Document
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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 September 30, 2017

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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth 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 ¨
Emerging Growth Company ¨
Florida Power & Light Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-Accelerated Filer þ
Smaller Reporting Company ¨
Emerging Growth Company ¨
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934. o

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 September 30, 2017470,397,581

Number of shares of Florida Power & Light Company common stock, without par value, outstanding as of September 30, 2017, 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
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 or modifications to, or the elimination of, governmental incentives or policies that support utility scale renewable energy, including, but not limited to, tax laws, policies and 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 and/or financing 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 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 and businesses 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, guidance or policies, including but not limited to changes in corporate income tax rates, 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.
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.

4


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.
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 have a material adverse effect on the business, financial condition, results of operations and prospects of NEE and FPL.
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.
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.
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.

5


Nuclear Generation Risks
The 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 and/or result in reduced revenues.
The inability to operate any of NEE'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.
NEE's and FPL's nuclear units are periodically removed from service to accommodate planned 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, financial condition 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 condition 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, 2016 (2016 Form 10-K), and investors should refer to that section of the 2016 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 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.

6


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
September 30,
 
Nine Months Ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
OPERATING REVENUES
 
$
4,808

 
$
4,805

 
$
13,185

 
$
12,457

OPERATING EXPENSES (INCOME)
 
 
 
 
 
 
 
 
Fuel, purchased power and interchange
 
1,176

 
1,217

 
3,093

 
3,105

Other operations and maintenance
 
769

 
833

 
2,400

 
2,474

Merger
 
2

 
123

 
17

 
129

Depreciation and amortization
 
1,070

 
983

 
2,576

 
2,262

Gains on disposal of a business/assets - net
 
(5
)
 
(4
)
 
(1,106
)
 
(257
)
Taxes other than income taxes and other - net
 
397

 
374

 
1,115

 
1,062

Total operating expenses - net
 
3,409

 
3,526

 
8,095

 
8,775

OPERATING INCOME
 
1,399

 
1,279

 
5,090

 
3,682

OTHER INCOME (DEDUCTIONS)
 
 
 
 
 
 
 
 
Interest expense
 
(381
)
 
(369
)
 
(1,171
)
 
(1,480
)
Benefits associated with differential membership interests - net
 
67

 
59

 
311

 
220

Equity in earnings of equity method investees
 
56

 
70

 
153

 
147

Allowance for equity funds used during construction
 
21

 
20

 
68

 
62

Interest income
 
20

 
23

 
59

 
61

Gains on disposal of investments and other property - net
 
15

 
9

 
64

 
36

Revaluation of contingent consideration
 

 
101

 

 
118

Other - net
 
23

 
15

 
7

 
21

Total other deductions - net
 
(179
)
 
(72
)
 
(509
)
 
(815
)
INCOME BEFORE INCOME TAXES
 
1,220

 
1,207

 
4,581

 
2,867

INCOME TAXES
 
364

 
418

 
1,329

 
879

NET INCOME
 
856

 
789

 
3,252

 
1,988

LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
9


36


29


42

NET INCOME ATTRIBUTABLE TO NEE
 
$
847

 
$
753

 
$
3,223


$
1,946

Earnings per share attributable to NEE:
 
 
 
 
 
 
 
 
Basic
 
$
1.80

 
$
1.63

 
$
6.88

 
$
4.21

Assuming dilution
 
$
1.79

 
$
1.62

 
$
6.83

 
$
4.19

Dividends per share of common stock
 
$
0.9825

 
$
0.87

 
$
2.9475

 
$
2.61

Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
469.4

 
463.3

 
468.3

 
461.7

Assuming dilution
 
473.5

 
466.0

 
472.0

 
464.7













This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

7




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

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
NET INCOME
$
856

 
$
789

 
$
3,252

 
$
1,988

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
 
 
 
 
 
 
 
Reclassification of unrealized losses on cash flow hedges from accumulated other comprehensive income (loss) to net income (net of $4, $3, $9 and $26 tax expense, respectively)
10

 
17

 
24

 
53

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

 
 

 
 

 
 

Net unrealized gains on securities still held (net of $23, $23, $68 and $42 tax expense, respectively)
31

