Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2017

Financial assets and liabilities and other fair value measurements

Recurring Fair Value Measurements - NEE's and FPL's financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:



	June 30, 2017
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash:^(b)
NEE - equity securities	$	359	$	—		$	—				$	359
FPL - equity securities	$	104	$	—		$	—				$	104
Special use funds:^(c)
NEE:
Equity securities	$	1,547	$	1,621	^(d)	$	—				$	3,168
U.S. Government and municipal bonds	$	354	$	162		$	—				$	516
Corporate debt securities	$	1	$	803		$	—				$	804
Mortgage-backed securities	$	—	$	458		$	—				$	458
Other debt securities	$	—	$	117		$	—				$	117
FPL:
Equity securities	$	424	$	1,478	^(d)	$	—				$	1,902
U.S. Government and municipal bonds	$	253	$	135		$	—				$	388
Corporate debt securities	$	—	$	575		$	—				$	575
Mortgage-backed securities	$	—	$	351		$	—				$	351
Other debt securities	$	—	$	106		$	—				$	106
Other investments:
NEE:
Equity securities	$	23	$	10		$	—				$	33
Debt securities	$	7	$	137		$	—				$	144
Derivatives:
NEE:
Commodity contracts	$	1,543	$	1,541		$	1,325	$	(2,595	)	$	1,814	^(e)
Interest rate contracts	$	—	$	154		$	—	$	(2	)	$	152	^(e)
Foreign currency contracts	$	—	$	—		$	—	$	8		$	8	^(e)
FPL - commodity contracts	$	—	$	26		$	1	$	(9	)	$	18	^(e)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,461	$	938		$	484	$	(2,454	)	$	429	^(e)
Interest rate contracts	$	—	$	189		$	117	$	(2	)	$	304	^(e)
Foreign currency contracts	$	—	$	43		$	—	$	8		$	51	^(e)
FPL - commodity contracts	$	—	$	8		$	3	$	(9	)	$	2	^(e)

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(a)

Includes the effect of the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral payments and receipts. NEE and FPL also have contract settlement receivable and payable balances that are subject to the master netting arrangements but are not offset within the condensed consolidated balance sheets and are recorded in customer receivables - net and accounts payable, respectively.


(b)	Includes restricted cash of approximately $142 million ($92 million for FPL) in other current assets on the condensed consolidated balance sheets.


(c)	Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at Other than Fair Value below.


(d)	Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.


(e)	See Note 2 - Fair Value of Derivative Instruments for a reconciliation of net derivatives to NEE's and FPL's condensed consolidated balance sheets.



	December 31, 2016
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash:^(b)
NEE - equity securities	$	982	$	—		$	—				$	982
FPL - equity securities	$	120	$	—		$	—				$	120
Special use funds:^(c)
NEE:
Equity securities	$	1,410	$	1,503	^(d)	$	—				$	2,913
U.S. Government and municipal bonds	$	296	$	170		$	—				$	466
Corporate debt securities	$	1	$	763		$	—				$	764
Mortgage-backed securities	$	—	$	498		$	—				$	498
Other debt securities	$	—	$	81		$	—				$	81
FPL:
Equity securities	$	373	$	1,372	^(d)	$	—				$	1,745
U.S. Government and municipal bonds	$	221	$	141		$	—				$	362
Corporate debt securities	$	—	$	547		$	—				$	547
Mortgage-backed securities	$	—	$	384		$	—				$	384
Other debt securities	$	—	$	70		$	—				$	70
Other investments:
NEE:
Equity securities	$	26	$	9		$	—				$	35
Debt securities	$	8	$	153		$	—				$	161
Derivatives:
NEE:
Commodity contracts	$	1,563	$	1,827		$	1,200	$	(2,652	)	$	1,938	^(e)
Interest rate contracts	$	—	$	285		$	3	$	8		$	296	^(e)
Foreign currency contracts	$	—	$	1		$	—	$	—		$	1	^(e)
FPL - commodity contracts	$	—	$	208		$	4	$	(3	)	$	209	^(e)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,476	$	980		$	512	$	(2,485	)	$	483	^(e)
Interest rate contracts	$	—	$	171		$	113	$	8		$	292	^(e)
Foreign currency contracts	$	—	$	106		$	—	$	—		$	106	^(e)
FPL - commodity contracts	$	—	$	1		$	3	$	(3	)	$	1	^(e)

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(a)


(b)	Includes restricted cash of approximately $164 million ($120 million for FPL) in other current assets on the condensed consolidated balance sheets.


