NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013
1. Summary of Significant Accounting and Reporting Policies
Basis of Presentation
- The operations of NextEra Energy, Inc. (NEE) are conducted primarily through its wholly owned subsidiary Florida Power & Light Company (FPL) and its wholly owned indirect subsidiary NextEra Energy Resources, LLC (NEER). FPL, a rate-regulated electric utility, supplies electric service to approximately
4.8
million customer accounts throughout most of the east and lower west coasts of Florida. NEER invests in independent power projects through both controlled and consolidated entities and noncontrolling ownership interests in joint ventures essentially all of which are accounted for under the equity method. NEER also participates in natural gas, natural gas liquids and oil production through non-operating ownership interests and in pipeline infrastructure through either wholly owned subsidiaries or noncontrolling or joint venture interests. See Note 15 for a discussion of the movement of the natural gas pipeline projects to the NEER segment from Corporate and Other.
The consolidated financial statements of NEE and FPL include the accounts of their respective majority-owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Amounts included in the consolidated financial statements and the accompanying Notes have been adjusted to reflect the retrospective application of a Financial Accounting Standards Board (FASB) accounting standard update related to the presentation of debt issuance costs in the financial statements. See Debt Issuance Costs below. In addition, certain amounts included in prior years' consolidated financial statements have been reclassified to conform to the current year's presentation. The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
NextEra Energy Partners, LP
- NEE, through NEER, formed NextEra Energy Partners, LP (NEP) to acquire, manage and own contracted clean energy projects with stable, long-term cash flows through a limited partner interest in NextEra Energy Operating Partners, LP (NEP OpCo). On July 1, 2014, NEP closed its initial public offering (IPO) by issuing
18,687,500
common units representing limited partner interests. The proceeds from the sale of the common units, net of underwriting discounts, commissions and structuring fees, were approximately $
438 million
. NEP used such proceeds to purchase
18,687,500
common units of NEP OpCo, of which approximately $
288 million
was used to purchase common units from an indirect wholly owned subsidiary of NEE and $
150 million
was used to purchase common units from NEP OpCo. Through an indirect wholly owned subsidiary, NEE retained
74,440,000
units of NEP OpCo representing a
79.9%
interest in NEP's operating projects. Additionally, NEE owns a controlling general partner interest in NEP and consolidates this entity for financial reporting purposes and presents NEP's limited partner interest as a noncontrolling interest in NEE's consolidated financial statements. Certain equity and asset transactions between NEP, NEER and NEP OpCo involve the exchange of cash, energy projects and ownership interests in NEP OpCo. These exchanges are accounted for under the profit sharing method and resulted in a profit sharing liability of approximately $
447 million
and $
299 million
at December 31, 2015 and 2014, respectively, which is reflected in noncurrent other liabilities on NEE's consolidated balance sheets. The profit sharing liability will be amortized into income on a straight-line basis over the estimated useful lives of the underlying energy projects held by NEP OpCo. During the purchase price adjustment period associated with the IPO, which is expected to extend into the fourth quarter of 2016, approximately
$288 million
of the profit sharing liability is subject to potential adjustment and will not be amortized.
During 2015, NEP sold an additional
11,857,925
common units and purchased an additional
11,857,925
NEP OpCo common units. Also, in 2015, a subsidiary of NEE purchased
27,000,000
of NEP OpCo's common units. After giving effect to these transactions, NEE’s interest in NEP's operating projects is approximately
76.8%
as of December 31, 2015. As of December 31, 2015, NEP, through NEER's contribution of energy projects to NEP OpCo, owns a portfolio of
19
wind and solar projects with generating capacity totaling approximately
2,210
megawatts (MW), as well as a portfolio of seven long-term contracted natural gas pipeline assets located in Texas.
Rate Regulation
- FPL is subject to rate regulation by the Florida Public Service Commission (FPSC) and the Federal Energy Regulatory Commission (FERC). Its rates are designed to recover the cost of providing electric service to its customers including a reasonable rate of return on invested capital. As a result of this cost-based regulation, FPL follows the accounting guidance that allows regulators to create assets and impose liabilities that would not be recorded by non-rate regulated entities. Regulatory assets and liabilities represent probable future revenues that will be recovered from or refunded to customers through the ratemaking process.
Cost recovery clauses, which are designed to permit full recovery of certain costs and provide a return on certain assets allowed to be recovered through various clauses, include substantially all fuel, purchased power and interchange expense, certain construction-related costs for FPL's planned additional nuclear units at Turkey Point and FPL's solar generation facilities, and conservation and certain environmental-related costs.
Revenues from cost recovery clauses are recorded when billed; FPL achieves matching of costs and related revenues by deferring the net underrecovery or overrecovery. Any underrecovered costs or overrecovered revenues are collected from or returned to customers in subsequent periods.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2015, FPL assumed ownership of a 250 MW coal-fired generation facility located in Jacksonville, Florida (Cedar Bay) and terminated its long-term purchased power agreement for substantially all of the facility’s capacity and energy for a purchase price of approximately
$521 million
. The FPSC approved a stipulation and settlement between the State of Florida Office of Public Counsel and FPL regarding issues relating to the ratemaking treatment for Cedar Bay. Key elements of the settlement included, among other things, the following:
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FPL will recover the purchase price and associated income tax gross-up as a regulatory asset which will be amortized over approximately
nine years
. Approximately
$709 million
will be recovered through the capacity clause with a return on the portion of the unamortized balance associated with the purchase price and
$138 million
will be recovered through base rates until FPL's next test year for a general base rate proceeding, at which time the unamortized balance will be transferred to the capacity clause for continued recovery until fully amortized. At December 31, 2015, the regulatory assets, net of amortization, totaled approximately
$817 million
and are included in purchased power agreement termination and current other regulatory assets on NEE’s and FPL’s consolidated balance sheets.
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The reserve amount that is available for amortization under the 2012 rate agreement, which is effective through December 2016, was reduced by
$30 million
to
$370 million
, unless FPL needs the entire
$400 million
reserve to maintain a minimum regulatory ROE of
9.50%
. See Revenues and Rates - FPL Rates Effective January 2013 through December 2016 below.
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In October 2015, the Florida Industrial Power Users Group filed a notice of appeal challenging the FPSC's approval of this settlement, which is pending before the Florida Supreme Court.
If FPL were no longer subject to cost-based rate regulation, the existing regulatory assets and liabilities would be written off unless regulators specify an alternative means of recovery or refund. In addition, the FPSC has the authority to disallow recovery of costs that it considers excessive or imprudently incurred. The continued applicability of regulatory accounting is assessed at each reporting period.
Revenues and Rates
- FPL's retail and wholesale utility rate schedules are approved by the FPSC and the FERC, respectively. FPL records unbilled base revenues for the estimated amount of energy delivered to customers but not yet billed. FPL's unbilled base revenues are included in customer receivables on NEE's and FPL's consolidated balance sheets and amounted to approximately
$246 million
and
$223 million
at
December 31, 2015 and 2014
, respectively. FPL's operating revenues also include amounts resulting from cost recovery clauses (see Rate Regulation above), franchise fees, gross receipts taxes and surcharges related to storm-recovery bonds (see Note 9 - FPL). Franchise fees and gross receipts taxes are imposed on FPL; however, the FPSC allows FPL to include in the amounts charged to customers the amount of the gross receipts tax for all customers and the franchise amount for those customers located in the jurisdiction that imposes the fee. Accordingly, franchise fees and gross receipts taxes are reported gross in operating revenues and taxes other than income taxes and other in NEE's and FPL's consolidated statements of income and were approximately
$722 million
,
$716 million
and
$680 million
in
2015, 2014 and 2013
, respectively. The revenues from the surcharges related to storm-recovery bonds included in operating revenues in NEE's and FPL's consolidated statements of income were approximately
$115 million
,
$109 million
and
$108 million
in
2015, 2014 and 2013
, respectively. FPL also collects municipal utility taxes which are reported gross in customer receivables and accounts payable on NEE's and FPL's consolidated balance sheets.
FPL Rates Effective January 2013 through December 2016 - In January 2013, the FPSC issued a final order approving a stipulation and settlement between FPL and several intervenors in FPL's base rate proceeding (2012 rate agreement). Key elements of the 2012 rate agreement, which is effective from January 2013 through December 2016, include, among other things, the following:
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New retail base rates and charges were established in January 2013 resulting in an increase in retail base revenues of
$350 million
on an annualized basis.
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FPL's allowed regulatory return on common equity (ROE) is
10.50%
, with a range of plus or minus
100
basis points. If FPL's earned regulatory ROE falls below
9.50%
, FPL may seek retail base rate relief. If the earned regulatory ROE rises above
11.50%
, any party to the 2012 rate agreement other than FPL may seek a review of FPL's retail base rates.
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Retail base rates will be increased by the annualized base revenue requirements for FPL's three modernization projects (Cape Canaveral, Riviera Beach and Port Everglades) as each of the modernized power plants becomes operational. (Cape Canaveral and Riviera Beach became operational in April 2013 and April 2014, respectively, and Port Everglades is expected to be operational by April 2016.)
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Cost recovery of FPL's West County Energy Center (WCEC) Unit No. 3 will continue to occur through the capacity cost recovery clause (capacity clause) (reported as retail base revenues).
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Subject to certain conditions, FPL may amortize, over the term of the 2012 rate agreement, a depreciation reserve surplus remaining at the end of 2012 under a previous rate agreement (approximately
$224 million
) and may amortize a portion of FPL's fossil dismantlement reserve up to a maximum of
$176 million
(collectively, the reserve), provided that in any year of the 2012 rate agreement, FPL must amortize at least enough reserve to maintain a
9.50%
earned regulatory ROE but may not amortize any reserve that would result in an earned regulatory ROE in excess of
11.50%
. See Rate Regulation above regarding a subsequent reduction in the reserve amount.
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Future storm restoration costs would be recoverable on an interim basis beginning 60 days from the filing of a cost recovery petition, but capped at an amount that could produce a surcharge of no more than
$4
for every
1,000
kilowatt-hours (kWh) of
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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
usage on residential bills during the first 12 months of cost recovery. Any additional costs would be eligible for recovery in subsequent years. If storm restoration costs exceed
$800 million
in any given calendar year, FPL may request an increase to the
$4
surcharge to recover the amount above
$800 million
.
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An incentive mechanism whereby customers will receive 100% of certain gains, including but not limited to, gains from the purchase and sale of electricity and natural gas (including transportation and storage), up to a specified threshold. The gains exceeding that specified threshold will be shared by FPL and its customers.
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2016 Base Rate Proceeding - In January 2016, FPL filed a formal notification with the FPSC indicating its intent to initiate a base rate proceeding, consisting of a four-year rate plan that would begin in January 2017 following the expiration of the 2012 rate agreement at the end of 2016. The notification stated that, based on preliminary estimates, FPL expects to request an increase to base annual revenue requirements of (i) approximately
$860 million
effective January 2017, (ii) approximately
$265 million
effective January 2018, and (iii) approximately
$200 million
effective when the proposed natural gas-fired combined-cycle unit in Okeechobee County, Florida becomes operational, which is expected to occur in mid-2019 assuming it receives approval by the Siting Board (comprised of the governor and cabinet) under the Florida Electrical Power Plant Siting Act. Under the proposed rate plan, FPL commits that if its requested adjustments to base annual revenue requirements are approved, it will not request further adjustments for 2020. In addition, FPL expects to propose an allowed regulatory return on common equity midpoint of
11.50%
, which includes a
50
basis point performance adder. FPL expects to file its formal request to initiate a base rate proceeding in March 2016.
NEER's revenue is recorded on the basis of commodities delivered, contracts settled or services rendered and includes estimated amounts yet to be billed to customers. Certain commodity contracts for the purchase and sale of power that meet the definition of a derivative are recorded at fair value with subsequent changes in fair value recognized as revenue. See Energy Trading below and Note 3.
In May 2014, the FASB issued a new accounting standard which provides guidance on the recognition of revenue from contracts with customers and requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows from an entity's contracts with customers. The standard will be effective for NEE and FPL beginning January 1, 2018 and may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. NEE and FPL are currently evaluating the effect the adoption of this standard will have, if any, on their consolidated financial statements.
Electric Plant, Depreciation and Amortization
- The cost of additions to units of property of FPL and NEER is added to electric plant in service. In accordance with regulatory accounting, the cost of FPL's units of utility property retired, less estimated net salvage value, is charged to accumulated depreciation. Maintenance and repairs of property as well as replacements and renewals of items determined to be less than units of utility property are charged to other operations and maintenance (O&M) expenses. At
December 31, 2015
, the electric generation, transmission, distribution and general facilities of FPL represented approximately
50%
,
11%
,
33%
and
6%
, respectively, of FPL's gross investment in electric utility plant in service and other property. Substantially all of FPL's properties are subject to the lien of FPL's mortgage, which secures most debt securities issued by FPL. A number of NEER's generation and pipeline facilities are encumbered by liens securing various financings. The net book value of NEER's assets serving as collateral was approximately
$13.9 billion
at
December 31, 2015
. The American Recovery and Reinvestment Act of 2009, as amended (Recovery Act), provided for an option to elect a cash grant (convertible investment tax credits (ITCs)) for certain renewable energy property (renewable property). Convertible ITCs are recorded as a reduction in property, plant and equipment on NEE's and FPL's consolidated balance sheets and are amortized as a reduction to depreciation and amortization expense over the estimated life of the related property. At
December 31, 2015
and
2014
, convertible ITCs, net of amortization, were approximately
$1.8 billion
(
$153 million
at FPL) and
$1.6 billion
(
$159 million
at FPL). At
December 31, 2015
and
2014
, approximately
$207 million
and
$1 million
, respectively, of such convertible ITCs are included in other receivables on NEE's consolidated balance sheets.
Depreciation of FPL's electric property is primarily provided on a straight-line average remaining life basis. FPL includes in depreciation expense a provision for fossil and solar plant dismantlement, interim asset removal costs, accretion related to asset retirement obligations (see Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs below), storm recovery amortization and amortization of pre-construction costs associated with planned nuclear units recovered through a cost recovery clause. For substantially all of FPL's property, depreciation studies are typically performed and filed with the FPSC at least every
four
years. As part of a previous rate agreement, the FPSC approved new depreciation rates which became effective January 1, 2010. In accordance with the 2012 rate agreement, FPL is not required to file depreciation studies during the effective period of the agreement and the previously approved depreciation rates remain in effect. As discussed in Revenues and Rates above, the use of reserve amortization is permitted under the 2012 rate agreement. FPL files a twelve-month forecast with the FPSC each year which contains a regulatory ROE intended to be earned based on the best information FPL has at that time assuming normal weather. This forecast establishes a fixed targeted regulatory ROE. In order to earn the targeted regulatory ROE in each reporting period under the 2012 rate agreement, reserve amortization is calculated using a trailing thirteen-month average of retail rate base and capital structure in conjunction with the trailing twelve months regulatory retail base net operating income, which primarily includes the retail base portion of base and other revenues net of O&M, depreciation and amortization, interest and tax expenses. In general, the net impact of these income statement line items is adjusted, in part, by reserve amortization or its reversal to earn the targeted regulatory ROE. In accordance with the 2012 rate agreement, FPL recorded approximately
$(15) million
,
$(33) million
and
$155 million
of reserve (reversal) amortization in
2015, 2014 and 2013
, respectively. The reserve is
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
amortized as a reduction of (or reversed as an increase to) regulatory liabilities - accrued asset removal costs on NEE's and FPL's consolidated balance sheets. The weighted annual composite depreciation and amortization rate for FPL's electric utility plant in service, including capitalized software, but excluding the effects of decommissioning, dismantlement and the depreciation adjustments discussed above, was approximately
3.3%
,
3.3%
and
3.4%
for
2015, 2014 and 2013
, respectively.
NEER's electric plant in service less salvage value, if any, are depreciated primarily using the straight-line method over their estimated useful lives. At
December 31, 2015 and 2014
, wind, nuclear, natural gas and solar plants represented approximately
62%
and
63%
,
11%
and
12%
,
3%
and
8%
, and
9%
and
7%
, respectively, of NEER's depreciable electric plant in service and other property. The estimated useful lives of NEER's plants range primarily from
25
to
30
years for wind, natural gas and solar plants and from
25
to
47
years for nuclear plants. NEER reviews the estimated useful lives of its fixed assets on an ongoing basis. NEER's oil and gas production assets, representing approximately
7%
and
6%
, respectively, of NEER's depreciable electric plant in service and other property at
December 31, 2015 and 2014
, are accounted for under the successful efforts method. Depletion expenses for the acquisition of reserve rights and development costs are recognized using the unit of production method.
Nuclear Fuel
- FPL and NEER have several contracts for the supply of uranium, conversion, enrichment and fabrication of nuclear fuel. See Note 14 - Contracts. FPL's and NEER's nuclear fuel costs are charged to fuel expense on a unit of production method.
Construction Activity
- Allowance for funds used during construction (AFUDC) is a non-cash item which represents the allowed cost of capital, including an ROE, used to finance FPL construction projects. The portion of AFUDC attributable to borrowed funds is recorded as a reduction of interest expense and the remainder is recorded as other income. FPSC rules limit the recording of AFUDC to projects that have an estimated cost in excess of
0.5%
of a utility's plant in service balance and require more than one year to complete. FPSC rules allow construction projects below the
0.5%
threshold as a component of rate base. During
2015, 2014 and 2013
, FPL capitalized AFUDC at a rate of
6.34%
,
6.34%
and
6.52%
, respectively, which amounted to approximately
$88 million
,
$50 million
and
$81 million
, respectively. See Note 14 - Commitments.
