Derivative Instruments

NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the commodity price risk inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated primarily with outstanding and expected future debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets.

With respect to commodities related to NEE's competitive energy business, NEER employs risk management procedures to conduct its activities related to optimizing the value of its power generation and gas infrastructure assets, providing full energy and capacity requirements services primarily to distribution utilities, and engaging in power and gas marketing and trading activities to take advantage of expected future favorable price movements and changes in the expected volatility of prices in the energy markets. These risk management activities involve the use of derivative instruments executed within prescribed limits to manage the risk associated with fluctuating commodity prices. Transactions in derivative instruments are executed on recognized exchanges or via the over-the-counter (OTC) markets, depending on the most favorable credit terms and market execution factors. For NEER's power generation and gas infrastructure assets, derivative instruments are used to hedge all or a portion of the expected output of these assets. These hedges are designed to reduce the effect of adverse changes in the wholesale forward commodity markets associated with NEER's power generation and gas infrastructure assets. With regard to full energy and capacity requirements services, NEER is required to vary the quantity of energy and related services based on the load demands of the customers served. For this type of transaction, derivative instruments are used to hedge the anticipated electricity quantities required to serve these customers and reduce the effect of unfavorable changes in the forward energy markets. Additionally, NEER takes positions in energy markets based on differences between actual forward market levels and management's view of fundamental market conditions, including supply/demand imbalances, changes in traditional flows of energy, changes in short- and long-term weather patterns and anticipated regulatory and legislative outcomes. NEER uses derivative instruments to realize value from these market dislocations, subject to strict risk management limits around market, operational and credit exposure.

Derivative instruments, when required to be marked to market, are recorded on NEE's and FPL's consolidated balance sheets as either an asset or liability measured at fair value. At FPL, substantially all changes in the derivatives' fair value 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 and purchased power cost recovery clause (fuel clause). For NEE's non-rate regulated operations, predominantly NEER, essentially all changes in the derivatives' fair value for power purchases and sales, fuel sales and trading activities are recognized on a net basis in operating revenues; fuel purchases used in the production of electricity are recognized in fuel, purchased power and interchange expense; and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's consolidated statements of income. Settlement gains and losses are included within the line items in the consolidated statements of income to which they relate. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis in the consolidated statements of income. For commodity derivatives, NEE believes that, where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Settlements related to derivative instruments are primarily recognized in net cash provided by operating activities in NEE's and FPL's consolidated statements of cash flows.

In January 2016, NEE discontinued hedge accounting for its cash flow and fair value hedges related to interest rate and foreign currency derivative instruments and, therefore, all changes in the derivatives' fair value, as well as the transaction gain or loss on foreign denominated debt, are recognized in interest expense in NEE's consolidated statements of income. In addition, for the year ended December 31, 2016, NEE reclassified approximately $18 million ($11 million after tax), respectively, from AOCI to interest expense primarily because it became probable that a related future transaction being hedged would not occur. At December 31, 2016, NEE's AOCI included amounts related to the discontinued interest rate cash flow hedges with expiration dates through March 2035 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $80 million of net losses included in AOCI at December 31, 2016 is expected to be reclassified into earnings within the next 12 months as the principal and/or interest payments are made. Such amounts assume no change in scheduled principal payments.

Fair Value of Derivative Instruments - The tables below present NEE's and FPL's gross derivative positions at December 31, 2016 and December 31, 2015, as required by disclosure rules. However, the majority of the underlying contracts are subject to master netting agreements and generally would not be contractually settled on a gross basis. Therefore, the tables below also present the derivative positions on a net basis, which reflect the offsetting of positions of certain transactions within the portfolio, the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral (see Note 4 - Recurring Fair Value Measurements for netting information), as well as the location of the net derivative position on the consolidated balance sheets.



