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Non-Derivative Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Non-derivative fair value measurements consist of NEE’s and FPL’s cash equivalents and restricted cash equivalents, special use funds and other investments. The fair value of these financial assets is determined by using the valuation techniques and inputs as described in Note 2 – Fair Value Measurements of Derivative Instruments as well as below.

Cash Equivalents and Restricted Cash Equivalents - NEE and FPL hold investments in money market funds. The fair value of these funds is estimated using a market approach based on current observable market prices.

Special Use Funds and Other Investments - NEE and FPL hold primarily debt and equity securities directly, as well as indirectly through commingled funds. Substantially all directly held equity securities are valued at their quoted market prices. For directly held debt securities, multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or issue of each security. Commingled funds, which are similar to mutual funds, are maintained by banks or investment companies and hold certain investments in accordance with a stated set of objectives. The fair value of commingled funds is primarily derived from the quoted prices in active markets of the underlying securities. Because the fund shares are offered to a limited group of investors, they are not considered to be traded in an active market.

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


	March 31, 2021
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE - equity securities	$	699	$	—		$	—	$	699
FPL - equity securities	$	97	$	—		$	—	$	97
Special use funds:(b)
NEE:
Equity securities	$	2,329	$	2,650	(c)	$	—	$	4,979
U.S. Government and municipal bonds	$	712	$	63		$	—	$	775
Corporate debt securities	$	1	$	829		$	—	$	830
Mortgage-backed securities	$	—	$	434		$	—	$	434
Other debt securities	$	—	$	139		$	—	$	139
FPL:
Equity securities	$	791	$	2,405	(c)	$	—	$	3,196
U.S. Government and municipal bonds	$	558	$	47		$	—	$	605
Corporate debt securities	$	—	$	618		$	—	$	618
Mortgage-backed securities	$	—	$	328		$	—	$	328
Other debt securities	$	—	$	126		$	—	$	126
Other investments:(d)
NEE:
Equity securities	$	70	$	—		$	—	$	70
Debt securities	$	104	$	120		$	15	$	239
FPL - equity securities	$	12	$	—		$	—	$	12

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(a)Includes restricted cash equivalents of approximately $85 million ($84 million for FPL) in current other assets and $9 million ($9 million for FPL) in noncurrent other assets on the condensed consolidated balance sheets.

(b)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.

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

(d)Included in noncurrent other assets on NEE's and FPL's condensed consolidated balance sheets.


	December 31, 2020
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE - equity securities	$	742	$	—		$	—	$	742
FPL - equity securities	$	137	$	—		$	—	$	137
Special use funds:(b)
NEE:
Equity securities	$	2,237	$	2,489	(c)	$	—	$	4,726
U.S. Government and municipal bonds	$	590	$	127		$	—	$	717
Corporate debt securities	$	1	$	870		$	—	$	871
Mortgage-backed securities	$	—	$	422		$	—	$	422
Other debt securities	$	—	$	124		$	—	$	124
FPL:
Equity securities	$	752	$	2,260	(c)	$	—	$	3,012
U.S. Government and municipal bonds	$	449	$	87		$	—	$	536
Corporate debt securities	$	—	$	627		$	—	$	627
Mortgage-backed securities	$	—	$	335		$	—	$	335
Other debt securities	$	—	$	119		$	—	$	119
Other investments:(d)
NEE:
Equity securities	$	62	$	—		$	—	$	62
Debt securities	$	91	$	127		$	—	$	218
FPL - equity securities	$	12	$	—		$	—	$	12

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(a)Includes restricted cash equivalents of approximately $111 million ($91 million for FPL) in current other assets and $42 million ($42 million for FPL) in noncurrent other assets on the condensed consolidated balance sheets.

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

(d)Included in noncurrent other assets on NEE's and FPL's condensed consolidated balance sheets.

Contingent Consideration - At March 31, 2021, NEER had approximately $264 million of contingent consideration liabilities which are included in noncurrent other liabilities on NEE's condensed consolidated balance sheet. The liabilities relate to contingent consideration for the completion of capital expenditures for future development projects in connection with the acquisition of GridLiance Holdco, LP and GridLiance GP, LLC (see Note 5 - GridLiance). NEECH guarantees the contingent consideration obligations under the GridLiance acquisition agreements. Significant inputs and assumptions used in the fair value measurement, some of which are Level 3 and require judgement, include the projected timing and amount of future cash flows, estimated probability of completing future development projects as well as discount rates.

