XML 44 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurement (Tables)
 9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
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, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Netting(a)
 
Total
 
 
(millions)
 
Assets:
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash equivalents:(b)
 
 
 
 
 
 
 
 
 
 
NEE - equity securities
$
255

 
$
—

 
$
—

 
 
 
$
255

 
FPL - equity securities
$
167

 
$
—

 
$
—

 
 
 
$
167

 
Special use funds:(c)
 
 
 
 
 
 
 
 
 
 
NEE:
 
 
 
 
 
 
 
 
 
 
Equity securities
$
1,687

 
$
1,873

(d) 
$
—

 
 
 
$
3,560

 
U.S. Government and municipal bonds
$
479

 
$
155

 
$
—

 
 
 
$
634

 
Corporate debt securities
$
1

 
$
725

 
$
—

 
 
 
$
726

 
Mortgage-backed securities
$
—

 
$
428

 
$
—

 
 
 
$
428

 
Other debt securities
$
—

 
$
146

 
$
—

 
 
 
$
146

 
FPL:
 
 
 
 
 
 
 
 
 
 
Equity securities
$
478

 
$
1,701

(d) 
$
—

 
 
 
$
2,179

 
U.S. Government and municipal bonds
$
380

 
$
120

 
$
—

 
 
 
$
500

 
Corporate debt securities
$
—

 
$
548

 
$
—

 
 
 
$
548

 
Mortgage-backed securities
$
—

 
$
319

 
$
—

 
 
 
$
319

 
Other debt securities
$
—

 
$
130

 
$
—

 
 
 
$
130

 
Other investments:(e)
 
 
 
 
 
 
 
 
 
 
NEE:
 
 
 
 
 
 
 
 
 
 
Equity securities
$
16

 
$
12

 
$
—

 
 
 
$
28

 
Debt securities
$
44

 
$
87

 
$
—

 
 
 
$
131

 
Derivatives:
 
 
 
 
 
 
 
 
 
 
NEE:
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
1,256

 
$
1,617

 
$
1,227

 
$
(2,431
)
 
$
1,669

(f) 
Interest rate contracts
$
—

 
$
163

 
$
—

 
$
(7
)
 
$
156

(f) 
Foreign currency contracts
$
—

 
$
—

 
$
—

 
$
13

 
$
13

(f) 
FPL - commodity contracts
$
—

 
$
2

 
$
2

 
$
(1
)
 
$
3

(f) 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
NEE:
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
1,224

 
$
1,341

 
$
557

 
$
(2,355
)
 
$
767

(f) 
Interest rate contracts
$
—

 
$
61

 
$
142

 
$
(7
)
 
$
196

(f) 
Foreign currency contracts
$
—

 
$
29

 
$
—

 
$
13

 
$
42

(f) 
FPL - commodity contracts
$
—

 
$
—

 
$
4

 
$
(1
)
 
$
3

(f) 
———————————————
(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 $79 million ($76 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)
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 $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 September 30, 2018 are as follows:
 
 
Fair Value at
 
Valuation
 
Significant
 
 
 
 
Transaction Type
 
September 30, 2018
 
Technique(s)
 
Unobservable Inputs
 
Range
 
 
Assets
 
Liabilities
 
 
 
 
 
 
 
 
 
 
(millions)
 
 
 
 
 
 
 
 
Forward contracts - power
 
$
813

 
$
265

 
Discounted cash flow
 
Forward price (per MWh)
 
$(27)
—
$161
Forward contracts - gas
 
26

 
13

 
Discounted cash flow
 
Forward price (per MMBtu)
 
$2
—
$7
Options - power
 
51

 
21

 
Option models
 
Implied correlations
 
1%
—
100%
 
 
 
 
 
 
 
 
Implied volatilities
 
7%
—
197%
Options - primarily gas
 
143

 
153

 
Option models
 
Implied correlations
 
1%
—
100%
 
 
 
 
 
 
 
 
Implied volatilities
 
1%
—
110%
Full requirements and unit contingent contracts
 
194

 
105

 
Discounted cash flow
 
Forward price (per MWh)
 
$(17)
—
$561
 
 
 
 
 
 
 
 
Customer migration rate(a)
 
—%
—
20%
Total
 
$
1,227

 
$
557

 
 
 
 
 
 
 
 
———————————————
(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 September 30,
 
2018
 
2017
 
NEE
 
FPL
 
NEE
 
FPL
 
(millions)
Fair value of net derivatives based on significant unobservable inputs at June 30
$
650

