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 September 30, ~~2021~~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 no 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~~2022 3RD 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~~2022 3RD 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~~generating facility located in New Roads, ~~Louisiana.~~
~~Big Cajun II,~~Louisiana consisting of Unit 3			~~A 588-MW coal-fired generating unit at Cleco Cajun’s plant site in New Roads, Louisiana.~~1, Unit 2, and Unit 3. 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 Asset Management, 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

Cleco Securitization I			Cleco Securitization I, LLC, a special-purpose, wholly owned subsidiary of Cleco Power
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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~


~~ABBREVIATION OR ACRONYM~~			~~DEFINITION~~
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

EBITDA			Earnings before interest, income taxes, depreciation, and amortization



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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM			DEFINITION
EPA			U.S. Environmental Protection Agency
~~ERO~~			~~Electric Reliability Organization~~

~~Evangeline~~ESG			~~Cleco Evangeline LLC, a wholly owned subsidiary of Midstream. Cleco Evangeline LLC was dissolved effective July 29, 2021.~~Environmental, Social, and Governance

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)



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)


~~N/A~~			~~Not Applicable~~
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. 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
~~RFP~~			~~Request for Proposal~~
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.,~~Inc, a credit rating agency

SEC			U.S. Securities and Exchange Commission


SERP			Supplemental Executive Retirement Plan


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


~~SSR~~			~~System Support Resource~~



Storm Recovery Property			Storm Recovery Property as defined in the financing order issued by the LPSC in April 2022, which includes the right to impose, bill, charge, collect, and receive unamortized storm recovery costs from Cleco Power’s retail customers.
Support Group			Cleco Support Group LLC, a wholly owned subsidiary of Cleco Holdings
SWEPCO			Southwestern Electric Power Company, an electric utility subsidiary of American Electric Power Company, Inc.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~


~~ABBREVIATION OR ACRONYM~~			~~DEFINITION~~
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~~2022 3RD 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 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,

•economic impacts related to 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, and Cleco Power’s ability to recover stranded costs associated with these events,

•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 and stranded costs associated with these events,

•the ability of Cleco’s customers to ~~continue paying~~pay their utility bills on time due to ~~rising~~ costs related to rising fuel ~~hurricanes, ice storms,~~prices, severe weather recoveries, or the costs of other ~~weather~~ events that are passed through to Cleco Power’s customers,

•economic conditions in Cleco’s service areas, including inflation and the economy’s effects on customer demand for and payment of 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 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 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 and/or key initiatives, 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,

•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,


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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

•insufficient insurance coverage, more restrictive coverage terms, increasing insurance ~~cost,~~costs, 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 Holdings’ dependence on the earnings, dividends, or distributions from its subsidiaries to meet its debt obligations, and

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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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

•~~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 the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and 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~~2022 3RD 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						2022 3RD QUARTER FORM 10-Q


CLECO

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021
Operating revenue
Electric operations	$	619,500	$	462,164
Other operations	61,771		55,721

Gross operating revenue	681,271		517,885
Electric customer credits	(6,728)		(691)
Operating revenue, net	674,543		517,194
Operating expenses
Fuel used for electric generation	167,068		69,318
Purchased power	221,103		101,377
Other operations and maintenance	79,830		76,540
Depreciation and amortization	58,369		60,628
Taxes other than income taxes	18,722		17,766


Regulatory disallowance	13,841		—
Total operating expenses	558,933		325,629
Operating income	115,610		191,565
Interest income	2,238		941
Allowance for equity funds used during construction	965		711

Other expense, net	(4,940)		(8,109)
Interest charges
Interest charges, net	40,353		35,174
Allowance for borrowed funds used during construction	(463)		(545)
Total interest charges	39,890		34,629
Income before income taxes	73,983		150,479
Federal and state income tax expense	5,611		30,569
Net income	$	68,372	$	119,910
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 462,164 $ 386,388
Other operations 55,721 47,597
Gross operating revenue 517,885 433,985
Electric customer credits (691) (16,534)
Operating revenue, net 517,194 417,451
Operating expenses
Fuel used for electric generation 69,318 74,142
Purchased power 101,377 82,690
Other operations and maintenance 76,506 71,131
Depreciation and amortization 60,628 52,892
Taxes other than income taxes 17,766 14,660
Merger transaction and commitment costs 34 184
Total operating expenses 325,629 295,699
Operating income 191,565 121,752
Interest income 941 910
Allowance for equity funds used during construction 711 144
Other expense, net (8,109) (3,374)
Interest charges
Interest charges, net 35,174 34,349
Allowance for borrowed funds used during construction (545) (289)
Total interest charges 34,629 34,060
Income before income taxes 150,479 85,372
Federal and state income tax expense 30,569 25,075
Net income $ 119,910 $ 60,297
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 SEPT. 30,
(THOUSANDS)	2022		2021
Net income	$	68,372	$	119,910
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $4 in 2022 and $34 in 2021)	10		96

Total other comprehensive income, net of tax	10		96
Comprehensive income, net of tax	$	68,382	$	120,006
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Net income $ 119,910 $ 60,297
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $34 in 2021 and $159 in 2020) 96 448
Total other comprehensive income, net of tax 96 448
Comprehensive income, net of tax $ 120,006 $ 60,745
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021
Operating revenue
Electric operations	$	1,509,093	$	1,180,345
Other operations	167,042		150,777

Gross operating revenue	1,676,135		1,331,122
Electric customer credits	(6,992)		(40,185)
Operating revenue, net	1,669,143		1,290,937
Operating expenses
Fuel used for electric generation	333,174		150,620
Purchased power	481,728		336,573
Other operations and maintenance	222,657		221,234
Depreciation and amortization	195,639		169,892
Taxes other than income taxes	50,592		50,769

