10-Q
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

Commission
File
Number
 
Exact name of registrants as specified in their
charters, address of principal executive offices and
registrants' telephone number
 
IRS Employer
Identification
Number
1-8841
 
NEXTERA ENERGY, INC.
 
59-2449419
2-27612
 
FLORIDA POWER & LIGHT COMPANY
 
59-0247775
 
 
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
 
 

State or other jurisdiction of incorporation or organization:  Florida

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) have been subject to such filing requirements for the past 90 days.
NextEra Energy, Inc.    Yes þ    No ¨                                                                     Florida Power & Light Company    Yes þ    No ¨

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.
NextEra Energy, Inc.    Yes þ    No ¨                                                                     Florida Power & Light Company    Yes þ    No ¨

Indicate by check mark whether the registrants are a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.
NextEra Energy, Inc.
Large Accelerated Filer þ
Accelerated Filer ¨
Non-Accelerated Filer ¨
Smaller Reporting Company ¨
Florida Power & Light Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-Accelerated Filer þ
Smaller Reporting Company ¨

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).   Yes ¨   No þ

Number of shares of NextEra Energy, Inc. common stock, $0.01 par value, outstanding as of March 31, 2016461,445,951

Number of shares of Florida Power & Light Company common stock, without par value, outstanding as of March 31, 2016, all of which were held, beneficially and of record, by NextEra Energy, Inc.: 1,000

This combined Form 10-Q represents separate filings by NextEra Energy, Inc. and Florida Power & Light Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to NextEra Energy, Inc.'s other operations.

Florida Power & Light Company meets the conditions set forth in General Instruction H.(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.



DEFINITIONS

Acronyms and defined terms used in the text include the following:

Term
Meaning
AFUDC
allowance for funds used during construction
AFUDC - equity
equity component of AFUDC
AOCI
accumulated other comprehensive income
capacity clause
capacity cost recovery clause, as established by the FPSC
Duane Arnold
Duane Arnold Energy Center
EPA
U.S. Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
U.S. Federal Energy Regulatory Commission
Florida Southeast Connection
Florida Southeast Connection, LLC, a wholly owned NEER subsidiary
FPL
Florida Power & Light Company
FPL FiberNet
fiber-optic telecommunications business
FPSC
Florida Public Service Commission
fuel clause
fuel and purchased power cost recovery clause, as established by the FPSC
GAAP
generally accepted accounting principles in the U.S.
ITC
investment tax credit
kWh
kilowatt-hour(s)
Management's Discussion
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
MMBtu
One million British thermal units
MW
megawatt(s)
MWh
megawatt-hour(s)
NEE
NextEra Energy, Inc.
NEECH
NextEra Energy Capital Holdings, Inc.
NEER
NextEra Energy Resources, LLC
NEET
NextEra Energy Transmission, LLC
NEP
NextEra Energy Partners, LP
NEP OpCo
NextEra Energy Operating Partners, LP
Note __
Note __ to condensed consolidated financial statements
NRC
U.S. Nuclear Regulatory Commission
O&M expenses
other operations and maintenance expenses in the condensed consolidated statements of income
OCI
other comprehensive income
OTC
over-the-counter
OTTI
other than temporary impairment
PTC
production tax credit
PV
photovoltaic
Recovery Act
American Recovery and Reinvestment Act of 2009, as amended
regulatory ROE
return on common equity as determined for regulatory purposes
Sabal Trail
Sabal Trail Transmission, LLC, an entity in which a wholly owned NEER subsidiary has a 42.5% ownership interest
Seabrook
Seabrook Station
SEC
U.S. Securities and Exchange Commission
U.S.
United States of America

NEE, FPL, NEECH and NEER each has subsidiaries and affiliates with names that may include NextEra Energy, FPL, NextEra Energy Resources, NextEra, FPL Group, FPL Group Capital, FPL Energy, FPLE and similar references. For convenience and simplicity, in this report the terms NEE, FPL, NEECH and NEER are sometimes used as abbreviated references to specific subsidiaries, affiliates or groups of subsidiaries or affiliates. The precise meaning depends on the context.

2


TABLE OF CONTENTS


 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



3


FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance (often, but not always, through the use of words or phrases such as may result, are expected to, will continue, is anticipated, aim, believe, will, could, should, would, estimated, may, plan, potential, future, projection, goals, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on NEE's and/or FPL's operations and financial results, and could cause NEE's and/or FPL's actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of NEE and/or FPL in this combined Form 10-Q, in presentations, on their respective websites, in response to questions or otherwise.

Regulatory, Legislative and Legal Risks
NEE's and FPL's business, financial condition, results of operations and prospects may be materially adversely affected by the extensive regulation of their business.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected if they are unable to recover in a timely manner any significant amount of costs, a return on certain assets or a reasonable return on invested capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise.
Regulatory decisions that are important to NEE and FPL may be materially adversely affected by political, regulatory and economic factors.
FPL's use of derivative instruments could be subject to prudence challenges and, if found imprudent, could result in disallowances of cost recovery for such use by the FPSC.
Any reductions to, or the elimination of, governmental incentives or policies that support utility scale renewable energy, including, but not limited to, tax incentives, renewable portfolio standards, feed-in tariffs or the EPA's final rule under Section 111(d) of the Clean Air Act, or the imposition of additional taxes or other assessments on renewable energy, could result in, among other items, the lack of a satisfactory market for the development of new renewable energy projects, NEER abandoning the development of renewable energy projects, a loss of NEER's investments in renewable energy projects and reduced project returns, any of which could have a material adverse effect on NEE's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected as a result of new or revised laws, regulations, interpretations or other regulatory initiatives.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected if the rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act broaden the scope of its provisions regarding the regulation of OTC financial derivatives and make certain provisions applicable to NEE and FPL.
NEE and FPL are subject to numerous environmental laws, regulations and other standards that may result in capital expenditures, increased operating costs and various liabilities, and may require NEE and FPL to limit or eliminate certain operations.
NEE's and FPL's business could be negatively affected by federal or state laws or regulations mandating new or additional limits on the production of greenhouse gas emissions.
Extensive federal regulation of the operations of NEE and FPL exposes NEE and FPL to significant and increasing compliance costs and may also expose them to substantial monetary penalties and other sanctions for compliance failures.
Changes in tax laws, as well as judgments and estimates used in the determination of tax-related asset and liability amounts, could materially adversely affect NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects may be materially adversely affected due to adverse results of litigation.
Operational Risks
NEE's and FPL's business, financial condition, results of operations and prospects could suffer if NEE and FPL do not proceed with projects under development or are unable to complete the construction of, or capital improvements to, electric generation, transmission and distribution facilities, gas infrastructure facilities or other facilities on schedule or within budget.
NEE and FPL may face risks related to project siting, financing, construction, permitting, governmental approvals and the negotiation of project development agreements that may impede their development and operating activities.

