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Duke Energy Florida, LLC., et al. – ‘424B1’ on 6/17/16

On:  Friday, 6/17/16, at 4:01pm ET   ·   Accession #:  1047469-16-13865   ·   File #s:  333-209196, -01

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/17/16  Duke Energy Florida, LLC.         424B1                  1:1.4M                                   Merrill Corp/New/FA
          Duke Energy Florida Project Finance, LLC

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                          HTML   1.00M 

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Filed Pursuant to Rule 424(b)(1)
File No. 333-209196 and 333-209196-01

PROSPECTUS

$1,294,290,000 SERIES A SENIOR SECURED BONDS,

DUKE ENERGY FLORIDA, LLC
Sponsor, Depositor and Initial Servicer
Central Index Key Number: 0000037637

DUKE ENERGY FLORIDA PROJECT FINANCE, LLC
Issuing Entity
Central Index Key Number: 0001669374

            The total price to the public is $1,294,238,713. The total amount of the underwriting discounts and commissions is $6,789,530. The total amount of proceeds to Duke Energy Florida Project Finance, LLC before deduction of expenses (estimated to be $9,163,470) is $1,287,449,183.

            Duke Energy Florida, LLC, as depositor, is offering $1,294,290,000 aggregate principal amount of Series A Senior Secured Bonds listed above (each weighted average life designation a "WAL" and the five WALs collectively, the Series A Bonds or the bonds), to be issued by Duke Energy Florida Project Finance, LLC, referred to herein as DEF Project Finance, as issuing entity.

            The Series A Bonds are senior secured obligations of DEF Project Finance, and are its obligations only. The Series A Bonds are supported by nuclear asset-recovery property, which consists of all rights and interest of DEF Project Finance under the financing order, including the right to impose, bill, collect and receive irrevocable, binding, nonbypassable charges based on the usage of electricity. These charges pay principal, interest and expenses of the Series A Bonds and are known as nuclear asset-recovery charges, or as ratepayer obligation charges or ROCs and upon the issuance of the bonds may not be reduced, impaired, postponed, terminated or otherwise adjusted by the Florida Commission except as adjusted pursuant to the true-up mechanism described herein. These charges will be paid on a joint and several basis by all existing or future customers (individuals, corporations, other business entities, the State of Florida and other federal, state and local government entities) receiving transmission or distribution service from Duke Energy Florida, LLC, or DEF, or its successors or assignees under rate schedules approved by the Florida Commission or under special contracts. Nuclear asset-recovery charges are payable by customers even if the customers elect to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in Florida. Nuclear asset-recovery property includes the right to a mandatory true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of nuclear asset-recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds. With respect to the foregoing, interest is due on each payment date and principal is due upon the final maturity date for each WAL.

            The Series A Bonds do not constitute a debt, liability or other obligation of, or interest in, DEF or any of its other affiliates (other than us). The bonds will not be insured or guaranteed by DEF, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The Series A Bonds will be nonrecourse obligations, secured only by the collateral. The Series A Bonds are not a debt or general obligation of the Florida Commission, the State of Florida or any of its political subdivisions, agencies, or instrumentalities. However, in so far as the State of Florida or any such political subdivision, agency or instrumentality is receiving transmission or distribution service from DEF or its successor or assignee, such governmental entity will be obligated, in its capacity as a customer, to pay nuclear asset-recovery charges.

            The Series A Bonds are a type of ratepayer obligation charge or ROC bonds, to be issued pursuant to a special Florida statute, or the Financing Act, and an irrevocable financing order of the Florida Public Service Commission, or the FPSC or the Florida Commission. Under the irrevocable financing order, the Florida Commission guarantees it will act, as directed by the Financing Act, to implement the true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of nuclear asset-recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds. The Florida Commission's obligations under the Financing Act and the financing order are direct, explicit, irrevocable and unconditional upon issuance of the bonds. Those obligations are legally enforceable against the Florida Commission, a United States public sector entity.

            All matters relating to the structuring, marketing and pricing of the Series A Bonds have been considered jointly by DEF, by designated personnel of the Florida Commission and by the Florida Commission's financial advisor. The financial advisor to the Florida Commission is:

Saber Partners, LLC

            The bonds will accrue interest from the date of issuance. The bonds are scheduled to pay principal and interest semi-annually and sequentially as described herein. We will pay interest and principal on the bonds on March 1 and September 1 of each year, beginning on March 1, 2017. The Series A Bonds are not subject to optional redemption prior to maturity.

            The Series A Bonds are corporate securities. Neither the depositor nor DEF Project Finance is an asset-backed issuer and the Series A Bonds are not asset-backed securities as defined by the SEC governing regulations Item 1101 of Regulation AB. The Series A Bonds will be payable only from revenues received by us under the indenture for the bonds and funds on deposit in trust accounts relating to the bonds. These amounts, together with the nuclear asset-recovery property, including the Florida Commission guaranteed true-up mechanism, are the source of funds for the payment of principal of and interest on the Series A Bonds. A capital subaccount will hold the depositor's capital contribution to us. An excess funds subaccount will hold revenues that are collected but not needed to meet current obligations associated with the Series A Bonds. Credit enhancement for the bonds will be provided by the true-up mechanism, as well as the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the bonds. However, amounts in the excess funds subaccount may be used to make debt service payments on the bonds when needed.

            DEF is the depositor, sponsor, seller and initial servicer with regard to the bonds. DEF is the sole member and owner of our equity interest. Our Central Index Key number is 0001669374. DEF's Central Index Key number is 0000037637.

Investing in the Series A Bonds involves risks. See "Risk Factors" beginning on page 21 to read about factors you should consider before buying the Series A Bonds.

            NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

            The Series A Bonds will be ready for delivery in book-entry form through the facilities of The Depository Trust Company against payment in New York, New York on or about June 22, 2016.

The date of this prospectus is June 15, 2016

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ABOUT THIS PROSPECTUS

        This prospectus is part of a registration statement filed with the Securities and Exchange Commission, or SEC. This prospectus provides you with a description of the Series A Senior Secured Bonds being offered. You should carefully review this prospectus and the information, if any, contained in the documents referenced in this prospectus under the heading "Where You Can Find More Information."

        References in this prospectus to we, us, our, the issuing entity or DEF Project Finance means Duke Energy Florida Project Finance, LLC. References to DEF, the depositor or the sponsor refer to Duke Energy Florida, LLC or to any successor thereto. References to the servicer are to DEF, and any successor servicer under the servicing agreement described in this prospectus. References to the seller mean DEF or any successor under the sale agreement described in this prospectus. References to the administrator mean DEF, or any successor or assignee under the administration agreement described in this prospectus. References to the Florida Commission or the FPSC are to the Florida Public Service Commission. References to the Financing Act are to Section 366.95, Florida Statutes. Unless the context otherwise requires, the term customer means all existing and future customers receiving transmission or distribution service from DEF or its successors or assignees under FPSC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in Florida. References to a financing order, unless the context indicates otherwise, are to the irrevocable financing order, dated November 19, 2015, issued by the Florida Commission to DEF. You can find a glossary of some of the other defined terms used in this prospectus on page 145 of this prospectus.

        We have included cross-references to sections in this prospectus to allow you to find further related discussions. You can also find key topics in the table of contents on the preceding pages. Check the table of contents to locate these sections.

        You should rely only on the information contained or incorporated by reference in this prospectus. Neither we nor the depositor has authorized anyone else to provide you with any different information. If anyone provides you with different or inconsistent information, you should not rely on it. The bonds are not being offered in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is current only as of the date of this prospectus.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as "will," "will likely result," "are expected to," "will continue," "is anticipated," "believe," "could," "should," "estimated," "may," "plan," "potential," "projection," "target," "outlook," "is designed to," "intended") are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to important factors included in "Risk Factors" (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on financial results, and could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us or DEF, in this prospectus, in presentations, on websites, in response to questions or otherwise.

        The following are some factors, among others, that could cause actual results to differ materially from those expressed or implied by forward looking statements in this prospectus:

•

state and federal legislative and regulatory actions or developments, including deregulation, re-regulation and restructuring of the electric utility industry, and changes in, or changes in application of, laws or regulations applicable to other aspects of DEF's business;



•

the accuracy of the servicer's estimates of future demand and prices for energy;



•

the accuracy of the servicer's estimates of industrial, commercial and residential growth or decline in the service territory or customer bases resulting from customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;



•

large customers unexpectedly ceasing business or departing DEF's service territory;



•

changes in market demand, including the effect of demographic patterns;



•

the influence of weather and other natural phenomena affecting electric customer energy usage in the service territory, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes;



•

the operating performance of DEF's facilities;



•

the accuracy of the servicer's forecast of energy consumption;



•

the accuracy of the servicer's estimates of the customer payment patterns, including the rate of delinquencies and any collections curves;



•

the reliability of the systems, procedures and other infrastructure necessary to operate the electric business in the service territory;



•

national or regional economic conditions affecting electric customer energy usage in the service territory;



•

direct or indirect results of cyber attacks, security breaches or other attempts to disrupt the servicer's business;



•

acts of war or terrorism, global instability or other catastrophic events affecting electric customer energy consumption in the service territory; and



•

other factors discussed in this prospectus and any of our SEC filings.

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        Any forward-looking statement speaks only as of the date on which such statement is made, and the depositor does not undertake any obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

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		Under the irrevocable financing order, the Florida Commission guarantees it will act, as directed by the Financing Act, to implement the true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of the nuclear asset-recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds.
		Credit enhancement for the bonds will be provided by the true-up mechanism, as well as by the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the bonds but to hold funds collected in amounts that were more than necessary to pay current debt service. However, amounts in the excess funds subaccount may be used to make debt service payments on the bonds when needed.
Allocation and flow of funds:		The following chart represents a general summary of the flow of funds.
		Generally, DEF's transmission and distribution customers will pay nuclear asset-recovery charges and all other components of their monthly electricity bills to DEF.

