Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2016

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:



	June 30, 2016
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash:^(b)
NEE - equity securities	$	303	$	—		$	—				$	303
FPL - equity securities	$	24	$	—		$	—				$	24
Special use funds:^(c)
NEE:
Equity securities	$	1,325	$	1,394	^(d)	$	—				$	2,719
U.S. Government and municipal bonds	$	318	$	143		$	—				$	461
Corporate debt securities	$	—	$	861		$	—				$	861
Mortgage-backed securities	$	—	$	502		$	—				$	502
Other debt securities	$	—	$	88		$	—				$	88
FPL:
Equity securities	$	352	$	1,275	^(d)	$	—				$	1,627
U.S. Government and municipal bonds	$	222	$	126		$	—				$	348
Corporate debt securities	$	—	$	651		$	—				$	651
Mortgage-backed securities	$	—	$	393		$	—				$	393
Other debt securities	$	—	$	74		$	—				$	74
Other investments:
NEE:
Equity securities	$	25	$	9		$	—				$	34
Debt securities	$	17	$	153		$	—				$	170
Derivatives:
NEE:
Commodity contracts	$	1,742	$	2,037		$	1,263	$	(3,289	)	$	1,753	^(e)
Interest rate contracts	$	—	$	74		$	—	$	(9	)	$	65	^(e)
FPL - commodity contracts	$	—	$	63		$	4	$	(19	)	$	48	^(e)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,695	$	1,240		$	613	$	(2,975	)	$	573	^(e)
Interest rate contracts	$	—	$	643		$	118	$	(6	)	$	755	^(e)
Foreign currency swaps	$	—	$	45		$	—	$	(3	)	$	42	^(e)
FPL - commodity contracts	$	—	$	23		$	5	$	(19	)	$	9	^(e)

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(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 $89 million ($24 million for FPL) in other current 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)	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, 2015
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash:^(b)
NEE - equity securities	$	312	$	—		$	—				$	312
FPL - equity securities	$	36	$	—		$	—				$	36
Special use funds:^(c)
NEE:
Equity securities	$	1,320	$	1,354	^(d)	$	—				$	2,674
U.S. Government and municipal bonds	$	446	$	166		$	—				$	612
Corporate debt securities	$	—	$	713		$	—				$	713
Mortgage-backed securities	$	—	$	412		$	—				$	412
Other debt securities	$	—	$	52		$	—				$	52
FPL:
Equity securities	$	364	$	1,234	^(d)	$	—				$	1,598
U.S. Government and municipal bonds	$	335	$	145		$	—				$	480
Corporate debt securities	$	—	$	531		$	—				$	531
Mortgage-backed securities	$	—	$	327		$	—				$	327
Other debt securities	$	—	$	40		$	—				$	40
Other investments:
NEE:
Equity securities	$	30	$	10		$	—				$	40
Debt securities	$	39	$	132		$	—				$	171
Derivatives:
NEE:
Commodity contracts	$	2,187	$	2,540		$	1,179	$	(3,969	)	$	1,937	^(e)
Interest rate contracts	$	—	$	35		$	—	$	(1	)	$	34	^(e)
FPL - commodity contracts	$	—	$	1		$	6	$	(3	)	$	4	^(e)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	2,153	$	1,887		$	540	$	(3,598	)	$	982	^(e)
Interest rate contracts	$	—	$	214		$	101	$	4		$	319	^(e)
Foreign currency swaps	$	—	$	132		$	—	$	(5	)	$	127	^(e)
FPL - commodity contracts	$	—	$	219		$	6	$	(3	)	$	222	^(e)

———————————————

(a)


(b)	Includes restricted cash of approximately $61 million ($36 million for FPL) in other current 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)	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 June 30, 2016 are as follows:



Transaction Type	Fair Value at June 30, 2016				Valuation Technique(s)	Significant Unobservable Inputs	Range
	Assets		Liabilities
	(millions)
Forward contracts - power	$	644	$	237	Discounted cash flow	Forward price (per MWh)	$—	—	$109
Forward contracts - gas	33		12		Discounted cash flow	Forward price (per MMBtu)	$1	—	$5
Forward contracts - other commodity related	7		1		Discounted cash flow	Forward price (various)	$(6)	—	$51
Options - power	57		38		Option models	Implied correlations	(5)%	—	99%
						Implied volatilities	8%	—	320%
Options - primarily gas	230		278		Option models	Implied correlations	(5)%	—	99%
						Implied volatilities	1%	—	94%
Full requirements and unit contingent contracts	292		47		Discounted cash flow	Forward price (per MWh)	$(25)	—	$318
						Customer migration rate^(a)	—%	—	20%
Total	$	1,263	$	613

