Item 8. Financial Statements and Supplementary Data

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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 the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f). 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 present 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, 2021, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control – Integrated Framework (2013). Based on this assessment, management believes that NEE's and FPL's internal control over financial reporting was effective as of December 31, 2021.

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.

JAMES L. ROBOREBECCA J. KUJAWA
James L. Robo Chairman, President and Chief Executive Officer of NEE and Chairman of FPLRebecca J. Kujawa Executive Vice President, Finance and Chief Financial Officer of NEE and FPL
JAMES M. MAY
James M. May Vice President, Controller and Chief Accounting Officer of NEE
ERIC E. SILAGYKEITH FERGUSON
Eric E. Silagy President and Chief Executive Officer of FPLKeith Ferguson Controller of FPL

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of

NextEra Energy, Inc. and Florida Power & Light Company

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of NextEra Energy, Inc. and subsidiaries (NEE) and Florida Power & Light Company and subsidiaries (FPL) as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, NEE and FPL maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of NEE and FPL and our report dated February 17, 2022, expressed unqualified opinions on those financial statements.

Basis for Opinion

NEE'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 opinions on NEE’s and FPL’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to NEE and FPL in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. 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 opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

DELOITTE & TOUCHE LLP

Boca Raton, Florida

February 17, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of

NextEra Energy, Inc. and Florida Power & Light Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of NextEra Energy, Inc. and subsidiaries (NEE) and the related separate consolidated balance sheets of Florida Power & Light Company and subsidiaries (FPL) as of December 31, 2021 and 2020, and NEE's and FPL's related consolidated statements of income and cash flows, NEE's consolidated statements of comprehensive income and equity, and FPL’s consolidated statements of common shareholder’s equity, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of NEE and the consolidated financial position of FPL as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2021, 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) (PCAOB), NEE’s and FPL’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2022, expressed unqualified opinions on NEE’s and FPL’s internal control over financial reporting.

Emphasis of Matter

As discussed in Note 6 to the financial statements, on January 1, 2021, FPL and Gulf Power Company merged, with FPL as the surviving entity. FPL’s 2019 and 2020 financial statements have been retrospectively adjusted to reflect this merger. Our opinion is not modified with respect to this matter.

Basis for Opinion

These financial statements are the responsibility of NEE’s and FPL’s management. Our responsibility is to express opinions on NEE’s and FPL’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to NEE and FPL in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinions.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements of NEE and FPL that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

NEE – Operating Revenue – Unrealized Losses – Refer to Note 3 to the financial statements

Critical Audit Matter Description

NEE enters into complex energy derivatives and transacts in certain markets that are thinly traded, which may result in subjective estimates of fair value that include unobservable inputs. Changes in the derivatives’ fair value for power purchases and sales, fuel sales and trading activities are primarily recognized on a net basis in operating revenues. For the year ended December 31, 2021, unrealized losses associated with Level 3 transactions of $924 million are included in operating revenues in the consolidated statement of income of NEE.

Given management uses complex proprietary models and unobservable inputs to estimate the fair value of Level 3 derivative assets and liabilities, performing audit procedures to evaluate the appropriateness of these models and inputs required a high degree of auditor judgment and an increased extent of effort, including the need to involve our firm specialists who possess significant quantitative and modeling expertise.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to operating revenue – unrealized losses included the following, among others:

  • We tested the effectiveness of controls relating to commodity valuation models, their related Level 3 unobservable inputs, and market data validation.

  • We selected a sample of transactions, obtained an understanding of the business rationale of transactions, and read the underlying contractual agreements.

  • We used personnel in our firm who specialize in energy transacting to independently value Level 3 transactions. For certain fair value models, we used our firm specialists to directly test the underlying assumptions of the unobservable inputs used by management.

  • We evaluated NEE’s disclosures related to the proprietary models and unobservable inputs to estimate the fair value of Level 3 derivative assets and liabilities, including the balances recorded and significant assumptions.

FPL – Impact of Rate Regulation on the Financial Statements – Refer to Note 1 to the financial statements

Critical Audit Matter Description

FPL is subject to rate regulation by the Florida Public Service Commission (the “FPSC”), which has jurisdiction with respect to the rates of electric distribution companies. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant, and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; and depreciation expense.

Rates are determined and approved in regulatory proceedings based on an analysis of FPL’s costs to provide utility service and a return on, and recovery of, FPL’s investment in the assets required to deliver utility service. Accounting guidance for FPL’s regulated operations provides that rate-regulated entities report assets and liabilities consistent with the recovery of those incurred costs in rates, if it is probable that such rates will be charged and collected. The FPSC has the authority to disallow recovery of costs that it considers excessive or imprudently incurred. Future FPSC decisions could impact the accounting for regulated operations, including decisions about the amount of allowable costs and any refunds that may be required. As a result of this cost-based regulation, FPL follows the accounting guidance that allows regulators to create assets and impose liabilities, based on the probability of future cash flows, 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.

We identified the impact of rate regulation as a critical audit matter due to the requirement to have auditors with deep knowledge of and significant experience with accounting for rate regulation and the rate setting process due to its inherent complexities.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the impact of rate regulation included the following, among others:

  • We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment and regulatory assets or liabilities; the depreciation and amortization of such amounts in accordance with FPSC orders; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs recognized as property, plant and equipment and regulatory assets in future rates or of a refund or future reduction in rates that should be recognized as a regulatory liability.

  • We evaluated FPL’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

  • We assessed the likelihood of (1) recovery of recorded regulatory assets and (2) obligations requiring future reductions in rates by obtaining, reading and evaluating relevant regulatory orders issued by the FPSC to FPL, including the December 2, 2021 order adopting the stipulation of settlement for FPL's 2021 rate agreement. We also evaluated such regulatory orders and other publicly available filings made by FPL and compared them to management’s recorded regulatory asset and liability balances for completeness.

DELOITTE & TOUCHE LLP

Boca Raton, Florida

February 17, 2022

We have served as NEE’s and FPL’s auditor since 1950.

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NEXTERA ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(millions, except per share amounts)

Years Ended December 31,
202120202019
OPERATING REVENUES$17,069$17,997$19,204
OPERATING EXPENSES
Fuel, purchased power and interchange4,5273,5394,363
Other operations and maintenance3,9533,7513,640
Storm restoration costs28183234
Depreciation and amortization3,9244,0524,216
Taxes other than income taxes and other – net1,8011,7091,804
Total operating expenses – net14,23313,23414,257
GAINS ON DISPOSAL OF BUSINESSES/ASSETS – NET77353406
OPERATING INCOME2,9135,1165,353
OTHER INCOME (DEDUCTIONS)
Interest expense(1,270)(1,950)(2,249)
Equity in earnings (losses) of equity method investees666(1,351)66
Allowance for equity funds used during construction1429367
Gains on disposal of investments and other property – net705055
Change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds – net267163238
Other net periodic benefit income257200185
Other – net13092121
Total other income (deductions) – net262(2,703)(1,517)
INCOME BEFORE INCOME TAXES3,1752,4133,836
INCOME TAXES34844448
NET INCOME2,8272,3693,388
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS746550381
NET INCOME ATTRIBUTABLE TO NEE$3,573$2,919$3,769
Earnings per share attributable to NEE:
Basic$1.82$1.49$1.95
Assuming dilution$1.81$1.48$1.94

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NEXTERA ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions)

Years Ended December 31,
202120202019
NET INCOME$2,827$2,369$3,388
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Reclassification of unrealized losses on cash flow hedges from accumulated other comprehensive income (loss) to net income (net of $2 tax benefit, $4 tax benefit and $8 tax expense, respectively)61229
Net unrealized gains (losses) on available for sale securities:
Net unrealized gains (losses) on securities still held (net of $4 tax benefit, $4 tax expense and $8 tax expense, respectively)(11)1220
Reclassification from accumulated other comprehensive income (loss) to net income (net of $2 tax expense, $1 tax expense and $1 tax benefit, respectively)(4)(3)(2)
Defined benefit pension and other benefits plans:
Net unrealized gain (loss) and unrecognized prior service benefit (cost) (net of $30 tax expense, $11 tax expense and $14 tax benefit, respectively)9537(46)
Reclassification from accumulated other comprehensive income (loss) to net income (net of $1 tax benefit, $1 tax benefit and $1 tax benefit, respectively)52(3)
Net unrealized gains (losses) on foreign currency translation(1)1322
Other comprehensive income related to equity method investees (net of less than $1 tax expense, less than $1 tax expense and $0 tax expense, respectively)111
Total other comprehensive income, net of tax917421
IMPACT OF DISPOSAL OF A BUSINESS (NET OF $19 TAX BENEFIT)—10—
COMPREHENSIVE INCOME2,9182,4533,409
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS747543380
COMPREHENSIVE INCOME ATTRIBUTABLE TO NEE$3,665$2,996$3,789

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NEXTERA ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(millions, except par value)

December 31,
20212020
ASSETS
Current assets:
Cash and cash equivalents$639$1,105
Customer receivables, net of allowances of $35 and $67, respectively3,3782,263
Other receivables730711
Materials, supplies and fuel inventory1,5611,552
Regulatory assets1,125377
Derivatives689570
Other1,166804
Total current assets9,2887,382
Other assets:
Property, plant and equipment – net ($20,521 and $18,084 related to VIEs, respectively)99,34891,803
Special use funds8,9227,779
Investment in equity method investees6,1595,728
Prepaid benefit costs2,2431,707
Regulatory assets4,5783,712
Derivatives1,1351,647
Goodwill4,8444,254
Other4,3953,672
Total other assets131,624120,302
TOTAL ASSETS$140,912$127,684
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Commercial paper$1,382$1,551
Other short-term debt700458
Current portion of long-term debt ($58 and $27 related to VIEs, respectively)1,7854,138
Accounts payable ($752 and $1,433 related to VIEs, respectively)6,9354,615
Customer deposits485474
Accrued interest and taxes525519
Derivatives1,263311
Accrued construction-related expenditures1,378991
Regulatory liabilities289245
Other2,6952,256
Total current liabilities17,43715,558
Other liabilities and deferred credits:
Long-term debt ($1,125 and $493 related to VIEs, respectively)50,96041,944
Asset retirement obligations3,0823,057
Deferred income taxes8,3108,020
Regulatory liabilities11,27310,735
Derivatives1,7131,199
Other2,4682,242
Total other liabilities and deferred credits77,80667,197
TOTAL LIABILITIES95,24382,755
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTERESTS – VIE245—
EQUITY
Common stock ($0.01 par value, authorized shares – 3,200; outstanding shares – 1,963 and 1,960, respectively)2020
Additional paid-in capital11,27111,222
Retained earnings25,91125,363
Accumulated other comprehensive loss—(92)
Total common shareholders' equity37,20236,513
Noncontrolling interests ($8,217 and $8,413 related to VIEs, respectively)8,2228,416
TOTAL EQUITY45,42444,929
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY$140,912$127,684

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NEXTERA ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)

Years Ended December 31,
202120202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$2,827$2,369$3,388
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization3,9244,0524,216
Nuclear fuel and other amortization290263262
Unrealized losses (gains) on marked to market derivative contracts – net2,005533(108)
Foreign currency transaction losses (gains)(94)4517
Deferred income taxes436(78)258
Cost recovery clauses and franchise fees(599)(121)155
Equity in losses (earnings) of equity method investees(666)1,351(66)
Distributions of earnings from equity method investees526456438
Gains on disposal of businesses, assets and investments – net(146)(403)(461)
Recoverable storm-related costs(138)(69)(180)
Other – net(326)189(141)
Changes in operating assets and liabilities:
Current assets(1,267)(364)123
Noncurrent assets(324)(234)(93)
Current liabilities1,053(6)116
Noncurrent liabilities52—231
Net cash provided by operating activities7,5537,9838,155
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures of FPL Segment(6,626)(6,477)(5,560)
Acquisition and capital expenditures of Gulf Power(782)(1,012)(5,165)
Independent power and other investments of NEER(8,247)(6,851)(6,385)
Nuclear fuel purchases(275)(245)(315)
Other capital expenditures(147)(25)(37)
Sale of independent power and other investments of NEER2,7611,0121,316
Proceeds from sale or maturity of securities in special use funds and other investments4,9953,9164,008
Purchases of securities in special use funds and other investments(5,310)(4,100)(4,160)
Other – net4083121
Net cash used in investing activities(13,591)(13,699)(16,177)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt, including premiums and discounts16,68312,40413,905
Retirements of long-term debt(9,594)(6,103)(5,492)
Proceeds from differential membership investors2,7793,5221,604
Net change in commercial paper(169)(965)(234)
Proceeds from other short-term debt—2,158200
Repayments of other short-term debt(257)(2,100)(4,765)
Payments from (to) related parties under a cash sweep and credit support agreement – net47(2)(54)
Issuances of common stock/equity units – net14(92)1,494
Proceeds from sale of noncontrolling interests6550199
Dividends on common stock(3,024)(2,743)(2,408)
Other – net(737)(406)(476)
Net cash provided by financing activities5,8076,1743,873
Effects of currency translation on cash, cash equivalents and restricted cash1(20)4
Net increase (decrease) in cash, cash equivalents and restricted cash(230)438(4,145)
Cash, cash equivalents and restricted cash at beginning of year1,5461,1085,253
Cash, cash equivalents and restricted cash at end of year$1,316$1,546$1,108
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized)$1,323$1,432$1,799
Cash paid (received) for income taxes – net$(69)$235$184
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued property additions$4,995$4,445$3,573
Increase in property, plant and equipment related to an acquisition$—$68$—
Decrease in joint venture investments related to an acquisition$—$145$—

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NEXTERA ENERGY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(millions)

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Common Shareholders' EquityNon- controlling InterestsTotal EquityRedeemable Non-controlling Interests
SharesAggregate Par Value
Balances, December 31, 20181,912$19$10,476$(188)$23,837$34,144$3,269$37,413$468
Net income (loss)————3,7693,769(371)(9)
Issuances of common stock/equity units – net40—1,470——1,470——
Share-based payment activity4—164——164——
Dividends on common stock(a)————(2,408)(2,408)——
Other comprehensive income———20—201—
Premium on equity units——(120)——(120)——
Other differential membership interest activity——(20)——(20)1,27029
Other—1(15)(1)1(14)186(1)
Balances, December 31, 20191,9562011,955(169)25,19937,0054,355$41,360487
Net income (loss)————2,9192,919(546)(4)
Issuances of common stock/equity units – net——(92)——(92)——
Share-based payment activity4—153——153——
Dividends on common stock(a)————(2,743)(2,743)——
Other comprehensive income———67—677—
Impact of disposal of a business———10—10——
Adoption of accounting standards update(b)————(11)(11)——
Premium on equity units——(587)——(587)——
Other differential membership interests activity——(36)——(36)3,809(483)
Sale of noncontrolling interests——(169)——(169)689—
Other——(2)—(1)(3)102—
Balances, December 31, 20201,9602011,222(92)25,36336,5138,416$44,929—
Net income (loss)————3,5733,573(748)2
Share-based payment activity3—132——132——
Dividends on common stock(a)————(3,024)(3,024)——
Other comprehensive income (loss)———92—92(1)—
Other differential membership interests activity (c)——(26)——(26)363243
Other——(57)—(1)(58)192—
Balances, December 31, 20211,963$20$11,271$—$25,911$37,202$8,222$45,424$245

(a)Dividends per share were $1.54, $1.40 and $1.25 for the years ended December 31, 2021, 2020 and 2019, respectively.

(b)See Note 1 – Measurement of Credit Losses on Financial Instruments.

(c)See Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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FLORIDA POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(millions)

Years Ended December 31,
20212020(a)2019(a)
OPERATING REVENUES$14,102$13,060$13,680
OPERATING EXPENSES
Fuel, purchased power and interchange3,9563,0603,802
Other operations and maintenance1,8031,7071,790
Storm restoration costs28183234
Depreciation and amortization2,2662,5262,771
Taxes other than income taxes and other – net1,5331,4641,504
Total operating expenses – net9,5868,94010,101
OPERATING INCOME4,5164,1203,579
OTHER INCOME (DEDUCTIONS)
Interest expense(615)(641)(649)
Allowance for equity funds used during construction1328766
Other – net1127
Total other deductions – net(472)(552)(576)
INCOME BEFORE INCOME TAXES4,0443,5683,003
INCOME TAXES838678484
NET INCOME(b)$3,206$2,890$2,519

(a)Amounts have been retrospectively adjusted to reflect the merger of FPL and Gulf Power Company, see Note 6 – Merger of FPL and Gulf Power Company.

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

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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FLORIDA POWER & LIGHT COMPANY

CONSOLIDATED BALANCE SHEETS

(millions, except share amount)

December 31,
20212020(a)
ASSETS
Current assets:
Cash and cash equivalents$55$25
Customer receivables, net of allowances of $11 and $44, respectively1,2971,141
Other receivables350405
Materials, supplies and fuel inventory963899
Regulatory assets1,111360
Other142182
Total current assets3,9183,012
Other assets:
Electric utility plant and other property – net58,22753,879
Special use funds6,1585,347
Prepaid benefit costs1,6571,550
Regulatory assets4,3433,399
Goodwill2,9892,989
Other775825
Total other assets74,14967,989
TOTAL ASSETS$78,067$71,001
LIABILITIES AND EQUITY
Current liabilities:
Commercial paper$1,382$1,551
Other short-term debt200200
Current portion of long-term debt536354
Accounts payable1,318874
Customer deposits478468
Accrued interest and taxes322300
Accrued construction-related expenditures601423
Regulatory liabilities278224
Other643948
Total current liabilities5,7585,342
Other liabilities and deferred credits:
Long-term debt17,97416,882
Asset retirement obligations2,0491,871
Deferred income taxes7,1376,519
Regulatory liabilities11,05310,600
Other502559
Total other liabilities and deferred credits38,71536,431
TOTAL LIABILITIES44,47341,773
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock (no par value, 1,000 shares authorized, issued and outstanding)1,3731,373
Additional paid-in capital19,93618,236
Retained earnings12,2859,619
TOTAL EQUITY33,59429,228
TOTAL LIABILITIES AND EQUITY$78,067$71,001

(a)Amounts have been retrospectively adjusted to reflect the merger of FPL and Gulf Power Company, see Note 6 – Merger of FPL and Gulf Power Company.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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FLORIDA POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)

Years Ended December 31,
20212020(a)2019(a)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$3,206$2,890$2,519
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization2,2662,5262,771
Nuclear fuel and other amortization174167178
Deferred income taxes75262945
Cost recovery clauses and franchise fees(599)(121)155
Recoverable storm-related costs(138)(69)(180)
Other – net(157)35(5)
Changes in operating assets and liabilities:
Current assets(49)(164)(42)
Noncurrent assets(114)(77)22
Current liabilities203150
Noncurrent liabilities(3)(31)(12)
Net cash provided by operating activities5,3585,8165,501
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(7,411)(7,476)(6,290)
Nuclear fuel purchases(159)(203)(195)
Proceeds from sale or maturity of securities in special use funds3,3082,4882,729
Purchases of securities in special use funds(3,394)(2,567)(2,854)
Other – net156510
Net cash used in investing activities(7,641)(7,693)(6,600)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of long-term debt, including premiums and discounts2,5883,0032,998
Retirements of long-term debt(1,304)(1,603)(200)
Net change in commercial paper(169)(123)418
Proceeds from other short-term debt——200
Capital contributions from NEE1,7002,750359
Dividends to NEE(540)(2,210)(2,620)
Other – net(44)(44)(46)
Net cash provided by financing activities2,2311,7731,109
Net increase (decrease) in cash, cash equivalents and restricted cash(52)(104)10
Cash, cash equivalents and restricted cash at beginning of year160264254
Cash, cash equivalents and restricted cash at end of year$108$160$264
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized)$586$620$614
Cash paid (received) for income taxes – net$(1)$105$584
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued property additions$1,107$698$914
NEE's noncash contribution of a consolidated subsidiary – net$—$—$4,436

(a) Amounts have been retrospectively adjusted to reflect the merger of FPL and Gulf Power Company, see Note 6 – Merger of FPL and Gulf Power Company.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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FLORIDA POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY**(a)**

(millions)

Common StockAdditional Paid-In CapitalRetained EarningsCommon Shareholder's Equity
Balances, December 31, 2018$1,373$10,601$9,040$21,014
Net income——2,519
Capital contributions from NEE—359—
Dividends to NEE——(2,620)
NEE's contribution of a consolidated subsidiary—4,525—
Balances, December 31, 20191,37315,4858,939$25,797
Net income——2,890
Capital contributions from NEE—2,750—
Dividends to NEE——(2,210)
Other—1—
Balances, December 31, 20201,37318,2369,619$29,228
Net income——3,206
Capital contributions from NEE—1,700—
Dividends to NEE——(540)
Balances, December 31, 2021$1,373$19,936$12,285$33,594

(a)2020 and 2019 amounts have been retrospectively adjusted to reflect the merger of FPL and Gulf Power Company, see Note 6 – Merger of FPL and Gulf Power Company.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2021, 2020 and 2019

1. Summary of Significant Accounting and Reporting Policies

Basis of Presentation – The operations of NextEra Energy, Inc. (NEE) are conducted primarily through Florida Power & Light Company (FPL), a wholly owned subsidiary, and NextEra Energy Resources, LLC (NextEra Energy Resources) and NextEra Energy Transmission, LLC (NEET) (collectively, NEER), wholly owned indirect subsidiaries that are combined for segment reporting purposes. On January 1, 2021, FPL and Gulf Power Company merged, with FPL as the surviving entity. However during 2021, FPL continued to be regulated as two separate ratemaking entities in the former service areas of FPL and Gulf Power. The FPL segment (FPL, excluding Gulf Power, related purchase accounting adjustments and eliminating entries) and the Gulf Power segment (Gulf Power) continued to be operating segments of NEE, as well as FPL, through 2021. Effective January 1, 2022, FPL became regulated as one ratemaking entity with new unified rates and tariffs, and also became one operating segment of NEE (see Rate Regulation – Base Rates Effective January 2022 through December 2025 below). The merger of FPL and Gulf Power Company was a merger between entities under common control, which required it to be accounted for as if the merger occurred since the inception of common control, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, FPL's consolidated financial statements have been retrospectively adjusted to include the historical results and financial position of the common control merger prior to the merger date. See Note 6 – Merger of FPL and Gulf Power Company.

