Fitch Rates Florida Power & Light Company's First Mortgage Bonds 'AA-'

  Fitch Rates Florida Power & Light Company's First Mortgage Bonds 'AA-'

Business Wire

NEW YORK -- June 3, 2013

Fitch Ratings has assigned an 'AA-' rating to Florida Power & Light Company's
(FPL) issue of $500 million 2.75% series first mortgage bonds due June 1,
2023. The Rating Outlook is Stable. FPL plans to use the net proceeds from
this offering to repay all or a portion of a $425 million term loan that
matures on Sept. 30, 2013, a portion of its outstanding commercial paper
borrowings, which stood at approximately $411.3 million as of May 29, 2013,
and for other general corporate purposes.

FPL's ratings reflect the predictable nature of cash flows from regulated
electric operations, a favorable outcome to the recently concluded base rate
case that provides for at least four years of regulatory certainty, recovering
electric sales in its service territory after a prolonged trough, and a strong
balance sheet and liquidity profile. The ratings also reflect high-capex
investments over 2013-16 as the utility spends on new generation and other
infrastructure improvements.

The outcome of FPL's 2012 base rate case filing was quite constructive, in
Fitch's opinion, and resulted in a $350 million base rate increase effective
January 2013 and allows the utility to earn a return on equity (ROE) of up to
a 100-basis point band around 10.5%. FPL was also granted a four-year
generation base rate adjustment (GBRA) mechanism that automatically adjusts
base rates on commercial operations of its new generation plants in 2013, 2014
and 2016, and reflects an approximately $3.5 billion addition to the rate
base. While the order spans a four-year term (till December 2016), FPL could
potentially delay filing a rate case for a longer period by proactively
managing its costs. A favorable turnaround in the regulatory climate in
Florida and an extended period of regulatory certainty is a key credit
positive for FPL.

A recovering Florida economy could drive FPL's electric sales growth rates
above national averages over Fitch's forecast period. Adjusted for weather,
FPL's retail kWH sales grew 1.7% in 2011 and 1.8% in 2012. Fitch's financial
forecasts for FPL are based on a conservative 1.0% cumulative annual growth
rate over 2013-16; any upside in sales growth would be positive for FPL's
credit metrics. Conversely, a flat or declining growth environment could put
pressure on FPL's financial performance. That said, FPL's credit metrics are
expected to be quite robust in 2013 on the heels of a favorable rate decision
and there exists adequate headroom to withstand a long period of
flat-to-negative growth, which is what Fitch has assumed in its stress case.
This is also a key factor in the stability of FPL's ratings, since the utility
cannot implement a base rate increase outside the GBRA mechanism before
December 2016.

FPL plans to spend over $9.2 billion in baseline capex through 2016. Of this
amount, approximately $2 billion will be spent on modernizing its aging gas
fleet at Cape Canaveral, Riviera Beach and Port Everglades. All these projects
have been approved by the Florida Public Service Commission (FPSC). Recovery
of these expenditures will be via the GBRA mechanism and is expected to result
in only modest price increases for consumers due to the anticipated fuel cost
savings. Infrastructure improvements and maintenance expenditures make up the
bulk of the remaining capex budget.

In addition, FPL has identified another $4 billion-$5 billion of incremental
investment opportunities in areas such as storm hardening, generation
upgrades, solar investment, natural gas pipeline and other
infrastructure/reliability improvements. The visibility around the incremental
capex is low at present; Fitch has assumed that FPL spends between $3
billion-$3.5 billion in incremental capex over the forecast period. Fitch
expects FPL to finance its capex needs using a mix of equity and debt so as to
maintain its regulatory capital structure. Reflecting the additional capex in
financial assumptions does pressure FPL's forecasted credit metrics, since
there will likely be a regulatory lag associated with some of these
incremental investments.

Fitch anticipates FPL's credit metrics to strengthen in 2013 and beyond as a
result of the $350 million base rate increase effective 2013, stepped-up GBRA
increases, and rate increases associated with the ongoing nuclear uprates.
Fitch expects the EBITDA coverage ratio to be 8.0-8.5x and Debt-to-EBITDA
ratio to be in the 2.4x-2.6x range towards the end of the forecast period. The
funds flow from operations (FFO)-based credit measures remain robust over
2013-14 due to bonus depreciation benefits, and decline to more normalized
levels thereafter. Fitch forecasts FFO-to-Debt to be in the 25%-27% range and
FFO-to-interest coverage to approximate 7.0x toward the end of the forecast
period.

RATING SENSITIVITIES

Change in Florida Regulation: Unfavorable changes in current Florida
regulatory policies for timely recovery of utility capital investments, fuel
and purchased power costs, and storm-related costs would adversely affect
FPL's ratings.

Increasing Parent Risk Profile: If parent, Nextera Energy, Inc. (NEE),
increases its debt leverage or changes its corporate strategy such that NEE's
risk profile materially worsens, it could adversely affect FPL's ratings in
line with Fitch's Parent and Subsidiary Rating Linkage Criteria.

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

Applicable Criteria and Related Research:

--'Recovery Ratings and Notching Criteria for Utilities', Nov. 13, 2012;

--'Corporate Rating Methodology', Aug. 8, 2012;

--'Parent and Subsidiary Rating Linkage', Aug. 8, 2012;

--'Rating North American Utilities, Power, Gas and Water Companies', May 16,
2011.

Applicable Criteria and Related Research:

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=792754

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Contact:

Fitch Ratings
Primary Analyst
Shalini Mahajan, CFA, +1 212-908-0351
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Glen Grabelsky, +1 212-908-0577
Managing Director
or
Committee Chairperson
Philip Smyth, +1 212-908-0531
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com
 
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