4


The operation and maintenance of NEE's and FPL's electric generation, transmission and distribution facilities, gas infrastructure facilities and other facilities are subject to many operational risks, the consequences of which could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects may be negatively affected by a lack of growth or slower growth in the number of customers or in customer usage.
NEE's and FPL's business, financial condition, results of operations and prospects can be materially adversely affected by weather conditions, including, but not limited to, the impact of severe weather.
Threats of terrorism and catastrophic events that could result from terrorism, cyber attacks, or individuals and/or groups attempting to disrupt NEE's and FPL's business, or the businesses of third parties, may materially adversely affect NEE's and FPL's business, financial condition, results of operations and prospects.
The ability of NEE and FPL to obtain insurance and the terms of any available insurance coverage could be materially adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers. NEE's and FPL's insurance coverage does not provide protection against all significant losses.
NEE invests in gas and oil producing and transmission assets through NEER’s gas infrastructure business. The gas infrastructure business is exposed to fluctuating market prices of natural gas, natural gas liquids, oil and other energy commodities. A prolonged period of low gas and oil prices could impact NEER’s gas infrastructure business and cause NEER to delay or cancel certain gas infrastructure projects and for certain existing projects to be impaired, which could materially adversely affect NEE's results of operations.
If supply costs necessary to provide NEER's full energy and capacity requirement services are not favorable, operating costs could increase and materially adversely affect NEE's business, financial condition, results of operations and prospects.
Due to the potential for significant volatility in market prices for fuel, electricity and renewable and other energy commodities, NEER's inability or failure to manage properly or hedge effectively the commodity risks within its portfolios could materially adversely affect NEE's business, financial condition, results of operations and prospects.
Sales of power on the spot market or on a short-term contractual basis may cause NEE's results of operations to be volatile.
Reductions in the liquidity of energy markets may restrict the ability of NEE to manage its operational risks, which, in turn, could negatively affect NEE's results of operations.
NEE's and FPL's hedging and trading procedures and associated risk management tools may not protect against significant losses.
If price movements significantly or persistently deviate from historical behavior, NEE's and FPL's risk management tools associated with their hedging and trading procedures may not protect against significant losses.
If power transmission or natural gas, nuclear fuel or other commodity transportation facilities are unavailable or disrupted, FPL's and NEER's ability to sell and deliver power or natural gas may be limited.
NEE and FPL are subject to credit and performance risk from customers, hedging counterparties and vendors.
NEE and FPL could recognize financial losses or a reduction in operating cash flows if a counterparty fails to perform or make payments in accordance with the terms of derivative contracts or if NEE or FPL is required to post margin cash collateral under derivative contracts.
NEE and FPL are highly dependent on sensitive and complex information technology systems, and any failure or breach of those systems could have a material adverse effect on their business, financial condition, results of operations and prospects.
NEE's and FPL's retail businesses are subject to the risk that sensitive customer data may be compromised, which could result in a material adverse impact to their reputation and/or the results of operations of the retail business.
NEE and FPL could recognize financial losses as a result of volatility in the market values of derivative instruments and limited liquidity in OTC markets.
NEE and FPL may be materially adversely affected by negative publicity.
NEE's and FPL's business, financial condition, results of operations and prospects may be materially adversely affected if FPL is unable to maintain, negotiate or renegotiate franchise agreements on acceptable terms with municipalities and counties in Florida.
Increasing costs associated with health care plans may materially adversely affect NEE's and FPL's results of operations.
NEE's and FPL's business, financial condition, results of operations and prospects could be negatively affected by the lack of a qualified workforce or the loss or retirement of key employees.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected by work strikes or stoppages and increasing personnel costs.

5


NEE's ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including, but not limited to, the effect of increased competition for acquisitions resulting from the consolidation of the power industry.
NEP’s acquisitions may not be completed and, even if completed, NEE may not realize the anticipated benefits of any acquisitions, which could materially adversely affect NEE’s business, financial condition, results of operations and prospects.
Nuclear Generation Risks
The construction, operation and maintenance of NEE's and FPL's nuclear generation facilities involve environmental, health and financial risks that could result in fines or the closure of the facilities and in increased costs and capital expenditures.
In the event of an incident at any nuclear generation facility in the U.S. or at certain nuclear generation facilities in Europe, NEE and FPL could be assessed significant retrospective assessments and/or retrospective insurance premiums as a result of their participation in a secondary financial protection system and nuclear insurance mutual companies.
NRC orders or new regulations related to increased security measures and any future safety requirements promulgated by the NRC could require NEE and FPL to incur substantial operating and capital expenditures at their nuclear generation facilities.
The inability to operate any of NEER's or FPL's nuclear generation units through the end of their respective operating licenses could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
Various hazards posed to nuclear generation facilities, along with increased public attention to and awareness of such hazards, could result in increased nuclear licensing or compliance costs which are difficult or impossible to predict and could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's nuclear units are periodically removed from service to accommodate normal refueling and maintenance outages, and for other purposes. If planned outages last longer than anticipated or if there are unplanned outages, NEE's and FPL's results of operations and financial condition could be materially adversely affected.
Liquidity, Capital Requirements and Common Stock Risks
Disruptions, uncertainty or volatility in the credit and capital markets may negatively affect NEE's and FPL's ability to fund their liquidity and capital needs and to meet their growth objectives, and can also materially adversely affect the results of operations and financial condition of NEE and FPL.
NEE's, NEECH's and FPL's inability to maintain their current credit ratings may materially adversely affect NEE's and FPL's liquidity and results of operations, limit the ability of NEE and FPL to grow their business, and increase interest costs.
NEE's and FPL's liquidity may be impaired if their credit providers are unable to fund their credit commitments to the companies or to maintain their current credit ratings.
Poor market performance and other economic factors could affect NEE's defined benefit pension plan's funded status, which may materially adversely affect NEE's and FPL's business, financial condition, liquidity and results of operations and prospects.
Poor market performance and other economic factors could adversely affect the asset values of NEE's and FPL's nuclear decommissioning funds, which may materially adversely affect NEE's and FPL's liquidity and results of operations.
Certain of NEE's investments are subject to changes in market value and other risks, which may materially adversely affect NEE's liquidity, financial results and results of operations.
NEE may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay upstream dividends or repay funds to NEE.
NEE may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if NEE is required to perform under guarantees of obligations of its subsidiaries.
NEP may not be able to access sources of capital on commercially reasonable terms, which would have a material adverse effect on its ability to consummate future acquisitions and on the value of NEE’s limited partner interest in NEP OpCo.
Disruptions, uncertainty or volatility in the credit and capital markets may exert downward pressure on the market price of NEE's common stock.