FPL's principal business is a rate-regulated electric utility which supplies electric service to more than 5.7 million customer accounts throughout most of the east and lower west coasts of Florida and eight counties throughout northwest Florida. NEER invests in independent power projects through both controlled and consolidated entities and noncontrolling ownership interests in joint ventures. NEER participates in natural gas, natural gas liquids and oil production primarily through operating and non-operating ownership interests and in pipeline infrastructure through either wholly owned subsidiaries or noncontrolling or joint venture interests. NEER also invests in rate-regulated transmission facilities and transmission lines that connect its electric generation facilities to the electric grid through controlled and consolidated entities.

The consolidated financial statements of NEE and FPL include the accounts of their respective controlled subsidiaries. They also include NEE's and FPL's share of the undivided interest in certain assets, liabilities, revenues and expenses. Amounts representing NEE's interest in entities it does not control, but over which it exercises significant influence, are included in investment in equity method investees; the earnings/losses of these entities is included in equity in earnings (losses) of equity method investees. 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.

NEP was formed in 2014 to acquire, manage and own contracted clean energy projects with stable long-term cash flows through a limited partner interest in NextEra Energy Operating Partners, LP (NEP OpCo). NEP owns or has an ownership interest in a portfolio of wind, solar and solar plus battery storage projects and long-term contracted natural gas pipelines. NEE owns a noncontrolling interest in NEP and accounts for its ownership interest in NEP as an equity method investment with its earnings/losses from NEP as equity in earnings (losses) of equity method investees and accounts for NextEra Energy Resources' project sales to NEP as third-party sales in its consolidated financial statements. NEER operates essentially all of the energy projects owned by NEP and provide services to NEP under various related party operations and maintenance, administrative and management services agreements.

Operating Revenues – FPL and NEER generate substantially all of NEE’s operating revenues, which primarily include revenues from contracts with customers as further discussed in Note 2, as well as, at NEER, derivative and lease transactions. FPL's operating revenues include amounts resulting from base rates, cost recovery clauses (see Rate Regulation below), franchise fees, gross receipts taxes and surcharges related to storms (see Storm Funds, Storm Reserves and Storm Cost Recovery below). Franchise fees and gross receipts taxes are imposed on FPL; however, the Florida Public Service Commission (FPSC) allows FPL to include in the amounts charged to customers the amount of the gross receipts tax for all customers and the franchise fee for those customers located in the jurisdiction that imposes the amount. Accordingly, FPL's 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 $852 million, $800 million and $838 million in 2021, 2020 and 2019, 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. Certain NEER commodity contracts for the purchase and sale of power that meet the definition of a derivative are recorded at fair value with subsequent changes in fair value recognized as revenue. See Energy Trading below and Note 3.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Rate Regulation – FPL, the most significant of NEE's rate-regulated subsidiaries, is subject to rate regulation by the FPSC and the Federal Energy Regulatory Commission (FERC). Its rates are designed to recover the cost of providing 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.

NEE's and FPL's regulatory assets and liabilities are as follows:

NEEFPL
December 31,December 31,
2021202020212020
(millions)
Regulatory assets:
Current:
Early retirement of generation facilities and transmission assets(a)$140$36$140$36
Acquisition of purchased power agreements(b)141161141161
Deferred clause and franchise expenses6982869828
Other146152132135
Total$1,125$377$1,111$360
Noncurrent:
Early retirement of generation facilities and transmission assets(a)$2,233$1,438$2,233$1,438
Acquisition of purchased power agreements(b)332473332473
Accrued asset removal costs(c)263—263—
Other1,7501,8011,5151,488
Total$4,578$3,712$4,343$3,399
Regulatory liabilities:
Current:
Deferred clause revenues$274$215$274$215
Other153049
Total$289$245$278$224
Noncurrent:
Asset retirement obligation regulatory expense difference$4,290$3,583$4,290$3,583
Accrued asset removal costs(c)7821,2067521,179
Deferred taxes4,5614,6984,4574,594
Other1,6401,2481,5541,244
Total$11,273$10,735$11,053$10,600

(a)The majority of these regulatory assets are being amortized over 20 years.

(b)The majority of these regulatory assets are being amortized over approximately 9 years.

(c)See Electric Plant, Depreciation and Amortization below.

Cost recovery clauses, which are designed to permit full recovery of certain costs and provide a return on certain assets allowed to be recovered through various clauses, include substantially all fuel, purchased power and interchange expense, certain costs associated with the acquisition and retirement of several electric generation facilities, certain construction-related costs for certain of FPL's solar generation facilities, and conservation and certain environmental-related costs. Revenues from cost recovery clauses are recorded when billed; FPL achieves matching of costs and related revenues by deferring the net underrecovery or overrecovery. Any underrecovered costs or overrecovered revenues are collected from or returned to customers in subsequent periods.

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. Regulatory assets and liabilities are discussed within various subsections below.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Base Rates Effective January 2022 through December 2025 – In December 2021, the FPSC issued a final order approving a stipulation and settlement between FPL and several intervenors in FPL's base rate proceeding (2021 rate agreement).

Key elements of the 2021 rate agreement, which is effective from January 2022 through at least December 2025, include, among other things, the following:

  • New retail base rates and charges were established for the combined utility system (including the former Gulf Power service area) resulting in the following increases in annualized retail base revenues:

◦$692 million beginning January 1, 2022, and

◦$560 million beginning January 1, 2023.

  • In addition, FPL is eligible to receive, subject to conditions specified in the 2021 rate agreement, base rate increases associated with the addition of up to 894 megawatts (MW) annually of new solar generation (through a Solar Base Rate Adjustment (SoBRA) mechanism) in each of 2024 and 2025, and may carry forward any unused MW in 2024 to 2025. FPL has agreed to an installed cost cap of $1,250 per kilowatt and will be required to demonstrate that these proposed solar facilities are cost effective.

  • FPL's authorized regulatory return on common equity (ROE) is 10.60%, with a range of 9.70% to 11.70%. If FPL's earned regulatory ROE falls below 9.70%, FPL may seek retail base rate relief. If the earned regulatory ROE rises above 11.70%, any party with standing may seek a review of FPL's retail base rates. If the average 30-year U.S. Treasury rate is 2.49% or greater over a consecutive six-month period, the authorized regulatory ROE will increase to 10.80% with a range of 9.80% to 11.80%. If triggered, the increase in the authorized regulatory ROE will not result in an incremental general base rate increase, but will apply for all other regulatory purposes, including the SoBRA mechanism.

  • Subject to certain conditions, FPL may amortize, over the term of the 2021 rate agreement, up to $1.45 billion of depreciation reserve surplus, provided that in any year of the 2021 rate agreement FPL must amortize at least enough reserve amount to maintain its minimum authorized regulatory ROE and also may not amortize any reserve amount that would result in an earned regulatory ROE in excess of its maximum authorized regulatory ROE. FPL is limited to the amortization of $200 million of depreciation reserve surplus during the first year of the 2021 rate agreement.

  • FPL is authorized to expand SolarTogether™, a voluntary community solar program that gives certain FPL electric customers an opportunity to participate directly in the expansion of solar energy and receive credits on their related monthly customer bill, by constructing an additional 1,788 MW of solar generation from 2022 through 2025, such that the total capacity of SolarTogether™ would be 3,278 MW.

  • Future storm restoration costs would be recoverable on an interim basis beginning 60 days from the filing of a cost recovery petition, but capped at an amount that produces a surcharge of no more than $4 for every 1,000 kilowatt-hour (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. See Storm Funds, Storm Reserves and Storm Cost Recovery below.

  • If federal or state permanent corporate income tax changes become effective during the term of the 2021 rate agreement, FPL will be able to prospectively adjust base rates after a review by the FPSC.

In December 2021, Floridians Against Increased Rates, Inc. and, as a group in January 2022, Florida Rising, Inc., Environmental Confederation of Southwest Florida, Inc., and League of United Latin American Citizens of Florida filed notices of appeal challenging the FPSC's final order approving the 2021 rate agreement, which notices of appeal are pending before the Florida Supreme Court.

Base Rates Effective January 2017 through December 2021 – In December 2016, the FPSC issued a final order approving a stipulation and settlement between FPL and several intervenors in FPL's base rate proceeding (2016 rate agreement). Key elements of the 2016 rate agreement, which became effective in January 2017, provided for, among other things, the following:

  • new retail base rates and charges which resulted in the following increases in annualized retail base revenues:

◦$400 million beginning January 1, 2017;

◦$211 million beginning January 1, 2018; and

◦$200 million beginning April 1, 2019 for a new approximately 1,720 MW natural gas-fired combined-cycle unit in Okeechobee County, Florida that achieved commercial operation on March 31, 2019;

  • additional base rate increases in 2018 through 2020 associated with the addition of approximately 1,200 MW of new solar generating capacity that became operational during that timeframe;

  • regulatory ROE of 10.55%, with a range of 9.60% to 11.60%;

  • subject to certain conditions, the right to reduce depreciation expense up to $1.25 billion (reserve), provided that in any year of the 2016 rate agreement FPL was required to amortize enough reserve to maintain an earned regulatory ROE within the range of 9.60% to 11.60%; and

  • an interim cost recovery mechanism for storm restoration costs. See Storm Funds, Storm Reserves and Storm Cost Recovery below.

Electric Plant, Depreciation and Amortization – The cost of additions to units of property of FPL and NEER is added to electric plant in service and other property. 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. The American Recovery and Reinvestment Act of 2009, as amended, provided for an option to

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

elect a cash grant (convertible investment tax credits (ITCs)) for certain renewable energy property (renewable property). Convertible ITCs are recorded as a reduction in property, plant and equipment on NEE's and FPL's consolidated balance sheets and are amortized as a reduction to depreciation and amortization expense over the estimated life of the related property. At December 31, 2021 and 2020, convertible ITCs, net of amortization, were approximately $755 million ($116 million at FPL) and $791 million ($122 million at FPL).

Depreciation of FPL's electric property is provided on a straight-line basis, primarily over its average remaining useful life. FPL includes in depreciation expense a provision for electric generation plant dismantlement, interim asset removal costs, accretion related to asset retirement obligations (see Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs below) and storm recovery amortization. For substantially all of FPL's property, depreciation studies are performed periodically and filed with the FPSC which result in updated depreciation rates. As part of the 2021 rate agreement, the FPSC approved new unified depreciation rates which became effective January 1, 2022. These new rates are expected to decrease depreciation expense. Reserve amortization is recorded as either an increase or decrease to accrued asset removal costs which is reflected in noncurrent regulatory assets at December 31, 2021 and noncurrent regulatory liabilities at December 31, 2020 on NEE's and FPL's consolidated balance sheets. The FPL segment used available reserve amortization to offset all of the storm restoration costs that were expensed during 2019 through 2021. See Storm Funds, Storm Reserves and Storm Cost Recovery below. FPL files a twelve-month forecast with the FPSC each year which contains a regulatory ROE intended to be earned based on the best information FPL has at that time assuming normal weather. This forecast establishes a targeted regulatory ROE. In order to earn the targeted regulatory ROE in each reporting period subject to the conditions of the effective rate agreement, reserve amortization is calculated using a trailing thirteen-month average of retail rate base and capital structure in conjunction with the trailing twelve months regulatory retail base net operating income, which primarily includes the retail base portion of base and other revenues, net of O&M, depreciation and amortization, interest and tax expenses. In general, the net impact of these income statement line items is adjusted, in part, by reserve amortization or its reversal to earn the targeted regulatory ROE. See Rate Regulation – Base Rates Effective January 2022 through December 2025 above.

NEER's electric plant in service and other property less salvage value, if any, are depreciated primarily using the straight-line method over their estimated useful lives. NEER reviews the estimated useful lives of its fixed assets on an ongoing basis. NEER's oil and gas production assets are accounted for under the successful efforts method. Depletion expenses for the acquisition of reserve rights and development costs are recognized using the unit of production method.

Nuclear Fuel – FPL and NEER have several contracts for the supply of uranium and the conversion, enrichment and fabrication of nuclear fuel. See Note 15 – 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 noncash item which represents the allowed cost of capital, including an ROE, used to finance construction projects. FPL records the portion of AFUDC attributable to borrowed funds as a reduction of interest expense and the remainder as other income. FPSC rules limit the recording of AFUDC to projects that have an estimated cost in excess of 0.5% prior to 2021 and 0.4% beginning in 2021 of a utility's plant in service balance and require more than one year to complete. FPSC rules allow construction projects below the applicable threshold as a component of rate base.

FPL's construction work in progress includes construction materials, progress payments on major equipment contracts, engineering costs, AFUDC and other costs directly associated with the construction of various projects. Upon completion of the projects, these costs are transferred to electric utility plant in service and other property. Capitalized costs associated with construction activities are charged to O&M expenses when recoverability is no longer probable.

NEER capitalizes project development costs once it is probable that such costs will be realized through the ultimate construction of the related asset or sale of development rights. At December 31, 2021 and 2020, NEER's capitalized development costs totaled approximately $831 million and $571 million, respectively, which are included in noncurrent other assets on NEE's consolidated balance sheets. These costs include land rights and other third-party costs directly associated with the development of a new project. Upon commencement of construction, these costs either are transferred to construction work in progress or remain in other assets, depending upon the nature of the cost. Capitalized development costs are charged to O&M expenses when it is probable that these costs will not be realized.

NEER's construction work in progress includes construction materials, progress payments on major equipment contracts, third-party engineering costs, capitalized interest and other costs directly associated with the construction and development of various projects. Interest expense allocated from NextEra Energy Capital Holdings, Inc. (NEECH) to NEER is based on a deemed capital structure of 70% debt and differential membership interests sold by NextEra Energy Resources' subsidiaries. Upon commencement of project operation, costs associated with construction work in progress are transferred to electric plant in service and other property. In 2019, NEER determined it was no longer moving forward with the construction of a 220 MW wind facility due to unresolved permitting issues. NEE recorded charges of approximately $72 million ($54 million after tax), which are included in taxes other than income taxes and other – net in NEE’s consolidated statements of income for the year ended December 31, 2019, primarily related to the write-off of capitalized construction costs.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. NEE's AROs relate primarily to decommissioning obligations of FPL's and NEER's nuclear units and to obligations for the dismantlement of certain of NEER's wind and solar facilities. See Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs below and Note 11.

For NEE's rate-regulated operations, including FPL, the asset retirement cost is subsequently allocated to a regulatory liability or regulatory asset using a systematic and rational method over the asset's estimated useful life. Changes in the ARO resulting from the passage of time are recognized as an increase in the carrying amount of the ARO and a decrease in the regulatory liability or regulatory asset. 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 ARO and asset retirement cost, or regulatory liability when asset retirement cost is depleted.

For NEE's non-rate regulated operations, 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 recognized as an increase in the carrying amount of the liability and as accretion expense, which is included in depreciation and amortization expense in NEE's 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.

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 and other generation plants over the expected service life of each unit based on nuclear decommissioning and other generation 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. Any differences between expense recognized for financial reporting purposes and the amount recovered through rates are reported as a regulatory asset or liability in accordance with regulatory accounting. See Rate Regulation, Electric Plant, Depreciation and Amortization, and Asset Retirement Obligations above and Note 11.

Nuclear decommissioning studies are performed at least every five years and are filed with the FPSC for approval. FPL filed updated nuclear decommissioning studies with the FPSC in December 2020. These studies reflect, among other things, the expiration dates of the operating licenses for FPL's nuclear units at the time of the studies. The 2020 studies provide for the dismantlement of Turkey Point Units Nos. 3 and 4 following the end of plant operation with decommissioning activities commencing in 2052 and 2053, respectively, and provide for St. Lucie Unit No. 1 to be mothballed beginning in 2036 with decommissioning activities to be integrated with the dismantlement of St. Lucie Unit No. 2 in 2043. These studies also assume that FPL will be storing spent fuel on site pending removal to a United States (U.S.) government facility. 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, is estimated to be approximately $10.2 billion, or $2.4 billion expressed in 2021 dollars. The ultimate costs of decommissioning reflect the application submitted to the U.S. Nuclear Regulatory Commission (NRC) for the extension of St. Lucie Units Nos. 1 and 2 licenses for an additional 20 years.

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 carried at fair value. See Note 4. Fund earnings, consisting of dividends, interest and realized gains and losses, net of taxes, are reinvested in the funds. Fund earnings, as well as any changes in unrealized gains and losses and estimated credit losses on debt securities, are not recognized in income and are reflected as a corresponding offset in the related regulatory asset or liability accounts. FPL does not currently make contributions to the decommissioning funds, other than the reinvestment of fund earnings. During 2021, 2020 and 2019 fund earnings on decommissioning funds were approximately $173 million, $132 million and $125 million, respectively. The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes.

Other generation plant dismantlement studies are performed periodically and are submitted to the FPSC for approval. Previously approved studies were effective from January 1, 2017 through December 2021 and resulted in an annual expense of $26 million which is recorded in depreciation and amortization expense in NEE's and FPL's consolidated statements of income. As part of the 2021 rate agreement, the FPSC approved a new annual expense of $48 million based on FPL's updated dismantlement studies which became effective January 1, 2022. At December 31, 2021, FPL's portion of the ultimate cost to dismantle its other generation units is approximately $2.5 billion, or $1.2 billion expressed in 2021 dollars.

