Common Shareholders' Equity

Stock-Based Compensation - On March 30, 2016, the FASB issued an accounting standards update related to the accounting for employee share-based payment awards including simplification in areas such as (i) income tax consequences; (ii) classification of awards as either equity or liabilities; and (iii) classification on the statement of cash flows. The standards update was effective for NEE beginning January 1, 2017, however, NEE early adopted the provisions of the standards update during the three months ended June 30, 2016 with an effective date of January 1, 2016. Upon adoption, NEE recorded approximately $18 million primarily related to previously unrecognized excess tax benefits in deferred income taxes with a resulting increase to retained earnings as of January 1, 2016. For the year ended December 31, 2016, the impact of the standards update resulted in approximately $30 million of excess tax benefits being recorded in NEE's consolidated statements of income. All other provisions of the standards update did not have a material impact to NEE's consolidated financial statements. The standards update had no effect on FPL.

Earnings Per Share - The reconciliation of NEE's basic and diluted earnings per share attributable to NEE is as follows:



	Years Ended December 31,
	2016		2015		2014
	(millions, except per share amounts)
Numerator - net income attributable to NEE	$	2,912	$	2,752	$	2,465
Denominator:
Weighted-average number of common shares outstanding - basic	463.1		450.5		434.4
Equity units, performance share awards, stock options, forward sale agreement and restricted stock^(a)	2.7		3.5		5.7
Weighted-average number of common shares outstanding - assuming dilution	465.8		454.0		440.1
Earnings per share attributable to NEE:
Basic	$	6.29	$	6.11	$	5.67
Assuming dilution	$	6.25	$	6.06	$	5.60

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(a)	Calculated using the treasury stock method. Performance share awards are included in diluted weighted-average number of common shares outstanding based upon what would be issued if the end of the reporting period was the end of the term of the award.

Common shares issuable pursuant to equity units, performance share awards, stock options and forward sale agreements and restricted stock which were not included in the denominator above due to their antidilutive effect were approximately 7.9 million, 3.5 million and 2.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Issuance of Common Stock and Forward Sale Agreement - In November 2013, NEE sold 4.5 million shares of its common stock at a price of $88.03 per share, and a forward counterparty borrowed and sold 6.6 million shares of NEE's common stock in connection with a forward sale agreement. In December 2014, NEE physically settled the forward sale agreement by delivering 6.6 million shares of its common stock to the forward counterparty in exchange for cash proceeds of approximately $552 million. The forward sale price used to determine the cash proceeds received by NEE was calculated based on the initial forward sale price of $88.03 per share less certain adjustments as specified in the forward sale agreement. Prior to the settlement date, the forward sale agreement had a dilutive effect on NEE’s earnings per share when the average market price per share of NEE’s common stock was above the adjusted forward sale price per share.

Forward Sale Agreements - In November 2016, NEE entered into forward sale agreements with several forward counterparties to be settled on a date or dates to be specified at NEE’s direction, no later than November 1, 2017. NEE may elect physical settlement, cash settlement or net share settlement for all or a portion of its obligations under the forward sale agreements. If NEE physically settles, it will deliver the shares of its common stock to the applicable forward counterparty in exchange for cash proceeds at the then applicable forward sale price, which represents the initial forward sale price of $124.00 per share, less certain adjustments as specified in the forward sale agreements. The forward sale transactions are classified as equity transactions because they are indexed to NEE's common stock and physical settlement is within NEE's control. At December 31, 2016, if NEE had settled the forward sale agreements by delivery of 12 million shares of its common stock to the forward counterparties, NEE would have received net proceeds of approximately $1.5 billion. Prior to the settlement date, the forward sale agreements will have a dilutive effect on NEE's earnings per share when the average market price per share of NEE's common stock is above the adjusted forward sale price per share. As of December 31, 2016, the adjusted forward sale price per share was greater than the average market price per share of NEE's common stock; accordingly the 12 million shares were antidilutive.

Common Stock Dividend Restrictions - NEE's charter does not limit the dividends that may be paid on its common stock. FPL's mortgage securing FPL's first mortgage bonds contains provisions which, under certain conditions, restrict the payment of dividends and other distributions to NEE. These restrictions do not currently limit FPL's ability to pay dividends to NEE.

Stock-Based Compensation - Net income for the years ended December 31, 2016, 2015 and 2014 includes approximately $77 million, $60 million and $60 million, respectively, of compensation costs and $30 million, $23 million and $23 million, respectively, of income tax benefits related to stock-based compensation arrangements. Compensation cost capitalized for the years ended December 31, 2016, 2015 and 2014 was not material. As of December 31, 2016, there were approximately $78 million of unrecognized compensation costs related to nonvested/nonexercisable stock-based compensation arrangements. These costs are expected to be recognized over a weighted-average period of 1.8 years.

At December 31, 2016, approximately 16 million shares of common stock were authorized for awards to officers, employees and non-employee directors of NEE and its subsidiaries under NEE's: (a) Amended and Restated 2011 Long Term Incentive Plan, (b) 2007 Non-Employee Directors Stock Plan and (c) earlier equity compensation plans under which shares are reserved for issuance under existing grants, but no additional shares are available for grant under the earlier plans. NEE satisfies restricted stock and performance share awards by issuing new shares of its common stock or by purchasing shares of its common stock in the open market. NEE satisfies stock option exercises by issuing new shares of its common stock. NEE generally grants most of its stock-based compensation awards in the first quarter of each year.

