed its refocus on the power business. In late 1992, passage of the National Energy Policy Act signaled additional changes in the industry, prompting a cost reduction program to be initiated in 1993. Despite the significant reductions, FPL's performance continued to improve. Most notably perhaps, the Turkey Point nuclear plant, which had been on the Nuclear Regulatory Commission's "watch list" when Mr.
Broadhead joined the company, received its best NRC rating ever. In 1994 - in a bold and unprecedented move that took the entire electric utility industry by surprise - Mr. Broadhead announced a new financial policy that included reducing FPL Group's common stock dividend by nearly one-third. This put the company's percentage of corporate earnings paid as dividends in line with other competitive industries. The dividend reduction initially drew heavy criticism, but the financial community quickly endorsed the move as a reflection of FPL Group's emergence as a growth company. As one analyst said, "This early and aggressive action will further enhance an already sound competitive profile. " In 1995, Mr.
Broadhead's peers selected him Financial World magazine's "CEO of the Year." By that time the actions taken by Mr. Broadhead were producing a multitude of benefits for the company, including improved credit ratings, positive cash flow for the first time in years, and rising stock value. In recognition of the company's achievements, Fortune Magazine in 1998 declared FPL Group "the brightest light in utilities" and America's "most admired" power company. During the remainder of the 90 s and into the 21 st century, FPL continued to achieve significant improvements in service, reliability, and plant performance while operating and maintenance costs continued to be driven down. In 1999 a rate reduction agreement - made possible because of the utility's increased efficiencies - lowered residential base rates by nearly nine percent and provided customer savings of more than $ 1 billion. Outside of Florida the company was beginning to take advantage of new growth opportunities through FPL Energy, which rapidly established its presence in the independent power business as a leader in the use of environmentally friendly fuels and renewable energy sources.
FPL Energy's contributions to earnings increased significantly. And in 2000 a new subsidiary called FPL Fiber Net was launched, which soon became Florida's leading wholesale provider of fiber optic services. Jim Broadhead's objective was to build on the solid foundation of FPL and its energy-related expertise to strengthen FPL Group and build long term shareholder value. During his 13 -year tenure, FPL's power capability expanded by nearly one-third while non-utility power production increased more than seven-fold. Overall, the company's power capacity grew almost 50 percent to nearly 25, 000 megawatts. This helped to nearly double the value of FPL Group from $ 4. 7 billion to more than $ 9 billion and rewarded shareholders with an annualized total return well above the industry average.
Customers, meanwhile, were rewarded with the lowest electric rates since 1984. "I think what pleased me most during my time here was our ability to add more than a million new customers without increasing rates, " says Mr. Broadhead. "This has made people's lives a little easier and reduced the costs companies pay for energy, making it possible for them to create jobs. It has made Florida an even more attractive place to live and work. " 3. Dividend Policy at FPL Group. Inc. Firms pay dividends to reward their shareholders for investing in the company.
Shareholders are the owners of the firm, and the dividends are their share of the firms profits. The dividends induce the shareholders to continue investing in the company rather than investing elsewhere in the market. The advantage of paying dividends is that the dividend signals the firms financial stability. The ability to pay dividends promotes the confidence of the market in the firms prospects.
Dividends not only encourage...
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