NEER's AROs primarily include nuclear decommissioning liabilities for Seabrook Station (Seabrook), Duane Arnold Energy Center (Duane Arnold) and Point Beach Nuclear Power Plant (Point Beach) and dismantlement liabilities for its wind and solar

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

facilities. The liabilities are being accreted using the interest method through the date decommissioning or dismantlement activities are expected to be complete. See Note 11. At December 31, 2021 and 2020, NEER's ARO was approximately $1.1 billion and $1.2 billion, respectively, and was primarily 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 or dismantlement. 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 $9.4 billion, or $2.1 billion expressed in 2021 dollars. The ultimate cost to dismantle NEER's wind and solar facilities is estimated to be approximately $2.0 billion.

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 2019. Seabrook's decommissioning funding plan is also subject to annual review by the NDFC. Currently, there are no ongoing decommissioning funding requirements for Seabrook, Duane Arnold and Point Beach, however, the NRC, and in the case of Seabrook, the NDFC, has the authority to require additional funding in the future. NEER's portion of Seabrook's, Duane Arnold's and Point Beach's restricted funds for the payment of future expenditures to decommission these plants is included in nuclear decommissioning reserve funds, which are included in special use funds on NEE's consolidated balance sheets. Marketable securities held in the decommissioning funds are primarily carried at fair value. See Note 4. Market adjustments for debt securities result in a corresponding adjustment to other comprehensive income (OCI), except for estimated credit losses and unrealized losses on debt securities intended or required to be sold prior to recovery of the amortized cost basis, which are recognized in other – net in NEE's consolidated statements of income. Market adjustments for equity securities are recorded in change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds – net in NEE's consolidated statements of income. Fund earnings, consisting of dividends, interest and realized gains and losses are recognized in income and are reinvested in the funds. The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes.

Major Maintenance Costs – FPL expenses costs associated with planned maintenance for its non-nuclear electric generation plants as incurred. FPL recognizes costs associated with planned major nuclear maintenance in accordance with regulatory treatment. FPL defers nuclear maintenance costs for each nuclear unit’s planned outage to a regulatory asset as the costs are incurred. FPL amortizes the costs to O&M expense using the straight-line method over the period from the end of the current outage to the next planned outage where the respective work scope is performed.

NEER uses the deferral method to account for certain planned major maintenance costs. NEER's major maintenance costs for its nuclear generation units and combustion turbines are capitalized (included in noncurrent other assets on NEE's consolidated balance sheets) and amortized to O&M expense using the straight-line method over the period from the end of the current outage to the next planned outage where the respective work scope is performed.

Cash Equivalents – Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.

Restricted Cash – At December 31, 2021 and 2020, NEE had approximately $677 million ($53 million for FPL) and $441 million ($135 million for FPL), respectively, of restricted cash, of which approximately $677 million ($53 million for FPL) and $374 million ($93 million for FPL), respectively, are included in current other assets and the remaining balances are included in noncurrent other assets on NEE's and FPL's consolidated balance sheets. Restricted cash is primarily related to debt service payments and margin cash collateral requirements at NEER and bond proceeds held for construction at FPL. In addition, where offsetting positions exist, restricted cash related to margin cash collateral of $121 million is netted against derivative assets and $172 million is netted against derivative liabilities at December 31, 2021 and $183 million is netted against derivative assets and $136 million is netted against derivative liabilities at December 31, 2020. See Note 3.

Measurement of Credit Losses on Financial Instruments – Effective January 1, 2020, NEE and FPL adopted an accounting standards update that provides for a new methodology, the current expected credit loss (CECL) model, to account for credit losses for certain financial assets measured at amortized cost. On January 1, 2020, NEE recorded a reduction to retained earnings of approximately $11 million representing the cumulative effect of adopting the new standards update, which primarily related to the impact of applying the CECL model to NEER's receivables. The impact of adopting the new standards update was not material to FPL. See also Note 4 – Special Use Funds.

Allowance for Doubtful Accounts and Bad Debt – 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 four months of revenue, and includes estimates of credit and other losses based on both current events and forecasts. 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, as well as includes estimates for credit and other losses based on both current events and forecasts. When necessary, NEER uses the specific identification method for all other receivables.

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Credit Losses – NEE's credit department monitors current and forward credit exposure to counterparties and their affiliates. Prospective and existing customers are reviewed for creditworthiness based on established standards and credit quality indicators. Credit quality indicators and standards that are closely monitored include credit ratings, certain financial ratios and delinquency trends which are based off the latest available information. Customers not meeting minimum standards provide various credit enhancements or secured payment terms, such as letters of credit, the posting of margin cash collateral or use of master netting arrangements.

For the years ended December 31, 2021, 2020 and 2019, NEE recorded approximately $146 million, $94 million and $32 million of bad debt expense, including credit losses, respectively, which are included in O&M expenses in NEE’s consolidated statements of income. The amount for the year ended December 31, 2021 primarily relates to credit losses at NEER driven by the operational and energy market impacts of severe prolonged winter weather in Texas in February 2021 (February 2021 weather event). The estimate for credit losses related to the impacts of the February 2021 weather event was developed based on NEE’s assessment of the ultimate collectability of these receivables. At December 31, 2021, approximately $127 million of allowances are included in noncurrent other assets on NEE's consolidated balance sheet related to the February 2021 weather event.

Inventory – FPL values materials, supplies and fuel inventory using a weighted-average cost method. NEER's materials, supplies and fuel inventories, which include emissions allowances and renewable energy credits, are carried at the lower of weighted-average cost and net realizable value, unless evidence indicates that the weighted-average cost 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 fuel marketing and trading activities to optimize the value of electricity and fuel contracts, generation facilities and gas infrastructure assets, as well as to take advantage of projected favorable commodity price movements. Trading contracts that meet the definition of a derivative are accounted for at fair value and realized gains and losses from all trading contracts, including those where physical delivery is required, are recorded net for all periods presented. See Note 3.

Storm Funds, Storm Reserves and Storm Cost Recovery – The storm and property insurance reserve funds (storm funds) provide coverage toward FPL's storm damage costs. Marketable securities held in the storm funds are carried at fair value. See Note 4. Fund earnings, consisting of dividends, interest and realized gains and losses, net of taxes, are reinvested in the funds. Fund earnings, as well as any changes in unrealized gains and losses, are not recognized in income and are reflected as a corresponding adjustment to the storm and property insurance reserves (storm reserves). The tax effects of amounts not yet recognized for tax purposes are included in deferred income taxes. The storm funds are included in special use funds and the storm reserves in noncurrent regulatory liabilities, or in the case of a deficit, in regulatory assets on NEE's and FPL's consolidated balance sheets.

During 2021, 2020 and 2019, FPL’s service area was impacted by hurricanes and tropical storms, which resulted in the recording of incremental storm restoration costs. The FPL segment determined that it would not seek recovery of certain of such costs through a storm surcharge from customers and instead recorded such costs as storm restoration costs in NEE's and FPL’s consolidated statements of income. The FPL segment used available reserve amortization to offset all such storm restoration costs that were expensed.

Restoration costs associated with multiple storms since 2018 that impacted FPL's customers in the former Gulf Power service area are being collected from northwest Florida customers through a storm damage surcharge through late 2024 and are recorded as regulatory assets. As of December 31, 2021, the balance was $242 million, of which $92 million and $150 million are included in current regulatory assets and noncurrent regulatory assets, respectively, on NEE's and FPL's consolidated balance sheets. As of December 31, 2020, the balance was $347 million, of which $100 million and $247 million are included in current regulatory assets and noncurrent regulatory assets, respectively, on NEE's and FPL's consolidated balance sheets.

Impairment of Long-Lived Assets – NEE evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. 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.

Impairment of Equity Method Investments – NEE evaluates its equity method investments for impairment when events or changes in circumstances indicate that the fair value of the investment is less than the carrying value and the investment may be other-than-temporarily impaired. An impairment loss is required to be recognized if the impairment is deemed to be other than temporary. Investments that are other-than-temporarily impaired are written down to their estimated fair value and cannot subsequently be written back up for increases in estimated fair value. Impairment losses are recorded in equity in earnings (losses) of equity method investees in NEE’s consolidated statements of income. See Note 4 – Nonrecurring Fair Value Measurements.

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Goodwill and Other Intangible Assets – NEE's goodwill and other intangible assets are as follows:

Weighted- Average Useful LivesDecember 31,
20212020
(years)(millions)
Goodwill (by reporting unit):
FPL segment:
Florida City Gas$292$292
Other99
Gulf Power (see Note 6 – Merger of FPL and Gulf Power Company)2,6882,688
NEER segment:
Rate-regulated transmission (see Note 6 – GridLiance)1,206614
Gas infrastructure487487
Customer supply and trading9593
Generation assets5660
Corporate and Other1111
Total goodwill$4,844$4,254
Other intangible assets not subject to amortization, primarily land easements$136$135
Other intangible assets subject to amortization:
Purchased power agreements15$507$453
Other, primarily transportation contracts and customer lists23187166
Total694619
Accumulated amortization(88)(61)
Total other intangible assets subject to amortization – net$606$558

NEE's, including FPL's, goodwill relates to various acquisitions which were accounted for using the purchase method of accounting. Other intangible assets are primarily included in noncurrent other assets on NEE's consolidated balance sheets. NEE's other intangible assets subject to amortization are amortized, primarily on a straight-line basis, over their estimated useful lives. Amortization expense was approximately $25 million, $27 million and $18 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is expected to be approximately $16 million, $16 million, $18 million, $16 million and $16 million for 2022, 2023, 2024, 2025 and 2026, respectively.

Goodwill and other intangible assets not subject to amortization are assessed for impairment at least annually by applying a fair value-based analysis. Other intangible assets subject to amortization are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted future cash flows.

Pension Plan – NEE records the service cost component of net periodic benefit income to O&M expense and the non-service cost component to other net periodic benefit income in NEE's consolidated statements of income. NEE allocates net periodic pension income to its subsidiaries based on the pensionable earnings of the subsidiaries' employees. Accounting guidance requires recognition of the funded status of the pension plan in the balance sheet, with changes in the funded status recognized in other comprehensive income within shareholders' equity in the year in which the changes occur. Since NEE is the plan sponsor, and its subsidiaries do not have separate rights to the plan assets or direct obligations to their employees, this accounting guidance is reflected at NEE and not allocated to the subsidiaries. The portion of previously unrecognized actuarial gains and losses and prior service costs or credits that are estimated to be allocable to FPL as net periodic (income) cost in future periods and that otherwise would be recorded in accumulated other comprehensive income (AOCI) are classified as regulatory assets and liabilities at NEE in accordance with regulatory treatment.

Stock-Based Compensation – NEE accounts for stock-based payment transactions based on grant-date fair value. Compensation costs for awards with graded vesting are recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures of stock-based awards are recognized as they occur. See Note 14 – Stock-Based Compensation.

Retirement of Long-Term Debt – For NEE's rate-regulated subsidiaries, including FPL, gains and losses that result from differences in reacquisition cost and the net 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 their treatment in the ratemaking process. NEE's non-rate regulated subsidiaries recognize such differences in interest expense at the time of retirement.

Reference Rate Reform – In March 2020, the Financial Accounting Standards Board issued an accounting standards update which provides certain options to apply accounting guidance on contract modifications and hedge accounting as companies

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transition from the London Inter-Bank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. NEE’s and FPL’s contracts that reference LIBOR or other interbank offered rates mainly relate to debt and derivative instruments. The standards update was effective upon issuance but can be applied prospectively through December 31, 2022. During the fourth quarter of 2021, NEE began utilizing options provided by the standards update with regard to modifications to debt and debt-related hedging instruments. NEE will continue to evaluate reference rate modifications to debt and derivative instruments through December 31, 2022 and continue to apply the standards update if eligible. Although the full impact is unknown, to date there has not been a material impact to NEE.

Income Taxes – Deferred income taxes are recognized on all significant temporary differences between the financial statement and tax bases of assets and liabilities, and are presented as noncurrent on NEE's and FPL's consolidated balance sheets. In connection with the tax sharing agreement between NEE and certain of its subsidiaries, the income tax provision at each applicable 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 applicable subsidiary that generated the tax benefits. Any remaining consolidated income tax benefits or expenses are recorded at the corporate level. Included in other regulatory assets and other regulatory liabilities on NEE's and FPL's consolidated balance sheets is the revenue equivalent of the difference in deferred income taxes computed under accounting rules, as compared to regulatory accounting rules. The net regulatory liability totaled $3,780 million ($3,723 million for FPL) and $3,949 million ($3,890 million for FPL) at December 31, 2021 and 2020, 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.

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. NEER recognizes ITCs as a reduction to income tax expense when the related energy property is placed into service. FPL recognizes ITCs as a reduction to income tax expense over the depreciable life of the related energy property. At December 31, 2021 and 2020, FPL’s accumulated deferred ITCs were approximately $1,054 million and $753 million, respectively, and are included in noncurrent 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. 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. Federal tax liabilities, with the exception of certain refund claims, are effectively settled for all years prior to 2017. State and foreign tax liabilities, which have varied statutes of limitations regarding additional assessments, are generally effectively settled for years prior to 2017. At December 31, 2021, NEE had unrecognized tax benefits of approximately $125 million that, if recognized, could impact the annual effective income tax rate. 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. See Note 5.

Sales of Differential Membership Interests – Certain subsidiaries of NextEra Energy Resources sold Class B membership interests in entities that have ownership interests in wind and solar generation facilities, with generating capacity totaling approximately 11,226 MW and 1,894 MW, respectively, and battery storage capacity in operation or under construction totaling 220 MW at December 31, 2021, to third-party investors. NEE retains a controlling interest in the entities and therefore presents the Class B member interests as noncontrolling interests. Noncontrolling interests represents the portion of net assets in consolidated entities that are not owned by NEE and are reported as a component of equity in NEE’s consolidated balance sheet. The third-party investors are allocated earnings, tax attributes and cash flows in accordance with the respective limited liability company agreements. Those economics are allocated primarily to the third-party investors until they receive a targeted return (the flip date) and thereafter to NEE. NEE has the right to call the third-party interests at specified amounts if and when the flip date occurs. NEE has determined the allocation of economics between the controlling party and third-party investor should not follow the respective ownership percentages for each wind and solar project but rather the hypothetical liquidation of book value (HLBV) method based on the governing provisions in each respective limited liability company agreement. Under the HLBV method, the amounts of income and loss attributable to the noncontrolling interest reflects changes in the amount the owners would hypothetically receive at each balance sheet date under the respective liquidation provisions, assuming the net assets of these entities were liquidated at the recorded amounts, after taking into account any capital transactions, such as contributions and distributions, between the entities and the owners. At the point in time that the third-party investor, in hypothetical liquidation, would achieve its targeted return, NEE attributes the additional hypothetical proceeds to the Class B membership interests based on the call price. A loss attributable to noncontrolling interest on NEE’s consolidated statements of income represents earnings attributable to NEE.

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Redeemable Noncontrolling Interests – Certain subsidiaries of NextEra Energy Resources sold Class B membership interests in entities that have ownership interests in wind generation as well as solar and solar plus battery storage facilities to third-party investors. As specified in the respective limited liability company agreements, if, subject to certain contingencies, certain events occur, including, among others, those that would delay completion or cancel any of the underlying projects, an investor has the option to require NEER to return all or part of its investment. As these potential redemptions were outside of NEER’s control, these balances were classified as redeemable noncontrolling interests on NEE's consolidated balance sheet as of December 31, 2021. These contingencies are expected to be resolved in 2022.

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.

Leases – NEE and FPL determine if an arrangement is a lease at inception. NEE and FPL recognize a right-of-use (ROU) asset and a lease liability for operating and finance leases by recognizing and measuring leases at the commencement date based on the present value of lease payments over the lease term. For sales-type leases, the book value of the leased asset is removed from the balance sheet and a net investment in sales-type lease is recognized based on fixed payments under the contract and the residual value of the asset being leased. NEE and FPL have elected not to apply the recognition requirements to short-term leases and not to separate nonlease components from associated lease components for all classes of underlying assets except for purchased power agreements. ROU assets are included in noncurrent other assets, lease liabilities are included in current and noncurrent other liabilities and net investments in sales-type leases are included in current and noncurrent other assets on NEE’s and FPL's consolidated balance sheets. Operating lease expense is included in fuel, purchased power and interchange or O&M expenses, interest and amortization expenses associated with finance leases are included in interest expense and depreciation and amortization expense, respectively, and rental income associated with operating leases and interest income associated with sales-type leases are included in operating revenues in NEE’s and FPL’s consolidated statements of income. See Note 10.

Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests – In December 2021, subsidiaries of NextEra Energy Resources sold their 100% ownership interest, comprised of a 50% controlling ownership interest to a NEP subsidiary and a 50% noncontrolling ownership interest to a third party, in a portfolio of seven wind generation facilities and six solar generation facilities in geographically diverse locations throughout the U.S. representing a total generating capacity of 2,520 MW and 115 MW of battery storage capacity, three of which are currently under construction with expected in-service dates in the first half of 2022. Total cash proceeds for these two separate transactions totaled approximately $1.7 billion, subject to working capital and other adjustments. NEER will continue to consolidate the three projects currently under construction for accounting purposes. A NextEra Energy Resources affiliate will continue to operate the facilities included in the sales. In connection with the sales, a loss of approximately $53 million ($33 million after tax) is reflected in the gains on disposal of businesses/assets – net in NEE’s consolidated statements of income for the year ended December 31, 2021. In connection with the three facilities currently under construction, approximately $668 million of cash received was recorded as contract liabilities, which is included in current other liabilities on NEE’s consolidated balance sheet. The contract liabilities relate to sale proceeds from NEP and the third party of approximately $349 million and differential membership interests of approximately $319 million, of which $117 million is contingent on the enactment of a solar PTC by a specified date in 2022. The contract liabilities associated with the sale proceeds and the differential membership interests are also subject to the three facilities under construction achieving commercial operations by specified dates in the first half of 2022. The contract liabilities will be reversed and the sale recognized for accounting purposes if the contingencies are resolved in 2022. Otherwise, NextEra Energy Resources may be required to return proceeds related to differential membership interests and/or repurchase the facilities for up to $668 million. In addition, NextEra Energy Resources is responsible to pay for all construction costs related to the portfolio. At December 31, 2021, approximately $970 million is included in accounts payable on NEE's consolidated balance sheet and represents amounts owed by NextEra Energy Resources to NEP to reimburse NEP for construction costs.

In October 2021, subsidiaries of NextEra Energy Resources completed the sale to a NEP subsidiary of their 100% ownership interests in three wind generation facilities and one solar generation facility located in the West and Midwest regions of the U.S. with a total generating capacity of 467 MW and 33.3% of the noncontrolling ownership interests in four solar generation facilities and multiple distributed generation solar facilities located in geographically diverse locations throughout the U.S. representing a total net ownership interest in plant capacity (net generating capacity) of 122 MW for cash proceeds of approximately $563 million, plus working capital and other adjustments of $22 million. A NextEra Energy Resources affiliate will continue to operate the facilities included in the sale. In connection with the sale, a gain of approximately $94 million ($69 million after tax) was recorded in NEE's consolidated statements of income for the year ended December 31, 2021, which is included in gains on disposal of businesses/assets, and noncontrolling interests of approximately $125 million and additional paid-in capital of approximately $60 million ($43 million after tax) were recorded on NEE's consolidated balance sheet at December 31, 2021.