 
31

 
91

 
56

Reclassification from accumulated other comprehensive income (loss) to net income (net of $4, $2, $15 and $6 tax benefit, respectively)
(6
)
 
(2
)
 
(23
)
 
(8
)
Defined benefit pension and other benefits plans (net of less than $1 tax benefit, $4 tax expense and $4 tax benefit, respectively)
(1
)
 

 
6

 
(7
)
Net unrealized gains (losses) on foreign currency translation (net of less than $1, $1 and $1 tax expense and $2 tax benefit, respectively)
10

 
(9
)
 
30

 
19

Other comprehensive income (loss) related to equity method investee (net of less than $1 tax expense, $0, less than $1 tax expense and $3 tax benefit, respectively)
1

 
3

 
1

 
(1
)
Total other comprehensive income, net of tax
45

 
40

 
129

 
112

COMPREHENSIVE INCOME
901

 
829

 
3,381

 
2,100

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
9

 
30

 
40

 
22

COMPREHENSIVE INCOME ATTRIBUTABLE TO NEE
$
892

 
$
799

 
$
3,341

 
$
2,078






























This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

8


NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions, except par value)
(unaudited)
 
 
September 30,
2017
 
December 31,
2016
PROPERTY, PLANT AND EQUIPMENT
 
 
 
 
Electric plant in service and other property
 
$
84,045

 
$
80,150

Nuclear fuel
 
2,011

 
2,131

Construction work in progress
 
6,492

 
4,732

Accumulated depreciation and amortization
 
(21,460
)
 
(20,101
)
Total property, plant and equipment - net ($14,186 and $14,632 related to VIEs, respectively)
 
71,088

 
66,912

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents
 
1,381

 
1,292

Customer receivables, net of allowances of $9 and $5, respectively
 
2,147

 
1,784

Other receivables
 
603

 
655

Materials, supplies and fossil fuel inventory
 
1,352

 
1,289

Regulatory assets
 
551

 
524

Derivatives
 
442

 
885

Assets held for sale
 

 
452

Other
 
551

 
528

Total current assets
 
7,027

 
7,409

OTHER ASSETS
 
 

 
 

Special use funds
 
5,894

 
5,434

Other investments ($474 and $479 related to a VIE, respectively)
 
2,983

 
2,482

Prepaid benefit costs
 
1,217

 
1,177

Regulatory assets ($53 and $107 related to a VIE, respectively)
 
3,290

 
1,894

Derivatives
 
1,546

 
1,350

Other
 
3,736

 
3,335

Total other assets
 
18,666

 
15,672

TOTAL ASSETS
 
$
96,781

 
$
89,993

CAPITALIZATION
 
 

 
 

Common stock ($0.01 par value, authorized shares - 800; outstanding shares - 470 and 468, respectively)
 
$
5

 
$
5

Additional paid-in capital
 
9,046

 
8,948

Retained earnings
 
17,299

 
15,458

Accumulated other comprehensive income (loss)
 
48

 
(70
)
Total common shareholders' equity
 
26,398

 
24,341

Noncontrolling interests
 
923

 
990

Total equity
 
27,321

 
25,331

Long-term debt ($5,909 and $5,080 related to VIEs, respectively)
 
30,345

 
27,818

Total capitalization
 
57,666

 
53,149

CURRENT LIABILITIES
 
 

 
 

Commercial paper
 
2,074

 
268

Other short-term debt
 
255

 
150

Current maturities of long-term debt
 
2,285

 
2,604

Accounts payable
 
2,256

 
3,447

Customer deposits
 
449

 
470

Accrued interest and taxes
 
873

 
480

Derivatives
 
257

 
404

Accrued construction-related expenditures
 
921

 
1,120

Regulatory liabilities
 
157

 
299

Liabilities associated with assets held for sale
 

 
451

Other
 
2,077

 
1,226

Total current liabilities
 
11,604

 
10,919

OTHER LIABILITIES AND DEFERRED CREDITS
 
 

 
 