	December 31, 2016
	Fair Values of Derivatives Not Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Fair Values of Derivatives Not Designated as Hedging Instruments for Accounting Purposes - Net Basis
	Assets		Liabilities		Assets		Liabilities
	(millions)
NEE:
Commodity contracts	$	4,590	$	2,968	$	1,938	$	483
Interest rate contracts	288		284		296		292
Foreign currency contracts	1		106		1		106
Total fair values	$	4,879	$	3,358	$	2,235	$	881

FPL:
Commodity contracts	$	212	$	4	$	209	$	1

Net fair value by NEE balance sheet line item:
Current derivative assets^(a)					$	885
Noncurrent derivative assets^(b)					1,350
Current derivative liabilities							$	404
Noncurrent derivative liabilities							477
Total derivatives					$	2,235	$	881

Net fair value by FPL balance sheet line item:
Current derivative assets					$	209
Current derivative liabilities							$	1
Total derivatives					$	209	$	1

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(a)	Reflects the netting of approximately $96 million in margin cash collateral received from counterparties.


(b)	Reflects the netting of approximately $71 million in margin cash collateral received from counterparties.



	December 31, 2015
	Fair Values of Derivatives Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Fair Values of Derivatives Not Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Total Derivatives Combined - Net Basis
	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
	(millions)
NEE:
Commodity contracts	$	—	$	—	$	5,906	$	4,580	$	1,937	$	982
Interest rate contracts	33		155		2		160		34		319
Foreign currency contracts	—		132		—		—		—		127
Total fair values	$	33	$	287	$	5,908	$	4,740	$	1,971	$	1,428

FPL:
Commodity contracts	$	—	$	—	$	7	$	225	$	4	$	222

Net fair value by NEE balance sheet line item:
Current derivative assets^(a)									$	712
Assets held for sale									57
Noncurrent derivative assets^(b)									1,202
Current derivative liabilities^(c)											$	882
Liabilities associated with assets held for sale											16
Noncurrent derivative liabilities^(d)											530
Total derivatives									$	1,971	$	1,428

Net fair value by FPL balance sheet line item:
Current derivative assets									$	3
Noncurrent other assets									1
Current derivative liabilities											$	222
Total derivatives									$	4	$	222

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(a)	Reflects the netting of approximately $279 million in margin cash collateral received from counterparties.


(b)	Reflects the netting of approximately $151 million in margin cash collateral received from counterparties.


(c)	Reflects the netting of approximately $46 million in margin cash collateral paid to counterparties.


(d)	Reflects the netting of approximately $13 million in margin cash collateral paid to counterparties.

At December 31, 2016 and 2015, NEE had approximately $5 million and $27 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets in the above presentation. These amounts are included in current other liabilities on NEE's consolidated balance sheets. Additionally, at December 31, 2016 and 2015, NEE had approximately $129 million and $116 million (none at FPL), respectively, in margin cash collateral paid to counterparties that was not offset against derivative assets or liabilities in the above presentation. These amounts are included in current other assets on NEE's consolidated balance sheets.

Income Statement Impact of Derivative Instruments - Losses related to NEE's cash flow hedges, which were previously designated as hedging instruments, are recorded in NEE's consolidated financial statements (none at FPL) as follows:



	Year Ended December 31, 2015											Year Ended December 31, 2014
	Interest Rate Contracts				Foreign Currency Contracts				Total			Interest Rate Contracts				Foreign Currency Contracts				Total

Losses recognized in OCI	$	(113	)		$	(12	)		$	(125	)	$	(132	)		$	(89	)		$	(221	)
Losses reclassified from AOCI to net income	$	(73	)	^(a)	$	(15	)	^(b)	$	(88	)	$	(77	)	^(a)	$	(78	)	^(b)	$	(155	)

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(a)	Included in interest expense.


(b)	For 2015 and 2014, losses of approximately $11 million and $8 million, respectively, are included in interest expense and the balances are included in other - net.

Gains (losses) related to NEE's derivatives not designated as hedging instruments are recorded in NEE's consolidated statements of income as follows:



	Years Ended December 31,
	2016			2015		2014
	(millions)
Commodity contracts:^(a)
Operating revenues	$	459		$	932	$	420
Fuel, purchased power and interchange	(1		)	8		1
Foreign currency contracts - interest expense	14			—		—
Foreign currency contracts - other - net	(1		)	—		(1		)
Interest rate contracts - interest expense	181			8		(64		)
Losses reclassified from AOCI to interest expense:
Interest rate contracts	(90		)	—		—
Foreign currency contracts	(11		)	—		—
Total	$	551		$	948	$	356

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(a)	For the years ended December 31, 2016, 2015 and 2014, FPL recorded gains (losses) of approximately $203 million, $(326) million and $(289) million, respectively, related to commodity contracts as regulatory liabilities (assets) on its consolidated balance sheets.

