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Non-Derivative Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Non-Derivative 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 2 – 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.

Fair Value Measurement Alternative – NEE holds investments in equity securities without readily determinable fair values, which are initially recorded at cost, of approximately $514 million and $485 million at September 30, 2023 and December 31, 2022, respectively, and are included in noncurrent other assets on NEE's condensed consolidated balance sheets. Adjustments to carrying values are recorded as a result of observable price changes in transactions for identical or similar investments of the same issuer.

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:


	September 30, 2023
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE – equity securities	$	677	$	—		$	—	$	677
FPL – equity securities	$	36	$	—		$	—	$	36
Special use funds:(b)
NEE:
Equity securities	$	2,237	$	2,520	(c)	$	—	$	4,757
U.S. Government and municipal bonds	$	699	$	43		$	—	$	742
Corporate debt securities	$	—	$	554		$	—	$	554
Asset-backed securities	$	—	$	775		$	—	$	775
Other debt securities	$	—	$	12		$	—	$	12
FPL:
Equity securities	$	903	$	2,280	(c)	$	—	$	3,183
U.S. Government and municipal bonds	$	572	$	15		$	—	$	587
Corporate debt securities	$	—	$	389		$	—	$	389
Asset-backed securities	$	—	$	582		$	—	$	582
Other debt securities	$	—	$	5		$	—	$	5
Other investments:(d)
NEE:
Equity securities	$	49	$	—		$	—	$	49
U.S. Government and municipal bonds	$	291	$	265		$	—	$	556
Corporate debt securities	$	—	$	358		$	114	$	472
Other debt securities	$	—	$	190		$	15	$	205
FPL:
Equity securities	$	9	—			$	—	$	9
Debt securities	$	—	$	262		$	—	$	262

———————————————

(a)Includes restricted cash equivalents of approximately $20 million ($11 million for FPL) in current other assets on the condensed 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 and FPL's condensed consolidated balance sheets.


	December 31, 2022
	Level 1		Level 2			Level 3		Total
	(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE – equity securities	$	961	$	—		$	—	$	961
FPL – equity securities	$	36	$	—		$	—	$	36
Special use funds:(b)
NEE:
Equity securities	$	2,062	$	2,375	(c)	$	—	$	4,437
U.S. Government and municipal bonds	$	641	$	63		$	—	$	704
Corporate debt securities	$	6	$	716		$	—	$	722
Asset-backed securities	$	—	$	615		$	—	$	615
Other debt securities	$	1	$	19		$	—	$	20
FPL:
Equity securities	$	743	$	2,162	(c)	$	—	$	2,905
U.S. Government and municipal bonds	$	505	$	29		$	—	$	534
Corporate debt securities	$	6	$	547		$	—	$	553
Asset-backed securities	$	—	$	473		$	—	$	473
Other debt securities	$	1	$	11		$	—	$	12
Other investments:(d)
NEE:
Equity securities	$	30	$	1		$	—	$	31
U.S. Government and municipal bonds	$	117	$	118		$	—	$	235
Corporate debt securities	$	—	$	125		$	108	$	233
Other debt securities	$	—	$	57		$	10	$	67
FPL:
Equity securities	$	9	$	—		$	—	$	9
Debt securities	$	—	$	114		$	—	$	114

———————————————

(a)Includes restricted cash equivalents of approximately $69 million ($33 million for FPL) in current other assets on the condensed 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 and FPL's condensed consolidated balance sheets.

Contingent Consideration – On March 31, 2021, a wholly owned subsidiary of NEET acquired GridLiance Holdco, LP and GridLiance GP, LLC (GridLiance). The acquisition agreements are subject to earn-out provisions for additional payments by NEER related to the completion of capital expenditures for certain future development projects. NEECH guarantees the contingent consideration obligations under the GridLiance acquisition agreement. Significant inputs and assumptions used in the fair value measurement of the contingent consideration, some of which are Level 3 and require judgment, include the projected timing and amount of future cash flows, estimated probability of completing future development projects as well as discount rates. The contingent consideration liabilities were valued at approximately $264 million as of the acquisition date. Approximately $123 million and $203 million of contingent consideration liabilities are included in noncurrent other liabilities on NEE's condensed consolidated balance sheets at September 30, 2023 and December 31, 2022, respectively. The decrease in contingent consideration liabilities is primarily due to a revised assessment of the likelihood of future payments expected under the purchase and sale agreement governing the acquisition of GridLiance.