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RISK FACTORS

        You should consider carefully all the information included in this prospectus, including the following factors, which might result in a reduction in the market value of your investment in the bonds, before you decide whether to invest in the bonds:

You might experience payment delays as a result of limited sources of payment for the bonds and limited credit enhancement

        You may suffer material payment delays on your bonds if the collateral securing your bonds is insufficient to pay the accrued interest on and the principal amount of those bonds in full. The only source of funds for payments of interest on and principal of the bonds will be the collateral. The collateral for the bonds will be limited to:

•

the nuclear asset-recovery property securing the bonds, including the right to impose, bill, collect and receive nuclear asset-recovery charges and the right to implement the true-up mechanism in respect of the nuclear asset-recovery charges;



•

the funds on deposit in the accounts held by the indenture trustee and;



•

our rights under various contracts described in this prospectus.

        The bonds will not be insured or guaranteed by DEF, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The bonds will be nonrecourse obligations, secured only by the collateral. Delays in payment on the bonds might result in a reduction in the market value of the bonds and, therefore, the value of your investment in the bonds.

        The bonds do not constitute a debt, liability or other obligation of, or interest in, DEF or any of its other affiliates (other than us). The bonds are not a debt or general obligation of the Florida Commission, State of Florida or any of its political, subdivisions, agencies or instrumentalities, and are not a charge on the full faith and credit or taxing power of the State of Florida or any other governmental agency or instrumentality. However, insofar as the State of Florida or any such political subdivision, agency or instrumentality is receiving transmission or distribution service from DEF or its successor or assignee, such governmental entity will be obligated, in its capacity as a customer, to pay nuclear asset-recovery charges securing the bonds.

        You must rely for payment of principal of and interest on the bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the Financing Act, the financing order, collections of nuclear asset-recovery charges and funds on deposit in the related accounts held pursuant to the indenture and the series supplement.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions

Future legal action might challenge or invalidate the Financing Act or the financing order and materially adversely affect your investment

        The nuclear asset-recovery property is created pursuant to the Financing Act and a financing order issued by the Florida Commission pursuant to the Financing Act. The Financing Act became effective on July 1, 2015. DEF is the first utility to petition the Florida Commission to issue nuclear asset-recovery bonds under the Financing Act.

        The Financing Act or any provisions thereof might be directly contested in courts or otherwise become the subject of litigation. In addition, the financing order or any provision thereof might be directly contested in courts or otherwise become the subject of litigation. As of the date of this prospectus, no such litigation has arisen; however, we cannot assure you that a lawsuit challenging the

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validity of the Financing Act or the financing order will not be filed in the future or that, if filed, such lawsuit will not be successful. If an invalidation of any relevant underlying legislative provision or financing order provision were to result from such litigation, you might lose some or all of your investment or you might experience delays in recovering your investment. See "The Nuclear Asset-Recovery Property and the Financing Act" and "DEF's Financing Order" in this prospectus.

        Florida and other states have passed legislation similar to the Financing Act to authorize recoveries by utilities of specified costs, such as hurricane recovery costs, environmental control costs, or costs associated with deregulation of the electricity market, and some of those laws have been challenged by judicial actions or utility commission proceedings. To date, none of those challenges has succeeded, but future judicial challenges might be made. An unfavorable decision challenging legislation similar to the Financing Act would not automatically invalidate the Financing Act or the financing order, but it might provoke a challenge to the Financing Act or the financing order, establish a legal precedent for a successful challenge to the Financing Act or the financing order or heighten awareness of the political and other risks of the bonds, and in that way may limit the liquidity and value of the bonds. Therefore, legal activity in other states might indirectly affect the value of your investment in the bonds.

Future Florida legislative action might attempt to invalidate the bonds or the nuclear asset-recovery property

        Under the Financing Act, the State of Florida has pledged not to (i) alter the provisions of the Financing Act that make the nuclear asset-recovery changes imposed by the financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs the value of the nuclear asset-recovery property or revises the nuclear asset-recovery costs for which recovery is authorized or, (iii) except as provided in the FPSC-guaranteed true-up mechanism, reduce, alter, or impair nuclear asset-recovery charges that are to be imposed, collected, and remitted for the benefit of the bondholders and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the nuclear asset-recovery bonds have been paid and performed in full. For a description of this state pledge, see "The Nuclear Asset-Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of Nuclear Asset-Recovery Bonds—The Financing Act Contains a State Pledge" in this prospectus. Despite the state pledge, the Florida legislature might attempt to repeal the Financing Act, or attempt to amend the Financing Act, or as described below, the Florida Commission might take certain actions that impair the nuclear asset-recovery property. As of the date of this prospectus, neither we nor DEF is aware of any pending legislation in the Florida legislature that would affect any provisions of the Financing Act.

        In the opinion of Hunton & Williams LLP, counsel to DEF and us, with respect to applicable federal constitutional principles relating to the impairment of contracts, the state pledge constitutes a contractual relationship between the bondholders and the State of Florida. In the event that the Florida legislature passes any law (or the Florida Commission exercising legislative powers takes any action) prior to the time that the bonds and related financing costs are fully paid and discharged that in either case limits, alters, impairs, or reduces the value of the nuclear asset-recovery property or the nuclear asset-recovery charges, then, absent a demonstration by the State of Florida that such action or inaction is necessary to further a significant and legitimate public purpose, the bondholders (or the indenture trustee acting on their behalf) would likely have a valid claim, under the Contract Clause of the U.S. Constitution, against the constitutionality of any such action or inaction that limits, alters, impairs, or reduces the value of the nuclear asset-recovery property or the nuclear asset-recovery charges prior to the time that the bonds are fully paid and discharged, provided that the repeal or amendment or the action or inaction would substantially impair the rights of the owners of the nuclear asset-recovery property or the bondholders. Preliminary injunctive relief should be available under federal law to delay implementation of any such action or inaction hereafter taken and determined to

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limit, alter, impair, or reduce the value of the nuclear asset-recovery property or the nuclear asset-recovery charges so as to cause such an impairment in violation of the Contract Clause of the U.S. Constitution, and, upon final adjudication of a claim challenging any such action or inaction, permanent injunctive relief should be available under federal law to prevent implementation thereof.

        Further, the Takings Clause of the U.S. Constitution would likely require the State of Florida to pay just compensation to the bondholders if a court determines that a repeal or amendment of the Financing Act, or any other action taken by the State of Florida in contravention of the state pledge, (a) completely deprived the bondholders of all economically beneficial use of the nuclear asset-recovery property or (b) unduly interfered with the reasonable expectations of the bondholders arising from their investment in the bonds. Even if such State action or inaction is treated as a taking and the State of Florida provides you with an amount deemed to be full compensation, that amount might not be sufficient for you to fully recover your investment.

        In the opinion of Shutts & Bowen LLP, as counsel to DEF and addressed to us, under applicable Florida constitutional principles relating to the impairment of contracts, absent a demonstration that such action or inaction was necessary to serve a legitimate and important public purpose, the state pledge provides a basis upon which the bondholders (or the indenture trustee acting on their behalf) could successfully challenge any law subsequently passed by Florida legislature or any action of the Florida Commission exercising legislative powers or any refusal to take any action required by the state pledge determined by the court to reduce, alter or impair the value of the nuclear asset-recovery property so as to substantially impair the rights of the owners of the nuclear assets-recovery property or the bondholders. However, it might be possible for the Florida legislature to enact legislation, for the people of the State of Florida to pass a constitutional amendment, or for the Florida Commission to take action exercising legislative powers or to refuse to take action required by the state pledge that would impair the rights and remedies of bondholders without giving rise to an impairment of contract under State constitutional principles, if such action or inaction occurs in order to serve a significant and legitimate public purpose (a legitimate and important public purpose under Florida law), such as protecting the public health and safety, or if such action or inaction otherwise is in the valid exercise of the State of Florida's police power.

        Any such action or inaction by the State of Florida adversely affecting the nuclear asset-recovery property or the ability to collect nuclear asset-recovery charges might also be considered a "taking" under the Florida Constitution. The State of Florida may then be obligated to pay the estimated value of the nuclear asset-recovery property at the time of the taking. DEF cannot assure you of the likelihood or legal validity of any action of this type by the State of Florida, or whether the action or inaction would be considered a taking. Even if such State action or inaction is treated as a taking and the State of Florida provides you with an amount deemed to be full compensation, that amount might not be sufficient for you to fully recover your investment.

        In addition, the people of the State of Florida have the right to amend the Florida Constitution through initiative powers; however, the voters do not have the right to amend statutes through initiative powers. Thus, it is possible that the people of Florida, using their initiative powers, might amend or repeal the Florida Constitution in a manner affecting the Financing Act. The power to propose a revision or amendment to the Florida Constitution by initiative may be invoked by filing a petition signed by a number of voters in each of one-half of the congressional districts of the State of Florida, and of the State of Florida as a whole, equal to 8% of the votes cast in each district and in the State of Florida as a whole in the last election in which presidential electors were chosen. If this requirement is met, the amendment would be placed on a statewide ballot for approval by 60% of the State of Florida voters voting at the election (unless a different approval vote is required by the Florida Constitution for a particular amendment). DEF is currently unaware of any efforts to amend the Florida Constitution in a manner which would affect the Financing Act in any way.

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        Further, nothing in the state pledge precludes any limitation or alteration of the Financing Act or a financing order if full compensation is made by law for the full protection of the nuclear asset-recovery charges collected pursuant to a financing order and of the holders of the related series of bonds. It is unclear what "full compensation" and "full protection" would be afforded to holders of the bonds by the State of Florida if such limitation or alteration were attempted. Accordingly, no assurance can be given that any such provision would not adversely affect the market value of the related series of bonds, or the timing or receipt of payments with respect to such bonds.

        We cannot assure you that a repeal of or amendment to the Financing Act will not be sought or adopted or that any action or inaction by the State of Florida adverse to your investment in the bonds will not occur. The servicer has agreed to take legal or administrative action, including instituting legal action, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of or amendment to the Financing Act or a modification of the financing order or nuclear asset-recovery property. However, enforcement of any rights against the State of Florida or the Florida Commission under the state pledge may be subject to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against State of Florida and local governmental entities in Florida. These limitations might include, for example, the necessity to exhaust administrative remedies prior to bringing suit in a court, or limitations on type and locations of courts in which the State of Florida or the Florida Commission may be sued. See "The Servicing Agreement—Servicing Standards and Covenants" in this prospectus. However, we cannot assure that the servicer would be able to take this action or that this action would be successful.