These factors should be read together with the risk factors included in Part I, Item 1A. Risk Factors in NEE's and FPL's Annual Report on Form 10-K for the year ended December 31, 2015 (2015 Form 10-K), and investors should refer to that section of the 2015 Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and NEE and FPL undertake no obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on

6


the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

Website Access to SEC Filings. NEE and FPL make their SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on NEE's internet website, www.nexteraenergy.com, as soon as reasonably practicable after those documents are electronically filed with or furnished to the SEC. The information and materials available on NEE's website (or any of its subsidiaries' websites) are not incorporated by reference into this combined Form 10-Q. The SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at www.sec.gov.

7


PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
(unaudited)

 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
OPERATING REVENUES
 
$
3,835

 
$
4,104

OPERATING EXPENSES
 
 
 
 
Fuel, purchased power and interchange
 
928

 
1,363

Other operations and maintenance
 
799

 
735

Merger-related
 
4

 
4

Depreciation and amortization
 
537

 
547

Taxes other than income taxes and other
 
333

 
326

Total operating expenses
 
2,601

 
2,975

OPERATING INCOME
 
1,234

 
1,129

OTHER INCOME (DEDUCTIONS)
 
 
 
 
Interest expense
 
(509
)
 
(321
)
Benefits associated with differential membership interests - net
 
84

 
57

Equity in earnings of equity method investees
 
32

 
9

Allowance for equity funds used during construction
 
25

 
11

Interest income
 
18

 
21

Gains on disposal of assets - net
 
15

 
22

Other - net
 
(3
)
 
8

Total other deductions - net
 
(338
)
 
(193
)
INCOME BEFORE INCOME TAXES
 
896

 
936

INCOME TAXES
 
259

 
286

NET INCOME
 
637

 
650

LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
1



NET INCOME ATTRIBUTABLE TO NEE
 
$
636


$
650

Earnings per share attributable to NEE
 
 

 
 

Basic
 
$
1.38

 
$
1.47

Assuming dilution
 
$
1.37

 
$
1.45

Dividends per share of common stock
 
$
0.87

 
$
0.77

Weighted-average number of common shares outstanding:
 
 

 
 

Basic
 
460.5

 
442.3

Assuming dilution
 
462.9

 
448.8















This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

8




NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(millions)
(unaudited)

 
Three Months Ended 
 March 31,
 
2016
 
2015
NET INCOME
$
637

 
$
650

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
 
 
 
Net unrealized gains (losses) on cash flow hedges:
 

 
 

Effective portion of net unrealized losses (net of $26 tax benefit)

 
(52
)
Reclassification from accumulated other comprehensive loss to net income (net of $13 and $4 tax expense, respectively)
23

 
18

Net unrealized gains (losses) on available for sale securities:
 

 
 

Net unrealized gains on securities still held (net of $7 and $9 tax expense, respectively)
8

 
12

Reclassification from accumulated other comprehensive income to net income (net of $1 and $7 tax benefit, respectively)
(1
)
 
(10
)
Defined benefit pension and other benefits plans (net of $4 and $10 tax benefit, respectively)
(7
)
 
(16
)
Net unrealized gains on foreign currency translation (net of less than $1 and $8 tax expense, respectively)
20

 
14

Other comprehensive loss related to equity method investee (net of $2 and $1 tax benefit, respectively)
(3
)
 
(2
)
Total other comprehensive income (loss), net of tax
40

 
(36
)
COMPREHENSIVE INCOME
677

 
614

LESS COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(13
)
 
(3
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NEE
$
690

 
$
617
































This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

9


NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions, except par value)
(unaudited)
 
 
March 31,
2016
 
December 31,
2015
PROPERTY, PLANT AND EQUIPMENT
 
 
 
 
Electric plant in service and other property
 
$
73,648

 
$
72,606

Nuclear fuel
 
2,153

 
2,067

Construction work in progress
 
6,519

 
5,657

Accumulated depreciation and amortization
 
(19,426
)
 
(18,944
)
Total property, plant and equipment - net ($11,458 and $7,966 related to VIEs, respectively)
 
62,894

 
61,386

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents
 
628

 
571

Customer receivables, net of allowances of $9 and $13, respectively
 
1,574

 
1,784

Other receivables
 
693

 
481

Materials, supplies and fossil fuel inventory
 
1,287

 
1,259

Regulatory assets:
 
 
 
 
Deferred clause and franchise expenses
 
33

 
75

Derivatives
 
253

 
218

Other
 
203

 
210

Derivatives
 
815

 
712

Assets held for sale
 
1,092

 
1,009

Other
 
518

 
476

Total current assets
 
7,096

 
6,795

OTHER ASSETS
 
 

 
 

Special use funds
 
5,166

 
5,138

Other investments ($486 related to a VIE at March 31, 2016)
 
1,892

 
1,786

Prepaid benefit costs
 
1,179

 
1,155

Regulatory assets:
 
 

 
 

Purchased power agreement termination
 
704

 
726

Securitized storm-recovery costs ($118 and $128 related to a VIE, respectively)
 
191

 
208

Other
 
839

 
844

Derivatives
 
1,391

 
1,202

Other
 
3,285

 
3,239

Total other assets
 
14,647

 
14,298

TOTAL ASSETS
 
$
84,637

 
$
82,479

CAPITALIZATION
 
 

 
 

Common stock ($0.01 par value, authorized shares - 800; outstanding shares - 461 and 461, respectively)
 
$
5

 
$
5

Additional paid-in capital
 
8,645

 
8,596

Retained earnings
 
14,375

 
14,140

Accumulated other comprehensive loss
 
(113
)
 