(c)	Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at Other than Fair Value below.


(d)	Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.


(e)	See Note 2 - Fair Value of Derivative Instruments for a reconciliation of net derivatives to NEE's and FPL's condensed consolidated balance sheets.

Significant unobservable inputs used in valuation of contracts categorized as Level 3

The significant unobservable inputs used in the valuation of NEE's commodity contracts categorized as Level 3 of the fair value hierarchy at June 30, 2017 are as follows:



	Fair Value at				Valuation	Significant
Transaction Type	June 30, 2017				Technique(s)	Unobservable Inputs	Range
	Assets		Liabilities
	(millions)
Forward contracts - power	$	762	$	216	Discounted cash flow	Forward price (per MWh)	$—	—	$92
Forward contracts - gas	24		11		Discounted cash flow	Forward price (per MMBtu)	$2	—	$6
Options - power	33		22		Option models	Implied correlations	1%	—	100%
						Implied volatilities	8%	—	246%
Options - primarily gas	187		208		Option models	Implied correlations	1%	—	100%
						Implied volatilities	—%	—	102%
Full requirements and unit contingent contracts	319		27		Discounted cash flow	Forward price (per MWh)	$(20)	—	$230
						Customer migration rate^(a)	—%	—	20%
Total	$	1,325	$	484

———————————————


(a)	Applies only to full requirements contracts.

Reconciliation of changes in the fair value measured based on significant unobservable inputs

The reconciliation of changes in the fair value of derivatives that are based on significant unobservable inputs is as follows:



	Three Months Ended June 30,
	2017						2016
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at March 31	$	715		$	(4	)	$	649		$	(8	)
Realized and unrealized gains (losses):
Included in earnings^(a)	144			—			(34		)	—
Included in other comprehensive income (loss)^(b)	(10		)	—			3			—
Included in regulatory assets and liabilities	—			—			3			3
Purchases	23			—			75			—
Settlements	(72		)	2			(95		)	4
Issuances	(88		)	—			(69		)	—
Transfers in^(c)	6			—			—			—
Transfers out^(c)	6			—			—			—
Fair value of net derivatives based on significant unobservable inputs at June 30	$	724		$	(2	)	$	532		$	(1	)
The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to derivatives still held at the reporting date^(d)	$	135		$	—		$	(38	)	$	—

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(a)	For the three months ended June 30, 2017 and 2016, realized and unrealized gains (losses) of approximately $140 million and $(28) million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.


(b)	Reflected in net unrealized gains on foreign currency translation on the condensed consolidated statements of comprehensive income.


(c)	Transfers into Level 3 were a result of decreased observability of market data and transfers from Level 3 to Level 2 were a result of increased observability of market data. NEE's and FPL's policy is to recognize all transfers at the beginning of the reporting period.


(d)	For the three months ended June 30, 2017 and 2016, unrealized gains (losses) of approximately $131 million and $(32) million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is reflected in interest expense.



	Six Months Ended June 30,
	2017						2016
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period	$	578		$	1		$	538		$	—
Realized and unrealized gains (losses):
Included in earnings^(a)	360			—			220			—
Included in other comprehensive income^(b)	(11		)	—			(3		)	—
Included in regulatory assets and liabilities	(2		)	(2		)	—			—
Purchases	45			—			175			—
Settlements	(157		)	(1		)	(228		)	(1		)
Issuances	(104		)	—			(143		)	—
Transfers in^(c)	14			—			3			—
Transfers out^(c)	1			—			(30		)	—
Fair value of net derivatives based on significant unobservable inputs at June 30	$	724		$	(2	)	$	532		$	(1	)
The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to derivatives still held at the reporting date^(d)	$	284		$	—		$	125		$	—

———————————————


(a)	For the six months ended June 30, 2017 and 2016, realized and unrealized gains of approximately $356 million and $246 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.


