XML 28 R12.htm IDEA: XBRL DOCUMENT
v3.20.2

Derivative Instruments | 6 Months Ended
--- | ---
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the physical and financial risks inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated primarily with outstanding and expected future debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets. NEE and FPL do not utilize hedge accounting for their cash flow and fair value hedges. With respect to commodities related to NEE's competitive energy business, NEER employs risk management procedures to conduct its activities related to optimizing the value of its power generation and gas infrastructure assets, providing full energy and capacity requirements services primarily to distribution utilities, and engaging in power and gas marketing and trading activities to take advantage of expected future favorable price movements and changes in the expected volatility of prices in the energy markets. These risk management activities involve the use of derivative instruments executed within prescribed limits to manage the risk associated with fluctuating commodity prices. Transactions in derivative instruments are executed on recognized exchanges or via the OTC markets, depending on the most favorable credit terms and market execution factors. For NEER's power generation and gas infrastructure assets, derivative instruments are used to hedge all or a portion of the expected output of these assets. These hedges are designed to reduce the effect of adverse changes in the wholesale forward commodity markets associated with NEER's power generation and gas infrastructure assets. With regard to full energy and capacity requirements services, NEER is required to vary the quantity of energy and related services based on the load demands of the customers served. For this type of transaction, derivative instruments are used to hedge the anticipated electricity quantities required to serve these customers and reduce the effect of unfavorable changes in the forward energy markets. Additionally, NEER takes positions in energy markets based on differences between actual forward market levels and management's view of fundamental market conditions, including supply/demand imbalances, changes in traditional flows of energy, changes in short- and long-term weather patterns and anticipated regulatory and legislative outcomes. NEER uses derivative instruments to realize value from these market dislocations, subject to strict risk management limits around market, operational and credit exposure. Derivative instruments, when required to be marked to market, are recorded on NEE's and FPL's condensed consolidated balance sheets as either an asset or liability measured at fair value. At FPL, substantially all changes in the derivatives' fair value are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel clause. For NEE's non-rate regulated operations, predominantly NEER, essentially all changes in the derivatives' fair value for power purchases and sales, fuel sales and trading activities are recognized on a net basis in operating revenues and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's condensed consolidated statements of income. Settlement gains and losses are included within the line items in the condensed consolidated statements of income to which they relate. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis in the condensed consolidated statements of income. For commodity derivatives, NEE believes that, where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Settlements related to derivative instruments are primarily recognized in net cash provided by operating activities in NEE's and FPL's condensed consolidated statements of cash flows. For interest rate and foreign currency derivative instruments, all changes in the derivatives' fair value, as well as the transaction gain or loss on foreign denominated debt, are recognized in interest expense and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's condensed consolidated statements of income. In addition, for the six months ended June 30, 2020 and 2019, NEE reclassified from AOCI approximately $23 million ($3 million after tax) to gains on disposal of businesses/assets - net (see Note 11 - Disposal of Businesses) and $6 million ($5 million after tax) to interest expense, respectively, because it became probable that related future transactions being hedged would not occur. At June 30, 2020, NEE's AOCI included amounts related to discontinued interest rate cash flow hedges with expiration dates through March 2035 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $8 million of net losses included in AOCI at June 30, 2020 are expected to be reclassified into earnings within the next 12 months as the principal and/or interest payments are made. Such amounts assume no change in scheduled principal payments. Fair Value of Derivative Instruments - The tables below present NEE's and FPL's gross derivative positions at June 30, 2020 and December 31, 2019, 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 5 - Recurring Fair Value Measurements for netting information), as well as the location of the net derivative position on the condensed consolidated balance sheets.