Asset retirement obligations
 
2,882

 
2,736

Deferred income taxes
 
12,563

 
11,101

Regulatory liabilities
 
4,895

 
4,906

Derivatives
 
514

 
477

Deferral related to differential membership interests - VIEs
 
4,542

 
4,656

Other
 
2,115

 
2,049

Total other liabilities and deferred credits
 
27,511

 
25,925

COMMITMENTS AND CONTINGENCIES
 


 


TOTAL CAPITALIZATION AND LIABILITIES
 
$
96,781

 
$
89,993




This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

9




NEXTERA ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
3,252

 
$
1,988

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
2,576

 
2,262

Nuclear fuel and other amortization
 
210

 
275

Unrealized losses on marked to market derivative contracts - net
 
45

 
369

Foreign currency transaction losses (gains)
 
(23
)
 
99

Deferred income taxes
 
1,316

 
766

Cost recovery clauses and franchise fees
 
61

 
111

Acquisition of purchased power agreement
 
(258
)
 

Benefits associated with differential membership interests - net
 
(311
)
 
(220
)
Gains on disposal of a business/assets - net
 
(1,170
)
 
(291
)
Recoverable storm-related costs
 
(334
)
 
(17
)
Other - net
 
106

 
(161
)
Changes in operating assets and liabilities:
 
 
 
 
Current assets
 
(544
)
 
(204
)
Noncurrent assets
 
(77
)
 
(17
)
Current liabilities
 
299

 
362

Noncurrent liabilities
 
12

 
(28
)
Net cash provided by operating activities
 
5,160

 
5,294

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Capital expenditures of FPL
 
(3,676
)
 
(2,976
)
Independent power and other investments of NEER
 
(4,678
)
 
(4,610
)
Nuclear fuel purchases
 
(175
)
 
(194
)
Other capital expenditures and other investments
 
(58
)
 
(149
)
Proceeds from sale of the fiber-optic telecommunications business
 
1,482

 

Sale of independent power and other investments of NEER
 
159

 
395

Proceeds from sale or maturity of securities in special use funds and other investments
 
2,059

 
2,635

Purchases of securities in special use funds and other investments
 
(2,146
)
 
(2,711
)
Proceeds from sales of noncontrolling interests in NEP
 

 
645

Other - net
 
198

 
(18
)
Net cash used in investing activities
 
(6,835
)
 
(6,983
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Issuances of long-term debt
 
5,196

 
4,644

Retirements of long-term debt
 
(3,892
)
 
(2,654
)
Proceeds from differential membership investors
 
340

 
328

Net change in commercial paper
 
1,806

 
254

Proceeds from other short-term debt
 
200

 
500

Repayments of other short-term debt
 
(2
)
 
(362
)
Issuances of common stock - net
 
36

 
528

Dividends on common stock
 
(1,382
)
 
(1,205
)
Other - net
 
(538
)
 
(234
)
Net cash provided by financing activities
 
1,764

 
1,799

Net increase in cash and cash equivalents
 
89

 
110

Cash and cash equivalents at beginning of period
 
1,292

 
571

Cash and cash equivalents at end of period
 
$
1,381

 
$
681

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 
 
 
Accrued property additions
 
$
2,036

 
$
2,655

Decrease (increase) in property, plant and equipment - net as a result of cash grants primarily under the Recovery Act
 
$
(145
)
 
$
403

Increase in property, plant and equipment - net as a result of a settlement/noncash exchange
 
$
(92
)
 
$
(70
)
Proceeds from differential membership investors used to reduce debt
 
$

 
$
100





This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

10




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

 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Retained
Earnings
 
Total
Common
Shareholders'
Equity
 
Non-
controlling
Interests
 
Total
Equity
 
Shares
 
Aggregate
Par Value
 
Balances, December 31, 2016
468

 
$
5

 
$
8,948

 
$
(70
)
 
$
15,458

 
$
24,341

 
$
990

 
$
25,331

Net income

 

 

 

 
3,223

 
3,223

 
29

 
 
Issuances of common stock, net of issuance cost of less than $1
2

 

 
24

 

 

 
24

 

 
 
Share-based payment activity

 

 
77

 

 

 
77

 

 
 
Dividends on common stock

 

 

 

 
(1,382
)
 
(1,382
)
 

 
 
Other comprehensive income

 

 