(167
)
Total common shareholders' equity
 
22,912

 
22,574

Noncontrolling interests
 
718

 
538

Total equity
 
23,630

 
23,112

Long-term debt ($5,185 and $684 related to VIEs, respectively)
 
27,791

 
26,681

Total capitalization
 
51,421

 
49,793

CURRENT LIABILITIES
 
 

 
 

Commercial paper
 
1,560

 
374

Notes payable
 
912

 
412

Current maturities of long-term debt
 
2,145

 
2,220

Accounts payable
 
1,139

 
2,529

Customer deposits
 
472

 
473

Accrued interest and taxes
 
543

 
449

Derivatives
 
974

 
882

Accrued construction-related expenditures
 
930

 
921

Liabilities associated with assets held for sale
 
969

 
992

Other
 
943

 
855

Total current liabilities
 
10,587

 
10,107

OTHER LIABILITIES AND DEFERRED CREDITS
 
 

 
 

Asset retirement obligations
 
2,509

 
2,469

Deferred income taxes
 
9,982

 
9,827

Regulatory liabilities:
 
 

 
 

Accrued asset removal costs
 
1,778

 
1,930

Asset retirement obligation regulatory expense difference
 
2,167

 
2,182

Other
 
515

 
494

Derivatives
 
699

 
530

Deferral related to differential membership interests - VIEs
 
3,059

 
3,142

Other
 
1,920

 
2,005

Total other liabilities and deferred credits
 
22,629

 
22,579

COMMITMENTS AND CONTINGENCIES
 


 


TOTAL CAPITALIZATION AND LIABILITIES
 
$
84,637

 
$
82,479

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

10




NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
637

 
$
650

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
537

 
547

Nuclear fuel and other amortization
 
114

 
90

Unrealized gains on marked to market derivative contracts - net
 
(48
)
 
(99
)
Foreign currency transaction loss
 
40

 

Deferred income taxes
 
214

 
262

Cost recovery clauses and franchise fees
 
124

 
66

Benefits associated with differential membership interests - net
 
(84
)
 
(57
)
Allowance for equity funds used during construction
 
(25
)
 
(11
)
Other - net
 
8

 
7

Changes in operating assets and liabilities:
 
 
 
 
Customer and other receivables
 
188

 
118

Materials, supplies and fossil fuel inventory
 
(27
)
 
43

Other current assets
 
8

 
(23
)
Other assets
 
(85
)
 
(2
)
Accounts payable and customer deposits
 
(40
)
 
(157
)
Margin cash collateral
 
(3
)
 
(187
)
Income taxes
 
38

 
12

Interest and other taxes
 
93

 
105

Other current liabilities
 
(145
)
 
(152
)
Other liabilities
 
1

 
(31
)
Net cash provided by operating activities
 
1,545

 
1,181

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Capital expenditures of FPL
 
(1,133
)
 
(721
)
Independent power and other investments of NEER
 
(2,614
)
 
(740
)
Nuclear fuel purchases
 
(89
)
 
(91
)
Other capital expenditures and other investments
 
(43
)
 
(14
)
Proceeds from sale or maturity of securities in special use funds and other investments
 
823

 
771

Purchases of securities in special use funds and other investments
 
(838
)
 
(828
)
Proceeds from the sale of a noncontrolling interest in subsidiaries
 
292

 

Other - net
 
(79
)
 
59

Net cash used in investing activities
 
(3,681
)
 
(1,564
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Issuances of long-term debt
 
1,250

 
194

Retirements of long-term debt
 
(367
)
 
(170
)
Proceeds from notes payable
 
500

 
625

Net change in commercial paper
 
1,186

 
(22
)
Issuances of common stock - net
 
17

 
16

Dividends on common stock
 
(401
)
 
(341
)
Other - net
 
8

 
(27
)
Net cash provided by financing activities
 
2,193

 
275

Net increase (decrease) in cash and cash equivalents
 
57

 
(108
)
Cash and cash equivalents at beginning of period
 
571

 
577

Cash and cash equivalents at end of period
 
$
628

 
$
469

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 
 
 
Accrued property additions
 
$
1,252

 
$
632

Decrease (increase) in property, plant and equipment as a result of a settlement
 
$
(68
)
 
$
25







This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

11




NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(millions)
(unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
Unearned
ESOP
Compensation
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Retained
Earnings
 
Total
Common
Shareholders'
Equity
 
Non-
controlling
Interests
 
Total
Equity
 
Shares
 
Aggregate
Par Value
 
Balances, December 31, 2015
461

 
$
5

 
$
8,597

 
$
(1
)
 
$
(167
)
 
$
14,140

 
$
22,574

 
$
538

 
$
23,112

Net income

 

 

 

 

 
636

 
636

 
1

 
 
Issuances of common stock, net of issuance cost of less than $1

 

 
8

 

 

 

 
8

 

 
 
Exercise of stock options and other incentive plan activity

 

 
3

 

 

 

 
3

 

 
 
Dividends on common stock

 

 

 

 

 
(401
)
 
(401
)
 

 
 
Earned compensation under ESOP

 

 
10

 
1

 

 

 
11

 

 
 
Other comprehensive income(loss)

 

 

 

 
54

 

 
54

 
(14
)
 
 
Sale of NEER assets to NEP

 

 
27

 

 

 

 
27

 
198

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(9
)
 
 
Other changes in noncontrolling interests in subsidiaries

 

 

 

 

 

 

 
4

 

Balances, March 31, 2016
461

 
$
5

 
$
8,645

 
$

 
$
(113
)
 
$
14,375

 
$
22,912

 
$
718

 
$
23,630



 
Common Stock
 
Additional
Paid-In
Capital
 
Unearned
ESOP
Compensation
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Retained
Earnings
 
Total
Common
Shareholders'
Equity
 
Non-
controlling
Interests
 
Total
Equity
 
Shares
 
Aggregate
Par Value
 
Balances, December 31, 2014
443

 
$
4

 
$
7,193

 
$
(14
)
 
$
(40
)
 
$
12,773

 
$
19,916

 
$
252

 
$
20,168

Net income

 

 

 

 

 
650

 
650

 

 
 
Issuances of common stock, net of issuance cost of less than $1

 

 
13

 
1

 

 

 
14

 

 
 
Exercise of stock options and other incentive plan activity
1

 

 
2

 

 

 

 
2

 

 
 
Dividends on common stock

 

 

 

 

