Derivative Instruments

NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the commodity price risk inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated primarily with outstanding and forecasted debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets.

With respect to commodities related to NEE's competitive energy business, NEER employs risk management procedures to conduct its activities related to optimizing the value of its power generation and gas infrastructure assets, providing full energy and capacity requirements services primarily to distribution utilities, and engaging in power and gas marketing and trading activities to take advantage of expected future favorable price movements and changes in the expected volatility of prices in the energy markets. These risk management activities involve the use of derivative instruments executed within prescribed limits to manage the risk associated with fluctuating commodity prices. Transactions in derivative instruments are executed on recognized exchanges or via the OTC markets, depending on the most favorable credit terms and market execution factors. For NEER's power generation and gas infrastructure assets, derivative instruments are used to hedge the commodity price risk associated with the fuel requirements of the assets, where applicable, as well as to hedge all or a portion of the expected output of these assets. These hedges are designed to reduce the effect of adverse changes in the wholesale forward commodity markets associated with NEER's power generation and gas infrastructure assets. With regard to full energy and capacity requirements services, NEER is required to vary the quantity of energy and related services based on the load demands of the customers served. For this type of transaction, derivative instruments are used to hedge the anticipated electricity quantities required to serve these customers and reduce the effect of unfavorable changes in the forward energy markets. Additionally, NEER takes positions in the energy markets based on differences between actual forward market levels and management's view of fundamental market conditions, including supply/demand imbalances, changes in traditional flows of energy, changes in short- and long-term weather patterns and anticipated regulatory and legislative outcomes. NEER uses derivative instruments to realize value from these market dislocations, subject to strict risk management limits around market, operational and credit exposure.

Derivative instruments, when required to be marked to market, are recorded on NEE's and FPL's condensed consolidated balance sheets as either an asset or liability measured at fair value. At FPL, substantially all changes in the derivatives' fair value are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel clause. For NEE's non-rate regulated operations, predominantly NEER, essentially all changes in the derivatives' fair value for power purchases and sales, fuel sales and trading activities are recognized on a net basis in operating revenues; fuel purchases used in the production of electricity are recognized in fuel, purchased power and interchange expense; and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's condensed consolidated statements of income. Settlement gains and losses are included within the line items in the condensed consolidated statements of income to which they relate. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis in the condensed consolidated statements of income. For commodity derivatives, NEE believes that, where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Settlements related to derivative instruments are primarily recognized in net cash provided by operating activities in NEE's and FPL's condensed consolidated statements of cash flows.

While most of NEE's derivatives are entered into for the purpose of managing commodity price risk, optimizing the value of NEER's power generation and gas infrastructure assets, reducing the impact of volatility in interest rates on outstanding and forecasted debt issuances and managing foreign currency risk, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective in offsetting the hedged risk. Additionally, for hedges of forecasted transactions, the forecasted transactions must be probable. For interest rate and foreign currency derivative instruments, generally NEE assesses a hedging instrument's effectiveness by using nonstatistical methods including dollar value comparisons of the change in the fair value of the derivative to the change in the fair value or cash flows of the hedged item. Hedge effectiveness is tested at the inception of the hedge and on at least a quarterly basis throughout its life. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of OCI and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings or when it becomes probable that a forecasted transaction being hedged would not occur. The ineffective portion of net unrealized gains (losses) on these hedges is reported in earnings in the current period. At September 30, 2015, NEE's AOCI included amounts related to interest rate cash flow hedges with expiration dates through October 2036 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $58 million of net losses included in AOCI at September 30, 2015 is expected to be reclassified into earnings within the next 12 months as the principal and/or interest payments are made. Such amounts assume no change in interest rates, currency exchange rates or scheduled principal payments.

Fair Value of Derivative Instruments - The tables below present NEE's and FPL's gross derivative positions at September 30, 2015 and December 31, 2014, as required by disclosure rules. However, the majority of the underlying contracts are subject to master netting agreements and generally would not be contractually settled on a gross basis. Therefore, the tables below also present the derivative positions on a net basis, which reflect the offsetting of positions of certain transactions within the portfolio, the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral (see Note 3 - Recurring Fair Value Measurements for netting information), as well as the location of the net derivative position on the condensed consolidated balance sheets.