 
$
—

 
$
724

 
$
(2
)
Realized and unrealized gains (losses):
 

 
 

 
 

 
 

Included in earnings(a)
(131
)
 
—

 
158

 
—

Included in other comprehensive income(b)
1

 
—

 
(5
)
 
—

Included in regulatory assets and liabilities
(1
)
 
(1
)
 
—

 
—

Purchases
22

 
—

 
38

 
—

Settlements
6

 
(1
)
 
(77
)
 
1

Issuances
(19
)
 
—

 
(59
)
 
—

Transfers out(c)
—

 
—

 
1

 
—

Fair value of net derivatives based on significant unobservable inputs at September 30
$
528

 
$
(2
)
 
$
780

 
$
(1
)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(d)
$
(115
)
 
$
—

 
$
213

 
$
—


———————————————
(a)
For the three months ended September 30, 2018 and 2017, realized and unrealized gains (losses) of approximately $(134) million and $164 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is primarily included in interest expense.
(b)
Included in net unrealized gains (losses) on foreign currency translation in the condensed consolidated statements of comprehensive income.
(c)
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, 2018 and 2017, unrealized gains (losses) of approximately $(118) million and $219 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is primarily included in interest expense.

 
Nine Months Ended September 30,
 
2018
 
2017
 
NEE
 
FPL
 
NEE
 
FPL
 
(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period
$
566

 
$
—

 
$
578

 
$
1

Realized and unrealized gains (losses):
 

 
 

 
 

 
 

Included in earnings(a)
(79
)
 
—

 
518

 
—

Included in other comprehensive income(b)
5

 
—

 
(16
)
 
—

Included in regulatory assets and liabilities
(1
)
 
(1
)
 
(2
)
 
(2
)
Purchases
125

 
—

 
83

 
—

Settlements
(1
)
 
(2
)
 
(234
)
 
—

Issuances
(80
)
 
—

 
(162
)
 
—

Impact of adoption of new revenue standard(c)
(30
)
 
—

 
—

 
—

Transfers in(d)
1

 
1

 
14

 
—

Transfers out(d)
22

 
—

 
1

 
—

Fair value of net derivatives based on significant unobservable inputs at September 30
$
528

 
$
(2
)
 
$
780

 
$
(1
)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(e)
$
(68
)
 
$
—

 
$
461

 
$
—

———————————————
(a)
For the nine months ended September 30, 2018 and 2017, realized and unrealized gains (losses) of approximately $(63) million and $519 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is primarily included in interest expense.
(b)
Included in net unrealized gains (losses) on foreign currency translation in 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 nine months ended September 30, 2018 and 2017, unrealized gains (losses) of approximately $(53) million and $462 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is primarily included 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:
 
September 30, 2018
 
December 31, 2017
 
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
 
(millions)
 
NEE:
 
 
Special use funds(a)
$
867

 
$
867

 
$
743

 
$
744

 
Other investments - primarily notes receivable(b)
$
30

 
$
30

 
$
500

 
$
680

 
Long-term debt, including current maturities
$
29,694

 
$
30,326

(c) 
$
33,134

 
$
35,447

(c) 
FPL:
 
 
 
 
 
 
 
 
Special use funds(a)
$
688

 
$
688

 
$
593

 
$
593

 
Long-term debt, including current maturities
$
11,691

 
$
12,438

(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 (Level 2).
(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 8 - NEER).
(c)
At September 30, 2018 and December 31, 2017, substantially all is Level 2 for NEE and all is Level 2 for FPL.
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 September 30,
 
Nine Months Ended September 30,
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
(millions)
Realized gains
$
5

 
$
29

 
$
32

 
$
106

 
$
2

 
$
9

 
$
22

 
$
35

Realized losses
$
9

 
$
15

 
$
49

 
$
58

 
$
5

 
$
8

 
$
34

 
$
34

Proceeds from sale or maturity of securities
$
576

 
$
518

 
$
1,889

 
$
1,772

 
$
487

 
$
329

 
$
1,529

 
$
1,166


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
 
September 30, 2018
 
December 31, 2017
 
September 30, 2018
 
December 31, 2017
 
(millions)
Unrealized gains
$
8

 
$
37

 
$
6

 
$
28

Unrealized losses(a)
$
47

 
$
12

 
$
37

 
$
9

Fair value
$
1,626

 
$
918

 
$
1,253

 
$
670

———————————————
(a)
Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at September 30, 2018 and December 31, 2017 were not material to NEE or FPL