 
118

 

 
118

 
11

 
 
Sale of NEER assets to NEP

 

 

 

 

 

 
(17
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 
(64
)
 
 
Other

 

 
(3
)
 

 

 
(3
)
 
(26
)
 
 
Balances, September 30, 2017
470

 
$
5

 
$
9,046

 
$
48

 
$
17,299

 
$
26,398

 
$
923

 
$
27,321


 
Common Stock
 
Additional
Paid-In
Capital
 
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

 
$
8,596

 
$
(167
)
 
$
14,140

 
$
22,574

 
$
538

 
$
23,112

Net income

 

 

 

 
1,946

 
1,946

 
42

 
 
Issuances of common stock, net of issuance cost of less than $1
5

 

 
523

 

 

 
523

 

 
 
Share-based payment activity
1

 

 
96

 

 

 
96

 

 
 
Dividends on common stock

 

 

 

 
(1,205
)
 
(1,205
)
 

 
 
Premium on equity units

 

 
(200
)
 

 

 
(200
)
 

 
 
Other comprehensive income (loss)

 

 

 
131

 

 
131

 
(19
)
 
 
Sale of NEER assets to NEP

 

 
49

 

 

 
49

 
440

 
 
Distributions to noncontrolling interests

 

 

 

 

 

 
(37
)
 
 
Other

 

 
(25
)
 

 
18

 
(7
)
 
(2
)
 
 
Balances, September 30, 2016
467

 
$
5

 
$
9,039

 
$
(36
)
 
$
14,899

 
$
23,907

 
$
962

 
$
24,869





















This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

11




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

 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
OPERATING REVENUES
 
$
3,477

 
$
3,283

 
$
9,095

 
$
8,337

OPERATING EXPENSES (INCOME)
 
 

 
 

 
 

 
 

Fuel, purchased power and interchange
 
1,036

 
1,045

 
2,696

 
2,556

Other operations and maintenance
 
362

 
403

 
1,137

 
1,203

Depreciation and amortization
 
704

 
587

 
1,514

 
1,207

Taxes other than income taxes and other - net
 
353

 
327

 
975

 
908

Total operating expenses - net
 
2,455

 
2,362

 
6,322

 
5,874

OPERATING INCOME
 
1,022

 
921

 
2,773

 
2,463

OTHER INCOME (DEDUCTIONS)
 
 

 
 

 
 

 
 

Interest expense
 
(121
)
 
(114
)
 
(360
)
 
(342
)
Allowance for equity funds used during construction
 
20

 
17

 
55

 
55

Other - net
 
1

 

 
2

 
3

Total other deductions - net
 
(100
)
 
(97
)
 
(303
)
 
(284
)
INCOME BEFORE INCOME TAXES
 
922

 
824

 
2,470

 
2,179

INCOME TAXES
 
356

 
309

 
933

 
823

NET INCOME(a)
 
$
566

 
$
515

 
$
1,537

 
$
1,356

_______________________
(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 2016 Form 10-K.

12




FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions, except share amount)
(unaudited)
 
 
September 30,
2017
 
December 31,
2016
ELECTRIC UTILITY PLANT AND OTHER PROPERTY
 
 
 
 
Plant in service and other property
 
$
46,394

 
$
44,966

Nuclear fuel
 
1,260

 
1,308

Construction work in progress
 
3,341

 
2,039

Accumulated depreciation and amortization
 
(12,730
)
 
(12,304
)
Total electric utility plant and other property - net
 
38,265

 
36,009

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents
 
8

 
33

Customer receivables, net of allowances of $5 and $2, respectively
 
1,212

 
768

Other receivables
 
225

 
148

Materials, supplies and fossil fuel inventory
 
903

 
851

Regulatory assets
 
551

 
524

Derivatives
 
7

 
209

Other
 
176

 
213

Total current assets
 
3,082

 
2,746

OTHER ASSETS
 
 

 
 

Special use funds
 
3,963

 
3,665

Prepaid benefit costs
 
1,332

 
1,301

Regulatory assets ($53 and $107 related to a VIE, respectively)
 
