Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2018

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:



	March 31, 2018
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:^(b)
NEE - equity securities	$	227	$	—		$	—				$	227
FPL - equity securities	$	117	$	—		$	—				$	117
Special use funds:^(c)
NEE:
Equity securities	$	1,631	$	1,691	^(d)	$	—				$	3,322
U.S. Government and municipal bonds	$	444	$	151		$	—				$	595
Corporate debt securities	$	1	$	716		$	—				$	717
Mortgage-backed securities	$	—	$	427		$	—				$	427
Other debt securities	$	—	$	141		$	—				$	141
FPL:
Equity securities	$	457	$	1,537	^(d)	$	—				$	1,994
U.S. Government and municipal bonds	$	346	$	118		$	—				$	464
Corporate debt securities	$	—	$	545		$	—				$	545
Mortgage-backed securities	$	—	$	322		$	—				$	322
Other debt securities	$	—	$	127		$	—				$	127
Other investments:^(e)
NEE:
Equity securities	$	2	$	12		$	—				$	14
Debt securities	$	32	$	103		$	—				$	135
Derivatives:
NEE:
Commodity contracts	$	1,030	$	2,023		$	1,255	$	(2,415	)	$	1,893	^(f)
Interest rate contracts	$	—	$	77		$	—	$	1		$	78	^(f)
Foreign currency contracts	$	—	$	35		$	—	$	12		$	47	^(f)
FPL - commodity contracts	$	—	$	2		$	1	$	(1	)	$	2	^(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,038	$	1,550		$	483	$	(2,397	)	$	674	^(f)
Interest rate contracts	$	—	$	61		$	147	$	1		$	209	^(f)
Foreign currency contracts	$	—	$	24		$	—	$	12		$	36	^(f)
FPL - commodity contracts	$	—	$	—		$	3	$	(1	)	$	2	^(f)

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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 equivalents of approximately $107 million ($103 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.



	December 31, 2017
	Level 1		Level 2			Level 3		Netting^(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:^(b)
NEE - equity securities	$	1,294	$	—		$	—				$	1,294
FPL - equity securities	$	144	$	—		$	—				$	144
Special use funds:^(c)
NEE:
Equity securities	$	1,595	$	1,719	^(d)	$	—				$	3,314
U.S. Government and municipal bonds	$	478	$	139		$	—				$	617
Corporate debt securities	$	1	$	764		$	—				$	765
Mortgage-backed securities	$	—	$	435		$	—				$	435
Other debt securities	$	—	$	129		$	—				$	129
FPL:
Equity securities	$	473	$	1,562	^(d)	$	—				$	2,035
U.S. Government and municipal bonds	$	362	$	112		$	—				$	474
Corporate debt securities	$	—	$	539		$	—				$	539
Mortgage-backed securities	$	—	$	333		$	—				$	333
Other debt securities	$	—	$	116		$	—				$	116
Other investments:^(e)
NEE:
Equity securities	$	2	$	10		$	—				$	12
Debt securities	$	34	$	103		$	—				$	137
Derivatives:
NEE:
Commodity contracts	$	1,303	$	1,301		$	1,358	$	(2,225	)	$	1,737	^(f)
Interest rate contracts	$	—	$	50		$	—	$	5		$	55	^(f)
Foreign currency contracts	$	—	$	—		$	—	$	12		$	12	^(f)
FPL - commodity contracts	$	—	$	1		$	2	$	(1	)	$	2	^(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,217	$	915		$	660	$	(2,225	)	$	567	^(f)
Interest rate contracts	$	—	$	143		$	132	$	5		$	280	^(f)
Foreign currency contracts	$	—	$	40		$	—	$	12		$	52	^(f)
FPL - commodity contracts	$	—	$	1		$	2	$	(1	)	$	2	^(f)

———————————————

(a)


(b)	Includes restricted cash equivalents of approximately $159 million ($128 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 March 31, 2018 are as follows:



	Fair Value at				Valuation	Significant
Transaction Type	March 31, 2018				Technique(s)	Unobservable Inputs	Range
	Assets		Liabilities
	(millions)
Forward contracts - power	$	783	$	254	Discounted cash flow	Forward price (per MWh)	$(40)	—	$284
Forward contracts - gas	57		8		Discounted cash flow	Forward price (per MMBtu)	$1	—	$6
Options - power	49		15		Option models	Implied correlations	1%	—	100%
						Implied volatilities	7%	—	485%
Options - primarily gas	100		168		Option models	Implied correlations	1%	—	100%
						Implied volatilities	1%	—	95%
Full requirements and unit contingent contracts	266		38		Discounted cash flow	Forward price (per MWh)	$(29)	—	$928
						Customer migration rate^(a)	—%	—	20%
Total	$	1,255	$	483

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(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 March 31,
	2018						2017
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period	$	564		$	—		$	578		$	1
Realized and unrealized gains (losses):
Included in earnings^(a)	16			—			216			—
Included in other comprehensive income^(b)	(3		)	—			(1		)	—
Included in regulatory assets and liabilities	(1		)	(2		)	(2		)	(2		)
Purchases	42			—			21			—
Settlements	48			—			(85		)	(3		)
Issuances	(33		)	—			(16		)	—
Impact of adoption of new revenue standard^(c)	(30		)	—			—			—
Transfers in^(d)	—			—			9			—
Transfers out^(d)	22			—			(5		)	—
Fair value of net derivatives based on significant unobservable inputs at March 31	$	625		$	(2	)	$	715		$	(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^(e)	$	19		$	—		$	141		$	—

———————————————


(a)	For the three months ended March 31, 2018 and 2017, realized and unrealized gains of approximately $26 million and $215 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)	See Note 1.


(d)	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.


(e)	For the three months ended March 31, 2018 and 2017, unrealized gains of approximately $29 million and $141 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

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, 2018					December 31, 2017
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds^(a)	$	833	$	833		$	743	$	744
Other investments - primarily notes receivable^(b)	$	19	$	19		$	500	$	680
Long-term debt, including current maturities	$	29,226	$	30,828	^(c)	$	33,134	$	35,447	^(c)
FPL:
Special use funds^(a)	$	687	$	687		$	593	$	593
Long-term debt, including current maturities	$	11,895	$	13,077	^(c)	$	11,702	$	13,285	^(c)

———————————————


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


(b)	Included in noncurrent other assets in the condensed consolidated balance sheets. At December 31, 2017, primarily a note receivable (Level 3) classified as held for sale and under contract, along with debt secured by this note receivable (see Note 7 - NEER).


(c)	At March 31, 2018 and December 31, 2017, for NEE, approximately $30,649 million and $33,743 million, respectively, is Level 2; the balance is Level 3. For FPL, all is 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
		Three Months Ended March 31,				Three Months Ended March 31,
		2018		2017		2018		2017
	(millions)
Realized gains		$	8	$	55	$	5	$	13
Realized losses		$	14	$	29	$	9	$	19
Proceeds from sale or maturity of securities		$	595	$	626	$	389	$	441

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, 2018		December 31, 2017		March 31, 2018		December 31, 2017
	(millions)
Unrealized gains	$	18	$	37	$	15	$	28
Unrealized losses^(a)	$	32	$	12	$	25	$	9
Fair value	$	1,295	$	918	$	1,008	$	670

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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, 2018 and December 31, 2017 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