Non-Derivative Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Measurements

Non-derivative fair value measurements consist of NEE’s and FPL’s cash equivalents and restricted cash equivalents, special use funds and other investments. The fair value of these financial assets is determined by using the valuation techniques and inputs as described in Note 3 – Fair Value Measurements of Derivative Instruments as well as below.

Cash Equivalents and Restricted Cash Equivalents - NEE and FPL hold investments in money market funds. The fair value of these funds is estimated using a market approach based on current observable market prices.

Special Use Funds and Other Investments - NEE and FPL hold primarily debt and equity securities directly, as well as indirectly through commingled funds. Substantially all directly held equity securities are valued at their quoted market prices. For directly held debt securities, multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or issue of each security. Commingled funds, which are similar to mutual funds, are maintained by banks or investment companies and hold certain investments in accordance with a stated set of objectives. The fair value of commingled funds is primarily derived from the quoted prices in active markets of the underlying securities. Because the fund shares are offered to a limited group of investors, they are not considered to be traded in an active market.

Recurring Non-Derivative Fair Value Measurements - NEE's and FPL's financial assets and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:


	December 31, 2020
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE - equity securities	$	742	$	—		$	—	$	742
FPL - equity securities	$	78	$	—		$	—	$	78
Special use funds:(b)
NEE:
Equity securities	$	2,237	$	2,489	(c)	$	—	$	4,726
U.S. Government and municipal bonds	$	590	$	127		$	—	$	717
Corporate debt securities	$	1	$	870		$	—	$	871
Mortgage-backed securities	$	—	$	422		$	—	$	422
Other debt securities	$	—	$	124		$	—	$	124
FPL:
Equity securities	$	752	$	2,260	(c)	$	—	$	3,012
U.S. Government and municipal bonds	$	449	$	87		$	—	$	536
Corporate debt securities	$	—	$	627		$	—	$	627
Mortgage-backed securities	$	—	$	335		$	—	$	335
Other debt securities	$	—	$	119		$	—	$	119
Other investments:(d)
NEE:
Equity securities	$	62	$	—		$	—	$	62
Debt securities	$	91	$	127		$	—	$	218

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(a)Includes restricted cash equivalents of approximately $111 million ($56 million for FPL) in current other assets and $42 million ($17 million for FPL) in noncurrent other assets on the consolidated balance sheets.

(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 Other than Fair Value 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)Included in noncurrent other assets on NEE's consolidated balance sheet.


	December 31, 2019
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE - equity securities	$	363	$	—		$	—	$	363
FPL - equity securities	$	156	$	—		$	—	$	156
Special use funds:(b)
NEE:
Equity securities	$	1,875	$	2,088	(c)	$	—	$	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	(c)	$	—	$	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:(d)
NEE:
Equity securities	$	34	$	12		$	—	$	46
Debt securities	$	82	$	69		$	—	$	151

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(a)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 consolidated balance sheets.

(c)Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.

(d)Included in noncurrent other assets on NEE's consolidated balance sheet.

Fair Value of Financial Instruments Recorded at Other than Fair Value - 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:


	December 31, 2020					December 31, 2019
	Carrying Amount		Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(millions)
NEE:
Special use funds(a)	$	919	$	920		$	892		$	891
Other investments(b)	$	29	$	29		$	30		$	30
Long-term debt, including current portion	$	46,082	$	51,525	(c)	$	39,667	(d)	$	42,928	(c)(d)
FPL:
Special use funds(a)	$	718	$	719		$	706		$	705
Long-term debt, including current portion	$	15,676	$	19,470	(c)	$	14,161		$	16,448	(c)

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(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 consolidated balance sheets.

(c)At December 31, 2020 and 2019, substantially all is Level 2 for NEE and all is Level 2 for FPL.

(d)Excludes debt totaling approximately $463 million classified as held for sale, which is included in current other liabilities on NEE's consolidated balance sheet at December 31, 2019, for which the carrying amount approximates fair value. See Note 1 - Disposal of Businesses/Assets.

Special Use Funds - The special use funds noted above and those carried at fair value (see Recurring Non-Derivative Fair Value Measurements above) consist of NEE's nuclear decommissioning fund assets of approximately $7,703 million and $6,880 million at December 31, 2020 and 2019, respectively, ($5,271 million and $4,697 million, respectively, for FPL) and FPL's storm fund assets of $76 million and $74 million at December 31, 2020 and 2019, respectively. The investments held in the special use funds consist of equity and available for sale debt securities which are primarily carried at estimated fair value. The amortized cost of debt securities is approximately $2,009 million and $2,030 million at December 31, 2020 and 2019, respectively ($1,521 million and $1,523 million, respectively, for FPL). Debt securities included in the nuclear decommissioning funds have a weighted-average maturity at December 31, 2020 of approximately eight years at NEE and nine years at FPL. FPL's storm fund primarily consists of debt securities with a weighted-average maturity at December 31, 2020 of approximately one year. The cost of securities sold is determined using the specific identification method.