FPL's construction work in progress includes construction materials, progress payments on major equipment contracts, engineering costs, AFUDC and other costs directly associated with the construction of various projects. Upon completion of the projects, these costs are transferred to electric utility plant in service and other property. Capitalized costs associated with construction activities are charged to O&M expenses when recoverability is no longer probable. See Rate Regulation above for information on recovery of costs associated with new nuclear capacity and solar generation facilities.
NEER capitalizes project development costs once it is probable that such costs will be realized through the ultimate construction of a power plant or sale of development rights. At
December 31, 2015 and 2014
, NEER's capitalized development costs totaled approximately
$133 million
and
$122 million
, respectively, which are included in noncurrent other assets on NEE's consolidated balance sheets. These costs include land rights and other third-party costs directly associated with the development of a new project. Upon commencement of construction, these costs either are transferred to construction work in progress or remain in other assets, depending upon the nature of the cost. Capitalized development costs are charged to O&M expenses when it is no longer probable that these costs will be realized.
NEER's construction work in progress includes construction materials, progress payments on major equipment contracts, third-party engineering costs, capitalized interest and other costs directly associated with the construction and development of various projects. Interest capitalized on construction projects amounted to approximately
$100 million
,
$104 million
and
$109 million
during
2015, 2014 and 2013
, respectively. Interest expense allocated from NextEra Energy Capital Holdings, Inc. (NEECH) to NEER is based on a deemed capital structure of
70%
debt. Upon commencement of plant operation, costs associated with construction work in progress are transferred to electric plant in service and other property.
Asset Retirement Obligations
- NEE and FPL each account for asset retirement obligations and conditional asset retirement obligations (collectively, AROs) under accounting guidance that requires a liability for the fair value of an ARO to be recognized in the period in which it is incurred if it can be reasonably estimated, with the offsetting associated asset retirement costs capitalized as part of the carrying amount of the long-lived assets. The asset retirement cost is subsequently allocated to expense, for NEE's non-rate regulated operations, and regulatory liability, for FPL, using a systematic and rational method over the asset’s estimated useful life. Changes in the ARO resulting from the passage of time are recognized as an increase in the carrying amount of the liability and as accretion expense, which is included in depreciation and amortization expense in the consolidated statements of income for NEE's non-rate regulated operations, and ARO and regulatory liability, in the case of FPL. Changes resulting from revisions to the timing or amount of the original estimate of cash flows are recognized as an increase or a decrease in the asset retirement cost, or income when asset retirement cost is depleted, in the case of NEE's non-rate regulated operations, and ARO and regulatory liability, in the case of FPL. See Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs below and Note 13.
Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs
- For ratemaking purposes, FPL accrues for the cost of end of life retirement and disposal of its nuclear, fossil and solar plants over the expected service life of each unit based on nuclear decommissioning and fossil and solar dismantlement studies periodically filed with the FPSC. In addition, FPL accrues for interim removal costs over the life of the related assets based on depreciation studies approved by the
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FPSC. As approved by the FPSC, FPL previously suspended its annual decommissioning accrual. For financial reporting purposes, FPL recognizes decommissioning and dismantlement liabilities in accordance with accounting guidance that requires a liability for the fair value of an ARO to be recognized in the period in which it is incurred. Any differences between expense recognized for financial reporting purposes and the amount recovered through rates are reported as a regulatory liability in accordance with regulatory accounting. See Revenues and Rates, Electric Plant, Depreciation and Amortization, Asset Retirement Obligations above and Note 13.
Nuclear decommissioning studies are performed at least every
five
years and are submitted to the FPSC for approval. FPL filed updated nuclear decommissioning studies with the FPSC in December 2015. These studies reflect FPL's current plans, under the operating licenses, for prompt dismantlement of Turkey Point Units Nos. 3 and 4 following the end of plant operation with decommissioning activities commencing in 2032 and 2033, respectively, and provide for St. Lucie Unit No. 1 to be mothballed beginning in 2036 with decommissioning activities to be integrated with the prompt dismantlement of St. Lucie Unit No. 2 in 2043. These studies also assume that FPL will be storing spent fuel on site pending removal to a United States (U.S.) government facility. The studies indicate FPL's portion of the ultimate costs of decommissioning its
four
nuclear units, including costs associated with spent fuel storage above what is expected to be refunded by the U.S. Department of Energy (DOE) under a spent fuel settlement agreement, to be approximately
$7.5 billion
, or
$2.9 billion
expressed in 2015 dollars.
Restricted funds for the payment of future expenditures to decommission FPL's nuclear units are included in nuclear decommissioning reserve funds, which are included in special use funds on NEE's and FPL's consolidated balance sheets. Marketable securities held in the decommissioning funds are primarily classified as available for sale and carried at fair value. See Note 4. FPL does not currently make contributions to the decommissioning funds, other than the reinvestment of dividends and interest. Fund earnings, consisting of dividends, interest and realized gains and losses, as well as any changes in unrealized gains and losses are not recognized in income and are reflected as a corresponding offset in the related regulatory liability accounts. During 2015, 2014 and 2013 fund earnings on decommissioning funds were approximately
$96 million
,
$91 million
and
$167 million
, respectively. The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes.
Fossil and solar plant dismantlement studies are typically performed at least every
four
years and are submitted to the FPSC for approval. FPL's latest fossil and solar plant dismantlement studies became effective January 1, 2010 and resulted in an annual expense of
$18 million
which is recorded in depreciation and amortization expense in NEE's and FPL's consolidated statements of income. At
December 31, 2015
, FPL's portion of the ultimate cost to dismantle its fossil and solar units is approximately
$752 million
, or
$411 million
expressed in 2015 dollars. In accordance with the 2012 rate agreement, FPL is not required to file fossil and solar dismantlement studies during the effective period of the agreement.
NEER records nuclear decommissioning liabilities for Seabrook Station (Seabrook), Duane Arnold Energy Center (Duane Arnold) and Point Beach Nuclear Power Plant (Point Beach) in accordance with accounting guidance that requires a liability for the fair value of an ARO to be recognized in the period in which it is incurred. The liability is being accreted using the interest method through the date decommissioning activities are expected to be complete. See Note 13. At
December 31, 2015 and 2014
, NEER's ARO related to nuclear decommissioning was approximately
$423 million
and
$462 million
, respectively, and was determined using various internal and external data and applying a probability percentage to a variety of scenarios regarding the life of the plant and timing of decommissioning. NEER's portion of the ultimate cost of decommissioning its nuclear plants, including costs associated with spent fuel storage above what is expected to be refunded by the DOE under a spent fuel settlement agreement, is estimated to be approximately
$11.8 billion
, or
$1.9 billion
expressed in 2015 dollars.
Seabrook files a comprehensive nuclear decommissioning study with the New Hampshire Nuclear Decommissioning Financing Committee (NDFC) every
four
years; the most recent study was filed in 2015. Seabrook's decommissioning funding plan is also subject to annual review by the NDFC. Currently, there are no ongoing decommissioning funding requirements for Seabrook, Duane Arnold and Point Beach, however, the U.S. Nuclear Regulatory Commission (NRC), and in the case of Seabrook, the NDFC, has the authority to require additional funding in the future. NEER's portion of Seabrook's, Duane Arnold's and Point Beach's restricted funds for the payment of future expenditures to decommission these plants is included in nuclear decommissioning reserve funds, which are included in special use funds on NEE's consolidated balance sheets. Marketable securities held in the decommissioning funds are primarily classified as available for sale and carried at fair value. Market adjustments result in a corresponding adjustment to other comprehensive income (OCI), except for unrealized losses associated with marketable securities considered to be other than temporary, including any credit losses, which are recognized as other than temporary impairment losses on securities held in nuclear decommissioning funds in NEE's consolidated statements of income. Fund earnings are recognized in income and are reinvested in the funds. See Note 4. The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes.
Major Maintenance Costs
- FPL recognizes costs associated with planned major nuclear maintenance in accordance with regulatory treatment and records the related accrual as a regulatory liability. FPL expenses costs associated with planned fossil maintenance as incurred. FPL's estimated nuclear maintenance costs for each nuclear unit's next planned outage are accrued over the period from the end of the last outage to the end of the next planned outage. Any difference between the estimated and actual costs is included in O&M expenses when known. The accrued liability for nuclear maintenance costs at
December 31, 2015 and 2014
totaled approximately
$48 million
and
$50 million
, respectively, and is included in regulatory liabilities - other on NEE's and FPL's consolidated
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
balance sheets. For the years ended
December 31, 2015, 2014 and 2013
, FPL recognized approximately
$90 million
,
$76 million
and
$92 million
, respectively, in nuclear maintenance costs which are primarily included in O&M expenses in NEE's and FPL's consolidated statements of income.
NEER uses the deferral method to account for certain planned major maintenance costs. NEER's major maintenance costs for its nuclear generation units and combustion turbines are capitalized and amortized on a unit of production method over the period from the end of the last outage to the beginning of the next planned outage. NEER's capitalized major maintenance costs, net of accumulated amortization, totaled approximately
$97 million
and
$141 million
at
December 31, 2015 and 2014
, respectively, and are included in noncurrent other assets on NEE's consolidated balance sheets. For the years ended
December 31, 2015, 2014 and 2013
, NEER amortized approximately
$79 million
,
$81 million
and
$93 million
in major maintenance costs which are included in O&M expenses in NEE's consolidated statements of income.
Cash Equivalents
- Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.
Restricted Cash
- At
December 31, 2015 and 2014
, NEE had approximately
$244 million
(
$75 million
for FPL) and
$228 million
($
38 million
for FPL), respectively, of restricted cash included in other current assets on NEE's and FPL's consolidated balance sheets, which was primarily related to margin cash collateral requirements, debt service payments and bond proceeds held for construction at FPL. Where offsetting positions exist, restricted cash related to margin cash collateral is netted against derivative instruments. See Note 3.
Allowance for Doubtful Accounts
- FPL maintains an accumulated provision for uncollectible customer accounts receivable that is estimated using a percentage, derived from historical revenue and write-off trends, of the previous five months of revenue. Additional amounts are included in the provision to address specific items that are not considered in the calculation described above. NEER regularly reviews collectibility of its receivables and establishes a provision for losses estimated as a percentage of accounts receivable based on the historical bad debt write-off trends for its retail electricity provider operations and, when necessary, using the specific identification method for all other receivables.
Inventory
- FPL values materials, supplies and fossil fuel inventory using a weighted-average cost method. NEER's materials, supplies and fossil fuel inventories are carried at the lower of weighted-average cost or market, unless evidence indicates that the weighted-average cost (even if in excess of market) will be recovered with a normal profit upon sale in the ordinary course of business.
Energy Trading
- NEE provides full energy and capacity requirements services primarily to distribution utilities, which include load-following services and various ancillary services, in certain markets and engages in power and gas marketing and trading activities to optimize the value of electricity and fuel contracts, generation facilities and gas infrastructure assets, as well as to take advantage of projected favorable commodity price movements. Trading contracts that meet the definition of a derivative are accounted for at fair value and realized gains and losses from all trading contracts, including those where physical delivery is required, are recorded net for all periods presented. See Note 3.
Securitized Storm-Recovery Costs, Storm Fund and Storm Reserve
- In connection with the 2007 storm-recovery bond financing (see Note 9 - FPL), the net proceeds to FPL from the sale of the storm-recovery property were used primarily to reimburse FPL for its estimated net of tax deficiency in its storm and property insurance reserve (storm reserve) and provide for a storm and property insurance reserve fund (storm fund). Upon the issuance of the storm-recovery bonds, the storm reserve deficiency was reclassified to securitized storm-recovery costs and is recorded as a regulatory asset on NEE's and FPL's consolidated balance sheets. As storm-recovery charges are billed to customers, the securitized storm-recovery costs are amortized and included in depreciation and amortization expense in NEE's and FPL's consolidated statements of income. Marketable securities held in the storm fund are classified as available for sale and are carried at fair value with market adjustments, including any other than temporary impairment losses, resulting in a corresponding adjustment to the storm reserve. Fund earnings, net of taxes, are reinvested in the fund. The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes. The storm fund is included in special use funds on NEE's and FPL's consolidated balance sheets and was approximately
$74 million
and
$75 million
at
December 31, 2015 and 2014
, respectively. See Note 4.
The storm reserve that was reestablished in an FPSC financing order related to the issuance of the storm-recovery bonds was not initially reflected on NEE's and FPL's consolidated balance sheets because the associated regulatory asset did not meet the specific recognition criteria under the accounting guidance for certain regulated entities. As a result, the storm reserve will be recognized as a regulatory liability as the storm-recovery charges are billed to customers and charged to depreciation and amortization expense in NEE's and FPL's consolidated statements of income. Furthermore, the storm reserve will be reduced as storm costs are reimbursed. As of
December 31, 2015
, FPL had the capacity to absorb up to approximately
$119 million
in future prudently incurred storm restoration costs without seeking recovery through a rate adjustment from the FPSC or filing a petition with the FPSC.
Impairment of Long-Lived Assets
-
NEE evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is required to be recognized if the carrying value of the asset exceeds the undiscounted future net cash flows associated with that asset. The impairment loss to be recognized is the
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
amount by which the carrying value of the long-lived asset exceeds the asset's fair value. In most instances, the fair value is determined by discounting estimated future cash flows using an appropriate interest rate. See Note 4 - Nonrecurring Fair Value Measurements.
Goodwill and Other Intangible Assets
- NEE's goodwill and other intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
Average
Useful Lives
|
|
December 31,
|
|
|
|
2015
|
|
2014
|
|
|
(years)
|
|
(millions)
|
|
Goodwill (by reporting unit):
|
|
|
|
|
|
|
NEER segment:
|
|
|
|
|
|
|
Gas infrastructure, primarily Texas pipelines
|
|
|
$
|
635
|
|
|
$
|
—
|
|
|
Customer supply
|
|
|
72
|
|
|
72
|
|
|
Generation assets
|
|
|
43
|
|
|
47
|
|
|
Other
|
|
|
28
|
|
|
28
|
|
|
Total goodwill
|
|
|
$
|
778
|
|
|
$
|
147
|
|
|
Other intangible assets not subject to amortization, primarily land easements
|
|
|
$
|
143
|
|
|
$
|
143
|
|
|
Other intangible assets subject to amortization:
|
|
|
|
|
|
|
Customer relationships associated with gas infrastructure
|
40
|
|
$
|
720
|
|
|
$
|
—
|
|
|
Purchased power agreements
|
22
|
|
328
|
|
|
348
|
|
|
Other, primarily transmission and development rights and customer lists
|
22
|
|
136
|
|
|
139
|
|
|
Total
|
|
|
1,184
|
|
|
487
|
|
|
Accumulated amortization
|
|
|
(120
|
)
|
|
(125
|
)
|
|
Total other intangible assets subject to amortization - net
|
|
|
$
|
1,064
|
|
|
$
|
362
|
|
NEE's goodwill relates to various acquisitions which were accounted for using the purchase method of accounting. Other intangible assets subject to amortization are amortized, primarily on a straight-line basis, over their estimated useful lives. For the years ended
December 31, 2015, 2014 and 2013
, amortization expense was approximately
$17 million
,
$15 million
and
$13 million
, respectively, and is expected to be approximately $
38 million
,
$37 million
,
$36 million
,
$35 million
and
$35 million
for 2016, 2017, 2018, 2019 and 2020, respectively.
Goodwill and other intangible assets are included in noncurrent other assets on NEE's consolidated balance sheets. Goodwill and other intangible assets not subject to amortization are assessed for impairment at least annually by applying a fair value-based analysis. Other intangible assets subject to amortization are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted future cash flows.
Debt Issuance Costs
- Effective December 31, 2015, NEE and FPL retrospectively adopted an accounting standard update which changed the presentation of debt issuance costs in the consolidated financial statements. This standard update requires that debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs was not affected by this standard update. Upon adoption, NEE reclassified debt issuance costs of
$324 million
(
$85 million
for FPL) as of December 31, 2014 from noncurrent other assets to long-term debt.
Pension Plan
- NEE allocates net periodic pension income to its subsidiaries based on the pensionable earnings of the subsidiaries' employees. Accounting guidance requires recognition of the funded status of the pension plan in the balance sheet, with changes in the funded status recognized in other comprehensive income within shareholders' equity in the year in which the changes occur. Since NEE is the plan sponsor, and its subsidiaries do not have separate rights to the plan assets or direct obligations to their employees, this accounting guidance is reflected at NEE and not allocated to the subsidiaries. The portion of previously unrecognized actuarial gains and losses and prior service costs or credits that are estimated to be allocable to FPL as net periodic (income) cost in future periods and that otherwise would be recorded in accumulated other comprehensive income (AOCI) are classified as regulatory assets and liabilities at NEE in accordance with regulatory treatment.
Stock-Based Compensation
- NEE accounts for stock-based payment transactions based on grant-date fair value. Compensation costs for awards with graded vesting are recognized on a straight-line basis over the requisite service period for the entire award. See Note 11 - Stock-Based Compensation.
Income Taxes
- Deferred income taxes are recognized on all significant temporary differences between the financial statement and tax bases of assets and liabilities. In connection with the tax sharing agreement between NEE and its subsidiaries, the income tax provision at each subsidiary reflects the use of the "separate return method," except that tax benefits that could not be used on a
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
separate return basis, but are used on the consolidated tax return, are recorded by the subsidiary that generated the tax benefits. Any remaining consolidated income tax benefits or expenses are recorded at the corporate level. Included in other regulatory assets and other regulatory liabilities on NEE's and FPL's consolidated balance sheets is the revenue equivalent of the difference in deferred income taxes computed under accounting rules, as compared to regulatory accounting rules. The net regulatory asset totaled $
283 million
(
$268 million
for FPL) and $
250 million
(
$236 million
for FPL) at
December 31, 2015
and
2014
, respectively, and is being amortized in accordance with the regulatory treatment over the estimated lives of the assets or liabilities for which the deferred tax amount was initially recognized.