 
(341
)
 
(341
)
 

 
 
Earned compensation under ESOP

 

 
10

 
1

 

 

 
11

 

 
 
Other comprehensive loss

 

 

 

 
(33
)
 

 
(33
)
 
(3
)
 
 
Sale of NEER assets to NEP

 

 
16

 

 

 

 
16

 
(11
)
 
 
Distributions to noncontrolling interests

 

 

 

 

 

 

 
(4
)
 
 
Other changes in noncontrolling interests in subsidiaries

 

 

 

 

 

 

 
(5
)
 

Balances, March 31, 2015
444

 
$
4

 
$
7,234

 
$
(12
)
 
$
(73
)
 
$
13,082

 
$
20,235

 
$
229

 
$
20,464









This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

12




FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions)
(unaudited)

 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
OPERATING REVENUES
 
$
2,303

 
$
2,541

OPERATING EXPENSES
 
 

 
 

Fuel, purchased power and interchange
 
700

 
1,005

Other operations and maintenance
 
390

 
353

Depreciation and amortization
 
219

 
242

Taxes other than income taxes and other
 
280

 
274

Total operating expenses
 
1,589

 
1,874

OPERATING INCOME
 
714

 
667

OTHER INCOME (DEDUCTIONS)
 
 

 
 

Interest expense
 
(112
)
 
(115
)
Allowance for equity funds used during construction
 
24

 
10

Other - net
 
1

 
1

Total other deductions - net
 
(87
)
 
(104
)
INCOME BEFORE INCOME TAXES
 
627

 
563

INCOME TAXES
 
234

 
204

NET INCOME(a)
 
$
393

 
$
359

_______________________
(a)
FPL's comprehensive income is the same as reported net income.






























This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

13




FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions, except share amount)
(unaudited)
 
 
March 31,
2016
 
December 31,
2015
ELECTRIC UTILITY PLANT
 
 
 
 
Plant in service and other property
 
$
41,574

 
$
41,227

Nuclear fuel
 
1,368

 
1,306

Construction work in progress
 
3,221

 
2,850

Accumulated depreciation and amortization
 
(12,027
)
 
(11,862
)
Total electric utility plant - net
 
34,136

 
33,521

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents
 
31

 
23

Customer receivables, net of allowances of $1 and $3, respectively
 
697

 
849

Other receivables
 
176

 
123

Materials, supplies and fossil fuel inventory
 
844

 
826

Regulatory assets:
 
 

 
 

Deferred clause and franchise expenses
 
33

 
75

Derivatives
 
253

 
218

Other
 
201

 
209

Other
 
141

 
184

Total current assets
 
2,376

 
2,507

OTHER ASSETS
 
 

 
 

Special use funds
 
3,518

 
3,504

Prepaid benefit costs
 
1,258

 
1,243

Regulatory assets:
 
 

 
 

Purchased power agreement termination
 
704

 
726

Securitized storm-recovery costs ($118 and $128 related to a VIE, respectively)
 
191

 
208

Other
 
583

 
579

Other
 
346

 
235

Total other assets
 
6,600

 
6,495

TOTAL ASSETS
 
$
43,112

 
$
42,523

CAPITALIZATION
 
 

 
 

Common stock (no par value, 1,000 shares authorized, issued and outstanding)
 
$
1,373

 
$
1,373

Additional paid-in capital
 
7,733

 
7,733

Retained earnings
 
5,940

 
6,447

Total common shareholder's equity
 
15,046

 
15,553

Long-term debt ($176 and $210 related to a VIE, respectively)
 
9,924

 
9,956

Total capitalization
 
24,970

 
25,509

CURRENT LIABILITIES
 
 

 
 

Commercial paper
 
550

 
56

Notes payable
 
600

 
100

Current maturities of long-term debt
 
66

 
64

Accounts payable
 
554

 
664

Customer deposits
 
468

 
469

Accrued interest and taxes
 
343

 
279

Derivatives
 
256

 
222

Accrued construction-related expenditures
 
226

 
240

Other
 
343

 
355

Total current liabilities
 
3,406

 
2,449

OTHER LIABILITIES AND DEFERRED CREDITS
 
 

 
 

Asset retirement obligations
 
1,844

 
1,822

Deferred income taxes
 
8,047

 
7,730

Regulatory liabilities:
 
 

 
 

Accrued asset removal costs
 
1,768

 
1,921

Asset retirement obligation regulatory expense difference
 
2,167

 
2,182

Other
 
507

 
492

Other
 
403

 
418

Total other liabilities and deferred credits
 
14,736

 
14,565

COMMITMENTS AND CONTINGENCIES
 


 


TOTAL CAPITALIZATION AND LIABILITIES
 
$
43,112

 
$
42,523


This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

14


FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)

 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
393

 
$
359

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 

 
 

Depreciation and amortization
 
219

 
242

Nuclear fuel and other amortization
 
58

 
54

Deferred income taxes
 
304

 
72

Cost recovery clauses and franchise fees
 
124

 
66

Allowance for equity funds used during construction
 
(24
)
 
(10
)
Other - net
 
6

 
20

Changes in operating assets and liabilities:
 
 

 
 

Customer and other receivables
 
136

 
39

Materials, supplies and fossil fuel inventory
 
(18
)
 
7

Other current assets
 
14

 
(39
)
Other assets
 
(14
)
 
(17
)
Accounts payable and customer deposits
 
(15
)
 
(30
)
Income taxes
 
(85
)
 
157

Interest and other taxes
 
109

 
112

Other current liabilities
 
(86
)
 
(67
)
Other liabilities
 
(8
)
 
(13
)
Net cash provided by operating activities
 
1,113

 
952

CASH FLOWS FROM INVESTING ACTIVITIES
 
 

 
 

Capital expenditures
 
(1,133
)
 
(721
)
Nuclear fuel purchases
 
(62
)
 
(44
)
Proceeds from sale or maturity of securities in special use funds
 
530

 
589

Purchases of securities in special use funds
 
(544
)
 
(606
)
Other - net
 
20

 
24

Net cash used in investing activities
 
(1,189
)
 
(758
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 

 
 

Retirements of long-term debt
 
(33
)
 
(31
)
Proceeds from notes payable
 
500

 

Net change in commercial paper
 
494

 
(722
)
Capital contribution from NEE
 

 
550

Dividends to NEE
 
(900
)
 

Other - net
 
23

 
23

Net cash provided by (used in) financing activities
 
84

 
(180
)
Net increase in cash and cash equivalents
 
8

 
14

Cash and cash equivalents at beginning of period
 
23

 
14

Cash and cash equivalents at end of period
 
$
31

 
$
28

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 

 
 

Accrued property additions
 
$
363

 
$
282






This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K.

