UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐ 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)			(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

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)			(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


Securities registered pursuant to Section 12(b) of the Act:
Cleco Corporate Holdings LLC: None			Cleco Power LLC: None

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 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 0no common stock outstanding. All of the outstanding 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 POWER						~~2021 2ND~~2022 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 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
CLECO POWER						~~2021 2ND~~2022 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

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

BCI			British Columbia Investment Management Corporation
Big Cajun II, Unit 1			A 580-MW coal-fired generating unit at Cleco Cajun’s plant site in New Roads, Louisiana.
Big Cajun II, Unit 2
			A 540-MW natural-gas-fired generating unit at Cleco Cajun’s plant site in New Roads, Louisiana
Big Cajun II, Unit 3			A 588-MW coal-fired generating unit at Cleco Cajun’s plant site in New Roads, Louisiana. Cleco Cajun has a 58% ownership interest in the capacity of Big Cajun II, Unit 3.


CARES Act			Coronavirus Aid, Relief, and Economic Security Act of March 2020
CCR
			Coal combustion by-products or residual
CDC			Centers for Disease Control and Prevention
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)~~ 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-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 ~~Macquarie Infrastructure and Real Assets Inc., British Columbia Investment Management Corporation,~~MAM, 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			Coronavirus disease 2019, including any variants thereof, 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 Power Station. The Dolet Hills Power Station was retired on December 31, 2021.
EAC			Environmental Adjustment Clause


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM			DEFINITION
EBITDA			Earnings before interest, income taxes, depreciation, and amortization



Entergy Gulf States			Entergy Gulf States Louisiana, LLC
Entergy Louisiana			Entergy Louisiana, LLC
EPA			U.S. Environmental Protection Agency
ERO			Electric Reliability Organization
ESG			Environmental, Social, and Governance
~~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.
GHG			Greenhouse gas



IRS			Internal Revenue Service

kWh			Kilowatt-hour(s)

LDEQ			Louisiana Department of Environmental Quality

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

LTSA			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
Madison Unit 3			A 641-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana
MAM			Macquarie Asset Management
MATS			Mercury and Air Toxics Standards
Merger Agreement			Agreement and Plan of Merger, dated as of October 17, 2014, by and among Cleco Partners, Merger Sub, and Cleco Corporation relating to the 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


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)

NAAQS			National Ambient Air Quality Standards
NERC			North American Electric Reliability Corporation



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.






OSHA			Occupational Safety and Health Administration
Other Benefits			Includes medical, dental, vision, and life insurance for 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~~Holdings. Perryville Energy Partners, L.L.C. was dissolved effective September 8, 2021.



Purchase and Sale Agreement			Purchase and Sale Agreement, dated as of February 6, 2018, by and among NRG Energy, South Central Generating, and Cleco 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			S&P Global Ratings, a division of S&P Global Inc, a credit rating agency

SEC			U.S. Securities and Exchange Commission


SERP			Supplemental Executive Retirement Plan
SIP			State Implementation Plan

South Central Generating			South Central Generating LLC, formerly NRG South Central Generating LLC


SSR			System Support Resource



Support Group			Cleco Support Group LLC, a wholly owned subsidiary of Cleco Holdings


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM			DEFINITION
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
WHO			World Health Organization


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical fact included in this 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~~restrictions 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, and the ordering of refunds to customers and discretion over allowed return on investment,

•the loss of regulatory accounting treatment, which could result in the write-off of regulatory assets and the loss of regulatory deferral and recovery mechanisms,

•economic, regulatory, or workforce impacts related to pandemics, epidemics, or other outbreaks, and other conflicts and hostilities, including the ~~COVID-19 pandemic,~~current armed conflict in Ukraine,

•the possibility of stranded costs with respect to assets that may be retired as a result of new climate legislation, technological advances, a shift in demand, or legal action,

•changes in climate and weather conditions, including natural disasters such as wind and ice storms, hurricanes, floods, and droughts, and Cleco Power’s ability to recover restoration costs associated with these events,

•the ability of Cleco’s customers to continue paying their utility bills due to rising costs related to fuel, hurricanes, ice storms, or other ~~weather~~ events,

•economic conditions in Cleco’s service areas, including inflation and 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 ~~effects~~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 operating or information technology systems,

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

•changes in Cleco’s strategic business plans, which could be affected by any of the 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,

•failure to meet expectations and report progress on ESG initiatives and GHG targets, as well as the increased focus on and activism related to ESG, which could limit Cleco’s access to capital and/or financing,

•declining energy demand related to customer energy efficiency, conservation measures, technological advancements, or increased distributed generation,

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

•~~deterioration in the 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, energy, or fuel,

•Cleco Holdings’ and Cleco Power’s ability to remain in compliance with their respective debt covenants,

•the outcome of legal proceedings and other contingencies,

•changes in actuarial assumptions, interest rates, and the actual return on plan assets for Cleco’s pension and other postretirement benefit plans,


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

•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 the commitments made to the LPSC in connection with the Cleco Cajun Transaction and the 2016 Merger,


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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

•workforce factors, including aging workforce, changes in key members of management, availability of workers in a variety 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,

see Part II, Item 1A, “Risk Factors” in this report and in Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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 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						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


PART I — FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco

These unaudited 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, ~~2020.~~2021. 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 2ND QUARTER FORM 10-Q~~

CLECO
Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 351,936 $ 321,956
Other operations 45,330 44,902
Gross operating revenue 397,266 366,858
Electric customer credits (18,517) (9,100)
Operating revenue, net 378,749 357,758
Operating expenses
Fuel used for electric generation 25,482 67,864
Purchased power 90,494 59,505
Other operations and maintenance 72,815 71,798
Depreciation and amortization 54,318 54,087
Taxes other than income taxes 11,886 14,036
Merger transaction and commitment costs (232) 274
Total operating expenses 254,763 267,564
Operating income 123,986 90,194
Interest income 829 898
Allowance for equity funds used during construction 1,105 127
Other (expense) income, net (3,970) 257
Interest charges
Interest charges, net 33,826 35,023
Allowance for borrowed funds used during construction (535) (308)
Total interest charges 33,291 34,715
Income before income taxes 88,659 56,761
Federal and state income tax expense 9,837 13,593
Net income $ 78,822 $ 43,168
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Net income $ 78,822 $ 43,168
Other comprehensive (loss) income, net of tax
Postretirement benefits (loss) gain (net of tax benefit of $148 in 2021 and tax expense of $156 in 2020) (420) 442
Total other comprehensive (loss) income, net of tax (420) 442
Comprehensive income, net of tax $ 78,402 $ 43,610
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Operating revenue
Electric operations	$	397,309	$	366,245
Other operations	52,007		49,726

Gross operating revenue	449,316		415,971
Electric customer credits	(136)		(20,976)
Operating revenue, net	449,180		394,995
Operating expenses
Fuel used for electric generation	(2,506)		55,820
Purchased power	115,828		144,702
Other operations and maintenance	68,143		72,112
Depreciation and amortization	69,088		54,947
Taxes other than income taxes	16,448		21,117


Total operating expenses	267,001		348,698
Operating income	182,179		46,297
Interest income	756		647
Allowance for equity funds used during construction	931		887


Other expense, net	(190)		(3,033)
Interest charges
Interest charges, net	33,903		34,091
Allowance for borrowed funds used during construction	(384)		(200)
Total interest charges	33,519		33,891
Income before income taxes	150,157		10,907
Federal and state income tax benefit	(5,587)		(9,420)
Net income	$	155,744	$	20,327
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Income (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 718,181 $ 633,113
Other operations 95,056 89,810
Gross operating revenue 813,237 722,923
Electric customer credits (39,494) (17,593)
Operating revenue, net 773,743 705,330
Operating expenses
Fuel used for electric generation 81,302 144,501
Purchased power 235,196 125,825
Other operations and maintenance 144,978 146,564
Depreciation and amortization 109,265 109,960
Taxes other than income taxes 33,003 30,572
Merger transaction and commitment costs (285) 3,049
Total operating expenses 603,459 560,471
Operating income 170,284 144,859
Interest income 1,475 2,054
Allowance for equity funds used during construction 1,991 53
Other expense, net (7,002) (12,452)
Interest charges
Interest charges, net 67,918 70,350
Allowance for borrowed funds used during construction (735) (487)
Total interest charges 67,183 69,863
Income before income taxes 99,565 64,651
Federal and state income tax expense 416 15,155
Net income $ 99,149 $ 49,496
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Net income	$	155,744	$	20,327
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $5 in 2022 and $222 in 2021)	14		628

Total other comprehensive income, net of tax	14		628
Comprehensive income, net of tax	$	155,758	$	20,955
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Net income $ 99,149 $ 49,496
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $74 in 2021 and $302 in 2020) 208 856
Total other comprehensive income, net of tax 208 856
Comprehensive income, net of tax $ 99,357 $ 50,352
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Assets
Current assets
Cash and cash equivalents	$	197,774	$	148,563
Restricted cash and cash equivalents	1,675		1,674
Customer accounts receivable (less allowance for credit losses of $1,002 in 2022 and $1,302 in 2021)	81,558		91,869
Accounts receivable - affiliate	3,046		3,041
Other accounts receivable	57,567		27,818
Taxes receivable	33,597		564
Unbilled revenue	34,692		37,663
Fuel inventory, at average cost	80,547		68,838
Materials and supplies, at average cost	138,250		133,666
Energy risk management assets	82,656		43,479
Accumulated deferred fuel	49,597		56,826
Cash surrender value of company-/trust-owned life insurance policies	84,690		98,576
Prepayments	8,562		13,283
Regulatory assets	31,724		29,261
Other current assets	5,220		12,839
Total current assets	891,155		767,960
Property, plant, and equipment
Property, plant, and equipment	5,450,092		5,416,722
Accumulated depreciation	(763,332)		(700,991)
Net property, plant, and equipment	4,686,760		4,715,731
Construction work in progress	110,129		100,163
Total property, plant, and equipment, net	4,796,889		4,815,894
Equity investment in investee	2,072		2,072
Goodwill	1,490,797		1,490,797
Prepayments	24,697		21,598
Operating lease right of use assets	23,429		24,014
Restricted cash and cash equivalents	745		745
Note receivable	13,543		13,744

Regulatory assets	801,162		810,820
Intangible assets	75,835		82,235

Energy risk management assets	84,898		50,962
Other deferred charges	45,005		44,177
Total assets	$	8,250,227	$	8,125,018
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Liabilities and member’s equity
Liabilities
Current liabilities

Long-term debt and finance leases due within one year	$	93,474	$	93,455
Accounts payable	138,502		167,886
Accounts payable - affiliate	11,295		51,297
Customer deposits	61,564		60,852
Provision for rate refund	5,845		5,682
Taxes payable	23,630		6,311
Interest accrued	39,555		15,203

Energy risk management liabilities	599		834
Regulatory liabilities	44,072		44,072
Deferred compensation	13,484		14,420

Other current liabilities	38,606		53,150
Total current liabilities	470,626		513,162
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	795,153		755,764

Postretirement benefit obligations	291,606		291,606

Regulatory liabilities - deferred taxes, net	36,854		51,472



Deferred lease revenue	29,150		31,451
Intangible liabilities	17,737		18,997
Asset retirement obligations	69,695		69,667
Operating lease liabilities	20,577		21,128
Other deferred credits	30,078		27,582
Total long-term liabilities and deferred credits	1,290,850		1,267,667
Long-term debt and finance leases, net	3,388,837		3,390,033
Total liabilities	5,150,313		5,170,862
Commitments and contingencies (Note 12)	0		0
Member’s equity	3,099,914		2,954,156
Total liabilities and member’s equity	$	8,250,227	$	8,125,018
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Assets
Current assets
Cash and cash equivalents $ 78,353 $ 84,976
Restricted cash and cash equivalents 2,949 4,545
Customer accounts receivable (less allowance for credit losses of $1,334 in 2021 and $2,758 in 2020) 92,686 82,511
Accounts receivable - affiliate 2,686 1,663
Other accounts receivable 34,993 32,076
Taxes receivable 5,023 0
Unbilled revenue 44,308 40,127
Fuel inventory, at average cost 164,548 109,494
Materials and supplies, at average cost 135,494 132,449
Energy risk management assets 38,724 13,081
Accumulated deferred fuel 75,295 28,194
Cash surrender value of company-/trust-owned life insurance policies 94,684 89,138
Prepayments 16,616 14,549
Regulatory assets 24,699 21,041
Other current assets 16,563 11,048
Total current assets 827,621 664,892
Property, plant, and equipment
Property, plant, and equipment 5,446,409 5,337,190
Accumulated depreciation (821,447) (672,271)
Net property, plant, and equipment 4,624,962 4,664,919
Construction work in progress 157,419 124,622
Total property, plant, and equipment, net 4,782,381 4,789,541
Equity investment in investee 5,572 9,072
Goodwill 1,490,797 1,490,797
Prepayments 18,337 23,405
Operating lease right of use assets 25,315 26,172
Restricted cash and cash equivalents 744 744
Note receivable 14,134 14,506
Regulatory assets 626,527 554,609
Intangible assets 98,804 111,731
Other deferred charges 51,237 40,100
Total assets $ 7,941,469 $ 7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.
(Continued on next page)


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

CLECO
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt $ 160,000 $ 75,000
Long-term debt and finance leases due within one year 66,718 66,682
Accounts payable 175,189 161,357
Accounts payable - affiliate 41,283 41,283
Customer deposits 60,092 58,718
Provision for rate refund 7,251 9,444
Taxes payable 32,502 7,530
Interest accrued 15,349 15,583
Energy risk management liabilities 1,161 2,453
Regulatory liabilities 44,862 23,509
Deferred compensation 13,563 13,240
Other current liabilities 54,326 49,813
Total current liabilities 672,296 524,612
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net 694,046 661,376
Postretirement benefit obligations 316,330 314,653
Regulatory liabilities - deferred taxes, net 108,908 157,056
Deferred lease revenue 36,054 40,657
Intangible liabilities 21,517 24,859
Asset retirement obligations 27,404 27,986
Operating lease liabilities 22,315 23,333
Other deferred credits 24,180 28,627
Total long-term liabilities and deferred credits 1,250,754 1,278,547
Long-term debt and finance leases, net 3,162,039 3,165,387
Total liabilities 5,085,089 4,968,546
Commitments and contingencies (Note 13) 0 0
Member’s equity 2,856,380 2,757,023
Total liabilities and member’s equity $ 7,941,469 $ 7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022			2021
Operating activities
Net income	$	155,744		$	20,327
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	77,075			62,549



Provision for credit losses	391			1,874
Unearned compensation expense	1,357			2,422
Allowance for equity funds used during construction	(931)			(887)
Gain on risk management assets and liabilities, net	(104,919)			(4,697)
Deferred lease revenue	(2,301)			(2,301)
Deferred income taxes	24,766			(6,684)
Cash surrender value of company-/trust-owned life insurance	(2,460)			(2,841)
Changes in assets and liabilities
Accounts receivable	(10,398)			(19,478)

Unbilled revenue	2,971			7,474
Fuel inventory and materials and supplies	(16,794)			(2,838)
Prepayments	2,200			263
Accounts payable	(32,448)			(47,838)
Accounts payable - affiliate	(40,002)			—
Customer deposits	2,726			3,236

Postretirement benefit obligations	20			1,446
Regulatory assets and liabilities, net	4,155			(19,459)
Deferred fuel recoveries	9,542			(41,121)
Other deferred accounts	405			(4,217)
Taxes accrued	(16,032)			12,459
Interest accrued	24,351			24,159
Energy risk management collateral received	26,300			—

Other operating	(6,603)			(5,891)
Net cash provided by (used in) operating activities	99,115			(22,043)
Investing activities
Additions to property, plant, and equipment	(40,199)			(37,771)








Return of equity investment in investee	—			1,750




Other investing	491			356
Net cash used in investing activities	(39,708)			(35,665)
Financing activities
Draws on revolving credit facilities	—			60,000






Distributions to member	(10,000)			—
Other financing	(195)			(284)
Net cash (used in) provided by financing activities	(10,195)			59,716
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	49,212			2,008
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	150,982		(1)	90,265
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	200,194	(2)	$	92,273






Supplementary cash flow information
Interest paid, net of amount capitalized	$	6,987		$	7,225

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	13,377		$	14,246




(1) Includes cash and cash equivalents of $148,563, current restricted cash and cash equivalents of $1,674, and non-current restricted cash and cash equivalents of $745. (2) Includes cash and cash equivalents of $197,774, current restricted cash and cash equivalents of $1,675, and non-current restricted cash and cash equivalents of $745.
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating activities
Net income $ 99,149 $ 49,496
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 124,750 124,797
Provision for credit losses 2,486 4,093
Unearned compensation expense 3,749 3,219
Allowance for equity funds used during construction (1,991) (53)
(Gain) loss on risk management assets and liabilities, net (48,242) (2,534)
Deferred lease revenue (4,603) (4,603)
Deferred income taxes 5,425 16,120
Cash surrender value of company-/trust-owned life insurance (5,545) 5,790
Changes in assets and liabilities
Accounts receivable (18,826) (10,131)
Accounts receivable, affiliate (1,023) (32)
Unbilled revenue (4,181) (6,924)
Fuel inventory and materials and supplies (57,899) (46,816)
Prepayments (7,555) (12,438)
Accounts payable 12,768 (38,532)
Customer deposits 6,286 3,699
Provision for merger commitments (1,143) 858
Postretirement benefit obligations 1,959 3,013
Regulatory assets and liabilities, net (17,608) (3,580)
Deferred fuel recoveries (48,321) (2,137)
Other deferred accounts (8,745) (6,030)
Taxes accrued 19,220 17,407
Interest accrued (234) (2,709)
Deferred compensation 323 (1,050)
Other operating (4,737) 4,906
Net cash provided by operating activities 45,462 95,829
Investing activities
Additions to property, plant, and equipment (140,507) (139,339)
Allowance for equity funds used during construction 1,991 53
Return of equity investment in investee 1,750 0
Other investing 1,091 572
Net cash used in investing activities (135,675) (138,714)
Financing activities
Draws on revolving credit facilities 100,000 238,000
Payments on revolving credit facilities (15,000) 0
Repayment of long-term debt 0 (11,055)
Payment of financing costs (2,674) (3,471)
Other financing (332) (300)
Net cash provided by financing activities 81,994 223,174
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents (8,219) 180,289
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 $ 82,046 (2) $ 322,884
Supplementary cash flow information
Interest paid, net of amount capitalized $ 62,947 $ 65,658
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 3,547 $ 7,851
Accrued distribution from equity investment in investee $ 1,750 $ 0
(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 $78,353, current restricted cash and cash equivalents of $2,949, and non-current restricted cash and cash equivalents of $744.
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

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














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

Balances, Dec. 31, 2021	$	2,454,276	$	523,509	$	(23,629)	$	2,954,156

Distributions to member	—		(10,000)		—		(10,000)
Net income	—		155,744		—		155,744
Other comprehensive income, net of tax	—		—		14		14
Balances, Mar. 31, 2022	$	2,454,276	$	669,253	$	(23,615)	$	3,099,914
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND 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, March 31, 2020 $ 2,454,276 $ 212,571 $ (17,099) $ 2,649,748
Net income — 43,168 — 43,168
Other comprehensive income, net of tax — — 442 442
Balances, June 30, 2020 $ 2,454,276 $ 255,739 $ (16,657) $ 2,693,358
Balances, March 31, 2021 $ 2,454,276 $ 348,870 $ (25,168) $ 2,777,978
Net income — 78,822 — 78,822
Other comprehensive loss, net of tax — — (420) (420)
Balances, June 30, 2021 $ 2,454,276 $ 427,692 $ (25,588) $ 2,856,380
Balances, Dec. 31, 2019 $ 2,454,276 $ 206,243 $ (17,513) $ 2,643,006
Net income — 49,496 — 49,496
Other comprehensive income, net of tax — — 856 856
Balances, June 30, 2020 $ 2,454,276 $ 255,739 $ (16,657) $ 2,693,358
Balances, Dec. 31, 2020 $ 2,454,276 $ 328,543 $ (25,796) $ 2,757,023
Net income — 99,149 — 99,149
Other comprehensive income, net of tax — — 208 208
Balances, June 30, 2021 $ 2,454,276 $ 427,692 $ (25,588) $ 2,856,380
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco Power

These unaudited 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, ~~2020.~~2021. 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						2022 1ST QUARTER FORM 10-Q


CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Operating revenue
Electric operations	$	296,097	$	267,158
Other operations	19,084		18,626
Affiliate revenue	1,459		1,655
Gross operating revenue	316,640		287,439
Electric customer credits	(136)		(20,976)
Operating revenue, net	316,504		266,463
Operating expenses
Fuel used for electric generation	100,582		45,210
Purchased power	50,410		79,033
Other operations and maintenance	48,729		53,565
Depreciation and amortization	45,239		42,076
Taxes other than income taxes	12,631		16,502


Total operating expenses	257,591		236,386
Operating income	58,913		30,077
Interest income	740		642
Allowance for equity funds used during construction	931		887

Other expense, net	(2,035)		(4,258)
Interest charges
Interest charges, net	19,185		18,846
Allowance for borrowed funds used during construction	(384)		(200)
Total interest charges	18,801		18,646
Income before income taxes	39,748		8,702
Federal and state income tax expense (benefit)	724		(9,723)
Net income	$	39,024	$	18,425
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 262,948 $ 239,643
Other operations 16,269 15,904
Affiliate revenue 1,224 1,240
Gross operating revenue 280,441 256,787
Electric customer credits (18,762) (9,100)
Operating revenue, net 261,679 247,687
Operating expenses
Fuel used for electric generation 68,633 64,064
Purchased power 34,255 19,179
Other operations and maintenance 52,160 54,667
Depreciation and amortization 40,933 41,596
Taxes other than income taxes 7,314 9,448
Total operating expenses 203,295 188,954
Operating income 58,384 58,733
Interest income 825 755
Allowance for equity funds used during construction 1,105 127
Other expense, net (5,700) (3,423)
Interest charges
Interest charges, net 18,772 18,911
Allowance for borrowed funds used during construction (535) (308)
Total interest charges 18,237 18,603
Income before income taxes 36,377 37,589
Federal and state income tax expense 8,956 9,356
Net income $ 27,421 $ 28,233
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Net income	$	39,024	$	18,425
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $113 in 2022 and $162 in 2021)	306		458
Amortization of interest rate derivatives to earnings (net of tax expense of $23 in 2022 and $22 in 2021)	63		64
Total other comprehensive income, net of tax	369		522
Comprehensive income, net of tax	$	39,393	$	18,947
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Net income $ 27,421 $ 28,233
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $101 in 2021 and $148 in 2020) 287 419
Amortization of interest rate derivatives to earnings (net of tax expense of $22 in both 2021 and 2020) 64 64
Total other comprehensive income, net of tax 351 483
Comprehensive income, net of tax $ 27,772 $ 28,716
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Assets
Utility plant and equipment
Property, plant, and equipment	$	5,777,277	$	5,745,489
Accumulated depreciation	(1,957,956)		(1,919,766)
Net property, plant, and equipment	3,819,321		3,825,723
Construction work in progress	104,354		94,573
Total utility plant and equipment, net	3,923,675		3,920,296
Current assets
Cash and cash equivalents	108,241		85,667
Restricted cash and cash equivalents	1,675		1,674
Customer accounts receivable (less allowance for credit losses of $1,002 in 2022 and $1,302 in 2021)	39,768		48,551
Accounts receivable - affiliate	1,728		13,612
Other accounts receivable	25,974		21,931
Taxes receivable	279		—
Unbilled revenue	34,692		37,663
Fuel inventory, at average cost	54,197		46,121
Materials and supplies, at average cost	106,078		101,502
Energy risk management assets	840		5,515
Accumulated deferred fuel	49,597		56,826
Cash surrender value of company-owned life insurance policies	16,276		16,260
Prepayments	5,364		7,784
Regulatory assets	23,989		21,526
Other current assets	1,664		782
Total current assets	470,362		465,414
Equity investment in investee	2,072		2,072
Prepayments	1,349		1,243
Operating lease right of use assets	23,388		23,970

Note receivable	13,543		13,744

Regulatory assets	673,672		680,813


Other deferred charges	22,716		21,949
Total assets	$	5,130,777	$	5,129,501
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Income (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 530,107 $ 464,073
Other operations 34,895 31,668
Affiliate revenue 2,879 2,346
Gross operating revenue 567,881 498,087
Electric customer credits (39,738) (17,440)
Operating revenue, net 528,143 480,647
Operating expenses
Fuel used for electric generation 113,843 125,129
Purchased power 113,288 42,641
Other operations and maintenance 105,726 111,608
Depreciation and amortization 83,009 85,273
Taxes other than income taxes 23,816 21,725
Total operating expenses 439,682 386,376
Operating income 88,461 94,271
Interest income 1,468 1,709
Allowance for equity funds used during construction 1,991 53
Other expense, net (9,958) (6,091)
Interest charges
Interest charges, net 37,618 37,671
Allowance for borrowed funds used during construction (735) (487)
Total interest charges 36,883 37,184
Income before income taxes 45,079 52,758
Federal and state income tax (benefit) expense (767) 12,694
Net income $ 45,846 $ 40,064
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Liabilities and member’s equity
Member’s equity	$	1,987,930	$	1,948,537
Long-term debt and finance leases, net	1,801,160		1,800,854
Total capitalization	3,789,090		3,749,391
Current liabilities

Long-term debt and finance leases due within one year	25,774		25,755
Accounts payable	94,473		114,493
Accounts payable - affiliate	19,549		69,729
Customer deposits	61,564		60,852
Provision for rate refund	5,845		5,682

Taxes payable	18,738		5,494
Interest accrued	21,263		5,080

Energy risk management liabilities	273		597
Regulatory liabilities	44,072		44,072

Other current liabilities	18,764		23,467
Total current liabilities	310,315		355,221
Commitments and contingencies (Note 12)	0		0
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	722,886		707,479

Postretirement benefit obligations	205,651		205,214

Regulatory liabilities - deferred taxes, net	36,854		51,472




Asset retirement obligations	19,507		19,456
Operating lease liabilities	20,552		21,100
Other deferred credits	25,922		20,168
Total long-term liabilities and deferred credits	1,031,372		1,024,889
Total liabilities and member’s equity	$	5,130,777	$	5,129,501
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Net income $ 45,846 $ 40,064
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $263 in 2021 and $299 in 2020) 745 845
Amortization of interest rate derivatives to earnings (net of tax expense of $45 in both 2021 and 2020) 128 128
Total other comprehensive income, net of tax 873 973
Comprehensive income, net of tax $ 46,719 $ 41,037
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022			2021
Operating activities
Net income	$	39,024		$	18,425
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	46,726			43,458

Provision for credit losses	391			1,874

Allowance for equity funds used during construction	(931)			(887)
Deferred income taxes	651			(6,975)

Changes in assets and liabilities
Accounts receivable	(1,883)			(17,179)
Accounts receivable - affiliate	12,672			(302)
Unbilled revenue	2,971			7,474
Fuel inventory and materials and supplies	(13,153)			(1,167)
Prepayments	3,763			2,176
Accounts payable	(24,600)			(24,222)
Accounts payable - affiliate	(49,657)			(155)
Customer deposits	2,726			3,236


Regulatory assets and liabilities, net	3,658			(19,956)
Deferred fuel recoveries	9,542			(41,121)
Other deferred accounts	4,752			(1,410)
Taxes accrued	12,649			10,893
Interest accrued	16,183			16,010
Other operating	(4,691)			(2,662)
Net cash provided by (used in) operating activities	60,793			(12,490)
Investing activities
Additions to property, plant, and equipment	(38,492)			(36,263)


Return of equity investment in investee	—			1,750





Other investing	469			356
Net cash used in investing activities	(38,023)			(34,157)
Financing activities
Draws on revolving credit facility	—			60,000







Other financing	(195)			(255)
Net cash (used in) provided by financing activities	(195)			59,745
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	22,575			13,098
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	87,341		(1)	29,391
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	109,916	(2)	$	42,489
Supplementary cash flow information

Interest paid, net of amount capitalized	$	1,039		$	797

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	13,286		$	12,738



(1) Includes cash and cash equivalents of $85,667 and current restricted cash and cash equivalents of $1,674. (2) Includes cash and cash equivalents of $108,241 and current restricted cash and cash equivalents of $1,675.