NEER recognizes ITCs as a reduction to income tax expense when the related energy property is placed into service. Production tax credits (PTCs) are recognized as wind energy is generated and sold based on a per kWh rate prescribed in applicable federal and state statutes and are recorded as a reduction of current income taxes payable, unless limited by tax law in which instance they are recorded as deferred tax assets. NEE and FPL record a deferred income tax benefit created by the convertible ITCs on the difference between the financial statement and tax bases of renewable property. For NEER, this deferred income tax benefit is recorded in income tax expense in the year that the renewable property is placed in service. For FPL, this deferred income tax benefit is offset by a regulatory liability, which is amortized as a reduction of depreciation expense over the approximate lives of the related renewable property in accordance with the regulatory treatment. At
December 31, 2015
and
2014
, the net deferred income tax benefits associated with FPL's convertible ITCs were approximately $
48 million
and $
50 million
, respectively, and are included in other regulatory assets and regulatory liabilities on NEE's and FPL's consolidated balance sheets.
A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets when it is more likely than not that such assets will not be realized. NEE recognizes interest income (expense) related to unrecognized tax benefits (liabilities) in interest income and interest expense, respectively, net of the amount deferred at FPL. At FPL, the offset to accrued interest receivable (payable) on income taxes is classified as a regulatory liability (regulatory asset) which will be amortized to income (expense) over a five-year period upon settlement in accordance with regulatory treatment. All tax positions taken by NEE in its income tax returns that are recognized in the financial statements must satisfy a more-likely-than-not threshold. See Note 5.
In November 2015, the FASB issued an accounting standard update which simplifies the classification of deferred taxes by eliminating the requirement to separate deferred tax assets and liabilities between current and noncurrent amounts, and instead requires deferred taxes to be presented as noncurrent on the balance sheet. NEE and FPL decided to early adopt this standard update effective for the year ended December 31, 2015, and to apply it prospectively.
Sale of Differential Membership Interests
- Certain subsidiaries of NEER sold their Class B membership interest in entities that have ownership interests in wind facilities, with generating capacity totaling approximately
5,272
MW at
December 31, 2015
, to third-party investors. In exchange for the cash received, the holders of the Class B membership interests will receive a portion of the economic attributes of the facilities, including income tax attributes, for variable periods. The transactions are not treated as a sale under the accounting rules and the proceeds received are deferred and recorded as a liability in deferral related to differential membership interests - VIEs on NEE's consolidated balance sheets. The deferred amount is being recognized in benefits associated with differential membership interests - net in NEE's consolidated statements of income as the Class B members receive their portion of the economic attributes. NEE continues to operate and manage the wind facilities, and consolidates the entities that own the wind facilities.
Variable Interest Entities (VIEs)
- An entity is considered to be a VIE when its total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, or its equity investors, as a group, lack the characteristics of having a controlling financial interest. A reporting company is required to consolidate a VIE as its primary beneficiary when it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. NEE and FPL evaluate whether an entity is a VIE whenever reconsideration events as defined by the accounting guidance occur. See Note 9.
In February 2015, the FASB issued an accounting standard update that will modify current consolidation guidance. The standard makes changes to both the variable interest entity model and the voting interest entity model, including modifying the evaluation of whether limited partnerships or similar legal entities are VIEs or voting interest entities and amending the guidance for assessing how relationships of related parties affect the consolidation analysis of VIEs. The standard is effective for NEE and FPL beginning January 1, 2016. NEE and FPL continue to evaluate the effect the adoption of this standard will have on their consolidated financial statements.
Proposed Merger
- In 2014, NEE and Hawaiian Electric Industries, Inc. (HEI) entered into an Agreement and Plan of Merger (the merger agreement) pursuant to which Hawaiian Electric Company, Inc., HEI's wholly owned electric utility subsidiary, will become a wholly owned subsidiary of NEE and each outstanding share of HEI common stock will be converted into the right to receive
0.2413
shares of NEE common stock. Completion of the merger and the actual closing date remain subject to the satisfaction of certain conditions, including Hawaii Public Utilities Commission approval. The merger agreement contains certain termination rights and provides that, upon termination of the merger agreement under specified circumstances, HEI or NEE, as the case may be, would be required to pay to the other party a termination fee of
$90 million
and reimburse the other party for up to
$5 million
of its documented out-of-pocket expenses incurred in connection with the merger agreement.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assets and Liabilities Associated with Assets Held for Sale -
In November 2015, a subsidiary of NEER entered into an agreement to sell its ownership interest in its merchant natural gas generation facilities located in Texas, which have a total generating capacity of
2,884
MW at December 31, 2015. The transaction is expected to close in the first quarter of 2016, pending the receipt of necessary regulatory approvals and satisfaction of other customary closing conditions.
The carrying amounts of the major classes of assets and liabilities related to the facilities that were classified as held for sale on NEE's consolidated balance sheets primarily represent property, plant and equipment and the related long-term debt.
2. Employee Retirement Benefits
Employee Pension Plan and Other Benefits Plans
- 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 (SERP), 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 total accrued benefit cost of the SERP and postretirement plans is approximately
$321 million
(
$230 million
for FPL) and
$355 million
(
$237 million
for FPL) at December 31, 2015 and 2014, respectively.
Plan Assets, Benefit Obligations and Funded Status - The changes in assets, benefit obligations and the funded status of the pension plan are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Change in plan assets:
|
|
|
|
|
Fair value of plan assets at January 1
|
$
|
3,698
|
|
|
$
|
3,692
|
|
|
Actual return on plan assets
|
(8
|
)
|
|
203
|
|
|
Benefit payments
|
(127
|
)
|
|
(197
|
)
|
|
Fair value of plan assets at December 31
|
$
|
3,563
|
|
|
$
|
3,698
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
Obligation at January 1
|
$
|
2,454
|
|
|
$
|
2,236
|
|
|
Service cost
|
70
|
|
|
61
|
|
|
Interest cost
|
97
|
|
|
101
|
|
|
Plan amendments
|
—
|
|
|
(9
|
)
|
|
Actuarial losses (gains) - net
|
(86
|
)
|
|
262
|
|
|
Benefit payments
|
(127
|
)
|
|
(197
|
)
|
|
Obligation at December 31
(a)
|
$
|
2,408
|
|
|
$
|
2,454
|
|
|
Funded status:
|
|
|
|
|
|
|
Prepaid benefit costs at NEE at December 31
|
$
|
1,155
|
|
|
$
|
1,244
|
|
|
Prepaid benefit costs at FPL at December 31
|
$
|
1,243
|
|
|
$
|
1,189
|
|
______________________
|
|
|
|
(a)
|
NEE's accumulated pension benefit obligation, which includes no assumption about future salary levels, at
December 31, 2015
and
2014
was approximately $
2,366 million
and $
2,400 million
, respectively.
|
NEE's unrecognized amounts included in accumulated other comprehensive income (loss) yet to be recognized as components of prepaid pension cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Components of AOCI:
|
|
|
|
|
Unrecognized prior service cost (net of $1 and $1 tax benefit, respectively)
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
Unrecognized losses (net of $38 and $10 tax benefit, respectively)
|
(60
|
)
|
|
(16
|
)
|
|
Total
|
$
|
(62
|
)
|
|
$
|
(18
|
)
|
NEE's unrecognized amounts included in regulatory assets yet to be recognized as components of net prepaid pension cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Unrecognized prior service cost
|
$
|
9
|
|
|
$
|
10
|
|
|
Unrecognized losses
|
232
|
|
|
128
|
|
|
Total
|
$
|
241
|
|
|
$
|
138
|
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides the assumptions used to determine the benefit obligation for the pension plan. These rates are used in determining net periodic income in the following year.
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Discount rate
|
4.35
|
%
|
|
3.95
|
%
|
|
Salary increase
|
4.10
|
%
|
|
4.10
|
%
|
NEE's investment policy for the pension plan recognizes the benefit of protecting the plan's funded status, thereby avoiding the necessity of future employer contributions. Its broad objectives are to achieve a high rate of total return with a prudent level of risk taking while maintaining sufficient liquidity and diversification to avoid large losses and preserve capital over the long term.
The NEE pension plan fund's current target asset allocation, which is expected to be reached over time, is
45%
equity investments,
32%
fixed income investments,
13%
alternative investments and
10%
convertible securities. The pension fund's investment strategy emphasizes traditional investments, broadly diversified across the global equity and fixed income markets, using a combination of different investment styles and vehicles. The pension fund's equity and fixed income holdings consist of both directly held securities as well as commingled investment arrangements such as common and collective trusts, pooled separate accounts, registered investment companies and limited partnerships. The pension fund's convertible security assets are principally direct holdings of convertible securities and includes a convertible security oriented limited partnership. The pension fund's alternative investment holdings consist of absolute return oriented limited partnerships that use a broad range of investment strategies on a global basis as well as other alternative investments, such as private equity, income and real estate oriented investments in limited partnerships.
The fair value measurements of NEE's pension plan assets by fair value hierarchy level are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
(a)
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
|
(millions)
|
|
Equity securities
(b)
|
$
|
910
|
|
|
$
|
21
|
|
|
$
|
1
|
|
|
$
|
932
|
|
|
Equity commingled vehicles
(c)
|
—
|
|
|
792
|
|
|
—
|
|
|
792
|
|
|
U.S. Government and municipal bonds
|
110
|
|
|
13
|
|
|
—
|
|
|
123
|
|
|
Corporate debt securities
(d)
|
2
|
|
|
277
|
|
|
1
|
|
|
280
|
|
|
Asset-backed securities
|
—
|
|
|
167
|
|
|
—
|
|
|
167
|
|
|
Debt security commingled vehicles
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
Convertible securities
(e)
|
16
|
|
|
258
|
|
|
—
|
|
|
274
|
|
|
Total investments in the fair value hierarchy
|
$
|
1,038
|
|
|
$
|
1,549
|
|
|
$
|
2
|
|
|
2,589
|
|
|
Total investments measured at net asset value
(f)
|
|
|
|
|
|
|
974
|
|
|
Total fair value of plan assets
|
|
|
|
|
|
|
$
|
3,563
|
|
______________________
|
|
|
|
(a)
|
See Note 4 for discussion of fair value measurement techniques and inputs.
|
|
|
|
|
(b)
|
Includes foreign investments of $
384 million
.
|
|
|
|
|
(c)
|
Includes foreign investments of $
249 million
.
|
|
|
|
|
(d)
|
Includes foreign investments of $
68 million
.
|
|
|
|
|
(e)
|
Includes foreign investments of $
23 million
.
|
|
|
|
|
(f)
|
Includes foreign investments of $
283 million
. Reflects the adoption of an accounting standard update in 2015 whereby certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are excluded from the fair value hierarchy.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
(a)
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
|
(millions)
|
|
Equity securities
(b)
|
$
|
984
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
1,015
|
|
|
Equity commingled vehicles
(c)
|
—
|
|
|
767
|
|
|
—
|
|
|
767
|
|
|
U.S. Government and municipal bonds
|
144
|
|
|
20
|
|
|
—
|
|
|
164
|
|
|
Corporate debt securities
(d)
|
—
|
|
|
355
|
|
|
—
|
|
|
355
|
|
|
Asset-backed securities
|
—
|
|
|
223
|
|
|
—
|
|
|
223
|
|
|
Debt security commingled vehicles
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
Convertible securities
|
45
|
|
|
229
|
|
|
—
|
|
|
274
|
|
|
Total investments in the fair value hierarchy
|
$
|
1,173
|
|
|
$
|
1,646
|
|
|
$
|
—
|
|
|
2,819
|
|
|
Total investments measured at net asset value
(e)
|
|
|
|
|
|
|
879
|
|
|
Total fair value of plan assets
|
|
|
|
|
|
|
$
|
3,698
|
|
______________________
|
|
|
|
(a)
|
See Note 4 for discussion of fair value measurement techniques and inputs.
|
|
|
|
|
(b)
|
Includes foreign investments of $
321 million
.
|
|
|
|
|
(c)
|
Includes foreign investments of $
306 million
.
|
|
|
|
|
(d)
|
Includes foreign investments of $
88 million
.
|
|
|
|
|
(e)
|
Includes foreign investments of $
200 million
. Reflects the retrospective application of an accounting standard update in 2015 whereby certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are excluded from the fair value hierarchy.
|
Expected Cash Flows - The following table provides information about benefit payments expected to be paid by the pension plan for each of the following calendar years (in millions):
|
|
|
|
|
|
|
|
2016
|
$
|
144
|
|
|
2017
|
$
|
150
|
|
|
2018
|
$
|
155
|
|
|
2019
|
$
|
160
|
|
|
2020
|
$
|
163
|
|
|
2021 - 2025
|
$
|
865
|
|
Net Periodic (Income) Cost - The components of net periodic (income) cost for the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
2015
|
|
2014
|
|
2013
|
|
2015
|
|
2014
|
|
2013
|
|
|
|
|
(millions)
|
|
|
|
Service cost
|
$
|
70
|
|
|
$
|
61
|
|
|
$
|
72
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
Interest cost
|
97
|
|
|
101
|
|
|
94
|
|
|
13
|
|
|
16
|
|
|
14
|
|
|
Expected return on plan assets
|
(253
|
)
|
|
(241
|
)
|
|
(238
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
Amortization of prior service cost (benefit)
|
1
|
|
|
5
|
|
|
7
|
|
|
(3
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
Amortization of losses
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
Special termination benefits
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic (income) cost at NEE
|
$
|
(85
|
)
|
|
$
|
(74
|
)
|
|
$
|
(17
|
)
|
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
17
|
|
|
Net periodic (income) cost at FPL
|
$
|
(55
|
)
|
|
$
|
(47
|
)
|
|
$
|
(7
|
)
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
13
|
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Comprehensive Income - The components of net periodic income (cost) recognized in OCI for the pension plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
|
(millions)
|
|
Prior service benefit (net of $3 tax expense)
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
Net gains (losses) (net of $27 and $29 tax benefit and $58 tax expense, respectively)
|
(44
|
)
|
|
(45
|
)
|
|
91
|
|
|
Amortization of prior service benefit
|
—
|
|
|
1
|
|
|
2
|
|
|
Total
|
$
|
(44
|
)
|
|
$
|
(40
|
)
|
|
$
|
93
|
|
Regulatory Assets (Liabilities) - The components of net periodic (income) cost recognized during the year in regulatory assets (liabilities) for the pension plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Prior service benefit
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
Unrecognized losses
|
104
|
|
|
226
|
|
|
Amortization of prior service benefit
|
(1
|
)
|
|
(3
|
)
|
|
Total
|
$
|
103
|
|
|
$
|
211
|
|
The assumptions used to determine net periodic income for the pension plan are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Discount rate
|
3.95
|
%
|
|
4.80
|
%
|
|
4.00
|
%
|
|
Salary increase
|
4.10
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
Expected long-term rate of return
(a)(b)
|
7.35
|
%
|
|
7.75
|
%
|
|
7.75
|
%
|
______________________
|
|
|
|
(a)
|
In developing the expected long-term rate of return on assets assumption for its pension plan, NEE evaluated input, including other qualitative and quantitative factors, from its actuaries and consultants, as well as information available in the marketplace. NEE considered different models, capital market return assumptions and historical returns for a portfolio with an equity/bond asset mix similar to its pension fund. NEE also considered its pension fund's historical compounded returns.
|
|
|
|
|
(b)
|
In 2015, an expected long-term rate of return of
7.75%
is presented net of investment management fees.
|
Employee Contribution Plans
- NEE offers employee retirement savings plans which allow eligible participants to contribute a percentage of qualified compensation through payroll deductions. NEE makes matching contributions to participants' accounts. Defined contribution expense pursuant to these plans was approximately $
63 million
, $
59 million
and $
46 million
for NEE ($
40 million
, $
37 million
and $
30 million
for FPL) for the years ended
December 31, 2015
,
2014
and
2013
, respectively. See Note 11 - Employee Stock Ownership Plan.
3. 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 over-the-counter (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
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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 and purchased power cost recovery clause (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 consolidated statements of income. Settlement gains and losses are included within the line items in the 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 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 consolidated statements of cash flows.