15


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The accompanying condensed consolidated financial statements should be read in conjunction with the 2015 Form 10-K. In the opinion of NEE and FPL management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period generally will not give a true indication of results for the year.

1.  Employee Retirement Benefits

NEE sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of NEE and its subsidiaries. NEE also has a supplemental executive retirement plan, which includes a non-qualified supplemental defined benefit pension component that provides benefits to a select group of management and highly compensated employees, and sponsors a contributory postretirement plan for other benefits for retirees of NEE and its subsidiaries meeting certain eligibility requirements.

The components of net periodic (income) cost for the plans are as follows:
 
Pension Benefits
 
Postretirement Benefits
 
Three Months Ended 
 March 31,
 
Three Months Ended 
 March 31,
 
2016
 
2015
 
2016
 
2015
 
(millions)
Service cost
$
16

 
$
18

 
$
1

 
$
1

Interest cost
26

 
24

 
3

 
3

Expected return on plan assets
(65
)
 
(63
)
 

 

Amortization of prior service benefit

 

 
(1
)
 

Net periodic (income) cost at NEE
$
(23
)
 
$
(21
)
 
$
3

 
$
4

Net periodic (income) cost at FPL
$
(15
)
 
$
(14
)
 
$
2

 
$
3


2.  Derivative Instruments

NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the commodity price risk inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated primarily with outstanding and forecasted debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets.

With respect to commodities related to NEE's competitive energy business, NEER employs risk management procedures to conduct its activities related to optimizing the value of its power generation and gas infrastructure assets, providing full energy and capacity requirements services primarily to distribution utilities, and engaging in power and gas marketing and trading activities to take advantage of expected future favorable price movements and changes in the expected volatility of prices in the energy markets. These risk management activities involve the use of derivative instruments executed within prescribed limits to manage the risk associated with fluctuating commodity prices. Transactions in derivative instruments are executed on recognized exchanges or via the OTC markets, depending on the most favorable credit terms and market execution factors. For NEER's power generation and gas infrastructure assets, derivative instruments are used to hedge the commodity price risk associated with the fuel requirements of the assets, where applicable, as well as to hedge all or a portion of the expected output of these assets. These hedges are designed to reduce the effect of adverse changes in the wholesale forward commodity markets associated with NEER's power generation and gas infrastructure assets. With regard to full energy and capacity requirements services, NEER is required to vary the quantity of energy and related services based on the load demands of the customers served. For this type of transaction, derivative instruments are used to hedge the anticipated electricity quantities required to serve these customers and reduce the effect of unfavorable changes in the forward energy markets. Additionally, NEER takes positions in the energy markets based on differences between actual forward market levels and management's view of fundamental market conditions, including supply/demand imbalances, changes in traditional flows of energy, changes in short- and long-term weather patterns and anticipated regulatory and legislative outcomes. NEER uses derivative instruments to realize value from these market dislocations, subject to strict risk management limits around market, operational and credit exposure.

Derivative instruments, when required to be marked to market, are recorded on NEE's and FPL's condensed consolidated balance sheets as either an asset or liability measured at fair value. At FPL, substantially all changes in the derivatives' fair value are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel clause. For NEE's non-rate regulated operations, predominantly NEER, essentially all changes in the derivatives' fair value for power purchases and sales, fuel sales and trading activities are recognized on a net basis in operating revenues; fuel purchases used in the production of electricity are recognized in fuel, purchased power and interchange expense; and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's condensed consolidated statements

16


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


of income. Settlement gains and losses are included within the line items in the condensed consolidated statements of income to which they relate. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis in the condensed consolidated statements of income. For commodity derivatives, NEE believes that, where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Settlements related to derivative instruments are primarily recognized in net cash provided by operating activities in NEE's and FPL's condensed consolidated statements of cash flows.

In January 2016, NEE discontinued hedge accounting for its cash flow and fair value hedges related to interest rate and foreign currency derivative instruments and, therefore, all changes in the derivatives' fair value, as well as the transaction gain or loss on foreign denominated debt, are recognized in interest expense in NEE's condensed consolidated statements of income. In addition, for three months ended March 31, 2016, NEE reclassified approximately $14 million ($9 million after tax) from AOCI to interest expense because it became probable that the related forecasted transaction being hedged would not occur. At March 31, 2016, NEE's AOCI included amounts related to the discontinued interest rate cash flow hedges with expiration dates through October 2036 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $36 million of net losses included in AOCI at March 31, 2016 is expected to be reclassified into earnings within the next 12 months as the principal and/or interest payments are made. Such amounts assume no change in scheduled principal payments.

Fair Value of Derivative Instruments - The tables below present NEE's and FPL's gross derivative positions at March 31, 2016 and December 31, 2015, as required by disclosure rules. However, the majority of the underlying contracts are subject to master netting agreements and generally would not be contractually settled on a gross basis. Therefore, the tables below also present the derivative positions on a net basis, which reflect the offsetting of positions of certain transactions within the portfolio, the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral (see Note 3 - Recurring Fair Value Measurements for netting information), as well as the location of the net derivative position on the condensed consolidated balance sheets.
 
 
March 31, 2016
 
 
Fair Values of Derivatives Not
Designated as Hedging
Instruments for Accounting
Purposes - Gross Basis
 
Fair Values of Derivatives Not
Designated as Hedging
Instruments for Accounting
Purposes - Net Basis
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(millions)
NEE:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
6,772

 
$
5,281

 
$
2,201

 
$
1,114

Interest rate contracts
 
60

 
490

 
47

 
486

Foreign currency swaps
 

 
98

 

 
89

Total fair values
 
$
6,832

 
$
5,869

 
$
2,248

 
$
1,689

 
 
 
 
 
 
 
 
 
FPL:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
11

 
$
261

 
$
7

 
$
257

 
 
 
 
 
 
 
 
 
Net fair value by NEE balance sheet line item:
 
 
 
 
 
 
 
 
Current derivative assets(a)
 
 
 
 
 
$
815

 
 
Assets held for sale
 
 
 
 
 
42

 
 