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:


	March 31, 2021					December 31, 2020
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds(a)	$	853	$	854		$	919	$	920
Other investments(b)	$	28	$	28		$	29	$	29
Long-term debt, including current portion	$	49,902	$	53,173	(c)	$	46,082	$	51,525	(c)
FPL:
Special use funds(a)	$	644	$	645		$	718	$	719
Long-term debt, including current portion	$	17,421	$	19,859	(c)	$	17,236	$	21,178	(c)

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(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 on NEE's condensed consolidated balance sheets.

(c)At March 31, 2021 and December 31, 2020, substantially all is Level 2 for NEE and FPL.

Special Use Funds - The special use funds noted above and those carried at fair value (see Recurring Non-Derivative Fair Value Measurements above) consist of NEE's nuclear decommissioning fund assets of approximately $7,934 million and $7,703 million at March 31, 2021 and December 31, 2020, respectively ($5,441 million and $5,271 million, respectively, for FPL), and FPL's storm fund assets of $76 million and $76 million at March 31, 2021 and December 31, 2020, respectively. The investments held in the special use funds consist of equity and available for sale debt securities which are primarily carried at estimated fair value. The amortized cost of debt securities is approximately $2,134 million and $2,009 million at March 31, 2021 and December 31, 2020, respectively ($1,642 million and $1,521 million, respectively, for FPL). Debt securities included in the nuclear decommissioning funds have a weighted-average maturity at March 31, 2021 of approximately eight years at both NEE and FPL. FPL's storm fund primarily consists of debt securities with a weighted-average maturity at March 31, 2021 of approximately one year. The cost of securities sold is determined using the specific identification method.

Effective January 1, 2020, NEE and FPL adopted an accounting standards update that provides a modified version of the other than temporary impairment model for debt securities. The new available for sale debt security impairment model no longer allows consideration of the length of time during which the fair value has been less than its amortized cost basis when determining whether a credit loss exists. Credit losses are required to be presented as an allowance rather than as a write-down on securities not intended to be sold or required to be sold. NEE and FPL adopted this model prospectively. See Note 11 - Measurement of Credit Losses on Financial Instruments.

For FPL's special use funds, changes in fair value of debt and equity securities, including any estimated credit losses of debt securities, result in a corresponding adjustment to the related regulatory asset or liability accounts, consistent with regulatory treatment. For NEE's non-rate regulated operations, changes in fair value of debt securities result in a corresponding adjustment to OCI, except for estimated credit losses and unrealized losses on debt securities intended or required to be sold prior to recovery of the amortized cost basis, which are recognized in other - net in NEE's condensed consolidated statements of income. Changes in fair value of equity securities are recorded in change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds - net in NEE’s condensed consolidated statements of income.

Unrealized gains (losses) recognized on equity securities held at March 31, 2021 and 2020 are as follows:


		NEE					FPL
	Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2021		2020
		(millions)
Unrealized gains (losses)		$	247	$	(808)		$	161	$	(502)

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


		NEE					FPL
	Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2021		2020
		(millions)
Realized gains		$	18	$	30		$	12	$	25
Realized losses		$	14	$	17		$	13	$	15
Proceeds from sale or maturity of securities		$	548	$	738		$	390	$	607

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
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
	(millions)
Unrealized gains	$	72	$	134	$	56	$	104
Unrealized losses(a)	$	29	$	9	$	21	$	9
Fair value	$	747	$	201	$	537	$	150

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(a) Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at March 31, 2021 and December 31, 2020 were not material to NEE or FPL.

Regulations issued by the FERC and the NRC provide general risk management guidelines to protect nuclear decommissioning funds and to allow such funds to earn a reasonable return. The FERC regulations prohibit, among other investments, investments in any securities of NEE or its subsidiaries, affiliates or associates, excluding investments tied to market indices or

mutual funds. Similar restrictions applicable to the decommissioning funds for NEER's nuclear plants are included in the NRC operating licenses for those facilities or in NRC regulations applicable to NRC licensees not in cost-of-service environments. With respect to the decommissioning fund for Seabrook, decommissioning fund contributions and withdrawals are also regulated by the New Hampshire Nuclear Decommissioning Financing Committee pursuant to New Hampshire law.

The nuclear decommissioning reserve funds are managed by investment managers who must comply with the guidelines of NEE and FPL and the rules of the applicable regulatory authorities. The funds' assets are invested giving consideration to taxes, liquidity, risk, diversification and other prudent investment objectives.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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