While most of NEE's derivatives are entered into for the purpose of managing commodity price risk, optimizing the value of NEER's power generation and gas infrastructure assets, reducing the impact of volatility in interest rates on outstanding and forecasted debt issuances and borrowings and managing foreign currency exchange risk, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective in offsetting the hedged risk. Additionally, for hedges of forecasted transactions, the forecasted transactions must be probable. For interest rate and foreign currency derivative instruments, generally NEE assesses a hedging instrument's effectiveness by using nonstatistical methods including dollar value comparisons of the change in the fair value of the derivative to the change in the fair value or cash flows of the hedged item. Hedge effectiveness is tested at the inception of the hedge and on at least a quarterly basis throughout its life. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of OCI and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings or when it becomes probable that a forecasted transaction being hedged would not occur. The ineffective portion of net unrealized gains (losses) on these hedges is reported in earnings in the current period. In April 2013, NEE discontinued hedge accounting for cash flow hedges related to interest rate swaps associated with the solar projects in Spain (see Note 14 - Spain Solar Projects). At
December 31, 2015
, NEE's AOCI included amounts related to interest rate cash flow hedges with expiration dates through
October 2036
and foreign currency cash flow hedges with expiration dates through
September 2030
. Approximately
$50 million
of net losses included in AOCI at
December 31, 2015
is expected to be reclassified into earnings within the next 12 months as principal and/or interest payments are made. Such amounts assume no change in interest rates, currency exchange rates or scheduled principal payments. In January 2016, NEE discontinued hedge accounting for its cash flow and fair value hedges related to interest rate and foreign currency derivative instruments.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value of Derivative Instruments
- The tables below present NEE's and FPL's gross derivative positions at
December 31, 2015
and
December 31, 2014
, 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 4 - Recurring Fair Value Measurements for netting information), as well as the location of the net derivative position on the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,145
|
|
|
$
|
5,290
|
|
|
$
|
1,949
|
|
|
$
|
1,358
|
|
|
Interest rate contracts
|
35
|
|
|
126
|
|
|
—
|
|
|
125
|
|
|
50
|
|
|
266
|
|
|
Foreign currency swaps
|
—
|
|
|
131
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
131
|
|
|
Total fair values
|
$
|
35
|
|
|
$
|
257
|
|
|
$
|
6,145
|
|
|
$
|
5,415
|
|
|
$
|
1,999
|
|
|
$
|
1,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
371
|
|
|
$
|
7
|
|
|
$
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value by NEE balance sheet line item:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current derivative assets
(a)
|
|
|
|
|
|
|
|
|
$
|
990
|
|
|
|
|
Noncurrent derivative assets
(b)
|
|
|
|
|
|
|
|
|
1,009
|
|
|
|
|
Current derivative liabilities
(c)
|
|
|
|
|
|
|
|
|
|
|
$
|
1,289
|
|
|
Noncurrent derivative liabilities
(d)
|
|
|
|
|
|
|
|
|
|
|
466
|
|
|
Total derivatives
|
|
|
|
|
|
|
|
|
$
|
1,999
|
|
|
$
|
1,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value by FPL balance sheet line item:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current other assets
|
|
|
|
|
|
|
|
|
$
|
6
|
|
|
|
|
Noncurrent other assets
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
Current derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
$
|
370
|
|
|
Total derivatives
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
$
|
370
|
|
______________________
|
|
|
|
(a)
|
Reflects the netting of approximately
$197 million
in margin cash collateral received from counterparties.
|
|
|
|
|
(b)
|
Reflects the netting of approximately
$97 million
in margin cash collateral received from counterparties.
|
|
|
|
|
(c)
|
Reflects the netting of approximately
$20 million
in margin cash collateral paid to counterparties.
|
|
|
|
|
(d)
|
Reflects the netting of approximately
$10 million
in margin cash collateral paid to counterparties.
|
At
December 31, 2015 and 2014
, NEE had approximately
$27 million
and
$60 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 consolidated balance sheets. Additionally, at
December 31, 2015 and 2014
, NEE had approximately
$116 million
and
$122 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 consolidated balance sheets.
Income Statement Impact of Derivative Instruments
- Gains (losses) related to NEE's cash flow hedges are recorded in NEE's consolidated financial statements (none at FPL) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2015
|
|
Year Ended
December 31, 2014
|
|
Year Ended
December 31, 2013
|
|
|
|
Interest
Rate
Contracts
|
|
Foreign
Currency
Swaps
|
|
Total
|
|
Interest
Rate
Contracts
|
|
Foreign
Currency
Swaps
|
|
Total
|
|
Interest
Rate
Contracts
|
|
Foreign
Currency
Swaps
|
|
Total
|
|
|
(millions)
|
|
Gains (losses) recognized in OCI
|
|
$
|
(113
|
)
|
|
$
|
(12
|
)
|
|
$
|
(125
|
)
|
|
$
|
(132
|
)
|
|
$
|
(89
|
)
|
|
$
|
(221
|
)
|
|
$
|
150
|
|
|
$
|
(21
|
)
|
|
$
|
129
|
|
|
Losses reclassified from AOCI to net income
|
|
$
|
(73
|
)
|
(a)
|
$
|
(15
|
)
|
(b)
|
$
|
(88
|
)
|
|
$
|
(77
|
)
|
(a)
|
$
|
(78
|
)
|
(b)
|
$
|
(155
|
)
|
|
$
|
(61
|
)
|
(a)
|
$
|
(44
|
)
|
(b)
|
$
|
(105
|
)
|
______________________
|
|
|
|
(a)
|
Included in interest expense.
|
|
|
|
|
(b)
|
For 2015, 2014 and 2013, losses of approximately
$11 million
,
$8 million
and
$4 million
, respectively, are included in interest expense and the balances are included in other - net.
|
For the years ended
December 31, 2015
,
2014
and
2013
, NEE recorded gains (losses) of approximately
$(4) million
,
$20 million
and
$(65) million
, respectively, on fair value hedges which resulted in corresponding increases (decreases) in the related debt.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Gains (losses) related to NEE's derivatives not designated as hedging instruments are recorded in NEE's consolidated statements of income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
|
(millions)
|
|
Commodity contracts:
(a)
|
|
|
|
|
|
|
Operating revenues
|
$
|
932
|
|
|
$
|
420
|
|
|
$
|
76
|
|
|
Fuel, purchased power and interchange
|
8
|
|
|
1
|
|
|
—
|
|
|
Foreign currency swap - other - net
|
—
|
|
|
(1
|
)
|
|
(72
|
)
|
|
Interest rate contracts - interest expense
|
8
|
|
|
(64
|
)
|
|
3
|
|
|
Total
|
$
|
948
|
|
|
$
|
356
|
|
|
$
|
7
|
|
______________________
|
|
|
|
(a)
|
For the years ended
December 31, 2015
,
2014
and
2013
, FPL recorded gains (losses) of approximately
$(326) million
,
$(289) million
and
$81 million
, respectively, related to commodity contracts as regulatory liabilities (assets) on its 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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
December 31, 2014
|
|
Commodity Type
|
|
NEE
|
|
FPL
|
|
NEE
|
|
FPL
|
|
|
|
(millions)
|
|
Power
|
|
(112
|
)
|
|
MWh
(a)
|
|
—
|
|
|
|
|
(73
|
)
|
|
MWh
(a)
|
|
—
|
|
|
|
|
Natural gas
|
|
1,321
|
|
|
MMBtu
(b)
|
|
833
|
|
|
MMBtu
(b)
|
|
1,436
|
|
|
MMBtu
(b)
|
|
845
|
|
|
MMBtu
(b)
|
|
Oil
|
|
(9
|
)
|
|
barrels
|
|
—
|
|
|
|
|
(11
|
)
|
|
barrels
|
|
—
|
|
|
|
______________________
|
|
|
|
(b)
|
One million British thermal units
|
At
December 31, 2015
and
2014
, NEE had interest rate contracts with notional amounts totaling approximately
$8.3 billion
and
$7.4 billion
, respectively, and foreign currency swaps with notional amounts totaling
$715 million
and
$661 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
December 31, 2015
and
2014
, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately
$2.2 billion
(
$224 million
for FPL) and
$2.7 billion
(
$369 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
$250 million
(
$20 million
at FPL) as of
December 31, 2015
and
$700 million
(
$130 million
at FPL) as of
December 31, 2014
. 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
(
$0.6 billion
at FPL) and
$2.8 billion
(
$0.7 billion
at FPL) as of
December 31, 2015
and
2014
, respectively. Some 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
$660 million
(
$120 million
at FPL) and
$850 million
(
$200 million
at FPL) as of
December 31, 2015
and
2014
, respectively.
Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At
December 31, 2015
, applicable NEE subsidiaries have posted approximately
$123 million
(
$3 million
at FPL) in the form of letters of credit which
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
could be applied toward the collateral requirements described above. At
December 31, 2014
, applicable NEE subsidiaries have posted approximately
$20 million
(
none
at FPL) in cash and
$236 million
(
none
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.
4. 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 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
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
(a)
|
|
Total
|
|
|
|
(millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents and restricted cash:
(b)
|
|
|
|
|
|
|
|
|
|
|
|
NEE - equity securities
|
$
|
312
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
312
|
|
|
|
FPL - equity securities
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
36
|
|
|
|
Special use funds:
(c)
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
1,320
|
|
|
$
|
1,354
|
|
(d)
|
$
|
—
|
|
|
|
|
$
|
2,674
|
|
|
|
U.S. Government and municipal bonds
|
$
|
446
|
|
|
$
|
166
|
|
|
$
|
—
|
|
|
|
|
$
|
612
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
713
|
|
|
$
|
—
|
|
|
|
|
$
|
713
|
|
|
|
Mortgage-backed securities
|
$
|
—
|
|
|
$
|
412
|
|
|
$
|
—
|
|
|
|
|
$
|
412
|
|
|
|
Other debt securities
|
$
|
—
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
|
|
$
|
52
|
|
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
364
|
|
|
$
|
1,234
|
|
(d)
|
$
|
—
|
|
|
|
|
$
|
1,598
|
|
|
|
U.S. Government and municipal bonds
|
$
|
335
|
|
|
$
|
145
|
|
|
$
|
—
|
|
|
|
|
$
|
480
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
531
|
|
|
$
|
—
|
|
|
|
|
$
|
531
|
|
|
|
Mortgage-backed securities
|
$
|
—
|
|
|
$
|
327
|
|
|
$
|
—
|
|
|
|
|
$
|
327
|
|
|
|
Other debt securities
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
—
|
|
|
|
|
$
|
40
|
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
30
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
|
|
$
|
40
|
|
|
|
Debt securities
|
$
|
39
|
|
|
$
|
132
|
|
|
$
|
—
|
|
|
|
|
$
|
171
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
2,187
|
|
|
$
|
2,540
|
|
|
$
|
1,179
|
|
|
$
|
(3,969
|
)
|
|
$
|
1,937
|
|
(e)
|
|
Interest rate contracts
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
34
|
|
(e)
|
|
FPL - commodity contracts
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
(3
|
)
|
|
$
|
4
|
|
(e)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
2,153
|
|
|
$
|
1,887
|
|
|
$
|
540
|
|
|
$
|
(3,598
|
)
|
|
$
|
982
|
|
(e)
|
|
Interest rate contracts
|
$
|
—
|
|
|
$
|
214
|
|
|
$
|
101
|
|
|
$
|
4
|
|
|
$
|
319
|
|
(e)
|
|
Foreign currency swaps
|
$
|
—
|
|
|
$
|
132
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
127
|
|
(e)
|
|
FPL - commodity contracts
|
$
|
—
|
|
|
$
|
219
|
|
|
$
|
6
|
|
|
$
|
(3
|
)
|
|
$
|
222
|
|
(e)
|
______________________
|
|
|
|
(a)
|
Includes the effect of the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral payments and receipts. NEE and FPL also have contract settlement receivable and payable balances that are subject to the master netting arrangements but are not offset within the consolidated balance sheets and are recorded in customer receivables - net and accounts payable, respectively.
|
|
|
|
|
(b)
|
Includes restricted cash of approximately
$61 million
(
$36 million
for FPL) in other current assets on the consolidated balance sheets.
|
|
|
|
|
(c)
|
Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at the Carrying Amount below.
|
|
|
|
|
(d)
|
Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.
|
|
|
|
|
(e)
|
See Note 3 - Fair Value of Derivative Instruments for a reconciliation of net derivatives to NEE's and FPL's consolidated balance sheets.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
(a)
|
|
Total
|
|
|
|
(millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
NEE - equity securities
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
32
|
|
|
|
Special use funds:
(b)
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
1,217
|
|
|
$
|
1,417
|
|
(c)
|
$
|
—
|
|
|
|
|
$
|
2,634
|
|
|
|
U.S. Government and municipal bonds
|
$
|
520
|
|
|
$
|
191
|
|
|
$
|
—
|
|
|
|
|
$
|
711
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
704
|
|
|
$
|
—
|
|
|
|
|
$
|
704
|
|
|
|
Mortgage-backed securities
|
$
|
—
|
|
|
$
|
493
|
|
|
$
|
—
|
|
|
|
|
$
|
493
|
|
|
|
Other debt securities
|
$
|
25
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
|
|
$
|
57
|
|
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
324
|
|
|
$
|
1,237
|
|
(c)
|
$
|
—
|
|
|
|
|
$
|
1,561
|
|
|
|
U.S. Government and municipal bonds
|
$
|
435
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
|
|
$
|
600
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
501
|
|
|
$
|
—
|
|
|
|
|
$
|
501
|
|
|
|
Mortgage-backed securities
|
$
|
—
|
|
|
$
|
422
|
|
|
$
|
—
|
|
|
|
|
$
|
422
|
|
|
|
Other debt securities
|
$
|
25
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
|
|
$
|
45
|
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
35
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
$
|
36
|
|
|
|
Debt securities
|
$
|
5
|
|
|
$
|
170
|
|
|
$
|
—
|
|
|
|
|
$
|
175
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
1,801
|
|
|
$
|
3,177
|
|
|
$
|
1,167
|
|
|
$
|
(4,196
|
)
|
|
$
|
1,949
|
|
(d)
|
|
Interest rate contracts
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
50
|
|
(d)
|
|
FPL - commodity contracts
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
7
|
|
(d)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
NEE:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
1,720
|
|
|
$
|
3,150
|
|
|
$
|
420
|
|
|
$
|
(3,932
|
)
|
|
$
|
1,358
|
|
(d)
|
|
Interest rate contracts
|
$
|
—
|
|
|
$
|
126
|
|
|
$
|
125
|
|
|
$
|
15
|
|
|
$
|
266
|
|
(d)
|
|
Foreign currency swaps
|
$
|
—
|
|
|
$
|
131
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
131
|
|
(d)
|
|
FPL - commodity contracts
|
$
|
—
|
|
|
$
|
370
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
370
|
|
(d)
|
______________________
|
|
|
|
(a)
|
Includes the effect of the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral payments and receipts. NEE and FPL also have contract settlement receivable and payable balances that are subject to the master netting arrangements but are not offset within the consolidated balance sheets and are recorded in customer receivables - net and accounts payable, respectively.
|
|
|
|
|
(b)
|
Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at the Carrying Amount below.
|
|
|
|
|
(c)
|
Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.
|
|
|
|
|
(d)
|
See Note 3 - Fair Value of Derivative Instruments for a reconciliation of net derivatives to NEE's and FPL's consolidated balance sheets.
|
Significant Unobservable Inputs Used in Recurring Fair Value Measurements
- The valuation of certain commodity contracts requires the use of significant unobservable inputs. All forward price, implied volatility, implied correlation and interest rate inputs used in the valuation of such contracts are directly based on third-party market data, such as broker quotes and exchange settlements, when that data is available. If third-party market data is not available, then industry standard methodologies are used to develop inputs that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Observable inputs, including some forward prices, implied volatilities and interest rates used for determining fair value are updated daily to reflect the best available market information. Unobservable inputs which are related to observable inputs, such as illiquid portions of forward price or volatility curves, are updated daily as well, using industry standard techniques such as interpolation and extrapolation, combining observable forward inputs supplemented by historical market and other relevant data. Other unobservable inputs, such as implied correlations, customer migration rates from full requirements contracts and some implied volatility curves, are modeled using proprietary models based on historical data and industry standard techniques.
All price, volatility, correlation and customer migration inputs used in valuation are subject to validation by the Trading Risk
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Management group. The Trading Risk Management group performs a risk management function responsible for assessing credit, market and operational risk impact, reviewing valuation methodology and modeling, confirming transactions, monitoring approval processes and developing and monitoring trading limits. The Trading Risk Management group is separate from the transacting group. For markets where independent third-party data is readily available, validation is conducted daily by directly reviewing this market data against inputs utilized by the transacting group, and indirectly by critically reviewing daily risk reports. For markets where independent third-party data is not readily available, additional analytical reviews are performed on at least a quarterly basis. These analytical reviews are designed to ensure that all price and volatility curves used for fair valuing transactions are adequately validated each quarter, and are reviewed and approved by the Trading Risk Management group. In addition, other valuation assumptions such as implied correlations and customer migration rates are reviewed and approved by the Trading Risk Management group on a periodic basis. Newly created models used in the valuation process are also subject to testing and approval by the Trading Risk Management group prior to use and established models are reviewed annually, or more often as needed, by the Trading Risk Management group.
On a monthly basis, the Exposure Management Committee (EMC), which is comprised of certain members of senior management, meets with representatives from the Trading Risk Management group and the transacting group to discuss NEE's and FPL's energy risk profile and operations, to review risk reports and to discuss fair value issues as necessary. The EMC develops guidelines required for an appropriate risk management control infrastructure, which includes implementation and monitoring of compliance with Trading Risk Management policy. The EMC executes its risk management responsibilities through direct oversight and delegation of its responsibilities to the Trading Risk Management group, as well as to other corporate and business unit personnel.