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In December 2020, a subsidiary of NextEra Energy Resources sold a 90% noncontrolling ownership interest, comprised of a 50% ownership interest to a third party and a 40% ownership interest to a NEP subsidiary, in a portfolio of three wind generation facilities and four solar generation facilities in geographically diverse locations throughout the U.S. representing a total net generating capacity of 900 MW. In addition, in December 2020, a subsidiary of NextEra Energy Resources also sold its 100% ownership interest in a 100 MW solar generation facility and a 30 MW battery storage facility (solar-plus-storage facility) under construction in Arizona to a NEP subsidiary. Total cash proceeds for these two separate transactions totaled approximately $656 million. NEER continued to consolidate the projects until the sale was recognized for accounting purposes, see Note 9 – NEER. A NextEra Energy Resources affiliate will continue to operate the facilities included in the sale. In connection with the 90% sale, noncontrolling interests of approximately $689 million and a reduction to additional paid-in capital of approximately $188 million ($165 million after tax) were recorded on NEE's consolidated balance sheet at December 31, 2020. In connection with the solar-plus-storage facility transaction, approximately $155 million of cash received was recorded as a contract liability, which is included in current other liabilities on NEE's consolidated balance sheet at December 31, 2020. The solar-plus-storage facility achieved commercial operations in June 2021 and the contract liability was reversed and the sale was recognized for accounting purposes.

In 2020, a subsidiary of NextEra Energy Resources completed the sale of its ownership interest in two solar generation facilities located in Spain with a total generating capacity of 99.8 MW, which resulted in net cash proceeds of approximately €111 million (approximately $121 million). In connection with the sale, a gain of approximately $270 million (pretax and after tax) was recorded in NEE's consolidated statements of income for the year ended December 31, 2020 and is included in gains on disposal of businesses/assets – net.

In 2019, subsidiaries of NextEra Energy Resources completed the sale of ownership interests in three wind generation facilities and three solar generation facilities, including noncontrolling interests in two of the solar facilities, located in the Midwest and West regions of the U.S. with a total net generating capacity of 611 MW to a NEP subsidiary for cash proceeds of approximately $1.0 billion, plus working capital of $12 million. A NextEra Energy Resources affiliate will continue to operate the facilities included in the sale. In connection with the sale, a gain of approximately $341 million ($259 million after tax) was recorded in NEE's consolidated statements of income for the year ended December 31, 2019, which is included in gains on disposal of businesses/assets – net, and noncontrolling interests of approximately $118 million were recorded on NEE's consolidated balance sheet.

2. Revenue from Contracts with Customers

Revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The promised goods or services in the majority of NEE’s contracts with customers is, at FPL, for the delivery of electricity based on tariff rates approved by the FPSC and, at NEER, for the delivery of energy commodities and the availability of electric capacity and electric transmission.

FPL and NEER generate substantially all of NEE’s operating revenues, which primarily include revenues from contracts with customers, as well as derivative and lease transactions at NEER. For the vast majority of contracts with customers, NEE believes that the obligation to deliver energy, capacity or transmission is satisfied over time as the customer simultaneously receives and consumes benefits as NEE performs. In 2021, 2020 and 2019, NEE’s revenue from contracts with customers was approximately $18.8 billion ($14.1 billion at FPL), $17.0 billion ($13.0 billion at FPL) and $17.5 billion ($13.6 billion at FPL), respectively. NEE's and FPL's receivables are primarily associated with revenues earned from contracts with customers, as well as derivative and lease transactions at NEER, and consist of both billed and unbilled amounts, which are recorded in customer receivables and other receivables on NEE's and FPL's consolidated balance sheets. Receivables represent unconditional rights to consideration and reflect the differences in timing of revenue recognition and cash collections. For substantially all of NEE's and FPL's receivables, regardless of the type of revenue transaction from which the receivable originated, customer and counterparty credit risk is managed in the same manner and the terms and conditions of payment are similar. During 2021, NEER did not recognize approximately $180 million of revenue related to reimbursable expenses from a counterparty that are deemed not probable of collection. These reimbursable expenses arose from the impacts of the February 2021 weather event. These determinations were made based on assessments of the counterparty's creditworthiness and NEER's ability to collect.

FPL – FPL’s revenues are derived primarily from tariff-based sales that result from providing electricity to retail customers in Florida with no defined contractual term. Electricity sales to retail customers account for approximately 90% of FPL’s 2021 operating revenues, the majority of which are to residential customers. FPL’s retail customers receive a bill monthly based on the amount of monthly kWh usage with payment due monthly. For these types of sales, FPL recognizes revenue as electricity is delivered and billed to customers, as well as an estimate for electricity delivered and not yet billed. The billed and unbilled amounts represent the value of electricity delivered to the customer. At December 31, 2021 and 2020, FPL's unbilled revenues amounted to approximately $583 million and $454 million, respectively, and are included in customer receivables on NEE’s and FPL’s consolidated balance sheets. Certain contracts with customers contain a fixed price which primarily relate to certain power purchase agreements with maturity dates through 2041. As of December 31, 2021, FPL expects to record approximately $400 million of revenues related to the fixed capacity price components of such contracts over the remaining terms of the related

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contracts as the capacity is provided. These contracts also contain a variable price component for energy usage which FPL recognizes as revenue as the energy is delivered based on rates stipulated in the respective contracts.

NEER – NEER’s revenue from contracts with customers is derived primarily from the sale of energy commodities, electric capacity and electric transmission. For these types of sales, NEER recognizes revenue as energy commodities are delivered and as electric capacity and electric transmission are made available, consistent with the amounts billed to customers based on rates stipulated in the respective contracts as well as an accrual for amounts earned but not yet billed. The amounts billed and accrued represent the value of energy or transmission delivered and/or the capacity of energy or transmission available to the customer. Revenues yet to be earned under these contracts, which have maturity dates ranging from 2022 to 2053, will vary based on the volume of energy or transmission delivered and/or available. NEER’s customers typically receive bills monthly with payment due within 30 days. Certain contracts with customers contain a fixed price which primarily relate to electric capacity sales associated with independent system operator annual auctions through 2025 and certain power purchase agreements with maturity dates through 2034. As of December 31, 2021, NEER expects to record approximately $735 million of revenues related to the fixed price components of such contracts over the remaining terms of the related contracts as the capacity is provided.

3. Derivative Instruments

NEE and FPL use derivative instruments (primarily swaps, options, futures and forwards) to manage the physical and financial risks inherent in the purchase and sale of fuel and electricity, as well as interest rate and foreign currency exchange rate risk associated primarily with outstanding and expected future debt issuances and borrowings, and to optimize the value of NEER's power generation and gas infrastructure assets. NEE and FPL do not utilize hedge accounting for their cash flow and fair value hedges.

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

Derivative instruments, when required to be marked to market, are recorded on NEE's and FPL's 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 applicable fuel and purchased power cost recovery clause (fuel clause). For NEE's non-rate regulated operations, predominantly NEER, essentially all changes in the derivatives' fair value for power purchases and sales, fuel sales and trading activities are recognized on a net basis in operating revenues and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEE's consolidated statements of income. Settlement gains and losses are included within the line items in the consolidated statements of income to which they relate. Transactions for which physical delivery is deemed not to have occurred are presented on a net basis in the consolidated statements of income. For commodity derivatives, NEE believes that, where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes. Settlements related to derivative instruments are primarily recognized in net cash provided by operating activities in NEE's and FPL's consolidated statements of cash flows.

For interest rate and foreign currency derivative instruments, all changes in the derivatives' fair value, as well as the transaction gain or loss on foreign denominated debt, are recognized in interest expense and the equity method investees' related activity is recognized in equity in earnings (losses) of equity method investees in NEE's consolidated statements of income. In addition, for the years ended December 31, 2020 and 2019, NEE reclassified from AOCI approximately $26 million ($6 million after tax), of which $23 million was reclassified to gains on disposal of businesses/assets – net (see Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests) with the balance to interest expense, and $11 million ($8 million after tax) to

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interest expense, respectively, because it became probable that related future transactions being hedged would not occur. At December 31, 2021, NEE's AOCI included amounts related to discontinued interest rate cash flow hedges with expiration dates through March 2035 and foreign currency cash flow hedges with expiration dates through September 2030. Approximately $6 million of net losses included in AOCI at December 31, 2021 are expected to be reclassified into earnings within the next 12 months as the principal and/or interest payments are made. Such amounts assume no change in scheduled principal payments.

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

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

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

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

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

In all cases where NEE and FPL use significant unobservable inputs for the valuation of a commodity contract, consideration is given to the assumptions that market participants would use in valuing the asset or liability. The primary input to the valuation models for commodity contracts is the forward commodity curve for the respective instruments. Other inputs include, but are not limited to, assumptions about market liquidity, volatility, correlation and contract duration as more fully described below in Significant Unobservable Inputs Used in Recurring Fair Value Measurements. In instances where the reference markets are deemed to be inactive or do not have transactions for a similar contract, the derivative assets and liabilities may be valued using significant other observable inputs and potentially significant unobservable inputs. In such instances, the valuation for these contracts is established using techniques including extrapolation from or interpolation between actively traded contracts, or estimated basis adjustments from liquid trading points. NEE and FPL regularly evaluate and validate the inputs used to determine fair value by a number of methods, consisting of various market price verification procedures, including the use of pricing services and multiple broker quotes to support the market price of the various commodities. In all cases where there are assumptions and models used to generate inputs for valuing derivative assets and liabilities, the review and verification of the assumptions, models and changes to the models are undertaken by individuals that are independent of those responsible for estimating fair value.

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

The tables below present NEE's and FPL's gross derivative positions at December 31, 2021 and December 31, 2020, as required by disclosure rules. However, the majority of the underlying contracts are subject to master netting agreements and generally would not be contractually settled on a gross basis. Therefore, the tables below also present the derivative positions on a net basis, which reflect the offsetting of positions of certain transactions within the portfolio, the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral, as well as the location of the net derivative position on the consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021
Level 1Level 2Level 3Netting**(a)**Total
(millions)
Assets:
NEE:
Commodity contracts$1,896$5,082$1,401$(6,622)$1,757
Interest rate contracts$—$106$—$(30)76
Foreign currency contracts$—$8$—$(17)(9)
Total derivative assets$1,824
FPL – commodity contracts$—$3$13$(3)$13
Liabilities:
NEE:
Commodity contracts$2,571$4,990$1,231$(6,594)$2,198
Interest rate contracts$—$739$—$(30)709
Foreign currency contracts$—$86$—$(17)69
Total derivative liabilities$2,976
FPL – commodity contracts$—$8$5$(3)$10
Net fair value by NEE balance sheet line item:
Current derivative assets(b)$689
Noncurrent derivative assets(c)1,135
Total derivative assets$1,824
Current derivative liabilities(d)$1,263
Noncurrent derivative liabilities(e)1,713
Total derivative liabilities$2,976
Net fair value by FPL balance sheet line item:
Current other assets$13
Current other liabilities$9
Noncurrent other liabilities1
Total derivative liabilities$10

(a)Includes the effect of the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral payments and receipts. NEE and FPL also have contract settlement receivable and payable balances that are subject to the master netting arrangements but are not offset within the consolidated balance sheets and are recorded in customer receivables – net and accounts payable, respectively.

(b)Reflects the netting of approximately $150 million in margin cash collateral received from counterparties.

(c)Reflects the netting of approximately $56 million in margin cash collateral received from counterparties.

(d)Reflects the netting of approximately $6 million in margin cash collateral paid to counterparties.

(e)Reflects the netting of approximately $172 million in margin cash collateral paid to counterparties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2020
Level 1Level 2Level 3Netting(a)Total
(millions)
Assets:
NEE:
Commodity contracts$919$1,881$1,679$(2,325)$2,154
Interest rate contracts$—$81$—$(41)40
Foreign currency contracts$—$57$—$(34)23
Total derivative assets$2,217
FPL – commodity contracts$—$1$2$—$3
Liabilities:
NEE:
Commodity contracts$1,004$1,468$305$(2,277)$500
Interest rate contracts$—$1,042$—$(41)1,001
Foreign currency contracts$—$43$—$(34)9
Total derivative liabilities$1,510
FPL – commodity contracts$—$—$3$—$3
Net fair value by NEE balance sheet line item:
Current derivative assets$570
Noncurrent derivative assets(b)1,647
Total derivative assets$2,217
Current derivative liabilities(c)$311
Noncurrent derivative liabilities1,199
Total derivative liabilities$1,510
Net fair value by FPL balance sheet line item:
Current other assets$3
Current other liabilities$2
Noncurrent other liabilities1
Total derivative liabilities$3

(a)Includes the effect of the contractual ability to settle contracts under master netting arrangements and the netting of margin cash collateral payments and receipts. NEE and FPL also have contract settlement receivable and payable balances that are subject to the master netting arrangements but are not offset within the consolidated balance sheets and are recorded in customer receivables – net and accounts payable, respectively.

(b)Reflects the netting of approximately $184 million in margin cash collateral received from counterparties.

(c)Reflects the netting of approximately $136 million in margin cash collateral paid to counterparties.

At December 31, 2021 and 2020, NEE had approximately $56 million and $6 million (none at FPL), respectively, in margin cash collateral received from counterparties that was not offset against derivative assets in the above presentation. These amounts are included in current other liabilities on NEE's consolidated balance sheets. Additionally, at December 31, 2021 and 2020, NEE had approximately $673 million and $315 million (none at FPL), respectively, in margin cash collateral paid to counterparties that was not offset against derivative assets or liabilities in the above presentation. These amounts are included in current other assets on NEE's consolidated balance sheets.

Significant Unobservable Inputs Used in Recurring Fair Value Measurements – The valuation of certain commodity contracts requires the use of significant unobservable inputs. All forward price, implied volatility, implied correlation and interest rate inputs used in the valuation of such contracts are directly based on third-party market data, such as broker quotes and exchange settlements, when that data is available. If third-party market data is not available, then industry standard methodologies are used to develop inputs that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Observable inputs, including some forward prices, implied volatilities and interest rates used for determining fair value are updated daily to reflect the best available market information. Unobservable inputs which are related to observable inputs, such as illiquid portions of forward price or volatility curves, are updated daily as well, using industry standard techniques such as interpolation and extrapolation, combining observable forward inputs supplemented by historical market and other relevant data. Other unobservable inputs, such as implied correlations, block-to-hourly price shaping, customer migration rates from full requirements contracts and some implied volatility curves, are modeled using proprietary models based on historical data and industry standard techniques.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The significant unobservable inputs used in the valuation of NEE's commodity contracts categorized as Level 3 of the fair value hierarchy at December 31, 2021 are as follows:

Transaction TypeFair Value at December 31, 2021Valuation Technique(s)Significant Unobservable InputsRangeWeighted-average(a)
AssetsLiabilities
(millions)
Forward contracts – power$433$204Discounted cash flowForward price (per MWh(b))$(5)—$140$37
Forward contracts – gas19131Discounted cash flowForward price (per MMBtu(c))$2—$15$3
Forward contracts – congestion298Discounted cash flowForward price (per MWh(b))$(10)—$45$—
Options – power52(1)Option modelsImplied correlations32%—86%52%
Implied volatilities8%—368%81%
Options – primarily gas356347Option modelsImplied correlations32%—86%52%
Implied volatilities17%—295%36%
Full requirements and unit contingent contracts200566Discounted cash flowForward price (per MWh(b))$2—$308$64
Customer migration rate(d)—%—19%2%
Forward contracts – other14076
Total$1,401$1,231

(a)Unobservable inputs were weighted by volume.

(b)Megawatt-hours

(c)One million British thermal units

(d)Applies only to full requirements contracts.

The sensitivity of NEE's fair value measurements to increases (decreases) in the significant unobservable inputs is as follows:

Significant Unobservable InputPositionImpact on Fair Value Measurement
Forward pricePurchase power/gasIncrease (decrease)
Sell power/gasDecrease (increase)
Implied correlationsPurchase optionDecrease (increase)
Sell optionIncrease (decrease)
Implied volatilitiesPurchase optionIncrease (decrease)
Sell optionDecrease (increase)
Customer migration rateSell power(a)Decrease (increase)

————————————

(a)Assumes the contract is in a gain position.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The reconciliation of changes in the fair value of derivatives that are based on significant unobservable inputs is as follows:

Years Ended December 31,
202120202019
NEEFPLNEEFPLNEEFPL
(millions)
Fair value of net derivatives based on significant unobservable inputs at December 31 of prior year$1,374$(1)$1,207$(8)$647$(36)
Realized and unrealized gains (losses):
Included in earnings(a)(1,488)—547—923—
Included in other comprehensive income (loss)(b)——1—5—
Included in regulatory assets and liabilities882211
Purchases243—191—141—
Sales(c)——114———
Settlements2591(562)6(356)25
Issuances(196)—(123)—(87)—
Transfers in(d)2—18(1)(5)—
Transfers out(d)(32)—(21)—(62)2
Fair value of net derivatives based on significant unobservable inputs at December 31$170$8$1,374$(1)$1,207$(8)
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) relating to derivatives held at the reporting date(e)$(924)$—$317$—$611$—

(a)For the years ended December 31, 2021, 2020 and 2019, realized and unrealized gains (losses) of approximately $(1,488) million, $569 million and $956 million are included in the consolidated statements of income in operating revenues and the balance is included in interest expense.

(b)Included in net unrealized gains (losses) on foreign currency translation in the consolidated statements of comprehensive income.

(c)See Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests.

(d)Transfers into Level 3 were a result of decreased observability of market data. Transfers from Level 3 to Level 2 were a result of increased observability of market data.

(e)For the years ended December 31, 2021, 2020 and 2019, unrealized gains (losses) of approximately $(924) million, $317 million and $638 million are included in the consolidated statements of income in operating revenues and the balance is included in interest expense.

Income Statement Impact of Derivative Instruments – Gains (losses) related to NEE's derivatives are recorded in NEE's consolidated statements of income as follows:

Years Ended December 31,
202120202019
(millions)
Commodity contracts(a) – operating revenues$(2,710)$352$762
Foreign currency contracts – interest expense(89)8(7)
Interest rate contracts – interest expense264(421)(699)
Losses reclassified from AOCI:
Interest rate contracts(b)(7)(35)(32)
Foreign currency contracts – interest expense(3)(3)(4)
Total$(2,545)$(99)$20

(a)For the years ended December 31, 2021, 2020 and 2019, FPL recorded gains of approximately $7 million, $6 million and $9 million, respectively, related to commodity contracts as regulatory liabilities on its consolidated balance sheets.

(b)For the year ended December 31, 2020, approximately $23 million was reclassified to gains on disposal of businesses/assets – net (see Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests); remaining balances were reclassified to interest expense on NEE's consolidated statements of income.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2021December 31, 2020
Commodity TypeNEEFPLNEEFPL
(millions)
Power(103)MWh—(90)MWh—
Natural gas(1,290)MMBtu91MMBtu(607)MMBtu87MMBtu
Oil(33)barrels—(6)barrels—

At December 31, 2021 and 2020, NEE had interest rate contracts with a notional amount of approximately $11.2 billion and a net notional amount of approximately $10.5 billion, respectively, and foreign currency contracts with a notional amount of approximately $1.0 billion and $1.0 billion, respectively.

Credit-Risk-Related Contingent Features – Certain derivative instruments contain credit-risk-related contingent features including, among other things, the requirement to maintain an investment grade credit rating from specified credit rating agencies and certain financial ratios, as well as credit-related cross-default and material adverse change triggers. At December 31, 2021 and 2020, the aggregate fair value of NEE's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $4.1 billion ($12 million for FPL) and $1.9 billion ($3 million for FPL), respectively.

