This discussion should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) appearing in the 2008 Form 10-K for FPL Group and FPL. The results of operations for an interim period generally will not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year period.

Results of Operations

FPL Group and NextEra Energy Resources segregate into two categories unrealized mark-to-market gains and losses on energy derivative transactions which are used to manage commodity price risk. The first category, referred to as trading activities, represents the net unrealized effect of actively traded positions entered into to take advantage of market price movements and to optimize the value of generation assets and related contracts. The second category, referred to as non-qualifying hedges, represents the net unrealized effect of derivative transactions entered into as economic hedges but which do not qualify for hedge accounting and the ineffective portion of transactions accounted for as cash flow hedges. At FPL, substantially all changes in the fair value of energy derivative transactions are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel clause or the capacity clause.

FPL Group's management uses earnings excluding certain items (adjusted earnings) internally for financial planning, for analysis of performance, for reporting of results to the Board of Directors and as inputs in determining whether performance targets are met for performance-based compensation under FPL Group's employee incentive compensation plans. FPL Group also uses adjusted earnings when communicating its earnings outlook to investors. Adjusted earnings exclude the unrealized mark-to-market effect of non-qualifying hedges and other than temporary impairment (OTTI) losses on securities held in NextEra Energy Resources' nuclear decommissioning funds, net of the reversal of previously recognized OTTI losses on securities sold and losses on securities where price recovery was deemed unlikely (collectively, OTTI reversals). FPL Group's management believes adjusted earnings provide a more meaningful representation of the company's fundamental earnings power. Although the excluded amounts are properly included in the determination of net income in accordance with generally accepted accounting principles, management believes that the amount and/or nature of such items make period to period comparisons of operations difficult and potentially confusing. Adjusted earnings does not represent a substitute for net income, as prepared in accordance with generally accepted accounting principles.

In March 2009, FPL, certain subsidiaries of NextEra Energy Resources and certain nuclear plant joint owners signed a settlement agreement with the U.S. Government (settlement agreement) agreeing to dismiss with prejudice lawsuits filed against the U.S. Government seeking damages caused by the U.S. Department of Energy's failure to dispose of spent nuclear fuel from FPL's and NextEra Energy Resources' nuclear plants. In connection with the settlement agreement, FPL Group established an approximately $153 million ($100 million for FPL) receivable from the U.S. Government and a liability to nuclear plant joint owners of $22 million ($5 million for FPL), which are included with other receivables and other current liabilities, respectively, in the condensed consolidated balance sheets at March 31, 2009. In addition, FPL Group reduced its March 31, 2009 property, plant and equipment balances by $107 million ($83 million for FPL) and, for the three months ended March 31, 2009, reduced operating expenses by $15 million ($12 million for FPL) and increased operating revenues by $9 million. The payments due from the U.S. Government under the settlement agreement increased FPL Group's net income for the three months ended March 31, 2009 by approximately $16 million ($9 million for FPL). A substantial portion of the amount due from the U.S. Government is expected during the second quarter of 2009. FPL and NextEra Energy Resources will continue to pay fees to the U.S. Government's nuclear waste fund.

Summary - Presented below is a summary of net income (loss) by reportable segment (see Note 10):

                            Three Months Ended
                                March 31,
                            2009          2008
                                (millions)

FPL                         $    127       $  108
NextEra Energy Resources         252          164
Corporate and Other              (15 )        (23 )
FPL Group Consolidated      $    364       $  249

The increase in FPL's results for the three months ended March 31, 2009 reflects the settlement agreement, lower operations and maintenance (O&M) expenses and a higher equity component of AFUDC (AFUDC † equity) partly offset by lower retail customer usage.