The significant unobservable inputs used in the valuation of NEE's commodity contracts categorized as Level 3 of the fair value hierarchy at
December 31, 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Type
|
|
Fair Value at
December 31, 2015
|
|
Valuation
Technique(s)
|
|
Significant
Unobservable Inputs
|
|
Range
|
|
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
Forward contracts - power
|
|
$
|
636
|
|
|
$
|
252
|
|
|
Discounted cash flow
|
|
Forward price (per MWh)
|
|
$6
|
—
|
$113
|
|
Forward contracts - gas
|
|
24
|
|
|
25
|
|
|
Discounted cash flow
|
|
Forward price (per MMBtu)
|
|
$1
|
—
|
$6
|
|
Forward contracts - other commodity related
|
|
16
|
|
|
6
|
|
|
Discounted cash flow
|
|
Forward price (various)
|
|
$(18)
|
—
|
$55
|
|
Options - power
|
|
68
|
|
|
58
|
|
|
Option models
|
|
Implied correlations
|
|
(5)%
|
—
|
99%
|
|
|
|
|
|
|
|
|
|
Implied volatilities
|
|
1%
|
—
|
308%
|
|
Options - primarily gas
|
|
105
|
|
|
164
|
|
|
Option models
|
|
Implied correlations
|
|
(5)%
|
—
|
99%
|
|
|
|
|
|
|
|
|
|
Implied volatilities
|
|
1%
|
—
|
195%
|
|
Full requirements and unit contingent contracts
|
|
330
|
|
|
35
|
|
|
Discounted cash flow
|
|
Forward price (per MWh)
|
|
$(20)
|
—
|
$239
|
|
|
|
|
|
|
|
|
|
Customer migration rate
(a)
|
|
—%
|
—
|
20%
|
|
Total
|
|
$
|
1,179
|
|
|
$
|
540
|
|
|
|
|
|
|
|
|
|
______________________
|
|
|
|
(a)
|
Applies only to full requirements contracts.
|
The sensitivity of NEE's fair value measurements to increases (decreases) in the significant unobservable inputs is as follows:
|
|
|
|
|
|
|
|
|
Significant Unobservable Input
|
|
Position
|
|
Impact on
Fair Value Measurement
|
|
Forward price
|
|
Purchase power/gas
|
|
Increase (decrease)
|
|
|
|
Sell power/gas
|
|
Decrease (increase)
|
|
Implied correlations
|
|
Purchase option
|
|
Decrease (increase)
|
|
|
|
Sell option
|
|
Increase (decrease)
|
|
Implied volatilities
|
|
Purchase option
|
|
Increase (decrease)
|
|
|
|
Sell option
|
|
Decrease (increase)
|
|
Customer migration rate
|
|
Sell power
(a)
|
|
Decrease (increase)
|
————————————
|
|
|
|
(a)
|
Assumes the contract is in a gain position.
|
In addition, the fair value measurement of interest rate swap liabilities related to the solar projects in Spain of approximately
$101 million
at
December 31, 2015
includes a significant credit valuation adjustment. The credit valuation adjustment, considered an unobservable input, reflects management's assessment of non-performance risk of the subsidiaries related to the solar projects in Spain that are party to the swap agreements.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The reconciliation of changes in the fair value of derivatives that are based on significant unobservable inputs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
|
NEE
|
|
FPL
|
|
NEE
|
|
FPL
|
|
NEE
|
|
FPL
|
|
|
(millions)
|
|
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior year
|
$
|
622
|
|
|
$
|
5
|
|
|
$
|
622
|
|
|
$
|
—
|
|
|
$
|
566
|
|
|
$
|
2
|
|
|
Realized and unrealized gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings
(a)
|
451
|
|
|
—
|
|
|
(77
|
)
|
|
—
|
|
|
299
|
|
|
—
|
|
|
Included in other comprehensive income
|
11
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Included in regulatory assets and liabilities
|
3
|
|
|
3
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
Purchases
|
180
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
101
|
|
|
—
|
|
|
Settlements
|
(473
|
)
|
|
(8
|
)
|
|
194
|
|
|
(2
|
)
|
|
(55
|
)
|
|
(2
|
)
|
|
Issuances
|
(202
|
)
|
|
—
|
|
|
(122
|
)
|
|
—
|
|
|
(173
|
)
|
|
—
|
|
|
Transfers in
(b)
|
(13
|
)
|
|
—
|
|
|
80
|
|
|
—
|
|
|
(120
|
)
|
|
—
|
|
|
Transfers out
(b)
|
(41
|
)
|
|
—
|
|
|
(155
|
)
|
|
—
|
|
|
4
|
|
|
—
|
|
|
Fair value of net derivatives based on significant unobservable inputs at December 31
|
$
|
538
|
|
|
$
|
—
|
|
|
$
|
622
|
|
|
$
|
5
|
|
|
$
|
622
|
|
|
$
|
—
|
|
|
The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to derivatives still held at the reporting date
(c)
|
$
|
277
|
|
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
329
|
|
|
$
|
—
|
|
______________________
|
|
|
|
(a)
|
For the year ended
December 31, 2015
,
$462 million
of realized and unrealized gains are reflected in the consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense. For the year December 31, 2014,
$79 million
of realized and unrealized losses are reflected in the consolidated statements of income in interest expense and the balance is primarily reflected in operating revenues. For the year ended December 31, 2013,
$302 million
of realized and unrealized gains are reflected in the consolidated statements of income in operating revenues and the balance is primarily reflected in interest expense.
|
|
|
|
|
(b)
|
Transfers into Level 3 were a result of decreased observability of market data and, in 2013, a significant credit valuation adjustment. Transfers from Level 3 to Level 2 were a result of increased observability of market data. NEE's and FPL's policy is to recognize all transfers at the beginning of the reporting period.
|
|
|
|
|
(c)
|
For the years ended
December 31, 2015
, 2014, and 2013,
$289 million
,
$328 million
, and
$330 million
of unrealized gains are reflected in the consolidated statements of income in operating revenues and the balance is reflected in interest expense.
|
Contingent Consideration
- NEE recorded a liability related to a contingent holdback as part of the acquisition of seven long-term contracted natural gas pipeline assets located in Texas. See Note 8.
Nonrecurring Fair Value Measurements -
NEE tests long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In February 2013, the Spanish government enacted a new law that made further changes to the economic framework of renewable energy projects including, among other things, changes that negatively affect the projected economics of the
99.8
MW of solar thermal facilities that affiliates of NEER were constructing in Spain (Spain solar projects) (see Note 14 - Spain Solar Projects). Due to the February 2013 change in law, NEER performed a recoverability analysis, considering, among other things, working with lenders to restructure the financing agreements, abandoning the projects or selling the projects, and concluded that the undiscounted cash flows of the Spain solar projects were less than the carrying value of the projects. Accordingly, NEER performed a fair value analysis based on the income approach to determine the amount of the impairment. Based on the fair value analysis, property, plant and equipment with a carrying amount of approximately
$800 million
were written down to their estimated fair value of
$500 million
as of March 31, 2013, resulting in an impairment of
$300 million
(which is recorded as a separate line item in NEE's consolidated statements of income for the year ended December 31, 2013) and other related charges (
$342 million
after-tax, see Note 5).
The estimate of the fair value was based on the discounted cash flows which were determined using a market participant view of the Spain solar projects upon completion and final commissioning of the projects. As part of the valuation, NEER used observable inputs where available, including the revised renewable energy pricing under the February 2013 change in law. Significant unobservable inputs (Level 3), including forecasts of generation, estimates of tariff escalation rates and estimated costs of debt and equity capital, were also used in the estimation of fair value. In addition, NEER made certain assumptions regarding the projected capital and maintenance expenditures based on the estimated costs to complete the Spain solar projects and ongoing capital and maintenance expenditures. An increase in the revenue and generation forecasts, a decrease in the projected capital and maintenance expenditures or a decrease in the weighted-average cost of capital each would result in an increased fair market value. Changes in the opposite direction of those unobservable inputs would result in a decreased fair market value. See Note 14 - Spain Solar Projects for a discussion of additional developments that could potentially impact the Spain solar projects.
In 2013, NEER initiated a plan and received internal authorization to pursue the sale of its ownership interests in oil-fired generation plants located in Maine (Maine fossil) with a total generating capacity of
796
MW. In connection with the decision to sell Maine fossil, a loss of approximately $
67 million
($
43 million
after-tax) was originally reflected in net gain from discontinued operations, net of income taxes in NEE's consolidated statements of income for the year ended December 31, 2013. The fair value measurement (Level 3) was based on the estimated sales price less the estimated costs to sell. The estimated sales price was estimated using
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
an income approach based primarily on capacity revenue forecasts. In 2014, NEER decided not to pursue the sale of Maine fossil due to the divergence between the achievable sales price and management's view of the assets' value, which increased as a result of significant market changes. Accordingly, the Maine fossil assets were written-up to management's current estimate of fair value resulting in a gain of approximately $
21 million
($
12 million
after-tax). The fair value measurement (Level 3) was estimated using an income approach based primarily on the updated capacity revenue forecasts. Based on NEER's decision to retain Maine fossil, the $
67 million
loss recorded during the year ended December 31, 2013 was reclassified from discontinued operations to income from continuing operations and together with the $
21 million
gain recorded during the year ended December 31, 2014 are included as a separate line item in NEE's consolidated statements of income.
Fair Value of Financial Instruments Recorded at the Carrying Amount
- The carrying amounts of cash equivalents, commercial paper and notes payable approximate their fair values. The carrying amounts and estimated fair values of other financial instruments, excluding those recorded at fair value and disclosed above in Recurring Fair Value Measurements, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
December 31, 2014
|
|
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
|
|
(millions)
|
|
|
NEE:
|
|
|
|
Special use funds
(a)
|
$
|
675
|
|
|
$
|
675
|
|
|
$
|
567
|
|
|
$
|
567
|
|
|
|
Other investments - primarily notes receivable
|
$
|
512
|
|
|
$
|
722
|
|
(b)
|
$
|
525
|
|
|
$
|
679
|
|
(b)
|
|
Long-term debt, including current maturities
|
$
|
28,897
|
|
(c)
|
$
|
30,412
|
|
(d)
|
$
|
27,552
|
|
|
$
|
30,013
|
|
(d)
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
Special use funds
(a)
|
$
|
528
|
|
|
$
|
528
|
|
|
$
|
395
|
|
|
$
|
395
|
|
|
|
Long-term debt, including current maturities
|
$
|
10,020
|
|
|
$
|
11,028
|
|
(d)
|
$
|
9,388
|
|
|
$
|
11,020
|
|
(d)
|
______________________
|
|
|
|
(a)
|
Primarily represents investments accounted for under the equity method and loans not measured at fair value on a recurring basis.
|
|
|
|
|
(b)
|
Primarily classified as held to maturity. Fair values are primarily estimated using a discounted cash flow valuation technique based on certain observable yield curves and indices considering the credit profile of the borrower (Level 3). Notes receivable bear interest primarily at fixed rates and mature by
2029
. Notes receivable are considered impaired and placed in non-accrual status when it becomes probable that all amounts due cannot be collected in accordance with the contractual terms of the agreement. The assessment to place notes receivable in non-accrual status considers various credit indicators, such as credit ratings and market-related information. As of
December 31, 2015
and
2014
, NEE had no notes receivable reported in non-accrual status.
|
|
|
|
|
(c)
|
Excludes debt totaling
$938 million
reflected in liabilities associated with assets held for sale on NEE's consolidated balance sheet for which the carrying amount approximates fair value. See Note 1 - Assets and Liabilities Associated with Assets Held for Sale.
|
|
|
|
|
(d)
|
As of
December 31, 2015 and 2014
, for NEE, approximately
$18,031 million
and
$19,973 million
, respectively, is estimated using quoted market prices for the same or similar issues (Level 2); the balance is estimated using a discounted cash flow valuation technique, considering the current credit spread of the debtor (Level 3). For FPL, primarily estimated using quoted market prices for the same or similar issues (Level 2).
|
Special Use Funds
- The special use funds noted above and those carried at fair value (see Recurring Fair Value Measurements above) consist of FPL's storm fund assets of approximately
$74 million
and $
75 million
at December 31, 2015 and 2014, respectively and NEE's and FPL's nuclear decommissioning fund assets of
$5,064 million
and $
5,091 million
at
December 31, 2015
and 2014 (
$3,430 million
and
$3,449 million
, respectively, for FPL). The investments held in the special use funds consist of equity and debt securities which are primarily classified as available for sale and carried at estimated fair value. The amortized cost of debt and equity securities is approximately $
1,823 million
and $
1,505 million
, respectively, at
December 31, 2015
and $
1,906 million
and $
1,366 million
, respectively, at
December 31, 2014
($
1,409 million
and $
732 million
, respectively, at
December 31, 2015
and $
1,519 million
and $
664 million
, respectively, at
December 31, 2014
for FPL). For FPL's special use funds, consistent with regulatory treatment, changes in fair value, including any other than temporary impairment losses, result in a corresponding adjustment to the related regulatory liability accounts. For NEE's non-rate regulated operations, changes in fair value result in a corresponding adjustment to OCI, except for unrealized losses associated with marketable securities considered to be other than temporary, including any credit losses, which are recognized as other than temporary impairment losses on securities held in nuclear decommissioning funds in NEE's consolidated statements of income. Debt securities included in the nuclear decommissioning funds have a weighted-average maturity at
December 31, 2015
of approximately
eight
years at both NEE and FPL. FPL's storm fund primarily consists of debt securities with a weighted-average maturity at
December 31, 2015
of approximately
three
years. The cost of securities sold is determined using the specific identification method.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Realized gains and losses and proceeds from the sale or maturity of available for sale securities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
Years Ended December 31,
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
2015
|
|
2014
|
|
2013
|
|
|
(millions)
|
|
Realized gains
|
$
|
194
|
|
|
$
|
211
|
|
|
$
|
246
|
|
|
$
|
70
|
|
|
$
|
120
|
|
|
$
|
182
|
|
|
Realized losses
|
$
|
87
|
|
|
$
|
115
|
|
|
$
|
88
|
|
|
$
|
43
|
|
|
$
|
94
|
|
|
$
|
59
|
|
|
Proceeds from sale or maturity of securities
|
$
|
4,643
|
|
|
$
|
4,092
|
|
|
$
|
4,190
|
|
|
$
|
3,724
|
|
|
$
|
3,349
|
|
|
$
|
3,342
|
|
The unrealized gains on available for sale securities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
(millions)
|
|
|
|
Equity securities
|
$
|
1,166
|
|
|
$
|
1,267
|
|
|
$
|
863
|
|
|
$
|
896
|
|
|
Debt securities
|
$
|
17
|
|
|
$
|
66
|
|
|
$
|
14
|
|
|
$
|
54
|
|
The unrealized losses on available for sale debt securities and the fair value of available for sale debt securities in an unrealized loss position are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
(millions)
|
|
|
|
Unrealized losses
(a)
|
$
|
51
|
|
|
$
|
7
|
|
|
$
|
45
|
|
|
$
|
5
|
|
|
Fair value
|
$
|
1,129
|
|
|
$
|
542
|
|
|
$
|
861
|
|
|
$
|
434
|
|
______________________
|
|
|
|
(a)
|
Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at
December 31, 2015 and 2014
were not material to NEE or FPL.
|
Regulations issued by the FERC and the NRC provide general risk management guidelines to protect nuclear decommissioning funds and to allow such funds to earn a reasonable return. The FERC regulations prohibit, among other investments, investments in any securities of NEE or its subsidiaries, affiliates or associates, excluding investments tied to market indices or mutual funds. Similar restrictions applicable to the decommissioning funds for NEER's nuclear plants are included in the NRC operating licenses for those facilities or in NRC regulations applicable to NRC licensees not in cost-of-service environments. With respect to the decommissioning fund for Seabrook, decommissioning fund contributions and withdrawals are also regulated by the NDFC pursuant to New Hampshire law.
The nuclear decommissioning reserve funds are managed by investment managers who must comply with the guidelines of NEE and FPL and the rules of the applicable regulatory authorities. The funds' assets are invested giving consideration to taxes, liquidity, risk, diversification and other prudent investment objectives.