If the credit-risk-related contingent features underlying these derivative agreements were triggered, certain subsidiaries of NEE, including FPL, could be required to post collateral or settle contracts according to contractual terms which generally allow netting of contracts in offsetting positions. Certain derivative contracts contain multiple types of credit-related triggers. To the extent these contracts contain a credit ratings downgrade trigger, the maximum exposure is included in the following credit ratings collateral posting requirements. If FPL's and NEECH's credit ratings were downgraded to BBB/Baa2 (a three level downgrade for FPL and a one level downgrade for NEECH from the current lowest applicable rating), applicable NEE subsidiaries would be required to post collateral such that the total posted collateral would be approximately $645 million (none at FPL) and $80 million (none at FPL) at December 31, 2021 and 2020, respectively. If FPL's and NEECH's credit ratings were downgraded to below investment grade, applicable NEE subsidiaries would be required to post additional collateral such that the total posted collateral would be approximately $2.7 billion ($35 million at FPL) and $1.2 billion ($75 million at FPL) at December 31, 2021 and 2020, respectively. Some derivative contracts do not contain credit ratings downgrade triggers, but do contain provisions that require certain financial measures be maintained and/or have credit-related cross-default triggers. In the event these provisions were triggered, applicable NEE subsidiaries could be required to post additional collateral of up to approximately $1,040 million ($145 million at FPL) and $880 million ($75 million at FPL) at December 31, 2021 and 2020, respectively.

Collateral related to derivatives may be posted in the form of cash or credit support in the normal course of business. At December 31, 2021 and 2020, applicable NEE subsidiaries have posted approximately $84 million (none at FPL) and $2 million (none at FPL), respectively, in cash and $1,060 million (none at FPL) and $66 million (none at FPL), respectively, in the form of letters of credit each of which could be applied toward the collateral requirements described above. FPL and NEECH have capacity under their credit facilities generally in excess of the collateral requirements described above that would be available to support, among other things, derivative activities. Under the terms of the credit facilities, maintenance of a specific credit rating is not a condition to drawing on these credit facilities, although there are other conditions to drawing on these credit facilities.

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

4. Non-Derivative Fair Value Measurements

Non-derivative fair value measurements consist of NEE’s and FPL’s cash equivalents and restricted cash equivalents, special use funds and other investments. The fair value of these financial assets is determined by using the valuation techniques and inputs as described in Note 3 – Fair Value Measurements of Derivative Instruments as well as below.

Cash Equivalents and Restricted Cash Equivalents – NEE and FPL hold investments in money market funds. The fair value of these funds is estimated using a market approach based on current observable market prices.

Special Use Funds and Other Investments – NEE and FPL hold primarily debt and equity securities directly, as well as indirectly through commingled funds. Substantially all directly held equity securities are valued at their quoted market prices. For directly held debt securities, multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or issue of each security. Commingled funds, which are similar to mutual funds, are maintained by banks or investment companies and hold certain investments in accordance with a stated set of objectives. The fair value of 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recurring Non-Derivative Fair Value Measurements – NEE's and FPL's financial assets and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:

December 31, 2021
Level 1Level 2Level 3Total
(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE – equity securities$176$—$—$176
FPL – equity securities$58$—$—$58
Special use funds:(b)
NEE:
Equity securities$2,538$2,973(c)$—$5,511
U.S. Government and municipal bonds$770$75$—$845
Corporate debt securities$7$955$—$962
Mortgage-backed securities$—$431$—$431
Other debt securities$2$265$—$267
FPL:
Equity securities$862$2,690(c)$—$3,552
U.S. Government and municipal bonds$624$44$—$668
Corporate debt securities$6$720$—$726
Mortgage-backed securities$—$313$—$313
Other debt securities$2$225$—$227
Other investments:(d)
NEE:
Equity securities$70$2$—$72
Debt securities$111$162$12$285
FPL – equity securities$13$—$—$13

(a)Includes restricted cash equivalents of approximately $56 million ($53 million for FPL) in current other assets on the consolidated balance sheets.

(b)Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at Other than Fair Value below.

(c)Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.

(d)Included in noncurrent other assets on NEE's and FPL's consolidated balance sheets.

December 31, 2020
Level 1Level 2Level 3Total
(millions)
Assets:
Cash equivalents and restricted cash equivalents:(a)
NEE – equity securities$742$—$—$742
FPL – equity securities$137$—$—$137
Special use funds:(b)
NEE:
Equity securities$2,237$2,489(c)$—$4,726
U.S. Government and municipal bonds$590$127$—$717
Corporate debt securities$1$870$—$871
Mortgage-backed securities$—$422$—$422
Other debt securities$—$124$—$124
FPL:
Equity securities$752$2,260(c)$—$3,012
U.S. Government and municipal bonds$449$87$—$536
Corporate debt securities$—$627$—$627
Mortgage-backed securities$—$335$—$335
Other debt securities$—$119$—$119
Other investments:(d)
NEE:
Equity securities$62$—$—$62
Debt securities$91$127$—$218
FPL - equity securities$12$—$—$12

(a)Includes restricted cash equivalents of approximately $111 million ($91 million for FPL) in current other assets and $42 million ($42 million for FPL) in noncurrent other assets on the consolidated balance sheets.

(b)Excludes investments accounted for under the equity method and loans not measured at fair value on a recurring basis. See Fair Value of Financial Instruments Recorded at Other than Fair Value below.

(c)Primarily invested in commingled funds whose underlying securities would be Level 1 if those securities were held directly by NEE or FPL.

(d)Included in noncurrent other assets on NEE's and FPL's consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent Consideration – At December 31, 2021, NEER had approximately $261 million of contingent consideration liabilities which are included in noncurrent other liabilities on NEE's consolidated balance sheet. The liabilities relate to contingent consideration for the completion of capital expenditures for future development projects in connection with the acquisition of GridLiance Holdco, LP and GridLiance GP, LLC (see Note 6 – GridLiance). NEECH guarantees the contingent consideration obligations under the GridLiance acquisition agreements. Significant inputs and assumptions used in the fair value measurement, some of which are Level 3 and require judgement, include the projected timing and amount of future cash flows, estimated probability of completing future development projects as well as discount rates.

Fair Value of Financial Instruments Recorded at Other than Fair Value – The carrying amounts of commercial paper and other short-term debt approximate their fair values. The carrying amounts and estimated fair values of other financial instruments recorded at other than fair value are as follows:

December 31, 2021December 31, 2020
Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
(millions)
NEE:
Special use funds(a)$906$907$919$920
Other investments(b)$102$102$29$29
Long-term debt, including current portion$52,745$57,290(c)$46,082$51,525(c)
FPL:
Special use funds(a)$672$672$718$719
Long-term debt, including current portion$18,510$21,379(c)$17,236$21,178(c)

(a)Primarily represents investments accounted for under the equity method and loans not measured at fair value on a recurring basis (Level 2).

(b)Included in noncurrent other assets on NEE's consolidated balance sheets.

(c)At December 31, 2021 and 2020, substantially all is Level 2 for NEE and FPL.

Special Use Funds – The special use funds noted above and those carried at fair value (see Recurring Non-Derivative Fair Value Measurements above) consist of NEE's nuclear decommissioning fund assets of approximately $8,846 million and $7,703 million at December 31, 2021 and 2020, respectively, ($6,082 million and $5,271 million, respectively, for FPL) and FPL's storm fund assets of $76 million and $76 million at December 31, 2021 and 2020, respectively. The investments held in the special use funds consist of equity and available for sale debt securities which are primarily carried at estimated fair value. The amortized cost of debt securities is approximately $2,438 million and $2,009 million at December 31, 2021 and 2020, respectively ($1,877 million and $1,521 million, respectively, for FPL). Debt securities included in the nuclear decommissioning funds have a weighted-average maturity at December 31, 2021 of approximately eight years at both NEE and FPL. FPL's storm fund primarily consists of debt securities with a weighted-average maturity at December 31, 2021 of approximately one year. The cost of securities sold is determined using the specific identification method.

Effective January 1, 2020, NEE and FPL adopted an accounting standards update that provides a modified version of the other-than-temporary impairment model for debt securities. The new available for sale debt security impairment model no longer allows consideration of the length of time during which the fair value has been less than its amortized cost basis when determining whether a credit loss exists. Credit losses are required to be presented as an allowance rather than as a write-down of securities not intended to be sold or required to be sold. NEE and FPL adopted this model prospectively. See Note 1 – Measurement of Credit Losses on Financial Instruments.

For FPL's special use funds, changes in fair value of debt and equity securities, including any estimated credit losses of debt securities, result in a corresponding adjustment to the related regulatory asset or liability accounts, consistent with regulatory treatment. For NEE's non-rate regulated operations, changes in fair value of debt securities result in a corresponding adjustment to OCI, except for estimated credit losses and unrealized losses on debt securities intended or required to be sold prior to recovery of the amortized cost basis, which are recognized in other – net in NEE's consolidated statements of income. Changes in fair value of equity securities are recorded in change in unrealized gains (losses) on equity securities held in NEER's nuclear decommissioning funds – net in NEE’s consolidated statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrealized gains (losses) recognized on equity securities held at December 31, 2021, 2020 and 2019 are as follows:

NEEFPL
Years Ended December 31,Years Ended December 31,
202120202019202120202019
(millions)
Unrealized gains$981$627$780$652$444$510

Realized gains and losses and proceeds from the sale or maturity of available for sale debt securities are as follows:

NEEFPL
Years Ended December 31,Years Ended December 31,
202120202019202120202019
(millions)
Realized gains$78$110$68$59$83$44
Realized losses$73$70$48$57$56$29
Proceeds from sale or maturity of securities$1,831$2,541$3,005$1,330$2,162$2,539

The unrealized gains and unrealized losses on available for sale debt securities and the fair value of available for sale debt securities in an unrealized loss position are as follows:

NEEFPL
December 31,December 31,
2021202020212020
(millions)
Unrealized gains$76$134$63$104
Unrealized losses(a)$19$9$15$9
Fair value$1,100$201$857$150

(a)Unrealized losses on available for sale debt securities in an unrealized loss position for greater than twelve months at December 31, 2021 and 2020 were not material to NEE or FPL.

Regulations issued by the FERC and the NRC provide general risk management guidelines to protect nuclear decommissioning funds and to allow such funds to earn a reasonable return. The FERC regulations prohibit, among other investments, investments in any securities of NEE or its subsidiaries, affiliates or associates, excluding investments tied to market indices or mutual funds. Similar restrictions applicable to the decommissioning funds for NEER's nuclear plants are included in the NRC operating licenses for those facilities or in NRC regulations applicable to NRC licensees not in cost-of-service environments. With respect to the decommissioning fund for Seabrook, decommissioning fund contributions and withdrawals are also regulated by the NDFC pursuant to New Hampshire law.

The nuclear decommissioning reserve funds are managed by investment managers who must comply with the guidelines of NEE and FPL and the rules of the applicable regulatory authorities. The funds' assets are invested giving consideration to taxes, liquidity, risk, diversification and other prudent investment objectives.

Nonrecurring Fair Value Measurements – NEE tests its equity method investments for impairment whenever events or changes in circumstances indicate that the investment may be impaired. During the preparation of NEE's December 31, 2020 financial statements, it was determined that NextEra Energy Resources' investment in Mountain Valley Pipeline, LLC (Mountain Valley Pipeline) accounted for under the equity method of accounting was other-than-temporarily impaired. The impairment is the result of continued legal and regulatory challenges that have resulted in substantial delays in achieving commercial operation and increased costs to complete construction. More specifically at the end of 2020 and into early 2021, developments in the legal, regulatory and political environment caused NextEra Energy Resources to consider the investment impaired and the impairment to be other than temporary. The challenges included legal challenges to the various permits needed to complete construction and the regulatory approvals received, regulatory challenges related to alternative construction plans and the extended construction period, and the political and environmental challenges with the construction of an interstate pipeline. Accordingly, NextEra Energy Resources performed a fair value analysis based on the market approach to determine the amount of the impairment. The challenges to complete construction and the resulting economic outlook for the pipeline were considered in determining the magnitude of the other-than-temporary impairment. Based on the fair value analysis, the equity method investment with a carrying amount of approximately $1.9 billion was written down to its estimated fair value of approximately $400 million as of December 31, 2020, resulting in an impairment charge of $1.5 billion (or $1.2 billion after tax), which is recorded in equity in

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earnings (losses) of equity method investees in NEE’s consolidated statements of income for the year ended December 31, 2020.

The fair value estimate was based on a probability-weighted earnings before interest, taxes, depreciation and amortization (EBITDA) multiple valuation technique using a market participant view of the potential different outcomes for the investment. As part of the valuation, NextEra Energy Resources used observable inputs where available, including the EBITDA multiples of recent pipeline transactions. Significant unobservable inputs (Level 3), including the probabilities assigned to the different potential outcomes, the forecasts of operating revenues and costs, and the projected capital expenditures to complete the project, were also used in the estimation of fair value. An increase in the revenue forecasts, a decrease in the projected operating or capital expenditures or an increase in the probability assigned to the full pipeline being completed would result in an increased fair market value. Changes in the opposite direction of those unobservable inputs would result in a decreased fair market value.

On February 2, 2022, the U.S. Court of Appeals for the Fourth Circuit (the 4th Circuit) vacated and remanded Mountain Valley Pipeline’s Biological Opinion issued by the U.S. Fish and Wildlife Service. While NextEra Energy Resources continues to evaluate options and next steps with its joint venture partners, this event along with the 4th Circuit vacatur and remand of the U.S. Forest Service right-of-way grant on January 25, 2022 caused NextEra Energy Resources to re-evaluate its investment in Mountain Valley Pipeline for further other-than-temporary impairment, which evaluation coincided with the preparation of NEE's December 31, 2021 financial statements. As a result of this evaluation, it was determined that the continued legal and regulatory challenges have resulted in a very low probability of pipeline completion. Accordingly, NextEra Energy Resources updated its fair value estimate using the same probability-weighted EBITDA multiple valuation technique using a market participant view of the potential different outcomes for the investment as discussed above. Based on this fair value analysis, NextEra Energy Resources recorded an impairment charge in the first quarter of 2022 of approximately $0.8 billion ($0.6 billion after tax). This impairment charge resulted in the complete write off of NextEra Energy Resources’ equity method investment carrying amount of approximately $0.6 billion, as well as the recording of a liability of approximately $0.2 billion which reflects NextEra Energy Resources’ share of estimated future ARO costs.

5. Income Taxes

The components of income taxes are as follows:

NEEFPL
Years Ended December 31,Years Ended December 31,
202120202019202120202019
(millions)
Federal:
Current$(26)$105$167$85$16$390
Deferred311(148)115545474(41)
Total federal285(43)282630490349
State:
Current(62)182313250
Deferred1256914320715685
Total state6387166208188135
Total income taxes$348$44$448$838$678$484

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A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:

NEEFPL
Years Ended December 31,Years Ended December 31,
202120202019202120202019
Statutory federal income tax rate21.0%21.0%21.0%21.0%21.0%21.0%
Increases (reductions) resulting from:
State income taxes – net of federal income tax benefit(a)1.62.83.44.14.23.5
Taxes attributable to noncontrolling interests5.04.82.1———
PTCs and ITCs – NEER(10.3)(11.8)(7.2)———
Amortization of deferred regulatory credit(b)(4.4)(7.2)(6.2)(3.5)(4.9)(8.0)
Foreign operations(c)0.2(2.4)————
Other – net(2.1)(5.4)(1.4)(0.9)(1.3)(0.4)
Effective income tax rate11.0%1.8%11.7%20.7%19.0%16.1%

(a)NEE's 2019 amount reflects a valuation allowance of approximately $48 million related to deferred state tax credits.

(b)2019 reflects an adjustment of approximately $83 million recorded by FPL to reduce income tax expense for the cumulative amortization of excess deferred income taxes from January 1, 2018 as a result of the FPSC's order in connection with its review of impacts associated with the Tax Cuts and Jobs Act. One of the provisions of the order requires FPL to amortize approximately $870 million of its excess deferred income taxes over a period not to exceed ten years.

(c)The 2020 gain on sale of the Spain solar projects was not taxable for federal and state income tax purposes (see Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests).

The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:

NEEFPL
December 31,December 31,
2021202020212020
(millions)
Deferred tax liabilities:
Property-related$10,018$10,065$7,831$7,548
Pension564437425394
Investments in partnerships and joint ventures2,7832,23833
Other2,0921,7301,232862
Total deferred tax liabilities15,45714,4709,4918,807
Deferred tax assets and valuation allowance:
Decommissioning reserves296290296290
Net operating loss carryforwards33029923
Tax credit carryforwards4,6463,8591824
ARO and accrued asset removal costs199347126272
Regulatory liabilities1,4211,3801,3971,356
Other733755351363
Valuation allowance(a)(282)(289)——
Net deferred tax assets7,3436,6412,3542,288
Net deferred income taxes$8,114$7,829$7,137$6,519

(a)Reflects valuation allowances related to deferred state tax credits and state operating loss carryforwards.

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Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:

NEEFPL
December 31,December 31,
2021202020212020
(millions)
Noncurrent other assets$196$191$—$—
Deferred income taxes – noncurrent liabilities(8,310)(8,020)(7,137)(6,519)
Net deferred income taxes$(8,114)$(7,829)$(7,137)$(6,519)

The components of NEE's deferred tax assets relating to net operating loss carryforwards and tax credit carryforwards at December 31, 2021 are as follows:

AmountExpiration Dates
(millions)
Net operating loss carryforwards:
Federal$51(a)2034 – 2038
State2642022 – 2041
Foreign152022 – 2041
Net operating loss carryforwards$330
Tax credit carryforwards:
Federal$4,2962030 – 2041
State345(b)2022 – 2046
Foreign52035 – 2041
Tax credit carryforwards$4,646

(a)Includes $49 million of net operating loss carryforwards with an indefinite expiration period.

(b)Includes $191 million of ITC carryforwards with an indefinite expiration period.

6**. Acquisitions**

Gulf Power Company – On January 1, 2019, NEE acquired the outstanding common shares of Gulf Power Company, a rate-regulated electric utility under the jurisdiction of the FPSC, which served approximately 470,000 customers in eight counties throughout northwest Florida, had approximately 9,500 miles of transmission and distribution lines and owned approximately 2,300 MW of net generating capacity. The purchase price included approximately $4.44 billion in cash consideration and the assumption of approximately $1.3 billion of Gulf Power debt.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed on January 1, 2019 based on their fair value. The approval by the FPSC of Gulf Power's rates, which were intended to allow Gulf Power to collect from retail customers total revenues equal to Gulf Power's costs of providing service, including a reasonable rate of return on invested capital, was considered a fundamental input in measuring the fair value of Gulf Power's assets and liabilities and, as such, NEE concluded that the carrying values of all assets and liabilities recoverable through rates were representative of their fair values. As a result, NEE acquired assets of approximately $5.2 billion, primarily relating to property, plant and equipment of $4.0 billion and regulatory assets of $494 million, and assumed liabilities of approximately $3.4 billion, including $1.3 billion of long-term debt, $635 million of regulatory liabilities and $562 million of deferred income taxes. The excess of the purchase price over the fair value of assets acquired and liabilities assumed resulted in approximately $2.7 billion of goodwill which had been recognized on NEE's consolidated balance sheet. The goodwill arising from the transaction represents expected benefits from continued expansion of NEE's regulated businesses and the indefinite life of Gulf Power's service area franchise.

