Annual Report 2011
Annual Report 2011
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Annual Report 2011
Annual Report 2011
Workers inspect the
exhaust end of a highly
efficient combustion
turbine being installed
at the Cape Canaveral
Next Generation Clean
Energy Center.
Invest g
in
Affordable and Reliable Energy
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ANNUAL REPORT
AR-1
2011
2010
% change
1,923
$
1,957
(1.7)
Financial Highlights
Year End ($ in millions, except per share amounts)
FINANCIAL RESULTS
Net Income
Adjustments, net of income taxes:
Net unrealized mark-to-market gains
associated with non-qualifying hedges
Loss on sale of natural gas-fi red generating assets
Other than temporary impairment losses – net
Adjusted Earnings
Earnings Per Share (assuming dilution)
Adjustments:
Net unrealized mark-to-market gains
associated with non-qualifying hedges
Loss on sale of natural gas-fi red generating assets
Other than temporary impairment losses – net
Adjusted Earnings Per Share (assuming dilution)
Operating Revenues
Operating Income
Cash Flows from Operating Activities
Total Assets
COMMON STOCK DATA
Weighted-Average Shares Outstanding
(assuming dilution – millions)
Dividends Per Share
Book Value Per Share
Market Price Per Share (high – low)
$
$
$
$
$
$
$
$
$
$
$
(190)
98
6
1,837
4.59
(0.45)
0.24
0.01
4.39
15,341
3,378
4,074
57,188
419
2.20
35.91
61.20 - 49.00
$
$
$
$
$
$
$
$
$
$
(175)
–
(4)
1,778
4.74
(0.43)
–
(0.01)
4.30
15,317
3,243
3,834
52,994
413
2.00
34.36
56.26 - 45.29
OPERATING DATA
Utility Energy Sales (kilowatt-hour – millions)
FPL Customer Accounts (year end – thousands)
Employees (year end)
106,662
4,554
15,048
107,978
4,527
14,977
FORWARD-LOOKING STATEMENTS: This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any
statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance (often, but not
always, through the use of words or phrases such as will, will likely result, are expected to, will continue, is anticipated, aim, believe, could, should, would, estimated,
may, plan, potential, future, projection, goals, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward
looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualifi ed in their entirety by reference
to important factors included in Part I, Item 1A. Risk Factors at pages 24-35 of the enclosed Form 10-K (in addition to any assumptions and other factors referred to
specifi cally in connection with such forward-looking statements) that could have a signifi cant impact on NextEra Energy’s operations and fi nancial results, and could cause
NextEra Energy’s actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of NextEra Energy in this report,
in presentations, on its website, in response to questions or otherwise. Any forward-looking statement speaks only as of the date on which such statement is made, and
NextEra Energy undertakes no obligation to update any forward-looking statement to refl ect events or circumstances, including, but not limited to, unanticipated events,
after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict
all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained or implied in any forward-looking statement.
NextEra Energy, Inc.
NextEra Energy, Inc. (NYSE: NEE) is a leading clean energy company with 2011 revenues of more than $15.3 billion, more than 41,000 megawatts of generating
capacity, and approximately 15,000 employees in 24 states and Canada. Headquartered in Juno Beach, Fla., NextEra Energy’s principal subsidiaries are
Florida Power & Light Company, which serves approximately 4.6 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in
the country, and NextEra Energy Resources, LLC, which together with its affiliated entities is the largest generator in the United States of renewable energy from
the wind and sun. Through its subsidiaries, NextEra Energy operates the third largest number of commercial nuclear power units in the United States. For more
information about NextEra Energy companies, visit these websites: www.NextEraEnergy.com, www.FPL.com, www.NextEraEnergyResources.com.
Cover photo by: Pedro Portal
3.3
(3.2)
2.1
0.2
4.2
6.3
7.9
1.5
10.0
4.5
(1.2)
0.6
0.5
Investing in Affordable
and Reliable Energy
To our shareholders:
NextEra Energy generated solid results in 2011, and proved that we can deliver value despite the challenges and
uncertainties of the current environment. Florida Power & Light Company (FPL) continued to deliver the lowest electricity bill
in Florida and one of the best value propositions of any electric utility in the entire nation. NextEra Energy Resources, LLC
(with its subsidiaries, “NextEra Energy Resources”) remains the biggest generator of wind and solar power in the United
States, and is now developing the largest backlog of renewable projects we have ever had.
Our scale and strength helped us set another
all-time high for our company’s adjusted
earnings per share in 2011. Our 2011 growth
in adjusted earnings per share, at 2.1 percent,1
was roughly in line with what our peers have
delivered on average over the past 10 years,
which includes a long period when market
conditions were much more favorable than
they are today. Moreover, our profitability, as
reflected in 2011 adjusted return on equity
(ROE)2, continues to be better than the long-
term industry median.
Lewis Hay, III
Chairman and
Chief Executive Offi cer
support our efforts to deliver exceptional
system reliability.
NextEra Energy Resources faced several
challenges in 2011, yet we reached key
milestones as well. We signed nearly
2,200 megawatts (MW) of long-term wind
and solar contracts in 2011, our most ever in
a single year. On the solar front, the company
has between 850 and 950 MW of already-
contracted solar projects expected to enter
service through 2016. Our wind business in
2011 generated nearly 25 million megawatt-
hours of electricity, which is comparable to
FPL has a clear strategy of investing in new,
clean power generation to continue delivering benefits to
our customers, and one of those projects is featured on the
front cover of this report. The new Cape Canaveral Next
Generation Clean Energy Center is a $1 billion investment.
Because it will use 33 percent less fuel per megawatt-hour
of power generated, this plant effectively pays for itself
primarily due to fuel savings estimated at more than
$1 billion over the 30-year operational life of the plant. At
the same time, it will generate far fewer emissions and
NextEra Energy
Dividends Per Share
2007-2012 Compound Annual Growth Rate: 8%
$2.20
$2.40
$1.64
$1.78
$1.89
$2.00
the retail output of such utilities as OGE Energy, Alliant
Energy or Great Plains Energy.
We believe that NextEra Energy is well positioned to
continue to deliver outstanding value to our shareholders
over the long term. For the 10 years ended Dec. 31, 2011,
our adjusted earnings per share grew at a compound
annual rate of 6.3 percent,3 compared to the 2.2 percent
compound annual growth rate of the S&P 500 Electric
Utilities Index. Our dividends per share also grew at a
10-year Total Shareholder Return*
1/1/2002-12/31/11
209%
129%
33%
2007
2008
2009
2010
2011
2012*
S&P 500
S&P 500 Electric
Utilities Index
NextEra
Energy
* Projected based upon dividend of $0.60 declared on Feb. 17, 2012, for payment on March 15, 2012; dividend
declarations are subject to the discretion of the Board of Directors of NextEra Energy.
* With dividend reinvestment
Source: Bloomberg
1 See inside front cover for reconciliations of adjusted amounts to GAAP.
2 See page AR-6 for reconciliations of Adjusted Return on Equity (ROE) to GAAP ROE.
3 See page AR-6 for reconciliations of adjusted amounts to GAAP.
ANNUAL REPORT
AR-1
compound annual rate of 7 percent for the 10 years ended
Dec. 31, 2011, compared to a 4.9 percent rate for the S&P
500 Electric Utilities Index. Over the 10 years ended Dec.
31, 2011, our total shareholder return was 209 percent,
compared to 129 percent for the S&P 500 Electric Utilities
Index and 33 percent for the S&P 500 Index. In February
2012, we announced an increase in our quarterly dividend
to 60 cents per share, which is consistent with the current
expectation of the Board of Directors to target a payout
ratio, expressed relative to adjusted earnings, of about
55 percent in 2014. We remain focused on building long-
term value for our shareholders by investing in energy
technologies that are designed to provide affordable and
reliable power for our customers for years to come.
Florida Power & Light Company
For the full year 2011, FPL reported net income of $1.07
billion, or $2.55 per share, compared with $945 million, or
$2.29 per share, in 2010. The main drivers of this earnings
growth were our investments in clean and efficient power
generation. These investments provide significant benefits
for our customers, who have electric bills that are the
lowest in Florida and 25 percent lower than the national
average. Our customers enjoy reliability that ranks as the
best in the state among investor-owned utilities as well
as award-winning customer service. FPL customers also
benefit from an emissions profile that is among the best in
the industry.
During 2011, FPL deployed more than $3 billion in capital on
projects providing significant customer benefits. In addition
to Cape Canaveral, other major capital investments also
moved forward last year. Unit 3 at our West County Energy
Center in Palm Beach County came into service on time
and under budget. Local officials and residents from Riviera
Beach, also in Palm Beach County, enjoyed witnessing
firsthand the demolition of the old Riviera plant, paving the
way for another modernization. We began to pursue a third
modernization project, Port Everglades in Broward County,
which is also expected to save customers hundreds of
millions of dollars over and above the cost of the plant.
Operationally, FPL’s fossil fuel fleet set a new record for its
fuel efficiency in 2011, bringing its systemwide heat rate −
a key measure of power plant efficiency − down to 7,803
British thermal units (BTU) per kilowatt-hour. The average
fossil heat rate for the electric utility industry was 10,045
BTUs per kilowatt-hour for 2010, the most recent year for
which data is available. Since 2001, FPL’s fossil heat rate
has improved by 19 percent, and greater fuel efficiency has
saved our customers more than $5.5 billion in fuel costs,
including more than $650 million in 2011 alone. As fuel
costs for our customers have averaged nearly $5 billion per
year over the five years ended in 2011, FPL’s fuel efficiency
since 2001 has saved our customers the equivalent of
approximately one year’s supply of fuel.
FPL also had a very good year in keeping operations and
maintenance (O&M) costs low, and reliability high. FPL’s
O&M expenses for all of 2011 were 1.64 cents per retail
kilowatt-hour sales, compared with the latest available
industry average of 2.28 cents per retail kilowatt-hour
sales. FPL’s service reliability, as measured by the System
Average Interruption Duration Index (SAIDI), was the best
among Florida investor-owned utilities during the five years
ended in 2011.
We are proud of the affordable and reliable electric power
FPL delivered to our 4.6 million customers in 2011, and
we believe our investments will continue to benefit our
customers going forward. Through 2013, we expect to
invest an average of approximately $3 billion per year in
generation and infrastructure projects that benefit our
customers, including new, clean, efficient power generation.
In part to help pay for these investments and to maintain
our superior performance for customers, FPL has filed
with the Florida Public Service Commission a request for
an increase, currently estimated at $6.97 per month, or
about 23 cents per day, on the base portion of a typical
residential bill beginning in 2013. We know there is never
a good time to ask for a rate increase. Yet because of
projected fuel savings resulting from investments in more
efficient power generation, as well as lower fuel prices and
AR-2
ANNUAL REPORT
other adjustments, the net increase that a typical residential
customer would pay is currently estimated at less than
$2.50 per month, or about 8 cents per day. So even with
the increase, we expect to continue to deliver the lowest
typical residential bill in Florida.
NextEra Energy Resources
NextEra Energy Resources reported 2011 net income on a
GAAP basis of $774 million, or $1.85 per share, compared
with $980 million, or $2.37 per share, in 2010. On an
adjusted basis, NextEra Energy Resources’ 2011 earnings
were $679 million, or $1.62 per share, compared with $800
million, or $1.93 per share, for the full year 2010.4
These results did not meet the expectations we set out for
ourselves at the beginning of the year, for several reasons.
We were overly optimistic about the market environment for
our proprietary trading activities, and so we have reduced
our expectations for these activities to reflect softer market
conditions. We had unplanned and extended outages at
our Seabrook nuclear facility, which led to less availability
than we had anticipated. We were negatively impacted by
the extreme heat in Texas in August, and since then we
have made a number of operational changes to improve
our responsiveness and resilience should such extreme
conditions recur.
Finally, we had hoped to get a few more megawatts of
new renewable projects in the ground by the end of 2011.
Instead, two projects were pushed into the first quarter of
this year. The long-term financial impact on these projects
will be minimal, as the projects are still expected to qualify
for relevant tax incentives.
Strong enterprises succeed despite their challenges, and
that is what NextEra Energy Resources did in 2011. Our
non-nuclear generating facilities performed exceptionally
well, with one of our lowest forced-outage rates on record.
We had a banner year for development of new renewable
energy projects, which created the largest backlog of new
renewable energy projects in our history. We believe we are
positioned well to grow in the years ahead, and to extend
our leadership as the largest generator in the United States
of renewable energy from the wind and the sun.
We entered into long-term contracts for more than 1,600
MW of wind generation during 2011, with expected in-service
dates through 2014. We added approximately 380 MW of
wind generation during the year, and we remain on track to
add approximately 1,400 to 2,000 MW of new wind assets to
our portfolio during the two years ending on Dec. 31, 2012.
On the solar front, our company’s backlog of 940 MW of
contracted solar projects includes our 50 percent portion
of the recently announced Desert Sunlight project and 100
percent of the recently announced McCoy photovoltaic
project, both in California. Including all of the planned solar
projects that are already under long-term contract, NextEra
Energy Resources plans to invest between $2.1 billion
and $2.3 billion from 2011 through 2012, and between
$1.3 billion and $1.5 billion in 2013 and 2014 in solar
development projects. The backlog of contracted solar
opportunities is expected to begin contributing meaningfully
to cash flow and earnings in 2013.
In 2012, NextEra Energy is urging policymakers to extend
policy support for renewable energy, including through
extension of the federal Production Tax Credit (PTC)
for wind energy. This incentive is a good deal for U.S.
taxpayers, as it has encouraged tens of billions of dollars
of private investment in high-tech American manufacturing.
Indeed, investment in new wind projects that would follow
an extension of the PTC is projected to generate tax
revenues for federal, state and local governments that are
larger than the cost of the extension itself. Over the past
three years, investment in wind technology has decreased
the cost of wind energy by nearly one-third and increased
its efficiency by more than 20 percent. We believe the
PTC has proven its value, and we are hoping that the past
bipartisan consensus to support it will re-emerge.
Recognition of Excellence
As NextEra Energy’s leadership position in the electric
power industry has grown, so has our reputation. In 2011,
4 See page AR-6 for reconciliations of adjusted amounts to GAAP.
ANNUAL REPORT
AR-3
Finally, 2012 will be a year of transition as I have
announced my intention to retire at the end of 2013 as
part of a planned leadership succession process. Jim
Robo, currently our President and Chief Operating Officer,
will succeed me as Chief Executive Officer effective July 1,
2012, and I will serve as Executive Chairman, a full-time
role, from July 1 until my retirement.
I’ve been extremely blessed and privileged to have had the
opportunity to lead NextEra Energy over the past 11 years.
I have a deep passion for our company and enormous love
and respect for our people. I’m extremely proud of what
our team has accomplished during my tenure.
Jim Robo has been an invaluable partner and was
instrumental in developing and executing on NextEra
Energy’s clean energy growth strategy over the past
decade. He is an insightful strategist, experienced operator
and proven developer of talent. Jim is fully qualified and
clearly ready for his new role leading our company.
With that in mind, this is the perfect time for our company
to start this transition. NextEra Energy is in great shape,
both financially and operationally, and we have a great
team and an outstanding successor in place who will
undoubtedly take this company to even higher levels of
performance.
We thank you for your continued support and interest in
NextEra Energy.
Lewis Hay, III
Lewis Hay, III
Chairman and Chief Executive Officer
March 22, 2012
we were named to the prestigious Dow Jones Sustainability
Index for the third year in a row. In 2012, we were named
No. 1 in our sector on Fortune magazine’s “World's Most
Admired Companies” list for the sixth year in a row.
At FPL, we continued to deliver award-winning customer
service. For an industry-record eighth consecutive
year, FPL earned the ServiceOne Award for exceptional
customer service, which is presented annually by PA
Consulting Group. The worldwide consulting firm also
honored FPL with ServiceOne Balanced Scorecard
Achievement Awards for our customer care, billing, meter
reading and field meters departments. FPL was also one
of three utilities honored for Outstanding Customer Service
by the 25 national chain customers that comprise the
Customer Advisory Group of the Edison Electric Institute.
A Legacy of Leadership
We expect 2012 to be a year of new opportunities for
NextEra Energy, but it is also a year for showing gratitude
to a highly respected leader in the utility industry. After
40 years of dedicated and successful service to our
company, FPL Chief Executive Officer Armando Olivera
has announced that he will retire in May. He has led FPL
with extraordinary success since June 2003 and leaves
the business one of the strongest and best-performing
utilities anywhere in the nation. In addition to managing
the business, Armando has always focused on developing
the next generation of leaders. We are confident that Eric
Silagy, who was named President of FPL in December
and who has worked closely with Armando for the last
four years, will continue the culture of excellence Armando
has developed. We thank Armando for his service, we
congratulate him on his remarkable record, and we all wish
him well.
We also thank J. Hyatt Brown, who is retiring from the
NextEra Energy Board of Directors after more than 23
years of dedicated service. Hyatt has given wise counsel
and steady leadership throughout his tenure, including his
service as Lead Director in 2010-2011 and as the current
chair of the Board’s Governance & Nominating Committee.
AR-4
ANNUAL REPORT
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
Exact name of registrants as specified in their
charters, address of principal executive offices and
registrants' telephone number
NEXTERA ENERGY, INC.
FLORIDA POWER & LIGHT COMPANY
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
Commission
File
Number
1-8841
2-27612
State or other jurisdiction of incorporation or organization: Florida
Securities registered pursuant to Section 12(b) of the Act:
NextEra Energy, Inc.:
Florida Power & Light Company: None
Common Stock, $0.01 Par Value
IRS Employer
Identification
Number
59-2449419
59-0247775
Name of exchange
on which registered
New York Stock Exchange
Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act of 1933.
NextEra Energy, Inc. Yes
No
Florida Power & Light Company Yes
No
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.
NextEra Energy, Inc. Yes
No
Florida Power & Light Company Yes
No
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) have been subject to such filing requirements for the past 90 days.
NextEra Energy, Inc. Yes
No
Florida Power & Light Company Yes
No
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit
and post such files).
NextEra Energy, Inc. Yes
No
Florida Power & Light Company Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants'
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrants are a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.
NextEra Energy, Inc.
Florida Power & Light Company
Large Accelerated Filer
Large Accelerated Filer
Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Smaller Reporting Company
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes
No
Aggregate market value of the voting and non-voting common equity of NextEra Energy, Inc. held by non-affiliates as of June 30, 2011 (based on the closing market
price on the Composite Tape on June 30, 2011) was $24,179,141,166.
There was no voting or non-voting common equity of Florida Power & Light Company held by non-affiliates as of June 30, 2011.
The number of shares outstanding of NextEra Energy, Inc. common stock, as of the latest practicable date: Common Stock, $0.01 par value, outstanding as of January 31,
2012: 416,208,761 shares.
As of January 31, 2012, there were issued and outstanding 1,000 shares of Florida Power & Light Company common stock, without par value, all of which were held,
beneficially and of record, by NextEra Energy, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of NextEra Energy, Inc.'s Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated by reference in Part III hereof.
________________________
This combined Form 10-K represents separate filings by NextEra Energy, Inc. and Florida Power & Light Company. Information contained herein relating to an individual
registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to NextEra Energy, Inc.'s
other operations.
Florida Power & Light Company meets the conditions set forth in General Instruction I.(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
Acronyms and defined terms used in the text include the following:
DEFINITIONS
Term
AFUDC
AFUDC - debt
AFUDC - equity
AOCI
capacity clause
CFTC
CO2
DOE
Duane Arnold
EPA
ERCOT
FDEP
FERC
FPL
FPL FiberNet
FPSC
fuel clause
GAAP
GHG
ISO
ITCs
kw
kwh
Lone Star
Management's Discussion
mortgage
mw
mwh
NEE
NEECH
NEER
NERC
Note __
NOx
NRC
O&M expenses
OCI
OTC
OTTI
PJM
PMI
Point Beach
PTCs
PUCT
PURPA
PV
RFP
ROE
regulatory ROE
RPS
RTO
Seabrook
SEC
SO2
U.S.
WCEC
Meaning
allowance for funds used during construction
debt component of allowance for funds used during construction
equity component of allowance for funds used during construction
accumulated other comprehensive income
capacity cost recovery clause, as established by the FPSC
U.S. Commodity Futures Trading Commission
carbon dioxide
U.S. Department of Energy
Duane Arnold Energy Center
U.S. Environmental Protection Agency
Electric Reliability Council of Texas
Florida Department of Environmental Protection
Federal Energy Regulatory Commission
Florida Power & Light Company
Fiber-optic telecommunications business
Florida Public Service Commission
fuel and purchased power cost recovery clause, as established by the FPSC
generally accepted accounting principles in the U.S.
greenhouse gas(es)
independent system operator
investment tax credits
kilowatt
kilowatt-hour(s)
Lone Star Transmission, LLC
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
mortgage and deed of trust dated as of January 1, 1944, from FPL to Deutsche Bank Trust Company Americas, as
supplemented and amended
megawatt(s)
megawatt-hour(s)
NextEra Energy, Inc.
NextEra Energy Capital Holdings, Inc.
NextEra Energy Resources, LLC
North American Electric Reliability Corporation
Note __ to consolidated financial statements
nitrogen oxide
U.S. Nuclear Regulatory Commission
other operations and maintenance expenses in the consolidated statements of income
other comprehensive income
over-the-counter
other than temporary impairment
PJM Interconnection, L.L.C.
NextEra Energy Power Marketing, LLC
Point Beach Nuclear Power Plant
production tax credits
Public Utility Commission of Texas
Public Utility Regulatory Policies Act of 1978, as amended
photovoltaic
request for proposal
return on common equity
return on common equity as determined for regulatory purposes
renewable portfolio standards
regional transmission organization
Seabrook Station
U.S. Securities and Exchange Commission
sulfur dioxide
United States of America
FPL's West County Energy Center in western Palm Beach County, Florida
NEE, FPL, NEECH and NEER each has subsidiaries and affiliates with names that may include NextEra Energy, FPL, NextEra
Energy Resources, FPL Group Capital, FPL Energy, FPLE and similar references. For convenience and simplicity, in this report
the terms NEE, FPL, NEECH and NEER are sometimes used as abbreviated references to specific subsidiaries, affiliates or groups
of subsidiaries or affiliates. The precise meaning depends on the context.
2
TABLE OF CONTENTS
Definitions
Forward-Looking Statements
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
Signatures
PART IV
Page No.
2
3
4
24
35
36
39
39
39
41
41
67
68
120
120
120
121
121
121
121
122
123
131
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any
statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, strategies, future events
or performance (often, but not always, through the use of words or phrases such as will, will likely result, are expected to, will
continue, is anticipated, aim, believe, could, should, would, estimated, may, plan, potential, future, projection, goals, target, outlook,
predict and intend or words of similar meaning) are not statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by
reference to, and are accompanied by, important factors included in Part I, Item 1A. Risk Factors (in addition to any assumptions
and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact
on NEE's and/or FPL's operations and financial results, and could cause NEE's and/or FPL's actual results to differ materially from
those contained or implied in forward-looking statements made by or on behalf of NEE and/or FPL in this combined Form 10-K, in
presentations, on their respective websites, in response to questions or otherwise.
Any forward-looking statement speaks only as of the date on which such statement is made, and NEE and FPL undertake no
obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated
events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time
and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or
implied in any forward-looking statement.
3
Item 1. Business
OVERVIEW
PART I
NextEra Energy, Inc. (hereafter, NEE) is one of the largest electric power companies in North America, with over 41,000 mw of
generating capacity in 24 states in the U.S. and 3 provinces in Canada, and employing approximately 14,800 people as of
December 31, 2011. NEE provides retail and wholesale electric services to more than 4 million customers and owns generation,
transmission and distribution facilities to support its services. It also purchases electric power for resale to its customers and
provides risk management services related to power and gas consumption for a limited number of customers. NEE is the largest
generator in the U.S. of renewable energy from the wind and sun and owned approximately 18% of the installed base of U.S. wind
power production capacity as of December 31, 2011. NEE also produces electricity from solar facilities, and owns and operates
one of the largest fleets of nuclear power stations in the U.S., with eight reactors at five sites located in four states, representing
approximately 6% of U.S. nuclear power electric generating capacity as of December 31, 2011. NEE's business strategy has
emphasized the development, acquisition and operation of renewables, nuclear and natural gas-fired generation facilities in response
to long-term federal policy trends supportive of zero and low air emissions sources of power. NEE's generation fleet has significantly
lower rates of emissions of CO2, SO2 and NOx than the average rates of the U.S. electric power industry with approximately 93%
of its 2011 generation, measured by mwh produced, coming from renewables, nuclear and natural gas-fired facilities. Certain
environmental attributes of NEE's electric generating facilities, such as renewable energy credits, emissions reductions, offsets,
allowances and the avoided emission of GHG pollutants, have been or likely will be sold or transferred to third parties, who are
solely entitled to the reporting rights and ownership of the environmental attributes.
NEE was incorporated in 1984 under the laws of Florida and conducts its operations principally through two wholly-owned
subsidiaries, Florida Power & Light Company (hereafter, FPL) and NextEra Energy Resources, LLC (hereafter, NEER). NextEra
Energy Capital Holdings, Inc. (hereafter, NEECH), another wholly-owned subsidiary of NEE, owns and provides funding for NEER's
and NEE's other operating subsidiaries, other than FPL and its subsidiaries. NEE's two principal businesses also constitute NEE's
reportable segments for financial reporting purposes, as illustrated below:
FPL is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in
Florida. FPL is the largest electric utility in the state of Florida and one of the largest electric utilities in the U.S. based on
generation. FPL is vertically integrated, with approximately 24,500 mw of generating capacity as of December 31, 2011. FPL's
investments in its infrastructure since 2001, such as modernizing less efficient generating plants and upgrading its transmission
and distribution systems, have allowed FPL to produce more energy with less fuel and fewer air emissions, and deliver service
reliability that was among the best of the Florida investor-owned utilities, all while providing residential and commercial bills that
were among the lowest in Florida and below the national average based on a rate per kwh as of July 2011. With 85% of its power
generation coming from natural gas, nuclear and solar, FPL is also one of the cleanest electric utilities in the nation. Based on 2011
information, FPL's emissions rates for CO2, SO2 and NOx were 36%, 84% and 72% lower, respectively, than the average rates of
the U.S. electric power industry.
NEER is one of the largest wholesale generators of electric power in the U.S., with approximately 16,600 mw of generating capacity
across 22 states and 3 Canadian provinces as of December 31, 2011. NEER produces the majority of its electricity from clean and
renewable sources, including wind, solar and hydro. NEER also provides full energy and capacity requirements services, owns a
retail electricity provider serving customers in 13 states and the District of Columbia and engages in power and gas marketing and
trading activities.
NEECH's other business activities are primarily conducted through FPL FiberNet and Lone Star. FPL FiberNet delivers wholesale
and enterprise telecommunications services in Florida and certain areas of the South Central U.S. Lone Star, a rate-regulated
transmission service provider in Texas, is constructing transmission lines and other associated facilities in Texas.
4
NEE seeks to create value in its two principal businesses by meeting its customers' needs more economically and more reliably
than its competitors, as described in more detail in the following sections. NEE's strategy has resulted in profitable growth over
sustained periods at both FPL and NEER. Management seeks to grow each business in a manner consistent with the varying
opportunities open to it and does not maintain any specific goal as to the relative size of the two businesses. However, management
believes that the diversification and balance represented by FPL and NEER is a valuable characteristic of the enterprise.
NEE'S OPERATING SUBSIDIARIES
I. FPL
FPL was incorporated under the laws of Florida in 1925, and is a wholly-owned subsidiary of NEE. FPL is a rate-regulated electric
utility and is the largest electric utility in the state of Florida and one of the largest electric utilities in the U.S based on generation. FPL,
with 24,460 mw of generating capacity at December 31, 2011, supplies electric service throughout most of the east and lower west
coasts of Florida, serving nearly 8.9 million people through approximately 4.6 million customer accounts. At December 31, 2011,
FPL's service territory and plant locations are as follows (see Item 2 - Generating Facilities):
FRANCHISE AGREEMENTS AND COMPETITION
FPL's service to its retail customers is provided primarily under franchise agreements negotiated with municipalities or
counties. Municipalities and counties may form their own utility companies to provide service to their residents. In a few cases,
the franchise agreement provides the municipality or county the right to buy the distribution assets serving local residents at the
end of the agreement. However, during the term of a franchise agreement, which is typically 30-years, the municipality or county
agrees not to form its own utility, and FPL has the right to offer electric service to residents. FPL currently holds 178 franchise
agreements with various municipalities and counties in Florida with varying expiration dates through 2042. Four of these franchise
agreements expire in 2013 and 174 expire during the period 2014 through 2042. These franchise agreements cover approximately
83% of FPL's retail customer base in Florida. Negotiations are ongoing to renew the franchise agreements that expire in 2013. FPL
considers its franchises to be adequate for the conduct of its business. FPL also provides service to 11 other municipalities and to
22 unincorporated areas within its service area without franchise agreements pursuant to the general obligation to serve as a public
utility, relying upon Florida law for access to public rights of way.
Because any retail customer may elect to provide his/her own services, FPL effectively must compete for an individual customer's
business. As a practical matter, few customers provide their own service at the present time since FPL's cost of service is generally
substantially lower than the cost of self-generation for the vast majority of customers. Changing technology and economic conditions
could alter the favorable relative cost position that FPL currently enjoys; however, FPL seeks as a matter of strategy to ensure that
it delivers superior value, in the form of high reliability, low bills and excellent customer service.
FPL also faces competition from other suppliers of electrical energy to wholesale customers and from alternative energy sources
and self-generation for other customer groups, primarily industrial customers. In 2011, 2010 and 2009, operating revenues from
wholesale and industrial customers combined represented approximately 3%, 3% and 4%, respectively, of FPL's total operating
revenues.
The FPSC promotes cost competitiveness in the building of new steam generating capacity by requiring investor-owned electric
utilities, including FPL, to issue a request for proposal (RFP) except when the FPSC determines that an exception from the RFP
process is in the public interest. The RFP process allows independent power producers and others to bid to supply the new
generating capacity. If a bidder has the most cost-effective alternative, meets other criteria such as financial viability and
5
demonstrates adequate expertise and experience in building and/or operating generating capacity of the type proposed, the investor-
owned electric utility would seek to negotiate a purchased power agreement with the selected bidder and request that the FPSC
approve the terms of the purchased power agreement and, if appropriate, provide the required authorization for the construction
of the bidder's generating capacity. New nuclear power plants are exempt from the RFP requirement. See FPL Sources of
Generation - Nuclear Operations below regarding FPL's planned two additional nuclear units at Turkey Point.
CUSTOMERS AND REVENUE
FPL's primary source of operating revenues is from its retail customer base; it also serves a limited number of wholesale customers
within Florida. The percentage of FPL's operating revenues and customer accounts by customer class were as follows:
For both retail and wholesale customers, the prices (or rates) that FPL may charge are controlled by regulation, by the FPSC in
the case of retail customers, and by the FERC in the case of wholesale customers. In general, under U.S. and Florida law, regulated
rates are intended to cover the cost of providing service, including an appropriate rate of return on capital employed. However, the
regulatory bodies have authority to determine the relevant cost of providing service and the appropriate rate of return on capital
employed and there can be no guarantee that FPL will be able to earn any particular rate of return or recover all or any portion of
its costs through regulated rates. See discussion of regulation at FPL Regulation - FPL Rate Regulation below.
As noted above, FPL seeks to maintain attractive rates for its customers. A common benchmark used in the electric power industry
for comparing rates across companies is the cost per 1,000 kwh of consumption per month for a residential customer. FPL's 2011
average cost per 1,000 kwh of monthly residential usage was the lowest of the 55 electric utilities within Florida as indicated below:
6
TRANSMISSION AND DISTRIBUTION
FPL provides service to its customers through an integrated transmission and distribution system that links all its generation facilities
to all its customers. FPL also maintains interconnection facilities with neighboring utilities and wholesale power providers, enabling
it to buy and sell wholesale electricity outside its service territory and to enhance the reliability of its own network and support the
reliability of neighboring networks. FPL's transmission system carries high voltage electricity from its generating facilities to
substations where the electricity is stepped down to lower voltage levels and is sent through the distribution system to its customers.
A key element of FPL's strategy is to provide highly reliable service to its customers. The transmission and distribution system is
susceptible to interruptions or outages from a wide variety of sources including weather, animal interference, traffic accidents,
equipment failure and many others, and FPL seeks to reduce or eliminate outages where economically practical and to restore
service rapidly in the event of an outage. A common benchmark for transmission and distribution system reliability is the system
average interruption duration index (SAIDI), which represents the number of minutes the average customer is without power during
a time period. During the five years ended 2010, FPL had the best average SAIDI of the Florida investor-owned utilities.
FPL SYSTEM CAPABILITY AND LOAD
At December 31, 2011, FPL's resources for serving load consisted of 26,538 mw, of which 24,460 mw were from FPL-owned
facilities (see Item 2 - Generating Facilities) and 2,078 mw were available through purchased power agreements (see FPL Sources
of Generation - Purchased Power below). Occasionally, unusually cold temperatures during the winter months result in significant
increases in electricity usage for short periods of time. However, customer usage and operating revenues are typically higher during
the summer months, largely due to the prevalent use of air conditioning in FPL's service territory. The highest peak load FPL has
served to date was 24,346 mw, which occurred on January 11, 2010. FPL had adequate resources available at the time of this
peak to meet customer demand.
FPL's projected reserve margin for the summer of 2012 is approximately 28%. This reserve margin is expected to be achieved
through the combination of available output from FPL's active generating units, purchased power agreements and the capability to
reduce peak demand through the implementation of demand side management programs, including load management which was
estimated at December 31, 2011 to be capable of reducing demand by 1,817 mw, and energy efficiency and conservation
programs. See FPL Sources of Generation - Fossil Operations and Nuclear Operations below regarding generation projects
currently under construction.
FPL SOURCES OF GENERATION
FPL relies upon a diverse mix of fuel sources for its generating facilities, along with purchased power, in order to maintain the
flexibility to achieve a more economical fuel mix by responding to market and industry developments. See descriptions of fossil,
nuclear and solar operations below and a listing of FPL's generating facilities in Item 2 - Generating Facilities.
FPL's 2011 fuel mix based on mwh produced, including purchased power, was as follows:
7
Fossil Operations (Natural Gas, Coal and Oil)
At December 31, 2011, FPL owned and operated 78 units that used fossil fuels such as natural gas and/or oil, and had a joint
ownership interest in three coal units, which combined provided 21,455 mw of generating capacity for FPL. These fossil units are
out of service from time to time for routine maintenance or on standby during periods of reduced electricity demand.
FPL's natural gas plants require natural gas transportation, supply and storage. FPL has firm transportation contracts in place with
four different transportation suppliers with expiration dates ranging from 2015 to 2036 that together are expected to satisfy
substantially all of the anticipated needs for natural gas transportation at existing units. To the extent desirable, FPL also purchases
interruptible natural gas transportation service from these natural gas suppliers based on pipeline availability. FPL has several
short- and medium-term natural gas supply contracts to provide a portion of FPL's anticipated needs for natural gas. The remainder
of FPL's natural gas requirements is purchased in the spot market. FPL has an agreement for the storage of natural gas that expires
in 2013. See Note 14 - Contracts. With respect to its oil plants, FPL obtains its fuel requirements in the spot market.
St. Johns River Power Park (SJRPP) Units Nos. 1 and 2, in which FPL has a joint ownership interest, has a coal supply and
transportation contract for all of the 2012 fuel needs and a portion of the 2013 and 2014 fuel needs for those units. All of the
transportation requirements and a portion of the coal supply needs for Scherer Unit No. 4, the other coal unit in which FPL has a
joint ownership interest, are covered by a series of annual and long-term contracts. The remaining fuel requirements for these
units will be obtained in the spot market. See Note 14 - Contracts.
Modernization Projects. FPL is in the process of modernizing its Cape Canaveral and Riviera Beach power plants to high-efficiency
natural gas-fired units and expects the units to be placed in service by June 2013 and by 2014, respectively. Each modernized
plant is expected to provide approximately 1,200 mw of capacity. In November 2011, FPL filed a need petition with the FPSC to
modernize its Port Everglades power plant to a high-efficiency natural gas-fired unit. The modernized Port Everglades unit is
expected to provide approximately 1,280 mw of capacity, be in service in 2016 and cost approximately $1.2 billion. The modernization
of the Port Everglades plant is contingent upon, among other things, FPSC approval. An FPSC decision regarding the modernization
of the Port Everglades plant is expected in late March 2012.
Nuclear Operations
At December 31, 2011, FPL owned, or had undivided interests in, and operated the following four nuclear units with a total net
generating capacity of 2,970 mw.
Facility
St. Lucie Unit No. 1
St. Lucie Unit No. 2
Turkey Point Unit No. 3
Turkey Point Unit No. 4
mw
839
745
693
693
Operating License
Expiration Dates
2036
2043
2032
2033
FPL has several contracts for the supply of uranium and the conversion, enrichment and fabrication of nuclear fuel with expiration
dates ranging from March 2012 through 2022. See Note 14 - Contracts. NRC regulations require FPL to submit a plan for
decontamination and decommissioning five years before the projected end of plant operation. FPL's current plans, under the
applicable operating licenses, provide for prompt dismantlement of Turkey Point Units Nos. 3 and 4 with decommissioning activities
commencing in 2032 and 2033, respectively. Current plans 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 commencing in 2043. See
Management's Discussion - Critical Accounting Policies and Estimates - Nuclear Decommissioning and Fossil/Solar Dismantlement.
Projects to Add Additional Capacity. FPL is in the process of adding approximately 450 mw to 490 mw of capacity at its existing
nuclear units at St. Lucie and Turkey Point, which is expected to result in significant fuel cost savings compared to other sources
of generation over the lives of the units. The additional capacity is projected to be placed in service by 2013; approximately 31 mw
were placed in service in May 2011 at St. Lucie Unit No. 2. As part of the conditions of certification by the FDEP for the Turkey
Point project, FPL was required to implement a monitoring plan in and around the Turkey Point cooling canals due to concerns over
potential saltwater intrusion beyond FPL's property. Monitoring under the plan includes collection of data prior to and after the
additional capacity is placed in service. Data for the first year has been collected and provided to the FDEP. The ultimate results
of the monitoring plan are uncertain, and the financial and operational impacts on FPL, if any, cannot be determined at this time. In
2008, the FPSC approved FPL's need petition for two additional nuclear units at its Turkey Point site. The two units combined are
expected to add approximately 2,200 mw of capacity and have projected in-service dates between 2022 and 2023. Additional
approvals from other regulatory agencies will be required later in the development process.
Nuclear Unit Scheduled Refueling Outages. FPL's nuclear units are periodically removed from service to accommodate normal
refueling and maintenance outages, including inspections, repairs and certain other modifications. Scheduled nuclear refueling
outages typically require the unit to be removed from service for variable lengths of time. The scheduled nuclear refueling outages
8
for 2012 are all expanded scope outages related to the addition of capacity at the existing nuclear units which are expected to
require the unit to be removed from service for between 110 and 160 days. The following table summarizes each unit's current or
next scheduled refueling outage:
Facility
St. Lucie Unit No. 1
St. Lucie Unit No. 2
Turkey Point Unit No. 3
Turkey Point Unit No. 4
Beginning of Current or Next
Scheduled Refueling Outage
November 2011
August 2012
February 2012
November 2012
Disposition of Spent Nuclear Fuel. FPL's nuclear facilities use both on-site storage pools and dry storage casks to store spent
nuclear fuel generated by these facilities, which are expected to allow FPL to store spent nuclear fuel at these facilities through
license expiration.
Under the Nuclear Waste Policy Act of 1982, as amended (Nuclear Waste Policy Act), the DOE is responsible for the development
of a repository for the disposal of spent nuclear fuel and high-level radioactive waste. As required by the Nuclear Waste Policy Act,
FPL is a party to contracts with the DOE to provide for disposal of spent nuclear fuel from its nuclear units.
The DOE was required to construct permanent disposal facilities and take title to and provide transportation and disposal for spent
nuclear fuel by January 31, 1998 for a specified fee based on current generation from nuclear power plants. The DOE did not meet
its statutory obligation for disposal of spent nuclear fuel under the Nuclear Waste Policy Act. In 2009, FPL and certain nuclear plant
joint owners entered into a settlement agreement (spent fuel settlement agreement) with the U.S. government agreeing to dismiss
with prejudice lawsuits filed against the U.S. government seeking damages caused by the DOE's failure to dispose of spent nuclear
fuel from FPL's nuclear plants. The spent fuel settlement agreement permits FPL to make annual filings to recover certain spent
fuel storage costs incurred by FPL which are payable by the U.S. government on an annual basis. In a separate lawsuit filed in
2011, FPL joined the Nuclear Energy Institute and several other nuclear plant owners and operators in petitioning the U.S. Court
of Appeals for the District of Columbia (D.C. Circuit) to challenge the DOE's decision to continue to collect the nuclear waste fee,
which petition is pending. FPL will continue to pay fees to the U.S. government's nuclear waste fund pending the D.C. Circuit's
decision on the fee suspension petition.
In March 2010, the DOE filed a motion with the NRC to withdraw its license application for a nuclear waste repository at Yucca
Mountain. The DOE's withdrawal motion has been challenged and is being litigated before the NRC and the D.C. Circuit. In light
of the Obama Administration's decision not to proceed with the Yucca Mountain repository project, the DOE established a Blue
Ribbon Commission on America's Nuclear Future (BRC) to conduct a comprehensive review of policies for managing the back end
of the nuclear fuel cycle and to provide recommendations for developing a safe, long-term solution to managing spent nuclear fuel
and high-level radioactive waste. In January 2012, the BRC issued its report and recommendations which include a consent-based
approach, working with all affected units of government, to siting future nuclear waste management facilities, creation of a new
organization, independent of the DOE, dedicated solely to assuring the safe storage and ultimate disposal of spent nuclear fuel
and high-level radioactive waste, providing access to the U.S. government's nuclear waste fund for the purpose of nuclear waste
storage and disposal and initiating prompt efforts to develop geologic disposal facilities, consolidated interim storage facilities and
transportation to those facilities. The BRC's recommendations are not expected to result in any immediate change to the nuclear
waste management and disposal situation.
Recent Nuclear Developments. As a result of the impact of the March 2011 earthquake and tsunami on nuclear facilities in Japan,
the NRC established a task force to conduct a comprehensive review of processes and regulations relating to nuclear facilities in
the U.S. to determine whether the NRC should make additional improvements to its regulatory system and to make recommendations
to the NRC for its policy direction. In July 2011, the NRC task force released its recommendations to the NRC and, since then, the
NRC staff presented certain conclusions based on their review of the task force recommendations, which conclusions have been
approved by the NRC. The NRC staff's report concluded that none of the findings addressed by the task force recommendations
rise to the level of an imminent hazard to public health and safety. However, since the recommendations can contribute to safety
improvements, the NRC staff proposed the following actions: 1) issue orders within approximately six months to require each nuclear
site to purchase portable equipment and revise procedures to address multi-unit events, provide reliable spent fuel pool
instrumentation and enhance containment venting capabilities for boiling water reactors (FPL's nuclear units do not use boiling
water reactors); 2) request each site to re-evaluate its seismic and flood protection designs in light of current requirements and
identify any areas for improvement; and 3) issue new regulations requiring enhancements relating to extended periods of loss of
alternating current power, emergency preparedness and spent fuel pool cooling capabilities. The NRC is reviewing the timeline for
implementation of all of the actions, but has indicated that all actions should be completed by the end of 2016. FPL is currently
reviewing the NRC's directions relating to the NRC staff's recommendations and assessing the potential financial and operational
impacts on its nuclear units.
The lessons learned from the events in Japan and the results of the NRC's review of the NRC staff's recommendations may, among
other things, result in changes in or new licensing and safety-related requirements for U.S. nuclear facilities. Changes in or new
requirements could, among other things, impact the capacity additions (uprates) at FPL's existing nuclear units at St. Lucie and
9
Turkey Point, and future licensing and operations of U.S. nuclear facilities, including FPL's existing nuclear facilities and the NRC
approval of two additional nuclear units at FPL's Turkey Point site, and could, among other things, result in increased cost and
capital expenditures associated with the operation and maintenance of FPL's nuclear units. While the NRC continues its review,
FPL continues to work with industry organizations to understand the events in Japan and apply lessons learned, which may result
in FPL proactively making certain modifications to its nuclear facilities to, among other things, improve operational and safety
systems prior to any potential requirements being imposed by the NRC. Any modifications could, among other things, result in
increased cost and capital expenditures associated with the operation and maintenance of FPL's nuclear units. Third parties have
requested that the NRC suspend the approval of nuclear uprates, nuclear license extensions and new licenses, including approval
of licenses for two additional nuclear units at FPL's Turkey Point site. Another third party request was filed with the NRC seeking
immediate suspension of the NRC operating licenses for all boiling water reactors that use a certain primary containment system
pending completion of the NRC review. The NRC denied the request for immediate action related to the suspension of operating
licenses for boiling water reactors, and, since the nuclear events in Japan, has continued to grant approvals for nuclear uprates
and license extensions. However, it is uncertain at this time how and when the NRC will respond to the other items in these requests
or other requests it may receive, or take action with regard to the timing for implementation of all of the NRC staff's recommendations.
Solar Operations
Solar generation can be provided primarily through two conventions, utility-owned and customer-owned. In utility-owned solar
generation, the energy generated goes directly to the transmission grid, whereas, customer-owned solar generation goes directly
to the location it is serving. There are two principal solar technologies used for utility-scale projects: photovoltaic and thermal. FPL
placed its first utility-scale solar generating facility into service in 2009 and placed two additional solar generating facilities in service
in 2010. FPL's three solar generating facilities consist of a 25 mw solar PV facility in DeSoto County, Florida, a 10 mw solar PV
facility in Brevard County, Florida and a 75 mw solar thermal facility in Martin County, Florida.
Purchased Power
In addition to owning generation facilities, FPL also purchases electricity from other utilities to meet customer demand through long-
and short-term purchased power agreements. As of December 31, 2011, FPL's long-term purchased power agreements provided
for the purchase of approximately 2,190 mw of power with expiration dates ranging from May 2012 through 2034. See Note 14 -
Contracts. FPL also procures short-term capacity for both economic and reliability purposes.
FPL ENERGY MARKETING AND TRADING
FPL's Energy Marketing & Trading division (EMT) buys and sells wholesale energy commodities, such as natural gas, oil and
electricity. EMT procures natural gas and oil for FPL's use in power generation and sells excess natural gas, oil and electricity. EMT
also uses derivative instruments (primarily swaps, options and forwards) to manage the commodity price risk inherent in the purchase
and sale of fuel and electricity. Substantially all of the results of EMT's activities are passed through to customers in the fuel or
capacity clauses. See FPL Regulation - FPL Rate Regulation below, Management's Discussion - Energy Marketing and Trading
and Market Risk Sensitivity and Note 3.
FPL REGULATION
FPL's operations are subject to regulation by a number of federal, state and other organizations, including, but not limited to, the
following:
•
•
•
•
•
The FPSC, which has jurisdiction over retail rates, service territory, issuances of securities, planning, siting and construction
of facilities, among other things.
The FERC, which oversees the acquisition and disposition of facilities, transmission services and wholesale purchases and
sales of electric energy, among other things.
The NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval
by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system
blackouts.
The NRC, which has jurisdiction over the operation of FPL's nuclear power plants through the issuance of operating licenses,
rules, regulations and orders. See FPL Sources of Generation - Nuclear Operations above.
The EPA, which has the responsibility to maintain and enforce national standards under a variety of environmental laws. The
EPA also works with industries and all levels of government in a wide variety of voluntary pollution prevention programs and
energy conservation efforts.
FPL Rate Regulation
The FPSC sets rates at a level that is intended to allow FPL the opportunity to collect from retail customers total revenues (revenue
requirements) equal to FPL's cost of providing service, including a reasonable rate of return on invested capital. To accomplish
this, the FPSC uses various ratemaking mechanisms, including, among other things, base rates and cost recovery clauses.
10
Base Rates. In general, the basic costs of providing electric service, other than fuel and certain other costs, are recovered through
base rates, which are designed to recover the costs of constructing, operating and maintaining the utility system. These basic costs
include O&M expenses, depreciation and taxes, as well as a return on FPL's investment in assets used and useful in providing
electric service (rate base). At the time base rates are determined, the allowed rate of return on rate base approximates the FPSC's
determination of FPL's estimated weighted-average cost of capital, which includes its costs for outstanding debt and an allowed
ROE. The FPSC monitors FPL's actual regulatory ROE through a surveillance report that is filed monthly by FPL with the FPSC. The
FPSC does not provide assurance that any ROE will be achieved. Base rates are determined in rate proceedings or through
negotiated settlements of those proceedings, which occur at the initiative of FPL, the FPSC, the State of Florida Office of Public
Counsel or a substantially affected party. Base rates remain in effect until new base rates are approved by the FPSC.
Effective March 1, 2010, pursuant to an FPSC final order (FPSC rate order) new retail base rates for FPL were established, resulting
in an increase in retail base revenues of approximately $75 million on an annualized basis. The FPSC rate order also established
a regulatory ROE of 10.0% with a range of plus or minus 100 basis points and an adjusted regulatory equity ratio of 59.1%. It also
shifted certain costs from retail base rates to the capacity clause. (See Cost Recovery Clauses below for additional information
regarding the capacity clause.) In addition, the FPSC rate order directed FPL to reduce depreciation expense (surplus depreciation
credit) over the 2010 to 2013 period related to a depreciation reserve surplus. In February 2011, the FPSC issued a final order
approving a stipulation and settlement agreement between FPL, the State of Florida Office of Public Counsel, the Florida Attorney
General's Office and all other principal parties in FPL's 2009 rate case regarding FPL's base rates (2010 rate agreement), which
enables FPL to earn a regulatory ROE of up to 11% per year over the term of the 2010 rate agreement. Key elements of the 2010
rate agreement, which is effective through December 31, 2012, are as follows:
•
•
•
•
•
Subject to the provisions of the 2010 rate agreement, retail base rates are effectively frozen through the end of 2012.
Incremental cost recovery through FPL's capacity clause for the new combined-cycle natural gas unit at WCEC (WCEC Unit
No. 3), which was placed in service in May 2011, is permitted up to the amount of the projected annual fuel savings for customers
during the term of the 2010 rate agreement.
Future storm restoration costs would be recoverable on an accelerated basis beginning 60 days from the filing of a cost recovery
petition, but capped at an amount that produces a surcharge of no more than $4 for every 1,000 kwh of 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.
If FPL's earned regulatory ROE falls below 9%, FPL may seek retail base rate relief. If FPL's earned regulatory ROE rises
above 11%, any party to the 2010 rate agreement may seek a reduction in FPL's retail base rates. In determining the regulatory
ROE for all purposes under the 2010 rate agreement, earnings will be calculated on an actual, non-weather-adjusted basis.
FPL can vary the amount of surplus depreciation credit taken in any calendar year up to a cap in 2010 of $267 million, a cap
in subsequent years of $267 million plus the amount of any unused portion from prior years, and a total cap of $776 million
(surplus depreciation credit cap) over the course of the 2010 rate agreement, provided that in any year of the 2010 rate
agreement FPL must use at least enough surplus depreciation credit to maintain a 9% earned regulatory ROE but may not
use any amount of surplus depreciation credit that would result in an earned regulatory ROE in excess of 11%.
In January 2012, FPL notified the FPSC of its intent to initiate a base rate proceeding in 2012. See Recent Regulatory Developments
below.
Cost Recovery Clauses. 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 the various clauses, include substantially all fuel, purchased power and interchange
expenses, conservation and certain environmental-related expenses, certain revenue taxes and franchise fees. Beginning in 2009,
pre-construction costs and carrying charges on construction costs for FPL's planned two additional nuclear units at Turkey Point
and carrying charges on construction costs for FPL's approximately 450 mw to 490 mw of additional capacity at St. Lucie and Turkey
Point are also recoverable through a cost recovery clause. Also beginning in 2009, costs incurred for FPL's three solar generating
facilities are recoverable through a cost recovery clause. Cost recovery clause costs are recovered through levelized monthly
charges per kwh or kw, depending on the customer's rate class. These cost recovery clause charges are calculated at least annually
based on estimated costs and estimated customer usage for the following year, plus or minus a true-up adjustment to reflect the
estimated over or under recovery of costs in the current year. An adjustment to the levelized charges may be approved during the
course of a year to reflect revised estimates.
Fuel costs are recovered from customers through the fuel clause, the most significant of the cost recovery clauses. FPL uses a
risk management fuel procurement program which has been approved by the FPSC. The FPSC reviews the program activities
and results for prudence annually as part of its review of fuel costs. The program is intended to manage fuel price volatility by
locking in fuel prices for a portion of FPL's fuel requirements. See FPL Energy Marketing and Trading above, Management's
Discussion - FPL: Results of Operations, Note 1 - Regulation and Note 3.
Capacity payments to other utilities and generating companies for purchased power are recovered from customers through the
capacity clause. In accordance with the FPSC's nuclear cost recovery rule, FPL also recovers pre-construction costs and carrying
charges (equal to a pretax AFUDC rate) on construction costs for new nuclear capacity through the capacity clause. As property
related to the new nuclear capacity goes into service, construction costs and a return on investment are recovered through base
rate increases effective beginning the following January. See FPL Sources of Generation - Nuclear Operations above. In
11
accordance with the 2010 rate agreement, cost recovery for WCEC Unit No. 3, which was placed in service in May 2011, is permitted
up to the amount of the projected annual fuel savings for customers during the term of the 2010 rate agreement through FPL's
capacity clause and is reported as retail base revenues.
Costs associated with implementing energy conservation programs are recovered from customers through the energy conservation
cost recovery clause. Certain costs of complying with federal, state and local environmental regulations enacted after April 1993
and costs associated with FPL's three solar facilities are recovered through the environmental compliance cost recovery clause
(environmental clause).
The FPSC has the authority to disallow recovery of costs that it considers excessive or imprudently incurred. These costs may
include, among others, fuel and O&M expenses, the cost of replacing power lost when fossil and nuclear units are unavailable,
storm restoration costs and costs associated with the construction or acquisition of new facilities.
FERC
The Federal Power Act gives the FERC exclusive ratemaking jurisdiction over wholesale sales of electricity and the transmission
of electricity in interstate commerce. Pursuant to the Federal Power Act, electric utilities must maintain tariffs and rate schedules
on file with the FERC which govern the rates, terms and conditions for the provision of FERC-jurisdictional wholesale power and
transmission services. The Federal Power Act also gives the FERC authority to certify and oversee a national electric reliability
organization with authority to develop mandatory reliability standards applicable to all users, owners and operators of bulk-power
systems. The FERC also approves reliability standards and makes them enforceable. See NERC below. Electric utilities also are
subject to accounting, record-keeping and reporting requirements administered by the FERC. The FERC also places certain
limitations on transactions between electric utilities and their affiliates.
NERC
The NERC has been certified by the FERC as the national electric reliability organization. The NERC ensures the reliability and
security of the North American bulk power system. The NERC's regional entities establish requirements, approved by the FERC,
for reliable operation and maintenance of power generation facilities and transmission systems. FPL is subject to these reliability
requirements and can incur significant penalties for failing to comply with them. Each NERC region reports seasonally and annually
on the status of generation and transmission in each region.