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


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Assets
Utility plant and equipment
Property, plant, and equipment $ 5,915,689 $ 5,824,378
Accumulated depreciation (2,190,690) (2,067,362)
Net property, plant, and equipment 3,724,999 3,757,016
Construction work in progress 146,232 110,613
Total utility plant and equipment, net 3,871,231 3,867,629
Current assets
Cash and cash equivalents 20,767 24,846
Restricted cash and cash equivalents 2,949 4,545
Customer accounts receivable (less allowance for credit losses of $1,334 in 2021 and $2,758 in 2020) 49,863 43,852
Accounts receivable - affiliate 13,026 14,605
Other accounts receivable 27,715 27,535
Unbilled revenue 44,308 40,127
Fuel inventory, at average cost 119,379 63,234
Materials and supplies, at average cost 108,022 105,340
Energy risk management assets 6,867 4,337
Accumulated deferred fuel 75,295 28,194
Cash surrender value of company-owned life insurance policies 16,230 16,184
Prepayments 7,189 7,163
Regulatory assets 16,964 13,305
Other current assets 5,551 830
Total current assets 514,125 394,097
Equity investment in investee 5,572 9,072
Prepayments 1,370 1,496
Operating lease right of use assets 25,263 26,006
Note receivable 14,134 14,506
Regulatory assets 491,487 414,535
Other deferred charges 24,239 38,806
Total assets $ 4,947,421 $ 4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.
(Continued on next page)


CLECO POWER

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














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

Balances, Dec. 31, 2021	$	1,966,720	$	(18,183)	$	1,948,537


Net income	39,024		—		39,024
Other comprehensive income, net of tax	—		369		369
Balances, Mar. 31, 2022	$	2,005,744	$	(17,814)	$	1,987,930
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

CLECO POWER
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Liabilities and member’s equity
Member’s equity $ 1,854,598 $ 1,807,879
Long-term debt and finance leases, net 1,502,155 1,502,257
Total capitalization 3,356,753 3,310,136
Current liabilities
Short-term debt 160,000 75,000
Long-term debt and finance leases due within one year 718 682
Accounts payable 135,352 106,089
Accounts payable - affiliate 70,437 72,068
Customer deposits 60,092 58,718
Provision for rate refund 7,251 8,630
Taxes payable 35,568 4,778
Interest accrued 5,108 5,357
Energy risk management liabilities 877 1,121
Regulatory liabilities 44,862 23,509
Other current liabilities 23,475 24,754
Total current liabilities 543,740 380,706
Commitments and contingencies (Note 13) 0 0
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net 653,655 634,598
Postretirement benefit obligations 233,265 230,825
Regulatory liabilities - deferred taxes, net 108,908 157,056
Asset retirement obligations 11,529 11,364
Operating lease liabilities 22,282 23,295
Other deferred credits 17,289 18,167
Total long-term liabilities and deferred credits 1,046,928 1,075,305
Total liabilities and member’s equity $ 4,947,421 $ 4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 2ND QUARTER FORM 10-Q~~

CLECO POWER
Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
Operating activities
Net income $ 45,846 $ 40,064
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 85,844 88,034
Provision for credit losses 2,486 3,705
Unearned compensation expense 1,063 730
Allowance for equity funds used during construction (1,991) (53)
Deferred income taxes (8,424) 6,091
Cash surrender value of company-owned life insurance (46) 1,445
Changes in assets and liabilities
Accounts receivable (11,775) (15,462)
Accounts receivable - affiliate 3,368 2,573
Unbilled revenue (4,181) (6,924)
Fuel inventory and materials and supplies (58,627) (35,639)
Accounts payable 30,625 (30,242)
Accounts payable - affiliate (1,763) (3,149)
Customer deposits 6,286 3,699
Provision for merger commitments (643) (1,455)
Postretirement benefit obligations 1,661 1,800
Regulatory assets and liabilities, net (18,602) (4,574)
Deferred fuel recoveries (48,321) (2,137)
Other deferred accounts (4,898) (5,778)
Taxes accrued 30,062 23,517
Interest accrued (249) (2,056)
Other operating (7,196) 2,299
Net cash provided by operating activities 40,525 66,488
Investing activities
Additions to property, plant, and equipment (134,185) (132,578)
Allowance for equity funds used during construction 1,991 53
Return of equity investment in investee 1,750 0
Other investing 1,091 572
Net cash used in investing activities (129,353) (131,953)
Financing activities
Draws on revolving credit facility 100,000 150,000
Payments on revolving credit facility (15,000) 0
Repayment of long-term debt 0 (11,055)
Payment of financing costs (1,515) (1,123)
Other financing (332) (300)
Net cash provided by financing activities 83,153 137,522
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents (5,675) 72,057
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 $ 23,716 (2) $ 153,009
Supplementary cash flow information
Interest paid, net of amount capitalized $ 33,973 $ 33,711
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 2,814 $ 7,581
Accrued distribution from equity investment in investee $ 1,750 $ 0
(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 $20,767 and current restricted cash and cash equivalents of $2,949.
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND 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, March 31, 2020 $ 1,747,808 $ (22,095) $ 1,725,713
Net income 28,233 — 28,233
Other comprehensive income, net of tax — 483 483
Balances, June 30, 2020 $ 1,776,041 $ (21,612) $ 1,754,429
Balances, March 31, 2021 $ 1,851,057 $ (24,231) $ 1,826,826
Net income 27,421 — 27,421
Other comprehensive income, net of tax — 351 351
Balances, June 30, 2021 $ 1,878,478 $ (23,880) $ 1,854,598
Balances, Dec. 31, 2019 $ 1,735,977 $ (22,585) $ 1,713,392
Net income 40,064 — 40,064
Other comprehensive income, net of tax — 973 973
Balances, June 30, 2020 $ 1,776,041 $ (21,612) $ 1,754,429
Balances, Dec. 31, 2020 $ 1,832,632 $ (24,753) $ 1,807,879
Net income 45,846 — 45,846
Other comprehensive income, net of tax — 873 873
Balances, June 30, 2021 $ 1,878,478 $ (23,880) $ 1,854,598
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND~~2022 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	Recent Authoritative Guidance	Cleco and Cleco Power
Note 3	Leases	Cleco and Cleco Power
Note 4	Revenue Recognition	Cleco and Cleco Power
Note 5	Regulatory Assets and Liabilities	Cleco and Cleco Power
Note 6	Fair Value Accounting and Financial Instruments	Cleco and Cleco Power
~~Note 7~~	~~Debt~~	~~Cleco and Cleco Power~~
Note 87	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 98	Income Taxes	Cleco and Cleco Power
Note 109	Disclosures about Segments	Cleco
Note 1110	Regulation and Rates	Cleco and Cleco Power
Note 1211	Variable Interest Entities	Cleco and Cleco Power
Note 1312	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 1413	Affiliate Transactions	Cleco and Cleco Power
Note 1514	Intangible Assets and Liabilities	Cleco and Cleco Power
Note 1615	Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 1716	Storm Restoration, Securitization, and Cost Recovery	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. During March and April 2021, due

In response to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, the governor of the state of Louisiana reduced restrictions that were previously in effect, eased capacity limits on businesses and social gatherings, and revoked the mandatory, state-wide mask mandate. However, effective August 4, 2021, the state-wide mask mandate was reinstated due to a surge in COVID-19 cases.

~~The~~ COVID-19 pandemic, ~~may worsen~~ in March 2020 the ~~U.S. during~~LPSC issued an executive order prohibiting the ~~upcoming months, which may cause federal, state, and local governments~~disconnection of utilities for nonpayment. At March 31, 2022, Cleco Power had a regulatory asset of $3.0 million recorded for expenses incurred related to ~~reconsider restrictions on business and social activities. In~~ the ~~event governments reinstate or increase restrictions,~~executive order, as allowed by the ~~reopening of the economy may be further curtailed.~~LPSC.

~~Cleco has modified some of its business operations, as these~~While most 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.now been lifted, Cleco ~~is monitoring the ongoing COVID-19 pandemic and~~ continues to ~~adjust certain business practices to conform to government restrictions~~assess the COVID-19 situation 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 potential surges in COVID-19 infections, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the availability, timely distribution and acceptance of effective treatments and vaccines, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, and workforce ~~availability, and the timing and extent to which normal economic and operating conditions resume.~~availability.

Principles of Consolidation

The accompanying condensed consolidated financial statements of Cleco include the accounts of Cleco and its majority-owned subsidiaries after elimination of intercompany accounts and transactions.

Basis of Presentation

The 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 Form 10-Q and Regulation S-X. Accordingly, these 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 data was derived from audited financial statements. Because the interim 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 and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary ~~to fairly state~~for a fair statement of 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 2 — “Recent Authoritative Guidance.”


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Restricted Cash and Cash Equivalents

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

Cleco
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Current
Cleco Katrina/Rita’s storm recovery bonds $ 1,673 $ 2,626
Cleco Power’s charitable contributions 1,078 1,718
Cleco Power’s rate credit escrow 198 201
Total current 2,949 4,545
Non-current
Diversified Lands’ mitigation escrow 22 22
Cleco Cajun’s defense fund 722 722
Total non-current 744 744
Total restricted cash and cash equivalents $ 3,693 $ 5,289

Cleco Power
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Current
Cleco Katrina/Rita’s storm recovery bonds $ 1,673 $ 2,626
Charitable contributions 1,078 1,718
Rate credit escrow 198 201
Total restricted cash and cash equivalents $ 2,949 $ 4,545


Cleco
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current
Cleco Katrina/Rita storm recovery surcharge	$	1,675	$	1,674



Total current	1,675		1,674
Non-current
Diversified Lands’ mitigation escrow	22		22
Cleco Cajun’s defense fund	723		723




Total non-current	745		745
Total restricted cash and cash equivalents	$	2,420	$	2,419

~~Prior to the repayment~~


Cleco Power
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current
Cleco Katrina/Rita storm recovery surcharge	$	1,675	$	1,674









Total restricted cash and cash equivalents	$	1,675	$	1,674

In April 2021, after payments for all final administrative and winding up activities of ~~the storm recovery bonds in March 2020,~~ Cleco Katrina/Rita ~~had the right to bill and collect storm restoration costs from~~were made, Cleco ~~Power’s customers. As cash was collected, it was restricted for payment of administrative fees, interest, and principal on the storm recovery bonds. The~~Katrina/Rita transferred its remaining ~~$1.7 million of~~ restricted cash ~~relating~~ to Cleco ~~Katrina/Rita at June 30, 2021, will~~Power to be used to benefit retail customers in a manner ~~and timing as~~to be approved by the LPSC.

Reserves for Credit Losses

Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivable 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 a reserve matrix based on historical bad debt write-offs, as well as current and forecasted economic conditions, to establish a credit loss estimate. Management’s historical credit loss analysis included periods of economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of electricity, none of these past events have significantly impacted Cleco’s credit loss rates.

~~Although~~ Cleco’s service territory experienced ~~a recent~~an economic decline ~~in the economy in 2020 and~~during 2021, primarily related to the COVID-19 pandemic and weather-related ~~events, the~~events. Although inflation is currently at a 40-year historical high, Cleco’s economic outlook at ~~June 30, 2021,~~March 31, 2022, was still within range of ~~its~~Cleco’s historical credit loss analysis.

The tables below present the changes in the allowance for credit losses by receivable for Cleco and Cleco Power:

Cleco
FOR THE THREE MONTHS
ENDED JUNE 30, 2021 FOR THE SIX MONTHS
ENDED JUNE 30, 2021
(THOUSANDS) ACCOUNTS
RECEIVABLE OTHER* TOTAL ACCOUNTS
RECEIVABLE OTHER* TOTAL
Balances, beginning of period $ 2,040 $ 1,638 $ 3,678 $ 2,758 $ 1,638 $ 4,396
Current period provision 616 0 616 2,490 0 2,490
Charge-offs (1,583) 0 (1,583) (4,442) 0 (4,442)
Recovery 261 0 261 528 0 528
Balances, June 30, 2021 $ 1,334 $ 1,638 $ 2,972 $ 1,334 $ 1,638 $ 2,972

* Loan held at Diversified Lands that was fully reserved for at June 30, 2021.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~


Cleco														Cleco
				FOR THE THREE MONTHS ENDED JUNE 30, 2020						FOR THE SIX MONTHS ENDED JUNE 30, 2020
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL		(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period		$	2,123	$	1,638	$	3,761	$	3,005	$	1,250	$	4,255
CECL adoption		0		—		0		71		—		71
Balances, Dec. 31, 2021														Balances, Dec. 31, 2021	$	1,302	$	1,638	$	2,940

Current period provision	Current period provision	1,137		0		1,137		3,634		388		4,022		Current period provision	391		—		391
Charge-offs	Charge-offs	0		0		0		(4,091)		0		(4,091)		Charge-offs	(1,089)		—		(1,089)
Recovery	Recovery	226		0		226		867		0		867		Recovery	398		—		398
Balances, June 30, 2020		$	3,486	$	1,638	$	5,124	$	3,486	$	1,638	$	5,124
Balances, Mar. 31, 2022														Balances, Mar. 31, 2022	$	1,002	$	1,638	$	2,640

* Loan held at Diversified Lands that was fully reserved for at ~~June 30,~~December 31, 2020.

Cleco Power
FOR THE THREE MONTHS ENDED JUNE 30, 2021 FOR THE SIX MONTHS ENDED JUNE 30, 2021
(THOUSANDS) ACCOUNTS RECEIVABLE
Balances, beginning of period $ 2,040 $ 2,758
Current period provision 616 2,490
Charge-offs (1,583) (4,442)
Recovery 261 528
Balances, June 30, 2021 $ 1,334 $ 1,334


		FOR THE THREE MONTHS ENDED JUNE 30, 2020		FOR THE SIX MONTHS ENDED JUNE 30, 2020
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE				(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period		$	2,123	$	3,005
CECL adoption		0		71
Balances, Dec. 31, 2020						Balances, Dec. 31, 2020	$	2,758	$	1,638	$	4,396

Current period provision	Current period provision	1,137		3,634		Current period provision	1,874		—		1,874
Charge-offs	Charge-offs	0		(4,091)		Charge-offs	(2,859)		—		(2,859)
Recovery	Recovery	226		867		Recovery	267		—		267
Balances, June 30, 2020		$	3,486	$	3,486
Balances, Mar. 31, 2021						Balances, Mar. 31, 2021	$	2,040	$	1,638	$	3,678

* Loan held at Diversified Lands that was fully reserved for at December 31, 2020.


Cleco Power

(THOUSANDS)	ACCOUNTS RECEIVABLE
Balance, Dec. 31, 2021	$	1,302

Current period provision	391
Charge-offs	(1,089)
Recovery	398
Balance, Mar. 31, 2022	$	1,002



(THOUSANDS)	ACCOUNTS RECEIVABLE
Balance, Dec. 31, 2020	$	2,758

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


Note 2 — Recent Authoritative Guidance

In March 2020, FASB issued optional guidance, for a limited period of time, that applies to 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 reference rate reform. The guidance includes a general principal that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The optional guidance may be applied from March 12, 2020, through December 31, 2022. Management has identified contracts with reference rates that will be discontinued, primarily related to long-term debt obligations. ~~In the second quarter of 2021, certain~~Certain debt contracts ~~were~~have been amended to include fallback provisions that provide substitute reference rates ~~upon~~in the ~~discontinuance~~event LIBOR is discontinued or deemed to no longer be representative, or prior to such events, at the option of ~~LIBOR, among other amendments.~~Cleco and the administrative agent. Management will continue to modify

contracts to include similar fallback language and expects to apply this guidance on an ongoing basis. Management does not expect this guidance to have a significant impact on the Registrants’ results of operations, financial condition, or cash flows.

In ~~December 2019,~~November 2021, FASB ~~amended~~issued guidance requiring annual disclosures about government assistance with the objective of increasing transparency and reducing existing


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

diversity in practice. This guidance ~~for~~requires disclosure of the types of assistance, an entity’s accounting for ~~income taxes. The amendments simplify~~ the ~~accounting~~assistance, and the effect of the assistance on the entity’s financial statements. This guidance is effective for ~~income taxes by removing certain exceptions~~annual periods beginning after December 15, 2021. Early adoption is permitted. Funding is being sought for relief of incurred storm costs and to ~~general principles included in the accounting guidance. Effective January 1, 2021,~~help offset future costs associated with Cleco ~~adopted the amended accounting guidance. Adoption of~~Power’s upcoming Project Diamond Vault. Management will continue to monitor this activity to determine what, if any, disclosures are required. Management does not expect this guidance ~~did not materially~~to have a significant impact on the ~~Registrants’~~ results of operations, financial condition, or cash ~~flows.~~flows of the Registrants.

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 lease, NRG Energy will operate the Cottonwood Plant, incur all costs, and receive all revenues from the operations of the 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 be recovered through sales of power generation from the plant. The residual value of the Cottonwood Plant has been determined using the plant’s estimated economic life.

Cleco Cajun is Cleco’s only ~~entity~~subsidiary 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 ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020,~~ was as follows:


		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Fixed payments	Fixed payments	$	10,000	$	10,000	$	20,000	$	20,000	Fixed payments	$	10,000	$	10,000
Variable payments	Variable payments	5,010		5,194		10,475		10,760		Variable payments	5,549		5,465
Amortization of deferred lease liability*	Amortization of deferred lease liability*	2,301		2,301		4,603		4,603		Amortization of deferred lease liability*	2,301		2,301
Total lease income	Total lease income	$	17,311	$	17,495	$	35,078	$	35,363	Total lease income	$	17,850	$	17,766

* Consists of amortization of the deferred lease revenue resulting from the fair value of the lease between

Cottonwood Energy and a special-purpose entity that is a subsidiary of NRG Energy.


Note 4 — Revenue Recognition

27Operating revenue, net for the three months ended March 31, 2022, and 2021 was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	112,423		$	—		$	—		$	—	$	112,423
Commercial (1)	76,534			—			—			—		76,534
Industrial (1)	46,274			—			—			—		46,274
Other retail (1)	4,129			—			—			—		4,129

Electric customer credits	(136)			—			—			—		(136)
Total retail revenue	239,224			—			—			—		239,224
Wholesale, net	55,364		(1)	103,633		(2)	(2,420)		(3)	—		156,577
Transmission, net	13,892			17,743			—			(2,690)		28,945
Other	5,193			—			—			—		5,193
Affiliate (4)	1,459			—			27,393			(28,852)		—
Total revenue from contracts with customers	315,132			121,376			24,973			(31,542)		429,939
Revenue unrelated to contracts with customers
Other	1,372		(5)	17,869		(6)	1			(1)		19,241
Total revenue unrelated to contracts with customers	1,372			17,869			1			(1)		19,241
Operating revenue, net	$	316,504		$	139,245		$	24,974		$	(31,543)	$	449,180

(1) Includes fuel recovery revenue.

(2) Includes $(3.6) million of amortization of intangible assets and liabilities related to Cleco Cajun’s wholesale power supply agreements.

(3) Amortization of intangible assets related to Cleco Power’s wholesale power supply agreements.

(4) Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.

(5) Realized gains associated with FTRs.

(6) Includes $15.5 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


~~Note 4 — Revenue Recognition~~

~~Operating revenue, net for the three and six months ended June 30, 2021, and 2020, was as follows:~~


		FOR THE THREE MONTHS ENDED JUNE 30, 2021														FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL		(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers	Revenue from contracts with customers														Revenue from contracts with customers
Retail revenue	Retail revenue														Retail revenue
Residential (1)	Residential (1)	$	105,315		$	0		$	0		$	0	$	105,315	Residential (1)	$	95,081		$	—		$	—		$	—	$	95,081
Commercial (1)	Commercial (1)	68,392			0			0			0		68,392		Commercial (1)	63,026			—			—			—		63,026
Industrial (1)	Industrial (1)	37,385			0			0			0		37,385		Industrial (1)	36,666			—			—			—		36,666
Other retail (1)	Other retail (1)	3,876			0			0			0		3,876		Other retail (1)	3,570			—			—			—		3,570

Electric customer credits	Electric customer credits	(19,054)			0			0			0		(19,054)		Electric customer credits	(20,976)			—			—			—		(20,976)
Total retail revenue	Total retail revenue	195,914			0			0			0		195,914		Total retail revenue	177,367			—			—			—		177,367
Wholesale, net	Wholesale, net	46,216		(1)	91,407			(2,420)		(2)	0		135,203		Wholesale, net	61,722		(1)	101,507		(2)	(2,420)		(3)	—		160,809
Transmission, net	Transmission, net	13,313		(3)	13,573		(4)	0			(1,595)		25,291		Transmission, net	13,982			15,257			—			(1,940)		27,299
Other	Other	3,249			0			0			0		3,249		Other	4,642			—			—			—		4,642
Affiliate ~~(5)~~(4)	Affiliate ~~(5)~~(4)	1,224			0			26,120			(27,344)		0		Affiliate ~~(5)~~(4)	1,655			—			27,156			(28,811)		—
Total revenue from contracts with customers	Total revenue from contracts with customers	259,916			104,980			23,700			(28,939)		359,657		Total revenue from contracts with customers	259,368			116,764			24,736			(30,751)		370,117
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	1,763		(6)	17,326		(7)	1			2		19,092		Other	7,095		(5)	17,782		(6)	1			—		24,878
Total revenue unrelated to contracts with customers	Total revenue unrelated to contracts with customers	1,763			17,326			1			2		19,092		Total revenue unrelated to contracts with customers	7,095			17,782			1			—		24,878
Operating revenue, net	Operating revenue, net	$	261,679		$	122,306		$	23,701		$	(28,937)	$	378,749	Operating revenue, net	$	266,463		$	134,546		$	24,737		$	(30,751)	$	394,995

(1) Includes fuel recovery revenue.

(2)Includes $(3.1) million of amortization of intangible assets and liabilities related to Cleco Cajun’s wholesale power supply agreements.

(3) Amortization of intangible assets related to Cleco Power’s wholesale power supply agreements.

~~(3)~~ ~~Includes $(0.3) million of electric customer credits.~~

~~(4)~~ ~~Includes $(0.2) million of electric customer credits.~~

~~(5)~~ ~~Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.~~

~~(6)~~ ~~Realized gains associated with FTRs.~~

~~(7)~~ ~~Includes $15.0 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.~~

FOR THE THREE MONTHS ENDED JUNE 30, 2020
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 97,973 $ 0 $ 0 $ 0 $ 97,973
Commercial (1)
61,575 0 0 0 61,575
Industrial (1)
29,208 0 0 0 29,208
Other retail (1)
3,341 0 0 0 3,341
Electric customer credits (8,423) 0 0 0 (8,423)
Total retail revenue 183,674 0 0 0 183,674
Wholesale, net 45,694 (1) 84,733 (2,420) (2) 0 128,007
Transmission, net 11,625 (3) 13,131 0 (1,639) 23,117
Other 3,601 0 0 0 3,601
Affiliate (4)
1,240 43 29,138 (30,421) 0
Total revenue from contracts with customers 245,834 97,907 26,718 (32,060) 338,399
Revenue unrelated to contracts with customers
Other 1,853 (5) 17,505 (6) 1 0 19,359
Total revenue unrelated to contracts with customers 1,853 17,505 1 0 19,359
Operating revenue, net $ 247,687 $ 115,412 $ 26,719 $ (32,060) $ 357,758

~~(1)~~ ~~Includes fuel recovery revenue.~~

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

~~(3)~~ ~~Includes $0.7 million of electric customer credits.~~

(4) Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.

(5) Realized gains associated with FTRs.

(6) Includes ~~$15.2~~$15.5 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.

~~CLECO~~

~~CLECO POWER~~

~~2021 2ND QUARTER FORM 10-Q~~

FOR THE SIX MONTHS ENDED JUNE 30, 2021
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 200,396 $ 0 $ 0 $ 0 $ 200,396
Commercial (1)
131,418 0 0 0 131,418
Industrial (1)
74,051 0 0 0 74,051
Other retail (1)
7,446 0 0 0 7,446
Electric customer credits (40,030) 0 0 0 (40,030)
Total retail revenue 373,281 0 0 0 373,281
Wholesale, net 107,938 (1) 192,914 (4,840) (2) 0 296,012
Transmission, net 27,295 (3) 28,830 (4) 0 (3,535) 52,590
Other 7,891 0 0 0 7,891
Affiliate (5)
2,879 0 53,276 (56,155) 0
Total revenue from contracts with customers 519,284 221,744 48,436 (59,690) 729,774
Revenue unrelated to contracts with customers
Other 8,859 (6) 35,108 (7) 2 0 43,969
Total revenue unrelated to contracts with customers 8,859 35,108 2 0 43,969
Operating revenue, net $ 528,143 $ 256,852 $ 48,438 $ (59,690) $ 773,743

~~(1)~~

~~Includes fuel recovery revenue.~~

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

~~(3)~~ ~~Includes $(0.3) million of electric customer credits.~~

~~(4)~~ ~~Includes $(0.2) million of electric customer credits.~~

~~(5)~~ ~~Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.~~

~~(6)~~ ~~Realized gains associated with FTRs.~~

~~(7)~~ ~~Includes $30.5 million in lease revenue related to the Cottonwood Sale Leaseback and $4.6 million of deferred lease revenue amortization.~~

FOR THE SIX MONTHS ENDED JUNE 30, 2020
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 179,544 $ 0 $ 0 $ 0 $ 179,544
Commercial (1)
122,685 0 0 0 122,685
Industrial (1)
61,418 0 0 0 61,418
Other retail (1)
6,802 0 0 0 6,802
Surcharge 2,443 0 0 0 2,443
Electric customer credits (16,763) 0 0 0 (16,763)
Total retail revenue 356,129 0 0 0 356,129
Wholesale, net 87,923 (1) 173,880 (4,840) (2) 0 256,963
Transmission, net 23,694 (3) 26,062 (4) 0 (3,456) 46,300
Other 7,296 0 0 0 7,296
Affiliate (5)
2,346 204 58,415 (60,965) 0
Total revenue from contracts with customers 477,388 200,146 53,575 (64,421) 666,688
Revenue unrelated to contracts with customers
Other 3,259 (6) 35,382 (7) 1 0 38,642
Total revenue unrelated to contracts with customers 3,259 35,382 1 0 38,642
Operating revenue, net $ 480,647 $ 235,528 $ 53,576 $ (64,421) $ 705,330

~~(1)~~ ~~Includes fuel recovery revenue.~~

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

~~(3)~~ ~~Includes $0.7 million of electric customer credits.~~

~~(4)~~ ~~Includes $0.2 million of electric customer credits.~~

~~(5)~~ ~~Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.~~

~~(6)~~ ~~Realized gains associated with FTRs.~~

~~(7)~~ ~~Includes $30.8 million in lease revenue related to the Cottonwood Sale Leaseback and $4.6 million of deferred lease revenue amortization.~~

Cleco and Cleco Power have unsatisfied performance obligations under contracts with cooperatives and municipalities with durations ranging between 1 and 1413 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At ~~June 30, 2021,~~March 31, 2022, Cleco and Cleco Power had ~~$68.2~~$64.5 million of unsatisfied fixed performance obligations that will be recognized as revenue over the term of such contracts as the stand-ready obligation to provide energy is provided.