Financial Instruments Accounting Standard Update
- In January 2016, the FASB issued an accounting standard update which modifies current guidance for financial instruments. The standard requires that equity investments (except investments accounted for under the equity method and investments that are consolidated) be measured at fair value with changes in fair value recognized in net income and provides an option for those equity investments that do not have readily determinable fair values to be measured at cost minus impairment (plus or minus changes resulting from observable price changes). The standard also makes certain changes to presentation and disclosure requirements of financial instruments. The standard is effective for NEE and FPL beginning January 1, 2018 and will be applied retrospectively with the cumulative effect recognized as of the date of initial application. NEE and FPL are currently evaluating the effect the adoption of this standard will have, if any, on their consolidated financial statements.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Income Taxes
The components of income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
Years Ended December 31,
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
2015
|
|
2014
|
|
2013
|
|
|
(millions)
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
(145
|
)
|
|
$
|
423
|
|
|
$
|
240
|
|
|
$
|
174
|
|
|
Deferred
|
1,194
|
|
|
1,077
|
|
|
853
|
|
|
399
|
|
|
542
|
|
|
540
|
|
|
Total federal
|
1,204
|
|
|
1,077
|
|
|
708
|
|
|
822
|
|
|
782
|
|
|
714
|
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
31
|
|
|
(29
|
)
|
|
69
|
|
|
58
|
|
|
68
|
|
|
44
|
|
|
Deferred
|
(7
|
)
|
|
128
|
|
|
—
|
|
|
77
|
|
|
60
|
|
|
77
|
|
|
Total state
|
24
|
|
|
99
|
|
|
69
|
|
|
135
|
|
|
128
|
|
|
121
|
|
|
Total income taxes
|
$
|
1,228
|
|
|
$
|
1,176
|
|
|
$
|
777
|
|
|
$
|
957
|
|
|
$
|
910
|
|
|
$
|
835
|
|
A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
Years Ended December 31,
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
2015
|
|
2014
|
|
2013
|
|
Statutory federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
Increases (reductions) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes - net of federal income tax benefit
|
0.4
|
|
|
1.8
|
|
|
1.8
|
|
|
3.4
|
|
|
3.4
|
|
|
3.6
|
|
|
PTCs and ITCs - NEER
|
(4.1
|
)
|
|
(5.1
|
)
|
|
(8.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Convertible ITCs - NEER
|
(0.8
|
)
|
|
(1.4
|
)
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Valuation allowance associated with Spain solar projects
(a)
|
—
|
|
|
0.7
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Charges associated with Canadian assets
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other - net
|
0.3
|
|
|
—
|
|
|
0.7
|
|
|
(1.7
|
)
|
|
(0.9
|
)
|
|
(0.4
|
)
|
|
Effective income tax rate
|
30.8
|
%
|
|
32.3
|
%
|
|
31.7
|
%
|
|
36.7
|
%
|
|
37.5
|
%
|
|
38.2
|
%
|
______________________
|
|
|
|
(a)
|
Reflects a full valuation allowance on deferred tax assets associated with the Spain solar projects. See Note 4 - Nonrecurring Fair Value Measurements.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property-related
|
$
|
12,204
|
|
|
$
|
11,700
|
|
|
$
|
8,040
|
|
|
$
|
7,457
|
|
|
Pension
|
455
|
|
|
489
|
|
|
480
|
|
|
459
|
|
|
Nuclear decommissioning trusts
|
219
|
|
|
258
|
|
|
—
|
|
|
—
|
|
|
Net unrealized gains on derivatives
|
528
|
|
|
390
|
|
|
—
|
|
|
—
|
|
|
Investments in partnerships and joint ventures
|
403
|
|
|
291
|
|
|
—
|
|
|
—
|
|
|
Other
|
1,196
|
|
|
769
|
|
|
695
|
|
|
435
|
|
|
Total deferred tax liabilities
|
15,005
|
|
|
13,897
|
|
|
9,215
|
|
|
8,351
|
|
|
Deferred tax assets and valuation allowance:
|
|
|
|
|
|
|
|
|
Decommissioning reserves
|
438
|
|
|
427
|
|
|
386
|
|
|
374
|
|
|
Postretirement benefits
|
141
|
|
|
154
|
|
|
95
|
|
|
99
|
|
|
Net operating loss carryforwards
|
604
|
|
|
1,070
|
|
|
4
|
|
|
—
|
|
|
Tax credit carryforwards
|
2,916
|
|
|
2,742
|
|
|
—
|
|
|
—
|
|
|
ARO and accrued asset removal costs
|
759
|
|
|
737
|
|
|
697
|
|
|
686
|
|
|
Other
|
836
|
|
|
820
|
|
|
303
|
|
|
318
|
|
|
Valuation allowance
(a)
|
(223
|
)
|
|
(323
|
)
|
|
—
|
|
|
—
|
|
|
Net deferred tax assets
|
5,471
|
|
|
5,627
|
|
|
1,485
|
|
|
1,477
|
|
|
Net deferred income taxes
|
$
|
9,534
|
|
|
$
|
8,270
|
|
|
$
|
7,730
|
|
|
$
|
6,874
|
|
______________________
|
|
|
|
(a)
|
Amount relates to a valuation allowance related to the Spain solar projects, deferred state tax credits and state operating loss carryforwards.
|
Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEE
|
|
FPL
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
(millions)
|
|
|
|
Deferred income taxes - current assets
|
$
|
—
|
|
(a)
|
$
|
739
|
|
|
$
|
—
|
|
(a)
|
$
|
—
|
|
|
Noncurrent other assets
|
293
|
|
|
264
|
|
|
—
|
|
|
—
|
|
|
Other current liabilities
|
—
|
|
(a)
|
(12
|
)
|
|
—
|
|
(a)
|
(39
|
)
|
|
Deferred income taxes - noncurrent liabilities
|
(9,827
|
)
|
|
(9,261
|
)
|
|
(7,730
|
)
|
|
(6,835
|
)
|
|
Net deferred income taxes
|
$
|
(9,534
|
)
|
|
$
|
(8,270
|
)
|
|
$
|
(7,730
|
)
|
|
$
|
(6,874
|
)
|
______________________
|
|
|
|
(a)
|
Effective December 31, 2015, all deferred taxes are classified as noncurrent. See Note 1 - Income Taxes.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of NEE's deferred tax assets relating to net operating loss carryforwards and tax credit carryforwards at
December 31, 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Expiration
Dates
|
|
|
(millions)
|
|
|
|
Net operating loss carryforwards:
|
|
|
|
|
Federal
|
$
|
361
|
|
|
2026-2035
|
|
State
|
153
|
|
|
2016-2035
|
|
Foreign
|
90
|
|
(a)
|
2017-2024
|
|
Net operating loss carryforwards
|
$
|
604
|
|
|
|
|
Tax credit carryforwards:
|
|
|
|
|
Federal
|
$
|
2,585
|
|
|
2022-2035
|
|
State
|
331
|
|
(b)
|
2016-2037
|
|
Tax credit carryforwards
|
$
|
2,916
|
|
|
|
______________________
|
|
|
|
(a)
|
Includes $
89 million
of net operating loss carryforwards with an indefinite expiration period.
|
|
|
|
|
(b)
|
Includes $
158 million
of ITC carryforwards with an indefinite expiration period.
|
6. Discontinued Operations
In 2013, a subsidiary of NEER completed the sale of its ownership interest in a portfolio of hydropower generation plants and related assets with a total generating capacity of
351
MW located in Maine and New Hampshire. The sales price primarily included the assumption by the buyer of
$700 million
in related debt. In connection with the sale, a gain of approximately
$372 million
(
$231 million
after-tax) is reflected in gain from discontinued operations, net of income taxes in NEE's consolidated statements of income for the year ended
December 31, 2013
. The operations of the hydropower generation plants, exclusive of the gain, were not material to NEE's consolidated statements of income for the year ended December 31, 2013.
See Note 4 - Nonrecurring Fair Value Measurements for a discussion of the decision not to pursue the sale of Maine fossil and the related financial statement impacts.
7. Jointly-Owned Electric Plants
Certain NEE subsidiaries own undivided interests in the jointly-owned facilities described below, and are entitled to a proportionate share of the output from those facilities. The subsidiaries are responsible for their share of the operating costs, as well as providing their own financing. Accordingly, each subsidiary includes its proportionate share of the facilities and related revenues and expenses in the appropriate balance sheet and statement of income captions. NEE's and FPL's respective shares of direct expenses for these facilities are included in fuel, purchased power and interchange expense, O&M expenses, depreciation and amortization expense and taxes other than income taxes and other in NEE's and FPL's consolidated statements of income.
NEE's and FPL's proportionate ownership interest in jointly-owned facilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Ownership
Interest
|
|
Gross
Investment
(a)
|
|
Accumulated
Depreciation
(a)
|
|
Construction
Work
in Progress
|
|
|
|
|
(millions)
|
|
FPL:
|
|
|
|
|
|
|
|
|
St. Lucie Unit No. 2
|
85
|
%
|
|
$
|
2,190
|
|
|
$
|
777
|
|
|
$
|
23
|
|
|
St. Johns River Power Park units and coal terminal
|
20
|
%
|
|
$
|
398
|
|
|
$
|
207
|
|
|
$
|
2
|
|
|
Scherer Unit No. 4
|
76
|
%
|
|
$
|
1,130
|
|
|
$
|
378
|
|
|
$
|
—
|
|
|
NEER:
|
|
|
|
|
|
|
|
|
Duane Arnold
|
70
|
%
|
|
$
|
435
|
|
|
$
|
126
|
|
|
$
|
24
|
|
|
Seabrook
|
88.23
|
%
|
|
$
|
1,111
|
|
|
$
|
239
|
|
|
$
|
67
|
|
|
Wyman Station Unit No. 4
|
84.35
|
%
|
|
$
|
74
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
Transmission substation assets located in Seabrook, New Hampshire
|
88.23
|
%
|
|
$
|
73
|
|
|
$
|
19
|
|
|
$
|
3
|
|
______________________
|
|
|
|
(a)
|
Excludes nuclear fuel.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Texas Pipeline Business Acquisition
On October 1, 2015, a subsidiary of NEP acquired
100%
of the membership interests in NET Holdings Management, LLC (Texas pipeline business), a developer, owner and operator of a portfolio of seven long-term contracted natural gas pipeline assets located in Texas (Texas pipelines). One of the acquired pipelines is subject to a
10%
noncontrolling interest. The aggregate purchase price of approximately
$2 billion
included approximately
$934 million
in cash consideration and the assumption of approximately
$706 million
in existing debt of the Texas pipeline business and its subsidiaries at closing and excluded post-closing working capital adjustments of approximately
$2 million
. The purchase price is subject to (i) a
$200 million
holdback payable, in whole or in part, upon satisfaction of financial performance and capital expenditure thresholds relating to planned expansion projects (contingent holdback) and (ii) a
$200 million
holdback retained to satisfy any indemnification obligations of the sellers through April 2017. The
$200 million
indemnity holdback may be reduced by up to
$10 million
depending on certain post-closing employee retention thresholds. If successful, NEP may spend up to an additional
$100 million
of capital expenditures for the planned expansion projects, bringing the total transaction size of the acquisition to approximately
$2.1 billion
. NEP incurred approximately
$13 million
in acquisition-related costs during the year ended December 31, 2015, which are reflected in O&M expenses in NEE's consolidated statements of income.
Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed on October 1, 2015 based on their estimated fair value. All fair value measurements of assets acquired and liabilities assumed, including the noncontrolling interest, were based on significant estimates and assumptions, including Level 3 inputs, which require judgment. Estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting risk inherent in future cash flows and future market prices. The excess of the purchase price over the estimated fair value of assets acquired and liabilities assumed was recognized as goodwill at the acquisition date. The goodwill arising from the acquisition consists largely of growth opportunities from the Texas pipeline business. Upon full settlement of the contingent holdback, all of the goodwill is expected to be deductible for income tax purposes over a
15
year period. A liability of approximately
$186 million
was recognized as of the acquisition date for each of the contingent holdback and the indemnity holdback, reflecting the fair value of the expected future payments. NEP determined this fair value measurement based on management's probability assessment. The significant inputs and assumptions used in the fair value measurement included the estimated probability of executing contracts related to financial performance and capital expenditure thresholds as well as the appropriate discount rate.
The valuation of the acquired net assets is subject to change as additional information related to the estimates is obtained during the measurement period. The primary areas of the purchase price allocation that are not yet finalized relate to identifiable intangible assets and residual goodwill.
The following table summarizes the estimated fair value of assets acquired and liabilities assumed for the acquisition of the Texas pipeline business:
|
|
|
|
|
|
|
|
|
Amounts Recognized
as of October 1, 2015
|
|
|
(millions)
|
|
Assets
|
|
|
Property, plant and equipment
|
$
|
806
|
|
|
Cash
|
1
|
|
|
Other receivables and current other assets
|
21
|
|
|
Noncurrent other assets (other intangible assets, see Note 1 - Goodwill and Other Intangible Assets)
|
720
|
|
|
Noncurrent other assets (goodwill, see Note 1 - Goodwill and Other Intangible Assets)
|
622
|
|
|
Total assets
|
$
|
2,170
|
|
|
|
|
|
Liabilities
|
|
|
Long-term debt, including current portion
|
$
|
706
|
|
|
Accounts payable and current other liabilities
|
46
|
|
|
Noncurrent other liabilities, primarily acquisition holdbacks
|
415
|
|
|
Total liabilities
|
1,167
|
|
|
Less noncontrolling interest at fair value
|
69
|
|
|
Total cash consideration
|
$
|
934
|
|
9. Variable Interest Entities (VIEs)
As of
December 31, 2015
, NEE has
twenty-four
VIEs which it consolidates and has interests in certain other VIEs which it does not consolidate.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FPL
- FPL is considered the primary beneficiary of, and therefore consolidates, a VIE that is a wholly owned bankruptcy remote special purpose subsidiary that it formed in 2007 for the sole purpose of issuing storm-recovery bonds pursuant to the securitization provisions of the Florida Statutes and a financing order of the FPSC. FPL is considered the primary beneficiary because FPL has the power to direct the significant activities of the VIE, and its equity investment, which is subordinate to the bondholder's interest in the VIE, is at risk. Storm restoration costs incurred by FPL during 2005 and 2004 exceeded the amount in FPL's funded storm and property insurance reserve, resulting in a storm reserve deficiency. In 2007, the VIE issued $
652 million
aggregate principal amount of senior secured bonds (storm-recovery bonds), primarily for the after-tax equivalent of the total of FPL's unrecovered balance of the 2004 storm restoration costs, the 2005 storm restoration costs and to reestablish FPL's storm and property insurance reserve. In connection with this financing, net proceeds, after debt issuance costs, to the VIE (approximately $
644 million
) were used to acquire the storm-recovery property, which includes the right to impose, collect and receive a storm-recovery charge from all customers receiving electric transmission or distribution service from FPL under rate schedules approved by the FPSC or under special contracts, certain other rights and interests that arise under the financing order issued by the FPSC and certain other collateral pledged by the VIE that issued the bonds. The storm-recovery bonds are payable only from and are secured by the storm-recovery property. The bondholders have no recourse to the general credit of FPL. The assets of the VIE were approximately $
230 million
and $
279 million
at
December 31, 2015
and
2014
, respectively, and consisted primarily of storm-recovery property, which are included in securitized storm-recovery costs on NEE's and FPL's consolidated balance sheets. The liabilities of the VIE were approximately $
278 million
and $
338 million
at
December 31, 2015
and
2014
, respectively, and consisted primarily of storm-recovery bonds, which are included in long-term debt on NEE's and FPL's consolidated balance sheets.
FPL entered into a purchased power agreement effective in 1995 with a
330
MW coal-fired facility to purchase substantially all of the facility's capacity and electrical output over a substantial portion of its estimated useful life. The facility is considered a VIE because FPL absorbs a portion of the facility's variability related to changes in the market price of coal through the price it pays per MWh (energy payment). Since FPL does not control the most significant activities of the facility, including operations and maintenance, FPL is not the primary beneficiary and does not consolidate this VIE. The energy payments paid by FPL will fluctuate as coal prices change. This fluctuation does not expose FPL to losses since the energy payments paid by FPL to the facility are recovered through the fuel clause as approved by the FPSC.
NEER
- NEE consolidates
twenty-three
NEER VIEs. NEER is considered the primary beneficiary of these VIEs since NEER controls the most significant activities of these VIEs, including operations and maintenance, as well as construction, and through its equity ownership has the obligation to absorb expected losses of these VIEs.
A
NEER VIE consolidates two entities which own and operate natural gas/oil electric generation facilities with the capability of producing
110
MW. This VIE sells its electric output under power sales contracts to a third party, with expiration dates in
2018
and
2020
. The power sales contracts provide the offtaker the ability to dispatch the facilities and require the offtaker to absorb the cost of fuel. This VIE uses third-party debt and equity to finance its operations. The debt is secured by liens against the generation facilities and the other assets of these entities. The debt holders have no recourse to the general credit of NEER for the repayment of debt. The assets and liabilities of the VIE were approximately $
84 million
and $
47 million
, respectively, at
December 31, 2015
and $
85 million
and $
55 million
, respectively, at
December 31, 2014
, and consisted primarily of property, plant and equipment and long-term debt.
Two indirect subsidiaries of NEER each contributed, to a NEP subsidiary, an approximately
50
% ownership interest in three entities which own solar PV facilities that, upon completion of construction, are expected to have a total generating capacity of
277
MW, of which approximately
153
MW have been placed in service as of December 31, 2015. Each of the two indirect subsidiaries of NEER is considered a VIE since it has insufficient equity at risk, and is consolidated by NEER. The VIEs use third-party debt and equity to finance a portion of development and construction activities and require subordinated financing from NEER to complete the facility under construction. These VIEs will sell their electric output to third parties under power sales contracts with expiration dates in 2035 and
2036
. The debt balances are secured by liens against the assets of the entities. The debt holders have no recourse to the general credit of NEER. The assets and liabilities of these VIEs were approximately $
657 million
and $
626 million
, respectively, at
December 31, 2015
, and consisted primarily of property, plant and equipment and long-term debt.
The other
twenty
NEER VIEs consolidate several entities which own and operate wind electric generation facilities with the capability of producing a total of
5,272
MW. These VIEs sell their electric output either under power sales contracts to third parties with expiration dates ranging from
2018
through
2041
or in the spot market. The VIEs use third-party debt and/or equity to finance their operations. Certain investors that hold no equity interest in the VIEs hold differential membership interests, which give them the right to receive a portion of the economic attributes of the generation facilities, including certain tax attributes. The debt is secured by liens against the generation facilities and the other assets of these entities or by pledges of NEER's ownership interest in these entities. The debt holders have no recourse to the general credit of NEER for the repayment of debt. The assets and liabilities of these VIEs totaled approximately $
7.6 billion
and $
5.0 billion
, respectively, at
December 31, 2015
.
Sixteen
of the
twenty
were VIEs at December 31, 2014 and were consolidated; the assets and liabilities of those VIEs totaled approximately $
6.6 billion
and $
4.1 billion
, respectively, at
December 31, 2014
. At
December 31, 2015
and
2014
, the assets and liabilities of the VIEs consisted primarily of property, plant and equipment, deferral related to differential membership interests and long-term debt.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other
- As of
December 31, 2015
and
2014
, several NEE subsidiaries have investments totaling approximately $
602 million
($
476 million
at FPL) and $
716 million
($
606 million
at FPL), respectively, in certain special purpose entities, which consisted primarily of investments in mortgage-backed securities. These investments are included in special use funds and other investments on NEE's consolidated balance sheets and in special use funds on FPL's consolidated balance sheets. As of
December 31, 2015
, NEE subsidiaries, including FPL, are not the primary beneficiary and therefore do not consolidate any of these entities because they do not control any of the ongoing activities of these entities, were not involved in the initial design of these entities and do not have a controlling financial interest in these entities.
