Summary of Significant Accounting and Reporting Policies

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting and Reporting Policies

Restricted Cash – At June 30, 2022 and December 31, 2021, NEE had approximately $1,632 million ($39 million for FPL) and $677 million ($53 million for FPL), respectively, of restricted cash, which is included in current other assets on NEE's and FPL's condensed consolidated balance sheets. Restricted cash is primarily related to debt service payments and margin cash collateral requirements at NEER and bond proceeds held for construction at FPL. In addition, where offsetting positions exist, restricted cash related to margin cash collateral of $673 million is netted against derivative assets and $1,292 million is netted against derivative liabilities at June 30, 2022 and $121 million is netted against derivative assets and $172 million is netted against derivative liabilities at December 31, 2021. See Note 2.

Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests – In April 2022, subsidiaries of NextEra Energy Resources entered into an agreement to sell to a NEP subsidiary a 67% controlling ownership interest in a battery storage facility under construction in California with storage capacity of 230 MW. NEER expects to close the sale during 2022, subject to the facility commencing commercial operations, customary closing conditions and the receipt of regulatory approvals, for approximately $191 million, subject to closing adjustments. Additionally, NEP’s share of the projects’ noncontrolling interests related to differential membership investors is estimated to be approximately $89 million at the time of closing.

In December 2021, subsidiaries of NextEra Energy Resources sold their 100% ownership interest, comprised of a 50% controlling ownership interest to a NEP subsidiary and a 50% noncontrolling ownership interest to a third party, in a portfolio of seven wind generation facilities and six solar generation facilities representing a total generating capacity of 2,520 MW and 115 MW of battery storage capacity, three of which facilities were under construction. In connection with the three facilities that were under construction, approximately $668 million of cash received, which was subject to post-closing adjustments, was recorded as contract liabilities, which was included in current other liabilities on NEE’s condensed consolidated balance sheet at December 31, 2021. The three facilities achieved commercial operations during the first quarter of 2022 and approximately $551 million of contract liabilities were reversed and the sale was recognized for accounting purposes. The remaining contract liability balance primarily relates to differential membership interests proceeds and is contingent on the enactment of a solar PTC by October 31, 2022 and is included in current other liabilities on NEE’s condensed consolidated balance sheet at June 30, 2022. If there is an enactment of a solar PTC by October 31, 2022, the contract liability will be reversed and the additional sales proceeds recognized for accounting purposes. Otherwise, NextEra Energy Resources may be required to return proceeds related to differential membership interests of approximately $117 million to NEP. In addition, NextEra Energy Resources is responsible to pay for all construction costs related to the portfolio. At June 30, 2022 and December 31, 2021, approximately $279 million and $970 million, respectively, is included in accounts payable on NEE's condensed consolidated balance sheets and represents amounts owed by NextEra Energy Resources to NEP to reimburse NEP for construction costs.

Credit Losses – NEE's credit department monitors current and forward credit exposure to counterparties and their affiliates. Prospective and existing customers are reviewed for creditworthiness based on established standards and credit quality indicators. Credit quality indicators and standards that are closely monitored include credit ratings, certain financial ratios and delinquency trends which are based off the latest available information. Customers not meeting minimum standards provide various credit enhancements or secured payment terms, such as letters of credit, the posting of margin cash collateral or use of master netting arrangements.

For the six months ended June 30, 2022 and 2021, NEE recorded approximately $67 million and $146 million of bad debt expense, including credit losses, respectively, which are included in O&M expenses in NEE’s condensed consolidated statements of income. The amounts primarily relate to credit losses at NEER driven by the operational and energy market impacts of the February 2021 weather event. The estimate for credit losses related to the impacts of the February 2021 weather event was developed based on NEE’s assessment of the ultimate collectability of these receivables under potential workout scenarios. At December 31, 2021, approximately $127 million of allowances were included in noncurrent other assets on NEE's condensed consolidated balance sheets related to the February 2021 weather event. During the three months ended June 30, 2022, the net receivable was settled.

Property Plant and Equipment – Property, plant and equipment consists of the following:


	NEE				FPL
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
	(millions)
Electric plant in service and other property	$	118,443	$	112,500	$	71,298	$	67,771
Nuclear fuel	1,562		1,606		1,147		1,170
Construction work in progress	15,505		14,141		5,799		6,326
Property, plant and equipment, gross	135,510		128,247		78,244		75,267
Accumulated depreciation and amortization	(30,117)		(28,899)		(17,458)		(17,040)
Property, plant and equipment – net	$	105,393	$	99,348	$	60,786	$	58,227

During the three months ended June 30, 2022 and 2021, FPL recorded AFUDC of approximately $36 million and $42 million, respectively, including AFUDC – equity of approximately $28 million and $31 million, respectively. During the six months ended June 30, 2022 and 2021, FPL recorded AFUDC of approximately $81 million and $78 million, respectively, including AFUDC – equity of approximately $62 million and $58 million, respectively. During the three months ended June 30, 2022 and 2021, NEER capitalized interest on construction projects of approximately $37 million and $33 million, respectively. During the six months ended June 30, 2022 and 2021, NEER capitalized interest on construction projects of approximately $73 million and $63 million, respectively.