FPL Environmental Regulation
FPL is subject to environmental laws and regulations, and is affected by some of the emerging issues, described in the NEE
Environmental Matters section below. FPL expects to seek recovery through the environmental clause for compliance costs
associated with any new environmental laws and regulations.
During 2011, FPL spent approximately $117 million on capital additions related to environmental matters, primarily to comply with
existing environmental laws and regulations. FPL's capital expenditures related to environmental matters are estimated to total
approximately $325 million for 2012 through 2014, including $118 million in 2012.
Recent Regulatory Developments
In January 2012, FPL filed a formal notification with the FPSC indicating its intent to initiate a base rate proceeding. The notification
stated that, based on preliminary estimates, FPL expects to request a base rate increase of approximately $525 million effective
January 2013 and an additional base rate increase of approximately $170 million annually commencing when the modernized Cape
Canaveral plant becomes operational, which is expected to occur in June 2013. FPL expects to propose an allowed regulatory
ROE of 11.25% with a 0.25% ROE adder, which is included in the base rate increase FPL expects to request, if FPL maintains the
lowest typical residential customer bill among all the electric utilities in Florida. FPL expects to file its formal request to initiate a
base rate proceeding before the end of the first quarter of 2012 with a final FPSC decision expected in the fourth quarter of 2012
in time for new rates to be effective January 1, 2013.
FPL EMPLOYEES
FPL had approximately 9,800 employees at December 31, 2011. Approximately 31% of the employees are represented by the
International Brotherhood of Electrical Workers (IBEW) under a collective bargaining agreement with FPL that expires October 31,
2014.
12
II. NEER
NEER was formed in 1998 to aggregate NEE's competitive energy businesses. It is a limited liability company organized under
the laws of Delaware and is a wholly-owned subsidiary of NEECH. Through its subsidiaries, NEER currently owns, develops,
constructs, manages and operates electric generating facilities in wholesale energy markets primarily in the U.S., as well as in
Canada and Spain. See Note 15. NEER is one of the largest wholesale generators of electric power in the U.S., with 16,607 mw
of generating capacity across 22 states and 3 Canadian provinces as of December 31, 2011. NEER produces the majority of its
electricity from clean and renewable sources as described more fully below. NEER is the largest owner of wind and solar energy
projects in the U.S. and one of the largest owners and developers of wind projects in Canada. Since 2002, NEER has more than
doubled its generating capacity, primarily through the development of new wind projects and acquisition of nuclear projects.
In addition, NEER provides full energy and capacity requirements services primarily to distribution utilities in certain markets, offers
customized power and gas and related risk management services to wholesale customers and engages in power and gas marketing
and trading activities. NEER also owns a retail electricity provider serving customers in 13 states and the District of Columbia and
engages in limited development of natural gas reserves, as well as pipeline infrastructure, through non-operating ownership interests,
hereafter referred to as the gas infrastructure business.
MARKETS AND COMPETITION
Electricity markets in the U.S. are regional and diverse in character. All are extensively regulated, and competition in these markets
is shaped and constrained by regulation. The nature of the products offered varies based on the specifics of regulation in each
region, and the degree of control participants have over pricing also varies. Generally, in addition to the natural constraints on
pricing freedom presented by competition, NEER may also face specific constraints in the form of price caps, or maximum allowed
prices, for certain products. NEER's ability to sell the output of its generation facilities is also constrained by available transmission
capacity, which can vary from time to time and can have a significant impact on pricing.
The degree and nature of competition that NEER faces is different in wholesale markets and in retail markets. The majority of
NEER's revenue, roughly 90%, is derived from wholesale markets.
Wholesale power generation is a capital-intensive, commodity-driven business with numerous industry participants. NEER
competes on the basis of the location of its plants and ownership of multiple plants in various regions, which increases the reliability
of its energy supply. Wholesale power generation is a regional business that is currently highly fragmented relative to other
commodity industries and diverse in terms of industry structure. As such, there is a wide variation in terms of the capabilities,
resources, nature and identity of the companies NEER competes with depending on the market. In wholesale markets, customers'
needs are met through a variety of means, including long-term bilateral contracts, standardized bilateral products such as full
requirements service and customized supply and risk management services.
In general, U.S. electricity markets encompass three classes of product: energy, capacity and ancillary services. Energy services
relate to the physical delivery of power; capacity services relate to the availability of mw capacity of a power generation asset; and
ancillary services are other services related to power generation assets, for example, load-following services, which require the
supplier of energy to vary the quantity delivered based on the load demand needs of the customer. The exact nature of these
classes of product is defined in part by regulation. Not all regions have a capacity product class, and the specific definitions of
ancillary services vary from region to region.
RTOs and ISOs exist in a number of regions within which NEER operates to coordinate generation and transmission across wide
geographic areas. NEER also has operations that fall within the Western Electricity Coordinating Council reliability region that are
not under the jurisdiction of an established RTO or ISO. Although each RTO and ISO may have differing objectives and structures,
some benefits of these entities include regional planning, managing transmission congestion, developing larger wholesale markets
for energy and capacity, maintaining reliability and facilitating competition among wholesale electricity providers. NEER has
operations that fall within the following RTOs and ISOs:
Alberta Electric System Operator
California Independent System Operator
ERCOT
Independent Electricity System Operator
ISO New England
•
•
•
•
•
• Midwest Independent Transmission System Operator (MISO)
•
•
•
New York Independent System Operator (NYISO)
PJM
Southwest Power Pool
13
NEER competes in different regions to different degrees, but in general it seeks to enter into long-term bilateral contracts for the
full output of its generating facilities, and approximately 55% of NEER's generating capacity is fully committed under long-term
contracts. In some regions long-term contracts are not practical and NEER sells the output of its facilities into daily spot markets. In
such cases, NEER will frequently enter into shorter term bilateral contracts, typically but not always of one to three years duration,
to hedge the price risk associated with selling into a daily spot market. Such bilateral contracts, which may be hedges either for
physical delivery or for financial (pricing) offset, may only protect a portion of the revenue that NEER expects to derive from the
associated generation facility and may not qualify for hedge accounting under GAAP. Contracts that serve the economic purpose
of hedging some portion of the expected revenue of a generation facility but are not recorded as hedges under GAAP are referred
to as “non-qualifying hedges” for adjusted earnings purposes. See Management's Discussion - Overview.
While the majority of NEER's revenue is derived from the output of its generating facilities, NEER is also an active competitor in
several regions in the wholesale full requirements business and in providing structured and customized power and gas products
and services to a variety of customers. In the full requirements service, the supplier agrees to meet the customer's needs for a full
range of products for every hour of the day for a fixed period of time, thereby assuming the risk of fluctuations in the customer's
volume requirements.
The deregulated retail energy business is typically a highly competitive business. In general, competition in the retail energy
business is on the basis of price, service, brand image, product offerings and market perceptions of creditworthiness. Electricity
is sold pursuant to a variety of product types, including fixed, indexed and renewable products, and customers elect terms of service
typically ranging from one month to five years. Retail energy rates are market-based, and not subject to traditional cost-of-service
regulation by public service commissions. Non-affiliated transmission and distribution service companies provide, on a non-
discriminatory basis, the wires and metering services necessary to access customers. Subsidiaries of NEER compete in certain
states for retail customers, which can be divided into two principal segments: residential and commercial and industrial
(C&I). Residential customers largely require only energy services, which may be purchased on a month-to-month basis or under
a multi-year contract. Large C&I customers share many of the same characteristics as wholesale utility customers and may require
similarly customized and structured products.
In general, competitive retail electric providers are exposed to both volume and price risk: customers' volumes will vary, and
competitive retail providers are committed to supplying the customer's full needs at all times and are therefore responsible for
purchases in wholesale markets to meet those needs; and wholesale prices will fluctuate in ways that do not necessarily match
the retail prices committed to the customer.
Expanded competition
for
NEER. Opportunities exist for the selective acquisition of generation assets and for the construction and operation of efficient
facilities that can sell power in competitive markets. NEER seeks to reduce its market risk by having a diversified portfolio by fuel
type and location, as well as by contracting for the future sale of a significant amount of the electricity output of its facilities.
frequently changing regulatory environment presents both opportunities and risks
in a
14
GENERATION AND OTHER OPERATIONS
The vast majority of NEER's revenue is derived from selling the products (energy, capacity and ancillary services) produced by its
own generating facilities. To a limited extent, NEER also meets its customers' needs through purchases of relevant products in
wholesale markets and may combine purchases with sales from its own assets in order to meet particular customers' needs.
At December 31, 2011, the locations of NEER's generation facilities in North America are as follows:
At December 31, 2011, NEER managed or participated in the management of essentially all of its projects in which it has an
ownership interest.
NEER categorizes its portfolio in a number of different ways for different business purposes. See a listing of NEER's generating
facilities in Item 2 - Generating Facilities. The following combination of the presence/absence of long-term contracts, fuel/technology
and region is a common presentation that NEE has used in communicating its business:
Contracted, Merchant and Other Operations
NEER's portfolio of operations based on the presence/absence of long-term contracts and other operations is described below.
Contracted Assets. Contracted assets are projects with long-term power sales agreements for substantially all of their output and
certain wind assets where long-term power contracts are expected to be executed. At December 31, 2011, NEER had 9,647 mw
of contracted assets, substantially all of which have long-term power contracts. Essentially all of the output of these contracted
assets were under power sales agreements, with a weighted-average remaining contract life of approximately 16 years, and have
firm fuel and transportation agreements with expiration dates ranging from March 2012 through 2022. See Note 14 -
Contracts. Approximately 6,860 mw of this capacity is wind generation and 1,621 mw of this capacity is nuclear generation. The
remaining 1,166 mw use a variety of fuels and technologies such as natural gas, oil and solar.
Merchant Assets. Merchant assets are projects that do not have long-term power sales agreements to sell their output, or, in the
case of certain wind assets, are not expected to have long-term power contracts, and therefore require active marketing and
hedging. At December 31, 2011, NEER's portfolio of merchant assets consists of 6,960 mw of owned wind, nuclear, natural gas,
oil, solar and hydro generation facilities, including 846 mw of peak generating facilities. Approximately 60% (based on net mw
capacity) of the natural gas-fueled merchant assets have natural gas transportation agreements to provide for fluctuating natural
15
gas requirements. See Note 14 - Contracts. Derivative instruments (primarily swaps, options, futures and forwards) are used to
lock in pricing and manage the commodity price risk inherent in power sales and fuel purchases. Managing market risk through
these instruments introduces other types of risk, primarily counterparty, credit and operational risks.
Other. NEER's operations also include the gas infrastructure and customer supply and proprietary power and gas trading
businesses. See NEER Customer Supply and Proprietary Power and Gas Trading below.
NEER Fuel/Technology Mix
NEER's generating capacity is produced using a variety of fuel sources as further described below.
Wind Facilities
At December 31, 2011, NEER had ownership interests in wind generating facilities with a total capacity of 8,569 mw (net
ownership). NEER operates substantially all of these wind facilities, which are located in 17 states and Canada. NEER added 379
mw of new wind generation in 2011, including 128 mw related to the repowering of two California wind facilities, and expects to add
approximately 1,150 mw to 1,500 mw of new wind generation in 2012.
Natural Gas Facilities
At December 31, 2011, NEER had 3,991 mw of natural gas assets. NEER owns and operates 1,004 mw of natural gas-fired
generation from contracted assets located throughout the Northeast. During 2011, subsidiaries of NEER sold their ownership
interests in a portfolio of natural gas-fired generating assets totaling approximately 2,700 mw of capacity located in California,
Virginia, Alabama, South Carolina and Rhode Island. See Management's Discussion - Overview and Note 4 - Nonrecurring Fair
Value Measurements.
Nuclear Facilities
At December 31, 2011, NEER owned, or had undivided interests in, and operated the following four nuclear units with a total net
generating capacity of 2,721 mw.
Facility
Seabrook
Duane Arnold
Point Beach Unit No. 1
Point Beach Unit No. 2
Location
New Hampshire
Iowa
Wisconsin
Wisconsin
mw
1,100
431
595
595
Portfolio
Category
Operating License
Expiration Dates
Merchant
Contracted(b)
Contracted(c)
Contracted(c)
(a)
2030
2034
2030
2033
__________________
(a)
In 2010, NEER filed an application with the NRC to renew Seabrook's operating license for an additional 20 years.
(b) NEER sells substantially all of its share of the output of Duane Arnold under a long-term contract expiring in 2014.
(c) NEER sells all of the output of Point Beach Units Nos. 1 and 2 under long-term contracts through the current operating license terms.
16
NEER's nuclear facilities have several contracts for the supply of uranium and conversion, enrichment and fabrication of nuclear
fuel with expiration dates ranging from March 2012 through 2022. See Note 14 - Contracts. NEER is responsible for all nuclear
unit operations and the ultimate decommissioning of the nuclear units, the cost of which is shared on a pro-rata basis by the joint
owners for the jointly owned units. NRC regulations require plant owners to submit a plan for decontamination and decommissioning
five years before the projected end of plant operation. See estimated decommissioning cost data in Management's Discussion -
Critical Accounting Policies and Estimates - Nuclear Decommissioning and Fossil/Solar Dismantlement.
Nuclear Unit Scheduled Refueling Outages. NEER's nuclear units are periodically removed from service to accommodate normal
refueling and maintenance outages, including inspections, repairs and certain other modifications. Scheduled nuclear refueling
outages typically require the unit to be removed from service for variable lengths of time. The duration is longer for expanded scope
outages, one of which is scheduled at Duane Arnold in 2012 and is expected to last approximately 60 days. The following table
summarizes the next scheduled refueling outages:
Facility
Seabrook
Duane Arnold
Point Beach Unit No. 1
Next Scheduled
Refueling Outage
October 2012
October 2012
April 2013
Point Beach Unit No. 2
November 2012
Disposition of Spent Nuclear Fuel. NEER's nuclear facilities use both on-site storage pools and dry storage casks to store spent
nuclear fuel generated by these facilities, which are expected to allow NEER to store spent nuclear fuel at these facilities through
license expiration.
As owners and operators of nuclear facilities, certain subsidiaries of NEER are subject to the Nuclear Waste Policy Act and are
parties to the spent fuel settlement agreement and legal actions described in I. FPL - Nuclear Operations. Similar to FPL, these
subsidiaries will continue to pay fees to the U.S. government's nuclear waste fund pending the D.C. Circuit's decision on the fee
suspension petition.
Recent Nuclear Developments. For discussion of current developments regarding the impact of the 2011 earthquake and tsunami
in Japan as it relates to U.S. nuclear facilities, see I. FPL - Nuclear Operations. NEER's nuclear facilities are subject to the same
potential NRC actions as described for FPL. Duane Arnold is NEER's only boiling water reactor unit. NEER is currently reviewing
the NRC's directions relating to the NRC staff's recommendations and assessing the potential financial and operational impact on
its nuclear units.
Solar Facilities
NEER is one of the largest owners of utility-scale solar energy projects in the U.S., principally through a 310 mw facility in California's
Mojave Desert, of which 148 mw is owned by NEER as of December 31, 2011. NEER is in the process of constructing solar thermal
facilities with generating capacity of 99.8 mw in Spain (Spain solar project) and 250 mw in California (Genesis solar project), which
are expected to be completed in 2013 and 2014, respectively. In addition, a 550 mw solar PV project in California (Desert Sunlight
solar project), in which NEER has a 50% equity investment, has commenced construction and commercial operation is expected
to be phased in during 2013 through 2015. During 2011, NEER added approximately 5 mw of new solar generation.
Other Assets
At December 31, 2011, NEER had 1,168 mw of generation assets from a variety of other fuel technologies, including oil and
hydropower, with facilities located throughout the Northeast.
17
NEER Generation by Geographic Region
NEER's generating capacity spans various geographic regions in North America, thereby reducing overall volatility related to varying
market conditions and seasonality on a portfolio basis. NEER's generating facilities at December 31, 2011 are categorized by
geographic region (See Item 2 - Generating Facilities) in terms of mw of capacity as follows:
NEER's power generation in terms of mwh produced for the year ended December 31, 2011 by fuel type is as follows:
NEER CUSTOMER SUPPLY AND PROPRIETARY POWER AND GAS TRADING
PMI, a subsidiary of NEER, buys and sells wholesale energy commodities, such as electricity, natural gas and oil. PMI sells the
output from NEER's plants that has not been sold under long-term contracts and procures the non-nuclear fuel for use by NEER's
generation fleet. Its primary role is to manage the commodity risk of NEER's portfolio. PMI uses derivative instruments such as
swaps, options, futures and forwards to manage the risk associated with fluctuating commodity prices and to optimize the value of
NEER's power generation assets.
PMI also provides a wide range of electricity and gas commodity products as well as marketing and trading services to electric and
gas utilities, municipalities, cooperatives and other load-serving entities, as well as to owners of electric generation facilities. PMI's
customer supply business includes providing full energy and capacity requirements and mid-marketing services that include sales
and purchases of wholesale commodities-related products and the operations of a retail electricity provider, which during 2011,
served approximately 2,200 mw of peak load to approximately 201,800 customers across the ERCOT, New England Power Pool
(NEPOOL), PJM, NYISO and MISO markets.
18
The results of PMI's activities are included in NEER's operating results. See Management's Discussion - Energy Marketing and
Trading and Market Risk Sensitivity, Note 1 - Energy Trading and Note 3.
NEER REGULATION
Each of the energy markets in which NEER operates is subject to domestic and foreign regulation, including local, state and federal
regulation, and other specific rules.
At December 31, 2011, NEER had ownership interests in operating independent power projects located in the U.S. that have
received exempt wholesale generator status as defined under the Public Utility Holding Company Act of 2005, which represent
approximately 95% of NEER's net generating capacity. Exempt wholesale generators own or operate a facility exclusively to sell
electricity to wholesale customers. They are barred from selling electricity directly to retail customers. NEER's exempt wholesale
generators produce electricity from wind, hydro, fossil fuels and nuclear facilities. Essentially all of the remaining 5% of NEER's
net generating capacity has qualifying facility status under PURPA. NEER's qualifying facilities generate electricity primarily from
wind, solar and fossil fuels. Qualifying facility status exempts the projects from, among other things, many of the provisions of the
Federal Power Act, as well as state laws and regulations relating to rates and financial or organizational regulation of electric
utilities. While projects with qualifying facility and/or exempt wholesale generator status are exempt from various restrictions, each
project must still comply with other federal, state and local laws, including, but not limited to, those regarding siting, construction,
operation, licensing, pollution abatement and other environmental laws.
Additionally, NEER facilities located in the U.S. are subject to FERC regulations and market rules, the NERC's mandatory reliability
standards and the EPA's environmental laws, and its nuclear facilities are also subject to the jurisdiction of the NRC. See FPL -
FPL Regulation for additional discussion of FERC, NERC, NRC, and EPA regulations. With the exception of facilities located in
ERCOT, the FERC has jurisdiction over various aspects of NEER's business, including the oversight and investigation of competitive
wholesale energy markets, regulation of the transmission and sale of natural gas, regulation of hydro projects and oversight of
environmental matters related to natural gas and hydro projects and major electricity policy initiatives. The PUCT has jurisdiction,
including the regulation of rates and services, oversight of competitive markets, and enforcement of statutes and rules, over NEER
facilities located in ERCOT.
NEER is subject to environmental laws and regulations, and is affected by some of the emerging issues related to renewable energy
resources as described in the NEE Environmental Matters section below. In order to better anticipate these potential regulatory
changes, NEER continues to actively evaluate and participate in regional market redesigns of existing operating rules for the
integration of renewable energy resources and for the purchase and sale of energy commodities.
NEER EMPLOYEES
NEER and its subsidiaries had approximately 4,700 employees at December 31, 2011. Subsidiaries of NEER have collective
bargaining agreements with various unions which are summarized in the table below.
Union
Location
IBEW
Utility Workers Union of America
IBEW
Security Police and Fire Professionals of America
IBEW
IBEW
Total
______________________
(a) Various employees at Point Beach are represented by the IBEW under four separate contracts with different expiration dates.
(b) Less than 1% of NEER's employees.
Wisconsin
New Hampshire
Iowa
Iowa
Maine
California
Contract
Expiration Date
June 2012 - September 2013(a)
December 2013
May 2012
July 2012
February 2013
March 2012
10%
5
3
2
2
-
22%
(b)
% of NEER's
Employees Covered
In addition, the employees of an operating project in Illinois, constituting less than 1% of NEER's employees, are represented by
the International Union of Operating Engineers, which is currently negotiating its first collective bargaining agreement.
III. OTHER NEE OPERATING SUBSIDIARIES
NEE's Corporate and Other segment represents other business activities, primarily FPL FiberNet and Lone Star, that are not
separately reportable. See Note 15.
FPL FIBERNET
FPL FiberNet conducts its business through two separate wholly-owned subsidiaries of NEECH. One subsidiary was formed in
2000 to enhance the value of NEE's fiber-optic network assets that were originally built to support FPL operations and the other
was formed in 2011 to hold fiber-optic network assets which were acquired. Both subsidiaries are limited liability companies
organized under the laws of Delaware. FPL FiberNet leases fiber-optic network capacity and dark fiber to FPL and other customers,
19
primarily telephone, wireless, internet and other telecommunications companies. FPL FiberNet's networks cover most of the
metropolitan areas in Florida and several in Texas. FPL FiberNet also has a long-haul network providing bandwidth at wholesale
rates. The long-haul network connects major cities in Florida and Texas with additional connectivity to Atlanta, Georgia and the
South Central U.S., including Arkansas, Louisiana and Oklahoma. At December 31, 2011, FPL FiberNet's network consisted of
approximately 7,800 route miles. FPL FiberNet is subject to regulation by the Federal Communications Commission which has
jurisdiction over wire and wireless communication networks and by the public utility commissions in the states in which it provides
intrastate telecommunication services.
LONE STAR
Lone Star, an indirect wholly-owned subsidiary of NEECH, is constructing approximately 320 miles of 345 kv transmission lines
and other associated facilities in Texas. Lone Star, a limited liability company organized under the laws of Delaware, is a rate-
regulated transmission service provider in Texas. Two substations and associated facilities with a total capital investment of
approximately $60 million are expected to be placed in service in 2012, with the remaining associated facilities and transmission
lines expected to be placed in service in the first quarter of 2013, for a total capital investment of approximately $785 million. Lone
Star's transmission lines are part of a transmission grid improvement program that will add approximately 2,300 miles of 345 kv
lines to deliver power from the Competitive Renewable Energy Zones in west Texas and the Texas panhandle to the Dallas/Fort
Worth area and other population centers in Texas. Lone Star will own the transmission lines and associated facilities and operate
them after they are placed in service.
Lone Star is subject to regulation by a number of federal, state and other agencies, including, but not limited to, the PUCT, the
ERCOT, the NERC and the EPA, as well as certain limited regulations of the FERC. See I. FPL - FPL Regulation for further
discussion of FERC, NERC, and EPA regulations and NEE Environmental Matters. The PUCT has jurisdiction over a wide range
of Lone Star's business activities, including, among others, rates charged to customers and certain aspects of siting, construction
and operation of transmission systems. The PUCT sets rates at a level that allows Lone Star the opportunity to collect from customers
total revenues (revenue requirements) equal to Lone Star's cost of providing service, including a reasonable rate of return on
invested capital.
In January 2012, Lone Star filed a petition with the PUCT requesting, among other things, interim rates that would take effect when
Lone Star's first substation is placed in service and final rates when the transmission lines are energized. The petition also proposes
to limit cost recovery to Lone Star's actual capital costs by making a true-up filing within 120 days of energizing the transmission
lines. If approved, based on the expected in-service dates, the requested rates would result in annual revenues of approximately
$14 million in 2012 and $110 million in 2013. Lone Star's requested rates are based on a proposed regulatory ROE of 11% with a
regulatory equity ratio of 52%. Hearings on this rate proceeding are expected during the second quarter of 2012 and a final decision
is expected during the third quarter of 2012. The interim rates would be subject to refund pending the final decision on the rate
proceeding. The PUCT has the authority to disallow recovery of costs that it considers excessive or imprudently incurred.
NEE ENVIRONMENTAL MATTERS
NEE and FPL are subject to domestic and foreign environmental laws and regulations, including extensive federal, state, and local
environmental statutes, rules, and regulations. The U.S. Congress and certain states and regions continue to consider several
legislative and regulatory proposals with respect to GHG emissions. The economic and operational impact of climate change
legislation on NEE and FPL depends on a variety of factors, including, but not limited to, the allowed emissions, whether emission
allowances will be allocated or auctioned, the cost to reduce emissions or buy allowances in the marketplace and the availability
of offsets and mitigating factors to moderate the costs of compliance. Based on the most recent reference data available from
government sources, NEE is among the lowest emitters, among electric generators, of GHG in the U.S. measured by its rate of
emissions expressed as pounds of CO2 per mwh of generation. However, the legislative and regulatory proposals have differing
methods of implementation and the impact on FPL's and NEER's generating units and/or the financial impact (either positive or
negative) to NEE and FPL could be material, depending on the eventual structure of any legislation enacted or specific implementation
rules adopted.
I. Environmental Regulations
The following is a discussion of certain existing and emerging federal and state initiatives and rules, some of which could potentially
have a material effect (either positive or negative) on NEE and its subsidiaries. FPL expects to seek recovery through the
environmental clause for compliance costs associated with any new environmental laws and regulations.
• Mercury and Air Toxics Standards (MATS). In December 2011, the EPA issued a final MATS rule as required under the Clean
Air Act which requires coal-fired and oil-fired generating units to reduce emissions of hazardous air pollutants. The MATS rule
includes a limited use provision which excludes low-capacity generating units from the requirements to add pollution control
equipment, under which three oil-fired units at FPL and four oil-fired units at NEER are expected to qualify. Based on the
provisions of the rule, four oil-fired units and two coal-fired units at FPL are in the process of adding or could be required to
add additional pollution control equipment to meet Maximum Achievable Control Technology standards. A third coal-fired unit
at FPL is in the process of adding additional pollution control equipment to meet certain state compliance requirements which
would also satisfy the Maximum Achievable Control Technology standards under the MATS rule. Units affected by the rule will
20
•
•
•
•
be required to comply by April 2015, with a possible one year extension for compliance if required to install pollution control
equipment.
Clean Air Interstate Rule (CAIR)/Cross-State Air Pollution Rule (CSAPR). The EPA's CAIR requires SO2 and NOx emissions
reductions from electric generating units in specified Eastern states and the District of Columbia, where the emissions from
electric generating units are deemed to be transported to downwind states. NEER and FPL began complying with the CAIR
on January 1, 2009. In July 2011, the EPA issued the CSAPR, a final rule which was to replace the CAIR beginning in January
2012. The CSAPR would limit emissions of SO2 and NOx from power plants in 28 eastern states and provides an allocation
methodology for emission allowances and reduction limits for SO2 and NOx beginning in January 2012 and seasonal ozone
requirements beginning in May 2012, with a second phase of reductions beginning in January 2014. FPL would only be affected
by the seasonal ozone requirements of the rule while NEER would be affected by the annual SO2 and NOx emissions
requirements as well as the seasonal ozone requirements in several states. Several groups have petitioned the EPA to
reconsider the CSAPR and in December 2011, the D.C. Circuit issued an order staying implementation of the CSAPR pending
resolution of legal challenges to the rule and ordered that the CAIR remain in place while the CSAPR is stayed. The case is
scheduled for oral argument in April 2012. The ultimate resolution of the issues surrounding the CSAPR is uncertain at this
time.
Clean Water Act Section 316(b). In March 2011, the EPA issued a proposed rule under Section 316(b) of the Clean Water Act
to address the location, design, construction and capacity of intake structures at existing power plants with once-through cooling
water systems, with a final rule not expected until the summer of 2012. The proposed rule is intended to require the Best
Technology Available to reduce the impact on aquatic organisms from once-through cooling water intake systems. Under the
proposed rule, potentially thirteen of FPL's facilities and five of NEER's facilities may be required to add additional controls or
make operational changes to comply, the economic and operational impact of which cannot be determined at this time, but
could be material. Prior to the passage of a new rule, states are continuing to utilize “Best Professional Judgment” in the
application of Section 316(b) compliance requirements.
Avian/Bat Regulations and Wind Turbine Siting Guidelines. NEER and FPL are subject to numerous environmental regulations
and guidelines related to threatened and endangered species and their habitats, as well as avian and bat species, for the siting,
construction and ongoing operations of their facilities. The facilities most significantly affected are wind facilities and
transmission and distribution lines. The environmental laws include, among others, the Endangered Species Act, the Migratory
Bird Treaty Act, and the Bald and Golden Eagle Protection Act which provide for protection of migratory birds, eagles
and endangered species of birds and bats and their habitats. Regulations have been adopted under some of these laws that
contain provisions that allow the owner/operator of a facility to apply for a permit to undertake specific activities including those
associated with certain siting decisions, construction activities and operations. In addition to regulations, voluntary wind turbine
siting guidelines, which are expected to be finalized by the U.S. Fish and Wildlife Service by the end of the first quarter of 2012,
will set forth siting, monitoring and coordination protocols that are designed to support wind development in the U.S. while also
protecting both birds and bats and their habitats. These guidelines will include provisions for specific monitoring and study
conditions which will need to be met in order for projects to be in adherence with these voluntary guidelines. Complying with
these new environmental regulations and adhering to the provisions set forth in the voluntary wind turbine siting guidelines
could result in additional costs at existing and new wind generating facilities and transmission and distribution facilities at NEER
and FPL.
Regulation of GHG Emissions. Pursuant to rules issued by the EPA under the Clean Air Act, new facilities emitting 100,000
tons per year (tpy) or more of GHG and modifications to existing facilities resulting in an increase of GHG emissions of 75,000
tpy or more have to perform a Best Available Control Technology review and, based on that review, may have to reduce
emissions by adding additional emissions control equipment or implementing energy efficiency projects. Several petitioners
have challenged the EPA's GHG regulations and the case is pending review by the D.C. Circuit, the timing and ultimate outcome
of which is uncertain at this time. At FPL, the modernization of the Port Everglades facility, if approved by the FPSC, would
be affected by this rule, the impact of which cannot be determined at this time.
II. Other GHG Emissions Reduction Initiatives
NEER's plants operate in certain states and regions that continue to consider and implement regulatory proposals to reduce GHG
emissions. RPS, currently in place in approximately 30 states and the District of Columbia, require electricity providers in the state
or district to meet a certain percentage of their retail sales with energy from renewable sources. These standards vary, but the
majority include requirements to meet 10% to 25% of the electricity providers' retail sales with energy from renewable sources by
2025. NEER's plants operate in 18 states that have a RPS and NEER believes that these standards will create incremental demand
for renewable energy in the future.
Other GHG reduction initiatives including, among others, the Regional Greenhouse Gas Initiative and the California Greenhouse
Gas Regulation aim to reduce emissions through a variety of programs and under varying timelines. Based on its clean generating
portfolio, NEER expects to continue experiencing a positive impact on earnings as a result of these GHG reduction
initiatives. Additionally, these initiatives provide NEER opportunities with regards to wind and solar development as well as favorable
energy pricing.
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WEBSITE ACCESS TO SEC FILINGS
NEE and FPL make their SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and any amendments to those reports, available free of charge on NEE's internet website, www.nexteraenergy.com,
as soon as reasonably practicable after those documents are electronically filed with or furnished to the SEC. The information and
materials available on NEE's website (or any of its subsidiaries' websites) are not incorporated by reference into this combined
annual report on Form 10-K. The SEC maintains an internet website that contains reports, proxy and information statements, and
other information regarding registrants that file electronically with the SEC at http://www.sec.gov.
22
EXECUTIVE OFFICERS OF NEE(a)
Name
Christopher A. Bennett
Age
53
Position
Executive Vice President & Chief Strategy, Policy & Business Process
Improvement Officer of NEE
Paul I. Cutler
Moray P. Dewhurst
Shaun J. Francis
Chris N. Froggatt
Lewis Hay, III
Joseph T. Kelliher
Robert L. McGrath
Manoochehr K. Nazar
Armando J. Olivera
Armando Pimentel, Jr.
James L. Robo
Antonio Rodriguez
Charles E. Sieving
52
56
40
54
56
51
58
57
62
49
49
69
39
Treasurer of NEE
Treasurer of FPL
Assistant Secretary of NEE and FPL
Vice Chairman and Chief Financial Officer, and Executive Vice President -
Finance of NEE
Executive Vice President, Finance and Chief Financial Officer of FPL
Executive Vice President, Human Resources of NEE
Executive Vice President, Human Resources of FPL
Vice President of NEE
Controller and Chief Accounting Officer of NEE
Chief Executive Officer of NEE
Chairman of NEE and FPL
Executive Vice President, Federal Regulatory Affairs of NEE
Executive Vice President, Engineering, Construction & Corporate Services of
NEE and FPL
Effective Date
February 15, 2008(b)
February 19, 2003
February 18, 2003
December 10, 1997
October 5, 2011
August 16, 2010
January 31, 2011
October 19, 2009
February 27, 2010
June 11, 2001
January 1, 2002
May 18, 2009
February 21, 2005(b)
Executive Vice President, Nuclear Division and Chief Nuclear Officer of NEE
Executive Vice President, Nuclear Division and Chief Nuclear Officer of FPL
January 1, 2010
January 15, 2010
Chief Executive Officer of FPL
President and Chief Executive Officer of NEER
President and Chief Operating Officer of NEE
Executive Vice President, Power Generation Division of NEE
Executive Vice President, Power Generation Division of FPL
Executive Vice President & General Counsel of NEE
Executive Vice President of FPL
July 17, 2008
October 5, 2011
December 15, 2006
January 1, 2007(b)
July 1, 1999(b)
December 1, 2008
January 1, 2009
______________________
(a)
Information is as of February 27, 2012. Executive officers are elected annually by, and serve at the pleasure of, their respective boards of directors. Except as
noted below, each officer has held his present position for five years or more and his employment history is continuous. Mr. Bennett was vice president, business
strategy & policy of NEE from July 2007 to February 2008. From September 1995 to June 2007, Mr. Bennett was vice president of Dean & Company, a management
consulting and investment firm. Mr. Dewhurst has been vice chairman of NEE since August 2009 and was chief of staff of NEE from August 2009 to October
2011. From July 2001 to May 2008, Mr. Dewhurst was vice president, finance and chief financial officer of NEE and senior vice president, finance and chief
financial officer of FPL. Mr. Francis was general manager of human resources for a division of General Electric Company, GE Transportation, a supplier to the
railroad, marine, drilling, mining and wind power industries from February 2008 to August 2010. From February 2006 to February 2008, Mr. Francis served as
general manager of human resources for a division of General Electric Company, GE Equipment Services, a leader in the transportation industry including rail
cars, sea containers, tractor trailers, and truck leasing. Mr. Froggatt was the vice president and treasurer of Pinnacle West Capital Corporation, a public utility
holding company, and its major subsidiary, Arizona Public Service Company (APS), a regulated electric utility, from December 2008 to October 2009. From October
2002 to December 2008, Mr. Froggatt was vice president, controller and chief accounting officer of APS. Mr. Hay was also chief executive officer of FPL from
January 2002 to July 2008. Mr. Kelliher was chairman of the FERC from July 2005 to January 2009. Mr. Nazar was the chief nuclear officer of NEE from January
2009 to December 2009. Mr. Nazar was senior vice president and chief nuclear officer of FPL from November 2007 to January 2009. From October 2003 to
November 2007, Mr. Nazar was senior vice president & chief nuclear officer of American Electric Power Company, Inc., a public utility holding company. Mr. Olivera
was also president of FPL from June 2003 to December 2011. Mr. Olivera has announced that he will retire from FPL on May 2, 2012. Mr. Pimentel was chief
financial officer of NEE and FPL from May 2008 to October 2011 and executive vice president, finance of NEE and FPL from February 2008 to October 2011.
Prior to that, Mr. Pimentel was a partner of Deloitte & Touche LLP, an independent registered public accounting firm, from June 1998 to February 2008. Mr. Sieving
was also assistant secretary of NEE from May 2010 to May 2011 and general counsel of FPL from January 2009 to May 2010. Mr. Sieving was executive vice
president, general counsel and secretary of PAETEC Holding Corp., a communications services and solutions provider, from February 2007 to November 2008
and was primarily responsible for all legal and regulatory matters.
(b) NEE title changed from vice president to executive vice president effective May 23, 2008. Where applicable, FPL title changed from senior vice president to
executive vice president effective July 17, 2008.
23
Item 1A. Risk Factors
Risks Relating to NEE's and FPL's Business
The business, financial condition, results of operations and prospects of NEE and FPL are subject to a variety of risks, many of
which are beyond the control of NEE and FPL. The following is a description of important risks that may adversely affect the
business, financial condition, results of operations and prospects of NEE and FPL and may cause actual results of NEE and FPL
to differ substantially from those that NEE or FPL currently expects or seeks. In that event, the market price for the securities of
NEE or FPL could decline. Accordingly, the risks described below should be carefully considered together with the other information
set forth in this report and in future reports that NEE and FPL file with the SEC. The risks described below are not the only risks
facing NEE and FPL. Additional risks and uncertainties may also materially adversely affect NEE's or FPL's business, financial
condition, results of operations and prospects. Each of NEE and FPL has disclosed the material risks known to it to affect its
business at this time. However, there may be further risks and uncertainties that are not presently known or that are not currently
believed to be material that may in the future adversely affect the performance or financial condition of NEE and FPL.
Regulatory, Legislative and Legal Risks
NEE's and FPL's business, financial condition, results of operations and prospects may be adversely affected by the
extensive regulation of their business.
The operations of NEE and FPL are subject to complex and comprehensive federal, state and other regulation. This extensive
regulatory framework, portions of which are more specifically identified in the following risk factors, regulates, among other things
and to varying degrees, NEE's and FPL's industries, rates and cost structures, operation of nuclear power facilities, construction
and operation of generation, transmission and distribution facilities and natural gas and oil production, transmission and fuel storage
facilities, acquisition, disposal, depreciation and amortization of facilities and other assets, decommissioning costs and funding,
service reliability, wholesale and retail competition, and commodities trading and derivatives transactions. In their business planning
and in the management of their operations, NEE and FPL must address the effects of regulation on their business and any inability
or failure to do so adequately could have a material adverse effect on their business, financial condition, results of operations and
prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected
if they are unable to recover in a timely manner any significant amount of costs, a return on certain assets or an appropriate
return on capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise.
FPL is a regulated entity subject to the jurisdiction of the FPSC over a wide range of business activities, including, among other
items, the retail rates charged to its customers through base rates and cost recovery clauses, the terms and conditions of its services,
procurement of electricity for its customers, issuance of securities, and aspects of the siting and operation of its generating plants
and transmission and distribution systems for the sale of electric energy. The FPSC has the authority to disallow recovery by FPL
of costs that it considers excessive or imprudently incurred and to determine the level of return that FPL is permitted to earn on its
investments. The regulatory process, which may be adversely affected by the political, regulatory and economic environment in
Florida and elsewhere, limits FPL's ability to increase earnings and does not provide any assurance as to achievement of authorized
or other earnings levels. NEE's and FPL's business, financial condition, results of operations and prospects could be materially
adversely affected if any material amount of costs, a return on certain assets or an appropriate return on capital cannot be recovered
through base rates, cost recovery clauses, other regulatory mechanisms or otherwise. Lone Star, an indirect wholly-owned
subsidiary of NEE that is a regulated electric transmission utility subject to the jurisdiction of the PUCT, is subject to similar risks.
Regulatory decisions that are important to NEE and FPL may be materially adversely affected by political, regulatory and
economic factors.
The local and national political, regulatory and economic environment has had, and may in the future have, an adverse effect on
FPSC decisions with negative consequences for FPL. These decisions may require, for example, FPL to cancel or delay planned
development activities, to reduce or delay other planned capital expenditures or to pay for investments or otherwise incur costs
that it may not be able to recover through rates, each of which could have a material adverse effect on the business, financial
condition, results of operations and prospects of NEE and FPL. Lone Star is subject to similar risks.
FPL's use of derivative instruments could be subject to prudence challenges and, if found imprudent, could result in
disallowances of cost recovery for such use by the FPSC.
In the event that the FPSC engages in a prudence review of FPL's use of derivative instruments and finds such use to be imprudent,
the FPSC could deny cost recovery for such use by FPL. Such an outcome could have a material adverse effect on FPL's business,
financial condition, results of operations and prospects.
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Any reduction or elimination of existing government support policies, including, but not limited to, tax incentives, RPS
or feed-in tariffs, and ultimately any failure to renew or increase these existing support policies, could result in less demand
for generation from NEER's renewable energy projects and could have a material adverse effect on NEE's business,
financial condition, results of operations and prospects.
NEER depends heavily on government policies that support renewable energy and enhance the economic feasibility of developing
and operating wind and solar energy projects in regions in which NEER operates or plans to develop and operate renewable energy
facilities. The federal government, a majority of the 50 U.S. states and portions of Canada and Spain provide incentives, such as
tax incentives, RPS or feed-in tariffs, that support the sale of energy from renewable energy facilities owned by NEER, such as
wind and solar energy facilities. The applicable legislation often grants the relevant state public utility commission the ability to
reduce electric supply companies' obligations to meet renewable energy requirements in specified circumstances. Any changes
to, or the elimination of, governmental incentives that support renewable energy could result in less demand for generation from
NEE's wind and solar energy projects and could have a material adverse effect on NEER's business, financial condition, results of
operations and prospects.
NEER also depends heavily on investment cost recovery mechanisms currently available through the American Recovery and
Reinvestment Act of 2009 (Recovery Act). The Recovery Act includes, among other things, provisions that allow companies building
wind and solar energy facilities the option to choose between investment cost recovery mechanisms that make the development
of such facilities economically attractive. Any changes to the Recovery Act that eliminate or reduce support for renewable generation
projects could impede NEER's ability to economically develop wind and solar energy projects in the future and could have a material
adverse effect on NEER's ability to develop renewable energy projects in the future.
If investments in renewable energy and associated projects are perceived less positively by legislators, regulators or the public,
this could result in the non-renewal or elimination of beneficial tax policies, among other policies, that benefit NEER. Any such
legislative changes could impede NEER's ability to economically develop wind and solar energy projects in the future and could
have a material adverse effect on NEE's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected
as a result of new or revised laws, regulations or interpretations or other regulatory initiatives.
NEE's and FPL's business is influenced by various legislative and regulatory initiatives, including, but not limited to, initiatives
regarding deregulation or restructuring of the energy industry, regulation of the commodities trading and derivatives markets, and
environmental regulation, such as regulation of air emissions, regulation of water consumption and water discharges, and regulation
of gas and oil infrastructure operations, as well as associated environmental permitting. Changes in the nature of the regulation
of NEE's and FPL's business could have a material adverse effect on NEE's and FPL's results of operations. NEE and FPL are
unable to predict future legislative or regulatory changes, initiatives or interpretations, although any such changes, initiatives or
interpretations may increase costs and competitive pressures on NEE and FPL, which could have a material adverse effect on
NEE's and FPL's business, financial condition, results of operations and prospects.
FPL has limited competition in the Florida market for retail electricity customers. Any changes in Florida law or regulation which
introduce competition in the Florida retail electricity market could have a material adverse effect on FPL's business, financial
condition, results of operations and prospects. There can be no assurance that FPL will be able to respond adequately to such
regulatory changes, which could have a material adverse effect on FPL's business, financial condition, results of operations and
prospects.
NEER is subject to FERC rules related to transmission that are designed to facilitate competition in the wholesale market on
practically a nationwide basis by providing greater certainty, flexibility and more choices to wholesale power customers. NEE cannot
predict the impact of changing FERC rules or the effect of changes in levels of wholesale supply and demand, which are typically
driven by factors beyond NEE's control. There can be no assurance that NEER will be able to respond adequately or sufficiently
quickly to such rules and developments, or to any other changes that reverse or restrict the competitive restructuring of the energy
industry in those jurisdictions in which such restructuring has occurred. Any of these events could have a material adverse effect
on NEE's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected
if the rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) broaden the
scope of its provisions regarding the regulation of OTC financial derivatives and make them applicable to NEE and FPL.
The Dodd-Frank Act, enacted into law in July 2010, among other things, provides for the regulation of the OTC derivatives
market. The Dodd-Frank Act includes provisions that will require certain OTC derivatives, or swaps, to be centrally cleared and
executed through an exchange or other approved trading platform. While the legislation is broad and detailed, substantial portions
of the legislation require implementing rules to be adopted by federal governmental agencies including, but not limited to, the SEC
and the CFTC.
NEE and FPL cannot predict the final rules that will be adopted to implement the OTC derivatives market provisions of the Dodd-
25
Frank Act. Those rules could negatively affect NEE's and FPL's ability to hedge their commodity and interest rate risks, which could
have a material adverse effect on NEE's and FPL's results of operations. NEE or FPL may have portions of their business that
may be required to register as swap dealers or major swap participants and submit to extensive regulation if they wish to continue
certain aspects of their derivative activities. The rules could also cause NEER to restructure part of its energy marketing and trading
operations or to discontinue certain portions of its business. In addition, if the rules require NEE and FPL to post significant amounts
of cash collateral with respect to swap transactions, NEE's and FPL's liquidity could be materially adversely affected, and their
ability to enter into OTC derivatives to hedge commodity and interest rate risks could be significantly limited. Reporting and
compliance requirements of the rules also could significantly increase operating costs and expose NEE and FPL to penalties for
non-compliance. The Dodd-Frank Act or other initiatives also could impede the efficient operation of the commodities trading and
derivatives markets, which could also materially adversely affect NEE's and FPL's business, financial condition, results of operations
and prospects.
NEE and FPL are subject to numerous environmental laws and regulations that require capital expenditures, increase
their cost of operations and may expose them to liabilities.
NEE and FPL are subject to domestic and foreign environmental laws and regulations, including, but not limited to, extensive federal,
state and local environmental statutes, rules and regulations relating to air quality, water quality and usage, climate change, emissions
of greenhouse gases, including, but not limited to, CO2, waste management, hazardous wastes, marine, avian and other wildlife
mortality and habitat protection, historical artifact preservation, natural resources, health (including, but not limited to, electric and
magnetic fields from power lines and substations), safety and RPS that could, among other things, prevent or delay the development
of power generation, power or natural gas transmission, or other infrastructure projects, restrict the output of some existing facilities,
limit the use of some fuels required for the production of electricity, require additional pollution control equipment, and otherwise
increase costs, increase capital expenditures and limit or eliminate certain operations.
There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and
regulations, and those costs could be even more significant in the future as a result of new legislation, the current trend toward
more stringent standards, and stricter and more expansive application of existing environmental regulations. For example, among
other potential or pending changes, the use of hydraulic fracturing or similar technologies to drill for natural gas and related compounds
used by NEE's gas infrastructure business is currently being debated for potential regulation at the state and federal levels.
Violations of current or future laws, rules and regulations could expose NEE and FPL to regulatory and legal proceedings, disputes
with, and legal challenges by, third parties, and potentially significant civil fines, criminal penalties and other sanctions.
NEE's and FPL's business could be negatively affected by federal or state laws or regulations mandating new or additional
limits on the production of greenhouse gas emissions.
Federal or state laws or regulations may be adopted that would impose new or additional limits on the emissions of greenhouse
gases, including, but not limited to, CO2 and methane, from electric generating units using fossil fuels like coal and natural gas. The
potential effects of such greenhouse gas emission limits on NEE's and FPL's electric generating units are subject to significant
uncertainties based on, among other things, the timing of the implementation of any new requirements, the required levels of
emission reductions, the nature of any market-based or tax-based mechanisms adopted to facilitate reductions, the relative
availability of greenhouse gas emission reduction offsets, the development of cost-effective, commercial-scale carbon capture and
storage technology and supporting regulations and liability mitigation measures, and the range of available compliance alternatives.
While NEE's and FPL's electric generating units emit greenhouse gases at a lower rate of emissions than most of the U.S. electric
generation sector, the results of operations of NEE and FPL could be adversely affected to the extent that new federal or state
legislation or regulators impose any new greenhouse gas emission limits. Any future limits on greenhouse gas emissions could:
create substantial additional costs in the form of taxes or emission allowances;
•
• make some of NEE's and FPL's electric generating units uneconomical to operate in the long term;
•
require significant capital investment in carbon capture and storage technology, fuel switching, or the replacement of high-
emitting generation facilities with lower-emitting generation facilities; or
• affect the availability or cost of fossil fuels.
There can be no assurance that NEE or FPL would be able to completely recover any such costs or investments, which could have
a material adverse effect on their business, financial condition, results of operations and prospects.
Extensive federal regulation of the operations of NEE and FPL exposes NEE and FPL to significant and increasing
compliance costs and may also expose them to substantial monetary penalties and other sanctions for compliance failures.
NEE and FPL are subject to extensive federal regulation, which imposes significant and increasing compliance costs on their
operations. Additionally, any actual or alleged compliance failures could result in significant costs and other potentially adverse
effects of regulatory investigations, proceedings, settlements, decisions and claims, including, among other items, potentially
significant monetary penalties. As an example, under the Energy Policy Act of 2005, NEE and FPL, as owners and operators of
bulk power transmission systems and/or electric generation facilities, are subject to mandatory reliability standards. Compliance
26
with these mandatory reliability standards may subject NEE and FPL to higher operating costs and may result in increased capital
expenditures. If FPL or NEE is found not to be in compliance with these standards, it may incur substantial monetary penalties and
other sanctions. Both the costs of regulatory compliance and the costs that may be imposed as a result of any actual or alleged
compliance failures could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations
and prospects.
Changes in tax laws, as well as judgments and estimates used in the determination of tax-related asset and liability
amounts, could adversely affect NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's provision for income taxes and reporting of tax-related assets and liabilities require significant judgments and the
use of estimates. Amounts of tax-related assets and liabilities involve judgments and estimates of the timing and probability of
recognition of income, deductions and tax credits, including, but not limited to, estimates for potential adverse outcomes regarding
tax positions that have been taken and the ability to utilize tax benefit carryforwards, such as net operating loss and tax credit
carryforwards. Actual income taxes could vary significantly from estimated amounts due to the future impacts of, among other
things, changes in tax laws, regulations and interpretations, the financial condition and results of operations of NEE and FPL, and
the resolution of audit issues raised by taxing authorities. Ultimate resolution of income tax matters may result in material adjustments
to tax-related assets and liabilities, which could negatively affect NEE's and FPL's business, financial condition, results of operations
and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects may be materially adversely affected
due to adverse results of litigation.
NEE's and FPL's business, financial condition, results of operations and prospects may be materially affected by adverse results
of litigation. Unfavorable resolution of legal proceedings in which NEE is involved or other future legal proceedings, including, but
not limited to, class action lawsuits, may have a material adverse effect on the business, financial condition, results of operations
and prospects of NEE and FPL.
Operational Risks
NEE's and FPL's business, financial condition, results of operations and prospects could suffer if NEE and FPL do not
proceed with projects under development or are unable to complete the construction of, or capital improvements to,
electric generation, transmission and distribution facilities, gas infrastructure facilities or other facilities on schedule or
within budget.
NEE's and FPL's ability to complete construction of, and capital improvement projects for, their electric generation, transmission
and distribution facilities, gas infrastructure facilities and other facilities on schedule and within budget may be adversely affected
by escalating costs for materials and labor and regulatory compliance, inability to obtain or renew necessary licenses, rights-of-
way, permits or other approvals on acceptable terms or on schedule, disputes involving contractors, labor organizations, land
owners, governmental entities, environmental groups, Native American and aboriginal groups, and other third parties, negative
publicity, transmission interconnection issues and other factors. If any development project or construction or capital improvement
project is not completed, is delayed or is subject to cost overruns, certain associated costs may not be approved for recovery or
recoverable through regulatory mechanisms that may otherwise be available, and NEE and FPL could become obligated to make
delay or termination payments or become obligated for other damages under contracts, could experience the loss of tax credits or
tax incentives and could be required to write-off all or a portion of their investments in the project. Any of these events could have
a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE and FPL may face risks related to project siting, financing, construction, permitting, governmental approvals and the
negotiation of project development agreements that may impede their development and operating activities.
NEE and FPL own, develop, construct, manage and operate electric-generating and transmission facilities. A key component of
NEE's and FPL's growth is their ability to construct and operate generation and transmission facilities to meet customer needs. As
part of these operations, NEE and FPL must periodically apply for licenses and permits from various local, state, federal and other
regulatory authorities and abide by their respective conditions. Should NEE or FPL be unsuccessful in obtaining necessary licenses
or permits on acceptable terms, should there be a delay in obtaining or renewing necessary licenses or permits or should regulatory
authorities initiate any associated investigations or enforcement actions or impose related penalties or disallowances on NEE or
FPL, NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected. Any
failure to negotiate successful project development agreements for new facilities with third parties could have similar results.
The operation and maintenance of NEE's and FPL's electric generation, transmission and distribution facilities, gas
infrastructure facilities and other facilities are subject to many operational risks, the consequences of which could have
a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's electric generation, transmission and distribution facilities, gas infrastructure facilities and other facilities are subject
to many operational risks. Operational risks could result in, among other things, lost revenues due to prolonged outages, increased
expenses due to monetary penalties or fines for compliance failures, liability to third parties for property and personal injury damage,
27
a failure to perform under applicable power sales agreements and associated loss of revenues from terminated agreements or
liability for liquidated damages under continuing agreements, and replacement equipment costs or an obligation to purchase or
generate replacement power at potentially higher prices.
Uncertainties and risks inherent in operating and maintaining NEE's and FPL's facilities include, but are not limited to:
•
•
•
risks associated with facility start-up operations, such as whether the facility will achieve projected operating performance on
schedule and otherwise as planned;
failures in the availability, acquisition or transportation of fuel or other necessary supplies;
the impact of unusual or adverse weather conditions, including, but not limited to, natural disasters such as hurricanes, floods,
earthquakes and droughts;
• performance below expected or contracted levels of output or efficiency;
• breakdown or failure, including, but not limited to, explosions, fires or other major events, of equipment, transmission and
distribution lines or pipelines;
risks of property damage or human injury from energized equipment, hazardous substances or explosions, fires or other events;
• availability of replacement equipment;
•
• availability of adequate water resources and ability to satisfy water intake and discharge requirements;
•
• use of new or unproven technology;
•
inability to manage properly or mitigate known equipment defects in NEE's and FPL's facilities;
risks associated with dependence on a specific fuel source, such as commodity price risk and lack of available alternative fuel
sources;
increased competition due to, among other factors, new facilities, excess supply and shifting demand; and
insufficient insurance, warranties or performance guarantees to cover any or all lost revenues or increased expenses from the
foregoing.
•
•
NEE's and FPL's business, financial condition, results of operations and prospects may be negatively affected by a lack
of growth or slower growth in the number of customers or in customer usage.