NextEra Energy Resources' results for the three months ended March 31, 2009 reflect additional earnings from new investments, the foreign, state and convertible ITCs tax benefits (see Note 4), as well as the absence of an unplanned outage in 2008 at the Seabrook nuclear facility and the settlement agreement. These additional earnings were partially offset by lower results in the remainder of the existing portfolio primarily due to Electric Reliability Council of Texas (ERCOT) market conditions, a refueling outage at the Duane Arnold nuclear site and lower wind generation primarily due to a particularly strong wind resource in the prior quarter. In addition, interest expense and administrative and general expenses were higher to support growth of the business. FPL Group's and NextEra Energy Resources' net income for the three months ended March 31, 2009 reflects net unrealized after-tax gains from non-qualifying hedges of $30 million while in the prior period net income reflects net unrealized after-tax losses from such hedges of $52 million. The change in unrealized mark-to-market activity is primarily attributable to changes in forward power and natural gas prices, as well as the reversal of previously recognized unrealized mark-to-market gains/losses as the underlying transactions are realized. As a general rule, a gain (loss) in the non-qualifying hedge category is offset by decreases (increases) in the fair value of related physical asset positions in the portfolio or contracts, which are not marked to market under generally accepted accounting principles. For the three months ended March 31, 2009 and 2008, NextEra Energy Resources recorded $31 million and $4 million, respectively, of after-tax OTTI losses on securities held in NextEra Energy Resources' nuclear decommissioning funds. For the three months ended March 31, 2009, NextEra Energy Resources had approximately $1 million of after-tax OTTI reversals; there were no such OTTI reversals for the three months ended March 31, 2008.

The improvement in results for Corporate and Other in 2009 is primarily due to additional interest income.

FPL - FPL's net income for the three months ended March 31, 2009 and 2008 was $127 million and $108 million, respectively, an increase of $19 million. The increase reflects the settlement agreement, lower O&M expenses and higher AFUDC
† equity partly offset by lower retail customer usage.

In March 2009, FPL filed a petition with the FPSC requesting, among other things, a permanent increase in base rates and charges effective January 2010 and an additional permanent base rate increase effective January 2011. To address the addition of FPL's West County Energy Center Unit No. 3 and any subsequent power plant additions, FPL is also requesting FPSC approval to continue the GBRA mechanism previously approved by the FPSC as part of the stipulation and settlement agreement regarding FPL's 2005 base rate case. If approved, the requested permanent base rate increases would increase annual retail base revenues year-over-year by approximately $1 billion in 2010 and an additional $250 million in 2011. FPL's requested increases are based on a regulatory return on common equity of 12.5% and exclude amounts associated with the proposed extension of the GBRA mechanism and certain proposed cost recovery clause adjustments. Hearings on this base rate proceeding are expected during the third quarter of 2009 and a final decision is expected by the end of 2009. The final decision may approve rates and other terms that are different from those that FPL has requested. The 2005 rate agreement and its provisions will terminate on the date new retail base rates become effective pursuant to an FPSC order. FPL expects that retail base revenues will increase approximately $65 million in 2009 when retail base rates are changed pursuant to the GBRA mechanism to reflect the placement in service of West County Energy Center Unit Nos. 1 and 2, which is expected to occur by the third quarter of 2009 and fourth quarter of 2009, respectively.

FPL's operating revenues consisted of the following:

                                                                  Three Months Ended
                                                                       March 31,
                                                                  2009           2008
                                                                      (millions)

Retail base                                                    $      794      $     822
Fuel cost recovery                                                  1,325          1,331
Other cost recovery clauses and pass-through costs                    404            333
Other, primarily pole attachment rentals, transmission and
wholesale sales and customer-related fees                              50             48
Total                                                          $    2,573      $   2,534

For the three months ended March 31, 2009, a decrease in the average number of customers of 0.4% decreased retail base revenues by approximately $3 million while a 4.4% decrease in usage per retail customer, primarily reflecting factors other than weather conditions, decreased retail base revenues by approximately $25 million. The decline FPL experienced in retail customer growth in the latter half of 2007 and throughout 2008 as well as a decline in non-weather related retail customer usage, which FPL believes is reflective of the economic slowdown and housing crisis that has affected the country and the state of Florida, has continued into 2009. FPL is unable to predict if growth in customers and non-weather related customer usage will return to previous trends. The decline in retail customer usage for the three months ended March 31, 2009 also reflects one less day of sales in 2009, as 2008 was a leap year.