	September 30, 2015
	Fair Values of Derivatives Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Fair Values of Derivatives Not Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Total Derivatives Combined - Net Basis
	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
	(millions)
NEE:
Commodity contracts	$	—	$	—	$	5,710	$	4,348	$	1,903	$	866
Interest rate contracts	53		223		—		115		55		340
Foreign currency swaps	—		137		—		—		—		137
Total fair values	$	53	$	360	$	5,710	$	4,463	$	1,958	$	1,343

FPL:
Commodity contracts	$	—	$	—	$	6	$	236	$	5	$	235

Net fair value by NEE balance sheet line item:
Current derivative assets^(a)									$	654
Noncurrent derivative assets^(b)									1,304
Current derivative liabilities^(c)											$	734
Noncurrent derivative liabilities^(d)											609
Total derivatives									$	1,958	$	1,343

Net fair value by FPL balance sheet line item:
Current other assets									$	4
Noncurrent other assets									1
Current derivative liabilities											$	216
Noncurrent other liabilities											19
Total derivatives									$	5	$	235

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(a)	Reflects the netting of approximately $231 million in margin cash collateral received from counterparties.


(b)	Reflects the netting of approximately $173 million in margin cash collateral received from counterparties.


(c)	Reflects the netting of approximately $65 million in margin cash collateral paid to counterparties.


(d)	Reflects the netting of approximately $14 million in margin cash collateral paid to counterparties.



	December 31, 2014
	Fair Values of Derivatives Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Fair Values of Derivatives Not Designated as Hedging Instruments for Accounting Purposes - Gross Basis				Total Derivatives Combined - Net Basis
	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
	(millions)
NEE:
Commodity contracts	$	—	$	—	$	6,145	$	5,290	$	1,949	$	1,358
Interest rate contracts	35		126		—		125		50		266
Foreign currency swaps	—		131		—		—		—		131
Total fair values	$	35	$	257	$	6,145	$	5,415	$	1,999	$	1,755

FPL:
Commodity contracts	$	—	$	—	$	8	$	371	$	7	$	370

Net fair value by NEE balance sheet line item:
Current derivative assets^(a)									$	990
Noncurrent derivative assets^(b)									1,009
Current derivative liabilities^(c)											$	1,289
Noncurrent derivative liabilities^(d)											466
Total derivatives									$	1,999	$	1,755

Net fair value by FPL balance sheet line item:
Current other assets									$	6
Noncurrent other assets									1
Current derivative liabilities											$	370
Total derivatives									$	7	$	370

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(a)	Reflects the netting of approximately $197 million in margin cash collateral received from counterparties.


(b)	Reflects the netting of approximately $97 million in margin cash collateral received from counterparties.


(c)	Reflects the netting of approximately $20 million in margin cash collateral paid to counterparties.


(d)	Reflects the netting of approximately $10 million in margin cash collateral paid to counterparties.

At September 30, 2015 and December 31, 2014, NEE had approximately $36 million and $60 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets in the above presentation. These amounts are included in current other liabilities on NEE's condensed consolidated balance sheets. Additionally, at September 30, 2015 and December 31, 2014, NEE had approximately $238 million and $122 million (none at FPL), respectively, in margin cash collateral paid to counterparties that was not offset against derivative assets or liabilities in the above presentation. These amounts are included in current other assets on NEE's condensed consolidated balance sheets.

Income Statement Impact of Derivative Instruments - Gains (losses) related to NEE's cash flow hedges are recorded in NEE's condensed consolidated financial statements (none at FPL) as follows:



	Three Months Ended September 30,
	2015											2014
	Interest Rate Contracts				Foreign Currency Swaps				Total			Interest Rate Contracts				Foreign Currency Swaps				Total
	(millions)
Losses recognized in OCI	$	(151	)		$	(1	)		$	(152	)	$	(6	)		$	(45	)		$	(51	)
Gains (losses) reclassified from AOCI to net income	$	(18	)	^(a)	$	7		^(b)	$	(11	)	$	(20	)	^(a)	$	(51	)	^(b)	$	(71	)

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(a)	Included in interest expense.


(b)	For 2015 and 2014, losses of approximately $3 million are included in interest expense and the balances are included in other - net.



	Nine Months Ended September 30,
	2015											2014
	Interest Rate Contracts				Foreign Currency Swaps				Total			Interest Rate Contracts				Foreign Currency Swaps				Total
	(millions)
Losses recognized in OCI	$	(146	)		$	(16	)		$	(162	)	$	(70	)		$	(30	)		$	(100	)
Losses reclassified from AOCI to net income	$	(56	)	^(a)	$	(10	)	^(b)	$	(66	)	$	(62	)	^(a)	$	(26	)	^(b)	$	(88	)

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(a)	Included in interest expense.


(b)	For 2015 and 2014, losses of approximately $9 million and $5 million, respectively, are included in interest expense and the balances are included in other - net.

For the three months ended September 30, 2015 and 2014, NEE recorded a gain of approximately $26 million and a loss of $22 million, respectively, on fair value hedges which resulted in a corresponding increase and decrease, respectively, in the related debt. For the nine months ended September 30, 2015 and 2014, NEE recorded a gain of approximately $23 million and a loss of $3 million, respectively, on fair value hedges which resulted in a corresponding increase and decrease, respectively, in the related debt.

