Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2015

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:



	September 30, 2015
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents:^(b)
NEE - equity securities	$	234	$	—		$	—				$	234
FPL - equity securities	$	48	$	—		$	—				$	48
Special use funds:^(c)
NEE:
Equity securities	$	1,185	$	1,346	^(d)	$	—				$	2,531
U.S. Government and municipal bonds	$	425	$	204		$	—				$	629
Corporate debt securities	$	—	$	775		$	—				$	775
Mortgage-backed securities	$	—	$	369		$	—				$	369
Other debt securities	$	18	$	43		$	—				$	61
FPL:
Equity securities	$	332	$	1,176	^(d)	$	—				$	1,508
U.S. Government and municipal bonds	$	333	$	170		$	—				$	503
Corporate debt securities	$	—	$	562		$	—				$	562
Mortgage-backed securities	$	—	$	295		$	—				$	295
Other debt securities	$	17	$	36		$	—				$	53
Other investments:
NEE:
Equity securities	$	38	$	—		$	—				$	38
Debt securities	$	15	$	169		$	—				$	184
Derivatives:
NEE:
Commodity contracts	$	1,446	$	3,094		$	1,170	$	(3,807	)	$	1,903	^(e)
Interest rate contracts	$	—	$	53		$	—	$	2		$	55	^(e)
FPL - commodity contracts	$	—	$	1		$	5	$	(1	)	$	5	^(e)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,421	$	2,418		$	509	$	(3,482	)	$	866	^(e)
Interest rate contracts	$	—	$	223		$	115	$	2		$	340	^(e)
Foreign currency swaps	$	—	$	137		$	—	$	—		$	137	^(e)
FPL - commodity contracts	$	—	$	233		$	3	$	(1	)	$	235	^(e)

————————————

(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 $60 million and $3 million ($48 million and none for FPL) in other current assets and other noncurrent assets, respectively, 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 the Carrying Amount 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, 2014
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents:
NEE - equity securities	$	32	$	—		$	—				$	32
Special use funds:^(b)
NEE:
Equity securities	$	1,217	$	1,417	^(c)	$	—				$	2,634
U.S. Government and municipal bonds	$	520	$	191		$	—				$	711
Corporate debt securities	$	—	$	704		$	—				$	704
Mortgage-backed securities	$	—	$	493		$	—				$	493
Other debt securities	$	25	$	32		$	—				$	57
FPL:
Equity securities	$	324	$	1,237	^(c)	$	—				$	1,561
U.S. Government and municipal bonds	$	435	$	165		$	—				$	600
Corporate debt securities	$	—	$	501		$	—				$	501
Mortgage-backed securities	$	—	$	422		$	—				$	422
Other debt securities	$	25	$	20		$	—				$	45
Other investments:
NEE:
Equity securities	$	35	$	1		$	—				$	36
Debt securities	$	5	$	170		$	—				$	175
Derivatives:
NEE:
Commodity contracts	$	1,801	$	3,177		$	1,167	$	(4,196	)	$	1,949	^(d)
Interest rate contracts	$	—	$	35		$	—	$	15		$	50	^(d)
FPL - commodity contracts	$	—	$	2		$	6	$	(1	)	$	7	^(d)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,720	$	3,150		$	420	$	(3,932	)	$	1,358	^(d)
Interest rate contracts	$	—	$	126		$	125	$	15		$	266	^(d)
Foreign currency swaps	$	—	$	131		$	—	$	—		$	131	^(d)
FPL - commodity contracts	$	—	$	370		$	1	$	(1	)	$	370	^(d)

————————————

(a)


(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 the Carrying Amount 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)	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 September 30, 2015 are as follows:



Transaction Type	Fair Value at September 30, 2015				Valuation Technique(s)	Significant Unobservable Inputs	Range
	Assets		Liabilities
	(millions)
Forward contracts - power	$	640	$	218	Discounted cash flow	Forward price (per MWh)	$7	—	$125
Forward contracts - gas	16		23		Discounted cash flow	Forward price (per MMBtu)	$1	—	$6
Forward contracts - other commodity related	12		1		Discounted cash flow	Forward price (various)	$(29)	—	$59
Options - power	84		71		Option models	Implied correlations	(4)%	—	99%
						Implied volatilities	1%	—	133%
Options - primarily gas	95		166		Option models	Implied correlations	(4)%	—	99%
						Implied volatilities	1%	—	117%
Full requirements and unit contingent contracts	323		30		Discounted cash flow	Forward price (per MWh)	$(20)	—	$156
						Customer migration rate^(a)	—%	—	20%
Total	$	1,170	$	509