2,971

 
1,573

Other
 
302

 
207

Total other assets
 
8,568

 
6,746

TOTAL ASSETS
 
$
49,915

 
$
45,501

CAPITALIZATION
 
 

 
 

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

 
$
1,373

Additional paid-in capital
 
8,291

 
8,332

Retained earnings
 
7,682

 
6,875

Total common shareholder's equity
 
17,346

 
16,580

Long-term debt ($74 and $144 related to a VIE, respectively)
 
10,055

 
9,705

Total capitalization
 
27,401

 
26,285

CURRENT LIABILITIES
 
 

 
 

Commercial paper
 
1,079

 
268

Other short-term debt
 
250

 
150

Current maturities of long-term debt
 
463

 
367

Accounts payable
 
764

 
837

Customer deposits
 
446

 
466

Accrued interest and taxes
 
637

 
240

Accrued construction-related expenditures
 
218

 
262

Regulatory liabilities
 
145

 
294

Other
 
1,576

 
497

Total current liabilities
 
5,578

 
3,381

OTHER LIABILITIES AND DEFERRED CREDITS
 
 

 
 

Asset retirement obligations
 
2,001

 
1,919

Deferred income taxes
 
9,554

 
8,541

Regulatory liabilities
 
4,855

 
4,893

Other
 
526

 
482

Total other liabilities and deferred credits
 
16,936

 
15,835

COMMITMENTS AND CONTINGENCIES
 


 


TOTAL CAPITALIZATION AND LIABILITIES
 
$
49,915

 
$
45,501








This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

13


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

 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
1,537

 
$
1,356

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

 
 

Depreciation and amortization
 
1,514

 
1,207

Nuclear fuel and other amortization
 
153

 
167

Deferred income taxes
 
987

 
569

Cost recovery clauses and franchise fees
 
61

 
111

Acquisition of purchased power agreement
 
(258
)
 

Recoverable storm-related costs
 
(334
)
 
(17
)
Other - net
 
(63
)
 
(15
)
Changes in operating assets and liabilities:
 
 

 
 

Current assets
 
(578
)
 
(185
)
Noncurrent assets
 
(45
)
 
12

Current liabilities
 
507

 
679

Noncurrent liabilities
 
(13
)
 
(94
)
Net cash provided by operating activities
 
3,468

 
3,790

CASH FLOWS FROM INVESTING ACTIVITIES
 
 

 
 

Capital expenditures
 
(3,676
)
 
(2,976
)
Nuclear fuel purchases
 
(104
)
 
(121
)
Proceeds from sale or maturity of securities in special use funds
 
1,241

 
1,775

Purchases of securities in special use funds
 
(1,320
)
 
(1,836
)
Other - net
 
29

 
32

Net cash used in investing activities
 
(3,830
)
 
(3,126
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 

 
 

Issuances of long-term debt
 
200

 
150

Retirements of long-term debt
 
(73
)
 
(262
)
Net change in commercial paper
 
811

 
408

Proceeds from other short-term debt
 
200

 
500

Repayments of other short-term debt
 
(2
)
 
(150
)
Dividends to NEE
 
(800
)
 
(1,300
)
Other - net
 
1

 
13

Net cash provided by (used in) financing activities
 
337

 
(641
)
Net increase (decrease) in cash and cash equivalents
 
(25
)
 
23

Cash and cash equivalents at beginning of period
 
33

 
23

Cash and cash equivalents at end of period
 
$
8

 
$
46

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
 
 

 
 

Accrued property additions
 
$
400

 
$
475

Increase in electric utility plant and other property - net as a result of a noncash exchange
 
$
(96
)
 
$










This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2016 Form 10-K.