Growth in customer accounts and growth of customer usage each directly influence the demand for electricity and the need for
additional power generation and power delivery facilities. Customer growth and customer usage are affected by a number of factors
outside the control of NEE and FPL, such as mandated energy efficiency measures, demand side management goals, and economic
and demographic conditions, such as population changes, job and income growth, housing starts, new business formation and the
overall level of economic activity. A lack of growth, or a decline, in the number of customers or in customer demand for electricity
may cause NEE and FPL to fail to fully realize the anticipated benefits from significant investments and expenditures and could
have a material adverse effect on NEE's and FPL's own growth, business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects can be materially adversely affected
by weather conditions, including, but not limited to, the impact of severe weather.
Weather conditions directly influence the demand for electricity and natural gas and other fuels and affect the price of energy and
energy-related commodities. In addition, severe weather, such as hurricanes, floods and earthquakes, can be destructive and
cause power outages and property damage, reduce revenue, affect fuel supply, and require NEE and FPL to incur additional costs,
for example, to restore service and repair damaged facilities, obtain replacement power and access available financing
sources. Furthermore, NEE's and FPL's physical plant could be placed at greater risk of damage should changes in global climate
produce unusual variations in temperature and weather patterns, resulting in more intense, frequent and extreme weather events,
abnormal levels of precipitation and, particularly relevant to FPL, a change in sea level. FPL operates in the east and lower west
coasts of Florida, an area that historically has been prone to severe weather events, such as hurricanes. A disruption or failure of
electric generation, transmission or distribution systems or natural gas production, transmission, storage or distribution systems in
the event of a hurricane, tornado or other severe weather event, or otherwise, could prevent NEE and FPL from operating their
business in the normal course and could result in any of the adverse consequences described above. Any of the foregoing could
have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
At FPL and other businesses of NEE where cost recovery is available, recovery of costs to restore service and repair damaged
facilities is or may be subject to regulatory approval, and any determination by the regulator not to permit timely and full recovery
of the costs incurred could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations
and prospects.
Changes in weather can also affect the production of electricity at power generating facilities, including, but not limited to, NEER's
wind, solar and hydro-powered facilities. For example, the level of wind resource affects the revenue produced by wind generating
facilities. Because the levels of wind, solar and hydro resources are variable and difficult to predict, NEER's results of operations
for individual wind, solar and hydro facilities specifically, and NEE's results of operations generally, may vary significantly from period
to period, depending on the level of available resources. To the extent that resources are not available at planned levels, the
financial results from these facilities may be less than expected.
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Threats of terrorism and catastrophic events that could result from terrorism, cyber attacks, or individuals and/or groups
attempting to disrupt NEE's and FPL's business, or the businesses of third parties, may materially adversely affect NEE's
and FPL's business, financial condition, results of operations and prospects.
NEE and FPL are subject to the potentially adverse operating and financial effects of terrorist acts and threats, as well as cyber
attacks and other disruptive activities of individuals or groups. NEE's and FPL's generation, transmission and distribution facilities,
fuel storage facilities, information technology systems and other infrastructure facilities and systems could be direct targets of, or
be indirectly affected by, such activities.
Terrorist acts or other similar events affecting NEE's and FPL's systems and facilities, or those of third parties on which NEE and
FPL rely, could harm NEE's and FPL's business, for example, by limiting their ability to generate, purchase or transmit power, by
limiting their ability to bill customers and collect and process payments, and by delaying their development and construction of new
generating facilities or capital improvements to existing facilities. These events, and governmental actions in response, could result
in a material decrease in revenues, significant additional costs (for example, to repair assets, implement additional security
requirements or maintain or acquire insurance), and reputational damage, could adversely affect NEE's and FPL's operations (for
example, by contributing to disruption of supplies and markets for natural gas, oil and other fuels), and could impair NEE's and
FPL's ability to raise capital (for example, by contributing to financial instability and lower economic activity).
The ability of NEE and FPL to obtain insurance and the terms of any available insurance coverage could be adversely
affected by international, national, state or local events and company-specific events, as well as the financial condition
of insurers. NEE's and FPL's insurance coverage does not provide protection against all significant losses.
Insurance coverage may not continue to be available or may not be available at rates or on terms similar to those presently available
to NEE and FPL. The ability of NEE and FPL to obtain insurance and the terms of any available insurance coverage could be
adversely affected by international, national, state or local events and company-specific events, as well as the financial condition
of insurers. If insurance coverage is not available or obtainable on acceptable terms, NEE or FPL may be required to pay costs
associated with adverse future events. NEE and FPL generally are not fully insured against all significant losses. For example,
FPL is not fully insured against hurricane-related losses, but would instead seek recovery of such uninsured losses from customers
subject to approval by the FPSC, to the extent losses exceed restricted funds set aside to cover the cost of storm damage. A loss
for which NEE or FPL is not fully insured could have a material adverse effect on NEE's and FPL's business, financial condition,
results of operations and prospects.
If supply costs necessary to provide NEER's full energy and capacity requirement services are not favorable, operating
costs could increase and adversely affect NEE's business, financial condition, results of operations and prospects.
NEER provides full energy and capacity requirements services primarily to distribution utilities, which include load-following services
and various ancillary services to satisfy all or a portion of such utilities' power supply obligations to their customers. The supply
costs for these transactions may be affected by a number of factors, including, but not limited to, events that may occur after such
utilities have committed to supply power, such as weather conditions, fluctuating prices for energy and ancillary services, and the
ability of the distribution utilities' customers to elect to receive service from competing suppliers. NEER may not be able to recover
all of its increased supply costs, which could have a material adverse effect on NEE's business, financial condition, results of
operations and prospects.
Due to the potential for significant volatility in market prices for fuel, electricity and renewable and other energy
commodities, NEER's inability or failure to hedge effectively its assets or positions against changes in commodity prices,
volumes, interest rates, counterparty credit risk or other risk measures could significantly impair NEE's results of
operations.
There can be significant volatility in market prices for fuel, electricity and renewable and other energy commodities. NEE's inability
to manage properly or hedge the commodity risks within its portfolios, based on factors both from within or wholly or partially outside
of NEE's control, may materially adversely affect NEE's business, financial condition, results of operations and prospects.
Sales of power on the spot market or on a short-term contractual basis may cause NEE's results of operations to be
volatile.
A portion of NEER's power generation facilities operate wholly or partially without long-term power purchase agreements. Power
from these facilities is sold on the spot market or on a short-term contractual basis. Spot market sales are subject to market volatility,
and the revenue generated from these sales is subject to fluctuation that may cause NEE's results of operations to be volatile. NEER
and NEE may not be able to manage volatility adequately, which could then have a material adverse effect on NEE's business,
financial condition, results of operations and prospects.
Reductions in the liquidity of energy markets may restrict the ability of NEE to manage its operational risks, which, in
turn, could negatively affect NEE's results of operations.
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NEE is an active participant in energy markets. The liquidity of regional energy markets is an important factor in the company's
ability to manage risks in these operations. Over the past several years, other market participants have ceased or significantly
reduced their activities in energy markets as a result of several factors, including, but not limited to, government investigations,
changes in market design and deteriorating credit quality. Liquidity in the energy markets can be adversely affected by price volatility,
restrictions on the availability of credit and other factors, and any reduction in the liquidity of energy markets could have a material
adverse effect on NEE's business, financial condition, results of operations and prospects.
If price movements significantly or persistently deviate from historical behavior, NEE's and FPL's hedging and trading
procedures and associated risk management tools may not protect against significant losses.
NEE and FPL have hedging and trading procedures and associated risk management tools, such as separate but complementary
financial, credit, operational, compliance and legal reporting systems, internal controls, management review processes and other
mechanisms. NEE and FPL are unable to assure that such procedures and tools will be effective against all potential
risks. Additionally, risk management tools and metrics such as daily value at risk, earnings at risk, stop loss limits and liquidity
guidelines are based on historical price movements. Due to the inherent uncertainty involved in price movements and potential
deviation from historical pricing behavior, NEE and FPL are unable to assure that their risk management tools and metrics will be
effective to protect against adverse effects on their business, financial condition, results of operations and prospects. Such adverse
effects could be material.
If power transmission or natural gas, nuclear fuel or other commodity transportation facilities are unavailable or disrupted,
FPL's and NEER's ability to sell and deliver power or natural gas may be limited.
FPL and NEER depend upon power transmission and natural gas, nuclear fuel and other commodity transportation facilities, many
of which they do not own. Occurrences affecting the operation of these facilities that may or may not be beyond FPL's and NEER's
control (such as severe weather or a generator or transmission facility outage, pipeline rupture, or sudden and significant increase
or decrease in wind generation) may limit or halt the ability of FPL and NEER to sell and deliver power and natural gas, or to
purchase necessary fuels and other commodities, which could materially adversely impact NEE's and FPL's business, financial
condition, results of operations and prospects.
NEE and FPL are subject to credit and performance risk from customers, hedging counterparties and vendors.
NEE and FPL are exposed to risks associated with the creditworthiness and performance of their customers, hedging counterparties
and vendors under contracts for the supply of equipment, materials, fuel and other goods and services required for their business
operations and for the construction and operation of, and for capital improvements to, their facilities. Adverse conditions in the
energy industry or the general economy, as well as circumstances of individual customers, hedging counterparties and vendors,
may affect the ability of some customers, hedging counterparties and vendors to perform as required under their contracts with
NEE and FPL.
If any hedging, vending or other counterparty fails to fulfill its contractual obligations, NEE and FPL may need to make arrangements
with other counterparties or vendors, which could result in financial losses, higher costs, untimely completion of power generation
facilities and other projects, and/or a disruption of their operations. If a defaulting counterparty is in poor financial condition, NEE
and FPL may not be able to recover damages for any contract breach.
NEE and FPL could recognize financial losses or a reduction in operating cash flows if a counterparty fails to perform or
make payments in accordance with the terms of derivative contracts or if NEE or FPL is required to post margin cash
collateral under derivative contracts.
NEE and FPL use derivative instruments, such as swaps, options, futures and forwards, some of which are traded in the OTC
markets or on exchanges, to manage their commodity and financial market risks, and for NEE to engage in trading and marketing
activities. Any failures by their counterparties to perform or make payments in accordance with the terms of those transactions
could have a material adverse effect on NEE's or FPL's business, financial condition, results of operations and prospects. Similarly,
any requirement for FPL or NEE to post margin cash collateral under its derivative contracts could have a material adverse effect
on its business, financial condition, results of operations and prospects.
NEE and FPL are highly dependent on sensitive and complex information technology systems, and any failure or breach
of those systems could have a material adverse effect on their business, financial condition, results of operations and
prospects.
NEE and FPL operate in a highly regulated industry that requires the continuous functioning of sophisticated information technology
systems and network infrastructure. Despite NEE's and FPL's implementation of security measures, all of their technology systems
are vulnerable to disability, failures or unauthorized access due to such activities. If NEE's or FPL's information technology systems
were to fail or be breached, and NEE or FPL was unable to recover in a timely way, NEE and FPL would be unable to fulfill critical
business functions, and sensitive confidential and other data could be compromised.
NEE's and FPL's business is highly dependent on their ability to process and monitor, on a daily basis, a very large number of
30
transactions, many of which are highly complex and cross numerous and diverse markets. Due to the size, scope and geographical
reach of NEE's and FPL's business, and due to the complexity of the process of power generation, transmission and distribution,
the development and maintenance of information technology systems to keep track of and process this information is both critical
and extremely challenging. NEE's and FPL's operating systems and facilities may fail to operate properly or become disabled as
a result of events that are either within, or wholly or partially outside, their control, such as operator error, severe weather or terrorist
activities. Any such failure or disabling event could adversely affect NEE's and FPL's ability to process transactions and provide
services, and their financial results and liquidity.
NEE and FPL add, modify and replace information systems on a regular basis. Modifying existing information systems or
implementing new or replacement information systems is costly and involves risks, including, but not limited to, integrating the
modified, new or replacement system with existing systems and processes, implementing associated changes in accounting
procedures and controls, and ensuring that data conversion is accurate and consistent. Any disruptions or deficiencies in existing
information systems, or disruptions, delays or deficiencies in the modification or implementation of new information systems, could
result in increased costs, the inability to track or collect revenues, the diversion of management's and employees' attention and
resources, and could negatively impact the effectiveness of the companies' control environment, and/or the companies' ability to
timely file required regulatory reports.
NEE and FPL also face the risks of operational failure or capacity constraints of third parties, including, but not limited to, those
who provide power transmission and natural gas transportation services.
NEE's and FPL's retail businesses are subject to the risk that sensitive customer data may be compromised, which could
result in an adverse impact to their reputation and/or the results of operations of the retail business.
NEE's and FPL's retail businesses require access to sensitive customer data in the ordinary course of business. NEE's and
FPL's retail businesses may also need to provide sensitive customer data to vendors and service providers who require access to
this information in order to provide services, such as call center services, to the retail businesses. If a significant breach occurred,
the reputation of NEE and FPL could be adversely affected, customer confidence could be diminished, or customer information
could be subject to identity theft. NEE and FPL would be subject to costs associated with the breach and/or NEE and FPL could
be subject to fines and legal claims, any of which may have a material adverse effect on the business, financial condition, results
of operations and prospects of NEE and FPL.
NEE and FPL could recognize financial losses as a result of volatility in the market values of derivative instruments and
limited liquidity in OTC markets.
NEE and FPL execute transactions in derivative instruments on either recognized exchanges or via the OTC markets, depending
on management's assessment of the most favorable credit and market execution factors. Transactions executed in OTC markets
have the potential for greater volatility and less liquidity than transactions on recognized exchanges. As a result, NEE and FPL
may not be able to execute desired OTC transactions due to such heightened volatility and limited liquidity.
In the absence of actively quoted market prices and pricing information from external sources, the valuation of derivative instruments
involves management's judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative
valuation methods could affect the reported fair value of these derivative instruments and have a material adverse effect on NEE's
and FPL's business, financial condition, results of operations and prospects.
NEE and FPL may be adversely affected by negative publicity.
From time to time, political and public sentiment may result in a significant amount of adverse press coverage and other adverse
public statements affecting NEE and FPL. Adverse press coverage and other adverse statements, whether or not driven by political
or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal
claims. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceeding, can divert the time
and effort of senior management from NEE's and FPL's business.
Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive
and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of NEE and FPL,
on the morale and performance of their employees and on their relationships with their respective regulators. It may also have a
negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect
effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on NEE's
and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects may be materially adversely affected
if FPL is unable to maintain, negotiate or renegotiate franchise agreements on acceptable terms with municipalities and
counties in Florida.
FPL must negotiate franchise agreements with municipalities and counties in Florida to provide electric services within such
municipalities and counties, and electricity sales generated pursuant to these agreements represent a very substantial portion of
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FPL's revenues. If FPL is unable to maintain, negotiate or renegotiate such franchise agreements on acceptable terms, it could
contribute to lower earnings and FPL may not fully realize the anticipated benefits from significant investments and expenditures,
which could materially adversely affect NEE's and FPL's business, financial condition, results of operations and prospects.
Increasing costs associated with health care plans may materially adversely affect NEE's and FPL's results of operations.
The costs of providing health care benefits to employees and retirees have increased substantially in recent years. NEE and FPL
anticipate that their employee benefit costs, including, but not limited to, costs related to health care plans for employees and former
employees, will continue to rise. The increasing costs and funding requirements associated with NEE's and FPL's health care plans
may materially adversely affect NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be negatively affected by the
lack of a qualified workforce or the loss or retirement of key employees.
NEE and FPL may not be able to service customers, grow their business or generally meet their other business plan goals effectively
and profitably if they do not attract and retain a qualified workforce. Additionally, the loss or retirement of key executives and other
employees may materially adversely affect service and productivity and contribute to higher training and safety costs.
Over the next several years, a significant portion of NEE's and FPL's workforce, including, but not limited to, many workers with
specialized skills maintaining and servicing the nuclear generation facilities and electrical infrastructure, will be eligible to retire. Such
highly skilled individuals may not be able to be replaced quickly due to the technically complex work they perform. If a significant
amount of such workers retire and are not replaced, the subsequent loss in productivity and increased recruiting and training costs
could result in a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's business, financial condition, results of operations and prospects could be materially adversely affected
by work strikes or stoppages and increasing personnel costs.
Employee strikes or work stoppages could disrupt operations and lead to a loss of revenue and customers. Personnel costs may
also increase due to inflationary or competitive pressures on payroll and benefits costs and revised terms of collective bargaining
agreements with union employees. These consequences could have a material adverse effect on NEE's and FPL's business,
financial condition, results of operations and prospects.
NEE's ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including, but
not limited to, the effect of increased competition for acquisitions resulting from the consolidation of the power industry.
NEE is likely to encounter significant competition for acquisition opportunities that may become available as a result of the
consolidation of the power industry in general. In addition, NEE may be unable to identify attractive acquisition opportunities at
favorable prices and to complete and integrate them successfully and in a timely manner.
Nuclear Generation Risks
The construction, operation and maintenance of NEE's and FPL's nuclear generation facilities involve environmental,
health and financial risks that could result in fines or the closure of the facilities and in increased costs and capital
expenditures.
NEE's and FPL's nuclear generation facilities are subject to environmental, health and financial risks, including, but not limited to,
those relating to site storage of spent nuclear fuel, the disposition of spent nuclear fuel, leakage and emissions of tritium and other
radioactive elements in the event of a nuclear accident or otherwise, the threat of a terrorist attack and other potential liabilities
arising out of the ownership or operation of the facilities. NEE and FPL maintain decommissioning funds and external insurance
coverage which are intended to reduce the financial exposure to some of these risks; however, the cost of decommissioning nuclear
generation facilities could exceed the amount available in NEE's and FPL's decommissioning funds, and the exposure to liability
and property damages could exceed the amount of insurance coverage. If NEE or FPL is unable to recover the additional costs
incurred through insurance or, in the case of FPL, through regulatory mechanisms, their business, financial condition, results of
operations and prospects could be materially adversely affected.
In the event of an incident at any nuclear generation facility in the U.S. or at certain nuclear generation facilities in Europe,
NEE and FPL could be assessed significant retrospective assessments and/or retrospective insurance premiums as a
result of their participation in a secondary financial protection system and nuclear insurance mutual companies.
Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor
owners to the amount of insurance available from both private sources and an industry retrospective payment plan. In accordance
with this Act, NEE maintains $375 million of private liability insurance per site, which is the maximum obtainable, and participates
in a secondary financial protection system, which provides up to $12.2 billion of liability insurance coverage per incident at any
nuclear reactor in the U.S. Under the secondary financial protection system, NEE is subject to retrospective assessments and/or
retrospective insurance premiums of up to $940 million ($470 million for FPL), plus any applicable taxes, per incident at any nuclear
32
reactor in the U.S. or at certain nuclear generation facilities in Europe, regardless of fault or proximity to the incident, payable at a
rate not to exceed $140 million ($70 million for FPL) per incident per year. Such assessments, if levied, could materially adversely
affect NEE's and FPL's business, financial condition, results of operations and prospects.
NRC orders or new regulations related to increased security measures and any future safety requirements promulgated
by the NRC could require NEE and FPL to incur substantial operating and capital expenditures at their nuclear generation
facilities.
The NRC has broad authority to impose licensing and safety-related requirements for the operation and maintenance of nuclear
generation facilities, the addition of capacity at existing nuclear generation facilities and the construction of nuclear generation
facilities, and these requirements are subject to change. In the event of non-compliance, the NRC has the authority to impose fines
or shut down a nuclear generation facility, or to take both of these actions, depending upon its assessment of the severity of the
situation, until compliance is achieved. Any of the foregoing events could require NEE and FPL to incur increased costs and capital
expenditures, and could reduce revenues.
Any serious nuclear incident occurring at a NEE or FPL plant could result in substantial remediation costs and other expenses. A
major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any
domestic nuclear generation facility. An incident at a nuclear facility anywhere in the world also could cause the NRC to impose
additional conditions or other requirements on the industry, which could increase costs, reduce revenues and result in additional
capital expenditures.
The inability to operate any of NEER's or FPL's nuclear generation units through the end of their respective operating
licenses could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and
prospects.
The operating licenses for NEE's and FPL's nuclear generation facilities extend through at least 2030. If the facilities cannot be
operated for any reason through the life of those operating licenses, NEE or FPL may be required to increase depreciation rates,
incur impairment charges and accelerate future decommissioning expenditures, any of which could materially adversely affect their
business, financial condition, results of operations and prospects.
Various hazards posed to nuclear generation facilities, along with increased public attention to and awareness of such
hazards, could result in increased nuclear licensing or compliance costs which are difficult or impossible to predict and
could have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
The threat of terrorist activity, as well as recent international events implicating the safety of nuclear facilities, could result in more
stringent or complex measures to keep facilities safe from a variety of hazards, including, but not limited to, natural disasters such
as earthquakes and tsunamis, as well as terrorist or other criminal threats. This increased focus on safety could result in higher
compliance costs which, at present, cannot be assessed with any measure of certainty and which could have a material adverse
effect on NEE's and FPL's business, financial condition, results of operations and prospects.
NEE's and FPL's nuclear units are periodically removed from service to accommodate normal refueling and maintenance
outages, and for other purposes. If planned outages last longer than anticipated or if there are unplanned outages, NEE's
and FPL's results of operations and financial condition could be materially adversely affected.
NEE's and FPL's nuclear units are periodically removed from service to accommodate normal refueling and maintenance outages,
including, but not limited to, inspections, repairs and certain other modifications. In addition, outages may be scheduled, often in
connection with a refueling outage, to replace equipment, to increase the generation capacity at a particular nuclear unit, or for
other purposes, and those planned activities increase the time the unit is not in operation. In the event that a scheduled outage
lasts longer than anticipated or in the event of an unplanned outage due to, for example, equipment failure, such outages could
materially adversely affect NEE's or FPL's business, financial condition, results of operations and prospects.
Liquidity, Capital Requirements and Common Stock Risks
Disruptions, uncertainty or volatility in the credit and capital markets may negatively affect NEE's and FPL's ability to fund
their liquidity and capital needs and to meet their growth objectives, and can also adversely affect the results of operations
and financial condition of NEE and FPL.
NEE and FPL rely on access to capital and credit markets as significant sources of liquidity for capital requirements and other
operations requirements that are not satisfied by operating cash flows. Disruptions, uncertainty or volatility in those capital and
credit markets, including, but not limited to, the conditions of the most recent financial crises in the U.S. and abroad, could increase
NEE's and FPL's cost of capital. If NEE or FPL is unable to access regularly the capital and credit markets on terms that are
reasonable, it may have to delay raising capital, issue shorter-term securities and incur an unfavorable cost of capital, which, in
turn, could adversely affect its ability to grow its business, could contribute to lower earnings and reduced financial flexibility, and
could have a material adverse effect on its business, financial condition, results of operations and prospects.
33
Although NEE's competitive energy subsidiaries have used non-recourse or limited-recourse, project-specific financing in the past,
market conditions and other factors could adversely affect the future availability of such financing. The inability of NEE's subsidiaries
to access the capital and credit markets to provide project-specific financing for electric-generating and other energy facilities on
favorable terms, whether because of disruptions or volatility in those markets or otherwise, could necessitate additional capital
raising or borrowings by NEE and/or NEECH in the future.
The inability of subsidiaries that have existing project-specific financing arrangements to meet the requirements of various
agreements relating to those financings could give rise to a project-specific financing default which, if not cured or waived, might
result in the specific project, and potentially in some limited instances its parent companies, being required to repay the associated
debt or other borrowings earlier than otherwise anticipated, and if such repayment were not made, the lenders or security holders
would generally have rights to foreclose against the project assets and related collateral. Such an occurrence also could result in
NEE expending additional funds or incurring additional obligations over the shorter term to ensure continuing compliance with
project-specific financing arrangements based upon the expectation of improvement in the project's performance or financial returns
over the longer term. Any of these actions could materially adversely affect NEE's business, financial condition, results of operations
and prospects, as well as the availability or terms of future financings for NEE or its subsidiaries.
NEE's, NEECH's and FPL's inability to maintain their current credit ratings may adversely affect NEE's and FPL's liquidity
and results of operations, limit the ability of NEE and FPL to grow their business, and increase interest costs.
The inability of NEE, NEECH and FPL to maintain their current credit ratings could adversely affect their ability to raise capital or
obtain credit on favorable terms, which, in turn, could impact NEE's and FPL's ability to grow their business and service indebtedness
and repay borrowings, and would likely increase their interest costs. Some of the factors that can affect credit ratings are cash
flows, liquidity, the amount of debt as a component of total capitalization, and political, legislative and regulatory actions. There
can be no assurance that one or more of the ratings of NEE, NEECH and FPL will not be lowered or withdrawn entirely by a rating
agency.
NEE's and FPL's liquidity may be impaired if their creditors are unable to fund their credit commitments to the companies
or to maintain their current credit ratings.
The inability of NEE's, NEECH's and FPL's credit providers to fund their credit commitments or to maintain their current credit ratings
could require NEE, NEECH or FPL, among other things, to renegotiate requirements in agreements, find an alternative credit
provider with acceptable credit ratings to meet funding requirements, or post cash collateral and could have a material adverse
effect on NEE's and FPL's liquidity.
Poor market performance and other economic factors could affect NEE's and FPL's defined benefit pension plan's funded
status, which may materially adversely affect NEE's and FPL's liquidity and results of operations.
NEE sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of NEE and its subsidiaries. A
decline in the market value of the assets held in the defined benefit pension plan due to poor investment performance or other
factors may increase the funding requirements for this obligation.
NEE's and FPL's defined benefit pension plan is sensitive to changes in interest rates, since, as interest rates decrease the funding
liabilities increase, potentially increasing benefits costs and funding requirements. Any increase in benefits costs or funding
requirements may have a material adverse effect on NEE's and FPL's business, financial condition, results of operations and
prospects.
Poor market performance and other economic factors could adversely affect the asset values of NEE's and FPL's nuclear
decommissioning funds, which may materially adversely affect NEE's and FPL's liquidity and results of operations.
NEE and FPL are required to maintain decommissioning funds to satisfy their future obligations to decommission their nuclear
power plants. A decline in the market value of the assets held in the decommissioning funds due to poor investment performance
or other factors may increase the funding requirements for these obligations. Any increase in funding requirements may have a
material adverse effect on NEE's and FPL's business, financial condition, results of operations and prospects.
Certain of NEE's investments are subject to changes in market value and other risks, which may adversely affect NEE's
liquidity and financial results.
NEE holds other investments where changes in the fair value affect NEE's financial results. In some cases there may be no
observable market values for these investments, requiring fair value estimates to be based on other valuation techniques. This
type of analysis requires significant judgment and the actual values realized in a sale of these investments could differ materially
from those estimated. A sale of an investment below previously estimated value, or other decline in the fair value of an investment,
could result in losses or the write-off of such investment, and may have an material adverse effect on NEE's financial condition and
results of operations.
34
NEE may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if its
subsidiaries are unable to pay upstream dividends or repay funds to NEE.
NEE is a holding company and, as such, has no material operations of its own. Substantially all of NEE's consolidated assets are
held by its subsidiaries. NEE's ability to meet its financial obligations, including, but not limited to, its guarantees, and to pay
dividends on its common stock are primarily dependent on its subsidiaries' net income and cash flows, which are subject to the
risks of their respective businesses, and their ability to pay upstream dividends or to repay funds to NEE.
NEE's subsidiaries are separate legal entities and have no independent obligation to provide NEE with funds for its payment
obligations. The subsidiaries have financial obligations, including, but not limited to, payment of debt service, which they must
satisfy before they can fund NEE. In addition, in the event of a subsidiary's liquidation or reorganization, NEE's right to participate
in a distribution of assets is subject to the prior claims of the subsidiary's creditors.
The dividend-paying ability of some of the subsidiaries is limited by contractual restrictions which are contained in outstanding
financing agreements and which may be included in future financing agreements. The future enactment of laws or regulations also
may prohibit or restrict the ability of NEE's subsidiaries to pay upstream dividends or to repay funds.
NEE may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if NEE
is required to perform under guarantees of obligations of its subsidiaries.
NEE guarantees many of the obligations of its consolidated subsidiaries, other than FPL, through guarantee agreements with
NEECH. These guarantees may require NEE to provide substantial funds to its subsidiaries or their creditors or counterparties at
a time when NEE is in need of liquidity to meet its own financial obligations. Funding such guarantees may materially adversely
affect NEE's ability to pay dividends.
Disruptions, uncertainty or volatility in the credit and capital markets may exert downward pressure on the market price
of NEE's common stock.
The market price and trading volume of NEE's common stock are subject to fluctuations as a result of, among other factors, general
credit and capital market conditions and changes in market sentiment regarding the operations, business and financing strategies
of NEE and its subsidiaries. As a result, disruptions, uncertainty or volatility in the credit and capital markets may, for example,
have a material adverse effect on the market price of NEE's common stock.
The factors described above, as well as other information set forth in this report, which could materially adversely affect NEE's and
FPL's businesses, financial condition, future financial results and/or liquidity should be carefully considered. The risks described
above are not the only risks facing NEE and FPL. Additional risks and uncertainties not currently known to NEE or FPL, or that are
currently deemed to be immaterial, also may materially adversely affect NEE's or FPL's business, financial condition, results of
operations and prospects.
Item 1B. Unresolved Staff Comments
None
35
Item 2. Properties
NEE and its subsidiaries maintain properties which are adequate for their operations. The principal properties of FPL and NEER
are described below.
Generating Facilities
FPL
At December 31, 2011, the electric generating, transmission, distribution and general facilities of FPL represented approximately
48%, 12%, 36% and 4%, respectively, of FPL's gross investment in electric utility plant in service. At December 31, 2011, FPL had
the following generating facilities:
FPL Facilities
Fossil
Combined-cycle
Fort Myers
Lauderdale
Manatee
Martin
Martin
Putnam
Sanford
Turkey Point
West County
Steam turbines
Cutler
Manatee
Martin
Port Everglades
Location
Fort Myers, FL
Dania, FL
Parrish, FL
Indiantown, FL
Indiantown, FL
Palatka, FL
Lake Monroe, FL
Florida City, FL
West Palm Beach, FL
Miami, FL
Parrish, FL
Indiantown, FL
Port Everglades, FL
St. Johns River Power Park
Jacksonville, FL
Sanford
Scherer
Turkey Point
Simple-cycle combustion turbines
Fort Myers
Gas turbines
Fort Myers
Lauderdale
Lake Monroe, FL
Monroe County, GA
Florida City, FL
Fort Myers, FL
Fort Myers, FL
Dania, FL
Port Everglades
Port Everglades, FL
Nuclear
St. Lucie
Turkey Point
Solar PV
DeSoto
Space Coast
TOTAL
Hutchinson Island, FL
Florida City, FL
Arcadia, FL
Cocoa, FL
No.
of Units
Fuel
Net
Capability
(mw)(a)
1
2
1
1
2
2
2
1
3
2
2
2
4
2
1
1
2
2
12
24
12
2
2
1
1
Gas
Gas/Oil
Gas
Gas/Oil/Solar Thermal
Gas
Gas/Oil
Gas
Gas/Oil
Gas/Oil
Gas
Oil/Gas
Oil/Gas
Oil/Gas
Coal/Petroleum Coke
Oil/Gas
Coal
Oil/Gas
Gas/Oil
Oil
Oil/Gas
Oil/Gas
Nuclear
Nuclear
Solar PV
Solar PV
(b)
(c)
(d)
1,432
884
1,111
1,132
938
498
1,912
1,148
3,657
205
1,624
1,652
1,187
254
138
672
788
315
648
840
420
(e)
1,584
1,386
25
10
24,460
(f)
______________________
(a) Represents FPL's net ownership interest in plant capability.
(b) The megawatts generated by the 75 mw solar thermal facility replace steam produced by this unit and therefore are not incremental.
(c) Represents FPL's 20% ownership interest in each of SJRPP Units Nos. 1 and 2, which are jointly owned with JEA.
(d) Represents FPL's approximately 76% ownership of Scherer Unit No. 4, which is jointly owned with JEA.
(e) Excludes Orlando Utilities Commission's and the Florida Municipal Power Agency's combined share of approximately 15% of St. Lucie Unit No. 2.
(f)
Substantially all of FPL's properties are subject to the lien of FPL's mortgage.
36
NEER
At December 31, 2011, NEER had the following generating facilities:
Geographic
Region
No.
of Units
NEER Facilities
Wind
Ashtabula Wind(b)(c)
Ashtabula Wind II(c)
Ashtabula Wind III
Baldwin Wind(b)
Butler Ridge Wind(b)(c)
Cabazon(b)
Callahan Divide(b)
Capricorn Ridge
Capricorn Ridge Expansion
Cerro Gordo(b)
Crystal Lake I(b)(c)
Crystal Lake II
Crystal Lake III
Day County Wind(b)
Delaware Mountain
Diablo Wind(b)
Elk City Wind(b)
Elk City Wind II
Endeavor Wind
Endeavor Wind II
Ghost Pine Wind
Gray County
Green Mountain(b)
Green Power
Green Ridge Power
Hancock County(b)
High Winds(b)
Horse Hollow Wind(b)
Horse Hollow Wind II(b)
Horse Hollow Wind III(b)
Indian Mesa
King Mountain(b)
Lake Benton II(b)
Langdon Wind(b)(c)
Langdon Wind II(b)(c)
Lee / DeKalb Wind
Logan Wind(c)
Majestic Wind(b)(c)
Meyersdale(b)
Mill Run(b)
Minco Wind(b)
Minco Wind II(b)
Montezuma Wind(b)
Montfort(b)
Mount Copper(b)
Mount Miller(b)
Mountaineer(b)
Mower County Wind(c)
New Mexico Wind(b)
North Dakota Wind(b)
Northern Colorado(b)
Oklahoma / Sooner Wind(b)
Oliver County Wind I(c)
Oliver County Wind II(c)
Peetz Table Wind(c)
Pubnico Point(b)
Red Canyon Wind Energy(b)
Location
Barnes County, ND
Griggs & Steele Counties, ND
Barnes County, ND
Burleigh County, ND
Dodge County, WI
Riverside County, CA
Taylor County, TX
Sterling & Coke Counties, TX
Sterling & Coke Counties, TX
Cerro Gordo County, IA
Hancock County, IA
Winnebago County, IA
Winnebago County, IA
Day County, SD
Culberson County, TX
Alameda County, CA
Roger Mills & Beckham Counties, OK
Roger Mills & Beckham Counties, OK
Osceola County, IA
Osceola County, IA
Trochu, Alberta, Canada
Gray County, KS
Somerset County, PA
Riverside County, CA
Alameda & Contra Costa Counties, CA
Hancock County, IA
Solano County, CA
Taylor County, TX
Taylor & Nolan Counties, TX
Nolan County, TX
Pecos County, TX
Upton County, TX
Pipestone County, MN
Cavalier County, ND
Cavalier County, ND
Lee & DeKalb Counties, IL
Logan County, CO
Carson County, TX
Somerset County, PA
Fayette County, PA
Grady County, OK
Grady & Caddo Counties, OK
Solano County, CA
Iowa County, WI
Murdochville, Quebec, Canada
Murdochville, Quebec, Canada
Preston & Tucker Counties, WV
Mower County, MN
Quay & Debaca Counties, NM
LaMoure County, ND
Logan County, CO
Midwest
Midwest
Midwest
Midwest
Midwest
West
ERCOT
ERCOT
ERCOT
Midwest
Midwest
Midwest
Midwest
Midwest
ERCOT
West
Other South
Other South
Midwest
Midwest
West
Other South
Northeast
West
West
Midwest
West
ERCOT
ERCOT
ERCOT
ERCOT
ERCOT
Midwest
Midwest
Midwest
Midwest
West
Other South
Northeast
Northeast
Other South
Other South
West
Midwest
Midwest
Midwest
Northeast
Midwest
West
Midwest
West
Harper & Woodward Counties, OK
Other South
Oliver County, ND
Oliver County, ND
Logan County, CO
Yarmouth, Nova Scotia, Canada
Borden, Garza & Scurry Counties, TX
Midwest
Midwest
West
Midwest
ERCOT
37
Fuel
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Net
Capability
(mw)(a)
148
120
62
102
54
40
114
364
298
41
150
200
66
99
28
21
99
101
100
50
82
112
10
17
87
98
162
213
299
224
83
278
103
118
41
217
201
80
30
15
99
101
37
30
54
54
66
99
204
62
174
102
51
48
199
31
84
99
80
39
64
36
53
76
208
199
55
100
80
44
66
38
31
43
66
40
20
51
170
8
22
803
148
90
142
130
149
125
214
137
79
27
145
134
53
20
10
62
63
16
20
30
30
44
43
136
41
81
68
22
32
133
17
56
NEER Facilities
Location
Geographic
Region
No.
of Units
Red Mesa Wind
Sky River(b)
Somerset Wind Power(b)
South Dakota Wind(b)
Southwest Mesa(b)
Stateline(b)
Story County Wind(b)(c)
Story County Wind II(b)
Vansycle(b)
Vansycle II
Vasco Winds(c)
Victory Garden(b)
Waymart(b)
Weatherford Wind(b)
Wessington Springs Wind(b)(c)
White Oak(c)
Wilton Wind(b)
Wilton Wind II(c)
Windpower Partners 1990
Cibola County, NM
Kern County, CA
Somerset County, PA
Hyde County, SD
Upton & Crockett Counties, TX
West
West
Northeast
Midwest
ERCOT
Umatilla County, OR and Walla Walla County, WA
West
Story County, IA
Story & Hardin Counties, IA
Umatilla County, OR
Umatilla County, OR
Contra Costa County, CA
Kern County, CA
Wayne County, PA
Custer & Washita Counties, OK
Jerauld County, SD
McLean County, IL
Burleigh County, ND
Burleigh County, ND
Alameda & Contra Costa Counties, CA
Windpower Partners 1991
Alameda & Contra Costa Counties, CA
Windpower Partners 1991-92
Alameda & Contra Costa Counties, CA
Windpower Partners 1992
Windpower Partners 1993(c)
Windpower Partners 1993
Alameda & Contra Costa Counties, CA
Riverside County, CA
Lincoln County, MN
Windpower Partners 1994
Culberson County, TX
Wolf Ridge Wind
Cooke County, TX
Woodward Mountain
Wyoming Wind(b)
Investments in joint ventures(d)
Upton & Pecos Counties, TX
Uinta County, WY
Various
Total Wind
Contracted
Bayswater(b)
Duane Arnold
Hatch Solar
Jamaica Bay(b)
Marcus Hook 750(b)
Point Beach
Investments in joint ventures:
SEGS III-IX(b)
Other
Total Contracted
Merchant
Forney
Lamar Power Partners
Maine - Cape, Wyman
Maine(b)
Marcus Hook 50
Paradise Solar
Seabrook
Far Rockaway, NY
Palo, IA
Hatch, NM
Far Rockaway, NY
Marcus Hook, PA
Two Rivers, WI
Kramer Junction & Harper Lake, CA
Various
Forney, TX
Paris, TX
Various - ME
Various - ME
Marcus Hook, PA
West Deptford, NJ
Seabrook, NH
Investment in joint ventures
Various
Total Merchant
TOTAL
Fuel
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Gas
Nuclear
CPV Solar
Gas/Oil
Gas
Nuclear
Solar
(f)
Gas
Gas
Oil
64
342
6
27
106
454
100
100
38
43
33
96
43
98
34
100
33
33
141
162
223
300
33
73
107
75
242
80
643
2
1
1
2
4
2
7
4
8
6
6
81
Hydro
Gas
Solar PV
Nuclear
(f)
1
1
1
4
Net
Capability
(mw)(a)
102
77
9
41
74
300
150
150
25
99
78
22
65
147
51
150
49
50
14
16
22
30
50
26
39
112
160
144
95
8,569
56
431
5
54
744
1,190
148
158
2,786
1,792
1,000
796
359
50
5
1,100
150
5,252
16,607
(e)
(g)
(h)
Midwest
Midwest
West
West
West
West
Northeast
Other South
Midwest
Midwest
Midwest
Midwest
West
West
West
West
West
Midwest
ERCOT
ERCOT
ERCOT
West
West
Northeast
Midwest
West
Northeast
Northeast
Midwest
West
Northeast
ERCOT
ERCOT
Northeast
Northeast
Northeast
Northeast
Northeast
Northeast
________________________
(a) Represents NEER's net ownership interest in plant capacity.
(b) These generating facilities are encumbered by liens against their assets securing various financings.
(c) NEER owns these wind facilities together with third-party investors with differential membership interests. See Note 1 - Sale of Differential Membership Interests.
(d) Represents plants with no more than 50% ownership using wind technology. Certain facilities, totaling 57 mw, are encumbered by liens against their assets
securing a financing.
(e) Excludes Central Iowa Power Cooperative and Cornbelt Power Cooperative's combined share of 30%.
(f) Represents plants with no more than 50% ownership using fuels such as natural gas and waste coal.
(g) Excludes six other energy-related partners' combined share of 16%.
(h) Excludes Massachusetts Municipal Wholesale Electric Company's, Taunton Municipal Lighting Plant's and Hudson Light & Power Department's combined share
of 11.77%.
38
Transmission and Distribution
At December 31, 2011, FPL owned and operated 587 substations and the following electric transmission and distribution lines:
Nominal
Voltage
Overhead Lines
Pole Miles
Trench and
Submarine
Cables Miles
500
230
138
115
69
kv
kv
kv
kv
kv
Less than 69 kv
Total
(a)
1,106
3,038
1,575
746
164
42,334
48,963
___________________
(a) Includes approximately 75 miles owned jointly with JEA.
Character of Ownership
—
25
53
1
14
25,111
25,204
Substantially all of FPL's properties are subject to the lien of FPL's mortgage, which secures most debt securities issued by FPL. The
majority of FPL's real property is held in fee and is free from other encumbrances, subject to minor exceptions which are not of a
nature as to substantially impair the usefulness to FPL of such properties. Some of FPL's electric lines are located on parcels of
land which are not owned in fee by FPL but are covered by necessary consents of governmental authorities or rights obtained from
owners of private property. The majority of NEER's generating facilities are owned by NEER subsidiaries and a number of those
facilities are encumbered by liens securing various financings. Additionally, certain of NEER's generating facilities are located on
land leased from owners of private property. See Generating Facilities and Note 1 - Electric Plant, Depreciation and Amortization.
Item 3. Legal Proceedings
NEE and FPL are parties to various legal and regulatory proceedings in the ordinary course of their respective businesses. For
information regarding legal proceedings that could have a material effect on NEE or FPL, see Note 14 - Legal Proceedings. Such
descriptions are incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable
PART II
Item 5. Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock Data. All of FPL's common stock is owned by NEE. NEE's common stock is traded on the New York Stock
Exchange under the symbol "NEE." The high and low sales prices for the common stock of NEE as reported in the consolidated
transaction reporting system of the New York Stock Exchange and the cash dividends per share declared for each quarter during
the past two years are as follows:
Quarter
High
2011
Low
Cash
Dividends
High
2010
Low
Cash
Dividends
First
Second
Third
Fourth
$
$
$
$
55.86
58.98
58.25
61.20
$
$
$
$
51.54
54.16
49.00
51.33
$
$
$
$
0.55
0.55
0.55
0.55
$
$
$
$
53.75
53.50
55.98
56.26
$
$
$
$
45.29
47.96
48.44
50.00
$
$
$
$
0.50
0.50
0.50
0.50
39
The amount and timing of dividends payable on NEE's common stock are within the sole discretion of NEE's Board of Directors. The
Board of Directors reviews the dividend rate at least annually (generally in February) to determine its appropriateness in light of
NEE's financial position and results of operations, legislative and regulatory developments affecting the electric utility industry in
general and FPL in particular, competitive conditions, change in business mix and any other factors the Board of Directors deems
relevant. The ability of NEE to pay dividends on its common stock is dependent upon, among other things, dividends paid to it by
its subsidiaries. There are no restrictions in effect that currently limit FPL's ability to pay dividends to NEE. In February 2012, NEE
announced that it would increase its quarterly dividend on its common stock from $0.55 to $0.60 per share. See Management's
Discussion - Liquidity and Capital Resources - Covenants with respect to dividend restrictions and Note 11 - Common Stock Dividend
Restrictions regarding dividends paid by FPL to NEE.
As of the close of business on January 31, 2012, there were 25,588 holders of record of NEE's common stock.
Issuer Purchases of Equity Securities. Information regarding purchases made by NEE of its common stock during the three
months ended December 31, 2011 is as follows:
Period
10/1/2011 - 10/31/11
11/1/2011 - 11/30/11
12/1/2011 - 12/31/11
Total
Total
Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of a
Publicly Announced Program
(b)
(b)
(c)
848
5,093
6,725,809
6,731,750
$
$
$
$
54.82
55.65
55.76
55.76
—
—
6,725,252
6,725,252
Maximum Number of
Shares that May Yet be
Purchased Under the
Program(a)
20,000,000
20,000,000
13,274,748
__________________________________
(a)
(b)
(c)
In February 2005, NEE's Board of Directors authorized a common stock repurchase plan of up to 20 million shares of common stock over an unspecified period,
which authorization was most recently reaffirmed and ratified by the Board of Directors in July 2011.
Includes shares of common stock withheld from employees to pay certain withholding taxes upon the vesting of stock awards granted to such employees under
the NextEra Energy, Inc. Amended and Restated Long-Term Incentive Plan (former LTIP).
Includes: (1) 557 shares of common stock purchased as a reinvestment of dividends by the trustee of a grantor trust in connection with NEE's obligation under
a February 2006 grant under the former LTIP of deferred retirement share awards to an executive officer; and (2) 6,725,252 shares of common stock purchased
under an Accelerated Share Repurchase (ASR) agreement (see Note 11 - ASR of NEE Common Stock).
40
Item 6. Selected Financial Data
SELECTED DATA OF NEE (millions, except per share
amounts):
Operating revenues
Net income(a)
Earnings per share of common stock - basic
Earnings per share of common stock - assuming dilution
Dividends paid per share of common stock
Years Ended December 31,
2011
2010
2009
2008
2007
$ 15,341
$ 15,317
$ 15,643
$ 16,410
$ 15,263
$
$
$
$
1,923
4.62
4.59
2.20
$
$
$
$
1,957
4.77
4.74
2.00
$
$
$
$
1,615
3.99
3.97
1.89
$
$
$
$
1,639
4.10
4.07
1.78
$
$
$
$
1,312
3.30
3.27
1.64
Total assets
$ 57,188
$ 52,994
$ 48,458
$ 44,821
$ 40,123
Long-term debt, excluding current maturities
$ 20,810
$ 18,013
$ 16,300
$ 13,833
$ 11,280
SELECTED DATA OF FPL (millions):
Operating revenues
Net income
Total assets
$ 10,613
$ 10,485
$ 11,491
$ 11,649
$ 11,622
$
1,068
$
945
$
831
$
789
$
836
$ 31,816
$ 28,698
$ 26,812
$ 26,175
$ 24,044
Long-term debt, excluding current maturities
$
7,483
$
6,682
$
5,794
$
5,311
$
4,976
Energy sales (kwh)
Energy sales:
Residential
Commercial
Industrial
Interchange power sales
Other(b)
Total
Approximate 60-minute peak load (mw):(c)
Summer season
Winter season
Average number of customer accounts (thousands):
Residential
Commercial
Industrial
Other
Total
Average price billed to customers (cents per kwh)
106,662
107,978
105,414
105,406
108,636
51.2%
42.2
2.9
0.9
2.8
52.2%
41.3
2.9
0.8
2.8
51.2%
42.7
3.1
1.4
1.6
50.5%
43.2
3.4
1.6
1.3
50.8%
42.3
3.5
1.8
1.6
100.0%
100.0%
100.0%
100.0%
100.0%
21,619
17,934
22,256
21,153
22,351
24,346
21,060
20,031
21,962
18,055
4,027
508
9
3
4,547
9.83
4,004
504
9
3
4,520
9.34
3,984
501
10
4
4,499
11.19
3,992
501
13
4
4,510
10.96
3,981
493
19
4
4,497
10.63
__________________________________
(a)
Includes net unrealized mark-to-market after-tax (gains) losses associated with non-qualifying hedges of $(190) million, $(175) million, $20 million, $(170) million
and $86 million and OTTI after-tax losses, net of OTTI reversals of $6 million, $(4) million, $13 million, $76 million and $6 million for the years ended December 31,
2011, 2010, 2009, 2008 and 2007, respectively. Also, 2011 includes a loss on the sale of natural gas-fired generating assets of approximately $98 million. See
Note 4 - Nonrecurring Fair Value Measurements.
Includes the net change in unbilled sales.
(b)
(c) Winter season includes November and December of the current year and January to March of the following year (for 2011, through February 27, 2012).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
NEE’s operating performance is driven primarily by the operations of its two principal subsidiaries, FPL, which serves approximately
4.6 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the U.S., and NEER, which
together with its affiliated entities is the largest generator in the U.S. of renewable energy from the wind and sun. The table below
presents NEE’s net income and earnings per share by reportable segment - FPL, NEER and Corporate and Other, which is primarily
comprised of interest expense, the operating results of FPL FiberNet, Lone Star and other business activities, as well as other
income and expense items, including income taxes and eliminating entries (see Note 15 for additional segment information). The
41
discussion that follows should be read in conjunction with the Notes to the Consolidated Financial Statements contained herein. In
the discussion below and in Results of Operations, all comparisons are with the corresponding items in the prior year.
Net Income
Years Ended December 31,
Earnings Per Share,
assuming dilution
Years Ended December 31,
2011
2010
2009
2011
2010
2009
FPL
NEER(a)
Corporate and Other
NEE
(millions)
$ 1,068
$
774
81
$
945
980
32
831
759
25
$
2.55
$
2.29
$
2.04
1.85
0.19
2.37
0.08
1.86
0.07
3.97
$ 1,923
$ 1,957
$ 1,615
$
4.59
$
4.74
$
______________________
(a) NEER’s results reflect an allocation of interest expense from NEECH to NEER based on a deemed capital structure of 70% debt and allocated shared service
costs.
For the five years ended December 31, 2011, NEE delivered a total shareholder return of approximately 33%, significantly outpacing
the S&P 500’s 1% decline, the Dow Jones US Electricity's 14% return and the S&P 500 Electric Utilities’ 18% return. The historical
stock performance of NEE's common stock shown in the performance graph below is not necessarily indicative of future stock price
performance.
Adjusted Earnings
NEE prepares its financial statements in accordance with GAAP. However, management uses earnings excluding certain items
(adjusted earnings), a non-GAAP financial measure, internally for financial planning, for analysis of performance, for reporting of
results to the Board of Directors and as an input in determining whether performance goals are met for performance-based
compensation under NEE’s employee incentive compensation plans. NEE also uses adjusted earnings when communicating its
financial results and earnings outlook to investors. NEE’s management believes adjusted earnings provides a more meaningful
representation of the company’s fundamental earnings power. Although the excluded amounts are properly included in the
determination of net income in accordance with GAAP, management believes that the amount and/or nature of such items make
period to period comparisons of operations difficult and potentially confusing. Adjusted earnings do not represent a substitute for
net income, as prepared in accordance with GAAP.
42
Adjusted earnings exclude the unrealized mark-to-market effect of non-qualifying hedges (as described below), OTTI losses on
securities held in NEER’s nuclear decommissioning funds, net of the reversal of previously recognized OTTI losses on securities
sold and losses on securities where price recovery was deemed unlikely (collectively, OTTI reversals) and, in 2011, the after-tax
loss on the sale of natural gas-fired generating assets. OTTI reversals are reported in other - net in NEE's consolidated statements
of income.
NEE and NEER segregate into two categories unrealized mark-to-market gains and losses on energy derivative transactions which
are used to manage commodity price risk. The first category, referred to as trading activities, represents the net unrealized effect
of actively traded positions entered into to take advantage of market price movements and, in 2011 and 2010, the impact related
to exiting hedged positions on future gas drilling opportunities. The second category, referred to as non-qualifying hedges, represents
certain hedging transactions entered into as economic hedges but the transactions do not meet the requirements for hedge
accounting or hedge accounting treatment is not elected. Changes in the fair value of those transactions are marked to market
and reported in the consolidated statements of income, resulting in earnings volatility because the economic offset to the positions
which are required to be marked to market (such as the physical assets from which power is generated) are not marked to market.
As a consequence, net income reflects only the movement in one part of economically-linked transactions. For this reason, NEE's
management views results expressed excluding the unrealized mark-to-market impact of the non-qualifying hedges as a meaningful
measure of current period performance. At FPL, substantially all changes in the fair value of energy derivative transactions 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 or the capacity clause. See Note 4 - Nonrecurring Fair Value Measurements.
In 2011, subsidiaries of NEER completed the sales of their ownership interest in five natural gas-fired generating plants with a total
generating capacity of approximately 2,700 mw located in California, Virginia, Alabama, South Carolina and Rhode Island. In
connection with these sales, a loss of approximately $151 million ($98 million total after-tax with $92 million of this loss recorded
by NEER) was recorded in NEE's consolidated statements of income, which due to its nature and significance, was excluded from
adjusted earnings. See Note 3.
The following table provides details of the net unrealized after-tax gains and losses from non-qualifying hedges, after-tax OTTI
losses, net of reversals and the after-tax loss on the sale of the natural gas-fired generating assets.
Years Ended December 31,
2011
2010
(millions)
2009
Net unrealized mark-to-market after-tax gains (losses) from non-qualifying hedge
activity(a)
OTTI after-tax losses on securities held in nuclear decommissioning funds, net of OTTI
reversals
After-tax loss on sale of natural gas-fired assets(b)
$
$
$
190
(6)
(98)
$
$
$
175
4
—
$
$
$
(20)
(13)
—
____________________
(a) $193 million, $176 million and $(20) million, respectively, is included in NEER's net income; the balance, if any, is included in Corporate and Other.
(b) $92 million is included in NEER's net income; the balance is included in Corporate and Other.
The change in unrealized mark-to-market activity from non-qualifying hedges is primarily attributable to changes in forward power
and natural gas prices, as well as the reversal of previously recognized unrealized mark-to-market gains or losses as the underlying
transactions were realized. As a general rule, a gain (loss) in the non-qualifying hedge category is offset by decreases (increases)
in the fair value of related physical asset positions in the portfolio or contracts, which are not marked to market under GAAP.
2011 Summary
FPL's earned regulatory ROE was 11% in both 2010 and 2011 and FPL expects to earn an 11% regulatory ROE in 2012. FPL's
increase in net income in 2011 was primarily driven by investments in plant in service and FPL's ability to use the surplus depreciation
credit, as permitted under the 2010 rate agreement, to earn up to FPL's allowed 11% regulatory ROE on its retail rate base, as well
as higher cost recovery clause results. The 2010 rate agreement results in retail base rates that remain effectively frozen until the
end of 2012. Additionally, cost recovery for FPL’s WCEC Unit No. 3 is permitted during the term of the agreement and FPL can
vary the amount of surplus depreciation amortized in any one year subject to certain caps, provided its retail regulatory return on
equity remains within the allowed range of 9% to 11%.
NEER's earnings declined in 2011 reflecting the loss on sale of natural gas-fired generating assets, lower results from the customer
supply and proprietary power and gas trading businesses, extended and unplanned outages at Seabrook and lower deferred tax
benefits associated with cash grants (convertible ITCs), partly offset by a higher wind resource and higher gas infrastructure
results.
In 2011, NEER added 379 mw of wind capacity and secured approximately 1,600 mw of long-term wind power sales
agreements. Additionally, in 2011 construction began on the 250 mw Genesis solar project in California and the 550 mw Desert
Sunlight solar project in California, in which NEER has a 50% equity investment.