Note 5 — 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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

competition, 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.

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

Cleco Power
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Regulatory assets
Acadia Unit 1 acquisition costs $ 1,966 $ 2,019
Accumulated deferred fuel 75,295 28,194
AFUDC equity gross-up *
68,122 69,670
Affordability study 13,644 0
AMI deferred revenue requirement 2,318 2,591
AROs 7,202 5,488
Coughlin transaction costs 861 876
COVID-19 executive order 2,953 2,953
Deferred storm restoration costs -
  Hurricane Delta 17,802 17,051
Deferred storm restoration costs -
  Hurricane Laura 56,412 54,406
Deferred storm restoration costs -
  Hurricane Zeta 3,494 3,493
Deferred storm restoration costs -
  Winter Storms Uri & Viola 1,980 0
Dolet Hills Power Station closure costs 91,479 48,982
Dolet Hills Mine closure costs 13,910 0
Emergency declarations 0 270
Energy efficiency 2,350 2,820
Financing costs 7,011 7,184
Interest costs 3,583 3,708
Madison Unit 3 property taxes 4,181 0
Non-service cost of postretirement benefits 10,881 9,901
Other 13,040 4,229
Postretirement costs 155,067 165,437
Production operations and maintenance expenses 2,664 4,058
Rodemacher Unit 2 deferred costs 4,115 1,333
St. Mary Clean Energy Center 6,959 3,479
Training costs 6,007 6,085
Tree trimming costs 10,450 11,807
Total regulatory assets 583,746 456,034
Regulatory liabilities
AFUDC (5,359) (4,218)
Corporate franchise tax, net 0 (763)
Deferred taxes, net (148,411) (175,584)
Total regulatory liabilities (153,770) (180,565)
Total regulatory assets, net $ 429,976 $ 275,469
* Represents regulatory assets for past expenditures that were not earning a return on investment at June 30, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.

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

Cleco
(THOUSANDS) AT JUNE 30, 2021 AT DEC. 31, 2020
Total Cleco Power regulatory assets, net $ 429,976 $ 275,469
2016 Merger adjustments *
Fair value of long-term debt 115,852 119,553
Postretirement costs 14,418 15,411
Financing costs 7,419 7,592
Debt issuance costs 5,086 5,254
Total Cleco regulatory assets, net $ 572,751 $ 423,279

*~~Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.~~

~~Accumulated Deferred Fuel~~

In 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 United States, primarily due to prolonged freezing temperatures. Incremental fuel and purchased power costs were incurred as a result of the 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 FAC over a period of 12 months beginning in May 2021. For more information about the incremental fuel and purchased power costs related to Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

~~Affordability Study~~

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, Cleco Power was allowed to establish a regulatory asset of $13.6 million related to outside consulting fees for the assessment of Cleco Power’s practices and assistance in the identification of potential cost savings opportunities, while maintaining superior levels of employee safety, reliability, customer service, environmental stewardship, community involvement, and regulatory transparency. The regulatory asset is being amortized over 10 years beginning July 1, 2021.

~~Deferred Storm Restoration Costs~~ ~~— Winter Storms~~

~~In February 2021, Cleco 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 to track and defer non-capital expenses associated with these winter storms. For more information about Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

~~Dolet Hills Mine Closure Cost~~

On March 17, 2021, the LPSC approved the establishment of a regulatory asset for lignite costs that exceeded $150 per ton that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs

3025


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

~~related to the closure of the mine. At June 30, 2021, Cleco Power had a regulatory asset of $13.9 million for these mine-related incurred costs.~~


Cleco Power
					REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,886	$	1,913	17.75
Accumulated deferred fuel (1)	49,597		56,826		Various
Affordability study	12,749		13,094		9.25
AFUDC equity gross-up	65,799		66,574		Various	(2)
AMI deferred revenue requirement	1,909		2,045		4
AROs (1)(6)	15,644		15,141
Bayou Vista to Segura transmission project deferred revenue requirement (7)	3,209		1,392
Coughlin transaction costs	838		845		27.25
COVID-19 executive order (7)	2,953		2,953
Deferred storm restoration costs - Hurricane Delta (6)	16,729		17,113
Deferred storm restoration costs - Hurricane Ida (7)	37,841		37,617
Deferred storm restoration costs - Hurricane Laura (6)	53,061		54,282
Deferred storm restoration costs - Hurricane Zeta (6)	3,212		3,296
Deferred storm restoration costs - Winter Storms Uri & Viola (7)	1,912		1,912
Dolet Hills Power Station closure costs (7)	145,978		145,844

Energy efficiency	1,293		1,645		1
Financing costs (1)	6,733		6,826		Various	(3)
Interest costs	3,397		3,459		Various	(2)
Lignite Mine closure costs (7)	135,877		136,980
Madison Unit 3 property taxes (7)	10,597		8,362
Non-service cost of postretirement benefits	13,542		12,950		Various	(2)
Other	9,200		11,224		Various
Postretirement costs	114,690		117,773		Various	(4)
Production operations and maintenance expenses	10,304		11,058		Various	(5)
Rodemacher Unit 2 deferred costs (7)	8,350		6,931
St. Mary Clean Energy Center	5,654		6,089		3.25

Training costs	5,891		5,929		37.75
Tree trimming costs	8,413		9,092		3
Total regulatory assets	747,258		759,165
Regulatory liabilities


Deferred taxes, net	(80,926)		(95,544)		Various
Total regulatory liabilities	(80,926)		(95,544)
Total regulatory assets, net	$	666,332	$	663,621
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2022, and December 31, 2021, respectively. All other assets are earning a return on investment. (2) Amortized over the estimated lives of the respective assets. (3) Amortized over the terms of the related debt issuances. (4) Amortized over the average service life of the remaining plan participants. (5) Deferral is recovered over the following three-year regulatory period. (6) Currently being recovered through an interim storm rate. For more information, see Note 16 — “Storm Restoration, Securitization, and Cost Recovery — Hurricanes Laura, Delta, and Zeta.” (7) Currently not in a recovery period.

~~Madison Unit 3 Property Taxes~~

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, beginning July 1, 2022, Cleco Power will be allowed to recover property taxes paid for Madison Unit 3, including a carrying charge at Cleco Power’s weighted average cost of capital, grossed up for taxes. At June 30, 2021, Cleco Power recorded a

The following table summarizes Cleco’s net regulatory ~~asset of $4.2 million for the accrued 2021 Madison Unit 3 property taxes. The amount included in the cost recovery mechanism each year will amortize over 12 months.~~assets and liabilities:

~~Other~~


Cleco
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Total Cleco Power regulatory assets, net	$	666,332	$	663,621
2016 Merger adjustments *
Fair value of long-term debt	110,300		112,150
Postretirement costs	12,927		13,424
Financing costs	7,161		7,248
Debt issuance costs	4,837		4,920
Total Cleco regulatory assets, net	$	801,557	$	801,363

~~On June 16, 2021, the LPSC approved~~ *Cleco ~~Power’s new retail rate plan resulting in Cleco Power establishing several~~ regulatory ~~assets. Cleco Power was allowed to establish~~assets include acquisition accounting adjustments as a regulatory asset to recover the undercollection of revenues related to the Northlake Transmission Agreement. At June 30, 2021, Cleco Power had $3.5 million recorded for this regulatory asset, which is being amortized over 12 months beginning July 1, 2021. In addition, the LPSC approved recovery of other previously deferred costs totaling $4.1 million which are being amortized over four years beginning July 1, 2021. These costs are primarily associated with Cleco Power’s recently approved base rate case.

~~In June 2017 and prior to the approval of Cleco Power’s new retail rate plan, the LPSC approved the establishment of a regulatory asset upon the completion~~result of the Coughlin Pipeline project for the revenue requirement associated with the project until Cleco Power’s new retail rate plan was approved. At June 30, 2021, Cleco Power had a regulatory asset of $5.4 million related to the deferred revenue associated with the Coughlin Pipeline project. As approved by the LPSC in Cleco Power’s new rate plan, the regulatory asset is being amortized over four years beginning July 1, 2021.

2016 Merger.

~~St. Mary Clean Energy Center~~

At June 30, 2021, Cleco Power had a regulatory asset of $7.0 million for revenue requirements related to the St. Mary Clean Energy Center. As approved by the LPSC in Cleco Power’s new retail rate plan, the regulatory asset is being amortized over four years beginning July 1, 2021.


Note 6 — Fair Value Accounting and Financial Instruments

The amounts reflected on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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									Cleco
		AT JUNE 30, 2021				AT DEC. 31, 2020					AT MAR. 31, 2022				AT DEC. 31, 2021
(THOUSANDS)	(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE		(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	Long-term debt	$	3,226,952	$	3,509,555	$	3,230,500	$	3,541,349	Long-term debt	$	3,480,631	$	3,536,846	$	3,482,405	$	3,752,220

* The carrying value of long-term debt does not include deferred issuance costs of ~~$12.8~~$12.4 million at
~~June 30, 2021,~~March 31, 2022, and ~~$13.4~~$13.2 million at December 31, ~~2020.~~2021.

Cleco Power
AT JUNE 30, 2021 AT DEC. 31, 2020
(THOUSANDS) CARRYING
VALUE* FAIR VALUE CARRYING
VALUE* FAIR VALUE
Long-term debt $ 1,495,101 $ 1,772,243 $ 1,494,947 $ 1,794,799


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


Cleco Power
	AT MAR. 31, 2022				AT DEC. 31, 2021
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	1,820,331	$	1,969,329	$	1,820,254	$	2,085,944

* The carrying value of long-term debt does not include deferred issuance costs of ~~$6.9~~$7.5 million at
~~June 30, 2021,~~March 31, 2022, and ~~$7.0~~$7.9 million at December 31, ~~2020.~~2021.

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 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. Cleco elects not to designate derivatives as cash flow or fair value hedges, as allowed by accounting guidance. Cleco utilizes a mark-to-market approach recognizing changes in the fair value of FTRs and ~~other~~ commodity derivatives at Cleco Cajun in earnings and changes in the fair value of FTRs at Cleco Power as a component of deferred fuel assets and liabilities. Therefore, Cleco elects not to apply hedge accounting, as allowed by accounting guidance, to its commodity-related derivatives. 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. Cleco utilizes different valuation techniques for fair value measurements under a fair value hierarchy. Assets and liabilities classified as Level 1 under the hierarchy utilize observable inputs that reflect quotable prices in active markets. Assets and liabilities classified as Level 2 are measured through proxy inputs of similar index or composite pricing. Assets and liabilities classified as Level 3 under the hierarchy are valued based on unobservable inputs, such as internally generated valuation models or valuations obtained in inactive markets where there is 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. During the three months ended March 31, 2022, and the year ended December 31, 2021, Cleco did not experience any transfers into or out of Level 3 of the fair value hierarchy.

The following tables disclose for Cleco and Cleco Power the fair value of financial assets and liabilities measured on a recurring basis. These amounts are presented on a gross basis before consideration of amounts netted under master netting agreements and the application of collateral received or paid:


Cleco
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT MAR. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Money market funds	$	192,983	$	192,983	$	—	$	—	$	145,033	$	145,033	$	—	$	—
FTRs	1,114		—		—		1,114		6,977		—		—		6,977
Natural gas derivatives*	166,439		—		166,439		—		87,464		—		87,464		—
Total assets	$	360,536	$	192,983	$	166,439	$	1,114	$	239,474	$	145,033	$	87,464	$	6,977
Liability description
FTRs	$	599	$	—	$	—	$	599	$	834	$	—	$	—	$	834

Total liabilities	$	599	$	—	$	—	$	599	$	834	$	—	$	—	$	834

* Natural gas derivatives include fixed price physical forwards and swap transactions.


Cleco Power
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT MAR. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Money market funds	$	103,711	$	103,711	$	—	$	—	$	82,411	$	82,411	$	—	$	—
FTRs	840		—		—		840		5,515		—		—		5,515
Total assets	$	104,551	$	103,711	$	—	$	840	$	87,926	$	82,411	$	—	$	5,515
Liability description
FTRs	$	273	$	—	$	—	$	273	$	597	$	—	$	—	$	597
Total liabilities	$	273	$	—	$	—	$	273	$	597	$	—	$	—	$	597

3127


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

~~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 JUNE 30, 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 $ 77,105 $ 0 $ 77,105 $ 0 $ 86,001 $ 0 $ 86,001 $ 0
FTRs 8,662 0 0 8,662 4,805 0 0 4,805
Other commodity derivatives* 55,834 0 55,834 0 8,599 0 8,599 0
Total assets $ 141,601 $ 0 $ 132,939 $ 8,662 $ 99,405 $ 0 $ 94,600 $ 4,805
Liability description
FTRs $ 1,161 $ 0 $ 0 $ 1,161 $ 1,625 $ 0 $ 0 $ 1,625
Other commodity derivatives* 0 0 0 0 1,612 0 1,612 0
Total liabilities $ 1,161 $ 0 $ 0 $ 1,161 $ 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 JUNE 30, 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 $ 19,061 $ 0 $ 19,061 $ 0 $ 25,357 $ 0 $ 25,357 $ 0
FTRs 6,867 0 0 6,867 4,337 0 0 4,337
Total assets $ 25,928 $ 0 $ 19,061 $ 6,867 $ 29,694 $ 0 $ 25,357 $ 4,337
Liability description
FTRs $ 877 $ 0 $ 0 $ 877 $ 1,121 $ 0 $ 0 $ 1,121
Total liabilities $ 877 $ 0 $ 0 $ 877 $ 1,121 $ 0 $ 0 $ 1,121

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)	2022		2021
Beginning balance	$	6,143	$	3,180
Unrealized (losses) gains*	(620)		16,123
Purchases	292		849
Settlements	(5,300)		(19,129)
Ending balance	$	515	$	1,023
* Cleco Power’s unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco’s Condensed Consolidated Balance Sheet. Cleco Cajun’s unrealized gains (losses) are reported through Purchased power on Cleco’s Condensed Consolidated Income Statement.

Cleco
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Beginning balance $ 1,023 $ 1,096 $ 3,180 $ 5,778
Unrealized (losses) gains* (1,005) (284) 15,155 (371)
Purchases 9,958 9,267 10,806 9,732
Settlements (2,475) (2,039) (21,640) (7,099)
Ending balance $ 7,501 $ 8,040 $ 7,501 $ 8,040
* 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)	2022		2021
Beginning balance	$	4,918	$	3,216
Unrealized losses*	(263)		(37)
Purchases	292		849
Settlements	(4,380)		(2,940)
Ending balance	$	567	$	1,088
* Unrealized losses are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

Cleco Power and Cleco Cajun’s FTRs 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 is used for monthly valuation. FTRs are categorized as Level 3 fair value measurements because the only relevant value available comes from MISO auctions, which occur monthly in the Multi-Period Monthly Auction.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

Cleco Power
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Beginning balance $ 1,088 $ 1,149 $ 3,216 $ 5,725
Unrealized (losses)gains* (402) 1,298 (402) 1,298
Purchases 7,768 7,311 8,616 7,776
Settlements (2,464) (2,247) (5,440) (7,288)
Ending balance $ 5,990 $ 7,511 $ 5,990 $ 7,511
* 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 ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~

2021:

Cleco
FAIR VALUE VALUATION TECHNIQUE
SIGNIFICANT
UNOBSERVABLE INPUTS
FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE) ASSETS LIABILITIES LOW HIGH
FTRs at June 30, 2021 $ 8,662 $ 1,161 RTO auction pricing FTR price - per MWh $ (5.73) $ 7.28
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 June 30, 2021 $ 6,867 $ 877 RTO auction pricing FTR price - per MWh $ (2.03) $ 7.28
FTRs at Dec. 31, 2020 $ 4,337 $ 1,121 RTO auction pricing FTR price - per MWh $ (3.34) $ 4.36


Cleco
	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Mar. 31, 2022	$	1,114	$	599	RTO auction pricing	FTR price - per MWh	$	(2.23)	$	11.77
FTRs at Dec. 31, 2021	$	6,977	$	834	RTO auction pricing	FTR price - per MWh	$	(3.94)	$	9.25


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, 2022	$	840	$	273	RTO auction pricing	FTR price - per MWh	$	(2.23)	$	11.77
FTRs at Dec. 31, 2021	$	5,515	$	597	RTO auction pricing	FTR price - per MWh	$	(4.91)	$	9.25

Concentrations of Credit Risk

At ~~June 30, 2021,~~March 31, 2022, 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 in cash and cash equivalents and restricted cash and cash equivalents as recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	73,412	$	80,712	Cash and cash equivalents	$	192,961	$	145,011
Current restricted cash and cash equivalents		$	2,949	$	4,545

Non-current restricted cash and cash equivalents	Non-current restricted cash and cash equivalents	$	744	$	744	Non-current restricted cash and cash equivalents	$	22	$	22


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	16,112	$	20,812	Cash and cash equivalents	$	103,711	$	82,411
Current restricted cash and cash equivalents		$	2,949	$	4,545

~~Institutional money~~

Money market fund assets are discounted to the current period using a published U.S. Treasury interest rate as a proxy for a risk-free rate of return. 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~~1 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~~government 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.

~~Derivatives and other~~When Cleco enters into commodity ~~contracts that do not qualify for~~ derivative ~~accounting treatment transacted~~or physical commodity transactions directly with ~~a counterparty and are not cleared on an exchange contain~~market participants, Cleco may be exposed to counterparty credit risk. Cleco is exposed to counterparty credit risk when 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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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.

~~During the six months ended June 30, 2021, and the year ended December 31, 2020, Cleco did not experience any transfers between levels within the fair value hierarchy.~~

Commodity Contracts

On Cleco’s Condensed Consolidated Balance Sheets, the fair value of amounts associated with Cleco Cajun’s derivative instruments are offset with related cash collateral balances with the same counterparty. The following tables present the fair values of derivative instruments and their respective line items as recorded on


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


Cleco	Cleco						Cleco
								DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
									AT MAR. 31, 2022
		DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS									GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	(THOUSANDS)	BALANCE SHEET LINE ITEM	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts	Commodity-related contracts						Commodity-related contracts
FTRs	FTRs						FTRs
Current	Current	Energy risk management assets	$	8,662	$	4,805	Current	Energy risk management assets	$	1,114	$	—	$	1,114	$	—	$	1,114
Current	Current	Energy risk management liabilities	(1,161)		(1,625)		Current	Energy risk management liabilities	(599)		—		(599)		—		(599)
Other commodity derivatives
Natural gas derivatives							Natural gas derivatives
Current	Current	Energy risk management assets	30,063		8,276		Current	Energy risk management assets	107,842		(26,300)		81,542		(75,919)		5,623
Non-current	Non-current	Other deferred charges	25,771		323		Non-current	Energy risk management assets	84,898		—		84,898		(6,081)		78,817
Current		Energy risk management liabilities	0		(828)
Non-current		Other deferred credits	0		(784)

Commodity-related contracts, net	Commodity-related contracts, net		$	63,335	$	10,167	Commodity-related contracts, net		$	193,255	$	(26,300)	$	166,955	$	(82,000)	$	84,955

(1) Represents letters of credit by counterparties.


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
		AT DEC. 31, 2021
				GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CONTRACT NETTING		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	6,977	$	—	$	6,977	$	—	$	6,977
Current	Energy risk management liabilities	(834)		—		(834)		—		(834)
Natural gas derivatives
Current	Energy risk management assets	37,061		(559)		36,502		(15,000)		21,502
Non-current	Energy risk management assets	50,962		—		50,962		—		50,962
Current	Energy risk management liabilities	(559)		559		—		—		—

Commodity-related contracts, net		$	93,607	$	—	$	93,607	$	(15,000)	$	78,607

(1) Represents letters of credit by counterparties.


Cleco Power
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS)	BALANCE SHEET LINE ITEM	AT MAR. 31, 2022		AT DEC. 31, 2021
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	840	$	5,515
Current	Energy risk management liabilities	(273)		(597)
Commodity-related contracts, net		$	567	$	4,918

Cleco Power
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS) BALANCE SHEET LINE ITEM AT JUNE 30, 2021 AT DEC. 31, 2020
Commodity-related contracts
FTRs
Current Energy risk management assets $ 6,867 $ 4,337
Current Energy risk management liabilities (877) (1,121)
Commodity-related contracts, net $ 5,990 $ 3,216

At March 31, 2022, cash collateral received from counterparties and held by Cleco was $26.3 million, all of which was netted against the current portion of Energy risk management assets on Cleco’s Condensed Consolidated Balance Sheet. At December 31, 2021, there was no cash collateral posted with or received from counterparties that was netted on Cleco’s Condensed Consolidated Balance Sheet.

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 three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, and ~~2020:~~

2021:

Cleco
AMOUNT OF GAIN(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) INCOME STATEMENT LINE ITEM 2021 2020 2021 2020
Commodity-related contracts
FTRs(1)
Electric operations $ 1,763 $ 1,852 $ 9,207 $ 3,248
FTRs(1)
Purchased power 702 92 (7,858) (289)
Other commodity derivatives Fuel used for electric generation (51,683) 9,316 (57,897) 2,208
Total $ (49,218) $ 11,260 $ (56,548) $ 5,167

~~(1)~~ For the three and six months ended June 30, 2021, unrealized losses associated with FTRs for Cleco Power of $0.4 million were reported through Accumulated deferred fuel on the balance sheet. For the three and six months ended June 30, 2020, unrealized losses associated with FTRs for Cleco Power of $1.3 million 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 JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) INCOME STATEMENT LINE ITEM 2021 2020 2021 2020
Commodity-related contracts
FTRs(1)
Electric operations $ 1,763 $ 1,852 $ 9,208 $ 3,249
FTRs(1)
Purchased power (1,233) (1,319) (8,414) (2,070)
Total $ 530 $ 533 $ 794 $ 1,179

~~(1)~~ For the three and six months ended June 30, 2021, unrealized losses associated with FTRs of $0.4 million were reported through Accumulated deferred fuel on the balance sheet. For the three and six months ended June 30, 2020, unrealized losses associated with FTRs of $1.3 million were reported through Accumulated deferred fuel on the balance sheet.

The total volume of FTRs that Cleco Power had outstanding at June 30, 2021, and December 31, 2020, was 19.8 million MWh and 9.5 million MWh, respectively. The total volume of FTRs that Cleco had outstanding at June 30, 2021, and December 31, 2020, was 30.9 million MWh and 15.3 million MWh, respectively. The total volume of other commodity derivatives Cleco had outstanding at June 30, 2021, and December 31, 2020, was 127.9 million MMBtus and 73.0 million MMBtus, respectively.


~~Note 7 — Debt~~

On May 21, 2021, Cleco Holdings entered into a $175.0 million revolving credit agreement and a $266.0 million term loan agreement. These agreements replaced Cleco Holdings’ existing revolving credit agreement and term loan agreement. The revolving credit agreement matures on May 21, 2026. Under this agreement, Cleco Holdings is required to maintain total indebtedness less than or equal to 65% of total

capitalization. The borrowing costs under this agreement are currently equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay higher commitment fees and additional interest of 0.175%. At June 30, 2021, Cleco Holdings had 0 borrowings outstanding under its revolving credit agreement. Cleco Holdings’ term loan agreement matures on May 21, 2024 and has an interest rate of LIBOR plus 1.625% or ABR plus 0.625%.

In addition, on May 21, 2021, Cleco Power entered into a $300.0 million revolving credit agreement and a $125.0 million term loan agreement. These agreements replaced Cleco Power’s existing revolving credit agreement and term loan agreement. The revolving credit agreement matures on May 21, 2026. Under this agreement, Cleco Power is required to maintain total indebtedness less than or equal to 65% of total capitalization. The borrowing costs under this agreement are currently equal to LIBOR plus 1.25% or ABR plus 0.25%, plus

3429


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


Cleco
	AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
		FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2022		2021
Commodity-related contracts
FTRs(1)	Electric operations	$	1,583	$	7,444
FTRs(1)	Purchased power	1,722		(8,560)
Natural gas derivatives	Fuel used for electric generation	128,471		(4,710)
Total		$	131,776	$	(5,826)

~~commitment fees of 0.15%. If Cleco Power’s credit ratings were to be downgraded one level by~~(1) For the ~~credit rating agencies,~~three months ended March 31, 2022, unrealized losses associated with FTRs for Cleco Power ~~may be required to pay higher commitment fees and additional interest~~ of ~~0.15%. At June 30,~~$0.3 million were reported through Accumulated deferred fuel on the balance sheet. For the three months ended March 31, 2021, unrealized losses associated with FTRs for Cleco Power ~~had $160.0~~of less than $0.1 million were reported through Accumulated deferred fuel on the balance sheet.


Cleco Power
	AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
		FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2022		2021
Commodity-related contracts
FTRs(1)	Electric operations	$	1,583	$	7,444
FTRs(1)	Purchased power	(1,238)		(7,182)
Total		$	345	$	262

(1) For the three months ended March 31, 2022, unrealized losses associated with FTRs of ~~borrowings~~$0.3 million were reported through Accumulated deferred fuel on the balance sheet. 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.

The following table presents the volume of commodity-related derivative contracts outstanding ~~under the revolving credit agreement.~~at March 31, 2022, and December 31, 2021, for Cleco ~~Power’s term loan agreement matures on May 21, 2024~~ and ~~has an interest rate of LIBOR plus 1.25% or ABR plus 0.25%.~~Cleco Power:

Cleco

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT MAR. 31, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

5,739

14,055

Natural gas derivatives

MMBtus

249,118

109,306

Cleco Power

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT MAR. 31, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

3,646

8,899


Note 87 — 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. 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 0no pension contributions will be required through ~~2025. As of June 30, 2021,~~2026. Cleco ~~expects~~has not made, and does not expect to make, ~~$67.0 million in discretionary~~any contributions to the pension plan in ~~2021, which would offset future required contributions.~~2022.

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 accrued benefit at retirement.

Cleco’s retirees may be eligible to receive Other Benefits. Dependents of Cleco’s retirees may also be eligible to receive Other Benefits with the exception of life insurance benefits.

The non-service components of net periodic pension and Other Benefits cost are included in Other income (expense), net within Cleco and Cleco Power’s Condensed Consolidated Statements of Income. The components of net periodic pension and Other Benefits cost for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~ were as follows:


		PENSION BENEFITS				OTHER BENEFITS					PENSION BENEFITS				OTHER BENEFITS
		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE THREE MONTHS ENDED JUNE 30,					FOR THE THREE MONTHS ENDED MAR. 31,				FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021		2022		2021
Components of periodic benefit costs	Components of periodic benefit costs									Components of periodic benefit costs
Service cost	Service cost	$	2,730	$	2,582	$	595	$	508	Service cost	$	2,150	$	2,528	$	551	$	595
Interest cost	Interest cost	4,719		5,278		323		410		Interest cost	4,960		4,615		371		323
Expected return on plan assets	Expected return on plan assets	(5,698)		(6,242)		0		0		Expected return on plan assets	(6,177)		(5,703)		—		—
Amortizations	Amortizations									Amortizations
Prior period service credit		0		(15)		0		0

Net loss	Net loss	5,607		4,477		384		340		Net loss	3,085		4,763		303		384
Net periodic benefit cost	Net periodic benefit cost	$	7,358	$	6,080	$	1,302	$	1,258	Net periodic benefit cost	$	4,018	$	6,203	$	1,225	$	1,302

PENSION BENEFITS OTHER BENEFITS
FOR THE SIX MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Components of periodic benefit costs
Service cost $ 5,258 $ 4,910 $ 1,190 $ 1,015
Interest cost 9,334 10,408 645 820
Expected return on plan assets (11,400) (12,487) 0 0
Amortizations
Prior period service credit 0 (30) 0 0
Net loss 10,369 8,149 770 680
Net periodic benefit cost $ 13,561 $ 10,950 $ 2,605 $ 2,515


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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 ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 was ~~$0.9~~$0.8 million and ~~$1.8 million, respectively. The expense of the pension plan related to Cleco’s other subsidiaries for the three and six months ended June 30, 2020, was $1.3 million and $1.7~~$0.9 million, respectively.