14


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 2016 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 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
 
Pension Benefits
 
Postretirement Benefits
 
Three Months Ended
September 30,
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
(millions)
Service cost
$
16

 
$
16

 
$

 
$

 
$
49

 
$
47

 
$
1

 
$
1

Interest cost
21

 
26

 
2

 
3

 
63

 
78

 
6

 
10

Expected return on plan assets
(67
)
 
(65
)
 

 

 
(202
)
 
(195
)
 

 

Amortization of prior service cost (benefit)

 

 
(4
)
 

 
(1
)
 
1

 
(6
)
 
(2
)
Special termination benefits

 

 

 

 
38

 

 

 

Postretirement benefits settlement

 

 

 

 

 

 
1

 

Net periodic (income) cost at NEE
$
(30
)
 
$
(23
)
 
$
(2
)
 
$
3

 
$
(53
)
 
$
(69
)
 
$
2

 
$
9

Net periodic (income) cost at FPL
$
(20
)
 
$
(15
)
 
$
(2
)
 
$
2

 
$
(32
)
 
$
(44
)
 
$
1

 
$
7

 
Amendments to Presentation of Retirement Benefits - In March 2017, the FASB issued an accounting standards update that requires certain changes in classification of components of net periodic pension and postretirement benefit costs within the income statement and allows only the service cost component to be eligible for capitalization. This standards update will be applied using the retrospective approach for presentation of the components of net periodic pension and postretirement benefit costs and the prospective approach for capitalization of service cost. NEE and FPL will apply this standards update on January 1, 2018, and are currently evaluating the impact the adoption will have on their consolidated financial statements.
 
2.  Derivative Instruments
 
NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the physical and financial risks 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 expected future debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets. NEE and FPL do not utilize hedge accounting for their cash flow and fair value hedges.
 
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 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 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.

15


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


 
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 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.
 
For interest rate and foreign currency derivative instruments, 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 the nine months ended September 30, 2017 and 2016, NEE reclassified approximately $2 million ($1 million after-tax) and $17 million ($10 million after tax), respectively, from AOCI to interest expense primarily because it became probable that related future transactions being hedged would not occur. At September 30, 2017, NEE's AOCI included amounts related to discontinued interest rate cash flow hedges with expiration dates through March 2035 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $27 million of net losses included in AOCI at September 30, 2017 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 September 30, 2017 and December 31, 2016, 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.
 
September 30, 2017
 
Gross Basis
 
Net Basis
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
(millions)
NEE:
 
 
 
 
 
 
 
Commodity contracts
$
4,081

 
$
2,546

 
$
1,885

 
$
403

Interest rate contracts
76

 
299

 
92

 
315

Foreign currency contracts

 
42

 
11

 
53

Total fair values
$
4,157

 
$
2,887

 
$
1,988

 
$
771

 
 
 
 
 
 
 
 
FPL:
 
 
 
 
 
 
 
Commodity contracts
$
11

 
$
7

 
$
7

 
$
3

 
 
 
 
 
 
 
 
Net fair value by NEE balance sheet line item:
 
 
 
 
 
 
 
Current derivative assets(a)
 
 
 
 
$
442

 
 
Noncurrent derivative assets(b)
 
 
 
 
1,546

 
 
Current derivative liabilities
 
 
 
 
 
 
$
257

Noncurrent derivative liabilities(c)
 
 
 
 
 
 
514

Total derivatives
 
 
 
 
$
1,988

 
$
771

 
 
 
 
 
 
 
 
Net fair value by FPL balance sheet line item:
 
 
 
 
 
 
 
Current derivative assets
 
 
 
 
$
7

 
 
Current other liabilities
 
 
 
 
 
 
$
3

Total derivatives
 
 
 
 
$
7

 
$
3

———————————————
(a)
Reflects the netting of approximately $74 million in margin cash collateral received from counterparties.
(b)
Reflects the netting of approximately $12 million in margin cash collateral received from counterparties.
(c)
Reflects the netting of approximately $33 million in margin cash collateral paid to counterparties.

16


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


 
December 31, 2016
 
Gross Basis
 
Net Basis
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
(millions)
NEE:
 
 
 
 
 
 
 
Commodity contracts
$
4,590

 
$
2,968

 
$
1,938

 
$
483

Interest rate contracts
288

 
284

 
296

 
292

Foreign currency contracts
1

 
106

 
1

 
106

Total fair values
$
4,879

 
$
3,358

 
$
2,235

 
$
881

 
 
 
 
 
 
 
 
FPL:
 
 
 
 
 
 
 
Commodity contracts
$
212

 
$
4

 
$
209

 
$
1

 
 
 
 
 
 
 
 
Net fair value by NEE balance sheet line item:
 