43
Corporate and Other's earnings in 2011 increased primarily due to state deferred income tax benefits related to state tax law changes
and an income tax benefit related to the dissolution of a subsidiary.
NEE and its subsidiaries, including FPL, require funds to support and grow their businesses. These funds are primarily provided
by cash flow from operations and short- and long-term borrowings and, from time to time, issuance of equity securities. As of
February 9, 2012, NEE's total net available liquidity was approximately $5.1 billion, of which FPL's portion was approximately $2.8
billion.
Outlook
NEE's strategy at both of its major businesses seeks to meet customer needs more economically and reliably than
competitors. Meeting customer needs frequently requires the commitment of large capital expenditures to projects that have long
lives and such commitments are difficult to reverse once made. At the end of 2011, both FPL and NEER had made commitments
to a variety of major capital projects that are expected to be completed over the next several years. While NEE management
believes that these projects individually and collectively are attractive investments with the potential to create value for shareholders,
there can be no guarantee that all or any of these projects will be successful. Because of their importance, management focuses
particular attention on these large projects.
In 2012, NEE expects to focus efforts in particular on the following initiatives:
At FPL:
•
Sustaining FPL's customer value proposition. The combination of low bills, good reliability and excellent customer service that
FPL currently provides its customers is both an objective of FPL's strategy and an important contributor to its long-term business
success. FPL seeks to, at minimum, maintain and ideally improve its overall customer value proposition.
• Major Capital Projects: FPL is currently in a large capital expansion program and its objective is to bring these projects in on
schedule and within budget. This program includes:
• modernizing its Cape Canaveral and Riviera Beach power plants to high-efficiency natural gas-fired 1,200 mw units
•
•
to be placed in service by 2013 and 2014, respectively,
adding a total of approximately 450 mw to 490 mw of capacity at its existing nuclear units at St. Lucie and Turkey
Point, to be placed in service by 2013, and
petitioning the FPSC in November 2011 to modernize its Port Everglades power plant to a high-efficiency natural gas-
fired 1,280 mw unit which, if approved, is expected to be in service in 2016 and cost approximately $1.2 billion.
•
Rate Case: In January 2012, FPL filed a formal notification with the FPSC indicating its intent to initiate a base rate
proceeding. The notification stated that, based on preliminary estimates, FPL expects to request a base rate increase of
approximately $525 million effective January 2013 and an additional base rate increase of approximately $170 million annually
commencing when the modernized Cape Canaveral plant becomes operational, which is expected to occur in June 2013.
At NEER:
• Maintaining excellence in day-to-day operations. NEER has developed a track record of generally running its facilities reliably
and cost-effectively. The company seeks to, at minimum, maintain and ideally improve its operating performance.
• Wind: Add approximately 1,150 mw to 1,500 mw of new U.S. wind generation in 2012 and 600 mw of new Canadian wind
•
generation between 2012 and 2015, and
Solar: Add approximately 935 mw of new solar generation during the period 2012 through 2016, including the 250 mw Genesis
solar project in California, the 99.8 mw Spain solar project, the 550 mw Desert Sunlight solar project in California, in which
NEER has a 50% equity investment, and the 250 mw McCoy solar PV project located in the Mojave Desert near the Genesis
and Desert Sunlight solar projects.
At Lone Star, which is in the process of constructing approximately 320 miles of transmission lines and other associated facilities
in Texas:
• Construction: Achieve commercial operations by the end of the first quarter of 2013.
• Rate Case: In January 2012, Lone Star filed a petition with the PUCT requesting, among other things, interim rates which
would take effect when Lone Star's first substation is placed in service, currently projected to be in 2012, and final rates when
the transmission lines are energized. If approved, based on the expected in-service dates, the requested rates would result
in annual revenues of approximately $14 million in 2012 and $110 million in 2013.
In addition, NEE and FPL devote effort to numerous other initiatives designed to support their long-term growth and
development. There can be no guarantees that NEE or FPL will be successful in attaining their goals with respect to any of these
initiatives.
For additional information on certain of the above matters, see Item 1. Business.
44
RESULTS OF OPERATIONS
NEE’s net income for 2011 was $1.92 billion, compared to $1.96 billion in 2010 and $1.61 billion in 2009. The decrease in NEE’s
2011 net income was primarily driven by lower earnings at NEER, partly offset by improved results at FPL and income tax benefits
at Corporate and Other. The increase in NEE's 2010 net income was primarily driven by improved results at FPL and by net
unrealized mark-to-market after-tax gains from non-qualifying hedges at NEER.
NEE's effective income tax rate for all periods presented reflects PTCs for wind projects at NEER and deferred tax benefits associated
with convertible ITCs under the Recovery Act. PTCs and deferred tax benefits associated with convertible ITCs can significantly
affect NEE's effective income tax rate depending on the amount of pretax income. PTCs can be significantly affected by wind
generation and by the expiration of PTCs after ten years of production. See Note 1 - Income Taxes and - Sale of Differential
Membership Interests and Note 6.
FPL: Results of Operations
FPL’s net income for 2011, 2010 and 2009 was $1,068 million, $945 million and $831 million, respectively, representing an increase
in 2011 of $123 million and an increase in 2010 of $114 million. FPL obtains its operating revenues primarily from the sale of
electricity to retail customers at rates established by the FPSC through base rates and cost recovery clause mechanisms.
In 2011 and 2010, FPL earned a regulatory ROE of 11%, as permitted by the 2010 rate agreement, and expects to earn an 11%
regulatory ROE in 2012. In 2011 and in 2010, growth in earnings for FPL was driven by:
investment in plant in service and FPL's ability to use the surplus depreciation credit, and
higher cost recovery clause results,
•
•
partly offset for 2010 by,
•
lower AFUDC - equity.
FPL's operating revenues consisted of the following:
Retail base
Fuel cost recovery
Net deferral of retail fuel revenues
Net repayment of previously deferred retail fuel revenues
Other cost recovery clauses and pass-through costs, net of any deferrals
Other, primarily pole attachment rentals, transmission and wholesale sales and
customer-related fees
Total
Retail Base
Years Ended December 31,
2011
2010
(millions)
2009
$
4,217
$
4,190
$
4,416
—
—
1,751
229
4,090
—
356
1,638
211
$
10,613
$
10,485
$
3,828
5,982
(356)
—
1,840
197
11,491
As permitted by the 2010 rate agreement, FPL collected approximately $101 million in retail base revenues through the capacity
clause related to the placement in service of WCEC Unit No. 3 in May 2011. In addition, a base rate increase pursuant to an FPSC
order which became effective March 1, 2010, increased retail base revenues by approximately $8 million and $68 million in 2011
and 2010, respectively, and retail base revenues increased in 2010 by $196 million resulting from WCEC Unit Nos. 1 and 2 placed
in service in 2009.
FPSC Rate Order
Effective March 1, 2010, pursuant to the FPSC rate order, new retail base rates for FPL were established, resulting in an increase
in retail base revenues of approximately $75 million on an annualized basis. The FPSC rate order also established a regulatory
ROE of 10.0% with a range of plus or minus 100 basis points and an adjusted regulatory equity ratio of 59.1%. It also shifted certain
costs from retail base rates to the capacity clause. In addition, the FPSC rate order directed FPL to reduce depreciation expense
(surplus depreciation credit) over the 2010 to 2013 period related to a depreciation reserve surplus. Subsequently, the principal
parties in FPL's 2009 rate case signed the 2010 rate agreement and, in February 2011, the FPSC issued a final order approving
the 2010 rate agreement. Key elements of that rate agreement, which is effective through December 31, 2012, are as follows:
•
•
•
Subject to the provisions of the 2010 rate agreement, retail base rates are effectively frozen through the end of 2012.
Incremental cost recovery through FPL’s capacity clause for the new combined-cycle natural gas unit at WCEC Unit No. 3,
which was placed in service in May 2011, is permitted up to the amount of the projected annual fuel savings for customers
during the term of the 2010 rate agreement.
Future storm restoration costs would be recoverable on an accelerated basis beginning 60 days from the filing of a cost recovery
45
•
•
petition, but capped at an amount that produces a surcharge of no more than $4 for every 1,000 kwh of 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.
If FPL’s earned regulatory ROE falls below 9%, FPL may seek retail base rate relief. If FPL’s earned regulatory ROE rises
above 11%, any party to the 2010 rate agreement may seek a reduction in FPL’s retail base rates. In determining the regulatory
ROE for all purposes under the 2010 rate agreement, earnings will be calculated on an actual, non-weather-adjusted basis.
FPL can vary the amount of surplus depreciation credit taken in any calendar year up to a cap in 2010 of $267 million, a cap
in subsequent years of $267 million plus the amount of any unused portion from prior years, and a total cap of $776 million
(surplus depreciation credit cap) over the course of the 2010 rate agreement, provided that in any year of the 2010 rate
agreement, FPL must use at least enough surplus depreciation credit to maintain a 9% earned regulatory ROE but may not
use any amount of surplus depreciation credit that would result in an earned regulatory ROE in excess of 11%. In 2010 and
2011, FPL used a total of $191 million of surplus depreciation credit; $585 million of the surplus depreciation credit cap remains
available for use in 2012.
Under the terms of the 2005 rate agreement, which was in effect from January 1, 2006 through February 28, 2010, retail base rates
did not increase except to allow recovery of the revenue requirements of FPL’s three power plants that achieved commercial
operation during the term of the 2005 rate agreement: Turkey Point Unit No. 5 in 2007 and WCEC Units Nos. 1 and 2 in 2009. Under
the terms of the 2005 rate agreement, FPL’s electric property depreciation rates were based upon the comprehensive depreciation
studies it filed with the FPSC in March 2005; however, FPL reduced depreciation on its plant in service by $125 million each year
as allowed by the 2005 rate agreement. The 2005 rate agreement also provided for a revenue sharing mechanism, whereby
revenues from retail base operations in excess of certain thresholds would be shared with customers. During the term of the 2005
rate agreement, FPL’s revenues did not exceed the thresholds.
Retail Customer Usage and Growth
For the year ended December 31, 2011, FPL experienced a 2% decrease in average usage per retail customer, reflecting weather
and other factors, which decreased retail base revenues by approximately $107 million. For the year ended December 31, 2010,
FPL experienced a 1.7% increase in usage per retail customer, reflecting weather and other factors, which increased retail base
revenues by approximately $79 million. The usage per retail customer data for the year ended December 31, 2011 includes three
extra days of sales after adjusting for a change from a fiscal month to a calendar month. At December 31, 2011, inactive accounts
(accounts with installed meters without corresponding customer names) and low-usage customers (customers using less than 200
kwh per month), both measures of empty homes, were approximately 5.8% and 1.6% less, respectively, than they had been at
December 31, 2010. Non-weather related usage per retail customer began to decline in the mid-2000s and this decline intensified
in the 2007 to 2009 period. The rate of decline in non-weather related usage per retail customer moderated in 2010 and 2011.
For the year ended December 31, 2011, FPL experienced a 0.6% increase in the average number of customer accounts, increasing
retail base revenues by approximately $25 million, compared to a 0.5% increase in customer accounts in 2010, which increased
2010 retail base revenues by $19 million. Positive customer account growth is projected to continue in 2012, although the rate of
growth is projected to be below FPL’s average rate of 1.5% over the last 10 years.
FPL believes that the economic slowdown and the downturn in the housing market that have affected the country and the state of
Florida have contributed to the slowdown in customer growth and to the decline in non-weather related usage per retail customer. The
unemployment rate in Florida was 9.9% and 12.0% in December 2011 and 2010, respectively; the December 2011 rate is the lowest
since April 2009. A portion of the decline in non-weather related usage per retail customer may also be related to federal and state
energy efficiency standards. FPL is unable to predict whether or when growth in customers and non-weather related customer
usage might return to previous trends.
Cost Recovery Clauses
In 2011, 2010 and 2009, cost recovery clauses contributed $108 million, $75 million, $41 million, respectively, to FPL’s net
income. The increase in 2011 and 2010 cost recovery clause results is primarily due to a return related to additional solar,
environmental and nuclear capacity expenditures. In 2012, it is expected that cost recovery clauses will contribute higher earnings
for FPL as a result of additional nuclear capacity expenditures. Fluctuations in fuel cost recovery revenues are primarily driven by
changes in fuel and energy charges which are included in fuel, purchased power and interchange expense in the consolidated
statements of income, as well as by changes in energy sales. Fluctuations in revenues from other cost recovery clauses and pass-
through costs are primarily driven by changes in storm-related surcharges, capacity charges, franchise fee costs, the impact of
changes in O&M and depreciation expenses on the underlying cost recovery clause, investment in solar and environmental projects,
investment in nuclear capacity until such capacity goes into service, pre-construction costs associated with the development of two
additional nuclear units at the Turkey Point site and changes in energy sales. Capacity charges and franchise fee costs are included
in fuel, purchased power and interchange and taxes other than income taxes and other, respectively, in the consolidated statements
of income.
46
Risk Management Fuel Procurement Program
FPL uses a risk management fuel procurement program which was approved by the FPSC. The FPSC reviews the program activities
and results for prudence on an annual basis as part of its annual review of fuel costs. The program is intended to manage fuel
price volatility by locking in fuel prices for a portion of FPL’s fuel requirements. The current regulatory asset for the change in fair
value of derivative instruments used in the fuel procurement program amounted to approximately $502 million and $236 million at
December 31, 2011 and 2010, respectively.
In 2010, pursuant to an FPSC order, FPL was required to refund in the form of a one-time credit to retail customers’ bills the 2009
year-end estimated fuel overrecovery; during the first quarter of 2010, approximately $404 million was refunded to retail
customers. At December 31, 2009, approximately $356 million of retail fuel revenues were overrecovered, the reversal of which
is reflected in the net repayment of previously deferred retail fuel revenues caption included in the table above. The difference
between the refund and the December 31, 2009 overrecovery was collected from retail customers in 2011. The increase in fuel
revenues in 2011 reflects the absence of the $404 million refund partly offset by approximately $41 million related to lower energy
sales and $37 million related to a lower average fuel factor. The decrease in fuel revenues in 2010 reflects the $404 million refund
and approximately $1,573 million related to a lower average fuel factor, partly offset by $85 million attributable to higher energy
sales. The decrease from December 31, 2010 to December 31, 2011 in deferred clause and franchise expenses and in deferred
clause and franchise revenues was approximately $181 million and positively affected NEE’s and FPL’s cash flows from operating
activities for the year ended December 31, 2011.
Other
The decrease in revenues from other cost recovery clauses and pass-through costs in 2010 is primarily due to lower revenues
associated with the FPSC’s nuclear cost recovery rule and lower revenues related to franchise and revenue taxes, partly offset by
higher environmental clause revenues. The decline in 2010 in revenues associated with the nuclear cost recovery rule is primarily
due to lower spending related to the development of the two additional nuclear units at the Turkey Point site. The decline in 2010
revenues related to franchise and revenue taxes reflects the decline in fuel revenues. The nuclear cost recovery rule provides for
the recovery of prudently incurred pre-construction costs and carrying charges (equal to a pretax AFUDC rate) on construction
costs for new nuclear capacity through levelized charges under the capacity clause. The same rule provides for the recovery of
construction costs, once property related to the new nuclear capacity goes into service, through a base rate increase effective
beginning the following January.
Other Items Impacting FPL Results
Fuel, Purchased Power and Interchange
The major components of FPL's fuel, purchased power and interchange expense are as follows:
Fuel and energy charges during the period
Net collection of previously deferred retail fuel costs
Net deferral of retail fuel costs
Other, primarily capacity charges, net of any capacity deferral
Total
$
$
2009
2011
Years Ended December 31,
2010
(millions)
4,714
$
—
(276)
544
4,982
4,237
159
—
581
4,977
$
$
$
5,425
256
—
539
6,220
The decrease in fuel and energy charges in 2011 reflects lower fuel and energy prices of $415 million and lower energy sales of
$62 million. The decrease in fuel and energy charges in 2010 reflects lower fuel and energy prices of approximately $822
million, partly offset by approximately $111 million attributable to higher energy sales.
O&M Expenses
FPL’s O&M expenses increased $79 million in 2011 primarily due to higher cost recovery clause costs which did not significantly
affect net income.
FPL’s O&M expenses increased $124 million in 2010 reflecting an approximately $20 million charge for workforce reductions and
higher nuclear and fossil generation, distribution, transmission and nuclear insurance costs of $34 million, $29 million, $16 million,
$8 million and $12 million, respectively, partly offset by lower customer service costs, primarily due to lower uncollectible accounts,
of $13 million. The increase in nuclear generation costs is primarily due to higher maintenance costs and reflects a reimbursement
in 2009 of prior years’ costs of approximately $10 million related to a spent nuclear fuel litigation settlement agreement with the
U.S. Government. The increase in fossil generation costs is primarily related to WCEC Units Nos. 1 and 2, which units were placed
in service in the second half of 2009, and higher plant overhaul costs. The increase in distribution and transmission costs reflects
higher restoration and tree trimming costs. Other changes in O&M expenses were primarily driven by pass-through costs which
did not significantly affect net income.
47
Depreciation and Amortization Expense
The major components of FPL’s depreciation and amortization expense are as follows:
$125 million annual reduction under the 2005 rate agreement
Surplus depreciation credit recorded under the 2010 rate agreement
Other depreciation and amortization recovered under base rates
Depreciation and amortization recovered under cost recovery clauses and securitized
storm-recovery cost amortization
Total
Years Ended December 31,
2011
2010
(millions)
2009
—
$
—
$
(187)
944
41
(4)
891
121
798
$
1,008
$
(125)
—
942
280
1,097
$
$
From 2002 through 2009, FPL recorded the $125 million annual reduction in depreciation and amortization expense that was
approved by the FPSC in previous rate orders. Under the terms of the 2010 rate agreement, FPL can vary the amount of surplus
depreciation credit taken in any calendar year up to a cap in 2010 of $267 million, a cap in subsequent years of $267 million plus
the amount of any unused portion from prior years, and a cap of $776 million (surplus depreciation credit cap) over the 2010 to
2012 period. In any year of the 2010 rate agreement FPL must use at least enough surplus depreciation credit to maintain a 9%
earned regulatory ROE but may not use any amount of surplus depreciation credit that would result in an earned regulatory ROE
in excess of 11%. As of December 31, 2011, approximately $585 million of the surplus depreciation credit cap remains available
for use in 2012. The increase in other depreciation and amortization expense recovered under base rates in 2011 is primarily due
to higher plant in service balances. The decline in other depreciation and amortization expense recovered under base rates in
2010 is primarily due to lower depreciation rates as a result of the FPSC rate order, partly offset by higher plant in service balances
related to WCEC Units Nos. 1 and 2, which were placed in service in 2009. The decrease in depreciation and amortization recovered
under cost recovery clauses and securitized storm-recovery cost amortization in 2011 and 2010 is primarily due to lower depreciation
and amortization under the FPSC's nuclear cost recovery rule. See Note 1 - Electric Plant, Depreciation and Amortization.
Taxes Other Than Income Taxes and Other
Taxes other than income taxes and other increased $37 million in 2011 primarily due to higher franchise fees and revenue taxes,
both of which are pass-through costs and reflect the increase in revenues from fuel and other cost recovery clauses and pass-
through costs. Taxes other than income taxes and other decreased by $71 million in 2010 primarily due to changes in franchise
fees and revenue taxes. In addition, taxes other than income taxes and other in 2011 and 2010 reflect higher property taxes of $5
million and $34 million, respectively, primarily due to growth in plant in service balances and, in 2010, a higher average property
tax rate, partly offset in 2011 by a lower average property tax rate.
Interest Expense
The increase in interest expense in 2011 is primarily due to higher average interest rates and higher average debt balances. The
increase in interest expense in 2010 is primarily due to higher average debt balances, as well as lower AFUDC - debt. Interest
expense on storm-recovery bonds, as well as certain other interest expense (collectively, clause interest), are essentially pass-
through amounts and do not significantly affect net income, as the clause interest is recovered either under cost recovery clause
mechanisms or through a storm-recovery bond surcharge. Clause interest for 2011, 2010 and 2009 amounted to approximately
$65 million, $56 million, and $45 million, respectively. The increase in clause interest in 2011 and 2010 is primarily due to higher
interest associated with solar, environmental and nuclear capacity expenditures.
AFUDC - Equity
The decrease in AFUDC - equity in 2010 is primarily attributable to WCEC Units Nos. 1 and 2, which units commenced commercial
operation in 2009, partly offset by additional AFUDC - equity on WCEC Unit No. 3. The decrease in AFUDC - equity in 2010 also
reflects a decline, effective April 1, 2010, in the AFUDC rate from 7.41% to 6.41%, as approved by the FPSC.
48
NEER: Results of Operations
NEER’s net income for 2011, 2010 and 2009 was $774 million, $980 million and $759 million, respectively, resulting in a decrease
in 2011 of $206 million and an increase in 2010 of $221 million. The primary drivers, on an after-tax basis, of these changes were
as follows:
New investments(a)
Existing assets(a)
Gas infrastructure(b)
Customer supply and proprietary power and gas trading businesses(b)
Asset sales
Impairment charges
Interest expense, differential membership costs and other
Change in unrealized mark-to-market non-qualifying hedge activity(c)(d)
Loss on sale of natural gas-fired generating assets(e)
Change in OTTI losses on securities held in nuclear decommissioning funds, net of OTTI reversals(d)
Net income increase (decrease)
Increase (Decrease)
From Prior Period
Years Ended
December 31,
2011
2010
(millions)
$
$
(26)
26
23
(92)
(18)
(20)
(14)
17
(92)
(10)
(206)
$
$
45
54
23
(25)
7
(11)
(85)
196
—
17
221
______________________
(a)
Includes PTCs and state ITCs on wind projects and, for new investments, deferred income tax and other benefits associated with convertible ITCs (see Note 1 -
Electric Plant, Depreciation and Amortization, Note 1 - Income Taxes, Note 1 - Sale of Differential Membership Interests and Note 6) but does not include allocation
of interest expense or corporate general and administrative expenses. Results from new projects are included in new investments during the first twelve months
of operation. A project's results are included in existing assets beginning with the thirteenth month of operation.
(b) Does not include allocation of interest expense or corporate general and administrative expenses.
(c) See Note 3 and Overview related to derivative instruments.
(d) See table in Overview for additional detail.
(e) See Note 4 - Nonrecurring Fair Value Measurements and Overview for additional information.
New Investments
Results from new investments for the years ended December 31, 2011, 2010 and 2009 include approximately $1 million, $66 million
and $87 million, respectively, of deferred tax benefits associated with convertible ITCs. In addition, an after-tax benefit associated
with convertible ITCs of approximately $34 million was recorded in 2011 from the sale of membership interests where the investors
elected to receive the convertible ITCs related to the underlying wind projects; the pretax amount of such benefit was recorded in
taxes other than income taxes and other in NEE's consolidated statements of income for the year ended December 31, 2011. Results
from new investments in 2011 also reflect lower state ITCs partly offset by the addition of approximately 1,130 mw of wind and 5
mw of solar generation during or after 2010. NEER’s 2010 results from new investments also reflect the addition of over 2,100 mw
of wind generation during or after 2009 and a benefit related to state ITCs.
Existing Assets
In 2011, results from NEER's existing asset portfolio increased $26 million primarily due to:
•
•
•
•
lower after-tax depreciation and amortization expense of $44 million due to a change in estimate of the useful lives of certain
equipment across the wind portfolio (see Note 1 - Electric Plant, Depreciation and Amortization),
higher wind results of approximately $35 million due to a higher wind resource partly offset by lower prices,
a $30 million income tax benefit related to a valuation allowance reversal for certain state ITCs reflecting state tax planning
initiatives,
higher results of $23 million from a natural gas-fired project in California, which was sold in the fourth quarter of 2011, reflecting
higher prices under a new long-term contract,
partly offset by,
•
lower results at Seabrook of $91 million primarily due to extended and unplanned outages in 2011 and lower priced hedges,
and
the expiration of PTCs ($15 million) on certain projects after ten years of production.
•
In 2010, results from NEER's existing asset portfolio increased $54 million primarily due to:
•
•
favorable results at Seabrook of approximately $62 million resulting primarily from the absence of an extended outage in 2010,
favorable generation due to lower curtailments and a higher wind resource across the wind portfolio totaling $46 million,
49
partly offset by,
•
•
unfavorable market conditions in the ERCOT market affecting NEER's merchant gas assets totaling $30 million, and
the absence of a tax benefit of $15 million recorded in 2009 related to a change in state tax law that extended the carry forward
period of ITCs on certain wind projects.
Gas Infrastructure
The increase in gas infrastructure results in 2011 and 2010 is primarily due to exiting the hedged positions on a number of future
gas drilling opportunities.
Customer Supply and Proprietary Power and Gas Trading
Results from the customer supply and proprietary power and gas trading businesses decreased in 2011 by $92 million primarily
due to lower full requirements results, lower power and gas trading results, lower results from the retail electricity provider reflecting
the adverse effects of purchasing power at high prices during a period of hot weather in Texas in August 2011 and the absence of
a gain on the sale of a power supply contract realized in 2010. In 2010, results from the customer supply and proprietary power
and gas trading businesses decreased by $25 million, primarily due to lower power and gas trading results, partly offset by the gain
from the sale of the power supply contract.
Asset Sales
Asset sales in 2011 include an after-tax loss of $92 million realized on the sale of natural gas-fired generating assets, which due
to its nature and significance was excluded from adjusted earnings (see Overview). Asset sales in 2010 include an after-tax gain
of approximately $6 million on the sale of a coal-fired project and an after-tax gain on a waste-to-energy project of approximately
$12 million recorded in 2010 after the expiration of an option for the buyer to sell the project back to NEER. Asset sales in 2009
include after-tax gains of $3 million for the sale of wind development rights, $6 million for the sale of a 50 mw wind project and $2
million for the sale of an interest in the waste-to-energy project.
Impairment Charges
In 2011, NEER recorded impairment charges primarily to write down the value of certain wind and oil-fired generation assets deemed
to be unrecoverable. As a result of a fair value analysis, long-lived assets held and used with a carrying amount of approximately
$79 million were written down to their fair value of $28 million, resulting in an impairment charge of $51 million or $31 million after-
tax. See Note 4 - Nonrecurring Fair Value Measurements. In 2010, NEER recorded impairment charges of $19 million or $11
million after-tax to write down the value of certain assets associated with the plans to repower two California wind facilities. These
impairment charges are reported as a separate line item in NEE's consolidated statements of income.
Interest Expense, Differential Membership Costs and Other
In both 2011 and 2010, interest expense, differential membership costs and other reflects higher interest and other costs due to
growth of the business and, for 2010, also reflects the absence of an $18 million income tax benefit recorded in 2009 due to a
reduction of previously deferred income taxes resulting from an additional equity investment in Canadian operations.
Other Factors
In addition to the primary drivers of the changes in net income discussed above, the discussion below describes changes in certain
line items set forth in NEE's consolidated statements of income as they relate to NEER.
Operating Revenues
Operating revenues for the year ended December 31, 2011 decreased $134 million primarily due to:
•
lower revenues at PMI, reflecting lower trading and full requirements activity, and the existing asset portfolio, primarily due to
the extended and unplanned outages at Seabrook and unfavorable market conditions in the NEPOOL and ERCOT regions
(collectively, approximately $763 million),
partly offset by,
•
unrealized mark-to-market gains of $414 million from non-qualifying hedges compared to $75 million of losses on such hedges
in 2010, and
higher revenues from project additions of $132 million.
•
Operating revenues for the year ended December 31, 2010 increased $639 million primarily due to:
•
•
•
higher revenues at PMI and NEER's retail electricity provider (collectively, approximately $242 million),
higher revenues in the existing asset portfolio of $206 million primarily due to the absence of an extended outage in 2010 at
Seabrook,
higher revenues from project additions of $143 million,
50
•
•
•
higher gas infrastructure revenues of $31 million,
favorable generation due to lower curtailments and a higher wind resource across the wind portfolio, and
losses of $75 million on unrealized mark-to-market non-qualifying hedge activity compared to $88 million of such losses in
2009.
Operating Expenses
Operating expenses for the year ended December 31, 2011 decreased $53 million primarily due to:
lower fuel costs of approximately $445 million, and
higher benefits associated with differential membership interests of $102 million,
•
•
partly offset by,
•
•
•
•
•
partly offset by,
•
$95 million of unrealized mark-to-market losses from non-qualifying hedges compared to $364 million of gains on such hedges
in 2010, and
higher impairment charges of $32 million.
Operating expenses for the year ended December 31, 2010 increased $262 million primarily due to:
higher fuel costs of approximately $366 million,
higher other operating expenses of $130 million due to higher maintenance activities, impairment charges associated with the
plans to repower two California wind facilities and additional wells in gas infrastructure,
higher costs for project additions of approximately $85 million,
$364 million of unrealized mark-to-market gains from non-qualifying hedges compared to $60 million of such gains in 2009.
Interest Expense
NEER’s interest expense for the years ended December 31, 2011 and 2010 increased $15 million and $55 million, respectively,
primarily due to increased borrowings to support the growth of the business, partly offset by lower average interest rates and, in
2011, higher interest capitalized on construction projects.
Gains on Disposal of Assets - net
Gains on disposal of assets - net in NEE’s consolidated statements of income for the year ended December 31, 2011, 2010 and
2009 primarily reflect gains on sales of securities held in NEER’s nuclear decommissioning funds and, in 2010, also reflect a pretax
gain of $18 million on the sale of the waste-to-energy project.
Tax Credits and Benefits
PTCs from NEER’s wind projects are reflected in NEER’s earnings. PTCs are recognized as wind energy is generated and sold
based on a per kwh rate prescribed in applicable federal and state statutes, and were approximately $271 million, $307 million and
$255 million for the years ended December 31, 2011, 2010 and 2009, respectively. In addition, NEE’s effective income tax rate for
the years ended December 31, 2011, 2010 and 2009 was affected by deferred tax benefits associated with convertible ITCs of $2
million, $68 million and $88 million, respectively. See Note 6.
Corporate and Other: Results of Operations
Corporate and Other is primarily comprised of interest expense, the operating results of FPL FiberNet, Lone Star and other business
activities, as well as corporate interest income and expenses. Corporate and Other allocates non-utility interest expense and shared
service costs to NEER. Interest expense is allocated based on a deemed capital structure of 70% debt and, for purposes of
allocating non-utility interest expense, the deferred credit associated with differential membership interests sold by NEER’s
subsidiaries is included with debt. Each subsidiary’s income taxes are calculated based on the “separate return method,” except
that tax benefits that could not be used on a 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
Corporate and Other. The major components of Corporate and Other’s results, on an after-tax basis, are as follows:
Interest expense, net of allocations to NEER
Interest income
Federal and state income tax benefits
Other
Net income
51
Years Ended December 31,
2011
2010
(millions)
2009
(72)
$
(63)
$
(43)
32
91
30
81
$
43
35
17
32
$
34
—
34
25
$
$
The increase in interest expense in 2011 and 2010 reflects additional debt outstanding, partly offset by lower average interest rates
and, in 2010, a higher allocation of interest costs to NEER. The decline in interest income in 2011 is primarily due to lower interest
recorded on unrecognized tax benefits, reflecting the settlement with the Internal Revenue Service in 2011. See Note 6 -
Unrecognized Tax Benefits. The increase in interest income in 2010 is primarily due to earnings on an energy-related loan made
to a third party by a NEECH subsidiary. The federal and state income tax benefits reflect consolidating income tax adjustments
and include the following the items:
•
•
•
•
in 2011, a state deferred income tax benefit of approximately $64 million, net of federal income taxes, related to state tax law
changes,
in 2011, an income tax benefit of $41 million related to the dissolution of a subsidiary,
in 2011, a $6 million expense associated with the loss on sale of natural gas-fired generating assets, and
in 2010, an income tax benefit of $24 million related to employee benefits.
Other includes all other corporate income and expenses, as well as other business activities. The decline in other in 2010 is primarily
due to an $11 million after-tax loss on the sale of assets held under leveraged leases; the pretax amount ($17 million) of such loss
is reflected in other - net in NEE's consolidated statements of income.
LIQUIDITY AND CAPITAL RESOURCES
NEE and its subsidiaries, including FPL, require funds to support and grow their businesses. These funds are used for, among
other things, working capital, capital expenditures, investments in or acquisitions of assets and businesses, payment of maturing
debt obligations and, from time to time, redemption or repurchase of outstanding debt or equity securities. It is anticipated that
these requirements will be satisfied through a combination of cash flow from operations, short- and long-term borrowings, and the
issuance, from time to time, of short- and long-term debt and equity securities, consistent with NEE’s and FPL’s objective of
maintaining, on a long-term basis, a capital structure that will support a strong investment grade credit rating. NEE, FPL and NEECH
rely on access to credit and capital markets as significant sources of liquidity for capital requirements and other operations that are
not satisfied by operating cash flows. The inability of NEE, FPL and NEECH to maintain their current credit ratings could affect
their ability to raise short- and long-term capital, their cost of capital and the execution of their respective financing strategies, and
could require the posting of additional collateral under certain agreements.
Cash Flows
Sources and uses of NEE's and FPL's cash for the years ended December 31, 2011, 2010 and 2009 were as follows:
Sources of cash:
Cash flows from operating activities
Long-term borrowings, net of loan proceeds restricted
for construction
Proceeds from the sale of differential membership
interests, net of payments to investors
Sale of natural gas-fired generating assets
Capital contribution from NEE
Cash grants under the Recovery Act
Issuances of common stock - net
Net increase in short-term debt
Other sources
Total sources of cash
Uses of cash:
Capital expenditures and independent power and
other investments and nuclear fuel purchases
Retirements of long-term debt
Net decrease in short-term debt
Dividends
Repurchases of common stock
Other uses
Total uses of cash
NEE
FPL
Years Ended December 31,
Years Ended December 31,
2011
2010
2009
2011
2010
2009
(millions)
$
4,074
$
3,834
$
4,463
$
2,245
$
1,934
$
2,871
3,375
366
1,204
—
624
48
460
205
10,356
(6,628)
(2,121)
—
(920)
(375)
(237)
(10,281)
3,724
3,220
261
—
—
588
308
—
76
8,791
(5,846)
(769)
(1,130)
(823)
—
(159)
(8,727)
—
—
—
100
198
154
102
8,237
(6,006)
(1,635)
—
(766)
—
(127)
(8,534)
840
—
—
410
218
—
229
924
—
—
660
161
—
—
516
—
—
—
—
—
45
89
4,031
65
3,744
76
3,508
(3,502)
(45)
—
(400)
—
(68)
(4,015)
(2,706)
(42)
(717)
(250)
—
(92)
(3,807)
(2,717)
(263)
—
(485)
—
(80)
(3,545)
Net increase (decrease) in cash and cash equivalents
$
75
$
64
$
(297)
$
16
$
(63)
$
(37)
52
NEE's primary capital requirements are for expanding and enhancing FPL's electric system and generating facilities to continue to
provide reliable service to meet customer electricity demands and for NEER's investments in independent power and other
projects. The following table provides a summary of the major capital investments for the years ended December 31, 2011, 2010
and 2009.
FPL:
Generation:
New
Existing
Transmission and distribution
Nuclear fuel
General and other
Other, primarily the exclusion of AFUDC - equity and change in accrued property additions
Total
NEER:
Wind
Solar
Nuclear, including nuclear fuel
Other
Total
Corporate and Other
Years Ended December 31,
2011
2010
2009
(millions)
$
1,424
$
1,112
$
1,185
907
880
365
213
(287)
636
606
101
101
150
734
633
195
102
(132)
$
3,502
$
2,706
$
2,717
953
594
727
500
2,774
352
1,950
2,625
185
510
427
3,072
68
40
455
115
3,235
54
Total capital expenditures and independent power and other investments and nuclear fuel purchases
$
6,628
$
5,846
$
6,006
In February 2012, an indirect wholly-owned subsidiary of NEER issued Class B membership interests to two third-party investors
for approximately $225 million. The NEER subsidiary has ownership interests in a wind generation facility with generating capacity
totaling approximately 662 mw located in Texas.
Liquidity
On February 9, 2012, FPL and NEECH refinanced a portion of their bank revolving line of credit facilities. The table below provides
the components of FPL's and NEECH's estimated total net available liquidity as of that date.
Bank revolving line of credit facilities(a)
Less letters of credit(c)
$
Revolving credit facility
Less borrowings
Maturity Date
FPL
NEECH
(millions)
Total
$
3,018
(80)
2,938
$
4,579
(1,484)
3,095
235
—
235
—
—
—
7,597
(1,564)
6,033
235
—
235
FPL
(b)
2014
NEECH
(b)
Subtotal
3,173
3,095
6,268
Cash and cash equivalents(c)
Less commercial paper(c)
Net available liquidity
_______________________
(a) Provide for the funding of loans up to $7,597 million ($3,018 million for FPL) and the issuance of letters of credit up to $4,097 million ($1,568 million for FPL). The
entire amount of the credit facilities is available for general corporate purposes, including to provide back-up liquidity for FPL’s and NEECH’s commercial paper
programs and other short-term borrowings and to provide additional liquidity in the event of a loss to the companies’ or their subsidiaries’ operating facilities
(including, in the case of FPL, a transmission and distribution property loss). FPL’s bank revolving line of credit facilities are also available to support the purchase
of $633 million of pollution control, solid waste disposal and industrial development revenue bonds (tax exempt bonds) in the event they are tendered by individual
bond holders and not remarketed prior to maturity.
400
(1,188)
2,307
426
(1,600)
5,094
26
(412)
2,787
$
$
$
(b) Approximately $4 million and $1,114 million of FPL’s bank revolving line of credit facilities expire in 2012 and 2013, respectively. Approximately $10 million and
$1,469 million of NEECH’s bank revolving line of credit facilities expire in 2012 and 2013, respectively. The remaining portion of bank revolving line of credit
facilities for FPL and NEECH expires in 2017.
(c) As of January 31, 2012.
53
As of February 27, 2012, 62 banks participate in FPL’s and NEECH’s bank revolving line of credit facilities and FPL’s revolving credit
facility, with no one bank providing more than 5% of the combined bank revolving line of credit facilities and FPL’s revolving credit
facility. European banks provide approximately 35% of the combined bank revolving line of credit facilities and FPL's revolving credit
facility. Pursuant to a 1998 guarantee agreement, NEE guarantees the payment of NEECH’s debt obligations under the bank
revolving line of credit facilities. In order for FPL or NEECH to borrow or to have letters of credit issued under the terms of their
respective bank revolving line of credit facilities and FPL's revolving credit facility, FPL, in the case of FPL, and NEE, in the case of
the NEECH, are required, among other things, to maintain a ratio of funded debt to total capitalization that does not exceed a stated
ratio. The FPL and NEECH bank revolving line of credit facilities and FPL revolving credit facility also contain default and related
acceleration provisions relating to, among other things, failure of FPL and NEE, as the case may be, to maintain the respective ratio
of funded debt to total capitalization at or below the specified ratio. At December 31, 2011, each of NEE and FPL was in compliance
with its required ratio.
Additionally, at December 31, 2011, certain subsidiaries of NEE had credit or loan facilities with available liquidity as follows:
NEECH and NEER:
Canadian bank revolving credit
agreements(a)
Revolving loan agreement(a)
NEER:
Senior secured limited-recourse loan
agreement(b)(c)
Term loan facility(b)(c)
Lone Star:
Senior secured limited-recourse loan
agreement(b)(d)
Original
Amount
C$300
€170
€589
$150
Amount
Remaining
Available at
December 31, 2011
(millions)
Rate
Maturity
Date
Related
Project Use
$121
$175
$485
$150
Variable
2013
Variable
2014
Canadian renewable
generating assets
Construction of Spain solar
project
Variable
2030
Variable
2019
Construction of Spain solar
project
Construction of Genesis solar
project
$387
$279
Variable
2016
Construction of Lone Star
transmission line and
substations
______________________
(a)
Includes as a precondition to borrowing or issuing letters of credit as well as default and related acceleration provisions that require NEE's ratio of funded debt to
total capitalization to not exceed a stated ratio. Payment obligations are guaranteed by NEE pursuant to the 1998 guarantee agreement with NEECH.
Includes default and related acceleration provisions for, among other things, failure to comply with certain covenants, including requirements that construction of
the project must be completed by a certain date.
(b)
(c) Borrowings are preconditioned on equity being contributed by the project's parent, and are drawn on a pro-rata basis with those equity contributions. The total
equity funding commitment and, until certain conditions or obligations related to the project are met, certain obligations, including all or a portion of the debt payment
obligations, are guaranteed by NEECH, which guarantee obligations are in turn guaranteed by NEE. The related NEECH guarantee contains default and acceleration
provisions relating to, among other things, NEE's ratio of funded debt to total capitalization exceeding a specified ratio.
(d) Borrowings are preconditioned on equity being contributed by Lone Star's parent, and are drawn on a pro-rata basis with those equity contributions. The total equity
funding commitment has been guaranteed by NEECH, which guarantee obligations are in turn guaranteed by NEE. The related NEECH guarantee contains default
provisions and related provisions for acceleration of the unfunded equity commitment relating to, among other things, NEE's ratio of funded debt to total capitalization
exceeding a specified ratio.
Storm Restoration Costs
At December 31, 2011, FPL had the capacity to absorb up to approximately $202 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. See Note 1 – Revenue
and Rates.
Dodd-Frank Act
The Dodd-Frank Act, enacted into law in July 2010, among other things, provides for the regulation of the OTC derivatives market. The
Dodd-Frank Act includes provisions that will require certain OTC derivatives, or swaps, to be centrally cleared and executed through
an exchange or other approved trading platform. While the legislation is broad and detailed, substantial portions of the legislation
require implementing rules to be adopted by federal governmental agencies including, but not limited to, the SEC and the CFTC. While
some provisions of the statute related to OTC derivatives are currently in effect or have been finalized, the majority of the rules are
expected to be finalized and implemented in 2012. NEE and FPL cannot predict the impact of the final rules that will be adopted to
implement the OTC derivative-related provisions of the Dodd-Frank Act. Those rules could negatively affect NEE's and FPL's ability
to hedge their commodity and interest rate risks, which could have a material effect on NEE's and FPL's risk exposure and financial
results. The rules also could cause NEER to decide to restructure part of its energy marketing and trading operations or to discontinue
certain portions of that business. In addition, if the rules require NEE and FPL to post significant amounts of cash collateral with
respect to swap transactions, NEE's and FPL's liquidity could be materially affected, and their ability to enter into OTC derivatives
54
to hedge commodity and interest rate risks could be significantly limited. Reporting and compliance requirements of the rules also
could significantly increase operating costs and expose NEE and FPL to penalties for any failure to comply with the new
requirements. The financial and operational impact of the final rules cannot be determined at this time, but could be material.
Capital Support
Letters of Credit, Surety Bonds and Guarantees
NEE and FPL obtain letters of credit and surety bonds, and issue guarantees to facilitate commercial transactions with third parties
and financings. Letters of credit, surety bonds and guarantees support, among other things, the buying and selling of wholesale
energy commodities, debt and related reserves, nuclear activities, capital expenditures for wind and solar development and other
contractual agreements.
In addition, as part of contract negotiations in the normal course of business, NEE and FPL may agree to make payments to
compensate or indemnify other parties for possible future unfavorable financial consequences resulting from specified events. The
specified events may include, but are not limited to, an adverse judgment in a lawsuit, the imposition of additional taxes due to a
change in tax law or interpretations of the tax law or the non-receipt of renewable tax credits or proceeds from cash grants under
the Recovery Act. NEE and FPL are unable to develop an estimate of the maximum potential amount of future payments under
some of these contracts because events that would obligate them have not yet occurred or, if any such event has occurred, they
have not been notified of its occurrence.
In addition, NEE has guaranteed certain payment obligations of NEECH, including most of its debt and all of its debentures and
commercial paper issuances, as well as most of its payment guarantees and indemnifications, and NEECH has guaranteed certain
debt and other obligations of NEER and its subsidiaries. See Note 14 - Commitments.
At December 31, 2011, NEE had approximately $1.4 billion of standby letters of credit ($40 million for FPL), approximately $160
million of surety bonds ($56 million for FPL) and approximately $14.5 billion notional amount of guarantees and indemnifications
($25 million for FPL), of which approximately $9.2 billion ($45 million for FPL) letters of credit, guarantees and indemnifications have
expiration dates within the next five years. An aggregate of approximately $1.3 billion ($34 million for FPL) of the standby letters of
credit at December 31, 2011 were issued under FPL’s and NEECH’s credit facilities.
Each of NEE and FPL believe it is unlikely that it would incur any liabilities associated with these letters of credit, surety bonds,
guarantees and indemnifications. Accordingly, at December 31, 2011, NEE and FPL did not have any liabilities recorded for these
letters of credit, surety bonds, guarantees and indemnifications.
Shelf Registration
In August 2009, NEE, NEECH, FPL and certain affiliated trusts filed a shelf registration statement with the SEC for an unspecified
amount of securities which became effective upon filing. The amount of securities issuable by the companies is established from
time to time by their respective boards of directors. As of February 27, 2012, securities that may be issued under the registration
statement include, depending on the registrant, senior debt securities, subordinated debt securities, junior subordinated debentures,
first mortgage bonds, preferred trust securities, common stock, preferred stock, stock purchase contracts, stock purchase units,
warrants and guarantees related to certain of those securities. As of February 27, 2012, NEE and NEECH had approximately $2.3
billion (issuable by either or both of them up to such aggregate amount) of board-authorized available capacity, and FPL had $750
million of board-authorized available capacity.
Contractual Obligations and Estimated Planned Capital Expenditures
NEE’s and FPL’s commitments at December 31, 2011 were as follows:
55
Long-term debt, including interest:(a)
FPL
NEER
Corporate and Other
Purchase obligations:
FPL(c)
NEER(d)
Corporate and Other(e)
Asset retirement activities:(f)
FPL(g)
NEER(h)
Other Commitments:
NEER(i)
Total
2012
2013
2014
2015
2016
Thereafter
Total
(millions)
$
428
729
739
5,985
1,970
250
—
2
142
$
$
818
958
$
409
986
410
707
$
1,697
1,531
1,610
411
677
405
$ 13,476
(b)
$ 15,952
4,317
12,580
8,374
18,562
3,810
2,900
2,545
2,295
9,415
26,950
475
15
—
—
76
140
—
—
—
78
110
—
—
—
100
—
—
—
520
—
7,106
11,564
3,315
265
7,106
11,566
103
115
557
1,071
$ 10,245
$ 7,849
$ 6,044
$ 5,485
$ 4,003
$ 59,535
$ 93,161
___________________________
(a)
(b)
Includes principal, interest and interest rate swaps. Variable rate interest was computed using December 31, 2011 rates.
Includes $633 million of 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, 2011, 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) Represents required capacity and minimum charges under long-term purchased power and fuel contracts (see Note 14 - Contracts), and projected capital expenditures
through 2016 (see Note 14 - Commitments).
(d) Represents firm commitments primarily in connection with construction activities and fuel-related contracts. See Note 14 - Commitments and Contracts.
(e) Represents firm commitments primarily for development and construction activities relating to Lone Star's transmission line and other associated facilities.
(f) Represents expected cash payments adjusted for inflation for estimated costs to perform asset retirement activities.
(g) At December 31, 2011, FPL had approximately $2,612 million in restricted funds for the payment of future expenditures to decommission FPL’s nuclear units, which
are included in NEE’s and FPL’s special use funds. See Note 13.
(h) At December 31, 2011, NEER’s 88.23% portion of Seabrook’s and 70% portion of Duane Arnold’s and its Point Beach’s restricted funds for the payment of future
expenditures to decommission its nuclear units totaled approximately $1,130 million and are included in NEE’s special use funds. See Note 13.
(i) Represents estimated cash distributions related to membership interests and payments related to the acquisition of certain development rights. For further discussion
of membership interests, see Note 1 - Sale of Differential Membership Interests.
Credit Ratings
NEE’s and FPL’s liquidity, ability to access credit and capital markets, cost of borrowings and collateral posting requirements under
certain agreements are dependent on their credit ratings. At February 27, 2012, Moody’s Investors Service, Inc. (Moody’s), Standard
& Poor’s Ratings Services (S&P) and Fitch Ratings (Fitch) had assigned the following credit ratings to NEE, FPL and NEECH:
NEE:(b)
Corporate credit rating
FPL:(b)
Corporate credit rating
First mortgage bonds
Pollution control, solid waste disposal and industrial development revenue bonds
Commercial paper
NEECH:(b)
Corporate credit rating
Debentures
Junior subordinated debentures
Commercial paper
Moody's(a)
S&P(a)
Fitch(a)
Baa1
A-
A-
A2
Aa3
VMIG-1
P-1
Baa1
Baa1
Baa2
P-2
A-
A
A
A-2
A-
BBB+
BBB
A-2
A
AA-
A+
F1
A-
A-
BBB
F1
____________________
(a) A security rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. The rating is subject to revision
or withdrawal at any time by the assigning rating organization.
(b) The outlook indicated by each of Moody's, S&P and Fitch is stable.
56
NEE and its subsidiaries, including FPL, have no credit rating downgrade triggers that would accelerate the maturity dates of
outstanding debt. A change in ratings is not an event of default under applicable debt instruments, and while there are conditions
to drawing on the credit facilities noted above, with the exception of the Spain senior secured limited-recourse loan facility, the
maintenance of a specific minimum credit rating is not a condition to drawing on these credit facilities.
Commitment fees and interest rates on loans under these credit facilities’ agreements are tied to credit ratings. A ratings downgrade
also could reduce the accessibility and increase the cost of commercial paper and other short-term debt issuances and additional
or replacement credit facilities. In addition, a ratings downgrade could result in the requirement that NEE subsidiaries, including
FPL, post collateral under certain agreements, including those related to fuel procurement, power sales and purchases, nuclear
decommissioning funding, debt-related reserves and trading activities. FPL’s and NEECH’s credit facilities are available to support
these potential requirements.
Covenants
NEE's charter does not limit the dividends that may be paid on its common stock. As a practical matter, the ability of NEE to pay
dividends on its common stock is dependent upon, among other things, dividends paid to it by its subsidiaries. For example, FPL
pays dividends to NEE in a manner consistent with FPL's long-term targeted capital structure. However, the mortgage securing
FPL's first mortgage bonds contains provisions which, under certain conditions, restrict the payment of dividends to NEE and the
issuance of additional first mortgage bonds. Additionally, in some circumstances, the mortgage restricts the amount of retained
earnings that FPL can use to pay cash dividends on its common stock. The restricted amount may change based on factors set out
in the mortgage. Other than this restriction on the payment of common stock dividends, the mortgage does not restrict FPL's use of
retained earnings. As of December 31, 2011, no retained earnings were restricted by these provisions of the mortgage and in light
of FPL's current financial condition and level of earnings, management does not expect that planned financing activities or dividends
would be affected by these limitations.
FPL may issue first mortgage bonds under its mortgage subject to its meeting an adjusted net earnings test set forth in the mortgage,
which generally requires adjusted net earnings to be at least twice the annual interest requirements on, or at least 10% of the
aggregate principal amount of, FPL’s first mortgage bonds including those to be issued and any other non-junior FPL indebtedness. As
of December 31, 2011, coverage for the 12 months ended December 31, 2011 would have been approximately 6.5 times the annual
interest requirements and approximately 3.6 times the aggregate principal requirements. New first mortgage bonds are also limited
to an amount equal to the sum of 60% of unfunded property additions after adjustments to offset property retirements, the amount
of retired first mortgage bonds or qualified lien bonds and the amount of cash on deposit with the mortgage trustee. As of December 31,
2011, FPL could have issued in excess of $8.9 billion of additional first mortgage bonds based on the unfunded property additions
and in excess of $5.8 billion based on retired first mortgage bonds. As of December 31, 2011, no cash was deposited with the
mortgage trustee for these purposes.
In September 2006, NEE and NEECH executed a Replacement Capital Covenant (September 2006 RCC) in connection with NEECH's
offering of $350 million principal amount of Series A Enhanced Junior Subordinated Debentures due 2066 and $350 million principal
amount of Series B Enhanced Junior Subordinated Debentures due 2066 (collectively, Series A and Series B junior subordinated
debentures). The September 2006 RCC is for the benefit of persons that buy, hold or sell a specified series of long-term indebtedness
(covered debt) of NEECH (other than the Series A and Series B junior subordinated debentures) or, in certain cases, of NEE. FPL
Group Capital Trust I's 5 7/8% Preferred Trust Securities have been initially designated as the covered debt under the September
2006 RCC. The September 2006 RCC provides that NEECH may redeem, and NEE or NEECH may purchase, any Series A and
Series B junior subordinated debentures on or before October 1, 2036, only to the extent that the redemption or purchase price does
not exceed a specified amount of proceeds from the sale of qualifying securities, subject to certain limitations described in the
September 2006 RCC. Qualifying securities are securities that have equity-like characteristics that are the same as, or more equity-
like than, the Series A and Series B junior subordinated debentures at the time of redemption or purchase, which are sold within 180
days prior to the date of the redemption or repurchase of the Series A and Series B junior subordinated debentures.
In June 2007, NEE and NEECH executed a Replacement Capital Covenant (June 2007 RCC) in connection with NEECH's offering
of $400 million principal amount of its Series C Junior Subordinated Debentures due 2067 (Series C junior subordinated
debentures). The June 2007 RCC is for the benefit of persons that buy, hold or sell a specified series of covered debt of NEECH
(other than the Series C junior subordinated debentures) or, in certain cases, of NEE. FPL Group Capital Trust I's 5 7/8% Preferred
Trust Securities have been initially designated as the covered debt under the June 2007 RCC. The June 2007 RCC provides that
NEECH may redeem or purchase, or satisfy, discharge or defease (collectively, defease), and NEE and any majority-owned subsidiary
of NEE or NEECH may purchase, any Series C junior subordinated debentures on or before June 15, 2037, only to the extent that
the principal amount defeased or the applicable redemption or purchase price does not exceed a specified amount raised from the
issuance, during the 180 days prior to the date of that redemption, purchase or defeasance, of qualifying securities that have equity-
like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Series C junior subordinated
debentures at the time of redemption, purchase or defeasance, subject to certain limitations described in the June 2007 RCC.
