Fitch Rates FPL Group Capital's $400MM 2.6% Debentures 'A-'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A-' rating to the 2.6% unsecured five-year debentures issued by FPL Group Capital Inc. (Group Capital; Issuer Default Rating [IDR] 'A-'). The proceeds from the offering will be used for general corporate purposes, including to repay all or a portion of outstanding indebtedness under term loan agreements which mature on or before Sept. 17, 2011, or to repay a part of outstanding commercial paper. The Rating Outlook of Group Capital is Negative.

The debentures are unconditionally guaranteed by Group Capital's parent, NextEra Energy, Inc (NEE; IDR 'A-' with a Negative Rating Outlook). NEE's ratings are supported by sound liquidity and satisfactory cash flow from two businesses: its utility subsidiary Florida Power & Light (FP&L) and Group Capital's non-regulated energy subsidiary, NextEra Energy Resources (NEE Resources). Although NEE's consolidated financial credit measures are not as robust as those of 'A-' peers, Fitch takes into consideration the following favorable factors: (1) NEE Resources' assets are concentrated in non-carbon emitting resources, and any future controls on carbon emissions or coal-fired generation may enhance and will not reduce cash flows; (2) NEE Resources hedges forward its power output with a balanced mix of physical contracts and derivatives; and (3) over $4 billion of project finance debt included in NEE's consolidated debt balance have no recourse or only limited recourse to corporate support (typically a limited undertaking to monetize tax benefits such as production tax credits relating to a project.)

Credit concerns reflected in the Negative Rating Outlook include: projected weak forward wholesale power and capacity prices; increased competition in the renewable energy field; and the effects on FP&L of an unfavorable January 2010 base rate decision and adverse economic conditions in Florida.

Recent developments: A pending settlement agreement that FP&L has negotiated with key intervenors is on the docket of the Florida Public Service Commission for consideration at the Commission's Aug. 31, 2010 meeting. If approved, the result would be to freeze and extend the current base rates until the end of 2012, but with added revenues approved in 2011-2012 for cost recovery relating to the new West County combined-cycle natural gas unit, subject to an annual limit of estimated fuel savings resulting from the unit's operation. Among other features of the proposed settlement, the utility would have a more streamlined procedure for cash recovery of costs relating to storm damage. In Fitch's view, approval of the settlement would indicate a reduction in uncertainty and regulatory exposure for FP&L for the next several years.

Ratings of NEE and Group Capital could be adversely affected by pursuit of more speculative power development or acquisitions without assured off-take arrangements; increased energy marketing and trading activities; inability to renew expiring contracts; use of higher debt leverage; or materially adverse state regulatory developments affecting FP&L that are unlikely to occur if the proposed settlement is approved.

Additional information is available at 'www.fitchratings.com'.

Related Research:

--'Corporate Rating Methodology', Aug. 16, 2010;

--'Credit Rating Guidelines for Regulated Utility Companies' July 31, 2007;

--'U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and Financial Guidelines' Aug. 22, 2007;

--'Utilities Sector Notching and Recovery Ratings', March 16, 2010.

Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Credit Rating Guidelines for Regulated Utility Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=334652

U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and Financial Guidelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=338030

Utilities Sector Notching and Recovery Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=504546

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