| June 30, 2020
| Gross Basis |  | Net Basis
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (millions)
NEE: |  |  |  |  |  |  |
Commodity contracts | $ | 5,473 |  |  | $ | 3,428 |  |  | $ | 2,463 |  |  | $ | 546 |
Interest rate contracts | 38 |  |  | 1,470 |  |  | 8 |  |  | 1,440 |
Foreign currency contracts | — |  |  | 67 |  |  | (1 | ) |  | 66 |
Total fair values | $ | 5,511 |  |  | $ | 4,965 |  |  | $ | 2,470 |  |  | $ | 2,052 |
FPL: |  |  |  |  |  |  |
Commodity contracts | $ | 4 |  |  | $ | 13 |  |  | $ | 2 |  |  | $ | 11 |
Net fair value by NEE balance sheet line item: |  |  |  |  |  |  |
Current derivative assets(a) |  |  |  |  | $ | 708 |  |  |
Noncurrent derivative assets(b) |  |  |  |  | 1,762 |  |  |
Current derivative liabilities(c) |  |  |  |  |  |  | $ | 337 |
Noncurrent derivative liabilities |  |  |  |  |  |  | 1,715 |
Total derivatives |  |  |  |  | $ | 2,470 |  |  | $ | 2,052 |
Net fair value by FPL balance sheet line item: |  |  |  |  |  |  |
Current other assets |  |  |  |  | $ | 2 |  |  |
Current other liabilities |  |  |  |  |  |  | $ | 11 |
Total derivatives |  |  |  |  | $ | 2 |  |  | $ | 11 |
———————————————
(a) | Reflects the netting of approximately $1 million in margin cash collateral received from counterparties.
(b) | Reflects the netting of approximately $202 million in margin cash collateral received from counterparties.
(c) | Reflects the netting of approximately $75 million in margin cash collateral paid to counterparties.
| December 31, 2019
| Gross Basis |  | Net Basis
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (millions)
NEE: |  |  |  |  |  |  |
Commodity contracts | $ | 5,050 |  |  | $ | 3,201 |  |  | $ | 2,350 |  |  | $ | 576 |
Interest rate contracts | 26 |  |  | 742 |  |  | 9 |  |  | 725 |
Foreign currency contracts | 26 |  |  | 38 |  |  | 27 |  |  | 39 |
Total fair values | $ | 5,102 |  |  | $ | 3,981 |  |  | $ | 2,386 |  |  | $ | 1,340 |
FPL: |  |  |  |  |  |  |
Commodity contracts | $ | 4 |  |  | $ | 14 |  |  | $ | 3 |  |  | $ | 13 |
Net fair value by NEE balance sheet line item: |  |  |  |  |  |  |
Current derivative assets(a) |  |  |  |  | $ | 762 |  |  |
Noncurrent derivative assets(b) |  |  |  |  | 1,624 |  |  |
Current derivative liabilities(c) |  |  |  |  |  |  | $ | 344 |
Current other liabilities(d) |  |  |  |  |  |  | 133 |
Noncurrent derivative liabilities |  |  |  |  |  |  | 863 |
Total derivatives |  |  |  |  | $ | 2,386 |  |  | $ | 1,340 |
Net fair value by FPL balance sheet line item: |  |  |  |  |  |  |
Current other assets |  |  |  |  | $ | 3 |  |  |
Current other liabilities |  |  |  |  |  |  | $ | 12 |
Noncurrent other liabilities |  |  |  |  |  |  | 1 |
Total derivatives |  |  |  |  | $ | 3 |  |  | $ | 13 |
———————————————
(a) | Reflects the netting of approximately $2 million in margin cash collateral received from counterparties.
(b) | Reflects the netting of approximately $139 million in margin cash collateral received from counterparties.
(c) | Reflects the netting of approximately $66 million in margin cash collateral paid to counterparties.
(d) | See Note 11 - Disposal of Businesses.