In September 2007, NEE and NEECH executed a Replacement Capital Covenant (September 2007 RCC) in connection with NEECH's
offering of $250 million principal amount of its Series D Junior Subordinated Debentures due 2067 and $350 million principal amount
of Series E Junior Subordinated Debentures due 2067 (collectively, Series D and Series E junior subordinated debentures). The
September 2007 RCC is for the benefit of persons that buy, hold or sell a specified series of covered debt of NEECH (other than the
57
Series D and Series E junior subordinated debentures) or, in certain cases, of NEE. FPL Group Capital Trust I's 5 7/8% Preferred
Trust Securities have been initially designated as the covered debt under the September 2007 RCC. The September 2007 RCC
provides that NEECH may redeem, purchase, or defease, and NEE and any majority-owned subsidiary of NEE or NEECH may
purchase, any Series D and Series E junior subordinated debentures on or before September 1, 2037, only to the extent that the
principal amount defeased or the applicable redemption or purchase price does not exceed a specified amount raised from the
issuance, during the 180 days prior to the date of that redemption, purchase or defeasance, of qualifying securities that have equity-
like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Series D and Series E junior
subordinated debentures at the time of redemption, purchase or defeasance, subject to certain limitations described in the September
2007 RCC.
In March 2009, NEE and NEECH executed a Replacement Capital Covenant (March 2009 RCC) in connection with NEECH's offering
of $375 million principal amount of its Series F Junior Subordinated Debentures due 2069. The March 2009 RCC is for the benefit
of persons that buy, hold or sell a specified series of covered debt of NEECH (other than the Series F junior subordinated debentures)
or, in certain cases, of NEE. FPL Group Capital Trust I's 5 7/8% Preferred Trust Securities have been initially designated as the
covered debt under the March 2009 RCC. The March 2009 RCC provides that NEECH may redeem, purchase, or defease, and
NEE and any majority-owned subsidiary of NEE or NEECH may purchase, any Series F junior subordinated debentures on or before
March 1, 2039, only to the extent that the principal amount defeased or the applicable redemption or purchase price does not exceed
a specified amount raised from the issuance, during the 180 days prior to the date of that redemption, purchase or defeasance, of
qualifying securities that have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics
of the Series F junior subordinated debentures at the time of redemption, purchase or defeasance, subject to certain limitations
described in the March 2009 RCC.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
NEE’s and FPL’s significant accounting policies are described in Note 1 to the consolidated financial statements, which were
prepared in accordance with GAAP. Critical accounting policies are those that NEE and FPL believe are both most important to
the portrayal of their financial condition and results of operations, and require complex, subjective judgments, often as a result of
the need to make estimates and assumptions about the effect of matters that are inherently uncertain. Judgments and uncertainties
affecting the application of those policies may result in materially different amounts being reported under different conditions or
using different assumptions.
NEE and FPL consider the following policies to be the most critical in understanding the judgments that are involved in preparing
their consolidated financial statements:
Accounting for Derivatives and Hedging Activities
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
with outstanding and forecasted debt issuances. In addition, NEE, through NEER, uses derivatives to optimize the value of power
generation assets and engages in power and gas marketing and trading activities to take advantage of expected future favorable
price movements.
Nature of Accounting Estimates
Accounting pronouncements require the use of fair value accounting if certain conditions are met, which requires significant judgment
to measure the fair value of assets and liabilities. This applies not only to traditional financial derivative instruments, but to any
contract having the accounting characteristics of a derivative. Much of the existing accounting guidance related to derivatives
focuses on when certain contracts for the purchase and sale of power and certain fuel supply contracts can be excluded from
derivative accounting rules, however the guidance does not address all contract issues. As a result, significant judgment must be
used in applying derivatives accounting guidance to contracts. In the event changes in interpretation occur, it is possible that
contracts that currently are excluded from derivatives accounting rules would have to be recorded on the balance sheet at fair value,
with changes in the fair value recorded in the statement of income.
Assumptions and Accounting Approach
NEE's and FPL’s derivative instruments, when required to be marked to market, are recorded on the balance sheet at fair value. Fair
values for some of the longer-term contracts where liquid markets are not available are derived through internally developed models
which estimate the fair value of a contract by calculating the present value of the difference between the contract price and the
forward prices. Forward prices represent the price at which a buyer or seller could contract today to purchase or sell a commodity
at a future date. The near-term forward market for electricity is generally liquid and therefore the prices in the early years of the
forward curves reflect observable market quotes. However, in the later years, the market is much less liquid and forward price
curves must be developed using factors including the forward prices for the commodities used as fuel to generate electricity, the
expected system heat rate (which measures the efficiency of power plants in converting fuel to electricity) in the region where the
purchase or sale takes place, and a fundamental forecast of expected spot prices based on modeled supply and demand in the
region. NEE estimates the fair value of interest rate and foreign currency derivatives using a discounted cash flows valuation
58
technique based on the net amount of estimated future cash inflows and outflows related to the derivative agreements. The
assumptions in these models are critical since any changes therein could have a significant impact on the fair value of the derivative.
At FPL, substantially all changes in the fair value of energy derivative transactions 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 or the capacity
clause. See Note 3.
In NEE’s non-rate regulated operations, predominantly NEER, all changes in the derivatives’ fair value for power purchases and
sales and trading activities are recognized on a net basis in operating revenues; fuel purchases and sales are recognized on a net
basis 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, unless the criteria for hedge accounting are
met and the company elects to account for the derivative as a hedge.
For those transactions accounted for as cash flow hedges, much of the effects of changes in fair value are reflected in OCI, a
component of common shareholders’ equity, rather than being recognized in current earnings. For those transactions accounted
for as fair value hedges, the effects of changes in fair value are reflected in current earnings offset by changes in the fair value of
the item being hedged.
Certain hedging transactions at NEER are entered into as economic hedges but the transactions do not meet the requirements for
hedge accounting or hedge accounting treatment is not elected. Changes in the fair value of those transactions are marked to
market and reported in the consolidated statements of income, resulting in earnings volatility. These changes in fair value are
captured in the non-qualifying hedge category in computing adjusted earnings. This could be significant to NEER’s results because
the economic offset to the positions which are required to be marked to market (such as the physical assets from which power is
generated) are not marked to market. As a consequence, net income reflects only the movement in one part of economically-linked
transactions. For this reason, NEE’s management views results expressed excluding the unrealized mark-to-market impact of the
non-qualifying hedges as a meaningful measure of current period performance. For additional information regarding derivative
instruments, see Note 3, Overview and Energy Marketing and Trading and Market Risk Sensitivity.
Accounting for Pensions and Other Postretirement Benefits
NEE sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of NEE and its
subsidiaries. NEE also has a supplemental executive retirement plan (SERP) which includes a non-qualified supplemental defined
benefit pension component that provides benefits to a select group of management and highly compensated employees. The
impact of the SERP component is included within the pension plan as discussed below. Management believes that, based on
actuarial assumptions and the well-funded status of the pension plan, NEE will not be required to make any cash contributions to
the qualified pension plan in the near future.
In addition to pension benefits, NEE sponsors a contributory postretirement plan for health care and life insurance benefits (other
benefits plan) for retirees of NEE and its subsidiaries meeting certain eligibility requirements. The qualified pension plan has a fully
funded trust dedicated to providing the benefits under the plan. The other benefits plan has a partially funded trust dedicated to
providing benefits related to life insurance. NEE allocates net periodic benefit income or cost associated with the pension and other
benefits plans to its subsidiaries annually using specific criteria.
Nature of Accounting Estimates
For the pension plan, the benefit obligation is the actuarial present value as of the December 31 measurement date, of all benefits
attributed by the pension benefit formula to employee service rendered to that date. The amount of benefit to be paid depends on
a number of future events incorporated into the pension benefit formula, including estimates of the average life of employees/
survivors and average years of service rendered. The projected benefit obligation is measured based on assumptions concerning
future interest rates and future employee compensation levels. For the other benefits plan, the benefit obligation is the actuarial
present value as of the December 31 measurement date of all future benefits attributed under the terms of the other benefits plan
to employee service rendered to that date. NEE derives pension income and the cost of the other benefits plan from actuarial
calculations based on each plan’s provisions and management’s assumptions regarding discount rate, rate of increase in
compensation levels and expected long-term rate of return on plan assets and, in the case of the other benefits plan, health care
cost trend rates.
Assumptions and Accounting Approach
NEE’s regulatory assets and liabilities are established in association with accounting guidance which requires recognition of the
funded status of benefit plans in the balance sheet, with changes in the funded status recognized in 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, prior service costs or credits and
transition obligations that are estimated to be allocable to FPL as net periodic benefit (income) cost in future periods and that
otherwise would be recorded in AOCI are classified as regulatory assets and liabilities at NEE in accordance with regulatory
59
treatment.
Pension income and the cost of the other benefits plan are included in O&M expenses, and are calculated using a number of
actuarial assumptions. Those assumptions include:
•
•
•
•
an expected long-term rate of return on qualified plan assets of 7.75% for all years for the pension plan and 8.00% for all years
for the other benefits plan,
assumed increases in salary of 4.00% for all years,
weighted-average discount rates of 5.00%, 5.50%, and 6.90% for the pension plan and 5.25%, 5.50%, and 6.90% for the other
benefits plan for the years ended December 31, 2011, 2010 and 2009, respectively, and
health care cost trend rates (as related to other benefits) for those under age 65 of 7.60% for medical and 8.20% for prescription
drug benefits and for those age 65 and over of 7.25% for medical and 7.75% for prescription drug benefits. These rates are
assumed to decrease over the next 7 years for medical benefits and 9 years for prescription drug benefits to the ultimate trend
rate of 5.50% and remain at that level thereafter. The ultimate trend rate is assumed to be reached in 2018 for medical benefits
and 2020 for prescription drug benefits.
In developing these assumptions, NEE evaluated input from its actuaries and consultants, as well as information available in the
marketplace. For the expected long-term rate of return on fund assets, NEE considered different models, capital market return
assumptions and historical returns for a portfolio with an equity/bond asset mix similar to its funds, as well as its funds' historical
compounded returns. NEE also considered input, including other qualitative and quantitative factors, from its actuaries and
consultants as well as information available in the marketplace. NEE believes that 7.75% and 8.00% are reasonable long-term
rates of return on its pension plan and other benefits plan assets, respectively. NEE will continue to evaluate all of its actuarial
assumptions, including its expected rate of return, at least annually, and will adjust them as necessary.
NEE bases its determination of pension and other benefits plan expense or income on a market-related valuation of assets, as
prescribed by accounting guidance. This market-related valuation reduces year-to-year volatility and recognizes investment gains
or losses over a five-year period following the year in which they occur. Investment gains or losses for this purpose are the difference
between the expected return calculated using the market-related value of assets and the actual return realized on those assets. Since
the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be affected as
previously deferred gains or losses are recognized. Such gains and losses together with other differences between actual results
and the estimates used in the actuarial valuations are deferred and recognized in determining pension income and other benefits
plan expense only to the extent they exceed 10% of the greater of projected benefit obligations or the market-related value of assets.
The following table illustrates the effect on net periodic benefit income of changing the critical actuarial assumptions discussed
above, while holding all other assumptions constant:
Expected long-term rate of return
Discount rate
Salary increase
Health care cost trend rate(a)
Increase (Decrease) in 2011
Net Periodic Benefit Income
Change in
Assumption
NEE
FPL
(0.5)%
(0.5)%
0.5 %
1.0 %
$
$
$
$
(16)
2
(2)
—
$
$
$
$
(11)
1
(1)
—
___________________
(a) Assumed health care cost trend rates can have a significant effect on the amounts reported for postretirement plans providing health care benefits. However,
this effect is somewhat mitigated by the retiree cost sharing structure incorporated in NEE’s other benefits plan.
See Note 2.
Carrying Value of Long-Lived Assets
NEE evaluates on an ongoing basis the recoverability of its assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
Nature of Accounting Estimates
The amount of future net cash flows, the timing of the cash flows and the determination of an appropriate interest rate all involve
estimates and judgments about future events. In particular, the aggregate amount of cash flows determines whether an impairment
exists, and the timing of the cash flows is critical in determining fair value. Because each assessment is based on the facts and
circumstances associated with each long-lived asset, the effects of changes in assumptions cannot be generalized.
60
Assumptions and Accounting Approach
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 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.
Nuclear Decommissioning and Fossil/Solar Dismantlement
The components of NEE’s and FPL’s decommissioning of nuclear plants, dismantlement of plants and other accrued asset removal
costs are as follows:
FPL
Nuclear
Decommissioning
Fossil/Solar
Dismantlement
Interim Removal
Costs and Other
NEER
NEE
December 31,
December 31,
December 31,
December 31,
December 31,
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
(millions)
AROs
$ 1,114
$ 1,057
$
27
$
23
$
3
$
3
$
467
$
556
$ 1,611
$ 1,639
Less capitalized ARO asset net of
accumulated depreciation
Accrued asset removal costs(a)
Asset retirement obligation regulatory
expense difference(a)
Accrued decommissioning,
dismantlement and other accrued
asset removal costs
—
216
—
207
1,618
1,571
7
337
23
4
336
22
—
1,644
—
1,701
(1)
(1)
—
—
—
—
—
—
7
2,197
4
2,244
1,640
1,592
$ 2,948 (b)
$ 2,835 (b)
$
380 (b)
$
377 (b)
$ 1,646 (b)
$ 1,703 (b)
$
467
$
556
$ 5,441
$ 5,471
____________________
(a) Regulatory liability on NEE’s and FPL’s consolidated balance sheets.
(b) Represents total amount accrued for ratemaking purposes.
Nature of Accounting Estimates
The calculation of the future cost of retiring long-lived assets, including nuclear decommissioning and fossil and solar dismantlement
costs, involves estimating the amount and timing of future expenditures and making judgments concerning whether or not such
costs are considered a legal obligation. Estimating the amount and timing of future expenditures includes, among other things,
making projections of when assets will be retired and ultimately decommissioned and how costs will escalate with inflation. In
addition, NEE and FPL also make interest rate and rate of return projections on their investments in determining recommended
funding requirements for nuclear decommissioning costs. Periodically, NEE and FPL are required to update these estimates and
projections which can affect the annual expense amounts recognized, the liabilities recorded and the annual funding requirements
for nuclear decommissioning costs. For example, an increase of 0.25% in the assumed escalation rates would increase NEE’s
and FPL’s asset retirement obligations and conditional asset retirement obligations (collectively, AROs) as of December 31, 2011
by $126 million and $87 million, respectively.
Assumptions and Accounting Approach
NEE and FPL each account for 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.
FPL - For ratemaking purposes, FPL accrues and funds for nuclear plant decommissioning costs over the expected service life of
each unit based on studies that are filed with the FPSC at least every five years. The studies reflect, among other things, the
expiration dates of the operating licenses for FPL’s nuclear units. The most recent studies, filed in 2010, indicate that FPL’s portion
of the future cost of decommissioning its four nuclear units, including spent fuel storage above what is expected to be refunded by
the DOE under the spent fuel settlement agreement, is approximately $6.2 billion, or $2.3 billion expressed in 2011 dollars.
FPL accrues the cost of dismantling its fossil and solar plants over the expected service life of each unit based on studies filed with
the FPSC. Unlike nuclear decommissioning, dismantlement costs are not funded. The most recent studies became effective
January 1, 2010. At December 31, 2011, FPL’s portion of the ultimate cost to dismantle its fossil and solar units is approximately
$860 million, or $421 million expressed in 2011 dollars. The majority of the dismantlement costs are not considered AROs. FPL
accrues for interim removal costs over the life of the related assets based on depreciation studies approved by the FPSC. Any
differences between the ARO amount recorded and the amount recorded for ratemaking purposes are reported as a regulatory
liability in accordance with regulatory accounting.
61
NEER - NEER records a liability for the present value of its expected decommissioning costs which is 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. The liability is being accreted using the interest method through the date decommissioning activities are
expected to be complete. At December 31, 2011, the ARO for nuclear decommissioning of NEER’s nuclear plants totaled
approximately $383 million. 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 the spent fuel settlement agreement, is estimated
to be approximately $11.4 billion, or $1.9 billion expressed in 2011 dollars.
See Note 1 - Asset Retirement Obligations, Note 1 - Decommissioning of Nuclear Plants, Dismantlement of Plants and Other
Accrued Asset Removal Costs and Note 13.
Regulatory Accounting
NEE’s and FPL’s regulatory assets and liabilities are as follows:
Regulatory assets:
Current:
Deferred clause and franchise expenses
Derivatives
Other
Noncurrent:
Securitized storm-recovery costs
Other
Regulatory liabilities:
Current, included in other current liabilities
Noncurrent:
Accrued asset removal costs
Asset retirement obligation regulatory expense
difference
Other
Nature of Accounting Estimates
NEE
December 31,
FPL
December 31,
2011
2010
2011
2010
(millions)
368
236
82
581
329
$
$
$
$
$
112
502
80
517
395
$
$
$
$
$
112
502
84
517
621
$
$
$
$
$
21
$
52
$
24
$
2,197
1,640
419
$
$
$
2,244
1,592
423
$
$
$
2,197
1,640
416
$
$
$
$
$
$
$
$
$
$
$
$
368
236
76
581
293
47
2,244
1,592
377
Regulatory assets and liabilities represent probable future revenues that will be recovered from or refunded to customers through
the ratemaking process. All regulatory assets and liabilities are included in rate base or otherwise earn (pay) a return on investment
during the recovery period.
Assumptions and Accounting Approach
Accounting guidance allows regulators to create assets and impose liabilities that would not be recorded by non-rate regulated
entities. 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. Such costs may include, among others, fuel and O&M expenses, the
cost of replacing power lost when fossil and nuclear units are unavailable, storm restoration costs and costs associated with the
construction or acquisition of new facilities. The continued applicability of regulatory accounting is assessed at each reporting
period. See Note 1 for a discussion of NEE’s and FPL’s other significant accounting policies.
Energy Marketing and Trading and Market Risk Sensitivity
NEE and FPL are exposed to risks associated with adverse changes in commodity prices, interest rates, equity prices and currency
exchange rates. Financial instruments and positions affecting the financial statements of NEE and FPL described below are held
primarily for purposes other than trading. Market risk is measured as the potential loss in fair value resulting from hypothetical
reasonably possible changes in commodity prices, interest rates, equity prices or currency exchange rates over the next
year. Management has established risk management policies to monitor and manage such market risks, as well as credit risks.
62
Commodity Price Risk
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. In addition, NEE, through NEER, uses derivatives to optimize the value of
power generation assets and engages in power and gas marketing and trading activities to take advantage of expected future
favorable price movements. See Critical Accounting Policies and Estimates and Note 3.
During 2010 and 2011, the changes in the fair value of NEE’s consolidated subsidiaries’ energy contract derivative instruments
were as follows:
Fair value of contracts outstanding at December 31, 2009
$
Reclassification to realized at settlement of contracts
Inception value of new contracts
Effective portion of changes in fair value recorded in OCI
Ineffective portion of changes in fair value recorded in earnings
Changes in fair value excluding reclassification to realized
Fair value of contracts outstanding at December 31, 2010
Reclassification to realized at settlement of contracts
Inception value of new contracts and contracts sold
Changes in fair value excluding reclassification to realized
Fair value of contracts outstanding at December 31, 2011
Net option premium payments (receipts)
Net margin cash collateral paid (received)
Total mark-to-market energy contract net assets (liabilities) at
December 31, 2011
Hedges on Owned Assets
Trading
Non-
Qualifying
OCI
(millions)
FPL Cost
Recovery
Clauses
NEE Total
$
39
(98)
108
-
-
76
125
2
11
72
210
(195)
126
(126)
(45)
-
1
457
413
(96)
(11)
403
709
11
$
$
131
(102)
-
20
-
-
49
(41)
—
—
8
—
$
(64)
492
-
-
-
(664)
(236)
381
—
(646)
(501)
—
232
166
63
20
1
(131)
351
246
—
(171)
426
(184)
(24)
$
15
$
720
$
8
$
(501)
$
218
NEE’s total energy contract net assets (liabilities) at December 31, 2011 shown above are included on the consolidated balance
sheets as follows:
Current derivative assets
Noncurrent derivative assets
Current derivative liabilities
Noncurrent derivative liabilities
NEE's total mark-to-market energy contract net assets
December 31,
2011
(millions)
$
$
589
931
(1,024)
(278)
218
63
The sources of fair value estimates and maturity of energy contract derivative instruments at December 31, 2011 were as follows:
Maturity
2012
2013
2014
2015
2016
Thereafter
Total
(millions)
Trading:
Quoted prices in active markets for identical assets
$
(49)
$
(73)
$
$ —
$
Significant other observable inputs
Significant unobservable inputs
Total
Owned Assets - Non-Qualifying:
Quoted prices in active markets for identical assets
Significant other observable inputs
Significant unobservable inputs
Total
Owned Assets - OCI:
Quoted prices in active markets for identical assets
Significant other observable inputs
Significant unobservable inputs
Total
Owned Assets - FPL Cost Recovery Clauses:
Quoted prices in active markets for identical assets
Significant other observable inputs
Significant unobservable inputs
Total
Total sources of fair value
(150)
129
(70)
(24)
160
(14)
122
15
(7)
—
8
—
(505)
3
(502)
$
4
4
9
17
(3)
93
38
—
10
11
21
(4)
85
40
19
55
1
(6)
82
25
101
128
121
—
—
—
—
—
—
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
2
—
—
—
—
—
—
—
—
—
—
—
—
2
—
33
11
44
—
72
176
248
—
—
—
—
—
—
—
—
$
(118)
(84)
217
15
(37)
492
265
720
15
(7)
—
8
—
(505)
4
(501)
$ (442)
$
103
$
145
$
142
$
$
292
$
242
With respect to commodities, NEE’s Exposure Management Committee (EMC), which is comprised of certain members of senior
management, and NEE's chief executive officer are responsible for the overall approval of market risk management policies and
the delegation of approval and authorization levels. The EMC and NEE's chief executive officer receive periodic updates on market
positions and related exposures, credit exposures and overall risk management activities.
NEE uses a value-at-risk (VaR) model to measure commodity price market risk in its trading and mark-to-market portfolios. The
VaR is the estimated nominal loss of market value based on a one-day holding period at a 95% confidence level using historical
simulation methodology. As of December 31, 2011 and 2010, the VaR figures are as follows:
Trading
Non-Qualifying Hedges
and Hedges in OCI and
FPL Cost Recovery Clauses(a)
Total
FPL
NEER
NEE
FPL
NEER
NEE
FPL
NEER
NEE
(millions)
$ —
$ —
$ —
$
$
$
3
2
3
$
$
$
3
2
3
$
$
$
51
38
46
$
$
$
21
50
43
$
$
$
35
25
37
$
$
$
51
38
46
$
$
$
23
50
43
$
$
$
36
26
37
December 31, 2010
December 31, 2011
Average for the period ended December 31,
2011
__________________________________
(a) Non-qualifying hedges are employed to reduce the market risk exposure to physical assets or contracts which are not marked to market. The VaR figures for the
non-qualifying hedges and hedges in OCI and FPL cost recovery clauses category do not represent the economic exposure to commodity price movements.
Interest Rate Risk
NEE and FPL are exposed to risk resulting from changes in interest rates as a result of their respective issuances of debt, investments
in special use funds and other investments. NEE and FPL manage their respective interest rate exposure by monitoring current
interest rates, entering into interest rate swaps and using a combination of fixed rate and variable rate debt. Interest rate swaps
are used to mitigate and adjust interest rate exposure when deemed appropriate based upon market conditions or when required
by financing agreements.
64
The following are estimates of the fair value of NEE's and FPL's financial instruments:
NEE:
Fixed income securities:
Special use funds
Other investments:
Debt securities
Notes receivable
Long-term debt, including current maturities
Interest rate swaps - net unrealized losses
FPL:
Fixed income securities - special use funds
Long-term debt, including current maturities
December 31, 2011
December 31, 2010
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
(millions)
$
$
$
$
$
$
$
1,897
$
1,897
89
503
21,614
(283)
1,499
7,533
$
$
$
$
$
$
89
535
23,699
(283)
1,499
9,078
(a)
(a)
(b)
(c)
(d)
(a)
(c)
$
$
$
$
$
$
$
1,701
$
1,701
114
525
19,929
(16)
1,375
6,727
$
$
$
$
$
$
114
583
20,756
(16)
1,375
7,236
(a)
(a)
(b)
(c)
(d)
(a)
(c)
__________________________________
(a) Based on quoted market prices for these or similar issues.
(b) Based on market prices provided by external sources.
(c) Provided by external sources based on market prices indicative of market conditions.
(d) Modeled internally based on market values using discounted cash flow analysis and credit valuation adjustment.
The special use funds of NEE and FPL consist of restricted funds set aside to cover the cost of storm damage for FPL and for the
decommissioning of NEE's and FPL's nuclear power plants. A portion of these funds is invested in fixed income debt securities
primarily carried at estimated fair value. At FPL, changes in fair value, including any OTTI losses, result in a corresponding adjustment
to the related liability accounts based on current regulatory treatment. The changes in fair value of NEE's non-rate regulated
operations result in a corresponding adjustment to OCI, except for impairments deemed to be other than temporary, including any
credit losses, which are reported in current period earnings. Because the funds set aside by FPL for storm damage could be needed
at any time, the related investments are generally more liquid and, therefore, are less sensitive to changes in interest rates. The
nuclear decommissioning funds, in contrast, are generally invested in longer-term securities, as decommissioning activities are not
scheduled to begin until at least 2030 (2032 at FPL).
65
At December 31, 2011, the estimated fair value for NEE’s interest rate swaps was as follows:
Notional
Amount
(millions)
Fair value hedges - NEECH:
Effective
Date
Maturity
Date
Rate
Paid
Rate
Received
Estimated
Fair Value
(millions)
$250
$400
$250
$500
$500
$400
May 2010
August 2010
August 2011
August 2011
August 2011
August 2011
November 2013
September 2015
June 2013
December 2015
March 2019
June 2021
Variable
Variable
Variable
Variable
Variable
Variable
(a)
(b)
(c)
(d)
(e)
(f)
$
2.55%
2.60%
5.35%
7.875%
6.00%
4.50%
Total fair value hedges
Cash flow hedges:
NEER:
$32
$10
$130
$336
$292
$124
$78
$17
$7
$282
$106
$239
$275
$255
$764
$632
$70
$216
December 2003
December 2017
April 2004
December 2017
December 2005
November 2019
January 2007
January 2009
January 2009(i)
January 2009
March 2009
March 2009(i)
May 2009
May 2009(i)
April 2010
October 2010
April 2011
April 2011(i)
April 2011(i)
August 2011
January 2022
December 2016
December 2023
December 2023
December 2016
December 2023
May 2017
May 2024
January 2027
September 2028
December 2013
June 2018
December 2030
January 2016
December 2011
December 2029
4.245%
3.845%
4.905%
5.390%
2.680%
3.725%
2.578%
2.655%
3.960%
3.015%
4.663%
4.040%
2.822%
2.733%
4.042%
4.694%
(m)
2.275%
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
NEECH:
$250
October 2010(i)
June 2023
3.479%
Variable
Total cash flow hedges
Total interest rate swaps
(g)
(g)
(g)
(h)
(g)
(g)
(j)
(g)
(g)
(g)
(g)
(h)
(g)
(k)
(l)
(l)
(g)
(g)
(g)
6
11
(1)
(2)
6
12
32
(3)
(1)
(14)
(40)
(17)
(3)
(3)
(1)
—
(20)
(4)
(37)
(18)
(18)
(54)
(53)
—
(5)
(24)
(315)
(283)
$
___________________________
(a) Three-month London InterBank Offered Rate (LIBOR) plus 0.4726%.
(b) Three-month LIBOR plus 0.7980%.
(c) Three-month LIBOR plus 4.8275%.
(d) Three-month LIBOR plus 6.675%.
(e) Three-month LIBOR plus 3.945%.
(f)
(g) Three-month LIBOR.
(h) Six-month LIBOR.
(i)
(j)
(k) One-month Euro Interbank Offered Rate (Euribor).
(l)
(m) Rate varies over time from 0.4914% to 3.0048%.
Three-month LIBOR plus 2.05%.
Six-month Euribor.
Exchange of payments does not begin until December 2016, December 2016, May 2017, December 2013, June 2018 and June 2013, respectively.
Three-month Banker's Acceptance Rate.
Based upon a hypothetical 10% decrease in interest rates, which is a reasonable near-term market change, the net fair value of
NEE’s net liabilities would increase by approximately $1,012 million ($421 million for FPL) at December 31, 2011.
66
Equity Price Risk
NEE and FPL are exposed to risk resulting from changes in prices for equity securities. For example, NEE’s nuclear decommissioning
reserve funds include marketable equity securities primarily carried at their market value of approximately $1,970 million and $2,041
million ($1,238 million and $1,262 million for FPL) at December 31, 2011 and 2010, respectively. At December 31, 2011, a
hypothetical 10% decrease in the prices quoted by stock exchanges, which is a reasonable near-term market change, would result
in a $183 million ($116 million for FPL) reduction in fair value. For FPL, a corresponding adjustment would be made to the related
liability accounts based on current regulatory treatment, and for NEE’s non-rate regulated operations, a corresponding adjustment
would be made to OCI to the extent the market value of the securities exceeded amortized cost and to OTTI loss to the extent the
market value is below amortized cost.
Currency Exchange Rate Risk
At December 31, 2011, with respect to certain debt issuances and borrowings, NEECH has two cross currency swaps to hedge
against currency movements with respect to both interest and principal payments. At December 31, 2011 and 2010, the fair value
of cross currency swaps was approximately $18 million and $44 million, respectively.
Credit Risk
NEE and its subsidiaries are also exposed to credit risk through their energy marketing and trading operations. Credit risk is the
risk that a financial loss will be incurred if a counterparty to a transaction does not fulfill its financial obligation. NEE manages
counterparty credit risk for its subsidiaries with energy marketing and trading operations through established policies, including
counterparty credit limits, and in some cases credit enhancements, such as cash prepayments, letters of credit, cash and other
collateral and guarantees.
Credit risk is also managed through the use of master netting agreements. NEE’s credit department monitors current and forward
credit exposure to counterparties and their affiliates, both on an individual and an aggregate basis. For all derivative and contractual
transactions, NEE’s energy marketing and trading operations, which includes FPL’s energy marketing and trading division, are
exposed to losses in the event of nonperformance by counterparties to these transactions. Some relevant considerations when
assessing NEE’s energy marketing and trading operations’ credit risk exposure include the following:
•
•
•
•
Operations are primarily concentrated in the energy industry.
Trade receivables and other financial instruments are predominately with energy, utility and financial services related companies,
as well as municipalities, cooperatives and other trading companies in the U.S.
Overall credit risk is managed through established credit policies and is overseen by the EMC.
Prospective and existing customers are reviewed for creditworthiness based upon established standards, with customers not
meeting minimum standards providing various credit enhancements or secured payment terms, such as letters of credit or the
posting of margin cash collateral.
• Master netting agreements are used to offset cash and non-cash gains and losses arising from derivative instruments with the
same counterparty. NEE’s policy is to have master netting agreements in place with significant counterparties.
Based on NEE’s policies and risk exposures related to credit, NEE and FPL do not anticipate a material adverse effect on their
financial statements as a result of counterparty nonperformance. As of December 31, 2011, approximately 97% of NEE’s and 100%
of FPL’s energy marketing and trading counterparty credit risk exposure is associated with companies that have investment grade
credit ratings.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See Management’s Discussion – Energy Marketing and Trading and Market Risk Sensitivity.
67
Item 8. Financial Statements and Supplementary Data
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
NextEra Energy, Inc.'s (NEE) and Florida Power & Light Company's (FPL) management are responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. The consolidated financial statements, which in part are based on informed judgments and estimates made
by management, have been prepared in conformity with generally accepted accounting principles applied on a consistent basis.
To aid in carrying out this responsibility, we, along with all other members of management, maintain a system of internal accounting
control which is established after weighing the cost of such controls against the benefits derived. In the opinion of management,
the overall system of internal accounting control provides reasonable assurance that the assets of NEE and FPL and their subsidiaries
are safeguarded and that transactions are executed in accordance with management's authorization and are properly recorded for
the preparation of financial statements. In addition, management believes the overall system of internal accounting control provides
reasonable assurance that material errors or irregularities would be prevented or detected on a timely basis by employees in the
normal course of their duties. Any system of internal accounting control, no matter how well designed, has inherent limitations,
including the possibility that controls can be circumvented or overridden and misstatements due to error or fraud may occur and
not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an
effective system of internal control will provide only reasonable assurance with respect to financial statement preparation and
reporting.
The system of internal accounting control is supported by written policies and guidelines, the selection and training of qualified
employees, an organizational structure that provides an appropriate division of responsibility and a program of internal
auditing. NEE's written policies include a Code of Business Conduct & Ethics that states management's policy on conflicts of
interest and ethical conduct. Compliance with the Code of Business Conduct & Ethics is confirmed annually by key personnel.
The Board of Directors pursues its oversight responsibility for financial reporting and accounting through its Audit Committee. This
Committee, which is comprised entirely of independent directors, meets regularly with management, the internal auditors and the
independent auditors to make inquiries as to the manner in which the responsibilities of each are being discharged. The independent
auditors and the internal audit staff have free access to the Committee without management's presence to discuss auditing, internal
accounting control and financial reporting matters.
Management assessed the effectiveness of NEE's and FPL's internal control over financial reporting as of December 31, 2011,
using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control -
Integrated Framework. Based on this assessment, management believes that NEE's and FPL's internal control over financial
reporting was effective as of December 31, 2011.
NEE's and FPL's independent registered public accounting firm, Deloitte & Touche LLP, is engaged to express an opinion on NEE's
and FPL's consolidated financial statements and an opinion on NEE's and FPL's internal control over financial reporting. Their
reports are based on procedures believed by them to provide a reasonable basis to support such opinions. These reports appear
on the following pages.
LEWIS HAY, III
MORAY P. DEWHURST
Lewis Hay, III
Chairman and Chief Executive Officer of NEE and
Chairman of the Board of FPL
Moray P. Dewhurst
Vice Chairman and Chief Financial Officer,
and Executive Vice President - Finance of NEE and
FPL
ARMANDO J. OLIVERA
Armando J. Olivera
Chief Executive Officer of FPL
CHRIS N. FROGGATT
Chris N. Froggatt
Vice President, Controller and Chief Accounting Officer
of NEE
KIMBERLY OUSDAHL
Kimberly Ousdahl
Vice President, Controller and Chief Accounting Officer
of FPL
68
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
NextEra Energy, Inc. and Florida Power & Light Company:
We have audited the internal control over financial reporting of NextEra Energy, Inc. and subsidiaries (NextEra Energy) and Florida
Power & Light Company and subsidiaries (FPL) as of December 31, 2011, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. NextEra Energy's and
FPL’s management are responsible for maintaining effective internal control over financial reporting and for their assessments of
the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on NextEra Energy’s and FPL’s internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audits included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, NextEra Energy and FPL maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended December 31, 2011 of NextEra Energy and FPL and our report dated
February 27, 2012 expressed an unqualified opinion on those financial statements.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 27, 2012
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
NextEra Energy, Inc. and Florida Power & Light Company:
We have audited the accompanying consolidated balance sheets of NextEra Energy, Inc. and subsidiaries (NextEra Energy) and
the separate consolidated balance sheets of Florida Power & Light Company and subsidiaries (FPL) as of December 31, 2011 and
2010, and the related consolidated statements of income, NextEra Energy’s common shareholders' equity, FPL’s common
shareholder’s equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements
are the responsibility of NextEra Energy's and FPL's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of NextEra Energy
and FPL at December 31, 2011 and 2010, and the respective results of their operations and their cash flows for each of the three
years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
NextEra Energy’s and FPL’s internal control over financial reporting as of December 31, 2011, based on the criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated February 27, 2012 expressed an unqualified opinion on NextEra Energy’s and FPL’s internal control over financial
reporting.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 27, 2012
70
NEXTERA ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
OPERATING REVENUES
OPERATING EXPENSES
Fuel, purchased power and interchange
Other operations and maintenance
Impairment charges
Depreciation and amortization
Taxes other than income taxes and other
Total operating expenses
OPERATING INCOME
OTHER INCOME (DEDUCTIONS)
Interest expense
Loss on sale of natural gas-fired generating assets
Equity in earnings of equity method investees
Allowance for equity funds used during construction
Interest income
Gains on disposal of assets - net
Other than temporary impairment losses on securities held in nuclear
decommissioning funds
Other - net
Total other deductions - net
INCOME BEFORE INCOME TAXES
INCOME TAXES
NET INCOME
Earnings per share of common stock:
Basic
Assuming dilution
Dividends per share of common stock
Weighted-average number of common shares outstanding:
Basic
Assuming dilution
Years Ended December 31,
2011
2010
2009
$
15,341
$
15,317
$
15,643
6,256
3,002
51
1,567
1,087
11,963
3,378
(1,035)
(151)
55
39
79
85
(36)
38
(926)
2,452
529
6,242
2,877
19
1,788
1,148
12,074
3,243
7,405
2,649
—
1,765
1,230
13,049
2,594
(979)
(849)
—
58
37
91
67
(16)
(12)
(754)
2,489
532
—
52
53
78
60
(58)
12
(652)
1,942
327
1,615
3.99
3.97
1.89
404.4
407.2
$
$
$
$
1,923
$
1,957
$
4.62
4.59
2.20
$
$
$
4.77
4.74
2.00
$
$
$
416.6
419.0
410.3
413.0
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
71
NEXTERA ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(millions, except par value)
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant in service and other property
Nuclear fuel
Construction work in progress
Less accumulated depreciation and amortization
Total property, plant and equipment - net ($3,063 and $2,398 related to VIEs, respectively)
CURRENT ASSETS
Cash and cash equivalents
Customer receivables, net of allowances of $11 and $20, respectively
Other receivables
Materials, supplies and fossil fuel inventory
Regulatory assets:
Deferred clause and franchise expenses
Derivatives
Other
Derivatives
Other
Total current assets
OTHER ASSETS
Special use funds
Other investments
Prepaid benefit costs
Regulatory assets:
Securitized storm-recovery costs ($317 and $356 related to a VIE, respectively)
Other
Derivatives
Other
Total other assets
TOTAL ASSETS
CAPITALIZATION
Common stock ($0.01 par value, authorized shares - 800; outstanding shares - 416 and 421, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total common shareholders' equity
Long-term debt ($1,364 and $1,338 related to VIEs, respectively)
Total capitalization
CURRENT LIABILITIES
Commercial paper
Current maturities of long-term debt
Accounts payable
Customer deposits
Accrued interest and taxes
Derivatives
Accrued construction-related expenditures
Other
Total current liabilities
OTHER LIABILITIES AND DEFERRED CREDITS
Asset retirement obligations
Accumulated deferred income taxes
Regulatory liabilities:
Accrued asset removal costs
Asset retirement obligation regulatory expense difference
Other
Derivatives
Deferral related to differential membership interests - VIEs
Other
Total other liabilities and deferred credits
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES
$
$
$
December 31,
2011
2010
$
50,768
1,795
4,989
(15,062)
42,490
48,841
1,539
3,841
(15,146)
39,075
$
$
377
1,372
430
1,074
112
502
84
611
310
4,872
3,867
907
1,021
517
621
973
1,920
9,826
57,188
4
5,217
9,876
(154)
14,943
20,810
35,753
1,349
808
1,191
547
464
1,090
518
752
6,719
1,611
5,681
2,197
1,640
419
541
1,203
1,424
14,716
302
1,509
1,073
857
368
236
82
506
325
5,258
3,742
971
1,259
581
329
589
1,190
8,661
52,994
4
5,418
8,873
166
14,461
18,013
32,474
889
1,920
1,124
634
462
536
371
968
6,904
1,639
5,109
2,244
1,592
423
243
949
1,417
13,616
$
57,188
$
52,994
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
72
NEXTERA ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
Years Ended December 31,
2010
2009
2011
$
1,923
$
1,957
$
1,615
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
Nuclear fuel amortization
Loss on sale of natural gas-fired generating assets
Impairment charges
Unrealized (gains) losses on marked to market energy contracts
Deferred income taxes
Cost recovery clauses and franchise fees
Changes in prepaid option premiums and derivative settlements
Equity in earnings of equity method investees
Distributions of earnings from equity method investees
Allowance for equity funds used during construction
Gains on disposal of assets - net
Other than temporary impairment losses on securities held in nuclear decommissioning funds
Other - net
Changes in operating assets and liabilities:
Customer receivables
Other receivables
Materials, supplies and fossil fuel inventory
Other current assets
Other assets
Accounts payable
Customer deposits
Margin cash collateral
Income taxes
Interest and other taxes
Other current liabilities
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures of FPL
Independent power and other investments of NEER
Cash grants under the American Recovery and Reinvestment Act of 2009
Funds received from a spent fuel settlement
Nuclear fuel purchases
Other capital expenditures
Sale of natural gas-fired generating assets
Loan proceeds restricted for construction
Proceeds from sale or maturity of securities in special use funds
Purchases of securities in special use funds
Proceeds from sale or maturity of other securities
Purchases of other securities
Other - net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt
Retirements of long-term debt
Proceeds from sale of differential membership interests
Payments to differential membership investors
Net change in short-term debt
Issuances of common stock - net
Repurchases of common stock
Dividends on common stock
Other - net
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized)
Cash (received) paid for income taxes - net
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Assumption of debt in connection with the purchase of independent power projects
Accrued property additions
Sale of natural gas-fired generating assets through assumption of debt by buyer
$
$
$
$
$
$
1,567
277
151
51
(271)
553
181
(11)
(55)
95
(39)
(85)
36
203
93
56
(308)
(22)
(103)
(97)
(87)
81
62
12
3
(192)
4,074
(3,137)
(2,601)
624
73
(538)
(352)
1,204
(565)
4,348
(4,440)
488
(515)
132
(5,279)
3,940
(2,121)
466
(100)
460
48
(375)
(920)
(118)
1,280
75
302
377
978
(95)
—
909
158
$
$
$
$
$
$
1,788
285
—
19
(386)
511
(629)
86
(58)
74
(37)
(67)
16
38
(73)
(29)
22
(52)
42
179
21
61
56
(3)
76
(63)
3,834
(2,605)
(2,899)
588
44
(274)
(68)
—
—
6,726
(6,835)
721
(714)
32
(5,284)
3,724
(769)
261
—
(1,130)
308
—
(823)
(57)
1,514
64
238
302
916
20
35
545
—
$
$
$
$
$
$
1,765
239
—
—
59
273
624
(11)
(52)
69
(53)
(60)
58
119
18
(13)
85
9
(103)
(86)
38
(110)
8
22
(45)
(5)
4,463
(2,522)
(3,068)
100
86
(362)
(54)
—
—
4,592
(4,710)
773
(782)
12
(5,935)
3,220
(1,635)
—
—
154
198
—
(766)
4
1,175
(297)
535
238
805
61
—
683
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
73
NEXTERA ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(millions)
Common Stock
Aggregate
Par Value
$
Shares
409
—
Balances, December 31, 2008
Net income
Issuances of common stock, net of issuance cost of
approximately $2
Exercise of stock options and other incentive plan
activity
Dividends on common stock
Earned compensation under ESOP
Other comprehensive income
Defined benefit pension and other benefits plans
Premium on publicly-traded equity units known as
Corporate Units
Issuance costs on publicly-traded equity units known
as Corporate Units
Implementation of new accounting rules
Balances, December 31, 2009
Net income
Issuances of common stock, net of issuance cost of
approximately $2
Exercise of stock options and other incentive plan
activity
Dividends on common stock
Earned compensation under ESOP
Other comprehensive loss
Defined benefit pension and other benefits plans
Premium on publicly-traded equity units known as
Corporate Units
Issuance costs on publicly-traded equity units known
as Corporate Units
Balances, December 31, 2010
Net income
Issuances of common stock, net of issuance cost of
less than $1
Repurchases of common stock
Exercise of stock options and other incentive plan
activity
Dividends on common stock
Earned compensation under ESOP
Other comprehensive loss
Defined benefit pension and other benefits plans
Balances, December 31, 2011
4
1
—
—
—
—
—
—
—
(b)
414
—
6
1
—
—
—
—
—
—
(b)
421
—
1
(7)
1
—
—
—
—
(b)
416
$
Additional
Paid-In
Capital
Unearned
ESOP
Compensation
Accumulated
Other
Comprehensive
Income
(Loss)(a)
Retained
Earnings
Common
Shareholders'
Equity
$
4,905
$
(100)
$
(13)
$
6,885
$
11,681
—
204
56
—
30
—
—
(47)
(8)
—
5,140
—
279
107
—
26
—
—
(59)
(6)
5,487
—
59
(375)
68
—
31
—
—
—
4
—
—
11
—
—
—
—
—
(85)
—
5
—
—
11
—
—
—
—
—
—
—
—
—
165
22
—
—
(5)
1,615
—
—
(766)
—
—
—
—
—
5
169
7,739
$
12,967
—
—
—
—
—
(5)
2
—
—
1,957
—
—
(823)
—
—
—
—
—
(69)
166
8,873
$
14,461
—
5
—
—
—
11
—
—
—
—
—
—
—
—
(275)
(45)
1,923
—
—
—
(920)
—
—
—
$
5,270
$
(53)
$
(154)
$
9,876
$
14,943
4
—
—
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
4
__________________________________
(a) Comprehensive income, which includes net income and other comprehensive income (loss), totaled approximately $1,603 million, $1,954 million and $1,802 million
for 2011, 2010 and 2009, respectively.
(b) Outstanding and unallocated shares held by the Employee Stock Ownership Plan (ESOP) Trust totaled approximately 4 million, 5 million and 6 million at
December 31, 2011, 2010 and 2009, respectively; the original number of shares purchased and held by the ESOP Trust was approximately 25 million shares.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
74
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(millions)
OPERATING REVENUES
OPERATING EXPENSES
Fuel, purchased power and interchange
Other operations and maintenance
Depreciation and amortization
Taxes other than income taxes and other
Total operating expenses
OPERATING INCOME
OTHER INCOME (DEDUCTIONS)
Interest expense
Allowance for equity funds used during construction
Other - net
Total other deductions - net
INCOME BEFORE INCOME TAXES
INCOME TAXES
NET INCOME
Years Ended December 31,
2011
2010
2009
$
10,613
$
10,485
$
11,491
4,977
1,699
798
1,063
8,537
2,076
(387)
35
(2)
(354)
1,722
654
$
1,068
$
4,982
1,620
1,008
1,026
8,636
1,849
(361)
36
1
(324)
1,525
580
945
$
6,220
1,496
1,097
1,097
9,910
1,581
(318)
53
(12)
(277)
1,304
473
831
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
75
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(millions, except share amount)
ELECTRIC UTILITY PLANT
Plant in service
Nuclear fuel
Construction work in progress
Less accumulated depreciation and amortization
Electric utility plant - net
CURRENT ASSETS
Cash and cash equivalents
Customer receivables, net of allowances of $8 and $17, respectively
Other receivables
Materials, supplies and fossil fuel inventory
Regulatory assets:
Deferred clause and franchise expenses
Derivatives
Other
Other
Total current assets
OTHER ASSETS
Special use funds
Prepaid benefit costs
Regulatory assets:
Securitized storm-recovery costs ($317 and $356 related to a VIE, respectively)
Other
Other
Total other assets
TOTAL ASSETS
CAPITALIZATION
Common stock (no par value, 1,000 shares authorized, issued and outstanding)
Additional paid-in capital
Retained earnings
Total common shareholder's equity
Long-term debt ($437 and $486 related to a VIE, respectively)
Total capitalization
CURRENT LIABILITIES
Commercial paper
Current maturities of long-term debt
Accounts payable
Customer deposits
Accrued interest and taxes
Derivatives
Accrued construction-related expenditures
Other
Total current liabilities
OTHER LIABILITIES AND DEFERRED CREDITS
Asset retirement obligations
Accumulated deferred income taxes
Regulatory liabilities:
Accrued asset removal costs
Asset retirement obligation regulatory expense difference
Other
Other
Total other liabilities and deferred credits
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES
$
$
$
December 31,
2011
2010
$
31,564
1,005
2,601
(10,916)
24,254
29,519
729
2,175
(10,871)
21,552
$
$
36
682
312
759
112
502
80
166
2,649
2,737
1,088
517
395
176
4,913
31,816
1,373
5,464
4,013
10,850
7,483
18,333
330
50
678
541
221
512
261
373
2,966
1,144
4,593
2,197
1,640
416
527
10,517
20
710
395
505
368
236
76
145
2,455
2,637
1,035
581
293
145
4,691
28,698
1,373
5,054
3,364
9,791
6,682
16,473
101
45
554
628
311
245
183
441
2,508
1,083
3,835
2,244
1,592
377
586
9,717
$
31,816
$
28,698
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
76
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating
Years Ended December 31,
2010
2009
2011
$
1,068
$
945
$
831
activities:
Depreciation and amortization
Nuclear fuel amortization
Deferred income taxes
Cost recovery clauses and franchise fees
Allowance for equity funds used during construction
Other - net
Changes in operating assets and liabilities:
Customer receivables
Other receivables
Materials, supplies and fossil fuel inventory
Other current assets
Other assets
Accounts payable
Customer deposits
Income taxes
Interest and other taxes
Other current liabilities
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Cash grants under the American Recovery and Reinvestment Act of 2009
Funds received from a spent fuel settlement
Nuclear fuel purchases
Proceeds from sale or maturity of securities in special use funds
Purchases of securities in special use funds
Other - net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt
Retirements of long-term debt
Net change in short-term debt
Capital contribution from NEE
Dividends to NEE
Other - net
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized)
Cash paid for income taxes - net
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Accrued property additions
$
$
$
$
798
147
675
181
(35)
73
28
37
(254)
(20)
(52)
(49)
(88)
(215)
(21)
32
(60)
2,245
(3,137)
218
57
(365)
2,988
(3,052)
32
(3,259)
840
(45)
229
410
(400)
(4)
1,030
16
20
36
389
194
$
$
$
1,008
137
419
(629)
(36)
16
127
(43)
23
(25)
40
51
22
(129)
7
22
(21)
1,934
(2,605)
161
32
(101)
5,079
(5,160)
33
(2,561)
924
(42)
(717)
660
(250)
(11)
564
(63)
83
20
321
291
$
$
$
526
$
275
$
1,097
127
391
624
(53)
75
(42)
42
34
6
(62)
(91)
37
(132)
10
(33)
10
2,871
(2,522)
—
71
(195)
3,270
(3,349)
(1)
(2,726)
516
(263)
45
—
(485)
5
(182)
(37)
120
83
305
232
418
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
77
FLORIDA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY(a)
(millions)
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Common
Shareholder's
Equity
Balances, December 31, 2008
$
1,373
$
4,393
$
2,323
$
8,089
Net income
Dividends to NEE
Other
—
—
—
—
—
—
831
(485)
1
Balances, December 31, 2009
1,373
4,393
2,670
$
8,436
Net income
Capital contributions from NEE
Dividends to NEE
Other
—
—
—
—
—
660
—
1
945
—
(250)
(1)
Balances, December 31, 2010
1,373
5,054
3,364
$
9,791
Net income
Capital contributions from NEE
Dividends to NEE
Balances, December 31, 2011
__________________________________
(a) FPL's comprehensive income is the same as reported net income.
—
—
—
—
410
—
1,068
—
(419)
$
1,373
$
5,464
$
4,013
$
10,850
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
78
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009
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 4.6 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 non-controlling ownership interests in joint ventures essentially all of which are accounted for under the equity method.
The consolidated financial statements of NEE and FPL include the accounts of their respective majority-owned and controlled
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 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.
Regulation - FPL is subject to 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 the various clauses, include substantially all fuel, purchased power and interchange expenses, conservation
and certain environmental-related expenses, certain revenue taxes and franchise fees. Beginning in 2009, pre-construction costs
and carrying charges on construction costs for FPL's planned two additional nuclear units at Turkey Point and carrying charges on
construction costs for FPL's approximately 450 megawatt (mw) to 490 mw of additional capacity at St. Lucie and Turkey Point are
also recoverable through a cost recovery clause. Also beginning in 2009, costs incurred for FPL's three solar generating facilities
are recoverable through a cost recovery clause. In accordance with the 2010 rate agreement, cost recovery for FPL's West County
Energy Center (WCEC) Unit No. 3, which was placed in service in May 2011, is permitted up to the amount of the projected annual
fuel savings for customers during the term of the 2010 rate agreement through a cost recovery clause and is reported as retail base
revenues. See Revenues and Rates below. 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.
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. Unbilled base revenues
are included in customer receivables on NEE's and FPL's consolidated balance sheets and amounted to approximately $160 million
and $148 million at December 31, 2011 and 2010, respectively. FPL's operating revenues also include amounts resulting from cost
recovery clauses (see 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 $716 million, $687 million and $791 million in 2011, 2010 and 2009, 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 $100 million, $101 million and $91 million in 2011, 2010 and 2009, 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.
Effective March 1, 2010, pursuant to an FPSC final order (FPSC rate order) new retail base rates for FPL were established, resulting
in an increase in retail base revenues of approximately $75 million on an annualized basis. The FPSC rate order also established
a regulatory return on common equity (ROE) of 10.0% with a range of plus or minus 100 basis points and an adjusted regulatory
equity ratio of 59.1%. It also shifted certain costs from retail base rates to the capacity cost recovery clause (capacity clause). In
addition, the FPSC rate order directed FPL to reduce depreciation expense (surplus depreciation credit) over the 2010 to 2013
period related to a depreciation reserve surplus of approximately $895 million. In February 2011, the FPSC issued a final order
approving a stipulation and settlement agreement between FPL and principal parties in FPL's 2009 rate case regarding FPL's base
rates (2010 rate agreement), which enables FPL to earn a regulatory ROE of up to 11% per year over the term of the 2010 rate
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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
agreement. Key elements of the 2010 rate agreement, which is effective through December 31, 2012, are as follows:
•
•
•
•
•
Subject to the provisions of the 2010 rate agreement, retail base rates are effectively frozen through the end of 2012.
Incremental cost recovery through FPL’s capacity clause for WCEC Unit No. 3, which was placed in service in May 2011, is
permitted up to the amount of the projected annual fuel savings for customers during the term of the 2010 rate agreement.
Future storm restoration costs would be recoverable on an accelerated basis beginning 60 days from the filing of a cost recovery
petition, but capped at an amount that produces a surcharge of no more than $4 for every 1,000 kilowatt-hours (kwh) of 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.
If FPL's earned regulatory ROE falls below 9%, FPL may seek retail base rate relief. If FPL's earned regulatory ROE rises
above 11%, any party to the 2010 rate agreement may seek a reduction in FPL’s retail base rates. In determining the regulatory
ROE for all purposes under the 2010 rate agreement, earnings will be calculated on an actual, non-weather-adjusted basis.
FPL can vary the amount of surplus depreciation credit taken in any calendar year up to a cap in 2010 of $267 million, a cap
in subsequent years of $267 million plus the amount of any unused portion from prior years, and a total cap of $776 million
(surplus depreciation credit cap) over the course of the 2010 rate agreement, provided that in any year of the 2010 rate
agreement FPL must use at least enough surplus depreciation credit to maintain a 9% earned regulatory ROE but may not
use any amount of surplus depreciation credit that would result in an earned regulatory ROE in excess of 11%.
Under the terms of a rate agreement approved in 2005 (2005 rate agreement), which was in effect from January 1, 2006 through
February 28, 2010, retail base rates did not increase except to allow recovery of the revenue requirements of FPL's three power
plants that achieved commercial operation during the term of the 2005 rate agreement: Turkey Point Unit No. 5 in 2007 and WCEC
Units Nos. 1 and 2 in 2009. Under the terms of the 2005 rate agreement, FPL's electric property depreciation rates were based
upon the comprehensive depreciation studies it filed with the FPSC in March 2005; however, FPL reduced depreciation on its plant
in service by $125 million each year as allowed by the 2005 rate agreement. The 2005 rate agreement also provided for a revenue
sharing mechanism, whereby revenues from retail base operations in excess of certain thresholds would be shared with
customers. During the term of the 2005 rate agreement, FPL's revenues did not exceed the thresholds.