Merger of FPL and Gulf Power Company – On January 1, 2021, FPL and Gulf Power Company merged, with FPL as the surviving entity. However, during 2021, FPL continued to be regulated as two separate ratemaking entities in the former service areas of FPL and Gulf Power. The FPL segment and Gulf Power continued to be separate operating segments of NEE, as well as FPL, through 2021. See Note 16. Effective January 1, 2022, FPL became regulated as one ratemaking entity with new unified rates and tariffs, and also became one operating segment of NEE. See Note 1 – Rate Regulation – Base Rates Effective January 2022 through December 2025. As a result of the merger, FPL acquired assets of approximately $6.7 billion, primarily relating to property, plant and equipment, net of approximately $4.9 billion and regulatory assets of $1.2 billion, and assumed liabilities of approximately $3.9 billion, including $1.8 billion of debt, primarily long-term debt, $729 million of deferred income taxes and $566 million of regulatory liabilities. Additionally, goodwill of approximately $2.7 billion and purchase accounting adjustments associated with the 2019 Gulf Power Company acquisition by NEE were transferred to FPL from Corporate and

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Other at NEE. Goodwill associated with the Gulf Power Company acquisition is reflected within Corporate and Other at FPL and, for impairment testing, is included in the Gulf Power reporting unit. The assets acquired and liabilities assumed by FPL were at carrying amounts as the merger was between entities under common control.

Trans Bay Cable LLC – On July 16, 2019, a wholly owned subsidiary of NEET acquired the membership interests of Trans Bay Cable LLC (Trans Bay), which owns and operates a 53-mile, high-voltage direct current underwater transmission cable system in California extending from Pittsburg to San Francisco, with utility rates set by the FERC and revenues paid by the California Independent System Operator. The purchase price included approximately $670 million in cash consideration and the assumption of debt of approximately $422 million.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair value. The approval by the FERC of Trans Bay’s rates, which is intended to allow Trans Bay to collect total revenues equal to Trans Bay's costs for the development, financing, construction, operation and maintenance of Trans Bay, including a reasonable rate of return on invested capital, is considered a fundamental input in measuring the fair value of Trans Bay's assets and liabilities and, as such, NEE concluded that the carrying values of all assets and liabilities recoverable through rates are representative of their fair values. As a result, NEE acquired assets of approximately $703 million, primarily relating to property, plant and equipment, and assumed liabilities of approximately $643 million, primarily relating to long-term debt. The excess of the purchase price over the fair value of assets acquired and liabilities assumed resulted in approximately $610 million of goodwill which has been recognized on NEE's consolidated balance sheet, of which approximately $572 million is expected to be deductible for tax purposes. Goodwill associated with the Trans Bay acquisition is reflected within NEER and, for impairment testing, is included in the rate-regulated transmission reporting unit. The goodwill arising from the transaction represents expected benefits from continued expansion of NEE's regulated businesses.

GridLiance – On March 31, 2021, a wholly owned subsidiary of NEET acquired GridLiance Holdco, LP and GridLiance GP, LLC (GridLiance), which owns and operates three FERC-regulated transmission utilities with approximately 700 miles of high-voltage transmission lines across six states, five in the Midwest and Nevada. The purchase price included approximately $502 million in cash consideration, and the assumption of approximately $175 million of debt, excluding post-closing adjustments.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair value. The approval by the FERC of GridLiance's rates, which is intended to allow GridLiance to collect total revenues equal to GridLiance's costs for the development, financing, construction, operation and maintenance of GridLiance, including a reasonable rate of return on invested capital, is considered a fundamental input in measuring the fair value of GridLiance's assets and liabilities and, as such, NEE concluded that the carrying values of all assets and liabilities recoverable through rates are representative of their fair values. As a result, NEE acquired assets of approximately $384 million, primarily relating to property, plant and equipment, and assumed liabilities of approximately $210 million, primarily relating to long-term debt. The acquisition agreements are subject to earn-out provisions for additional payments, valued at approximately $264 million at March 31, 2021, to be made upon the completion of capital expenditures for future development projects (see Note 4 – Contingent Consideration). The excess of the purchase price over the fair value of assets acquired and liabilities assumed resulted in approximately $592 million of goodwill which has been recognized on NEE's consolidated balance sheet at December 31, 2021, of which approximately $586 million is expected to be deductible for tax purposes. Goodwill associated with the GridLiance acquisition is reflected within NEER and, for impairment testing, is included in the rate-regulated transmission reporting unit. The goodwill arising from the transaction represents expected benefits from continued expansion of NEE's regulated businesses. The valuation of the acquired net assets is subject to change as additional information related to the estimates is obtained during the measurement period.

7. Property, Plant and Equipment

Property, plant and equipment consists of the following at December 31:

NEEFPL
2021202020212020
(millions)
Electric plant in service and other property$112,500$105,860$67,771$62,963
Nuclear fuel1,6061,6041,1701,143
Construction work in progress14,14110,6396,3265,361
Property, plant and equipment, gross128,247118,10375,26769,467
Accumulated depreciation and amortization(28,899)(26,300)(17,040)(15,588)
Property, plant and equipment – net$99,348$91,803$58,227$53,879

FPL – At December 31, 2021, FPL's gross investment in electric plant in service and other property for the electric generation, transmission, distribution and general facilities of FPL represented approximately 46%, 13%, 35% and 6%, respectively; the

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respective amounts at December 31, 2020 were 47%, 12%, 35% and 6%. Substantially all of FPL's properties are subject to the lien of FPL's mortgage, which secures most debt securities issued by FPL. The weighted annual composite depreciation and amortization rate for FPL's electric plant in service, including capitalized software, but excluding the effects of decommissioning, dismantlement and the depreciation adjustments discussed in the following sentence, was approximately 3.8%, 3.8% and 3.9% for 2021, 2020 and 2019, respectively. In accordance with the 2016 rate agreement (see Note 1 – Rate Regulation – Base Rates Effective January 2017 through December 2021), FPL recorded reserve amortization (reversal) of approximately $429 million, $(1) million and $(357) million in 2021, 2020 and 2019, respectively. During each of 2021, 2020 and 2019, the FPL segment capitalized AFUDC at a rate of 6.22%, which amounted to approximately $124 million, $79 million and $80 million, respectively. During each of 2021, 2020 and 2019, Gulf Power capitalized AFUDC at a rate of 5.73%, which amounted to approximately $53 million, $38 million and $6 million, respectively.

NEER – At December 31, 2021, wind, solar and nuclear plants represented approximately 53%, 14% and 8%, respectively, of NEER's depreciable electric plant in service and other property; the respective amounts at December 31, 2020 were 55%, 13% and 8%. The estimated useful lives of NEER's plants range primarily from 30 to 35 years for wind plants, 30 to 35 years for solar plants and 23 to 47 years for nuclear plants. NEER's oil and gas production assets represented approximately 14% and 14% of NEER's depreciable electric plant in service and other property at December 31, 2021 and 2020, respectively. A number of NEER's generation, regulated transmission and pipeline facilities are encumbered by liens securing various financings. The net book value of NEER's assets serving as collateral was approximately $13.5 billion at December 31, 2021. Interest capitalized on construction projects amounted to approximately $139 million, $168 million and $135 million during 2021, 2020 and 2019, respectively.

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's proportionate share of the facilities and related revenues and expenses is included in the appropriate balance sheet and statement of income captions. NEE's and FPL's respective shares of direct expenses for these facilities are included in fuel, purchased power and interchange expense, O&M expenses, depreciation and amortization expense and taxes other than income taxes and other – net 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, 2021
Ownership InterestGross Investment**(a)**Accumulated Depreciation**(a)**Construction Work in Progress
(millions)
FPL:
St. Lucie Unit No. 285%$2,284$1,044$90
Daniel Units Nos. 1 and 2(b)50%$759$274$16
Scherer Unit No. 3(c)25%$449$204$3
NEER:
Seabrook88.23%$1,330$453$58
Wyman Station Unit No. 491.19%$30$11$—
Stanton65%$139$19$—
Transmission substation assets located in Seabrook, New Hampshire88.23%$114$8$22

(a)Excludes nuclear fuel.

(b)FPL intends to retire its share of these units in 2024. Net book value is reflected in other property on NEE's and FPL's consolidated balance sheets.

(c)Together with its joint interest owner, FPL intends to retire this unit in 2028. Net book value is reflected in other property on NEE's and FPL's consolidated balance sheets.

8. Equity Method Investments

At December 31, 2021 and 2020, NEE's equity method investments totaled approximately $6,159 million and $5,728 million, respectively. The principal entities included in investment in equity method investees on NEE's consolidated balance sheets are NEP OpCo, Sabal Trail Transmission, LLC (Sabal Trail) (see Note 15 – Contracts), Mountain Valley Pipeline (see Note 15 – Contracts), and Silver State South Solar, LLC. NEE's interest in these entities range from approximately 32% to 55%, and these entities own or are constructing natural gas pipelines or own electric generation facilities.

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Summarized combined information for these principal entities is as follows:

20212020
(millions)
Operating revenue$1,469$1,359
Operating income$559$538
Net income$739$516
Total assets$29,537$22,717
Total liabilities$9,501$6,612
Partners'/members' equity(a)$20,036$16,105
NEE's share of underlying equity in the principal entities$4,352$3,927
Difference between investment carrying amount and underlying equity in net assets(b)1,1331,312
NEE's investment carrying amount for the principal entities$5,485$5,239

(a)Reflects NEE's interest, as well as third-party interests, in NEP OpCo.

(b)Approximately $2.6 billion in 2021 and $2.8 billion in 2020 is associated with NEP OpCo, of which approximately 75% and 70%, respectively, relates to goodwill and is not being amortized and the remaining balance is being amortized primarily over a period of 17 to 25 years. The difference for both years is net of an approximately $1.5 billion impairment charge in 2020 related to NextEra Energy Resources' investment in Mountain Valley Pipeline. In the first quarter of 2022, NextEra Energy Resources recorded an additional impairment charge to completely write off its investment in Mountain Valley Pipeline. See Note 4 – Nonrecurring Fair Value Measurements for a discussion of the impairment charges.

NextEra Energy Resources provides operational, management and administrative services as well as transportation and fuel management services to NEP and its subsidiaries under various agreements (service agreements). NextEra Energy Resources is also party to a cash sweep and credit support (CSCS) agreement with a subsidiary of NEP. At December 31, 2021 and 2020, the cash sweep amounts (due to NEP and its subsidiaries) held in accounts belonging to NextEra Energy Resources or its subsidiaries were approximately $57 million and $10 million, respectively, and are included in accounts payable. Fee income related to the CSCS agreement and the service agreements totaled approximately $148 million, $120 million and $101 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is included in operating revenues in NEE's consolidated statements of income. Amounts due from NEP of approximately $113 million and $68 million are included in other receivables and $40 million and $32 million are included in noncurrent other assets at December 31, 2021 and 2020, respectively. See also Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests for amounts due to NEP for reimbursement of construction-related costs. NEECH or NextEra Energy Resources guaranteed or provided indemnifications, letters of credit or surety bonds totaling approximately $3,778 million at December 31, 2021 primarily related to obligations on behalf of NEP's subsidiaries with maturity dates ranging from 2022 to 2059, including certain project performance obligations, obligations under financing and interconnection agreements and obligations, primarily incurred and future construction payables, associated with the December 2021 sale of projects to NEP (see Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests). Payment guarantees and related contracts with respect to unconsolidated entities for which NEE or one of its subsidiaries are the guarantor are recorded on NEE’s consolidated balance sheets at fair value. At December 31, 2021, approximately $41 million related to the fair value of the credit support provided under the CSCS agreement is recorded as noncurrent other liabilities on NEE's consolidated balance sheet.

9. Variable Interest Entities (VIEs)

NEER – At December 31, 2021, NEE consolidates a number of VIEs within the NEER segment. Subsidiaries within the NEER segment are considered the primary beneficiary of these VIEs since they control the most significant activities of these VIEs, including operations and maintenance, and they have the obligation to absorb expected losses of these VIEs.

Eight indirect subsidiaries of NextEra Energy Resources have an ownership interest ranging from approximately 50% to 67% in entities which own and operate solar facilities with the capability of producing a total of approximately 772 MW. Each of the subsidiaries is considered a VIE since the non-managing members have no substantive rights over the managing members, and is consolidated by NextEra Energy Resources. These entities sell their electric output to third parties under power sales contracts with expiration dates ranging from 2035 through 2052. These entities have third-party debt which is secured by liens against the assets of the entities. The debt holders have no recourse to the general credit of NextEra Energy Resources for the repayment of debt. The assets and liabilities of these VIEs were approximately $1,851 million and $1,258 million, respectively, at December 31, 2021. There were three of these consolidated VIEs at December 31, 2020, and the assets and liabilities of those VIEs at such date totaled approximately $751 million and $607 million, respectively. At December 31, 2021 and 2020, the assets and liabilities of these VIEs consisted primarily of property, plant and equipment and long-term debt.

NEE consolidates a NEET VIE that is constructing an approximately 280-mile electricity transmission line. A NEET subsidiary is the primary beneficiary and controls the most significant activities during the construction period, including controlling the construction budget. NEET is entitled to receive 50% of the profits and losses of the entity. The assets and liabilities of the VIE totaled approximately $614 million and $64 million, respectively, at December 31, 2021, and $423 million and $68 million,

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respectively, at December 31, 2020. At December 31, 2021 and 2020, the assets and liabilities of this VIE consisted primarily of property, plant and equipment and accounts payable.

NextEra Energy Resources consolidates a VIE which has a 10% direct ownership interest in wind generation facilities and solar facilities which have the capability of producing approximately 400 MW and 599 MW, respectively. These entities sell their electric output under power sales contracts to third parties with expiration dates ranging from 2025 through 2040. These entities are also considered a VIE because the holders of differential membership interests in these entities do not have substantive rights over the significant activities of these entities. The assets and liabilities of the VIE were approximately $1,518 million and $79 million, respectively, at December 31, 2021, and $1,572 million and $393 million, respectively, at December 31, 2020. At December 31, 2021 and 2020, the assets and liabilities of this VIE consisted primarily of property, plant and equipment and accounts payable.

The other 33 NextEra Energy Resources VIEs that are consolidated primarily relate to certain subsidiaries which have sold differential membership interests in entities which own and operate wind generation as well as solar and solar plus battery storage facilities with the capability of producing a total of approximately 10,626 MW and 890 MW, respectively, and own wind generation as well as solar and solar plus battery storage facilities that, upon completion of construction, which is anticipated in the first half of 2022, are expected to have a total capacity of approximately 200 MW and 625 MW, respectively. These entities sell, or will sell, their electric output either under power sales contracts to third parties with expiration dates ranging from 2024 through 2053 or in the spot market. These entities are considered VIEs because the holders of differential membership interests do not have substantive rights over the significant activities of these entities. NextEra Energy Resources has financing obligations with respect to these entities, including third-party debt which is secured by liens against the generation facilities and the other assets of these entities or by pledges of NextEra Energy Resources' ownership interest in these entities. The debt holders have no recourse to the general credit of NEER for the repayment of debt. The assets and liabilities of these VIEs totaled approximately $17,419 million and $1,480 million, respectively, at December 31, 2021, and $16,180 million and $1,741 million, respectively at December 31, 2020. At December 31, 2021 and 2020, the assets and liabilities of these VIEs consisted primarily of property, plant and equipment and accounts payable. At December 31, 2021, subsidiaries of NEE had guarantees related to certain obligations of two of these consolidated VIEs.

Other – At December 31, 2021 and 2020, several NEE subsidiaries had investments totaling approximately $4,559 million ($3,799 million at FPL) and $3,704 million ($3,124 million at FPL), respectively, which are included in special use funds and noncurrent other assets on NEE's consolidated balance sheets and in special use funds on FPL's consolidated balance sheets. These investments represented primarily commingled funds and mortgage-backed securities. NEE subsidiaries, including FPL, are not the primary beneficiaries 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.

Certain subsidiaries of NEE have noncontrolling interests in entities accounted for under the equity method, including NEE's noncontrolling interest in NEP OpCo (see Note 8). These entities are limited partnerships or similar entity structures in which the limited partners or non-managing members do not have substantive rights over the significant activities of these entities, and therefore are considered VIEs. NEE is not the primary beneficiary because it does not have a controlling financial interest in these entities, and therefore does not consolidate any of these entities. NEE’s investment in these entities totaled approximately $4,214 million and $3,932 million at December 31, 2021 and 2020, respectively. At December 31, 2021, subsidiaries of NEE had guarantees related to certain obligations of one of these entities, as well as commitments to invest an additional approximately $110 million in several of these entities. See further discussion of such guarantees and commitments in Note 15 – Commitments and – Contracts, respectively.

10. Leases

NEE has operating and finance leases primarily related to purchased power agreements, land use agreements that convey exclusive use of the land during the arrangement for certain of its renewable energy projects and substations, buildings and equipment. Operating and finance leases primarily have fixed payments with expected expiration dates ranging from 2022 to 2083, with the exception of operating leases related to three land use agreements with an expiration date of 2106, some of which include options to extend the leases up to 20 years and some have options to terminate at NEE's discretion. At December 31, 2021, NEE’s ROU assets and lease liabilities for operating leases totaled approximately $547 million and $555 million, respectively; the respective amounts at December 31, 2020 were $535 million and $541 million. At December 31, 2021, NEE’s ROU assets and lease liabilities for finance leases totaled approximately $205 million and $200 million, respectively; the respective amounts at December 31, 2020 were $128 million and $124 million. NEE’s lease liabilities at December 31, 2021 and 2020 were calculated using a weighted-average incremental borrowing rate at the lease inception of 3.57% and 3.81%, respectively, for operating leases and 3.52% and 3.50%, respectively, for finance leases, and a weighted-average remaining lease term of 39 years and 33 years, respectively, for operating leases and 31 years and 25 years, respectively, for finance leases. At December 31, 2021, expected lease payments over the remaining terms of the leases were approximately $1.4 billion with no one year being material. NEE's operating lease cost for the years ended December 31, 2021, 2020 and 2019 totaled approximately $92 million, $95 million and $91 million, respectively. During the year ended December 31, 2021, 2020 and 2019,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NEE's ROU assets obtained in exchange for operating lease obligations totaled approximately $92 million, $121 million and $450 million, respectively, and in 2019 primarily relate to leases acquired with the Gulf Power ($262 million at FPL) and Trans Bay acquisitions (see Note 6). Other operating and finance lease-related amounts were not material to NEE's consolidated statements of income for the periods presented.

NEE has operating and sales-type leases primarily related to a natural gas and oil electric generation facility and certain battery storage facilities that sell their electric output under power sales agreements to third parties which provide the customers the ability to dispatch the facilities. At December 31, 2021 and 2020, NEE recorded a net investment in sales-type leases of approximately $42 million and $47 million, respectively. At December 31, 2021, the power sales agreements have expiration dates from 2024 to 2043 and NEE expects to receive approximately $843 million of lease payments over the remaining terms of the power sales agreements with no one year being material. Operating and sales-type lease-related amounts were not material to NEE's consolidated statements of income for the periods presented.

11. Asset Retirement Obligations

NEE's AROs relate primarily to decommissioning obligations of FPL's and NEER's nuclear units and to obligations for the dismantlement of certain of NEER's wind and solar facilities. For NEE's rate-regulated operations, including FPL, the accounting provisions result in timing differences in the recognition of legal asset retirement costs for financial reporting purposes and the method the regulator allows for recovery in rates. See Note 1 – Rate Regulation and – Decommissioning of Nuclear Plants, Dismantlement of Plants and Other Accrued Asset Removal Costs.

A rollforward of NEE's and FPL's AROs is as follows:

NEEFPL
(millions)
Balances, December 31, 2019$3,506$2,410
Liabilities incurred138—
Accretion expense169103
Liabilities settled(53)(32)
Revision in estimated cash flows – net(594)(a)(545)(a)
Balances, December 31, 20203,166(b)1,936(b)
Liabilities incurred797
Accretion expense14178
Liabilities settled(88)(c)(15)
Revision in estimated cash flows – net(119)(d)101(e)
Balances, December 31, 2021$3,179(b)$2,107(b)

(a)Primarily reflects the effect of revised cost estimates for decommissioning FPL's nuclear units consistent with the updated nuclear decommissioning studies filed with the FPSC in December 2020.