Gains (losses) related to NEE's derivatives not designated as hedging instruments are recorded in NEE's condensed consolidated statements of income as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(millions)
Commodity contracts:^(a)
Operating revenues	$	397		$	46		$	812		$	(379	)
Fuel, purchased power and interchange	3			—			5			(4		)
Foreign currency swap - other - net	—			—			—			(1		)
Interest rate contracts - interest expense	(12		)	(16		)	(1		)	(51		)
Total	$	388		$	30		$	816		$	(435	)

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(a)

For the three and nine months ended September 30, 2015, FPL recorded losses of approximately $141 million and $204 million, respectively, related to commodity contracts as regulatory assets on its condensed consolidated balance sheets. For the three and nine months ended September 30, 2014, FPL recorded approximately $113 million of losses and $34 million of gains, respectively, related to commodity contracts as regulatory assets and regulatory liabilities, respectively, on its condensed consolidated balance sheets.

Notional Volumes of Derivative Instruments - The following table represents net notional volumes associated with derivative instruments that are required to be reported at fair value in NEE's and FPL's condensed consolidated financial statements. The table includes significant volumes of transactions that have minimal exposure to commodity price changes because they are variably priced agreements. These volumes are only an indication of the commodity exposure that is managed through the use of derivatives. They do not represent net physical asset positions or non-derivative positions and their hedges, nor do they represent NEE’s and FPL’s net economic exposure, but only the net notional derivative positions that fully or partially hedge the related asset positions. NEE and FPL had derivative commodity contracts for the following net notional volumes:



	September 30, 2015					December 31, 2014
Commodity Type	NEE			FPL		NEE			FPL
	(millions)
Power	(136	)	MWh	—		(73	)	MWh	—
Natural gas	1,363		MMBtu	887	MMBtu	1,436		MMBtu	845	MMBtu
Oil	(9	)	barrels	—		(11	)	barrels	—

At September 30, 2015 and December 31, 2014, NEE had interest rate contracts with notional amounts totaling approximately $8.1 billion and $7.4 billion, respectively, and foreign currency swaps with notional amounts totaling approximately $702 million and $661 million, respectively.

Credit-Risk-Related Contingent Features - Certain derivative instruments contain credit-risk-related contingent features including, among other things, the requirement to maintain an investment grade credit rating from specified credit rating agencies and certain financial ratios, as well as credit-related cross-default and material adverse change triggers. At September 30, 2015 and December 31, 2014, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $2.1 billion ($173 million for FPL) and $2.7 billion ($369 million for FPL), respectively.

If the credit-risk-related contingent features underlying these agreements and other commodity-related contracts were triggered, certain subsidiaries of NEE, including FPL, could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL's and NEECH's credit ratings were downgraded to BBB/Baa2 (a two level downgrade for FPL and a one level downgrade for NEECH from the current lowest applicable rating), applicable NEE subsidiaries would be required to post collateral such that the total posted collateral would be approximately $250 million ($30 million at FPL) as of September 30, 2015 and $700 million ($130 million at FPL) as of December 31, 2014. If FPL's and NEECH's credit ratings were downgraded to below investment grade, applicable NEE subsidiaries would be required to post additional collateral such that the total posted collateral would be approximately $2.3 billion ($0.6 billion at FPL) and $2.8 billion ($0.7 billion at FPL) as of September 30, 2015 and December 31, 2014, respectively. Some contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered, applicable NEE subsidiaries could be required to post additional collateral of up to approximately $720 million ($160 million at FPL) and $850 million ($200 million at FPL) as of September 30, 2015 and December 31, 2014, respectively.

Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At September 30, 2015, applicable NEE subsidiaries have posted approximately $157 million (none at FPL) in cash which could be applied toward the collateral requirements described above. In addition, at September 30, 2015 and December 31, 2014, applicable NEE subsidiaries have posted approximately $18 million (none at FPL) and $236 million (none at FPL), respectively, in the form of letters of credit which could be applied toward the collateral requirements described above. FPL and NEECH have credit facilities generally in excess of the collateral requirements described above that would be available to support, among other things, derivative activities. Under the terms of the credit facilities, maintenance of a specific credit rating is not a condition to drawing on these credit facilities, although there are other conditions to drawing on these credit facilities.

Additionally, some contracts contain certain adequate assurance provisions where a counterparty may demand additional collateral based on subjective events and/or conditions. Due to the subjective nature of these provisions, NEE and FPL are unable to determine an exact value for these items and they are not included in any of the quantitative disclosures above.