 
 
 
 
 
 
Current derivative assets(a)
 
 
 
 
$
885

 
 
Noncurrent derivative assets(b)
 
 
 
 
1,350

 
 
Current derivative liabilities
 
 
 
 
 
 
$
404

Noncurrent derivative liabilities
 
 
 
 
 
 
477

Total derivatives
 
 
 
 
$
2,235

 
$
881

 
 
 
 
 
 
 
 
Net fair value by FPL balance sheet line item:
 
 
 
 
 
 
 
Current derivative assets
 
 
 
 
$
209

 
 
Current other liabilities
 
 
 
 
 
 
$
1

Total derivatives
 
 
 
 
$
209

 
$
1

———————————————
(a)
Reflects the netting of approximately $96 million in margin cash collateral received from counterparties.
(b)
Reflects the netting of approximately $71 million in margin cash collateral received from counterparties.

At September 30, 2017 and December 31, 2016, NEE had approximately $13 million and $5 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 September 30, 2017 and December 31, 2016, NEE had approximately $177 million and $129 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 derivatives are recorded in NEE's condensed consolidated statements of income as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
(millions)
Commodity contracts:(a)
 
 
 
 
 
 
 
Operating revenues
$
114

 
$
264

 
$
538

 
$
502

Fuel, purchased power and interchange

 
1

 

 
(1
)
Foreign currency contracts - interest expense
(4
)

15

 
53

 
96

Foreign currency contracts - other - net
(2
)
 
1

 
(5
)
 
(2
)
Interest rate contracts - interest expense
(41
)
 
(58
)
 
(232
)
 
(515
)
Losses reclassified from AOCI to interest expense:
 
 
 
 
 
 
 
Interest rate contracts
(13
)
 
(18
)
 
(36
)
 
(71
)
Foreign currency contracts
(1
)
 
(3
)
 
(80
)
 
(9
)
Total
$
53

 
$
202

 
$
238

 
$

———————————————
(a)
For the three and nine months ended September 30, 2017, FPL recorded losses of approximately $12 million and $164 million, respectively, related to commodity contracts as regulatory assets on its condensed consolidated balance sheets. For the three and nine months ended September 30, 2016, FPL recorded approximately $35 million of losses and $35 million of gains, respectively, related to commodity contracts as regulatory assets and regulatory liabilities on its condensed consolidated balance sheets.

17


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


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 NEE’s and FPL’s 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:
 
 
September 30, 2017
 
December 31, 2016
Commodity Type
 
NEE
 
FPL
 
NEE
 
FPL
 
 
(millions)
Power
 
(107
)
 
MWh
 

 
 
 
(84
)
 
MWh
 

 
 
Natural gas
 
312

 
MMBtu
 
255

 
MMBtu
 
1,002

 
MMBtu
 
618

 
MMBtu
Oil
 
(3
)
 
barrels
 

 
 
 
(7
)
 
barrels
 

 
 

At September 30, 2017 and December 31, 2016, NEE had interest rate contracts with notional amounts totaling approximately $13.6 billion and $15.1 billion, respectively, and foreign currency contracts with notional amounts totaling approximately $714 million and $705 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 September 30, 2017 and December 31, 2016, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $1.1 billion ($7 million for FPL) and $1.3 billion ($5 million for FPL), respectively.

If the credit-risk-related contingent features underlying these derivative agreements 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 derivative 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 $130 million (none at FPL) as of September 30, 2017 and $110 million (none at FPL) as of December 31, 2016. 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 $1.1 billion ($40 million at FPL) as of September 30, 2017 and $990 million ($10 million at FPL) as of December 31, 2016. Some derivative contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered, applicable NEE subsidiaries could be required to post additional collateral of up to approximately $220 million ($140 million at FPL) as of September 30, 2017 and $225 million ($115 million at FPL) as of December 31, 2016.

Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At September 30, 2017 and December 31, 2016, applicable NEE subsidiaries have posted approximately $2 million (none at FPL) and $1 million (none at FPL), respectively, in cash and $26 million (none at FPL) and $30 million (none at FPL), respectively, in the form of letters of credit each of 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.



18


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


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 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 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 comm