Noncurrent derivative assets(b)
 
 
 
 
 
1,391

 
 
Current derivative liabilities(c)
 
 
 
 
 
 
 
$
974

Liabilities associated with assets held for sale
 
 
 
 
 
 
 
16

Noncurrent derivative liabilities(d)
 
 
 
 
 
 
 
699

Total derivatives
 
 
 
 
 
$
2,248

 
$
1,689

 
 
 
 
 
 
 
 
 
Net fair value by FPL balance sheet line item:
 
 
 
 
 
 
 
 
Current other assets
 
 
 
 
 
$
3

 
 
Noncurrent other assets
 
 
 
 
 
4

 
 
Current derivative liabilities
 
 
 
 
 
 
 
$
256

Noncurrent other liabilities
 
 
 
 
 
 
 
1

Total derivatives
 
 
 
 
 
$
7

 
$
257

______________________
(a)
Reflects the netting of approximately $261 million in margin cash collateral received from counterparties.
(b)
Reflects the netting of approximately $165 million in margin cash collateral received from counterparties.
(c)
Reflects the netting of approximately $8 million in margin cash collateral paid to counterparties.
(d)
Reflects the netting of approximately $14 million in margin cash collateral paid to counterparties.


17


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


 
December 31, 2015
 
Fair Values of Derivatives
Designated as Hedging
Instruments for Accounting
Purposes - Gross Basis
 
Fair Values of Derivatives Not
Designated as Hedging
Instruments for Accounting
Purposes - Gross Basis
 
Total Derivatives Combined -
Net Basis
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
(millions)
NEE:
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$

 
$

 
$
5,906

 
$
4,580

 
$
1,937

 
$
982

Interest rate contracts
33

 
155

 
2

 
160

 
34

 
319

Foreign currency swaps

 
132

 

 

 

 
127

Total fair values
$
33

 
$
287

 
$
5,908

 
$
4,740

 
$
1,971

 
$
1,428

 
 
 
 
 
 
 
 
 
 
 
 
FPL:
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$

 
$

 
$
7

 
$
225

 
$
4

 
$
222

 
 
 
 
 
 
 
 
 
 
 
 
Net fair value by NEE balance sheet line item:
 
 
 
 
 
 
 
 
 
 
 
Current derivative assets(a)
 
 
 
 
 
 
 
 
$
712

 
 
Assets held for sale
 
 
 
 
 
 
 
 
57

 
 
Noncurrent derivative assets(b)
 
 
 
 
 
 
 
 
1,202

 
 
Current derivative liabilities(c)
 
 
 
 
 
 
 
 
 
 
$
882

Liabilities associated with assets held for sale
 
 
 
 
 
 
 
 
 
 
16

Noncurrent derivative liabilities(d)
 
 
 
 
 
 
 
 
 
 
530

Total derivatives
 
 
 
 
 
 
 
 
$
1,971

 
$
1,428

 
 
 
 
 
 
 
 
 
 
 
 
Net fair value by FPL balance sheet line item:
 
 
 
 
 
 
 
 
 
 
 
Current other assets
 
 
 
 
 
 
 
 
$
3

 
 
Noncurrent other assets
 
 
 
 
 
 
 
 
1

 
 
Current derivative liabilities
 
 
 
 
 
 
 
 
 
 
$
222

Total derivatives
 
 
 
 
 
 
 
 
$
4

 
$
222

______________________
(a)
Reflects the netting of approximately $279 million in margin cash collateral received from counterparties.
(b)
Reflects the netting of approximately $151 million in margin cash collateral received from counterparties.
(c)
Reflects the netting of approximately $46 million in margin cash collateral paid to counterparties.
(d)
Reflects the netting of approximately $13 million in margin cash collateral paid to counterparties.

At March 31, 2016 and December 31, 2015, NEE had approximately $26 million and $27 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets in the above presentation. These amounts are included in current other liabilities on NEE's condensed consolidated balance sheets. Additionally, at March 31, 2016 and December 31, 2015, NEE had approximately $150 million and $116 million (none at FPL), respectively, in margin cash collateral paid to counterparties that was not offset against derivative assets or liabilities in the above presentation. These amounts are included in current other assets on NEE's condensed consolidated balance sheets.

Income Statement Impact of Derivative Instruments - Gains (losses) related to NEE's cash flow hedges are recorded in NEE's condensed consolidated financial statements (none at FPL) as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
March 31, 2015
 
Interest
Rate
Contracts
 
Foreign
Currency
Swaps
 
Total
 
(millions)
Losses recognized in OCI
$
(70
)
 
$
(8
)
 
$
(78
)
Losses reclassified from AOCI to net income
$
(20
)
(a) 
$
(2
)
(b) 
$
(22
)
————————————
(a)
Included in interest expense.
(b)
Losses of approximately $3 million are included in interest expense and the balances are included in other - net.


18


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


Gains (losses) related to NEE's derivatives not designated as hedging instruments are recorded in NEE's condensed consolidated statements of income as follows:
 
Three Months Ended 
 March 31,
 
2016
 
2015
 
(millions)
Commodity contracts:(a)
 
 
 
Operating revenues
$
330

 
$
237

Fuel, purchased power and interchange
2

 
2

Foreign currency swaps - interest expense
30

 

Interest rate contracts - interest expense
(179
)
 
(13
)
Losses reclassified from AOCI to interest expense:
 
 
 
Interest rate contracts
(28
)
 

Foreign currency swaps
(3
)
 

Total
$
152

 
$
226

————————————
(a)
For the three months ended March 31, 2016 and 2015, FPL recorded losses of approximately $108 million and $86 million, respectively, related to commodity contracts as regulatory assets on its condensed consolidated balance sheets.

Notional Volumes of Derivative Instruments - The following table represents net notional volumes associated with derivative instruments that are required to be reported at fair value in NEE's and FPL's condensed consolidated financial statements. The table includes significant volumes of transactions that have minimal exposure to commodity price changes because they are variably priced agreements. These volumes are only an indication of the commodity exposure that is managed through the use of derivatives. They do not represent net physical asset positions or non-derivative positions and their hedges, nor do they represent NEEs and FPLs net economic exposure, but only the net notional derivative positions that fully or partially hedge the related asset positions. NEE and FPL had derivative commodity contracts for the following net notional volumes:
 
 
March 31, 2016
 
December 31, 2015
Commodity Type
 
NEE
 
FPL
 
NEE
 
FPL
 
 
(millions)
Power
 
(113
)
 
MWh
 

 
 
 
(112
)
 
MWh
 

 
 
Natural gas
 
1,611

 
MMBtu
 
915

 
MMBtu
 
1,321

 
MMBtu
 
833

 
MMBtu
Oil
 
(9
)
 
barrels
 

 
 
 
(9
)
 
barrels
 

 
 

At March 31, 2016 and December 31, 2015, NEE had interest rate contracts with notional amounts totaling approximately $8.2 billion and $8.3 billion, respectively, and foreign currency swaps with notional amounts totaling approximately $700 million and $715 million, respectively.