Revenues from fuel and other cost recovery clauses and pass-through costs, such as franchise fees, revenue taxes and storm-related surcharges do not significantly affect net income; however, underrecovery or overrecovery of such costs can significantly affect FPL Group's and FPL's operating cash flows. Fluctuations in fuel cost recovery revenues are primarily driven by changes in fuel and energy charges which are included in fuel, purchased power and interchange expense in the condensed consolidated statements of income, as well as by changes in energy sales. Fluctuations in revenues from other cost recovery clauses and pass-through costs are primarily driven by changes in storm-related surcharges, capacity charges, franchise fee costs, the impact of changes in O&M and depreciation expenses on the underlying cost recovery clause, as well as changes in energy sales. Capacity charges and franchise fee costs are included in fuel, purchased power and interchange and taxes other than income taxes, respectively, in the condensed consolidated statements of income.

FPL uses a risk management fuel procurement program which was approved by the FPSC at the program's inception. The FPSC reviews the program activities and results for prudence on an annual basis as part of its annual review of fuel costs. The program is intended to manage fuel price volatility by locking in fuel prices for a portion of FPL's fuel requirements; any resulting gains or losses are passed through the fuel clause. The current regulatory asset for the change in fair value of derivative instruments used in the fuel procurement program amounted to approximately $1,309 million and $1,109 million at March 31, 2009 and December 31, 2008, respectively. The decrease in fuel revenues for the three months ended March 31, 2009 reflects approximately $58 million attributable to lower energy sales partly offset by approximately $52 million related to a higher average fuel factor. The increase in revenues from other cost recovery clauses and pass-through costs is primarily due to additional revenues associated with the nuclear cost recovery rule.

The major components of FPL's fuel, purchased power and interchange expense are as follows:

                                                                   Three Months Ended March 31,
                                                                     2009                2008
                                                                            (millions)

Fuel and energy charges during the period                         $       1,083       $       1,236
Net collection of previously deferred retail fuel costs                     254                 104
Other, primarily capacity charges net of any capacity deferral              132                 117
Total                                                             $       1,469       $       1,457

The decrease in fuel and energy charges for the three months ended March 31, 2009 reflects lower fuel and energy prices of approximately $104 million and $49 million attributable to lower energy sales. At March 31, 2009, approximately $1 million of retail fuel costs were deferred pending collection from retail customers in a subsequent period. The decrease from December 31, 2008 to March 31, 2009 in deferred clause and franchise expenses and the increase in deferred clause and franchise revenues (current and noncurrent, collectively) on FPL Group's and FPL's condensed consolidated balance sheets totaled approximately $266 million and positively affected FPL Group's and FPL's cash flows from operating activities for the three months ended March 31, 2009.

FPL's O&M expenses decreased $38 million for the three months ended March 31, 2009 reflecting lower nuclear, fossil generation and distribution costs of approximately $20 million, $12 million and $12 million, respectively. The decline in nuclear costs reflects a reimbursement of costs expected under the terms of the settlement agreement, as well as lower costs related to plant improvement initiatives and refueling and maintenance outages. The decline in fossil generation costs is primarily due to differences in the timing of plant overhauls which are expected to occur later this year. The decline in distribution costs reflects lower support costs and the timing of work activities. Other changes in O&M expenses were primarily driven by pass-through costs which did not significantly affect net income. Management expects O&M expenses in 2009 to exceed the 2008 level, primarily due to the absence of an environmental insurance policy termination which occurred in the fourth quarter of 2008, as well as higher expected nuclear, fossil generation, transmission, customer service, information management and other support costs and employee benefit costs.

Depreciation and amortization expense for the three months ended March 31, 2009 increased $36 million, reflecting the amortization of approximately $32 million of pre-construction costs associated with FPL's planned nuclear units recovered under the nuclear cost recovery rule and higher depreciation on transmission and distribution facilities (collectively, approximately $6 million) offset by a reduction in depreciation due to the settlement agreement.

The decline in interest expense for the three months ended March 31, 2009 is primarily due to a decline in average interest rates of approximately 62 basis points, partly offset by higher average debt balances. The decline in interest expense also reflects a higher debt component of AFUDC. The increase in AFUDC - equity for the three months ended March 31, 2009 is primarily attributable to additional AFUDC - equity on three natural gas-fired combined-cycle units of approximately 1,220 mw each at FPL's West County Energy Center in western Palm Beach County, Florida.