(b)Includes the current portion of AROs as of December 31, 2021 and 2020 of approximately $97 million ($58 million for FPL) and $109 million ($65 million for FPL), respectively, which are included in other current liabilities on NEE's and FPL's consolidated balance sheets.

(c)Includes approximately $35 million related to project sales to NEP as well as other sales of businesses and assets. See Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests.

(d)The increase at FPL discussed in (e) was offset primarily by the effect of revised cost estimates and useful lives of NEER's solar facilities.

(e)Primarily reflects the effect of pending license extension requests of St. Lucie Units Nos. 1 and 2 for an additional 20 years.

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 presented below (see Note 4 – Special Use Funds). Duane Arnold is being actively decommissioned and was granted an exemption from the NRC, which allows for use of the funds for certain other site restoration activities in addition to decommissioning obligations recorded as AROs.

NEEFPL
(millions)
Balances, December 31, 2021$8,846$6,082
Balances, December 31, 2020$7,703$5,271

NEE and FPL have identified but not recognized ARO liabilities related to the majority of their electric transmission and distribution assets and pipelines resulting from easements over property not owned by NEE or FPL. These easements are generally perpetual and only require retirement action upon abandonment or cessation of use of the property or facility for its specified purpose. The related ARO liability is not estimable for such easements as NEE and FPL intend to use these properties indefinitely. In the event NEE or FPL decide to abandon or cease the use of a particular easement, an ARO liability would be recorded at that time.

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12. Employee Retirement Benefits

Employee Pension Plan and Other Benefits Plans – NEE sponsors a qualified noncontributory defined benefit pension plan for substantially all employees of NEE and its subsidiaries. NEE also has a supplemental executive retirement plan (SERP), which includes a non-qualified supplemental defined benefit pension component that provides benefits to a select group of management and highly compensated employees, and sponsors a contributory postretirement plan for other benefits for retirees of NEE and its subsidiaries meeting certain eligibility requirements. The total accrued benefit cost of the SERP and postretirement plans is approximately $300 million ($139 million for FPL) and $323 million ($156 million for FPL) at December 31, 2021 and 2020, respectively.

Pension Plan Assets, Benefit Obligations and Funded Status – The changes in assets, benefit obligations and the funded status of the pension plan are as follows:

20212020
(millions)
Change in pension plan assets:
Fair value of plan assets at January 1$5,314$4,800
Actual return on plan assets627723
Benefit payments(253)(209)
Fair value of plan assets at December 31$5,688$5,314
Change in pension benefit obligation:
Obligation at January 1$3,607$3,363
Service cost9085
Interest cost6492
Special termination benefit(a)—16
Plan amendments—1
Actuarial losses (gains) – net(63)259
Benefit payments(253)(209)
Obligation at December 31(b)$3,445$3,607
Funded status:
Prepaid pension benefit costs at NEE at December 31$2,243$1,707
Prepaid pension benefit costs at FPL at December 31(c)$1,657$1,550

(a)Reflects enhanced early retirement benefit.

(b)NEE's accumulated pension benefit obligation, which includes no assumption about future salary levels, at December 31, 2021 and 2020 was approximately $3,352 million and $3,521 million, respectively.

(c)Reflects FPL's allocated benefits under NEE's pension plan.

NEE's unrecognized amounts included in accumulated other comprehensive income (loss) yet to be recognized as components of prepaid pension benefit costs are as follows:

20212020
(millions)
Unrecognized prior service benefit (net of $1 tax expense and $1 tax expense, respectively)$2$2
Unrecognized gains (losses) (net of $7 tax expense and $24 tax benefit, respectively)41(60)
Total$43$(58)

NEE's unrecognized amounts included in regulatory assets (liabilities) yet to be recognized as components of net prepaid pension benefit costs are as follows:

20212020
(millions)
Unrecognized prior service benefit$(1)$(1)
Unrecognized losses (gains)(80)163
Total$(81)$162

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The following table provides the assumptions used to determine the benefit obligation for the pension plan. These rates are used in determining net periodic pension income in the following year.

20212020
Discount rate(a)2.87%2.53%
Salary increase4.90%4.40%
Weighted-average interest crediting rate3.79%3.82%

(a)The method of estimating the interest cost component of net periodic benefit costs uses a full yield curve approach by applying a specific spot rate along the yield curve.

NEE's investment policy for the pension plan recognizes the benefit of protecting the plan's funded status, thereby avoiding the necessity of future employer contributions. Its broad objectives are to achieve a high rate of total return with a prudent level of risk taking while maintaining sufficient liquidity and diversification to avoid large losses and preserve capital over the long term.

The NEE pension plan fund's current target asset allocation, which is expected to be reached over time, is 45% equity investments, 32% fixed income investments, 13% alternative investments and 10% convertible securities. The pension fund's investment strategy emphasizes traditional investments, broadly diversified across the global equity and fixed income markets, using a combination of different investment styles and vehicles. The pension fund's equity and fixed income holdings consist of both directly held securities as well as commingled investment arrangements such as common and collective trusts, pooled separate accounts, registered investment companies and limited partnerships. The pension fund's convertible security assets are principally direct holdings of convertible securities and include a convertible security oriented limited partnership. The pension fund's alternative investments consist primarily of private equity and real estate oriented investments in limited partnerships as well as absolute return oriented limited partnerships that use a broad range of investment strategies on a global basis.

The fair value measurements of NEE's pension plan assets by fair value hierarchy level are as follows:

December 31, 2021**(a)**
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total
(millions)
Equity securities(b)$1,977$29$2$2,008
Equity commingled vehicles(c)—889—889
U.S. Government and municipal bonds1316—137
Corporate debt securities(d)—351—351
Asset-backed securities—386—386
Debt security commingled vehicles(e)—219—219
Convertible securities(f)91489—580
Total investments in the fair value hierarchy$2,199$2,369$24,570
Total investments measured at net asset value(g)1,118
Total fair value of plan assets$5,688

(a)See Notes 3 and 4 for discussion of fair value measurement techniques and inputs.

(b)Includes foreign investments of $927 million.

(c)Includes foreign investments of $169 million.

(d)Includes foreign investments of $109 million.

(e)Includes foreign investments of $5 million.

(f)Includes foreign investments of $41 million.

(g)Includes foreign investments of $220 million.

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December 31, 2020(a)
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total
(millions)
Equity securities(b)$2,017$10$3$2,030
Equity commingled vehicles(c)—668—668
U.S. Government and municipal bonds1698—177
Corporate debt securities(d)—340—340
Asset-backed securities—375—375
Debt security commingled vehicles(e)—201—201
Convertible securities(f)64453—517
Total investments in the fair value hierarchy$2,250$2,055$34,308
Total investments measured at net asset value(g)1,006
Total fair value of plan assets$5,314

(a)See Notes 3 and 4 for discussion of fair value measurement techniques and inputs.

(b)Includes foreign investments of $881 million.

(c)Includes foreign investments of $156 million.

(d)Includes foreign investments of $93 million.

(e)Includes foreign investments of $5 million.

(f)Includes foreign investments of $35 million.

(g)Includes foreign investments of $153 million.

Expected Cash Flows – The following table provides information about benefit payments expected to be paid by the pension plan for each of the following calendar years (in millions):

2022$204
2023$208
2024$209
2025$210
2026$214
2027 – 2031$1,033

Net Periodic Income – The components of net periodic income for the plans are as follows:

Pension BenefitsPostretirement Benefits
202120202019202120202019
(millions)
Service cost$90$85$80$2$1$1
Interest cost6492114489
Expected return on plan assets(339)(321)(312)———
Amortization of actuarial loss2418—53—
Amortization of prior service benefit(1)(1)(1)(15)(16)(15)
Special termination benefits—1619———
Net periodic income at NEE$(162)$(111)$(100)$(4)$(4)$(5)
Net periodic income allocated to FPL$(108)$(84)$(61)$(4)$(4)$(4)

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Other Comprehensive Income – The components of net periodic income recognized in OCI for the pension plan are as follows:

202120202019
(millions)
Net gains (losses) (net of $29 tax expense, $13 tax expense and $10 tax benefit, respectively)$95$42$(36)
Amortization of unrecognized losses (net of $2 tax expense and $1 tax expense, respectively)65—
Total$101$47$(36)

Regulatory Assets (Liabilities) – The components of net periodic income recognized during the year in regulatory assets (liabilities) for the pension plan are as follows:

20212020
(millions)
Prior service cost (benefit)$(1)$1
Unrecognized gains(226)(89)
Amortization of prior service benefit—1
Amortization of unrecognized losses(16)(12)
Total$(243)$(99)

The assumptions used to determine net periodic pension income for the pension plan are as follows:

202120202019
Discount rate2.53%3.22%4.26%
Salary increase4.40%4.40%4.40%
Expected long-term rate of return, net of investment management fees(a)7.35%7.35%7.35%
Weighted-average interest crediting rate3.82%3.83%3.88%

(a)In developing the expected long-term rate of return on assets assumption for its pension plan, NEE evaluated input, including other qualitative and quantitative factors, from its actuaries and consultants, as well as information available in the marketplace. NEE considered different models, capital market return assumptions and historical returns for a portfolio with an equity/bond asset mix similar to its pension fund. NEE also considered its pension fund's historical compounded returns.

Employee Contribution Plan – NEE offers an employee retirement savings plan which allows eligible participants to contribute a percentage of qualified compensation through payroll deductions. NEE makes matching contributions to participants' accounts. Defined contribution expense pursuant to this plan was approximately $66 million, $64 million and $58 million for NEE ($42 million, $40 million and $40 million for FPL) for the years ended December 31, 2021, 2020 and 2019, respectively.

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13. Debt

Long-term debt consists of the following:

December 31,
20212020
Maturity DateBalanceWeighted- Average Interest RateBalanceWeighted- Average Interest Rate
(millions)(millions)
FPL:
First mortgage bonds – fixed2023 – 2051$14,2904.20%$13,0904.32%
Pollution control, solid waste disposal and industrial development revenue bonds – primarily variable(a)2022 – 20501,4070.15%1,4070.17%
Senior unsecured notes – primarily variable(b)(c)2022 – 20712,6971.37%2,6211.55%
Other long-term debt – variable(c)2022 – 20463070.82%3000.70%
Unamortized debt issuance costs and discount(191)(182)
Total long-term debt of FPL18,51017,236
Less current portion of long-term debt536354
Long-term debt of FPL, excluding current portion17,97416,882
NEER:
NextEra Energy Resources:
Senior secured limited-recourse long-term debt – variable(c)(d)2024 – 20373,1001.74%2,6211.99%
Senior secured limited-recourse long-term loans – fixed2028 – 20492,4753.30%7043.59%
Other long-term debt – primarily variable(c)(d)2024 – 20487852.50%4502.72%
NEET – long-term debt – primarily fixed(d)2022 – 20491,1512.69%9373.09%
Unamortized debt issuance costs and premium(92)(65)
Total long-term debt of NEER7,4194,647
Less current portion of long-term debt664239
Long-term debt of NEER, excluding current portion6,7554,408
NEECH:
Debentures – fixed2023 – 205210,9902.21%11,540(d)2.86%
Debentures – variable(c)2022 – 20233,8500.56%1,2250.80%
Debentures, related to NEE's equity units – fixed2024 – 20256,0001.46%6,0001.46%
Junior subordinated debentures – primarily fixed(d)2057 – 20823,7234.54%3,6934.78%
Japanese yen denominated long-term debt – primarily variable(c)(d)(e)2023 – 20305821.49%6501.49%
Australian dollar denominated long-term debt – fixed(e)20263602.20%3852.20%
Other long-term debt – fixed20221860.92%2210.92%
Other long-term debt – variable(c)2023 – 20241,2450.64%6000.70%
Unamortized debt issuance costs, premium(120)(115)
Total long-term debt of NEECH26,81624,199
Less current portion of long-term debt5853,545
Long-term debt of NEECH, excluding current portion26,23120,654
Total long-term debt$50,960$41,944

(a)Includes variable rate tax exempt bonds that permit individual bondholders to tender the bonds for purchase at any time prior to maturity. In the event these variable rate tax exempt 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 these variable rate tax exempt bonds. At December 31, 2021, these variable rate tax exempt bonds totaled approximately $1,375 million. All variable rate tax exempt bonds tendered for purchase have been successfully remarketed. FPL's syndicated revolving credit facilities are available to support the purchase of the variable rate tax exempt bonds. Variable interest rate is established at various intervals by the remarketing agent.

(b)At December 31, 2021, includes approximately $882 million of floating rate notes that permit individual noteholders to require repayment at specified dates prior to maturity. FPL’s syndicated revolving credit facilities are available to support the purchase of the floating rate notes.

(c)Variable rate is based on an underlying index plus a specified margin.

(d)Interest rate contracts, primarily swaps, have been entered into with respect to certain of these debt issuances. See Note 3.

(e)Foreign currency contracts have been entered into with respect to these debt issuances. See Note 3.

As of December 31, 2021, minimum annual maturities of long-term debt for NEE are approximately $1,785 million, $8,394 million, $3,672 million, $6,536 million and $1,322 million for 2022, 2023, 2024, 2025 and 2026, respectively. The respective amounts for FPL are approximately $536 million, $1,548 million, $646 million, $1,700 million and $0.2 million.

At December 31, 2021 and 2020, short-term borrowings had a weighted-average interest rate of 0.39% (0.27% for FPL) and 0.35% (0.28% for FPL), respectively. Subsidiaries of NEE, including FPL, had credit facilities with available capacity at December 31, 2021 of approximately $12.1 billion ($4.6 billion for FPL), of which approximately $11.1 billion ($4.6 billion for FPL)

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relate to revolving line of credit facilities and $1.0 billion (none for FPL) relate to letter of credit facilities. Certain of the revolving line of credit facilities provide for the issuance of letters of credit which at December 31, 2021 had available capacity of approximately $1.9 billion ($647 million for FPL). The issuance of letters of credit under certain revolving line of credit facilities is subject to the aggregate commitment of the relevant banks to issue letters of credit under the applicable facility.

NEE has guaranteed certain payment obligations of NEECH, including most of those under NEECH's debt, including all of its debentures and commercial paper issuances, as well as most of its payment guarantees and indemnifications. NEECH has guaranteed certain debt and other obligations of subsidiaries within the NEER segment.

In August 2019, NEECH completed a remarketing of $1.5 billion aggregate principal amount of its Series I Debentures due September 1, 2021 (Series I Debentures) that were issued in August 2016 as components of equity units issued concurrently by NEE (August 2016 equity units). The Series I Debentures are fully and unconditionally guaranteed by NEE. In connection with the remarketing of the Series I Debentures, the interest rate on the Series I Debentures was reset to 2.403% per year, and interest is payable on March 1 and September 1 of each year, commencing September 1, 2019. In connection with the settlement of the contracts to purchase NEE common stock that were issued as components of the August 2016 equity units, in the third quarter of 2019, NEE issued approximately 9.5 million shares of common stock (38.2 million shares after giving effect to the four-for-one stock split of NEE common stock effective October 26, 2020 (2020 stock split) in exchange for $1.5 billion.

As a result of the 2020 stock split (and adjustments related to the dividend rate), the fixed settlement rates of NEE’s three outstanding series of Corporate Units have been adjusted as described below. In addition, the Corporate Units provide that the applicable market value (as described below) for each series of Corporate Units will also be adjusted (when determined) to give effect to the 2020 stock split and certain other anti-dilution adjustments to determine the applicable settlement rate. However, for purposes of the presentation below, corresponding adjustments were instead made to the reference prices and the threshold appreciation prices for each series of Corporate Units to present the practical effect of the antidilution adjustments as of December 31, 2021.

In September 2019, NEE sold $1.5 billion of equity units (initially consisting of Corporate Units). Each equity unit has a stated amount of $50 and consists of a contract to purchase NEE common stock (stock purchase contract) and, initially, a 5% undivided beneficial ownership interest in a Series J Debenture due September 1, 2024, issued in the principal amount of $1,000 by NEECH. Each stock purchase contract requires the holder to purchase by no later than September 1, 2022 (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 described in the following sentence. If purchased on the final settlement date, as of December 31, 2021, the number of shares issued per equity unit would (subject to antidilution adjustments) range from 0.8973 shares if the applicable market value of a share of NEE common stock is less than or equal to $55.72 (the adjusted reference price) to 0.7181 shares if the applicable market value of a share is equal to or greater than $69.66 (the adjusted threshold appreciation price), with the applicable market value to be determined using the average closing prices of NEE common stock over a 20-day trading period ending August 29, 2022. Total annual distributions on the equity units are at the rate of 4.872%, consisting of interest on the debentures (2.10% per year) and payments under the stock purchase contracts (2.772% per year). The interest rate on the debentures is expected to be reset on or after March 1, 2022. A 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, the debentures that are components of the Corporate Units will be used to satisfy in full the holders' obligations to purchase NEE common stock under the related stock purchase contracts on the final settlement date. The debentures are fully and unconditionally guaranteed by NEE.

In February 2020, NEE sold $2.5 billion of equity units (initially consisting of Corporate Units). Each equity unit has a stated amount of $50 and consists of a contract to purchase NEE common stock (stock purchase contract) and, initially, a 5% undivided beneficial ownership interest in a Series K Debenture due March 1, 2025, issued in the principal amount of $1,000 by NEECH. Each stock purchase contract requires the holder to purchase by no later than March 1, 2023 (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 described in the following sentence. If purchased on the final settlement date, as of December 31, 2021, the number of shares issued per equity unit would (subject to antidilution adjustments) range from 0.7104 shares if the applicable market value of a share of NEE common stock is less than or equal to $70.39 (the adjusted reference price) to 0.5681 shares if the applicable market value of a share is equal to or greater than $87.99 (the adjusted threshold appreciation price), with the applicable market value to be determined using the average closing prices of NEE common stock over a 20-day trading period ending February 24, 2023. Total annual distributions on the equity units are at the rate of 5.279%, consisting of interest on the debentures (1.84% per year) and payments under the stock purchase contracts (3.439% per year). The interest rate on the debentures is expected to be reset on or after September 1, 2022. A 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

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business day prior to the final settlement date, and a holder has not notified NEE of its intention to settle the stock purchase contract with cash, the debentures that are components of the Corporate Units will be used to satisfy in full the holders' obligations to purchase NEE common stock under the related stock purchase contracts on the final settlement date. The debentures are fully and unconditionally guaranteed by NEE.

In September 2020, NEE sold $2.0 billion of equity units (initially consisting of Corporate Units). Each equity unit has a stated amount of $50 and consists of a contract to purchase NEE common stock (stock purchase contract) and, initially, a 5% undivided beneficial ownership interest in a Series L Debenture due September 1, 2025, issued in the principal amount of $1,000 by NEECH. Each stock purchase contract requires the holder to purchase by no later than September 1, 2023 (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 described in the following sentence. If purchased on the final settlement date, as of December 31, 2021, the number of shares issued per equity unit would (subject to antidilution adjustments) range from 0.6776 shares if the applicable market value of a share of NEE common stock is less than or equal to $73.79 (the adjusted reference price) to 0.5421 shares if the applicable market value of a share is equal to or greater than $92.24 (the adjusted threshold appreciation price), with the applicable market value to be determined using the average closing prices of NEE common stock over a 20-day trading period ending August 29, 2023. Total annual distributions on the equity units are at the rate of 6.219%, consisting of interest on the debentures (0.509% per year) and payments under the stock purchase contracts (5.710% per year). The interest rate on the debentures is expected to be reset on or after March 1, 2023. A 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, the debentures that are components of the Corporate Units will be used to satisfy in full the holders' obligations to purchase NEE common stock under the related stock purchase contracts on the final settlement date. The debentures are fully and unconditionally guaranteed by NEE.

