Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Financial assets and liabilities and other 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, 2020
	Level 1		Level 2			Level 3		Netting(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(b)
NEE - equity securities	$	654	$	—		$	—				$	654
FPL - equity securities	$	123	$	—		$	—				$	123
Special use funds:(c)
NEE:
Equity securities	$	1,799	$	2,025	(d)	$	—				$	3,824
U.S. Government and municipal bonds	$	525	$	169		$	—				$	694
Corporate debt securities	$	1	$	881		$	—				$	882
Mortgage-backed securities	$	—	$	421		$	—				$	421
Other debt securities	$	—	$	100		$	—				$	100
FPL:
Equity securities	$	589	$	1,837	(d)	$	—				$	2,426
U.S. Government and municipal bonds	$	415	$	111		$	—				$	526
Corporate debt securities	$	—	$	626		$	—				$	626
Mortgage-backed securities	$	—	$	325		$	—				$	325
Other debt securities	$	—	$	92		$	—				$	92
Other investments:(e)
NEE:
Equity securities	$	45	$	—		$	—				$	45
Debt securities	$	95	$	112		$	—				$	207
Derivatives:
NEE:
Commodity contracts	$	1,286	$	2,429		$	1,758	$	(3,010	)	$	2,463		(f)
Interest rate contracts	$	—	$	38		$	—	$	(30	)	$	8		(f)
Foreign currency contracts	$	—	$	—		$	—	$	(1	)	$	(1	)	(f)
FPL - commodity contracts	$	—	$	2		$	2	$	(2	)	$	2		(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,390	$	1,606		$	432	$	(2,882	)	$	546		(f)
Interest rate contracts	$	—	$	1,449		$	21	$	(30	)	$	1,440		(f)
Foreign currency contracts	$	—	$	67		$	—	$	(1	)	$	66		(f)
FPL - commodity contracts	$	—	$	5		$	8	$	(2	)	$	11		(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 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 $103 million ($56 million for FPL) in current other assets and $97 million ($46 million for FPL) in noncurrent 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 on NEE's condensed consolidated balance sheet.

(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, 2019
	Level 1		Level 2			Level 3		Netting(a)			Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(b)
NEE - equity securities	$	363	$	—		$	—				$	363
FPL - equity securities	$	156	$	—		$	—				$	156
Special use funds:(c)
NEE:
Equity securities	$	1,875	$	2,088	(d)	$	—				$	3,963
U.S. Government and municipal bonds	$	567	$	150		$	—				$	717
Corporate debt securities	$	—	$	748		$	—				$	748
Mortgage-backed securities	$	—	$	517		$	—				$	517
Other debt securities	$	—	$	117		$	—				$	117
FPL:
Equity securities	$	596	$	1,895	(d)	$	—				$	2,491
U.S. Government and municipal bonds	$	429	$	106		$	—				$	535
Corporate debt securities	$	—	$	533		$	—				$	533
Mortgage-backed securities	$	—	$	395		$	—				$	395
Other debt securities	$	—	$	111		$	—				$	111
Other investments:(e)
NEE:
Equity securities	$	34	$	12		$	—				$	46
Debt securities	$	82	$	69		$	—				$	151
Derivatives:
NEE:
Commodity contracts	$	1,229	$	2,082		$	1,739	$	(2,700	)	$	2,350	(f)
Interest rate contracts	$	—	$	24		$	2	$	(17	)	$	9	(f)
Foreign currency contracts	$	—	$	26		$	—	$	1		$	27	(f)
FPL - commodity contracts	$	—	$	3		$	1	$	(1	)	$	3	(f)
Liabilities:
Derivatives:
NEE:
Commodity contracts	$	1,365	$	1,446		$	390	$	(2,625	)	$	576	(f)
Interest rate contracts	$	—	$	598		$	144	$	(17	)	$	725	(f)
Foreign currency contracts	$	—	$	38		$	—	$	1		$	39	(f)
FPL - commodity contracts	$	—	$	5		$	9	$	(1	)	$	13	(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 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 $60 million ($54 million for FPL) in current other assets and $64 million ($64 million for FPL) in noncurrent 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 on NEE's condensed consolidated balance sheet.

