FPL Group profits drop 48 percent; Loss fueled by plunging net income in renewable energy

FPL Group Inc., owner of Florida's largest utility, reported a 48 percent drop in its net income for the second quarter Thursday largely due to a massive drop in profits for its renewable energy subsidiary.

FPL reported a small rise in quarterly earnings for its other subsidiary, Florida Power & Light Co.

FPL Group Inc., the largest U.S. producer of wind power, said second-quarter profits fell 48 percent on a drop in the valuation of energy contracts. Its net income declined to $209 million, or 52 cents a share, from $405 million, or $1.01, a year earlier. Revenue fell 8.8 percent to $3.59 billion.

FPL Energy, the alternative energy arm of the company, reported a decrease in net income of 98.5 percent to $3 million in the second quarter from $203 million last year. The net income of Florida Power & Light Co., which provides electricity for 4.5 million customers in Florida, increased by 2.8 percent to $217 million from $211 million.

The news comes days after the state of Florida shuttered the utility's Sunshine Energy Program because most of the money collected from customers was spent on marketing and administration instead of on renewable energy projects.

Excluding such items as an unrealized after-tax loss of $157 million related to hedging, FPL earned $375 million or 93 cents a share. That equaled the average of 12 analyst estimates compiled by Bloomberg. Profit from competitive electricity sales, excluding the impact of the energy contracts, rose 16 percent to $169 million in the quarter from a year earlier.

"The competitive business came in strong as expected," said Barry Abramson, who helps manage $30 billion in assets, including about 850,000 FPL shares, at Gamco Investors Inc. in Rye, New York. He cited growth in the company's wind portfolio.

The company adjusts the valuation of contracts used to lock in margins to reflect current market prices for power-plant fuel and electricity.

FPL has expanded by buying nuclear reactors and building wind farms outside of its home state. FPL also plans to build new solar capacity in California and Florida. The company completed its $924 million purchase of the Point Beach nuclear plant in Wisconsin last year.

FPL's nuclear reactors provide a cost advantage over some other fuel types. U.S. nuclear plants generated electricity in the second quarter for as little as $18 per megawatt-hour, 78 percent less than the cost for the most efficient plants fueled by natural gas, according to Jeremy Sussman, an analyst at Natixis Bleichroeder in New York.

Florida Power & Light's year-over-year growth in customer accounts was about 21,000, or 0.5 percent. The 15-year average is about 2 percent, FPL said.

The company has been affected by an "unusually difficult" economy in Florida, Lewis Hay III, FPL Group's chief executive officer, said Thursday during a conference call with analysts and investors. Hay said conditions will improve sometime in the future from the "cyclical" trend.

FPL closed at $64.53, up 36 cents, in New York Stock Exchange composite trading.

Staff Writer Julie Patel contributed to this report.