10. Investments in Partnerships and Joint Ventures
Certain subsidiaries of NEE, primarily NEER, have noncontrolling non-majority owned interests in various partnerships and joint ventures, essentially all of which own electric generation facilities. At
December 31, 2015
and
2014
, NEE's investments in partnerships and joint ventures totaled approximately
$1,063 million
and
$663 million
, respectively, which are included in other investments on NEE's consolidated balance sheets. NEER's interest in these partnerships and joint ventures range from approximately
29%
to
50%
. At
December 31, 2015
and 2014, the principal entities included in NEER's investments in partnerships and joint ventures were Desert Sunlight Investment Holdings, LLC, and Northeast Energy, LP, and in 2015 also included Sabal Trail Transmission, LLC and Cedar Point II Wind, LP.
Summarized combined information for these principal entities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
(millions)
|
|
Net income
|
$
|
213
|
|
|
$
|
171
|
|
|
Total assets
|
$
|
3,339
|
|
|
$
|
2,636
|
|
|
Total liabilities
|
$
|
1,307
|
|
|
$
|
1,645
|
|
|
Partners'/members' equity
|
$
|
2,032
|
|
|
$
|
991
|
|
|
|
|
|
|
|
NEER's share of underlying equity in the principal entities
|
$
|
874
|
|
|
$
|
495
|
|
|
Difference between investment carrying amount and underlying equity in net assets
(a)
|
(3
|
)
|
|
(4
|
)
|
|
NEER's investment carrying amount for the principal entities
|
$
|
871
|
|
|
$
|
491
|
|
______________________
|
|
|
|
(a)
|
The majority of the difference between the investment carrying amount and the underlying equity in net assets is being amortized over the remaining life of the investee's assets.
|
In 2004, a trust created by NEE sold $
300 million
of 5 7/8% preferred trust securities to the public and $
9 million
of common trust securities to NEE. The trust is an unconsolidated
100%
-owned finance subsidiary. The proceeds from the sale of the preferred and common trust securities were used to buy 5 7/8% junior subordinated debentures maturing in March 2044 from NEECH. NEE has fully and unconditionally guaranteed the preferred trust securities and the junior subordinated debentures.
11. Common Shareholders' Equity
Earnings Per Share
- The reconciliation of NEE's basic and diluted earnings per share attributable to NEE from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
|
2013
|
|
|
(millions, except per share amounts)
|
|
Numerator - income from continuing operations attributable to NEE
(a)
|
$
|
2,752
|
|
|
$
|
2,465
|
|
|
$
|
1,677
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding - basic
|
450.5
|
|
|
434.4
|
|
|
424.2
|
|
|
Equity units, performance share awards, options, forward sale agreements and restricted stock
(b)
|
3.5
|
|
|
5.7
|
|
|
2.8
|
|
|
Weighted-average number of common shares outstanding - assuming dilution
|
454.0
|
|
|
440.1
|
|
|
427.0
|
|
|
Earnings per share attributable to NEE from continuing operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
6.11
|
|
|
$
|
5.67
|
|
|
$
|
3.95
|
|
|
Assuming dilution
|
$
|
6.06
|
|
|
$
|
5.60
|
|
|
$
|
3.93
|
|
______________________
|
|
|
|
(a)
|
Calculated as income from continuing operations less net income attributable to noncontrolling interests from NEE's consolidated statements of income.
|
|
|
|
|
(b)
|
Calculated using the treasury stock method. Performance share awards are included in diluted weighted-average number of common shares outstanding based upon what would be issued if the end of the reporting period was the end of the term of the award.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Common shares issuable pursuant to equity units, the forward sale agreement described below, stock options and performance share awards and restricted stock which were not included in the denominator above due to their antidilutive effect were approximately
3.5 million
,
2.6 million
and
7.1 million
for the years ended December 31,
2015
,
2014
and
2013
, respectively.
Issuance of Common Stock and Forward Sale Agreement
- In November 2013, NEE sold
4.5 million
shares of its common stock at a price of
$88.03
per share, and a forward counterparty borrowed and sold
6.6 million
shares of NEE's common stock in connection with a forward sale agreement. In December 2014, NEE physically settled the forward sale agreement by delivering
6.6 million
shares of its common stock to the forward counterparty in exchange for cash proceeds of approximately
$552 million
. The forward sale price used to determine the cash proceeds received by NEE was calculated based on the initial forward sale price of
$88.03
per share less certain adjustments as specified in the forward sale agreement. Prior to the settlement date, the forward sale agreement had a dilutive effect on NEE’s earnings per share when the average market price per share of NEE’s common stock was above the adjusted forward sale price per share.
Common Stock Dividend Restrictions
- NEE's charter does not limit the dividends that may be paid on its common stock. FPL's mortgage securing FPL's first mortgage bonds contains provisions which, under certain conditions, restrict the payment of dividends and other distributions to NEE. These restrictions do not currently limit FPL's ability to pay dividends to NEE.
Employee Stock Ownership Plan
- The employee retirement savings plans of NEE include a leveraged ESOP feature. Shares of common stock held by the trust for the employee retirement savings plans (Trust) are used to provide all or a portion of the employers' matching contributions. Dividends received on all shares, along with cash contributions from the employers, are used to pay principal and interest on an ESOP loan held by a subsidiary of NEECH. Dividends on shares allocated to employee accounts and used by the Trust for debt service are replaced with shares of common stock, at prevailing market prices, in an equivalent amount. For purposes of computing basic and fully diluted earnings per share, ESOP shares that have been committed to be released are considered outstanding.
ESOP-related compensation expense was approximately $
63 million
, $
59 million
and $
46 million
in
2015
,
2014
and
2013
, respectively. The related share release was based on the fair value of shares allocated to employee accounts during the period. Interest income on the ESOP loan is eliminated in consolidation. ESOP-related unearned compensation included as a reduction of common shareholders' equity at December 31,
2015
was approximately $
1 million
, representing unallocated shares at the original issue price. The fair value of the ESOP-related unearned compensation account using the closing price of NEE common stock at December 31,
2015
was approximately $
11 million
.
Stock-Based Compensation
- Net income for the years ended December 31,
2015
,
2014
and
2013
includes approximately $
60 million
, $
60 million
and $
67 million
, respectively, of compensation costs and $
23 million
, $
23 million
and $
26 million
, respectively, of income tax benefits related to stock-based compensation arrangements. Compensation cost capitalized for the years ended December 31,
2015
,
2014
and
2013
was not material. As of December 31,
2015
, there were approximately $
70 million
of unrecognized compensation costs related to nonvested/nonexercisable stock-based compensation arrangements. These costs are expected to be recognized over a weighted-average period of
1.8
years.
At December 31,
2015
, approximately
17 million
shares of common stock were authorized for awards to officers, employees and non-employee directors of NEE and its subsidiaries under NEE's: (a) Amended and Restated 2011 Long Term Incentive Plan, (b) 2007 Non-Employee Directors Stock Plan and (c) earlier equity compensation plans under which shares are reserved for issuance under existing grants, but no additional shares are available for grant under the earlier plans. NEE satisfies restricted stock and performance share awards by issuing new shares of its common stock or by purchasing shares of its common stock in the open market. NEE satisfies stock option exercises by issuing new shares of its common stock. NEE generally grants most of its stock-based compensation awards in the first quarter of each year.
Restricted Stock and Performance Share Awards
- Restricted stock typically vests within
three
years after the date of grant and is subject to, among other things, restrictions on transferability prior to vesting. The fair value of restricted stock is measured based upon the closing market price of NEE common stock as of the date of grant. Performance share awards are typically payable at the end of a
three
-year performance period if the specified performance criteria are met. The fair value of performance share awards is estimated primarily based upon the closing market price of NEE common stock as of the date of grant less the present value of expected dividends, multiplied by an estimated performance multiple which is subsequently trued up based on actual performance.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The activity in restricted stock and performance share awards for the year ended December 31,
2015
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
Restricted Stock:
|
|
|
|
|
Nonvested balance, January 1, 2015
|
579,497
|
|
|
$
|
75.65
|
|
|
Granted
|
303,150
|
|
|
$
|
103.58
|
|
|
Vested
|
(274,620
|
)
|
|
$
|
73.92
|
|
|
Forfeited
|
(44,367
|
)
|
|
$
|
99.99
|
|
|
Nonvested balance, December 31, 2015
|
563,660
|
|
|
$
|
89.60
|
|
|
Performance Share Awards:
|
|
|
|
|
Nonvested balance, January 1, 2015
|
996,227
|
|
|
$
|
67.19
|
|
|
Granted
|
567,437
|
|
|
$
|
77.12
|
|
|
Vested
|
(609,321
|
)
|
|
$
|
53.55
|
|
|
Forfeited
|
(39,144
|
)
|
|
$
|
79.36
|
|
|
Nonvested balance, December 31, 2015
|
915,199
|
|
|
$
|
81.90
|
|
The weighted-average grant date fair value per share of restricted stock granted for the years ended
December 31, 2014
and
2013
was $
93.46
and $
74.02
respectively. The weighted-average grant date fair value per share of performance share awards granted for the years ended
December 31, 2014
and
2013
was $
71.52
and $
58.53
, respectively.
The total fair value of restricted stock and performance share awards vested was $
108 million
, $
85 million
and $
82 million
for the years ended December 31,
2015
,
2014
and
2013
, respectively.
Options - Options typically vest within
three
years after the date of grant and have a maximum term of
ten
years. The exercise price of each option granted equals the closing market price of NEE common stock on the date of grant. The fair value of the options is estimated on the date of the grant using the Black-Scholes option-pricing model and based on the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Expected volatility
(a)
|
18.91%
|
|
20.32%
|
|
20.08 - 20.15%
|
|
Expected dividends
|
3.11%
|
|
3.11%
|
|
3.28 - 3.64%
|
|
Expected term (years)
(b)
|
7.0
|
|
7.0
|
|
7.0
|
|
Risk-free rate
|
1.84%
|
|
2.17%
|
|
1.15 - 1.40%
|
______________________
|
|
|
|
(a)
|
Based on historical experience.
|
|
|
|
|
(b)
|
Based on historical exercise and post-vesting cancellation experience adjusted for outstanding awards.
|
Option activity for the year ended December 31,
2015
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Underlying
Options
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term
(years)
|
|
Aggregate
Intrinsic
Value
(millions)
|
|
Balance, January 1, 2015
|
2,825,035
|
|
|
$
|
59.04
|
|
|
|
|
|
|
Granted
|
229,158
|
|
|
$
|
103.62
|
|
|
|
|
|
|
Exercised
|
(187,692
|
)
|
|
$
|
47.03
|
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
Balance, December 31, 2015
|
2,866,501
|
|
|
$
|
63.39
|
|
|
5.3
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2015
|
2,415,194
|
|
|
$
|
57.62
|
|
|
4.7
|
|
$
|
112
|
|
The weighted-average grant date fair value of options granted was $
13.62
, $
14.09
and $
9.20
per share for the years ended December 31,
2015
,
2014
and
2013
, respectively. The total intrinsic value of stock options exercised was approximately $
11 million
, $
30 million
and $
14 million
for the years ended December 31,
2015
,
2014
and
2013
, respectively.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash received from option exercises was approximately $
9 million
, $
26 million
and $
14 million
for the years ended December 31,
2015
,
2014
and
2013
, respectively. The tax benefits realized from options exercised were approximately
$4 million
, $
11 million
and $
5 million
for the years ended December 31,
2015
,
2014
and
2013
, respectively.
Preferred Stock
- NEE's charter authorizes the issuance of
100 million
shares of serial preferred stock, $
0.01
par value,
none
of which are outstanding. FPL's charter authorizes the issuance of
10,414,100
shares of preferred stock, $
100
par value,
5 million
shares of subordinated preferred stock,
no
par value, and
5 million
shares of preferred stock,
no
par value,
none
of which are outstanding.
Accumulated Other Comprehensive Income (Loss)
- The components of AOCI, net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
Net Unrealized
Gains (Losses)
on Cash Flow
Hedges
|
|
Net Unrealized
Gains (Losses)
on Available for
Sale Securities
|
|
Defined Benefit
Pension and
Other Benefits
Plans
|
|
Net Unrealized
Gains (Losses)
on Foreign
Currency
Translation
|
|
Other
Comprehensive
Income (Loss)
Related to Equity
Method Investee
|
|
Total
|
|
|
(millions)
|
|
Balances, December 31, 2012
|
$
|
(266
|
)
|
|
$
|
96
|
|
|
$
|
(74
|
)
|
|
$
|
12
|
|
|
$
|
(23
|
)
|
|
$
|
(255
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
84
|
|
|
118
|
|
|
95
|
|
|
(45
|
)
|
|
7
|
|
|
259
|
|
|
Amounts reclassified from AOCI
|
67
|
|
(a)
|
(17
|
)
|
(b)
|
2
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|
Net other comprehensive income (loss)
|
151
|
|
|
101
|
|
|
97
|
|
|
(45
|
)
|
|
7
|
|
|
311
|
|
|
Balances, December 31, 2013
|
(115
|
)
|
|
197
|
|
|
23
|
|
|
(33
|
)
|
|
(16
|
)
|
|
56
|
|
|
Other comprehensive income (loss) before reclassifications
|
(141
|
)
|
|
62
|
|
|
(44
|
)
|
|
(25
|
)
|
|
(8
|
)
|
|
(156
|
)
|
|
Amounts reclassified from AOCI
|
98
|
|
(a)
|
(41
|
)
|
(b)
|
1
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
Net other comprehensive income (loss)
|
(43
|
)
|
|
21
|
|
|
(43
|
)
|
|
(25
|
)
|
|
(8
|
)
|
|
(98
|
)
|
|
Less other comprehensive loss attributable to noncontrolling interests
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
Balances, December 31, 2014
|
(156
|
)
|
|
218
|
|
|
(20
|
)
|
|
(58
|
)
|
|
(24
|
)
|
|
(40
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
(88
|
)
|
|
(7
|
)
|
|
(42
|
)
|
|
(27
|
)
|
|
—
|
|
|
(164
|
)
|
|
Amounts reclassified from AOCI
|
63
|
|
(a)
|
(37
|
)
|
(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
Net other comprehensive income (loss)
|
(25
|
)
|
|
(44
|
)
|
|
(42
|
)
|
|
(27
|
)
|
|
—
|
|
|
(138
|
)
|
|
Less other comprehensive loss attributable to noncontrolling interests
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
Balances, December 31, 2015
|
$
|
(170
|
)
|
|
$
|
174
|
|
|
$
|
(62
|
)
|
|
$
|
(85
|
)
|
|
$
|
(24
|
)
|
|
$
|
(167
|
)
|
————————————
|
|
|
|
(a)
|
Reclassified to interest expense and other - net in NEE's consolidated statements of income. See Note 3 - Income Statement Impact of Derivative Instruments.
|
|
|
|
|
(b)
|
Reclassified to gains on disposal of assets - net in NEE's consolidated statements of income.
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2015
|
|
2014
|
|
|
Maturity
Date
|
|
Balance
|
|
Weighted-
Average
Interest Rate
|
|
Balance
|
|
Weighted-
Average
Interest Rate
|
|
|
|
|
(millions)
|
|
|
|
(millions)
|
|
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
|
First mortgage bonds - fixed
|
2017 - 2044
|
|
$
|
8,690
|
|
|
4.77
|
%
|
|
$
|
8,490
|
|
|
4.95
|
%
|
|
Storm-recovery bonds - fixed
(a)
|
2017 - 2021
|
|
273
|
|
|
5.26
|
%
|
|
331
|
|
|
5.24
|
%
|
|
Pollution control, solid waste disposal and industrial development revenue bonds - variable
(b)(c)
|
2020 - 2045
|
|
718
|
|
|
0.04
|
%
|
|
633
|
|
|
0.05
|
%
|
|
Other long-term debt - variable
(c)
|
2018
|
|
400
|
|
|
1.11
|
%
|
|
—
|
|
|
|
|
|
Other long-term debt - fixed
|
2014 - 2040
|
|
53
|
|
|
5.06
|
%
|
|
55
|
|
|
4.96
|
%
|
|
Unamortized debt issuance costs and discount
|
|
|
(114
|
)
|
|
|
|
(121
|
)
|
(d)
|
|
|
Total long-term debt of FPL
|
|
|
10,020
|
|
|
|
|
9,388
|
|
|
|
|
Less current maturities of long-term debt
|
|
|
64
|
|
|
|
|
60
|
|
|
|
|
Long-term debt of FPL, excluding current maturities
|
|
|
9,956
|
|
|
|
|
9,328
|
|
|
|
|
NEECH:
|
|
|
|
|
|
|
|
|
|
|
|
Debentures - fixed
(e)
|
2015 - 2023
|
|
3,100
|
|
|
3.15
|
%
|
|
3,125
|
|
|
3.87
|
%
|
|
Debentures, related to NEE's equity units - fixed
|
2014 - 2020
|
|
1,200
|
|
|
1.98
|
%
|
|
2,152
|
|
|
1.54
|
%
|
|
Junior subordinated debentures - fixed
|
2044 - 2073
|
|
2,978
|
|
|
5.84
|
%
|
|
2,978
|
|
|
5.84
|
%
|
|
Senior secured bonds - fixed
(f)
|
2030
|
|
497
|
|
|
7.50
|
%
|
|
500
|
|
|
7.50
|
%
|
|
Japanese yen denominated senior notes - fixed
(e)
|
2030
|
|
83
|
|
|
5.13
|
%
|
|
83
|
|
|
5.13
|
%
|
|
Japanese yen denominated term loans - variable
(c)(e)
|
2017
|
|
456
|
|
|
1.83
|
%
|
|
459
|
|
|
1.83
|
%
|
|
Other long-term debt - fixed
|
2016 - 2044
|
|
810
|
|
|
2.74
|
%
|
|
510
|
|
|
2.70
|
%
|
|
Other long-term debt - variable
(c)
|
2014 - 2019
|
|
1,513
|
|
|
1.81
|
%
|
|
716
|
|
|
2.44
|
%
|
|
Fair value hedge adjustment
|
|
|
24
|
|
|
|
|
20
|
|
|
|
|
Unamortized debt issuance costs and discount
|
|
|
(94
|
)
|
|
|
|
(112
|
)
|
(d)
|
|
|
Total long-term debt of NEECH
|
|
|
10,567
|
|
|
|
|
10,431
|
|
|
|
|
Less current maturities of long-term debt
|
|
|
667
|
|
|
|
|
1,787
|
|
|
|
|
Long-term debt of NEECH, excluding current maturities
|
|
|
9,900
|
|
|
|
|
8,644
|
|
|
|
|
NEER:
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured limited-recourse bonds and notes - fixed
|
2017 - 2038
|
|
2,203
|
|
|
5.88
|
%
|
|
2,273
|
|
|
6.02
|
%
|
|
Senior secured limited-recourse term loans - primarily variable
(c)(e)
|
2015 - 2035
|
|
3,969
|
|
(g)
|
2.51
|
%
|
|
4,242
|
|
|
3.12
|
%
|
|
Other long-term debt - primarily variable
(c)(e)
|
2015 - 2035
|
|
2,118
|
|
|
2.80
|
%
|
|
656
|
|
|
3.71
|
%
|
|
Canadian revolving credit facilities - variable
(c)
|
2015 - 2016
|
|
155
|
|
|
1.56
|
%
|
|
704
|
|
|
2.33
|
%
|
|
Unamortized debt issuance costs and discount
|
|
|
(131
|
)
|
|
|
|
(135
|
)
|
(d)
|
|
|
Total long-term debt of NEER
|
|
|
8,314
|
|
|
|
|
7,740
|
|
|
|
|
Less current maturities of long-term debt
(h)
|
|
|
1,489
|
|
|
|
|
1,668
|
|
|
|
|
Long-term debt of NEER, excluding current maturities
|
|
|
6,825
|
|
|
|
|
6,072
|
|
|
|
|
Total long-term debt
|
|
|
$
|
26,681
|
|
|
|
|
$
|
24,044
|
|
|
|
______________________
|
|
|
|
(a)
|
Principal on the storm-recovery bonds is due on the final maturity date (the date by which the principal must be repaid to prevent a default) for each tranche, however, it is being paid semiannually and sequentially.