Notional Volumes of Derivative Instruments - The following table represents net notional volumes associated with derivative instruments that are required to be reported at fair value in NEE's and FPL's consolidated financial statements. The table includes significant volumes of transactions that have minimal exposure to commodity price changes because they are variably priced agreements. These volumes are only an indication of the commodity exposure that is managed through the use of derivatives. They do not represent net physical asset positions or non-derivative positions and their hedges, nor do they represent NEE's and FPL's net economic exposure, but only the net notional derivative positions that fully or partially hedge the related asset positions. NEE and FPL had derivative commodity contracts for the following net notional volumes:



	December 31, 2016					December 31, 2015
Commodity Type	NEE			FPL		NEE			FPL
	(millions)
Power	(84	)	MWh^(a)	—		(112	)	MWh^(a)	—
Natural gas	1,002		MMBtu^(b)	618	MMBtu^(b)	1,321		MMBtu^(b)	833	MMBtu^(b)
Oil	(7	)	barrels	—		(9	)	barrels	—

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(a)	Megawatt-hours


(b)	One million British thermal units

At December 31, 2016 and 2015, NEE had interest rate contracts with notional amounts totaling approximately $15.1 billion and $8.3 billion, respectively, and foreign currency contracts with notional amounts totaling approximately $705 million and $715 million, respectively.

Credit-Risk-Related Contingent Features - Certain derivative instruments contain credit-risk-related contingent features including, among other things, the requirement to maintain an investment grade credit rating from specified credit rating agencies and certain financial ratios, as well as credit-related cross-default and material adverse change triggers. At December 31, 2016 and 2015, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $1.3 billion ($5 million for FPL) and $2.2 billion ($224 million for FPL), respectively.

If the credit-risk-related contingent features underlying these derivative agreements were triggered, certain subsidiaries of NEE, including FPL, could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain derivative contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL's and NEECH's credit ratings were downgraded to BBB/Baa2 (a two level downgrade for FPL and a one level downgrade for NEECH from the current lowest applicable rating), applicable NEE subsidiaries would be required to post collateral such that the total posted collateral would be approximately $110 million (none at FPL) and $165 million ($20 million at FPL) as of December 31, 2016 and 2015, respectively. If FPL's and NEECH's credit ratings were downgraded to below investment grade, applicable NEE subsidiaries would be required to post additional collateral such that the total posted collateral would be approximately $990 million ($10 million at FPL) and $1.4 billion ($185 million at FPL) as of December 31, 2016 and 2015, respectively. Some derivative contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered, applicable NEE subsidiaries could be required to post additional collateral of up to approximately $225 million ($115 million at FPL) and $270 million ($120 million at FPL) as of December 31, 2016 and 2015, respectively.

Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At December 31, 2016, applicable NEE subsidiaries have posted approximately $1 million (none at FPL) in cash and $30 million (none at FPL) in the form of letters of credit which could be applied toward the collateral requirements described above. At December 31, 2015, applicable NEE subsidiaries have posted approximately $123 million ($3 million at FPL) in the form of letters of credit which could be applied toward the collateral requirements described above. FPL and NEECH have credit facilities generally in excess of the collateral requirements described above that would be available to support, among other things, derivative activities. Under the terms of the credit facilities, maintenance of a specific credit rating is not a condition to drawing on these credit facilities, although there are other conditions to drawing on these credit facilities.

Additionally, some contracts contain certain adequate assurance provisions where a counterparty may demand additional collateral based on subjective events and/or conditions. Due to the subjective nature of these provisions, NEE and FPL are unable to determine an exact value for these items and they are not included in any of the quantitative disclosures above.