Acquisitions

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisitions

Acquisitions

Gulf Power - On January 1, 2019, NEE acquired the outstanding common shares of Gulf Power, a rate-regulated electric utility under the jurisdiction of the FPSC. Gulf Power serves more than 460,000 customers in eight counties throughout northwest Florida, has approximately 9,400 miles of transmission and distribution lines and owns approximately 2,300 MW of net generating capacity. The purchase price included approximately $4.47 billion in cash consideration, excluding post-closing working capital adjustments, and the assumption of approximately $1.3 billion of Gulf Power debt. The cash purchase price was funded through $4.5 billion of borrowings by NEECH in December 2018 under certain short-term bi-lateral term loan agreements (see Note 10); the proceeds of which borrowings were restricted and included in noncurrent other assets on NEE's condensed consolidated balance sheet at December 31, 2018.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed on January 1, 2019 based on their fair value. The approval by the FPSC of Gulf Power's rates, which is intended to allow Gulf Power to collect from retail customers total revenues equal to Gulf Power's costs of providing service, including a reasonable rate of return on invested capital, is considered a fundamental input in measuring the fair value of Gulf Power's assets and liabilities and, as such, NEE concluded that the carrying values of all assets and liabilities recoverable through rates are representative of their fair values. As a result, NEE acquired assets of approximately $5.3 billion, primarily relating to property, plant and equipment of $4.0 billion and regulatory assets of $490 million, and assumed liabilities of approximately $3.4 billion, including $1.3 billion of long-term debt, $640 million of regulatory liabilities and $563 million of deferred income taxes. The excess of the purchase price over the fair value of assets acquired and liabilities assumed resulted in approximately $2.6 billion of goodwill which has been recognized on NEE's condensed consolidated balance sheet at September 30, 2019. Goodwill associated with the Gulf Power acquisition is reflected within Corporate and Other and, for impairment testing, is included in the Gulf Power reporting unit. The goodwill arising from the transaction represents expected benefits from continued expansion of NEE's regulated business mix and the indefinite life of Gulf Power's service territory franchise. In connection with the acquisition, operating right-of-use assets and lease liabilities were recorded primarily related to a purchased power agreement; such amounts each totaled approximately $220 million at September 30, 2019.

The operating leases have fixed payments with expiration dates ranging from late 2019 to 2023. At September 30, 2019, expected lease payments over the remaining terms of the operating leases were approximately $235 million with no one year being material. Gulf Power's operating leases did not have a material impact on NEE's condensed consolidated statements of income or cash flows.

Trans Bay Cable, LLC - On July 16, 2019, a wholly owned subsidiary of NextEra Energy Transmission, LLC acquired the membership interests of an entity that indirectly owns Trans Bay Cable, LLC (Trans Bay), which owns and operates a 53-mile, high-voltage direct current underwater transmission cable system in California extending from Pittsburg to San Francisco, with utility rates set by the FERC and revenues paid by the California Independent System Operator. The purchase price included approximately $671 million in cash consideration, excluding post-closing working capital adjustments, and the assumption of debt of approximately $420 million.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair value. The approval by the FERC of Trans Bay’s rates, which is intended to allow Trans Bay to collect total revenues equal to Trans Bay's costs for the development, financing, construction, operation and maintenance of Trans Bay, including a reasonable rate of return on invested capital, is considered a fundamental input in measuring the fair value of Trans Bay's assets and liabilities and, as such, NEE concluded that the carrying values of all assets and liabilities recoverable through rates are representative of their fair values. As a result, NEE acquired assets of approximately $710 million, primarily relating to property, plant and equipment, and assumed liabilities of approximately $652 million, primarily relating to long-term debt. The excess of the purchase price over the fair value of assets acquired and liabilities assumed resulted in approximately $613 million of goodwill which has been recognized on NEE's condensed consolidated balance sheet at September 30, 2019, of which approximately $570 million is expected to be deductible for tax purposes. Goodwill associated with the Trans Bay acquisition is reflected within Corporate and Other and, for impairment testing, is included in the rate-regulated transmission reporting unit. The goodwill arising from the transaction represents expected benefits from the growth potential of the transmission line. As part of the acquisition, right-of-use assets and lease liabilities were recorded primarily related to land use agreements that convey exclusive use of the land during the arrangement for the substations; such amounts each totaled approximately $145 million at September 30, 2019. The leases have fixed payments with expiration dates ranging from 2023 to 2106. At September 30, 2019, expected lease payments over the remaining terms of the leases were approximately $445 million with no one year being material. Trans Bay's leases did not have a material impact on NEE's condensed consolidated statements of income or cash flows. The valuation of the acquired net assets is subject to change as NEE obtains additional information for its estimates during the measurement period.