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:


	September 30, 2023					December 31, 2022
	Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value
	(millions)
NEE:
Special use funds(a)	$	1,181	$	1,181		$	998	$	999
Other receivables, net of allowances(b)	$	696	$	696		$	246	$	246
Long-term debt, including current portion	$	67,162	$	60,952	(c)	$	61,889	$	57,892	(c)
FPL:
Special use funds(a)	$	850	$	850		$	744	$	744
Long-term debt, including current portion	$	24,889	$	22,275	(c)	$	21,002	$	19,364	(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)Approximately $475 million and $25 million is included in current other assets and $221 million and $221 million is included in noncurrent other assets on NEE's condensed consolidated balance sheets at September 30, 2023 and December 31, 2022, respectively (primarily Level 3).

(c)At September 30, 2023 and December 31, 2022, substantially all is Level 2 for NEE and FPL.

Special Use Funds and Other Investments Carried at Fair Value – 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 $8,020 million ($5,595 million for FPL) and $7,495 million ($5,220 million for FPL) at September 30, 2023 and December 31, 2022, respectively, and FPL's storm fund assets of $1 million and $1 million at September 30, 2023 and December 31, 2022, respectively. The investments held in the special use funds and other investments 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 $3,562 million ($1,969 million for FPL) and $2,858 million ($1,873 million for FPL) at September 30, 2023 and December 31, 2022, respectively. Debt securities included in the nuclear decommissioning funds have a weighted-average maturity at September 30, 2023 of approximately nine years at both NEE and FPL. Other investments primarily consist of debt securities with a weighted-average maturity at September 30, 2023 of approximately six years. The cost of securities sold is determined using the specific identification method.

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 condensed consolidated statements of income. Changes in fair value of equity securities are primarily recorded in change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds – net in NEE’s condensed consolidated statements of income.

Unrealized gains (losses) recognized on equity securities held at September 30, 2023 and 2022 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,
	2023		2022		2023		2022		2023		2022		2023		2022
	(millions)
Unrealized gains (losses)	$	(180)	$	(222)	$	396	$	(1,317)	$	(114)	$	(135)	$	279	$	(857)

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 September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
	(millions)
Realized gains	$	12	$	8	$	31	$	26	$	11	$	6	$	27	$	20
Realized losses	$	64	$	41	$	140	$	100	$	60	$	36	$	122	$	79
Proceeds from sale or maturity of securities	$	781	$	681	$	1,801	$	1,901	$	688	$	324	$	1,428	$	1,001

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, 2023		December 31, 2022		September 30, 2023		December 31, 2022
	(millions)
Unrealized gains	$	5	$	4	$	4	$	3
Unrealized losses(a)	$	260	$	285	$	152	$	193
Fair value	$	2,797	$	2,315	$	1,480	$	1,466

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(a) Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at September 30, 2023 and December 31, 2022 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 New Hampshire Nuclear Decommissioning Financing Committee 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 fair value of the investment is less than the carrying value. Indicators of impairment may include, among other things, an observable market price below NEE’s carrying value. Investments that are other than temporarily impaired are written down to their estimated fair value on the reporting date and an impairment loss is recognized.

NextEra Energy Resources owns a noncontrolling interest in NEP, primarily through its limited partner interest in NEP OpCo, and accounts for this ownership interest as an equity method investment. During the preparation of NEE’s September 30, 2023 financial statements, it was determined that NextEra Energy Resources’ investment in NEP was OTTI as a result of a significant decline in trading price of NEP's common units during the final three trading days of the third quarter of 2023 following the announcement of a decrease in NEP’s distribution growth rate expectations. The impairment reflected NEE’s fair value analysis using the market approach and the observable trading price of NEP’s common units at September 30, 2023 of $29.70. When making the OTTI determination, NEE considered, among other things, the extent to which the publicly traded unit price was less than cost. Based on the fair value analysis, the equity method investment with a carrying amount of approximately $4.2 billion was written down to its estimated fair value of approximately $3.0 billion, which is the carrying amount as of September 30, 2023, resulting in an impairment charge of $1.2 billion ($0.9 billion after tax), which is recorded in equity in earnings (losses) of equity method investees in NEE’s condensed consolidated statements of income for the three and nine months ended September 30, 2023.

During the first quarter of 2022, NextEra Energy Resources recorded an impairment charge of approximately $0.8 billion ($0.6 billion after tax) related to an investment in Mountain Valley Pipeline, LLC (Mountain Valley Pipeline), which is reflected in equity in earnings (losses) of equity method investees in NEE’s condensed consolidated statements of income for the nine months ended September 30, 2022. The impairment reflected NextEra Energy Resources’ fair value analysis based on the market approach and considered legal and regulatory challenges to the completion of construction and the resulting economic outlook for the pipeline. This impairment charge resulted in the complete write off of NextEra Energy Resources’ equity method investment carrying amount as of March 31, 2022 of approximately $0.6 billion, as well as the recording of a liability of approximately $0.2 billion which reflects NextEra Energy Resources’ share of estimated future dismantlement costs.

The Mountain Valley Pipeline 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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