Effective January 1, 2020, NEE and FPL adopted an accounting standards update that provides a modified version of the other-than-temporary impairment model for debt securities. The new available for sale debt security impairment model no longer allows consideration of the length of time during which the fair value has been less than its amortized cost basis when determining whether a credit loss exists. Credit losses are required to be presented as an allowance rather than as a write-down on securities not intended to be sold or required to be sold. NEE and FPL adopted this model prospectively. See Note 1 - Measurement of Credit Losses on Financial Instruments.

For FPL's special use funds, changes in fair value of debt and equity securities, including any estimated credit losses of debt securities, result in a corresponding adjustment to the related regulatory asset or liability accounts, consistent with regulatory treatment. For NEE's non-rate regulated operations, changes in fair value of debt securities result in a corresponding adjustment to OCI, except for estimated credit losses and unrealized losses on debt securities intended or required to be sold prior to recovery of the amortized cost basis, which are recognized in other - net in NEE's consolidated statements of income. Changes in fair value of equity securities are recorded in change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds - net in NEE’s consolidated statements of income.

Unrealized gains (losses) recognized on equity securities held at December 31, 2020 and 2019 are as follows:


	NEE				FPL
	Years Ended December 31,				Years Ended December 31,
	2020		2019		2020		2019
			(millions)
Unrealized gains (losses)	$	627	$	780	$	444	$	510

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


	NEE						FPL
	Years Ended December 31,						Years Ended December 31,
	2020		2019		2018		2020		2019		2018
	(millions)
Realized gains	$	110	$	68	$	51	$	83	$	44	$	31
Realized losses	$	70	$	48	$	75	$	56	$	29	$	49
Proceeds from sale or maturity of securities	$	2,541	$	3,005	$	2,551	$	2,162	$	2,539	$	2,100

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
	December 31,				December 31,
	2020		2019		2020		2019
			(millions)
Unrealized gains	$	134	$	75	$	104	$	58
Unrealized losses(a)	$	9	$	7	$	9	$	7
Fair value	$	201	$	314	$	150	$	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 December 31, 2020 and 2019 were not material to NEE or FPL.

Regulations issued by the FERC and the NRC provide general risk management guidelines to protect nuclear decommissioning funds and to allow such funds to earn a reasonable return. The FERC regulations prohibit, among other investments, investments in any securities of NEE or its subsidiaries, affiliates or associates, excluding investments tied to market indices or mutual funds. Similar restrictions applicable to the decommissioning funds for NEER's nuclear plants are included in the NRC operating licenses for those facilities or in NRC regulations applicable to NRC licensees not in cost-of-service environments. With respect to the decommissioning fund for Seabrook, decommissioning fund contributions and withdrawals are also regulated by the NDFC pursuant to New Hampshire law.

The nuclear decommissioning reserve funds are managed by investment managers who must comply with the guidelines of NEE and FPL and the rules of the applicable regulatory authorities. The funds' assets are invested giving consideration to taxes, liquidity, risk, diversification and other prudent investment objectives.

Nonrecurring Fair Value Measurements - NEE tests its equity method investments for impairment whenever events or changes in circumstances indicate that the investment may be impaired. During the preparation of NEE's December 31, 2020 financial statements, it was determined that NextEra Energy Resources' investment in Mountain Valley Pipeline accounted for under the equity method of accounting was other-than-temporarily impaired. The impairment is the result of continued legal and regulatory challenges that have resulted in substantial delays in achieving commercial operation and increased costs to complete construction. More specifically at the end of 2020 and into early 2021, developments in the current legal, regulatory and political environment have caused NextEra Energy Resources to consider the investment impaired and the impairment to be other than temporary. The challenges include legal challenges to the various permits needed to complete construction and the regulatory approvals received, regulatory challenges related to alternative construction plans and the extended construction period, and the current political and environmental challenges with the construction of an interstate pipeline. Accordingly, NextEra Energy Resources performed a fair value analysis based on the market approach to determine the amount of the impairment. The current challenges to complete construction and the resulting economic outlook for the pipeline were considered in determining the magnitude of the other-than-temporary impairment. Based on the fair value analysis, the equity method investment with a carrying amount of approximately $1.9 billion was written down to its estimated fair value of approximately $400 million as of December 31, 2020, resulting in an impairment charge of $1.5 billion (or $1.2 billion after tax), which is recorded in equity in earnings (losses) of equity method investees in NEE’s consolidated statements of income for the year ended December 31, 2020.

The fair value estimate was based on a probability-weighted earnings before interest, taxes, depreciation and amortization (EBITDA) multiple valuation technique using a market participant view of the potential different outcomes for the investment. As part of the valuation, NextEra Energy Resources used observable inputs where available, including the EBITDA multiples of recent pipeline transactions. Significant unobservable inputs (Level 3), including the probabilities assigned to the different potential outcomes, the forecasts of operating revenues and costs, and the projected capital expenditures to complete the project, were also used in the estimation of fair value. An increase in the revenue forecasts, a decrease in the projected operating or capital expenditures or an increase in the probability assigned to the full pipeline being completed would result in an

increased fair market value. Changes in the opposite direction of those unobservable inputs would result in a decreased fair market value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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