(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 June 30, 2020 are as follows:

	Fair Value at				Valuation	Significant				Weighted-
Transaction Type	June 30, 2020				Technique(s)	Unobservable Inputs	Range			average(a)
	Assets		Liabilities
	(millions)
Forward contracts - power	$	793	$	102	Discounted cash flow	Forward price (per MWh)	$2	—	$215	$28
Forward contracts - gas	263		24		Discounted cash flow	Forward price (per MMBtu)	$1	—	$6	$2
Forward contracts - congestion	22		6		Discounted cash flow	Forward price (per MWh)	$(6)	—	$30	$—
Options - power	45		25		Option models	Implied correlations	40%	—	85%	55%
						Implied volatilities	17%	—	510%	62%
Options - primarily gas	168		196		Option models	Implied correlations	40%	—	100%	59%
						Implied volatilities	16%	—	135%	38%
Full requirements and unit contingent contracts	436		62		Discounted cash flow	Forward price (per MWh)	$6	—	$790	$47
						Customer migration rate(b)	—%	—	122%	2%
Forward contracts - other	31		17
Total	$	1,758	$	432

———————————————

(a)

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

(b)

Applies only to full requirements contracts.

The sensitivity of NEE's fair value measurements to increases (decreases) in the significant unobservable in

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,
	2020						2019
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at March 31	$	1,519		$	(9	)	$	844		$	(16	)
Realized and unrealized gains (losses):
Included in earnings(a)	(38		)	—			513			—
Included in other comprehensive income (loss)(b)	1			—			(2		)	—
Included in regulatory assets and liabilities	—			—			1			1
Purchases	39			—			43			—
Settlements	(176		)	3			(81		)	2
Issuances	(40		)	—			(37		)	—
Transfers out(c)	—			—			(50		)	—
Fair value of net derivatives based on significant unobservable inputs at June 30	$	1,305		$	(6	)	$	1,231		$	(13	)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(d)	$	(31	)	$	—		$	487		$	—

———————————————

(a) For the three months ended June 30, 2020 and 2019, realized and unrealized gains (losses) of approximately $(36) million and $509 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is 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.

(d) For the three months ended June 30, 2020 and 2019, unrealized gains (losses) of approximately $(30) million and $482 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is included in interest expense.

	Six Months Ended June 30,
	2020						2019
	NEE			FPL			NEE			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior period	$	1,207		$	(8	)	$	647		$	(36	)
Realized and unrealized gains (losses):
Included in earnings(a)	349			—			692			—
Included in other comprehensive income (loss)(b)	1			—			1			—
Included in regulatory assets and liabilities	(2		)	(2		)	(1		)	(1		)
Purchases	120			—			67			—
Sales(c)	114			—			—			—
Settlements	(382		)	4			(119		)	22
Issuances	(72		)	—			(51		)	—
Transfers out(d)	(30		)	—			(5		)	2
Fair value of net derivatives based on significant unobservable inputs at June 30	$	1,305		$	(6	)	$	1,231		$	(13	)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(e)	$	176		$	—		$	568		$	—

———————————————

(a) For the six months ended June 30, 2020 and 2019, realized and unrealized gains of approximately $369 million and $703 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is 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 11 - Disposal of Businesses.

(d) Transfers from Level 3 to Level 2 were a result of increased observability of market data.

(e)

For the six months ended June 30, 2020 and 2019, unrealized gains of approximately $188 million and $578 million, respectively, are included in the condensed consolidated statements of income in operating revenues and the balance is 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:

	June 30, 2020					December 31, 2019
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds(a)	$	879	$	878		$	892	$	891
Other investments(b)	$	24	$	24		$	30	$	30
Long-term debt, including current portion(c)	$	45,735	$	50,020	(d)	$	39,667	$	42,928	(d)
FPL:
Special use funds(a)	$	695	$	694		$	706	$	705
Long-term debt, including current portion	$	14,419	$	18,007	(d)	$	14,161	$	16,448	(d)

———————————————

(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 on NEE's condensed consolidated balance sheets.

(c) Excludes debt totaling approximately $463 million classified as held for sale, which is included in current other liabilities on NEE's condensed consolidated balance sheet at December 31, 2019, for which the carrying amount approximated fair value. See Note 11 - Disposal of Businesses.

(d)

At June 30, 2020 and December 31, 2019, substantially all is Level 2 for NEE and all is Level 2 for FPL.

Gains and Losses on Available-for-sale Debt Securities

Realized gains and losses and proceeds from the sale or maturity of available for sale debt securities are as follows:

	NEE								FPL
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019		2020		2019
	(millions)
Realized gains	$	26	$	17	$	56	$	25	$	20	$	9	$	45	$	15
Realized losses	$	16	$	11	$	33	$	20	$	13	$	5	$	28	$	9
Proceeds from sale or maturity of securities	$	753	$	788	$	1,491	$	1,475	$	665	$	685	$	1,272	$	1,227

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
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(millions)
Unrealized gains	$	125	$	75	$	96	$	58
Unrealized losses(a)	$	29	$	7	$	24	$	7
Fair value	$	289	$	314	$	220	$	240

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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, 2020 and December 31, 2019 were not material to NEE or FPL.