Cleco Holdings is the plan sponsor for the other benefit plans. There are 0no 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 the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 was ~~$1.2~~$1.1 million and ~~$2.4 million, respectively. The expense related to other benefits reflected in Cleco Power’s Condensed~~

~~Consolidated Statements of Income for the three and six months ended June 30, 2020, was~~ $1.2 ~~million and $2.5~~ million, respectively. The current and non-current portions of the Other Benefits liability for Cleco and Cleco Power at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	4,463	$	4,463	Current	$	5,181	$	5,181
Non-current	Non-current	$	51,522	$	51,868	Non-current	$	49,605	$	50,093


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	3,865	$	3,865	Current	$	4,432	$	4,432
Non-current	Non-current	$	40,449	$	40,734	Non-current	$	38,943	$	39,315


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

SERP

Certain Cleco officers are covered by SERP. Cleco does not fund the SERP liability, but instead pays for current benefits out of 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 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 general cash available of the respective companies that employed the officer. Cleco Power is the plan sponsor and Support Group is 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 six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~ were as follows:


		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Components of periodic benefit costs	Components of periodic benefit costs									Components of periodic benefit costs
Service cost	Service cost	$	61	$	105	$	116	$	200	Service cost	$	57	$	55
Interest cost	Interest cost	644		734		1,269		1,466		Interest cost	670		625
Amortizations	Amortizations									Amortizations
Prior period service credit	Prior period service credit	(55)		(67)		(107)		(107)		Prior period service credit	(54)		(53)
Net (gain) loss		(401)		835		613		1,592
Net loss										Net loss	262		1,016
Net periodic benefit cost	Net periodic benefit cost	$	249	$	1,607	$	1,891	$	3,151	Net periodic benefit cost	$	935	$	1,643

The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 was ~~less than~~ $0.1 million and $0.3 ~~million, respectively. The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2020, was $0.2 million and $0.5~~ million, respectively.

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 ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	4,703	$	4,703	Current	$	4,654	$	4,654
Non-current	Non-current	$	91,355	$	92,522	Non-current	$	88,082	$	88,523


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	711	$	711	Current	$	679	$	679
Non-current	Non-current	$	19,364	$	19,828	Non-current	$	12,788	$	12,909

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 Plan is voluntary, and active Cleco employees are eligible to participate. Cleco’s 401(k) Plan expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~ was as follows:


		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
401(k) Plan expense	401(k) Plan expense	$	2,120	$	1,898	$	4,880	$	5,154	401(k) Plan expense	$	2,591	$	2,759

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 six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~ was as follows:


		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
401(k) Plan expense	401(k) Plan expense	$	946	$	832	$	2,326	$	2,495	401(k) Plan expense	$	1,322	$	1,380


Note 98 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~:


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30					FOR THE THREE MONTHS ENDED MAR. 31,
		2021		2020		2021		2020			2022		2021
Effective tax rate	Effective tax rate	11.1	%	23.9	%	0.4	%	23.4	%	Effective tax rate	(3.7)	%	(86.4)	%

Cleco Power
FOR THE THREE MONTHS
ENDED JUNE 30, FOR THE SIX MONTHS
ENDED JUNE 30,
2021 2020 2021 2020
Effective tax rate 24.6 % 24.9 % (1.7) % 24.1 %


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
	2022		2021
Effective tax rate	1.8	%	(111.7)	%

For ~~the three~~Cleco and ~~six months ended June 30, 2021,~~Cleco Power, the effective income tax ~~rates~~rate for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the amortization of excess ADIT, adjustment to record tax expense at the projected annual effective tax rate, and state tax expense.

~~For~~ the three ~~and six~~ months ended ~~June 30, 2020, the effective income tax rates for both Cleco and Cleco Power~~March 31, 2022, were different than the federal statutory rate primarily due to the adjustment to record tax expense at the projected annual effective tax rate; the amortization of excess ADIT; the flow through of state tax ~~benefits, including AFUDC equity;~~benefits; and state tax expense.

For Cleco and Cleco Power, the effective income tax rates for the three months ended March 31, 2021, were different than the federal statutory rate primarily due to the amortization of excess ADIT.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. ~~At June 30,~~For the three months ended March 31, 2022, and 2021, ~~and December 31, 2020,~~ Cleco and Cleco Power had 0no interest expense related to uncertain tax positions. At March 31, 2022, and December 31, 2021, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions. ~~Cleco estimates that it is~~


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

reasonably possible that the balance of unrecognized tax benefits as of June 30, 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.

Income Tax Audits

Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal tax return. While the statute of limitations remains open for tax years ~~2017,~~ 2018, 2019, and ~~2019,~~2020, the IRS has completed its review of years ~~2017 through~~2018 and 2019, and these tax returns were filed consistent with the IRS’s review. The IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for the 2020 and 2021 tax ~~year.~~years. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year.

The state income tax years ~~2017,~~ 2018, 2019, and ~~2019~~2020 remain ~~open~~subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expense. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020, 0~~no 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.

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

At March 31, 2022, Cleco Power had $1.8 million deferred ~~$3.6 million~~ in employer payroll tax payments for the period March 27, 2020, through December 31, ~~2020. Cleco Power~~2020, which will ~~pay $1.8 million of the obligation~~be paid 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 2019 and 2020 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 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 109 — Disclosures about Segments

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

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. 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 as well as transmission services provided by Cleco Power to Cleco Cajun.

3732


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


Segment Information for the Three Months Ended June 30,
2021 (THOUSANDS)		CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Segment Information for the Three Months Ended Mar. 31,									Segment Information for the Three Months Ended Mar. 31,
2022 (THOUSANDS)									2022 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue	Revenue								Revenue
Electric operations	Electric operations	$	262,948	$	91,407		$	354,355	Electric operations	$	296,097	$	103,633		$	399,730
Other operations	Other operations	16,269		30,655			46,924		Other operations	19,084		35,612			54,696
Affiliate revenue	Affiliate revenue	1,224		0			1,224		Affiliate revenue	1,459		—			1,459
Electric customer credits	Electric customer credits	(18,762)		244			(18,518)		Electric customer credits	(136)		—			(136)
Operating revenue, net	Operating revenue, net	$	261,679	$	122,306		$	383,985	Operating revenue, net	$	316,504	$	139,245		$	455,749
Net income	Net income	$	27,421	$	52,494		$	79,915	Net income	$	39,024	$	93,381		$	132,405
Add: Depreciation and amortization	Add: Depreciation and amortization	40,933		12,339		(1)	53,272		Add: Depreciation and amortization	45,239		23,180		(1)	68,419
Less: Interest income	Less: Interest income	825		3			828		Less: Interest income	740		13			753
Add: Interest charges	Add: Interest charges	18,237		(180)			18,057		Add: Interest charges	18,801		(8)			18,793
Add: Federal and state income tax expense	Add: Federal and state income tax expense	8,956		18,063			27,019		Add: Federal and state income tax expense	724		33,641			34,365

EBITDA	EBITDA	$	94,722	$	82,713		$	177,435	EBITDA	$	103,048	$	150,181		$	253,229

(1) Includes $3.3 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.
Additions to property, plant, and equipment									Additions to property, plant, and equipment	$	38,492	$	1,471		$	39,963
Equity investment in investee									Equity investment in investee	$	2,072	$	—		$	2,072
Goodwill									Goodwill	$	1,490,797	$	—		$	1,490,797
Total segment assets									Total segment assets	$	6,621,574	$	1,194,748		$	7,816,322
(1) Includes $3.6 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.									(1) Includes $3.6 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.


2021 (THOUSANDS)		TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
2022 (THOUSANDS)											2022 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue										Revenue
Electric operations	Electric operations	$	354,355	$	(2,420)		$	1	$	351,936	Electric operations	$	399,730	$	(2,420)		$	(1)	$	397,309
Other operations	Other operations	46,924		1			(1,595)		45,330		Other operations	54,696		1			(2,690)		52,007
Affiliate revenue	Affiliate revenue	1,224		26,120			(27,344)		0		Affiliate revenue	1,459		27,393			(28,852)		—
Electric customer credits	Electric customer credits	(18,518)		0			1		(18,517)		Electric customer credits	(136)		—			—		(136)
Operating revenue, net	Operating revenue, net	$	383,985	$	23,701		$	(28,937)	$	378,749	Operating revenue, net	$	455,749	$	24,974		$	(31,543)	$	449,180
Depreciation and amortization	Depreciation and amortization	$	53,272	$	4,427	(1)	$	0	$	57,699	Depreciation and amortization	$	68,419	$	4,379	(1)	$	—	$	72,798
Interest income	Interest income	$	828	$	14		$	(13)	$	829	Interest income	$	753	$	31		$	(28)	$	756
Interest charges	Interest charges	$	18,057	$	15,248		$	(14)	$	33,291	Interest charges	$	18,793	$	14,753		$	(27)	$	33,519

Federal and state income tax (benefit)		$	27,019	$	(17,182)		$	0	$	9,837
Federal and state income tax expense (benefit)											Federal and state income tax expense (benefit)	$	34,365	$	(39,952)		$	—	$	(5,587)
Net income (loss)	Net income (loss)	$	79,915	$	(1,093)		$	0	$	78,822	Net income (loss)	$	132,405	$	23,339		$	—	$	155,744

(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.
Additions to property, plant, and equipment											Additions to property, plant, and equipment	$	39,963	$	236		$	—	$	40,199
Equity investment in investee (2)											Equity investment in investee (2)	$	2,072	$	(66,901)		$	66,901	$	2,072
Goodwill (2)											Goodwill (2)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (2)											Total segment assets (2)	$	7,816,322	$	582,322		$	(148,417)	$	8,250,227
(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) At March 31, 2022.											(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) At March 31, 2022.


2020 (THOUSANDS)		CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
2021 (THOUSANDS)									2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue	Revenue								Revenue
Electric operations	Electric operations	$	239,643	$	84,733		$	324,376	Electric operations	$	267,158	$	101,507		$	368,665
Other operations	Other operations	15,904		30,636			46,540		Other operations	18,626		33,039			51,665
Affiliate revenue	Affiliate revenue	1,240		43			1,283		Affiliate revenue	1,655		—			1,655
Electric customer credits	Electric customer credits	(9,100)		0			(9,100)		Electric customer credits	(20,976)		—			(20,976)
Operating revenue, net	Operating revenue, net	$	247,687	$	115,412		$	363,099	Operating revenue, net	$	266,463	$	134,546		$	401,009
Net income	Net income	$	28,233	$	26,762		$	54,995	Net income	$	18,425	$	14,481		$	32,906
Add: Depreciation and amortization	Add: Depreciation and amortization	41,596		11,143		(1)	52,739		Add: Depreciation and amortization	42,076		11,653		(1)	53,729
Less: Interest income	Less: Interest income	755		103			858		Less: Interest income	642		3			645
Add: Interest charges	Add: Interest charges	18,603		120			18,723		Add: Interest charges	18,646		(152)			18,494
Add: Federal and state income tax expense		9,356		8,601			17,957
Add: Federal and state income tax (benefit) expense									Add: Federal and state income tax (benefit) expense	(9,723)		4,610			(5,113)
EBITDA	EBITDA	$	97,033	$	46,523		$	143,556	EBITDA	$	68,782	$	30,589		$	99,371

(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.
Additions to property, plant, and equipment									Additions to property, plant, and equipment	$	36,263	$	2,313		$	38,576
Equity investment in investees (2)									Equity investment in investees (2)	$	2,072	$	—		$	2,072
Goodwill (2)									Goodwill (2)	$	1,490,797	$	—		$	1,490,797
Total segment assets (2)									Total segment assets (2)	$	6,620,298	$	1,104,090		$	7,724,388
(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) At December 31, 2021.									(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) At December 31, 2021.

3833


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 324,376 $ (2,420) $ 0 $ 321,956
Other operations 46,540 1 (1,639) 44,902
Affiliate revenue 1,283 29,138 (30,421) 0
Electric customer credits (9,100) 0 0 (9,100)
Operating revenue, net $ 363,099 $ 26,719 $ (32,060) $ 357,758
Depreciation and amortization $ 52,739 $ 4,565 (1) $ 0 $ 57,304
Interest income $ 858 $ 55 $ (15) $ 898
Interest charges $ 18,723 $ 16,007 $ (15) $ 34,715
Federal and state income tax expense (benefit) $ 17,957 $ (4,364) $ 0 $ 13,593
Net income (loss) $ 54,995 $ (11,826) $ (1) $ 43,168
(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.

Segment Information for the Six Months Ended June 30,
2021 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 530,107 $ 192,914 $ 723,021
Other operations 34,895 63,694 98,589
Affiliate revenue 2,879 0 2,879
Electric customer credits (39,738) 244 (39,494)
Operating revenue, net $ 528,143 $ 256,852 $ 784,995
Net income $ 45,846 $ 66,975 $ 112,821
Add: Depreciation and amortization 83,009 23,991 (2) 107,000
Less: Interest income 1,468 6 1,474
Add: Interest charges 36,883 (332) 36,551
Add: Federal and state income tax (benefit) expense (767) 22,673 21,906
EBITDA $ 163,503 $ 113,301 $ 276,804
Additions to property, plant, and equipment $ 134,185 $ 4,882 $ 139,067
Equity investment in investees (1)
$ 5,572 $ 0 $ 5,572
Goodwill (1)
$ 1,490,797 $ 0 $ 1,490,797
Total segment assets (1)
$ 6,438,218 $ 1,078,534 $ 7,516,752
(1) Balances as of June 30, 2021.
(2) Includes $6.4 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(4.6) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2021 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 723,021 $ (4,840) $ 0 $ 718,181
Other operations 98,589 2 (3,535) 95,056
Affiliate revenue 2,879 53,276 (56,155) 0
Electric customer credits (39,494) 0 0 (39,494)
Operating revenue, net $ 784,995 $ 48,438 $ (59,690) $ 773,743
Depreciation and amortization $ 107,000 $ 8,862 (2) $ 0 $ 115,862
Interest income $ 1,474 $ 57 $ (56) $ 1,475
Interest charges $ 36,551 $ 30,687 $ (55) $ 67,183
Federal and state income tax expense (benefit) $ 21,906 $ (21,490) $ 0 $ 416
Net income (loss) $ 112,821 $ (13,672) $ 0 $ 99,149
Additions to property, plant, and equipment $ 139,067 $ 1,440 $ 0 $ 140,507
Equity investment in investees (1)
$ 5,572 $ 0 $ 0 $ 5,572
Goodwill (1)
$ 1,490,797 $ 0 $ 0 $ 1,490,797
Total segment assets (1)
$ 7,516,752 $ 569,126 $ (144,409) $ 7,941,469
(1) Balances as of June 30, 2021.
(2) Includes $4.8 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.


2021 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	368,665	$	(2,420)		$	—	$	366,245
Other operations	51,665		1			(1,940)		49,726
Affiliate revenue	1,655		27,156			(28,811)		—
Electric customer credits	(20,976)		—			—		(20,976)
Operating revenue, net	$	401,009	$	24,737		$	(30,751)	$	394,995
Depreciation and amortization	$	53,729	$	4,435	(1)	$	—	$	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)		$	—	$	(9,420)
Net income (loss)	$	32,906	$	(12,579)		$	—	$	20,327
Additions to property, plant, and equipment	$	38,576	$	(805)		$	—	$	37,771
Equity investment in investees (2)	$	2,072	$	(46,901)		$	46,901	$	2,072
Goodwill (2)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (2)	$	7,724,388	$	619,101		$	(218,471)	$	8,125,018
(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) At December 31, 2021.

~~CLECO~~

~~CLECO POWER~~

~~2021 2ND QUARTER FORM 10-Q~~

2020 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 464,073 $ 173,880 $ 637,953
Other operations 31,668 61,597 93,265
Affiliate revenue 2,346 204 2,550
Electric customer credits (17,440) (153) (17,593)
Operating revenue, net $ 480,647 $ 235,528 $ 716,175
Net income $ 40,064 $ 46,298 $ 86,362
Add: Depreciation and amortization 85,273 22,041 (2) 107,314
Less: Interest income 1,709 258 1,967
Add: Interest charges 37,184 131 37,315
Add: Federal and state income tax expense 12,694 15,022 27,716
EBITDA $ 173,506 $ 83,234 $ 256,740
Additions to property, plant, and equipment $ 132,578 $ 5,417 $ 137,995
Equity investment in investees (1)
$ 9,072 $ 0 $ 9,072
Goodwill (1)
$ 1,490,797 $ 0 $ 1,490,797
Total segment assets (1)
$ 6,256,944 $ 1,029,812 $ 7,286,756
(1) Balances as of December 31, 2020.
(2) Includes $6.2 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(4.6) million deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 637,953 $ (4,840) $ 0 $ 633,113
Other operations 93,265 1 (3,456) 89,810
Affiliate revenue 2,550 58,415 (60,965) 0
Electric customer credits (17,593) 0 0 (17,593)
Operating revenue, net $ 716,175 $ 53,576 $ (64,421) $ 705,330
Depreciation and amortization $ 107,314 $ 9,079 (2) $ 0 $ 116,393
Interest income $ 1,967 $ 155 $ (68) $ 2,054
Interest charges $ 37,315 $ 32,617 $ (69) $ 69,863
Federal and state income tax expense (benefit) $ 27,716 $ (12,561) $ 0 $ 15,155
Net income (loss) $ 86,362 $ (36,865) $ (1) $ 49,496
Additions to property, plant, and equipment $ 137,995 $ 1,344 $ 0 $ 139,339
Equity investment in investees (1)
$ 9,072 $ 0 $ 0 $ 9,072
Goodwill (1)
$ 1,490,797 $ 0 $ 0 $ 1,490,797
Total segment assets (1)
$ 7,286,756 $ 595,217 $ (156,404) $ 7,725,569
(1) Balances as of December 31, 2020.
(2) Includes $4.8 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.

FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Net income $ 78,822 $ 43,168 $ 99,149 $ 49,496
Add: Depreciation and amortization 57,699 57,304 115,862 116,393
Less: Interest income 829 898 1,475 2,054
Add: Interest charges 33,291 34,715 67,183 69,863
Add: Federal and state income tax expense 9,837 13,593 416 15,155
Add: Other corporate costs and noncash items (1)
(1,385) (4,326) (4,331) 7,887
Total segment EBITDA $ 177,435 $ 143,556 $ 276,804 $ 256,740
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.

~~CLECO~~

~~CLECO POWER~~

~~2021 2ND QUARTER FORM 10-Q~~



	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Net income	$	155,744	$	20,327
Add: Depreciation and amortization	72,798		58,164

Less: Interest income	756		647
Add: Interest charges	33,519		33,891
Add: Federal and state income tax expense	(5,587)		(9,420)
Add: Other corporate costs and noncash items (1)	(2,489)		(2,944)
Total segment EBITDA	$	253,229	$	99,371
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


Note 1110 — Regulation and Rates

Provision for rate refund on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets consisted primarily of the following:


(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Cleco Katrina/Rita storm recovery charges						Cleco Katrina/Rita storm recovery charges	$	1,611	$	1,611

FRP	FRP	$	2,392	$	1,786	FRP	$	1,230	$	1,229
Site-specific industrial customer						Site-specific industrial customer	$	995	$	833
TCJA	TCJA	$	2,057	$	2,057	TCJA	$	2,057	$	2,057
Cleco Katrina/Rita storm recovery charges		$	1,610	$	1,617
Site-specific industrial customer		$	990	$	710
Transmission ROE		$	250	$	595
FERC audit		$	0	$	1,912

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the Cleco Katrina/Rita 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. In April 2021, after payments for all final administrative and winding up activities of Cleco Katrina/Rita were made, Cleco Katrina/Rita transferred its remaining restricted cash to Cleco Power. As a result, at March 31, 2022, Cleco Power had $1.6 million accrued for amounts to be used to benefit retail customers in a manner and timing as approved by the LPSC. For more information on Cleco Katrina/Rita’s storm recovery, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

FRP

Prior to July 1, 2021, Cleco Power’s annual retail earnings were subject to an FRP established by the LPSC in June 2014. The

2014 FRP allowed Cleco Power 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%, were required to be refunded to customers. ~~In June 2019, Cleco Power filed an application with the LPSC for a new FRP. The FRP rates previously established remained in effect due to delays in the base rate case.~~ On June 16, 2021, the LPSC approved Cleco Power’s new ~~retail rate plan.~~FRP. Effective July 1, 2021, under the terms of the new FRP, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, 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. Cleco Power’s next base rate case is required to be filed with the LPSC on or before March 31, 2023.

~~Cleco Power filed its~~A monitoring report for the 12 months ended June 30, ~~2019, on October 31, 2019, indicating that no refund~~2021, was due. On June 30, 2021, the LPSC Staff filed their report indicating agreement with Cleco Power’s refund calculation for the 12 months ending June 30, 2019. Cleco Power anticipates approval of the report from the LPSC in the third quarter of 2021. Monitoring reports for the 12 months ended June 30, 2020, and 2021 were not required due to the expiration of the 2014 FRP. The next monitoring report will be filed on or before October 31, 2022, for the 12 months ending June 30, 2022.

Cleco Power continued to accrue the annual cost of service savings resulting from the 2016 Merger Commitments through June 30, 2021. Beginning July 1, 2021, the annual cost of service savings are included in Cleco Power’s new retail rate plan. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had ~~$2.4~~$1.2 million accrued for the period July 1, ~~2019,~~2020, through June 30, ~~2021. Cleco Power expects~~2021, which is expected to ~~refund its~~be refunded to customers ~~$1.2 million~~ in ~~September 2021 and~~ September 2022.

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


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

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.

AsIn 2020 and as a result of the delay in the rate case, ~~on July 15, 2020,~~ the LPSC approved Cleco Power’s ~~application to extend~~extension of 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~~June 30, ~~2020, until such a time that the rate case was completed.~~2021. The $7.0 million monthly refund consisted of approximately $4.4 million, which was 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 ~~June 30, 2021,~~March 31, 2022, Cleco Power had $2.1 million accrued for the ~~estimated~~remaining balance of federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan which includes the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1, 2021, all retail customers ~~will continue~~continued receiving bill credits resulting from the TCJA. The target retail portion of the unprotected excess ADIT is approximately $2.5 million monthly and will be credited over a period of three years concluding on June 30, 2024. The retail portion of the protected excess ADIT will be credited until the full amount of the protected excess ADIT has been returned to Cleco Power’s customers through bill credits. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had ~~$324.6~~$291.0 million accrued for the excess ADIT, of which ~~$39.5~~$44.1 million is reflected in current regulatory liabilities.

~~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 activities are subject to refund. At June 30, 2021, Cleco Power had $1.6 million accrued for Cleco Katrina/Rita storm recovery charges that are 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.”

~~Transmission ROE~~

~~NaN complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco Power, may collect under the MISO tariff.~~ ~~As of~~ ~~June 30, 2021,~~ ~~Cleco Power h~~ad $0.3 million accrued for the change in ROE. For more information on the ROE complaints, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

~~FERC Audit~~

As of June 30, 2021, the estimated refund was fully refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments and a reduction in Attachment O of the MISO tariff and grandfathered agreement rates over the preceding 12 months. For more information about the FERC audit, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — FERC Audit.”

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 iswas available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution could be implemented to mitigate reliability issues. One mitigating factor identified was Cleco Power’s Terrebonne to Bayou Vista Transmission project, which was completed in April 2019. Cleco Power received a termination notice, effective April 30, 2019, and filed paperwork to withdraw the filed Attachment Y. While operating as an SSR unit, Cleco Power received monthly payments that included recovery of expenses, including capital expenditures, related to the operations of Teche Unit 3. Additionally, MISO allocated SSR costs to the load serving entities that required the operation of the SSR unit, including Cleco Power. These 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.

On September 7, 2021, Cleco Power ~~expects~~filed an attachment Y with MISO requesting retirement of Teche Unit 3, ~~to continue to be available to run and to continue to offer the unit into MISO through 2024,~~ barring ~~a significant unit failure. At June 30,~~any violations of specific applicable reliability standards. In December 2021, Cleco Power ~~had~~filed notice with the LPSC and MISO to suspend the retirement of Teche Unit 3. On March 15, 2022, Cleco Power paid MISO $4.3 million ~~accrued for the net capital refund~~ for capital

expenditures paid for by third parties while operating under the SSR agreement. ~~The capital refund is expected to be paid in early 2022.~~


Note 1211 — 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 ~~June 30, 2021,~~March 31, 2022, consisted of its equity investment of ~~$5.6~~$2.1 million. ~~During the six months ended June 30, 2021, Cleco Power had a return of equity investment from Oxbow of $3.5 million.~~

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


INCEPTION TO DATE (THOUSANDS)	INCEPTION TO DATE (THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		INCEPTION TO DATE (THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Purchase price	Purchase price	$	12,873	$	12,873	Purchase price	$	12,873	$	12,873
Cash contributions	Cash contributions	6,399		6,399		Cash contributions	6,399		6,399
Distributions	Distributions	(13,700)		(10,200)		Distributions	(17,200)		(17,200)
Total equity investment in investee	Total equity investment in investee	$	5,572	$	9,072	Total equity investment in investee	$	2,072	$	2,072

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)	(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Oxbow’s net assets/liabilities	Oxbow’s net assets/liabilities	$	11,145	$	18,145	Oxbow’s net assets/liabilities	$	4,145	$	4,145
Cleco Power’s 50% equity	Cleco Power’s 50% equity	$	5,572	$	9,072	Cleco Power’s 50% equity	$	2,072	$	2,072
Cleco Power’s maximum exposure to loss	Cleco Power’s maximum exposure to loss	$	5,572	$	9,072	Cleco Power’s maximum exposure to loss	$	2,072	$	2,072

The following table contains summarized financial information for Oxbow:


		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Operating revenue	Operating revenue	$	1,627	$	29,110	$	3,626	$	30,991	Operating revenue	$	66	$	1,999
Operating expenses	Operating expenses	1,627		29,110		3,626		30,991		Operating expenses	66		1,999
Income before taxes	Income before taxes	$	0	$	0	$	0	$	0	Income before taxes	$	—	$	—

Prior to June 30, 2020, DHLC mined lignite reserves at Oxbow through the Amended Lignite Mining Agreement. The lignite reserves were intended to be used to provide fuel to the Dolet Hills Power Station. Under the Amended Lignite Mining Agreement, DHLC ~~bills~~billed Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs. Oxbow ~~bills~~billed Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. At December 31, 2021, the Dolet Hills Power Station was retired, and all of Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. For more information on DHLC and the Oxbow mine, see Note 1312 — ~~“Litigation,~~


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

“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 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

2016 Merger

In connection with the 2016 Merger, 4 actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and 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 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 Como 1, Cleco Corporation, Merger Sub, and, in some cases, certain of the investors in Como 1 either aided and abetted or entered into a civil conspiracy to


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

advance those supposed breaches of duty. The petitions sought various remedies, including monetary damages, which includes attorneys’ fees and expenses.

The 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).

In November 2014, the plaintiff in the Braunstein action moved for a dismissal of the action without prejudice, and that motion was granted in November 2014. In December 2014, the ~~Court~~court consolidated the remaining 3 actions and appointed interim co-lead counsel, and dismissed the investors in Cleco Partners as defendants, per agreement of the parties. Also, in December 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 3 actions filed in the Civil District Court for Orleans Parish 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).

