Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Financial assets and liabilities and other 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:

	September 30, 2019
	Level 1		Level 2			Level 3		Netting(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(b)
NEE - equity securities	$	924	$	—		$	—				$	924
FPL - equity securities	$	196	$	—		$	—				$	196
Special use funds:(c)
NEE:
Equity securities	$	1,725	$	1,909	(d)	$	—				$	3,634
U.S. Government and municipal bonds	$	552	$	144		$	—				$	696
Corporate debt securities	$	—	$	777		$	—				$	777
Mortgage-backed securities	$	—	$	452		$	—				$	452
Other debt securities	$	—	$	116		$	—				$	116
FPL:
Equity securities	$	553	$	1,731	(d)	$	—				$	2,284
U.S. Government and municipal bonds	$	420	$	105		$	—				$	525
Corporate debt securities	$	—	$	542		$	—				$	542
Mortgage-backed securities	$	—	$	344		$	—				$	344
Other debt securities	$	—	$	106		$	—				$	106
Other investments:(e)
NEE:
Equity securities	$	18	$	12		$	—				$	30
Debt securities	$	105	$	67		$	—				$	172
Derivatives:
NEE:
Commodity contracts	$	1,003	$	1,827		$	1,586	$	(2,213	)	$	2,203	(f)
Interest rate contracts	$	—	$	27		$	—	$	(21	)	$	6	(f)
Foreign currency contracts	$	—	$	20		$	—	$	—		$	20	(f)
FPL - commodity contracts	$	—	$	9		$	1	$	(3	)	$	7	(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,030	$	1,232		$	389	$	(2,156	)	$	495	(f)
Interest rate contracts	$	—	$	810		$	146	$	(21	)	$	935	(f)
Foreign currency contracts	$	—	$	42		$	—	$	—		$	42	(f)
FPL - commodity contracts	$	—	$	8		$	11	$	(3	)	$	16	(f)

———————————————

(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 equivalents of approximately $66 million ($62 million for FPL) in current other assets and $89 million ($89 million for FPL) in noncurrent other 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) Included in noncurrent other assets in the condensed consolidated balance sheets.

(f) See Note 4 - Fair Value of Derivative Instruments for a reconciliation of net derivatives to NEE's and FPL's condensed consolidated balance sheets.

	December 31, 2018
	Level 1		Level 2			Level 3		Netting(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(b)
NEE - equity securities	$	486	$	—		$	—				$	486
FPL - equity securities	$	206	$	—		$	—				$	206
Special use funds:(c)
NEE:
Equity securities	$	1,445	$	1,601	(d)	$	—				$	3,046
U.S. Government and municipal bonds	$	449	$	155		$	—				$	604
Corporate debt securities	$	—	$	728		$	—				$	728
Mortgage-backed securities	$	—	$	478		$	—				$	478
Other debt securities	$	—	$	145		$	1				$	146
FPL:
Equity securities	$	398	$	1,452	(d)	$	—				$	1,850
U.S. Government and municipal bonds	$	350	$	120		$	—				$	470
Corporate debt securities	$	—	$	544		$	—				$	544
Mortgage-backed securities	$	—	$	367		$	—				$	367
Other debt securities	$	—	$	131		$	1				$	132
Other investments:(e)
NEE:
Equity securities	$	13	$	11		$	—				$	24
Debt securities	$	36	$	90		$	—				$	126
Derivatives:
NEE:
Commodity contracts	$	1,379	$	1,923		$	1,349	$	(2,811	)	$	1,840	(f)
Interest rate contracts	$	—	$	56		$	—	$	(7	)	$	49	(f)
Foreign currency contracts	$	—	$	17		$	—	$	13		$	30	(f)
FPL - commodity contracts	$	—	$	2		$	—	$	(2	)	$	—	(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,329	$	1,410		$	566	$	(2,622	)	$	683	(f)
Interest rate contracts	$	—	$	336		$	136	$	(7	)	$	465	(f)
Foreign currency contracts	$	—	$	30		$	—	$	13		$	43	(f)
FPL - commodity contracts	$	—	$	7		$	36	$	(2	)	$	41	(f)

———————————————

(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 equivalents of approximately $85 million ($81 million for FPL) in current other 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) Included in noncurrent other assets in the condensed consolidated balance sheets.

(f)

See Note 4 - 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 September 30, 2019 are as follows:

	Fair Value at				Valuation	Significant
Transaction Type	September 30, 2019				Technique(s)	Unobservable Inputs	Range
	Assets		Liabilities
	(millions)
Forward contracts - power	$	909	$	186	Discounted cash flow	Forward price (per MWh)	$(15)	—	$181
Forward contracts - gas	134		27		Discounted cash flow	Forward price (per MMBtu)	$1	—	$7
Forward contracts - other commodity related	2		2		Discounted cash flow	Forward price (various)	$1	—	$58
Options - power	33		9		Option models	Implied correlations	1%	—	100%
						Implied volatilities	5%	—	213%
Options - primarily gas	143		146		Option models	Implied correlations	1%	—	100%
						Implied volatilities	1%	—	152%
Full requirements and unit contingent contracts	365		19		Discounted cash flow	Forward price (per MWh)	$(18)	—	$647
						Customer migration rate(a)	—%	—	20%
Total	$	1,586	$	389

———————————————

(a)

Applies only to full requirements contracts.