FPL is currently constructing the three natural gas-fired combined-cycle units at its West County Energy Center, which units are expected to be placed in service by the third quarter of 2009, fourth quarter of 2009 and mid-2011, respectively. In addition, FPL is in the process of adding approximately 400 mw of baseload capacity at its existing nuclear units at St. Lucie and Turkey Point, which additional capacity is projected to be placed in service by the end of 2012. In 2008, the FPSC approved FPL's plan to modernize its Cape Canaveral and Riviera power plants to high-efficiency natural gas-fired units. Each modernized plant is expected to provide approximately 1,200 mw of capacity and be placed in service by 2013 and 2014, respectively. Siting Board approval is pending and a decision is expected in early 2010. In April 2009, FPL filed a need petition with the FPSC for an approximately 300-mile underground natural gas pipeline in Florida, which is projected to be in service in 2014. If approved, the pipeline would supply natural gas to the Cape Canaveral and Riviera power plants once they are modernized. An FPSC decision is expected in July 2009. The pipeline requires additional approvals from, among others, the Siting Board.

In 2008, the FPSC approved FPL's need petition for two additional nuclear units at its Turkey Point site with projected in-service dates between 2018 and 2020, which units are expected in the aggregate to add between 2,200 mw and 3,040 mw of baseload capacity. Additional approvals from other regulatory agencies will be required later in the process. In 2009, FPL began recovering, under the capacity clause in accordance with the FPSC's nuclear cost recovery rule, pre-construction costs associated with FPL's planned nuclear units and carrying charges (equal to the pretax AFUDC rate) on construction costs associated with the addition of approximately 400 mw of baseload capacity. Substantially all of these costs are subject to a prudence review by the FPSC. The same rule provides for the recovery of construction costs, once the new capacity goes into service, through a base rate increase.

NextEra Energy Resources - NextEra Energy Resources' net income for the three months ended March 31, 2009 and 2008 was $252 million and $164 million, respectively, an increase of $88 million. The primary drivers, on an after-tax basis, of this increase were as follows:

                                                                          Increase (Decrease)
                                                                          Three Months Ended
                                                                            March 31, 2009
                                                                              (millions)

New investments (a)                                                            $            58
Existing assets (a)                                                                        (31 )
Full energy and capacity requirements services and trading                                  (6 )
Asset sale                                                                                   3
Interest expense, differential membership costs and other                                    8
Change in unrealized mark-to-market non-qualifying hedge activity (b)                       82
Change in OTTI losses on securities held in nuclear decommissioning
funds, net of OTTI reversals                                                               (26 )
Net income increase                                                            $            88


††††††††††
(a) Includes PTCs and ITCs on wind projects and ITCs on solar
    projects as well as tax benefits under the Recovery Act (see

The increase in NextEra Energy Resources' results from new investments reflects the addition of over 1,300 mw of wind generation during or after the first quarter of 2008 and the state and convertible ITCs tax benefits (see Note 4). Results from NextEra Energy Resources' existing asset portfolio decreased primarily due to unfavorable market conditions in the ERCOT region, a refueling outage at the Duane Arnold nuclear facility and lower wind generation primarily due to a particularly strong wind resource in the prior quarter. These decreased results from the existing asset portfolio were partially offset by the absence of an unplanned outage in 2008 at the Seabrook nuclear facility, favorable commodity margins from NextEra Energy Resources' retail energy provider and the settlement agreement.

NextEra Energy Resources' first quarter 2009 financial results reflect lower gains from its full energy and capacity requirements services and trading activities. Full energy and capacity requirements services include load-following services, which require the supplier of energy to vary the quantity delivered based on the load demand needs of the customer, as well as various ancillary services.

The asset sale represents the sale of wind development rights in 2009. The increase in interest expense, differential membership costs and other reflects the foreign tax benefit (see Note 4), partially offset by higher interest expense and corporate general and administrative costs due to growth of the business.