In December 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. Also, in December 2014, the plaintiffs in each action jointly filed a motion to consolidate the 3 actions pending in Orleans Parish and to appoint interim co-lead plaintiffs and co-lead counsel. In January 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. In February 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.

In February 2015, the Ninth Judicial District Court for Rapides Parish held a hearing on a motion for preliminary injunction filed by plaintiffs in the consolidated action seeking to enjoin the shareholder vote for approval of the Merger Agreement. The District Court heard and denied the plaintiffs’ motion. In June 2015, the plaintiffs filed their Second Consolidated Amended Verified Derivative and Class Action Petition. Cleco filed exceptions seeking dismissal of the second amended petition in July 2015. The LPSC voted to

approve the 2016 Merger before the ~~Court~~court could consider the plaintiffs’ peremptory exceptions.

In March 2016 and May 2016, the plaintiffs filed their Third Consolidated Amended Verified Derivative Petition for Damages and Preliminary and Permanent Injunction and their Fourth Verified Consolidated Amended Class Action 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. The defendants filed exceptions seeking dismissal of the fourth amended Petition. In September 2016, the District Court granted the exceptions 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. In December 2017, the Third Circuit Court of Appeal 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 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 7, 2019, the District Court certified a class limited to shareholders who voted against, abstained from voting, or did not vote on the 2016 Merger. On October 18, 2021, the District Court issued an order consistent with a joint motion by the parties to dismiss all claims against the former independent directors leaving two former executives as the only remaining defendants. Cleco


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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.~~Louisiana (the Bunkie Project). According to the petition filed by Gulf Coast in the 12th 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.

Cleco filed an Exception of No Cause of Action arguing that the case should be dismissed. The 12th Judicial District Court denied Cleco’s exception in December 2015, after considering briefs and arguments. In January 2016, Cleco appealed the 12th Judicial District Court’s denial of its exception by filing with the Third Circuit Court of Appeal. In June 2016, the Third Circuit Court of Appeal denied the request to have the case dismissed. In July 2016, Cleco filed a writ to the Louisiana Supreme Court


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

seeking a review of ~~the~~12th Judicial 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 12th Judicial District Court lifted the stay at the request of Gulf Coast. The parties are currently participating in discovery.

Diversified Lands loaned $2.0 million to Gulf Coast for the Bunkie Project. The loan was secured by a mortgage on the Bunkie Project site. Diversified Lands foreclosed on the Bunkie property in February 2020 and has also asserted claims personally against the former owner of Gulf Coast. These claims are based on contracts and credit documents executed by Gulf Coast, the obligations and performance of which were personally guaranteed by the former owner of Gulf Coast. Diversified Lands is seeking recovery of the indebtedness still owed by Gulf Coast to Diversified Lands following the February 2020 foreclosure.

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.

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 September 14, 2020, Cabot ~~Industries~~Corporation 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 Saulsbury Industries, Inc. v. Cabot Corporation and Cleco Power LLC, in the 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 Rapides Parish. Saulsbury Industries, Inc. did not oppose the Magistrate Judge’s report and 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 Corporation and 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 stay the case, arguing that the Rapides Parish suit should proceed. On February 14, 2020, the 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 St. Mary’s Parish case has been dismissed. Saulsbury filed a motion for a new trial. The hearing on this motion was held on February 5, 2021, and the 16th Judicial District Court judge

denied Saulsbury’s motion for a new trial. Saulsbury has appealed this decision. The Rapides Parish case remains stayed during the pendency of Saulsbury’s appeal of the 16th Judicial District Court decision.

LPSC Audits

Fuel Audits

Generally, Cleco Power’s cost of fuel used for electric generation and the cost of purchased 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 March 2020, Cleco Power received a notice of audit from the LPSC for the period of January 2018 to December 2019. The total amount of fuel expense included in the audit is $565.8 million. Cleco Power has responded to several sets of data requests from the LPSC. Cleco Power has FAC filings for January 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.


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

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.

On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola over a period of 12 months beginning inwith the May ~~2021.~~2021 bills. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for the fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Cleco Power has responded to several data requests. Management is unable to determine the outcome or timing of the audit. For more information on these winter storms, see Note 1716 — “Storm Restoration, Securitization, and Cost Recovery — Winter Storms Uri and Viola.”

Environmental Audit

In 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides 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 March 2020, Cleco Power received notice from the LPSC of the EAC audit for the period of January 2018 to December 2019. The total amount of environmental expense included in the audit is $26.2 million. Cleco Power has responded to several sets of data requests from the LPSC. Cleco Power has EAC filings for January 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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

of operations, financial condition, or cash flows of the Registrants.

Cleco Power incurs environmental compliance expenses for reagents associated with the compliance standards of ~~Mercury and Air Toxics Standards (MATS).~~MATS. These expenses 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~~Presidential 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~~directed the EPA to consider issuing a proposed rule ~~by August 2021~~ to suspend, revise, or rescind the rule. The EPA determined the most environmentally protective course is to implement the rules in the executive order. On February 9, 2022, the EPA published in the Federal

Register a proposed rule to revoke the agency’s May 2020 finding with respect to whether it is appropriate and necessary to regulate coal and oil-fired generating units under MATS, but the EPA has not yet acted on a review of the risk and technology determination from the May 2020 rule. Management is unable to determine whether the outcome of the D.C. Circuit Court of ~~Appeals~~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. As of June 30, 2021, the estimated refund of $4.4 million was fully refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments and a reduction in Attachment O of the MISO tariff and grandfathered agreement rates over the preceding 12 months.

~~Transmission ROE~~

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

complaints covered the period December 2013 through 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. 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 covered in the first complaint and going forward. The draft FERC order further found that complainants in the second complaint proceeding failed to show that the 9.88% base 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 final FERC Order will be issued. As of June 30, 2021, Cleco Power had $0.3 million accrued for the 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 collection of the adder was included in MISO’s transmission rates for a total ROE of 10.38% and 10.52% beginning January 1, 2020, and June 1, 2020, respectively.

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 expected to be allocated a portion of the 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.

Prior to the Cleco Cajun Transaction, South Central Generating was involved in various litigation matters, including environmental and contract proceedings, before various courts regarding matters arising out of the ordinary course of business. As of ~~June 30, 2021,~~March 31, 2022, 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.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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 incur with respect to any one of these matters may be in excess of amounts currently accrued. Management regularly analyzes current information and, as of ~~June 30, 2021,~~March 31, 2022, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are ~~$3.8~~$6.7 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 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 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


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

indemnifications relate to environmental matters that may have been present prior to closing. These remaining indemnifications have no time limitations. The maximum amount of the potential payment to Entergy Louisiana and Entergy Gulf States is $42.4 million. 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 or maximum potential future payments. 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 and 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. 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 projected to be paid ~~on behalf of the miner~~ would be credited by the lignite miner against future invoices for lignite delivered. As of June 30, 2021, the maximum projected payment by Cleco Power under this guarantee is estimated to be $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~~the reclamation of ~~equipment.~~land used in DHLC’s mining operations prior to its termination of such operations or in support of such mining operations, and the fulfillment of DHLC’s mine closing and environmental obligations under its mining plan. As of March 31, 2022, Cleco Power does not expect any payments to be made under this guarantee. Cleco Power has the right to dispute the incurrence of such loan and lease obligations ~~through~~before their incurrence but cannot unreasonably withhold approval thereof. The Amended Lignite Mining Agreement does not affect the ~~review of~~amount the ~~mining plan before the incurrence of such loan and lease obligations.~~ Registrants can borrow under their credit facilities.

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,~~June 30, 2020, all lignite reserves intended to be extracted from the ~~Oxbow mine~~mines 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. On March 19, 2021, the LPSC approved the establishment of a regulatory asset for the deferral of certain accelerated mine costs in fuel and related ratemaking treatment. Cleco Power is currently responding to data requests related toFor more information on the joint filing. The Amended Lignite Mining Agreement 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.filing, see “— Risks and Uncertainties.”

Cleco ~~Holdings, in relation to Cleco Cajun’s participation in MISO, and Cleco Power have~~has 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, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March 2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. 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 0

no 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

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

In April 2015, the EPA published a final rule in the Federal Register for regulating the disposal and management of CCRs from coal-fired power plants (CCR Rule). The CCR Rule established extensive requirements for existing and new CCR landfills and surface impoundments and all lateral expansions consisting of location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. In August 2018, the D.C. Court of Appeals vacated several requirements in the CCR regulation, which included eliminating the previous acceptability of compacted clay material as a liner for impoundments. As a result, in August 2020, the EPA published a final rule in the Federal Register that would set deadlines for costly modifications including retrofitting of clay-lined impoundments with compliant liners or closure of the impoundments. In November 2020, Cleco submitted demonstrations to the EPA specifying its intended course of action for the ash disposal facilities at Rodemacher Unit 2, Dolet Hills Power Station, and Big Cajun II in order to comply with the final CCR Rule. During 2021, additional information was submitted to the LDEQ to revise and update Cleco Power’s compliance strategy. On January 11, 2022, Cleco Power and Cleco Cajun received communication from the EPA that the demonstrations have been deemed complete. However, the demonstrations are still subject to EPA approval based on pending technical reviews. At March 31, 2022, Cleco and Cleco Power had AROs of $74.4 million and $23.0 million, respectively. At December 31, 2021, Cleco and Cleco Power had AROs of $74.3 million and $23.0 million, respectively.

As part of the Cleco Cajun Transaction, NRG agreed to indemnify Cleco for environmental costs up to $25.0 million associated with the CCR rule. At March 31, 2022, Cleco Cajun recognized indemnification assets totaling $22.4 million. The current portion of the indemnification asset of $1.1 million is reflected in Other current assets and the non-current portion of $21.3 million is reflected in Other deferred charges on Cleco’s Condensed Consolidated Balance Sheet. The indemnification asset is expected to be collected as closure costs are incurred.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND 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.

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows.

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 and Cleco Cajun are participants in the MISO market. ~~Energy prices~~Power purchases in the MISO market are ~~based on~~made at


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

prevailing market prices, also referred to as LMP. LMP ~~which~~ includes a component directly related to congestion on the transmission ~~system. Pricing zones with greater transmission congestion may have higher LMPs. Physical transmission constraints present in~~system and, as a result, can be different based on the ~~MISO market could increase~~location and time of the day the energy is dispatched causing energy costs ~~within pricing zones.~~to fluctuate. Cleco Power and Cleco Cajun use FTRs to mitigate transmission congestion price risks. ~~Changes~~Recovery of these costs included in Cleco Power’s FAC is subject to, ~~anticipated transmission paths~~and may ~~result in an unexpected increase in energy costs.~~be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC.

~~On March 1, 2019, Cleco Power began to operate the~~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.

was retired on December 31, 2021. On January 31, 2022, Cleco Power ~~anticipates filing~~filed an application ~~in the third quarter of 2021~~ with the LPSC ~~giving notice that~~requesting recovery of stranded and decommissioning costs associated with the ~~Dolet Hills Power Station will be retired at the end of 2021.~~

~~In June 2020, Cleco Power remeasured its ARO liabilities due to the expected~~ retirement of the Dolet Hills Power Station. At March 31, 2022, Cleco ~~Power’s ARO liability increased $3.3~~Power had $146.0 million deferred as a ~~result of this remeasurement. At June 30, 2021, Cleco Power’s undivided interest in the Dolet Hills Power Station was $62.6 million and was included in base rates.~~regulatory asset for stranded costs.

The expected early closure of the mines ~~has~~ resulted in increased lignite costs. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that ~~will~~would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine. At March 31, 2022, Cleco Power had a regulatory asset of $135.9 million for deferred fuel ~~adjustment clause,~~and mine-related incurred costs, which ~~management~~were included in the application filed on January 31, 2022. Management currently believes these costs 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. On March 19, 2021, the LPSC approved the establishment of a regulatory asset for the deferral of certain accelerated mine costs in fuel and related ratemaking treatment. 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 is currently responding to data requests related to the joint filing.

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~~ billed Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs as fuel is delivered. ~~As of June 30, 2021, DHLC estimates $96.1 million of costs will be billed to Cleco 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~~billed Cleco Power its proportionate share of incurred costs. AsAt December 31, 2021, all of ~~June 30, 2021, Oxbow estimates approximately $6.6 million~~Cleco Power’s proportional share of lignite-related costs ~~will be~~had been billed ~~to Cleco Power prior to the closure of the Dolet Hills Power Station.~~by DHLC and Oxbow. If any of these costs are not recoverable, it could materially impact the Registrants’ results of operations, financial condition, or cash flows.


Note 1413 — Affiliate Transactions

At ~~June 30, 2021,~~both March 31, 2022, and December 31, ~~2020,~~2021, Cleco Holdings had an affiliate receivable of ~~$2.7~~$3.0 million ~~and $1.7 million, respectively, from Cleco Group~~ primarily for franchise ~~taxes.~~taxes paid on behalf of Cleco Group. At ~~both June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco Holdings had an affiliate payable of ~~$41.3~~$11.3 million and $51.3 million, respectively, to Cleco Group primarily ~~for settlement of taxes payable. At both June 30, 2021, and December 31, 2020, Cleco Power had an affiliate payable to Cleco Holdings for $57.7 million, of which $57.6 million was~~ 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 JUNE 30, 2021 AT DEC. 31, 2020
(THOUSANDS) ACCOUNTS
RECEIVABLE ACCOUNTS
PAYABLE ACCOUNTS
RECEIVABLE ACCOUNTS
PAYABLE
Cleco Holdings $ 10,383 $ 57,696 $ 10,353 $ 57,713
Support Group 1,707 12,737 3,248 14,355
Cleco Cajun 936 4 1,004 0
Total $ 13,026 $ 70,437 $ 14,605 $ 72,068


	AT MAR. 31, 2022				AT DEC. 31, 2021
(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	$	141	$	9,335	$	10,347	$	59,627
Support Group	666		10,213		2,473		10,038
Cleco Cajun	921		1		792		64
Total	$	1,728	$	19,549	$	13,612	$	69,729

Of the affiliate payable balances at March 31, 2022, and December 31, 2021, Cleco Power had $9.1 million and $59.4 million, respectively, payable to Cleco Holdings for the settlement of income taxes.

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 and six months ended June 30, 2021, Cleco Power recorded $0.9 million and $1.9 million, respectively, of its proportionate share of incurred costs. During the three and six months ended June 30, 2020, Cleco Power recorded $14.6 million and $15.5 million, respectively, of its proportionate share of incurred costs. At both June 30, 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 1211 — “Variable Interest Entities.”

Note 1514 — 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~~finite intangible assets relating to long-term


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

wholesale power supply agreements. At the end of their lives, these power supply agreement intangible assets will have 0no 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 assets and liabilities will have 0no residual value. These intangibles are amortized over the estimated life of each applicable contract ranging between 26 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~~table presents Cleco’s amortization of intangible assets and ~~liabilities:~~liabilities for the three months ended March 31, 2022, and 2021:

Cleco
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS
ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges $ 0 $ 0 $ 0 $ 517
Trade name $ 64 $ 64 $ 128 $ 128
Power supply agreements $ 6,400 $ 6,400 $ 12,800 $ 12,800
Intangible liabilities
LTSA $ 871 $ 871 $ 1,742 $ 1,742
Power supply agreements $ 718 $ 882 $ 1,600 $ 1,764

Cleco Power
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS
ENDED JUNE 30,
(THOUSANDS) 2021 2020 2021 2020
Cleco Katrina/Rita right to bill and collect storm recovery charges $ 0 $ 0 $ 0 $ 517

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

Cleco
(THOUSANDS) AT JUNE 30, 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 (73,517) (63,932)
Net intangible assets subject to amortization $ 77,287 $ 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 debits.

Cleco
FOR THE THREE
MONTHS ENDED
JUNE 30, 2021 FOR THE SIX
MONTHS ENDED
JUNE 30, 2021
(THOUSANDS) POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period $ (25,168) $ (25,796)
Amounts reclassified from AOCI
Amortization of postretirement benefit net (gain) loss (420) 208
Balances, June 30, 2021 $ (25,588) $ (25,588)

FOR THE THREE MONTHS ENDED
JUNE 30, 2020 FOR THE SIX MONTHS ENDED
JUNE 30, 2020
(THOUSANDS) POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period $ (17,099) $ (17,513)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 442 856
Balances, June 30, 2020 $ (16,657) $ (16,657)


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Intangible assets

Trade name	$	—	$	64
Power supply agreements	$	6,400	$	6,400
Intangible liabilities
LTSA	$	871	$	871
Power supply agreements	$	389	$	882

Cleco Power
FOR THE THREE MONTHS ENDED JUNE 30, 2021 FOR THE SIX MONTHS ENDED JUNE 30, 2021
(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 $ (18,681) $ (5,550) $ (24,231) $ (19,139) $ (5,614) $ (24,753)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 287 — 287 745 — 745
Reclassification of net loss to interest charges — 64 64 — 128 128
Balances, June 30, 2021 $ (18,394) $ (5,486) $ (23,880) $ (18,394) $ (5,486) $ (23,880)

4840


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

FOR THE THREE MONTHS ENDED JUNE 30, 2020 FOR THE SIX MONTHS ENDED JUNE 30, 2020
(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 $ (16,291) $ (5,804) $ (22,095) $ (16,717) $ (5,868) $ (22,585)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 419 — 419 845 — 845
Reclassification of net loss to interest charges — 64 64 — 128 128
Balances, June 30, 2020 $ (15,872) $ (5,740) $ (21,612) $ (15,872) $ (5,740) $ (21,612)

The following table summarizes the balances for intangible assets and liabilities subject to amortization for Cleco at March 31, 2022, and December 31, 2021:


Cleco
(THOUSANDS)	AT MAR. 30, 2022		AT DEC. 31, 2021
Intangible assets

Power supply agreements	$	184,004	$	184,004
Total intangible assets carrying amount	184,004		184,004
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	145,704		145,704
Accumulated amortization	(87,606)		(82,466)
Net intangible assets subject to amortization	$	58,098	$	63,238

Note 15 — 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 debits.


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balance, beginning of period	$	(23,629)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	14


Balance, Mar. 31, 2022	$	(23,615)


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



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	628


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


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS		NET LOSS ON CASH FLOW HEDGES		TOTAL AOCI
Balances, beginning of period	$	(12,885)	$	(5,298)	$	(18,183)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	306		—		306
Reclassification of net loss to interest charges	—		63		63

Balances, Mar. 31, 2022	$	(12,579)	$	(5,235)	$	(17,814)


	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)

Note 1716 — Storm Restoration, Securitization, and Cost Recovery

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 ~~$243.0~~$239.9 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 ~~$152.4~~$150.4 million, of the total restoration costs recorded at ~~June 30, 2021.~~March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling ~~$77.7~~$73.0 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. On May 19, 2021, the LPSC issued an order authorizing Cleco Power to recover $16.0 million annually for interim storm recovery costs. ~~This order is effective until such time that the LPSC issues its order authorizing the recovery of the verified final storm costs and securitization of those costs.~~ Cleco Power began collecting this amount

through rates on June 1, 2021.

~~On August 5, 2021,~~ ~~Cleco Power filed testimony with~~ This order is in effect until such time that the ~~LPSC relating to~~ securitization offinancing closes, which is expected in mid-2022. For more information on the ~~final~~ storm ~~costs for Hurricanes Laura, Delta,~~securitization, see “— Storm Securitization and ~~Zeta.~~Cost Recovery.”

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.

Winter Storms Uri and Viola

In February 2021, Winter Storms Uri and Viola ~~reached Louisiana causing~~caused Cleco’s service ~~territories~~territory to experience extreme and unprecedented winter weather that resulted in

damage to Cleco Power’s distribution assets and caused electricity generation supply shortages, natural gas supply shortages, and increases in ~~wholesale~~ prices of natural gas in the ~~United States,~~U.S., 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 $10.5~~$10.1 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 ~~$8.4~~$8.1 million, of the estimated total restoration costs recorded at ~~June 30, 2021.~~March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had a


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

regulatory asset for ~~the remaining operations and maintenance costs~~non-capital expenses of ~~$2.0~~$1.9 million, as allowed by the LPSC. Cleco Power has requested recovery of these costs through the storm securitization filing that was made with the LPSC on August 5, 2021.For more information on the storm securitization, see “— Storm Securitization and Cost Recovery.”

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 inwith the May ~~2021.~~2021 bills. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for the fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Cleco Power has responded to several data requests. Management is unable to determine the outcome or timing of the audit.

Hurricane Ida

In August 2021, Cleco ~~Cajun's incremental negative impact~~Power’s distribution and transmission systems sustained substantial damage from Hurricane Ida.

Cleco Power’s total storm restoration costs related to Hurricane Ida is approximately $92.6 million. The damage to equipment from the hurricane required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 57%, or approximately $52.5 million, of the total restoration costs recorded at March 31, 2022. At March 31, 2022, Cleco Power had a regulatory asset for non-capital expenses related to Hurricane Ida, as allowed by the LPSC, totaling $37.8 million.

On September 28, 2021, Cleco Power made a supplemental filing to its application for storm restoration costs securitization to recover costs related to Hurricane Ida. For more information on the storm securitization, see “— Storm Securitization and Cost Recovery.”

Storm Securitization and Cost Recovery

On August 5, 2021, Cleco Power filed testimony with the LPSC relating to securitization of the final storm costs for Hurricanes Laura, Delta, and Zeta, and Winter Storms Uri and Viola, ~~on operations is approximately $11.2~~totaling $342.0 million, including the establishment of a newly funded $100.0 million storm reserve to cover future storm costs. On September 28, 2021, Cleco Power filed supplemental testimony with the LPSC relating to storm securitization requesting an additional $100.0 million for a separate storm reserve to cover costs associated with Hurricane Ida.

On March 24, 2022, Cleco Power and the LPSC Staff filed a settlement agreement allowing securitization of $424.1 million. ~~The incremental impact to Cleco Cajun’s operations is subject to final settlement.~~

~~In February 2021, as a result~~This amount includes the balance of storm costs of $220.1 million, after adjustments and collections through rates for interim storm recovery, for Hurricanes Laura, Delta, and Zeta and Winter Storms Uri and ~~Viola,~~Viola; $95.0 million for a reserve for Hurricane Ida storm costs; $100.0 million for a reserve to cover future storm costs; and $9.0 million for estimated upfront securitization costs and ongoing costs. On March 30, 2022, the LPSC approved the settlement agreement. On April 1, 2022, the LPSC issued the financing order authorizing Cleco Power ~~and Cleco Holdings, on behalf~~to issue storm recovery bonds in the aggregate principal amount of ~~Cleco Cajun, were required~~up to ~~post collateral with MISO. In March 2021,~~ $425.0 million. Cleco Power ~~and Cleco Cajun settled with MISO~~expects the ~~purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral postings of $24.9 million and $6.5 million~~securitization financing to close by mid-2022.

Cleco Power, ~~and~~in line with other impacted utilities, will seek available funds from the U.S. government for customer relief of costs incurred from the storms. Cleco ~~Holdings, respectively.~~

Power cannot predict the likelihood that any funding from the U.S. government ultimately will be approved.


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~


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 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, ~~2020,~~2021, and Cleco and Cleco Power’s Condensed Consolidated Financial Statements contained in this 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 six~~ months ended ~~June 30, 2021,~~March 31, 2022, and ~~2020.~~2021.


OVERVIEW

Cleco is a regional energy company that conducts substantially all of its business operations through its two principal operating business segments:

•Cleco Power, a regulated electric utility company that owns 10nine generating units with a total rated capacity of ~~3,360~~3,035 MW

and serves approximately ~~290,000~~291,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and 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~~a mixture of electric cooperatives, ~~two wholesale~~ municipal ~~customers,~~bodies, a utility, and ~~one electric utility. Upon the closing of the Cleco Cajun Transaction, Cottonwood Energy entered into the Cottonwood Sale Leaseback.~~a non-profit corporation.

Significant Events

~~Winter Storms Uri~~Storm Restoration and ~~Viola~~Recovery

~~In February~~During 2020 and 2021, ~~Winter Storms Uri~~Cleco Power’s distribution and ~~Viola reached Louisiana causing~~transmission systems sustained substantial damage from four separate hurricanes and two severe winter storms. The damage to equipment from the hurricanes required replacement, as well as repair of existing assets. The winter storms caused Cleco’s service ~~territories~~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,~~U.S., primarily due to prolonged freezing temperatures.

Cleco Power’s ~~current estimate of the~~ total storm restoration costs ~~related~~relating to ~~Winter Storms Uri and Viola is~~these weather events are approximately ~~$10.5~~$342.6 million. The ~~damage to equipment from the storms required replacement, as well as repair of existing assets. Therefore, the~~


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

balance sheets of Cleco and Cleco Power reflect the capitalization of approximately ~~80%, or approximately $8.4~~$211.0 million of the ~~estimated~~ total restoration costs recorded at ~~June 30, 2021.~~March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had a regulatory ~~asset~~assets for ~~the remaining operations and maintenance costs of $2.0 million,~~non-capital expenses related to these weather events, as allowed by the ~~LPSC. Cleco Power has requested recovery of these costs through the storm securitization filing that was made with the~~ LPSC, ~~on August 5, 2021.~~

~~Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is~~

~~approximately $55.0~~totaling $112.8 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. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Management is unable to determine the outcome or timing of the audit.

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

In February 2021, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March 2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral postings of ~~$24.9 million and $6.5 million~~ ~~to Cleco Power and Cleco Holdings, respectively.~~

For more information on ~~Winter Storms Uri and Viola,~~these weather events that significantly affected Cleco, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1716 — Storm Restoration, ~~— Winter Storms Uri~~Securitization, and ~~Viola.~~Cost Recovery.”

~~Hurricanes Laura, Delta, and Zet~~a

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

Cleco Power’s total storm restoration costs related to the hurricanes is approximately $243.0 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 $152.4 million, of the total restoration costs recorded at June 30, 2021. At June 30, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling $77.7 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. On May 19, 2021, the LPSC issued an order authorizing Cleco Power to recover $16.0 million annually for interim storm ~~recovery costs. This order is effective until such time that the LPSC issues its order authorizing the recovery of the verified final storm costs and securitization of those costs.~~recovery. Cleco Power began collecting this amount through rates on June 1, 2021.

This order is effective until such time that the securitization financing closes, which is expected in mid-2022. On ~~August 5, 2021,~~March 30, 2022, the LPSC approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power ~~filed testimony with the LPSC~~ relating to securitization of storm costs. On April 1, 2022, the ~~final storm costs for Hurricanes Laura, Delta, and Zeta.~~

LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in ~~line with other impacted utilities, will seek available funds from~~ the ~~U.S. government for relief~~aggregate principal amount of ~~costs incurred from Hurricanes Laura, Delta,~~up to $425.0 million. For more information on Cleco Power’s storm securitization, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 16 — Storm Restoration, Securitization, and ~~Zeta. Cleco Power cannot predict the likelihood that any reimbursement from the U.S. government ultimately will be approved.~~Cost Recovery — Storm Securitization and Cost Recovery.”

COVID-19

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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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. During March and April 2021, due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, the governor of the state of Louisiana reduced restrictions that were previously in effect, eased capacity limits on businesses and social gatherings, and revoked the mandatory, state-wide mask mandate. However, effective August 4, 2021, the state-wide mask mandate was reinstated due to a surge in COVID-19 cases.