In January 2012, FPL filed a formal notification with the FPSC indicating its intent to initiate a base rate proceeding. The notification
stated that, based on preliminary estimates, FPL expects to request a base rate increase of approximately $525 million effective
January 2013 and an additional base rate increase of approximately $170 million annually commencing when the modernized Cape
Canaveral plant becomes operational, which is expected to occur in June 2013. FPL expects to propose an allowed regulatory
ROE of 11.25% with a 0.25% ROE adder, which is included in the base rate increase FPL expects to request, if FPL maintains the
lowest typical residential customer bill among all the electric utilities in Florida. FPL expects to file its formal request to initiate a
base rate proceeding before the end of the first quarter of 2012. A final FPSC decision regarding FPL's base rates is expected in
the fourth quarter of 2012 in time for new rates to be effective January 1, 2013.
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, unless hedge accounting is
applied. See Energy Trading and Note 3.
Electric Plant, Depreciation and Amortization - The cost of additions to units of property of FPL and NEER is added to electric utility
plant. 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, 2011, the electric generating, transmission, distribution and general facilities of FPL represented approximately 48%,
12%, 36% and 4%, respectively, of FPL's gross investment in electric utility plant in service. 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 generating
facilities are encumbered by liens securing various financings. The net book value of NEER's assets serving as collateral was
approximately $8 billion at December 31, 2011. 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 were approximately $1.2 billion ($186 million at FPL) and $1.0 billion ($186 million at FPL) at
December 31, 2011 and 2010, respectively, and are amortized as a reduction to depreciation and amortization expense over the
estimated life of the related property. At December 31, 2011 and 2010, approximately $95 million (none at FPL) and $429 million
($124 million at FPL), respectively, of such convertible ITCs are included in other receivables on NEE's and FPL'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 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), storm
recovery amortization and amortization of pre-construction costs associated with planned nuclear units recovered through a cost
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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
recovery clause. For substantially all of FPL's property, depreciation studies are performed and filed with the FPSC at least every
four years. As part of the FPSC rate order, the FPSC approved new depreciation rates which became effective January 1, 2010. In
addition, in accordance with the 2010 rate agreement, FPL can vary the amount of surplus depreciation credit taken in any calendar
year up to a maximum of $267 million (with any unused portion of the maximum rolling over to and available in subsequent years),
provided its regulatory ROE remains within the range of 9% to 11%; FPL may use up to a maximum of $776 million in surplus
depreciation credit over the course of the 2010 rate agreement. FPL recognized approximately $187 million and $4 million of the
surplus depreciation credit cap in 2011 and 2010, respectively. Under the terms of the 2005 rate agreement, FPL's electric property
depreciation rates were based upon the comprehensive depreciation studies it filed with the FPSC in March 2005; however FPL
reduced depreciation by $125 million annually as was allowed by the 2005 rate agreement. The weighted annual composite
depreciation rate for FPL's electric plant in service, including capitalized software, but excluding the effects of decommissioning,
dismantlement and the depreciation adjustments discussed above, was approximately 3.2%, 3.2% and 3.6% for 2011, 2010 and
2009, respectively.
NEER's electric plants in service less salvage value, if any, are depreciated primarily using the straight-line method over their
estimated useful lives. NEER's effective depreciation rates, excluding decommissioning, were 4.0%, 4.4% and 4.2% for 2011, 2010
and 2009, respectively. NEER reviews the estimated useful lives of its fixed assets on an ongoing basis. In 2011, this review
indicated that the actual lives of certain equipment at NEER's wind plants are expected to be longer than the previously estimated
useful lives used for depreciation purposes. As a result, effective January 1, 2011, NEER changed the estimates of the useful lives
of certain equipment to better reflect the estimated periods during which these assets are expected to remain in service. The useful
lives of substantially all of the wind plants’ equipment that were previously estimated to be 25 years were increased to 30 years. The
effect of this change in estimate was to reduce depreciation and amortization expense by approximately $75 million, increase net
income by $44 million and increase basic and diluted earnings per share by approximately $0.11 for the year ended December 31,
2011.
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 2011,
AFUDC was capitalized at a rate of 6.41% and amounted to approximately $50 million. During the period January 2010 through
March 2010 and during April 2010 through December 2010, AFUDC was capitalized at a rate of 7.41% and 6.41%, respectively,
and amounted to approximately $50 million for the year. During 2009, AFUDC was capitalized at a rate of 7.41%, and amounted
to approximately $74 million. See Note 14 - Commitments.
FPL's construction work in progress includes construction materials, progress payments on major equipment contracts, third-party
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. Capitalized costs associated with construction activities are
charged to O&M expenses when recoverability is no longer probable. See Regulation above for information on recovery of costs
associated with new nuclear capacity and solar generating 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, 2011 and 2010, NEER's capitalized development costs totaled
approximately $89 million and $99 million, respectively, which are included in 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 probable that
these costs are not realizable.
NEER's construction work in progress includes construction materials, prepayments on turbine generators and other equipment,
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 $104 million, $71 million and $85 million
during 2011, 2010 and 2009, 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 utility 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 using a
systematic and rational method over the asset’s estimated useful life. Changes in the ARO resulting from the passage of time are
81
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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. 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
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 recoverable through rates are reported as a regulatory liability in accordance with
regulatory accounting. See Electric Plant, Depreciation and Amortization, Asset Retirement Obligations 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 2010. 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 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 $6.2 billion. FPL's portion of the ultimate cost of decommissioning its four units, expressed in 2011 dollars, is
estimated by the studies to aggregate $2.3 billion.
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 with market adjustments, including any other than temporary impairment losses, resulting in a corresponding adjustment to
the related regulatory liability accounts consistent with regulatory treatment. See Note 5. Contributions to the funds have been
suspended since 2005. Fund earnings, net of taxes, are reinvested in the funds. Earnings are recognized as income/loss and
then recorded to reflect a corresponding increase/decrease in the related regulatory liability accounts. As a result, there is no effect
on net income. During 2011, 2010 and 2009, fund earnings on decommissioning funds were approximately $66 million, $76 million
and $81 million, respectively. The tax effects of amounts not yet recognized for tax purposes are included in accumulated deferred
income taxes.
Fossil and solar plant dismantlement studies are 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 increase
in the annual expense from $15 million to $18 million which is recorded in depreciation and amortization expense in NEE's and
FPL's consolidated statements of income. At December 31, 2011, FPL's portion of the ultimate cost to dismantle its fossil and solar
units is approximately $860 million, or $421 million expressed in 2011 dollars.
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, 2011 and 2010, NEER's
ARO related to nuclear decommissioning totaled approximately $383 million and $478 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 $11.4 billion, or $1.9 billion expressed in 2011 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 2011 and the final order on the proposed decommissioning
funding plan is pending NDFC approval. Seabrook's decommissioning funding plan is also subject to annual review by the NDFC,
and in January 2012, the NDFC issued an interim order suspending Seabrook's decommissioning funding requirements pending
the NDFC's final order. Currently, there are no ongoing decommissioning funding requirements for Duane Arnold and Point Beach,
however, the U.S. Nuclear Regulatory Commission (NRC) 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
82
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 either on a pretax or after-tax basis. See
Note 5. The tax effects of amounts not yet recognized for tax purposes are included in accumulated deferred income taxes.
Major Maintenance Costs - FPL uses the accrue-in-advance method for recognizing 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, 2011 and 2010 totaled approximately $49 million and $58 million, respectively, and is included in regulatory
liabilities - other. For the years ended December 31, 2011, 2010 and 2009, FPL recognized approximately $97 million, $100 million
and $84 million, respectively, in nuclear maintenance costs which are 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 generating 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 $133 million and $95 million at December 31, 2011 and 2010, respectively, and
are included in other assets. For the years ended December 31, 2011, 2010 and 2009, NEER recognized approximately $77 million,
$88 million and $73 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, 2011 and 2010, NEE had approximately $88 million ($37 million for FPL) and $111 million ($39
million for FPL), respectively, of restricted cash included in other current assets on NEE's and FPL's consolidated balance sheets,
which was restricted primarily for margin cash collateral and debt service payments. Where offsetting positions exist, restricted
cash related to margin cash collateral is netted against derivative instruments. See Note 3. In addition, NEE had approximately
$565 million of noncurrent restricted cash at December 31, 2011 related to loan proceeds held for construction at NEER, which
was included in other assets on NEE's consolidated balance sheets.
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 and generating facilities, as well as to take advantage of expected 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 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 accumulated deferred income taxes. The storm fund is
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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
included in special use funds on NEE's and FPL's consolidated balance sheets and was approximately $125 million at both
December 31, 2011 and 2010. See Note 5.
The storm reserve that was reestablished in an FPSC financing order related to the issuance of the storm-recovery bonds is not
reflected on NEE's and FPL's consolidated balance sheets as of December 31, 2011 or 2010 because the associated regulatory
asset does 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 in NEE's and FPL's consolidated statements of income. Although NEE's and FPL's consolidated
balance sheets as of December 31, 2011 reflect a storm reserve of approximately $54 million (included in regulatory liabilities -
other on NEE's and FPL's consolidated balance sheets), FPL had the capacity to absorb up to approximately $202 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 on an ongoing basis the recoverability of its assets for impairment whenever
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 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:
Goodwill:
Merchant reporting unit
Wind reporting unit
Fiber-optic telecommunications reporting unit
Total goodwill
Other intangible assets:
Purchased power agreements
Customer lists
Other, primarily land and transmission rights, permits and licenses
Total
Less accumulated amortization
Total other intangible assets - net
Weighted-
Average
Useful Lives
(years)
December 31,
2011
2010
(millions)
$
$
$
$
$
72
50
25
147
$
$
70
45
231
346
88
258
$
72
45
—
117
87
34
249
370
93
277
19
7
29
NEE's goodwill relates to various acquisitions which were accounted for using the purchase method of accounting. Other intangible
assets are amortized, primarily on a straight-line basis, over their estimated useful lives. For the years ended December 31, 2011,
2010 and 2009, amortization expense was approximately $14 million, $18 million and $14 million, respectively, and is expected to
be approximately $12 million, $9 million, $8 million, $7 million and $5 million for 2012, 2013, 2014, 2015 and 2016, respectively.
Goodwill and other intangible assets are included in other assets on NEE's consolidated balance sheets. Goodwill is assessed for
impairment at least annually by applying a fair value-based analysis. Other intangible assets are periodically reviewed when
impairment indicators are present to assess recoverability from future operations using undiscounted future cash flows.
Pension and Other Postretirement Plans - NEE allocates net periodic pension benefit income to its subsidiaries based on the
pensionable earnings of the subsidiaries' employees; net periodic supplemental executive retirement plan (SERP) benefit costs to
its subsidiaries based upon actuarial calculations by participant; and postretirement health care and life insurance benefits (other
benefits) net periodic benefit costs to its subsidiaries based upon the number of eligible employees at each subsidiary.
NEE's regulatory assets and liabilities are established in association with accounting guidance which requires recognition of the
funded status of benefit plans in the balance sheet, with changes in the funded status recognized in 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, prior service costs or credits and
84
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
transition obligations that are estimated to be allocable to FPL as net periodic benefit (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.
Retirement of Long-Term Debt - Gains and losses that result from differences in FPL's reacquisition cost and the book value of
long-term debt which is retired are deferred as a regulatory asset or liability and amortized to interest expense ratably over the
remaining life of the original issue, which is consistent with its treatment in the ratemaking process. NEECH and NEER recognize
such differences as other income (deductions) at the time of retirement.
Income Taxes - Deferred income taxes are provided 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
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
accumulated deferred income taxes computed under accounting rules, as compared to regulatory accounting rules. The net
regulatory asset totaled $171 million and $151 million at December 31, 2011 and 2010, 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, 2011 and 2010, the net deferred
income tax benefits associated with the convertible ITCs were approximately $56 million and $58 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 6.
Sale of Differential Membership Interests - Certain indirect wholly-owned subsidiaries of NEER sold their Class B membership
interest in entities that have ownership interests in wind facilities, with generating capacity totaling approximately 1,916 mw at
December 31, 2011, 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 tax attributes, for a variable period. The transactions are
not treated as a sale under the accounting rules and the proceeds received are deferred and recorded in deferral related to differential
membership interests on NEE's consolidated balance sheets. The deferred amount is being recognized as an adjustment to taxes
other than income taxes and other 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.
Guarantees - NEE's and FPL's payment guarantees and related contracts provided to unconsolidated entities entered into after
December 31, 2002, for which it or a subsidiary is the guarantor, are recorded at fair value. See Note 14 - Commitments.
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.
85
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Employee Retirement Benefits
Employee Benefit Plans and Other Postretirement Plan - NEE sponsors a qualified noncontributory defined benefit pension plan
for substantially all employees of NEE and its subsidiaries. NEE also has a SERP, which includes a non-qualified supplemental
defined benefit pension component that provides benefits to a select group of management and highly compensated employees. The
impact of this SERP component is included within pension benefits in the following tables, and was not material to NEE's financial
statements for the years ended December 31, 2011, 2010 and 2009. In addition to pension benefits, NEE sponsors a contributory
postretirement plan for other benefits for retirees of NEE and its subsidiaries meeting certain eligibility requirements.
Plan Assets, Benefit Obligations and Funded Status - The changes in assets and benefit obligations of the plans and the plans'
funded status are as follows:
Change in plan assets:
Fair value of plan assets at January 1
$
3,233
$
3,028
$
32
$
Pension Benefits
Other Benefits
2011
2010
2011
2010
(millions)
Actual return on plan assets
Employer contributions(a)
Transfers(b)
Participant contributions
Benefit payments(a)
Fair value of plan assets at December 31
Change in benefit obligation:
Obligation at January 1
Service cost
Interest cost
Participant contributions
Plan amendments
Special termination benefits
Actuarial losses (gains) - net
Benefit payments(a)
Obligation at December 31(c)
Funded status:
Prepaid (accrued) benefit cost at NEE at December 31
Prepaid (accrued) benefit cost at FPL at December 31
__________________________
$
$
$
$
$
(3)
1
—
—
(109)
380
3
(29)
—
(149)
(2)
29
—
8
(39)
3,122
$
3,233
$
28
$
1,994
$
1,866
$
417
$
64
98
—
22
—
54
(109)
59
102
—
1
13
102
(149)
6
21
8
17
—
(3)
(39)
2,123
$
1,994
$
427
$
32
2
28
—
9
(39)
32
430
6
23
9
—
—
(12)
(39)
417
999
1,080
$
$
1,239
1,027
$
$
(399)
(273)
$
$
(385)
(279)
(a) Employer contributions and benefit payments include only those amounts contributed directly to, or paid directly from, plan assets. FPL's portion of contributions
related to SERP benefits was $1 million for 2011 and for 2010. FPL's portion of contributions related to other benefits was $27 million and $26 million for 2011
and 2010, respectively.
(b) Represents amounts that were transferred from the qualified pension plan as reimbursement for eligible retiree medical expenses paid by NEE pursuant to the
provisions of the Internal Revenue Code.
(c) NEE's accumulated pension benefit obligation, which includes no assumption about future salary levels, for its pension plans at December 31, 2011 and 2010 was
$2,068 million and $1,935 million, respectively.
NEE's and FPL's prepaid (accrued) benefit cost shown above are included on the consolidated balance sheets as follows:
NEE
FPL
Pension Benefits
2010
2011
Other Benefits
2011
2010
Pension Benefits
2010
2011
Other Benefits
2011
2010
(millions)
Prepaid benefit costs
$
1,021
$
1,259
$
—
$
—
$
1,088
$
1,035
$
—
$
—
Accrued benefit cost included in
other current liabilities
Accrued benefit cost included in
other liabilities
Prepaid (accrued) benefit cost at
(4)
(18)
(3)
(17)
(26)
(27)
(373)
(358)
(2)
(6)
(2)
(6)
(22)
(23)
(251)
(256)
December 31
$
999
$
1,239
$
(399)
$
(385)
$
1,080
$
1,027
$
(273)
$
(279)
86
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NEE's unrecognized amounts included in accumulated other comprehensive income (loss) yet to be recognized as components of
prepaid (accrued) benefit cost are as follows:
Pension Benefits
Other Benefits
2011
2010
2011
2010
(millions)
Components of AOCI:
Unrecognized prior service benefit (cost) (net of $3, $2 and $2
tax benefits, respectively)
Unrecognized transition obligation (net of $1 tax benefit)
Unrecognized gain (loss) (net of $24 tax benefit, $5 tax
expense, $3 tax benefit and $5 tax benefit, respectively)
Total
$
$
(5)
$
—
(37)
(42)
$
(4)
$
(3)
$
—
8
4
$
—
(1)
(4)
$
—
(1)
(4)
(5)
NEE's unrecognized amounts included in regulatory assets (liabilities) yet to be recognized as components of net prepaid (accrued)
benefit cost are as follows:
Unrecognized prior service cost
Unrecognized transition obligation
Unrecognized (gain) loss
Total
Regulatory Assets (Liabilities)
(Pension)
Regulatory Assets
(SERP and Other)
2011
2010
2011
2010
$
$
16
—
153
169
$
$
(millions)
$
13
—
(64)
(51)
$
13
$
2
44
59
$
1
4
37
42
The following table provides the weighted-average assumptions used to determine benefit obligations for the plans. These rates
are used in determining net periodic benefit cost in the following year.
Discount rate
Salary increase
Pension Benefits
Other Benefits
2011
2010
2011
2010
4.65%
4.00%
5.00%
4.00%
4.75%
4.00%
5.25%
4.00%
The projected 2012 trend assumption used to measure the expected cost of health care benefits covered by the plans for those
under age 65 is 7.30% for medical and 7.90% for prescription drug benefits and for those age 65 and over is 7.00% for medical
and 7.50% for prescription drug benefits. These rates are assumed to decrease over the next 6 years for medical benefits and 8
years for prescription drug benefits to the ultimate trend rate of 5.50% and remain at that level thereafter. The ultimate trend rate
is assumed to be reached in 2018 for medical benefits and 2020 for prescription drug benefits. Assumed health care cost trend
rates have an effect on the amounts reported for postretirement plans providing health care benefits. An increase or decrease of
one percentage point in assumed health care cost trend rates would have a corresponding effect on the other benefits accumulated
obligation of approximately $2 million at December 31, 2011.
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 asset allocation is a mix of 43.5% equity investments, 43.5% fixed income investments, 10%
convertible securities and 3% alternative investments. The 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 allocation includes direct equity holdings and assets classified as equity commingled vehicles. Similarly, its
fixed income allocation includes direct debt security holdings and assets classified as debt security commingled vehicles. These
equity and debt security commingled vehicles include common and collective trusts, pooled separate accounts, registered investment
companies or other forms of pooled investment arrangements. The pension fund's convertible security allocation is principally direct
holdings of convertible securities and includes a convertible security oriented limited partnership. The pension fund's alternative
investments allocation consists of absolute return oriented limited partnerships that use a broad range of investment strategies on
a global basis.
87
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
With regard to its other benefits plan, NEE's policy is to fund claims as incurred during the year through NEE contributions, participant
contributions and plan assets. The other benefits plan's assets are invested with a focus on assuring the availability of funds to
pay benefits while maintaining sufficient diversification to avoid large losses and preserve capital. The other benefits plan's fund
has a strategic asset allocation that targets a mix of 60% equity investments and 40% fixed income investments. The fund's
investment strategy consists of traditional investments, diversified across the global equity and fixed income markets. The fund's
equity investments are comprised of assets classified as equity commingled vehicles. Similarly, its fixed income investments are
comprised of assets classified as debt security commingled vehicles. These equity and debt commingled vehicles include common
and collective trusts, pooled separate accounts, registered investment companies or other forms of pooled investment arrangements.
The fair value measurements of NEE's pension plan assets by fair value hierarchy level are as follows:
December 31, 2011(a)
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Equity securities(b)
Equity commingled vehicles(c)
U.S. Government and municipal bonds
Corporate debt securities(d)
Asset-backed securities
Debt security commingled vehicles(e)
Convertible securities
Limited partnerships(f)
Total
__________________________________
$
750
$
(millions)
5
$
—
84
—
—
—
—
—
568
51
325
318
586
265
63
$
834
$
2,181
$
Total
$
1
—
—
—
—
—
—
106
107
$
756
568
135
325
318
586
265
169
3,122
(a) See Note 4 for discussion of fair value measurement techniques.
(b)
(c)
(d)
(e)
(f)
Includes foreign investments of $258 million.
Includes foreign investments of $185 million.
Includes foreign investments of $58 million.
Includes foreign investments of $61 million and $85 million of short-term commingled vehicles.
Includes alternative investments of $94 million, of which $31 million were foreign investments. Fair values have been estimated using net asset value per share
of the investments. These investments primarily have a one- to three-year lockup and are redeemable on either a quarterly or annual basis with a 30 to 90 day
redemption notification requirement and have unfunded commitments of $24 million.
December 31, 2010(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
$
800
$
—
60
—
—
—
—
(millions)
6
$
669
35
335
263
744
310
$
—
11
—
—
—
—
—
806
680
95
335
263
744
310
$
860
$
2,362
$
11
$
3,233
Equity securities(b)
Equity commingled vehicles(c)
U.S. Government and municipal bonds
Corporate debt securities(d)
Asset-backed securities
Debt security commingled vehicles(e)
Convertible securities
Total
__________________________________
(a) See Note 4 for discussion of fair value measurement techniques.
(b)
(c)
(d)
(e)
Includes foreign investments of $293 million.
Includes foreign investments of $219 million.
Includes foreign investments of $47 million.
Includes foreign investments of $56 million and $206 million of short-term commingled vehicles.
88
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value measurements, all of which were Level 2, of NEE's other benefits plan assets at December 31, 2011 and 2010 were
approximately $17 million and $20 million of equity commingled vehicles (of which $4 million and $5 million were foreign investments)
and $11 million and $12 million of debt security commingled vehicles, respectively.
Expected Cash Flows - NEE anticipates paying approximately $26 million for eligible retiree medical expenses on behalf of the
other benefits plan during 2012.
The following table provides information about benefit payments expected to be paid by the plans, net of government drug subsidy,
for each of the following calendar years:
2012
2013
2014
2015
2016
2017 - 2021
Pension
Benefits
Other
Benefits
(millions)
162
162
162
162
167
850
$
$
$
$
$
$
33
36
36
30
30
144
$
$
$
$
$
$
Net Periodic Cost - The components of net periodic benefit (income) cost for the plans are as follows:
Pension Benefits
Other Benefits
2011
2010
2009
2011
2010
2009
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of prior service benefit
Amortization of gains
SERP settlements
Special termination benefits
$
64
98
(238)
—
(3)
—
—
—
Net periodic benefit (income) cost at NEE
Net periodic benefit (income) cost at FPL
$
$
(79)
(51)
$
$
(millions)
$
59
$
51
$
6
$
6
$
102
(241)
—
(3)
1
1
13
(68)
(42)
109
(239)
—
(3)
(23)
—
—
$
$
(105)
(73)
$
$
21
(2)
3
—
—
—
—
28
21
$
$
23
(2)
3
—
—
—
—
30
23
$
$
5
24
(3)
4
—
—
—
—
30
23
Other Comprehensive Income - The components of net periodic benefit income (cost) recognized in OCI for the plans are as follows:
Prior service cost (net of $2 tax benefit)
Net gains (losses) (net of $32 tax benefit, none, $2 tax expense and $1 tax
expense, respectively)
Amortization of prior service benefit
Amortization of transition obligation
Total
Pension Benefits
Other Benefits
2011
2010
2011
2010
$
$
—
$
(45)
(1)
—
(46)
$
(millions)
—
$
1
(1)
—
—
$
(3)
$
3
—
1
1
$
—
2
—
—
2
89
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Regulatory Assets (Liabilities) - The components of net periodic benefit (income) cost recognized during the year in regulatory assets
(liabilities) for the plans are as follows:
Prior service cost
Unrecognized (gains) losses
Amortization of prior service benefit
Amortization of transition obligation
Total
Regulatory
Assets (Liabilities)
(Pension)
Regulatory Assets
(SERP and Other)
2011
2010
2011
2010
$
$
1
$
217
2
—
(millions)
1
$
(35)
2
—
$
12
7
—
(2)
220
$
(32)
$
17
$
—
(9)
—
(2)
(11)
The weighted-average assumptions used to determine net periodic benefit (income) cost for the plans are as follows:
Discount rate
Salary increase
Expected long-term rate of return(a)
__________________________________
Pension Benefits
Other Benefits
2011
2010
2009
2011
2010
2009
5.00%
5.50%
6.90%
5.25%
5.50%
6.90%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
7.75%
7.75%
7.75%
8.00%
8.00%
8.00%
(a)
In developing the expected long-term rate of return on assets assumption for its plans, 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 funds. NEE also considered its funds' historical compounded returns.
Assumed health care cost trend rates have an effect on the amounts reported for postretirement plans providing health care
benefits. An increase or decrease of one percentage point in assumed health care cost trend rates would have a corresponding
effect on the total service and interest cost recognized at December 31, 2011 by less than $1 million.
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 $42 million, $34 million and $38 million for NEE
($28 million, $26 million and $28 million for FPL) for the years ended December 31, 2011, 2010 and 2009, 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
with outstanding and forecasted debt issuances, and to optimize the value of NEER's power generation 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 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 markets,
depending on the most favorable credit terms and market execution factors. For NEER's power generation 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 energy output of these assets. These hedges protect NEER against adverse
changes in the wholesale forward commodity markets associated with its generation 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
customer served by the distribution utility. For this type of transaction, derivative instruments are used to hedge the anticipated
electricity quantities required to serve these customers and protect against 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. NEER uses derivative instruments to realize value from these market
dislocations, subject to strict risk management limits around market, operational and credit exposure.
90
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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) or the capacity clause. For NEE's non-rate regulated operations,
predominantly NEER, unless hedge accounting is applied, essentially all changes in the derivatives' fair value for power purchases
and sales and trading activities are recognized on a net basis in operating revenues; fuel purchases and sales are recognized on
a net basis 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. 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. Transactions for which physical
delivery is deemed not to have occurred are presented on a net basis in the consolidated statements of income. 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, reducing the impact of volatility
in interest rates on outstanding and forecasted debt issuances and managing foreign currency 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 swaps 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. See Note 7. The ineffective portion of net unrealized gains (losses) on these hedges is reported in earnings in
the current period. At December 31, 2011, NEE's AOCI included amounts related to discontinued commodity cash flow hedges
with expiration dates through December 2012; interest rate cash flow hedges with expiration dates through December 2030; and
foreign currency cash flow hedges with expiration dates through September 2030.
In 2011, subsidiaries of NEER sold their ownership interest in five natural gas-fired generating plants. See Note 4 - Nonrecurring
Fair Value Measurements. Certain of the plants had hedged their exposure to interest rate and commodity price fluctuations by
entering into derivative contracts. Because the plants were sold to a third party, it became no longer probable that the future hedged
transactions would occur. Therefore, NEE was required to reclassify any gains or losses in AOCI related to those hedges to
earnings. During the year ended December 31, 2011, NEE reclassified approximately $21 million of net losses to earnings, with
$30 million of losses recorded in loss on sale of natural gas-fired generating assets and $9 million of gains recorded in other - net.
The net fair values of NEE's and FPL's mark-to-market derivative instrument assets (liabilities) are included on the consolidated
balance sheets as follows:
Current derivative assets(a)
Noncurrent derivative assets(c)
Current derivative liabilities(e)
Noncurrent derivative liabilities(f)
NEE
December 31,
FPL
December 31,
2011
2010
2011
2010
$
611
$
506
$
(millions)
973
(1,090)
(541)
589
(536)
(243)
$
(b)
(d)
10
2
(512)
(g)
(1)
Total mark-to-market derivative instrument assets (liabilities)
$
(47)
$
316
$
(501)
$
__________________________________
(b)
(d)
8
1
(245)
—
(236)
(a) At December 31, 2011 and 2010, NEE's balances reflect the netting of approximately $106 million and $23 million (none at FPL), respectively, in margin cash
collateral received from counterparties.
Included in current other assets on FPL's consolidated balance sheets.
(b)
(c) At December 31, 2011 and 2010, NEE's balances reflect the netting of approximately $109 million and $43 million (none at FPL), respectively, in margin cash
collateral received from counterparties.
Included in noncurrent other assets on FPL's consolidated balance sheets.
(d)
(e) At December 31, 2011 and 2010, NEE's balances reflect the netting of approximately $112 million and $23 million (none at FPL), respectively, in margin cash
collateral provided to counterparties.
At December 31, 2011 and 2010, NEE's balances reflect the netting of approximately $79 million and $72 million (none at FPL) in margin cash collateral provided
to counterparties.
Included in noncurrent other liabilities on FPL's consolidated balance sheets.
(f)
(g)
91
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2011 and December 31, 2010, NEE had approximately $22 million and $7 million (none at FPL), respectively, in
margin cash collateral received from counterparties that was not offset against derivative assets. These amounts are included in
current other liabilities on NEE's consolidated balance sheets. Additionally, at December 31, 2011 and December 31, 2010, NEE
had approximately $50 million and $58 million (none at FPL), respectively, in margin cash collateral provided to counterparties that
was not offset against derivative liabilities. These amounts are included in current other assets on NEE's consolidated balance
sheets.
As discussed above, NEE uses derivative instruments to, among other things, manage its commodity price risk, interest rate risk
and foreign currency exchange rate risk. The table above presents NEE's and FPL's net derivative positions at December 31, 2011
and December 31, 2010, 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. However, disclosure rules require
that the following tables be presented on a gross basis.
The fair values of NEE's derivatives designated as hedging instruments for accounting purposes (none at FPL) are presented below
as gross asset and liability values, as required by disclosure rules.
Interest rate swaps:
Current derivative assets
Current derivative liabilities
Noncurrent derivative assets
Noncurrent derivative liabilities
Foreign currency swaps:
Current derivative assets
Current derivative liabilities
Noncurrent derivative assets
Noncurrent derivative liabilities
Total
December 31, 2011
December 31, 2010
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
$
$
22
—
15
—
—
—
—
—
(millions)
$
—
60
—
260
—
3
—
3
$
16
—
91
—
24
—
11
—
—
64
—
59
—
4
—
—
$
37
$
326
$
142
$
127
Gains (losses) related to NEE's cash flow hedges are recorded on NEE's consolidated financial statements (none at FPL) as follows:
Year Ended
December 31, 2011
Commodity
Contracts
Interest
Rate
Swaps
Foreign
Currency
Swaps
Total
Commodity
Contracts
Year Ended
December 31, 2010
Interest
Rate
Swaps
Foreign
Currency
Swaps
(millions)
Year Ended
December 31, 2009
Total
Commodity
Contracts
Interest
Rate
Swaps
Foreign
Currency
Swap
Total
Gains (losses)
recognized
in OCI
Gains (losses)
reclassified
from AOCI
to net
income(a)
Gains (losses)
recognized
in income(d)
$
$
$
—
$ (383)
$
(17)
$(400)
$
20
$
(52)
$
24
$ (8)
$
197
$
28
$
3
$228
41
$
(76)
$
(b)
1
$ (34)
$
118
$
(65)
$
(b)
20
$ 73
$
164
$
(39)
$
(c)
4
$129
—
$ —
$
—
$ —
$
1
$ —
$
—
$
1
$
29
$ —
$
—
$ 29
__________________________________
(a)
Included in operating revenues for commodity contracts and interest expense for interest rate swaps. In 2011, excludes approximately $21 million of net losses
related to the discontinuance of certain cash flow hedges. See further discussion above.
(b) Loss of approximately $4 million is included in interest expense and the balance is included in other - net.
Loss of approximately $1 million is included in interest expense and the balance is included in other - net.
(c)
(d) Represents the ineffective portion of the hedging instrument included in operating revenues.
For the year ended December 31, 2011, NEE recorded a gain of approximately $28 million on six fair value hedges which resulted
in a corresponding increase in the related debt. For the year ended December 31, 2010, NEE recorded a gain of approximately
$11 million on three fair value hedges which resulted in a corresponding increase in the related debt. For the year ended December 31,
2009, NEE recorded a loss of $6 million on a fair value hedge which resulted in a corresponding reduction in the related debt.
92
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair values of NEE's and FPL's derivatives not designated as hedging instruments for accounting purposes are presented below
as gross asset and liability values, as required by disclosure rules. However, the majority of the underlying contracts are subject
to master netting arrangements and would not be contractually settled on a gross basis.
December 31, 2011
December 31, 2010
NEE
FPL
NEE
FPL
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
(millions)
Commodity contracts:
Current derivative assets
$
1,127
$
432
$
(a)
11
$
(a)
1
$
754
$
278
$
Current derivative liabilities
Noncurrent derivative assets
Noncurrent derivative liabilities
Foreign currency swap:
Current derivative assets
Current derivative liabilities
Noncurrent derivative assets
3,358
1,290
1,222
—
—
27
4,494
250
1,579
—
3
—
Total
$
7,024
$
6,758
$
__________________________________
(b)
1
2
—
—
—
—
14
(a)
(b)
(c)
Included in current other assets on FPL's consolidated balance sheets.
Included in noncurrent other assets on FPL's consolidated balance sheets.
Included in noncurrent other liabilities on FPL's consolidated balance sheets.
513
1,848
(c)
—
1
—
—
—
687
828
13
—
—
2,339
157
1,084
—
—
—
$
515
$
4,130
$
3,858
$
9
12
1
—
—
—
—
22
(a)
$
(a)
1
(b)
257
—
—
—
—
—
$
258
Gains (losses) related to NEE's derivatives not designated as hedging instruments are recorded in NEE's consolidated statements
of income (none at FPL) as follows:
Commodity contracts:
Operating revenues
Fuel, purchased power and interchange
Foreign currency swap - other - net
Interest rate contracts - other - net
Total
__________________________________
Years Ended December 31,
2011
2010
(millions)
2009
$
$
(a)
473
$
(a)
531
(a)
279
—
22
(11)
484
1
18
—
$
550
$
28
(3)
—
304
(a)
In addition, for the years ended December 31, 2011, 2010 and 2009, FPL recorded approximately $646 million, $665 million and $688 million of losses, respectively,
related to commodity contracts as regulatory assets on its consolidated balance sheets.
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. The table does not present a complete picture
of NEE's and FPL's overall net economic exposure because NEE and FPL do not use derivative instruments to hedge all of their
commodity exposures. At December 31, 2011, NEE and FPL had derivative commodity contracts for the following net notional
volumes:
Commodity Type
NEE
FPL
(millions)
Power
Natural gas
Oil
(121)
1,132
mwh(a)
mmbtu(b)
(3)
barrels
—
775
—
mmbtu(b)
__________________________________
(a) Megawatt-hours
(b) One million British thermal units
93
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2011, NEE had interest rate contracts with a notional amount totaling approximately $6.5 billion and foreign
currency swaps with a notional amount totaling approximately $544 million.
Certain of NEE's and FPL's 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, 2011, the aggregate fair value of NEE's
derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $3.2 billion ($0.5
billion for FPL).
If the credit-risk-related contingent features underlying these agreements and other commodity-related contracts were triggered,
NEE or 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), NEE would be required to post collateral such that the total posted
collateral would be approximately $800 million ($250 million at FPL).
If FPL's and NEECH's credit ratings were downgraded to
below investment grade, NEE would be required to post additional collateral such that the total posted collateral would be
approximately $2.8 billion ($0.9 billion at FPL). Some contracts at NEE, including some FPL 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, NEE could be required to post additional collateral of up to
approximately $600 million ($100 million at FPL).
Collateral may be posted in the form of cash or credit support. At December 31, 2011, NEE had posted approximately $400 million
($30 million at FPL) in the form of letters of credit, related to derivatives, in the normal course of business which could be applied
toward the collateral requirements described above. FPL and NEECH have bank revolving line of credit facilities in excess of the
collateral requirements described above that would be available to support, among other things, derivative activities. Under the
terms of the bank revolving line of 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
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 - Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or
less. NEE and FPL primarily hold 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 on a daily basis using prices observed on
commodities exchanges and in the over-the-counter 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
94
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
interest, the measurement is established using settlement prices from the exchanges, and therefore considered to be valued using
significant other observable inputs.
NEE and FPL also enter into over-the-counter 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. 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, through NEER, also enters into full requirements contracts, which, in many 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. This consideration includes, but is not
limited to, assumptions about market liquidity, volatility and contract duration.
NEE uses interest rate and foreign currency swaps to mitigate and adjust interest rate and foreign currency exposure related to
certain outstanding and forecasted debt issuances and borrowings. 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
swap 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:
95
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
December 31, 2011
Significant
Unobservable
Inputs
(Level 3)
(millions)
Netting(a)
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
159
11
709
508
—
—
—
128
458
—
—
—
4
8
—
—
5
2,448
—
—
—
2,588
—
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
1,206
(b)
167
516
511
47
1,056
(b)
134
359
434
32
—
—
43
33
5
3,478
37
27
8
3,582
320
9
513
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,071
—
—
6
585
—
—
2
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(5,477)
—
—
(2)
(5,453)
—
—
(2)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
159
11
1,915
675
516
511
47
1,184
592
359
434
32
4
8
43
33
10
1,520
37
27
12
1,302
320
9
513
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
Assets:
Cash equivalents:
NEE - equity securities
FPL - equity securities
Special use funds:
NEE:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other debt securities
FPL:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other debt securities
Other investments:
NEE:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other
Derivatives:
NEE:
Commodity contracts
Interest rate swaps
Foreign currency swaps
FPL - commodity contracts
Liabilities:
Derivatives:
NEE:
Commodity contracts
Interest rate swaps
Foreign currency swaps
FPL - commodity contracts
__________________________________
Includes the effect of the contractual ability to settle contracts under master netting arrangements and margin cash collateral payments and receipts.
(a)
(b) At NEE, approximately $1,086 million ($979 million at FPL) are invested in commingled funds whose underlying investments would be Level 1 if those investments
were held directly by NEE or FPL.
(c) See Note 3 for a reconciliation of net derivatives to NEE's and FPL's consolidated balance sheets.
96
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
December 31, 2010
Significant
Unobservable
Inputs
(Level 3)
(millions)
Netting(a)
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
741
495
—
—
—
125
458
—
—
—
3
8
—
—
5
1,755
—
—
—
1,821
—
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
122
7
1,245
(b)
127
486
447
108
1,082
(b)
111
334
381
41
1
4
32
58
10
1,538
107
48
14
1,509
123
4
257
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
824
—
—
8
528
—
—
1
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,177)
—
—
(13)
(3,206)
—
—
(13)
$
$
$
$
$
$
$
$
122
7
1,986
622
486
447
108
1,207
569
334
381
41
4
12
32
58
15
940
107
48
9
652
123
4
245
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
Assets:
Cash equivalents:
NEE - equity securities
FPL - equity securities
Special use funds:
NEE:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other debt securities
FPL:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other debt securities
Other investments:
NEE:
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other
Derivatives:
NEE:
Commodity contracts
Interest rate swaps
Foreign currency swaps
FPL - commodity contracts
Liabilities:
Derivatives:
NEE:
Commodity contracts
Interest rate swaps
Foreign currency swaps
FPL - commodity contracts
__________________________________
Includes the effect of the contractual ability to settle contracts under master netting arrangements and margin cash collateral payments and receipts.
(a)
(b) At NEE, approximately $1,084 million ($980 million at FPL) are invested in commingled funds whose underlying investments would be Level 1 if those investments
were held directly by NEE or FPL.
(c) See Note 3 for a reconciliation of net derivatives to NEE's and FPL's consolidated balance sheets.
97
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:
Fair value of net derivatives based on significant unobservable
inputs at December 31 of prior year
Realized and unrealized gains (losses):
Included in earnings(a)
Included in regulatory assets and liabilities
Purchases, sales, settlements and issuances(b)
Transfers in(c)
Transfers out(c)
Fair value of net derivatives based on significant unobservable
inputs at December 31
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(d)
$
$
Years Ended December 31,
2011
2010
2009
NEE
FPL
NEE
FPL
NEE
FPL
(millions)
$
296
$
7
$
364
$
11
$
404
$
(1)
454
3
(258)
6
(15)
—
3
(6)
—
—
407
1
(432)
2
(46)
—
1
(5)
—
—
555
7
(521)
16
(97)
—
7
6
—
(1)
486
$
4
$
296
$
7
$
364
$
11
423
$
—
$
170
$
—
$
270
$
—
__________________________________
(a) For the years ended December 31, 2011, 2010 and 2009, $441 million, $384 million and $555 million, respectively, of realized and unrealized gains are reflected
in the consolidated statements of income in operating revenues and the balance is reflected in fuel, purchased power and interchange.
(b) For the year ended December 31, 2011, includes $270 million of purchases, $166 million of settlements and $362 million of issuances.
(c) Transfers into Level 3 were a result of decreased observability of market data and 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.
(d) For the years ended December 31, 2011, 2010 and 2009, $423 million, $153 million and $270 million, respectively, of unrealized gains are reflected in the consolidated
statements of income in operating revenues and the balance is reflected in fuel, purchased power and interchange.
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 2011, recent market value indications and the impact of newly proposed
environmental regulations suggested that the carrying value of certain NEER assets, primarily wind assets in West Texas and oil-
fired assets in Maine, may be impaired. NEER performed a fair value analysis and concluded that an impairment charge related
to the long-lived assets, primarily property, plant and equipment, was necessary. The fair value analysis was primarily based on
the income approach using significant unobservable inputs (Level 3) including revenue and generation forecasts, projected capital
and maintenance expenditures and discount rates. As a result, long-lived assets held and used with a carrying amount of
approximately $79 million were written down to their fair value of $28 million, resulting in an impairment charge of $51 million ($31
million after-tax), which is recorded as a separate line item in NEE's consolidated statements of income for the year ended
December 31, 2011.
In 2011, subsidiaries of NEER completed the sales of their ownership interests in five natural gas-fired generating plants with a total
generating capacity of approximately 2,700 mw for net cash proceeds of approximately $1.2 billion, after transaction costs and
working capital and other adjustments. Approximately $363 million of these proceeds were used to repay debt associated with
certain of the projects. A NEER affiliate will continue to operate the facilities included in the sales under service contracts: three
facilities for a five-year period, one facility for a two-year period and the fifth facility for a one-year period. In connection with the
sales, a loss of approximately $151 million ($98 million after-tax) was recorded in NEE's consolidated statements of income. The
loss includes the reclassification of $30 million from AOCI as a result of the discontinuance of certain cash flow hedges because it
became probable that the related forecasted transactions being hedged would not occur. See Note 3.
98
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Financial Instruments
The carrying amounts of cash equivalents and commercial paper approximate their fair values. At December 31, 2011 and 2010,
other investments of NEE, not included in the table below, included financial instruments of approximately $35 million and $97
million ($4 million and $4 million at FPL), respectively, including $2 million and $48 million included in current other receivables on
the consolidated balance sheets (none at FPL), which primarily consist of notes receivable that are carried at estimated fair value
or cost, which approximates fair value.
The following estimates of the fair value of financial instruments have been made primarily using available market
information. However, the use of different market assumptions or methods of valuation could result in different estimated fair values.
NEE:
Special use funds
Other investments:
Notes receivable
Debt securities
Equity securities
Long-term debt, including current maturities
Interest rate swaps - net unrealized losses
Foreign currency swaps - net unrealized gains
FPL:
Special use funds
Long-term debt, including current maturities
__________________________________
December 31, 2011
December 31, 2010
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$
$
$
$
$
$
$
$
$
3,867
(a)
(d)
503
89
80
21,614
(283)
18
(a)
2,737
7,533
$
$
$
$
$
$
$
$
$
(millions)
3,867
(b)
535
89
159
23,699
(283)
18
2,737
9,078
(c)
(b)
(e)
(f)
(g)
(g)
(b)
(f)
$
$
$
$
$
$
$
$
$
3,742
(a)
(d)
525
114
57
19,929
(16)
44
(a)
2,637
6,727
$
$
$
$
$
$
$
$
$
3,742
(b)
583
114
125
20,756
(16)
44
2,637
7,236
(c)
(b)
(e)
(f)
(g)
(g)
(b)
(f)
(a) At December 31, 2011, includes $164 million of investments accounted for under the equity method and $39 million of loans not measured at fair value on a
recurring basis ($112 million and $24 million, respectively, for FPL). At December 31, 2010, includes $76 million of investments accounted for under the equity
method and $17 million of loans not measured at fair value on a recurring basis ($94 million and $11 million, respectively, for FPL). For the remaining balance,
see Note 4 for classification by major security type. The amortized cost of debt and equity securities is $1,638 million and $1,425 million, respectively, at
December 31, 2011 and $1,616 million and $1,489 million, respectively, at December 31, 2010 ($1,321 million and $864 million, respectively, at December 31,
2011 and $1,281 million and $943 million, respectively, at December 31, 2010 for FPL).
(b) Based on quoted market prices for these or similar issues.
(c) Classified as held to maturity. Based on market prices provided by external sources. Notes receivable bear interest primarily at fixed rates and mature from 2014
to 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 standings and ratings and market-related information. As of December 31, 2011, neither NEE nor FPL had any notes receivable reported in non-accrual
status.
(d) Classified as trading securities.
(e) Modeled internally based on latest market data.
(f)
(g) Modeled internally based on market values using discounted cash flow analysis and credit valuation adjustment.
Provided by external sources based on market prices indicative of market conditions.
Special Use Funds - The special use funds consist of FPL's storm fund assets of $125 million and NEE's and FPL's nuclear
decommissioning fund assets of $3,742 million and $2,612 million, respectively, at December 31, 2011. 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 (see Note 4). 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, 2011 of approximately
six years at both NEE and FPL. FPL's storm fund primarily consists of debt securities with a weighted-average maturity at
December 31, 2011 of approximately three years. The cost of securities sold is determined using the specific identification method.
99
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:
Realized gains
Realized losses
Proceeds from sale or maturity of securities
NEE
FPL
Years Ended December 31,
Years Ended December 31,
2011
2010
2009
2011
2010
2009
$
$
$
183
88
4,348
$
$
$
106
30
6,726
$
$
$
(millions)
108
$
30
4,592
$
$
74
62
2,988
$
$
$
49
22
5,079
$
$
$
48
25
3,270
Unrealized losses on available for sale debt securities at December 31, 2011 and 2010 were not material to NEE or FPL. The
unrealized gains on available for sale securities are as follows:
NEE
December 31,
FPL
December 31,
2011
2010
2011
2010
Equity securities
U.S. Government and municipal bonds
Corporate debt securities
Mortgage-backed securities
Other debt securities
$
$
$
$
$
546
46
31
27
3
$
$
$
$
$
(millions)
612
$
$
$
$
$
15
23
20
2
376
43
24
24
3
$
$
$
$
$
384
15
19
18
1
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.
Interest Rate and Foreign Currency Swaps - NEE and its subsidiaries use a combination of fixed rate and variable rate debt to
manage interest rate exposure. Interest rate swaps are used to mitigate and adjust interest rate exposure when deemed appropriate
based upon market conditions or when required by financing agreements. In addition, with respect to certain debt issuances and
borrowings, NEECH has two cross currency swaps to hedge against currency movements with respect to both interest and principal
payments. See Note 3.
6. Income Taxes
The components of income taxes are as follows:
NEE
FPL
Years Ended December 31,
2010
2009
2011
Years Ended December 31,
2011
2010
2009
Federal:
Current(a)
Deferred
Total federal
State:
Current(a)
Deferred
Total state
Total income taxes
$
(35)
$
572
537
11
(19)
(8)
529
$
$
__________________________________
(a)
Includes provision for unrecognized tax benefits.
11
434
445
11
76
87
532
$
$
100
(millions)
(18)
290
272
77
(22)
55
327
$
$
$
(64)
622
558
43
53
96
654
$
113
385
498
49
33
82
580
$
$
63
342
405
57
11
68
473
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation between the effective income tax rates and the applicable statutory rates is as follows:
Statutory federal income tax rate
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
NEE
FPL
Years Ended December 31,
Years Ended December 31,
2011
2010
2009
2011
2010
2009
Increases (reductions) resulting from:
State income taxes - net of federal income
tax benefit
PTCs and ITCs - NEER
Convertible ITCs - NEER
Other - net
Effective income tax rate
(0.2)
(11.1)
(0.1)
(2.0)
21.6%
2.4
(12.2)
(2.5)
(1.3)
21.4%
1.9
(13.1)
(4.3)
(2.6)
16.9%
3.6
—
—
(0.6)
38.0%
3.5
—
—
(0.5)
38.0%
3.4
—
—
(2.1)
36.3%
The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:
Deferred tax liabilities:
Property-related
Pension
Storm reserve deficiency
Nuclear decommissioning trusts
Net unrealized gains on derivatives
Deferred fuel costs
Other
NEE
December 31,
FPL
December 31,
2011
2010
2011
2010
(millions)
$
8,727
$
7,795
$
5,260
$
4,532
394
235
117
209
40
573
485
258
146
226
101
638
420
235
—
—
40
151
6,106
336
118
—
—
788
261
—
1,503
399
258
—
—
101
187
5,477
323
130
—
—
802
309
—
1,564
3,913
Total deferred tax liabilities
10,295
9,649
Deferred tax assets and valuation allowance:
Decommissioning reserves
Postretirement benefits
Net operating loss carryforwards
Tax credit carryforwards
ARO and accrued asset removal costs
Other
Valuation allowance(a)
Net deferred tax assets
406
170
557
2,111
884
830
(228)
4,730
393
175
663
1,819
895
790
(246)
4,489
Net accumulated deferred income taxes
$
5,565
$
5,160
$
4,603
$
__________________________________
(a) Amount relates to deferred state tax credits and state operating loss carryforwards.
Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:
Other current assets
Other assets
Other current liabilities
Accumulated deferred income taxes
Net accumulated deferred income taxes
NEE
December 31,
FPL
December 31,
2011
2010
2011
2010
10
$
153
(47)
(5,681)
(millions)
17
$
106
(174)
(5,109)
$
—
—
(10)
(4,593)
(5,565)
$
(5,160)
$
(4,603)
$
—
—
(78)
(3,835)
(3,913)
$
$
101
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, 2011 are as follows:
Net operating loss carryforwards:
Federal
State
Foreign
Net operating loss carryforwards
Tax credit carryforwards:
Federal
State
Net tax credit carryforwards
Expiration
Dates
2026-2031
2014-2031
2021-2031
Amount
(millions)
433
110
14
557
1,813
2022-2031
298
2012-2035
2,111
$
$
$
$
Unrecognized Tax Benefits - The majority of the liabilities for unrecognized tax benefits represent tax positions for which the ultimate
deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A disallowance of the shorter
deductibility period for these tax positions would not affect the annual effective income tax rate. Amounts included in the liabilities
for unrecognized tax benefits at December 31, 2011, 2010 and 2009 at NEE and FPL that, if disallowed, could impact the annual
effective income tax rate were not significant.
At December 31, 2010 and 2009, NEE's liabilities for unrecognized tax benefits totaled $264 million and $279 million ($215 million
and $247 million for FPL), respectively. During 2011, NEE settled the majority of the uncertainties giving rise to the unrecognized
tax benefits with the Internal Revenue Service (IRS). As part of the settlement, NEE received a cash refund of approximately $278
million, including interest of approximately $131 million, related to the 1988 through 2005 tax years and finalized the examination
of the 2006 through 2008 tax years (collectively, IRS settlement). The IRS settlement primarily related to the timing of certain NEE
and FPL deductions for repairs, casualty losses and indirect service costs. At December 31, 2011, NEE's and FPL's liabilities for
unrecognized tax benefits were not material.
NEE and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states, the most significant of which is
Florida, and certain foreign jurisdictions. With the exception of a few states, NEE and FPL are effectively no longer subject to U.S.
federal, state and foreign examinations by taxing authorities for years before 2009. Income tax returns for 2009 and 2010 are under
examination by the IRS. The amounts of unrecognized tax benefits and related interest accruals may change within the next 12
months; however, NEE and FPL do not expect these changes to have a significant impact on NEE’s or FPL’s financial statements.
102
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Comprehensive Income
The components of NEE's comprehensive income and accumulated other comprehensive income (loss) are as follows:
Accumulated
Other Comprehensive Income (Loss)
Net
Unrealized
Gains
(Losses)
On Cash
Flow Hedges
Net
Income
Other
Total
Comprehensive
Income
(millions)
Balances, December 31, 2008
Net income of NEE
$
5
$
(18)
$
(13)
$
1,615
$
1,615
Net unrealized gains (losses) on cash flow hedges:
Effective portion of net unrealized gains (net of $90 tax expense)
Reclassification from AOCI to net income (net of $50 tax benefit)(a)
Net unrealized gains (losses) on available for sale securities:
Net unrealized gains on securities still held (net of $77 tax expense)
Reclassification from AOCI to net income (net of $17 tax benefit)
Adjustments between AOCI and retained earnings
Defined benefit pension and other benefits plans (net of $14 tax expense)
Net unrealized gains on foreign currency translation (net of $5 tax expense)
Balances, December 31, 2009
Net income of NEE
$
1,957
Net unrealized gains (losses) on cash flow hedges:
Effective portion of net unrealized losses (net of $3 tax benefit)
Reclassification from AOCI to net income (net of $35 tax benefit)
Net unrealized gains (losses) on available for sale securities:
Net unrealized gains on securities still held (net of $41 tax expense)
Reclassification from AOCI to net income (net of $16 tax benefit)
Defined benefit pension and other benefits plans (net of $1 tax expense)
Net unrealized losses on foreign currency translation
Balances, December 31, 2010
Net income of NEE
$
1,923
Net unrealized gains (losses) on cash flow hedges:
Effective portion of net unrealized losses (net of $135 tax benefit)
Reclassification from AOCI to net income (net of $18 tax expense)
Net unrealized gains (losses) on available for sale securities:
Net unrealized gain on securities still held (net of $13 tax expense)
Reclassification from AOCI to net income (net of $34 tax benefit)
Defined benefit pension and other benefits plans (net of $32 tax benefit)
Net unrealized losses on foreign currency translation (net of $3 tax benefit)
Other comprehensive loss related to equity method investee (net of $8 tax
benefit)
Balances, December 31, 2011
__________________________________
137
(75)
—
—
—
—
—
67
(5)
(38)
—
—
—
—
24
(265)
37
—
—
—
—
—
(204) (b)
$
—
—
119
(27)
(5)
22
11
102
—
—
60
(21)
2
(1)
142
—
—
19
(49)
(45)
(5)
(12)
$
$
$
$
137
(75)
119
(27)
(5)
22
11
169
(5)
(38)
60
(21)
2
(1)
166
(265)
37
19
(49)
(45)
(5)
(12)
137
(75)
119
(27)
—
22
11
1,802
1,957
(5)
(38)
60
(21)
2
(1)
1,954
1,923
(265)
37
19
(49)
(45)
(5)
(12)
$
50
$
(154)
$
1,603
(a)
Includes amounts reclassified into earnings due to discontinuance of cash flow hedges of approximately $3 million (net of $2 million tax benefit) for which the
hedged transactions are no longer probable of occurring.
(b) Approximately $13 million of losses, related to derivative instruments, is expected to be reclassified into earnings within the next 12 months as either the principal
and/or interest payments are made or electricity is sold. Such amount assumes no change in power prices, interest rates or scheduled principal payments.
