Economic Analyses of FPL’s New Nuclear Projects: An Overview

1. Economic Analyses of FPL’s New Nuclear Projects: An Overview Dr. Steven Sim Senior Manager, Resource Assessment & Planning Florida Power & Light Company October 20, 2011

2. Background • Florida Power & Light Company (FPL) currently has 4 nuclear-powered generating units; two at its Turkey Point site and two at its St. Lucie site • These 4 nuclear units comprise about 2,900 MW of generating capacity and supply about 20% of FPL’s annual electricity output • FPL is currently pursuing approximately 2,650 MW of additional, new nuclear generating capacity through two projects: - Extended Power Uprates (EPU) Project: Increase the capacity (450 MW) at FPL’s 4 existing nuclear units (projected to be completed in 2012 & 2013) - Turkey Point 6 & 7 Project: Add two new nuclear units at the Turkey Point site (2,200 MW projected to completed in 2022 & 2023) The slides that follow provide an overview of the analyses that support pursuing these two nuclear projects for the benefit of FPL’s customers

3. FPL employs an Integrated Resource Planning (IRP) process when planning for future energy needs. Factors in Utility Resource Planning • First, all cost-effective conservation and demand side management options are identified and accounted for • Second, to meet the remaining projected electricity demand, generation alternatives are then considered • Economic and non-economic analyses of the generation alternatives are based on projections of impacts for the FPL system as a whole over the life of the alternatives • Factors accounted for in these analyses include, but are not limited to, the following: • Fixed costs (upfront capital, annual O&M, etc.) • Variable annual system costs (fuel, environmental compliance, etc.) • Capacity factors (“Base Load” vs. “Peaking”) • Firm capacity or intermittent, non-firm energy • Fuel Diversity All system cost and other impacts must be accounted for when evaluating competing generation alternatives

4. Overview of the Economic Analyses for the Two Nuclear Projects • FPL’s basic analytical approach accounts creates two long-range resource plans, one with the nuclear project and one with a competing generation alternative • The projected operation of FPL’s system over many years is then evaluated assuming first one, then the other, resource plan is implemented • Because the future costs of fuels (oil, natural gas, etc.) and compliance with environmental regulations is not known, the economic analyses address this fact by performing separate analyses for possible future scenarios that include at least the following: - 3 forecasts of future fuel costs (low, medium, and high) - 3 forecasts of future environmental compliance costs In this way, the economic viability of the nuclear projects can be evaluated over a very wide range of possible future conditions

5. I. The EPU Project • FPL received approval from the Florida Public Service Commission (FPSC) to proceed with the EPU project in 2008 • The EPU project is nearing completion. Work at 3 of the 4 nuclear units is projected to be completed in 2012 and work at the remaining unit is projected to be completed in early 2013 • The total installed cost of the project is currently projected to be approximately $2.5 billion. Of that amount, approximately $0.7 billion, or $700 million, has already been spent • These values, plus the projected fuel savings on the FPL system over the remaining lives of the 4 nuclear units, is graphically displayed on the following page The following slide presents a snapshot of two key factors in the economic analysis of the EPU project: construction cost vs system fuel savings

6. The EPU Project: Comparison of Actual Costs Spentt, Projected Costs Remaining to Complete, and Projected System Fuel Savings (Million $, Nominal, approximate)

7. I. The EPU Project • The results of the most recent economic analyses for the EPU project, including the snapshot presented on the preceding page, are consistent with the results previously provided to the FPSC annually from 2007 through 2010 • In each of these analyses, the EPU project was projected to be an economical addition for FPL’s customers • And, in addition to providing economic benefits, the EPU project is projected to provide other benefits to FPL’s customers including: - significant reductions in FPL system use of fossil fuels - significant reductions in FPL system air emissions (SO2, NOX, CO2, etc.) From the start of the project in 2007 through the present, analyses of the EPU project have consistently projected it to be a cost-effective addition for FPL’s customers

8. II. The Turkey Point 6 & 7 Project • FPL also received approval from the FPSC to proceed with the Turkey Point 6 & 7 (TP 6&7) project in 2008 • There are two basic steps to the TP 6&7 project: - Obtain all necessary federal licenses and permits to construct and operate the new units, especially the Combined Operating License (COL) (currently projected by or after late 2013) - Construct the two new units (currently projected to be completed in 2022 for TP 6 and 2023 for TP 7) • The cost to obtain the COL (plus other necessary licenses and permits) is currently projected to be approximately $215 million of which approximately $130 million has been spent • The cost of building the two new nuclear units cannot yet be projected with a high level of certainty, but for purposes of this discussion, a total construction cost of approximately $18 billion is assumed The following 3 slides present a snapshot of key factors in the economic analysis of the TP 6&7 project: COL costs, construction cost, and system fuel savings

9. Projected Cost for Obtaining a COL for TP 6&7 (Million $, Nominal, approximate)

10. Projected Costs for Obtaining a COL & Building TP 6&7(Million $, Nominal, approximate)

11. The TP 6&7 Project: Comparison of Projected Costs of COL, Building TP 6&7, and System Fuel Savings (Million $, Nominal, approximate)

12. II. The TP 6&7 Project • As shown by the graph on the preceding pages, the costs currently being incurred for licenses and permits is very small relative to the potential fuel savings from TP 6&7 • In addition, the projected fuel savings of $75 billion for the TP 6&7 project far exceeds the projected cost of building the two nuclear units • FPL’s current total annual fuel bill is approximately $4 billion and this fuel bill accounts for roughly half of a customer’s monthly electric bill The projected fuel savings from TP 6&7 is equivalent to no fuel costs for FPL’s customers for more than 18 years at current fuel costs

13. II. The TP 6&7 Project • The results of the most recent economic analyses for the TP 6&7 project, including the snapshot presented on the preceding pages, are consistent with the results previously provided to the FPSC annually from 2007 through 2010 • In each of these analyses, the TP 6&7 project was projected to be an economical addition for FPL’s customers • And, in addition to providing economic benefits, the TP 6&7 project – like the EPU project, only to a much greater extent - is projected to provide other benefits to FPL’s customers including: - significant reductions in FPL system use of fossil fuels - significant reductions in FPL system air emissions (SO2, NOX, CO2, etc.) From the start of the project in 2007 through the present, analyses of the TP 6&7 project have consistently projected it to be a cost-effective addition for FPL’s customers

14. Nuclear generation offers a unique combination of attributes that address several areas of concern Nuclear’s Unique Attributes • As a generation alternative, nuclear has direct benefits: • Firm capacity • High availability & base load operation (90%) • Low and stable fuel costs • High energy density (MW/acre) to limit land requirements • As a part of a portfolio, nuclear has system benefits • Fuel source diversity and cost stabilization • Fuel supply reliability and on-site reserves • Emission-free operation • Technology diversity • From a policy perspective, nuclear offers • Energy security • Meaningful progress on greenhouse gas emissions Nuclear generation offers unique and beneficial features not provided by any other type of generation alternative

15. Back Up Information

16. I. The EPU Project The table below presents the complete results of the most recent (August 2011) analyses FPL provided to the FPSC regarding the projected total economic impacts of the EPU project on the entire FPL system:

17. II. The TP 6&7 Project • The table below presents the complete results of the most recent (August 2011) analyses FPL provided to the FPSC regarding the projected total economic impacts of the TP 6&7 project on the entire FPL system in terms of breakeven costs: • The current projected range of construction costs to which these breakeven costs are compared is $3,483/kw to $5,063/kw