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

The sensitivity of NEE's fair value measurements to increases (decreases) in the significant unobservable inputs is as follows:

Significant Unobservable Input	Position	Impact on Fair Value Measurement
Forward price	Purchase power/gas	Increase (decrease)
	Sell power/gas	Decrease (increase)
Implied correlations	Purchase option	Decrease (increase)
	Sell option	Increase (decrease)
Implied volatilities	Purchase option	Increase (decrease)
	Sell option	Decrease (increase)
Customer migration rate	Sell power(a)	Decrease (increase)

———————————————

(a)

Assumes the contract is in a gain position.

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 September 30,
	2019						2018
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at June 30	$	1,231		$	(13	)	$	650		$	—
Realized and unrealized gains (losses):
Included in earnings(a)	(29		)	—			(131		)	—
Included in other comprehensive income (loss)(b)	6			—			1			—
Included in regulatory assets and liabilities	2			2			(1		)	(1		)
Purchases	27			—			22			—
Settlements	(146		)	1			6			(1		)
Issuances	(13		)	—			(19		)	—
Transfers out(c)	(27		)	—			—			—
Fair value of net derivatives based on significant unobservable inputs at September 30	$	1,051		$	(10	)	$	528		$	(2	)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(d)	$	53		$	—		$	(115	)	$	—

———————————————

(a) For the three months ended September 30, 2019 and 2018, realized and unrealized gains (losses) of approximately $(23) million and $(134) million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is included in interest expense.

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

(c) 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 September 30, 2019 and 2018, unrealized gains (losses) of approximately $61 million and $(118) million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is included in interest expense.

	Nine Months Ended September 30,
	2019						2018
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period	$	647		$	(36	)	$	566		$	—
Realized and unrealized gains (losses):
Included in earnings(a)	663			—			(79		)	—
Included in other comprehensive income (loss)(b)	7			—			5			—
Included in regulatory assets and liabilities	1			1			(1		)	(1		)
Purchases	94			—			125			—
Settlements	(265		)	23			(1		)	(2		)
Issuances	(64		)	—			(80		)	—
Impact of adoption of revenue standard	—			—			(30		)	—
Transfers in(c)	—			—			1			1
Transfers out(c)	(32		)	2			22			—
Fair value of net derivatives based on significant unobservable inputs at September 30	$	1,051		$	(10	)	$	528		$	(2	)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(d)	$	476		$	—		$	(68	)	$	—

———————————————

(a) For the nine months ended September 30, 2019 and 2018, realized and unrealized gains (losses) of approximately $680 million and $(63) million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is included in interest expense.

(b) Included in net unrealized gains (losses) on foreign currency translation in 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 nine months ended September 30, 2019 and 2018, unrealized gains (losses) of approximately $493 million and $(53) million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is included in interest expense.

Fair Value, by Balance Sheet Grouping

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:

	September 30, 2019					December 31, 2018
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds(a)	$	958	$	957		$	884	$	883
Other investments(b)	$	30	$	30		$	54	$	54
Long-term debt, including current portion	$	39,032	$	42,362	(c)	$	29,498	$	30,043	(c)
FPL:
Special use funds(a)	$	767	$	766		$	693	$	692
Long-term debt, including current portion	$	14,171	$	16,567	(c)	$	11,783	$	12,613	(c)

———————————————

(a) Primarily represents investments accounted for under the equity method and loans not measured at fair value on a recurring basis (Level 2).

(b) Included in noncurrent other assets in the condensed consolidated balance sheets.

(c)

At September 30, 2019 and December 31, 2018, substantially all is Level 2 for NEE and all is Level 2 for FPL.

Gains and Losses on Available-for-sale Debt Securities

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

	NEE								FPL
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
	(millions)
Realized gains	$	21	$	5	$	47	$	32	$	15	$	2	$	30	$	22
Realized losses	$	14	$	9	$	34	$	49	$	11	$	5	$	20	$	34
Proceeds from sale or maturity of securities	$	612	$	576	$	2,087	$	1,889	$	489	$	487	$	1,717	$	1,529

The unrealized gains and 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
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
	(millions)
Unrealized gains	$	88	$	14	$	68	$	11
Unrealized losses(a)	$	9	$	52	$	8	$	41
Fair value	$	264	$	1,273	$	191	$	961

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(a)

Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at September 30, 2019 and December 31, 2018 were not material to NEE or FPL.