Cleco is monitoring the ongoing COVID-19 pandemic 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. The first priority in Cleco’s response to this crisis has been the health and safety of its employees, 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 expenses incurred as a result of an LPSC executive order, issued in response to the ~~regulatory asset~~COVID-19 pandemic, prohibiting the disconnection of utilities for non-payment, as well as the lost revenue associated with the disconnection fees and incremental costs. At ~~June 30, 2021,~~March 31, 2022, Cleco Power had a regulatory asset of $3.0 million for expenses incurred. ~~Cleco expects LPSC approval for the recovery of the regulatory asset in September 2021.~~

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~~ liquidity.Cleco ~~Holdings’~~will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as warranted. and Cleco Power’s revolving credit facilities. At June 30, 2021, there was no balance outstanding on Cleco Holdings’ revolving credit facility and $160.0 million outstanding on Cleco Power’s revolving credit facility. While most restrictions have now been lifted, Cleco continues to assess the COVID-19 situation ~~Cleco~~and 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”~~Pandemics, Epidemics, or Other Outbreaks” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

~~American Jobs Act of 2021~~Future Tax Reform

On ~~March 31,~~November 19, 2021, the ~~President announced~~U.S. House of Representatives passed the ~~American Jobs Act. This proposal includes~~Build Back Better Act (BBBA); however, the U.S. Senate declined to vote on it in its current form. The BBBA targets individual tax relief, clean energy incentives, and increased spending on healthcare, education, childcare, and other programs. There are several tax and renewables provisions in this legislation that could have a ~~number~~material effect on the results of ~~incentives~~operations, financial conditions, or cash flows of the Registrants. Management continues to ~~encourage construction~~monitor the legislative status of ~~certain transmission~~the BBBA and ~~energy storage property. The proposed act also proposes to raise~~any successor legislation.

On November 13, 2021, the ~~federal statutory~~Louisiana state corporate income tax rate decreased from ~~21%~~8% to ~~28%~~7.5%, effective for the income tax periods beginning on or after January 1, 2022.

ESG Goals

Cleco is accelerating its efforts to protect the environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco aims to ~~introduce~~increase electrification initiatives and reduce GHG emissions by incorporating renewable energy resources into its generating fleet, as it replaces coal-fired generation units retired after serving their useful lives. Cleco aims to sustainably reduce its GHG emissions 60.0% by 2030 with aspirations of net zero emissions by 2050. To manage social relationships, Cleco plans to ensure that the electricity that it generates is affordable, reliable, and sustainable, as well as support community investment opportunities across its service territory and create a ~~minimum tax based on book income.~~workforce culture that rewards inclusion, safety, and innovation. To govern responsibly, Cleco plans to continue operating according to the governance framework. To ensure accountability, Cleco has created an ESG Steering Committee and has appointed a Chief Sustainability Officer to oversee the continued implementation of the ESG goals. Currently, management is unable to predict the impact of ~~the proposed act~~implementing these ESG goals on the Registrants. For more information on these ESG goals, see Part I, Item 1, “Business — Human Capital — Diversity and Inclusion,” “— Communities,” and “— Oversight and Governance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2021. For more information about Cleco’s environmental initiatives, see “— Cleco Power — Project Diamond Vault.”

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~~impact the ROE, 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. Cleco Power’s current key initiatives are ~~continuing construction~~pursuing solar-related projects, initiating work on the ~~Bayou Vista to Segura Transmission project;~~winterization of generation assets, beginning Project Diamond Vault, continuing the DSMART ~~project;~~project, and maintaining and growing its wholesale and retail businesses. These and other initiatives are discussed below.

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. Effective July 1, 2021, under the terms of the


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

new ~~FRP,~~retail rate plan, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, 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. For more information on the new ~~FRP~~retail rate plan for Cleco Power, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1110 — Regulation and Rates— FRP.”

~~Bayou Vista~~Project Diamond Vault

On April 11, 2022, Cleco Power announced Project Diamond Vault, a carbon capture and sequestration facility that is anticipated to ~~Segura Transmission Project~~

~~The Bayou Vista to Segura Transmission project includes~~be constructed at the ~~construction of 48 miles of 230 kilovolt transmission line, a 230/138 kilovolt substation, and three substation expansions in south Louisiana. The project~~Brame Energy Center. This facility is expected to capture and compress carbon dioxide produced by the combustion of fuel at Madison Unit 3 and store the compressed gas permanently in deep geological formations located beneath the Brame Energy Center. Cleco Power expects to reduce the carbon output of Madison Unit 3 by approximately 95% with the implementation of this technology. Through this project, Cleco Power plans to leverage technology advancements and Louisiana’s natural resources to create a clean power solution.

The Front End Engineering Design (FEED) study for Project Diamond Vault has begun and is projected to cost approximately ~~$125.1~~$12.0 million. A $9.0 million congressional appropriation has been secured to offset the costs of the study. The ~~project~~FEED study is expected to ~~increase reliability, provide transmission system redundancy,~~be completed by the end of 2023 and provide hurricane hardening for customers in south Louisiana. Cleco Power received MISO approval for the project in December 2017. As part of Cleco Power’s new retail rate plan, the LPSC approved the establishment of a regulatory asset and recovery of the revenue requirements associated with the Bayou Vista to Segura Transmission project upon completion of each phase of the project. Construction has already been completed on expansions to existing substations. The northern phasepermitting is expected to be completed in the ~~third quarter~~second half of ~~2021, and~~2025. Construction of the ~~southern phase~~project is expected to begin by the end of 2025. Management expects the total project will be completed inby the ~~fourth quarter~~end of ~~2021. As~~2028. After the cost of ~~June 30, 2021,~~the FEED study, the current total estimated project cost is $900.0 million. Cleco ~~Power had spent $84.7 million on the project.~~anticipates funding this project through one or more sources including tax credits, Department of Energy grants, and private equity investment.

DSMART Project

~~The~~In 2019, Cleco Power initiated the DSMART project. This project includes modernization of Cleco Power’s distribution system by replacing or upgrading distribution line equipment ~~utilizing~~to utilize new and emerging technologies to facilitate


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

automatic fault isolation, service restoration, and fault location. The project is expected to provide savings through a reduction in outage restoration time and improve operational efficiencies and time to locate ~~faults, and improved operational efficiencies.~~faults. The project is also expected to improve safety and reliability of Cleco Power’s distribution assets by minimizing outage patrols and improving situational awareness in the 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, Cleco Power began the first phase of the project.~~ As of ~~June 30, 2021,~~March 31, 2022, Cleco Power had spent ~~$25.0~~$33.9 million on the project.

Other

Cleco Power is working 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.~~loads. 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.

In 2021, a wholesale customer that is currently Cleco Power’s largest single customer, based on revenue, and is under contract with Cleco Power through March 31, 2024, conducted a request for proposal for capacity and energy beginning April 1, 2024, in which Cleco Power participated. In August 2021, the wholesale customer informed Cleco Power that it was not selected as a provider of capacity and energy after the first quarter of 2024 and filed a notice with the LPSC to certify the results of the request for proposal. Cleco Power subsequently filed a notice of intervention with the LPSC requesting further review prior to certifying the wholesale customer’s notice. The certification process is ongoing, and the LPSC procedural schedule extends into the third quarter of 2022. Cleco Power cannot predict the outcome of the process. Failure to ~~renew existing franchises and wholesale contracts could have a material adverse effect on~~recontract this or other agreements may affect jurisdictional retail rates that will be subject to review by the LPSC in conjunction with Cleco Power’s ~~results of operations, financial condition, cash flows, and liquidity.~~next rate case.

Cleco Cajun

Cleco Cajun currently has 12 power purchase agreements totaling approximately 2,100 MW with 12 wholesale customers, which consist of a mixture of electric cooperatives, municipal bodies, a utility, and a ~~utility.~~non-profit corporation. 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 the first quarter of 2025 but may prevent Cleco Cajun from taking advantage of rising market rates for power.

In 2020, a group of electric cooperatives, which are currently under contract with Cleco Cajun through the first quarter of 2025, conducted a request for proposal for ~~load~~capacity, energy, and resources beginning in the second quarter of 2025 in which Cleco Cajun participated. On January 25, 2022, the LPSC certified the results of the electric cooperatives’ request for proposal, which did not include any of Cleco Cajun’s assets or contracts.

In 2021, a separate electric cooperative, which is currently under contract with Cleco Cajun through the first quarter of 2025, conducted a request for proposal for capacity and energy after March 27, 2025, in which Cleco Cajun participated. In ~~March~~August 2021, the ~~group of cooperatives~~electric cooperative informed Cleco Cajun that it was not selected as a provider, ~~of load after the first quarter of 2025~~ and filed a notice with the LPSC ~~to certify~~requesting certification of 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’~~potential certification of the electric cooperative’s notice. The certification process is ~~in the early stages~~ongoing, and ~~on April 20, 2021,~~ the LPSC ~~issued a~~ procedural schedule ~~that~~ extends into the ~~first~~third quarter of 2022. Cleco Cajun ~~will continue to support the process and~~ cannot predict the outcome of the process.

In 2021, Cleco Cajun participated in a request for proposal for capacity and energy after March 31, 2025, that was conducted by three electric cooperatives which are currently under contract with Cleco Cajun through the first quarter of 2025. In December 2021, one electric cooperative informed Cleco Cajun that it was not selected as a provider. As of May 12, 2022, this electric cooperative has not filed a notice with the LPSC requesting certification of the request for proposal results. Cleco Cajun will monitor the cooperative’s filing of a request for certification with the LPSC. Cleco Cajun is an active participant in the request for proposal process for both of the two additional electric cooperatives. Cleco Cajun cannot predict the outcome of the process.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Failure to recontract these or other agreements or failure to enter into new contracts to replace the existing agreements could have a material adverse effect on ~~Cleco Cajun’s~~Cleco’s results of operations, financial condition, cash flows, and ~~cash flows.~~liquidity as early as the second quarter of 2025. Cleco Cajun is working to secure load growth opportunities that include renewing existing wholesale contracts with electric cooperatives in Louisiana, pursuing new wholesale contracts with other utilities and municipalities in MISO South, and continuing support of economic development with existing customers throughout the state.

Many factors affect Cleco Cajun’s primary business of providing wholesale power and capacity. These factors include weather, the market price of power, the sales volume of power through 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 compliance with the commitments made to the LPSC as a result of the Cleco Cajun Transaction.


RESULTS OF OPERATIONS

Comparison of the Three Months Ended ~~June 30,~~March 31, 2022, and 2021 ~~and 2020~~


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED JUNE 30,									FOR THE THREE MONTHS ENDED MAR. 31,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2021		2020		VARIANCE		CHANGE		(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue, net	Operating revenue, net	$	378,749	$	357,758	$	20,991	5.9	%	Operating revenue, net	$	449,180	$	394,995	$	54,185	13.7	%
Operating expenses	Operating expenses	254,763		267,564		12,801		4.8	%	Operating expenses	267,001		348,698		81,697		23.4	%
Operating income	Operating income	123,986		90,194		33,792		37.5	%	Operating income	182,179		46,297		135,882		293.5	%
Interest income	Interest income	829		898		(69)		(7.7)	%	Interest income	756		647		109		16.8	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	1,105		127		978		770.1	%	Allowance for equity funds used during construction	931		887		44		5.0	%

Other (expense) income, net		(3,970)		257		(4,227)		*
Other expense, net										Other expense, net	(190)		(3,033)		2,843		93.7	%
Interest charges	Interest charges	33,291		34,715		1,424		4.1	%	Interest charges	33,519		33,891		372		1.1	%
Federal and state income tax expense		9,837		13,593		3,756		27.6	%
Federal and state income tax benefit										Federal and state income tax benefit	(5,587)		(9,420)		(3,833)		(40.7)	%
Net income	Net income	$	78,822	$	43,168	$	35,654	82.6	%	Net income	$	155,744	$	20,327	$	135,417	666.2	%
* Not meaningful

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

Operating Revenue, Net

Operating revenue, net increased ~~$21.0~~$54.2 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$23.2~~$24.5 million of higher fuel cost recovery revenue, $20.8 million of lower electric customer credits, and $4.4 million of higher base revenue at Cleco Power. Also contributing to the increase was ~~$6.7~~$2.6 million of higher other operations revenue and $2.1 million of higher electric operations revenue at Cleco Cajun. ~~These increases were partially offset by $9.7 million of higher electric customer credits at Cleco Power.~~

Operating Expenses

Operating expenses decreased ~~$12.8~~$81.7 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$47.0~~$100.6 million of ~~lower fuel used for electric generation~~higher mark-to-market gains on gas-related derivative contracts at Cleco Cajun. Also contributing to the decrease was ~~$3.4~~$4.8 million of lower ~~non-recoverable fuel~~depreciation and ~~purchased power, $2.5 million of lower other operations~~amortization expense and ~~maintenance expenses, and $2.1~~$3.9 million of lower taxes other than

income taxes at Cleco Power. These decreases were partially offset by ~~$23.1~~$24.4 million of higher recoverable fuel and purchased power expense, $3.2 million of higher depreciation and amortization expense, and $2.4 million of higher non-recoverable fuel and purchased power expense at Cleco Power, ~~and $15.9~~as well as $11.0 million of higher ~~purchased power~~depreciation and amortization expense at Cleco Cajun.

Other ~~(Expense) Income,~~Expense, Net

Other ~~(expense) income,~~expense, net ~~increased $4.2~~decreased $2.8 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$3.0 million for the decrease in cash surrender value of certain trust-owned life insurance policies as a result of less favorable market conditions~~lower pension non-service costs at Cleco ~~Holdings.~~Power.

Income Taxes

Federal and state income tax ~~expense~~benefit decreased $3.8 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$9.5~~$29.2 million for the change in pretax income, excluding AFUDC equity, $8.7 million for state tax expense, and $3.1 million for the amortization of excess ~~ADIT, $2.1~~ADIT. These decreases were partially offset by $32.0 million to record tax expense at the projected annual effective tax rate, $4.3 million for ~~the~~ flow through of state tax benefits, and ~~$0.4~~$0.9 million for permanent tax deductions.

The estimated annual effective income tax rates used during the first quarter of 2022 and 2021 for Cleco may not be indicative of the full-year income tax rates. For more information on Cleco’s effective income tax rates, see Item 1, “Notes to ~~record tax expense at~~ the Unaudited Condensed Consolidated Financial Statements — Note 8 — Income Taxes — Effective Tax Rates.”


Cleco Power
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021			VARIANCE		CHANGE
Operating revenue
Base	$	157,024	$	152,611		$	4,413	2.9	%
Fuel cost recovery	139,073		114,547			24,526		21.4	%
Electric customer credits	(136)		(20,976)			20,840		99.4	%
Other operations	19,084		18,626			458		2.5	%
Affiliate revenue	1,459		1,655			(196)		(11.8)	%
Operating revenue, net	316,504		266,463			50,041		18.8	%
Operating expenses
Recoverable fuel and purchased power	138,951		114,573			(24,378)		(21.3)	%
Non-recoverable fuel and purchased power	12,041		9,670			(2,371)		(24.5)	%
Other operations and maintenance	48,729		53,565			4,836		9.0	%
Depreciation and amortization	45,239		42,076			(3,163)		(7.5)	%
Taxes other than income taxes	12,631		16,502			3,871		23.5	%


Total operating expenses	257,591		236,386			(21,205)		(9.0)	%
Operating income	58,913		30,077			28,836		95.9	%
Interest income	740		642			98		15.3	%
Allowance for equity funds used during construction	931		887			44		5.0	%
Other expense, net	(2,035)		(4,258)			2,223		52.2	%
Interest charges	18,801		18,646			(155)		(0.8)	%
Federal and state income tax expense (benefit)	724		(9,723)			(10,447)		(107.4)	%
Net income	$	39,024	$	18,425		$	20,599	111.8	%

5245


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

~~projected annual effective tax rate. These decreases were partially offset by $6.4 million for the change in pretax income, excluding AFUDC equity, and $2.0 million of state tax expense.~~

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

Cleco Power
FOR THE THREE MONTHS ENDED JUNE 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Base $ 164,113 $ 163,994 $ 119 0.1 %
Fuel cost recovery 98,835 75,649 23,186 30.6 %
Electric customer credits (18,762) (9,100) (9,662) (106.2) %
Other operations 16,269 15,904 365 2.3 %
Affiliate revenue 1,224 1,240 (16) (1.3) %
Operating revenue, net 261,679 247,687 13,992 5.6 %
Operating expenses
Recoverable fuel and purchased power 98,824 75,756 (23,068) (30.5) %
Non-recoverable fuel and purchased power 4,064 7,487 3,423 45.7 %
Other operations and maintenance 52,160 54,667 2,507 4.6 %
Depreciation and amortization 40,933 41,596 663 1.6 %
Taxes other than income taxes 7,314 9,448 2,134 22.6 %
Total operating expenses 203,295 188,954 (14,341) (7.6) %
Operating income 58,384 58,733 (349) (0.6) %
Interest income 825 755 70 9.3 %
Allowance for equity funds used during construction 1,105 127 978 770.1 %
Other expense, net (5,700) (3,423) (2,277) (66.5) %
Interest charges 18,237 18,603 366 2.0 %
Federal and state income tax expense 8,956 9,356 400 4.3 %
Net income $ 27,421 $ 28,233 $ (812) (2.9) %

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


		FOR THE THREE MONTHS ENDED JUNE 30,						FOR THE THREE MONTHS ENDED MAR. 31,
(MILLION kWh)	(MILLION kWh)	2021	2020	FAVORABLE/ (UNFAVORABLE)			(MILLION kWh)	2022	2021	FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales						Electric sales
Residential	Residential	873	904		(3.4)	%	Residential	890	916		(2.8)	%
Commercial	Commercial	649	636		2.0	%	Commercial	599	580		3.3	%
Industrial	Industrial	508	453		12.1	%	Industrial	544	520		4.6	%
Other retail	Other retail	32	30		6.7	%	Other retail	30	31		(3.2)	%
Total retail	Total retail	2,062	2,023		1.9	%	Total retail	2,063	2,047		0.8	%
Sales for resale	Sales for resale	690	722		(4.4)	%	Sales for resale	683	696		(1.9)	%
Total retail and wholesale customer sales	Total retail and wholesale customer sales	2,752	2,745		0.3	%	Total retail and wholesale customer sales	2,746	2,743		0.1	%

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


		FOR THE THREE MONTHS ENDED JUNE 30,								FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2022		2021		FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales								Electric sales
Residential	Residential	$	78,254	$	79,069		(1.0)	%	Residential	$	69,916	$	67,811		3.1	%
Commercial	Commercial	47,364		47,921			(1.2)	%	Commercial	48,264		46,465			3.9	%
Industrial	Industrial	19,754		19,170			3.0	%	Industrial	21,358		22,427			(4.8)	%
Other retail	Other retail	2,785		2,670			4.3	%	Other retail	2,702		2,667			1.3	%

Total retail	Total retail	148,157		148,830			(0.5)	%	Total retail	142,240		139,370			2.1	%
Sales for resale	Sales for resale	15,956		15,164			5.2	%	Sales for resale	14,784		13,241			11.7	%
Total base revenue	Total base revenue	$	164,113	$	163,994		0.1	%	Total base revenue	$	157,024	$	152,611		2.9	%

Cleco Power’s residential customers’ demand for electricity is largely affected 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 degree-days.

FOR THE THREE MONTHS ENDED JUNE 30,
2021 CHANGE
2021 2020 NORMAL PRIOR YEAR NORMAL
Cooling degree-days 984 998 942 (1.4) % 4.5 %


	FOR THE THREE MONTHS ENDED MAR. 31,
				2022 CHANGE
	2022	2021	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	925	935	891	(1.1)	%	3.8	%
Cooling degree-days	94	140	78	(32.9)	%	20.5	%

Base

Base revenue increased ~~$0.1~~$4.4 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$1.3~~$4.0 million of new interim rate recovery for return on certain

storm costs relating to Hurricanes Laura, Delta, and Zeta and $2.5 million of higher rates as a result of the implementation of Cleco Power’s new retail rate plan. These increases were partially offset by ~~$1.2~~$2.3 million of lower ~~usage from milder weather.~~demand charges for industrial customers.

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, ~~2020.~~2021.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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. During the three months ended March 31, 2021, 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. Cleco Power’s incremental fuel and purchased power costs for the three months ended March 31, 2021, were also impacted by higher costs of lignite at the Dolet Hills Power Station. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.” For more information on lignite costs at the Dolet Hills Power Station, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 12 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits ~~increased $9.7~~decreased $20.8 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~higher refunds~~lower credits to retail customers for the federal tax-related benefits of the ~~TCJA.~~TCJA now being a component of rates as a result of the settlement of Cleco Power’s retail rate plan. After the implementation of Cleco Power’s retail rate plan, these credits offset base revenue on Cleco Power’s Condensed Consolidated Statement of Income. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1110 — Regulation and Rates — TCJA.”

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power ~~decreased $3.4~~increased $2.4 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~lower~~higher MISO transmission costs.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Other Operations and Maintenance Expense

Other operations and maintenance expense decreased ~~$2.5~~$4.8 million during the ~~second~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the second quarter of 2020~~ primarily due to ~~$5.4~~$3.2 million of lower ~~outside services, mostly relating~~outage generation maintenance expenses and $1.7 million of lower routine generation maintenance expenses. Also contributing to ~~information technology services and START project~~the decrease was $1.5 million of lower uncollectible expenses largely the result of the expiration of deferred financing agreements which were put into place due to the COVID-19 disconnection moratorium order issued by the LPSC in March 2020. These decreases were partially offset by ~~$2.8~~$1.7 million of higher ~~distribution maintenance expense.~~expenses related to employee benefits.

Depreciation and Amortization Expense

Depreciation and amortization expense increased $3.2 million during the first quarter of 2022 compared to the first quarter of 2021 primarily due to the amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta.

~~Taxes Other Than Income Taxes~~

~~Taxes other than income taxes decreased $2.1 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to lower property taxes.~~

~~Other expense, net~~

Other expense, net increased $2.3 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to $1.0 million for disallowed costs as a result of the rate case, $0.8 million of higher pension non-service costs as a result of a lower discount rate, and $0.4 million for the decrease in cash surrender value of certain company-owned life insurance policies as a result of less favorable market conditions.

~~Income Taxes~~

Federal and state income tax expense decreased $0.4 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to $9.5 million for the amortization of excess ADIT, $2.1 million for the flow through of state tax benefits, and $0.6 million of state tax expense. These decreases were partially offset by $11.9 million to record tax expense at the projected annual effective tax rate.

~~The estimated annual effective income tax rates used during the second quarter of 2021 and 2020 for Cleco Power may not be indicative of the full-year income tax rates. For~~

~~more information on these effective income tax rates, 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 JUNE 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Electric operations $ 91,407 $ 84,733 $ 6,674 7.9 %
Electric customer credits 244 — 244 100.0 %
Other operations 30,655 30,636 19 0.1 %
Affiliate revenue — 43 (43) (100.0) %
Operating revenue, net 122,306 115,412 6,894 6.0 %
Operating expenses
Fuel used for electric generation (43,153) 3,798 46,951 *
Purchased power 57,835 41,966 (15,869) (37.8) %
Other operations and maintenance 22,113 20,175 (1,938) (9.6) %
Depreciation and amortization 11,378 10,346 (1,032) (10.0) %
Taxes other than income taxes 3,752 3,791 39 1.0 %
Total operating expenses 51,925 80,076 28,151 35.2 %
Operating income 70,381 35,336 35,045 99.2 %
Interest income 3 103 (100) (97.1) %
Other (expense) income, net (7) 44 (51) (115.9) %
Interest charges (180) 120 300 250.0 %
Federal and state income tax expense 18,063 8,601 (9,462) (110.0) %
Net income $ 52,494 $ 26,762 $ 25,732 96.2 %
* Not meaningful

~~Electric Operations~~

Electric operations revenue increased $6.7 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to $5.3 million of higher fuel rates, $1.9 million for the absence of a 2020 customer demand adjustment, $1.2 million of higher capacity contract rates, and $0.6 million of higher MISO pass-through recoveries, partially offset by $2.7 million of lower load volumes.

~~Fuel Used for Electric Generation~~

Fuel used for electric generation decreased $47.0 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to $34.8 million of higher mark-to-market gains on gas related derivative contracts and $7.5 million of settlements related to gas swaps activity. Also contributing to the decrease was $5.0 million of lower fuel expenses largely related to lower gas consumption from higher gas prices, partially offset by higher coal usage.

~~Purchased Power~~

~~Purchased power increased $15.9 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to higher costs of purchased power from MISO.~~

~~Other Operations and Maintenance Expense~~

~~Other operations and maintenance expense increased $1.9 million during the second quarter of 2021 compared to the~~


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

~~second quarter of 2020 primarily due to higher generating outage maintenance expense.~~

~~Income Taxes~~

Federal and state income tax expense increased $9.5 million during the second quarter of 2021 compared to the second quarter of 2020 primarily due to $7.4 million for the change in pretax income and $2.4 million for state tax expense.

The effective income tax rates for the second quarters of 2021 and 2020 were 25.6% and 23.4%, respectively. The estimated annual effective income tax rates used during the second quarter of 2021 and 2020 for Cleco Cajun may not be indicative of the full-year income tax rates.

~~Comparison of the Six Months Ended June 30, 2021, and 2020~~

Cleco
FOR THE SIX MONTHS ENDED JUNE 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue, net $ 773,743 $ 705,330 $ 68,413 9.7 %
Operating expenses 603,459 560,471 (42,988) (7.7) %
Operating income 170,284 144,859 25,425 17.6 %
Interest income 1,475 2,054 (579) (28.2) %
Allowance for equity funds used during construction 1,991 53 1,938 *
Other expense, net (7,002) (12,452) 5,450 43.8 %
Interest charges 67,183 69,863 2,680 3.8 %
Federal and state income tax expense 416 15,155 14,739 97.3 %
Net income $ 99,149 $ 49,496 $ 49,653 100.3 %
*Not meaningful

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

~~Operating Revenue, Net~~

Operating revenue, net increased $68.4 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $61.3 million of higher fuel cost recovery revenue, $4.7 million of higher base revenue, and $3.2 million of higher other operations revenue at Cleco Power. Also contributing to the increase was $19.0 million of higher electric operations income and $2.1 million of higher other operations revenue at Cleco Cajun. These increases were partially offset by $22.3 million of higher electric customer credits at Cleco Power.

~~Operating Expenses~~

Operating expenses increased $43.0 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $60.8 million of higher recoverable fuel and purchased power expenses and $2.1 million of higher taxes other than income taxes at Cleco Power. Also contributing to the increase was $38.8 million of higher purchased power expense, $3.5 million of higher other operations and maintenance expense, and $1.8 million of higher depreciation and amortization expense at Cleco Cajun. These increases were partially offset by $5.9 million of lower other operations and maintenance expenses and $2.3 million

~~of lower depreciation and amortization expense at Cleco Power and $51.9 million of lower fuel expense at Cleco Cajun.~~

~~Allowance for equity funds used during construction~~

Allowance for equity funds used during construction increased $1.9 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher AFUDC rates driven by the election of the FERC modified formula authorized in March 2020.

~~Other Expense, Net~~

Other expense, net decreased $5.5 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $9.2 million for the increase in the cash surrender value of certain trust-owned life insurance policies as a result of favorable market conditions and $0.9 million of lower SERP non-service costs at Cleco Holdings. Partially offsetting these decreases were $1.9 million of higher pension non-service costs and $1.0 million for disallowed costs as a result of the rate case at Cleco Power.

~~Interest Charges~~

Interest charges decreased $2.7 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020. Lower rates on Cleco Holdings’ variable rate debt associated with the 2016 Merger and Cleco Cajun Transaction contributed to $1.3 million and $1.0 million, respectively, of the decrease. Also contributing to the decrease was $0.7 million of lower interest on tax rate refunds. Partially offsetting these decreases was $0.9 million of higher interest associated with Cleco Power’s variable rate bank term loan issued in August 2020.

~~Income Taxes~~

Federal and state income tax expense decreased $14.7 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $20.6 million for the amortization of excess ADIT and $3.8 million to record tax expense at the projected annual effective tax rate. These decreases were partially offset by $6.8 million for the change in pretax income, excluding AFUDC equity, and $2.1 million for state tax expense.

The estimated annual effective income tax rates used during the six months ended June 30, 2021, and 2020 for Cleco might not be indicative of the full-year income tax rates. For more information on these effective income tax rates, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

Cleco Power
FOR THE SIX MONTHS ENDED JUNE 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Base $ 316,724 $ 311,993 $ 4,731 1.5 %
Fuel cost recovery 213,383 152,080 61,303 40.3 %
Electric customer credits (39,738) (17,440) (22,298) (127.9) %
Other operations 34,895 31,668 3,227 10.2 %
Affiliate revenue 2,879 2,346 533 22.7 %
Operating revenue, net 528,143 480,647 47,496 9.9 %
Operating expenses
Recoverable fuel and purchased power 213,397 152,591 (60,806) (39.8) %
Non-recoverable fuel and purchased power 13,734 15,179 1,445 9.5 %
Other operations and maintenance 105,726 111,608 5,882 5.3 %
Depreciation and amortization 83,009 85,273 2,264 2.7 %
Taxes other than income taxes 23,816 21,725 (2,091) (9.6) %
Total operating expenses 439,682 386,376 (53,306) (13.8) %
Operating income 88,461 94,271 (5,810) (6.2) %
Interest income 1,468 1,709 (241) (14.1) %
Allowance for equity funds used during construction 1,991 53 1,938 *
Other expense, net (9,958) (6,091) (3,867) (63.5) %
Interest charges 36,883 37,184 301 0.8 %
Federal and state income tax (benefit) expense (767) 12,694 13,461 106.0 %
Net income $ 45,846 $ 40,064 $ 5,782 14.4 %
* Not meaningful

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

FOR THE SIX MONTHS ENDED JUNE 30,
(Million kWh) 2021 2020
FAVORABLE/
(UNFAVORABLE)
Electric sales
Residential 1,788 1,684 6.2 %
Commercial 1,230 1,218 1.0 %
Industrial 1,028 936 9.8 %
Other retail 64 62 3.2 %
Total retail 4,110 3,900 5.4 %
Sales for resale 1,386 1,372 1.0 %
Total retail and wholesale customer sales 5,496 5,272 4.2 %

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

FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS) 2021 2020
FAVORABLE/
(UNFAVORABLE)
Electric sales
Residential $ 146,065 $ 140,959 3.6 %
Commercial 93,829 94,978 (1.2) %
Industrial 42,181 39,750 6.1 %
Other retail 5,452 5,348 1.9 %
Surcharge — 2,442 (100.0) %
Total retail 287,527 283,477 1.4 %
Sales for resale 29,197 28,516 2.4 %
Total base revenue $ 316,724 $ 311,993 1.5 %

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 SIX MONTHS ENDED JUNE 30,
2021 CHANGE
2021 2020 NORMAL PRIOR YEAR NORMAL
Heating degree-days 985 615 941 60.2 % 4.7 %
Cooling degree-days 1,124 1,262 1,020 (10.9) % 10.2 %

~~Base~~

Base revenue increased $4.7 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $4.8 million of higher usage from colder winter weather, $2.2 million of higher unbilled revenue largely due to colder winter weather, and $1.3 million of new interim rate recovery for return on certain storm costs relating to Hurricanes Laura, Delta, and Zeta. Partially offsetting these increases were the absence of $2.4 million of Cleco Katrina/Rita storm restoration surcharge revenue as a result of the final principal and interest payments on the Cleco Katrina/Rita bonds in March 2020 and $1.2 million of lower revenue related to the St. Mary Clean Energy Center project.

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

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 73% of Cleco Power’s total fuel cost during the first six months of 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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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 fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.”

~~Electric Customer Credits~~

Electric customer credits increased $22.3 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily related to higher refunds for the federal tax-related benefits of the TCJA. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — TCJA.”

~~Other Operations Revenue~~

Other operations revenue increased $3.2 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $2.3 million of higher transmission revenue and $1.0 million of higher reconnection fees.

~~Non-Recoverable Fuel and Purchased Power~~

Non-recoverable fuel and purchased power decreased $1.4 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $2.1 million of lower MISO transmission costs, partially offset by $0.8 million of higher fuel costs largely due to the winter storms in 2021.

~~Other Operations and Maintenance Expense~~

Other operations and maintenance expense decreased $5.9 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $5.9 million of lower fees for outside services mostly relating to START project expenses, audit services, and consulting expenses, $1.2 million of lower uncollectible expense, $1.0 million of lower generation operation expenses, and $0.8 million of lower distribution operations expense. These decreases were partially offset by $3.1 million of higher distribution maintenance expenses.

~~Depreciation and Amortization~~

Depreciation and amortization expense decreased $2.3 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to the absence of amortization of storm damages as a result of the final principal and interest payments on the Cleco Katrina/Rita bonds in March 2020.

Taxes Other Than Income Taxes

Taxes other than income taxes ~~increased $2.1~~decreased $3.9 million during the ~~six months ended June 30, 2021,~~first quarter of 2022 compared to the ~~six months ended June 30, 2020,~~first quarter of 2021 primarily due to ~~$1.1 million of higher~~lower property ~~taxes, $0.5 million of higher franchise taxes, and $0.4 million of higher payroll~~ taxes.

~~Allowance for Equity Funds Used During Construction~~

~~Allowance for equity funds used during construction increased $1.9 million during the six months ended June 30, 2021,~~

~~compared to the six months ended June 30, 2020, primarily due to higher AFUDC rates driven by the election of the FERC modified formula authorized in March 2020.~~

Other ~~Expense, Net~~expense, net

Other expense, net ~~increased $3.9~~decreased $2.2 million during the ~~six months ended June 30, 2021,~~first quarter of 2022 compared to the ~~six months ended June 30, 2020,~~first quarter of 2021 primarily due to ~~$1.9 million of higher~~lower pension non-service costs as a result of a lower discount rate, $1.0 million for disallowed costs as a result of the rate case, and $0.4 million for the decrease in cash surrender value of certain company-owned life insurance policies as a result of less favorable market conditions.costs.

Income Taxes

Federal and state income tax ~~benefit~~expense (benefit) increased ~~$13.5~~$10.4 million during the ~~six months ended June 30, 2021,~~first quarter of 2022 compared to the ~~six months ended June 30, 2020,~~first quarter of 2021 primarily due to ~~$20.6 million for the amortization of excess ADIT and $2.1~~$6.5 million for the change in pretax income, excluding AFUDC ~~equity. These increases were partially offset by $9.1~~equity, $3.6 million to record tax expense at the projected annual effective tax ~~rate.~~rate, $3.1 million for the amortization of excess ADIT, and $1.7 million for state tax expense. These increases were partially offset by $4.3 million for the flow through of state tax benefits.

The estimated annual effective income tax rates used during the ~~six months ended June 30,~~first quarter of 2022 and 2021 ~~and 2020~~ for Cleco ~~might~~Power may not be indicative of the full-year income tax rates. For more information on ~~these~~Cleco Power’s effective income tax rates, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 98 — Income Taxes — Effective Tax Rates.”

Cleco Cajun
FOR THE SIX MONTHS ENDED JUNE 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Electric operations $ 192,914 $ 173,880 $ 19,034 10.9 %
Other operations 63,694 61,597 2,097 3.4 %
Electric customer credits 244 (153) 397 259.5 %
Affiliate revenue — 204 (204) (100.0) %
Operating revenue, net 256,852 235,528 21,324 9.1 %
Operating expenses
Fuel used for electric generation (32,542) 19,372 51,914 268.0 %
Purchased power 125,443 86,640 (38,803) (44.8) %
Other operations and maintenance 44,226 40,688 (3,538) (8.7) %
Depreciation and amortization 22,234 20,448 (1,786) (8.7) %
Taxes other than income taxes 7,522 7,265 (257) (3.5) %
Total operating expenses 166,883 174,413 7,530 4.3 %
Operating income 89,969 61,115 28,854 47.2 %
Interest income 6 258 (252) (97.7) %
Other (expense) income, net (659) 78 (737) (944.9) %
Interest charges (332) 131 463 100.0 %
Federal and state income tax expense 22,673 15,022 (7,651) (50.9) %
Net income $ 66,975 $ 46,298 $ 20,677 44.7 %


Cleco Cajun
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021			VARIANCE		CHANGE
Operating revenue
Electric operations	$	103,633	$	101,507		$	2,126	2.1	%

Other operations	35,612		33,039			2,573		7.8	%

Operating revenue, net	139,245		134,546			4,699		3.5	%
Operating expenses
Fuel used for electric generation	(103,087)		10,610			113,697		*
Purchased power	68,108		67,608			(500)		(0.7)	%
Other operations and maintenance	22,339		22,114			(225)		(1.0)	%
Depreciation and amortization	21,890		10,856			(11,034)		(101.6)	%
Taxes other than income taxes	3,078		3,770			692		18.4	%

Total operating expenses	12,328		114,958			102,630		89.3	%
Operating income	126,917		19,588			107,329		547.9	%
Interest income	13		3			10		333.3	%
Other income (expense), net	84		(652)			736		112.9	%
Interest charges	(8)		(152)			144		94.7	%
Federal and state income tax expense	33,641		4,610			(29,031)		(629.7)	%
Net income	$	93,381	$	14,481		$	78,900	544.9	%
* Not Meaningful

Electric Operations

Electric operations revenue increased ~~$19.0~~$2.1 million during the ~~six months ended June 30, 2021,~~first quarter of 2022 compared to the ~~six months~~first quarter of 2021 primarily due to $8.3 million of higher fuel rates and $2.2 million of higher load volumes. These increases were partially offset by $4.7 million of lower MISO make-whole payments and $3.9 million for the expiration of a power supply agreement in May 2021.

Other Operations Income

Other operations income increased $2.6 million during the first quarter of 2022 compared to the first quarter of 2021 primarily due to higher transmission revenue.

Fuel Used for Electric Generation

Fuel used for electric generation decreased $113.7 million during the first quarter of 2022 compared to the first quarter of 2021 primarily due to $100.6 million of higher mark-to-market gains on gas-related derivative contracts. Increased natural gas prices have resulted in the unrealized gains related to these gas-related derivative contracts. Also contributing to the decrease was $21.7 million of settlements related to gas swaps activity and $2.0 million of lower natural gas consumption due to lower natural gas generating unit dispatch largely due to higher natural gas prices. These decreases were partially offset by $9.9 million of higher coal consumption which was largely the result of higher generating unit dispatch.

Depreciation and Amortization

Depreciation and amortization increased $11.0 million during the first quarter of 2022 compared to the first quarter of 2021 primarily due to higher depreciation on ARO assets as a result of an increase to those assets recorded in the third quarter of 2021 to comply with the final CCR Rule, as well as a reduction to the remaining lives of those assets.

5747


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

ended June 30, 2020, primarily due to $8.9 million of higher fuel rates, $4.9 million of higher MISO make-whole payments, $2.9 million of higher capacity contract rates, $2.8 million of higher load volumes, and $1.3 million for the absence of a 2020 customer demand adjustment. These amounts were partially offset by $2.0 million of lower MISO pass-through recoveries.

~~Other Operations Revenue~~

~~Other operations revenue increased $2.1 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher transmission revenue.~~

~~Fuel Used for Electric Generation~~

Fuel used for electric generation decreased $51.9 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $46.6 million of higher mark-to-market gains on gas related derivative contracts and $9.1 million of settlements related to gas swaps activity. These decreases were partially offset by $2.4 million of higher fuel expenses largely the result of higher coal usage, partially offset by lower gas usage.

~~Purchased Power~~

~~Purchased power increased $38.8 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher costs of purchased power from MISO.~~

~~Other Operations and Maintenance~~

Other operations and maintenance increased $3.5 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to $6.1 million of higher generating outage maintenance expense, partially offset by $3.3 million of lower generation operations expense.

~~Depreciation and Amortization~~

Depreciation and amortization increased $1.8 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to normal recurring additions to fixed assets.

Income Taxes

Federal and state income tax expense increased ~~$7.7~~$29.0 million during the ~~six months ended June 30, 2021,~~first quarter of 2022 compared to the ~~six months ended June 30, 2020,~~first quarter of 2021 primarily due to ~~$5.9~~$22.7 million for the change in pretax income and ~~$1.8~~$7.2 million for state tax ~~expenses.~~expense. These increases were partially offset by $0.7 million for permanent tax deductions.

The effective income tax rates for the ~~six months ended June 30,~~first quarters of 2022 and 2021 were 26.5% and ~~2020 were 25.3% and 24.5%~~24.1%, respectively. ~~These~~The estimated annual effective income tax rates used during the first quarter of 2022 and 2021 for Cleco Cajun may not be indicative of the full-year income tax 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; however, it is not indicative of future performance. 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.

The following tables set forth a reconciliation of net income, the nearest comparable GAAP financial performance measure, to EBITDA for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, and ~~2020:~~2021:


		FOR THE THREE MONTHS ENDED JUNE 30,											FOR THE THREE MONTHS ENDED MAR. 31,
		2021					2020						2022					2021
(THOUSANDS)	(THOUSANDS)	CLECO POWER		CLECO CAJUN			CLECO POWER		CLECO CAJUN			(THOUSANDS)	CLECO POWER		CLECO CAJUN			CLECO POWER		CLECO CAJUN
Net income	Net income	$	27,421	$	52,494		$	28,233	$	26,762		Net income	$	39,024	$	93,381		$	18,425	$	14,481
Add: Depreciation and amortization	Add: Depreciation and amortization	40,933		12,339		(1)	41,596		11,143		(2)	Add: Depreciation and amortization	45,239		23,180		(1)	42,076		11,653		(2)
Less: Interest income	Less: Interest income	825		3			755		103			Less: Interest income	740		13			642		3
Add: Interest charges	Add: Interest charges	18,237		(180)			18,603		120			Add: Interest charges	18,801		(8)			18,646		(152)
Add: Federal and state income tax (benefit) expense	Add: Federal and state income tax (benefit) expense	8,956		18,063			9,356		8,601			Add: Federal and state income tax (benefit) expense	724		33,641			(9,723)		4,610
EBITDA	EBITDA	$	94,722	$	82,713		$	97,033	$	46,523		EBITDA	$	103,048	$	150,181		$	68,782	$	30,589
(1) Includes $3.3 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) 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.
(1) Includes $3.6 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) 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.												(1) Includes $3.6 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) 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.

FOR THE SIX MONTHS ENDED JUNE 30,
2021 2020
(THOUSANDS) CLECO POWER CLECO CAJUN CLECO POWER CLECO CAJUN
Net income $ 45,846 $ 66,975 $ 40,064 $ 46,298
Add: Depreciation and amortization 83,009 23,991 (1) 85,273 22,041 (2)
Less: Interest income 1,468 6 1,709 258
Add: Interest charges 36,883 (332) 37,184 131
Add: Federal and state income tax expense (767) 22,673 12,694 15,022
EBITDA $ 163,503 $ 113,301 $ 173,506 $ 83,234
(1) Includes $6.4 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(4.6) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.
(2) Includes $6.2 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(4.6) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

~~CLECO~~

~~CLECO POWER~~

~~2021 2ND QUARTER FORM 10-Q~~


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 ~~June 30, 2021:~~March 31, 2022:

SENIOR UNSECURED DEBT

CORPORATE/LONG-TERM ISSUER

S&P

MOODY’S

FITCH

S&P

MOODY’S

FITCH

Cleco Holdings

BBB-

Baa3

BBB-

Baa3

BBB-

Cleco Power

BBB+

BBB

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.

On April 1, 2022, and following the LPSC’s authorization of the securitization financing of Cleco Power’s storm restoration costs, S&P revised its outlook on Cleco Holdings and Cleco Power to stable from negative. S&P revised its outlook due to its expectation that Cleco’s financial measures will improve and have a stronger balance sheet given the anticipated securitization of storm restoration costs.

Cleco Holdings and Cleco Power pay fees and interest under their bank credit agreements based on the highest ratings held. ~~Savings are dependent upon the level of borrowings.~~ If Cleco Holdings’ or Cleco Power’s credit ratings were to be downgraded, Cleco Holdings or Cleco Power, respectively, could be required to pay additional fees and incur higher interest rates for borrowings under their respective revolving credit facilities.

Cleco may be required to provide credit support with respect to any open trading contracts that Cleco has or may initiate 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 notional value of the initial contract, changes in forward market prices, changes in the volume of open contracts, changes in credit ratings or credit quality where netting agreements ~~take~~are in place, and changes in the amount counterparties owe Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco Power and Cleco Cajun participate in the MISO market. MISO requires Cleco Power and Cleco Cajun to provide credit support which may increase or decrease due to the timing of the settlement schedules and MISO margining formulas. In February 2021, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March 2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral

~~postings of $24.9 million and $6.5 million to 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” in the Registrants’


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. For more information about credit support see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about 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 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 with regard to debt issuances; however, these rates have negatively affected interest income for the Registrants’ short-term investments.

Recently, inflationary pressures have increased substantially. Under established regulatory practice, historical costs have traditionally formed the basis for recovery from customers. As a result, Cleco Power’s future cash flows designed to provide recovery of historical plant costs may not be adequate to replace property, plant, and equipment in future years.

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.

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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

case was completed. The $7.0 million monthly refund consisted of approximately $4.4 million, which was 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 June 30, 2021, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan, which ~~includes~~included the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1, 2021, all retail customers will continue receiving bill credits resulting from the TCJA. ~~The target retail portion~~For more information on the regulatory impact of the ~~unprotected excess ADIT is approximately $2.5 million monthly~~TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Regulation and will be credited over a period of three years concluding on June 30, 2024. The retail portion of the protected excess ADIT will be credited until the full amount of the protected excess ADIT has been returned to Cleco Power’s customers through bill credits. At June 30, 2021, Cleco Power had $324.6 million accrued for the excess ADIT, of which $39.5 million is reflected in current regulatory liabilities.Rates — TCJA.”

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 6 — Fair Value ~~Accounting.~~Accounting and Financial Instruments.”

Cash Generation and Cash Requirements

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~~company purposes. For more information on Cleco and Cleco Power’s restricted cash and cash equivalents, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

Debt

Cleco

At ~~June 30,~~March 31, 2022, and December 31, 2021, Cleco had ~~$160.0 million of~~no short-term debt ~~outstanding under its $475.0 million revolving credit facilities, at an average all-in interest rate of 1.35%. Cleco had $75.0 million of short-term debt outstanding at December 31, 2020.~~outstanding.

At ~~June 30, 2021,~~March 31, 2022, Cleco’s long-term debt and finance leases outstanding ~~was $3.23~~totaled $3.48 billion, of which ~~$66.7~~$93.5 million was due within one year. The long-term debt due within one year at ~~June 30, 2021,~~March 31, 2022, primarily represents ~~$66.0~~$67.7 million of principal payments on Cleco Holdings’ debt as required by the

Cleco Cajun Transaction commitments to the ~~LPSC. Long-term debt decreased by $3.3~~LPSC and $25.0 million ~~from~~of Cleco Power’s senior notes due in December ~~31, 2020.~~2022.

Cash and cash equivalents available at ~~June 30, 2021,~~March 31, 2022, were ~~$78.4~~$197.8 million, combined with ~~$315.0~~$475.0 million available revolving credit facility capacity ($175.0 million from Cleco Holdings and ~~$140.0~~$300.0 million from Cleco Power) for total liquidity of ~~$393.4~~$672.8 million. For more information on the credit facility capacity, see “— Credit Facilities.”

At ~~June 30, 2021,~~March 31, 2022, 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 6 — Fair Value ~~Accounting.~~Accounting and Financial Instruments.”

At ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco had a working capital surplus of ~~$155.3~~$420.5 million and ~~$140.3~~$254.8 million, respectively. The ~~$15.0~~$165.7 million increase in working capital is primarily due to:

•a ~~$55.1~~$49.2 million increase in ~~fuel inventory primarily due to decreases in usage, as well as higher per unit cost of both lignite~~cash and ~~petroleum coke at Cleco Power,~~cash equivalents,

•a $46.2 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 $23.1~~$43.9 million increase in energy risk management assets, excluding Cleco Power FTRs, primarily due to market value changes on gas-related derivative ~~contracts.~~

~~These increases in working capital were partially offset by:~~

•~~an $85.0 million increase in short-term debt due to draws on~~contracts at Cleco ~~Power’s revolving credit facility,~~Cajun,

•a ~~$25.0~~$40.0 million decrease in affiliate accounts payable primarily due to settlement of intercompany taxes payable,

•a $33.0 million increase in taxes ~~payable~~receivable primarily due to ~~accruals of property~~higher accrual for federal income taxes,

•a ~~$21.4~~$29.7 million increase in ~~regulatory liabilities~~ other accounts receivable primarily due to a receivable for a life insurance death benefit and the ~~reclassification~~settlement of ~~the short-term portion of the regulatory liability related to the TCJA, partially offset by credits to~~gas-related derivative contracts at Cleco ~~Power’s customers for the TCJA refunds, and~~Cajun,

•a ~~$10.2~~$27.9 million ~~increase~~decrease in accounts payable, excluding Cleco Power FTR purchases, primarily due to ~~an increase in solid fuel purchases and an increase in gas prices, partially offset by the~~ short-term incentive plan payments in March ~~2021 and the timing of property tax payments.~~2022,

lower accruals for generating station outage maintenance at Cleco ~~Holdings~~

~~At June 30, 2021, and December 31, 2020 Cleco Holdings had no short-term debt outstanding.~~

At June 30, 2021, Cleco Holding’s long-term debt outstanding was $1.60 billion, of which $66.0 million was due within one year. The long-term debt due within one year at June 30, 2021, represents principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitmentsPower, lower accruals related to the ~~LPSC.~~

At June 30, 2021, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For more information on Cleco Holding’s revolving credit facility, see “— Credit Facilities.” Cleco Holdings has an uncommitted line of credit that allows up to $10.0 million in short-termrestoration efforts for Hurricane

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CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q

Ida at Cleco Power, lower MISO power purchases at Cleco Power, partially offset by higher accruals for natural gas at Cleco Power and Cleco Cajun,

•a $14.5 million decrease in other current liabilities primarily due to the settlement of the South Central Generating lawsuit in January 2022 and payment to MISO for the refund of capital expenditures paid for by third parties while Cleco Power was operating under the SSR agreement, and

•an $11.7 million increase in fuel inventory, excluding Cleco Power FTRs, primarily due to less burning of coal at Cleco Cajun as a result of generating station outages and higher petroleum coke at Cleco Power as a result of an increase in volume at a higher price per ton.

These increases in working capital were partially offset by:

•a $24.4 million increase in interest accrued primarily due to the timing of interest payments on long-term debt,

•a $17.3 million increase in taxes payable primarily due to accruals of property taxes,

•a $13.9 million decrease in the cash surrender value of a life insurance policy primarily due to the recognition of a death benefit and unfavorable market conditions at Cleco Holdings,

•a $10.1 million decrease in accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to the timing of collections, and

•a $10.3 million decrease in customer accounts receivable primarily due to the timing of collections from Cleco Power customers.

Cleco Holdings

At March 31, 2022, and December 31, 2021, Cleco Holdings had no short-term debt outstanding.

At March 31, 2022, Cleco Holdings’ long-term debt outstanding was $1.54 billion, of which $67.7 million was due within one year. The long-term debt due within one year at March 31, 2022, represents principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC.

At March 31, 2022, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For more information on Cleco Holdings’ revolving credit facility, see “— Credit Facilities.” Cleco Holdings 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 Power’s similar line of credit, to support its working capital needs. There were no amounts outstanding under the uncommitted line of credit at ~~June 30, 2021.~~March 31, 2022.

Cash and cash equivalents available at Cleco Holdings at ~~June 30, 2021,~~March 31, 2022, were ~~$6.2~~$2.3 million, combined with $175.0 million revolving credit facility capacity for total liquidity of ~~$181.2~~$177.3 million.

Cleco Power

At ~~June 30,~~March 31, 2022, and December 31, 2021, Cleco Power had ~~$160.0 million of~~no 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. Following the restoration efforts for Hurricanes Laura, Delta, and Zeta, Cleco Power believes it has sufficient liquidity to meet its current obligations using a combination of cash on hand and available capacity under its revolving credit facilities. However, Cleco Power continues to explore 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.” outstanding.

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 ~~June~~March 31, 2022.

On March 30, ~~2021.~~2022, the LPSC approved a settlement agreement filed by the LPSC Staff and Cleco Power allowing securitization of $424.1 million. On April 1, 2022, the LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in the aggregate principal amount of up to $425.0 million. Cleco Power expects the securitization financing to close by mid-2022. For more information on the securitization, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 16 — Storm Restoration, Securitization, and Cost Recovery — Storm Securitization and Cost Recovery.”

At ~~June 30, 2021,~~March 31, 2022, Cleco Power’s long-term debt outstanding was ~~$1.50~~$1.83 billion, of which ~~$0.7~~$25.8 million was due within one year. ~~For Cleco Power, long-term debt decreased $0.1~~The amount due within one year primarily represents $25.0 million ~~from~~of senior notes due in December ~~31, 2020.~~2022.

Cash and cash equivalents available at ~~June 30, 2021,~~March 31, 2022, were ~~$20.8~~$108.2 million, combined with ~~$140.0~~$300.0 million revolving credit facility capacity for total liquidity of ~~$160.8~~$408.2 million.

At ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco Power had a working capital ~~deficit~~surplus of ~~$29.6~~$160.0 million and a surplus of ~~$13.4~~$110.2 million, respectively. The ~~$43.0~~$49.9 million ~~decrease~~increase in working capital is primarily due to:

•~~an $85.0~~a $50.2 million ~~increase~~decrease in ~~short-term debt~~affiliate accounts payable primarily due to ~~draws on~~ the ~~revolving credit facility,~~settlement of intercompany taxes payable,

•a ~~$30.8~~$22.6 million increase in cash and cash equivalents,

•an $18.5 million decrease in accounts payable, excluding FTR purchases, primarily due to short-term incentive plan payments in March 2022, lower accruals for generating station outage maintenance, lower accruals related to the restoration efforts for Hurricane Ida, and lower MISO power purchases, partially offset by higher accruals for natural gas, and

•an $8.1 million increase in fuel inventory, excluding Cleco Power FTRs, primarily due to higher petroleum coke as a result of an increase in volume at a higher price per ton.

These increases in working capital were partially offset by:

•a $16.2 million increase in interest accrued primarily due to the timing of interest payments on long-term debt,

•a $13.2 million increase in taxes payable primarily due to accruals of property taxes,

•~~a $25.6~~an $11.9 million ~~increase~~decrease in affiliate accounts ~~payable, excluding FTR purchases,~~receivable primarily due to ~~an increase in solid fuel purchases and an increase in gas prices, partially offset by~~ the ~~short-term incentive plan payments in March 2021 and the timing~~settlement of ~~property tax payments, and~~intercompany receivables,

•a ~~$21.4~~$10.1 million increase in regulatory liabilities primarily due to the reclassification of the short-term portion of the regulatory liability related to the TCJA, partially offset by credits to Cleco Power’s customers for the TCJA refunds.

~~These decreases in working capital were partially offset by:~~

•~~a $56.1 million increase in fuel inventory primarily due to decreases in usage, as well as higher per unit cost of both lignite and petroleum coke and~~

•~~a $46.2 million increase~~decrease in accumulated deferred fuel, excluding FTRs, primarily due to ~~additional deferrals through a fuel surcharge for incremental costs related~~the timing of collections, and

•an $8.8 million decrease in customer accounts receivable primarily due to ~~Winter Storms Uri and Viola.~~the timing of collections from customers.

Credit Facilities

At ~~June 30, 2021,~~March 31, 2022, Cleco had two separate revolving credit facilities, one for Cleco Holdings in the amount of $175.0 million with no outstanding borrowings and one for Cleco Power in the amount of $300.0 million with no outstanding ~~borrowings of $160.0 million.~~borrowings. These revolving credit agreements were entered into on May 21, 2021, and replaced the respective previously existing agreements. The total of all revolving credit facilities creates a maximum aggregate capacity of $475.0 ~~million with outstanding borrowings of $160.0~~ million.

Cleco Holdings’ revolving credit facility provides for working capital and other financing needs. The revolving credit


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

facility includes restrictive financial covenants and expires in May 2026. 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 ~~June 30, 2021,~~March 31, 2022, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At ~~June 30, 2021,~~March 31, 2022, the borrowing costs under the facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay ~~higher~~incremental interest and commitment fees of 0.125% and ~~additional interest of 0.175%~~0.05%, respectively, under the pricing levels of its revolving credit facility.

Cleco Power’s revolving credit facility provides for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in May 2026. 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 ~~June 30, 2021,~~March 31, 2022, Cleco Power was in compliance with the covenants of its revolving credit facility. At ~~June 30, 2021,~~March 31, 2022, the borrowing costs under the facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating agencies, Cleco Power may be required to pay ~~higher~~incremental interest and commitment fees of 0.125% and ~~additional interest of 0.15%~~0.025%, 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 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, 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 ~~June 30, 2021,~~March 31, 2022, Cleco Holdings was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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 ~~June 30, 2021,~~March 31, 2022, 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. For more information on the 2016

Merger Commitments, see Part I, Item 1A, “Risk Factors — Structural Risks — Holding Company” and “— Regulatory Risks — Regulatory Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Cleco ~~Consolidated~~ Cash Flows

Net Operating Cash Flow

Net cash provided by operating activities was ~~$45.5~~$99.1 million and ~~$95.8~~$22.0 million ~~during~~for the ~~six~~three months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash provided by operating activities ~~decreased $50.3~~increased $121.1 million primarily due to:

•~~higher recoverable~~lower fuel and purchased power costs at Cleco Power of $50.7 million primarily due to the absence of costs associated with Winter Storms Uri and Viola, ~~not yet collected from Cleco Power customers of approximately $46.2 million,~~

•~~higher~~lower operations and maintenance payments related to storm restoration activities of ~~$7.3~~$42.2 million at Cleco Power,

•~~lower~~collateral of $26.3 million received from counterparties related to Cleco Cajun’s natural gas derivatives,

•higher collections from Cleco ~~Cajun’s joint owners~~Power customers of ~~$6.1~~$9.3 million due to timing of collections,

•lower vendor payments of $6.7 million primarily due to timing of ~~receipts for their portions of generating station expenditures,~~invoices related to outside services,

•~~lower collections~~higher receipts of $4.8 million for advances from Cleco Power customers, ~~of $4.6 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 decreases were partially offset by:~~

•lower payments for fuel inventory at Cleco Power of ~~$13.4~~$2.8 million primarily due to lower gas purchases, partially offset by higher coal and ~~gas purchases,~~petroleum coke purchases.

These increases were partially offset by:

•higher payments for affiliate settlements of $40.0 million,

•lower ~~payments for fuel inventory at~~collections from Cleco ~~Cajun~~Cajun’s joint owners of ~~$9.6~~$5.5 million primarily due to ~~lower coal purchases,~~the timing of receipts for their portions of generating station expenditures, and

•lower ~~payments~~collections from Cleco Power’s joint owners of $3.9 million primarily due to the timing of receipts for ~~employee benefits~~their portions of ~~$3.0 million.~~generating station expenditures.

Net Investing Cash Flow

Net cash used in investing activities was ~~$135.7~~$39.7 million and ~~$138.7~~$35.7 million ~~during~~for the ~~six~~three months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash used in investing activities ~~decreased $3.0~~increased $4.0 million primarily due ~~to higher distributions of $1.8 million received by Cleco Power from Oxbow.~~to:

•higher additions to property, plant, and equipment, net of AFUDC, of $2.4 million and

•lower returns of equity investment from Oxbow of $1.8 million.

Net Financing Cash Flow

Net cash ~~provided by~~used in financing activities was ~~$82.0~~$10.2 million ~~and $223.2 million during~~for the ~~six~~three months ended ~~June 30, 2021, and 2020, respectively.~~March 31, 2022. Net cash provided by financing activities ~~decreased $141.2~~was $59.7 million for the three months ended March 31, 2021. Net cash used in financing activities increased $69.9 million primarily due to to:

•lower draws on revolving credit facilities of ~~$138.0~~$60.0 million and

•higher ~~payments on revolving credit facilities~~distributions to Cleco Group of ~~$15.0 million, partially offset by the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1~~$10.0 million.


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

Cleco Power Cash Flows

Net Operating Cash Flow

Net cash provided by operating activities was ~~$40.5~~$60.8 million for the three months ended March 31, 2022. Net cash used in operating activities was $12.5 million during the ~~six~~three months ended ~~June 30,~~March 31, 2021. Net cash provided by operating activities ~~was $66.5 million during the six months ended June 30, 2020. Net cash provided by operating activities decreased $26.0~~increased $73.3 million primarily due to:

•~~higher~~lower operations and maintenance payments related to storm restoration activities of ~~$7.3~~$42.2 million,

•higher collections from customers of $9.3 million due to timing of collections,

•higher receipts of $4.8 million for advances from customers, and

•lower payments for fuel inventory at Cleco Power of $2.8 million primarily due to lower gas purchases, partially offset by higher coal and petroleum coke purchase.

These increases were partially offset by:

•higher payments for affiliate settlements of $36.5 million and

•lower collections from ~~customers~~joint owners of ~~$4.6 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 $13.4~~$3.9 million primarily due to ~~lower coal and gas purchases.~~the timing of receipts for their portions of generating station expenditures.

Net Investing Cash Flow

Net cash used in investing activities was ~~$129.4~~$38.0 million and ~~$132.0~~$34.2 million ~~during~~for the ~~six~~three months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash used in investing activities ~~decreased $2.6~~increased $3.8 million primarily due to:

•higher additions to ~~higher distributions~~property, plant, and equipment, net of AFUDC, of $2.2 million and

•lower returns of equity investment from Oxbow of $1.8 ~~million received from Oxbow.~~million.

Net Financing Cash Flow

Net cash ~~provided by~~used in financing activities was ~~$83.2~~$0.2 million ~~and $137.5 million during~~for the ~~six~~three months ended ~~June 30, 2021, and 2020, respectively.~~March 31, 2022. Net cash provided by financing activities ~~decreased $54.3~~was $59.7 million for the three months ended March 31, 2021. Net cash used in financing activities increased $59.9 million primarily due to lower draws on revolving credit facilities of $50.0 million and higher payments on revolving credit facilities of $15.0 million, partially offset by the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.facilities.

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


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~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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 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 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 1312 — 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~~cyberattack, 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~~providers are susceptible to data breaches, which ~~a vulnerability was inserted and, if present and activated,~~ could ~~have~~ potentially ~~allowed~~allow an attacker to compromise the ~~server~~third party servers on which the products run. Cleco ~~found no impact~~could have potential impacts to the confidentiality, integrity, or availability of its data or systems. The ~~incident investigation has been closed by the~~ third party ~~provider.~~providers and Cleco investigate data breach incidents. Past instances have resulted in no negative impacts to Cleco’s confidentiality, integrity, or availability of its data or systems. 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.~~2021.

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, water and/or waste management. Cleco may incur significant additional costs to comply with these revisions,


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

reinterpretations, and requirements. Cleco Power could then seek recovery of additional environmental compliance costs as riders through the LPSC’s EAC or FRP. If Cleco fails to comply with these revisions, reinterpretations, and requirements, it could be subject to civil or criminal liabilities and fines.

For a discussion of other Cleco environmental matters, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental 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, ~~2020.~~2021.

~~Regional Haze State Implementation Plan (SIP)~~Cross-State Air Pollution Rule

~~The Clean Air Act contains~~On April 6, 2022, the EPA published in the federal register a ~~regional haze program with~~proposed federal implementation plan (FIP) that

if finalized would be applied to address the ~~goal of returning Class I Federal areas of the nation to natural visibility by 2064. States are required to develop a SIP and revise it every ten years. A SIP must include~~“good neighbor” requirements for the ~~installation of Best Available Retrofit Technology (BART)~~2015 ozone NAAQS for ~~applicable electrical generating units in Louisiana. The~~those states that do not have an approved state implementation plan (SIP). If the EPA ~~issued a final approval~~finalizes its proposed disapproval of the Louisiana SIP, the EPA would apply a finalized FIP to address the “good neighbor” provision in Louisiana for the first planning phase in December 2017. Although the approval was appealed to the U.S. Court of Appeals for the Fifth Circuit by the Sierra Club and the National Parks Conservation Association, the court denied all the challenges to the EPA’s approval of the Louisiana Regional Haze SIP. Because the Louisiana SIP mandates use of existing controls and participation2015 ozone NAAQS, which might result in the ~~CSAPR as BART, Cleco does not believe the Louisiana SIP will have a material impact on the results~~allocation of ~~operations, financial condition, or cash flows of the Registrants. The second planning period for the regional haze program covers the period from 2018 through 2028 and requires states~~fewer emission allowances to adopt SIPs that make reasonable further progress toward achieving natural visibility conditions in Class I Federal areas. The LDEQ published a proposed SIP for the second planning period in April 2021 that is now receiving public commentgenerating units and may ~~be subject~~cause Cleco to ~~revision upon further review by the LDEQ. The proposal does not call for new controls on any state sources but relies upon existing consent decrees and expected source retirements~~buy additional allowances and/or take other measures to achieve reasonable progress in reducing emissions and improving visibility in Class I Federal areas. The SIP for the second planning phase is due to be submitted to the EPA by July 31, 2021. Until the LDEQ determines what the reasonable progress requirements are for Cleco units and completes its update of the SIP and the EPA approves the SIP, Clecocomply. Management is unable to predict ~~if the second phase SIP will have~~or give a ~~material impact on the results of operations, financial condition, or cash flows~~reasonable estimate of the ~~Registrants.~~outcome of the EPA’s decision regarding the “good neighbor” provision.

~~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


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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’ National Ambient Air Quality Standards (NAAQS) nonattainment. In response to the remand of the rule, on October 30, 2020, the EPA published a proposed rule in the Federal Register, Revised CSAPR Update for the 2008 ozone NAAQS. On April 30, 2021, the EPA issued in the Federal Register the final rule. Cleco does not foresee the final regulation having a material impact on the results of operations, financial condition, or cash flow of the Registrants.

~~Solid Waste Disposal~~

On January 20, 2021, the President 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 administration also released a nonexhaustive list of agency actions to be reviewed, which includes the coal combustion by-products or residual rules promulgated in July 2018, August 2020, and November 2020. It is now indicated on the EPA coal ash rule website that the EPA completed review of the three coal combustion residuals rules in response to the executive order. The EPA determined that the most environmentally protective course is to implement these rules.

Retail Rates of Cleco Power

Base Rates

Effective July 1, 2021, Cleco Power’s annual retail earnings are subject to an FRP that was approved by the LPSC on June 16, 2021. For more information on ~~the new~~this FRP, see Note 1110 — “Regulation and Rates — FRP.”

Fuel Rates

Generally, Cleco Power’s cost of fuel used for electric generation and the cost of purchased 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. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Management is unable to determine the outcome or timing of ~~the audit.~~these audits. For more information on the FAC and the most recent fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.”

Environmental Rates

In July 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides Cleco Power an EAC to recover from customers certain costs of environmental compliance. These expenses are eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. For more information on the EAC, ~~and the most recent environmental audit,~~ see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements —�� Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental Audit.”

Energy Efficiency

In 2013, the LPSC issued a General Order adopting rules promoting energy efficiency programs. Cleco Power began participating in energy efficiency programs in November 2014. Cleco Power has recovered approximately $3.3 million annually for each of the program years through an approved rate tariff. In January 2018, Cleco began recovering an additional $3.3 million annually for estimated costs related to programs specific to political subdivisions.

On June 9, 2021, the LPSC initiated an audit on program years ~~five~~2019 and ~~six~~2020 to consider all program costs. Cleco Power has responded to ~~the first set of~~several sets of data requests regarding the audit. Program years ~~seven~~2021 and thereafter are subject to audit. Management is unable to predict or give a reasonable estimate of the outcome of this or any future audits.

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 approval from the LPSC allowing recovery of the accumulated Lost Contribution to Fixed Cost revenues until base rates reset, which took effect on July 1, 2021.

Wholesale Rates

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 must be filed with FERC every three years or upon the occurrence of a change in status as defined by FERC regulation. Cleco filed its most recent triennial market power analysis on December 23, ~~2020.~~2020, and it is currently pending FERC approval. The next triennial market power analysis is expected to be filed in December 2023.

Transmission Rates

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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

For information about the risks associated with 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, ~~2020.~~2021.

For information on transmission rates of Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

~~Transmission,~~ Distribution ~~and Generation~~ Projects

Cleco Power’s significant ongoing projects ~~include the Bayou Vista to Segura transmission project and~~includes the DSMART distribution project. For information on ~~these projects,~~this project, see “— Overview — Cleco Power.”

Market ~~Restructuring~~Structure

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~~Structure — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

ERO

~~The Energy Policy Act~~NERC, subject to oversight by FERC, is the ERO responsible for developing and enforcing mandatory reliability standards for users, owners, and operators 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~~bulk power system. NERC, as the ERO, ~~that will be required~~delegates authority to ~~develop and enforce the mandatory reliability standards.~~SERC Reliability Corporation.

A NERC Reliability Standards audit is ~~conducted~~conducted every three years for Cleco Power and Cleco Cajun. The next NERC Reliability Standards audits for Cleco Power and Cleco Cajun are scheduled to begin in September 2022.

A NERC CIP audit is also conducted every three years for Cleco Power and Cleco Cajun. ~~Cleco Power’s current~~The next NERC CIP ~~audit was completed on August 14, 2020,~~audits for Cleco Power and ~~the final report was issued by SERC on November 5, 2020.~~ Cleco ~~Cajun’s most recent CIP audit occurred during June 2019, and the final report was issued by SERC on June 27, 2019.~~ Cajun are scheduled to begin in 2023.

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 ~~the most recent CIP audits,~~ any future audits or whether any findings will have a material adverse effect on the results of operations, ~~financial~~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 CIP Standards Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~

2021.

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~~Structure — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~

2021.

Integrated Resource Plan (IRP)

On October 20, 2021, Cleco Power filed its request with the LPSC to initiate its next IRP process. Cleco Power filed its initial data assumptions to be used in its IRP analysis on February 21, 2022. The IRP process includes conducting stakeholder meetings and receiving feedback from stakeholders. The first stakeholders meeting was conducted on March 24, 2022. The first draft of the IRP is expected to be filed in October 2022.

The IRP report describes how Cleco Power plans to meet its forecasted load requirements on a reliable and economic basis. The IRP is used as a guide in future decision-making and does not represent firm operational commitments.

Service Quality Plan (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 expired on December 31, 2020. Cleco Power is currently working to complete a new five-year program to submit to the LPSC for approval. On April 29, 2022, Cleco Power filed its annual SQP monitoring report for 2021 based on the expired reporting requirements.

Franchises

Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities and parishes (counties), and is 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’s next municipal franchise expires in April ~~2022.~~2023.

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, 2020.

Recent Authoritative Guidance

For a discussion of recent authoritative guidance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 2 — 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, ~~2020.~~2021.


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).


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST QUARTER FORM 10-Q


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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 help manage these and other risks.

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 when 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 future. The amount of credit support that Cleco may be required to provide at any point in the future is dependent on credit terms and thresholds in master agreements, the notional value of the initial contract, changes in the market prices, 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 monitors and manages its credit risk exposure through credit risk management policies and procedures that include:

•routine review of counterparty credit quality and credit exposure,

•entering into industry standard master agreements with specific terms and conditions for credit exposure and non-performance,

•measuring expected and potential future exposure regularly, and

•exchanging guarantees or forms of cash equivalent collateral for financial assurance.

For more information, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and 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~~Disruption in the ~~federal government, including a failure to~~capital and credit markets may potentially 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.~~capital and limit the ability to access the capital markets. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its ~~businesses.~~business. 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. For more information, see Item 2, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital

Resources — General Considerations and Credit-Related Risks.”

Interest Rate 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~~bank facilities with fixed-rate ~~debt.~~debt or vice versa. 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 ~~June 30, 2021,~~March 31, 2022, Cleco Holdings had no short-term debt outstanding under its $175.0 million revolving credit facility. At ~~June 30, 2021,~~March 31, 2022, the borrowing costs under Cleco Holdings’ revolving credit facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%.

At ~~June 30, 2021,~~March 31, 2022, Cleco Holdings had a ~~$266.0~~$200.0 million long-term variable rate bank term loan outstanding at an interest rate of LIBOR plus 1.625%, for an all-in interest rate of ~~1.725%~~2.085%. Each 1% increase in the interest rate applicable to Cleco Holdings’ long-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of ~~$2.7~~$2.0 million on an annualized basis. The weighted average rate for all outstanding term loan debt at Cleco Holdings for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, was ~~1.94%~~1.77%.

At ~~June 30, 2021,~~March 31, 2022, Cleco Power had ~~$160.0 million of~~no short-term debt outstanding under its $300.0 million revolving credit ~~facility at an all-in interest rate of 1.35%.~~facility. At ~~June 30, 2021,~~March 31, 2022, 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 ~~June 30, 2021,~~March 31, 2022, Cleco Power had a $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 ~~1.35%~~1.71%. The weighted average rate for the outstanding term loan debt at Cleco Power for the three months ended March 31, 2022, was 1.40%.

At March 31, 2022, Cleco Power had $325.0 million long-term floating rate senior notes outstanding. These notes bear interest at a rate of three-month LIBOR plus 50 basis points per annum, for an all-in interest rate of 0.716% at March 31, 2022. The weighted average rate for the outstanding floating rate senior notes at Cleco Power for the three months ended March 31, 2022, was 0.85%. Each 1% increase in the interest rate applicable to Cleco Power’s ~~short- and~~ long-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of ~~$2.9~~

$4.5 million on an annualized basis. ~~The weighted average rate for the outstanding term loan debt at Cleco Power for the six months ended June 30, 2021, was 1.37%.~~

Each 1% increase in the interest rate applicable to Cleco’s short- and long-term variable rate debt would result in a decrease in Cleco’s consolidated pretax earnings of ~~$5.5~~$6.5 million on an annualized basis.

Cleco 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.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Commodity Price Risk

~~Cleco Power and Cleco Cajun’s~~Cleco’s financial performance can be impacted by changes in commodity prices that can impact fuel costs, generation ~~revenues,~~revenue, costs to serve its contracted wholesale electricity customers, and ~~customer supply costs and customer revenues.~~revenue from those customers. Cleco’s risk management policies and procedures authorize hedging commodity price risk with


~~CLECO~~
~~CLECO POWER~~						~~2021 2ND QUARTER FORM 10-Q~~

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 and recorded on the balance sheet at their fair value.

Cleco Power and Cleco Cajun, each separately and 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. FTRs are accounted for as derivatives not designated as hedging instruments for accounting purposes.

~~During the six months ended June 30, 2021,~~At March 31, 2022, Cleco Cajun ~~entered into~~had gas-related derivative contracts including fixed price physical forwards and financially settled swap transactions. These are included in ~~other commodity~~natural gas derivatives in the following tables. Cleco Power does not have any gas-related contracts accounted for as derivatives.

The following tables present the fair values of derivative instruments and their respective line items as recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~June 30, 2021:~~March 31, 2022:

~~Cleco~~

~~DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS~~

~~(THOUSANDS)~~

~~BALANCE SHEET LINE ITEM~~

~~AT JUNE 30, 2021~~

~~Commodity-related contracts~~

~~FTRs~~

~~Current~~

~~Energy risk management assets~~

~~8,662~~

~~Current~~

~~Energy risk management liabilities~~

~~(1,161)~~

~~Other commodity derivatives~~

~~Current~~

~~Energy risk management assets~~

~~30,063~~

~~Non-current~~

~~Other deferred charges~~

~~25,771~~

~~Commodity-related contracts, net~~

~~63,335~~


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
		AT MAR. 31, 2022
				GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	1,114	$	—	$	1,114	$	—	$	1,114
Current	Energy risk management liabilities	(599)		—		(599)		—		(599)
Natural gas derivatives
Current	Energy risk management assets	107,842		(26,300)		81,542		(75,919)		5,623
Non-current	Energy risk management assets	84,898		—		84,898		(6,081)		78,817


Commodity-related contracts, net		$	193,255	$	(26,300)	$	166,955	$	(82,000)	$	84,955

(1) Represents letters of credit by counterparties.

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT ~~JUNE 30, 2021~~MAR. 31, 2022

Commodity-related contracts

FTRs

Current

Energy risk management assets

~~6,867~~840

Current

Energy risk management liabilities

~~(877)~~(273)

Commodity-related contracts, net

~~5,990~~567

Cleco monitors the Value at Risk (VaR) of its ~~other commodity~~natural gas 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 estimating risk 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 the methodology’s other limitations.

The following table presents the VaR of ~~other commodity~~natural gas derivative contracts based on these assumptions:


				FOR THE THREE MONTHS ENDED JUNE 30, 2021						FOR THE SIX MONTHS ENDED JUNE 30, 2021									FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	(THOUSANDS)	AT JUNE 30, 2021		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE		(THOUSANDS)	AT MAR. 31, 2022		HIGH		LOW		AVERAGE
Cleco	Cleco	$	8,345	$	11,589	$	7,382	$	9,005	$	12,234	$	7,199	$	9,032	Cleco	$	31,161	$	32,717	$	21,025	$	25,818

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 6 — Fair Value Accounting and Financial Instruments — Commodity Contracts.”


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of Cleco Holdings and Cleco Power (individually, “Registrant” and collectively, the “Registrants”) management, including the CEO and CFO, the Registrants have evaluated the effectiveness of their disclosure controls and procedures as of ~~June 30, 2021.~~March 31, 2022. Based on the evaluations, the 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 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 ~~June 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

6757


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST 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 1312 — 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 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”


ITEM 1A. RISK FACTORS

~~There~~Other than the update to the risk factor below, 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, ~~2020.~~2021. 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 Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~

2021.

Commodity Prices

Cleco Power and Cleco Cajun’s financial performance could be exposed to fluctuations in commodity prices and other factors, which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Because Cleco is exposed to uncertain market prices of electricity, natural gas, coal, and other commodities that can impact costs of fuel supply for generation, generation revenue, cost to serve its contracted wholesale electricity customers, and revenue from these customers, Cleco may enter into transactions to mitigate the volatility in those costs that are accounted for as derivatives.

For Cleco Power, the changes in fair value of transactions accounted for as derivatives are deferred as a component of deferred fuel assets or liabilities in accordance with regulatory

policy. When transactions expire or are offset through liquidation, actual gains or losses are deferred and included in Cleco Power’s FAC. Recovery of these costs included in Cleco Power’s FAC is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC. For Cleco Cajun, the changes in fair value of transactions accounted for as derivatives, as well as the actual gains and losses at settlement, are reflected in current period earnings as either a component of fuel expense, for gas-related derivatives, or purchased power expense, for FTRs. As a result, Cleco is unable to accurately predict the effect that these transactions could have on its results of operations, financial condition, or cash flows.

Further, the supply markets for fuel, natural gas, and oil are subject to price fluctuations, availability restrictions, counterparty default, and geopolitical risk, including the current Russia-Ukraine conflict and U.S. sanctions against Russia. Historically, natural gas prices have been more volatile than other fuel sources. In 2021, and continuing in 2022, market prices for natural gas increased significantly from the relatively low market prices prevalent in recent years. Increases in fuel prices could significantly increase the cost of electric service Cleco provides to its customers. Recovery of these costs included in Cleco Power’s FAC is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


ITEM 6. EXHIBITS

CLECO
10.1			~~Credit~~Form of Sixth Agreement ~~dated as~~to Extend the Board of Managers Services Agreement, effective May ~~21, 2021,~~1, 2022, by and among Cleco ~~Corporate Holdings~~Group LLC, ~~the lenders party thereto and Regions Bank, as administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 26, 2021)~~
~~10.2~~			~~Term Loan Agreement, dated as of May 21, 2021, by and among~~ Cleco Corporate Holdings LLC, ~~the lenders party thereto~~ and ~~Regions Bank, as administrative agent (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed May 26, 2021)~~
~~10.3~~			Cleco ~~Corporate Holdings~~Power LLC ~~Executive Severance Plan, effective May 21, 2021~~and Manager.
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
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
~~10.4~~10.1			~~Credit~~Form of Sixth Agreement ~~dated as~~to Extend the Board of Managers Services Agreement, effective May ~~21, 2021,~~1, 2022, by and among Cleco ~~Power~~Group LLC, ~~the lenders party thereto~~Cleco Corporate Holdings LLC, and ~~Regions Bank, as administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 26, 2021)~~
~~10.5~~			~~Term Loan Agreement, dated as of May 21, 2021, by and among~~ Cleco Power LLC ~~the lenders party thereto~~ and ~~Regions Bank, as administrative agent (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed May 26, 2021)~~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
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)

6859


CLECO
CLECO POWER						~~2021 2ND~~2022 1ST 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: ~~August 11, 2021~~May 12, 2022

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: ~~August 11, 2021~~May 12, 2022

6960


TABLE OF CONTENTS
		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		56

PART I	Financial Information
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)	78
	Cleco Power — Condensed Consolidated Financial Statements (Unaudited)	1615
	Notes to the Unaudited Condensed Consolidated Financial Statements	2522
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4942
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	6555
ITEM 4.	Controls and Procedures	6757

PART II	Other Information
ITEM 1.	Legal Proceedings	6858
ITEM 1A.	Risk Factors	6858



ITEM 6.	Exhibits	6859
	Signatures	6960


Cleco
			FOR THE THREE MONTHS ENDED JUNE 30, 2021						FOR THE SIX MONTHS ENDED JUNE 30, 2021
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period	$	2,040	$	1,638	$	3,678	$	2,758	$	1,638	$	4,396

Current period provision	616		0		616		2,490		0		2,490
Charge-offs	(1,583)		0		(1,583)		(4,442)		0		(4,442)
Recovery	261		0		261		528		0		528
Balances, June 30, 2021	$	1,334	$	1,638	$	2,972	$	1,334	$	1,638	$	2,972


Cleco
	AMOUNT OF GAIN(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
		FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2021		2020		2021		2020
Commodity-related contracts
FTRs(1)	Electric operations	$	1,763	$	1,852	$	9,207	$	3,248
FTRs(1)	Purchased power	702		92		(7,858)		(289)
Other commodity derivatives	Fuel used for electric generation	(51,683)		9,316		(57,897)		2,208
Total		$	(49,218)	$	11,260	$	(56,548)	$	5,167


Cleco
	FOR THE THREE MONTHS ENDED JUNE 30, 2021		FOR THE SIX MONTHS ENDED JUNE 30, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(25,168)	$	(25,796)


Amounts reclassified from AOCI
Amortization of postretirement benefit net (gain) loss	(420)		208


Balances, June 30, 2021	$	(25,588)	$	(25,588)


	FOR THE THREE MONTHS ENDED JUNE 30, 2020		FOR THE SIX MONTHS ENDED JUNE 30, 2020
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(17,099)	$	(17,513)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	442		856


Balances, June 30, 2020	$	(16,657)	$	(16,657)


	FOR THE THREE MONTHS ENDED JUNE 30,
				2021 CHANGE
	2021	2020	NORMAL	PRIOR YEAR		NORMAL

Cooling degree-days	984	998	942	(1.4)	%	4.5	%