        Except as described in "The Sale Agreement—Indemnification" in this prospectus, neither DEF, nor any of its successors, assignees or affiliates will indemnify you for any change in law, including any amendment or repeal of the Financing Act, that might affect the value of the bonds.

The Florida Commission might attempt to take actions which might reduce the value of your investment

        The Financing Act provides that the financing order issued to DEF is irrevocable upon the transfer of the nuclear asset-recovery property to an assignee or the issuance of the bonds, whichever is earlier, and is not subject to amendment, modification or termination by subsequent action of the Florida Commission, except for the periodic true-up adjustments. Apart from the financing order, the Florida Commission retains the power to adopt, revise or rescind rules or regulations affecting DEF or a successor utility. The Florida Commission also retains the power to interpret and implement the financing order. Any new or amended regulations or orders by the Florida Commission for example, could affect the ability of the servicer to collect the nuclear asset-recovery charges in full and on a timely basis. The servicer has agreed to take legal or administrative action to resist any Florida Commission rule, regulation or decision that would violate the state pledge. We cannot assure you that the servicer would be successful in its efforts. Thus, future Florida Commission rules, regulations or decisions might adversely affect the rating of the bonds, their price or the rate of nuclear asset-recovery charge collections and, accordingly, the amortization of bonds and their weighted average lives. As a result, you could suffer a loss of your investment.

        The servicer is required to file with the Florida Commission, on our behalf, periodic true-up adjustments of the nuclear asset-recovery charges. Under the irrevocable financing order, the Florida Commission guarantees it will act to administratively approve the requested adjustment (including, if applicable, the correction of any mathematical error in such calculations) within 60 days of the date of the request for adjustment. Please read "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" and "The Servicing Agreement—The Florida Commission's Mandated True-Up Adjustment Process" in this prospectus. However, true-up adjustments could be challenged, and any such challenge might adversely affect the market perception and valuation of the bonds. Also, any such challenge could result in costly and time-consuming litigation, and such litigation could result in a shortfall or material delay in nuclear asset-recovery charge collections.

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A municipal entity might assert the right to acquire portions of DEF's electric distribution facilities and avoid payment of the nuclear asset-recovery charges

        A municipality might bring a proceeding and allege that it has the right to acquire portions of an electric utility's electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. If a municipality were to bring such a proceeding against DEF, DEF would first contest the municipality's right to utilize eminent domain to acquire DEF's electric distribution facilities. If the municipality was successful in such a proceeding, then after the final, non-appealable judgment, DEF would adhere to the covenant described below in the servicing agreement. A municipality may also seek to acquire portions of an electric utility's electric distribution facilities by exercising a unilateral contract option to request a valuation and forced sale of the electric utility's electric distribution facilities. There can be no assurance that one or more municipalities will not seek to acquire some or all of DEF's electric distribution facilities while the bonds remain outstanding. The Financing Act specifies that nuclear asset-recovery charges approved by a financing order shall be collected by an electric utility as well as its "successors or assignees." In the servicing agreement, DEF has covenanted to assert in an appropriate forum that any municipality that acquires any portion of DEF's electric distribution facilities by eminent domain or by exercising a unilateral contract option, must be treated as a successor to DEF under the Financing Act and the financing order and that customers in such municipalities remain responsible for payment of nuclear asset-recovery charges. However, the involved municipality might assert that it should not be treated as a successor to DEF for these purposes and that its distribution customers are not responsible for payment of nuclear asset-recovery charges. In any case, DEF cannot assure you that the nuclear asset-recovery charges will be collected from customers of municipally-owned utilities who were formerly customers of DEF and that such an occurrence might not affect the timing or receipt of payments with respect to your bonds.

Neither DEF Project Finance nor DEF is obligated to indemnify you for changes in law

        Neither we nor DEF nor any of their successors, assignees or affiliates will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Financing Act that might affect the value of your bonds. DEF, as servicer, will agree in the servicing agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Financing Act that would be materially adverse to us, the indenture trustee or bondholders. However, we cannot assure you that DEF would be able to take this action or that this action would be successful. Although DEF or any successor assignee might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the bonds invalidates the nuclear asset-recovery property, such indemnification obligations do not apply for any changes in law after the date the bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. See "The Sale Agreement—Seller Representations and Warranties" and "The Servicing Agreement—Servicing Standards and Covenants" in this prospectus.

Servicing Risks

Inaccurate forecasting of electric consumption or collections might reduce scheduled payments on the bonds

        The nuclear asset-recovery charges are assessed based on forecasted customer usage. The amount and the rate of nuclear asset-recovery charge collections will depend in part on actual electricity consumption and the amount of collections and write-offs. The nuclear asset-recovery charges are calculated by the servicer according to the methodology approved in the financing order, which includes the allocation of cost responsibility among customer rate classes based upon the cost responsibilities approved in DEF's most recently filed rate case. If the servicer inaccurately forecasts either electricity consumption or underestimates customer delinquency or write-offs when setting or adjusting the

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nuclear asset-recovery charges, there could be a shortfall or material delay in nuclear asset-recovery charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the bonds. Please read "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" and "The Servicing Agreement—The Florida Commission's Mandated True-Up Adjustment Process" in this prospectus.

        Inaccurate forecasting of electricity consumption by the servicer might result from, among other things:

•

unanticipated weather or economic conditions, resulting in less electricity consumption than forecast;



•

general economic conditions being worse than expected, causing customers to migrate from DEF's service territory or reduce their electricity consumption;



•

the occurrence of a natural disaster, such as a hurricane, wind storm or an act of terrorism, cyber attack or other catastrophic event unexpectedly disrupting electrical service and reducing electricity consumption;



•

unanticipated changes in the market structure of the electric industry;



•

large customers unexpectedly ceasing business or departing DEF's service territory;



•

dramatic and unexpected changes in energy prices resulting in decreased electricity consumption;



•

customers consuming less electricity than anticipated because of increased energy prices, unanticipated increases in conservation efforts or unanticipated increases in electric consumption efficiency;



•

differences or changes in forecasting methodology; or



•

large customers switching to alternative sources of energy, including self-generation or co-generation of electric power in some cases without using DEF's transmission or distribution system. Self-generators that receive no transmission or distribution service from DEF are not liable for the nuclear asset-recovery charge. The Financing Act and financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

        Inaccurate forecasting of delinquencies or write-offs by the servicer could result from, among other things:

•

unexpected deterioration of the economy, the occurrence of a natural disaster, an act of war or terrorism or other catastrophic events causing greater write-offs than expected or forcing DEF or a successor utility to grant additional payment relief to more customers;



•

an unexpected change in law that makes it more difficult for DEF or a successor distribution company to terminate service to nonpaying customers, or that requires DEF or a successor to apply more lenient credit standards for customers; or



•

the unexpected introduction into the energy markets, as a result of a fundamental change in the regulation of electric utilities in Florida, of alternative energy suppliers who are authorized to collect payments arising from the nuclear asset-recovery charges, but who may fail to remit customer charges to the servicer in a timely manner.

Your investment in the bonds depends on DEF or its successors or assignees acting as servicer of the nuclear asset-recovery property

        DEF, as servicer, will be responsible for, among other things, calculating, billing, collecting and posting the nuclear asset-recovery charges from customers, submitting requests to the Florida

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Commission to adjust these charges, monitoring the collateral for the bonds and taking certain actions in the event of non-payment by a customer. The indenture trustee's receipt of collections in respect of the nuclear asset-recovery charges, which will be used to make payments on bonds, will depend in part on the skill and diligence of the servicer in performing these functions. The systems that the servicer has in place for nuclear asset-recovery charge billings, collections and postings, as the same may be modified by any applicable current or future Florida Commission regulations, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and completely accurate manner. If the servicer fails to make collections for any reason, then the servicer's payments to the indenture trustee in respect of the nuclear asset-recovery charges might be delayed or reduced. In that event, our payments on the bonds might be delayed or reduced.

If DEF Project Finance needs to replace DEF as the servicer, DEF Project Finance may experience difficulties finding and using a replacement servicer

        If DEF ceases to service the nuclear asset-recovery property related to the bonds, it might be difficult to find a successor servicer. Also, any successor servicer might have less experience and ability than DEF and might experience difficulties in collecting nuclear asset-recovery charges and determining appropriate adjustments to the nuclear asset-recovery charges and billing and/or payment arrangements may change, resulting in delays or disruptions of collections. A successor servicer might not be willing to perform except for fees higher than those approved in the financing order and might charge fees that, while permitted under the financing order, are substantially higher than the fees paid to DEF as servicer. DEF has agreed in the servicing agreement to indemnify the Florida Commission on behalf of customers for any increase in the servicing fees if DEF is replaced as a result of its willful misconduct, recklessness or negligence or termination for cause. Although a true-up adjustment would be required to allow for the increase in fees, there could be a gap between the incurrence of those fees and the implementation of a true-up adjustment to adjust for that increase that might adversely affect distributions to bondholders. In the event of the commencement of a case by or against the servicer under Title 11 of the United States Code, as amended, or the Bankruptcy Code, or similar laws, we and the indenture trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code. Any of these factors might delay the timing of payments and reduce the value of your investment.

        DEF currently has accounts receivable sale arrangements under which it sells substantially all of its accounts receivable on a revolving basis. Under the intercreditor agreement to be entered into at the time of issuance of the bonds among DEF, us, the indenture trustee, and the parties to DEF's accounts receivable sale programs, replacement of the servicer would require the agreement of the indenture trustee and the administrative agents under the accounts receivable sale programs. In the event of a default by the servicer under the servicing agreement, if the indenture trustee and the administrative agents under the accounts receivable sale programs are unable to agree on a replacement servicer, the indenture trustee would not be able to replace DEF or any successor as servicer. Any of these events could adversely affect the billing, collection and posting of the nuclear asset-recovery charges and the value of your investment in the bonds. See "The Servicing Agreement" in this prospectus.

        In addition to the above, it is possible that DEF may, in the future, cause other subsidiaries to issue other securities, similar to the bonds that are backed by charges owing from customers or similar types of property. DEF has covenanted in the sale agreement that, in the event of any issuance of that sort, it will also enter into an intercreditor agreement with the indenture trustee and the trustees for those other issuances, which would provide that the servicer for the bonds and those other issuances must be one and the same entity. Any expansion of the intercreditor agreement to include those subsequent issuances could further impair the ability of the indenture trustee to appoint a successor servicer in the event of a servicer default.

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Changes to billing, collection and posting practices might reduce the value of your investment in the bonds

        The financing order specifies the methodology for determining the amount of the nuclear asset-recovery charges we may impose. However, subject to any required Florida Commission approval, the servicer may set its own billing, collection and posting arrangements with customers from whom it collects nuclear asset-recovery charges, provided that these arrangements comply with any applicable Florida Commission customer safeguards and the provisions of the servicing agreement. For example, to recover part of an outstanding bill, the servicer may agree to extend a customer's payment schedule, including the nuclear asset-recovery charges. Also, subject to any required Florida Commission approval, the servicer may change billing, collection and posting practices, which might adversely impact the timing and amount of customer payments and might reduce nuclear asset-recovery charge collections, thereby limiting our ability to make scheduled payments on the bonds. Separately, the Florida Commission might require changes to these practices. Any changes in billing, collection and posting practices or regulations might make it more difficult for the servicer to collect the nuclear asset-recovery charges and adversely affect the value of your investment in the bonds.

It might be difficult for successor servicers to collect the nuclear asset-recovery charge from DEF's customers

        Any successor servicer may bring an action against a customer for non-payment of the nuclear asset-recovery charge, but only a successor servicer that is a successor electric utility may terminate service for failure to pay the nuclear asset-recovery charge. The financing order provides that partial payment of monthly electric bills shall be allocated pro rata among the nuclear asset-recovery charge and other charges on the bill. A successor servicer that does not have the threat of termination of service available to enforce payment of the nuclear asset-recovery charge would need to rely on the successor electric utility to threaten to terminate service for nonpayment of other portions of monthly electric utility bills. This inability might reduce the value of your investment.

Risk Associated with the Unusual Nature of the Nuclear Asset-Recovery Property

Nuclear asset-recovery charges may not be billed more than 276 months after the inception of the nuclear asset-recovery charges

        Nuclear asset-recovery charges may not be imposed on customers following a date which is the close of the last billing cycle for the 276th month from the inception of the nuclear asset-recovery charge. If nuclear asset-recovery charges billed through this period are not sufficient to repay the bonds in full, apart from amounts in the capital subaccount, no other funds will be available to pay the unpaid balance due on the bonds.

Foreclosure of the indenture trustee's lien on the nuclear asset-recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected

        Under the Financing Act, the indenture and the series supplement, the indenture trustee or the bondholders have the right to foreclose or otherwise enforce the lien on the nuclear asset-recovery property securing the bonds. However, in the event of foreclosure, there is likely to be a limited market, if any, for the nuclear asset-recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Moreover, although principal of the bonds will be due and payable upon acceleration of the bonds before maturity, we do not anticipate that the nuclear asset-recovery charges will be adjusted beyond the periodic payment requirement and therefore nuclear asset-recovery charges likely would not be sufficient to pay principal due and payable upon such an acceleration, and the nature of our business will result in principal of the bonds being paid as funds become available. See "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" in this prospectus. If there is an acceleration of the bonds, all of the bonds will be paid pro rata; therefore, some bonds might be paid earlier than expected and some bonds might be paid later than expected.

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Risk Associated with Storms

Storm damage to DEF's operations might impair payment of the bonds

        DEF's operations might be impacted by hurricanes, tropical storms or wind storms. Transmission, distribution and consumption of electricity might be interrupted temporarily, reducing the collections of nuclear asset-recovery charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the DEF service area, which could cause the per-kWh nuclear asset-recovery charge to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the state pledge, might be defended on the basis of public necessity. Please read "The Nuclear Asset-Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of Nuclear Asset-Recovery Bonds—The Financing Act Contains a State Pledge" and "Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions—Future Florida Legislative Action Might Attempt to Invalidate the Bonds or the Nuclear Asset-Recovery Property" in this prospectus.

Risks Associated with Potential Bankruptcy Proceedings

        For a detailed discussion of the following risks, please read "Bankruptcy and Creditors' Rights Issues." In addition, the risk factors enumerated below in this subsection are based on general legal principles and outcomes; each bankruptcy case is factually unique, and the outcome of any bankruptcy case is based upon the application of legal principles to the specific facts of that bankruptcy case.

Bankruptcy of DEF or any successor or assignee could result in losses or delays in payments on the bonds

        The Financing Act provides that as a matter of Florida law:

•

the rights of a selling utility in nuclear asset-recovery property assignable under the Financing Act or a financing order, prior to sale, are contract rights of the seller;



•

the seller may make a present transfer of its rights under the financing order, including the right to impose, bill, collect and receive future nuclear asset-recovery charges that customers do not yet owe, and each such transfer is considered to be a transaction in the ordinary course of business;



•

upon the transfer to us, the rights will become nuclear asset-recovery property and as described in the financing order, nuclear asset-recovery property represents a legally enforceable regulatory property right under the Financing Act to bill and collect nuclear asset-recovery charges from persons who receive electric transmission and distribution services from the electric utility or its successors or assignees, even though the imposition and collection of nuclear asset-recovery charges depend on further acts that have not yet occurred; and



•

a transfer of the nuclear asset-recovery property from the seller to us is an absolute transfer and true sale of the nuclear-asset recovery property, not a pledge of the nuclear asset-recovery property to secure a financing by the seller.

        Please read "The Nuclear Asset-Recovery Property and the Financing Act" in this prospectus. These four provisions are important to maintaining payments on the bonds in accordance with their terms during any bankruptcy of DEF. In addition, the transaction has been structured with the objective of keeping us separate from DEF in the event of a bankruptcy of DEF.

        The Financing Act further provides that the interest of a transferee, purchaser, acquirer, assignee, or pledgee in nuclear asset-recovery property specified in the financing order, and in the revenue and collections arising from that property, is not subject to setoff, counterclaim, surcharge, or defense by

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the electric utility or any other person or in connection with the reorganization, bankruptcy, or other insolvency of the electric utility or any other entity.

        A bankruptcy court generally follows state property law on issues such as those addressed by the four provisions described above. However, a bankruptcy court has authority not to follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest. If a bankruptcy court in a bankruptcy of DEF refused to enforce one or more of the State property law provisions described above for this reason, the effect of this decision on you as a bondholder would be similar to the treatment you would receive in a bankruptcy of DEF if the bonds had been issued directly by DEF, including without limitation possibly causing material delays in payment of, or losses on, your bonds and possibly materially reducing the value of your investment in the bonds. Specific examples of possible effects are set forth below. A decision by the bankruptcy court that, despite our separateness from DEF, our assets and liabilities and those of DEF should be consolidated would have a similar effect on you as a bondholder.

        We have taken steps together with DEF, as the seller, to reduce the risk that in the event DEF or an affiliate of DEF were to become the debtor in a bankruptcy case, a court would order that our assets and liabilities be substantively consolidated with those of DEF or an affiliate. Such steps include, without limitation, provisions in our limited liability company agreement concerning entity separation and requiring an independent manager. Nonetheless, these steps might not be completely effective, and thus if DEF or an affiliate of DEF were to become a debtor in a bankruptcy case, a court may order that our assets and liabilities be consolidated with those of DEF or the affiliate. This might cause material delays in payment of, or losses on, your bonds and might materially reduce the value of your investment in the bonds. For example:

•

without permission from the bankruptcy court, the indenture trustee might be prevented from taking actions against DEF or recovering or using funds on your behalf or replacing DEF as the servicer;



•

the bankruptcy court might order the indenture trustee to exchange the nuclear asset-recovery property for other property, which might be of lower value;



•

tax or other government liens on DEF's property that arose after the transfer of the nuclear asset-recovery property to us might nevertheless have priority over the indenture trustee's lien and might be paid from nuclear asset-recovery charge collections before payments on your bonds;



•

the indenture trustee's lien might not be properly perfected in nuclear asset-recovery property collections that were commingled with other funds of DEF collected from customers as of the date of DEF's bankruptcy, or might not be properly perfected in all of the nuclear asset-recovery property, including, without limitation, if all perfection requirements are not met, and the lien might therefore be set aside in the bankruptcy, with the result that your bonds would represent only general unsecured claims against DEF;



•

the bankruptcy court might rule that neither our property interest nor the indenture trustee's lien extends to nuclear asset-recovery charges in respect of electricity consumed after the commencement of DEF's bankruptcy case, with the result that your bonds would represent only general unsecured claims against DEF;



•

we and DEF might be relieved of the obligation to make any payments on your bonds during the pendency of the bankruptcy case and might be relieved of any obligation to pay interest accruing after the commencement of the case;



•

DEF might be able to alter the terms of your bonds as part of its plan of reorganization;

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•

the bankruptcy court might rule that the nuclear asset-recovery charges should be used to pay a portion of the cost of providing electric service;



•

the bankruptcy court might rule that the remedy provisions of the sale agreement are unenforceable, leaving us with an unsecured claim of actual damages against DEF which might be expensive and difficult to prove;



•

the sale of the related nuclear asset-recovery property might be construed as a financing and not a sale which might delay or limit payment on your bonds;



•

claims against DEF or any successor or assignee might be limited in the event of a bankruptcy of the seller;



•

a bankruptcy of DEF or any successor or assignee could limit the remedies available to the indenture trustee;



•

if the servicer defaults or enters bankruptcy proceedings, it might be difficult to find a successor servicer and payments on your bonds might be temporarily suspended;



•

the servicer will commingle the nuclear asset-recovery charges with other revenues which might obstruct access to the nuclear asset-recovery charges in case of bankruptcy of the servicer;



•

if the servicer enters bankruptcy proceedings, the collections of the nuclear asset-recovery charges paid by the servicer in the 90 days before the date of bankruptcy might constitute voidable preferences; or



•

bondholders of another series of nuclear asset-recovery bonds might attempt to obtain access to the collateral for the bonds, resulting in losses or a delay in payment on the bonds.

Other Risks Associated with the Purchase of the Bonds

DEF's obligation to indemnify DEF Project Finance for a breach of a representation or warranty might not be sufficient to protect your investment

        DEF will be obligated under the sale agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders, only in specified circumstances. DEF will not be obligated to repurchase the nuclear asset-recovery property in the event of a breach of any of its representations, warranties or covenants regarding such nuclear asset-recovery property. Similarly, DEF will be obligated under the servicing agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders only in specified circumstances. Please read "The Sale Agreement" and "The Servicing Agreement" in this prospectus.

        Neither the indenture trustee nor the bondholders will have the right to accelerate payments on the related bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture and series supplement as described in "Description of the Series A Bonds—Events of Default; Rights Upon Event of Default." Furthermore, DEF might not have sufficient funds available to satisfy its indemnification obligations, and the amount of any indemnification paid by DEF might not be sufficient for you to recover all of your investment in the bonds. In addition, if DEF becomes obligated to indemnify bondholders, the ratings on the bonds might be downgraded as a result of the circumstances causing the breach and the fact that bondholders will be unsecured creditors of DEF with respect to any of these indemnification amounts. DEF will not indemnify any person for any loss, damages, liability, obligation, claim, action, suit or payment resulting solely from a downgrade in the ratings on the bonds, or for any consequential damages, including any loss of market value of the bonds resulting from a default or a downgrade of the ratings of the bonds. Please read "The Sale Agreement—Seller Representations and Warranties" and "—Indemnification" in this prospectus.

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DEF Project Finance might issue additional series of nuclear asset-recovery bonds

        The financing order authorizes us to issue one or more series of nuclear asset-recovery bonds not to exceed the aggregate principal amount of the Financeable Balance as of the issuance date. We may also, at our sole discretion, acquire separate and additional nuclear asset-recovery property under a subsequent financing order, and issue one or more additional series of nuclear asset-recovery bonds supported by such additional nuclear asset-recovery property. In addition, DEF may in its sole discretion sell nuclear asset-recovery property to one or more entities other than us in connection with the issuance of a new series of nuclear asset-recovery bonds. Any new series may include terms and provisions that would be unique to that particular series. We may not issue additional nuclear asset-recovery bonds, nor may DEF sell nuclear asset-recovery property to other entities issuing nuclear asset-recovery bonds, if the issuance would not satisfy the rating agency condition. If additional series of nuclear asset-recovery bonds are issued, nuclear asset-recovery charge revenues collected by or for the benefit of DEF will be prorated among the owners of the nuclear asset-recovery property associated with each such series based on the respective amounts of nuclear asset-recovery charges billed and not yet paid. However, we cannot assure you that a new series or issuance would not cause reductions or delays in payment on your bonds. In addition, some matters relating to the bonds issued by us may require the vote of the holders of all series of bonds issued by us. Your interests in these votes might conflict with the interests of the beneficial owners of nuclear asset-recovery bonds of another series or with the interests of holders of other securities that might be issued. Thus, these votes could result in an outcome that is materially unfavorable to you.

Technological change might make alternative energy sources more attractive in the future

        Technological developments and/or tax or other economic incentives might result in the introduction of economically attractive, more fuel-efficient, more environmentally-friendly and/or more cost-effective alternatives to purchasing electricity through a utility's distribution facilities for increasing numbers of retail customers. Manufacturers of self-generation facilities may develop smaller-scale, more fuel-efficient on-site generating and/or storage units that can be cost-effective options for a greater number of retail customers. Moreover, an increase in self-service power may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable. Customers who self-generate their electricity must pay the nuclear asset-recovery charges to the extent that such energy, or emergency back-up power, is transmitted through use of a utility's delivery system. Technological developments might allow greater numbers of retail customers to reduce or even altogether avoid nuclear asset-recovery charges under such provisions through on-site generation and storage. This might reduce the kilowatt-hours of electric energy delivered to retail customers by means of DEF's transmission and distribution facilities, thereby causing nuclear asset-recovery charges to the remaining retail customers to increase.

Absence of a secondary market for the bonds might limit your ability to resell bonds

        The underwriters for the bonds might assist in resales of such bonds but they are not required to do so. A secondary market for the bonds might not develop. If a secondary market does develop, it might not continue or there might not be sufficient liquidity to allow you to resell any of your bonds. We do not anticipate that any bonds will be listed on any securities exchange.

DEF's credit ratings might affect the market value of your bonds

        Although DEF is not an obligor on the bonds, a downgrading of DEF's current credit ratings might have an adverse effect, at least temporarily, on the market value of the bonds. Credit ratings might change at any time. A rating agency has the authority to revise or withdraw its rating based solely upon its own judgment.

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The ratings are no indication of the expected rate of payment of principal on the bonds and DEF Project Finance might pay principal of the bonds later than expected

        The bonds will be rated by one or more established rating agencies. A rating is not a recommendation to buy, sell or hold the bonds. The ratings merely analyze the probability that we will repay the total principal amount of each WAL of the bonds at its final maturity date (which is later than the expected final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule. Thus, we might repay the principal of your bonds later than you expect, which might materially reduce the value of your investment.

Regulatory provisions affecting certain investors could adversely affect the liquidity of the bonds

        We and DEF believe that the bonds will not be subject to the 5% risk retention requirement imposed by the European Union Capital Requirements Regulation (Regulation (EU) No 575/2013). For the purposes of the European Union's risk retention rules, we and DEF believe the issue of the bonds does not fall within the definition of a "securitisation" as the credit risk associated with exposure is not tranched. We and DEF believe, therefore, that the EU risk retention rules do not apply to the issue of the bonds.

        Although we and DEF consider the possibility remote, if a European regulator should decide that the issue of the bonds is a "securitisation" for EU regulatory purposes then failure to comply with one or more of the requirements set out in Regulation (EU) No 575/2013 might result in the imposition of a penal capital charge with respect to the investment made in the securitization by a credit institution and investment firm regulated in a Member State of the European Economic Area and its consolidated group affiliates.

        Investors in the bonds are responsible for analyzing their own regulatory position and are encouraged to consult their own investment and legal advisors regarding the issues discussed in the prior two paragraphs and the suitability of the bonds for investment. None of DEF, us nor any other party to the transaction of which this offering is a part makes any representation to any prospective investor or purchaser of the bonds regarding the regulatory treatment of their investment in the bonds now or at any time in the future.

If the investment of collected nuclear asset-recovery charges and other funds held pursuant to the indenture and the series supplement in the collection account results in investment losses or the investments become illiquid, you might receive payment of principal of and interest on the bonds later than you expect

        Funds held pursuant to the indenture and the series supplement in the collection account will be invested in eligible investments. Eligible investments include money market funds having a rating from Moody's Investors Service, Inc. (or any successor in interest), or Moody's, and Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business (or any successor in interest), or S&P, of Aaa and AAA, respectively. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity are experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the bonds.

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KEY QUESTIONS AND ANSWERS
REGARDING THE BONDS AND RELATED TRUE-UP MECHANISM

        The following questions and answers are intended to briefly address certain questions regarding the offering. These questions and answers may not address all questions that may be important to you. Please refer to the section entitled "Prospectus Summary" beginning on page 4 of this prospectus, the more detailed information contained elsewhere in this prospectus and the documents referred to in this prospectus, which you should read carefully and in their entirety. You may obtain the information incorporated by reference into this prospectus without charge by following the instructions under the section entitled "Where You Can Find More Information" beginning on page 144 of this prospectus.

Q1:

Are the Series A Bonds asset-backed securities as defined by the SEC governing regulations Item 1101 of Regulation AB?

A:

No. The Series A Bonds are not "asset-backed securities" and neither DEF nor DEF Project Finance is an "asset-backed issuer" as defined by the SEC governing regulations Item 1101 of Regulation AB.

Q2:

What type of securities are the Series A Bonds?

A.

The Series A Bonds are corporate securities to be issued by DEF Project Finance. The Series A Bonds do not constitute a debt liability or other obligation of, or interest in, DEF or any of its affiliates (other than DEF Project Finance). The bonds will be included on the consolidated balance sheet of DEF as a debt of the consolidated entity, as required by the Financial Accounting Standards Board and the SEC Office of Chief Accountant governing corporate financial reporting for utilities. The bonds will be treated as debt of DEF for U.S. federal income tax purposes. For federal income tax purposes and consistent with financial reporting requirements, DEF will not recognize gross income unless and until DEF bills customers for the nuclear asset-recovery charges and only in connection with such billing of customers for such nuclear asset-recovery charges.

Q3:

What is the collateral securing the Series A Bonds?

A:

The principal collateral is nuclear asset-recovery property. Nuclear asset-recovery property includes the right to impose, bill, collect and receive nuclear asset-recovery charges from all existing and future customers receiving transmission or distribution service from DEF or its successors or assignees under FPSC-approved rate schedules or under special contracts to be paid on a joint and several basis. See "DEF's Financing Order—Nuclear Asset-Recovery Charges" on page 46 in this prospectus.

Nuclear asset-recovery property is not a receivable, and the bonds are not secured by a pool of receivables.

Q4:

What is the nature of the pledge provided by the state for the benefit of bondholders?

A:

The state pledge, in conjunction with the true-up adjustment, constitute a guarantee of regulatory action for the benefit of bondholders. This performance guarantee is pursuant to the irrevocable financing order as authorized by the Financing Act.

Q5:

Are the Series A Bonds ERISA eligible?

A:

Yes, see "ERISA Considerations" on page 132 in this prospectus.

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Q6:

May the financing order be rescinded or altered or the FPSC fail to implement the true-up mechanism?

A:

No. Once the bonds are issued, the Financing Act provides that the financing order, and therefore all obligations set forth within, are irrevocable. See "The Nuclear Asset-Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of the Bonds" on page 43 in this prospectus.

Q7:

May the Financing Act be repealed or altered in a manner that will impair the value of the security or prevent timely repayment of the bonds?

A:

No. Any such action by the State of Florida that impairs the value of the security or the timely repayment of the bonds would violate the state's pledge in the Financing Act. See "The Nuclear Asset-Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of the Bonds" on page 43 in this prospectus.

Q8:

What happens if, for any reason, electricity usage and, as a result, nuclear asset-recovery charges, are less than projected at any time over the life of the bonds?

A:

In the event that collections are less than projected, the nuclear asset-recovery charges will be increased, pursuant to the true-up mechanism, to a level sufficient to provide for the timely payment of principal of and interest on the bonds when due. See "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" on page 48 in this prospectus.

Q9:

How often is the true-up mechanism implemented?

A:

The servicer is required to file for a standard true-up adjustment at least every six months. Additionally, the servicer is authorized to make optional interim true-up adjustments at any time and for any reason to ensure the recovery of revenues sufficient to pay principal and interest on the bonds when due. See "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" on page 48 in this prospectus.

Q10:

Is there an approval or review process related to the True-Up?

A:

Yes. The FPSC is allowed to review the true-up request. However, the review is strictly mathematical, limited to determining whether there is any error in the application of the formula-based mechanism. The commission does not have the ability to deny the request for adjustment under any circumstances, other than a mathematical error. True-up requests are deemed approved if the FPSC takes no action within 60 days. See "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" on page 48 in this prospectus.

Q11:

Does the Financing Act or the financing order provide for any cap or limit on the amount of the charge for any customer?

A:

No.

Q12:

May customers avoid paying nuclear asset-recovery charges if they switch electric generation service providers or if there is a fundamental change in the regulation of public utilities?

A:

No. The Financing Act provides that the nuclear asset-recovery charges are nonbypassable and are to be paid by all existing and future customers receiving transmission or distribution service from DEF or its successors. See "The Nuclear Asset-Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of the Bonds" on page 43 in this prospectus.

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Q13:

How are customers responsible for paying nuclear asset-recovery charges on a joint and several basis?

A:

In the event that some customers no longer receive electric transmission or distribution service from DEF or its successors or, for whatever reason, fail to pay the nuclear asset-recovery charges, other customers that continue to consume electric transmission or distribution service from DEF or its successors would be responsible for paying nuclear asset-recovery charges. Any delinquencies or under-collections in one customer rate class will be taken into account in the application of the true-up mechanism to adjust the nuclear asset-recovery charge for all customers of DEF. See "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" on page 48 in this prospectus.

Q14:

How is the transaction affected in the case of a merger, acquisition or bankruptcy of DEF or any successor?

A:

Pursuant to the financing order, any successor to DEF is required to perform all obligations of and have the same rights under the financing order as DEF, including the collection of the nuclear asset-recovery charges from customers and payment of appropriate amounts to DEF Project Finance. DEF Project Finance has been organized as a ring-fenced/bankruptcy-remote entity and other measures have been taken to enhance the separateness between DEF and DEF Project Finance. These measures mitigate DEF Project Finance's credit exposure to DEF and the risk that DEF Project Finance's assets would be substantively consolidated with the assets and liabilities of DEF in a potential DEF bankruptcy.

Q15:

How are the bondholders protected under the U.S. Constitution and the Florida Constitution?

A:

In the event that the Florida legislature passes any law (or the Florida Commission exercising legislative powers takes any action) prior to the time that the bonds and related financing costs are fully paid and discharged that in either case limits, alters, impairs, or reduces the value of the nuclear asset-recovery property or the nuclear asset-recovery charges, then, absent a demonstration by the State of Florida that such action or inaction is necessary to further a significant and legitimate public purpose, the bondholders (or the indenture trustee acting on their behalf) would likely have a valid claim, under the Contract Clause of the U.S. Constitution, and also applicable Florida constitutional principles relating to the impairment of contracts, against the constitutionality of any such action or inaction that limits, alters, impairs, or reduces the value of the nuclear asset-recovery property or the nuclear asset-recovery charges prior to the time that the bonds are fully paid and discharged, provided that the repeal or amendment or the action or inaction would substantially impair the rights of the owners of the nuclear asset-recovery property or the bondholders.

Further, the Takings Clause of the U.S. Constitution would likely require the State of Florida to pay just compensation to the bondholders if a court determines that a repeal or amendment of the Financing Act, or any other action taken by the State of Florida in contravention of the state pledge, (a) completely deprived the bondholders of all economically beneficial use of the nuclear asset-recovery property or (b) unduly interfered with the reasonable expectations of the bondholders arising from their investment in the bonds. Any such action or inaction by the State of Florida adversely affecting the nuclear asset-recovery property or the ability to collect nuclear asset-recovery charges might also be considered a "taking" under the Florida Constitution. The State of Florida may then be obligated to pay the estimated value of the nuclear asset-recovery property at the time of the taking. See "Risks Associated with Potential Judicial, Legislative or Regulatory Actions—Future Florida legislative action might attempt to invalidate the bonds or the nuclear asset-recovery property" on page 22 in this prospectus.

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DEF'S REVIEW OF NUCLEAR ASSET-RECOVERY PROPERTY

        Pursuant to the rules of the SEC, DEF, as sponsor, has performed, as described below, a review of the nuclear asset-recovery property underlying the bonds. As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the nuclear asset-recovery property is accurate in all material respects. DEF did not engage a third party in conducting its review.

        The bonds will be secured under the indenture by the indenture's trust estate. The principal asset of the indenture's trust estate is the nuclear asset-recovery property relating to the bonds. The nuclear asset-recovery property is a present property right authorized and created pursuant to Financing Act and the financing order. The nuclear asset-recovery property includes the right to impose, bill, collect and receive nonbypassable irrevocable nuclear asset-recovery charges in amounts necessary to pay principal on and interest of the bonds and other required amounts and charges owing in connection with the bonds, the right under the financing order to obtain true-up adjustments of nuclear asset-recovery charges under Financing Act (with respect to adjustments, in the manner and with the effect provided in the servicing agreement) and all revenue, collections, claims, right to payments, payments, money and proceeds arising out of the rights and interests created under the financing order. Under the Financing Act and the financing order, the nuclear asset-recovery charges are payable by all existing and future customers receiving transmission or distribution service from DEF or its successors or assignees under FPSC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in Florida.

        The nuclear asset-recovery property is not a receivable, and the principal collateral securing the bonds is not a pool of receivables, nor are the bonds asset-backed securities within the meaning of Item 1101 of Regulation AB. Nuclear asset-recovery charges that relate to the nuclear asset-recovery property are irrevocable and not subject to reduction, impairment, postponement, termination or, except for the specified true-up adjustments to correct any overcollections or undercollections, adjustment by further action of the Florida Commission. The rates at which nuclear asset-recovery charges are billed to customers will be adjusted to correct any overcollections or undercollections from prior periods. These adjustments are intended to ensure the recovery of revenues sufficient to retire the principal amount of the bonds in accordance with the expected sinking fund schedule, to pay all interest on the bonds when due, to pay fees and expenses of servicing the bonds and premiums, if any, associated with the bonds and to fund any required credit enhancement for the bonds. In addition to the semi-annual true-up adjustments, the servicer is also required to implement (a) quarterly true-up adjustments if bonds of a series are outstanding following the latest scheduled final payment date for such bonds, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of scheduled principal of and interest on the bonds and other required amounts and charges owing in connection with the bonds on the next payment date. There is no cap on the level of nuclear asset-recovery charges that may be imposed on electric customers as a result of the true-up adjustment process to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds. All revenues and collections resulting from nuclear asset-recovery charges provided for in the financing order are part of the nuclear asset-recovery property. The nuclear asset-recovery property relating to the bonds is described in more detail under "The Nuclear Asset-Recovery Property and the Financing Act" in this prospectus.

        In the financing order, the Florida Commission, among other things:

•

orders that the owner of nuclear asset-recovery property is authorized to impose, bill, collect, and adjust from time to time (as described in the financing order) a nuclear asset-recovery charge to be collected on a per kWh basis from all applicable customer rate classes until the bonds are paid in full and all other costs of the bonds have been recovered in full;

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•

orders that such nuclear asset-recovery charges shall be in amounts sufficient to ensure the timely recovery of DEF's nuclear asset-recovery costs and financing costs including the payment of principal of and interest on the bonds;



•

orders that upon the transfer of the nuclear asset-recovery property to us by DEF, we will have all rights and interest of DEF with respect to the nuclear asset-recovery property including, without limitation, the right to impose, bill, collect and receive nuclear asset-recovery charges authorized by the financing order and all revenues, collections, claims, rights to payments, or proceeds with respect thereto; and



•

reaffirms that it shall not take or permit any action that impairs or would impair the value of nuclear asset-recovery property or revise the nuclear asset-recovery costs for which recovery is authorized or, except for the true-up adjustment, reduce, alter, or impair nuclear asset-recovery charges that are to be imposed, collected, and remitted for the benefit of the bondholders and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

        Please read "The Nuclear Asset-Recovery Property and the Financing Act" and "DEF's Financing Order" in this prospectus for more information.

        The characteristics of nuclear asset-recovery property are unlike the characteristics of assets underlying mortgage and other commercial asset based financings because nuclear asset-recovery property is a creature of statute and state regulatory commission proceedings. Because the nature and characteristics of nuclear asset-recovery property and many elements of nuclear asset-recovery bond financings are set forth in and constrained by the Financing Act and the financing order, DEF, as sponsor, does not select the assets to be pledged as collateral in ways common to many traditional asset-based financings. Moreover, the bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Financing Act and the financing order require the imposition on, and collection of nuclear asset-recovery charges from, existing and future customers. Since the nuclear asset-recovery charges are assessed against all such customers and the true-up mechanism adjusts for the impact of customer defaults, the collectability of the nuclear asset-recovery charges is not ultimately dependent upon the credit quality of particular DEF customers, as would be the case in the absence of the true-up adjustment.

        The review by DEF of the nuclear asset-recovery property underlying the bonds has involved a number of discrete steps and elements as described in more detail below. First, DEF has analyzed and applied the Financing Act's requirements for recovering nuclear asset-recovery costs and approval of the Florida Commission for the issuance of the financing order and in its proposal with respect to the characteristics of the nuclear asset-recovery property to be created pursuant to the financing order. In preparing this proposal, DEF worked with its counsel and its structuring advisor in preparing the application for a financing order. DEF has also worked with the Florida Commission and its financial advisor on the terms of the financing order. Moreover, DEF worked with its counsel, the staff of the Florida Commission, the financial advisor to the Florida Commission and the underwriters in preparing the legal agreements that provide for the terms of the bonds and the security for the bonds. DEF has analyzed economic issues and practical issues for the scheduled payment of principal of and interest on the bonds, including the impact of economic factors, potential for disruptions due to weather or catastrophic events and its own forecasts for customer growth as well as the historic accuracy of its prior forecasts.

        In light of the unique nature of the nuclear asset-recovery property, DEF has taken (or, prior to the offering of the bonds, will take) the following actions in connection with its review of the nuclear

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asset-recovery property and the preparation of the disclosure for inclusion in this prospectus describing the nuclear asset-recovery property, the bonds and the proposed financing transaction:

•

reviewed the Financing Act, other relevant provisions of Florida statutes and any applicable rules, regulations and orders of the Florida Commission as they relate to the nuclear asset-recovery property in connection with the preparation and filing of the application with the Florida Commission for the approval of the financing order in order to confirm that the application and proposed financing order satisfied applicable statutory and regulatory requirements;



•

actively participated in the proceeding before the Florida Commission relating to the approval of the requested financing order;



•

compared the process by which the financing order was adopted and approved by the Florida Commission to the Financing Act and any applicable rules and regulations of the Florida Commission as they relate to the nuclear asset-recovery property to confirm that it met such requirements;



•

compared the proposed terms of the bonds to the applicable requirements in the Financing Act, other relevant provisions of Florida statutes, the financing order and any applicable regulations of the Florida Commission to confirm that they met such requirements;



•

prepared and reviewed the agreements to be entered into in connection with the issuance of the bonds and compared such agreements to the applicable requirements in the Financing Act, other relevant provisions of Florida statutes, the financing order and any applicable regulations of the Florida Commission to confirm that they met such requirements;



•

reviewed the disclosure in this prospectus regarding the Financing Act, other relevant provisions of Florida statutes, the financing order and the agreements to be entered into in connection with the issuance of the bonds, and compared such descriptions to the relevant provisions of the Financing Act, other relevant provisions of Florida statutes, the financing order and such agreements to confirm the accuracy of such descriptions;



•

consulted with legal counsel to assess if there is a basis upon which the bondholders (or the indenture trustee acting on their behalf) could successfully challenge the constitutionality of any legislative action by the State of Florida (including action by the Florida Commission or the voters by amendment to the Florida Constitution) that could repeal or amend the provisions of the Financing Act in a way that could substantially impair the value of the nuclear asset-recovery property, or substantially reduce, alter or impair the nuclear asset-recovery charges;



•

reviewed the process and procedures in place for it, as servicer, to perform its obligations under the servicing agreement, including billing, collecting, receiving and posting the nuclear asset-recovery charges to be provided for under the nuclear asset-recovery property, forecasting nuclear asset-recovery charges, and preparing and filing applications for true-up adjustments to the nuclear asset-recovery charges;



•

reviewed the operation of the true-up adjustment for adjusting nuclear asset-recovery charge levels to meet the scheduled payments on the bonds and in this context took into account its experience with the Florida Commission; and



•

with the assistance of its advisors, prepared financial models in order to set the initial nuclear asset-recovery charges to be provided for under the nuclear asset-recovery property at levels sufficient to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds.

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        In connection with the preparation of such models, DEF:

•

reviewed (i) the historical electric consumption and customer growth within its service territory and (ii) forecasts of expected energy sales and customer growth; and



•

analyzed the sensitivity of the weighted average life of the bonds in relation to variances in actual energy consumption levels and related charge collections from forecasted levels and in relation to the true-up adjustment in order to assess the probability that the weighted average life of the bonds may be extended as a result of such variances, and in the context of the operation of the true-up adjustment for adjustment of nuclear asset-recovery charges to address undercollections or overcollections in light of scheduled payments on the bonds to prevent an event of default.

        As a result of this review, DEF has concluded that:

•

the nuclear asset-recovery property, the financing order and the agreements to be entered into in connection with the issuance of the bonds meet in all material respects the applicable statutory and regulatory requirements;



•

the disclosure in this prospectus regarding the Financing Act, other relevant provisions of Florida statutes, the financing order and the agreements to be entered into in connection with the issuance of the bonds is, as of its respective date, accurate in all material respects and fails to omit any material information;



•

the servicer has adequate processes and procedures in place to perform its obligations under the servicing agreement;



•

nuclear asset-recovery charges, as adjusted from time to time as provided in the Financing Act and the financing order, are expected to generate sufficient revenues to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds; and



•

the design and scope of DEF's review of the nuclear asset-recovery property as described above is effective to provide reasonable assurance that the disclosure regarding the nuclear asset-recovery property in this prospectus is accurate in all material respects.

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THE NUCLEAR ASSET-RECOVERY PROPERTY AND THE FINANCING ACT

The Nuclear Asset-Recovery Property

        In general terms, all of the rights and interests of DEF that relate to the bonds under the financing order, upon transfer to us pursuant to the sale agreement, are referred to in this prospectus as the nuclear asset-recovery property. The nuclear asset-recovery property includes the right to impose, bill, collect and receive, through the nuclear asset-recovery charges payable by customers who receive electric transmission or distribution service from DEF or its successors or assignees under rate schedules approved by the Florida Commission or under special contracts, including the State and other governmental entities, an amount sufficient to pay principal and interest and other amounts in connection with the bonds. The Financing Act provides that the right to collect payments based on the nuclear asset-recovery charge is a present property right that may be pledged, assigned or sold in connection with the issuance of the bonds.

        The nuclear asset-recovery property is not a receivable, and the principal collateral securing the bonds is not a pool of receivables.

        During 2015, approximately 9% of DEF's total retail billed electric consumption was by industrial customers, approximately 31% was by commercial customers and approximately 52% was by residential customers, with other entities comprising approximately 8% of DEF's total retail billed electric consumption. Except in their capacity as customers, neither the State of Florida nor any political subdivision, agency, authority or instrumentality of the State of Florida, nor any other entity, will be obligated to provide funds for the payment of principal of and interest on the bonds.

        Nuclear asset-recovery charges authorized in the financing order are irrevocable and not subject to reduction, impairment, or adjustment by further action of the Florida Commission, except for at least semi-annual true-up adjustments that are necessary to correct for any overcollection or undercollection of the nuclear asset-recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds. Please read "DEF's Financing Order—FPSC-Guaranteed True-Up Mechanism" in this prospectus. All revenues resulting from nuclear asset-recovery charges are part of the nuclear asset-recovery property.

        The nuclear asset-recovery property relating to the bonds is described in more detail under "The Sale Agreement—Sale and Assignment of Nuclear Asset-Recovery Property" in this prospectus.

        The aggregate principal amount of bonds that may be issued pursuant to the financing order may not exceed the Financeable Balance on the date of issuance. The servicer will bill and collect nuclear asset-recovery charges allocable to the bonds and will remit the collections to the indenture trustee. DEF will include the nuclear asset-recovery charges (which may relate to one or more series of bonds) as a separate line item on its customers' bills.

        Because the amount of nuclear asset-recovery charge collections will depend in part on the amount of electricity consumed by customers of DEF or its successor, the amount of collections may vary from year to year. Please read "Duke Energy Florida, LLC" in this prospectus.

        Under the Financing Act, if a default or termination occurs under the terms of the bonds, the indenture trustee or the holders of the bonds may foreclose on or otherwise enforce their lien and security interest in the nuclear asset-recovery property.

        However, in the event of foreclosure, there is likely to be a limited market, if any, for the nuclear asset-recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Please read "Risk Factors—Risks Associated with the Unusual Nature of the Nuclear Asset-Recovery Property—Foreclosure of the indenture trustee's lien on the nuclear asset-recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being

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repaid either earlier or later than expected" and "Description of the Series A Bonds—Events of Default; Rights Upon Event of Default" in this prospectus.

The Financing Act Authorizes Utilities to Recover Nuclear Asset-Recovery Costs Through the Issuance of Nuclear Asset-Recovery Bonds

        On July 1, 2015, the Financing Act, codified as Section 366.95, Florida Statutes, became effective, authorizing electric utilities in the State of Florida to petition the Florida Commission for financing orders that authorize, among other things,

•

The issuance of nuclear asset-recovery bonds;



•

The creation of nuclear asset-recovery property; and



•

The imposition, collection, and periodic adjustments of nuclear asset-recovery charges.

        The Financing Act gives an electric utility the opportunity to finance the recovery of pretax costs it has incurred or expects to incur which are caused by, associated with, or remained as a result of the early retirement or abandonment of a nuclear generating asset unit where such early retirement or abandonment was deemed reasonable and prudent by the Florida Commission through a final order approving a settlement or other final order issued by the Florida Commission prior to July 1, 2017, and where pretax costs to be financed exceed $750 million.

        In order to finance their nuclear asset-recovery costs and financing costs, Florida utilities may petition for a financing order under the Financing Act. As described below, DEF petitioned for the first such financing order, which was issued by the Florida Commission on November 19, 2015.

The Financing Act Provides for the Issuance of a Financing Order

        The Financing Act authorizes the Florida Commission to issue a financing order. A financing order provides for the creation of nuclear asset-recovery property, including the right to impose, bill, collect and receive the nuclear asset-recovery charges and for the issuance of nuclear asset-recovery bonds.

        In addition, a financing order will:

•

authorize the transfer of nuclear asset-recovery property to an issuing entity to secure nuclear asset-recovery bonds;



•

set forth procedures for establishing the initial nuclear asset-recovery charges and for periodic true-up adjustments to nuclear asset-recovery charges in the event of overcollection or undercollection of nuclear asset-recovery charges;



•

remain in effect until the nuclear asset-recovery bonds issued pursuant to the financing order have been paid in full and the FPSC-approved financing costs of such bonds have been recovered in full; and



•

remain in effect and unabated notwithstanding the reorganization, bankruptcy, or other insolvency proceedings, merger, or sale of the electric utility or its successors or assignees.

        Having issued the financing order, the Florida Commission may not, in exercising its powers and carrying out its duties regarding any matter within its authority, (i) consider nuclear asset-recovery bonds issued pursuant to the financing order to be the debt of DEF other than for federal income tax purposes, (ii) consider the nuclear asset-recovery charges paid under the financing order to be the revenue of DEF for any purpose, or (iii) consider the nuclear asset-recovery costs or financing costs specified in the financing order to be the costs of DEF, nor may the Florida Commission determine any action taken by DEF which is consistent with the financing order to be unjust or unreasonable.

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The Financing Act Provides for the Creation of Nuclear Asset-Recovery Property to Secure the Bonds

        The Financing Act authorizes the Florida Commission, through issuance of a financing order, to provide for the creation of nuclear asset-recovery property to secure repayment of nuclear asset-recovery bonds. Nuclear asset-recovery property is defined under the Financing Act to include

          (i)  the rights and interests of an electric utility or its successor or assignee under a financing order, including the right to impose, bill, collect and receive nuclear asset-recovery charges established in the financing order and to obtain periodic adjustments to nuclear asset-recovery charges as provided in the financing order, and

         (ii)  all revenues, collections, claims and rights to payments or proceeds arising from the rights and interests described in clause (i).

        Pursuant to the Financing Act and a financing order, the owner of nuclear asset-recovery property is authorized to impose and collect a nonbypassable, consumption based, nuclear asset-recovery charge, which charges shall be paid by all existing and future customers receiving transmission or distribution service from the electric utility (or its successors or assignees) under FPSC-approved rate schedules or under special contracts (i.e., contracts with large industrial users), even if the customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in Florida. Under current law, customers of Florida electric utilities cannot buy their electricity from alternative electric suppliers. DEF has not entered into any special contracts with its retail customers.

        The nuclear asset-recovery charges authorized to be imposed and collected pursuant to the Financing Act and a financing order are designed to recover (among other financing costs) all principal of and interest on the bonds, and any other costs of issuing, supporting, repaying and servicing such bonds, as more fully described below.

The Financing Act Provides for the Recovery of Nuclear Asset-Recovery Costs and the Issuance of the Bonds

        The Financing Act contains a number of provisions designed to facilitate the recovery of nuclear asset-recovery costs and the issuance of nuclear asset-recovery bonds.

        A Financing Order is Irrevocable.    Once nuclear asset-recovery bonds have been issued or nuclear asset-recovery property has been transferred under an effective financing order, the financing order, together with the nuclear asset-recovery charges established in the financing order, are irrevocable and not subject to amendment, modification or termination by the Florida Commission. The only exception is for periodic true-up adjustments pursuant to the Financing Act in order to correct overcollections or undercollections of nuclear asset-recovery charges and to ensure that sufficient funds are available for payments of principal of and interest on the nuclear asset-recovery bonds when due and other financing costs and required amounts and charges payable in connection with such bonds.

        The Financing Act Contains a State Pledge.    Under the Financing Act, the State of Florida has pledged to nuclear asset-recovery bondholders, that it will not (i) alter the provisions of the Financing Act that make the nuclear asset-recovery charges imposed by a financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs or would impair the value of the nuclear asset-recovery property, or (iii) except for "true-up" adjustments discussed in the following paragraph, reduce, alter, or impair the nuclear asset-recovery charges to be imposed, collected and remitted for the benefit of the holders of nuclear asset-recovery bonds. The state pledge remains effective until the principal, interest and premium, if any, and any other charges incurred and contracts to be performed in connection with the related nuclear asset-recovery bonds have been paid and performed in full. This state pledge does not preclude any limitation or alteration of the Financing Act or a financing order if "full compensation" is made by law for the "full protection" of the nuclear asset-recovery charges

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collected pursuant to a financing order and of the holders of the nuclear asset-recovery bonds or any financing party entering into a contract with the electric utility. Further, even after a financing order is effective, the Florida Commission retains the power to interpret the financing order. Please read "Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions" in this prospectus.

        Nuclear Asset-Recovery Charge Adjustments.    The Financing Act requires the Florida Commission to provide a formula-based true-up mechanism pursuant to which the nuclear asset-recovery charges are to be reviewed and adjusted at least semi-annually. The purposes of these adjustments are:

•

to correct any overcollections or undercollections of the charges during the preceding remittance period, and



•

to ensure the recovery of revenues sufficient to provide for the timely payments of scheduled principal of and interest on the nuclear asset-recovery bonds, and related financing costs of supporting, repaying and servicing the nuclear asset-recovery bonds approved under the financing order.

        Neither the Financing Act nor the financing order imposes any cap on the size of nuclear asset-recovery charges, however, nuclear asset-recovery charges may not be imposed after the 276^th month from inception of imposition of the nuclear asset-recovery charge.

        Transmission and Distribution Customers Cannot Avoid Nuclear Asset-Recovery Charges—Nonbypassable.    The Financing Act provides that the nuclear asset-recovery charges are nonbypassable. The charges will be collected from all the existing customers of the utility and all future customers receiving transmission or distribution service from the utility or its successors or assignees under FPSC-approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electricity suppliers following a fundamental change in regulation of public utilities in the State. Self-generators that receive no transmission or distribution service from DEF are not liable for the nuclear asset-recovery charge. The Financing Act and the financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

        Any successor to DEF, whether pursuant to any reorganization, bankruptcy, or other insolvency proceeding or whether pursuant to any merger or acquisition, sale, or other business combination, or transfer by operation of law, as a result of electric utility restructuring or otherwise, is required to cooperate with the servicer in performing and satisfying all obligations of, and will have the same rights under the financing order as, DEF in the same manner and to the same extent as DEF, including cooperating with the servicer in collecting and paying to us the revenues, collections, payments or proceeds of the nuclear asset-recovery property.

        The Financing Act Protects the Lien on Nuclear Asset-Recovery Property for the Benefit of Bondholders.    The Financing Act governs whether the transfer of nuclear asset-recovery property from the electric utility to an issuer of bonds will be enforceable and will be perfected under Florida law and whether the security interest granted by us to the indenture trustee in the nuclear asset-recovery property will be perfected under Florida law. The Financing Act provides that a transfer of an interest in nuclear asset-recovery property to an assignee is enforceable only upon the later of:

•

the financing order being issued,



•

transfer documents having been executed and delivered to the assignee in connection with the issuance of bonds, and



•

the receipt of value.

        A transfer of or security interest in the nuclear asset-recovery property is perfected by means of a filing under the Financing Act. Upon perfection, the lien attaches both to nuclear asset-recovery property and to all proceeds of nuclear asset-recovery property, whether the related nuclear

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asset-recovery charges have accrued or not. Perfection of the indenture trustee's security interest in the nuclear asset-recovery property is necessary in order to establish the priority of the indenture trustee's security interests over claims of other parties to the nuclear asset-recovery property.

        The Financing Act provides that the priority of a security interest in nuclear asset-recovery property will not be impaired by:

•

later modifications to the financing order or nuclear asset-recovery property; or



•

commingling of funds arising from nuclear asset-recovery property with other funds.

        The Financing Act further provides that any other security interest that may apply to such funds, other than a security interest perfected in accordance with the Financing Act, are terminated when such funds are transferred to a segregated account for the assignee or a financing party.

        The Financing Act Provides that the Transfer of Nuclear Asset-Recovery Property Is a True Sale.    The Financing Act provides that an electric utility's transfer of nuclear asset-recovery property is a "true sale" and is not a pledge of or a secured transaction relating to the electric utility's right, title and interest in the nuclear asset-recovery property (other than for federal and state income and franchise tax purposes) and that legal and equitable title passes to the transferee, if the agreement governing that transfer expressly states that the transfer is a sale or other absolute transfer. The transfer as a true sale is not affected by:

•

commingling of amounts arising with respect to the nuclear asset-recovery property with other amounts;



•

retention by the electric utility of a partial or residual interest, including an equity interest, in the nuclear asset-recovery property, whether direct or indirect, or whether subordinate or otherwise;



•

any recourse that the transferee may have against the electric utility other than any such recourse created, contingent upon, or otherwise occurring or resulting from one or more of the electric utility's customers' inability or failure to timely pay all or a portion of the nuclear asset-recovery charge;



•

any indemnifications, obligations, or repurchase rights made or provided by the electric utility, other than indemnity or repurchase rights based solely upon an electric utility's customers' inability or failure to timely pay all or a portion of the nuclear asset-recovery charge;



•

the responsibility of the electric utility to collect nuclear asset-recovery charges;



•

the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes; or



•

granting or providing to holders of the bonds a preferred right to the nuclear asset-recovery property or credit enhancement by the electric utility or its affiliates with respect to the related bonds.

        Please read "Risk Factors—Risks Associated with Potential Bankruptcy Proceedings" and "Bankruptcy and Creditors' Rights Issues" in this prospectus.

The Bonds are Legal Investments for Florida Investors that Require Statutory Authority

        Under the Financing Act, the following Florida entities may legally invest any sinking funds, moneys, or other funds belonging to them or under their control in the bonds:

•

the State of Florida, the investment board, municipal corporations, political subdivisions, public bodies, and public officers, except for members of the Florida Commission;

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•

banks and bankers, savings and loan associations, credit unions, trust companies, savings banks and institutions, investment companies, insurance companies, insurance associations, and other persons carrying on a banking or insurance business;



•

personal representatives, guardians, trustees, and other fiduciaries; and



•

all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obligations of a similar nature.