103
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. 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, O&M, depreciation and amortization 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, 2011
Ownership
Interest
Gross
Investment(a)
Accumulated
Depreciation(a)
Construction
Work
in Progress
(millions)
85%
20%
76%
70%
88.23%
84.35%
$
$
$
$
$
$
1,424
389
720
330
884
105
$
$
$
$
$
$
550
157
232
76
145
41
$
$
$
$
$
$
88.23%
$
60
$
12
$
138
6
323
50
75
1
2
FPL:
St. Lucie Unit No. 2
St. Johns River Power Park units and coal terminal
Scherer Unit No. 4
NEER:
Duane Arnold
Seabrook
Wyman Station Unit No. 4
Corporate and Other:
Transmission substation assets located in Seabrook, New
Hampshire
__________________________________
(a) Excludes nuclear fuel.
9. Variable Interest Entities
As of December 31, 2011, NEE has eight VIEs which it consolidates and has interests in certain other VIEs which it does not
consolidate.
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 approximately $200 million 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 $406 million and $444 million at December 31, 2011 and December 31, 2010, 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 $496 million and $542 million at December 31, 2011
and December 31, 2010, 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 identified a potential VIE, which is considered a qualifying facility as defined by the Public Utility Regulatory Policies Act of
1978, as amended (PURPA). PURPA requires utilities, such as FPL, to purchase the electricity output of a qualifying facility. FPL
entered into a PPA effective in 1994 with this 250 mw coal-fired qualifying facility to purchase substantially all of the facility's capacity
and electrical output over a substantial portion of its estimated useful life. 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). After making exhaustive efforts, FPL
104
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
was unable to obtain the information from the facility necessary to determine whether the facility is a VIE or whether FPL is the
primary beneficiary of the facility. The PPA with the facility contains no provision which legally obligates the facility to release this
information to FPL. 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 passed on to FPL's customers through the fuel clause as approved
by the FPSC. Notwithstanding the fact that FPL's energy payments are recovered through the fuel clause, if the facility was
determined to be a VIE, the absorption of some of the facility's fuel price variability might cause FPL to be considered the primary
beneficiary. During the years ended December 31, 2011, 2010 and 2009, FPL purchased 1,188,649 mwh, 1,502,234 mwh and
1,604,735 mwh, respectively, from the facility at a total cost of approximately $189 million, $184 million and $173 million, respectively.
Additionally, FPL entered into a PPA effective in 1995 with a 330 mw coal-fired qualifying facility to purchase substantially all of the
facility's 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 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 passed on to FPL’s customers through the fuel
clause as approved by the FPSC.
NEER - NEE consolidates seven 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, and through its 100% equity ownership has the
obligation to absorb expected losses of these VIEs.
An NEER VIE consolidates two entities which own and operate natural gas/oil electric generating 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 generating
facilities and the other assets of these entities. The debt holders have no recourse to the general credit of NEER. The assets and
liabilities of the VIE were approximately $105 million and $82 million, respectively, at December 31, 2011 and $99 million and $82
million, respectively, at December 31, 2010, and consisted primarily of property, plant and equipment and long-term debt. In
November 2011, NEER sold its ownership interest in certain natural gas-fired generating plants (see Note 4), of which two were
VIEs with the capability of producing a total of 1,175 mw. At December 31, 2010, the assets and liabilities of these two VIEs totaled
approximately $730 million and $373 million, respectively, and consisted primarily of property, plant and equipment and long-term
debt.
The other six NEER VIEs consolidate several entities which own and operate wind electric generating facilities with the capability
of producing a total of 1,916 mw. These VIEs sell their electric output under power sales contracts to third parties with expiration
dates ranging from 2018 through 2037. 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 generating facilities, including certain tax attributes. The debt is secured by liens against the generating
facilities and the other assets of these entities. The debt holders have no recourse to the general credit of NEER. The assets and
liabilities of these VIEs totaled approximately $3.2 billion and $2.6 billion, respectively, at December 31, 2011. Three of the VIEs
were consolidated at December 31, 2010, and the assets and liabilities of those VIEs totaled approximately $1.7 billion and $1.6
billion, respectively, at December 31, 2010. At December 31, 2011 and December 31, 2010, the assets and liabilities of the VIEs
consisted primarily of property, plant and equipment, deferral related to differential membership interests and long-term debt.
Other - As of December 31, 2011 and December 31, 2010, several NEE subsidiaries have investments totaling approximately $668
million ($526 million at FPL) and $646 million ($480 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, 2011,
NEE subsidiaries 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. Prior to December 31, 2011, NEE consolidated one of these entities; however, NEE is no longer
the primary beneficiary of this entity and therefore no longer consolidates this entity. Upon deconsolidation, NEE's investment in
this entity is accounted for under the equity method. NEE did not recognize any gain or loss and there was no significant effect on
NEE's consolidated balance sheets as a result of the deconsolidation.
105
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Investments in Partnerships and Joint Ventures
NEER - NEER has non-controlling non-majority owned interests in various partnerships and joint ventures, essentially all of which
own electric generating facilities. At December 31, 2011 and 2010, NEER's investments in partnerships and joint ventures totaled
approximately $193 million and $217 million, respectively, which is included in other investments on NEE's consolidated balance
sheets. NEER's interest in these partnerships and joint ventures range from approximately 5.5% to 50%. At December 31, 2011,
the principal operating entities included in NEER's investments in partnerships and joint ventures were Northeast Energy, LP, Desert
Sunlight Investment Holdings, LLC, Mojave 3/4/5 LLC, Luz Solar Partners Ltd., III, Luz Solar Partners Ltd., V and in 2010 also
included Luz Solar Partners Ltd., IV.
Summarized combined information for these principal operating entities is as follows:
Net income
Total assets
Total liabilities
Partners'/members' equity
NEER's share of underlying equity in the principal operating entities
Difference between investment carrying amount and underlying equity in net assets(a)
NEER's investment carrying amount for the principal operating entities
__________________________________
2011
2010
(millions)
72
873
508
365
182
$
$
$
$
$
(19)
163
$
81
660
210
450
223
(26)
197
$
$
$
$
$
$
(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.
Certain subsidiaries of NEER provide services to the partnerships and joint ventures, including operations and maintenance and
business management services. NEE's operating revenues for the years ended December 31, 2011, 2010 and 2009 include
approximately $26 million, $25 million and $21 million, respectively, related to such services. The net receivables at December 31,
2011 and 2010, for these services, as well as for affiliate energy commodity transactions, payroll and other payments made on
behalf of these investees, were approximately $19 million and $36 million, respectively, and are included in other receivables on
NEE's consolidated balance sheets.
NEE - 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 and Preferred Stock
Earnings Per Share - The reconciliation of NEE's basic and diluted earnings per share of common stock is as follows:
Numerator - net income
Denominator:
Years Ended December 31,
2011
2010
2009
(millions, except per share amounts)
$
1,923
$
1,957
$
1,615
Weighted-average number of common shares outstanding - basic
Performance share awards, options, restricted stock, equity units and warrants(a)
Weighted-average number of common shares outstanding - assuming dilution
416.6
2.4
419.0
410.3
2.7
413.0
Earnings per share of common stock:
Basic
Assuming dilution
__________________________________
$
$
4.62
4.59
$
$
4.77
4.74
$
$
404.4
2.8
407.2
3.99
3.97
(a) 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. Options, performance share awards, restricted stock, equity units and warrants are included in diluted
weighted-average number of common shares outstanding by applying the treasury stock method.
Common shares issuable pursuant to equity units and stock options, restricted stock and performance share awards which were
not included in the denominator above due to their antidilutive effect were approximately 14.6 million, 9.1 million and 0.8 million for
the years ended December 31, 2011, 2010 and 2009, respectively.
106
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 $42 million, $37 million and $42 million in 2011, 2010 and 2009,
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, 2011 was approximately $53 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, 2011 was approximately $224 million.
Stock-Based Compensation - Net income for the years ended December 31, 2011, 2010 and 2009 includes approximately $49
million, $57 million and $51 million, respectively, of compensation costs and $19 million, $22 million and $20 million, respectively,
of income tax benefits related to stock-based compensation arrangements. Compensation cost capitalized for the years ended
December 31, 2011, 2010 and 2009 was not material. As of December 31, 2011, there were approximately $58 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, 2011, approximately 23 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) 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 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.
The activity in restricted stock and performance share awards for the year ended December 31, 2011 was as follows:
Restricted Stock:
Nonvested balance, January 1, 2011
Granted
Vested
Forfeited
Nonvested balance, December 31, 2011
Performance Share Awards:
Nonvested balance, January 1, 2011
Granted
Vested
Forfeited
Nonvested balance, December 31, 2011
107
Weighted-
Average
Grant Date
Fair Value
Per Share
50.40
54.77
53.22
51.34
50.84
45.96
50.13
58.42
43.34
43.72
Shares
1,154,590
452,488
(521,882)
(52,908)
1,032,288
1,318,398
566,386
(448,416)
(85,294)
1,351,074
$
$
$
$
$
$
$
$
$
$
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The weighted-average grant date fair value per share of restricted stock granted for the years ended December 31, 2010 and 2009
was $46.72 and $51.50 respectively. The weighted-average grant date fair value per share of performance share awards granted
for the years ended December 31, 2010 and 2009 was $42.95 and $42.66, respectively.
The total fair value of restricted stock and performance share awards vested was $53 million, $47 million and $46 million for the
years ended December 31, 2011, 2010 and 2009, 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:
Expected volatility(a)
Expected dividends
Expected term (years)(b)
Risk-free rate
__________________________________
2011
21.54%
4.03%
6
2.80%
2010
2009
20.74 - 21.64%
19.02 - 20.23%
3.61 - 4.39%
3.35 - 3.71%
6
6
1.65 - 2.91%
2.68 - 2.97%
(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, 2011 was as follows:
Balance, January 1, 2011
Granted
Exercised
Forfeited
Expired
Balance, December 31, 2011
Exercisable, December 31, 2011
Weighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
(millions)
38.69
54.59
29.14
50.49
47.42
42.64
40.15
4.7
3.6
$
$
81
71
Shares
Underlying
Options
5,036,652
536,302
(1,065,939)
(102,451)
(18,699)
4,385,865
3,348,329
$
$
$
$
$
$
$
The weighted-average grant date fair value of options granted was $7.78, $6.22 and $6.79 per share for the years ended
December 31, 2011, 2010 and 2009, respectively. The total intrinsic value of stock options exercised was approximately $29 million,
$32 million and $9 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Cash received from option exercises was approximately $31 million, $41 million and $10 million for the years ended December 31,
2011, 2010 and 2009, respectively. The tax benefits realized from options exercised were approximately $11 million, $12 million
and $3 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Accelerated Share Repurchase (ASR) of NEE Common Stock - In December 2011, NEE purchased approximately 6.7 million shares
of its common stock at a price of $55.76 per share for an aggregate price of $375 million pursuant to an ASR agreement. The
approximately 6.7 million shares repurchased were retired, which resulted in a decrease in common stock and additional paid-in
capital on NEE's consolidated balance sheet. On February 24, 2012, NEE elected to settle the ASR agreement in cash, which
settlement is expected to be complete within three business days of such date; the settlement amount is not expected to be material.
Continuous Offering of NEE Common Stock - In December 2010, NEE completed the program it commenced in January 2009
under which it offered and sold, from time to time, NEE common stock having a gross sales price of up to $400 million. During
2010 and 2009, NEE received gross proceeds through the sale and issuance of common stock under this program of approximately
$240 million and $160 million, 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.
108
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Debt
Long-term debt consists of the following:
FPL:
First mortgage bonds - maturing 2013 through 2042 - 4.125% to 6.20%
Storm-recovery bonds - maturing 2013 through 2021 - 5.0440% to 5.2555%(a)
Pollution control, solid waste disposal and industrial development revenue bonds - maturing 2020
through 2029 - variable, 0.1% and 0.3% weighted-average interest rates, respectively(b)
Other long-term debt - maturing 2012 through 2040 - 4.000% to 5.250%
Unamortized discount
Total long-term debt of FPL
Less current maturities of long-term debt
Long-term debt of FPL, excluding current maturities
NEECH:
Debentures - maturing 2013 through 2021 - 2.55% to 7 7/8%(c)
Debentures - maturing 2012 - variable, 0.77% and 1.0% weighted-average interest rate, respectively(d)
Debentures, related to NEE's equity units - maturing 2014 and 2015 - 3.60% and 1.90%
Junior Subordinated Debentures - maturing 2044 through 2069 - 5 7/8% to 8.75%
Senior secured bonds - maturing 2030 - 7.500%(e)
Japanese yen denominated senior notes - maturing 2030 - 5.1325%(c)
Japanese yen denominated term loans - maturing 2014 and 2011 - variable, 1.9% and 2.2% weighted-
average interest rate, respectively(c)(d)
Term loans - maturing 2012 through 2016 - primarily variable, 1.39% and 1.2% weighted-average
interest rate, respectively(d)
Fair value swap
Unamortized discount
Total long-term debt of NEECH
Less current maturities of long-term debt
Long-term debt of NEECH, excluding current maturities
NEER:
Senior secured limited-recourse bonds and notes - maturing 2013 through 2038 - 4.125% to 7.59%
Other long-term debt - maturing 2012 through 2030 - primarily limited-recourse and variable, 2.6%
weighted-average interest rate(c)(d)
Canadian revolving credit facility - maturing 2013 - variable, 1.3% weighted-average interest rate(d)
Total long-term debt of NEER
Less current maturities of long-term debt
Long-term debt of NEER, excluding current maturities
Total long-term debt
__________________________________
December 31,
2011
2010
(millions)
$
6,390
$
487
633
57
(34)
7,533
50
7,483
2,300
200
753
2,353
500
130
442
1,533
32
(6)
8,237
350
7,887
3,147
2,529
172
5,848
408
5,440
5,540
531
633
57
(34)
6,727
45
6,682
2,500
450
753
2,353
500
123
327
950
3
(8)
7,951
1,485
6,466
2,652
2,521
82
5,255
390
4,865
$
20,810
$
18,013
(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 began being paid semiannually and sequentially on February 1, 2008, when the first semiannual interest payment became due.
(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, 2011, all tax exempt bonds tendered for purchase have been successfully remarketed. FPL's bank
revolving lines of credit are available to support the purchase of tax exempt bonds.
Interest rate swap agreements have been entered into for the majority of these debt issuances.
(c)
(d) Variable rate is based on an underlying index plus a margin.
(e)
Issued by a wholly-owned subsidiary of NEECH and collateralized by a third-party note receivable held by that subsidiary. See Note 5.
Minimum annual maturities of long-term debt for NEE are approximately $808 million, $2,435 million, $1,974 million, $1,837 million
and $695 million for 2012, 2013, 2014, 2015 and 2016, respectively. The respective amounts for FPL are approximately $50 million,
$453 million, $56 million, $60 million and $64 million.
At December 31, 2011 and 2010, commercial paper borrowings had a weighted-average interest rate of 0.48% (0.26% for FPL)
and 0.39% (0.26% for FPL), respectively. Available lines of credit aggregated approximately $7.4 billion ($4.4 billion for NEECH
and $3.0 billion for FPL) at December 31, 2011 and were available to support NEECH's and FPL's commercial paper
programs. These facilities provide for the issuance of letters of credit of up to approximately $6.4 billion. The issuance of letters
of credit is subject to the aggregate commitment under the applicable facility. While no direct borrowings were outstanding at
109
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2011, letters of credit totaling $1,238 million and $34 million were outstanding under the NEECH and FPL credit
facilities, respectively. On February 9, 2012, NEECH and FPL refinanced a portion of their credit facilities and reduced the amount
of letters of credit that could be issued under the facilities from 100% to 50% of the facility amount.
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 guarantees. NEECH has guaranteed certain debt and other
obligations of NEER and its subsidiaries.
In 2008, FPL entered into a reclaimed water agreement with Palm Beach County, Florida (PBC) to provide FPL's WCEC with
reclaimed water for cooling purposes beginning in January 2011. Under the reclaimed water agreement, FPL constructed a
reclaimed water system, including modifications to an existing treatment plant and a water pipeline, that PBC legally owns and
operates. The reclaimed water agreement also required PBC to issue bonds for the purpose of paying the costs associated with
the construction of the reclaimed water system. In 2009, PBC issued approximately $68 million principal amount of Palm Beach
County, Florida Water and Sewer Revenue Bonds. Under the reclaimed water agreement, FPL will pay PBC an operating fee for
the reclaimed water delivered which will be used by PBC to, among other things, service the principal of, and interest on, the
bonds. The portion of the operating fee related to PBC's servicing principal of, and interest on, the bonds will be paid by FPL,
beginning October 2011, until final maturity of the bonds. FPL does not have a direct obligation to the bondholders; however, if
FPL or PBC were to terminate the reclaimed water agreement, FPL would be obligated to continue to pay the portion of the operating
fee intended to reimburse PBC for costs related to issuance of the bonds, including amounts to be used by PBC to service the
principal of, and interest on, the bonds. In the event of a default by PBC under the reclaimed water agreement, FPL would have
certain rights, including, among other things, the right to appoint a third-party contractor to repair, and restore operations of, the
reclaimed water treatment plant, and, in the event of a termination of the reclaimed water agreement by FPL relating to a PBC
default, the right to assume ownership of the reclaimed water pipeline from PBC. For financial reporting purposes, FPL is considered
the owner of the reclaimed water system and FPL and NEE have recorded electric utility plant in service and other property and
long-term debt (see FPL's other long-term debt in the table above) as costs were reimbursed by PBC to FPL.
In 2009, NEE sold $350 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 1/20, or 5%, undivided beneficial
ownership interest in a Series C Debenture due June 1, 2014 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 June 1, 2012 (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 $55.67 to $66.80. If purchased on the final settlement date, as of December 31, 2011, the number of shares issued would
(subject to antidilution adjustments) range from 0.9051 shares if the applicable market value of a share of common stock is less
than or equal to $55.67, to 0.7544 shares if the applicable market value of a share is equal to or greater than $66.80, with applicable
market value to be determined using the average closing prices of NEE common stock over a 20-day trading period ending May 29,
2012. Total annual distributions on the equity units will be at the rate of 8.375%, consisting of interest on the debentures (3.60%
per year) and payments under the stock purchase contracts (4.775% per year). The interest rate on the debentures is expected
to be reset no later than May 2012. The holder of an 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,
NEE would exercise its rights as a secured party in the debentures 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 2010, NEE sold $402.5 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 1/20, or 5%, undivided
beneficial ownership interest in a Series D Debenture due September 1, 2015 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, 2013 (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 $55.02 to $68.78. If purchased on the final settlement date, as of December 31, 2011, the number
of shares issued would (subject to antidilution adjustments) range from 0.9121 shares if the applicable market value of a share of
common stock is less than or equal to $55.02, to 0.7296 shares if the applicable market value of a share is equal to or greater than
$68.78, with applicable market value to be determined using the average closing prices of NEE common stock over a 20-day trading
period ending August 28, 2013. Total annual distributions on the equity units will be at the rate of 7.00%, consisting of interest on
the debentures (1.90% per year) and payments under the stock purchase contracts (5.10% per year). The interest rate on the
debentures is expected to be reset on or after March 1, 2013. The holder of an 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, NEE would exercise its rights as a secured party in the debentures to satisfy in full the holders’ obligations to purchase
110
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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:
Balances, December 31, 2009
$
1,833
$
585
$
2,418
FPL
NEER
(millions)
NEE
Liabilities incurred
Accretion expense
Liabilities settled
Revision in estimated cash flows - net
Balances, December 31, 2010
Liabilities incurred
Accretion expense
Revision in estimated cash flows - net
Balances, December 31, 2011
__________________________________
—
101
—
(a)
(851)
1,083
3
58
—
$
1,144
$
(b)
3
36
(1)
(67)
556
3
31
(c)
(123)
467
$
3
137
(1)
(918)
1,639
6
89
(123)
1,611
(a) Primarily reflects the effect of a decrease in the escalation rates used to determine the ultimate projected costs of decommissioning FPL's nuclear units and lower
costs due to the expected future reimbursement by the DOE of certain spent fuel storage costs as stipulated by a spent fuel settlement agreement.
(b) Primarily reflects the effect of revised probability assessments regarding when assets will be retired and ultimately decommissioned and lower costs due to the
expected future reimbursement by the DOE of certain spent fuel storage costs as stipulated by a spent fuel settlement agreement.
(c) Primarily reflects the effect of revised cost estimates and probability assessments regarding when assets will be decommissioned.
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 5):
Balances, December 31, 2011
Balances, December 31, 2010
FPL
NEER
(millions)
NEE
$
$
2,612
2,512
$
$
1,130
1,105
$
$
3,742
3,617
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. In addition, NEE has identified but
not recognized ARO liabilities related to the majority of NEER's hydro facilities. These easements are generally perpetual and,
along with the hydro facilities, 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 and hydro facilities as NEE and FPL intend to use these
properties and facilities indefinitely. In the event NEE and FPL decide to abandon or cease the use of a particular easement and/
or hydro facility, an ARO liability would be recorded at that time.
111
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 of wind and solar projects and the procurement of nuclear fuel. Capital expenditures for Corporate and Other
primarily include the cost for construction of a transmission line and other associated facilities by Lone Star Transmission, LLC
(Lone Star), a rate-regulated transmission service provider in Texas, and the cost to meet customer-specific requirements and
maintain the fiber-optic network for the fiber-optic telecommunications business (FPL FiberNet).
At December 31, 2011, estimated planned capital expenditures for 2012 through 2016 were as follows:
FPL:
Generation:(a)
New(b)(c)
Existing
Transmission and distribution
Nuclear fuel
General and other
Total
NEER:
Wind(d)
Solar(e)
Nuclear(f)
Other(g)
Total
Corporate and Other(h)
__________________________________
2012
2013
2014
2015
2016
Total
(millions)
$
1,780
$
730
830
205
130
625
660
705
125
190
$
85
$
—
$
—
$
660
690
205
120
525
660
250
80
430
705
250
85
2,490
3,005
3,590
1,035
605
$
$
$
$
3,675
$
2,305
$
1,760
$
1,515
$
1,470
$
10,725
1,490
$
30
$
20
$
5
$
1,435
310
175
715
255
80
3,410
530
$
$
1,080
85
$
$
145
265
95
525
85
$
$
45
280
100
430
75
$
$
5
—
275
65
345
75
$
$
$
1,550
2,340
1,385
515
5,790
850
Includes AFUDC of approximately $70 million, $87 million and $33 million in 2012 to 2014, respectively.
Includes land, generating structures, transmission interconnection and integration and licensing.
(a)
(b)
(c) Consists of projects that have received FPSC approval. Includes pre-construction costs and carrying charges (equal to a pretax AFUDC rate) on construction
costs recoverable through the capacity clause of approximately $109 million, $40 million and $2 million in 2012 to 2014, respectively. Excludes capital expenditures
for the construction costs for the two additional nuclear units at FPL's Turkey Point site beyond what is required to receive an NRC license for each unit. Excludes
capital expenditures for the modernization of the Port Everglades facility, which if the project proceeds and the required regulatory approvals are obtained is
expected to cost approximately $1.2 billion and be placed in-service in 2016.
(d) Consists of capital expenditures for planned new wind projects that have received applicable internal approvals and related transmission. NEER plans to add new
wind generation of approximately 1,150 mw to 1,500 mw in 2012, at a total cost of approximately $2 billion to $3 billion.
(e) Consists of capital expenditures for planned new solar projects totaling 665 mw that have received applicable internal approvals and related transmission, including
equity contributions associated with an equity method investment in a 550 mw solar project. Excludes solar projects requiring internal approvals with generation
totaling 270 mw with an estimated cost of approximately $1 billion.
Includes nuclear fuel.
(f)
(g) Consists of capital expenditures that have received applicable internal approvals. NEER plans to add natural gas infrastructure projects at a total cost of
approximately $400 million to $600 million in 2010 through 2014.
(h) Consists of capital expenditures that have received applicable internal approvals and includes AFUDC related to Lone Star of approximately $41 million and $14
million in 2012 and 2013, respectively.
These estimates are subject to continuing review and adjustment and actual capital expenditures may vary significantly from these
estimates.
At December 31, 2011, subsidiaries of NEE, other than FPL, in the normal course of business, have guaranteed certain debt service
and fuel payments of non-consolidated entities. The terms of the guarantees relating to the non-consolidated entities are equal to
the terms of the related agreements, with remaining terms ranging from less than one year to six years. The maximum potential
amount of future payments that could be required under these guarantees at December 31, 2011 was approximately $50 million. At
December 31, 2011, NEE did not have any liabilities recorded for these guarantees. In certain instances, NEE can seek recourse
from third parties for amounts paid under the guarantees. At December 31, 2011, the fair value of the guarantees was not material. In
addition to the guarantees relating to non-consolidated entities, NEE has guaranteed certain payment obligations of NEECH,
including most payment obligations under NEECH's debt and guarantees.
112
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contracts - In addition to the estimated planned capital expenditures included in the table in Commitments above, FPL has
commitments under long-term purchased power and fuel contracts. FPL is obligated under take-or-pay purchased power contracts
with JEA and with subsidiaries of The Southern Company (Southern subsidiaries) to pay for approximately 1,330 mw annually
through 2015 and 375 mw annually thereafter through 2021. FPL also has various firm pay-for-performance contracts to purchase
approximately 705 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging
from 2024 through 2034. The purchased power contracts provide for capacity and energy payments. Energy payments are based
on the actual power taken under these contracts. Capacity payments for the pay-for-performance contracts are subject to the
qualifying facilities meeting certain contract conditions. FPL has one agreement with an electricity supplier to purchase
approximately 155 mw of power with an expiration date of May 2012. In general, the agreement requires FPL to make a capacity
payment and supply the fuel consumed by the plant under the contract. FPL has contracts with expiration dates through 2036 for
the purchase and transportation of natural gas and coal, and storage of natural gas.
NEER has entered into contracts primarily for the purchase of wind turbines and towers, solar reflectors, steam turbine generators
and heat collection elements and related construction and development activities, as well as for the supply of uranium, conversion,
enrichment and fabrication of nuclear fuel, with expiration dates ranging from March 2012 through 2031, approximately $2.6 billion
of which is included in the estimated planned capital expenditures table in Commitments above. In addition, NEER has contracts
primarily for the purchase, transportation and storage of natural gas and firm transmission service with expiration dates ranging
from March 2012 through 2033.
The transmission business included in Corporate and Other has entered into contracts primarily for development and construction
activities relating to Lone Star's transmission line and other associated facilities, all of which is included in the estimated planned
capital expenditures table in Commitments above.
The required capacity and/or minimum payments under the contracts discussed above as of December 31, 2011 were estimated
as follows:
2012
2013
2014
2015
2016
Thereafter
FPL:
Capacity charges:(a)
Qualifying facilities
JEA and Southern subsidiaries
Other electricity suppliers
Minimum charges, at projected prices:
Natural gas, including transportation
and storage(b)
Coal(b)
NEER(c)
Corporate and Other
$
$
$
$
$
$
$
295
225
5
1,705
80
1,970
250
$
$
$
$
$
$
$
270
225
—
925
85
475
15
$
$
$
$
$
$
$
(millions)
275
205
—
575
30
140
—
$
$
$
$
$
$
$
280
180
—
565
5
110
—
$
$
$
$
$
$
$
240
55
—
525
5
100
—
$
$
$
$
$
$
$
2,395
145
—
6,925
5
590
—
____________________________
(a) Capacity charges under these contracts, substantially all of which are recoverable through the capacity clause, totaled approximately $511 million, $537 million
and $603 million for the years ended December 31, 2011, 2010 and 2009, respectively. Energy charges under these contracts, which are recoverable through
the fuel clause, totaled approximately $403 million, $434 million and $439 million for the years ended December 31, 2011, 2010 and 2009, respectively.
(b) Recoverable through the fuel clause.
(c)
Includes termination payments associated with wind turbine contracts for projects that have not yet received applicable internal approvals.
Insurance - Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear
reactor owners to the amount of insurance available from both private sources and an industry retrospective payment plan. In
accordance with this Act, NEE maintains $375 million of private liability insurance per site, which is the maximum obtainable, and
participates in a secondary financial protection system, which provides up to $12.2 billion of liability insurance coverage per incident
at any nuclear reactor in the United States. Under the secondary financial protection system, NEE is subject to retrospective
assessments of up to $940 million ($470 million for FPL), plus any applicable taxes, per incident at any nuclear reactor in the United
States, payable at a rate not to exceed $140 million ($70 million for FPL) per incident per year. NEE and FPL are contractually
entitled to recover a proportionate share of such assessments from the owners of minority interests in Seabrook, Duane Arnold
and St. Lucie Unit No. 2, which approximates $14 million, $35 million and $18 million, plus any applicable taxes, per incident,
respectively.
NEE participates in a nuclear insurance mutual company that provides $2.75 billion of limited insurance coverage per occurrence
per site for property damage, decontamination and premature decommissioning risks at its nuclear plants. The proceeds from such
insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair. NEE
113
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
also participates in an insurance program that provides limited coverage for replacement power costs if a nuclear plant is out of
service for an extended period of time because of an accident. In the event of an accident at one of NEE's or another participating
insured's nuclear plants, NEE could be assessed up to $165 million ($93 million for FPL), plus any applicable taxes, in retrospective
premiums in a policy year. NEE and FPL are contractually entitled to recover a proportionate share of such assessments from the
owners of minority interests in Seabrook, Duane Arnold and St. Lucie Unit No. 2, which approximates $2 million, $4 million and $3
million, plus any applicable taxes, respectively.
Due to the high cost and limited coverage available from third-party insurers, NEE does not have insurance coverage for a substantial
portion of its transmission and distribution property and has no insurance coverage for FPL FiberNet's fiber-optic cable. Should
FPL's future storm restoration costs exceed the reserve amount established through the issuance of storm-recovery bonds by a
VIE in 2007, FPL may recover storm restoration costs, subject to prudence review by the FPSC, either through surcharges approved
by the FPSC or through securitization provisions pursuant to Florida law.
In the event of a loss, the amount of insurance available might not be adequate to cover property damage and other expenses
incurred. Uninsured losses and other expenses, to the extent not recovered from customers in the case of FPL, would be borne
by NEE and FPL and could have a material adverse effect on NEE's and FPL's financial condition, results of operations and liquidity.
Legal Proceedings - In November 1999, the Attorney General of the United States, on behalf of the U.S. Environmental Protection
Agency (EPA), brought an action in the U.S. District Court for the Northern District of Georgia against Georgia Power Company
and other subsidiaries of The Southern Company for certain alleged violations of the Prevention of Significant Deterioration (PSD)
provisions and the New Source Performance Standards (NSPS) of the Clean Air Act. In May 2001, the EPA amended its complaint
to allege, among other things, that Georgia Power Company constructed and is continuing to operate Scherer Unit No. 4, in which
FPL owns a 76% interest, without obtaining a PSD permit, without complying with NSPS requirements, and without applying best
available control technology for nitrogen oxides, sulfur dioxides and particulate matter as required by the Clean Air Act. It also
alleges that unspecified major modifications have been made at Scherer Unit No. 4 that require its compliance with the
aforementioned Clean Air Act provisions. The EPA seeks injunctive relief requiring the installation of best available control technology
and civil penalties. Under the EPA's civil penalty rules, the EPA could assess up to $25,000 per day for each violation from an
unspecified date after June 1, 1975 through January 30, 1997, up to $27,500 per day for each violation from January 31, 1997
through March 15, 2004, up to $32,500 per day for each violation from March 16, 2004 through January 12, 2009 and up to $37,500
per day for each violation thereafter. Georgia Power Company has answered the amended complaint, asserting that it has complied
with all requirements of the Clean Air Act, denying the plaintiff's allegations of liability, denying that the plaintiff is entitled to any of
the relief that it seeks and raising various other defenses. In June 2001, a federal district court stayed discovery and administratively
closed the case and the EPA has not yet moved to reopen the case. In April 2007, the U.S. Supreme Court in a separate unrelated
case rejected an argument that a "major modification" occurs at a plant only when there is a resulting increase in the hourly rate
of air emissions. Georgia Power Company has made a similar argument in defense of its case, but has other factual and legal
defenses that are unaffected by the U.S. Supreme Court's decision.
In 1995 and 1996, NEE, through an indirect subsidiary, purchased from Adelphia Communications Corporation (Adelphia) 1,091,524
shares of Adelphia common stock and 20,000 shares of Adelphia preferred stock (convertible into 2,358,490 shares of Adelphia
common stock) for an aggregate price of approximately $35,900,000. On January 29, 1999, Adelphia repurchased all of these
shares for $149,213,130 in cash. In June 2004, Adelphia, Adelphia Cablevision, L.L.C. and the Official Committee of Unsecured
Creditors of Adelphia filed a complaint against NEE and its indirect subsidiary in the U.S. Bankruptcy Court, Southern District of
New York. The complaint alleges that the repurchase of these shares by Adelphia was a fraudulent transfer, in that at the time of
the transaction Adelphia (i) was insolvent or was rendered insolvent, (ii) did not receive reasonably equivalent value in exchange
for the cash it paid, and (iii) was engaged or about to engage in a business or transaction for which any property remaining with
Adelphia had unreasonably small capital. The complaint seeks the recovery for the benefit of Adelphia's bankruptcy estate of the
cash paid for the repurchased shares, plus interest from January 29, 1999. NEE has filed an answer to the complaint. NEE believes
that the complaint is without merit because, among other reasons, Adelphia will be unable to demonstrate that (i) Adelphia's
repurchase of shares from NEE, which repurchase was at the market value for those shares, was not for reasonably equivalent
value, (ii) Adelphia was insolvent at the time of the repurchase, or (iii) the repurchase left Adelphia with unreasonably small
capital. The case has been scheduled for trial in April 2012.
In October 2004, TXU Portfolio Management Company (TXU) served FPL Energy Pecos Wind I, LP, FPL Energy Pecos Wind I GP,
LLC, FPL Energy Pecos Wind II, LP, FPL Energy Pecos Wind II GP, LLC and Indian Mesa Wind Farm, LP (NEER Affiliates) as
defendants in a civil action filed in the District Court in Dallas County, Texas. FPL Energy, LLC, now known as NextEra Energy
Resources, LLC, was added as a defendant in 2005. The petition alleged that the NEER Affiliates had contractual obligations to
produce and sell to TXU a minimum quantity of energy and renewable energy credits each year during the period from 2002 through
2005 and that the NEER Affiliates failed to meet this obligation. The plaintiff asserted claims for breach of contract and declaratory
judgment and sought damages of approximately $34 million. Following a jury trial in 2007, among other findings, both TXU and
the NEER Affiliates were found to have breached the contracts. In August 2008, the trial court issued a final judgment holding that
the contracts were not terminated and neither party was entitled to recover any damages. In November 2008, TXU appealed the
final judgment to the Fifth District Court of Appeals in Dallas, Texas. In an opinion issued in July 2010, the appellate court reversed
portions of the trial court's judgment, ruling that the contracts' liquidated damage provision is an enforceable liquidated damage
114
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
clause. The appellate court ordered that the case be remanded back to the trial court for further proceedings to determine the
amount of damages payable by the NEER Affiliates. The NEER Affiliates filed a motion for rehearing of the appellate court’s decision,
which motion was denied, and in April 2011 filed a petition for review of the appellate court decision with the Texas Supreme Court.
In February 2012, the Texas Supreme Court granted the petition for review and will be scheduling the case for oral argument.
NEE and FPL are vigorously defending, and believe that they or their affiliates have meritorious defenses to, the lawsuits described
above. In addition to the legal proceedings discussed above, NEE and its subsidiaries, including FPL, are involved in other legal
and regulatory proceedings, actions and claims in the ordinary course of their businesses. Generating plants in which NEE or FPL
has an ownership interest are also involved in legal and regulatory proceedings, actions and claims, the liabilities from which, if
any, would be shared by NEE or FPL. In the event that NEE and FPL, or their affiliates, do not prevail in the lawsuits described
above or these other legal and regulatory proceedings, actions and claims, there may be a material adverse effect on their financial
statements. While management is unable to predict with certainty the outcome of the lawsuits described above or these other legal
and regulatory proceedings, actions and claims, based on current knowledge it is not expected that their ultimate resolution,
individually or collectively, will have a material adverse effect on the financial statements of NEE or FPL.
15. Segment Information
NEE's reportable segments are FPL, a rate-regulated electric utility, and NEER, a competitive energy business. NEER's segment
information includes an allocation of interest expense from NEECH based on a deemed capital structure of 70% debt and allocated
shared service costs. Corporate and Other represents other business activities, other segments that are not separately reportable
and eliminating entries. NEE's operating revenues derived from the sale of electricity represented approximately 95%, 95% and
98% of NEE's operating revenues for the years ended December 31, 2011, 2010 and 2009. Less than 1% of operating revenues
were from foreign sources for each of the three years ended December 31, 2011, 2010 and 2009. At December 31, 2011 and 2010,
approximately 2% and 1%, respectively, of long-lived assets were located in foreign countries.
NEE's segment information is as follows:
2011
2010
2009
FPL
NEER(a)
Corp.
and
Other
Total
FPL
NEER(a)
Corp.
and
Other
Total
FPL
NEER(a)
Corp.
and
Other
Total
$10,613
$ 8,537
387
$
3
$
$
798
$
$
—
654
$ 1,068
$
$
$
$
$
$
$
$
4,502
3,233
530
23
736
$
$
$
$
$
226
193
118
53
$15,341
$11,963
$ 1,035
79
$
$10,485
$ 8,636
361
$
—
$
33
$ 1,567
$ 1,008
55
$ —
$
55
(24)
$ (101)
$
529
774
$
81
$ 1,923
$
$
$
—
580
945
(millions)
4,636
3,286
515
21
$ 196
$ 152
$ 103
70
$
$15,317
$12,074
979
$
91
$
$11,491
$ 9,910
318
$
1
$
759
$
21
$ 1,788
$ 1,097
58
$ —
$
58
(11)
980
$
$
(37)
$
532
32
$ 1,957
$
$
$
—
473
831
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,997
3,024
460
23
651
$
$
$
$
$
155
115
71
54
$15,643
$13,049
849
$
78
$
17
$ 1,765
52
$ —
(158)
759
$
$
12
25
$
$
52
327
$ 1,615
$ 3,502
$
2,774
$35,170
$ 21,482
$
$
352
$ 6,628
$ 2,706
$
3,072
$
68
$ 5,846
$ 2,717
$
3,235
900
$57,552
$32,423
$ 21,304
$ 494
$54,221
$30,982
$ 18,844
$
$
54
$ 6,006
343
$50,169
$10,916
$
3,914
$
232
$15,062
$10,871
$
4,073
$ 202
$15,146
$10,578
$
3,341
$
172
$14,091
$31,816
$ 23,459
$ 1,913
$57,188
$28,698
$ 22,389
$ 1,907
$52,994
$26,812
$ 20,136
$ 1,510
$48,458
$
—
$
193
$
9
$
202
$
—
$
217
$
10
$
227
$
—
$
173
$
10
$
183
Operating revenues
Operating expenses(b)
Interest expense
Interest income
Depreciation and
amortization
Equity in earnings of
equity method
investees
Income tax expense
(benefit)(c)(d)
Net income (loss)(b)(e)
Capital expenditures,
independent power
and other investments
and nuclear fuel
purchases
Property, plant and
equipment
Accumulated
depreciation and
amortization
Total assets
Investment in equity
method investees
__________________________
(a)
Interest expense allocated from NEECH to NEER is based on a deemed capital structure of 70% debt. For this purpose, the deferred credit associated with
differential membership interests sold by NEER subsidiaries is included with debt. Residual non-utility interest expense is included in Corporate and Other.
In 2011, NEER includes impairment charges of approximately $51 million ($31 million after-tax). See Note 4 - Nonrecurring Fair Value Measurements.
(b)
(c) NEER includes PTCs that were recognized based on its tax sharing agreement with NEE. See Note 1 - Income Taxes.
(d)
In 2011, Corporate and Other includes state deferred income tax benefits of approximately $64 million, net of federal income taxes, related to state tax law changes
and an income tax benefit of $41 million related to the dissolution of a subsidiary.
In 2011, NEER and Corporate and Other include an after-tax loss on sale of natural gas-fired generating assets of $92 million and $6 million, respectively. See
Note 4 - Nonrecurring Fair Value Measurements.
(e)
115
Operating expenses
Interest expense
Equity in earnings of
subsidiaries
Other income
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Summarized Financial Information of NEECH
NEECH, a 100% owned subsidiary of NEE, provides funding for, and holds ownership interests in, NEE's operating subsidiaries
other than FPL. Most of NEECH's debt, including its debentures, and payment guarantees are fully and unconditionally guaranteed
by NEE. Condensed consolidating financial information is as follows:
Condensed Consolidating Statements of Income
Year Ended
December 31, 2011
NEE
(Guaran-
tor)
NEECH
Other(a)
NEE
Consoli-
dated
NEE
(Guaran-
tor)
Year Ended
December 31, 2010
NEECH
Other(a)
(millions)
Year Ended
December 31, 2009
NEE
Consoli-
dated
NEE
(Guaran-
tor)
NEECH
Other(a)
NEE
Consoli-
dated
Operating revenues
$
—
$ 4,740
$10,601
$ 15,341
$
—
$ 4,843
$10,474
$ 15,317
$
(15)
(14)
(3,423)
(8,525)
(11,963)
(645)
(376)
(1,035)
(4)
(15)
(3,446)
(8,624)
(12,074)
(618)
(346)
(979)
(17)
(531)
(301)
(849)
—
—
$ 4,164
$11,479
$ 15,643
(3,151)
(9,898)
(13,049)
1,878
—
(1,878)
—
1,931
—
(1,931)
—
1,618
—
(1,618)
—
(deductions) - net
1
85
23
109
16
188
21
225
14
160
23
197
Income (loss) before
income taxes
Income tax expense
(benefit)
1,850
757
(155)
2,452
1,928
967
(406)
2,489
1,615
642
(315)
1,942
(73)
(53)
655
529
(29)
(19)
580
532
—
(145)
472
327
Net income (loss)
$
1,923
$
810
$ (810)
$ 1,923
$
1,957
$
986
$ (986)
$ 1,957
$
1,615
$
787
$ (787)
$ 1,615
__________________________________
(a) Represents FPL and consolidating adjustments.
116
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheets
December 31, 2011
December 31, 2010
NEE
(Guaran-
tor)
NEECH
Other(a)
NEE
Consoli-
dated
NEE
(Guaran-
tor)
(millions)
NEECH
Other(a)
NEE
Consoli-
dated
PROPERTY, PLANT AND EQUIPMENT
Electric utility plant in service and other property
$
31
$ 22,351
$ 35,170
$
57,552
$
Less accumulated depreciation and amortization
Total property, plant and equipment - net
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other
Total current assets
OTHER ASSETS
Investment in subsidiaries
Other
Total other assets
TOTAL ASSETS
CAPITALIZATION
(3)
28
1
84
5
90
(4,143)
(10,916)
(15,062)
18,208
24,254
42,490
339
1,026
1,075
2,440
37
692
1,613
2,342
377
1,802
2,693
4,872
19
—
19
—
654
9
663
$ 21,779
$ 32,423
$
54,221
(4,275)
(10,871)
(15,146)
17,504
21,552
39,075
282
1,380
1,024
2,686
20
548
1,341
1,909
14,879
513
15,392
—
(14,879)
—
14,150
—
(14,150)
4,849
4,849
4,464
(10,415)
9,826
9,826
365
14,515
3,845
3,845
4,451
(9,699)
$
15,510
$ 25,497
$ 16,181
$
57,188
$
15,197
$ 24,035
$ 13,762
$
52,994
302
2,582
2,374
5,258
—
8,661
8,661
Common shareholders' equity
$
14,943
$
4,030
$
(4,030)
$
14,943
$
14,461
$
4,359
$
(4,359)
$
14,461
Long-term debt
Total capitalization
CURRENT LIABILITIES
Debt due within one year
Accounts payable
Other
Total current liabilities
OTHER LIABILITIES AND DEFERRED CREDITS
Asset retirement obligations
Accumulated deferred income taxes
Other
Total other liabilities and deferred credits
COMMITMENTS AND CONTINGENCIES
—
14,943
13,327
17,357
—
—
250
250
—
68
249
317
1,778
512
1,520
3,810
466
1,376
2,488
4,330
7,483
3,453
379
679
1,601
2,659
1,145
4,237
4,687
20,810
35,753
—
14,461
11,331
15,690
2,157
1,191
3,371
6,719
1,611
5,681
7,424
—
—
352
352
—
53
331
384
2,664
571
1,361
4,596
556
1,336
1,857
3,749
10,069
14,716
6,682
2,323
145
553
1,258
1,956
1,083
3,720
4,680
9,483
18,013
32,474
2,809
1,124
2,971
6,904
1,639
5,109
6,868
13,616
TOTAL CAPITALIZATION AND LIABILITIES
$
15,510
$ 25,497
$ 16,181
$
57,188
$
15,197
$ 24,035
$ 13,762
$
52,994
__________________________________
(a) Represents FPL and consolidating adjustments.
117
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statements of Cash Flows
Year Ended
December 31, 2011
NEECH
Other(a)
NEE
(Guar-
antor)
NEE
Consoli-
dated
NEE
(Guar-
antor)
Year Ended
December 31, 2010
NEECH
Other(a)
(millions)
NEE
Consoli-
dated
NEE
(Guar-
antor)
Year Ended
December 31, 2009
NEECH
Other(a)
NEE
Consoli-
dated
CASH FLOWS FROM
OPERATING
ACTIVITIES
Dividends from FPL
$
400
$
—
$ (400)
$
—
$
250
$
—
$ (250)
$
—
$
485
$
—
$ (485)
$
898
383
—
(898)
—
1,446
2,245
4,074
970
(42)
—
(970)
—
1,940
1,936
3,834
25
81
—
(25)
1,513
2,869
4,463
—
—
Dividends from
NEECH
Other
Net cash provided by
operating
activities
CASH FLOWS FROM
INVESTING
ACTIVITIES
Capital expenditures,
independent
power and other
investments and
nuclear fuel
purchases
Capital contribution
to FPL
Cash grants under
the Recovery Act
Sale of natural gas-
fired generating
assets
Loan proceeds
restricted for
construction
Other - net
Net cash used in
investing
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES
Issuances of long-
term debt
Retirements of long-
term debt
Proceeds from sale
of differential
membership
interests
Net change in short-
term debt
Dividends on
common stock
Dividends to NEE(b)
Other - net
Net cash provided
by (used in)
financing
activities
Net increase (decrease) in
cash and cash
equivalents
Cash and cash
equivalents at
beginning of year
Cash and cash
equivalents at end of
year
1,681
1,446
947
4,074
1,178
1,940
716
3,834
591
1,513
2,359
4,463
(16)
(3,109)
(3,503)
(6,628)
—
(3,140)
(2,706)
(5,846)
(410)
—
—
406
410
218
624
—
(660)
—
—
—
—
—
428
—
—
5
660
160
—
588
—
—
—
(31)
—
(26)
—
—
—
—
—
(7)
(3,289)
(2,717)
(6,006)
—
100
—
—
1
—
—
—
—
(23)
—
100
—
—
(29)
—
1,204
—
1,204
—
16
(565)
60
—
10
(565)
86
(410)
(2,004)
(2,865)
(5,279)
(660)
(2,707)
(1,917)
(5,284)
(7)
(3,188)
(2,740)
(5,935)
—
—
—
—
(920)
—
(350)
3,100
840
3,940
(2,076)
(45)
(2,121)
466
231
—
(898)
(208)
—
229
—
898
13
466
460
(920)
—
(545)
—
—
—
—
2,800
924
3,724
(727)
(42)
(769)
261
—
261
(414)
(716)
(1,130)
—
—
—
—
(823)
—
305
—
(970)
(57)
—
970
3
(823)
(766)
—
251
—
182
2,704
516
3,220
(1,371)
(264)
(1,635)
—
110
—
(25)
(1)
—
44
—
25
21
—
154
(766)
—
202
(1,270)
615
1,935
1,280
(518)
893
1,139
1,514
(584)
1,417
342
1,175
1
—
57
282
17
20
75
302
—
—
126
(62)
64
156
82
238
—
—
(258)
(39)
(297)
414
121
535
$
1
$
339
$
37
$
377
$
—
$
282
$
20
$
302
$
—
$
156
$
82
$
238
__________________________________
(a) Represents FPL and consolidating adjustments.
(b) Other column also includes cash dividends from FPL to NEE of $400 million, $250 million and $485 million, respectively, and corresponding consolidating adjustments.
118
NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
17. Quarterly Data (Unaudited)
Condensed consolidated quarterly financial information is as follows:
March 31(a)
June 30(a)
September 30(a)
December 31(a)
(millions, except per share amounts)
NEE:
2011
Operating revenues(b)
Operating income(b)
Net income(b)
Earnings per share(c)
Earnings per share - assuming dilution(c)
Dividends per share
$
$
$
$
$
$
3,134
428
268
0.64
0.64
0.55
$
$
$
$
$
$
3,961
907
580
1.39
1.38
0.55
High-low common stock sales prices
$55.86 - 51.54
$58.98 - 54.16
2010
Operating revenues(b)
Operating income(b)
Net income(b)
Earnings per share(c)
Earnings per share - assuming dilution(c)
Dividends per share
$
$
$
$
$
$
3,622
939
556
1.36
1.36
0.50
$
$
$
$
$
$
3,591
709
417
1.02
1.01
0.50
$
$
$
$
$
$
$
$
$
$
$
$
4,382
911
407
0.98
0.97
0.55
$58.25 - 49.00
4,691
1,125
720
1.75
1.74
0.50
$
$
$
$
$
$
$
$
$
$
$
$
3,864
1,132
667
1.60
1.59
0.55
$61.20 - 51.33
3,413
469
263
0.64
0.63
0.50
High-low common stock sales prices
$53.75 - 45.29
$53.50 - 47.96
$55.98 - 48.44
$56.26 - 50.00
FPL:
Operating revenues(b)
Operating income(b)
Net income(b)
2011
2010
Operating revenues(b)
Operating income(b)
Net income(b)
__________________________________
$
$
$
$
$
$
2,246
406
205
2,328
393
191
$
$
$
$
$
$
2,801
571
301
2,580
501
265
$
$
$
$
$
$
3,152
656
347
3,116
584
308
$
$
$
$
$
$
2,414
442
216
2,461
371
181
(a)
In the opinion of NEE and FPL, all adjustments, which consist of normal recurring accruals necessary to present a fair statement of the amounts shown for such
periods, have been made. Results of operations for an interim period generally will not give a true indication of results for the year.
(b) The sum of the quarterly amounts may not equal the total for the year due to rounding.
(c) The sum of the quarterly amounts may not equal the total for the year due to rounding and changes in weighted-average number of common shares outstanding.
119
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of December 31, 2011, each of NEE and FPL had performed an evaluation, under the supervision and with the participation of
its management, including NEE's and FPL's chief executive officer and chief financial officer, of the effectiveness of the design and
operation of each company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15
(e) or 15d-15(e)). Based upon that evaluation, the chief executive officer and chief financial officer of each of NEE and FPL concluded
that the company's disclosure controls and procedures were effective as of December 31, 2011.
Internal Control Over Financial Reporting
(a)
Management's Annual Report on Internal Control Over Financial Reporting
See Item 8. Financial Statements and Supplementary Data.
(b)
Attestation Report of the Independent Registered Public Accounting Firm
See Item 8. Financial Statements and Supplementary Data.
(c)
Changes in Internal Control Over Financial Reporting
NEE and FPL are continuously seeking to improve the efficiency and effectiveness of their operations and of their internal
controls. This results in refinements to processes throughout NEE and FPL. However, there has been no change in NEE's
or FPL's internal control over financial reporting that occurred during NEE's and FPL's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, NEE's or FPL's internal control over financial reporting.
Item 9B. Other Information
None
120
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item will be included under the headings "Business of the Annual Meeting," "Corporate Governance
and Board Matters" and "Information About NextEra Energy and Management" in NEE's Proxy Statement which will be filed with
the SEC in connection with the 2012 Annual Meeting of Shareholders (NEE's Proxy Statement) and is incorporated herein by
reference, or is included in Item 1. Business - Executive Officers of NEE.
NEE has adopted the NextEra Energy, Inc. Code of Ethics for Senior Executive and Financial Officers (the Senior Financial Executive
Code), which is applicable to the chief executive officer, the chief financial officer, the chief accounting officer and other senior
executive and financial officers. The Senior Financial Executive Code is available under Corporate Governance in the Investor
Relations section of NEE’s internet website at www.nexteraenergy.com. Any amendments to, or waivers of any provision of, the
Senior Financial Executive Code which are required to be disclosed to shareholders under applicable SEC rules will be disclosed
on the NEE website at the address listed above within the time period required under SEC rules from time to time.
Item 11. Executive Compensation
The information required by this item will be included in NEE's Proxy Statement under the headings "Executive Compensation" and
"Corporate Governance and Board Matters" and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item relating to security ownership of certain beneficial owners and management will be included
in NEE's Proxy Statement under the heading "Information About NextEra Energy and Management" and is incorporated herein by
reference.
Securities Authorized For Issuance Under Equity Compensation Plans
NEE's equity compensation plan information as of December 31, 2011 is as follows:
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of
securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
(c)
6,999,099
(a)
2,523
7,001,622
$
$
$
42.64
(b)
27.11
42.63
(b)
14,549,515
—
14,549,515
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders(c)
Total
__________________________________
(a)
Includes an aggregate of 4,385,865 outstanding options, 2,197,680 unvested performance share awards (at maximum payout), 287,201 deferred fully vested
performance shares and 102,813 deferred stock awards (including future reinvested dividends) under the former LTIP and 25,540 fully vested shares deferred by
directors under the NextEra Energy, Inc. 2007 Non-Employee Directors Stock Plan and its predecessor, the FPL Group, Inc. Amended and Restated Non-Employee
Directors Stock Plan at December 31, 2011.
(b) Relates to outstanding options only.
(c) Represents options granted by Gexa Corp. under its Amended and Restated 2004 Incentive Plan and pursuant to various individual grants, all of which were made
prior to NEE's acquisition of Gexa Corp. All such options were assumed by NEE in connection with the acquisition of Gexa Corp. and are fully vested and exercisable
for shares of NEE common stock. No further grants of stock options will be made under this plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item, to the extent applicable, will be included in NEE's Proxy Statement under the heading
"Corporate Governance and Board Matters" and is incorporated herein by reference.
121
Item 14. Principal Accounting Fees and Services
NEE - The information required by this item will be included in NEE's Proxy Statement under the heading
and is incorporated herein by reference.
Matters"
FPL - The following table presents fees billed for professional services rendered by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively, Deloitte & Touche) for the fiscal years ended December 31,
2011 and 2010. The amounts presented below reflect allocations from NEE for FPL's portion of the fees, as well as amounts billed
directly to FPL.