At June 30, 2020 and December 31, 2019, NEE had approximately $12 million and $10 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets in the above presentation. These amounts are included in current other liabilities on NEE's condensed consolidated balance sheets. Additionally, at June 30, 2020 and December 31, 2019, NEE had approximately $326 million and $360 million (none at FPL), respectively, in margin cash collateral paid to counterparties that was not offset against derivative assets or liabilities in the above presentation. These amounts are included in current other assets on NEE's condensed consolidated balance sheets. Income Statement Impact of Derivative Instruments - Gains (losses) related to NEE's derivatives are recorded in NEE's condensed consolidated statements of income as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
| (millions)
Commodity contracts(a) - operating revenues | $ | (53 | ) |  | $ | 276 |  |  | $ | 572 |  |  | $ | 272 |
Foreign currency contracts - interest expense | 16 |  |  | 11 |  |  | (63 | ) |  | (8 | )
Interest rate contracts - interest expense | 64 |  |  | (204 | ) |  | (841 | ) |  | (530 | )
Losses reclassified from AOCI: |  |  |  |  |  |  |
Interest rate contracts(b) | (1 | ) |  | (6 | ) |  | (27 | ) |  | (18 | )
Foreign currency contracts - interest expense | (1 | ) |  | (1 | ) |  | (2 | ) |  | (2 | )
Total | $ | 25 |  |  | $ | 76 |  |  | $ | (361 | ) |  | $ | (286 | )
———————————————
(a) | For the three and six months ended June 30, 2020, FPL recorded gains of approximately $1 million and losses of approximately $2 million, respectively, related to commodity contracts as regulatory liabilities and regulatory assets, respectively, on its condensed consolidated balance sheets. For the three and six months ended June 30, 2019, FPL recorded gains of approximately $1 million and $4 million, respectively, related to commodity contracts as regulatory liabilities on its condensed consolidated balance sheets.
(b) | For the six months ended June 30, 2020, approximately $23 million was reclassified to gains on disposal of businesses/assets - net (see Note 11 - Disposal of Businesses); remaining balances were reclassified to interest expense on NEE's condensed consolidated statements of income.
Notional Volumes of Derivative Instruments - The following table represents net notional volumes associated with derivative instruments that are required to be reported at fair value in NEE's and FPL's condensed consolidated financial statements. The table includes significant volumes of transactions that have minimal exposure to commodity price changes because they are variably priced agreements. These volumes are only an indication of the commodity exposure that is managed through the use of derivatives. They do not represent net physical asset positions or non-derivative positions and the related 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:
|  | June 30, 2020 |  | December 31, 2019
Commodity Type |  | NEE |  | FPL |  | NEE |  | FPL
|  | (millions)
Power |  | (72 | ) |  | MWh |  | — |  |  | MWh |  | (81 | ) |  | MWh |  | 1 |  |  | MWh
Natural gas |  | (120 | ) |  | MMBtu |  | 229 |  |  | MMBtu |  | (1,723 | ) |  | MMBtu |  | 161 |  |  | MMBtu
Oil |  | (13 | ) |  | barrels |  | — |  |  |  |  | (13 | ) |  | barrels |  | — |  |  |
At June 30, 2020 and December 31, 2019, NEE had interest rate contracts with a net notional amount of approximately $8.3 billion and $8.9 billion, respectively, and foreign currency contracts with a net notional amount of approximately $960 million and $1.0 billion, 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 June 30, 2020 and December 31, 2019, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $2.5 billion ($12 million for FPL) and $1.7 billion ($12 million for FPL), respectively. If the credit-risk-related contingent features underlying these derivative agreements were triggered, certain subsidiaries of NEE, including FPL, could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain derivative contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL's and NEECH's credit ratings were downgraded to BBB/Baa2 (a three level downgrade for FPL and a one level downgrade for NEECH from the current lowest applicable rating), applicable NEE subsidiaries would be required to post collateral such that the total posted collateral would be approximately $130 million (none at FPL) at June 30, 2020 and $215 million (none at FPL) at December 31, 2019. If FPL's and NEECH's credit ratings were downgraded to below investment grade, applicable NEE subsidiaries would be required to post additional collateral such that the total posted collateral would be approximately $1.0 billion ($55 million at FPL) at June 30, 2020 and $1.2 billion ($35 million at FPL) at December 31, 2019. Some derivative contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered, applicable NEE subsidiaries could be required to post additional collateral of up to approximately $1.3 billion ($55 million at FPL) at June 30, 2020 and $590 million ($75 million at FPL) at December 31, 2019. Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At June 30, 2020 and December 31, 2019, applicable NEE subsidiaries have posted approximately $2 million (none at FPL) and $2 million (none at FPL), respectively, in cash and $84 million (none at FPL) and $88 million (none at FPL), respectively, in the form of letters of credit, each of which could be applied toward the collateral requirements described above. FPL and NEECH have capacity under their 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 whereby 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.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration