UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-15759

CLECO CORPORATE HOLDINGS LLC

(Exact name of registrant as specified in its charter)



Louisiana		72-1445282
(State or other jurisdiction of incorporation or organization)		~~72-1445282~~ (I.R.S. Employer Identification No.)

~~2030 Donahue Ferry Road, Pineville, Louisiana~~ ~~(Address of principal executive offices)~~	~~71360-5226~~ ~~(Zip Code)~~

~~Registrant’s telephone number, including area code: (318) 484-7400~~

2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (318) 484-7400

Commission file number 1-05663

CLECO POWER LLC

(Exact name of registrant as specified in its charter)



Louisiana			72-0244480
(State or other jurisdiction of incorporation or organization)			~~72-0244480~~ (I.R.S. Employer Identification No.)

2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (318) 484-7400


~~2030 Donahue Ferry Road, Pineville, Louisiana~~ ~~(Address~~Securities registered pursuant to Section 12(b) of ~~principal executive offices)~~		~~71360-5226~~ ~~(Zip Code)~~ the Act:

~~Registrant’s telephone number, including area code: (318) 484-7400~~

Indicate by check mark whether the Registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes x No ¨

~~Indicate by check mark whether~~ Cleco Corporate Holdings LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ ~~Accelerated filer~~ ¨ ~~Non-accelerated filer~~ x ~~(Do not check if a smaller reporting company) Smaller reporting company~~ ¨ ~~Emerging growth company~~ ¨ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ LLC: None	Cleco Power LLC: None

Indicate by check mark whether Cleco Power LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ ~~Accelerated filer~~ ¨ ~~Non-accelerated filer~~ x ~~(Do not check if a smaller reporting company) Smaller reporting company~~ ¨ ~~Emerging growth company~~ ¨ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

~~Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act) Yes~~ ¨ No x

Indicate by check mark whether the Registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes ☐No ☒

Indicate by check mark whether the Registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of ~~November 9, 2017,~~ Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit such files). Yes ☒No ☐

Indicate by check mark whether Cleco Corporate Holdings LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether Cleco Power LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☐

Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

Cleco Corporate Holdings LLC has no0 common stock outstanding. All of the outstanding ~~interest~~equity of Cleco Corporate Holdings LLC is held by Cleco Group LLC, a wholly owned subsidiary of Cleco Partners L.P.

Cleco Power LLC, a wholly owned subsidiary of Cleco Corporate Holdings LLC, meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.



~~CLECO~~


CLECO
CLECO POWER									~~2017 3RD~~2021 1ST QUARTER FORM 10-Q

This Combined Quarterly Report on Form 10-Q (this “Quarterly Report on Form 10-Q”) is separately filed by Cleco Corporate Holdings LLC and Cleco Power LLC. Information in this filing relating to Cleco Power LLC is filed by Cleco Corporate Holdings LLC and separately by Cleco Power LLC on its own behalf. Cleco Power LLC makes no representation as to information relating to Cleco Corporate Holdings LLC (except as it may relate to Cleco Power LLC) or any other affiliate or subsidiary of Cleco Corporate Holdings LLC.

This ~~report~~Quarterly Report on Form 10-Q should be read in its entirety as it pertains to each respective Registrant. The Notes to the Unaudited Condensed Consolidated Financial Statements for the Registrants and certain other sections of this Quarterly Report on Form 10-Q are combined.



~~CLECO~~
ITEM 6.	Exhibits	57
	Signatures	58


CLECO
CLECO POWER									~~2017 3RD~~2021 1ST QUARTER FORM 10-Q



GLOSSARY OF TERMS

Abbreviations or acronyms used in this filing, including all items in Parts I and II, are defined below.



ABBREVIATION OR ACRONYM		DEFINITION
2016 Merger		Merger of Merger Sub with and into Cleco Corporation pursuant to the terms of the Merger Agreement which was completed on April 13, 2016
2016 Merger Commitments		Cleco Partners’, Cleco Group’s, Cleco Holdings’, and Cleco Power’s 77 commitments to the LPSC as defined in Docket No. U-33434
401(k) Plan		Cleco Power 401(k) Savings and Investment Plan
ABR		Alternate Base Rate which is the greater of the prime rate, the federal funds effective rate plus 0.50%, or LIBOR plus 1.0%
Acadia		Acadia Power Partners, LLC, previously a wholly owned subsidiary of Midstream. Acadia Power Partners, LLC was dissolved effective August 29, 2014.
Acadia Unit 1		Cleco Power’s 580-MW, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana
Acadia Unit 2		Entergy Louisiana’s 580-MW, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana, which is operated by Cleco Power
ACE		Affordable Clean Energy
ADIT		Accumulated Deferred Income Tax
AFUDC		Allowance for Funds Used During Construction
~~ALJ~~		~~Administrative Law Judge~~
Amended Lignite Mining Agreement		Amended and restated lignite mining agreement effective December 29, 2009
AMI		Advanced Metering Infrastructure
AOCI		Accumulated Other Comprehensive Income (Loss)
ARO		Asset Retirement Obligation
~~ARRA~~		~~American Recovery~~

BCI		British Columbia Investment Management Corporation


CARES Act		Coronavirus Aid, Relief, and ~~Reinvestment~~Economic Security Act of ~~2009~~March 2020
~~Attala~~		~~Attala Transmission~~

CECL		Current Expected Credit Losses
CEO		Chief Executive Officer
CFO		Chief Financial Officer
CIP		Critical Infrastructure Protection
Cleco		Cleco Holdings and its subsidiaries
Cleco Cajun		Cleco Cajun LLC (formerly Cleco Energy LLC, a wholly owned subsidiary of Cleco ~~Holdings~~
~~bcIMC~~	~~British Columbia Investment Management Corporation~~
~~CCR~~	~~Coal combustion by-products or residual~~
~~CEO~~	~~Chief Executive Officer~~
~~CFO~~	~~Chief Financial Officer~~
~~Cleco~~	~~Cleco Holdings~~Holdings) and its subsidiaries
Cleco Cajun Transaction		The transaction between Cleco Cajun and NRG Energy in which Cleco Cajun acquired all the membership interest in South Central Generating, which closed on February 4, 2019, pursuant to the Purchase and Sale Agreement, which includes the Cottonwood Sale Leaseback
Cleco Corporation		~~Pre-merger~~Pre-2016 Merger entity that was converted to a limited liability company and changed its name to Cleco Corporate Holdings LLC on April 13, 2016

Cleco Group		Cleco Group LLC, a wholly owned subsidiary of Cleco Partners
Cleco Holdings		Cleco Corporate Holdings LLC, a wholly owned subsidiary of Cleco Group
Cleco Katrina/Rita		Cleco Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of Cleco Power
Cleco Partners		Cleco Partners L.P., a Delaware limited partnership that is owned by a consortium of investors, including funds or investment vehicles managed by MIRA, ~~bcIMC,~~BCI, John Hancock Financial, and other infrastructure investors
Cleco Power		Cleco Power LLC and its subsidiaries, a wholly owned subsidiary of Cleco Holdings

Como 1		Como 1, L.P., currently known as Cleco Partners

Cottonwood Energy		Cottonwood Energy Company LP, a wholly owned subsidiary of Cleco Cajun. Prior to the closing of the Cleco Cajun Transaction on February 4, 2019, Cottonwood Energy was an indirect subsidiary of South Central Generating.
Cottonwood Plant		Cleco Cajun’s 1,263-MW, natural-gas-fired generating station located in Deweyville, Texas
Cottonwood Sale Leaseback		A lease agreement executed and delivered between Cottonwood Energy and a special-purpose entity that is a subsidiary of NRG Energy pursuant to which NRG Energy will lease back the Cottonwood Plant and will operate it until no later than May 2025.
Coughlin		Cleco Power’s 775-MW, combined-cycle power plant located in St. Landry, Louisiana
COVID-19		Novel coronavirus disease 2019 and the related global outbreak that was subsequently declared a pandemic by WHO in March 2020
CPP		Clean Power Plan
CSAPR		Cross-State Air Pollution Rule

DHLC		Dolet Hills Lignite Company, LLC, a wholly owned subsidiary of SWEPCO
Diversified Lands		Diversified Lands LLC, a wholly owned subsidiary of Cleco Holdings


Dolet Hills		A facility consisting of Dolet Hills Power Station, the Dolet Hills mine, and the Oxbow mine
Dolet Hills Power Station		A 650-MW generating unit at Cleco Power’s plant site in Mansfield, Louisiana. Cleco Power has a 50% ownership interest in the capacity of the Dolet ~~Hills.~~Hills Power Station.
EAC		Environmental Adjustment Clause
~~EBITDA~~
EBITDA		Earnings before interest, income taxes, depreciation, and amortization



Entergy Gulf States		Entergy Gulf States Louisiana, LLC
Entergy Louisiana		Entergy Louisiana, LLC

~~Entergy Mississippi~~	~~Entergy Mississippi, Inc.~~
CLECO
CLECO POWER		2021 1ST QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM		DEFINITION
EPA		U.S. Environmental Protection Agency
ERO		Electric Reliability Organization
~~ESPP~~		~~Employee Stock Purchase Plan~~
Evangeline		Cleco Evangeline LLC, a wholly owned subsidiary of Midstream
FAC		Fuel Adjustment Clause
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
Fitch		Fitch Ratings, a credit rating agency
FTR		Financial Transmission Right
FRP		Formula Rate Plan
GAAP		Generally Accepted Accounting Principles in the U.S.




IRS		Internal Revenue Service

kWh		Kilowatt-hour(s)
~~LED~~		~~Louisiana Economic Development~~


LIBOR		London Interbank Offered Rate
LMP		Locational Marginal Price
Louisiana Generating		Louisiana Generating, LLC, a wholly owned subsidiary of South Central Generating
LPSC		Louisiana Public Service Commission
~~LTIP~~		~~Long-Term Incentive Compensation Plan~~
~~MATS~~	~~Mercury and Air Toxics Standards~~
~~Merger~~	~~Merger of Merger Sub with and into Cleco Corporation pursuant to the terms of the Merger Agreement which was completed on April 13, 2016~~

Long-Term Parts and Service Agreement between Cottonwood Energy and a third party, dated January 19, 2001, that Cleco Cajun assumed as a result of the Cleco Cajun Transaction to provide maintenance services related to the Cottonwood Plant

~~ABBREVIATION OR ACRONYM~~		~~DEFINITION~~
Merger Agreement		Agreement and Plan of Merger, dated as of October 17, 2014, by and among Cleco Partners, Merger Sub, and Cleco Corporation
~~Merger Commitments~~	~~Cleco Partners’, Cleco Group’s, Cleco Holdings’, and Cleco Power’s 77 commitments~~ relating to the ~~LPSC as defined in Docket No. U-33434 of which a performance report must be filed annually by October 31 for the 12 months ending June 30~~2016 Merger
Merger Sub		Cleco MergerSub Inc., previously an indirect wholly owned subsidiary of Cleco Partners that was merged with and into Cleco Corporation, with Cleco Corporation surviving the 2016 Merger, and Cleco Corporation converting to a limited liability company and changing its name to Cleco Holdings
Midstream		Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Holdings

MIRA		Macquarie Infrastructure and Real Assets Inc.
MISO		Midcontinent Independent System Operator, Inc.
MMBtu		One million British thermal units
Moody’s		Moody’s Investors Service, a credit rating agency
MW		Megawatt(s)
MWh		Megawatt-hour(s)


NERC		North American Electric Reliability Corporation
~~NMTC~~		~~New Markets Tax Credit~~
~~NMTC Fund~~		~~USB NMTC Fund 2008-1 LLC was formed to invest in projects qualifying~~

Not Meaningful		A percentage comparison of these items is not statistically meaningful because the percentage difference is greater than 1,000%


NRG Energy		NRG Energy, Inc.






Other Benefits		Includes medical, dental, vision, and life insurance for ~~New Markets Tax Credits and Solar Projects~~Cleco’s retirees
Oxbow		Oxbow Lignite Company, LLC, 50% owned by Cleco Power and 50% owned by SWEPCO

Perryville		Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Holdings
~~Predecessor~~		~~Pre-merger activity~~


Purchase and Sale Agreement		Purchase and Sale Agreement, dated as of ~~Cleco.~~February 6, 2018, by and among NRG Energy, South Central Generating, and Cleco ~~has accounted for the merger transaction by applying the acquisition method of accounting. The predecessor period is not comparable to the successor period.~~Cajun

Registrant(s)		Cleco Holdings and/or Cleco Power

Rodemacher Unit 2		A 523-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana. Cleco Power has a 30% ownership interest in the capacity of Rodemacher Unit 2.
ROE		Return on Equity


RTO		Regional Transmission Organization
S&P		~~Standard & Poor’s~~S&P Global Ratings, ~~Services,~~a division of S&P Global Inc, a credit rating agency

SEC		U.S. Securities and Exchange Commission

SERP		Supplemental Executive Retirement Plan
~~SPP~~		~~Southwest Power Pool~~
South Central Generating		South Central Generating LLC, formerly NRG South Central Generating LLC


SSR		System Support Resource
~~Successor~~		~~Post-merger activity of Cleco. Cleco has accounted for the merger transaction by applying the acquisition method of accounting. The successor period is not comparable to the predecessor period.~~


Support Group		Cleco Support Group LLC, a wholly owned subsidiary of Cleco Holdings
SWEPCO		Southwestern Electric Power Company, an electric utility subsidiary of American Electric Power Company, Inc.
TCJA		Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017
Teche Unit 3		A 359-MW generating unit at Cleco Power’s plant site in Baldwin, Louisiana
~~VaR~~WHO		~~Value-at-Risk~~World Health Organization


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This ~~Combined~~ Quarterly Report on Form 10-Q includes ~~“forward-looking statements” about future events, circumstances, and results.~~forward-looking statements. All statements other than statements of historical fact included in this ~~Combined~~ Quarterly Report on Form 10-Q are forward-looking statements, including, without limitation, future capital expenditures; business strategies; goals, beliefs, plans, and objectives; competitive strengths; market developments; development and operation of facilities; growth in sales volume; meeting capacity requirements; expansion of service to existing customers and service to new customers; future environmental regulations and remediation liabilities; electric customer credits; and the anticipated outcome of various regulatory and legal proceedings. Although the Registrants believe that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are based on numerous assumptions (some of which may prove to be incorrect) and are subject to risks and uncertainties that could cause the actual results to differ materially from the Registrants’ expectations. In addition to any assumptions and other factors referred to specifically in connection with these forward-looking statements in this Quarterly Report on Form 10-Q, the following list identifies some of the factors that could cause the Registrants’ actual results to differ materially from those contemplated in any of the Registrants’ forward-looking statements:

•changes in environmental laws, regulations, decisions and policies, including present and potential environmental remediation costs, restrictions on greenhouse gas emissions to mitigate concerns over global climate changes, possible effects on Cleco’s generation resources, or prohibitions or restriction on new or existing services, and Cleco’s compliance with these matters,

•state and federal regulatory decisions or related judicial decisions disallowing or delaying recovery of capital investments, operating costs, commodity costs, the ~~effects~~ordering of refunds to customers and discretion over allowed return on investment,

•the ~~Merger on Cleco Holdings’~~loss of regulatory accounting treatment, which could result in the write-off of regulatory assets and the loss of regulatory deferral and recovery mechanisms,

•pandemics, including the current COVID-19 pandemic,

•changes in climate and weather conditions, including natural disasters such as wind and ice storms, hurricanes, floods, and droughts, and Cleco Power’s ~~business relationships, operating results, and business generally,~~

regulatory factors such as changes in rate-setting practices or policies; the unpredictability in political actions of governmental regulatory bodies; adverse regulatory ratemaking actions; recovery of investments made under traditional regulation; recovery of storm restoration costs; the frequency, timing, and amount of rate increases or decreases; the impact that rate cases or requests for FRP extensions may have on operating decisions of Cleco Power; the results of periodic NERC, LPSC, and FERC audits; participation in MISO and the related operating challenges and uncertainties, including increased wholesale competition relative to additional suppliers; and compliance with the ERO reliability standards for bulk power systems by Cleco Power,

~~the~~ ability to recover ~~fuel~~restoration costs ~~through the FAC,~~associated with these events,

factors affecting utility operations, such as unusual weather conditions or other natural phenomena; catastrophic weather-related damage caused by hurricanes and other storms or severe drought conditions; unscheduled generation outages; unanticipated maintenance or repairs; unanticipated changes to fuel costs or fuel supply costs, shortages, transportation problems, or other developments; fuel mix of Cleco’s generating facilities; decreased customer load; environmental incidents and compliance costs; and power transmission system constraints,

~~reliance on third parties for determination of Cleco Power’s commitments and obligations to markets for generation resources and reliance on third-party transmission services,~~

~~global and domestic economic conditions, including~~ •the ability of Cleco’s customers to continue paying their utility bills due to rising costs related ~~growth and/~~to hurricanes, ice storms, or ~~down-sizing of businesses~~other weather events,

•economic conditions in Cleco’s service ~~area, monetary fluctuations,~~ areas, including the economy’s effects on customer demand for utility services,

•Cleco’s ability to recontract existing power purchase agreements or secure future power purchase agreements with wholesale customers,

•mechanical breakdowns or other incidents that could impair assets and disrupt operations of any of Cleco’s generation facilities, transmission and distribution systems, or other operations and may require Cleco to purchase replacement power or incur costs to repair the facilities,

•growth or decline of Cleco’s customer base, or decline in existing services, including, the effect of the trend toward distributed generation at customer sites, the loss of key suppliers for fuel, materials, or services or other disruptions to the supply chain,

•wholesale and retail competition, including alternative energy sources, growth in customer-owned power resource technologies that displace utility-supplied energy or that may be sold back to the utility, and alternative energy suppliers and delivery arrangements,

•blackouts or disruptions of interconnected transmission systems (the regional power grid),

•terrorist attacks, cyberattacks, or other malicious acts, including any effects of terrorism, cyberattacks, ransomware, or vandalism that may damage or disrupt information technology systems,

•changes in ~~commodity prices,~~technology costs that impede Cleco’s ability to effectively implement new information systems or to operate and ~~inflation rates,~~ maintain current production technology,

~~the ability~~•changes in Cleco’s strategic business plans, which could be affected by any of the ~~lignite reserves at Dolet Hills~~factors discussed herein,

•the impact of Cleco’s credit ratings, changes in interest rates, other capital market conditions, and global market conditions on financing through the issuance of debt and/or equity securities,

•declining energy demand related to ~~provide sufficient fuel to~~customer energy efficiency, conservation measures or increased distributed generation,

•industry and geographic concentrations of Cleco’s counterparties, suppliers, and customers,

•deterioration in the ~~Dolet Hills Power Station until at least 2036,~~creditworthiness of Cleco’s customers,

•volatility and illiquidity in wholesale energy markets,

•default or nonperformance on the part of any parties from whom Cleco purchases and/or sells capacity or energy,

•Cleco Holdings’ and Cleco Power’s ability to ~~maintain its right to sell wholesale power at market-based rates within its control area,~~

~~Cleco Power’s dependence on energy from sources other than its facilities and future sources of such additional energy,~~

~~reliability of Cleco Power’s generating facilities,~~

~~the imposition of energy efficiency requirements or increased conservation efforts of customers,~~

the impact of current or future environmental laws and regulations, including those related to CCRs, greenhouse gases, and energy efficiency that could limit or terminate the operation of certain generating units, increase costs, or reduce customer demand for electricity,

~~the ability to recover costs of~~remain in compliance with ~~environmental laws~~their respective debt covenants,

•the outcome of legal proceedings and ~~regulations, including those through the EAC,~~other contingencies,

~~financial or regulatory accounting principles or policies imposed by FASB, the SEC, FERC, the LPSC, or similar entities with regulatory or accounting oversight,~~

changing market conditions and a variety of other factors associated with physical energy, financial transactions, and energy service activities, including, but not limited to, price, basis, credit, liquidity, volatility, capacity, transmission,•changes in actuarial assumptions, interest rates and ~~warranty risks,~~

~~legal, environmental, and regulatory delays~~the actual return on plan assets for Cleco’s pension and other ~~obstacles associated~~postretirement benefit plans,

•insufficient insurance coverage, more restrictive coverage terms, increasing insurance cost and Cleco’s ability to obtain insurance,

•Cleco’s ability to remain in compliance with ~~acquisitions, reorganizations, investments~~the commitments made to the LPSC in ~~joint ventures, or other capital projects,~~connection with the Cleco Cajun Transaction and the 2016 Merger,

~~costs and other effects of legal and administrative proceedings, settlements, investigations, claims, and other matters,~~

~~the availability and use of alternative sources of energy and technologies, such as wind, solar, battery storage, and distributed generation,~~

changes in federal, state, or local laws (including tax laws), changes in tax rates, disallowances of tax positions, or changes in other regulating policies that may result in a change to tax benefits or expenses,

~~the restriction on the ability of Cleco Power to make distributions to Cleco Holdings in certain instances, as a result of the Merger Commitments,~~

•Cleco Holdings’ dependence on the earnings, dividends, or distributions from its subsidiaries to meet its debt obligations,



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~acts of terrorism, cyber attacks, data security breaches or other attempts to disrupt Cleco’s business or the business of third parties, or other man-made disasters,~~

~~nonperformance by and creditworthiness of the guarantor counterparty of the NMTC Fund,~~

~~credit ratings of Cleco Holdings and Cleco Power,~~

~~the ability to remain in compliance with debt covenants,~~

the availability or cost of capital resulting from changes in global markets, Cleco’s business or financial condition, interest rates, or market perceptions of the electric utility industry and energy-related industries, and

~~employee~~ •workforce factors, including aging workforce, changes in key members of management, ~~and inadequate resources.~~availability of workers in a variety


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

of skill areas, and Cleco’s ability to recruit and retain qualified employees, and

•the unpredictability of civil unrest and its direct and indirect impact on Cleco.

For more discussion of these factors and other factors that could cause actual results to differ materially from those contemplated in the Registrants’ forward-looking statements, ~~please~~ see Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

All subsequent written and oral forward-looking statements attributable to the Registrants, or persons acting on their

behalf, are expressly qualified in their entirety by the factors identified above.

Any forward-looking statement is considered only as of the date of this ~~Combined~~ Quarterly Report on Form 10-Q and, except as required by law, the Registrants undertake no obligation to update any forward-looking statements, whether as a result of changes in actual results, changes in assumptions, or other factors affecting such statements.



CLECO
CLECO POWER									~~2017 3RD~~2021 1ST QUARTER FORM 10-Q



PART I — FINANCIAL INFORMATION



ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco

These unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements should be read in conjunction with Cleco’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020. For more information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Operating revenue
Electric operations	$	366,245	$	311,157
Other operations	49,726		44,908

Gross operating revenue	415,971		356,065
Electric customer credits	(20,976)		(8,493)
Operating revenue, net	394,995		347,572
Operating expenses
Fuel used for electric generation	55,820		76,637
Purchased power	144,702		66,320
Other operations and maintenance	72,165		74,766
Depreciation and amortization	54,947		55,873
Taxes other than income taxes	21,117		16,536
Merger transaction and commitment costs	(53)		2,775

Total operating expenses	348,698		292,907
Operating income	46,297		54,665
Interest income	647		1,157
Allowance for equity funds used during construction	887		(74)


Other expense, net	(3,033)		(12,709)
Interest charges
Interest charges, net	34,091		35,328
Allowance for borrowed funds used during construction	(200)		(179)
Total interest charges	33,891		35,149
Income before income taxes	10,907		7,890
Federal and state income tax (benefit) expense	(9,420)		1,562
Net income	$	20,327	$	6,328
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Net income	$	20,327	$	6,328
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $222 in 2021 and $146 in 2020)	628		414

Total other comprehensive income, net of tax	628		414
Comprehensive income, net of tax	$	20,955	$	6,742
The accompanying notes are an integral part of the condensed consolidated financial statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Operating revenue
Electric operations $ 317,589
$ 323,707
Other operations 21,282
18,976
Gross operating revenue 338,871
342,683
Electric customer credits (372 ) 177
Operating revenue, net 338,499
342,860
Operating expenses
Fuel used for electric generation 103,217
101,908
Power purchased for utility customers 39,355
36,058
Other operations 27,957
35,361
Maintenance 18,031
19,412
Depreciation and amortization 42,228
42,535
Taxes other than income taxes 12,414
12,574
Merger transaction and commitment costs 185
1,869
Total operating expenses 243,387
249,717
Operating income 95,112
93,143
Interest income 354
318
Allowance for equity funds used during construction 2,096
1,308
Other income 2,557
658
Other expense (1,299 ) (248 )
Interest charges
Interest charges, including amortization of debt issuance costs, premiums, and discounts, net 31,110
32,233
Allowance for borrowed funds used during construction (648 ) (375 )
Total interest charges 30,462
31,858
Income before income taxes 68,358
63,321
Federal and state income tax expense 23,054
23,700
Net income $ 45,304
$ 39,621
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~				~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Net income $ 45,304
$ 39,621
Other comprehensive loss, net of tax

Postretirement benefits loss (net of tax benefits of $26 and $1,442, respectively) (44 ) (2,305 )
Total other comprehensive loss, net of tax (44 ) (2,305 )
Comprehensive income, net of tax $ 45,260
$ 37,316
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.




~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Income (Unaudited)
SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE NINE MONTHS ENDED SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016

JAN. 1, 2016 -
APR. 12, 2016

Operating revenue
Electric operations $ 839,080
$ 553,634
$ 281,154
Other operations 59,627
33,110
19,080
Gross operating revenue 898,707
586,744
300,234
Electric customer credits (1,045 ) (381 ) (364 )
Operating revenue, net 897,662
586,363
299,870
Operating expenses
Fuel used for electric generation 261,063
168,159
96,378
Power purchased for utility customers 114,675
60,439
27,249
Other operations 89,201
59,633
33,563
Maintenance 66,955
42,317
29,813
Depreciation and amortization 124,630
76,695
44,076
Taxes other than income taxes 36,790
22,953
14,611
Merger transaction and commitment costs 187
173,172
34,912
Gain on sale of asset —
—
(1,095 )
Total operating expenses 693,501
603,368
279,507
Operating income (loss) 204,161
(17,005 ) 20,363
Interest income 1,046
515
265
Allowance for equity funds used during construction 4,446
2,057
723
Other income 4,402
2,395
870
Other expense (1,833 ) (435 ) (590 )
Interest charges
Interest charges, including amortization of debt issuance costs, premiums, and discounts, net 94,077
58,926
22,330
Allowance for borrowed funds used during construction (1,277 ) (603 ) (207 )
Total interest charges 92,800
58,323
22,123
Income (loss) before income taxes 119,422
(70,796 ) (492 )
Federal and state income tax expense (benefit) 42,381
(28,502 ) 3,468
Net income (loss) $ 77,041
$ (42,294 ) $ (3,960 )
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE NINE MONTHS ENDED SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
Net income (loss) $ 77,041
$ (42,294 ) $ (3,960 )
Other comprehensive (loss) income, net of tax
Postretirement benefits (loss) gain (net of tax benefit of $1,359 and $1,442 and tax expense of $367, respectively) (2,175 ) (2,305 ) 587
Amortization of interest rate derivatives to earnings (net of tax expense of $0, $0, and $37, respectively) —
—
60
Total other comprehensive (loss) income, net of tax (2,175 ) (2,305 ) 647
Comprehensive income (loss), net of tax $ 74,866
$ (44,599 ) $ (3,313 )
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Assets
Current assets
Cash and cash equivalents $ 6,127
$ 23,077
Restricted cash and cash equivalents 8,874
23,084
Customer accounts receivable (less allowance for doubtful accounts of $2,102 in 2017 and $7,199 in 2016) 78,313
56,780
Other accounts receivable 33,934
19,778
Unbilled revenue 38,912
34,268
Fuel inventory, at average cost 51,847
46,410
Materials and supplies, at average cost 84,522
81,818
Energy risk management assets 13,425
7,884
Accumulated deferred fuel 21,057
20,787
Cash surrender value of company-/trust-owned life insurance policies 81,165
77,225
Prepayments 6,553
7,813
Regulatory assets 27,636
26,803
Other current assets 410
1,315
Total current assets 452,775
427,042
Property, plant, and equipment
Property, plant, and equipment 3,556,775
3,476,581
Accumulated depreciation (162,040 ) (75,816 )
Net property, plant, and equipment 3,394,735
3,400,765
Construction work in progress 163,423
78,577
Total property, plant, and equipment, net 3,558,158
3,479,342
Equity investment in investee 18,172
18,672
Goodwill 1,490,797
1,490,797
Prepayments 1,887
4,731
Restricted cash and cash equivalents 24,547
23,410
Regulatory assets - deferred taxes, net 240,431
237,449
Regulatory assets 430,893
454,644
Net investment in direct financing lease 13,381
13,420
Intangible assets 121,269
142,634
Tax credit fund investment, net 10,409
11,888
Other deferred charges 34,982
39,115
Total assets $ 6,397,701
$ 6,343,144
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

(Continued on next page)



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt $ 6,470
$ —
Long-term debt due within one year 19,193
19,715
Accounts payable 99,138
112,087
Customer deposits 58,018
56,599
Provision for rate refund 3,734
3,974
Provision for merger commitments 4,945
14,371
Taxes payable, net 26,894
3,942
Interest accrued 38,656
14,783
Energy risk management liabilities 538
201
Deferred compensation 11,604
11,654
Other current liabilities 21,309
14,850
Total current liabilities 290,499
252,176
Long-term liabilities and deferred credits

Accumulated deferred federal and state income taxes, net 1,075,869
1,033,055
Accumulated deferred investment tax credits 2,254
2,751
Postretirement benefit obligations 230,203
223,003
Restricted storm reserve 18,189
17,385
Other deferred credits 29,430
29,440
Total long-term liabilities and deferred credits 1,355,945
1,305,634
Long-term debt, net 2,713,583
2,738,571
Total liabilities 4,360,027
4,296,381
Commitments and contingencies (Note 12)

Member’s equity

Membership interest 1,985,421
2,069,376
Retained earnings/(Accumulated deficit) 52,928
(24,113 )
Accumulated other comprehensive (loss) income (675 ) 1,500
Total member’s equity 2,037,674
2,046,763
Total liabilities and member’s equity $ 6,397,701
$ 6,343,144
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
SUCCESSOR PREDECESSOR
(THOUSANDS)
FOR THE NINE
MONTHS ENDED
SEPT. 30, 2017

APR. 13 2016 -
SEPT. 30, 2016

JAN. 1, 2016 - APR. 12, 2016
Operating activities
Net income (loss) $ 77,041
$ (42,294 ) $ (3,960 )
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 140,433
104,561
45,869
Gain on sale of asset —
—
(1,095 )
Provision for doubtful accounts 2,694
1,932
1,212
Unearned compensation expense 2,809
769
3,276
Allowance for equity funds used during construction (4,446 ) (2,056 ) (724 )
Deferred income taxes 41,192
(25,681 ) 2,219
Deferred fuel costs 4,231
(11,489 ) 977
Cash surrender value of company-/trust-owned life insurance (3,940 ) (2,198 ) (840 )
Changes in assets and liabilities
Accounts receivable (44,139 ) (23,157 ) (1,865 )
Accounts receivable, affiliate 12
(3,794 ) —
Unbilled revenue (4,643 ) (13,643 ) 563
Fuel inventory and materials and supplies (6,885 ) 19,464
19,312
Prepayments 5,509
(236 ) 2,395
Accounts payable (22,325 ) (15,294 ) 8,348
Customer deposits 9,317
5,421
3,342
Provision for merger commitments (9,244 ) 40,357
—
Postretirement benefit obligations 3,789
2,267
9,746
Regulatory assets and liabilities, net 9,430
9,640
5,178
Other deferred accounts (6,546 ) (2,065 ) 6,878
Taxes accrued 22,233
5,006
10,820
Interest accrued 23,772
13,479
17,909
Other operating 6,595
5,714
219
Net cash provided by operating activities 246,889

66,703
129,779
Investing activities
Additions to property, plant, and equipment (185,609 ) (102,677 ) (42,392 )
Allowance for equity funds used during construction 4,446
2,056
724
Proceeds from sale of property 590
263
1,932
Contributions to equity investment in investee —
—
(2,450 )
Return of equity investment in tax credit fund 1,223
901
476
Transfer of cash from (to) restricted accounts, net 13,073
(33,943 ) 4,847
Other investing 7
137
53
Net cash used in investing activities (166,270 )
(133,263 ) (36,810 )
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

(Continued on next page)



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
SUCCESSOR PREDECESSOR
(THOUSANDS)
FOR THE NINE
MONTHS ENDED
SEPT. 30, 2017

APR. 13 2016 -
SEPT. 30, 2016

JAN. 1, 2016 - APR. 12, 2016
Financing activities
Proceeds from short-term debt, net 6,470
—
—
Draws on credit facilities 134,000
15,000
3,000
Payments on credit facilities (134,000 ) (15,000 ) (10,000 )
Issuance of long-term debt —
1,350,000
—
Repayment of long-term debt (17,896 ) (1,358,268 ) (8,546 )
Payment of financing costs (369 ) (6,860 ) (43 )
Dividends paid on common stock —
(572 ) (24,579 )
Contribution from member —
100,720
—
Distributions to member (83,955 ) (56,000 ) —
Other financing (1,819 ) (1,220 ) (717 )
Net cash (used in) provided by financing activities (97,569 )
27,800
(40,885 )
Net (decrease) increase in cash and cash equivalents (16,950 )
(38,760 ) 52,084
Cash and cash equivalents at beginning of period 23,077
120,330
68,246
Cash and cash equivalents at end of period $ 6,127

$ 81,570
$ 120,330

Supplementary cash flow information
Interest paid, net of amount capitalized $ 64,555
$ 42,963
$ 2,478
Income taxes (refunded) paid, net $ (6 ) $ 256
$ (481 )
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 13,083
$ 15,853
$ 10,619
Non-cash additions to property, plant, and equipment $ 3,015
$ —
$ —
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS) MEMBERSHIP INTEREST

(ACCUMULATED DEFICIT)
/RETAINED EARNINGS

AOCI

TOTAL
MEMBER’S
EQUITY

Balances, Dec. 31, 2016 $ 2,069,376
$ (24,113 ) $ 1,500
$ 2,046,763
Distributions to member (83,955 ) —
—
(83,955 )
Net income —
77,041
—
77,041
Other comprehensive loss, net of tax —
—
(2,175 ) (2,175 )
Balances, Sept. 30, 2017 $ 1,985,421
$ 52,928

$ (675 )
$ 2,037,674
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~						~~2017 3RD QUARTER FORM 10-Q~~


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Assets
Current assets
Cash and cash equivalents	$	87,099	$	84,976
Restricted cash and cash equivalents	4,430		4,545
Customer accounts receivable (less allowance for credit losses of $2,040 in 2021 and $2,758 in 2020)	88,353		82,511

Other accounts receivable	41,681		32,076
Taxes receivable	2,743		0
Unbilled revenue	32,653		40,127
Fuel inventory, at average cost	112,379		109,494
Materials and supplies, at average cost	132,410		132,449
Energy risk management assets	11,299		13,081
Accumulated deferred fuel	69,832		28,194
Cash surrender value of company-/trust-owned life insurance policies	91,980		89,138
Prepayments	11,658		14,549
Regulatory assets	21,887		21,041
Other current assets	17,492		12,711
Total current assets	725,896		664,892
Property, plant, and equipment
Property, plant, and equipment	5,400,321		5,337,190
Accumulated depreciation	(746,201)		(672,271)
Net property, plant, and equipment	4,654,120		4,664,919
Construction work in progress	134,956		124,622
Total property, plant, and equipment, net	4,789,076		4,789,541
Equity investment in investee	7,322		9,072
Goodwill	1,490,797		1,490,797
Prepayments	16,458		23,405
Operating lease right of use assets	25,735		26,172
Restricted cash and cash equivalents	744		744
Note receivable	14,322		14,506

Regulatory assets	572,040		554,609
Intangible assets	105,268		111,731

Other deferred charges	43,618		40,100
Total assets	$	7,791,276	$	7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt	$	135,000	$	75,000
Long-term debt and finance leases due within one year	66,700		66,682
Accounts payable	119,892		161,357
Accounts payable - affiliate	41,283		41,283
Customer deposits	59,485		58,718
Provision for rate refund	8,933		9,444
Taxes payable	23,097		7,530
Interest accrued	39,742		15,583

Energy risk management liabilities	1,442		2,453
Regulatory liabilities	21,335		23,509
Deferred compensation	12,813		13,240

Other current liabilities	53,473		49,813
Total current liabilities	583,195		524,612
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	667,691		661,376

Postretirement benefit obligations	315,249		314,653

Regulatory liabilities - deferred taxes, net	147,179		157,056



Deferred lease revenue	38,355		40,657
Intangible liabilities	23,106		24,859
Asset retirement obligations	27,605		27,986
Operating lease liabilities	23,044		23,333
Other deferred credits	23,761		28,627
Total long-term liabilities and deferred credits	1,265,990		1,278,547
Long-term debt and finance leases, net	3,164,113		3,165,387
Total liabilities	5,013,298		4,968,546
Commitments and contingencies (Note 13)	0		0
Member’s equity	2,777,978		2,757,023
Total liabilities and member’s equity	$	7,791,276	$	7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021			2020
Operating activities
Net income	$	20,327		$	6,328
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	62,549			63,307



Provision for credit losses	1,874			2,957
Unearned compensation expense	2,422			1,788
Allowance for equity funds used during construction	(887)			74
(Gain) loss on risk management assets and liabilities, net	(4,697)			6,509
Deferred lease revenue	(2,301)			(2,301)
Deferred income taxes	(6,684)			(2,900)
Deferred fuel costs	(41,121)			7,626
Cash surrender value of company-/trust-owned life insurance	(2,841)			10,686
Changes in assets and liabilities
Accounts receivable	(19,478)			13,310

Unbilled revenue	7,474			2,773
Fuel inventory and materials and supplies	(2,838)			(27,928)
Prepayments	263			(1,638)
Accounts payable	(47,838)			(55,131)

Customer deposits	3,236			2,731
Provision for merger commitments	(627)			1,018
Postretirement benefit obligations	1,446			1,315
Regulatory assets and liabilities, net	(19,459)			(721)
Other deferred accounts	(4,756)			(4,571)
Taxes accrued	12,459			14,563
Interest accrued	24,159			22,730

Deferred compensation	(427)			(2,743)
Other operating	(4,298)			424
Net cash (used in) provided by operating activities	(22,043)			60,206
Investing activities
Additions to property, plant, and equipment	(38,658)			(65,624)
Allowance for equity funds used during construction	887			(74)







Return of equity investment in investees	1,750			0




Other investing	356			285
Net cash used in investing activities	(35,665)			(65,413)
Financing activities
Draws on revolving credit facilities	60,000			238,000


Repayment of long-term debt	0			(11,055)




Other financing	(284)			(149)
Net cash provided by financing activities	59,716			226,796
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	2,008			221,589
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	90,265		(1)	142,595
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	92,273	(2)	$	364,184






Supplementary cash flow information
Interest paid, net of amount capitalized	$	7,225		$	9,077

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	14,246		$	11,854



(1) Includes cash and cash equivalents of $84,976, current restricted cash and cash equivalents of $4,545, and non-current restricted cash and cash equivalents of $744. (2) Includes cash and cash equivalents of $87,099, current restricted cash and cash equivalents of $4,430, and non-current restricted cash and cash equivalents of $744.

The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS)	MEMBERSHIP INTEREST		RETAINED EARNINGS		AOCI		TOTAL MEMBER’S EQUITY














Balances, Dec. 31, 2019	$	2,454,276	$	206,243	$	(17,513)	$	2,643,006


Net income	—		6,328		—		6,328
Other comprehensive income, net of tax	—		—		414		414
Balances, Mar. 31, 2020	$	2,454,276	$	212,571	$	(17,099)	$	2,649,748

Balances, Dec. 31, 2020	$	2,454,276	$	328,543	$	(25,796)	$	2,757,023


Net income	—		20,327		—		20,327
Other comprehensive income, net of tax	—		—		628		628
Balances, Mar. 31, 2021	$	2,454,276	$	348,870	$	(25,168)	$	2,777,978
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco Power

These unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements should be read in conjunction with Cleco Power’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020. For more information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Operating revenue
Electric operations	$	267,158	$	224,430
Other operations	18,626		15,764
Affiliate revenue	1,655		1,106
Gross operating revenue	287,439		241,300
Electric customer credits	(20,976)		(8,340)
Operating revenue, net	266,463		232,960
Operating expenses
Fuel used for electric generation	45,210		61,064
Purchased power	79,033		23,462
Other operations and maintenance	53,565		56,944
Depreciation and amortization	42,076		43,677
Taxes other than income taxes	16,502		12,276


Total operating expenses	236,386		197,423
Operating income	30,077		35,537
Interest income	642		954
Allowance for equity funds used during construction	887		(74)

Other expense, net	(4,258)		(2,667)
Interest charges
Interest charges, net	18,846		18,760
Allowance for borrowed funds used during construction	(200)		(179)
Total interest charges	18,646		18,581
Income before income taxes	8,702		15,169
Federal and state income tax (benefit) expense	(9,723)		3,338
Net income	$	18,425	$	11,831
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Net income	$	18,425	$	11,831
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $162 in 2021 and $152 in 2020)	458		426
Amortization of interest rate derivatives to earnings (net of tax expense of $22 in 2021 and $22 in 2020)	64		64
Total other comprehensive income, net of tax	522		490
Comprehensive income, net of tax	$	18,947	$	12,321
The accompanying notes are an integral part of the condensed consolidated financial statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Operating revenue
Electric operations $ 320,009
$ 326,281
Other operations 20,768
18,460
Affiliate revenue 209
213
Gross operating revenue 340,986
344,954
Electric customer credits (372 ) 177
Operating revenue, net 340,614
345,131
Operating expenses
Fuel used for electric generation 103,217
101,908
Power purchased for utility customers 39,355
36,058
Other operations 28,680
35,886
Maintenance 17,812
19,326
Depreciation and amortization 40,049
40,353
Taxes other than income taxes 12,008
12,180
Total operating expenses 241,121
245,711
Operating income 99,493
99,420
Interest income 332
264
Allowance for equity funds used during construction 2,096
1,308
Other income 1,463
629
Other expense (1,299 ) (445 )
Interest charges
Interest charges, including amortization of debt issuance costs, premiums, and discounts, net 17,789
19,552
Allowance for borrowed funds used during construction (648 ) (375 )
Total interest charges 17,141
19,177
Income before income taxes 84,944
81,999
Federal and state income tax expense 30,092
29,427
Net income $ 54,852
$ 52,572
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Net income $ 54,852
$ 52,572
Other comprehensive income, net of tax

Postretirement benefits gain (net of tax expense of $104 in 2017 and $1,364 in 2016) 167
2,180
Amortization of interest rate derivatives to earnings (net of tax expense of $33 in 2017 and 2016) 53
53
Total other comprehensive income, net of tax 220
2,233
Comprehensive income, net of tax $ 55,072
$ 54,805
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Operating revenue
Electric operations $ 847,417
$ 839,593
Other operations 58,083
50,638
Affiliate revenue 649
669
Gross operating revenue 906,149
890,900
Electric customer credits (1,045 ) (745 )
Operating revenue, net 905,104
890,155
Operating expenses

Fuel used for electric generation 261,063
264,537
Power purchased for utility customers 114,675
87,688
Other operations 90,453
94,566
Maintenance 66,496
71,818
Depreciation and amortization 118,280
115,196
Taxes other than income taxes 35,412
36,096
Merger commitment costs —
151,501
Gain on sale of asset —
(1,095 )
Total operating expenses 686,379
820,307
Operating income 218,725
69,848
Interest income 926
590
Allowance for equity funds used during construction 4,446
2,780
Other income 1,839
828
Other expense (1,833 ) (1,082 )
Interest charges
Interest charges, including amortization of debt issuance costs, premiums, and discounts, net 53,931
58,587
Allowance for borrowed funds used during construction (1,277 ) (810 )
Total interest charges 52,654
57,777
Income before income taxes 171,449
15,187
Federal and state income tax expense 63,010
2,965
Net income $ 108,439
$ 12,222
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~				~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Net income $ 108,439
$ 12,222
Other comprehensive income, net of tax
Postretirement benefits (loss) gain (net of tax benefit of $38 in 2017 and tax expense of $1,602 in 2016) (60 ) 2,561
Amortization of interest rate derivatives to earnings (net of tax expense of $99 in 2017 and 2016) 159
159
Total other comprehensive income, net of tax 99
2,720
Comprehensive income, net of tax $ 108,538
$ 14,942
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Assets
Utility plant and equipment
Property, plant, and equipment $ 4,858,764
$ 4,790,565
Accumulated depreciation (1,687,337 ) (1,618,241 )
Net property, plant, and equipment 3,171,427
3,172,324
Construction work in progress 162,500
77,306
Total utility plant and equipment, net 3,333,927
3,249,630
Current assets
Cash and cash equivalents 4,227
21,482
Restricted cash and cash equivalents 8,874
23,084
Customer accounts receivable (less allowance for doubtful accounts of $2,102 in 2017 and $7,199 in 2016) 78,313
56,780
Accounts receivable - affiliate 1,545
1,406
Other accounts receivable 33,676
19,457
Taxes receivable, net —
12,490
Unbilled revenue 38,912
34,268
Fuel inventory, at average cost 51,847
46,410
Materials and supplies, at average cost 84,522
81,818
Energy risk management assets 13,425
7,884
Accumulated deferred fuel 21,057
20,787
Cash surrender value of company-owned life insurance policies 20,216
20,018
Prepayments 5,367
5,892
Regulatory assets 18,779
17,721
Other current assets —
577
Total current assets 380,760
370,074
Equity investment in investee 18,172
18,672
Prepayments 1,887
4,731
Restricted cash and cash equivalents 24,526
23,389
Regulatory assets - deferred taxes, net 240,431
237,449
Regulatory assets 253,146
268,016
Intangible asset 45,636
58,473
Other deferred charges 33,020
37,014
Total assets $ 4,331,505
$ 4,267,448
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

(Continued on next page)



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Liabilities and member’s equity
Member’s equity $ 1,568,740
$ 1,535,202
Long-term debt, net 1,216,967
1,235,056
Total capitalization 2,785,707
2,770,258
Current liabilities
Short-term debt 6,470
—
Long-term debt due within one year 19,193
19,715
Accounts payable 92,522
101,874
Accounts payable - affiliate 8,293
7,190
Customer deposits 58,018
56,599
Provision for rate refund 3,734
3,974
Provision for merger commitments 4,945
14,371
Taxes payable, net 19,487
—
Interest accrued 20,348
7,141
Energy risk management liabilities 538
201
Other current liabilities 15,659
9,951
Total current liabilities 249,207
221,016
Commitments and contingencies (Note 12)

Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net 1,084,482
1,068,592
Accumulated deferred investment tax credits 2,254
2,751
Postretirement benefit obligations 164,183
159,107
Restricted storm reserve 18,189
17,385
Other deferred credits 27,483
28,339
Total long-term liabilities and deferred credits 1,296,591
1,276,174
Total liabilities and member’s equity $ 4,331,505
$ 4,267,448
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
Operating activities
Net income $ 108,439
$ 12,222
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 123,911
120,703
Gain on sale of asset —
(1,095 )
Provision for doubtful accounts 2,592
3,014
Unearned compensation expense 1,479
—
1,394
Allowance for equity funds used during construction (4,446 ) (2,780 )
Deferred income taxes 12,847
5,201
Deferred fuel costs 4,231
(10,512 )
Changes in assets and liabilities
Accounts receivable (44,115 ) (24,378 )
Accounts receivable, affiliate 1,221
1,647
Unbilled revenue (4,643 ) (13,080 )
Fuel inventory and materials and supplies (6,885 ) 38,776
Prepayments 4,774
1,368
Accounts payable (19,648 ) (9,485 )
Accounts payable, affiliate 611
(2,583 )
Customer deposits 9,317
8,763
Provision for merger commitments (9,244 ) 40,357
Postretirement benefit obligations 3,673
3,656
Regulatory assets and liabilities, net 7,939
13,893
Other deferred accounts (6,093 ) 4,813
Taxes accrued 31,258
1,607
Interest accrued 13,207
15,147
Other operating 5,537
5,818
Net cash provided by operating activities 235,962
214,466
Investing activities
Additions to property, plant, and equipment (183,604 ) (144,637 )
Allowance for equity funds used during construction 4,446
2,780
Proceeds from sale of property 590
2,195
Contributions to equity investment in investee —
(2,450 )
Transfer of cash from (to) restricted accounts, net 13,073
(29,096 )
Other investing 637
190
Net cash used in investing activities (164,858 ) (171,018 )
Financing activities
Proceeds from short-term debt, net 6,470
—
Draws on credit facility 106,000
15,000
Payments on credit facility (106,000 ) (15,000 )
Repayment of long-term debt (17,896 ) (16,814 )
Contributions from parent —
50,000
Distributions to parent (75,000 ) (85,000 )
Other financing (1,933 ) (2,070 )
Net cash used in financing activities (88,359 ) (53,884 )
Net decrease in cash and cash equivalents (17,255 ) (10,436 )
Cash and cash equivalents at beginning of period 21,482
65,705
Cash and cash equivalents at end of period $ 4,227
$ 55,269

Supplementary cash flow information
Interest paid, net of amount capitalized $ 36,241
$ 40,153
Income taxes refunded, net $ —
$ (485 )
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 13,072
$ 15,837
Non-cash additions to property, plant, and equipment $ 3,015
$ —
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

CLECO POWER

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS) MEMBER’S EQUITY
AOCI

TOTAL
MEMBER’S
EQUITY

Balances, Dec. 31, 2016 $ 1,548,624
$ (13,422 ) $ 1,535,202
Distributions to parent (75,000 ) —
(75,000 )
Net income 108,439
—
108,439
Other comprehensive income, net of tax —
99
99
Balances, Sept. 30, 2017 $ 1,582,063
$ (13,323 ) $ 1,568,740
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Assets
Utility plant and equipment
Property, plant, and equipment	$	5,875,428	$	5,824,378
Accumulated depreciation	(2,128,642)		(2,067,362)
Net property, plant, and equipment	3,746,786		3,757,016
Construction work in progress	121,385		110,613
Total utility plant and equipment, net	3,868,171		3,867,629
Current assets
Cash and cash equivalents	38,059		24,846
Restricted cash and cash equivalents	4,430		4,545
Customer accounts receivable (less allowance for credit losses of $2,040 in 2021 and $2,758 in 2020)	52,316		43,852
Accounts receivable - affiliate	15,792		14,605
Other accounts receivable	32,367		27,535
Taxes receivable	2,713		0
Unbilled revenue	32,653		40,127
Fuel inventory, at average cost	64,652		63,234
Materials and supplies, at average cost	105,097		105,340
Energy risk management assets	1,986		4,337
Accumulated deferred fuel	69,832		28,194
Cash surrender value of company-owned life insurance policies	16,212		16,184
Prepayments	4,946		7,163
Regulatory assets	14,151		13,305
Other current assets	3,842		830
Total current assets	459,048		394,097
Equity investment in investee	7,322		9,072
Prepayments	1,433		1,496
Operating lease right of use assets	25,679		26,006

Note receivable	14,322		14,506

Regulatory assets	434,482		414,535


Other deferred charges	39,807		38,806
Total assets	$	4,850,264	$	4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Liabilities and member’s equity
Member’s equity	$	1,826,826	$	1,807,879
Long-term debt and finance leases, net	1,502,353		1,502,257
Total capitalization	3,329,179		3,310,136
Current liabilities
Short-term debt	135,000		75,000
Long-term debt and finance leases due within one year	700		682
Accounts payable	88,013		106,089
Accounts payable - affiliate	71,389		72,068
Customer deposits	59,485		58,718
Provision for rate refund	8,119		8,630

Taxes payable	18,748		4,778
Interest accrued	21,367		5,357

Energy risk management liabilities	898		1,121
Regulatory liabilities	21,335		23,509

Other current liabilities	24,467		24,754
Total current liabilities	449,521		380,706
Commitments and contingencies (Note 13)	0		0
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	640,585		634,598

Postretirement benefit obligations	231,810		230,825

Regulatory liabilities - deferred taxes, net	147,179		157,056




Asset retirement obligations	11,446		11,364
Operating lease liabilities	23,009		23,295
Other deferred credits	17,535		18,167
Total long-term liabilities and deferred credits	1,071,564		1,075,305
Total liabilities and member’s equity	$	4,850,264	$	4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021			2020
Operating activities
Net income	$	18,425		$	11,831
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	43,458			45,079

Provision for credit losses	1,874			2,569

Allowance for equity funds used during construction	(887)			74
Deferred income taxes	(6,975)			5,341
Deferred fuel costs	(41,121)			7,626

Changes in assets and liabilities
Accounts receivable	(17,179)			3,452
Accounts receivable - affiliate	(302)			2,863
Unbilled revenue	7,474			2,773
Fuel inventory and materials and supplies	(1,167)			(22,429)
Prepayments	2,176			1,209
Accounts payable	(24,222)			(33,749)
Accounts payable - affiliate	(155)			(3,817)
Customer deposits	3,236			2,731
Provision for merger commitments	(127)			(1,295)
Postretirement benefit obligations	720			1,181
Regulatory assets and liabilities, net	(19,956)			(1,218)
Other deferred accounts	(1,328)			(3,452)
Taxes accrued	10,893			7,691
Interest accrued	16,010			15,260
Other operating	(3,337)			330
Net cash (used in) provided by operating activities	(12,490)			44,050
Investing activities
Additions to property, plant, and equipment	(37,150)			(61,477)
Allowance for equity funds used during construction	887			(74)
Return of equity investment in investees	1,750			0






Other investing	356			285
Net cash used in investing activities	(34,157)			(61,266)
Financing activities
Draws on revolving credit facility	60,000			150,000


Repayment of long-term debt	0			(11,055)




Other financing	(255)			(148)
Net cash provided by financing activities	59,745			138,797
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	13,098			121,581
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	29,391		(1)	80,952
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	42,489	(2)	$	202,533
Supplementary cash flow information

Interest paid, net of amount capitalized	$	797		$	605

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	12,738		$	11,015



(1) Includes cash and cash equivalents of $24,846 and current restricted cash and cash equivalents of $4,545. (2) Includes cash and cash equivalents of $38,059 and current restricted cash and cash equivalents of $4,430.

The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS)	MEMBER’S EQUITY		AOCI		TOTAL MEMBER’S EQUITY














Balances, Dec. 31, 2019	$	1,735,977	$	(22,585)	$	1,713,392


Net income	11,831		—		11,831
Other comprehensive income, net of tax	—		490		490
Balances, Mar. 31, 2020	$	1,747,808	$	(22,095)	$	1,725,713

Balances, Dec. 31, 2020	$	1,832,632	$	(24,753)	$	1,807,879


Net income	18,425		—		18,425
Other comprehensive income, net of tax	—		522		522
Balances, Mar. 31, 2021	$	1,851,057	$	(24,231)	$	1,826,826
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


Index to Applicable Notes to the Unaudited Condensed Consolidated Financial Statements of Registrants

Note 1			Summary of Significant Accounting Policies	Cleco and Cleco Power
Note 2			~~Business Combinations~~Recent Authoritative Guidance	Cleco and Cleco Power
Note 3			~~Recent Authoritative Guidance~~Leases	Cleco and Cleco Power
Note 4			Revenue Recognition	Cleco and Cleco Power
Note 5			Regulatory Assets and Liabilities	Cleco and Cleco Power
Note 56			Fair Value Accounting	Cleco and Cleco Power
Note 67			Debt	Cleco and Cleco Power
Note 78			Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 89			Income Taxes	Cleco and Cleco Power
Note 910			Disclosures about Segments	~~Cleco~~
~~Note 10~~	~~Regulation and Rates~~	Cleco and Cleco Power
Note 11			Regulation and Rates	Cleco
Note 12			Variable Interest Entities	Cleco and Cleco Power
Note 1213			Litigation, Other Commitments and Contingencies, andDisclosures about Guarantees	Cleco and Cleco Power
Note 1314			Affiliate Transactions	Cleco and Cleco Power
Note 1415			Intangible Assets and Liabilities	Cleco and Cleco Power
Note 16			Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 1517			~~Subsequent Event~~Storm Restoration	Cleco and Cleco Power



Notes to the Unaudited Condensed Consolidated Financial Statements



Note 1 — Summary of Significant Accounting Policies

COVID-19 Impacts

In March 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and the U.S. declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory. State and local authorities also subsequently implemented multistep policies to reopen various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. Due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, effective March 31, 2021, the governor of the state of Louisiana issued orders reducing some of the restrictions that were in effect and easing capacity limits on businesses as well as social gatherings. Effective April 28, 2021, the governor of the state of Louisiana further reduced restrictions by revoking the mandatory, state-wide mask mandate.

The COVID-19 pandemic may worsen in the U.S. during the upcoming months, which may cause federal, state, and local governments to reconsider restrictions on business and social activities. In the event governments increase restrictions, the reopening of the economy may be further curtailed.

Cleco has modified some of its business operations, as these restrictions have significantly impacted many sectors of the economy. Impacts include record levels of unemployment, with businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. Cleco has also modified and continues to adjust certain business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, and other governmental and regulatory authorities.

Cleco cannot predict the full impact that COVID-19, or the significant disruption and volatility currently being experienced

in the markets, will have on its business, cash flows, liquidity, financial condition, and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the availability and timely distribution of effective treatments and vaccines, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

Principles of Consolidation

The accompanying ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements of Cleco include the accounts of Cleco ~~Holdings~~ and its majority-owned subsidiaries after elimination of intercompany accounts and transactions.

Basis of Presentation

The ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to ~~the~~ Form 10-Q and Regulation S-X. Accordingly, these ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end ~~Condensed Consolidated Balance Sheet~~condensed consolidated balance sheet data was derived from audited financial statements. Because the interim ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and other information included in this ~~quarterly report~~Quarterly Report on Form 10-Q should be read in conjunction with the ~~Consolidated Financial Statements~~consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

These ~~Condensed Consolidated Financial Statements,~~condensed consolidated financial statements, in the opinion of management, reflect all normal recurring


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

adjustments that are necessary to fairly state the financial position and results of operations of Cleco and Cleco Power. Amounts reported in Cleco and Cleco Power’s interim financial statements are not necessarily indicative of amounts expected for the annual periods due to the effects of seasonal temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices, discrete income tax items, and other factors.

In preparing financial statements that conform to GAAP, management must make estimates and assumptions that

affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. For information on recent authoritative guidance and its effect on financial results, see Note 32 — “Recent Authoritative Guidance.”

On April 13, 2016, Cleco Holdings completed its merger with Merger Sub whereby Merger Sub merged with and into Cleco Corporation, with Cleco Corporation surviving the Merger, and Cleco Corporation converting to a limited liability company and changing its name to Cleco Holdings, as a direct, wholly owned subsidiary of Cleco Group and an indirect, wholly owned subsidiary of Cleco Partners. At the effective time of the Merger, each outstanding share of Cleco Corporation common stock, par value $1.00 per share (other than shares that were owned by Cleco Corporation, Cleco Partners, Merger Sub, or any other direct or indirect wholly owned subsidiary of Cleco Partners or Cleco Corporation), were cancelled and were converted into the right to receive $55.37 per share in cash, without interest, with all dividends payable before the effective time of the Merger.

Cleco Holdings accounted for the merger transaction by applying the acquisition method of accounting. The objective of the acquisition method is to establish a new accounting basis for the acquiree, Cleco Holdings and its subsidiaries, and requires the acquirer, Cleco Group, to recognize and measure the acquiree’s assets and liabilities at fair value as of the acquisition date. Cleco Power’s assets and liabilities were recorded at historical cost since Cleco did not elect pushdown accounting at the Cleco Power level. The financial statements and accompanying footnotes for Cleco have been segregated to present pre-merger activity as the “Predecessor” and post-merger activity as the “Successor.” The predecessor period is not comparable to the successor period.

~~Goodwill~~

~~Goodwill is the excess of the purchase price (consideration transferred and liabilities assumed) over the estimated fair value of net assets of the acquired business and is not subject~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

to amortization. On April 13, 2016, in connection with the completion of the Merger, Cleco recognized goodwill of $1.49 billion. Management assigned goodwill to Cleco’s reportable segment, Cleco Power. Goodwill is required to be tested for impairment at the reporting segment level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting segment below its carrying value. Application of the goodwill impairment test requires significant judgments, including the identification of reporting segments, assignments of assets and liabilities to reporting segments, assignment of goodwill to reporting segments, and the determination of the fair value of the reporting segments. Management has determined that Cleco Power is Cleco’s only reporting segment.

Cleco conducted its 2017 annual impairment test using an August 1, 2017, measurement date. The fair value of Cleco’s reporting segment, Cleco Power, was estimated using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. Significant assumptions used in these fair value estimates include estimation of future cash flows, long-term rate of growth, the selection of comparable companies, and weighted-average cost of capital (WACC) or discount rate. Changes in these assumptions could materially affect the determination of fair value and goodwill impairment at Cleco Power. Based on the tests performed, management has determined that there was no impairment of Cleco Power’s goodwill as of August 1, 2017.

Management estimated the fair value of Cleco Power’s equity to be $3.34 billion at the August 1, 2017, measurement date. The carrying value of Cleco Power’s equity was approximately $3.25 billion with the excess of the fair value over the carrying value representing 3% or $89.5 million. There were no accumulated impairment charges.

The fair value estimate is particularly sensitive to WACC. WACC takes into account both the after-tax cost of debt and the cost of equity. WACC used for calculating the fair values as of August 1, 2017, was 5.2%. A downgrade in Cleco Power’s debt ratings or a decrease in income tax rates could increase Cleco Power’s after-tax cost of debt. In addition, an increase in interest rates or return required by investors in equity markets could increase Cleco Power’s cost of equity. Any increase in the cost of equity or the cost of debt could materially impact Cleco Power’s fair value estimate. A WACC of 5.1% or 5.3% would have resulted in fair value calculations of $3.43 billion and $3.25 billion, respectively.

The fair value estimate is also sensitive to long-term cash flow growth rates applicable to periods beyond management’s five-year business plan. Management assumed a long-term cash flow growth rate of 2.5% based on historical and projected consumer price inflation, economic indicators, and projected industry growth. Any change in the expected terminal cash flow growth rate could materially impact Cleco Power’s fair value estimate. A terminal cash flow growth rate of 2.4% or 2.6% would have resulted in a fair value calculation of $3.25 billion and $3.43 billion, respectively.

Restricted Cash and Cash Equivalents

Various agreements to which Cleco is subject contain covenants that restrict its use of cash. As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its

intended purposes and/or general corporate purposes.

Cleco and Cleco Power’s restricted cash and cash equivalents consisted ~~of:~~of the following:


Cleco					Cleco
(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current					Current
Cleco Katrina/Rita’s storm recovery bonds	$	3,798	$	9,213	Cleco Katrina/Rita’s storm recovery bonds	$	2,626	$	2,626

Cleco Power’s charitable contributions	1,200		1,200		Cleco Power’s charitable contributions	1,603		1,718
Cleco Power’s rate credit escrow	3,876		12,671		Cleco Power’s rate credit escrow	201		201
Total current	8,874		23,084		Total current	4,430		4,545
Non-current					Non-current
Diversified Lands’ mitigation escrow	21		21		Diversified Lands’ mitigation escrow	22		22
Cleco Power’s future storm restoration costs	17,999		17,379
Cleco Power’s charitable contributions	3,640		4,179
Cleco Power’s rate credit escrow	2,887		1,831
Cleco Cajun’s defense fund					Cleco Cajun’s defense fund	722		722

Total non-current	24,547		23,410		Total non-current	744		744
Total restricted cash and cash equivalents	$	33,421	$	46,494	Total restricted cash and cash equivalents	$	5,174	$	5,289


Cleco Power					Cleco Power
(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current					Current
Cleco Katrina/Rita’s storm recovery bonds	$	3,798	$	9,213	Cleco Katrina/Rita’s storm recovery bonds	$	2,626	$	2,626

Charitable contributions	1,200		1,200		Charitable contributions	1,603		1,718
Rate credit escrow	3,876		12,671		Rate credit escrow	201		201
Total current	8,874		23,084
Non-current
Future storm restoration costs	17,999		17,379
Charitable contributions	3,640		4,179
Rate credit escrow	2,887		1,831
Total non-current	24,526		23,389

Total restricted cash and cash equivalents	$	33,400	$	46,473	Total restricted cash and cash equivalents	$	4,430	$	4,545

Prior to the repayment of the storm recovery bonds in March 2020, Cleco Katrina/Rita ~~has~~had the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash iswas collected, it iswas restricted for payment of administration fees, interest, and principal on the storm recovery bonds. The ~~change from December~~remaining $2.6 million of restricted cash at March 31, ~~2016, to~~ ~~September 30, 2017~~,2021, was ~~due~~used in April 2021 for final administrative and winding up activities of Cleco Katrina/Rita. Refunds to Cleco Power customers for amounts remaining after all other costs and expenses of Cleco Katrina/Rita are expected to be paid with the completion of Cleco Power’s current LPSC base rate case.

Reserves for Credit Losses

Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivables are generally considered to become past due 20 days after the billing date. Cleco recognizes write-offs within the allowance for credit losses once all recovery methods have been exhausted. It is the policy of management to review accounts receivable and unbilled revenue monthly using ~~$17.9 million for scheduled storm recovery bond principal payments~~a reserve matrix based on historical bad debt write-offs as well as current and ~~$3.6 million for related interest payments, partially offset by collections~~forecasted economic conditions to establish a credit loss estimate. Management’s historical credit loss analysis included periods of ~~$16.1 million net~~economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of ~~administration fees.~~electricity, none of these past events have significantly impacted Cleco’s credit loss rates.

~~Included~~Although Cleco’s service territory experienced a recent decline in the ~~Merger Commitments were $6.0 million~~economy in 2020 and 2021 primarily related to the COVID-19 pandemic and weather-related events, the economic outlook at March 31, 2021, was still within range of ~~charitable contributions to be disbursed over five years and $136.0 million of rate credits to eligible customers. In April 2016,~~its historical credit loss analysis.

The table below presents the changes in ~~accordance with~~ the ~~Merger Commitments, Cleco Power established the charitable contribution fund and also deposited the rate~~allowance for credit funds into an escrow account. In April 2016, the LPSC voted to issue the rate credits equally to customers with service as of June 30, 2016, beginning in July 2016. As of September 30, 2017, $1.2 million of the charitable contributions and $129.4 million of the rate credits had been released from restricted cash.

~~Fair Value Measurements and Disclosures~~

Power:



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~


Cleco
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, Dec. 31, 2020	$	2,758	$	1,638	$	4,396

Current period provision	1,874		0		1,874
Charge-offs	(2,859)		0		(2,859)
Recovery	267		0		267
Balances, Mar. 31, 2021	$	2,040	$	1,638	$	3,678

* Loan held at Diversified Lands that was fully reserved for at March 31, 2021.


(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, Dec. 31, 2019	$	3,005	$	1,250	$	4,255
CECL adoption	71		—		71
Current period provision	2,498		388		2,886
Charge-offs	(4,092)		0		(4,092)
Recovery	641		0		641
Balances, Mar. 31, 2020	$	2,123	$	1,638	$	3,761

~~required~~* Loan held at Diversified Lands that was fully reserved for ~~recognition purposes. For more information about fair value levels, see Note 5 — “Fair Value Accounting.”~~at March 31, 2020.

~~Risk Management~~

Market risk inherent in Cleco’s market risk-sensitive instruments and positions includes potential changes in value arising from changes in interest rates and the commodity market prices of power, FTRs, and natural gas in the industry on different energy exchanges. Cleco’s Energy Market Risk Management Policy authorizes the use of various derivative instruments, including exchange traded futures and option contracts, forward purchase and sales contracts, and swap transactions to reduce exposure to fluctuations in the price of power, FTRs, and natural gas. Cleco evaluates derivatives and hedging activities to determine whether the market risk-sensitive instruments and positions are required to be marked-to-market.

Cleco Power may also enter into risk mitigating positions that would not meet the requirements of a normal-purchase, normal-sale transaction in order to attempt to mitigate the volatility in customer fuel costs. These positions would be marked-to-market with the resulting gain or loss recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets as a component of energy risk management assets or liabilities. Such gain or loss would be deferred as a component of deferred fuel assets or liabilities in accordance with regulatory policy. When these positions close, actual gains or losses would be included in the FAC and reflected on customers’ bills as a component of the fuel charge. In June 2015, the LPSC approved a long-term natural gas hedging pilot program that requires Cleco Power to establish a proposal for a program that will be designed to provide gas price stability for a minimum of five years. This proposal was submitted to the LPSC on July 28, 2017. An ALJ was assigned to the docket and a status conference was held on October 3, 2017. A procedural schedule was determined and management expects a final determination in the second quarter of 2018. There were no open natural gas positions at September 30, 2017, or December 31, 2016.

Cleco Power purchases FTRs in auctions facilitated by MISO. The majority of its FTRs are purchased in annual auctions during the second quarter, but Cleco Power may purchase additional FTRs in monthly auctions. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Cleco Power’s customer load. FTRs are not designated as hedging instruments for accounting purposes. Cleco Power records FTRs at their estimated fair value when purchased. Each accounting period, Cleco Power adjusts the carrying value of FTRs to their estimated fair value based on the most recent MISO FTR auction prices. Unrealized gains or losses on FTRs held by Cleco Power are included in Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheets. Realized gains or losses on settled FTRs are recorded in Fuel used for electric generation on Cleco Power’s Condensed Consolidated Statements of Income. At ~~September 30, 2017~~, Cleco Power’s Condensed Consolidated Balance Sheets reflected the fair value of open FTR positions of $13.4 million in Energy risk management assets and $0.5 million in Energy risk management liabilities, compared to $7.9 million in Energy risk management assets and $0.2 million in Energy risk management liabilities at December 31, 2016. For more information on FTRs, see Note 5 — “Fair Value Accounting — Commodity Contracts.”

Cleco and Cleco Power maintain a master netting agreement policy and monitor credit risk exposure through review of counterparty credit quality, aggregate counterparty credit exposure, and aggregate counterparty concentration levels. Cleco manages these risks by establishing appropriate credit and concentration limits on transactions with counterparties and requiring contractual guarantees, cash deposits, or letters of credit from counterparties or their affiliates, as deemed necessary. Cleco Power has agreements in place with various counterparties that authorize the netting of financial buys and sells and contract payments to mitigate credit risk for transactions entered into for risk management purposes.

Cleco and Cleco Power may enter into contracts to mitigate the volatility in interest rate risk. These contracts include, but are not limited to, interest rate swaps and treasury rate locks. For each reporting period presented, the Registrants did not enter into any contracts to mitigate the volatility in interest rate risk.

~~Stock-Based Compensation~~

Prior to the completion of the Merger, Cleco had two stock-based compensation plans: the ESPP and the LTIP. As a result of the completion of the Merger, both stock-based compensation plans were terminated.

Pursuant to the terms of the LTIP, certain officers, key employees, and directors of Cleco were eligible to be granted stock options, restricted stock, also known as non-vested stock, common stock equivalents, and stock appreciation rights. During the predecessor period January 1, 2016, through April 12, 2016, Cleco granted no shares of non-vested stock pursuant to the LTIP. As a result of the Merger on April 13, 2016, all unvested shares outstanding under the LTIP that were granted prior to January 1, 2015, vested at target and were paid out in cash to plan participants. Unvested shares that were granted during 2015 were prorated to the target amount and paid out in cash to plan participants in accordance with the terms of the Merger Agreement.

During the predecessor period January 1, 2016, through April 12, 2016, Cleco reported pretax compensation expense of $3.2 million on non-vested stock with a related tax benefit of $1.2 million. In April 2016, Cleco incurred $2.3 million of merger expense due to the accelerated vesting of the LTIP shares for the predecessor period. For more information about the Merger, see Note 2 — “Business Combinations.”

~~During the nine months ended September 30, 2016, Cleco Power reported pretax compensation expense of $1.0 million on non-vested stock with a related tax benefit of $0.4 million.~~



~~Note 2 — Business Combinations~~Cleco Power
(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, Dec. 31, 2020	$	2,758

Current period provision	1,874
Charge-offs	(2,859)
Recovery	267
Balances, Mar. 31, 2021	$	2,040

~~Regulatory Matters~~


(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, Dec. 31, 2019	$	3,005
CECL adoption	71
Current period provision	2,498
Charge-offs	(4,092)
Recovery	641
Balances, Mar. 31, 2020	$	2,123

On March 28, 2016, the LPSC approved the Merger. The LPSC’s written order approving the Merger was issued on April 7, 2016. Approval of the Merger was conditioned upon certain commitments, including $136.0 million of customer rate credits, a $7.0 million one-time contribution for economic development in Cleco Power’s service territory to be administered by the LED, $6.0 million of charitable contributions to be disbursed over five years, and $2.5 million of contributions for economic development for Louisiana state and local organizations to be disbursed over five years. These commitment costs were accrued on April 13, 2016. In addition, the Merger Commitments also included $1.2 million of annual


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~Note 2 — Recent Authoritative Guidance

~~refunds~~In March 2020, FASB issued optional guidance for a limited period of time that applies to ~~customers representing cost savings~~entities meeting certain criteria for the contract modifications or hedging relationships that are referencing LIBOR or another reference rate expected to be discontinued due to ~~the Merger. For more information, see Note 10 — “Regulation and Rates.”~~

~~Accounting for the Merger Transaction~~

reference rate reform. The ~~total purchase price consideration was approximately $3.36 billion, which consisted of cash paid~~guidance includes a general principal that permits an entity to ~~Cleco Corporation shareholders of $3.35 billion and cash paid for Cleco LTIP equity awards of $9.5 million. There were no remaining LTIP equity awards as of the close of the Merger.~~

~~Pushdown accounting was applied~~consider contract modifications due to ~~Cleco, and accordingly, the Cleco consolidated assets acquired and liabilities assumed were recorded on April 13, 2016, at their fair values as follows:~~

Purchase Price Allocation
(THOUSANDS) AT APR. 13, 2016
Current assets $ 455,016
Property, plant, and equipment, net 3,432,144
Goodwill 1,490,797
Other long-term assets 1,023,487
Less
Current liabilities 228,515
Net deferred income tax liabilities 1,059,939
Other deferred credits 279,379
Long-term debt, net 1,470,126
Total purchase price $ 3,363,485

~~Cleco Power’s assets and liabilities were recorded at historical cost since Cleco did~~reference rate reform to be an event that does not ~~elect pushdown accounting~~require contract remeasurement at the ~~Cleco Power level.~~

modification date or reassessment of a previous accounting determination. The ~~following table presents the fair value adjustments to Cleco’s balance sheet and recognition of goodwill:~~

(THOUSANDS) AT APR. 13, 2016
Property, plant, and equipment $ (1,334,932 )
Accumulated depreciation $ (1,565,776 )
Goodwill $ 1,490,797
Intangible assets $ 91,826
Regulatory assets $ 250,409
Deferred income tax liabilities $ 126,853
Other deferred credits $ 21,175
Long-term debt $ 198,599

~~Most of the carrying values of Cleco’s assets and liabilities were determined to~~optional guidance may be stated at fair value at the Merger date, considering that most of these assets are subject to regulation by the LPSC and FERC. Under such regulation, rates charged to customers are established by a regulator to provide for recovery of costs and a fair return on rate base and are generally measured at historical cost. As such, a market participant would not expect to recover any more or less than the carrying value of the assets. Prior to the Merger, the Coughlin step-up value was not recorded on Cleco’s Condensed Consolidated Balance Sheet due to the accounting treatment for the transfer of that asset inapplied from March 2014. However, the recovery of the step-up value of the Coughlin asset was approved by the LPSC for recovery in base rates, including a return on rate base. On the date of the Merger, the step-up value for the Coughlin asset was recognized on Cleco’s Condensed Consolidated Balance Sheet since Cleco Power is able to earn a return on and recover these costs from its customers. The beginning balance

~~of fixed depreciable assets was shown net at the date of the Merger, as no accumulated depreciation existed on the date of the Merger.~~

The excess of the purchase price over the estimated fair value of assets acquired and the liabilities assumed was $1.49 billion, which was recognized as goodwill by Cleco Holdings at the Merger date. The goodwill represents the potential long-term return of Cleco to its member.12, 2020, through December 31, 2022. Management has ~~assigned goodwill to Cleco’s reportable segment, Cleco Power.~~

A fair value adjustment was recorded on Cleco’s Condensed Consolidated Balance Sheet to reflect the valuation of the Cleco trade name. This adjustment is included in Intangible assets on Cleco’s Condensed Consolidated Balance Sheet. The valuation of the trade name was estimated by applying the relief-from-royalty method under the income approach. This valuation method is based on the premise that, in lieu of ownership of the asset, a company would be willing to pay a royalty to a third-party for the use of that asset. The owner of the asset is spared this cost, and the value of the asset is estimated by the cost savings. The projected revenue attributed to the trade name was based on projections of the value of Cleco’s wholesale contracts. The trade name is being amortized over 20 years. The amortization of the Cleco trade name is included in Depreciation and amortization on Cleco’s Condensed Consolidated Statement of Income.

On the date of the Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the difference between the contract price and the market price of long-term wholesale power supply agreements. These adjustments are classified as Intangible assets on Cleco’s Condensed Consolidated Balance Sheet. The valuation of the power supply agreements was estimated using the income approach. The income approach is based upon discounted projected future cash flows associatedidentified contracts with the underlying contracts. The intangible assets for the power supply agreements are being amortized over the remaining term of each applicable contract. The amortization of the power supply agreements is included in Electric operations on Cleco’s Condensed Consolidated Statement of Income.

The net increase in deferred tax liabilities on Cleco’s Condensed Consolidated Balance Sheet represents the differences between the assigned fair values of assets acquired and their related income tax basis, net of a deferred tax asset representing the net operating loss carryforwardreference rates that will be utilized in future periods. As the underlying asset assigned fair values are amortized, the related deferred tax liabilities will be included in income tax expense. Goodwill is not deductible for income tax purposes; therefore, no deferred income tax assets or liabilities were recognized for goodwill.

~~Other fair value adjustments were recorded for long-term debt, postretirement benefit remeasurements~~discontinued and ~~deferred losses, and interest rate derivative settlement gains and losses. These fair value adjustments are subject~~expects to rate regulation, but do not earn a return. In these instances, a corresponding regulatory asset was established, as the underlying utility asset or liability amounts are recoverable from or refundable to customers at historical cost through the rate setting process. These regulatory assets established to offset fair value adjustments are amortized in amounts and over time frames consistent with the realization or settlement of the fair value adjustments.

~~The valuations performed in the second quarter of 2016 to estimate the fair value of assets acquired and liabilities assumed were considered preliminary as a result of the short~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

time period between the closing of the Merger and the end of the second quarter of 2016. During the third quarter of 2016, valuations were performed for the valuation and assessment of the postretirement benefit plans as of April 13, 2016, and the economic useful life of the Cleco trade name. Cleco completed its evaluation and determination of the fair value of certain assets and liabilities acquired as of December 31, 2016. There were no adjustments to those amounts during the nine months ended September 30, 2017. While management believes the positions reflected on the income tax returns are reasonable, the returns have not been audited by the applicable taxing authorities.

~~Note 3 — Recent Authoritative Guidance~~

~~The Registrants adopted, or will adopt, the recent authoritative guidance listed below on their respective effective dates.~~

In May 2014, FASB amended the accounting guidance for revenue recognition. The amended guidance affects entities that enter into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards. The core principle ofapply this guidance ~~is that~~on an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity must identify the performance obligations in a contract and the transaction price, and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendments in this update also require extensive disclosure of sufficient information to allow users to understand the nature, amount, timing, and uncertainty of revenue and cash flow arising from contracts. Additional disclosure requirements include disaggregated revenue, reconciliation of contract balances, the entity’s performance obligations, significant judgments used, costs to obtain or fulfill a contract and the use of practical expedients. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Reporting entities have the option of using either a full retrospective or a modified retrospective approach. Under the full retrospective approach, companies will apply rules to contracts in all reporting periods presented, subject to certain allowable exceptions. Under the modified retrospective approach, companies will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous rules. Cleco intends to implement the amended guidance in January 2018 using the modified retrospective approach.

Upon initial evaluation, key changes in the standard that management is assessing for potential areas of impact include accounting for contract modifications, contracts with pricing provisions that may require it to recognize revenue at prices other than the contract price (e.g., straight-line or estimated future market prices), and accounting for alternative revenue programs. Management has not identified any impacts that would have a material impact on the results of operations, financial condition, or cash flows of the Registrants. Management expects most of Cleco’s revenue to be in scope of the new guidance. The majority of sales, including energy provided to residential customers, are from tariff offerings that provide electricity supplied and billed in that period. As such,

management does not expect that there will be a significant shift in the timing or pattern of revenue recognition for such sales. Management is evaluating other revenue streams, including long-term contracts with industrial and wholesale customers. Management will continue to evaluate the impact of this guidance, including any additional clarifying amendments issued during implementation. Management is finalizing the design and implementation of controls related to the new standard.

In February 2016, FASB amended the guidance to account for leases. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes practical expedients that may be elected by entities. Other than an expected increase in assets and liabilities, the full impact of the amended guidance has not been determined. Management will continue to evaluate the impact of this guidance, including any additional clarifying amendments issued during implementation. The amended guidance could have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

In August 2016, FASB amended the guidance for certain cash flow issues with the objective of reducing existing diversity in practice. This guidance affects the cash flow classification related to certain types of transactions including debt, contingent consideration, proceeds from the settlement of insurance claims, and distributions from equity method investees. The adoption of this guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. This amendment should be applied using a retrospective transition method to each period presented. This guidance will impact the presentation of the cash flow statement, but will not have an impact on the results of operations or financial condition of the Registrants.

In October 2016, FASB amended the income tax guidance related to intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This new guidance states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The adoption of this guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years.on-going basis. Management does not expect this guidance to have a significant impact on the Registrants’ results of operations, financial condition, or cash ~~flows of the Registrants.~~flows.

In ~~November 2016,~~December 2019, FASB amended the guidance for accounting for income taxes. The amendments simplify the accounting for income taxes by removing certain ~~cash flow issues. The amended guidance requires that a statement of cash flow explain the change during the period~~exceptions to general principles included in the total of cash, cash equivalents, and amounts generally described as restricted cash. Therefore, amounts generally described as restricted cash and cash equivalents should be included with cash and cash equivalents when reconcilingaccounting guidance. Effective January 1, 2021, Cleco adopted the ~~beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption~~amended accounting guidance. Adoption of this guidance is



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

effective for fiscal years beginning after December 15, 2017, including interim periods within those years. This amendment should be applied using a retrospective transition method to each period presented. This guidance willdid not materially impact the ~~presentation of the cash flow statement, but will not have an impact on the results of operations or financial condition of the Registrants.~~

In January 2017, FASB issued amendments to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The adoption of this guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Management does not expect this guidance to have a significant impact on theRegistrants’ results of operations, financial condition, or cash ~~flows~~flows.

Note 3 — Leases

Cleco maintains operating and finance leases in its ordinary course of business activities.

Cottonwood Sale Leaseback Agreement

Upon closing the Cleco Cajun Transaction, the Cottonwood Sale Leaseback was executed. Under the terms of the ~~Registrants.~~lease,

~~In January 2017, FASB amended~~

NRG Energy will operate the ~~accounting guidance to simplify~~Cottonwood Plant, incur all costs, and receive all revenues from the ~~measurement of a goodwill impairment loss. The amended guidance eliminates step two~~operations of the ~~goodwill impairment test, which requires a hypothetical purchase price allocation~~plant. Cottonwood Energy will receive fixed lease payments of $40.0 million per year and variable lease payments for LTSA costs and property taxes paid by NRG Energy on behalf of Cleco. Cleco may terminate the lease contract under specific circumstances stated in the lease contract. The residual value under the Cottonwood Sale Leaseback is expected to ~~measure goodwill impairment. Under~~be recovered through sales of power generation from the ~~new guidance, a goodwill impairment will now be~~plant. The residual value of the ~~amount by which a reporting unit’s carrying value exceeds its~~Cottonwood Plant has been determined using the plant’s estimated economic life.

Cleco Cajun is Cleco’s only entity with lessor arrangements. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback is included in Other operations within Cleco’s Condensed Consolidated Statement of Income. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback for the three months ended March 31, 2021, and 2020, was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Fixed payments	$	10,000	$	10,000
Variable payments	5,465		5,566
Amortization of deferred lease liability*	2,301		2,302
Total lease income	$	17,766	$	17,868

* Consists of amortization of the deferred lease revenue resulting from the fair value not to exceed the carrying amount of goodwill. The adoption of this guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years. Early adoption is permitted. Management does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows of the ~~Registrants.~~lease between Cottonwood Energy and a special-purpose entity that is a subsidiary of NRG Energy.


Note 4 — Revenue Recognition

Operating revenue, net for the three months ended March ~~2017, FASB amended guidance~~31, 2021, and 2020, was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	95,081		$	0		$	0		$	0	$	95,081
Commercial (1)	63,026			0			0			0		63,026
Industrial (1)	36,666			0			0			0		36,666
Other retail (1)	3,570			0			0			0		3,570

Electric customer credits	(20,976)			0			0			0		(20,976)
Total retail revenue	177,367			0			0			0		177,367
Wholesale, net	61,722		(1)	101,507			(2,420)		(2)	0		160,809
Transmission, net	13,982			15,257			0			(1,940)		27,299
Other	4,642			0			0			0		4,642
Affiliate (3)	1,655			0			27,156			(28,811)		0
Total revenue from contracts with customers	259,368			116,764			24,736			(30,751)		370,117
Revenue unrelated to contracts with customers
Other	7,095		(4)	17,782		(5)	1			0		24,878
Total revenue unrelated to contracts with customers	7,095			17,782			1			0		24,878
Operating revenue, net	$	266,463		$	134,546		$	24,737		$	(30,751)	$	394,995

(1) Includes fuel recovery revenue.

(2) Amortization of intangible assets related to ~~defined benefit pension~~Cleco Power’s wholesale power supply agreements.

(3) Includes interdepartmental rents and ~~other postretirement benefit plans. The new amendment requires an entity to present service cost~~support services. This revenue is eliminated upon consolidation.

(4) Represents realized gains associated with FTRs.

(5) Includes $15.5 million in the same line item as other current employee compensation costs and to present the remaining components of net benefit cost in a separate line item outside of operating items. The amendment also allows only the service cost component of net benefit cost to be eligible for capitalization. The non-service cost components that are no longer eligible for capitalization under GAAP will be presented as regulatory assets. The adoption of this guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those years. This amendment should be applied retrospectively for the presentation of the service cost in the income statement while the capitalization of the service cost should be applied prospectively. Management does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows of the Registrants.

~~In May 2017, FASB amended guidance~~lease revenue related to ~~service concession arrangements. The amendment clarifies that~~ the ~~grantor, rather than the third-party users, is the customer~~Cottonwood Sale Leaseback and $2.3 million of ~~the operation services in all cases for service concession arrangements. The adoption~~deferred lease revenue amortization.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	81,571		$	0		$	0		$	0	$	81,571
Commercial (1)	61,110			0			0			0		61,110
Industrial (1)	32,210			0			0			0		32,210
Other retail (1)	3,461			0			0			0		3,461
Surcharge	2,443			0			0			0		2,443
Electric customer credits	(8,340)			0			0			0		(8,340)
Total retail revenue	172,455			0			0			0		172,455
Wholesale, net	42,229		(1)	89,147			(2,420)		(2)	0		128,956
Transmission, net	12,069			12,931		(3)	0			(1,818)		23,182
Other	3,695			0			1			0		3,696
Affiliate (4)	1,106			161			29,278			(30,545)		0
Total revenue from contracts with customers	231,554			102,239			26,859			(32,363)		328,289
Revenue unrelated to contracts with customers
Other	1,406		(5)	17,877		(6)	0			0		19,283
Total revenue unrelated to contracts with customers	1,406			17,877			0			0		19,283
Operating revenue, net	$	232,960		$	120,116		$	26,859		$	(32,363)	$	347,572

(1) Includes fuel recovery revenue.

(2) Amortization of this guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Management does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows of the Registrants.

~~In August 2017, FASB amended guidance~~intangible assets related to ~~derivatives~~Cleco Power’s wholesale power supply agreements.

(3) Includes $0.2 million of electric customer credits.

(4) Includes interdepartmental rents and ~~hedging. The amendment broadens~~support services. This revenue is eliminated upon consolidation.

(5) Represents realized gains associated with FTRs.

(6) Includes $15.6 million in lease revenue related to the ~~financial~~Cottonwood Sale Leaseback and ~~non-financial hedging strategies~~$2.3 million of deferred lease revenue amortization.

Cleco and Cleco Power have unsatisfied performance obligations with durations ranging between 1 and 14 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At March 31, 2021, Cleco and Cleco Power had $70.7 million of unsatisfied fixed performance obligations that will be ~~eligible for hedge accounting. The new guidance also~~

recognized as revenue over the term of such contracts as the stand-ready obligation to provide energy is provided.

changes how a company tests hedging strategies for effectiveness. The adoption of this guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. Management does not expect this guidance to have a significant impact on the results of operations, financial condition, or cash flows of the Registrants.



Note 45 — Regulatory Assets and Liabilities

Cleco Power capitalizes or defers certain costs for recovery from customers and recognizes a liability for amounts expected to be returned to customers based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, ~~Cleco’s~~Cleco Power’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable, Cleco Power would be required to write-down such assets. In addition, potential deregulation of the industry or possible future changes in the method of rate regulation of Cleco Power could require discontinuance of the application of the authoritative guidance on regulated operations.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

The following table summarizes Cleco Power’s regulatory assets and liabilities:


Cleco Power					Cleco Power
(THOUSANDS)					(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Regulatory assets					Regulatory assets
Acadia Unit 1 acquisition costs					Acadia Unit 1 acquisition costs	$	1,992	$	2,019
Accumulated deferred fuel					Accumulated deferred fuel	69,832		28,194
AFUDC equity gross-up *					AFUDC equity gross-up *	68,896		69,670
AMI deferred revenue requirement					AMI deferred revenue requirement	2,454		2,591
AROs					AROs	6,345		5,488
Coughlin transaction costs					Coughlin transaction costs	869		876
COVID-19 executive order					COVID-19 executive order	2,953		2,953
Deferred storm restoration costs - Hurricane Delta					Deferred storm restoration costs - Hurricane Delta	17,052		17,051
Deferred storm restoration costs - Hurricane Laura					Deferred storm restoration costs - Hurricane Laura	54,744		54,406
Deferred storm restoration costs - Hurricane Zeta					Deferred storm restoration costs - Hurricane Zeta	3,613		3,493
Deferred storm restoration costs - Winter Storms Uri & Viola					Deferred storm restoration costs - Winter Storms Uri & Viola	1,938		0
Dolet Hills closure costs					Dolet Hills closure costs	70,192		48,982
Emergency declarations					Emergency declarations	131		270
Energy efficiency					Energy efficiency	2,703		2,820
Financing costs					Financing costs	7,091		7,184
Interest costs					Interest costs	3,646		3,708
Non-service cost of postretirement benefits					Non-service cost of postretirement benefits	10,181		9,901
Other, net					Other, net	4,682		4,229
Postretirement costs					Postretirement costs	160,674		165,437
Production operations and maintenance expenses					Production operations and maintenance expenses	3,361		4,058
Rodemacher Unit 2 closure costs					Rodemacher Unit 2 closure costs	2,722		1,333
St. Mary Clean Energy Center					St. Mary Clean Energy Center	5,219		3,479

(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016
Regulatory assets – deferred taxes, net	$	240,431	$	237,449
Mining costs	4,461		6,372
Interest costs	4,590		4,860
AROs	2,590		2,096
Postretirement costs	137,815		145,268
Training costs					Training costs	6,046		6,085
Tree trimming costs	6,801		5,549		Tree trimming costs	11,129		11,807
Training costs	6,591		6,708
Surcredits, net	3,084		5,876
AMI deferred revenue requirement	4,363		4,772
Emergency declarations	3,976		—
Production operations and maintenance expenses	9,656		13,999
AFUDC equity gross-up	70,046		70,423
Acadia Unit 1 acquisition costs	2,362		2,442
Financing costs	8,385		8,663
Biomass costs	—		18
MISO integration costs	702		1,404
Coughlin transaction costs	976		999
Corporate franchise tax	968		1,308
MATS costs	3,846		4,270
Other	713		710
Total regulatory assets	271,925		285,737		Total regulatory assets	518,465		456,034
Accumulated deferred fuel	21,057		20,787
Regulatory liabilities					Regulatory liabilities
AFUDC					AFUDC	(4,574)		(4,218)
Corporate franchise tax, net					Corporate franchise tax, net	(1,133)		(763)
Deferred taxes, net					Deferred taxes, net	(162,807)		(175,584)
Total regulatory liabilities					Total regulatory liabilities	(168,514)		(180,565)
Total regulatory assets, net	$	533,413	$	543,973	Total regulatory assets, net	$	349,951	$	275,469
* Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.					* Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

The following table summarizes Cleco’s net regulatory assets and liabilities:


Cleco					Cleco
(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Total Cleco Power regulatory assets, net	$	533,413	$	543,973	Total Cleco Power regulatory assets, net	$	349,951	$	275,469
Cleco Holdings’ Merger adjustments ⁽¹⁾
2016 Merger adjustments *					2016 Merger adjustments *
Fair value of long-term debt	149,256		155,776		Fair value of long-term debt	117,703		119,553
Postretirement costs	21,872		23,362		Postretirement costs	14,915		15,411
Financing costs	8,708		8,966		Financing costs	7,506		7,592
Debt issuance costs	6,768		7,606		Debt issuance costs	5,170		5,254
Total Cleco regulatory assets, net	$	720,017	$	739,683	Total Cleco regulatory assets, net	$	495,245	$	423,279

⁽¹⁾*Cleco ~~Holdings’~~ regulatory assets include acquisition accounting adjustments as a result

of the 2016 Merger.

~~Emergency Declarations~~Accumulated Deferred Fuel

In ~~August 2016,~~February 2021, Winter Storms Uri and Viola moved through Louisiana causing substantial damage to Cleco’s distribution

assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the ~~LPSC issued emergency declaration executive orders following flooding events in south Louisiana which prohibited public utilities from disconnecting or charging late fees~~United States, primarily due to customers for non-payment in affected parishes. In January 2017, the LPSC issued an order terminating those executive orders effective March 1, 2017. The January 2017 order also provided that public utilitiesprolonged freezing temperatures. Incremental fuel and purchased power costs were ~~entitled to formally petition the LPSC to recover lost revenues~~incurred as a result of the ~~executive orders issued in August 2016. Beginning July 2017,~~winter storms. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs through Cleco Power’s ~~lost revenues are being recovered and amortized~~FAC over a ~~three-year period.~~

~~Cleco Holdings’ Merger Adjustments~~

~~As a result~~period of 12 months beginning in May 2021. For more information about the ~~Merger, Cleco implemented acquisition accounting, which eliminated AOCI at the Cleco consolidated level on the date of the Merger. Cleco will continue to recover expenses~~incremental fuel and purchased power costs related to ~~certain postretirement costs; therefore,~~Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Deferred Storm Restoration Costs — Winter Storms

In February 2021, Cleco ~~recognized~~Power’s service territory experienced extreme and unprecedented winter weather.

On February 14, 2021, Winter Storm Uri reached Louisiana resulting in power outages for approximately 11,000 of Cleco Power’s electric customers located primarily in south Louisiana.

On February 17, 2021, Winter Storm Viola reached Louisiana resulting in power outages for approximately 43,000 of Cleco Power’s electric customers located primarily in central and south Louisiana.

On March 17, 2021, the LPSC approved utilities establishing a regulatory asset ~~based on its determination that these costs can continue~~ to be collected from customers. These costs are being amortized to Other operations expense over the average remaining service period of participating employees. Cleco will also continue to recover financing coststrack and defer non-capital expenses associated with ~~the settlement of two treasury rate locks~~these winter storms. For more information about Winter Storms Uri and ~~a forward starting swap contract that were previously recognized in AOCI. Additionally, as a result of the Merger, a regulatory asset was recorded for debt issuance costs that were eliminated at Cleco~~Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and a regulatory asset was recorded for the difference between the carrying value and the fair value of long-term debt. These regulatory assets are being amortized over the terms of the related debt issuances. On March 1, 2017, Cleco completed the repayment of the first of

Viola.”

two tranches of its Cleco Katrina/Rita storm recovery bonds issued in March 2008. As a result, the fair value adjustments for the redeemed long-term debt and the related unamortized debt issuance cost of $0.7 million on Cleco’s Condensed Consolidated Balance Sheet were derecognized. The offset was to the respective regulatory assets.



Note 56 — Fair Value Accounting

The amounts reflected on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~September 30, 2017~~,March 31, 2021, and December 31, ~~2016~~,2020, for cash equivalents, restricted cash equivalents, accounts receivable, other accounts receivable, short-term debt, and accounts payable approximate fair value because of their short-term nature. Cleco applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including business combinations, as well as impairment related to goodwill and other long-lived assets.

The following tables summarize the carrying value and estimated market value of Cleco and Cleco Power’s financial instruments not measured at fair value on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets:


Cleco									Cleco
	AT SEPT. 30, 2017				AT DEC. 31, 2016					AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE		(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	2,743,987	$	2,831,805	$	2,768,149	$	2,754,518	Long-term debt	$	3,228,726	$	3,556,579	$	3,230,500	$	3,541,349

* The carrying value of long-term debt ~~excludes~~does not include deferred issuance costs of ~~$11.2~~$12.7 million at
March 31, 2021, and ~~$11.7~~$13.4 million at ~~September 30, 2017, and~~ December 31, ~~2016, respectively.~~2020.


Cleco Power									Cleco Power
	AT SEPT. 30, 2017				AT DEC. 31, 2016					AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE		(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	1,244,731	$	1,428,761	$	1,262,373	$	1,418,693	Long-term debt	$	1,495,024	$	1,865,938	$	1,494,947	$	1,794,799

* The carrying value of long-term debt ~~excludes~~does not include deferred issuance costs of ~~$8.6~~$6.8 million at
March 31, 2021, and ~~$9.4~~$7.0 million at ~~September 30, 2017, and~~ December 31, ~~2016, respectively.~~2020.

In order to fund capital requirements, Cleco issues fixed and variable rate long-term debt with various tenors. The fair value of this class fluctuates as the market interest rates for


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

fixed and variable rate debt with similar tenors and credit ratings change. The fair value of the debt could also change from period to period due to changes in the credit rating of the Cleco entity by which the debt was issued. The fair value of long-term debt is classified as Level 2 in the fair value hierarchy.

Fair Value Measurements and Disclosures

Cleco classifies assets and liabilities that are measured at their fair value according to three different levels depending on the inputs used in determining fair value.

~~The following tables disclose for~~ Cleco ~~and~~elects not to designate derivatives as cash flow or fair value hedges, as allowed by accounting guidance. Cleco ~~Power~~utilizes a mark-to-market approach recognizing changes in the fair value of ~~financial assets~~FTRs and ~~liabilities measured on a recurring basis:~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Cleco
CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS) AT SEPT. 30, 2017

QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)

SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)

AT DEC. 31, 2016

QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)

SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)

Asset description
Institutional money market funds $ 35,117
$ —
$ 35,117
$ —
$ 66,410
$ —
$ 66,410
$ —
FTRs 13,425
—
—
13,425
7,884
—
—
7,884
Total assets $ 48,542
$ —
$ 35,117
$ 13,425
$ 74,294
$ —
$ 66,410
$ 7,884
Liability description

FTRs $ 538
$ —
$ —
$ 538
$ 201
$ —
$ —
$ 201
Total liabilities $ 538
$ —
$ —
$ 538
$ 201
$ —
$ —
$ 201

Cleco Power
CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS) AT SEPT. 30, 2017

QUOTED PRICES IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)

SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)

AT DEC. 31, 2016

QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)

SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)

Asset description
Institutional money market funds $ 33,796
$ —
$ 33,796
$ —
$ 65,089
$ —
$ 65,089
$ —
FTRs 13,425
—
—
13,425
7,884
—
—
7,884
Total assets $ 47,221
$ —
$ 33,796
$ 13,425
$ 72,973
$ —
$ 65,089
$ 7,884
Liability description

FTRs $ 538
$ —
$ —
$ 538
$ 201
$ —
$ —
$ 201
Total liabilities $ 538
$ —
$ —
$ 538
$ 201
$ —
$ —
$ 201

~~The following tables summarize the net~~other commodity derivatives at Cleco Cajun in earnings and changes ~~in the net fair value of FTR assets and liabilities classified as Level 3~~ in the fair value ~~hierarchy for~~of FTRs at Cleco Power as a component of deferred fuel assets and ~~Cleco Power:~~

Cleco
SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE THREE
MONTHS ENDED
SEPT. 30, 2017

FOR THE THREE
MONTHS ENDED
SEPT. 30, 2016

FOR THE NINE
MONTHS ENDED
SEPT. 30, 2017

APR. 13, 2016 -
SEPT. 30, 2016

JAN. 1, 2016 -
APR. 12, 2016

Beginning balance $ 17,943
$ 13,618
$ 7,683
$ 3,458
$ 7,398
Unrealized gains (losses)* 1,591
1,840
(791 ) 2,529
(1,031 )
Purchases 419
164
23,537
12,772
2,070
Settlements (7,066 ) (6,046 ) (17,542 ) (9,183 ) (4,979 )
Ending balance $ 12,887
$ 9,576
$ 12,887
$ 9,576
$ 3,458
* Unrealized gains and losses are reported through Accumulated deferred fuel on Cleco’s Condensed Consolidated Balance Sheet.

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
2017
2016
Beginning balance $ 17,943
$ 13,618
$ 7,683
$ 7,398
Unrealized gains (losses)* 1,591
1,840
(791 ) 1,498
Purchases 419
164
23,537
14,842
Settlements (7,066 ) (6,046 ) (17,542 ) (14,162 )
Ending balance $ 12,887
$ 9,576
$ 12,887
$ 9,576
* Unrealized gains and losses are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

~~The following table quantifies the significant unobservable inputs used in developing the fair value of Level 3 positions as of~~ ~~September 30, 2017, and~~ ~~December 31, 2016~~:

FAIR VALUE VALUATION TECHNIQUE
SIGNIFICANT
UNOBSERVABLE INPUTS
FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE) ASSETS
LIABILITIES
LOW
HIGH
FTRs at Sept. 30, 2017 $ 13,425
$ 538
RTO auction pricing FTR price - per MWh $ (3.07 ) $ 5.87
FTRs at Dec. 31, 2016 $ 7,884
$ 201
RTO auction pricing FTR price - per MWh $ (3.61 ) $ 6.04



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

liabilities. Cleco utilizes different valuation techniques for fair value ~~calculations. In order to measure the~~measurements under a fair value ~~for~~hierarchy. Assets and liabilities classified as Level 1 ~~assets~~under the hierarchy utilize observable inputs that

reflect quotable prices in active markets. Assets and liabilities ~~Cleco obtains the closing price from published indices in active markets for the various instruments and multiplies this price by the appropriate number of instruments held. Cleco’s~~classified as Level 2 ~~fair values~~ are ~~determined by obtaining the closing price of similar~~measured through inputs other than quoted prices, either directly or indirectly. Institutional money market fund assets ~~and liabilities from published indices in active markets and then discounting the price~~are discounted to the current period using a published U.S. Treasury ~~published~~ interest rate as a proxy for a risk-free rate of return. Assets and liabilities classified as Level 3 ~~fair values occur~~under the hierarchy are valued based on unobservable inputs, such as internally generated valuation models or valuations obtained in ~~situations in which~~inactive markets where there is ~~little, if any, market activity for the asset or liability at the measurement date. Cleco’s Level 3 assets and liabilities are valued using RTO auction prices.~~no readily available information. Cleco has consistently applied the Level 2 and Level 3 fair value techniques from fiscal period to fiscal period. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

The assets and liabilities reported at fair value are grouped into classes based on the underlying nature and risks associated with the individual asset or liability.

The following tables disclose for Cleco and Cleco Power the fair value of financial assets and liabilities measured on a recurring basis:


Cleco
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT MAR. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2020		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Institutional money market funds	$	87,686	$	0	$	87,686	$	0	$	86,001	$	0	$	86,001	$	0
FTRs	2,140		0		0		2,140		4,805		0		0		4,805
Other commodity derivatives*	12,125		0		12,125		0		8,599		0		8,599		0
Total assets	$	101,951	$	0	$	99,811	$	2,140	$	99,405	$	0	$	94,600	$	4,805
Liability description
FTRs	$	1,117	$	0	$	0	$	1,117	$	1,625	$	0	$	0	$	1,625
Other commodity derivatives*	428		0		428		0		1,612		0		1,612		0
Total liabilities	$	1,545	$	0	$	428	$	1,117	$	3,237	$	0	$	1,612	$	1,625

* Other commodity derivatives include fixed price physical forwards and swap transactions.


Cleco Power
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT MAR. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2020		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Institutional money market funds	$	38,242	$	0	$	38,242	$	0	$	25,357	$	0	$	25,357	$	0
FTRs	1,986		0		0		1,986		4,337		0		0		4,337
Total assets	$	40,228	$	0	$	38,242	$	1,986	$	29,694	$	0	$	25,357	$	4,337
Liability description
FTRs	$	898	$	0	$	0	$	898	$	1,121	$	0	$	0	$	1,121
Total liabilities	$	898	$	0	$	0	$	898	$	1,121	$	0	$	0	$	1,121


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

The following tables summarize the net changes in the net fair value of FTR assets and liabilities classified as Level 3 in the fair value hierarchy for Cleco and Cleco Power:


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Beginning balance	$	3,180	$	5,778
Unrealized gains (losses)*	16,123		(1,398)
Purchases	849		466
Settlements	(19,129)		(3,750)
Ending balance	$	1,023	$	1,096
* Cleco Power’s unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco’s Condensed Consolidated Balance Sheet. Cleco Cajun’s unrealized (losses) gains are reported through Purchased power on Cleco’s Condensed Consolidated Income Statement.


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Beginning balance	$	3,216	$	5,725
Unrealized losses*	(37)		(1,311)
Purchases	849		466
Settlements	(2,940)		(3,731)
Ending balance	$	1,088	$	1,149
* Unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

The following tables quantify the significant unobservable inputs used in developing the fair value of Level 3 positions for Cleco and Cleco Power as of March 31, 2021, and December 31, 2020:


Cleco
	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Mar. 31, 2021	$	2,140	$	1,117	RTO auction pricing	FTR price - per MWh	$	(1.18)	$	4.09
FTRs at Dec. 31, 2020	$	4,805	$	1,625	RTO auction pricing	FTR price - per MWh	$	(3.49)	$	4.36


Cleco Power
	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Mar. 31, 2021	$	1,986	$	898	RTO auction pricing	FTR price - per MWh	$	(1.18)	$	4.09
FTRs at Dec. 31, 2020	$	4,337	$	1,121	RTO auction pricing	FTR price - per MWh	$	(3.34)	$	4.36

At ~~September 30, 2017~~,March 31, 2021, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents and restricted cash equivalents. The following tables present the institutional money market funds ~~were reported on Cleco’s Condensed Consolidated Balance Sheets~~ in cash and cash equivalents ~~current~~and restricted cash and cash equivalents ~~and non-current restricted cash and cash equivalents of~~ ~~$1.8 million~~, ~~$8.9 million, and~~ ~~$24.4 million, respectively, at~~ ~~September 30, 2017, and $20.0 million, $23.1 million, and $23.3 million, respectively, at December 31, 2016. At~~as recorded on Cleco ~~Power, the institutional money market funds were reported on~~and Cleco Power’s Condensed Consolidated Balance Sheets ~~in cash~~at March 31, 2021, and ~~cash equivalents, current restricted cash and cash equivalents, and non-current restricted cash and cash equivalents of~~ ~~$0.5 million~~, ~~$8.9 million, and~~ ~~$24.4 million, respectively, at~~ ~~September 30, 2017, and $18.7 million, $23.1 million, and $23.3 million, respectively, at~~ December 31, ~~2016.~~ 2020:


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Cash and cash equivalents	$	82,512	$	80,712
Current restricted cash and cash equivalents	$	4,430	$	4,545
Non-current restricted cash and cash equivalents	$	744	$	744


Cleco Power
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Cash and cash equivalents	$	33,812	$	20,812
Current restricted cash and cash equivalents	$	4,430	$	4,545

If the money market funds failed to perform under the terms of the investments, Cleco and Cleco Power would be exposed to a loss of the invested amounts. Collateral on these types of

investments is not required by either Cleco or Cleco Power. The Level 2 institutional money market funds asset consists of a single class. In order to capture interest income and minimize risk, cash is invested in money market funds that invest primarily in short-term securities issued by the U.S. Treasury to maintain liquidity and achieve the goal of a net asset value of a dollar. The risks associated with this class are

counterparty risk of the fund manager and risk of price volatility associated with the underlying securities of the fund.

These contracts contain counterparty credit risk because they are transacted directly with a counterparty and are not cleared on an exchange. Cleco ~~Power’s~~may be required to provide credit support or pay liquidated damages with respect to any open trading contracts that Cleco has entered into or may enter into in the future. The amount of credit support that Cleco may be required to provide at any point in the future is dependent on the amount of the initial contract, changes in the market price, changes in open contracts, and changes in the amounts counterparties owe to Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco Power and Cleco Cajun’s FTRs ~~were priced~~are valued using MISO’s monthly auction prices. Forward seasonal periods are not included in every monthly auction; therefore, the average of the most recent seasonal auction prices ~~are~~is used for monthly valuation. FTRs are categorized as Level 3 fair value measurements because the only relevant ~~pricing~~value available comes from MISO auctions, which occur monthly in the Multi-Period Monthly Auction.

During the ~~nine~~three months ended ~~September 30, 2017~~,March 31, 2021, and the year ended December 31, ~~2016~~,2020, Cleco did not experience any transfers between levels within the fair value hierarchy.

Commodity Contracts

The following ~~table presents~~tables present the fair values of derivative instruments and their respective line items as recorded on


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016:~~2020:


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS)	BALANCE SHEET LINE ITEM	AT MAR. 31, 2021		AT DEC. 31, 2020
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	2,140	$	4,805
Current	Energy risk management liabilities	(1,117)		(1,625)
Other commodity derivatives
Current	Energy risk management assets	9,159		8,276
Non-current	Other deferred charges	2,966		323
Current	Energy risk management liabilities	(325)		(828)
Non-current	Other deferred credits	(103)		(784)
Commodity-related contracts, net		$	12,720	$	10,167


Cleco Power
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS)	BALANCE SHEET LINE ITEM	AT MAR. 31, 2021		AT DEC. 31, 2020
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	1,986	$	4,337
Current	Energy risk management liabilities	(898)		(1,121)
Commodity-related contracts, net		$	1,088	$	3,216

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS) BALANCE SHEET LINE ITEM AT SEPT. 30, 2017
AT DEC. 31, 2016
Commodity-related contracts
FTRs
Current Energy risk management assets $ 13,425
$ 7,884
Current Energy risk management liabilities 538
201
Commodity-related contracts, net $ 12,887
$ 7,683

The following tables present the effect of derivatives not designated as hedging instruments on Cleco and Cleco Power’s Condensed Consolidated Statements of Income for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, and ~~2016:~~2020:


Cleco																	Cleco
		AMOUNT OF GAIN/(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES																AMOUNT OF GAIN(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
								SUCCESSOR						PREDECESSOR					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	DERIVATIVES LINE ITEM	FOR THE THREE MONTHS ENDED SEPT. 30, 2017			FOR THE THREE MONTHS ENDED SEPT. 30, 2016			FOR THE NINE MONTHS ENDED SEPT. 30, 2017			APR. 13, 2016 - SEPT. 30, 2016			JAN. 1, 2016 - APR. 12, 2016			(THOUSANDS)	INCOME STATEMENT LINE ITEM	2021		2020
Commodity contracts
Commodity-related contracts																	Commodity-related contracts
FTRs⁽¹⁾	Electric operations	$	14,062		$	9,718		$	35,172		$	23,467		$	8,563		FTRs(1)	Electric operations	$	7,444	$	1,396
FTRs⁽¹⁾	Power purchased for utility customers	(7,767		)	(5,066		)	(18,759		)	(11,742		)	(5,761		)	FTRs(1)	Purchased power	(8,560)		(381)
Other commodity derivatives																	Other commodity derivatives	Fuel used for electric generation	(4,710)		(7,108)
Total		$	6,295		$	4,652		$	16,413		$	11,725		$	2,802		Total		$	(5,826)	$	(6,093)

⁽¹⁾ For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, unrealized ~~gains (losses)~~losses associated with FTRs ~~not recognized in income on derivatives~~for Cleco Power of ~~$1.6~~less than $0.1 million and $(0.8) million, respectively, were reported through Accumulated deferred fuel on the balance sheet. For the periods July 1, 2016 - September 30, 2016, January 1, 2016 - April 12, 2016, and April 13, 2016 - September 30, 2016, unrealized (losses) gains associated with FTRs not recognized in income on derivatives of $1.8 million, $(1.0) million, and 2.5 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Cleco Power
AMOUNT OF GAIN/(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) DERIVATIVES LINE ITEM 2017
2016
2017
2016
Commodity contracts
FTRs⁽¹⁾
Electric operations $ 14,062
$ 9,718
$ 35,172
$ 32,030
FTRs⁽¹⁾
Power purchased for utility customers (7,767 ) (5,066 ) (18,759 ) (17,503 )
Total $ 6,295
$ 4,652
$ 16,413
$ 14,527

⁽¹⁾ ~~For the three and nine months ended September 30, 2017, unrealized gains (losses) associated with FTRs not recognized in income on derivatives of $1.6 million and $(0.8) million, respectively,~~ were reported through Accumulated deferred fuel on the balance sheet. For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2020, unrealized ~~gains~~losses associated with FTRs ~~not recognized in income on derivatives~~for Cleco Power of ~~$1.8~~$1.3 million ~~and $1.5 million, respectively,~~ were reported through Accumulated deferred fuel on the balance sheet.


Cleco Power
	AMOUNT OF GAIN(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
		FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2021		2020
Commodity-related contracts
FTRs(1)	Electric operations	$	7,444	$	1,396
FTRs(1)	Purchased power	(7,182)		(751)
Total		$	262	$	645

(1) For the three months ended March 31, 2021, unrealized losses associated with FTRs of less than $0.1 million were reported through Accumulated deferred fuel on the balance sheet. For the three months ended
March 31, 2020, unrealized losses associated with FTRs of $1.3 million were reported through Accumulated deferred fuel on the balance sheet.

At ~~September 30, 2017, and~~ ~~December 31, 2016~~, Cleco Power had no open positions hedged for natural gas. In June 2015, the LPSC approved a long-term natural gas hedging pilot program that requires Cleco Power to establish a proposal for a program that will be designed to provide gas price stability for a minimum of five years. This proposal was submitted to the LPSC on July 28, 2017. An ALJ was assigned to the docket and a status conference was held on October 3, 2017. A procedural schedule was determined and management expects a final determination in the second quarter of 2018.

Cleco Power purchases FTRs in auctions facilitated by MISO. The majority of its FTRs are purchased in annual auctions during the second quarter, but Cleco Power may purchase additional FTRs in monthly auctions. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Cleco Power’s customer load. FTRs represent rights to congestion credits or charges along a path during a given time frame for a certain MW quantity. FTRs are not designated as hedging instruments for accounting purposes. The total volume of FTRs that Cleco Power had outstanding at ~~September 30, 2017~~,March 31, 2021, and December 31, ~~2016~~,2020, was ~~14.4~~3.7 million MWh and ~~9.0~~9.5 million MWh, respectively. The total volume of FTRs that Cleco had outstanding at March 31, 2021, and December 31, 2020, was 6.0 million MWh and 15.3 million MWh, respectively. The total volume of other commodity derivatives Cleco had outstanding at March 31, 2021, and December 31, 2020, was 138.2 million MMBtus and 73.0 million MMBtus, respectively.



Note 67 — Debt

At ~~September 30, 2017, Cleco and~~March 31, 2021, Cleco Power had ~~$6.5~~$135.0 million of ~~short-term debt~~borrowings outstanding under ~~Cleco Power’s $10.0~~its $300.0 million ~~uncommitted line of~~revolving credit facility at an all-in interest rate of ~~2.98%~~1.35%. At December 31, 2016, Cleco and Cleco Power had no short-term debt outstanding. Cleco Holdings and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short-term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.

~~4.973% senior notes, which were not registered~~The borrowing costs under the ~~Securities Act~~agreement currently are equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 1933, as amended, for an equal principal amount of newly issued 3.743% senior notes due May 1, 2026, and 4.973% senior notes due May 1, 2046, that were so registered. Cleco Holdings did not receive any proceeds from the exchange offer.0.15%.

On March 1, 2017, Cleco completed the repayment of the first of two tranches of its Cleco Katrina/Rita storm recovery bonds issued in March 2008. The total principal amount for both tranches was $180.6 million. The first tranche had an initial principal amount of $113.0 million at an interest rate of 4.41% and a final maturity date of March 1, 2020. As part of the early redemption on March 1, 2017, Cleco paid $1.1 million in principal and less than $0.1 million in accrued interest.



Note 78 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Employees hired before August 1, 2007, are covered by a non-contributory, defined benefit pension plan. In December 2020, Cleco made a $15.8 million required contribution to the pension plan. Based on the funding assumptions at December 31, 2020, and the funding relief provided by the American Rescue Plan Act, which was signed by the President on March 11, 2021, management estimates that 0 pension contributions will be required through 2025. As of March 31, 2021, Cleco expects to make $67.0 million in discretionary contributions to the pension plan in 2021, which offsets future required contributions.

Cleco Power is the plan sponsor and Support Group is the plan administrator. Benefits under the plan reflect an employee’s years of service, age at retirement, and highest total average compensation for any consecutive five calendar years during the last ten years of employment with Cleco. Cleco’s policy is to base its contributions to the employee pension plan upon actuarial computations utilizing the projected unit credit method, subject to the IRS’s full funding limitation. Cleco did not make any required or discretionary contributions to the pension plan in 2016 and does not expect to make any in 2017. The required contributions are driven by liability funding target percentages set by law which could cause the required contributions to be uneven among the years. The ultimate amount and timing of the contributions may be affected by changes in the discount rate, changes in the funding regulations, and actual returns on fund assets. Cleco Power is considered the plan sponsor and Support Group is considered the plan administrator.accrued benefit at retirement.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Cleco’s retirees ~~and their dependents~~ may be eligible to receive ~~medical, dental, vision, and~~Other Benefits. Dependents of Cleco’s retirees may also be eligible to receive Other Benefits with the exception of life insurance ~~benefits (other benefits).~~benefits.

The non-service components of net periodic pension and Other Benefits cost are included in Other income (expense),

net within Cleco ~~recognizes the expected cost~~and Cleco Power’s Condensed Consolidated Statements of ~~these other benefits during the periods in which the benefits are earned.~~

Income. The components of net periodic pension and ~~other benefit~~Other Benefits cost for the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021, and ~~2016~~2020 were as follows:


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE THREE MONTHS ENDED MAR. 31,				FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020		2021		2020
Components of periodic benefit costs
Service cost	$	2,528	$	2,328	$	595	$	508
Interest cost	4,615		5,130		323		410
Expected return on plan assets	(5,703)		(6,245)		0		0
Amortizations
Prior period service cost (credit)	0		(15)		0		0
Net loss	4,763		3,672		384		339
Net periodic benefit cost	$	6,203	$	4,870	$	1,302	$	1,257

~~CLECO~~

~~CLECO POWER~~

~~2017 3RD QUARTER FORM 10-Q~~

PENSION BENEFITS OTHER BENEFITS
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
2017
2016
Components of periodic benefit costs
Service cost $ 2,260
$ 2,229
$ 314
$ 380
Interest cost 5,412
5,455
372
420
Expected return on plan assets (6,016 ) (6,001 ) —
—
Amortizations
Prior period service credit (18 ) (18 ) —
—
Net loss (gain) 2,502
3,365
(32 ) —
Net periodic benefit cost $ 4,140
$ 5,030
$ 654
$ 800

PENSION BENEFITS OTHER BENEFITS
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE NINE MONTHS ENDED
SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
FOR THE NINE MONTHS ENDED
SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
Components of periodic benefit costs
Service cost $ 6,779
$ 4,122
$ 2,563
$ 1,084
$ 709
$ 431
Interest cost 16,235
10,124
6,242
1,176
784
476
Expected return on plan assets (18,048 ) (11,195 ) (6,812 ) —
—
—
Amortizations
Prior period service (credit) cost (53 ) (33 ) (20 ) —
—
34
Net loss (gain) 7,506
5,211
2,798
(37 ) —
181
Net periodic benefit cost $ 12,419
$ 8,229
$ 4,771
$ 2,223
$ 1,493
$ 1,122

Because Cleco Power is the pension plan sponsor and the related trust holds the assets, the net unfunded status of the pension plan is reflected at Cleco Power. The liability of Cleco’s other subsidiaries is transferred with a like amount of assets to Cleco Power monthly. The expense of the pension plan related to Cleco’s other subsidiaries for the three months ended ~~September 30, 2017, and 2016~~March 31, 2021, was ~~$0.5 million and $0.4 million, respectively. The amount for the predecessor period January 1, 2016, through April 12, 2016, was $0.5~~$0.9 million. The expense of the pension plan related to Cleco’s other subsidiaries for the ~~successor periods for the nine~~three months ended ~~September 30, 2017, and April 13, 2016, through September 30, 2016,~~March 31, 2020, was ~~$1.4 million and $0.8 million, respectively.~~$0.4 million.

Cleco Holdings is the plan sponsor for the other benefit plans. There are no0 assets set aside in a trust, and the liabilities are reported on the individual subsidiaries’ financial statements. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, and 2020, was ~~$0.8 million and $2.5 million, respectively. The amounts for the three and nine months ended September 30, 2016, were also $0.8 million and $2.5 million, respectively.~~$1.2 million. The current and non-current portions of the ~~other benefits~~Other Benefits liability for Cleco and Cleco Power at ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016,~~2020, were as follows:


Cleco					Cleco
(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current	$	3,854	$	3,854	Current	$	4,463	$	4,463
Non-current	$	39,296	$	40,196	Non-current	$	51,727	$	51,868


Cleco Power					Cleco Power
(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current	$	3,345	$	3,345	Current	$	3,865	$	3,856
Non-current	$	34,147	$	34,892	Non-current	$	40,616	$	40,734

SERP

Certain Cleco officers are covered by SERP. ~~In 2014, SERP was closed to new participants; however, with regard to~~

current SERP participants, including former employees or their beneficiaries, all terms of SERP will continue, other than as described below. SERP is a non-qualified, non-contributory, defined benefit pension plan. Generally, benefits under the plan reflect an employee’s years of service, age at retirement and the sum of (a) the highest base salary paid out over the last five calendar years and (b) the average of the three highest cash bonuses paid during the 60 months prior to retirement. SERP benefits are reduced by retirement benefits received from any other defined benefit pension plan, supplemental executive retirement plan, or Cleco contributions under the enhanced 401(k) Plan to the extent such contributions exceed the amount the employee would have received under the terms of the original 401(k) Plan. In accordance with the SERP plan document and the Merger Agreement, four executive officers received enhanced benefits, and upon termination of employment, two of these executive officers received accelerated vesting. Another executive officer received enhanced SERP benefits, net of other postretirement benefits, as part of a separation agreement. Two current executive officers’ SERP benefits will be capped as of December 31, 2017, with regard to final compensation; however, adjustments will continue with regard to age and tenure with Cleco. Additionally, these executive officers had their annual bonuses set at target rather than actual awards for the year 2016 and will have their annual bonuses set at target rather than actual awards for the year 2017 for the average incentive award portion of their SERP benefit calculation. A third executive officer’s SERP calculation will use a fixed salary amount for 2017 and will exclude any compensation exceeding this amount. Management will review current market trends as it evaluates Cleco’s future compensation strategy. Cleco does not fund the SERP liability, but instead pays for current benefits out of the general funds available. Cleco Power has formed a rabbi trust. The life insurance policies issued on SERP participants designate the rabbi trust as the beneficiary. Market conditions could have a significant impact on the cash surrender value of the life



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

insurance policies. Proceeds from the life insurance policies are expected to be used to pay the SERP participants’ death benefits, as well as future SERP payments. However, because SERP is a non-qualified plan, the assets of the trust could be used to satisfy general creditors of Cleco Power in the event of insolvency. All SERP benefits are paid out of the general cash available of the respective companies that

employed the officer. Cleco Power is ~~considered~~ the plan sponsor and Support Group is ~~considered~~ the plan administrator.

The non-service components of net periodic benefit cost related to SERP are included in Other income (expense), net within Cleco and Cleco Power’s Condensed Consolidated Statements of Income. The components of the net periodic benefit cost related to SERP for the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021, and ~~2016,~~2020 were as follows:


	FOR THE THREE MONTHS ENDED SEPT. 30,							FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2017			2016			(THOUSANDS)	2021		2020
Components of periodic benefit costs							Components of periodic benefit costs
Service cost	$	123		$	213		Service cost	$	55	$	95
Interest cost	810			839			Interest cost	625		733
Amortizations							Amortizations
Prior period service credit	(57		)	(9		)	Prior period service credit	(53)		(40)
Net loss	536			511			Net loss	1,016		757
Total benefit cost	$	1,412		$	1,554
Net periodic benefit cost							Net periodic benefit cost	$	1,643	$	1,545

SUCCESSOR PREDECESSOR
(THOUSANDS)
FOR THE NINE
MONTHS ENDED
SEPT. 30, 2017

APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
Components of periodic benefit costs
Service cost $ 370
$ 277
$ 702
Interest cost 2,430
1,543
900
Amortizations
Prior period service (credit) cost (124 ) (42 ) 17
Net loss 1,560
1,120
574
Net periodic benefit cost 4,236
2,898
2,193
Curtailment charge —
—
3,602
Special/contractual termination benefits 315
—
3,222
Total benefit cost $ 4,551
$ 2,898
$ 9,017

There was a remeasurement of SERP on March 30, 2017, to reflect a special termination benefit resulting from an executive officer’s separation agreement. On the date of the remeasurement, the discount rate decreased from 4.22% to 4.08%. This remeasurement resulted in a special termination benefit for the executive officer of $0.3 million.

There was a remeasurement of SERP at April 13, 2016, to reflect change in control benefits as a result of the Merger. On the date of the remeasurement, the discount rate decreased from 4.60% to 4.15%. This remeasurement resulted in a $3.6 million curtailment charge and $3.2 million of special/contractual termination benefits. The curtailments and special/contractual termination benefits are included in Merger transaction and commitment costs on Cleco’s Consolidated Statements of Income. There was an additional remeasurement of SERP at August 31, 2016, to reflect changes to the plan relating to three executive officers’ SERP benefits being capped as of December 31, 2017, with regard to final compensation. On the date of the remeasurement, the discount rate decreased from 4.15% to 3.47%.

The ~~total~~ expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income ~~was $0.3 million and $0.9 million~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared~~March 31, 2021, was $0.3 million. The expense related to ~~$0.3~~

~~million and $1.1 million~~SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2020, was $0.2 million.

Liabilities relating to SERP are reported on the individual subsidiaries’ financial statements. The current and non-current portions of the SERP liability for Cleco and Cleco Power at ~~September 30, 2017~~,March 31, 2021, and December 31, ~~2016~~,2020, were as follows:


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current	$	4,703	$	4,703
Non-current	$	91,818	$	92,522


Cleco Power
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current	$	711	$	711
Non-current	$	19,490	$	19,828


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Cleco
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Current $ 4,431
$ 4,308
Non-current $ 76,870
$ 73,738

Cleco Power
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Current $ 939
$ 885
Non-current $ 15,999
$ 15,145

401(k) Plan

Cleco’s 401(k) Plan is intended to provide active, eligible employees with voluntary, long-term savings and investment opportunities. The 401(k) Plan is a defined contribution plan and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974. In accordance with the 401(k) Plan, employer contributions are made in the form of cash. Cash contributions are invested in proportion to the participant’s voluntary contribution investment choices. Participation in the ~~401(k)~~ Plan is voluntary, and ~~all~~ active Cleco employees are eligible to participate. Cleco’s 401(k) Plan expense for the three months ended March 31, 2021, and ~~nine monthsended~~ ~~September 30, 2017, and 2016,~~2020 was as follows:


	FOR THE THREE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2017		2016		(THOUSANDS)	2021		2020
401(k) Plan expense	$	1,386	$	1,331	401(k) Plan expense	$	2,759	$	3,256

SUCCESSOR PREDECESSOR
(THOUSANDS)
FOR THE NINE
MONTHS ENDED
SEPT. 30, 2017

APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
401(k) Plan expense $ 4,259
$ 2,440
$ 1,593

Cleco Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan related to Cleco’s other subsidiaries for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, and ~~2016,~~2020 was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
401(k) Plan expense	$	1,380	$	1,662

FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
401(k) Plan expense $ 234
$ 204

SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE NINE MONTHS ENDED
SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
401(k) Plan expense $ 710
$ 378
$ 319



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Note 89 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021, and ~~2016~~2020:


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
	2021		2020
Effective tax rate	(86.4)	%	19.8	%


Cleco
Cleco Power											Cleco Power
					SUCCESSOR				PREDECESSOR			FOR THE THREE MONTHS ENDED MAR. 31,
	FOR THE THREE MONTHS ENDED SEPT. 30, 2017		FOR THE THREE MONTHS ENDED SEPT. 30, 2016		FOR THE NINE MONTHS ENDED SEPT. 30, 2017		APR. 13, 2016 - SEPT. 30, 2016		JAN. 1, 2016 - APR. 12, 2016			2021		2020
Effective tax rate	33.7	%	37.4	%	35.5	%	40.3	%	(704.9	)%	Effective tax rate	(111.7)	%	22.0	%

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
2017
2016
2017
2016
Effective tax rate 35.4 % 35.9 % 36.8 % 19.5 %

For the ~~successor periods,~~three months ended March 31, 2021, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to ~~permanent tax differences,~~ the ~~flowthrough~~amortization of ~~state tax benefits, including AFUDC equity, benefits delivered from Cleco’s investment in the NMTC Fund, and state tax expense.~~excess ADIT.

For the ~~predecessor period,~~three months ended March 31, 2020, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the adjustment to record tax expense at the projected annual effective tax rate; an adjustment for increased allowable interest expense deduction as a ~~significant portion~~result of the ~~merger costs not being deductible,~~CARES Act; permanent tax differences; the flowthrough of ~~state~~ tax benefits, including AFUDC ~~equity, benefits delivered from Cleco’s investment in the NMTC Fund,~~equity; and state tax expense.

~~For the three and nine months ended~~ ~~September 30, 2017~~, and 2016, the effective income tax rate for Cleco Power was different than the federal statutory rate primarily due to the flowthrough of state tax benefits, including AFUDC equity, and state tax expense.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016,~~2020, Cleco and Cleco Power had no0 liability for uncertain tax positions or interest payable related to ~~uncertain tax positions. For the nine months ended September 30, 2017, and 2016, Cleco and Cleco Power had no interest expense related to uncertain tax positions.~~

~~At September 30, 2017, Cleco had no liability for~~ uncertain tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of ~~September 30, 2017,~~March 31, 2021, for Cleco and Cleco Power would be unchanged in the next 12 months. The settlement of open tax years could involve the payment of additional taxes, and/or the recognition of tax benefits, which may have an effect on Cleco’s effective tax rate.

~~The federal income tax years that remain subject to examination by the IRS are 2013, 2014, 2015, and 2016.~~

~~Beginning with the 2013 tax year,~~ Income Tax Audits

Cleco ~~entered into~~participates in the IRS’s Compliance Assurance Process in which ~~allows taxpayers~~

tax positions are examined and agreed upon prior to ~~work collaboratively with an IRS team to identify and resolve potential tax issues before~~filing the federal consolidated tax ~~return is~~return. While the statute of limitations remains open for tax years 2017, 2018, and 2019, the IRS has completed its review of the year 2017 through 2019, and these tax returns were filed ~~each year.~~consistent with the IRS’s review. The IRS has placed Cleco ~~must apply for admission to~~in the ~~program each year. Cleco has been approved for~~Bridge phase of the Compliance Assurance Process ~~through~~for 2020. In this phase, the ~~2017 tax year.~~IRS will not accept any disclosures, conduct any reviews, or provide any assurances.

The state income tax years ~~that~~2017, 2018, and 2019 remain subject to examination by the Louisiana Department of ~~Revenue are 2014 and 2015.~~Revenue.

Cleco classifies income tax penalties as a component of other expense. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, and ~~2016, no~~2020, 0 penalties were recognized.

CARES Act

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions such as an alternative minimum tax credit refund, a five-year net operating loss carryback from years 2018 through 2020, and deferred payments of employer payroll taxes.

Cleco deferred $6.0 million in employer payroll tax payments for the period March 27, 2020, through December 31, 2020. Cleco will pay $3.0 million of the obligation by December 31, 2021, and the remaining $3.0 million by December 31, 2022.

Cleco Power deferred $3.6 million in employer payroll tax payments for the period March 27, 2020 through December 31, 2020. Cleco Power will pay $1.8 million of the obligation by December 31, 2021, and the remaining $1.8 million by December 31, 2022.

The CARES Act also includes modifications on the limitations of business interest for the 2020 and 2019 tax years. The modifications increase the allowable business interest deduction from 30% to 50% of adjusted taxable income. Cleco does not anticipate having any disallowed interest for the 2020 tax year.

Consolidated Appropriations Act of 2021

In December 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. The CAA includes COVID-19 tax relief and tax extender provisions including extensions of time to begin construction on and placed in-service assets generating production tax credits and income tax credits, 100% deductibility of business meals in 2021 and 2022, and an extension of the work opportunity tax credit. The income tax credit percentage has been increased for projects starting construction through 2023 and placed in service by the end of



CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

2025. Management does not expect the CAA to have a material impact on the Registrants.

American Jobs Act of 2021

On March 31, 2021, the President announced the American Jobs Act. This proposal includes a number of incentives to encourage construction of certain transmission and energy storage property. The proposed act also proposes to raise the federal statutory corporate income tax rate from 21% to 28% and to introduce a minimum tax based on book income. Currently, management is unable to predict the impact of the proposed act on the Registrants.


Note 910 — Disclosures about Segments

Cleco’s reportable ~~segment is~~segments are based on its method of internal reporting, which disaggregates business units by its first-tier subsidiary.

Cleco’s reportable segments are Cleco Power ~~the~~and Cleco Cajun.

Each reportable segment engages in business activities from which it earns revenue and incurs expenses. Segment managers report periodically to Cleco’s CEO, who is Cleco’s chief operating decision maker, with discrete financial information and, at least quarterly, present discrete financial information to Cleco and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The reportable segment prepares budgets that are presented to and approved by

Cleco and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The column shown as Other in the ~~chart below~~following tables includes the holding company, a shared services subsidiary, ~~two transmission interconnection facility subsidiaries,~~ and an investment subsidiary. There were no changes to Cleco’s existing reportable segments.

The financial results ~~of Cleco’s segment~~in the following tables are presented on an accrual basis. EBITDA is a key non-GAAP financial measure used by the CEO to assess the operating performance of Cleco’s segments. Management evaluates the performance of ~~its segment~~Cleco’s segments and allocates resources to itthem based on segment profit and the requirements to implement ~~new~~ strategic initiatives and projects to meet current business objectives. EBITDA is defined as net income adjusted for interest, income taxes, depreciation, and amortization. Depreciation and amortization in the following tables includes amortization of intangible assets and liabilities recorded for the fair value adjustment of wholesale power supply agreements as a result of the 2016 Merger and the Cleco Cajun Transaction, as well as amortization of deferred lease revenue resulting from the Cleco Cajun Transaction. Material intercompany transactions occur on a regular basis. These intercompany transactions relate primarily to joint and common administrative support ~~services.~~services as well as transmission services provided by Cleco Power to Cleco Cajun.


Segment Information For The Three Months Ended Mar. 31,
2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	267,158	$	101,507		$	368,665
Other operations	18,626		33,039			51,665
Affiliate revenue	1,655		0			1,655
Electric customer credits	(20,976)		0			(20,976)
Operating revenue, net	$	266,463	$	134,546		$	401,009
Net income	$	18,425	$	14,481		$	32,906
Add: Depreciation and amortization	42,076		11,653		(1)	53,729
Less: Interest income	642		3			645
Add: Interest charges	18,646		(152)			18,494
Add: Federal and state income tax (benefit) expense	(9,723)		4,610			(5,113)



EBITDA	$	68,782	$	30,589		$	99,371
Additions to property, plant, and equipment	$	37,150	$	2,313		$	39,463
Equity investment in investee	$	7,322	$	0		$	7,322
Goodwill	$	1,490,797	$	0		$	1,490,797
Total segment assets	$	6,341,061	$	1,031,541		$	7,372,602
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


2021 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	368,665	$	(2,420)		$	0	$	366,245
Other operations	51,665		1			(1,940)		49,726
Affiliate revenue	1,655		27,156			(28,811)		0
Electric customer credits	(20,976)		0			0		(20,976)
Operating revenue, net	$	401,009	$	24,737		$	(30,751)	$	394,995
Depreciation and amortization	$	53,729	$	4,435	(1)	$	0	$	58,164
Interest income	$	645	$	43		$	(41)	$	647
Interest charges	$	18,494	$	15,440		$	(43)	$	33,891

Federal and state income tax (benefit)	$	(5,113)	$	(4,307)		$	0	$	(9,420)
Net income (loss)	$	32,906	$	(12,579)		$	0	$	20,327
Additions to property, plant, and equipment	$	39,463	$	(805)		$	0	$	38,658
Equity investment in investee	$	7,322	$	0		$	0	$	7,322
Goodwill	$	1,490,797	$	0		$	0	$	1,490,797
Total segment assets	$	7,372,602	$	586,718		$	(168,044)	$	7,791,276
(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.


2020 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	224,430	$	89,147		$	313,577
Other operations	15,764		30,961			46,725
Affiliate revenue	1,106		161			1,267
Electric customer credits	(8,340)		(153)			(8,493)
Operating revenue, net	$	232,960	$	120,116		$	353,076
Net income	$	11,831	$	19,535		$	31,366

Add: Depreciation and amortization	43,677		10,900		(1)	54,577

Less: Interest income	954		155			1,109
Add: Interest charges	18,581		10			18,591
Add: Federal and state income tax expense	3,338		6,421			9,759
EBITDA	$	76,473	$	36,711		$	113,184
Additions to property, plant, and equipment	$	61,477	$	3,341		$	64,818
Equity investment in investees (2)	$	9,072	$	0		$	9,072
Goodwill (2)	$	1,490,797	$	0		$	1,490,797
Total segment assets (2)	$	6,256,944	$	1,029,812		$	7,286,756
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Balances as of December 31, 2020.


2020 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	313,577	$	(2,420)		$	0	$	311,157
Other operations	46,725		1			(1,818)		44,908
Affiliate revenue	1,267		29,278			(30,545)		0
Electric customer credits	(8,493)		0			0		(8,493)
Operating revenue, net	$	353,076	$	26,859		$	(32,363)	$	347,572
Depreciation and amortization	$	54,577	$	4,514	(1)	$	(1)	$	59,090
Interest income	$	1,109	$	100		$	(52)	$	1,157
Interest charges	$	18,591	$	16,610		$	(52)	$	35,149

Federal and state income tax expense (benefit)	$	9,759	$	(8,197)		$	0	$	1,562
Net income (loss)	$	31,366	$	(25,039)		$	1	$	6,328
Additions to property, plant, and equipment	$	64,818	$	806		$	0	$	65,624
Equity investment in investees (2)	$	9,072	$	0		$	0	$	9,072
Goodwill (2)	$	1,490,797	$	0		$	0	$	1,490,797
Total segment assets (2)	$	7,286,756	$	595,217		$	(156,404)	$	7,725,569
(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger. (2) Balances as of December 31, 2020.

~~CLECO~~

~~CLECO POWER~~

~~2017 3RD QUARTER FORM 10-Q~~

SEGMENT INFORMATION FOR THE THREE MONTHS ENDED SEPT. 30,
2017 (THOUSANDS) CLECO POWER
OTHER
ELIMINATIONS
CONSOLIDATED
Revenue
Electric operations $ 320,009
$ (2,420 ) $ —
$ 317,589
Other operations 20,768
514
—
21,282
Electric customer credits (372 ) —
—
(372 )
Affiliate revenue 209
13,517
(13,726 ) —
Operating revenue, net $ 340,614
$ 11,611
$ (13,726 ) $ 338,499
Depreciation and amortization $ 40,049
$ 2,179
$ —
$ 42,228
Merger transaction and commitment costs $ —
$ 185
$ —
$ 185
Interest charges $ 17,141
$ 13,331
$ (10 ) $ 30,462
Interest income $ 332
$ 31
$ (9 ) $ 354
Federal and state income tax expense (benefit) $ 30,092
$ (7,038 ) $ —
$ 23,054
Net income (loss) $ 54,852
$ (9,548 ) $ —
$ 45,304

2016 (THOUSANDS) CLECO POWER
OTHER
ELIMINATIONS
CONSOLIDATED
Revenue
Electric operations $ 326,281
$ (2,574 ) $ —
$ 323,707
Other operations 18,460
517
(1 ) 18,976
Electric customer credits 177
—
—
177
Affiliate revenue 213
13,060
(13,273 ) —
Operating revenue, net $ 345,131
$ 11,003
$ (13,274 ) $ 342,860
Depreciation and amortization $ 40,353
$ 2,182
$ —
$ 42,535
Merger transaction and commitment costs $ —
$ 1,869
$ —
$ 1,869
Interest charges $ 19,177
$ 12,709
$ (28 ) $ 31,858
Interest income $ 264
$ 82
$ (28 ) $ 318
Federal and state income tax expense (benefit) $ 29,427
$ (5,728 ) $ 1
$ 23,700
Net income (loss) $ 52,572
$ (12,952 ) $ 1
$ 39,621

SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPT. 30,
SUCCESSOR
2017 (THOUSANDS) CLECO POWER
OTHER
ELIMINATIONS
CONSOLIDATED
Revenue
Electric operations $ 847,417
$ (8,337 ) $ —
$ 839,080
Other operations 58,083
1,544
—
59,627
Electric customer credits (1,045 ) —
—
(1,045 )
Affiliate revenue 649
41,882
(42,531 ) —
Operating revenue, net $ 905,104
$ 35,089
$ (42,531 ) $ 897,662
Depreciation and amortization $ 118,280
$ 6,351
$ (1 ) $ 124,630
Merger transaction and commitment costs $ —
$ 187
$ —
$ 187
Interest charges $ 52,654
$ 40,297
$ (151 ) $ 92,800
Interest income $ 926
$ 271
$ (151 ) $ 1,046
Federal and state income tax expense (benefit) $ 63,010
$ (20,629 ) $ —
$ 42,381
Net income (loss) $ 108,439
$ (31,398 ) $ —
$ 77,041
Additions to property, plant, and equipment $ 183,604
$ 2,005
$ —
$ 185,609
Equity investment in investees ⁽¹⁾
$ 18,172
$ —
$ —
$ 18,172
Goodwill ⁽¹⁾
$ 1,490,797
$ —
$ —
$ 1,490,797
Total segment assets ⁽¹⁾
$ 5,822,302
$ 592,681
$ (17,282 ) $ 6,397,701
⁽¹⁾Balances as of September 30, 2017

~~CLECO~~

~~CLECO POWER~~

~~2017 3RD QUARTER FORM 10-Q~~

SUCCESSOR
APR. 13, 2016 - SEPT. 30, 2016 PREDECESSOR
JAN. 1, 2016 - APR. 12, 2016
2016 (THOUSANDS) CLECO POWER
OTHER
ELIMINATIONS
CONSOLIDATED
CLECO POWER
OTHER
ELIMINATIONS
CONSOLIDATED
Revenue
Electric operations $ 558,439
$ (4,805 ) $ —
$ 553,634
$ 281,154
$ —
$ —
$ 281,154
Other operations 32,145
965
—
33,110
18,493
587
—
19,080
Electric customer credits (381 ) —
—
(381 ) (364 ) —
—
(364 )
Affiliate revenue 406
23,823
(24,229 ) —
263
15,024
(15,287 ) —
Operating revenue, net $ 590,609
$ 19,983
$ (24,229 ) $ 586,363
$ 299,546
$ 15,611
$ (15,287 ) $ 299,870
Depreciation and amortization $ 71,498
$ 5,198
$ (1 ) $ 76,695
$ 43,698
$ 377
$ 1
$ 44,076
Merger transaction and commitment costs $ 151,501
$ 21,671
$ —
$ 173,172
$ —
$ 34,928
$ (16 ) $ 34,912
Interest charges $ 35,937
$ 22,430
$ (44 ) $ 58,323
$ 21,840
$ 295
$ (12 ) $ 22,123
Interest income $ 382
$ 177
$ (44 ) $ 515
$ 208
$ 69
$ (12 ) $ 265
Federal and state income tax (benefit) expense $ (10,028 ) $ (18,474 ) $ —
$ (28,502 ) $ 12,993
$ (9,525 ) $ —
$ 3,468
Net (loss) income $ (9,326 ) $ (32,968 ) $ —
$ (42,294 ) $ 21,548
$ (25,508 ) $ —
$ (3,960 )
Additions to property, plant, and equipment $ 102,284
$ 393
$ —
$ 102,677
$ 42,353
$ 39
$ —
$ 42,392
Equity investment in investees ⁽¹⁾
$ 18,672
$ —
$ —
$ 18,672

Goodwill ⁽¹⁾
$ 1,490,797
$ —
$ —
$ 1,490,797

Total segment assets ⁽¹⁾
$ 5,758,245
$ 614,959
$ (30,060 ) $ 6,343,144

⁽¹⁾Balances as of December 31, 2016


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Net income	$	20,327	$	6,328
Add: Depreciation and amortization	58,164		59,090

Less: Interest income	647		1,157
Add: Interest charges	33,891		35,149
Add: Federal and state income tax (benefit) expense	(9,420)		1,562
Add: Other corporate costs and noncash items (1)	(2,944)		12,212

Total segment EBITDA	$	99,371	$	113,184
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


Note 1011 — Regulation and Rates

~~Transmission ROE~~

~~Two complaints were filed with FERC seeking to reduce the ROE component~~Provision for rate refund on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets consisted primarily of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. The first complaint, filed in November 2013, was for the period November 2013 through February 2015. In September 2016, FERC issued a Final Order in response to the first complaint establishing a 10.32% ROE.following:

The second complaint, filed in February 2015, was for the period February 2015 through May 2016. In June 2016, an ALJ issued an initial decision in the second rate case docket recommending a 9.70% base ROE. Cleco Power is unable to determine when a binding FERC order will be issued on the second ROE complaint.

~~On February 13, 2017, $1.2 million of refunds relating to the first complaint were~~ ~~submitted to MISO~~. ~~As of~~ ~~September 30, 2017, Cleco Power had~~ ~~$2.0 million~~ ~~accrued for ROE reductions, including accrued interest.~~


(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
FRP	$	2,089	$	1,786
TCJA	$	2,057	$	2,057
Cleco Katrina/Rita storm recovery charges	$	1,609	$	1,617
FERC audit	$	951	$	1,912
Site-specific industrial customer	$	865	$	710
Transmission ROE	$	595	$	595

~~For more information on the ROE complaints, see Note 12 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”~~

FRP

Cleco Power’s annual retail earnings are subject to an FRP that was approved by the LPSC in June 2014. Under the terms of ~~the~~Cleco Power’s current FRP, Cleco Power is allowed to earn a target ROE of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60.0% of retail earnings between 10.9% and 11.75%, and all retail earnings over 11.75%, are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC, annually. Credits are typically included on customers’ bills the following summer, but the amount and timing of the refunds isare ultimately subject to LPSC approval. Cleco Power’s FRP had a four-year term, which was set to expire in June 2018. As a result of the 2016 Merger, the FRP was extended an additional two years with an expiration of June 2020, and Cleco Power ~~will~~was required to file a new base rate case in June 2019 with any change in rates to be implemented in July 2020. On June 28, 2019, Cleco Power filed an application with the LPSC for a new FRP. However, there has been a delay in the current base rate case. Cleco Power has responded to multiple sets of data requests relating to the new FRP. Unless the 2014 FRP were to be extended by ~~June 30,~~order of the LPSC, the FRP rates established in July 2019 ~~with anticipated~~will remain in effect. Cleco Power anticipates new rates ~~being~~to be effective on July 1, ~~2020.~~

2021. However, management is unable to determine the outcome of the base rate case relating to the new FRP.

~~Cleco Power must file annual monitoring reports no later than October 31 for the 12-month period ended June 30. On October 31, 2016,~~ Cleco Power filed its monitoring report for the ~~12-month period~~12 months ended June 30, ~~2016, which indicated~~2019, on October 31, 2019, indicating that no refund was ~~due~~due. Cleco Power has responded to data requests relating to the 2019 FRP monitoring report.

Cleco Power’s monitoring report also included a $1.2 million annual cost of service savings as a result of the ~~FRP and $0.3 million was due as a result of the cost of service savings from the~~2016 Merger Commitments. On June 28, 2017, the LPSC approved the 2016 FRP monitoring report which confirmed no earnings-related refund. The $0.3 million cost of service savings were refunded on customer bills in September 2017. On October 31, 2017, Cleco Power filed its monitoring report for the 12-month period ended June 30, 2017, which indicated that no refund was due as a result of the FRP and $1.2 million was due as a result of the cost of service savings from the Merger Commitments. As of September 30, 2017, Cleco Power had $1.5 million accrued for the cost of service savings refund.

~~Merger Commitments~~

On March 28, 2016, the LPSC approved the Merger. The LPSC’s written order approving the Merger was issued on April 7, 2016. Approval of the Merger was conditioned upon certain commitments, including $136.0 million of customer rate credits. On April 28, 2016, the LPSC voted to issue credits equally to eligible customers with service as of June 30, 2016, beginning in July 2016. As of September 30, 2017, Cleco Power had issued $130.0 million of customer rate credits. Also included in the Merger Commitments were $2.5 million of contributions for economic development for Louisiana state and local organizations to be disbursed over five years, an additional $7.0 million one-time contribution for economic development in Cleco Power’s service territory to be administered by the LED, and $6.0 million of charitable contributions to be disbursed over five years. In December 2016, the $7.0 million one-time contribution was paid to the LED.

~~In addition, the Merger Commitments included $1.2 million of annual estimated cost of service savings expected as a result of the Merger.~~ The cost of service savings ~~are~~is not subject to the target ROE or any sharing ~~mechanism~~mechanism. The cost of service savings is refunded annually in ~~the current FRP~~September and will continue until Cleco Power’s ~~anticipated new rates begin~~next FRP is in effect, which is

expected on July 1, ~~2020. The~~2021. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated cost of service savings refunds.

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. As a result of the tax rate reduction, on January 1, 2018, Cleco Power began accruing an estimated reserve for the reduction in the federal statutory corporate income tax rate. In February 2018, the LPSC directed utilities, including Cleco Power, to provide considerations of the appropriate manner to flow through to ratepayers the benefits of the reduction in corporate income taxes as a result of the TCJA. In July 2019, the LPSC approved Cleco Power’s rate refund of $79.2 million, plus interest, for the reduction in the statutory federal tax rate for the period from January 2018 to June 2020. The refund was credited to customers over 12 months beginning August 1, 2019.

In July 2019, the LPSC approved Cleco Power’s motion to address the rate redesign and the regulatory liability for excess ADIT, resulting from the enactment of the TCJA, in Cleco Power’s current base rate case.

As a result of the delay in the rate case, on July 15, 2020, the LPSC approved Cleco Power’s application to extend the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through November 2020. On November 13, 2020, Cleco Power again received approval for its application to extend the TCJA bill credits from November 30, 2020, until such a time that the rate case is complete. The $7.0 million monthly refund will consist of approximately $4.4 million, which is to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA. The mechanism to refund the remaining balance of the excess ADIT will be determined in Cleco Power’s current LPSC base rate case. At March 31, 2021, Cleco Power had $337.4 million accrued for the excess ADIT, of which $15.6 million is reflected in current regulatory liabilities. Cleco Power’s current base rate case is ongoing and management is unable to determine its outcome.

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the storm recovery bonds in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers to pay administrative fees, interest, and principal on the Cleco Katrina/Rita storm recovery bonds. Amounts remaining after the final principal and interest payments on the storm recovery bonds and payments for final administrative and winding up



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activities are ~~included in~~subject to refund. For more information on Cleco Katrina/Rita’s restricted cash, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

FERC Audit

For more information about the ~~annual monitoring reports~~FERC audit, see Note 13 — “Litigation, Other Commitments and ~~are refunded~~Contingencies, and Disclosures about Guarantees — Litigation — FERC Audit.”

Transmission ROE

NaN complaints were filed with FERC seeking to ~~customers annually. A report on~~reduce the ~~status~~ROE component of the ~~Merger Commitments must be filed annually by October~~transmission rates that MISO transmission owners, including Cleco Power, may collect under the MISO tariff. As of March 31, 2021, Cleco Power had $0.6 million accrued for the 12-month period ended June 30. On October 31, 2016, Cleco Power filed the annual Merger Commitment status report for the period ended June 30, 2016. On October 31, 2017, Cleco Power filed the annual Merger Commitment status report for the period ended June 30, 2017.change in ROE. For more information on the ~~cost of service savings,~~ROE complaints, see ~~“— FRP.~~Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

SSR

In September 2016, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3 effective April 1, 2017. MISO conducted a study which determined the proposed retirement of Teche Unit 3 would result in violations of specific applicable reliability standards for which no mitigation is available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution ~~can~~could be implemented to mitigate reliability issues. One mitigating factor ~~that has been~~ identified iswas Cleco Power’s Terrebonne to Bayou Vista Transmission project, which ~~is expected to be complete by the third quarter of 2018.~~was completed in April 2019. Cleco Power ~~has~~received a ~~12-month~~termination notice, effective April 30, 2019, and filed paperwork to withdraw the filed Attachment Y. While operating as an SSR ~~Agreement for the period April 1, 2017, to March 31, 2018. During this time,~~unit, Cleco Power ~~will continue to operate Teche Unit 3. Cleco Power has filed with FERC for its approval to collect $20.3 million annually in SSR~~received monthly payments ~~from MISO which includes recovering operations and maintenance~~that included recovery of expenses, administrative and general expenses, taxes, depreciation, capital expenditures, and carrying charges, all of which are related to Teche Unit 3 for the period of the SSR Agreement. At the end of the agreement, when Teche Unit 3 is retired, any SSR payments received from MISO for capital expenditures paid by third parties will be credited to property, plant, and equipment. As of September 30, 2017, Cleco Power had $2.2 million accrued for SSR payments received forincluding capital expenditures, related to the operations of Teche Unit 3. ~~In the second quarter of 2017, Cleco Power began receiving the monthly SSR payments from~~Additionally, MISO subject to refund pending review and approval by FERC. On July 20, 2017, Cleco Power, FERC staff, and intervenors met at the first settlement conference and set a procedural schedule for data requests between parties. On July 27, 2017, Cleco Power received five sets of informal data requests from FERC staff and intervenors. The next settlement conference is scheduled for November 16, 2017. Cleco Power is unable to determine when a binding FERC order will be issued. Also in the second quarter of 2017, MISO began allocatingallocated SSR costs to the load serving entities that ~~require~~required the operation of the SSR unit, ~~for reliability purposes,~~ including Cleco Power. InThese payments and cost allocations were finalized as part of a MISO SSR settlement approved in December 2018. Cleco Power operated Teche Unit 3 as an SSR unit from April 2017 until April 2019.

Cleco Power expects Teche Unit 3 to continue to be available to run and to continue to offer the ~~first quarter~~unit into MISO through 2024, barring a significant unit failure. At March 31, 2021, Cleco Power had $6.1 million accrued for the net capital refund for capital expenditures paid for by third parties while operating under the SSR agreement. As part of ~~2018, another study~~the settlement, one of the load serving entities agreed to reimburse Cleco Power for a portion of their capital refund. The capital refund is expected to be performed by MISO to determine if an SSR Agreement will be needed after March 31, 2018. At the end of the SSR Agreement, Cleco Power will have the option to rescind the Attachment Y requesting retirement of Teche Unit 3. If this option is exercised, Cleco Power may be required to refund recoverable capital expenditures plus interest. Management does not expect to be required to refund any portion of these costs.paid in late 2021.

~~Other~~

the rates paid by the utility’s retail customers. Cleco Power filed a motion to intervene in this proceeding along with other Louisiana utilities. In April 2016, the LPSC also issued Docket No. R-34029 to investigate tax structure issues for all LPSC-jurisdictional utilities to consider whether only the state and federal taxes included in a utility’s retail rate will be those that do not exceed the utility’s share of the actual taxes paid to those federal and state taxing authorities. Cleco Power filed a motion to intervene in this proceeding along with other Louisiana utilities. In October 2016, Cleco received the first set of data requests from the LPSC Staff for each of the above mentioned dockets. Cleco has filed responses to the non-confidential requests and is waiting on the completion of a confidentiality agreement to respond to the confidential requests. Cleco is unable to determine if or when the completion of this confidentiality agreement will occur.



Note 1112 — Variable Interest Entities

Cleco and Cleco Power apply the equity method of accounting to report the investment in Oxbow in the consolidated financial statements. Under the equity method, the assets and liabilities of this entity are reported as Equity investment in investee on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets. The revenue and expenses (excluding income taxes) of this entity are netted and reported as equity income or loss from investees on Cleco and Cleco Power’s Condensed Consolidated Statements of Income.

Oxbow is owned 50% by Cleco Power and 50% by SWEPCO. Cleco Power is not the primary beneficiary because it shares the power to control Oxbow’s significant activities with SWEPCO. Cleco Power’s current assessment of its maximum exposure to loss related to Oxbow at ~~September 30, 2017~~,March 31, 2021, consisted of its equity investment of ~~$18.2 million. In June 2017,~~$7.3 million. During the three months ended March 31, 2021, Cleco Power received ~~$0.5~~$1.8 million from Oxbow as a return of equity investment.

~~During the first quarter of 2017, the transition from the Dolet Hills mine to the Oxbow mine commenced. This transition was completed in July 2017.~~

The following table presents the components of Cleco Power’s equity investment in Oxbow:


INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 2017			AT DEC. 31, 2016			INCEPTION TO DATE (THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Purchase price	$	12,873		$	12,873		Purchase price	$	12,873	$	12,873
Cash contributions	6,399			6,399			Cash contributions	6,399		6,399
Dividends	(1,100		)	(600		)	Dividends	(11,950)		(10,200)
Total equity investment in investee	$	18,172		$	18,672		Total equity investment in investee	$	7,322	$	9,072

The following table compares the carrying amount of Oxbow’s assets and liabilities with Cleco Power’s maximum exposure to loss related to its investment in Oxbow:


(THOUSANDS)	AT SEPT. 30, 2017		AT DEC. 31, 2016		(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Oxbow’s net assets/liabilities	$	36,344	$	37,345	Oxbow’s net assets/liabilities	$	14,645	$	18,145
Cleco Power’s 50% equity	$	18,172	$	18,672	Cleco Power’s 50% equity	$	7,322	$	9,072
Cleco Power’s maximum exposure to loss	$	18,172	$	18,672	Cleco Power’s maximum exposure to loss	$	7,322	$	9,072



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The following table contains summarized financial information for Oxbow:


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2017		2016		2017		2016		(THOUSANDS)	2021		2020
Operating revenue	$	392	$	1,034	$	1,997	$	4,661	Operating revenue	$	1,999	$	1,882
Operating expenses	392		1,034		1,997		4,661		Operating expenses	1,999		1,882
Income before taxes	$	—	$	—	$	—	$	—	Income before taxes	$	0	$	0

Prior to June 30, 2020, DHLC ~~mines~~mined lignite reserves at Oxbow through the Amended Lignite Mining Agreement. The lignite reserves are intended to be used to provide fuel to the Dolet Hills Power Station. Under the Amended Lignite Mining Agreement, DHLC bills Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs. Oxbow bills Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. For more information on DHLC and the Oxbow mine, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Oxbow has no third-party agreements, guarantees, or other third-party commitments that contain obligations affecting Cleco Power’s investment in Oxbow.



Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

~~Devil’s Swamp~~

In October 2007, Cleco received a Special Notice for Remedial Investigation and Feasibility Study (RI/FS) from the EPA pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (also known as the Superfund statute) for a facility known as the Devil’s Swamp Lake site located just northwest of Baton Rouge, Louisiana. The special notice requested that Cleco and Cleco Power, along with many other listed potentially responsible parties (PRP), enter into negotiations with the EPA for the performance of an RI/FS at the Devil’s Swamp Lake site. The EPA identified Cleco as one of many companies that sent polychlorinated biphenyl (PCB) wastes for disposal to the site. The EPA proposed to add the Devil’s Swamp Lake site to the National Priorities List on March 8, 2004, based on the release of PCBs to fisheries and wetlands located on the site, but no final listing decision has yet been made. The PRPs began discussing a potential proposal to the EPA in February 2008. The EPA issued a Unilateral Administrative Order to two PRPs, Clean Harbors, Inc. and Baton Rouge Disposal, to conduct an RI/FS in December 2009. The Tier 1 part of the study was completed in June 2012. Field activities for the Tier 2 investigation were completed in July 2012. The draft Tier 2 remedial investigation report was submitted in December 2014. In 2015, remedial investigation activities included the collection and analysis of sediment, crawfish, and fish tissue samples. After reviewing the sample analysis, in August 2015, the Louisiana Department of Health and Hospitals updated the advisory for the area to advise that fish and crawfish from the area should not be eaten. The final Tier 2 remedial investigation report was made public in December 2015. Currently, the study/remedy selection task continues, and there is no record of a decision. Therefore, management is unable to determine how significant Cleco’s share of the costs associated with the RI/FS and possible response action at the site, if any, and whether this will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

2016 Merger

In connection with the 2016 Merger, ~~four~~4 actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and

~~three~~ 3 actions were filed in the Civil District Court for Orleans Parish, Louisiana. The petitions in each action generally alleged, among other things, that the members of


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Cleco Corporation’s Board of Directors breached their fiduciary duties by, among other things, conducting an allegedly inadequate sale process, agreeing to the 2016 Merger at a price that allegedly undervalued Cleco, and failing to disclose material information about the 2016 Merger. The petitions also alleged that ~~Cleco Partners,~~Como 1, Cleco Corporation, Merger Sub, and, in some cases, certain of the investors in ~~Cleco Partners,~~Como 1 either aided and abetted or entered into a civil conspiracy to advance those supposed breaches of duty. The petitions ~~seek~~sought various remedies, including monetary damages, which includes attorneys’ fees and expenses.

The ~~four~~4 actions filed in the Ninth Judicial District Court for Rapides Parish are captioned as follows:

•Braunstein v. Cleco Corporation, No. 251,383B (filed October 27, 2014),

•Moore v. Macquarie Infrastructure and Real Assets, No. 251,417C (filed October 30, 2014),

•Trahan v. Williamson, No. 251,456C (filed November 5, 2014), and

•L’Herisson v. Macquarie Infrastructure and Real Assets, No. 251,515F (filed November 14, 2014).

OnIn November ~~14,~~ 2014, the plaintiff in the Braunstein action moved for a dismissal of the action without prejudice, and that motion was granted onin November ~~19,~~ 2014. OnIn December 3, 2014, the Court consolidated the remaining ~~three~~3 actions and appointed interim co-lead ~~counsel. On~~counsel, and dismissed the investors in Cleco Partners as defendants, per agreement of the parties. Also, in December ~~18,~~ 2014, the plaintiffs in the consolidated action filed a Consolidated Amended Verified Derivative and Class Action Petition for Damages and Preliminary and Permanent Injunction (the Consolidated Amended Petition). The consolidated action named Cleco Corporation, its directors, Cleco Partners, and Merger Sub as defendants. The Consolidated Amended Petition alleged, among other things, that Cleco Corporation’s directors breached their fiduciary duties to Cleco’s shareholders and grossly mismanaged Cleco by approving the Merger Agreement because it allegedly did not value Cleco adequately, failing to structure a process through which shareholder value would be maximized, engaging in self-dealing by ignoring conflicts of interest, and failing to disclose material information about the Merger. The Consolidated Amended Petition further alleged that all defendants conspired to commit the breaches of fiduciary duty. Cleco believes that the allegations of the Consolidated Amended Petition are without merit and that it has substantial meritorious defenses to the claims set forth in the Consolidated Amended Petition.Injunction.

The ~~three~~3 actions filed in the Civil District Court for Orleans Parish ~~are~~were captioned as follows:

•Butler v. Cleco Corporation, No. 2014-10776 (filed November 7, 2014),

•Creative Life Services, Inc. v. Cleco Corporation, No. 2014-11098 (filed November 19, 2014), and

•Cashen v. Cleco Corporation, No. 2014-11236 (filed November 21, 2014).

~~Both the~~ ~~Butler~~ ~~and~~ ~~Cashen~~ ~~actions name Cleco Corporation, its directors, Cleco Partners, Merger Sub, MIRA, bcIMC, and John Hancock Financial as defendants. The~~



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~~Creative Life Services~~ ~~action names Cleco Corporation, its directors, Cleco Partners, Merger Sub, MIRA, and Macquarie Infrastructure Partners III, L.P., as defendants. On~~In December ~~11, 2014, the plaintiff in the~~ ~~Butler~~ action filed an Amended Class Action Petition for Damages. Each petition alleged, among other things, that the members of Cleco Corporation’s Board of Directors breached their fiduciary duties to Cleco’s shareholders by approving the Merger Agreement because it allegedly does not value Cleco adequately, failing to structure a process through which shareholder value would be maximized and engaging in self-dealing by ignoring conflicts of interest. The ~~Butler~~ ~~and~~ ~~Creative Life Services~~ petitions also allege that the directors breached their fiduciary duties by failing to disclose material information about the Merger. Each petition further alleged that Cleco, Cleco Partners, Merger Sub, and certain of the investors in Cleco Partners aided and abetted the directors’ breaches of fiduciary duty. On December 23, 2014, the directors and Cleco filed declinatory exceptions in each action on the basis that each action was improperly brought in Orleans Parish and should either be transferred to the Ninth Judicial District Court for Rapides Parish or dismissed. OnAlso, in December ~~30,~~ 2014, the plaintiffs in each action jointly filed a motion to consolidate the ~~three~~3 actions pending in Orleans Parish and to appoint interim co-lead plaintiffs and co-lead counsel. OnIn January ~~23,~~ 2015, the Court in the Creative Life Services case sustained the defendants’ declinatory exceptions and dismissed the case so that it could be transferred to the Ninth Judicial District Court for Rapides Parish. OnIn February 5, 2015, the plaintiffs in Butler and Cashen also consented to the dismissal of their cases from Orleans Parish so they could be transferred to the Ninth Judicial District Court for Rapides Parish. By operation of the December 2014 order of the Ninth Judicial District Court for Rapides Parish, the Butler, Cashen, and Creative Life Services actions were consolidated into the actions pending in Rapides Parish.

OnIn February ~~25,~~ 2015, the Ninth Judicial District Court for Rapides Parish held a hearing on a motion for preliminary

injunction filed by plaintiffs ~~Moore~~, ~~L’Herisson, and~~ ~~Trahan~~in the consolidated action seeking to enjoin the shareholder vote ~~at the Special Meeting of Shareholders held on February 26, 2015,~~ for approval of the Merger Agreement. ~~Following the hearing, the~~The District Court heard and denied the plaintiffs’ motion. OnIn June ~~19,~~ 2015, ~~three of~~ the plaintiffs filed their Second Consolidated Amended Verified Derivative and Class Action Petition. ~~This will be considered according to a schedule established by the Ninth Judicial District Court for Rapides Parish.~~ Cleco filed exceptions seeking dismissal of the second amended petition onin July ~~24,~~ 2015. The LPSC voted to approve the 2016 Merger before the Court could consider the plaintiffs’ peremptory exceptions.

OnIn March ~~21,~~2016 and May 2016, the plaintiffs filed their Third Consolidated Amended Verified Derivative Petition for Damages and Preliminary and Permanent ~~Injunction. On May 13, 2016, the plaintiffs filed~~Injunction and their Fourth Verified Consolidated Amended Class Action ~~Petition. This~~Petition, respectively. The fourth amended petition, which remains the operative petition and was filed after the 2016 Merger closed, eliminated the request for preliminary and permanent injunction and also named an additional executive officer as a defendant. ~~Cleco~~The defendants filed exceptions seeking dismissal of the fourth amended Petition. ~~A hearing was held on~~In September ~~15, 2016. On September 26,~~ 2016, the District Court granted the exceptions ~~filed by Cleco~~of no cause of action and no right of action and dismissed all claims asserted by the former shareholders. The plaintiffs appealed the District Court’s ruling to the Louisiana Third Circuit Court of Appeal. ~~The~~In December 2017, the Third Circuit Court of Appeal ~~heard oral arguments~~issued an order reversing and remanding the case to the District Court for further proceedings. In January 2018, Cleco filed a writ with the Louisiana Supreme Court seeking review of the Third Circuit Court of Appeal’s decision. The writ was denied in March 2018 and the parties are engaged in discovery in the ~~case~~District Court. In November 2018, Cleco filed renewed exceptions of no cause of action and res judicata, seeking to dismiss all claims. On December 21, 2018, the court dismissed Cleco Partners and Cleco Holdings as defendants per the agreement of the parties, leaving as the only remaining defendants certain former executive officers and independent directors. The District Court denied the defendants’ exceptions on January 14, 2019. A hearing on the plaintiffs’ motion for certification of a class was scheduled for August 26, 2019; however, prior to the hearing, the parties reached an agreement to certify a limited class. On September ~~21, 2017. Cleco expects~~7, 2019, the District Court certified a ~~ruling by December 31, 2017.~~class limited to shareholders who voted against, abstained from voting, or did not vote on the 2016 Merger. Cleco believes that the allegations of the petitions in each action are without merit and that it has substantial meritorious defenses to the claims set forth in each of the petitions.

Gulf Coast Spinning

In September 2015, a potential customer sued Cleco for failure to fully perform an alleged verbal agreement to lend or otherwise fund its startup costs to the extent of $6.5 million. Gulf Coast Spinning Company, LLC (Gulf Coast), the primary plaintiff, alleges that Cleco promised to assist it in raising approximately $60.0 million, which Gulf Coast needed to construct a cotton spinning facility near Bunkie, Louisiana. According to the petition filed by Gulf Coast in the 12^th Judicial District Court for Avoyelles Parish, Louisiana (the “District Court”), Cleco made such promises of funding assistance in order to cultivate a new industrial electric customer which would increase its revenues under a power supply agreement that it executed with Gulf Coast. Gulf Coast seeks unspecified damages arising from its inability to raise sufficient funds to complete the project, including lost profits.


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Cleco filed an Exception of No Cause of Action arguing that the case should be dismissed. The District Court denied Cleco’s exception in December 2015, after considering briefs and arguments. In January 2016, Cleco appealed the District Court’s denial of its exception by filing with the Third Circuit Court of ~~Appeal for the State of Louisiana.~~Appeal. In June 2016, the Third Circuit Court of Appeal ~~for the State of Louisiana~~ denied the request to have the case dismissed. In July 2016, Cleco filed a writ to the Louisiana Supreme Court seeking a review of the District Court’s denial of Cleco’s exception. In November 2016, the Louisiana Supreme Court denied Cleco’s writ application.

In February 2016, the parties agreed to a stay of all proceedings pending discussions concerning settlement. In May 2016, the District Court lifted the stay at the request of Gulf Coast. The parties are currently participating in discovery. Cleco believes the allegations of the petition are contradicted by the written documents executed by Gulf Coast, are otherwise without merit, and that it has substantial meritorious defenses to the claims alleged by Gulf Coast.

~~Sabine River Flood~~Dispute with Saulsbury Industries

In October 2018, Cleco Power sued Saulsbury Industries, Inc., the former general contractor for the St. Mary Clean Energy Center project, seeking damages for Saulsbury Industries, Inc.’s failure to complete the St. Mary Clean Energy Center project on time and for costs incurred by Cleco Power in hiring a replacement general contractor. The action was filed in the Ninth Judicial District Court for Rapides Parish, No. 263339. Saulsbury Industries, Inc. removed the case to the U.S. District Court for the Western District of Louisiana, on March 1, 2019. On ~~March 17, 2017,~~September 14, 2020, Cabot Industries was allowed to join the case pending in the Ninth Judicial District Court for Rapides Parish.

In January 2019, Cleco Power was served with a summons in ~~Perry Bonin, Ace Chandler,~~Saulsbury Industries, Inc. v. Cabot Corporation and ~~Michael Manuel, et al v. Sabine River Authority of Texas and Sabine River Authority of Louisiana~~Cleco Power LLC, ~~No. B-160173-C. The action was filed~~ in the ~~163rd~~U.S. District Court for the Western District of Louisiana. Saulsbury Industries, Inc. alleged that Cleco Power and Cabot Corporation caused delays in the St. Mary Clean Energy Center project, resulting in alleged impacts to Saulsbury Industries, Inc.’s direct and indirect costs. On June 5, 2019, Cleco Power and Cabot Corporation each filed separate motions to dismiss. On October 24, 2019, the District Court denied Cleco’s motion as premature and ruled that Saulsbury Industries, Inc. had six weeks to conduct discovery on specified jurisdictional issues. The Magistrate Judge presiding over the Western District of Louisiana consolidated cases issued a report and recommendation to the District Judge that the case instituted by Saulsbury Industries, Inc. be dismissed without prejudice and the case initiated by Cleco Power be remanded to the Ninth Judicial District Court for ~~Orange County, Texas,~~Rapides Parish. Saulsbury Industries, Inc. did not oppose the Magistrate Judge’s report and ~~relates~~recommendation, and the District Judge issued a ruling that adopted the Magistrate Judge’s report and recommendation, which included reasoning consistent with Cleco Power’s arguments. Thus, the federal consolidated cases are now closed.

On October 10, 2019, Cleco Power was served with a summons in Saulsbury Industries, Inc. v. Cabot Corporationand Cleco Power LLC in the 16th Judicial District Court for St. Mary Parish, No. 133910-A. Saulsbury Industries, Inc. asserted the same claim as the Western District Litigation and further asserts claims for payment on an open account. On December 9, 2019, Cleco moved to ~~flooding that occurred in Texas and Louisiana in March 2016. The plaintiffs have alleged~~stay the case, arguing that the ~~flooding was~~Rapides Parish suit should proceed. On February 14, 2020, the ~~result~~

court granted Cleco’s motion, which stay order remains in place until lifted. The 16th Judicial District Court for the St. Mary Parish case held a hearing on October 16, 2020, and the judge granted Cleco’s declinatory exceptions of lis pendens. Thus, the release of water from the Toledo Bend spillway gates into the Sabine River. While the plaintiffs have made numerous allegations, they have specifically alleged that Cleco Power, included as one of several companies and governmental bodies, failed to repair one of the two hydroelectric generators at the Toledo Bend Dam, which in turn contributed to the flooding. Cleco Power does not operate the hydroelectric generator. Management believes that theSt. Mary’s Parish case ~~as it relates to Cleco Power, has no merit.~~

~~The suit~~ has been ~~removed to federal court in Texas. Unless~~dismissed. Saulsbury filed a motion for a new trial. The hearing on this motion was held on February 5, 2021, and ~~until~~ the ~~federal court remands the case, it will stay in federal court.~~16th Judicial District Court judge denied Saulsbury’s motion for a new trial. Saulsbury has appealed this decision.

LPSC Audits

Fuel Audit



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to pass on to its customers substantially all such charges. Recovery of FAC costs is subject to periodic fuel audits by the LPSC. The LPSC FAC General Order issued in November 1997, in Docket No. U-21497 provides that an audit of FAC filings will be performed at least every other year. In ~~February 2016,~~March 2020, Cleco Power received a notice of audit from the LPSC ~~initiated an audit of Cleco Power’s fuel and purchased power expenses~~ for the period of January ~~2014 through~~2018 to December ~~2015.~~2019. The total amount of fuel expense included in the audit ~~was $582.6~~is $565.8 million. ~~On January 19, 2017,~~Cleco Power has responded to several sets of data requests from the ~~LPSC Staff issued its audit report which recommended no disallowance of fuel costs. The report was approved by the LPSC on April 19, 2017.~~LPSC. Cleco Power has FAC filings for January ~~2016~~2020 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not been material. If a disallowance of fuel cost is ordered resulting in a refund, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Environmental Audit

In ~~July~~ 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides ~~for~~Cleco Power an EAC to recover from its customers certain costs of environmental compliance. The costs eligible for recovery are those for prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the costs of reagents such as ammonia and limestone that are a part of the fuel mix used to reduce air emissions, among other things. In ~~February 2016,~~March 2020, Cleco Power received notice from the LPSC ~~initiated an~~of the EAC audit ~~of Cleco Power’s environmental costs~~ for the period ~~November 2010 through~~of January 2018 to December ~~2015.~~2019. The total amount of environmental ~~costs~~expense included in the audit ~~was $81.2~~is $26.2 million. ~~In December 2016,~~Cleco Power has responded to several sets of data requests from the ~~LPSC Staff issued its audit report which recommended a disallowance of environmental costs of less than $0.1 million. The report was approved by the LPSC on February 17, 2017.~~LPSC. Cleco Power has EAC filings for January ~~2016~~2020 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not been material. If a disallowance of environmental cost is ordered resulting in a refund to Cleco Power’s customers, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

~~In the second quarter of 2015,~~ Cleco Power ~~began incurring additional~~incurs environmental compliance expenses for reagents associated with the compliance ~~with MATS. In June 2015, the U.S. Supreme Court remanded the MATS rule to the D.C. Circuit Court~~standards of Appeals. In December 2015, the D.C. Circuit Court of Appeals remanded the rule to the EPA; however, the D.C. Circuit Court of Appeals did not vacate this rule. In April 2016, the EPA released a final supplemental finding that, even considering costs, it is appropriateMercury and necessary to regulate hazardous air pollutants. By the June 24, 2016, deadline, six petitions were filed with the U.S. Court of Appeals for the D.C. Circuit Court of Appeals for review of the EPA’s findings. At the request of the EPA, on April 27, 2017, the court issued an order holding the cases in abeyance pending the EPA’s review of its supplemental finding. Oral arguments are set for November 16, 2017.Air Toxics Standards (MATS). These expenses


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CLECO POWER						2021 1ST QUARTER FORM 10-Q

are also eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. In May 2020, the EPA finalized a rule that concluded that it is not appropriate and necessary to regulate hazardous air pollutants from coal- and oil-fired electric generating units. However, the EPA concluded that coal- and oil-fired electric generating units would not be removed from the list of regulated sources of hazardous air pollutants and would remain subject to MATS. The EPA also determined that the results of its risk and technology review did not require any revisions to the emissions standards. Several petitions for review of the rule’s findings were filed between May and July 2020 in the D.C. Circuit Court of Appeals. On January 20, 2021, the new Administration issued an executive order, which directs federal agency heads to review regulations and other actions over the past four years to determine if they are inconsistent with the policies announced in the executive order. The order specifically directs the EPA to consider issuing a proposed rule by August 2021 to suspend, revise, or rescind the rule. Management is unable to determine whether the outcome of the D.C. Circuit Court of Appeals review or the EPA’s review of the rule as a result of the executive order will result in changes to the MATS standards.

FERC Audit

Generally, Cleco Power records wholesale transmission revenue through approved formula rates, Attachment O of the MISO tariff and certain grandfathered agreements. The calculation of the rate formulas, as well as FERC accounting and reporting requirements, are subject to periodic audits by FERC. In March 2018, the Division of Audits and Accounting, within the Office of Enforcement of FERC, initiated an audit of Cleco Power for the period of January 1, 2014, through June 30, 2019. On September 27, 2019, Cleco Power received the final audit report, which indicated 12 findings of noncompliance with a combination of FERC accounting and reporting requirements and computation of revenue requirements along with 59 recommendations associated with the audit period. Cleco Power submitted a plan for implementing the audit recommendations on October 28, 2019. Cleco Power also submitted the refund analysis on November 7, 2019, which resulted in a refund related to the FERC audit findings, pending final assessment by the FERC Division of Audits and Accounting, which is expected in the third quarter of 2021. On June 1, 2020, this amount began being refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments and a reduction in Attachment O and grandfathered agreement rates over 12 months. At March 31, 2021, Cleco Power had $1.0 million recorded in Provision for rate refund on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets for the estimated refund.

Transmission ROE

~~Two~~NaN complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. The complaints sought to reduce the 12.38% ROE

used in MISO’s transmission rates to a proposed 6.68%. The ~~first complaint, filed in November 2013, was for~~complaints covered the period ~~November~~December 2013 through ~~February 2015.~~May 2016. In June 2016, an administrative law judge issued an initial decision in the second rate case docket recommending a 9.70% base ROE. In September 2016, FERC issued a Final Order in response to the first complaint establishing a 10.32% ~~ROE.~~

~~The second complaint, filed in February 2015, was~~

ROE. However, on November 21, 2019, FERC voted to adopt a new methodology for evaluating base ROE for public utilities under the Federal Power Act. In addition, FERC set the MISO transmission owners’ region-wide base ROE at 9.88% for the refund period ~~February 2015 through May 2016. In June 2016, an ALJ issued an initial decision~~covered in the first complaint and going forward. The draft FERC order further found that complainants in the second ~~rate case docket recommending a 9.70%~~complaint proceeding failed to show that the 9.88% base ~~ROE.~~ROE was unjust and unreasonable and thus dismissed the second complaint. On May 21, 2020, FERC issued Opinion No. 569-A, which granted rehearing in part of Opinion No. 569, which had revised FERC’s methodology for analyzing the base ROE component of public utility rates under section 206 of the Federal Power Act. Opinion No. 569-A further refines FERC’s ROE methodology and finds that the MISO Transmission Owners’ base ROE should be set at 10.02% instead of 9.88%. Cleco Power is unable to determine when a ~~binding~~final FERC ~~order~~Order will be ~~issued on~~issued. As of March 31, 2021, Cleco Power had $0.6 million accrued for the ~~second ROE complaint.~~change in the ROE.

In November 2014, the MISO transmission owners committee, of which Cleco is a member, filed a request with FERC for an incentive to increase the new ROE by 50 basis points for RTO participation as allowed by the MISO tariff. In January 2015, FERC granted the request. ~~The~~Beginning January 1, 2020, the collection of the adder was included in MISO’s transmission rates for a total ROE of 10.38%. On June 1, 2020, the total ROE included in MISO’s transmission rate was 10.52%.

South Central Generating

In 2017, Louisiana Generating received insurance settlement proceeds for costs incurred to resolve a lawsuit which was brought by the EPA and the Louisiana Department of Environmental Quality against Louisiana Generating related to Big Cajun II, Unit 3. Entergy Gulf States, as co-owner of Big Cajun II, Unit 3, is ~~delayed until the resolution~~expected to be allocated a portion of the ~~ROE complaint proceedings.~~insurance settlement proceeds. Any amount allocated to Entergy Gulf States will be determined by ongoing litigation and negotiations. South Central Generating estimated this amount to be $10.0 million. As part of the Cleco Cajun Transaction, Cleco Cajun assumed the $10.0 million contingent liability and NRG Energy indemnified Cleco for losses associated with this litigation matter. As a result, Cleco also recorded a $10.0 million indemnification asset in Other current assets on Cleco’s Condensed Consolidated Balance Sheets as part of the Cleco Cajun Transaction.

~~On February 13, 2017, $1.2 million of refunds relating~~Prior to the ~~first complaint were submitted to MISO. As of September 30, 2017,~~ Cleco ~~Power had $2.0 million accrued for a reduction to the ROE,~~Cajun Transaction, South Central Generating was involved in various litigation matters, including ~~accrued interest. Management believes a reduction in the ROE, as well as any additional refund, will not have a material adverse effect on the results of operations, financial condition, or cash flows~~environmental and contract proceedings, before various courts regarding matters arising out of the ~~Registrants.~~ ordinary course of business. At March 31, 2021, management estimates potential losses to be $1.5 million with respect to one of these matters. Management is unable to estimate any potential losses Cleco Cajun may be ultimately responsible for with respect to any of the remaining matters. As part of the Cleco Cajun Transaction, NRG Energy indemnified Cleco for losses as of the closing date associated with matters that existed as of the closing date, including pending litigation.

Other

Cleco is involved in various litigation matters, including regulatory, environmental, and administrative proceedings before various courts, regulatory commissions, arbitrators, and governmental agencies regarding matters arising in the ordinary course of business. The liability Cleco may ultimately


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

incur with respect to any one of these matters ~~in the event of a negative outcome~~ may be in excess of amounts currently accrued. Management regularly analyzes current information and, as of ~~September 30, 2017,~~March 31, 2021, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters ~~is $4.6~~are $4.5 million and has accrued this amount.

Off-Balance Sheet Commitments and Guarantees

Cleco Holdings and Cleco Power have entered into various off-balance sheet commitments, in the form of guarantees and ~~standing~~standby letters of credit, in order to facilitate their activities and the activities of Cleco Holdings’ subsidiaries and equity investees (affiliates). Cleco Holdings and Cleco Power have also agreed to contractual terms that require the Registrants to pay third parties if certain triggering events occur. These contractual terms generally are defined as guarantees.

Cleco Holdings entered into these off-balance sheet commitments in order to entice desired counterparties to contract with its affiliates by providing some measure of credit assurance to the counterparty in the event Cleco’s affiliates do not fulfill certain contractual obligations. If Cleco Holdings had not provided the off-balance sheet commitments, the desired counterparties may not have contracted with Cleco’s affiliates, or may have contracted with them at terms less favorable to its affiliates.

The off-balance sheet commitments are not recognized on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets because management has determined that Cleco and Cleco Power’s affiliates are able to perform the obligations



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

under their contracts and that it is not probable that payments by Cleco or Cleco Power will be required.

Cleco Holdings provided guarantees and indemnities to Entergy Louisiana and Entergy Gulf States as a result of the sale of the Perryville generation facility in 2005. The remaining indemnifications relate to environmental matters that may have been present prior to closing. These remaining indemnifications have no ~~limitations to time.~~time limitations. The maximum amount of the potential payment to Entergy Louisiana and Entergy Gulf States is $42.4 million. ~~Currently, management~~Management does not expect to be required to pay Entergy Louisiana and Entergy Gulf States under these guarantees.

On behalf of Acadia, Cleco Holdings provided guarantees and indemnifications as a result of the sales of Acadia Unit 1 to Cleco Power and Acadia Unit 2 to Entergy Louisiana in 2010 and 2011, respectively. The remaining indemnifications relate to the fundamental organizational structure of Acadia. These remaining indemnifications have no time limitations ~~as to time~~ or maximum potential future payments. ~~Currently, management~~Management does not expect to be required to pay Cleco Power or Entergy Louisiana under these guarantees.

Cleco Holdings provided indemnifications to Cleco Power as a result of the transfer of Coughlin to Cleco Power in March 2014. Cleco Power also provided indemnifications to Cleco Holdings and Evangeline as a result of the transfer of Coughlin to Cleco Power. The maximum amount of the potential payment to Cleco Power, Cleco Holdings, and Evangeline for their respective indemnifications is $40.0 million, except for indemnifications relating to the fundamental organizational structure of each respective entity, of which the maximum amount is $400.0 million. ~~Currently, management~~Management does not expect to be required to make any payments under these indemnifications.

As part of the Amended Lignite Mining Agreement, Cleco Power and SWEPCO, joint owners of the Dolet Hills Power Station, have agreed to pay the loan and lease principal

obligations of the lignite miner, DHLC, when due if DHLC does not have sufficient funds or credit to pay. Any amounts paid on behalf of the miner would be credited by the lignite miner against future invoices for lignite delivered. ~~The~~As of March 31, 2021, the maximum projected payment by Cleco Power under this guarantee is estimated to be ~~$106.5 million~~;$25.0 million; however, the Amended Lignite Mining Agreement does not contain a cap. The projection is based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for purchases of equipment. Cleco Power has the right to dispute the incurrence of loan and lease obligations through the review of the mining plan before the incurrence of such loan and lease obligations. In April 2020, Cleco Power and SWEPCO mutually agreed to not develop additional mining areas for future lignite extraction and subsequently provided notice to the LPSC of the intent to cease mining at the Dolet Hills and Oxbow mines by June 2020. The mine closures are subject to LPSC review and approval. As of December 31, 2020, all lignite reserves intended to be extracted from the Oxbow mine had been extracted. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. The Amended Lignite Mining Agreement ~~is not expected to terminate pursuant to its terms until 2036 and~~ does not affect the amount the Registrants can borrow under their credit facilities. Currently, management does not expect to be required to pay DHLC under this guarantee.

Cleco Holdings, in relation to Cleco Cajun’s participation in MISO, and Cleco Power have letters of credit to MISO pursuant to energy market requirements. The letters of credit automatically renew each year and have no impact on Cleco Holdings’ or Cleco Power’s revolving credit facility. In February 2021, Cleco Power posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net purchased power costs related to Winter Storms Uri and Viola exceeding respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively. For more information on these winter storms, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Generally, neither Cleco Holdings nor Cleco Power has recourse that would enable them to recover amounts paid under their guarantee or indemnification obligations. There are no0 assets held as collateral for third parties that either Cleco Holdings or Cleco Power could obtain and liquidate to recover amounts paid pursuant to the guarantees or indemnification obligations.

Other Commitments

~~NMTC Fund~~

~~In 2008, Cleco Holdings and US Bancorp Community Development (USBCDC) formed the NMTC Fund. Cleco Holdings has a~~ ~~99.9%~~ membership interest in the NMTC Fund and USBCDC has a 0.1% interest. The purpose of the NMTC Fund is to invest in projects located in qualified active low-income communities that are underserved by typical debt capital markets. These investments are designed to generate NMTCs and Historical Rehabilitation tax credits. The NMTC Fund was later amended to include renewable energy investments. The majority of the energy investments qualify for grants under Section 1603 of the ARRA. The tax benefits received from the NMTC Fund reduce the federal income tax obligations of Cleco Holdings. In total, Cleco Holdings contributed ~~$285.5 million~~ ~~of equity contributions to the NMTC Fund and will receive at least~~ ~~$303.8 million~~ ~~in the form of tax credits, tax losses, capital gains/losses, earnings, and cash over the life of the investment, which ends in 2018. The~~ ~~$18.3 million~~ ~~difference between equity contributions and total benefits received will be recognized over the life of the NMTC Fund as net tax benefits are delivered.~~

Due to the right of offset, the investment and associated debt are presented in Tax credit fund investment, net, on Cleco’s Condensed Consolidated Balance Sheet. At December 31, 2016, the amount of the liability component contained in the net asset was $0.6 million, and it was paid on March 30, 2017. The amount of tax benefits delivered in excess of capital contributions as of September 30, 2017, was $11.8 million.

~~By using the cost method for investments, the gross investment amortization expense will be recognized over a~~ ~~ten~~-year period, which is projected to end in 2018. The basis of the investment is reduced by the grants received under Section 1603 of the ARRA, which allow certain projects to receive a federal grant in lieu of tax credits, and other cash. Periodic amortization of the investment and the deferred taxes generated by the basis reduction temporary difference are included as components of income tax expense.

~~Fuel Transportation Agreement~~

In October 2007, Cleco Power entered into an agreement with Savage Services that met the accounting definition of a capital lease for barges in order to transport petroleum coke and limestone to Madison Unit 3. In December 2012, Cleco Power entered into an amended agreement for 42 dedicated barges. The amended agreement continued to meet the accounting definition of a capital lease until its expiration on August 31, 2017. Upon expiration of the amended agreement, Cleco Power entered into a second amended agreement with Savage Services to continue use of the 42 barges. The new agreement meets the accounting definition of an operating lease and automatically renews the terms of the lease on a month-to-month basis until terminated by either party. For the three and nine months ended September 30, 2017, Cleco Power recognized $0.3 million in operating lease expense for the barges. Cleco Power is evaluating future options related to its fuel transportation agreement with Savage Services.

~~Other~~

Cleco has accrued for liabilities related to third parties, employee medical benefits, and AROs.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Risks and Uncertainties

Cleco could be subject to possible adverse consequences if Cleco’s counterparties fail to perform their obligations or if Cleco or its affiliates are not in compliance with loan agreements or bond indentures.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. On April 7, 2017, Moody’s updated its credit ratings by maintaining Cleco Holdings at Baa3 (stable) and Cleco Power at A3 (stable). On May 30, 2017, S&P affirmed Cleco Holdings’ and Cleco Power’s credit ratings at BBB- (stable) and BBB+ (stable), respectively.

Changes in the regulatory environment or market forces could cause Cleco to determine its assets have suffered an other-than-temporary decline in value, whereby an impairment would be required and Cleco’s financial condition could be materially adversely affected.

Cleco Power ~~is a participant~~and Cleco Cajun are participants in the MISO market. Energy prices in the MISO market are based on ~~Locational Marginal Price (LMP),~~LMP, which includes a component directly related to congestion on the transmission system. Pricing zones with greater transmission congestion may have a higher ~~LMP.~~LMPs. Physical transmission constraints present in the MISO market could increase energy costs within ~~Cleco Power’s~~ pricing

zones. Cleco Power ~~uses~~and Cleco Cajun use FTRs to mitigate transmission congestion ~~risk.~~price risks. Changes to anticipated transmission paths may result in an unexpected increase in energy costs.

On March 1, 2019, Cleco Power began to operate the Dolet Hills Power Station from June through September of each year; however, the Dolet Hills Power Station will continue to be available to operate in other months, if needed. In June 2020, after thorough evaluation, management decided to retire the Dolet Hills Power Station.

In April 2020, Cleco Power and SWEPCO mutually agreed to not develop additional mining areas for future lignite extraction and subsequently provided notice to the LPSC of the intent to cease mining at the Dolet Hills and Oxbow mines by June 2020, subject to LPSC review and approval. As of December 31, 2020, all lignite reserves intended to be extracted from the Oxbow mine had been extracted. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine, and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. The expected early closure of the mines has resulted in increased costs that will be billed through the fuel adjustment clause, which management currently believes are recoverable. Management does not believe the early closure of the mines will have an adverse impact on the recovery value of the Dolet Hills Power Station. Cleco Power expects to have sufficient lignite fuel available to continue seasonal operations of the Dolet Hills Power Station through the end of 2021.

Cleco Power anticipates filing an application in the second quarter of 2021 with the LPSC giving notice that the Dolet Hills Power Station will be retired at the end of 2021 and requesting the approval of the regulatory treatment and recovery of the stranded costs and decommissioning costs over 20 years.

In June 2020, Cleco Power remeasured its ARO liabilities due to the expected retirement of the Dolet Hills Power Station. Cleco Power’s ARO liability increased $3.3 million as a result of this remeasurement. At March 31, 2021, Cleco Power’s undivided interest in the Dolet Hills Power Station was $76.4 million and was included in base rates.

Fuel costs incurred by the Dolet Hills Power Station are recoverable by Cleco Power through active fuel adjustment clauses. Under the Amended Lignite Mining Agreement, DHLC bills Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs as fuel is delivered. As of March 31, 2021, DHLC estimates $144.5 million of costs will be billed to Cleco ~~Power.~~Power prior to the closure of the Dolet Hills Power Station. In 2009, Cleco Power acquired an interest in Oxbow, which owns mineral rights and land leases. Under a joint operating agreement pertaining to the

Oxbow mineral rights and land leases, Oxbow bills Cleco Power its proportionate share of incurred costs. As of March 31, 2021, Oxbow estimates approximately $12.2 million of costs will be billed to Cleco Power prior to the closure of the Dolet Hills Power Station. If any of these costs are not recoverable, it could materially impact the Registrants’ results of operations, financial condition, or cash flows.



Note 1314 — Affiliate Transactions

At both March 31, 2021, and December 31, 2020, Cleco Holdings had an affiliate payable of $41.3 million to Cleco Group primarily for settlement of taxes payable.

Cleco Power has balances that are payable to or due from its affiliates. The following table is a summary of those balances:


	AT SEPT. 30, 2017				AT DEC. 31, 2016					AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	$	282	$	526	$	3	$	119	Cleco Holdings	$	10,513	$	57,697	$	10,353	$	57,713
Support Group	1,262		7,767		1,402		7,071		Support Group	4,589		13,665		3,248		14,355
Other ⁽¹⁾	1		—		1		—
Cleco Cajun									Cleco Cajun	690		27		1,004		0
Total	$	1,545	$	8,293	$	1,406	$	7,190	Total	$	15,792	$	71,389	$	14,605	$	72,068
⁽¹⁾ Represents Attala and Perryville.

Oxbow bills Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. These costs are included in fuel inventory and are recoverable from Cleco Power customers through the LPSC-established FAC or related wholesale contract provisions. During the three months ended March 31, 2021, Cleco Power recorded $1.0 million of its proportionate share of incurred costs. During the three months ended March 31, 2020, Cleco Power recorded $0.9 million of its proportionate share of incurred costs. At both March 31, 2021, and December 31, 2020, Cleco Power had $0.3 million payable to Oxbow. For more information on Cleco Power’s variable interest in Oxbow, see Note 12 — “Variable Interest Entities.”

Note 1415 — Intangible Assets and Liabilities

During 2008, Cleco Katrina/Rita acquired a $177.5 million intangible asset which includes $176.0 million for the right to bill and collect storm recovery charges from customers of Cleco Power and $1.5 million of financing costs. This intangible asset was fully amortized in March 2020 and had 0 residual value at the end of its life.

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of the Cleco trade name and long-term wholesale power supply agreements. At the end of their lives, these intangible assets will have 0 residual value. The trade name intangible asset is being amortized over its estimated economic useful life of 20 years. The intangible assets related to the power supply agreements are amortized over the estimated life of each applicable contract ranging between 7 and 19 years, and the amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

As a result of the Cleco Cajun Transaction, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the difference between the contract and market price of acquired long-term wholesale power agreements. At the end of their lives, these intangible


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

assets and liabilities will have 0 residual value. These intangibles are amortized over the estimated life of each applicable contract ranging between 2 and 8 years. The amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

As part of the Cleco Cajun Transaction, Cleco assumed an LTSA for maintenance services related to the Cottonwood Plant. This intangible liability is being amortized using the straight-line method over the estimated life of the LTSA of seven years. The amortization is included as a reduction to the LTSA prepayments on Cleco’s Condensed Consolidated Balance Sheet.

The following tables present Cleco and Cleco Power’s amortization of intangible assets and liabilities:


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	0	$	517
Trade name	$	64	$	64
Power supply agreements	$	6,400	$	6,400
Intangible liabilities
LTSA	$	871	$	871
Power supply agreements	$	882	$	882


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	0	$	517

The following tables summarize the balances for intangible assets and liabilities subject to amortization for Cleco and Cleco Power:


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Intangible assets
Trade name	5,100		5,100
Power supply agreements	184,004		184,004
Total intangible assets carrying amount	189,104		189,104
Intangible liabilities
LTSA	24,100		24,100
Power supply agreements	14,200		14,200
Total intangible liability carrying amount	38,300		38,300
Net intangible assets carrying amount	150,804		150,804
Accumulated amortization	(68,642)		(63,932)
Net intangible assets subject to amortization	$	82,162	$	86,872

Note 16 — Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are summarized in the following tables for Cleco and Cleco Power. All amounts are reported net of income taxes. Amounts in parentheses indicate ~~losses.~~

debits.

Cleco
FOR THE THREE MONTHS ENDED SEPT. 30, 2017 FOR THE NINE MONTHS ENDED SEPT. 30, 2017
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI

POSTRETIREMENT
BENFIT
NET GAIN (LOSS)

NET LOSS
ON CASH FLOW
HEDGES

TOTAL AOCI
Balances, beginning of period $ (631 ) $ —
$ (631 ) $ 1,500
$ —
$ 1,500
Other comprehensive loss before reclassifications
Postretirement benefit adjustments during the period —
—
—
(2,065 ) —
(2,065 )
Amounts reclassified from accumulated other comprehensive loss
Amortization of postretirement benefit net gain (44 ) —
(44 ) (110 ) —
(110 )
Net current-period other comprehensive loss (44 ) —
(44 ) (2,175 ) —
(2,175 )
Balances, Sept. 30, 2017 $ (675 ) $ —
$ (675 ) $ (675 ) $ —
$ (675 )

FOR THE THREE MONTHS ENDED SEPT. 30, 2016
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
Balances, beginning of period $ —
$ —
$ —
Other comprehensive loss before reclassifications
Postretirement benefits adjustment during the period (2,308 ) —
(2,308 )
Amounts reclassified from accumulated other comprehensive loss
Amortization of postretirement benefit net loss 3
—
3
Net current-period other comprehensive loss (2,305 ) —
(2,305 )
Balances, Sept. 30, 2016 $ (2,305 ) $ —
$ (2,305 )



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

FOR THE NINE MONTHS ENDED SEPT. 30, 2016
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
PREDECESSOR
Balances, beginning of period $ (20,857 ) $ (5,728 ) $ (26,585 )
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss 587
—
587
Reclassification of net loss to interest charges —
60
60
Net current-period other comprehensive income 587
60
647
Balances, Apr. 12, 2016 $ (20,270 ) $ (5,668 ) $ (25,938 )
SUCCESSOR⁽¹⁾

Balances, Apr. 13, 2016 $ —
$ —
$ —
Other comprehensive loss before reclassifications
Postretirement benefits adjustment during the period (2,308 ) —
(2,308 )
Amounts reclassified from accumulated other comprehensive loss

Amortization of postretirement benefit net loss 3
—
3
Net current-period other comprehensive loss (2,305 ) —
(2,305 )
Balances, Sept. 30, 2016 $ (2,305 ) $ —
$ (2,305 )
⁽¹⁾As a result of the Merger, accumulated other comprehensive income was reduced to zero on April 13, 2016, as required by acquisition accounting.

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, 2017 FOR THE NINE MONTHS ENDED SEPT. 30, 2017
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
Balances, beginning of period $ (8,132 ) $ (5,411 ) $ (13,543 ) $ (7,905 ) $ (5,517 ) $ (13,422 )
Other comprehensive loss before reclassifications
Postretirement benefit adjustments during the period —
—
—
(584 ) —
(584 )
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss 167
—
167
524
—
524
Reclassification of net loss to interest charges —
53
53
—
159
159
Net current-period other comprehensive income (loss) 167
53
220
(60 ) 159
99
Balances, Sept. 30, 2017 $ (7,965 ) $ (5,358 ) $ (13,323 ) $ (7,965 ) $ (5,358 ) $ (13,323 )

FOR THE THREE MONTHS ENDED SEPT. 30, 2016 FOR THE NINE MONTHS ENDED SEPT. 30, 2016
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
POSTRETIREMENT
BENEFIT
NET LOSS
NET LOSS
ON CASH FLOW
HEDGES
TOTAL AOCI
Balances, beginning of period $ (10,983 ) $ (5,622 ) $ (16,605 ) $ (11,364 ) $ (5,728 ) $ (17,092 )
Other comprehensive income before reclassifications:
Postretirement benefit adjustments during the period 2,013
—
2,013
2,013
—
2,013
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss 167
—
167
548
—
548
Reclassification of net loss to interest charges —
53
53
—
159
159
Net current-period other comprehensive income 2,180
53
2,233
2,561
159
2,720
Balances, Sept. 30, 2016 $ (8,803 ) $ (5,569 ) $ (14,372 ) $ (8,803 ) $ (5,569 ) $ (14,372 )



~~Note 15 — Subsequent Event~~Cleco

On October 10, 2017, Cleco Power, Attala, Perryville, Entergy Louisiana, and Entergy Mississippi completed a joint filing with FERC. The filing requested approval for Cleco Power and Perryville to sell certain transmission assets to Entergy Louisiana and for Attala to sell certain transmission assets to Entergy Mississippi. The filing requested an approval date by December 18, 2017. If approved, the parties will enter into binding agreements for the sale of the assets. The parties expect completion of the agreements by the end of 2017.

	FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(25,796)

~~CLECO~~
~~CLECO POWER~~			~~2017 3RD QUARTER FORM 10-Q~~
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	628


Balances, Mar. 31, 2021	$	(25,168)


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(17,513)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	414


Balances, Mar. 31, 2020	$	(17,099)


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS		NET LOSS ON CASH FLOW HEDGES		TOTAL AOCI
Balances, beginning of period	$	(19,139)	$	(5,614)	$	(24,753)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	458		—		458
Reclassification of net loss to interest charges	—		64		64

Balances, Mar. 31, 2021	$	(18,681)	$	(5,550)	$	(24,231)


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS		NET LOSS ON CASH FLOW HEDGES		TOTAL AOCI
Balances, beginning of period	$	(16,717)	$	(5,868)	$	(22,585)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	426		—		426
Reclassification of net loss to interest charges	—		64		64

Balances, Mar. 31, 2020	$	(16,291)	$	(5,804)	$	(22,095)

Note 17 — Storm Restoration

Hurricanes Laura, Delta, and Zeta

In August and October 2020, Cleco Power’s distribution and transmission systems sustained substantial damage from 3 separate hurricanes.

Cleco Power’s total storm restoration costs related to the hurricanes is approximately $240.7 million. The damage to equipment from the hurricanes required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 63%, or approximately $150.8 million, of the total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling $75.4 million.

On December 4, 2020, Cleco Power filed an application with the LPSC requesting an interim rate recovery for return on certain storm restoration costs associated with the hurricanes until securitization of such costs can be completed. Cleco Power has responded to multiple sets of data requests related to this filing. Cleco Power, in line with other impacted utilities, will seek available funds from the U.S. government for relief of costs incurred from Hurricanes Laura, Delta, and Zeta. Cleco Power cannot predict the likelihood that any reimbursement from the U.S. government ultimately will be approved. In addition to securitization, other recovery options are being analyzed.

Winter Storms Uri and Viola

In February 2021, Cleco’s service territories experienced extreme and unprecedented winter weather that resulted in damage to Cleco Power’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures.

On February 14, 2021, Winter Storm Uri reached Louisiana resulting in power outages for approximately 11,000 of Cleco Power’s electric customers located primarily in south Louisiana. By February 17, 2021, power was restored to 100% of customers who could receive power. On February 17, 2021, Winter Storm Viola reached Louisiana resulting in power

outages for approximately 43,000 of Cleco Power’s electric customers located primarily in central and south Louisiana. By February 22, 2021, power was restored to 100% of customers who could receive power. Cleco Power’s current estimate of the total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.2 million. The damage to equipment from the storms required replacement, as well as repair of the existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.3 million, of the estimated total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power recorded a regulatory asset for the remaining operations and maintenance costs of $1.9 million, as allowed by the LPSC.

On February 16, 2021, Cleco was notified by the regional reliability coordinator, MISO, that extremely cold temperatures were causing an increase in demand for power, which resulted in an overload of the power grid. The electricity generation shortages necessitated MISO to implement controlled outages in certain of its service areas. To help protect the stability of the power grid and prevent prolonged outages, MISO instructed Cleco to reduce demand on the power grid by initiating periodic outages to customers across Louisiana. The periodic power outages were minimal and suspended within one hour of initiation at the direction of MISO because the power shortage was no longer threatening the reliability of the power grid.

Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is approximately $55.0 million. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs over a period of 12 months beginning in May 2021. These amounts are subject to final settlement.

Cleco Cajun currently estimates the incremental negative impact of Winter Storms Uri and Viola on operations to be approximately $11.2 million. The incremental impact to Cleco Cajun’s operations is an estimate and subject to final settlement.

In February 2021, Cleco Power posted collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

purchased power costs relating to Winter Storms Uri and Viola exceeding respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority

of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cleco uses its website, https://www.cleco.com, as a routine channel for distribution of important information, including news releases and financial information. Cleco’s website is the primary source of publicly disclosed news about Cleco. Cleco is providing the address to its website solely for informational purposes and does not intend for the address to be an active link. The contents of the website are not incorporated into this ~~Combined~~ Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in combination with the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2020, and Cleco and Cleco Power’s Condensed Consolidated Financial Statements contained in this ~~Combined~~ Quarterly Report on Form 10-Q. The information included therein is essential to understanding the following discussion and analysis. Below is information concerning the consolidated results of operations of Cleco for the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021, and ~~2016~~.2020.



OVERVIEW

Cleco is a regional energy company that conducts substantially all of its business operations through its ~~primary subsidiary, Cleco Power.~~ two principal operating business segments:

•Cleco Power, is a regulated electric utility company that owns ~~nine~~10 generating units with a total ~~nameplate~~rated capacity of ~~3,310~~3,360 MW and serves approximately ~~288,000~~290,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and ~~Mississippi.~~Mississippi; and

•Cleco Cajun, an unregulated electric utility company that owns 14 generating units with a total rated capacity of 3,379 MW and wholesale contracts serving nine Louisiana cooperatives, three wholesale municipal customers, and one electric utility. Upon the closing of the Cleco Cajun Transaction, Cottonwood Energy entered into the Cottonwood Sale Leaseback.

~~Merger~~

Significant Events

Winter Storms Uri and Viola

In February 2021, Winter Storms Uri and Viola reached Louisiana causing Cleco’s service territory to experience extreme and unprecedented winter weather that resulted in damage to Cleco Power’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures.

Cleco Power’s current estimate of the total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.2 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.3 million, of the estimated total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power recorded a regulatory asset for the remaining operations and maintenance costs of $1.9 million, as allowed by the LPSC.

Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is approximately $55.0 million. On ~~April 13, 2016,~~March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs over a period of 12 months beginning in May 2021. These amounts are subject to final settlement.

In February 2021, Cleco Power posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, ~~completed its merger~~on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with ~~Merger Sub whereby Merger Sub merged~~MISO. These incremental collateral postings were a result of the increase in net purchased power costs relating to Winter Storms Uri and Viola exceeding respective unsecured credit capacity with ~~and into~~MISO. In March 2021, Cleco ~~Corporation, with Cleco Corporation surviving the Merger,~~Power and Cleco ~~Corporation converting to a limited liability company~~Cajun settled the majority of those purchased power obligations with MISO, and ~~changing its name~~MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, ~~as a direct, wholly owned subsidiary of Cleco Group and an indirect, wholly owned subsidiary of Cleco Partners.~~ respectively.

For more information on ~~the Merger,~~Winter Storms Uri and Viola, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 217 — ~~Business Combinations.~~Storm Restoration — Winter Storms Uri and Viola.”

~~Enterprise Business Applications Project~~Hurricanes Laura, Delta, and Zeta

In August and October 2020, Cleco Power’s distribution and transmission systems sustained substantial damage from three separate hurricanes.

COVID-19

In March 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and the U.S. declared a national


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19. These restrictions significantly impacted many sectors of the economy with record levels of unemployment driven by businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. State and local authorities also subsequently implemented multistep policies to reopen various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. Due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, effective March 31, 2021, the governor of the state of Louisiana issued orders reducing some of the restrictions that were in effect and easing capacity limits on businesses, as well as social gatherings. Effective April 28, 2021, the governor of the state of Louisiana further reduced restrictions by revoking the mandatory, state-wide mask mandate.

The ~~Enterprise Business Applications project~~first priority in Cleco’s response to this crisis has been the health and safety of its employees and those of its customers and other business counterparties. Cleco has implemented preventative measures and developed corporate response plans to minimize unnecessary risk of exposure and prevent infection, while supporting its customers’ operations to the best of its ability in the circumstances.

Beginning on March 13, 2020, and as a result of an LPSC executive order, Cleco Power suspended the assessment of late fees, disconnections, and the utilization of collection agencies to help customers facing financial challenges related to the COVID-19 pandemic. Cleco resumed disconnections and late fees beginning October 1, 2020, as allowed by the LPSC. On December 4, 2020, Cleco Power made a filing with the LPSC requesting the recovery of the regulatory asset as well as the lost revenue associated with the disconnect fees and incremental costs. At March 31, 2021, Cleco Power had a regulatory asset of $3.0 million for expenses incurred.

Cleco is also working with its suppliers to understand the potential impacts to its supply chain. Cleco will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as Cleco deems warranted.

Cleco has implemented certain measures that it believes will provide financial flexibility and help maintain its liquidity, including drawing on Cleco Holdings’ and Cleco Power’s revolving credit facilities. At March 31, 2021, there was no balance outstanding on Cleco Holdings’ revolving credit facility and $135.0 million outstanding on Cleco Power’s revolving credit facility. While Cleco continues to assess the COVID-19 situation, Cleco cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the markets will have on its business, cash flows, liquidity, financial condition, and results of operations. For additional discussion regarding certain risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors — Operational Risks — COVID-19” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

American Jobs Act of 2021

On March 31, 2021, the President announced the American Jobs Act. This proposal includes ~~replacement~~a number of incentives to encourage construction of certain transmission and ~~improvement~~energy storage property. The proposed act also proposes to ~~Cleco’s enterprise business applications.~~raise the

federal statutory corporate income tax rate from 21% to 28% and to introduce a minimum tax based on book income. Currently, management is unable to predict the impact of the proposed act on the Registrants.

Cleco Cajun

Cleco Cajun has 13 power purchase agreements totaling nearly 2,200 MW with a mixture of cooperatives, municipal bodies, and a utility. Cleco Cajun routinely seeks to grow the amount of power sold pursuant to these existing agreements. These contracts provide Cleco Cajun with predictable cash flow and market risk mitigation through at least 2025, but may prevent Cleco Cajun from taking advantage of rising market rates for power.

In 2020, a group of cooperatives, which are currently under contract with Cleco Cajun through 2025, conducted a request for proposal for load after 2025 in which Cleco Cajun participated. In March 2021, the group of cooperatives informed Cleco Cajun that it was not selected as a provider of load after 2025 and filed a notice with the LPSC to certify the results of the request for proposal. Cleco Cajun subsequently filed a notice of intervention with the LPSC requesting further review prior to certifying the cooperatives’ notice. The ~~project’s objectives are to gain efficiencies through consistent, industry leading work processes~~certification process is in the early stages and, ~~practices; enable better decision making through data transparency across business functions; mitigate risk through knowledge transfer and better process documentation; provide~~on April 20, 2021, the LPSC issued a ~~modernized, flexible platform~~procedural schedule that extends into the first quarter of 2022. Cleco Cajun will continue to support ~~future growth~~the process and ~~changing~~cannot predict the outcome of the process. Failure to recontract these or other agreements could have a material adverse effect on Cleco Cajun’s results of operations, financial condition, and cash flows.

Many factors affect Cleco Cajun’s primary business ~~models;~~of providing wholesale power and ~~provide customer-centric focus~~capacity. These factors include weather, the market price of power, the sales volume of power through ~~technology~~existing contracts, the ability to recontract existing contracts at or before their expiration or enter into new wholesale power agreements with new customers, the ability to comply with increasingly stringent environmental standards, and ~~flexibility. Management expects~~compliance with the ~~project~~commitments made to ~~be complete by~~ the ~~third quarter~~LPSC as a result of ~~2019. The total estimated project cost is $130.0 million. As of September 30, 2017,~~the Cleco ~~had spent $18.3 million on the project.~~Cajun Transaction.

Cleco Power

Many factors affect Cleco Power’s primary business of generating, delivering, and selling electricity. These factors include weather and the presence of a stable regulatory environment, which impacts ~~cost recovery~~the ROE and the ~~ROE,~~current rate case, as

well as the recovery of costs related to storms, growing energy demand, and rising fuel prices; the ability to increase energy sales while containing costs; the ability to reliably deliver power to its jurisdictional customers; the ability to comply with increasingly stringent regulatory and environmental standards; and the ability to successfully perform in MISO while subject to the related operating challenges and uncertainties, including increased wholesale competition. ~~Key~~Cleco Power’s current key initiatives ~~on which Cleco Power is currently working include~~are continuing construction on the ~~Cenla Transmission Expansion project and the St. Mary Clean Energy Center project; initiating construction of the Terrebonne to~~ Bayou Vista to Segura Transmission ~~project and~~project; continuing the ~~Coughlin Pipeline~~DSMART project; and maintaining and growing its wholesale and retail business. These and other initiatives are discussed below.

~~Cenla Transmission Expansion Project~~

The Cenla Transmission Expansion project includes the construction of transmission lines and a transmission substation within the central Louisiana area. The project is expected to improve reliability to customers by relieving forecasted overloads and mitigating potential load shedding events while providing flexibility to allow routine maintenance outages and serve future growth in the central Louisiana area. The substation construction is complete and has been placed in service. New line construction is complete and the re-conductor portion of the project is in progress. The project is expected to be complete by the end of 2017 with an estimated cost of $31.4 million. As of September 30, 2017, Cleco Power had spent $29.5 million on the project.

~~St. Mary Clean Energy Center Project~~

The St. Mary Clean Energy Center project includes Cleco Power constructing, owning, and operating a 50-MW generating unit to be fueled by waste heat from Cabot Corporation’s carbon black manufacturing plant in Franklin, Louisiana. Construction began in October 2016 and the unit is expected to be commercially operational by the third quarter of 2018 at an estimated cost of $99.8 million. The project is expected to generate more than 300,000 MWh of zero additional carbon emitting energy each year. As of September 30, 2017, Cleco Power had spent $62.6 million on the project.

~~Terrebonne to~~ Bayou Vista to Segura Transmission Project

The ~~Terrebonne~~Bayou Vista to ~~Bayou Vista~~Segura Transmission project includes the construction of ~~additional~~48 miles of 230kV transmission ~~interconnection facilities~~line, a 230/138kV substation, and three substation expansions in south ~~of Teche Power Station.~~Louisiana. The project is expected to cost approximately


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

$130.6 million. The project is expected to increase reliability, ~~reduce congestion,~~provide transmission system redundancy, and provide hurricane hardening ~~of the 230 kilovolt transmission system~~ for customers in south Louisiana. Cleco Power received MISO approval for the project in December 2017. Construction was completed on expansions to existing substations. The project team is finalizing negotiations on the right-of-way and land acquisition agreements. Cleco Power’s portion of the joint project with Entergy Louisiana is expected to cost $48.0 million. Constructionnorthern phase is expected to be ~~complete by~~completed in the third quarter of 2021, and the southern phase is expected to be completed in the fourth quarter of ~~2018.~~2021. As of ~~September 30, 2017,~~March 31, 2021, Cleco Power had spent ~~$6.5~~$66.0 million on the project.

~~Coughlin Pipeline~~DSMART Project

The ~~Coughlin Pipeline~~DSMART project includes ~~construction~~modernization of ~~a pipeline directly connecting the Pine Prairie Energy Center~~Cleco Power’s distribution system by replacing or upgrading distribution line equipment utilizing new and emerging technologies to



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~Cleco’s Coughlin Power Station.~~ facilitate automatic fault isolation, service restoration, and fault location. The project is expected to ~~increase reliability for fuel delivery~~provide savings through a reduction in outage restoration time, time to locate faults, and mitigate exposure to transportation cost increases. On June 28, 2017, the LPSC approved the establishment of a regulatory asset for the revenue requirement associated with the Coughlin Pipeline project until Cleco Power seeks recovery in its next rate case.improved operational efficiencies. The project is also expected to ~~be complete~~improve safety and reliability of Cleco Power’s distribution assets by minimizing outage patrols and improving situational awareness in the ~~second quarter~~distribution operations center. The total estimated project cost is $90.2 million. The project implementation will be completed in phases and management expects the total project will be completed by the end of 2025. In January 2019, ~~with an estimated cost~~Cleco Power began the first phase of ~~$29.4 million.~~the project. As of ~~September 30, 2017,~~March 31, 2021, Cleco Power had spent ~~$0.2~~$19.2 million on the project.

Other

Cleco Power is working ~~on securing~~to secure load growth opportunities that include renewing existing franchises and wholesale contracts, pursuing new wholesale contracts and franchises, and adding new retail load opportunities with large industrial, commercial, and residential load. The retail opportunities include sectors such as agriculture, oil and gas, chemicals, metals, national accounts, government and military, wood and paper, health care, information technology, transportation, and other manufacturing. Failure to renew existing franchises and wholesale contracts could have a material adverse effect on Cleco Power’s results of operations, financial condition, cash flows, and liquidity.


RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, 2021, and 2020


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020		VARIANCE		CHANGE
Operating revenue, net	$	394,995	$	347,572	$	47,423	13.6	%
Operating expenses	348,698		292,907		(55,791)		(19.0)	%
Operating income	46,297		54,665		(8,368)		(15.3)	%
Interest income	647		1,157		(510)		(44.1)	%
Allowance for equity funds used during construction	887		(74)		961		*

Other expense, net	(3,033)		(12,709)		9,676		76.1	%
Interest charges	33,891		35,149		1,258		3.6	%
Federal and state income tax (benefit) expense	(9,420)		1,562		10,982		703.1	%
Net income	$	20,327	$	6,328	$	13,999	221.2	%
* Not meaningful

Results of operations for Cleco Power and Cleco Cajun are more fully described following the discussion of Cleco’s results of operations.

COVID-19 Impacts

The rapid spread of COVID-19 and the varying degrees of restrictions on business and social activities imposed by federal, state, and local governments to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory, have caused Cleco to experience adverse business conditions. These directives include an executive order issued on March 13, 2020, by the LPSC prohibiting the disconnection of utilities for nonpayment. The LPSC is allowing utilities to establish a regulatory asset for the expenses incurred related to the executive order. At March 31, 2021, Cleco Power had a regulatory asset of $3.0 million for expenses incurred. While Cleco continues to assess the COVID-19 situation, at this time Cleco cannot estimate with any degree of certainty the full impact of the COVID-19 pandemic on its financial condition and future results of operations. For additional discussion regarding certain risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors — Operational Risks — COVID-19” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Operating Revenue, Net

Operating revenue, net increased $47.4 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $38.1 million of higher fuel cost recovery revenue and $4.6 million of higher base revenue at Cleco Power. Also contributing to the increase was $12.4 million of higher electric operations revenue at Cleco Cajun. These increases were partially offset by $12.6 million of higher electric customer credits at Cleco Power.

Operating Expenses

Operating expenses increased $55.8 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $37.7 million of higher recoverable fuel and purchased power and $4.2 million of higher taxes other than income taxes



~~RESULTS OF OPERATIONS~~CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

~~All~~

at Cleco Power. Also contributing to the increase was $22.9 million of ~~Cleco’s financial information~~higher purchased power at Cleco Cajun. These increases were partially offset by $5.0 million of lower fuel used for electric generation at Cleco Cajun and $3.4 million of lower other operations and maintenance expenses at Cleco Power.

Other Expense, Net

Other expense, net decreased $9.7 millionduring the first quarter of 2021 compared to the first quarter of 2020 primarily due to $12.2 million for the ~~nine months ended September 30, 2017,~~increase in cash surrender value of certain trust-owned life insurance policies as a result of favorable market conditions at Cleco Holdings, partially offset by $1.0 million of higher pension non-service costs at Cleco Power.

Income Taxes

Federal and ~~2016 is presented such that pre-merger activity is shown~~state income tax expense decreased $11.0 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $11.1 million for the amortization of excess ADIT and $3.4 million to record tax expense at the projected annual effective tax rate. These decreases were partially offset by $2.1 million for the flowthrough of state tax benefits, $0.4 million for the absence of an adjustment as ~~“Predecessor” and post-merger activity is shown as “Successor.” The purchase price~~a result of the ~~Merger was allocated to~~CARES Act, $0.4 million for permanent tax deductions, and $0.4 million for the ~~related assets and liabilities based on their respective~~change in pretax income, excluding AFUDC equity.

The estimated fair values on the Merger date, with the remaining consideration recorded as goodwill. The fair values of assets are being amortized over their estimated useful lives in a manner that best reflects the economic benefits derived from such assets. Goodwill is not amortized, but is subject to impairment testing, annually,annual effective income tax rates used during the ~~third quarter. Such adjustments to fair value~~first quarter of 2021 and 2020 for Cleco may not be indicative of the ~~allocation of purchase price between identifiable intangibles and goodwill will have an impact on Cleco’s expenses and profitability.~~full-year income tax rates. For more information on ~~Goodwill,~~the effective income tax rates for the first quarters of 2021 and 2020, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 19 — ~~Summary of Significant Accounting Polices~~Income Taxes — ~~Goodwill.~~Effective Tax Rates.”

~~Comparison of the Three Months Ended September 30, 2017, and 2016~~


Cleco Power
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020			VARIANCE		CHANGE
Operating revenue
Base	$	152,611	$	147,999		$	4,612	3.1	%
Fuel cost recovery	114,547		76,431			38,116		49.9	%
Electric customer credits	(20,976)		(8,340)			(12,636)		(151.5)	%
Other operations	18,626		15,764			2,862		18.2	%
Affiliate revenue	1,655		1,106			549		49.6	%
Operating revenue, net	266,463		232,960			33,503		14.4	%
Operating expenses
Recoverable fuel and purchased power	114,573		76,834			(37,739)		(49.1)	%
Non-recoverable fuel and purchased power	9,670		7,692			(1,978)		(25.7)	%
Other operations and maintenance	53,565		56,944			3,379		5.9	%
Depreciation and amortization	42,076		43,677			1,601		3.7	%
Taxes other than income taxes	16,502		12,276			(4,226)		(34.4)	%


Total operating expenses	236,386		197,423			(38,963)		(19.7)	%
Operating income	30,077		35,537			(5,460)		(15.4)	%
Interest income	642		954			(312)		(32.7)	%
Allowance for equity funds used during construction	887		(74)			961		*
Other expense, net	(4,258)		(2,667)			(1,591)		(59.7)	%
Interest charges	18,646		18,581			(65)		(0.3)	%
Federal and state income tax (benefit) expense	(9,723)		3,338			13,061		391.3	%
Net income	$	18,425	$	11,831		$	6,594	55.7	%
* Not meaningful

Cleco
FOR THE THREE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2017
2016
VARIANCE
CHANGE
Operating revenue, net $ 338,499
$ 342,860
$ (4,361 ) (1.3 )%
Operating expenses 243,387
249,717
6,330
2.5 %
Operating income $ 95,112
$ 93,143
$ 1,969
2.1 %
Allowance for equity funds used during construction $ 2,096
$ 1,308
$ 788
60.2 %
Other income, net $ 1,258
$ 410
$ 848
206.8 %
Interest charges $ 30,462
$ 31,858
$ 1,396
4.4 %
Federal and state income tax expense $ 23,054
$ 23,700
$ 646
2.7 %
Net income $ 45,304
$ 39,621
$ 5,683
14.3 %

~~Operating revenue, net decreased $4.4 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to lower base revenue partially offset by higher~~

~~fuel cost recovery revenue and higher other operations revenue at Cleco Power.~~

Operating expenses decreased $6.3 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to lower other operations expenses at Cleco Power, lower merger transaction and commitment costs at Cleco Holdings, and lower maintenance expenses at Cleco Power. These decreases were partially offset by higher recoverable fuel and power purchased at Cleco Power.

Other income, net increased $0.8 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to the increase in the cash surrender value of life insurance policies at Cleco Holdings due to favorable market conditions, higher mutual assistance income at Cleco Power, and higher royalty income at Cleco Power. These increases were partially offset by the absence of a death benefit recognized on life insurance policies and higher mutual assistance expenses at Cleco Power.

Interest charges decreased $1.4 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to long-term debt redeemed and replaced with lower interest rate debt in the fourth quarter of 2016 at Cleco Power, partially offset by higher interest rates on Cleco Holdings’ $300.0 million long-term variable rate bank term loan.

Federal and state income tax expense decreased $0.6 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to $4.4 million to record tax expense at the consolidated projected annual effective tax rate and $1.3 million for adjustments for permanent tax differences. These decreases were partially offset by $2.6 million for the flowthrough of state tax benefits, $2.2 million for the change in pretax income, excluding AFUDC equity, and $0.3 million for miscellaneous tax items. The effective income tax rate for the third quarter of 2017 and 2016 was 33.7% and 37.4%, respectively. The estimated annual effective income tax rate used during the third quarter of 2017 and 2016 for Cleco might not be indicative of the full-year income tax rate.

~~Results of operations for Cleco Power are more fully described below.~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2017
2016
VARIANCE
CHANGE
Operating revenue
Base $ 187,149
$ 198,448
$ (11,299 ) (5.7 )%
Fuel cost recovery 132,860
127,833
5,027
3.9 %
Electric customer credits (372 ) 177
(549 ) (310.2 )%
Other operations 20,768
18,460
2,308
12.5 %
Affiliate revenue 209
213
(4 ) (1.9 )%
Operating revenue, net 340,614
345,131
(4,517 ) (1.3 )%
Operating expenses

Recoverable fuel and power purchased 132,866
127,834
(5,032 ) (3.9 )%
Non-recoverable fuel and power purchased 9,706
10,132
426
4.2 %
Other operations 28,680
35,886
7,206
20.1 %
Maintenance 17,812
19,326
1,514
7.8 %
Depreciation and amortization 40,049
40,353
304
0.8 %
Taxes other than income taxes 12,008
12,180
172
1.4 %
Total operating expenses 241,121
245,711
4,590
1.9 %
Operating income $ 99,493
$ 99,420
$ 73
0.1 %
Allowance for equity funds used during construction $ 2,096
$ 1,308
$ 788
60.2 %
Interest charges $ 17,141
$ 19,177
$ 2,036
10.6 %
Federal and state income tax expense $ 30,092
$ 29,427
$ (665 ) (2.3 )%
Net income $ 54,852
$ 52,572
$ 2,280
4.3 %

~~Cleco Power’s net income in the third quarter of 2017 increased $2.3 million compared to the third quarter of 2016 primarily as a result of the following factors:~~

~~lower other operations expense,~~

~~higher other operations revenue,~~

~~lower interest charges, and~~

~~lower maintenance expense.~~

~~These increases were partially offset by~~ ~~lower base revenue~~.

The following table shows the components of Cleco Power’s retail and wholesale customer sales related to base revenue:


	FOR THE THREE MONTHS ENDED MAR. 31,
(MILLION kWh)	2021	2020	FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	916	780		17.4	%
Commercial	580	582		(0.3)	%
Industrial	520	484		7.4	%
Other retail	31	31		—	%
Total retail	2,047	1,877		9.1	%
Sales for resale	696	650		7.1	%
Total retail and wholesale customer sales	2,743	2,527		8.5	%

FOR THE THREE MONTHS ENDED SEPT. 30,
(MILLION kWh) 2017
2016
FAVORABLE/
(UNFAVORABLE)

Electric sales
Residential 1,113
1,225
(9.1 )%
Commercial 771
813
(5.2 )%
Industrial 535
504
6.2 %
Other retail 35
35
— %
Total retail 2,454
2,577
(4.8 )%
Sales for resale 924
949
(2.6 )%
Total retail and wholesale customer sales 3,378
3,526
(4.2 )%


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

The following table shows the components of Cleco Power’s base revenue:


	FOR THE THREE MONTHS ENDED SEPT. 30,								FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2017		2016		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2021		2020		FAVORABLE/ (UNFAVORABLE)
Electric sales								Electric sales
Residential	$	92,782	$	100,775		(7.9	)%	Residential	$	67,811	$	61,890		9.6	%
Commercial	49,848		52,082			(4.3	)%	Commercial	46,465		47,056			(1.3)	%
Industrial	21,690		21,215			2.2	%	Industrial	22,427		20,580			9.0	%
Other retail	2,732		2,812			(2.8	)%	Other retail	2,667		2,679			(0.4)	%
Surcharge	5,507		6,080			(9.4	)%	Surcharge	—		2,442			(100.0)	%
Total retail	172,559		182,964			(5.7	)%	Total retail	139,370		134,647			3.5	%
Sales for resale	14,590		15,484			(5.8	)%	Sales for resale	13,241		13,352			(0.8)	%
Total base revenue	$	187,149	$	198,448		(5.7	)%	Total base revenue	$	152,611	$	147,999		3.1	%

Cleco Power’s residential customers’ demand for electricity is largely affected ~~largely~~ by weather. Weather generally is measured in cooling degree-days and heating degree-days. A cooling degree-day is an indication of the likelihood that a consumer will use air conditioning, while a heating degree-day is an indication of the likelihood that a consumer will use heating. An increase in heating degree-days does not produce the same increase in revenue as an increase in cooling degree-days because alternative heating sources are more readily available, and winter energy is typically priced below the rate charged for energy used in the summer. Normal heating degree-days and cooling degree-days are calculated for a month by separately calculating the average actual heating and cooling degree-days for that month over a period of 30 years.

The following chart shows how heating and cooling degree-days varied from normal conditions and from the prior period. Cleco Power uses weather data provided by the National Oceanic and Atmospheric Administration to determine ~~cooling and heating~~ degree-days.

FOR THE THREE MONTHS ENDED SEPT. 30,
2017 CHANGE
2017
2016
NORMAL
PRIOR YEAR
NORMAL
Cooling degree-days 1,519
1,744
1,511
(12.9 )% 0.5 %


	FOR THE THREE MONTHS ENDED MAR. 31,
				CHANGE
	2021	2020	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	935	586	890	59.6	%	5.1	%
Cooling degree-days	140	264	78	(47.0)	%	79.5	%

Base

Base revenue ~~decreased $11.3~~increased $4.6 millionduring the ~~third~~first quarter of ~~2017~~2021 compared to the ~~third~~first quarter of ~~2016~~2020 primarily due to ~~$9.2~~$5.9 million of ~~lower~~higher usage from colder winter weather and $3.4 million of higher unbilled revenue largely due to colder winter weather. These increases were partially offset by the absence of $2.4 million of Cleco Katrina/Rita storm restoration surcharge revenue as a result of ~~milder summer weather~~the final principal and ~~lower sales to wholesale customers, $1.9~~interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020, $0.6 million ~~due to lower rates to a site specific industrial customer, $0.7 million due to~~of lower revenue related to ~~MATS, and $0.2~~the St. Mary Clean Energy Center project, $0.5 million of lower ~~other revenue. These decreases were partially offset by $0.7~~revenue for the over collection of revenue related to the energy efficiency program, and $0.4 million ~~due~~related to ~~an annual rate adjustment that began on July 1, 2017.~~

~~Cleco Power expects increased base revenue~~the absence of ~~$8.0 million in 2018 and an additional $8.6 million in 2019 through an FRP rider~~the amortization of shared services associated with the ~~recovery of expenditures for capital projects.~~ Cleco Cajun Transaction.

For information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco Power, see Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales” in the Registrants’ Combined

Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Fuel Cost Recovery/Recoverable Fuel and Purchased Power ~~Purchased~~

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately ~~75%~~76% of Cleco Power’s total fuel cost during the ~~third~~first quarter of ~~2017~~2021 was regulated by the LPSC. Recovery of FAC costs is subject to periodic fuel audits by the LPSC which may result in a refund to customers. Generally, fuel and purchased power expenses are impacted by customer usage, the per unit cost of fuel used for electric generation, and the dispatch of Cleco Power’s generating facilities by MISO. Cleco Power’s incremental fuel and purchased power costs were impacted significantly as a result of Winter Storms Uri and Viola. On March 29, 2021, Cleco Power received approval from the LPSC to recover a portion of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. For more information on Cleco Power’s most current fuel ~~audits,~~audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audit.”

~~Other Operations Revenue~~Electric Customer Credits

~~Other operations revenue~~Electric customer credits increased ~~$2.3~~$12.6 million during the ~~third~~first quarter of ~~2017~~2021 compared to the ~~third~~first quarter of ~~2016~~2020 primarily due to ~~$2.2 million of~~ higher ~~forfeited discounts and reconnect fees mostly due to~~estimated refunds for the ~~absence~~federal tax-related benefits of the 2016 customer rate credits as a result of the Merger and the absence of LPSC executive orders relating to 2016 flooding, $1.2 million of generation revenue from SSR payments, and $0.2 million of higher miscellaneous other operations revenue. These increases were partially offset by $1.3 million of lower net transmission revenue.TCJA. For more information on the ~~SSR, see “Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power — SSR.”~~

~~Non-recoverable Fuel and Power Purchased~~

Non-recoverable fuel and power purchased decreased $0.4 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to $1.9 million of lower net MISO transmission expenses due to lower usage and rates and $0.3 million due to the absence of a reserve for uncollectible transmission expenses. These decreases were partially offset by $0.8 million of higher miscellaneous expenses, $0.6 million of MISO SSR transmission expenses, and $0.4 million of expenses related to flood damages. For more information on the SSR, see “Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power — SSR.”

~~Other Operations Expense~~

Other operations expense decreased $7.2 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to $2.1 million of higher capitalized administrative and general expenses, $1.3 million of lower salaries, $1.1 million of lower fees for outside services, $1.1 million of flood related uncollectible accounts deferred to regulatory assets, $0.7 million of lower employee benefit expenses, $0.5 million of higher administrative and general costs billed to joint owners, and $0.5 million of lower generation operations expenses. These decreases were partially offset by $0.1 million of higher miscellaneous other operations expenses.

~~Maintenance~~

Maintenance expense decreased $1.5 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to $1.2 million of lower net generating station routine maintenance expenses, $0.2 million of lower distribution

~~routine maintenance expenses, and $0.1 million of lower administrative and general maintenance expenses.~~

~~Allowance for Equity Funds Used During Construction~~

Allowance for equity funds used during construction increased $0.8 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to higher costs related to the St. Mary Clean Energy Center project and other capital projects.

~~Interest Charges~~

Interest charges decreased $2.0 million during the third quarter of 2017 compared to the third quarter of 2016 due to long-term debt redeemed and replaced with lower interest rate debt in the fourth quarter of 2016.

~~Income Taxes~~

Federal and state income tax expense increased $0.7 million during the third quarter of 2017 compared to the third quarter of 2016 primarily due to $2.6 million for the flowthrough of state tax benefits, $1.4 million for the change in pretax income, excluding AFUDC equity, and $1.1 million for tax returns as filed. These increases were partially offset by $4.4 million to record tax expense at the projected annual effective tax rate.

The effective income tax rate for the third quarter of 2017 and 2016 was 35.4% and 35.9%, respectively. The estimated annual effective income tax rate used during the third quarter of 2017 and 2016 for Cleco Power might not be indicative of the full-year income tax rate.

~~Comparison of the Nine Months Ended September 30, 2017, and 2016~~

Cleco
SUCCESSOR PREDECESSOR
(THOUSANDS) FOR THE NINE MONTHS ENDED SEPT. 30, 2017
APR. 13, 2016 - SEPT. 30, 2016
JAN. 1, 2016 - APR. 12, 2016
Operating revenue, net $ 897,662
$ 586,363
$ 299,870
Operating expenses 693,501
603,368
279,507
Operating income (loss) $ 204,161
$ (17,005 ) $ 20,363
Interest income $ 1,046
$ 515
$ 265
Allowance for equity funds used during construction $ 4,446
$ 2,057
$ 723
Other income, net $ 2,569
$ 1,960
$ 280
Interest charges $ 92,800
$ 58,323
$ 22,123
Federal and state income tax expense (benefit) $ 42,381
$ (28,502 ) $ 3,468
Net income (loss) $ 77,041
$ (42,294 ) $ (3,960 )

Cleco’s net income attributable to the successor period for the nine months ended September 30, 2017, was $77.0 million. There were no significant changes in the underlying trends impacting net income. The effective income tax rate for the period was 35.5%.

Cleco’s net loss attributable to the successor period April 13, 2016, through September 30, 2016, was $42.3 million. There were no significant changes in the underlying trends impacting net loss with the exception of the change in pretax loss primarily related to:

~~$173.2 million of merger transaction and commitment costs,~~

~~$21.6 million of interest costs related to debt obtained as a result of the Merger,~~

~~$4.8 million of an offset to operating revenue related to the amortization of the intangible asset recorded for the fair~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~value adjustment of wholesale power supply agreements as a result of the Merger, and~~

~~$4.6 million of amortization of the fair value adjustment made as a result of the Merger to record the stepped-up basis for the Coughlin assets.~~

~~The effective income tax rate for the period was 40.3%.~~

Cleco’s net loss attributable to the predecessor period January 1, 2016, through April 12, 2016, was $4.0 million. There were no significant changes in the underlying trends impacting net loss with the exception of the change in pretax loss primarily related to $34.9 million of merger transaction costs. The effective income tax rate for the period was (704.9)%.

~~The estimated annual effective income tax rate used during the nine months ended September 30, 2017, and 2016 for Cleco might not be indicative of the full-year income tax rate.~~

~~Results of operations for Cleco Power are more fully described below.~~

Cleco Power
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2017
2016
VARIANCE
CHANGE
Operating revenue
Base $ 498,417
$ 515,294
$ (16,877 ) (3.3 )%
Fuel cost recovery 349,000
324,299
24,701
7.6 %
Electric customer credits (1,045 ) (745 ) (300 ) (40.3 )%
Other operations 58,083
50,638
7,445
14.7 %
Affiliate revenue 649
669
(20 ) (3.0 )%
Operating revenue, net 905,104
890,155
14,949
1.7 %
Operating expenses

Recoverable fuel and power purchased 348,853
324,305
(24,548 ) (7.6 )%
Non-recoverable fuel and power purchased 26,885
27,920
1,035
3.7 %
Other operations 90,453
94,566
4,113
4.3 %
Maintenance 66,496
71,818
5,322
7.4 %
Depreciation and amortization 118,280
115,196
(3,084 ) (2.7 )%
Taxes other than income taxes 35,412
36,096
684
1.9 %
Merger commitment costs —
151,501
151,501
100.0 %
Gain on sale of asset —
(1,095 ) (1,095 ) (100.0 )%
Total operating expenses 686,379
820,307
133,928
16.3 %
Operating income $ 218,725
$ 69,848
$ 148,877
213.1 %
Allowance for equity funds used during construction $ 4,446
$ 2,780
$ 1,666
59.9 %
Other income (expense), net $ 6
$ (254 ) $ 260
102.4 %
Interest charges $ 52,654
$ 57,777
$ 5,123
8.9 %
Federal and state income tax expense $ 63,010
$ 2,965
$ (60,045 ) *
Net income $ 108,439
$ 12,222
$ 96,217
787.2 %
* Not meaningful

~~Cleco Power’s net income in the first nine months of 2017 increased $96.2 million compared to the first nine months of 2016 primarily as a result of the following factors:~~

~~the absence of merger commitment costs,~~

~~higher other operations revenue,~~

~~lower maintenance expense,~~

~~lower interest charges,~~

~~lower other operations expense,~~

~~higher allowance for equity funds used during construction, and~~

~~lower non-recoverable fuel and power purchased.~~

~~These increases were partially offset by:~~

~~higher income taxes,~~

~~lower base revenue,~~

~~higher depreciation and amortization, and~~

~~the absence of a gain on sale of asset.~~

~~The following table shows the components of Cleco Power’s retail and wholesale customer sales related to base revenue:~~

FOR THE NINE MONTHS ENDED SEPT. 30,
(Million kWh) 2017
2016
FAVORABLE/
(UNFAVORABLE)

Electric sales
Residential 2,692
2,920
(7.8 )%
Commercial 2,026
2,110
(4.0 )%
Industrial 1,529
1,471
3.9 %
Other retail 99
103
(3.9 )%
Total retail 6,346
6,604
(3.9 )%
Sales for resale 2,256
2,385
(5.4 )%
Total retail and wholesale customer sales 8,602
8,989
(4.3 )%

~~The following table shows the components of Cleco Power’s base revenue:~~

FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2017
2016
FAVORABLE/
(UNFAVORABLE)

Electric sales
Residential $ 221,689
$ 232,430
(4.6 )%
Commercial 143,549
147,837
(2.9 )%
Industrial 64,778
64,395
0.6 %
Other retail 7,980
8,189
(2.6 )%
Surcharge 16,241
16,771
(3.2 )%
Total retail 454,237
469,622
(3.3 )%
Sales for resale 44,180
45,672
(3.3 )%
Total base revenue $ 498,417
$ 515,294
(3.3 )%

The following chart shows how cooling and heating degree-days varied from normal conditions and from the prior period. Cleco Power uses weather data provided by the National Oceanic and Atmospheric Administration to determine degree-days.

FOR THE NINE MONTHS ENDED SEPT. 30,
2017 CHANGE
2017
2016
NORMAL
PRIOR YEAR
NORMAL
Heating degree-days 440
755
942
(41.7 )% (53.3 )%
Cooling degree-days 2,675
2,885
2,531
(7.3 )% 5.7 %

~~Base~~

Base revenue decreased $16.9 million during the first nine months of 2017 compared to the first nine months of 2016 primarily due to $13.9 million of lower usage as a result of milder weather and lower sales to wholesale customers, $4.0 million due to lower rates to a site specific industrial customer,



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~and $0.1 million of lower other revenue. These decreases were partially offset by $1.0 million for annual rate adjustments and $0.1 million due to higher revenue related to MATS.~~

For information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco Power, see Part I, Item 1A, “Risk Factors — Future Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

~~Fuel Cost Recovery/Recoverable Fuel and Power Purchased~~

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately 76% of Cleco Power’s total fuel cost during the first nine months of 2017 was regulated by the LPSC. Recovery of FAC costs is subject to periodic fuel audits by the LPSC which may result in a refund to customers. Generally, fuel and purchased power expenses are impacted by customer usage, the per unit cost of fuel used for electric generation, and the dispatch of Cleco Power’s generating facilities by MISO. For more information on fuel audits,TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1211 — ~~Litigation, Other Commitments~~Regulation and ~~Contingencies, and Disclosures about Guarantees~~Rates — ~~Litigation — LPSC Audits — Fuel Audit.~~TCJA.”

Other Operations Revenue

Other operations revenue increased ~~$7.4~~$2.9 million during the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine months~~quarter of ~~2016~~2020 primarily ~~related~~due to ~~$6.3~~$1.8 million of ~~generation~~higher transmission revenue ~~from SSR payments, $2.0~~and $0.6 million of higher forfeited discounts and reconnect fees mostly due to the absence of the 2016 customer rate credits as a result of the Merger and the absence of LPSC executive orders relating to 2016 flooding, $1.0 million of higher net transmission revenue, and $0.4 million of higher miscellaneous revenue. These increases were partially offset by $2.3 million of lower transmission revenue from wholesale customers as a result of issuing customer credits relating to the MISO ROE complaints. For more information on the SSR, see “Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power — SSR.”discounts.

~~Non-recoverable~~Non-Recoverable Fuel and Purchased Power ~~Purchased~~

Non-recoverable fuel and purchased power ~~purchased decreased $1.0~~increased $2.0 million during the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine months~~quarter of ~~2016~~2020 primarily due to ~~a $2.3~~$1.4 million ~~refund from MISO for wholesale customers relating~~of higher transmission costs and $0.5 million of higher fuel expenses.

Other Operations and Maintenance Expense

Other operations and maintenance expense decreased $3.4 millionduring the first quarter of 2021 compared to the ~~MISO ROE complaints, $1.6~~first quarter of 2020 primarily due to $1.7 million of lower expenses related to employee benefits and $0.7 million for the absence of ~~a reserve for uncollectible transmission expenses, and $1.3 million due~~adjustments to the absence of expenses related to fuel accounting software. These decreases were partially offset by $2.7 million of MISO SSR transmission expenses, $0.8 million of higher miscellaneous expenses, $0.4 million of expenses related to flood damages, and $0.3 million of higher net MISO transmission expenses due to higher usage and rates. For more information on the SSR, see “Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power — SSR.”

~~Other Operations Expense~~

~~Other operations expense decreased $4.1 million during the first nine months of 2017 compared~~provision for credit losses. Also contributing to the ~~first nine months of 2016 primarily due to $2.1 million of higher capitalized~~

~~administrative and general expenses, $1.4~~decrease was $0.5 million of lower ~~salaries, $1.1 million of the flood related uncollectible accounts deferred to regulatory assets, $1.1~~outside services and $0.5 million of lower ~~generation operations expenses, $0.7 million of lower employee benefits expenses,~~materials and $0.7 million of higher company use of electricity. These decreases were partially offset by $1.3 million of higher fees for outside services, $0.9 million for higher uncollectible accounts, and $0.8 million of higher customer service expenses.supplies expense.

~~Maintenance Expense~~

Maintenance expense decreased $5.3 million during the first nine months of 2017 compared to the first nine months of 2016 primarily due to $4.7 million of lower net generating station outage and routine maintenance expenses and $1.0 million of lower transmission and distribution routine maintenance expenses. These decreases were partially offset by $0.4 million of higher administrative and general maintenance expenses.

Depreciation and Amortization

Depreciation and amortization expense ~~increased $3.1~~decreased $1.6 millionduring the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine months~~quarter of ~~2016~~2020 primarily due to $3.6 million of normal recurring additions to fixed assets and $1.8 million of lower deferrals of corporate franchise taxes to regulatory assets. These increases were partially offset by $1.7 million due to the absence of amortization ~~related to transition assets, $0.5 million~~ of ~~lower amortization~~storm damages as a result of ~~intangible assets,~~the final principal and ~~$0.1 million of lower miscellaneous amortization.~~interest

~~Merger Commitment Costs~~


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

~~Merger commitment costs decreased $151.5~~

payments on Cleco Katrina/Rita storm recovery bonds in March 2020.

Taxes Other Than Income Taxes

Taxes other than income taxes increased $4.2 million during the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine months~~quarter of ~~2016~~2020 primarily due to ~~the close of the Merger in April 2016.~~higher property taxes.

~~Allowance for Equity Funds Used During Construction~~Other expense, net

~~Allowance for equity funds used during construction~~Other expense, net increased ~~$1.7~~$1.6 million during the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine months~~quarter of ~~2016~~2020 primarily due to higher pension non-service costs ~~related to the St. Mary Clean Energy Center project and other capital projects.~~

~~Other Income (Expense), Net~~

Other income, net increased $0.3 million during the first nine months of 2017 compared to the first nine months of 2016 primarily due to $0.9 million of higher mutual assistance income, $0.3 million of higher royalty income, $0.3 million due to the absenceas a result of a ~~decrease in cash surrender value of life insurance policies, and $0.1 million due to~~ lower miscellaneous expenses. These increases were partially offset by $0.9 million of higher mutual assistance expenses and $0.4 million due to the absence of a death benefit recognized on life insurance policies.discount rate.

~~Interest Charges~~

Interest charges decreased $5.1 million during the first nine months of 2017 compared to the first nine months of 2016 primarily due to long-term debt redeemed and replaced with lower interest rate debt in the fourth quarter of 2016.

Income Taxes

Federal and state income tax expense ~~increased $60.0~~decreased $13.1 million during the first ~~nine months~~quarter of ~~2017~~2021 compared to the first ~~nine~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~months~~quarter of ~~2016~~2020 primarily due to ~~$60.3~~$11.1 million for the ~~change in pretax income, excluding AFUDC equity, $1.2~~amortization of excess ADIT, $2.8 million to record tax expense at the projected annual effective tax rate, and ~~$1.1~~$1.6 million for ~~tax returns as filed.~~the change in pretax income, excluding AFUDC equity. These ~~increases~~decreases were partially offset by ~~$2.5~~$2.1 million for the flowthrough of state tax benefits and ~~$0.1~~$0.4 million for ~~miscellaneous~~the absence of an adjustment as a result of the CARES Act.

The estimated annual effective income tax ~~items.~~rates used during the first quarter of 2021 and 2020 for Cleco Power may not be indicative of the full-year income tax rates. For more information on the effective income tax rates for the first quarters of 2021 and 2020, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Cajun
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020			VARIANCE		CHANGE
Operating revenue
Electric operations	$	101,507	$	89,147		$	12,360	13.9	%
Electric customer credits	—		(153)			153		100.0	%
Other operations	33,039		30,961			2,078		6.7	%
Affiliate revenue	—		161			(161)		(100.0)	%
Operating revenue, net	134,546		120,116			14,430		12.0	%
Operating expenses
Fuel used for electric generation	10,610		15,572			4,962		31.9	%
Purchased power	67,608		44,675			(22,933)		(51.3)	%
Other operations and maintenance	22,114		20,516			(1,598)		(7.8)	%
Depreciation and amortization	10,856		10,103			(753)		(7.5)	%
Taxes other than income taxes	3,770		3,473			(297)		(8.6)	%

Total operating expenses	114,958		94,339			(20,619)		(21.9)	%
Operating income	19,588		25,777			(6,189)		(24.0)	%
Interest income	3		155			(152)		(98.1)	%
Other (expense) income, net	(652)		34			(686)		*
Interest charges	(152)		10			162		*
Federal and state income tax expense	4,610		6,421			1,811		28.2	%
Net income	$	14,481	$	19,535		$	(5,054)	(25.9)	%
* Not meaningful

Electric Operations

Electric operations revenue increased $12.4 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $6.0 million of higher revenue resulting from an increase in load volumes, $4.5 million of higher MISO make-whole payments, and $3.4 million of higher revenue as a result of higher fuel rates, partially offset by $2.6 million of lower MISO pass-through recoveries.

Other Operations Revenue

Other operations revenue increased $2.1 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher transmission revenue.

Fuel Used for Electric Generation

Fuel used for electric generation decreased $5.0 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $11.8 million of higher mark-to-market gains on gas related derivative contracts, partially offset by $7.4 million of higher fuel consumption.

Purchased Power

Purchased power increased $22.9 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher cost of purchased power from MISO, largely the result of Winter Storms Uri and Viola.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased $1.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $4.0 million of higher generating outage maintenance expense, partially offset by $2.3 million of lower generation operations expense.

Income Taxes

Federal and state income tax expense decreased $1.8 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $1.4 million for the change in pretax income and $0.6 million for state tax expense.

The effective income tax ~~rate~~rates for the ~~nine months ended September 30, 2017,~~first quarters of 2021 and ~~2016 was 36.8%~~2020 were 24.1% and ~~19.5%~~25.0%, respectively. The estimated annual effective income tax ~~rate~~rates used during the first ~~nine months~~quarter of ~~2017~~2021 and ~~2016~~2020 for Cleco ~~Power might~~Cajun may not be indicative of the full-year income tax ~~rate.~~rates.

Non-GAAP Measure

The financial results in the following tables are presented on an accrual basis. EBITDA is a key non-GAAP financial measure used by the CEO to assess the operating performance of Cleco’s segments. Management evaluates the performance of Cleco’s segments and allocates resources to them based on segment profit and the requirements to implement strategic initiatives and projects to meet current business objectives. EBITDA is defined as net income adjusted for interest, income taxes, depreciation, and amortization.



~~FINANCIAL CONDITION~~CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

The following tables set forth a reconciliation of net income, the nearest comparable GAAP financial performance

measure, to EBITDA for the three months ended March 31, 2021, and 2020:


	FOR THE THREE MONTHS ENDED MAR. 31,
	2021					2020
(THOUSANDS)	CLECO POWER		CLECO CAJUN			CLECO POWER		CLECO CAJUN
Net income	$	18,425	$	14,481		$	11,831	$	19,535
Add: Depreciation and amortization	42,076		11,653		(1)	43,677		10,900		(2)
Less: Interest income	642		3			954		155
Add: Interest charges	18,646		(152)			18,581		10
Add: Federal and state income tax (benefit) expense	(9,723)		4,610			3,338		6,421
EBITDA	$	68,782	$	30,589		$	76,473	$	36,711
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements as a result of the Cleco Cajun Transaction and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements as a result of the Cleco Cajun Transaction and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

Financing for operational needs and capital expenditure requirements not satisfied by operating cash flows depends upon the cost and availability of external funds through both short- and long-term financing. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain or expand its businesses. Access to funds is dependent upon factors such as general economic and capital market conditions, including the impact of COVID-19, regulatory authorizations and policies, Cleco Holdings’ and Cleco Power’s credit ratings, cash flows from routine operations, and credit ratings of project counterparties. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. The following table presents the credit ratings of Cleco Holdings and Cleco Power at ~~September 30, 2017~~:March 31, 2021:

SENIOR UNSECURED DEBT

~~CORPORATE CREDIT~~CORPORATE/LONG-TERM ISSUER

~~MOODY’S~~S&P

MOODY’S

FITCH

S&P

MOODY’S

~~S&P~~FITCH

Cleco Holdings

~~Baa3~~BBB-

Baa3

BBB-

Baa3

BBB-

Cleco Power

BBB+

BBB

On April 7, 2017, Moody’s updated its credit ratings by maintaining Cleco Holdings at Baa3 (stable) and Cleco Power at A3 (stable). On May 30, 2017, S&P affirmed Cleco Holdings’ and Cleco Power’s credit ratings at BBB- (stable) and BBB+ (stable), respectively.

~~Cleco notes that credit~~Credit ratings are not recommendations to buy, sell, or hold securities, and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

Cleco Holdings and Cleco Power pay fees and interest under their bank credit agreements based on the highest ~~rating~~ratings held. Savings are dependent upon the level of borrowings. If Cleco ~~Holdings~~Holdings’ or Cleco Power’s credit ratings were to be downgraded, ~~by S&P or Moody’s,~~ Cleco Holdings ~~and/~~or Cleco Power, ~~would~~respectively, could be required to pay additional fees and incur higher interest rates for borrowings under their respective revolving credit facilities.

~~With respect to any open power or natural gas trading positions that~~ Cleco ~~Power may initiate in the future, Cleco Power~~ may be required to provide credit support with respect to any open trading contracts that Cleco has or ~~pay liquidated damages.~~may initiate in the future. The amount of credit support that Cleco ~~Power~~ may be required to provide at any point in the future is

dependent on the ~~amount~~notional value of the initial ~~transaction,~~contract, changes

in forward market prices, changes in the ~~market price~~volume of ~~power and natural gas,~~open contracts, changes in ~~open power and gas positions,~~credit ratings or credit quality where netting agreements take place, and changes in the amount counterparties owe ~~Cleco Power.~~Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco Power ~~participates~~and Cleco Cajun participate in the MISO ~~market, which operates a fully functioning RTO market with two major market processes: the Day-Ahead Energy~~market. MISO requires Cleco Power and ~~Operating Reserves Market and the Real-Time Energy and Operating Reserves Market. Both use market-based mechanisms to manage transmission congestion across the MISO market area. MISO required~~ Cleco ~~Power~~Cajun to provide credit support which may increase or decrease due to the timing of the settlement ~~schedules. At September 30, 2017,~~schedules and MISO margining formulas. In February 2021, Cleco Power ~~had~~posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a ~~$2.0~~result of the increase in net purchased power costs related to Winter Storms Uri and Viola exceeding the respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million ~~letter of credit~~and $6.5 million to ~~MISO pursuant to the credit requirements of FTRs. The letter of credit automatically renews each year.~~Cleco Power and Cleco Holdings, respectively. For more information about MISO, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission ~~Rates of Cleco Power”~~Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020. For more information about credit support see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Litigation — Off-Balance Sheet Commitments and Guarantees.” For more information on Winter Storms Uri and Viola, see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Storm Restoration — Winter Storms Uri and Viola.”

Global and U.S. Economic Environment

Global and domestic economic conditions may have an impact on Cleco’s business and financial condition. Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. During periods of capital market volatility, the availability of capital could be limited and the costs of capital may increase for many companies. Although the Registrants have not experienced restrictions in the financial markets, their ability to access the capital markets may be restricted at a time when the Registrants would like, or need, to do so. Any


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

restrictions could have a material impact on the Registrants’ ability to fund capital expenditures or debt service, or on their flexibility to react to changing economic and business conditions. Credit constraints could have a material negative impact on the Registrants’ lenders or customers, causing them to fail to meet their obligations to the Registrants or to delay payment of such obligations. The lower interest rates to which the Registrants have been exposed have been beneficial to debt issuances; however, these rates have negatively affected interest income for the Registrants’ short-term investments.

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. As a result of the tax rate reduction, on January 1, 2018, Cleco Power began accruing an estimated reduction in reserve for the federal statutory corporate income tax rate. In February 2018, the LPSC directed utilities, including Cleco Power, to provide considerations of the appropriate manner to flowthrough to ratepayers the benefits of the reduction in corporate income taxes as a result of the TCJA. In July 2019, the LPSC approved Cleco Power’s rate refund of $79.2 million, plus interest, for the reduction in the statutory federal tax rate for the period from January 2018 to June 2020. The refund was credited to customers over 12 months beginning August 1, 2019.

In July 2019, the LPSC also approved Cleco Power’s motion to address the rate redesign and the regulatory liability for excess ADIT, resulting from the enactment of the TCJA, in Cleco Power’s current base rate case.

As a result of the delay in the rate case, on July 15, 2020, the LPSC approved Cleco Power’s application to extend the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through November 2020. On November 13, 2020, Cleco Power again received approval of its application to extend the TCJA bill credits from November 30, 2020, until such time that the rate case is complete. The $7.0 million monthly refund will consist of approximately $4.4 million, which is to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA. The mechanism to refund the remaining balance of the excess ADIT will be determined in Cleco Power’s current LPSC base rate case. At March 31, 2021, Cleco Power had $337.4 million accrued for the excess ADIT, of which $15.6 million is reflected in current regulatory liabilities. Cleco Power’s current base rate case is ongoing and management is unable to determine its outcome.

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels. Other financial assets and liabilities are reported at their carrying values at their date of issuance on the consolidated balance sheets with their fair values as of the balance sheet date disclosed within the three levels. For more information about fair value levels, see Item 1, “Notes to the

Unaudited Condensed Consolidated Financial Statements — Note 56 — Fair Value Accounting.”



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Cash Generation and Cash Requirements

Restricted Cash and Cash Equivalents

For more information on Cleco and Cleco Power’s restricted cash and cash equivalents, ~~consisted of:~~see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

Cleco
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Current
Cleco Katrina/Rita’s storm recovery bonds $ 3,798
$ 9,213
Cleco Power’s charitable contributions 1,200
1,200
Cleco Power’s rate credit escrow 3,876
12,671
Total current 8,874
23,084
Non-current
Diversified Lands’ mitigation escrow 21
21
Cleco Power’s future storm restoration costs 17,999
17,379
Cleco Power’s charitable contributions 3,640
4,179
Cleco Power’s rate credit escrow 2,887
1,831
Total non-current 24,547
23,410
Total restricted cash and cash equivalents $ 33,421
$ 46,494

Cleco Power
(THOUSANDS) AT SEPT. 30, 2017
AT DEC. 31, 2016
Current
Cleco Katrina/Rita’s storm recovery bonds $ 3,798
$ 9,213
Charitable contributions 1,200
1,200
Rate credit escrow 3,876
12,671
Total current 8,874
23,084
Non-current
Future storm restoration costs 17,999
17,379
Charitable contributions 3,640
4,179
Rate credit escrow 2,887
1,831
Total non-current 24,526
23,389
Total restricted cash and cash equivalents $ 33,400
$ 46,473

Cleco Katrina/Rita has the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash is collected, it is restricted for payment of administration fees, interest, and principal on storm recovery bonds. The change from December 31, 2016, to September 30, 2017, was due to Cleco Katrina/Rita using $17.9 million for scheduled storm recovery bond principal payments and $3.6 million for related interest payments, partially offset by collections of $16.1 million net of administration fees.

Included in the Merger Commitments were $6.0 million of charitable contributions to be disbursed over five years and $136.0 million of rate credits to eligible customers. In April 2016, in accordance with the Merger Commitments, Cleco Power established the charitable contribution fund and deposited the rate credit funds into an escrow account. In April 2016, the LPSC voted to issue the rate credits equally to customers with service as of June 30, 2016, beginning in July 2016. As of September 30, 2017, $1.2 million of the charitable contributions and $129.4 million of the rate credits had been released from restricted cash.

Debt

Cleco ~~Consolidated~~

At ~~September 30, 2017,~~March 31, 2021, Cleco had ~~$6.5~~$135.0 million of short-term debt outstanding ~~on Cleco Power’s $10.0~~under its $475.0 million ~~uncommitted line of~~revolving credit facilities, at an average all-in interest rate of ~~2.98%~~1.35%. Cleco had no$75.0 million of short-term debt outstanding at December 31, 2016. Cleco Holdings and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short-term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.2020.

At ~~September 30, 2017,~~March 31, 2021, Cleco’s long-term debt and finance leases outstanding was ~~$2.73~~$3.23 billion, of which ~~$19.2~~$66.7 million was due within one year. The long-term debt due within one year at ~~September 30, 2017,~~March 31, 2021, primarily represents $66.0 million of principal payments ~~for~~on Cleco Holdings’ debt as required by the Cleco ~~Katrina/Rita storm recovery bonds. For Cleco, long-term~~Cajun Transaction commitments to the LPSC. Long-term debt decreased ~~$25.5~~by $1.3 million from December 31, 2016, primarily due to $17.9 million of scheduled payments made on Cleco Katrina/Rita storm recovery bonds, $6.5 million for amortizations of long-term debt fair value adjustments related to the Merger, and a $1.8 million decrease in capital lease obligations. These decreases were partially offset by $0.7 million of debt issuance cost and debt discount amortizations.

In May 2016, Cleco Holdings completed the private sale of $535.0 million aggregate principal amount of its 3.743% senior notes due May 1, 2026, and $350.0 million aggregate principal amount of its 4.973% senior notes due May 1, 2046. Cleco Holdings used the proceeds from the issuance and sale of these notes to repay a portion of the $1.35 billion Acquisition Loan Facility entered into in connection with the completion of the Merger. On April 28, 2017, Cleco Holdings completed an exchange offer for all of its then outstanding 3.743% and 4.973% senior notes, which were not registered under the Securities Act of 1933, as amended, for an equal principal amount of newly issued 3.743% senior notes due May 1, 2026, and 4.973% senior notes due May 1, 2046, that were so registered. Cleco Holdings did not receive any proceeds from the exchange offer.

On March 1, 2017, Cleco completed the repayment of the first of two tranches of its Cleco Katrina/Rita storm recovery bonds issued in March 2008. For more information, see “—- Cleco Power” below.2020.

Cash and cash equivalents available at ~~September 30, 2017,~~March 31, 2021, were ~~$6.1~~$87.1 million combined with ~~$400.0~~$340.0 million available revolving credit facility capacity ($~~100.0~~175.0 million from Cleco Holdings and ~~$300.0~~$165.0 million from Cleco Power) for total liquidity of ~~$406.1~~$427.1 million. For more information on the credit facility capacity, see “— Credit Facilities.”

At ~~September 30, 2017~~,March 31, 2021, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents. In order to mitigate potential credit risk, Cleco and Cleco Power have established guidelines for short-term investments. For more information on the concentration of credit risk through short-term investments classified as cash equivalents, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 56 — Fair Value Accounting.”

At ~~September 30, 2017,~~March 31, 2021, and December 31, ~~2016,~~2020, Cleco had a working capital surplus of ~~$162.3~~$142.7 million and ~~$174.9~~$140.3 million, respectively. The ~~$12.6~~$2.4 million ~~decrease~~increase in working capital is primarily due to:

•a ~~$23.9~~$41.4 million increase in accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to additional deferrals through a fuel surcharge at Cleco Power for incremental costs related to Winter Storms Uri and Viola and

•a $39.6 million decrease in accounts payable, excluding Cleco Power FTR purchases, primarily due to short-term incentive plan payments in March 2021, the timing of MISO purchased power payments, and lower accruals for outage maintenance.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

These increases in working capital were partially offset by:

•a $60.0 million increase in short-term debt due to draws on Cleco Power’s revolving credit facility,

•a $24.2 million increase in interest accrued primarily due to the timing of interest payments

on long-term debt, and



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

•a ~~$22.9~~$15.6 million increase in taxes payable primarily due to ~~timing~~accruals of property ~~tax payments, partially offset by lower income taxes,~~taxes.

~~a $17.0 million decrease in cash and cash equivalents,~~

~~a $14.2 million decrease in restricted cash and cash equivalents,~~

~~a $6.5 million increase in short-term debt primarily due to outstanding borrowings on Cleco Power’s uncommitted line of credit, and~~

~~a $6.5 million increase in other current liabilities primarily due to accruals for SSR payments received for capital expenditures, and timing of benefits and incentives.~~

~~These decreases in working capital were partially offset by:~~

a $26.2 million increase in customer accounts receivable and unbilled revenue primarily due to the normal seasonal fluctuations in retail revenue, timing of receipts from a wholesale customer and additional deferred arrangements due to the LPSC executive orders,

~~a $21.0 million decrease in accounts payable primarily due to the timing of property tax and vendor payments,~~

a $14.2 million increase in other accounts receivable primarily due to higher receivables for a lignite fuel credit, an insurance reimbursement, SSR payments, and timing of pole attachment receivables,

~~a $9.4 million decrease in provision for merger commitments primarily due to the issuance of Merger rate credits, and~~

~~a $5.4 million increase in fuel inventory primarily due to higher petroleum coke and limestone due to lower plant operations and higher coal purchases, partially offset by lower lignite purchases.~~

Cleco Holdings ~~(Holding Company Level)~~

At March 31, 2021, and December 31, 2020 Cleco Holdings had no short-term debt outstanding at September 30, 2017, and December 31, 2016. Cleco Holdings and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short-term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.

~~Cash and cash equivalents available at~~ ~~September 30, 2017, were $1.8 million, combined with the $100.0 million credit facility capacity for total liquidity of $101.8 million.~~

~~Cleco Power~~outstanding.

At ~~September 30, 2017,~~March 31, 2021, Cleco Power had $6.5 million of short-term debt outstanding on an uncommitted line of credit at an all-in interest rate of 2.98%. Cleco Power had no short-term debt outstanding at December 31, 2016. Cleco Holdings and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short-term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.

At ~~September 30, 2017, Cleco Power’s~~Holding’s long-term debt outstanding was ~~$1.24~~$1.60 billion, of which ~~$19.2~~$66.0 million was due within one year. The long-term debt due within one year at ~~September 30, 2017,~~March 31, 2021, represents principal payments ~~for~~on Cleco Holdings’ debt as required by the Cleco ~~Katrina/Rita storm recovery bonds.~~Cajun Transaction commitments to the LPSC.

At March 31, 2021, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For ~~Cleco Power, long-term debt~~ ~~decreased~~ ~~$18.6 million from December 31, 2016, primarily due to $17.9 million of scheduled payments made~~more information on Cleco ~~Katrina/Rita storm recovery bonds and a $1.8 million decrease in capital lease obligations. These decreases~~

~~were partially offset by $1.1 million~~Holding’s revolving credit facility, see “— Credit Facilities.” Cleco Holdings has an uncommitted line of ~~debt issuance cost and debt discount amortizations.~~

On March 1, 2017, Cleco Power completed the repayment of the first of two tranches of its Cleco Katrina/Rita storm recovery bonds issued in March 2008. The total principal amount for both tranches was $180.6 million. The first tranche had an initial principal amount of $113.0 million at an interest rate of 4.41%, and a final maturity date of March 1, 2020. As part of the early redemption on March 1, 2017, Cleco Power paid $1.1credit that allows up to $10.0 million in ~~principal and less~~short-term borrowings, but no more than ~~$0.1~~$10.0 million in ~~accrued interest.~~the aggregate with Cleco Power’s similar line of credit, to support its working capital needs. There were no amounts outstanding under the uncommitted line of credit at March 31, 2021.

Cash and cash equivalents available at ~~September 30, 2017~~,Cleco Holdings at March 31, 2021, were ~~$4.2~~$4.4 million, combined with ~~$300.0~~$175.0 million revolving credit facility capacity for total liquidity of ~~$304.2~~$179.4 million.

Cleco Power

At ~~September 30, 2017,~~March 31, 2021, Cleco Power had $135.0 million of short-term debt outstanding under its $300.0 million revolving credit facility, at an all-in interest rate of 1.35%. For more information on Cleco Power’s revolving credit facility, see “— Credit Facilities.” Cleco Power had $75.0 million short-term debt outstanding at December 31, 2020. Although Cleco Power believes it has sufficient liquidity to meet its current obligations as well as funding Hurricanes Laura, Delta, and Zeta restoration efforts from a combination of cash on hand and available capacity under its revolving credit facilities, Cleco Power is exploring options to supplement its liquidity until such time securitization of such costs can be completed. For more information on Hurricanes Laura, Delta, and Zeta, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Restoration.” Cleco Power has an uncommitted line of credit that allows up to $10.0 million in short-term borrowings, but no more than $10.0 million in the aggregate with Cleco Holdings’ similar line of credit, to support their working capital needs. There were no amounts outstanding under the uncommitted line of credit at March 31, 2021.

At March 31, 2021, Cleco Power’s long-term debt outstanding was $1.50 billion, of which $0.7 million was due within one year. For Cleco Power, long-term debt increased $0.1 million from December 31, 2020.

Cash and cash equivalents available at March 31, 2021, were $38.1 million, combined with $165.0 million revolving credit facility capacity for total liquidity of $203.1 million.

At March 31, 2021, and December 31, ~~2016,~~2020, Cleco Power had a working capital surplus of ~~$131.6~~$9.5 million and ~~$149.1~~$13.4 million, respectively. The ~~$17.5~~$3.9 million decrease in working capital is primarily due to:

•a ~~$32.0~~$60.0 million increase in short-term debt due to draws on the revolving credit facility,

•a $16.0 million increase in interest accrued primarily due to the timing of interest payments on long-term debt, and

•a $14.0 million increase in taxes payable primarily due to ~~timing~~accruals of property ~~tax payments, partially offset by lower income taxes,~~taxes.

~~a $17.3 million decrease in cash and cash equivalents,~~

~~a $14.2 million decrease in restricted cash and cash equivalents,~~

~~a $13.2 increase in interest accrued primarily due to timing of interest payments,~~

~~a $6.5 million increase in short-term debt primarily due to outstanding borrowings on an uncommitted line of credit, and~~

~~a $5.7 million increase in other current liabilities primarily due to accruals for SSR payments received for capital expenditures, and timing of benefits and incentives.~~

These decreases in working capital were partially offset by:

•a ~~$26.2~~$41.4 million increase in ~~customer accounts receivable and unbilled revenue~~accumulated deferred fuel, excluding FTRs, primarily due to ~~the normal seasonal fluctuations in retail revenue, timing of receipts from~~additional deferrals through a ~~wholesale customer~~fuel surcharge for incremental costs related to Winter Storms Uri and ~~additional deferred arrangements due to the LPSC executive orders,~~Viola,

•a ~~$17.4~~$16.2 million decrease in accounts payable, excluding FTR purchases, primarily due to short-term incentive plan payments in March 2021, the timing of ~~property tax~~MISO purchased power payments, and ~~vendor payments,~~lower accruals for outage maintenance, and

•a ~~$14.2~~$13.2 million increase in ~~other accounts receivable primarily due to higher receivables for a lignite fuel credit, an insurance reimbursement, SSR payments,~~cash and ~~timing of pole attachment receivables,~~cash equivalents.

~~a $9.4 million decrease in provision for merger commitments primarily due to the issuance of Merger rate credits, and~~

Credit Facilities

At ~~September 30, 2017,~~March 31, 2021, Cleco had two separate revolving credit facilities, one for Cleco Holdings ~~had~~in the amount of $175.0 million with no outstanding borrowings and one for Cleco Power in the amount of $300.0 million with outstanding borrowings of $135.0 million. The total of all revolving credit facilities creates a ~~$100.0~~maximum aggregate capacity of $475.0 million with outstanding borrowings of $135.0 million.

Cleco Holdings’ revolving credit ~~facility.~~facility provides for working capital and other financing needs. The revolving credit facility includes ~~restricted~~restrictive financial covenants and expires in ~~2021.~~June 2022. Under covenants contained in Cleco Holdings’ revolving credit facility, Cleco is required to maintain total indebtedness less than or equal to 65% of total capitalization. At ~~September 30, 2017,~~March 31, 2021, Cleco Holdings was in compliance with the covenants of its revolving credit facility. ~~The~~At March 31, 2021, the borrowing costs under ~~Cleco Holdings’ credit~~the facility ~~are~~were equal to LIBOR plus ~~1.75%~~1.875% or ABR plus ~~0.75%~~0.875%, plus commitment fees of ~~0.275%~~0.30%. If Cleco Holdings’ credit ratings were to be downgraded one level by ~~either agency,~~the credit rating agencies, Cleco



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~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Holdings ~~would~~may be required to pay higher fees and additional interest of ~~0.075% and~~ 0.50%~~, respectively,~~ under the pricing levels of its revolving credit facility.

~~At September 30, 2017,~~ Cleco ~~Power had a $300.0 million~~Power’s revolving credit facility provides for working capital and other financing needs. The revolving credit facility includes ~~restricted~~restrictive financial covenants and expires in ~~2021.~~June 2022. Under covenants contained in Cleco Power’s revolving credit facility, Cleco Power is required to maintain total indebtedness less than or equal to 65% of total capitalization. At ~~September 30, 2017,~~March 31, 2021, Cleco Power was in compliance with the covenants of its revolving credit facility. ~~The~~At March 31, 2021, the borrowing costs under ~~Cleco Power’s credit~~the facility ~~are~~were equal to LIBOR plus ~~1.125%~~1.25% or ABR plus ~~0.125%~~0.25%, plus commitment fees of ~~0.125%~~0.15%. If Cleco Power’s credit ratings were to be downgraded one level by ~~either agency,~~the credit rating agencies, Cleco Power ~~would~~may be required to pay higher fees and additional interest of ~~0.05% and~~ 0.125%~~, respectively,~~ under the pricing levels of its revolving credit facility.

If Cleco Holdings or Cleco Power were to default under the covenants in their respective revolving credit facilities or


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CLECO POWER						2021 1ST QUARTER FORM 10-Q

other debt agreements, they would be unable to borrow additional funds under the facilities, and the lenders could accelerate all principal and interest outstanding. Further, if Cleco Power were to default under its revolving credit facility or other debt agreements, Cleco Holdings would be considered in default under its revolving credit facility.

Debt and Distribution Limitations

The 2016 Merger Commitments include provisions for limiting the amount of distributions that can be made from Cleco Holdings to Cleco Group, ~~or Cleco Partners,~~ depending on Cleco Holdings’ debt to EBITDA ratio and its corporate credit ratings. Cleco Holdings may not make any distribution unless, after giving effect to such distribution, Cleco Holdings’ debt to EBITDA ratio is equal to or less than 6.50 to 1.00 and Cleco Holdings’ corporate credit rating is investment grade with one or more of the three credit rating agencies. At March 31, 2021, Cleco Holdings was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. Additionally, in accordance with the 2016 Merger Commitments, Cleco Power is subject to certain provisions limiting the amount of distributions that may be paid to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings. Cleco Power may not make any distribution unless, after giving effect to such distribution, Cleco Power’s common equity ratio would not be less than 48% and Cleco Power’s corporate credit rating is investment grade with two of the three credit rating agencies. At March 31, 2021, Cleco Power was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. The 2016 Merger Commitments also prohibit Cleco from incurring additional long-term debt, excluding non-recourse debt, unless certain financial ratios are achieved. At September 30, 2017, and December 31, 2016, Cleco Holdings and Cleco Power were in compliance with the provisions of the Merger Commitments that could restrict the amount of distributions available. For more information on the 2016 Merger Commitments, see Part I, Item 1A, “Risk Factors — ~~Regulatory Compliance”~~Structural Risks — Holding Company” and “— ~~Holding Company”~~Regulatory Risks — Regulatory Compliance” in the Registrants’ Combined ~~Quarterly~~Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Cleco Consolidated Cash Flows

~~Net Operating Cash Flow~~

Cleco’s net cash provided by operating activities for the successor period January 1, 2017, through September 30, 2017, was $246.9 million. There were no significant changes in the underlying trends impacting cash provided by operating activities.

Cleco’s net cash provided by operating activities for the successor period April 13, 2016, through September 30, 2016, was $66.7 million. There were no significant changes in the underlying trends impacting cash provided by operating activities with the exception of $23.9 million related to payments for merger transaction costs during the successor period.

Cleco’s net cash provided by operating activities for the predecessor period January 1, 2016, through April 12, 2016, was $129.8 million. There were no significant changes in the underlying trends impacting cash provided by operating activities.

~~Net Investing Cash Flow~~

Cleco’s net cash used in investing activities for the successor period January 1, 2017, through September 30, 2017, was $166.3 million. There were no significant changes in the underlying trends impacting cash used in investing activities.

Cleco’s net cash used in investing activities for the successor period April 13, 2016, through September 30, 2016, was $133.3 million. There were no significant changes in the underlying trends impacting cash used in investing activities with the exception of $147.8 million transferred into restricted cash and cash equivalents due to the funding of customer rate credits and charitable contributions as a result of the Merger Commitments. In addition, $113.9 million was transferred out of restricted cash and cash equivalents to pay for a portion of the Merger Commitments.

Cleco’s net cash used in investing activities for the predecessor period January 1, 2016, through April 12, 2016, was $36.8 million. There were no significant changes in the underlying trends impacting cash used in investing activities.

~~Net Financing Cash Flow~~

Cleco’s net cash used in financing activities for the successor period January 1, 2017, through September 30, 2017, was $97.6 million. There were no significant changes in the underlying trends impacting cash used in financing activities with the exception of Cleco Holdings no longer having dividends to stockholders after the Merger.

Cleco’s net cash provided by financing activities for the successor period April 13, 2016, through September 30, 2016, was $27.8 million. There were no significant changes in the underlying trends impacting cash provided by financing activities with the exception of $100.7 million in contributions from Cleco Group.

Cleco’s net cash used in financing activities for the predecessor period January 1, 2016, through April 12, 2016, was $40.9 million. There were no significant changes in the underlying trends impacting cash used in financing activities.

~~Cleco Power Cash Flows~~

Net Operating Cash Flow

Net cash ~~provided by~~used in operating activities was ~~$236.0 million and $214.5~~$22.0 million during the ~~nine~~three months ended ~~September 30, 2017, and 2016, respectively.~~March 31, 2021. Net cash provided by operating activities was $60.2 million during the three months ended March 31, 2020. Net cash used in operating activities increased ~~$21.5~~$82.2 million primarily due to:

~~higher collections from customers of $101.9 million due to the absence of the Merger credits issued in 2016 and~~

~~higher~~•lower net fuel and purchased power ~~purchase~~ collections at Cleco Power of ~~$14.7~~$59.5 million primarily due to timing of ~~recovery.~~collections primarily the result of the deferral of the recovery of incremental costs, as approved by the LPSC, related to Winter Storms Uri and Viola,

•lower receipts of $16.2 million primarily due to timing of receipts of joint owners’ portion of generating station expenditures,

•higher operations and maintenance payments related to storm restoration activities of $4.5 million at Cleco Power,

•lower collections from Cleco Power customers of $3.6 million due to the rate refund for the tax-related benefits from the TCJA, which began being credited to customers in August 2019, and

•the absence of Cleco Katrina/Rita storm restoration surcharge collections from Cleco Power customers of $2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

These ~~increases~~decreases were partially offset ~~by:~~

~~higher~~by lower payments for fuel inventory of ~~$40.9~~$27.4 million primarily due to lower coal and petroleum coke ~~and coal purchases,~~purchases.

~~higher payments to vendors of $10.2 million primarily related to the timing of property taxes,~~

~~lower receipts of $7.9 million from joint owners’ portions of generating station expenditures,~~

~~lower collections of $7.3 million due to LPSC executive orders relating to 2016 flooding,~~



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~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~lower receipts of advanced deposits for operations and maintenance costs on jointly owned generating units of $5.8 million, and~~

~~higher payments of $1.3 million related to storm restoration efforts.~~

Net Investing Cash Flow

Net cash used in investing activities was ~~$164.9~~$35.7 million and ~~$171.0~~$65.4 million during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, and ~~2016,~~2020, respectively. Net cash used in investing activities decreased ~~$6.1~~$29.7 million primarily due to lower ~~transfers of cash to restricted accounts of $42.2 million due to funding the Merger Commitments in 2016. This decrease was partially offset by higher~~ additions to property, plant, and equipment, net of ~~$39.0~~AFUDC, of $27.9 million.

Net Financing Cash Flow

Net cash ~~used in~~provided by financing activities was ~~$88.4~~$59.7 million and ~~$53.9~~$226.8 million during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, and ~~2016,~~2020, respectively. Net cash provided by financing activities decreased $167.1 million primarily due to lower draws on revolving credit facilities of $178.0 million, partially offset by the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.

Cleco Power Cash Flows

Net Operating Cash Flow

Net cash used in operating activities was $12.5 million during the three months ended March 31, 2021. Net cash provided by operating activities was $44.1 million during the three months ended March 31, 2020. Net cash used in operating activities increased $56.6 million primarily due to:

•lower net fuel and purchased power collections of $59.5 million primarily due to timing of collections primarily the result of the deferral of the recovery of incremental costs, as approved by the LPSC, related to Winter Storms Uri and Viola,

•lower receipts of $4.7 million primarily due to timing of receipts of joint owners’ portion of generating station expenditures,

•higher operations and maintenance payments related to storm restoration activities of $4.5 million,

•lower collections from customers of $3.6 million due to the rate refund for the tax-related benefits from the TCJA, which began being credited to customers in August 2019, and

•the absence of Cleco Katrina/Rita storm restoration surcharge collections from customers of $2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

These decreases were partially offset by lower payments for fuel inventory of $21.4 million primarily due to lower coal and petroleum coke purchases.

Net Investing Cash Flow

Net cash used in investing activities was $34.2 million and $61.3 million during the three months ended March 31, 2021, and 2020, respectively. Net cash used in investing activities decreased $27.1 million primarily due to lower additions to property, plant, and equipment, net of AFUDC, of $25.3 million.


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CLECO POWER						2021 1ST QUARTER FORM 10-Q

Net Financing Cash Flow

Net cash provided by financing activities ~~increased $34.5 million. Included in this net increase~~ was $59.7 million and $138.8 million during the three months ended March 31, 2021, and 2020, respectively. Net cash provided by financing activities decreased $79.1 million primarily due to lower draws on revolving credit facilities of $90.0 million, partially offset by the absence of ~~contributions from~~the final repayment of Cleco ~~Holdings~~Katrina/Rita storm recovery bonds of $50.0 million to help fund the Merger Commitments, partially offset by lower distributions to Cleco Holdings of $10.0 million and $6.5 million for net borrowings on Cleco Power’s uncommitted line of credit.$11.1 million.

Contractual Obligations

Cleco, in the normal course of business activities, enters into a variety of contractual obligations. Some of these result in direct obligations that are reflected in Cleco’s Condensed Consolidated Balance Sheets while others are commitments, some firm and some based on uncertainties, that are not reflected in the Condensed Consolidated Financial Statements.

For more information regarding Cleco’s Contractual Obligations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Contractual Obligations” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Off-Balance Sheet Commitments and Guarantees

Cleco Holdings and Cleco Power have entered into various off-balance sheet commitments, in the form of guarantees and ~~standing~~standby letters of credit in order to facilitate their activities and the activities of Cleco Holdings’ subsidiaries and equity investees (affiliates). Cleco Holdings and Cleco Power have also agreed to contractual terms that require ~~the Registrants~~them to pay third parties if certain triggering events occur. These contractual terms generally are defined as guarantees. For more information about off-balance sheet commitments and on-balance sheet guarantees, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments and Guarantees.”

Cybersecurity

The operation of Cleco’s electrical systems relies on evolving operational and information technology systems and network infrastructures that are complex. The failure of Cleco or its vendors’ operational and information technology systems and networks due to a physical attack or cyber attack or other event could significantly disrupt operations; cause harm to the public or employees; result in outages or reduced generating output; result in damage to Cleco’s assets or operations, or those of third parties; result in damage to Cleco’s reputation; and subject Cleco to claims by customers or third parties, any of which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. Cleco continues to assess its cybersecurity tools and processes and has taken a variety of actions to monitor and address cyber-related risks. Cleco’s Chief Information and Supply Chain Officer leads Cleco’s cybersecurity team and oversees Cleco’s cybersecurity maturity plan. Each month, management provides cybersecurity updates to Cleco’s Asset Management Committee. On December 13, 2020, Cleco’s third party provider publicly confirmed a breach of its monitoring products in which a vulnerability was inserted and, if present and activated, could have potentially allowed an attacker to compromise the server on which the products run. Cleco found no impact to the confidentiality, integrity, or availability of its

data or systems. The incident investigation has been closed by the third party provider. For more information on risks related to Cleco’s cybersecurity, see Part I, Item 1A, “Risk Factors — Operational Risks — Technology and Terrorism Threats” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Regulatory and Other Matters

Environmental Matters

Cleco is subject to extensive environmental regulation by federal, state, and local authorities and is required to comply with numerous environmental laws and regulations, and to

obtain and comply with numerous governmental permits, in operating its facilities. In addition, existing environmental laws, regulations, and permits could be revised or reinterpreted; new laws and regulations could be adopted or become applicable to Cleco or its facilities; and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air ~~emissions.~~emissions, water and/or waste management. Cleco may incur significant additional costs to comply with these revisions, reinterpretations, and requirements. Cleco Power ~~would~~could then seek recovery of additional environmental compliance costs as riders through the LPSC’s EAC or ~~its~~ FRP. If Cleco fails to comply with these revisions, reinterpretations, and requirements, it could be subject to civil or criminal liabilities and fines.

On March 28, 2017, the President signed a broad executive order. Among other measures, the order directed the EPA to review the Clean Power Plan (CPP), the proposed Federal Implementation Plan for the CPP, and the greenhouse gas new source performance standards (GHG NSPS). It also gave the U.S. Department of Justice discretion to request that the U.S. Court of Appeals of the D.C. Circuit stay or otherwise delay the litigation challenging the CPP and the GHG NSPS while the administrative review is underway. Until the directions of the executive order are carried out, management cannot predict what the final standards will entail or what controls the EPA and the state of Louisiana may require of Cleco in a final state implementation plan.

~~In the second quarter of 2015, Cleco Power began incurring additional environmental compliance expenses for reagents associated with compliance with MATS.~~ For a discussion ~~about MATS,~~of other Cleco environmental matters, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental ~~Audit.”~~

~~For a discussion of other Cleco environmental matters, see~~Audit” in this Quarterly Report on Form 10-Q and Part I, Item 1, “Business — Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

CPP and ACE

On January 19, 2021, the D.C. Circuit Court of Appeals ruled that the EPA’s repeal of the CPP and its 2019 promulgation of ACE were unlawful. Therefore, the court issued an order to vacate and remand the ACE rule to the EPA. On February 22, 2021, the court granted the EPA’s unopposed motion for a partial stay of the issuance of the mandate on vacating the CPP repeal ordering that it will withhold issuance of the mandate with respect to the vacatur of the CPP repeal until the EPA responds to the court’s remand by promulgating a new rule to regulate greenhouse gas emissions from existing electric generating units. This means that the CPP will not take effect during the EPA’s rulemaking process. In addition, on March 5, 2021, the court issued the partial mandate effectuating the court’s vacatur of the ACE rule which makes effective the court’s decision to vacate the ACE rule. At the end of April 2021, two parties filed petitions for a writ of certiorari asking the Supreme Court to review the decision by the D.C. Circuit Court of Appeals.

CSAPR

On September 13, 2019, the D.C. Circuit Court of Appeals partially remanded the CSAPR update rule to the EPA because the rule did not set a deadline by which upwind states must eliminate their significant contribution to downwind states’ NAAQS nonattainment. In response to the remand of the rule,


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on October 30, 2020, the EPA published a proposed rule in the Federal Register, Revised Cross-State Air Pollution Rule Update for the 2008 ozone NAAQS. On April 30, 2021, the EPA issued in the Federal Register the final rule. Until a review of the final regulation has been completed, Cleco is unable to predict if this will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

Retail Rates of Cleco Power

Fuel Rates

Generally, ~~the~~Cleco Power’s cost of fuel used for electric generation and the cost of ~~power~~ purchased ~~for utility customers~~power are recovered through the LPSC-established FAC that enables Cleco Power to pass on to its customers substantially all such charges. Recovery of FAC costs is subject to periodic fuel audits by the LPSC. The LPSC FAC General Order issued in November 1997, in Docket No. U-21497 provides that an audit of FAC filings will be performed at least every other year. In February 2016, the LPSC initiated an audit of Cleco Power’s fuel and purchased power expenses for the period January 2014 through December 2015. The total amount of fuel expense included in the audit was $582.6 million. On January 19, 2017, the LPSC Staff issued its audit report which recommended no disallowance of fuel costs. The report was approved by the LPSC on April 19, 2017. Cleco Power has FAC filings for January 2016 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings.

For ~~information concerning Cleco Power’s current FRP and amounts accrued and refunded by Cleco Power as a result of the FRP, and~~more information on the ~~LPSC Staff’s FRP reviews,~~FAC and the most recent fuel audit, see



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~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1013 — ~~Regulation~~Litigation, Other Commitments and ~~Rates.~~Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audit.”

Environmental Rates

In July 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides ~~for~~Cleco Power an EAC to recover from customers certain costs of environmental compliance. The costs eligible for recovery are prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the costs of reagents such as ammonia and limestone that are a part of the fuel mix used to reduce air emissions, among other things. In February 2016, the LPSC initiated an audit of Cleco Power’s environmental costs for the period November 2010 through December 2015. The total amount of environmental costs included in the audit was $81.2 million. In December 2016, the LPSC Staff issued its audit report which recommended a disallowance of environmental costs of less than $0.1 million. The report was approved by the LPSC on February 17, 2017. Cleco Power has EAC filings for January 2016 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. In the second quarter of 2015, Cleco Power began incurring additional environmental compliance expenses for reagents associated with compliance with MATS. These expenses are eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. For more information on ~~MATS,~~the EAC and the most recent environmental audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental Audit.”

In April 2016, the LPSC issued Docket No. R-34026 to investigate double leveraging issues for all LPSC-jurisdictional utilities whereby double leveraging is utilized to fund a utility’s capital structure, and to consider whether any costs associated with such double leveraging should be included in the rates paid by the utility’s retail customers. Cleco Power filed a motion to intervene in this proceeding along with other Louisiana utilities. In April 2016, the LPSC also issued Docket No. R-34029 to investigate tax structure issues for all LPSC-jurisdictional utilities to consider whether only the state and federal taxes included in a utility’s retail rate will be those that do not exceed the utility’s share of the actual taxes paid to those federal and state taxing authorities. Cleco Power filed a motion to intervene in this proceeding along with other Louisiana utilities. In October 2016, Cleco received the first set of data requests from the LPSC Staff for each of the above mentioned dockets. Cleco has filed responses to the non-confidential requests and is waiting on the completion of a confidentiality agreement to respond to the confidential requests. Cleco is unable to determine if or when the completion of this confidentiality agreement will occur. If the LPSC were to disallow such costs incurred by the utility to be included in retail rates, such disallowance could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

For information on certain other regulatory aspects of retail rates concerning Cleco Power, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power” in the

~~Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended~~ ~~December 31, 2016~~.

~~SSR~~

In September 2016, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3 effective April 1, 2017. MISO conducted a study which determined the proposed retirement of Teche Unit 3 would result in violations of specific applicable reliability standards for which no mitigation is available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution can be implemented to mitigate reliability issues. One mitigating factor that has been identified is Cleco Power’s Terrebonne to Bayou Vista Transmission project, which is expected to be complete by the third quarter of 2018. Cleco Power has a 12-month SSR Agreement for the period April 1, 2017 to March 31, 2018. During this time, Cleco Power will continue to operate Teche Unit 3. Cleco Power has filed with FERC for its approval to collect $20.3 million annually in SSR payments from MISO which includes recovering operations and maintenance expenses, administrative and general expenses, taxes, depreciation, capital expenditures, and carrying charges, all of which are related to Teche Unit 3 for the period of the SSR Agreement. At the end of the agreement, when Teche Unit 3 is retired, any SSR payments received from MISO for capital expenditures paid by third parties will be credited to property, plant, and equipment. As of September 30, 2017, Cleco Power had $2.2 million accrued for SSR payments received for capital expenditures related to Teche Unit 3. In the second quarter of 2017, Cleco Power began receiving the monthly SSR payments from MISO, subject to refund pending review and approval by FERC. On July 20, 2017, Cleco Power, FERC staff, and intervenors met at the first settlement conference and set a procedural schedule for data requests between parties. On July 27, 2017, Cleco Power received five sets of informal data request from FERC staff and intervenors. The next settlement conference is scheduled for November 16, 2017. Cleco Power is unable to determine when a binding FERC order will be issued. Also in the second quarter of 2017, MISO began allocating SSR costs to the load serving entities that require the operation of the SSR unit for reliability purposes, including Cleco Power. In the first quarter of 2018, another study is expected to be performed by MISO to determine if an SSR Agreement will be needed after March 31, 2018. At the end of the SSR Agreement, Cleco Power will have the option to rescind the Attachment Y requesting retirement of Teche Unit 3. If this option is exercised, Cleco Power may be required to refund recoverable capital expenditures plus interest. Management does not expect to be required to refund any portion of these costs.

Energy Efficiency

In ~~August 2009, the LPSC opened a docket to study the promotion of energy efficiency by jurisdictional electric and natural gas utilities. In September~~ 2013, the LPSC issued a General Order adopting rules promoting energy efficiency programs. Cleco Power ~~subsequently filed its formal intent with the LPSC to participate~~began participating in the Phase I - Quick Start portion of the LPSC’s energy efficiency initiative, which began in November 2014, and has been extended through the start of Phase II, which is anticipated to be in 2019 or later. During Phase I, Cleco Power designed several energy efficiency programs ~~and began offering these programs to customers~~ in November 2014. ~~In November 2014,~~ Cleco Power ~~began~~



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~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~recovering~~has recovered approximately $3.3 million annually for each of ~~estimated costs for~~ the program ~~though~~years through an approved rate tariff. In January ~~2017, the LPSC amended its Phase I — Quick Start program to allocate no less than 50% of its annual program budgets to applicable government and state agencies.~~2018, Cleco ~~Power’s participation in the amended program is also projected to be $3.3 million annually as approved by the LPSC in September 2017.~~

~~In September 2017, the LPSC approved a motion for~~began recovering an additional energy efficiency programs for the exclusive benefit of school districts, local governments, state agencies, and higher education institutions or any other public entities. The recovery of approximately $3.3 million annually for estimated costs ~~for~~related to programs specific to political subdivisions.

On December 17, 2019, the LPSC initiated an audit on program ~~is expected~~years three and four to ~~begin in January 2018.~~

~~MISO Cost Benefit Analysis~~

consider all program costs. Cleco Power entered into MISO in December 2013. Within five years of joining MISO, the LPSC required Cleco Power to conduct a study of the costs and benefits of its membership in MISO. During the second quarter of 2017, Cleco Power submitted an analysis with both a backward-looking, historical analysis and a forward-looking, prospective analysis of the costs and benefits of operating in MISO, as compared to a scenario where Cleco Power and Entergy Louisiana exit MISO and operate independently. Cleco Power’s analysis indicated that continued MISO membership would serve the public interest. Cleco Power has responded to ~~four~~several sets of data requests onregarding the ~~analysis.~~audit. In October 2020, a preliminary report was received by Cleco Power with no material findings. The LPSC approved the audit report in November 2020. Program year five and program years thereafter are still subject to audit. Management is unable to predict ~~the outcome of this analysis~~ or give a reasonable estimate of the ~~possible range~~outcome of ~~disallowance~~any future audit.

Generally, utility companies are allowed to recover from customers the accumulated decrease in revenues associated with the energy efficiency programs. On October 21, 2019, Cleco Power received notice of ~~costs, if any.~~approval from the LPSC allowing recovery of the accumulated Lost Contribution to Fixed Cost revenues until such a time that base rates reset, which is expected to take effect on July 1, 2021.

Wholesale Rates ~~of Cleco Power~~

The rates Cleco, through Cleco Power and Cleco Cajun, charges its wholesale customers are subject to FERC’s

triennial market power analysis. FERC requires a utility to pass a screening test as a condition for securing and/or retaining approval to sell electricity in wholesale markets at market-based rates. An updated market power analysis ~~is to~~must be filed with FERC every three years or upon the occurrence of a change in status as defined by FERC regulation. In February 2014, FERC issued an order to accept Cleco’s substitute market power analysis and grant the power marketing entities the authority to continue to charge market-based rates for wholesale power. Cleco filed its most recent triennial market power analysis with FERC in January 2015. In March 2016, FERC issued an order finding Cleco’s submittal satisfies its requirements for market-based rate authority regarding both horizontal and vertical market power. Cleco’s next triennial market power analysis will be filed byon December ~~31, 2017.~~23, 2020.

Transmission Rates ~~of Cleco Power~~

Two complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. For more information about the ROE complaints, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ~~ROE”.~~ROE.”

On May 1, 2017, Cleco Power filed a MISO Schedule 2 rate increase request with FERC. MISO Schedule 2 provides for compensation to Cleco Power for providing reactive power to MISO customers. On July 1, 2017, Cleco Power began collecting revenue at the requested rate, subject to refund.

~~Cleco Power is unable to determine when FERC will approve the rate increase and if any refund will be required.~~

For information about the risks associated with ~~Cleco Power’s~~Cleco’s participation in MISO, see Part I, Item 1A, “Risk Factors — Regulatory Risks — MISO” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

For information on transmission rates of Cleco, ~~Power,~~ see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission ~~Rates of Cleco Power”~~Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

Transmission, Distribution, and Generation Projects

Cleco ~~Power is involved in several~~Power’s significant ongoing projects include the Bayou Vista to Segura transmission ~~projects, including the Cenla Transmission Expansion~~ project and the ~~Terrebonne to Bayou Vista Transmission project. Cleco Power is also currently involved in the St. Mary Clean Energy Center project, which is a waste heat generating unit, and the Coughlin Pipeline~~DSMART distribution project. For information on these projects, see “— Overview — Cleco Power.”

Market Restructuring

Wholesale Electric Markets

RTO

For information on Cleco Power’s operations within MISO and for information on regulatory aspects of wholesale electric markets affecting Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

ERO

The Energy Policy Act of 2005 added Section 215 to the Federal Power Act, which provides for a uniform system of mandatory, enforceable reliability standards. In 2006, FERC named NERC as the ERO that will be required to develop and enforce the mandatory reliability standards.

~~The SPP Regional Entity (RE) conducts a~~A NERC Reliability ~~Standard~~Standards audit is conducted every three ~~years.~~years for Cleco ~~Power’s~~Power and Cleco Cajun. The next ~~audit is~~NERC Reliability Standards audits for Cleco Power and Cleco Cajun are scheduled to begin in ~~April~~2022.

A NERC CIP audit is also conducted every three years for Cleco Power and Cleco Cajun. Cleco Power’s current NERC CIP audit was completed on August 14, 2020, and the final report was issued by SERC on November 5, 2020. Cleco


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Cajun’s most recent CIP audit occurred during June 2019, and the final report was issued by SERC on June 27, 2019. Management is unable to determine the timing of NERC’s approval of the final reports.

Management is also unable to predict the final financial outcome of ~~this audit, or~~the most recent CIP audits, any future audits, or whether any findings will have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

The SPP RE also conducts a NERC Critical Infrastructure Protection audit every three years. A NERC Critical Infrastructure Protection audit was conducted in February 2017. Based on the evidence provided, the SPP RE determined there were three instances of potential noncompliance. These findings are not expected to have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

On July 23, 2017, the SPP RTO’s board of directors and members committee voted to authorize the SPP’s President and CEO to terminate the delegation agreement between the SPP and NERC, which will effectively dissolve the SPP RE by the end of 2018. On October 12, 2017, Cleco Power proposed a new RE to NERC. Once NERC approves a new RE, it will



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~then need to be approved by FERC. Management does not expect this termination to have a significant impact on the results of operations, financial condition, or cash flows of the Registrants.~~

For a discussion of risks associated with FERC’s regulation of Cleco Power’s transmission system, see Part I, Item 1A, “Risk Factors — Regulatory Risks — Reliability and ~~Infrastructure Protection~~CIP Standards Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Retail Electric Markets

For information on the regulatory aspects of retail electric markets affecting Cleco Power, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

~~Lignite Deferral~~

~~At September 30, 2017, and December 31, 2016, Cleco Power had $4.5 million and $6.4 million, respectively, in uncollected deferred lignite mining costs.~~

For more information on Cleco Power’s deferred lignite mining expenditures, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Lignite Deferral” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended ~~December 31, 2016~~.

~~Integrated Resource Plan (IRP)~~

In accordance with the General Order in LPSC Docket No. R-30021, on October 20, 2017, Cleco Power filed a request with the LPSC to initiate an IRP process. The IRP process includes conducting stakeholder meetings and receiving feedback from stakeholders. The schedule outlined in the General Order calls for Cleco Power to file a draft IRP in October 2018, and a final report in May 2019.

~~Service Quality Program (SQP)~~

In October 2015, the LPSC proposed an SQP containing 21 requirements for Cleco Power. The SQP has provisions relating to employee headcount, customer service, reliability, vegetation management, and reporting. In April 2016, the SQP was approved by the LPSC. The SQP will remain in effect until 2021. Prior to the expiration of the SQP, a new five-year program must be negotiated and submitted to the LPSC for approval. Cleco Power filed its annual monitoring report on April 1, 2017.

Franchises

Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities and parishes (counties), and enforced by state law. These franchises are for fixed terms, which vary from 10 years to more than 50 years. Historically, Cleco Power has been successful in the timely renewal of substantially all franchises as each neared the end of its term. Cleco Power’snext municipal franchise expires in ~~July 2021.~~

On April 11, 2017, the City of Slidell voted to approve a new franchise agreement with Cleco Power with an effective date of April 11, 2017. The franchise agreement is for 35 years until April 2052. Approximately 13,823 Cleco Power customers are located in the City of Slidell.

~~On July 13, 2017, the Town of Rosepine and the Town of Cheneyville voted to approve new franchise agreements with~~

Cleco Power with an effective date of July 13, 2017. Both franchise agreements are for 33 years until July 2050. Approximately 916 Cleco Power customers are located in the Town of Rosepine, and approximately 356 Cleco Power customers are located in the Town of Cheneyville.

On October 24, 2017, the Town of New Llano voted to approve a new franchise agreement with Cleco Power with an effective date of October 24, 2017. The franchise agreement is for 15 years until October 2032. Cleco Power currently serves seven customers located in the town of New Llano. This new franchise agreement provides Cleco Power the opportunity to compete for future growth opportunities in the town.2022.

For more information on franchises, see Part I, Item 1, “Business Regulatory Matters, Industry Developments, and Franchises — Franchises” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Recent Authoritative Guidance

For a discussion of recent authoritative guidance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 32 — Recent Authoritative Guidance.”



CRITICAL ACCOUNTING POLICIES

Cleco’s critical accounting policies include accounting policies that are important to Cleco’s financial condition and results of operations and that require management to make difficult, subjective, or complex judgments about future events, which could result in a material impact to the financial statements of Cleco. The preparation of financial statements contained in this report requires management to make estimates and assumptions. Estimates and assumptions about future events and their effects cannot be made with certainty. These estimates involve judgments regarding many factors that in and of themselves could materially affect the financial statements and disclosures. On an ongoing basis, these estimates and assumptions are evaluated and, if necessary, adjustments are made when warranted by new or updated information or by a change in circumstances or environment. Actual results may differ significantly from these estimates under different assumptions or conditions.

For more information on Cleco’s critical accounting policies, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020.

~~Business Combinations~~

On April 13, 2016, Cleco Holdings completed its merger with Merger Sub whereby Merger Sub merged with and into Cleco Corporation, with Cleco Corporation surviving the Merger, and Cleco Corporation converting to a limited liability company and changing its name to Cleco Holdings, as a direct, wholly owned subsidiary of Cleco Group and an indirect, wholly owned subsidiary of Cleco Partners. The merger transaction required the use of the acquisition method to account for business combinations. The objective of this method is to establish a new accounting basis for the acquiree. Cleco Holdings’ assets and liabilities were measured and recorded at fair value as of the acquisition date. Cleco Power’s assets and liabilities were recorded at historical cost since Cleco did not elect pushdown accounting at the Cleco Power level. The financial statements and accompanying footnotes for Cleco



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

have been segregated to present pre-merger activity as the “Predecessor” and post-merger activity as the “Successor.” The predecessor period is not comparable to the successor period. For more information, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 2 — Business Combinations.”

~~Goodwill~~

On April 13, 2016, in connection with the completion of the Merger, Cleco recognized goodwill of $1.49 billion. Goodwill is required to be tested for impairment at the reporting segment level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting segment below its carrying value. For more information on goodwill and its impairment testing, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Goodwill.”

CLECO POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Cleco Power meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q and is, therefore, permitted to use the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, Cleco Power has omitted from this report the information called for by Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following Part II items of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3 (Defaults upon Senior Securities).



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



~~Risk Overview~~RISK OVERVIEW

Cleco is exposed to counterparty credit risk, liquidity risk, interest rate risk, and commodity price risk. Cleco has implemented a governance framework, inclusive of risk policies and procedures to manage these and other risks.

~~Market~~

Counterparty Credit Risk

When Cleco enters into commodity derivative or physical commodity transactions directly with market participants, Cleco may be exposed to counterparty credit risk. Cleco is exposed to counterparty credit risk inherent in Cleco’s market risk-sensitive instruments and positions includes potential changes in value arising from changes in interest rates and the commodity market prices of power, FTRs, and natural gaswhen a counterparty fails to meet their financial obligations causing Cleco to incur replacement cost losses. Cleco may be required to provide credit support or pay liquidated damages with respect to any open trading contracts that Cleco has entered into or may enter into in the ~~industry on different energy exchanges.~~

future. The amount of credit support that Cleco ~~evaluates derivatives and hedging activities to determine whether market risk-sensitive instruments and positions are~~may be required to ~~be marked-to-market. When positions close, actual gains or losses are included~~provide at any point in the ~~FAC~~future is

dependent on credit terms and ~~reflected on customers’ bills as a component~~thresholds in master agreements, the notional value of the ~~FAC.~~

~~Cleco’s exposure to market risk, as discussed below, represents an estimate of possible~~initial contract, changes in the ~~fair value or future earnings that would occur, assuming possible future movements~~market prices, changes in open contracts, and changes in the ~~interest rates and commodity prices~~amounts counterparties owe to Cleco. Changes in any of ~~power, FTRs, and natural gas. Management’s views on market risk are not necessarily indicative~~these factors could cause the amount of ~~actual results, nor do they represent the maximum possible gains~~requested credit support to increase or ~~losses. The views do represent, within the parameters disclosed, what management estimates may happen.~~decrease.

Cleco ~~maintains a master netting agreement policy~~monitors and ~~monitors~~manages its credit risk exposure through ~~reviews~~credit risk management policies and procedures that include:

•routine review of counterparty credit quality ~~aggregate counterparty~~and credit exposure,

•entering into industry standard master agreements with specific terms and conditions for credit exposure and ~~aggregate counterparty concentration levels. Cleco manages these risks by establishing appropriate credit~~non-performance,

•measuring expected and ~~concentration limits on transactions with counterparties~~potential future exposure regularly, and ~~requiring contractual~~


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

•exchanging guarantees or forms of cash ~~deposits, or letters~~equivalent collateral for financial assurance.

For more information, see Item 2, “Management’s Discussion and Analysis of ~~credit from counterparties or their affiliates, as deemed necessary. Cleco Power has agreements in place with various counterparties that authorize the netting~~Financial Condition and Results of ~~financial buys~~Operations — Financial Condition — Liquidity and ~~sells~~Capital Resources — General Considerations and ~~contract payments to mitigate credit risk for transactions entered into for risk management purposes.~~Credit-Related Risks.”

Liquidity Risk

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. Future actions or inactions of the federal government, including a failure to increase the government debt limit, could increase the actual or perceived risk that the U.S. may not pay its obligations when due and may disrupt financial markets, including capital markets, potentially limiting availability and increasing costs of capital. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its

businesses. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. Cleco Holdings and Cleco Power pay fees and interest under their respective credit facilities based on the highest rating held. ~~On April 7, 2017, Moody’s updated its credit ratings by maintaining Cleco Holdings at Baa3 (stable)~~For more information, see Item 2, “Management’s Discussion and ~~Cleco Power at A3 (stable). On May 30, 2017, S&P affirmed Cleco Holdings’~~Analysis of Financial Condition and ~~Cleco Power’s credit ratings at BBB- (stable)~~Results of Operations — Financial Condition — Liquidity and ~~BBB+ (stable), respectively. If Cleco Holdings or Cleco Power’s credit ratings were to be downgraded by S&P or Moody’s, Cleco Holdings and/or Cleco Power would be required to pay additional fees~~Capital Resources — General Considerations and ~~incur higher interest rates for borrowings under their respective credit facilities.~~Credit-Related Risks.”

Interest Rate ~~Risks~~Risk

Cleco monitors its mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix, for example, refinancing balances outstanding under its variable-rate revolving credit facility with fixed-rate debt. Calculations of the changes in fair market value and interest expense of the debt securities are made over a one-year period.

Sensitivity to changes in interest rates for variable-rate obligations is computed by assuming a 1% change in the current interest rate applicable to such debt.

At ~~September 30, 2017,~~March 31, 2021, Cleco Holdings had no ~~variable-rate~~short-term debt outstanding under its ~~$100.0~~$175.0 million revolving credit facility. ~~The~~At March 31, 2021, the borrowing costs under Cleco Holdings’ revolving credit facility ~~are~~were equal to LIBOR plus ~~1.75%~~1.875% or ABR plus ~~0.75%~~0.875%, plus commitment fees of ~~0.275%~~0.30%.

At ~~September 30, 2017,~~March 31, 2021, Cleco Holdings had a ~~$300.0~~$266.0 million long-term variable rate bank term loan ~~outstanding. Amounts~~ outstanding ~~under the bank term loan bear~~at an interest atrate of LIBOR plus ~~1.625%. At September 30, 2017, the~~1.875%, for an all-in interest rate ~~was 2.87%~~of 1.985%. Each 1% increase in the interest rate applicable to ~~such~~Cleco Holdings’ long-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of ~~$3.0 million.~~$2.7 million on an annualized basis. The weighted average rate for all outstanding term loan debt at Cleco Holdings for the three months ended March 31, 2021, was 2.01%.

~~For~~At March 31, 2021, Cleco Power had $135.0 million of short-term debt outstanding under its $300.0 million revolving credit facility at an all-in interest rate of 1.35%. At March 31, 2021, Cleco Power’s borrowing costs under its $300.0 million revolving credit facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%.

At March 31, 2021, Cleco Power had a ~~discussion on~~$125.0 million long-term variable rate bank term loan outstanding, at an interest rate of LIBOR plus 1.25%, for an all-in interest rate of 1.36%. Each 1% increase in the interest rate applicable to Cleco Power’s short- and long-term ~~variable-rate~~variable rate debt ~~related to~~would result in a decrease in Cleco Power’s pretax earnings of $2.6

million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Power ~~please refer~~for the three months ended March 31, 2021, was 1.36%.

Each 1% increase in the interest rate applicable to ~~“— Cleco Power.”~~



~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

~~Commodity Price Risks~~

~~Management believes Cleco has controls~~Cleco’s short- and long-term variable rate debt would result in ~~place to minimize the risks involved~~a decrease in ~~its financial and energy commodity activities. Independent controls over energy commodity functions consist~~Cleco’s pretax earnings of a middle office (risk management), a back office (accounting), and regulatory compliance staff. All forward commodity positions have established risk limits and are monitored through a daily market report that identifies the VaR, current market conditions, and concentration of energy market positions.$5.3 million on an annualized basis.

Cleco ~~Power provides fuel for generation and purchases power to meet the power demands of customers. Cleco Power~~ may enter into ~~positions~~contracts to mitigate the volatility in ~~customer~~interest rate risk. These contracts include, but are not limited to, interest rate swaps and treasury rate locks. For each reporting period presented, the Registrants did not enter into any contracts to mitigate the volatility in interest rate risk.

Commodity Price Risk

Cleco Power and Cleco Cajun’s financial performance can be impacted by changes in commodity prices that impact fuel costs, ~~as encouraged by various LPSC orders. These positions would be~~generation revenues, and customer supply costs and customer revenues. Cleco’s risk management policies and procedures authorizes hedging commodity price risk with physical or financially settled derivative instruments within approved guidelines and limits of authority. Some of these transactions may qualify for the normal purchase, normal sale (NPNS) exception under derivative accounting guidance. Contracts that do not qualify for NPNS accounting treatment or are not elected for NPNS accounting treatment are marked-to-market ~~with the resulting gain or loss~~and recorded on the balance sheet as a component of the accumulated deferred fuel asset or liability and a component of the energy risk management assets or liabilities. When these positions close, actual gains or losses would be included in the FAC and reflected in customers’ bills as a component of the fuel charge. There were no open natural gas positions at September 30, 2017. In June 2015, the LPSC approved a long-term natural gas hedging pilot program that requires Cleco Power to establish a proposal for a program that will be designed to provide gas price stability for a minimum of five years. This proposal was submitted to the LPSC on July 28, 2017. An ALJ was assigned to the docket and a status conference was held on October 3, 2017. A procedural schedule was determined and management expects a final determination in the second quarter of 2018.their fair value.

Cleco Power ~~purchases~~and Cleco Cajun, individually, may be exposed to transmission congestion price risk as a result of physical transmission constraints present between MISO LMP nodes when serving customer load. Cleco Power and Cleco Cajun are awarded and/or purchase FTRs in auctions facilitated by MISO. ~~The majority of its~~ FTRs are purchased in annual auctions during the second quarter, but Cleco Power may purchase additional FTRs in monthly auctions. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Cleco Power’s customer load. FTRs areaccounted for as derivatives not designated as hedging instruments for accounting purposes.

During the three months ended March 31, 2021, Cleco ~~Power records FTRs at their estimated fair value when purchased. Each accounting period, Cleco Power adjusts the carrying~~

~~value of FTRs to their estimated fair value based on the most recent MISO FTR auction prices. Unrealized gains or losses on FTRs held by Cleco Power~~Cajun entered into gas-related derivative contracts including fixed price physical forwards and financially settled swap transactions. These are included in ~~Accumulated deferred fuel~~other commodity derivatives in the following tables.

The following tables present the fair values of derivative instruments and their respective line items as recorded on Cleco Power’s Condensed Consolidated Balance Sheets. Realized gains or losses on settled FTRs are recorded in Fuel used for electric generation on Cleco Power’s Condensed Consolidated Statements of Income. At ~~September 30, 2017~~,and Cleco Power’s Condensed Consolidated Balance Sheets ~~reflected open FTR positions~~at March 31, 2021:

Cleco

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT MAR. 31, 2021

Commodity-related contracts

FTRs

Current

Energy risk management assets

2,140

Current

Energy risk management liabilities

(1,117)

Other commodity derivatives

Current

Energy risk management assets

9,159

Non-current

Other deferred charges

2,966

Current

Energy risk management liabilities

(325)

Non-current

Other deferred credits

(103)

Commodity-related contracts, net

12,720


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT MAR. 31, 2021

Commodity-related contracts

FTRs

Current

Energy risk management assets

1,986

Current

Energy risk management liabilities

(898)

Commodity-related contracts, net

1,088

Cleco monitors the Value at Risk (VaR) of ~~$13.4 million~~its other commodity derivative contracts requiring derivative accounting treatment. VaR is defined as the minimum expected loss over a given holding period at a given confidence level based on observable market price volatilities. Cleco uses a parametric variance-covariance model methodology to estimate VaR. VaR is calculated using historical volatilities within a 5-day holding period at a 95% confidence interval. Given Cleco’s reliance on historical data, VaR is effective in ~~Energy~~estimating risk ~~management assets~~exposures in markets in which there are no sudden fundamental changes or

abnormal shifts in market conditions. An inherent limitation of VaR is that past changes in market risk factors, even when weighted toward more recent observations, may not produce accurate predictions of future market risk. VaR should be evaluated in light of this and ~~$0.5 million in Energy risk management liabilities.~~ the methodology’s other limitations.

The following table presents the VaR of other commodity derivative contracts based on these assumptions:


			FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	AT MAR. 31, 2021		HIGH		LOW		AVERAGE
Cleco	$	11,558	$	12,234	$	7,199	$	9,159

For more information on the accounting treatment and fair value of FTRs and other commodity derivatives, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 56 — Fair Value Accounting — Commodity Contracts.”

~~Cleco Power~~

~~Please refer to “— Risk Overview” for a discussion of market risk inherent in Cleco Power’s market risk-sensitive instruments.~~

Cleco Power may enter into various fixed- and variable-rate debt obligations. Please refer to “— Interest Rate Risks” for a discussion of how Cleco Power monitors its mix of fixed- and variable-rate debt obligations and the manner of calculating changes in fair market value and interest expense of its debt obligations.

At September 30, 2017, Cleco Power had $6.5 million of short-term variable-rate debt outstanding on an uncommitted line of credit at an all-in interest rate of 2.98%. Each 1% increase in the interest rate applicable to such debt would result in a decrease in Cleco Power’s pretax earnings of $0.1 million.

At September 30, 2017, Cleco Power had no debt outstanding under its $300.0 million credit facility. The borrowing costs under the Cleco Power credit facility are equal to LIBOR plus 1.125% or ABR plus 0.125%, plus commitment fees of 0.125%.

~~Please refer to “— Commodity Price Risks” for a discussion of controls, transactions, VaR, and market value maturities associated with Cleco Power’s energy commodity activities.~~



ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~As of~~ ~~September 30, 2017, evaluations were performed under~~Under the supervision and with the participation of Cleco Holdings and Cleco Power (individually, “Registrant” and collectively, the “Registrants”) management, including the ~~Interim CEOs~~CEO and ~~CFO. The evaluations assessed~~CFO, the Registrants have evaluated the effectiveness of ~~the Registrants’~~their disclosure controls and ~~procedures.~~procedures as of March 31, 2021. Based on the evaluations, the ~~Interim CEOs~~CEO and CFO have concluded that the Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in

SEC rules and forms; and

that the Registrants’ disclosure controls and procedures are also effective in ensuring that such information is accumulated and communicated to the Registrants’ management, including the ~~Interim CEOs~~CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Registrants’ internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017~~,March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

PART II — OTHER INFORMATION



ITEM 1.LEGAL PROCEEDINGS



CLECO

For information on legal proceedings affecting Cleco, see Part I, Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”



CLECO POWER

For information on legal proceedings affecting Cleco Power, see Part I, Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1213 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”



ITEM 1A.RISK FACTORS

There have been no material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016 (the “2016 Annual Report on Form 10-K”).~~2020. For risks that could affect actual results and cause

results to differ materially from those

expressed in any forward-looking statements made by, or on behalf of, the Registrants, see the risk factors disclosed under Part I, Item 1A, “Risk Factors” of the ~~2016~~Registrants’ Combined Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2020.


ITEM 6. EXHIBITS

~~ITEM 4.MINE SAFETY DISCLOSURES~~

~~The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010~~

~~and Item 104 of Regulation S-K is included in Exhibit 95 to this Combined Quarterly Report on Form 10-Q.~~

CLECO
10.1
~~ITEM 6.~~ ~~EXHIBITS~~Form of Fifth Agreement to Extend the Board of Managers Services Agreement, effective as of May 1, 2021, by and among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and Manager

~~CLECO~~
~~12(a)~~31.1	~~Computation of Ratios of Earnings to Fixed Charges~~
~~31.1~~	CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2		CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1		CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2		CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
95	~~Mine Safety Disclosures~~
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

CLECO POWER
~~12(b)~~10.1		~~Computation~~Form of ~~Ratios~~Fifth Agreement to Extend the Board of ~~Earnings to Fixed Charges~~Managers Services Agreement, effective as of May 1, 2021, by and among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and Manager
31.3		CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.4		CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.3		CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.4		CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
95	~~Mine Safety Disclosures~~
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


CLECO
CLECO POWER						2021 1ST QUARTER FORM 10-Q


~~CLECO~~
~~CLECO POWER~~		~~2017 3RD QUARTER FORM 10-Q~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			CLECO CORPORATE HOLDINGS LLC
			(Registrant)

			By:			/s/ F. Tonita Laprarie
						F. Tonita Laprarie
						Controller and Chief Accounting Officer

Date: ~~November 9, 2017~~May 12, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			CLECO POWER LLC
			(Registrant)

			By:			/s/ F. Tonita Laprarie
						F. Tonita Laprarie
						Controller and Chief Accounting Officer

Date: ~~November 9, 2017~~May 12, 2021


TABLE OF CONTENTS
					PAGE
GLOSSARY OF TERMS					3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS					5

~~TABLE OF CONTENTS~~ PART I
Financial Information		~~PAGE~~
~~GLOSSARY OF TERMS~~			3
~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS~~		5

~~PART I~~	~~Financial Information~~
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)			7
			Cleco Power — Condensed Consolidated Financial Statements (Unaudited)		1714
			Notes to the Unaudited Condensed Consolidated Financial Statements		2621
ITEM 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		4842
ITEM 3.			Quantitative and Qualitative Disclosures about Market Risk		6254
ITEM 4.			Controls and Procedures		6356

PART II			Other Information
ITEM 1.			Legal Proceedings		6457
ITEM 1A.			Risk Factors		6457
~~ITEM 4.~~			~~Mine Safety Disclosures~~		64
~~ITEM 6.~~	~~Exhibits~~	64
	~~Signatures~~	65



Purchase Price Allocation
(THOUSANDS)	AT APR. 13, 2016
Current assets	$	455,016
Property, plant, and equipment, net	3,432,144
Goodwill	1,490,797
Other long-term assets	1,023,487
Less
Current liabilities	228,515
Net deferred income tax liabilities	1,059,939
Other deferred credits	279,379
Long-term debt, net	1,470,126
Total purchase price	$	3,363,485



Cleco
	CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT SEPT. 30, 2017		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2016		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Institutional money market funds	$	35,117	$	—	$	35,117	$	—	$	66,410	$	—	$	66,410	$	—
FTRs	13,425		—		—		13,425		7,884		—		—		7,884
Total assets	$	48,542	$	—	$	35,117	$	13,425	$	74,294	$	—	$	66,410	$	7,884
Liability description
FTRs	$	538	$	—	$	—	$	538	$	201	$	—	$	—	$	201
Total liabilities	$	538	$	—	$	—	$	538	$	201	$	—	$	—	$	201



Cleco Power
	CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT SEPT. 30, 2017		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2016		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Institutional money market funds	$	33,796	$	—	$	33,796	$	—	$	65,089	$	—	$	65,089	$	—
FTRs	13,425		—		—		13,425		7,884		—		—		7,884
Total assets	$	47,221	$	—	$	33,796	$	13,425	$	72,973	$	—	$	65,089	$	7,884
Liability description
FTRs	$	538	$	—	$	—	$	538	$	201	$	—	$	—	$	201
Total liabilities	$	538	$	—	$	—	$	538	$	201	$	—	$	—	$	201



SEGMENT INFORMATION FOR THE THREE MONTHS ENDED SEPT. 30,
2017 (THOUSANDS)	CLECO POWER			OTHER			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	320,009		$	(2,420	)	$	—		$	317,589
Other operations	20,768			514			—			21,282
Electric customer credits	(372		)	—			—			(372		)
Affiliate revenue	209			13,517			(13,726		)	—
Operating revenue, net	$	340,614		$	11,611		$	(13,726	)	$	338,499
Depreciation and amortization	$	40,049		$	2,179		$	—		$	42,228
Merger transaction and commitment costs	$	—		$	185		$	—		$	185
Interest charges	$	17,141		$	13,331		$	(10	)	$	30,462
Interest income	$	332		$	31		$	(9	)	$	354
Federal and state income tax expense (benefit)	$	30,092		$	(7,038	)	$	—		$	23,054
Net income (loss)	$	54,852		$	(9,548	)	$	—		$	45,304



2016 (THOUSANDS)	CLECO POWER		OTHER			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	326,281	$	(2,574	)	$	—		$	323,707
Other operations	18,460		517			(1		)	18,976
Electric customer credits	177		—			—			177
Affiliate revenue	213		13,060			(13,273		)	—
Operating revenue, net	$	345,131	$	11,003		$	(13,274	)	$	342,860
Depreciation and amortization	$	40,353	$	2,182		$	—		$	42,535
Merger transaction and commitment costs	$	—	$	1,869		$	—		$	1,869
Interest charges	$	19,177	$	12,709		$	(28	)	$	31,858
Interest income	$	264	$	82		$	(28	)	$	318
Federal and state income tax expense (benefit)	$	29,427	$	(5,728	)	$	1		$	23,700
Net income (loss)	$	52,572	$	(12,952	)	$	1		$	39,621



	SUCCESSOR APR. 13, 2016 - SEPT. 30, 2016												PREDECESSOR JAN. 1, 2016 - APR. 12, 2016
2016 (THOUSANDS)	CLECO POWER			OTHER			ELIMINATIONS			CONSOLIDATED			CLECO POWER			OTHER			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	558,439		$	(4,805	)	$	—		$	553,634		$	281,154		$	—		$	—		$	281,154
Other operations	32,145			965			—			33,110			18,493			587			—			19,080
Electric customer credits	(381		)	—			—			(381		)	(364		)	—			—			(364		)
Affiliate revenue	406			23,823			(24,229		)	—			263			15,024			(15,287		)	—
Operating revenue, net	$	590,609		$	19,983		$	(24,229	)	$	586,363		$	299,546		$	15,611		$	(15,287	)	$	299,870
Depreciation and amortization	$	71,498		$	5,198		$	(1	)	$	76,695		$	43,698		$	377		$	1		$	44,076
Merger transaction and commitment costs	$	151,501		$	21,671		$	—		$	173,172		$	—		$	34,928		$	(16	)	$	34,912
Interest charges	$	35,937		$	22,430		$	(44	)	$	58,323		$	21,840		$	295		$	(12	)	$	22,123
Interest income	$	382		$	177		$	(44	)	$	515		$	208		$	69		$	(12	)	$	265
Federal and state income tax (benefit) expense	$	(10,028	)	$	(18,474	)	$	—		$	(28,502	)	$	12,993		$	(9,525	)	$	—		$	3,468
Net (loss) income	$	(9,326	)	$	(32,968	)	$	—		$	(42,294	)	$	21,548		$	(25,508	)	$	—		$	(3,960	)
Additions to property, plant, and equipment	$	102,284		$	393		$	—		$	102,677		$	42,353		$	39		$	—		$	42,392
Equity investment in investees ⁽¹⁾	$	18,672		$	—		$	—		$	18,672
Goodwill ⁽¹⁾	$	1,490,797		$	—		$	—		$	1,490,797
Total segment assets ⁽¹⁾	$	5,758,245		$	614,959		$	(30,060	)	$	6,343,144
⁽¹⁾Balances as of December 31, 2016



	FOR THE THREE MONTHS ENDED SEPT. 30,
				2017 CHANGE
	2017	2016	NORMAL	PRIOR YEAR		NORMAL
Cooling degree-days	1,519	1,744	1,511	(12.9	)%	0.5	%

~~CLECO~~LTSA

~~CLECO POWER~~

~~2017 3RD QUARTER FORM 10-Q~~