Audit fees(a)
Audit-related fees(b)
Tax fees(c)
All other fees(d)
Total
2011
2010
$
3,109,000
$
2,724,000
327,000
130,000
16,000
423,000
33,000
197,000
$
3,582,000
$
3,377,000
__________________________________
(a) Audit fees consist of fees billed for professional services rendered for the audit of FPL's and NEE's annual consolidated financial statements for the fiscal year,
the reviews of the financial statements included in FPL's and NEE's Quarterly Reports on Form 10-Q for the fiscal year and the audit of the effectiveness of internal
control over financial reporting, comfort letters, consents, and other services related to SEC matters, services in connection with annual and semi-annual filings
of NEE's financial statements with the Japanese Ministry of Finance and accounting consultations to the extent necessary for Deloitte & Touche to fulfill its
responsibility under Public Company Accounting Oversight Board standards.
(b) Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of FPL's and NEE's
consolidated financial statements and are not reported under audit fees. These fees primarily related to audits of subsidiary financial statements, comfort letters,
consents and other services related to subsidiary (non-SEC registrant) financing activities, consultation on accounting standards and on transactions,
procedures, attestation services and examinations related to applications for government grants.
(c) Tax fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning. In 2011, $32,000 of tax fees paid related to tax
compliance services and $98,000 related to tax advice and planning services. In 2010, all tax fees paid related to tax compliance services.
(d) All other fees consist of fees for products and services other than the services reported under the other named categories. In 2011, these fees related to training
and an assessment of the record management processes. In 2010, these fees related to training and to the reviews of a government grant process and enterprise
risk management reporting.
In accordance with the requirements of Sarbanes-Oxley Act of 2002, the Audit Committee Charter and the Audit Committee's pre-
approval policy for services provided by the independent registered public accounting firm, all services performed by Deloitte &
Touche are approved in advance by the Audit Committee, except for audits of certain trust funds where the fees are paid by the
trust. Audit and audit-related services specifically identified in an appendix to the pre-approval policy are pre-approved by the Audit
Committee each year. This pre-approval allows management to request the specified audit and audit-related services on an as-
needed basis during the year, provided any such services are reviewed with the Audit Committee at its next regularly scheduled
meeting. Any audit or audit-related service for which the fee is expected to exceed $250,000, or that involves a service not listed
on the pre-approval list, must be specifically approved by the Audit Committee prior to commencement of such service. In addition,
the Audit Committee approves all services other than audit and audit-related services performed by Deloitte & Touche in advance
of the commencement of such work. The Audit Committee has delegated to the Chair of the committee the right to approve audit,
audit-related, tax and other services, within certain limitations, between meetings of the Audit Committee, provided any such decision
is presented to the Audit Committee at its next regularly scheduled meeting. At each Audit Committee meeting (other than meetings
held to review earnings materials), the Audit Committee reviews a schedule of services for which Deloitte & Touche has been
engaged since the prior Audit Committee meeting under existing pre-approvals and the estimated fees for those services. In 2011
and 2010, none of the amounts presented above represent services provided to NEE or FPL by Deloitte & Touche that were approved
by the Audit Committee after services were rendered pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X (which provides for a
waiver of the otherwise applicable pre-approval requirement if certain conditions are met).
122
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a)
1.
Financial Statements
Management's Report on Internal Control Over Financial Reporting
Attestation Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
NEE:
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Common Shareholders' Equity
FPL:
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Common Shareholder's Equity
Notes to Consolidated Financial Statements
Page(s)
68
69
70
71
72
73
74
75
76
77
78
79 - 119
2.
Financial Statement Schedules - Schedules are omitted as not applicable or not required.
3.
Exhibits (including those incorporated by reference)
Certain exhibits listed below refer to "FPL Group" and "FPL Group Capital," and were effective prior to the
change of the name FPL Group, Inc. to NextEra Energy, Inc., and of the name FPL Group Capital Inc to
NextEra Energy Capital Holdings, Inc., during 2010.
Exhibit
Number
*3(i)a
*3(i)b
*3(ii)a
*3(ii)b
Description
Restated Articles of Incorporation of NEE (filed as Exhibit 3(i) to Form 10-Q for the
quarter ended June 30, 2010, File No. 1-8841)
NEE
x
Restated Articles of Incorporation of FPL (filed as Exhibit 3(i)b to Form 10-K for the
year ended December 31, 2010, File No. 2-27612)
Amended and Restated Bylaws of NEE, as amended through May 21, 2010 (filed as
Exhibit 3(ii) to Form 10-Q for the quarter ended June 30, 2010, File No. 1-8841)
x
Amended and Restated Bylaws of FPL, as amended through October 17, 2008 (filed
as Exhibit 3(ii)b to Form 10-Q for the quarter ended September 30, 2008, File
No. 2-27612)
FPL
x
x
123
Exhibit
Number
*4(a)
*4(b)
*4(c)
*4(d)
*4(e)
*4(f)
Description
Mortgage and Deed of Trust dated as of January 1, 1944, and One hundred and
eighteen Supplements thereto, between FPL and Deutsche Bank Trust Company
Americas, Trustee (filed as Exhibit B-3, File No. 2-4845; Exhibit 7(a), File No. 2-7126;
Exhibit 7(a), File No. 2-7523; Exhibit 7(a), File No. 2-7990; Exhibit 7(a), File No. 2-9217;
Exhibit 4(a)-5, File No. 2-10093; Exhibit 4(c), File No. 2-11491; Exhibit 4(b)-1, File No.
2-12900; Exhibit 4(b)-1, File No. 2-13255; Exhibit 4(b)-1, File No. 2-13705; Exhibit 4
(b)-1, File No. 2-13925; Exhibit 4(b)-1, File No. 2-15088; Exhibit 4(b)-1, File No.
2-15677; Exhibit 4(b)-1, File No. 2-20501; Exhibit 4(b)-1, File No. 2-22104; Exhibit 2
(c), File No. 2-23142; Exhibit 2(c), File No. 2-24195; Exhibit 4(b)-1, File No. 2-25677;
Exhibit 2(c), File No. 2-27612; Exhibit 2(c), File No. 2-29001; Exhibit 2(c), File
No. 2-30542; Exhibit 2(c), File No. 2-33038; Exhibit 2(c), File No. 2-37679; Exhibit 2
(c), File No. 2-39006; Exhibit 2(c), File No. 2-41312; Exhibit 2(c), File No. 2-44234;
Exhibit 2(c), File No. 2-46502; Exhibit 2(c), File No. 2-48679; Exhibit 2(c), File No.
2-49726; Exhibit 2(c), File No. 2-50712; Exhibit 2(c), File No. 2-52826; Exhibit 2(c),
File No. 2-53272; Exhibit 2(c), File No. 2-54242; Exhibit 2(c), File No. 2-56228; Exhibits
2(c) and 2(d), File No. 2-60413; Exhibits 2(c) and 2(d), File No. 2-65701; Exhibit 2(c),
File No. 2-66524; Exhibit 2(c), File No. 2-67239; Exhibit 4(c), File No. 2-69716; Exhibit
4(c), File No. 2-70767; Exhibit 4(b), File No. 2-71542; Exhibit 4(b), File No. 2-73799;
Exhibits 4(c), 4(d) and 4(e), File No. 2-75762; Exhibit 4(c), File No. 2-77629; Exhibit
4(c), File No. 2-79557; Exhibit 99(a) to Post-Effective Amendment No. 5 to Form S-8,
File No. 33-18669; Exhibit 99(a) to Post-Effective Amendment No. 1 to Form S-3, File
No. 33-46076; Exhibit 4(b) to Form 10-K for the year ended December 31, 1993, File
No. 1-3545; Exhibit 4(i) to Form 10-Q for the quarter ended June 30, 1994, File
No. 1-3545; Exhibit 4(b) to Form 10-Q for the quarter ended June 30, 1995, File
No. 1-3545; Exhibit 4(a) to Form 10-Q for the quarter ended March 31,1996, File No.
1-3545; Exhibit 4 to Form 10-Q for the quarter ended June 30, 1998, File No. 1-3545;
Exhibit 4 to Form 10-Q for the quarter ended March 31, 1999, File No. 1-3545; Exhibit
4(f) to Form 10-K for the year ended December 31, 2000, File No. 1-3545; Exhibit 4
(g) to Form 10-K for the year ended December 31, 2000, File No. 1-3545; Exhibit 4
(o), File No. 333-102169; Exhibit 4(k) to Post-Effective Amendment No. 1 to Form S-3,
File No. 333-102172; Exhibit 4(l) to Post-Effective Amendment No. 2 to Form S-3, File
No. 333-102172; Exhibit 4(m) to Post-Effective Amendment No. 3 to Form S-3, File
No. 333-102172; Exhibit 4(a) to Form 10-Q for the quarter ended September 30, 2004,
File No. 2-27612; Exhibit 4(f) to Amendment No. 1 to Form S-3, File No. 333-125275;
Exhibit 4(y) to Post-Effective Amendment No. 2 to Form S-3, File Nos. 333-116300,
333-116300-01 and 333-116300-02; Exhibit 4(z) to Post-Effective Amendment No. 3
to Form S-3, File Nos. 333-116300, 333-116300-01 and 333-116300-02; Exhibit 4(b)
to Form 10-Q for the quarter ended March 31, 2006, File No. 2-27612; Exhibit 4(a) to
Form 8-K dated April 17, 2007, File No. 2-27612; Exhibit 4 to Form 8-K dated
October 10, 2007, File No. 2-27612; Exhibit 4 to Form 8-K dated January 16, 2008,
File No. 2-27612; Exhibit 4(a) to Form 8-K dated March 17, 2009, File No. 2-27612;
Exhibit 4 to Form 8-K dated February 9, 2010, File No. 2-27612; Exhibit 4 to Form 8-
K dated December 9, 2010, File No. 2-27612; Exhibit 4(a) to Form 8-K dated June 10,
2011, File No. 2-27612; and Exhibit 4 to Form 8-K dated December 13, 2011, File No.
2-27612)
Indenture (For Unsecured Debt Securities), dated as of June 1, 1999, between FPL
Group Capital and The Bank of New York Mellon, as Trustee (filed as Exhibit 4(a) to
Form 8-K dated July 16, 1999, File No. 1-8841)
Guarantee Agreement, dated as of June 1, 1999, between FPL Group (as Guarantor)
and The Bank of New York Mellon (as Guarantee Trustee) (filed as Exhibit 4(b) to
Form 8-K dated July 16, 1999, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated June 17, 2008, creating the 5.35%
Debentures, Series due June 15, 2013 (filed as Exhibit 4(a) to Form 8-K dated June 17,
2008, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated December 12, 2008, creating the
7 7/8% Debentures, Series due December 15, 2015 (filed as Exhibit 4 to Form 8-K
dated December 12, 2008, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated March 9, 2009, creating the 6.00%
Debentures, Series due March 1, 2019 (filed as Exhibit 4 to Form 8-K dated March 9,
2009, file No. 1-8841)
124
NEE
x
FPL
x
x
x
x
x
x
Exhibit
Number
*4(g)
*4(h)
*4(i)
*4(j)
*4(k)
*4(l)
*4(m)
*4(n)
*4(o)
*4(p)
*4(q)
*4(r)
*4(s)
*4(t)
*4(u)
*4(v)
Description
Officer's Certificate of FPL Group Capital, dated May 26, 2009, creating the Series C
Debentures due June 1, 2014 (filed as Exhibit 4(c) to Form 8-K dated May 22, 2009,
File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated November 10, 2009, creating the
Floating Rate Debentures, Series due November 9, 2012 (filed as Exhibit 4 to Form
8-K dated November 10, 2009, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated May 18, 2010, creating the
Debentures, 2.55% Series due November 15, 2013 (filed as Exhibit 4 to Form 8-K
dated May 18, 2010, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated August 31, 2010, creating the
Debentures, 2.60% Series due September 1, 2015 (filed as Exhibit 4 to Form 8-K
dated August 31, 2010, File No. 1-8841)
Officer's Certificate of FPL Group Capital, dated September 21, 2010, creating the
Series D Debentures due September 1, 2015 (filed as Exhibit 4(c) to Form 8-K dated
September 15, 2010, File No. 1-8841)
Officer's Certificate of NEECH, dated June 10, 2011, creating the 4.50% Debentures,
Series due June 1, 2021 (filed as Exhibit 4(b) to Form 8-K dated June 10, 2011, File
No. 1-8841)
Indenture (For Unsecured Subordinated Debt Securities relating to Trust Securities),
dated as of March 1, 2004, among FPL Group Capital, FPL Group (as Guarantor) and
The Bank of New York Mellon (as Trustee) (filed as Exhibit 4(au) to Post-Effective
Amendment No. 3
to Form S-3, File Nos. 333-102173, 333-102173-01,
333-102173-02 and 333-102173-03)
Preferred Trust Securities Guarantee Agreement, dated as of March 15, 2004, between
FPL Group (as Guarantor) and The Bank of New York Mellon (as Guarantee Trustee)
relating to FPL Group Capital Trust I (filed as Exhibit 4(aw) to Post-Effective
Amendment No. 3
to Form S-3, File Nos. 333-102173, 333-102173-01,
333-102173-02 and 333-102173-03)
Amended and Restated Trust Agreement relating to FPL Group Capital Trust I, dated
as of March 15, 2004 (filed as Exhibit 4(at) to Post-Effective Amendment No. 3 to Form
S-3, File Nos. 333-102173, 333-102173-01, 333-102173-02 and 333-102173-03)
Agreement as to Expenses and Liabilities of FPL Group Capital Trust I, dated as of
March 15, 2004 (filed as Exhibit 4(ax) to Post-Effective Amendment No. 3 to Form
S-3, File Nos. 333-102173, 333-102173-01, 333-102173-02 and 333-102173-03)
Officer's Certificate of FPL Group Capital and FPL Group, dated March 15, 2004,
creating the 5 7/8% Junior Subordinated Debentures, Series due March 15, 2044 (filed
as Exhibit 4(av) to Post-Effective Amendment No. 3 to Form S-3, File Nos. 333-102173,
333-102173-01, 333-102173-02 and 333-102173-03)
Indenture (For Unsecured Subordinated Debt Securities), dated as of September 1,
2006, among FPL Group Capital, FPL Group (as Guarantor) and The Bank of New
York Mellon (as Trustee) (filed as Exhibit 4(a) to Form 8-K dated September 19, 2006,
File No. 1-8841)
Officer's Certificate of FPL Group Capital and FPL Group, dated September 19, 2006,
creating the Series A Enhanced Junior Subordinated Debentures due 2066 (filed as
Exhibit 4(b) to Form 8-K dated September 19, 2006, File No. 1-8841)
Officer's Certificate of FPL Group Capital and FPL Group, dated September 19, 2006,
creating the Series B Enhanced Junior Subordinated Debentures due 2066 (filed as
Exhibit 4(c) to Form 8-K dated September 19, 2006, File No. 1-8841)
Replacement Capital Covenant, dated September 19, 2006, by FPL Group Capital
and FPL Group relating to FPL Group Capital's Series A and Series B Enhanced Junior
Subordinated Debentures due 2066 (filed as Exhibit 4(d) to Form 8-K dated
September 19, 2006, File No. 1-8841)
Officer's Certificate of FPL Group Capital and FPL Group, dated June 12, 2007,
creating the Series C Junior Subordinated Debentures due 2067 (filed as Exhibit 4(a)
to Form 8-K dated June 12, 2007, File No. 1-8841)
125
NEE
x
FPL
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Description
Replacement Capital Covenant, dated June 12, 2007, by FPL Group Capital and FPL
Group relating to FPL Group Capital's Series C Junior Subordinated Debentures due
2067 (filed as Exhibit 4(b) to Form 8-K dated June 12, 2007, File No. 1-8841)
NEE
x
FPL
Exhibit
Number
*4(w)
*4(x)
*4(y)
*4(z)
*4(aa)
*4(bb)
*4(cc)
*4(dd)
*4(ee)
*4(ff)
*4(gg)
*10(a)
*10(b)
*10(c)
Officer's Certificate of FPL Group Capital and FPL Group, dated September 17, 2007,
creating the Series D Junior Subordinated Debentures due 2067 (filed as Exhibit 4(a)
to Form 8-K dated September 17, 2007, File No. 1-8841)
Officer's Certificate of FPL Group Capital and FPL Group, dated September 18, 2007,
creating the Series E Junior Subordinated Debentures due 2067 (filed as Exhibit 4(b)
to Form 8-K dated September 17, 2007, File No. 1-8841)
Replacement Capital Covenant, dated September 18, 2007, by FPL Group Capital
and FPL Group relating to FPL Group Capital's Series D and Series E Junior
Subordinated Debentures due 2067 (filed as Exhibit 4(c) to Form 8-K dated
September 17, 2007, File No. 1-8841)
Officer's Certificate of FPL Group Capital and FPL Group, dated March 19, 2009,
creating the Series F Junior Subordinated Debentures due 2069 (filed as Exhibit 4(b)
to Form 8-K dated March 17, 2009, File No. 1-8841)
Replacement Capital Covenant, dated March 19, 2009, by FPL Group Capital and
FPL Group relating to FPL Group Capital's Series F Junior Subordinated Debentures
due 2069 (filed as Exhibit 4(c) to Form 8-K dated March 17, 2009, File No. 1-8841)
Indenture (For Securing Senior Secured Bonds, Series A), dated May 22, 2007,
between FPL Recovery Funding LLC (as Issuer) and The Bank of New York Mellon
(as Trustee and Securities Intermediary) (filed as Exhibit 4.1 to Form 8-K dated May 22,
2007 and filed June 1, 2007, File No. 333-141357)
Purchase Contract Agreement, dated as of May 1, 2009, between FPL Group and The
Bank of New York Mellon, as Purchase Contract Agent (filed as Exhibit 4(a) to Form
8-K dated May 22, 2009, File No. 1-8841)
Pledge Agreement, dated as of May 1, 2009, among FPL Group, Deutsche Bank Trust
Company Americas, as Collateral Agent, Custodial Agent and Securities Intermediary,
and The Bank of New York Mellon, as Purchase Contract Agent and Trustee (filed as
Exhibit 4(b) to Form 8-K dated May 22, 2009, File No. 1-8841)
Purchase Contract Agreement, dated as of September 1, 2010, between NEE and
The Bank of New York Mellon, as Purchase Contract Agent (filed as Exhibit 4(a) to
Form 8-K dated September 15, 2010, File No. 1-8841)
Pledge Agreement, dated as of September 1, 2010, among NEE, Deutsche Bank Trust
Company Americas, as Collateral Agent, Custodial Agent and Securities Intermediary,
and The Bank of New York Mellon, as Purchase Contract Agent (filed as Exhibit 4(b)
to Form 8-K dated September 15, 2010, File No. 1-8841)
FPL Group Supplemental Executive Retirement Plan, amended and restated effective
April 1, 1997 (SERP) (filed as Exhibit 10(a) to Form 10-K for the year ended
December 31, 1999, File No. 1-8841)
FPL Group Supplemental Executive Retirement Plan, amended and restated effective
January 1, 2005 (Restated SERP) (filed as Exhibit 10(b) to Form 8-K dated
December 12, 2008, File No. 1-8841)
Amendment Number 1 to the Restated SERP changing name to NextEra Energy, Inc.
Supplemental Executive Retirement Plan (filed as Exhibit 10(b) to Form 10-Q for the
quarter ended June 30, 2010, File No. 1-8841)
10(d)
Appendix A1 (revised as of December 1, 2011) to the Restated SERP
10(e)
Appendix A2 (revised as of December 1, 2011) to the Restated SERP
*10(f)
Amended and Restated Supplement to the Restated SERP as it applies to Lewis Hay,
III effective January 1, 2005 (filed as Exhibit 10(c) to Form 8-K dated December 12,
2008, File No. 1-8841)
126
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Exhibit
Number
*10(g)
*10(h)
*10(i)
*10(j)
*10(k)
*10(l)
*10(m)
*10(n)
*10(o)
*10(p)
*10(q)
*10(r)
*10(s)
*10(t)
*10(u)
*10(v)
*10(w)
Description
Supplement to the SERP as it applies to Lewis Hay, III effective March 22, 2002 (filed
as Exhibit 10(g) to Form 10-K for the year ended December 31, 2001, File No. 1-8841)
NEE
x
FPL
x
Supplement to the Restated SERP relating to a special credit to certain executive
officers and other officers effective February 15, 2008 (filed as Exhibit 10(g) to Form
10-K for the year ended December 31, 2007, File No. 1-8841)
Supplement to the Restated SERP effective February 15, 2008 as it applies to
Armando Pimentel, Jr. (filed as Exhibit 10(i) to Form 10-K for the year ended
December 31, 2007, File No. 1-8841)
Supplement to the SERP effective December 14, 2007 as it applies to Manoochehr
K. Nazar (filed as Exhibit 10(j) to Form 10-K for the year ended December 31, 2009,
File No. 1-8841)
NEE (formerly known as FPL Group) Amended and Restated Long-Term Incentive
Plan, most recently amended and restated on May 22, 2009 (filed as Exhibit 10(a) to
Form 10-Q for the quarter ended June 30, 2009, File No. 1-8841)
FPL Group Long-Term Incentive Plan of 1985, as amended (filed as Exhibit 99(h) to
Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669)
NEE 2011 Long Term Incentive Plan (filed as Exhibit 10(a) to Form 8-K dated May 20,
2011, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Performance
Share Award Agreement effective February 15, 2008 (filed as Exhibit 10(c) to Form
8-K dated February 15, 2008, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Performance
Share Award Agreement effective February 13, 2009 with Christopher A. Bennett, Paul
I. Cutler, Chris N. Froggatt, Joseph T. Kelliher, Robert L. McGrath and Antonio
Rodriguez (filed as Exhibit 10(l) to Form 10-K for the year ended December 31, 2008,
File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Amended and
Restated Performance Share Award Agreement effective December 10, 2009 with
Lewis Hay, III, Manoochehr K. Nazar, Armando J. Olivera, Armando Pimentel, Jr.,
James L. Robo and Charles E. Sieving (filed as Exhibit 10(p) to Form 10-K for the
year ended December 31, 2009, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Performance
Share Award Agreement effective February 12, 2010 (filed as Exhibit 10(q) to Form
10-K for the year ended December 31, 2009, File No. 1-8841)
Form of NEE Amended and Restated Long-Term Incentive Plan Performance Share
Award Agreement effective February 18, 2011 (filed as Exhibit 10(b) to Form 10-Q for
the quarter ended March 31, 2011, File No. 1-8841)
Form of Performance Share Award Agreement under the NEE 2011 Long Term
Incentive Plan (filed as Exhibit 10(a) to Form 8-K dated October 13, 2011, File No.
1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Restricted Stock
Award Agreement effective February 15, 2007 (filed as Exhibit 10(l) to Form 10-K for
the year ended December 31, 2006, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Restricted Stock
Award Agreement effective February 15, 2008 (filed as Exhibit 10(a) to Form 8-K dated
February 15, 2008, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Restricted Stock
Award Agreement effective February 13, 2009 (filed as Exhibit 10(q) to Form 10-K for
the year ended December 31, 2008, File No. 1-8841)
Form of Amendment to Restricted Stock Award Agreements under the FPL Group
Amended and Restated Long-Term Incentive Plan executed March 2009 between FPL
Group and each of Christopher A. Bennett, Lewis Hay, III, Robert L. McGrath, Armando
J. Olivera, Armando Pimentel, Jr., James L. Robo and Antonio Rodriguez (filed as
Exhibit 10(c) to Form 10-Q for the quarter ended March 31, 2009, File No. 1-8841)
127
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Description
Form of FPL Group Amended and Restated Long-Term Incentive Plan Restricted Stock
Award Agreement effective February 12, 2010 (filed as Exhibit 10(w) to Form 10-K for
the year ended December 31, 2009, File No. 1-8841)
NEE
x
FPL
x
Exhibit
Number
*10(x)
*10(y)
*10(z)
*10(aa)
*10(bb)
*10(cc)
*10(dd)
*10(ee)
*10(ff)
*10(gg)
*10(hh)
*10(ii)
*10(jj)
*10(kk)
Form of NEE Amended and Restated Long-Term Incentive Plan Restricted Stock
Award Agreement effective February 18, 2011 (filed as Exhibit 10(c) to Form 10-Q for
the quarter ended March 31, 2011, File No. 1-8841)
Form of Restricted Stock Award Agreement under the NEE 2011 Long Term Incentive
Plan (filed as Exhibit 10(c) to Form 8-K dated October 13, 2011, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Stock Option
Award - Non-Qualified Stock Option Agreement (filed as Exhibit 10(c) to Form 8-K
dated December 29, 2004, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Stock Option
Award - Non-Qualified Stock Option Agreement (filed as Exhibit 10(d) to Form 8-K
dated December 29, 2004, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Stock Option
Award - Non-Qualified Stock Option Agreement effective February 15, 2008 (filed as
Exhibit 10(b) to Form 8-K dated February 15, 2008, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Stock Option
Award - Non-Qualified Stock Option Agreement effective February 13, 2009 (filed as
Exhibit 10(u) to Form 10-K for the year ended December 31, 2008, File No. 1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan - Non-Qualified
Stock Option Agreement effective February 12, 2010 (filed as Exhibit 10(bb) to Form
10-K for the year December 31, 2009, File No. 1-8841)
Form of NEE Amended and Restated Long-Term Incentive Plan - Non-Qualified Stock
Option Agreement effective February 18, 2011 (filed as Exhibit 10(d) to Form 10-Q for
the quarter ended March 31, 2011, File No. 1-8841)
Form of Non-Qualified Stock Option Award Agreement under the NEE 2011 Long Term
Incentive Plan (filed as Exhibit 10(b) to Form 8-K dated October 13, 2011, File No.
1-8841)
Form of FPL Group Amended and Restated Long-Term Incentive Plan Amended and
Restated Deferred Stock Award Agreement effective February 12, 2010 between FPL
Group and each of Moray P. Dewhurst and James L. Robo (filed as Exhibit 10(dd) to
Form 10-K for the year ended December 31, 2009, File No. 1-8841)
FPL Group Executive Annual Incentive Plan as amended and restated on
December 12, 2008 (filed as Exhibit 10(a) to Form 8-K dated December 12, 2008, File
No. 1-8841)
NEE Deferred Compensation Plan effective January 1, 2005 as amended and restated
through October 15, 2010 (filed as Exhibit 10(dd) to Form 10-K for the year ended
December 31, 2010, File No. 1-8841)
Amendment 1 (effective May 25, 2011) to the NEE Deferred Compensation Plan
effective January 1, 2005, as amended and restated through October 15, 2010 (filed
as Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 2011, File No. 1-8841)
10(ll)
Amendment 2 (effective November 16, 2011) to the NEE Deferred Compensation Plan
effective January 1, 2005, as amended and restated through October 15, 2010
*10(mm)
FPL Group Deferred Compensation Plan, amended and restated effective January 1,
2003 (filed as Exhibit 10(k) to Form 10-K for the year ended December 31, 2002, File
No. 1-8841)
*10(nn)
FPL Group Executive Long-Term Disability Plan effective January 1, 1995 (filed as
Exhibit 10(g) to Form 10-K for the year ended December 31, 1995, File No. 1-8841)
128
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Exhibit
Number
*10(oo)
*10(pp)
*10(qq)
Description
FPL Group Amended and Restated Non-Employee Directors Stock Plan, as amended
and restated October 13, 2006 (filed as Exhibit 10(b) to Form 10-Q for the quarter
ended September 30, 2006, File No. 1-8841)
NEE
x
FPL
FPL Group 2007 Non-Employee Directors Stock Plan (filed as Exhibit 99 to Form S-8,
File No. 333-143739)
NEE Non-Employee Director Compensation Summary effective January 1, 2011 (filed
as Exhibit 10(jj) to Form 10-K for the year ended December 31, 2010, File No. 1-8841)
10 (rr)
NEE Non-Employee Director Compensation Summary effective January 1, 2012
*10(ss)
*10(tt)
*10(uu)
*10(vv)
*10(ww)
*10(xx)
*10(yy)
*10(zz)
Form of Amended and Restated Executive Retention Employment Agreement, as of
December 12, 2008, between FPL Group and each of Christopher A. Bennett, Robert
L. McGrath and Antonio Rodriguez (filed as Exhibit 10(g) to Form 8-K dated December
12, 2008, File No. 1-8841)
Form of Amended and Restated Executive Retention Employment Agreement effective
December 10, 2009 between FPL Group and each of Lewis Hay, III, Moray P. Dewhurst,
James L. Robo, Armando J. Olivera, Armando Pimentel, Jr., and Charles E. Sieving
(filed as Exhibit 10(nn) to Form 10-K for the year ended December 31, 2009, File No.
1-8841)
Amended and Restated Employment Letter with Lewis Hay, III dated December 10,
2009 (filed as Exhibit 10(pp) to Form 10-K for the year ended December 31, 2009,
File No. 1-8841)
Executive Retention Employment Agreement between FPL Group and Joseph T.
Kelliher dated as of May 21, 2009 (filed as Exhibit 10(b) to Form 10-Q for the quarter
ended June 30, 2009, File No. 1-8841)
Executive Retention Employment Agreement between FPL Group and Manoochehr
K. Nazar dated as of January 1, 2010 (filed as Exhibit 10(rr) to Form 10-K for the year
ended December 31, 2009, File No. 1-8841)
Executive Retention Employment Agreement between NEE and Shaun J. Francis
dated as of August 16, 2010 (filed as Exhibit 10(b) to Form 10-Q for the quarter ended
September 30, 2010, File No. 1-8841)
Retention Agreement between FPL Group and Robert L. McGrath (filed as Exhibit 10
(a) to Form 10-Q for the quarter ended June 30, 2010, File No. 1-8841)
Guarantee Agreement between FPL Group and FPL Group Capital, dated as of
October 14, 1998 (filed as Exhibit 10(y) to Form 10-K for the year ended December 31,
2001, File No. 1-8841)
12(a)
Computation of Ratios
12(b)
Computation of Ratios
21
23
Subsidiaries of NEE
Consent of Independent Registered Public Accounting Firm
31(a)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of NEE
31(b)
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of NEE
31(c)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of FPL
31(d)
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of FPL
32(a)
Section 1350 Certification of NEE
32(b)
Section 1350 Certification of FPL
129
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Exhibit
Number
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
Description
101.PRE
XBRL Presentation Linkbase Document
101.CAL
XBRL Calculation Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.DEF
XBRL Definition Linkbase Document
__________________________________
* Incorporated herein by reference
NEE
x
FPL
x
x
x
x
x
x
x
x
x
x
x
NEE and FPL agree to furnish to the SEC upon request any instrument with respect to long-term debt that NEE and FPL have not
filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.
130
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEXTERA ENERGY, INC. SIGNATURES
NextEra Energy, Inc.
JAMES L. ROBO
James L. Robo
President and Chief Operating Officer
Date: February 27, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date indicated.
Signature and Title as of February 27, 2012:
LEWIS HAY, III
Lewis Hay, III
Chairman and Chief Executive Officer
and Director
(Principal Executive Officer)
MORAY P. DEWHURST
Moray P. Dewhurst
Vice Chairman and Chief Financial Officer,
and Executive Vice President - Finance
(Principal Financial Officer)
Directors:
SHERRY S. BARRAT
Sherry S. Barrat
ROBERT M. BEALL, II
Robert M. Beall, II
J. HYATT BROWN
J. Hyatt Brown
JAMES L. CAMAREN
James L. Camaren
KENNETH B. DUNN
Kenneth B. Dunn
J. BRIAN FERGUSON
J. Brian Ferguson
CHRIS N. FROGGATT
Chris N. Froggatt
Vice President, Controller and Chief Accounting
Officer
(Principal Accounting Officer)
TONI JENNINGS
Toni Jennings
Oliver D. Kingsley, Jr.
RUDY E. SCHUPP
Rudy E. Schupp
WILLIAM H. SWANSON
William H. Swanson
MICHAEL H. THAMAN
Michael H. Thaman
HANSEL E. TOOKES, II
Hansel E. Tookes, II
131
FLORIDA POWER & LIGHT COMPANY SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized and in the capacities and on the date indicated.
Florida Power & Light Company
ARMANDO J. OLIVERA
Armando J. Olivera
Chief Executive Officer and Director
(Principal Executive Officer)
Date: February 27, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date indicated.
KIMBERLY OUSDAHL
Kimberly Ousdahl
Vice President, Controller and Chief Accounting
Officer
(Principal Accounting Officer)
Signature and Title as of February 27, 2012:
MORAY P. DEWHURST
Moray P. Dewhurst
Executive Vice President, Finance
and Chief Financial Officer and Director
(Principal Financial Officer)
Directors:
LEWIS HAY, III
Lewis Hay, III
JAMES L. ROBO
James L. Robo
ANTONIO RODRIGUEZ
Antonio Rodriguez
132
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Securities Exchange Act
of 1934 by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Securities Exchange Act of
1934
No annual report, proxy statement, form of proxy or other proxy soliciting material has been sent to security holders of FPL during
the period covered by this Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
133
Exhibit 12(a)
NEXTERA ENERGY, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(a)
Earnings, as defined:
Net income
Income taxes
Fixed charges included in the determination of net income, as below
Amortization of capitalized interest
Distributed income of equity method investees
Less: Equity in earnings of equity method investees
Total earnings, as defined
Fixed charges, as defined:
Interest expense
Rental interest factor
Allowance for borrowed funds used during construction
Fixed charges included in the determination of net income
Capitalized interest
Total fixed charges, as defined
2011
$ 1,923
529
1,094
21
95
55
$ 3,607
$ 1,035
41
18
1,094
107
$ 1,201
Years Ended December 31,
2009
2010
(millions of dollars)
2008
$1,957
532
1,025
21
74
58
$3,551
$ 979
32
14
1,025
75
$1,100
$ 1,615
327
899
17
69
52
$ 2,875
$849
28
22
899
88
$ 987
$1,639
450
859
15
124
93
$2,994
$813
28
18
859
55
$ 914
2007
$ 1,312
368
799
12
175
68
$ 2,598
$762
23
14
799
40
839
$
Ratio of earnings to fixed charges and ratio of earnings to combined fixed
charges and preferred stock dividends(a)
3.00
3.23
2.91
3.28
3.10
__________________
(a) NextEra Energy, Inc. has no preference equity securities outstanding; therefore, the ratio of earnings to fixed charges is the same as the ratio of earnings to
combined fixed charges and preferred stock dividends.
Exhibit 12(b)
FLORIDA POWER & LIGHT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(a)
Earnings, as defined:
Net income
Income taxes
Fixed charges included in the determination of net income, as below
Total earnings, as defined
Fixed charges, as defined:
Interest expense
Rental interest factor
Allowance for borrowed funds used during construction
Fixed charges included in the determination of net income
Capitalized interest
Total fixed charges, as defined
2011
Years Ended December 31,
2009
2010
(millions of dollars)
2008
2007
$1,068
654
411
$2,133
$ 945
580
382
$1,907
$ 831
473
347
$ 1,651
$ 789
443
359
$1,591
$ 836
451
325
$ 1,612
$ 387
8
16
411
1
$ 412
$ 361
8
13
382
3
$ 385
$ 318
7
22
347
2
$ 349
$ 334
7
18
359
—
$ 359
$ 304
7
14
325
—
$ 325
Ratio of earnings to fixed charges and ratio of earnings to combined fixed
charges and preferred stock dividends(a)
5.18
4.95
4.73
4.43
4.96
__________________
(a) Florida Power & Light Company has no preference equity securities outstanding; therefore, the ratio of earnings to fixed charges is the same as the ratio of earnings
to combined fixed charges and preferred stock dividends.
Exhibit 21
SUBSIDIARIES OF NEXTERA ENERGY, INC.
NextEra Energy, Inc.'s principal subsidiaries as of December 31, 2011 are listed below.
Subsidiary
1.
2.
3.
4.
Florida Power & Light Company (100%-owned)
NextEra Energy Capital Holdings, Inc. (100%-owned)
NextEra Energy Resources, LLC(a)(b)
Palms Insurance Company, Limited(b)
__________________
State or
Jurisdiction of
Incorporation
or Organization
Florida
Florida
Delaware
Cayman Islands
(a)
Includes 477 subsidiaries that operate in the United States and 55 subsidiaries that operate in foreign countries in the same line of business as NextEra Energy
Resources, LLC.
(b) 100%-owned subsidiary of NextEra Energy Capital Holdings, Inc.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of our reports dated February 27, 2012,
relating to the consolidated financial statements of NextEra Energy, Inc. and subsidiaries (NextEra Energy) and Florida Power &
Light Company and subsidiaries (FPL) and the effectiveness of NextEra Energy's and FPL's internal control over financial reporting,
appearing in this Annual Report on Form 10-K of NextEra Energy and FPL for the year ended December 31, 2011:
Florida Power & Light Company Trust I
No. 333-160987-06
Form S-3
Florida Power & Light Company Trust II
No. 333-160987-05
Form S-3
NextEra Energy Capital Holdings, Inc.
Form S-3
No. 333-160987-08
FPL Group Capital Trust II
Form S-3
No. 333-160987-04
FPL Group Capital Trust III
Form S-3
No. 333-160987-03
NextEra Energy, Inc.
Form S-8
Form S-8
Form S-8
Form S-8
Form S-8
Form S-8
Form S-3
Form S-8
Form S-8
Form S-3
Form S-8
Form S-3
Form S-8
No. 33-11631
No. 33-57673
No. 333-27079
No. 333-88067
No. 333-114911
No. 333-116501
No. 333-125275
No. 333-125954
No. 333-130479
No. 333-160987
No. 333-143739
No. 333-159011
No. 333-174799
FPL Group Trust I
Form S-3
No. 333-160987-02
FPL Group Trust II
Form S-3
No. 333-160987-01
Florida Power & Light Company
Form S-3
No. 333-160987-07
DELOITTE & TOUCHE LLP
Miami, Florida
February 27, 2012
Exhibit 31(a)
I, Lewis Hay, III, certify that:
Rule 13a-14(a)/15d-14(a) Certification
1.
2.
3.
4.
I have reviewed this Form 10-K for the annual period ended December 31, 2011 of NextEra Energy, Inc. (the
registrant);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 27, 2012
LEWIS HAY, III
Lewis Hay, III
Chairman and Chief Executive Officer
of NextEra Energy, Inc.
Exhibit 31(b)
I, Moray P. Dewhurst, certify that:
Rule 13a-14(a)/15d-14(a) Certification
1.
2.
3.
4.
I have reviewed this Form 10-K for the annual period ended December 31, 2011 of NextEra Energy, Inc. (the
registrant);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 27, 2012
MORAY P. DEWHURST
Moray P. Dewhurst
Vice Chairman and Chief Financial Officer,
and Executive Vice President - Finance
of NextEra Energy, Inc.
Exhibit 31(c)
I, Armando J. Olivera, certify that:
Rule 13a-14(a)/15d-14(a) Certification
1.
2.
3.
4.
I have reviewed this Form 10-K for the annual period ended December 31, 2011 of Florida Power & Light Company.
(the registrant);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 27, 2012
ARMANDO J. OLIVERA
Armando J. Olivera
Chief Executive Officer
of Florida Power & Light Company
Exhibit 31(d)
I, Moray P. Dewhurst, certify that:
Rule 13a-14(a)/15d-14(a) Certification
1.
2.
3.
4.
I have reviewed this Form 10-K for the annual period ended December 31, 2011 of Florida Power & Light Company.
(the registrant);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 27, 2012
MORAY P. DEWHURST
Moray P. Dewhurst
Executive Vice President, Finance
and Chief Financial Officer of
Florida Power & Light Company
Exhibit 32(a)
Section 1350 Certification
We, Lewis Hay, III and Moray P. Dewhurst, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Annual Report on Form 10-K of NextEra Energy, Inc. (the registrant) for the annual period ended December 31, 2011
(Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the registrant.
Dated: February 27, 2012
LEWIS HAY, III
Lewis Hay, III
Chairman and Chief Executive Officer
of NextEra Energy, Inc.
MORAY P. DEWHURST
Moray P. Dewhurst
Vice Chairman and Chief Financial Officer,
and Executive Vice President - Finance
of NextEra Energy, Inc.
A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the
registrant and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section
906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part
of the Report and is not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933 or the
Securities Exchange Act of 1934 (whether made before or after the date of the Report, irrespective of any general incorporation
language contained in such filing).
Exhibit 32(b)
Section 1350 Certification
We, Armando J. Olivera and Moray P. Dewhurst, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Annual Report on Form 10-K of Florida Power & Light Company (the registrant) for the annual period ended
December 31, 2011 (Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the registrant.
Dated: February 27, 2012
ARMANDO J. OLIVERA
Armando J. Olivera
Chief Executive Officer of
Florida Power & Light Company
MORAY P. DEWHURST
Moray P. Dewhurst
Executive Vice President, Finance
and Chief Financial Officer of
Florida Power & Light Company
A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the
registrant and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section
906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part
of the Report and is not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933 or the
Securities Exchange Act of 1934 (whether made before or after the date of the Report, irrespective of any general incorporation
language contained in such filing).
[This page intentionally left blank.]
Performance Graph
The following graph compares the cumulative 5-year total shareholder return on NextEra Energy, Inc.’s common stock with
the cumulative total returns of the S&P 500 Index, the S&P 500 Electric Utilities Index and the Dow Jones U.S. Electricity
Index. The graph tracks the performance of an investment of $100 (with reinvestment of all dividends) in our common stock
and in each index from 12/31/2006 to 12/31/2011.
Comparison of 5-Year Cumulative Total Return*
$160
$140
$120
$100
$80
$60
$40
$20
12/06
12/07
12/08
12/09
12/10
12/11
NextEra Energy, Inc.
100.00
127.91
97.89
106.47
109.04
132.87
S&P 500
100.00
105.49
66.46
84.05
96.71
98.75
S&P 500 Electric Utilities
100.00
123.12
91.31
94.39
97.64
118.11
Dow Jones U.S. Electricity
100.00
121.01
84.03
91.84
96.64
113.77
$0
12/06
12/07
12/08
12/09
12/10
12/11
*$100 invested on 12/31/06 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Copyright© 2012 S&P, a division of The McGraw-Hill Companies, Inc. All rights reserved. Copyright© 2012 Dow Jones & Co. All rights reserved.
ANNUAL REPORT
AR-5
NextEra Energy, Inc.
Reconciliation of Adjusted Return on Equity (ROE)
to GAAP ROE
GAAP Net Income
by Segment
Year Ended December 31, 2011 (millions, except percentage amounts)
(millions)
Net Income
$1,923
Florida Power & Light
Adjustments, net of income taxes:
Net unrealized mark-to-market gains associated
with non-qualifying hedges (NQH)
Loss on sale of natural gas-fired generating assets
Other than temporary impairment (OTTI) losses – net
Adjusted Earnings
Average Common Shareholders’ Equity
Adjustments:
Accumulated Other Comprehensive Income
Cumulative NQH gains
Cumulative OTTI losses - net
Cumulative loss on sale of natural
gas-fired generating assets
Adjusted
GAAP ROE 1
Adjusted ROE 2
(190)
98
6
$1,837
$14,759
(43)
(229)
94
38
$14,619
13.0%
12.6%
2010
2011
$945 $1,068
980
32
774
81
NextEra Energy Resources
Corporate and Other
NextEra Energy, Inc. Consolidated
$1,957 $1,923
GAAP Earnings Per Share (assuming dilution) by Segment
Florida Power & Light
NextEra Energy Resources
Corporate and Other
NextEra Energy, Inc. Consolidated
2010
2011
$2.29
$2.55
2.37
0.08
1.85
0.19
$4.74
$4.59
Reconciliation of Adjusted Earnings Per Share to Earnings Per Share
Earnings Per Share (assuming dilution)
$2.34
$1.38
$2.53
$2.48
$2.34
$3.23
$3.27
$4.07
$3.97
$4.74
$4.59
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Adjustments:
NQH (gains) losses
OTTI losses, net
(0.02)
(0.06)
0.01
0.29
(0.23)
0.21
(0.42)
0.05
(0.43)
(0.45)
0.01
0.19
0.03
(0.01)
0.01
Cumulative effect of change in accounting principle, net
0.64
0.01
Impairment/other charges, net
0.39
Merger-related expenses
0.06
0.04
Loss on sale of natural gas-fired generating assets
0.24
Adjusted Earnings Per Share (assuming dilution)
$2.38
$2.41 $2.48
$2.49
$2.63
$3.04
$3.49
$3.84
$4.05
$4.30
$4.39
NextEra Energy Resources
Reconciliation of Adjusted Earnings to
GAAP Net Income
Reconciliation of Adjusted Earnings Per Share to
GAAP Earnings Per Share
(millions)
Net Income
2010
2011
$980
$774
Earnings Per Share (assuming dilution)
2010
2011
$2.37
$1.85
Adjustments, net of income taxes:
Adjustments:
NQH gains
(176)
(193)
NQH gains
(0.43)
(0.46)
Loss on sale of natural gas-fired generating assets
OTTI losses – net
Adjusted Earnings
92
6
(4)
Loss on sale of natural gas-fired generating assets
0.22
OTTI losses – net
(0.01)
0.01
$800
$679
Adjusted Earnings Per Share (assuming dilution)
$1.93
$1.62
1 Net income divided by five-quarter average common shareholders’ equity per book.
2 Adjusted earnings divided by five-quarter adjusted average common shareholders’ equity.
AR-6
ANNUAL REPORT
Board of Directors
SHERRY S. BARRAT
Vice Chairman, The Northern Trust
Company (banking corporation)
Director since 1998.
Member: Audit Committee,
Governance & Nominating Committee.
ROBERT M. BEALL, II
Chairman, Beall’s, Inc.
(department stores)
Director since 1989. Member:
Compensation Committee,
Finance & Investment Committee.
J. HYATT BROWN
Chairman, Brown & Brown, Inc.
(insurance broker)
Director since 1989. Chair:
Governance & Nominating Committee.
Member: Executive Committee,
Finance & Investment Committee.
JAMES L. CAMAREN
Private Investor. Formerly Chairman &
Chief Executive Officer, Utilities, Inc.
(water utilities)
Director since 2002.
Member: Audit Committee,
Governance & Nominating Committee.
KENNETH B. DUNN
Professor of Financial Economics
and former Dean, Tepper School of
Business, Carnegie Mellon University
(higher education)
Director since July 2010.
Member: Compensation Committee,
Finance & Investment Committee.
J. BRIAN FERGUSON
Retired. Formerly Chairman,
Eastman Chemical Company
(chemical company)
Director since 2005.
Chair: Compensation Committee.
Member: Executive Committee,
Governance & Nominating Committee.
LEWIS HAY, III
Chairman and Chief Executive
Officer, NextEra Energy, Inc.
Director since 2001.
Chair: Executive Committee.
TONI JENNINGS
Chairman, Jack Jennings & Sons, Inc.
(construction)
Former Lt. Governor, State of Florida
Director since 2007. Member:
Compensation Committee, Finance &
Investment Committee.
OLIVER D. KINGSLEY, JR.
Retired. Formerly President
and Chief Operating Officer,
Exelon Corporation
(integrated utility company)
Director since 2007.
Member: Audit Committee,
Nuclear Committee.
RUDY E. SCHUPP
President and Chief Executive
Officer, 1st United Bank, and
Chief Executive Officer,
1st United Bancorp, Inc.
(commercial bank)
Director since 2005. Chair:
Finance & Investment Committee.
Member: Compensation Committee,
Executive Committee.
WILLIAM H. SWANSON
Chairman and Chief Executive Officer,
Raytheon Company
(global defense technology)
Director since 2009.
Member: Audit Committee,
Governance & Nominating Committee.
MICHAEL H. THAMAN
Chairman, President and Chief
Executive Officer, Owens Corning
(manufacturer)
Director since 2003.
Chair: Audit Committee.
Member: Executive Committee.
HANSEL E. TOOKES, II
Retired. Formerly President,
Raytheon International
(defense and aerospace systems)
Director since 2005.
Member: Finance & Investment
Committee, Governance &
Nominating Committee.
Officers
NEXTERA ENERGY, INC.
LEWIS HAY, III
Chairman and Chief Executive Officer
JAMES L. ROBO
President and Chief Operating Officer
MORAY P. DEWHURST
Vice Chairman and
Chief Financial Officer, and
Executive Vice President - Finance
MANO K. NAZAR
Executive Vice President, Nuclear
Division and Chief Nuclear Officer
ANTONIO RODRIGUEZ
Executive Vice President,
Power Generation Division
ROBERT L. MCGRATH
Executive Vice President,
Engineering, Construction and
Corporate Services
CHRISTOPHER A. BENNETT
Executive Vice President & Chief
Strategy, Policy and Business
Process Improvement Officer
SHAUN J. FRANCIS
Executive Vice President,
Human Resources
JOSEPH T. KELLIHER
Executive Vice President,
Federal Regulatory Affairs
CHARLES E. SIEVING
Executive Vice President &
General Counsel
MARIA V. FOGARTY
Senior Vice President,
Internal Audit & Compliance
PAUL I. CUTLER
Treasurer
CHRIS N. FROGGATT
Vice President, Controller and
Chief Accounting Officer
ALISSA E. BALLOT
Vice President & Corporate Secretary
JAMES P. HIGGINS
Vice President, Tax
MICHAEL M. WILSON
Vice President, Governmental Affairs
- Federal
FLORIDA POWER & LIGHT COMPANY
ARMANDO J. OLIVERA
Chief Executive Officer
ERIC E. SILAGY
President
DEBORAH H. CAPLAN
Vice President &
Chief Operating Officer
ROBERT E. BARRETT, JR.
Vice President, Finance
G. KEITH HARDY
Vice President, Distribution
MANUEL B. MIRANDA
Vice President,
Transmission and Substation
MARLENE M. SANTOS
Vice President, Customer Service
LAKSHMAN CHARANJIVA
Vice President and
Chief Information Officer
TIMOTHY FITZPATRICK
Vice President,
Marketing & Communication
RANDALL R. LABAUVE
Vice President,
Environmental Services
R. WADE LITCHFIELD
Vice President & General Counsel
KIMBERLY OUSDAHL
Vice President, Controller and
Chief Accounting Officer
PAMELA M. RAUCH
Vice President, Development and
External Affairs
NEXTERA ENERGY RESOURCES, LLC
MARK MAISTO
President,
Commodities and Retail Markets
BRIAN LANDRUM
President, Gexa Energy GP, LLC
JOHN W. KETCHUM
Vice President, General Counsel and
Secretary
ARMANDO PIMENTEL, JR.
President and Chief Executive Officer
TJ TUSCAI
Chief Operating Officer
MARK R. SORENSEN
Senior Vice President, Finance and
Chief Financial Officer
MICHAEL O’SULLIVAN
Senior Vice President, Development
FPL FIBERNET, LLC
CARMEN M. PEREZ
President
ANNUAL REPORT
AR-7
Investor Information
CORPORATE OFFICES
NextEra Energy, Inc.
700 Universe Blvd.
Juno Beach, FL 33408-0420
EXCHANGE LISTING
Common Stock
New York Stock Exchange
Ticker Symbol: NEE
NextEra Energy Capital
Holdings, Inc. Series A Enhanced
Junior Subordinated Debentures
New York Stock Exchange
Ticker Symbol: FGC
NextEra Energy Capital
Holdings, Inc. Series E
Junior Subordinated Debentures
New York Stock Exchange
Ticker Symbol: FGE
NextEra Energy Capital
Holdings, Inc. Series F
Junior Subordinated Debentures
New York Stock Exchange
Ticker Symbol: NEE.PRF
FPL Group Capital Trust I
Preferred Trust Securities
New York Stock Exchange
Ticker Symbol: NEE.PRC
NEWSPAPER LISTING
Common Stock: NEE
ANNUAL MEETING
May 25, 2012, 10:00 a.m.
NextEra Energy, Inc.
Juno Beach Auditorium
700 Universe Blvd.
Juno Beach, FL 33408-0420
ELECTRONIC PROXY MATERIAL
Shareholders may elect to receive proxy
materials electronically by accessing
https://enroll1.icsdelivery.com/nee/
default.aspx
DIRECT DEPOSIT OF
DIVIDENDS
Cash dividends may be deposited
directly to personal accounts at
financial institutions. Call Computer-
share for authorization forms.
DIVIDEND REINVESTMENT
AND DIRECT STOCK
PURCHASE PLAN
NextEra Energy offers a plan for the
reinvestment of dividends and the
purchase of common stock. Enrollment
materials may be obtained by calling
Computershare or by accessing
www.computershare.com/nee.
DIRECT REGISTRATION
SERVICES
NextEra Energy common stock can
be issued in direct registration (book
entry) form.
ONLINE INVESTOR
INFORMATION
Visit our investor information site at
www.NextEraEnergy.com/investors
to get stock quotes, earnings reports,
financial releases, SEC filings and
other news. You can also request
and receive information via email.
Shareholders of record can receive
secure online account access
through a link to our transfer agent,
Computershare.
SEC FILINGS
All Securities and Exchange
Commission filings appear on our
website at www.NextEraEnergy.com/
investors. Copies of SEC filings also
are available without charge by writing
to NextEra Energy, Shareholder
Services.
NEWS AND FINANCIAL
INFORMATION
Get the latest news and financial
information about NextEra Energy by
visiting www.NextEraEnergy.com.
ANALYST INQUIRIES
Investor Relations
561-694-4697
561-691-7272 (fax)
NEWS MEDIA INQUIRIES
Media Relations
305-552-3888
CERTIFIED PUBLIC
ACCOUNTANTS
Deloitte & Touche LLP
333 Southeast Second Avenue
Suite 3600
Miami, FL 33131-2387
REGISTRAR, TRANSFER
AND PAYING AGENTS
NextEra Energy, Inc. Common Stock
NextEra Energy, Inc.
c/o Computershare
Trust Company, N.A.
250 Royall Street
Canton, MA 02021
888-218-4392
Florida Power & Light Company
First Mortgage Bonds
DB Services Americas, Inc.
5022 Gate Parkway
Suite 200
Jacksonville, FL 32256
800-735-7777
NextEra Energy Capital
Holdings, Inc. Debentures
NextEra Energy Capital
Holdings, Inc. Junior
Subordinated Debentures
NextEra Energy Capital
Holdings, Inc. Enhanced Junior
Subordinated Debentures
FPL Group Capital Trust I
Preferred Trust Securities
The Bank of New York Mellon
Corporate Trust Operations
111 Sanders Creek Parkway
East Syracuse, NY 13057
800-254-2826
SHAREHOLDER INQUIRIES
Communications concerning
transfer requirements, lost
certificates, dividend checks,
address changes, stock accounts
and the dividend reinvestment
and direct stock purchase
plan should be directed to
Computershare: 888-218-4392 or
www.computershare.com/nee.
Other shareholder communications
to: Shareholder Services 800-222-4511,
561-691-7272 (fax)
PROPOSED 2012 COMMON STOCK DIVIDEND DATES*
Declaration
Ex-Dividend
Record
Payment
February 17
May 25
July 27
October 12
March 15
March 2
February 29
June 15
June 4
June 1
August 29
September 17
August 31
November 28 November 30 December 17
* Declaration of dividends and dates shown are subject to the discretion of the Board
of Directors of NextEra Energy. Dates shown are based on the assumption that past
patterns will prevail.
AR-8
ANNUAL REPORT
NextEra Energy, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408
For more information, go to:
www.NextEraEnergy.com
www.FPL.com
www.NextEraEnergyResources.com