|
|
|
|
|
(b)
|
Tax exempt bonds that permit individual bond holders to tender the bonds for purchase at any time prior to maturity. In the event bonds are tendered for purchase, they would be remarketed by a designated remarketing agent in accordance with the related indenture. If the remarketing is unsuccessful, FPL would be required to purchase the tax exempt bonds. As of
December 31, 2015
, all tax exempt bonds tendered for purchase have been successfully remarketed. FPL's bank revolving line of credit facilities are available to support the purchase of tax exempt bonds.
|
|
|
|
|
(c)
|
Variable rate is based on an underlying index plus a margin except for in 2014 approximately
$983 million
of NEER's senior secured limited-recourse term loans is based on the greater of an underlying index or a floor, plus a margin.
|
|
|
|
|
(d)
|
Debt issuance costs were reclassified from noncurrent other assets to long-term debt to reflect the retrospective adoption of an accounting standard update. See Note 1 - Debt Issuance Costs.
|
|
|
|
|
(e)
|
Interest rate contracts, primarily swaps, have been entered into for the majority of these debt issuances. See Note 3.
|
|
|
|
|
(f)
|
Issued by a wholly owned subsidiary of NEECH and collateralized by a third-party note receivable held by that subsidiary. See Note 4 - Fair Value of Financial Instruments Recorded at the Carrying Amount.
|
|
|
|
|
(g)
|
Excludes debt totaling
$938 million
reflected in liabilities associated with assets held for sale on NEE's consolidated balance sheet. See Note 1 - Assets and Liabilities Associated with Assets Held for Sale.
|
|
|
|
|
(h)
|
See Note 14 - Spain Solar Projects for discussion of events of default related to debt associated with the Spain solar projects.
|
Minimum annual maturities of long
-
term debt for NEE are approximately
$2,220 million
,
$2,882 million
,
$2,819 million
,
$2,044 million
and
$1,578 million
for
2016
,
2017
,
2018
,
2019
and
2020
, respectively. The respective amounts for FPL are approximately
$64 million
,
$367 million
,
$472 million
,
$76 million
and
$10 million
.
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At
December 31, 2015 and 2014
, short-term borrowings had a weighted-average interest rate of
2.10%
(
0.83%
for FPL) and
0.40%
(
0.40%
for FPL), respectively. Available lines of credit aggregated approximately
$7.9 billion
(
$4.9 billion
for NEECH and
$3.0 billion
for FPL) at
December 31, 2015
. These facilities provide for the issuance of letters of credit of up to approximately
$4.0 billion
(
$2.9 billion
for NEECH and
$1.1 billion
for FPL). The issuance of letters of credit is subject to the aggregate commitment of the relevant banks to issue letters of credit under the applicable facility. While no direct borrowings were outstanding at
December 31, 2015
, letters of credit totaling
$410 million
and
$6 million
were outstanding under the NEECH and FPL credit facilities, respectively.
NEE has guaranteed certain payment obligations of NEECH, including most of those under NEECH's debt, including all of its debentures and commercial paper issuances, as well as most of its payment guarantees and indemnifications. NEECH has guaranteed certain debt and other obligations of NEER and its subsidiaries.
In August 2013, NEECH completed a remarketing of approximately $
402.4 million
aggregate principal amount of its Series D Debentures due September 1, 2015, which constitutes a portion of the $
402.5 million
aggregate principal amount of such debentures (Debentures) that were issued in September 2010 as components of equity units issued concurrently by NEE (2010 equity units). The Debentures are fully and unconditionally guaranteed by NEE. In connection with the remarketing of the Debentures, the interest rate on the Debentures was reset to
1.339%
per year, and interest is payable on March 1 and September 1 of each year, commencing September 1, 2013. In connection with the settlement of the contracts to purchase NEE common stock that were issued as components of the 2010 equity units, in August and September 2013, NEE issued a total of
5,946,530
shares of common stock in exchange for $
402.5 million
.
In September 2013, NEE sold
$500 million
of equity units (initially consisting of Corporate Units). Each equity unit has a stated amount of
$50
and consists of a contract to purchase NEE common stock (stock purchase contract) and, initially, a
5%
undivided beneficial ownership interest in a Series G Debenture due September 1, 2018 issued in the principal amount of
$1,000
by NEECH (see table above). Each stock purchase contract requires the holder to purchase by no later than September 1, 2016 (the final settlement date) for a price of
$50
in cash, a number of shares of NEE common stock (subject to antidilution adjustments) based on a price per share range of
$82.70
to
$99.24
. If purchased on the final settlement date, as of
December 31, 2015
, the number of shares issued would (subject to antidilution adjustments) range from
0.6088
shares if the applicable market value of a share of common stock is less than or equal to
$82.70
to
0.5073
shares if the applicable market value of a share is equal to or greater than
$99.24
, with applicable market value to be determined using the average closing prices of NEE common stock over a
20
-day trading period ending August 29, 2016. Total annual distributions on the equity units will be at the rate of
5.799%
, consisting of interest on the debentures (
1.45%
per year) and payments under the stock purchase contracts (
4.349%
per year). The interest rate on the debentures is expected to be reset on or after March 1, 2016. A holder of the equity unit may satisfy its purchase obligation with proceeds raised from remarketing the NEECH debentures that are part of its equity unit. The undivided beneficial ownership interest in the NEECH debenture that is a component of each Corporate Unit is pledged to NEE to secure the holder's obligation to purchase NEE common stock under the related stock purchase contract. If a successful remarketing does not occur on or before the third business day prior to the final settlement date, and a holder has not notified NEE of its intention to settle the stock purchase contract with cash, the debentures that are components of the Corporate Units will be used to satisfy in full the holders' obligations to purchase NEE common stock under the related stock purchase contracts on the final settlement date. The debentures are fully and unconditionally guaranteed by NEE.
In May 2015, NEECH completed a remarketing of
$600 million
aggregate principal amount of its Series E Debentures due June 1, 2017 (Debentures) that were issued in May 2012 as components of equity units issued concurrently by NEE (May 2012 equity units). The Debentures are fully and unconditionally guaranteed by NEE. In connection with the remarketing of the Debentures, the interest rate on the Debentures was reset to
1.586%
per year, and interest is payable on June 1 and December 1 of each year, commencing June 1, 2015. In connection with the settlement of the contracts to purchase NEE common stock that were issued as components of the May 2012 equity units, on June 1, 2015, NEE issued
7,860,000
shares of common stock in exchange for
$600 million
.
In August 2015, NEECH completed a remarketing of approximately
$650 million
aggregate principal amount of its Series F Debentures due September 1, 2017, which constitutes a portion of the
$650 million
aggregate principal amount of such debentures (Debentures) that were issued in September 2012 as components of equity units issued by NEE (September 2012 equity units). The Debentures are fully and unconditionally guaranteed by NEE. In connection with the remarketing, the interest rate on all of the Debentures was reset to
2.056%
per year and interest is payable on March 1 and September 1 of each year, commencing September 1, 2015. In connection with the settlement of the contracts to purchase NEE common stock that were issued as components of the September 2012 equity units, in August and September 2015, NEE issued a total of
8,173,099
shares of common stock in exchange for
$650 million
.
In September 2015, NEE sold
$700 million
of equity units (initially consisting of Corporate Units). Each equity unit has a stated amount of
$50
and consists of a contract to purchase NEE common stock (stock purchase contract) and, initially, a
5%
undivided beneficial ownership interest in a Series H Debenture due September 1, 2020 issued in the principal amount of
$1,000
by NEECH. Each stock purchase contract requires the holder to purchase by no later than September 1, 2018 (the final settlement date) for a price of
$50
in cash, a number of shares of NEE common stock (subject to antidilution adjustments) based on a price per share
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
range of
$95.35
to
$114.42
. If purchased on the final settlement date, as of
December 31, 2015
, the number of shares issued would (subject to antidilution adjustments) range from
0.5244
shares if the applicable market value of a share of common stock is less than or equal to
$95.35
to
0.4370
shares if the applicable market value of a share is equal to or greater than
$114.42
, with applicable market value to be determined using the average closing prices of NEE common stock over a
20
-day trading period ending August 29, 2018. Total annual distributions on the equity units will be at the rate of
6.371%
, consisting of interest on the debentures (
2.36%
per year) and payments under the stock purchase contracts (
4.011%
per year). The interest rate on the debentures is expected to be reset on or after March 1, 2018. A holder of the equity unit may satisfy its purchase obligation with proceeds raised from remarketing the NEECH debentures that are part of its equity unit. The undivided beneficial ownership interest in the NEECH debenture that is a component of each Corporate Unit is pledged to NEE to secure the holder's obligation to purchase NEE common stock under the related stock purchase contract. If a successful remarketing does not occur on or before the third business day prior to the final settlement date, and a holder has not notified NEE of its intention to settle the stock purchase contract with cash, the debentures that are components of the Corporate Units will be used to satisfy in full the holders' obligations to purchase NEE common stock under the related stock purchase contracts on the final settlement date. The debentures are fully and unconditionally guaranteed by NEE.
Prior to the issuance of NEE’s common stock, the stock purchase contracts, if dilutive, will be reflected in NEE’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of NEE common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares that would be issued upon settlement of the stock purchase contracts over the number of shares that could be purchased by NEE in the market, at the average market price during the period, using the proceeds receivable upon settlement.
13. Asset Retirement Obligations
FPL's ARO relates primarily to the nuclear decommissioning obligation of its nuclear units. FPL's AROs other than nuclear decommissioning are not significant. The accounting provisions result in timing differences in the recognition of legal asset retirement costs for financial reporting purposes and the method the FPSC allows FPL to recover in rates. NEER's ARO relates primarily to the nuclear decommissioning obligation of its nuclear plants and obligations for the dismantlement of its wind facilities located on leased property. See Note 1 - Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs.
A rollforward of NEE's and FPL's ARO is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FPL
|
|
NEER
|
|
NEE
|
|
|
|
|
(millions)
|
|
|
|
Balances, December 31, 2013
|
$
|
1,285
|
|
|
$
|
565
|
|
|
$
|
1,850
|
|
|
Liabilities incurred
|
1
|
|
|
29
|
|
|
30
|
|
|
Accretion expense
|
70
|
|
|
38
|
|
|
108
|
|
|
Liabilities settled
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
Revision in estimated cash flows - net
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
Balances, December 31, 2014
|
1,355
|
|
|
631
|
|
|
1,986
|
|
|
Liabilities incurred
|
5
|
|
|
46
|
|
|
51
|
|
|
Accretion expense
|
73
|
|
|
43
|
|
|
116
|
|
|
Liabilities settled
|
(20
|
)
|
|
(2
|
)
|
|
(22
|
)
|
|
Revision in estimated cash flows - net
|
409
|
|
(a)
|
(71
|
)
|
(b)
|
338
|
|
|
Balances, December 31, 2015
|
$
|
1,822
|
|
|
$
|
647
|
|
|
$
|
2,469
|
|
______________________
|
|
|
|
(a)
|
Primarily reflects the effect of revised cost estimates for decommissioning FPL's nuclear units consistent with the updated nuclear decommissioning studies filed with the FPSC in December 2015.
|
|
|
|
|
(b)
|
Primarily reflects the effect of revised cost estimates for decommissioning NEER’s nuclear units and a change in assumptions relating to spent fuel costs, partly offset by increased escalation rates.
|
Restricted funds for the payment of future expenditures to decommission NEE's and FPL's nuclear units included in special use funds on NEE's and FPL's consolidated balance sheets are as follows (see Note 4 - Special Use Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FPL
|
|
NEER
|
|
NEE
|
|
|
|
|
(millions)
|
|
|
|
Balances, December 31, 2015
|
$
|
3,430
|
|
|
$
|
1,634
|
|
|
$
|
5,064
|
|
|
Balances, December 31, 2014
|
$
|
3,449
|
|
|
$
|
1,642
|
|
|
$
|
5,091
|
|
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NEE and FPL have identified but not recognized ARO liabilities related to electric transmission and distribution and telecommunications assets resulting from easements over property not owned by NEE or FPL. These easements are generally perpetual and only require retirement action upon abandonment or cessation of use of the property or facility for its specified purpose. The ARO liability is not estimable for such easements as NEE and FPL intend to use these properties indefinitely. In the event NEE and FPL decide to abandon or cease the use of a particular easement, an ARO liability would be recorded at that time.
14. Commitments and Contingencies
Commitments
- NEE and its subsidiaries have made commitments in connection with a portion of their projected capital expenditures. Capital expenditures at FPL include, among other things, the cost for construction or acquisition of additional facilities and equipment to meet customer demand, as well as capital improvements to and maintenance of existing facilities and the procurement of nuclear fuel. At NEER, capital expenditures include, among other things, the cost, including capitalized interest, for construction and development of wind and solar projects and the procurement of nuclear fuel, as well as the investment in the development and construction of its natural gas pipeline assets. Capital expenditures for Corporate and Other primarily include the cost to meet customer-specific requirements and maintain the fiber-optic network for the fiber-optic telecommunications business (FPL FiberNet) and the cost to maintain existing transmission facilities at NextEra Energy Transmission, LLC.
At
December 31, 2015
, estimated capital expenditures for
2016
through
2020
for which applicable internal approvals (and also FPSC approvals for FPL, if required) have been received were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Total
|
|
|
(millions)
|
|
FPL:
|
|
|
|
|
|
|
|
|
|
|
|
|
Generation:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
New
(b)(c)
|
$
|
1,085
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,130
|
|
|
Existing
|
620
|
|
|
960
|
|
|
680
|
|
|
520
|
|
|
550
|
|
|
3,330
|
|
|
Transmission and distribution
|
1,930
|
|
|
1,990
|
|
|
1,985
|
|
|
2,485
|
|
|
2,335
|
|
|
10,725
|
|
|
Nuclear fuel
|
170
|
|
|
125
|
|
|
190
|
|
|
170
|
|
|
210
|
|
|
865
|
|
|
General and other
|
245
|
|
|
265
|
|
|
240
|
|
|
185
|
|
|
185
|
|
|
1,120
|
|
|
Total
|
$
|
4,050
|
|
|
$
|
3,385
|
|
|
$
|
3,095
|
|
|
$
|
3,360
|
|
|
$
|
3,280
|
|
|
$
|
17,170
|
|
|
NEER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wind
(d)
|
$
|
2,040
|
|
|
$
|
75
|
|
|
$
|
30
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
2,195
|
|
|
Solar
(e)
|
1,240
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,250
|
|
|
Nuclear, including nuclear fuel
|
300
|
|
|
240
|
|
|
270
|
|
|
310
|
|
|
265
|
|
|
1,385
|
|
|
Natural gas pipelines
(f)
|
1,020
|
|
|
740
|
|
|
465
|
|
|
35
|
|
|
15
|
|
|
2,275
|
|
|
Other
|
495
|
|
|
60
|
|
|
75
|
|
|
50
|
|
|
65
|
|
|
745
|
|
|
Total
|
$
|
5,095
|
|
|
$
|
1,125
|
|
|