(b)	Reflected in net unrealized gains on foreign currency translation on the condensed consolidated statements of comprehensive income.


(c)	Transfers into Level 3 were a result of decreased observability of market data and transfers from Level 3 to Level 2 were a result of increased observability of market data. NEE's and FPL's policy is to recognize all transfers at the beginning of the reporting period.


(d)	For the six months ended June 30, 2017 and 2016, unrealized gains of approximately $280 million and $151 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is reflected in interest expense.

Fair Value, by Balance Sheet Grouping

Fair Value of Financial Instruments Recorded at Other than Fair Value - The carrying amounts of commercial paper and other short-term debt approximate their fair values. The carrying amounts and estimated fair values of other financial instruments recorded at other than fair value are as follows:



	June 30, 2017					December 31, 2016
	Carrying Amount		Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(millions)
NEE:
Special use funds^(a)	$	693	$	693		$	712		$	712
Other investments - primarily notes receivable^(b)	$	508	$	663		$	526		$	668
Long-term debt, including current maturities	$	32,149	$	34,289	^(c)	$	30,418	^(d)	$	31,623	^(c)(d)
FPL:
Special use funds^(a)	$	539	$	539		$	557		$	557
Long-term debt, including current maturities	$	10,549	$	11,984	^(c)	$	10,072		$	11,211	^(c)

———————————————


(a)	Primarily represents investments accounted for under the equity method and loans not measured at fair value on a recurring basis.

(b)

Primarily a note receivable which bears interest at a fixed rate and matures in 2029. At June 30, 2017, the note receivable is classified as held for sale and being marketed with debt secured by this note receivable (see Note 6 - NEER). Fair values are estimated using an income approach utilizing a discounted cash flow valuation technique based on certain observable yield curves and indices considering the credit profile of the borrower (Level 3).

(c)

As of June 30, 2017 and December 31, 2016, for NEE, approximately $32,399 million and $29,804 million, respectively, is estimated using a market approach based on quoted market prices for the same or similar issues (Level 2); the balance is estimated using an income approach utilizing a discounted cash flow valuation technique, considering the current credit profile of the debtor (Level 3). For FPL, primarily estimated using quoted market prices for the same or similar issues (Level 2).


(d)	Excludes debt totaling $373 million reflected in liabilities associated with assets held for sale on NEE's condensed consolidated balance sheet for which the carrying amount approximates fair value. See Note 9 - Assets and Liabilities Associated with Assets Held for Sale.

Available-for-sale Securities

Realized gains and losses and proceeds from the sale or maturity of available for sale securities are as follows:



	NEE				FPL				NEE				FPL
	Three Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2017		2016		2017		2016
	(millions)
Realized gains	$	22	$	33	$	13	$	16	$	76	$	55	$	26	$	26
Realized losses	$	14	$	20	$	7	$	12	$	43	$	38	$	26	$	22
Proceeds from sale or maturity of securities	$	627	$	727	$	395	$	551	$	1,253	$	1,428	$	836	$	1,081

The unrealized gains on available for sale securities are as follows:



	NEE				FPL
	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
	(millions)
Equity securities	$	1,584	$	1,396	$	1,126	$	1,007
Debt securities	$	36	$	22	$	27	$	17

The unrealized losses on available for sale debt securities and the fair value of available for sale debt securities in an unrealized loss position are as follows:



	NEE				FPL
	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
	(millions)
Unrealized losses^(a)	$	16	$	34	$	13	$	28
Fair value	$	756	$	959	$	575	$	722

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(a)	Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at June 30, 2017 and December 31, 2016 were not material to NEE or FPL

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details