Prior to the issuance of NEE’s common stock, the stock purchase contracts, if dilutive, will be reflected in NEE’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of NEE common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares that would be issued upon settlement of the stock purchase contracts over the number of shares that could be purchased by NEE in the market, at the average market price during the period, using the proceeds receivable upon settlement.

In January 2022, FPL sold $1.5 billion principal amount of its First Mortgage Bonds, 2.45% Series due February 3, 2032 and sold $1.0 billion principal amount of its Floating Rate Notes, Series due January 12, 2024.

14. Equity

Earnings Per Share – The reconciliation of NEE's basic and diluted earnings per share attributable to NEE is as follows:

Years Ended December 31,
202120202019
(millions, except per share amounts)
Numerator – net income attributable to NEE$3,573$2,919$3,769
Denominator:
Weighted-average number of common shares outstanding – basic1,962.51,959.01,927.9
Equity units, stock options, performance share awards and restricted stock(a)9.79.814.0
Weighted-average number of common shares outstanding – assuming dilution1,972.21,968.81,941.9
Earnings per share attributable to NEE:
Basic$1.82$1.49$1.95
Assuming dilution$1.81$1.48$1.94

(a)Calculated using the treasury stock method. Performance share awards are included in diluted weighted-average number of common shares outstanding based upon what would be issued if the end of the reporting period was the end of the term of the award.

Common shares issuable pursuant to equity units, stock options and/or performance share awards, as well as restricted stock which were not included in the denominator above due to their antidilutive effect were approximately 30.5 million, 27.1 million and 3.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

On September 14, 2020, NEE's board of directors approved a four-for-one split of NEE common stock effective October 26, 2020. NEE's authorized common stock increased from 800 million to 3.2 billion shares. All share and share-based data included in NEE's consolidated financial statements reflect the effect of the 2020 stock split.

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Potentially Dilutive Securities at NEP – NEP senior unsecured convertible notes, when outstanding, are potentially dilutive securities to NEE. In June 2021 and December 2020, NEP issued $500 million and $600 million, respectively, principal amount of new senior unsecured convertible notes. Holders of these notes may convert all or a portion of the notes in accordance with the related indenture. Upon conversion, NEP will pay cash up to the principal amount of the notes to be converted and pay or deliver, as the case may be, cash, NEP common units or a combination of cash and common units, at NEP's election, in respect of the remainder, if any, of NEP's conversion obligation in excess of the principal amount of the notes being converted.

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.

Stock-Based Compensation – Net income for the years ended December 31, 2021, 2020 and 2019 includes approximately $119 million, $107 million and $100 million, respectively, of compensation costs and $19 million, $21 million and $17 million, respectively, of income tax benefits related to stock-based compensation arrangements. Compensation cost capitalized for the years ended December 31, 2021, 2020 and 2019 was not material. At December 31, 2021, there were approximately $148 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 2.8 years.

At December 31, 2021, approximately 84 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) 2021 Long Term Incentive Plan, (b) 2017 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 for the majority 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, 2021 was as follows:

Shares/UnitsWeighted- Average Grant Date Fair Value Per Share/Units
Restricted Stock:
Nonvested balance, January 1, 20211,674,242$50.26
Granted1,013,039$82.69
Vested(835,919)$48.06
Forfeited(33,630)$69.63
Nonvested balance, December 31, 20211,817,732$68.09
Performance Share Awards:
Nonvested balance, January 1, 20211,938,608$47.46
Granted1,297,680$54.82
Vested(1,738,904)$37.53
Forfeited(85,235)$64.84
Nonvested balance, December 31, 20211,412,149$61.22

The weighted-average grant date fair value per share of restricted stock granted for the years ended December 31, 2020 and 2019 was $68.25 and $46.64 respectively. The weighted-average grant date fair value per share of performance share awards granted for the years ended December 31, 2020 and 2019 was $46.09 and $34.75, respectively.

The total fair value of restricted stock and performance share awards vested was $186 million, $177 million and $125 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

202120202019
Expected volatility(a)17.32 – 17.75%14.63 – 16.31%14.20 – 14.31%
Expected dividends2.30 – 2.44%2.50 – 2.72%2.85 – 2.93%
Expected term (years)(b)7.07.07.0
Risk-free rate0.80 – 1.27%0.49 – 1.52%2.24 – 2.54%

(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, 2021 was as follows:

Shares Underlying OptionsWeighted- Average Exercise Price Per ShareWeighted- Average Remaining Contractual Term (years)Aggregate Intrinsic Value (millions)
Balance, January 1, 20219,618,204$38.32
Granted1,220,265$83.33
Exercised(738,516)$20.08
Forfeited(86,641)$71.19
Balance, December 31, 202110,013,312$44.876.0$486
Exercisable, December 31, 20217,235,572$35.355.0$420

The weighted-average grant date fair value of options granted was $9.82, $7.08 and $5.01 per share for the years ended December 31, 2021, 2020 and 2019, respectively. The total intrinsic value of stock options exercised was approximately $49 million, $71 million and $81 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Cash received from option exercises was approximately $15 million, $30 million and $34 million for the years ended December 31, 2021, 2020 and 2019, respectively. The tax benefits realized from options exercised were approximately $11 million, $17 million and $19 million for the years ended December 31, 2021, 2020 and 2019, 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.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (Loss) – The components of AOCI, net of tax, are as follows:

Accumulated Other Comprehensive Income (Loss)
Net Unrealized Gains (Losses) on Cash Flow HedgesNet Unrealized Gains (Losses) on Available for Sale SecuritiesDefined Benefit Pension and Other Benefits PlansNet Unrealized Gains (Losses) on Foreign Currency TranslationOther Comprehensive Income (Loss) Related to Equity Method InvesteesTotal
(millions)
Balances, December 31, 2018$(55)$(7)$(65)$(63)$2$(188)
Other comprehensive income (loss) before reclassifications—20(46)221(3)
Amounts reclassified from AOCI29(a)(2)(b)(3)(c)——24
Net other comprehensive income (loss)2918(49)22121
Less other comprehensive income attributable to noncontrolling interests———1—1
Acquisition of Gulf Power (see Note 6)(1)————(1)
Balances, December 31, 2019(27)11(114)(42)3(169)
Other comprehensive income before reclassifications—123713163
Amounts reclassified from AOCI12(a)(3)(b)2(c)——11
Net other comprehensive income1293913174
Less other comprehensive income attributable to noncontrolling interests———7—7
Impact of disposal of a business23(d)——(13)(d)—10
Balances, December 31, 2020820(75)(49)4(92)
Other comprehensive income (loss) before reclassifications—(11)95(1)184
Amounts reclassified from AOCI6(a)(4)(b)5(c)——7
Net other comprehensive income (loss)6(15)100(1)191
Less other comprehensive loss attributable to noncontrolling interests———(1)—(1)
Balances, December 31, 2021$14$5$25$(49)$5$—
Attributable to noncontrolling interests$—$—$—$6$—$6

(a)Reclassified to interest expense in NEE's consolidated statements of income. See Note 3 – Income Statement Impact of Derivative Instruments.

(b)Reclassified to gains on disposal of investments and other property – net in NEE's consolidated statements of income.

(c)Reclassified to other net periodic benefit income in NEE's consolidated statements of income.

(d)Reclassified to gains on disposal of businesses/assets – net and interest expense in NEE's consolidated statements of income. See Note 3 – Income Statement Impact of Derivative Instruments and Note 1 – Disposal of Businesses/Assets and Sale of Noncontrolling Ownership Interests.

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NEXTERA ENERGY, INC. AND FLORIDA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. 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 of additional facilities and equipment to meet customer demand, as well as capital improvements to and maintenance of existing facilities. At NEER, capital expenditures include, among other things, the cost, including capitalized interest, for construction and development of wind and solar projects, the procurement of nuclear fuel and the cost to maintain existing rate-regulated transmission facilities, as well as equity contributions to a joint venture for the development and construction of a rate-regulated transmission facility. Also see Note 4 – Contingent Consideration.

At December 31, 2021, estimated capital expenditures for 2022 through 2026 were as follows:

20222023202420252026Total
(millions)
FPL:
Generation:(a)
New(b)$1,825$1,670$1,635$1,210$995$7,335
Existing1,6051,4651,2206857505,725
Transmission and distribution(c)4,0353,7603,8704,7605,07521,500
Nuclear fuel155110145145120675
General and other8756257157406653,620
Total$8,495$7,630$7,585$7,540$7,605$38,855
NEER:(d)
Wind(e)$2,630$240$50$35$30$2,985
Solar(f)3,4451,01017025104,660
Battery storage270120——5395
Nuclear, including nuclear fuel200150200210210970
Rate-regulated transmission22085553030420
Other44085956070750
Total$7,205$1,690$570$360$355$10,180

(a)Includes AFUDC of approximately $75 million, $85 million, $60 million, $50 million and $40 million for 2022 through 2026, respectively.

(b)Includes land, generation structures, transmission interconnection and integration and licensing.

(c)Includes AFUDC of approximately $50 million, $45 million, $40 million, $15 million and $0 million for 2022 through 2026, respectively.

(d)Represents capital expenditures for which applicable internal approvals and also, if required, regulatory approvals have been received.

(e)Consists of capital expenditures for new wind projects, repowering of existing wind projects and related transmission totaling approximately 2,852 MW.

(f)Includes capital expenditures for new solar projects (including solar plus battery storage projects) and related transmission totaling approximately 5,946 MW.

The above estimates are subject to continuing review and adjustment and actual capital expenditures may vary significantly from these estimates.

In addition to guarantees noted in Note 8 with regards to NEP, NEECH has guaranteed or provided indemnifications or letters of credit related to third parties, including certain obligations of investments in joint ventures accounted for under the equity method, totaling approximately $484 million at December 31, 2021. These obligations primarily related to guaranteeing the residual value of certain financing leases. Payment guarantees and related contracts with respect to unconsolidated entities for which NEE or one of its subsidiaries are the guarantor are recorded at fair value and are included in noncurrent other liabilities on NEE’s consolidated balance sheets. Management believes that the exposure associated with these guarantees is not material.

Contracts – In addition to the commitments made in connection with the estimated capital expenditures included in the table in Commitments above, FPL has firm commitments under long-term contracts primarily for the transportation of natural gas with expiration dates through 2042.

At December 31, 2021, NEER has entered into contracts with expiration dates through 2033 primarily for the purchase of wind turbines, wind towers and solar modules and related construction and development activities, as well as for the supply of uranium, and the conversion, enrichment and fabrication of nuclear fuel, and has made commitments for the construction of a rate-regulated transmission facility. Approximately $4.3 billion of related commitments are included in the estimated capital expenditures table in Commitments above. In addition, NEER has contracts primarily for the transportation and storage of natural gas with expiration dates through 2040.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The required capacity and/or minimum payments under contracts, including those discussed above at December 31, 2021, were estimated as follows:

20222023202420252026Thereafter
(millions)
FPL(a)$1,025$980$955$900$825$8,570
NEER(b)(c)(d)$4,400$365$185$85$65$570

(a)Includes approximately $415 million, $410 million, $410 million, $405 million, $400 million and $5,960 million in 2022 through 2026 and thereafter, respectively, of firm commitments related to the natural gas transportation agreements with Sabal Trail and Florida Southeast Connection, LLC. The charges associated with these agreements are recoverable through the fuel clause and totaled approximately $419 million, $386 million and $316 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which $105 million, $108 million and $108 million, respectively, were eliminated in consolidation at NEE.

(b)Excludes commitments related to equity contributions and a 20-year natural gas transportation agreement (approximately $70 million per year) with a joint venture, in which NEER has a 31.9% equity investment, that is constructing a natural gas pipeline. These commitments are subject to the completion of construction of the pipeline which has a very low probability of completion. See Note 4 – Nonrecurring Fair Value Measurements**.**

(c)Includes approximately $370 million of commitments to invest in technology and other investments through 2031. See Note 9 – Other.

(d)Includes approximately $610 million, $20 million, $5 million, $5 million, $0 million and $5 million for 2022 through 2026 and thereafter, respectively, of joint obligations of NEECH and NEER.

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 $450 million of private liability insurance per site, which is the maximum obtainable, except at Duane Arnold which obtained an exemption from the NRC and maintains a $100 million private liability insurance limit. Each site, except Duane Arnold, participates in a secondary financial protection system, which provides up to $13.1 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 of up to $963 million ($550 million for FPL), plus any applicable taxes, per incident at any nuclear reactor in the U.S., payable at a rate not to exceed $143 million ($82 million for FPL) per incident per year. NextEra Energy Resources and FPL are contractually entitled to recover a proportionate share of such assessments from the owners of minority interests in Seabrook and St. Lucie Unit No. 2, which approximates $16 million and $20 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 and a sublimit of $1.5 billion for non-nuclear perils, except for Duane Arnold which has a limit of $50 million for property damage, decontamination risks and non-nuclear perils. NEE participates in co-insurance of 10% of the first $400 million of losses per site per occurrence, except at Duane Arnold. 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 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 $163 million ($104 million for FPL), plus any applicable taxes, in retrospective premiums in a policy year. NextEra Energy Resources 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, $2 million and $4 million, plus any applicable taxes, respectively.

Due to the high cost and limited coverage available from third-party insurers, NEE does not have property insurance coverage for a substantial portion of either its transmission and distribution property or natural gas pipeline assets. If FPL's future storm restoration costs exceed the storm and property insurance reserve, such storm restoration costs may be recovered, subject to prudence review by the FPSC, through surcharges approved by the FPSC or through securitization provisions pursuant to Florida law. See Note 1 – Storm Funds, Storm Reserves and Storm Cost Recovery.

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.

16. Segment Information

The tables below present information for NEE's and FPL's reportable segments. NEE's segments include its reportable segments, the FPL segment, a rate-regulated utility business, and NEER, which is comprised of competitive energy and rate-regulated transmission businesses, as well as an operating segment of NEE, Gulf Power, a rate-regulated utility business. FPL's reportable segments include the FPL segment and Gulf Power. See Note 6 – Merger of FPL and Gulf Power Company. Corporate and Other for each of NEE and FPL represents other business activities, such as purchase accounting adjustments for Gulf Power Company, includes eliminating entries, and may include the net effect of rounding. See Note 2 for information regarding NEE's and FPL's operating revenues.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NEE's segment information is as follows:

2021
FPL SegmentGulf PowerNEER**(a)**Corp. and OtherNEE Consolidated
(millions)
Operating revenues$12,600$1,503$3,053$(87)$17,069
Operating expenses – net$8,418$1,170$4,434$211$14,233
Gains (losses) on disposal of businesses/assets – net$1$—$78$(2)$77
Interest expense$588$28$367$287$1,270
Depreciation and amortization$1,968$297$1,576$83$3,924
Equity in earnings of equity method investees$—$—$666$—$666
Income tax expense (benefit)(b)$767$71$(395)$(95)$348
Net income (loss)$2,935$271$(147)$(232)$2,827
Net income (loss) attributable to NEE$2,935$271$599$(232)$3,573
Capital expenditures, independent power and other investments and nuclear fuel purchases$6,785$782$8,363$147$16,077
Property, plant and equipment – net$52,728$5,499$40,900$221$99,348
Total assets$68,197$7,209$62,113$3,393$140,912
Investment in equity method investees$—$—$6,150$9$6,159
2020
FPL SegmentGulf PowerNEER(a)Corp. and OtherNEE Consolidated
(millions)
Operating revenues$11,662$1,398$5,046$(109)$17,997
Operating expenses – net$7,862$1,081$4,125$166$13,234
Gains (losses) on disposal of businesses/assets – net$—$—$363$(10)$353
Interest expense$600$41$659$650$1,950
Depreciation and amortization$2,246$281$1,460$65$4,052
Equity in losses of equity method investees$—$—$(1,351)$—$(1,351)
Income tax expense (benefit)(b)$610$67$(416)$(217)$44
Net income (loss)$2,650$238$(19)$(500)$2,369
Net income (loss) attributable to NEE$2,650$238$531$(500)$2,919
Capital expenditures, independent power and other investments and nuclear fuel purchases$6,680$1,012$6,893$25$14,610
Property, plant and equipment – net$48,933$4,946$37,842$82$91,803
Total assets$61,610$6,725$55,633$3,716$127,684
Investment in equity method investees$—$—$5,713$15$5,728

(a)Interest expense allocated from NEECH is based on a deemed capital structure of 70% debt and differential membership interests sold by NextEra Energy Resources' subsidiaries. Residual NEECH corporate interest expense is included in Corporate and Other.

(b)NEER includes PTCs that were recognized based on its tax sharing agreement with NEE. See Note 1 – Income Taxes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2019
FPL SegmentGulf PowerNEER(a)Corp. and OtherNEE Consolidated
(millions)
Operating revenues$12,192$1,487$5,639$(114)$19,204
Operating expenses – net$8,895$1,216$4,037$109$14,257
Gains (losses) on disposal of businesses/assets – net$5$—$402$(1)$406
Interest expense$594$55$873$727$2,249
Depreciation and amortization$2,524$247$1,387$58$4,216
Equity in earnings (losses) of equity method investees$—$—$67$(1)$66
Income tax expense (benefit)(b)$441$42$162$(197)$448
Net income (loss)$2,334$180$1,426$(552)$3,388
Net income (loss) attributable to NEE$2,334$180$1,807$(552)$3,769
Capital expenditures, independent power and other investments and nuclear fuel purchases$5,755$729$6,505$4,473$17,462
Property, plant and equipment – net$45,074$4,763$32,042$131$82,010
Total assets$57,188$5,855$51,516$3,132$117,691
Investment in equity method investees$—$—$7,453$—$7,453

(a)Interest expense allocated from NEECH is based on a deemed capital structure of 70% debt and differential membership interests sold by NextEra Energy Resources' subsidiaries. Residual NEECH corporate interest expense is included in Corporate and Other.

(b)NEER includes PTCs that were recognized based on its tax sharing agreement with NEE. See Note 1 – Income Taxes.

FPL's segment information is as follows:

202120202019
FPL SegmentGulf PowerCorp. and OtherFPL Consoli- datedFPL SegmentGulf PowerCorp. and OtherFPL Consoli-datedFPL SegmentGulf PowerCorp. and OtherFPL Consoli-dated
(millions)
Operating revenues$12,600$1,503$(1)$14,102$11,662$1,398$—$13,060$12,192$1,487$1$13,680
Operating expenses – net (a)$8,418$1,170$(2)$9,586$7,862$1,081$(3)$8,940$8,895$1,216$(10)$10,101
Interest expense$588$28$(1)$615$600$41$—$641$594$55$—$649
Depreciation and amortization$1,968$297$1$2,266$2,246$281$(1)$2,526$2,524$247$—$2,771
Income tax expense$767$71$—$838$610$67$1$678$441$42$1$484
Net income$2,935$271$—$3,206$2,650$238$2$2,890$2,334$180$5$2,519
Capital expenditures, independent power and other investments and nuclear fuel purchases$6,785$782$3$7,570$6,680$1,012$(13)$7,679$5,755$729$1$6,485
Property, plant and equipment – net$52,728$5,499$—$58,227$48,933$4,946$—$53,879$45,074$4,763$—$49,837
Total assets$68,197$7,209$2,661$78,067$61,610$6,725$2,666$71,001$57,188$5,855$2,647$65,690

(a)FPL's income statement line for total operating expenses – net includes gains (losses) on disposal of businesses/assets – net.

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