Credit-Risk-Related Contingent Features - Certain derivative instruments contain credit-risk-related contingent features including, among other things, the requirement to maintain an investment grade credit rating from specified credit rating agencies and certain financial ratios, as well as credit-related cross-default and material adverse change triggers. At March 31, 2016 and December 31, 2015, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $2.4 billion ($259 million for FPL) and $2.2 billion ($224 million for FPL), respectively.

If the credit-risk-related contingent features underlying these agreements and other commodity-related contracts were triggered, certain subsidiaries of NEE, including FPL, could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL's and NEECH's credit ratings were downgraded to BBB/Baa2 (a two level downgrade for FPL and a one level downgrade for NEECH from the current lowest applicable rating), applicable NEE subsidiaries would be required to post collateral such that the total posted collateral would be approximately $350 million ($30 million at FPL) as of March 31, 2016 and $250 million ($20 million at FPL) as of December 31, 2015. If FPL's and NEECH's credit ratings were downgraded to below investment grade, applicable NEE subsidiaries would be required to post additional collateral such that the total posted collateral would be approximately $2.5 billion ($0.5 billion at FPL) as of March 31, 2016 and $2.5 billion ($0.6 billion at FPL) as of December 31, 2015. Some contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures to be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered,

19


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


applicable NEE subsidiaries could be required to post additional collateral of up to approximately $385 million ($105 million at FPL) as of March 31, 2016 and $660 million ($120 million at FPL) as of December 31, 2015.

Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At March 31, 2016 and December 31, 2015, applicable NEE subsidiaries have posted approximately $182 million (none at FPL) and $123 million ($3 million at FPL), respectively in the form of letters of credit which could be applied toward the collateral requirements described above. FPL and NEECH have credit facilities generally in excess of the collateral requirements described above that would be available to support, among other things, derivative activities. Under the terms of the credit facilities, maintenance of a specific credit rating is not a condition to drawing on these credit facilities, although there are other conditions to drawing on these credit facilities.

Additionally, some contracts contain certain adequate assurance provisions where a counterparty may demand additional collateral based on subjective events and/or conditions. Due to the subjective nature of these provisions, NEE and FPL are unable to determine an exact value for these items and they are not included in any of the quantitative disclosures above.

3.  Fair Value Measurements

The fair value of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available. NEE and FPL use several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis. NEE's and FPL's assessment of the significance of any particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels. Non-performance risk, including the consideration of a credit valuation adjustment, is also considered in the determination of fair value for all assets and liabilities measured at fair value.

Cash Equivalents and Restricted Cash - NEE primarily holds investments in money market funds. The fair value of these funds is calculated using current 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.

Derivative Instruments - NEE and FPL measure the fair value of commodity contracts using prices observed on commodities exchanges and in the OTC markets, or through the use of industry-standard valuation techniques, such as option modeling or discounted cash flows techniques, incorporating both observable and unobservable valuation inputs. The resulting measurements are the best estimate of fair value as represented by the transfer of the asset or liability through an orderly transaction in the marketplace at the measurement date.

Most exchange-traded derivative assets and liabilities are valued directly using unadjusted quoted prices. For exchange-traded derivative assets and liabilities where the principal market is deemed to be inactive based on average daily volumes and open interest, the measurement is established using settlement prices from the exchanges, and therefore considered to be valued using other observable inputs.

NEE, through its subsidiaries, including FPL, also enters into OTC commodity contract derivatives. The majority of these contracts are transacted at liquid trading points, and the prices for these contracts are verified using quoted prices in active markets from exchanges, brokers or pricing services for similar contracts.

NEE, through NEER, also enters into full requirements contracts, which, in most cases, meet the definition of derivatives and are measured at fair value. These contracts typically have one or more inputs that are not observable and are significant to the valuation of the contract. In addition, certain exchange and non-exchange traded derivative options at NEE have one or more significant inputs that are not observable, and are valued using industry-standard option models.

In all cases where NEE and FPL use significant unobservable inputs for the valuation of a commodity contract, consideration is given to the assumptions that market participants would use in valuing the asset or liability. The primary input to the valuation models for commodity contracts is the forward commodity curve for the respective instruments. Other inputs include, but are not limited to, assumptions about market liquidity, volatility, correlation and contract duration as more fully described below in Significant Unobservable Inputs Used in Recurring Fair Value Measurements. In instances where the reference markets are deemed to be inactive or do not have transactions for a similar contract, the derivative assets and liabilities may be valued using significant other

20


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


observable inputs and potentially significant unobservable inputs. In such instances, the valuation for these contracts is established using techniques including extrapolation from or interpolation between actively traded contracts, or estimated basis adjustments from liquid trading points. NEE and FPL regularly evaluate and validate the inputs used to determine fair value by a number of methods, consisting of various market price verification procedures, including the use of pricing services and multiple broker quotes to support the market price of the various commodities. In all cases where there are assumptions and models used to generate inputs for valuing derivative assets and liabilities, the review and verification of the assumptions, models and changes to the models are undertaken by individuals that are independent of those responsible for estimating fair value.

NEE uses interest rate contracts and foreign currency swaps to mitigate and adjust interest rate and foreign currency exchange exposure related primarily to certain outstanding and forecasted debt issuances and borrowings when deemed appropriate based on market conditions or when required by financing agreements. NEE estimates the fair value of these derivatives using a discounted cash flows valuation technique based on the net amount of estimated future cash inflows and outflows related to the agreements.


21


NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


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:
 
March 31, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Netting(a)
 
Total
 
 
(millions)
 
Assets:
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash:(b)
 
 
 
 
 
 
 
 
 
 
NEE - equity securities
$
315

 
$

 
$

 
 
 
$
315

 
FPL - equity securities
$
30

 
$

 
$

 
 <