———————————————


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



	Three Months Ended June 30,
	2016						2015
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at March 31	$	649		$	(8	)	$	451		$	(1	)
Realized and unrealized gains (losses):
Included in earnings^(a)	(34		)	—			224			—
Included in other comprehensive income (loss)^(b)	3			—			(7		)	—
Included in regulatory assets and liabilities	3			3			5			5
Purchases	75			—			61			—
Settlements	(95		)	4			(80		)	—
Issuances	(69		)	—			(112		)	—
Transfers in^(c)	—			—			1			—
Transfers out^(c)	—			—			1			—
Fair value of net derivatives based on significant unobservable inputs at June 30	$	532		$	(1	)	$	544		$	4
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)	$	(38	)	$	—		$	206		$	—

———————————————


(a)	For the three months ended June 30, 2016 and 2015, realized and unrealized gains (losses) of approximately $(28) million and $202 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is reflected in interest expense.


(b)	Reflected in net unrealized gains on foreign currency translation on 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 three months ended June 30, 2016 and 2015, unrealized gains (losses) of approximately $(32) million and $184 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is reflected in interest expense.



	Six Months Ended June 30,
	2016						2015
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period	$	538		$	—		$	622		$	5
Realized and unrealized gains (losses):
Included in earnings^(a)	220			—			254			—
Included in other comprehensive income (loss)^(b)	(3		)	—			8			—
Included in regulatory assets and liabilities	—			—			4			4
Purchases	175			—			83			—
Settlements	(228		)	(1		)	(267		)	(5		)
Issuances	(143		)	—			(132		)	—
Transfers in^(c)	3			—			(18		)	—
Transfers out^(c)	(30		)	—			(10		)	—
Fair value of net derivatives based on significant unobservable inputs at June 30	$	532		$	(1	)	$	544		$	4
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)	$	125		$	—		$	224		$	—

———————————————


(a)	For the six months ended June 30, 2016 and 2015, realized and unrealized gains of approximately $246 million and $248 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.


(b)	Reflected in net unrealized gains on foreign currency translation on 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 six months ended June 30, 2016 and 2015, unrealized gains of approximately $151 million and $219 million, respectively, are reflected in the condensed consolidated statements of income in operating revenues and the balance is reflected in interest expense.

Fair Value, by Balance Sheet Grouping

Fair Value of Financial Instruments Recorded at Other than Fair Value - 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 recorded at other than fair value, are as follows:



	June 30, 2016						December 31, 2015
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(millions)
NEE:
Special use funds^(a)	$	659		$	659		$	675		$	675
Other investments - primarily notes receivable	$	520		$	781	^(b)	$	512		$	722	^(b)
Long-term debt, including current maturities	$	30,122	^(c)	$	32,747	^(d)	$	28,897	^(c)	$	30,412	^(d)
FPL:
Special use funds^(a)	$	517		$	517		$	528		$	528
Long-term debt, including current maturities	$	9,991		$	11,894	^(d)	$	10,020		$	11,028	^(d)

———————————————


(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.


(c)	Excludes debt totaling $443 million and $938 million, respectively, reflected in liabilities associated with assets held for sale on NEE's condensed consolidated balance sheet for which the carrying amount approximates fair value. See Note 8 - Assets and Liabilities Associated with Assets Held for Sale.

(d)

As of June 30, 2016 and December 31, 2015, for NEE, approximately $20,036 million and $18,031 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, primarily 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 June 30,				Three Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		2016		2015		2016		2015
	(millions)
Realized gains	$	33	$	50	$	16	$	34	$	55	$	91	$	26	$	45
Realized losses	$	20	$	19	$	12	$	9	$	38	$	32	$	22	$	15
Proceeds from sale or maturity of securities	$	727	$	2,201	$	551	$	1,949	$	1,428	$	2,930	$	1,081	$	2,538

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



	NEE				FPL
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
	(millions)
Equity securities	$	1,225	$	1,166	$	900	$	863
Debt securities	$	60	$	17	$	45	$	14

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
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
	(millions)
Unrealized losses^(a)	$	22	$	51	$	21	$	45
Fair value	$	292	$	1,129	$	259	$	861

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(a)	Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at June 30, 2016 and December 31, 2015 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

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details