For the three months ended March 31, 2009, NextEra Energy Resources recorded after-tax net unrealized mark-to-market gains from non-qualifying hedges of approximately $30 million while in the prior period NextEra Energy Resources recorded $52 million of after-tax losses from such hedges. The change in unrealized mark-to-market activity is primarily attributable to changes in forward power and natural gas prices, as well as the reversal of previously recognized unrealized mark-to-market gains or losses as the underlying transactions were realized. For the three months ended March 31, 2009 and 2008, NextEra Energy Resources recorded $31 million and $4 million, respectively, of after-tax OTTI losses on securities held in NextEra Energy Resources' nuclear decommissioning funds. For the three months ended March 31, 2009, NextEra Energy Resources had approximately $1 million of after-tax OTTI reversals; there were no such OTTI reversals for the three months ended March 31, 2008.

Operating revenues for the three months ended March 31, 2009 increased $236 million primarily due to gains of $90 million on unrealized mark-to-market non-qualifying hedge activity during the three months ended March 31, 2009 compared to losses on such hedges of $205 million in the prior period. Excluding this mark-to-market activity, operating revenues decreased due to unfavorable market conditions in the ERCOT region, a refueling outage at the Duane Arnold nuclear facility and lower wind generation partially offset by higher revenues in the New England Power Pool region.

Operating expenses for the three months ended March 31, 2009 increased $109 million, reflecting $39 million of unrealized mark-to-market losses from non-qualifying hedges compared to $124 million of gains on such hedges in the prior period. Excluding these mark-to-market changes which are reflected in fuel, purchased power and interchange expense in FPL Group's condensed consolidated statements of income, operating expenses decreased primarily due to lower fuel costs partly offset by project additions and higher corporate general and administrative expenses to support the growth in NextEra Energy Resources' business.

Equity in earnings of equity method investees for the three months ended March 31, 2009 decreased $7 million due to the absence of certain favorable contractual provisions which benefited the prior quarter at a project in the PJM Interconnection, L.L.C. region. NextEra Energy Resources' interest expense for the three months ended March 31, 2009 increased $15 million reflecting higher average debt balances to support growth in the business, partly offset by lower average interest rates of approximately 56 basis points.

FPL Group's effective income tax rate for the three months ended March 31, 2009 and 2008 reflects PTCs for wind projects at NextEra Energy Resources. PTCs can significantly affect FPL Group's effective income tax rate depending on the amount of pretax income and wind generation. PTCs are recognized as wind energy is generated and sold based on a per kwh rate prescribed in applicable federal and state statutes, and amounted to approximately $72 million and $67 million for the three months ended March 31, 2009 and 2008, respectively. In addition, FPL Group's effective income tax rate for the three months ended March 31, 2009 was affected by the foreign, state and convertible ITCs tax benefits. See Note 4.

NextEra Energy Resources expects its future portfolio capacity growth to come primarily from wind and solar development and from asset acquisitions. NextEra Energy Resources plans to add a total of 7,000 mw to 9,000 mw of new wind generation over the 2008 to 2012 period, of which approximately 1,300 mw were added in 2008. NextEra Energy Resources expects to add over 1,000 mw in 2009, of which approximately 800 mw are either under construction or have obtained applicable internal approvals for construction. In addition, NextEra Energy Resources intends to pursue opportunities for new solar generating facilities. The wind and solar expansions are subject to, among other things, continued public policy support, which includes, but is not limited to, support for the construction and availability of sufficient transmission facilities and capacity, and access to reasonable capital and credit markets.

Corporate and Other - Corporate and Other is primarily comprised of interest expense, the operating results of FPL FiberNet and other business activities as well as corporate interest income and expenses. Corporate and Other allocates interest expense to NextEra Energy Resources based on a deemed capital structure at NextEra Energy Resources of 50% debt for operating projects and 100% debt for projects under construction. For these purposes, the deferred credit associated with differential membership interests sold by a NextEra Energy Resources subsidiary in 2007 is included with debt. Each subsidiary's income taxes are calculated based on the "separate return method," except that tax benefits that could not be used on a separate return basis, but are used on the consolidated tax return, are recorded by the subsidiary that generated the tax benefits. Any remaining consolidated income tax benefits or detriments are recorded at Corporate and Other. The major components of Corporate and Other's results, on an after-tax basis, are as follows:

                                                                       Three Months Ended
. . .