Restricted Stock and Performance Share Awards - Restricted stock typically vests within three years after the date of grant and is subject to, among other things, restrictions on transferability prior to vesting. The fair value of restricted stock is measured based upon the closing market price of NEE common stock as of the date of grant. Performance share awards are typically payable at the end of a three-year performance period if the specified performance criteria are met. The fair value of performance share awards is estimated primarily based upon the closing market price of NEE common stock as of the date of grant less the present value of expected dividends, multiplied by an estimated performance multiple which is subsequently trued up based on actual performance.

The activity in restricted stock and performance share awards for the year ended December 31, 2016 was as follows:



	Shares		Weighted- Average Grant Date Fair Value Per Share
Restricted Stock:
Nonvested balance, January 1, 2016	563,660		$	89.60
Granted	291,422		$	112.86
Vested	(274,144	)	$	85.62
Forfeited	(24,290	)	$	100.78
Nonvested balance, December 31, 2016	556,648		$	103.26
Performance Share Awards:
Nonvested balance, January 1, 2016	915,199		$	81.90
Granted	604,686		$	89.23
Vested	(630,773	)	$	69.40
Forfeited	(54,679	)	$	95.62
Nonvested balance, December 31, 2016	834,433		$	95.76

The weighted-average grant date fair value per share of restricted stock granted for the years ended December 31, 2015 and 2014 was $103.58 and $93.46 respectively. The weighted-average grant date fair value per share of performance share awards granted for the years ended December 31, 2015 and 2014 was $77.12 and $71.52, respectively.

The total fair value of restricted stock and performance share awards vested was $99 million, $108 million and $85 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Options - Options typically vest within three years after the date of grant and have a maximum term of ten years. The exercise price of each option granted equals the closing market price of NEE common stock on the date of grant. The fair value of the options is estimated on the date of the grant using the Black-Scholes option-pricing model and based on the following assumptions:



	2016	2015	2014
Expected volatility^(a)	16.37%	18.91%	20.32%
Expected dividends	3.16%	3.11%	3.11%
Expected term (years)^(b)	7.0	7.0	7.0
Risk-free rate	1.50%	1.84%	2.17%

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(a)	Based on historical experience.


(b)	Based on historical exercise and post-vesting cancellation experience adjusted for outstanding awards.

Option activity for the year ended December 31, 2016 was as follows:



	Shares Underlying Options		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Balance, January 1, 2016	2,866,501		$	63.39
Granted	294,889		$	111.67
Exercised	(651,492	)	$	55.37
Forfeited	(4,690	)	$	106.64
Balance, December 31, 2016	2,505,208		$	71.08	5.4	$	121

Exercisable, December 31, 2016	2,043,899		$	62.90	4.7	$	116

The weighted-average grant date fair value of options granted was $11.74, $13.62 and $14.09 per share for the years ended December 31, 2016, 2015 and 2014, respectively. The total intrinsic value of stock options exercised was approximately $42 million, $11 million and $30 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Cash received from option exercises was approximately $36 million, $9 million and $26 million for the years ended December 31, 2016, 2015 and 2014, respectively. The tax benefits realized from options exercised were approximately $16 million, $4 million and $11 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Preferred Stock - NEE's charter authorizes the issuance of 100 million shares of serial preferred stock, $0.01 par value, none of which are outstanding. FPL's charter authorizes the issuance of 10,414,100 shares of preferred stock, $100 par value, 5 million shares of subordinated preferred stock, no par value, and 5 million shares of preferred stock, no par value, none of which are outstanding.

Accumulated Other Comprehensive Income (Loss) - The components of AOCI, net of tax, are as follows:



	Accumulated Other Comprehensive Income (Loss)
	Net Unrealized Gains (Losses) on Cash Flow Hedges				Net Unrealized Gains (Losses) on Available for Sale Securities				Defined Benefit Pension and Other Benefits Plans			Net Unrealized Losses on Foreign Currency Translation			Other Comprehensive Income (Loss) Related to Equity Method Investee			Total
	(millions)
Balances, December 31, 2013	$	(115	)		$	197			$	23		$	(33	)	$	(16	)	$	56
Other comprehensive income (loss) before reclassifications	(141		)		62				(44		)	(25		)	(8		)	(156		)
Amounts reclassified from AOCI	98			^(a)	(41		)	^(b)	1			—			—			58
Net other comprehensive income (loss)	(43		)		21				(43		)	(25		)	(8		)	(98		)
Less other comprehensive loss attributable to noncontrolling interests	(2		)		—				—			—			—			(2		)
Balances, December 31, 2014	(156		)		218				(20		)	(58		)	(24		)	(40		)
Other comprehensive loss before reclassifications	(88		)		(7		)		(42		)	(27		)	—			(164		)
Amounts reclassified from AOCI	63			^(a)	(37		)	^(b)	—			—			—			26
Net other comprehensive loss	(25		)		(44		)		(42		)	(27		)	—			(138		)
Less other comprehensive loss attributable to noncontrolling interests	(11		)		—				—			—			—			(11		)
Balances, December 31, 2015	(170		)		174				(62		)	(85		)	(24		)	(167		)
Other comprehensive income (loss) before reclassifications	—				69				(21		)	(5		)	2			45
Amounts reclassified from AOCI	70			^(a)	(18		)	^(b)	—			—			—			52
Net other comprehensive income (loss)	70				51				(21		)	(5		)	2			97
Less other comprehensive income attributable to noncontrolling interests	—				—				—			—			—			—
Balances, December 31, 2016	$	(100	)		$	225			$	(83	)	$	(90	)	$	(22	)	$	(70	)

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(a)	Reclassified to interest expense and also to other - net in 2014 and 2015 in NEE's consolidated statements of income. See Note 3 - Income Statement Impact of Derivative Instruments.


(b)	Reclassified to gains on disposal of investments and other property - net in NEE's consolidated statements of income.