——————————


(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 fair value that are based on significant unobservable inputs is as follows:



	Three Months Ended September 30,
	2015						2014
	NEE			FPL			NEE			FPL
	(millions)
Fair value based on significant unobservable inputs at June 30	$	544		$	4		$	354		$	3
Realized and unrealized gains (losses):
Included in earnings^(a)	115			—			22			—
Included in other comprehensive income	—			—			11			—
Included in regulatory assets and liabilities	(1		)	(1		)	1			1
Purchases	42			—			209			197		^(b)
Settlements	(109		)	(1		)	(36		)	—
Issuances	(32		)	—			(9		)	—
Transfers in^(c)	3			—			—			—
Transfers out^(c)	(16		)	—			(136		)	—
Fair value based on significant unobservable inputs at September 30	$	546		$	2		$	416		$	201
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)	$	107		$	—		$	(63	)	$	—

————————————


(a)	For the three months ended September 30, 2015 and 2014, realized and unrealized gains of approximately $131 million and $42 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.


(b)	Represents investments associated with a limited partnership that was consolidated during the three months ended September 30, 2014.


(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 September 30, 2015 and 2014, unrealized gains (losses) of approximately $123 million and $(43) million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.



	Nine Months Ended September 30,
	2015						2014
	NEE			FPL			NEE			FPL
	(millions)
Fair value based on significant unobservable inputs at December 31	$	622		$	5		$	622		$	—
Realized and unrealized gains (losses):
Included in earnings^(a)	369			—			(474		)	—
Included in other comprehensive income	8			—			11			—
Included in regulatory assets and liabilities	3			3			6			6
Purchases	125			—			223			197
Settlements	(376		)	(6		)	268			(2		)
Issuances	(164		)	—			(103		)	—
Transfers in^(b)	(15		)	—			16			—
Transfers out^(b)	(26		)	—			(153		)	—
Fair value based on significant unobservable inputs at September 30	$	546		$	2		$	416		$	201
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^(c)	$	260		$	—		$	(168	)	$	—

Fair Value, by Balance Sheet Grouping

Fair Value of Financial Instruments Recorded at the Carrying Amount - The carrying amounts of cash equivalents, commercial paper and notes payable approximate their fair values. The carrying amounts and estimated fair values of other financial instruments, excluding those recorded at fair value and disclosed above in Recurring Fair Value Measurements, are as follows:



	September 30, 2015					December 31, 2014
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds^(a)	$	659	$	659		$	567	$	567
Other investments - primarily notes receivable	$	524	$	662	^(b)	$	525	$	679	^(b)
Long-term debt, including current maturities	$	28,096	$	29,545	^(c)	$	27,876	$	30,337	^(c)
FPL:
Special use funds^(a)	$	514	$	514		$	395	$	395
Long-term debt, including current maturities	$	9,099	$	10,248	^(c)	$	9,473	$	11,105	^(c)

————————————


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

(b)

Primarily classified as held to maturity. Fair values are primarily estimated using a discounted cash flow valuation technique based on certain observable yield curves and indices considering the credit profile of the borrower (Level 3). Notes receivable bear interest primarily at fixed rates and mature by 2029. Notes receivable are considered impaired and placed in non-accrual status when it becomes probable that all amounts due cannot be collected in accordance with the contractual terms of the agreement. The assessment to place notes receivable in non-accrual status considers various credit indicators, such as credit ratings and market-related information. As of September 30, 2015 and December 31, 2014, NEE had no notes receivable reported in non-accrual status.

(c)

As of September 30, 2015 and December 31, 2014, for NEE, $18,064 million and $19,973 million, respectively, is estimated using quoted market prices for the same or similar issues (Level 2); the balance is estimated using a discounted cash flow valuation technique, considering the current credit spread of the debtor (Level 3). For FPL, estimated using quoted market prices for the same or similar issues (Level 2).

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 September 30,				Three Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014		2015		2014		2015		2014
	(millions)
Realized gains	$	35	$	34	$	11	$	19	$	126	$	182	$	56	$	107
Realized losses	$	21	$	19	$	11	$	16	$	53	$	99	$	26	$	85
Proceeds from sale or maturity of securities	$	712	$	879	$	556	$	731	$	3,642	$	3,093	$	3,094	$	2,530

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



	NEE				FPL
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(millions)
Equity securities	$	1,073	$	1,267	$	786	$	896
Debt securities	$	26	$	66	$	21	$	54

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
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(millions)
Unrealized losses^(a)	$	40	$	7	$	34	$	5
Fair value	$	661	$	542	$	516	$	434

————————————


(a)	Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at September 30, 2015 and December 31, 2014 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