Regulatory disallowance	13,841		—
Total operating expenses	1,297,631		929,088
Operating income	371,512		361,849
Interest income	4,236		2,416
Allowance for equity funds used during construction	2,704		2,703

Other expense, net	(13,604)		(15,112)
Interest charges
Interest charges, net	111,018		103,092
Allowance for borrowed funds used during construction	(1,200)		(1,280)
Total interest charges	109,818		101,812
Income before income taxes	255,030		250,044
Federal and state income tax expense	29,551		30,985
Net income	$	225,479	$	219,059
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Income (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 1,180,345 $ 1,019,501
Other operations 150,777 137,407
Gross operating revenue 1,331,122 1,156,908
Electric customer credits (40,185) (34,126)
Operating revenue, net 1,290,937 1,122,782
Operating expenses
Fuel used for electric generation 150,620 218,643
Purchased power 336,573 208,515
Other operations and maintenance 221,486 217,693
Depreciation and amortization 169,892 162,852
Taxes other than income taxes 50,769 45,233
Merger transaction and commitment costs (252) 3,234
Total operating expenses 929,088 856,170
Operating income 361,849 266,612
Interest income 2,416 2,964
Allowance for equity funds used during construction 2,703 197
Other expense, net (15,112) (15,827)
Interest charges
Interest charges, net 103,092 104,700
Allowance for borrowed funds used during construction (1,280) (777)
Total interest charges 101,812 103,923
Income before income taxes 250,044 150,023
Federal and state income tax expense 30,985 40,230
Net income $ 219,059 $ 109,793
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021
Net income	$	225,479	$	219,059
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $11 in 2022 and $107 in 2021)	31		304

Total other comprehensive income, net of tax	31		304
Comprehensive income, net of tax	$	225,510	$	219,363
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Net income $ 219,059 $ 109,793
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $107 in 2021 and $460 in 2020) 304 1,304
Total other comprehensive income, net of tax 304 1,304
Comprehensive income, net of tax $ 219,363 $ 111,097
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Assets
Current assets
Cash and cash equivalents	$	103,117	$	148,563
Restricted cash and cash equivalents	14,902		1,674
Customer accounts receivable (less allowance for credit losses of $1,498 in 2022 and $1,302 in 2021)	160,201		91,869
Accounts receivable - affiliate	13,111		3,041
Other accounts receivable	49,487		27,818
Taxes receivable	—		564
Unbilled revenue	40,560		37,663
Fuel inventory, at average cost	112,662		68,838
Materials and supplies, at average cost	146,625		133,666
Energy risk management assets	80,912		43,479
Accumulated deferred fuel	81,928		56,826
Cash surrender value of company-/trust-owned life insurance policies	74,163		98,576
Prepayments	15,353		13,283
Regulatory assets	46,930		29,261
Other current assets	2,705		12,839
Total current assets	942,656		767,960
Property, plant, and equipment
Property, plant, and equipment	5,350,425		5,416,722
Accumulated depreciation	(891,468)		(700,991)
Net property, plant, and equipment	4,458,957		4,715,731
Construction work in progress	119,949		100,163
Total property, plant, and equipment, net	4,578,906		4,815,894
Equity investment in investee	2,072		2,072
Goodwill	1,490,797		1,490,797
Prepayments	31,819		21,598
Operating lease right of use assets	23,336		24,014
Restricted cash and cash equivalents	109,373		745
Note receivable	13,125		13,744

Regulatory assets	676,720		810,820
Intangible asset - securitization	415,946		—
Intangible assets - other	63,035		82,235

Energy risk management assets	91,853		50,962
Other deferred charges	44,883		44,177
Total assets	$	8,484,521	$	8,125,018
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt	$	87,000	$	—
Long-term debt and finance leases due within one year	267,954		93,455
Accounts payable	177,448		167,886
Accounts payable - affiliate	13,092		51,297
Customer deposits	59,101		60,852
Provision for rate refund	13,256		5,682
Taxes payable	51,844		6,311
Interest accrued	44,876		15,203

Energy risk management liabilities	5,521		834
Regulatory liabilities - deferred taxes, net	44,129		44,072
Deferred compensation	11,433		14,420

Other current liabilities	54,409		53,150
Total current liabilities	830,063		513,162
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	823,798		755,764

Postretirement benefit obligations	290,818		291,606

Regulatory liabilities - deferred taxes, net	4,970		51,472
Storm reserves	108,652		—


Deferred lease revenue	24,547		31,451
Intangible liabilities	15,216		18,997
Asset retirement obligations	68,852		69,667
Operating lease liabilities	20,465		21,128
Other deferred credits	31,046		27,582
Total long-term liabilities and deferred credits	1,388,364		1,267,667
Long-term debt and finance leases, net	3,306,016		3,390,033
Total liabilities	5,524,443		5,170,862
Commitments and contingencies (Note 13)
Member’s equity	2,960,078		2,954,156
Total liabilities and member’s equity	$	8,484,521	$	8,125,018
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Assets
Current assets
Cash and cash equivalents $ 273,215 $ 84,976
Restricted cash and cash equivalents 2,352 4,545
Customer accounts receivable (less allowance for credit losses of $1,757 in 2021 and $2,758 in 2020) 114,412 82,511
Accounts receivable - affiliate 3,038 1,663
Other accounts receivable 45,887 32,076
Taxes receivable 5,336 —
Unbilled revenue 36,759 40,127
Fuel inventory, at average cost 112,016 109,494
Materials and supplies, at average cost 132,848 132,449
Energy risk management assets 58,803 13,081
Accumulated deferred fuel 78,847 28,194
Cash surrender value of company-/trust-owned life insurance policies 94,361 89,138
Prepayments 15,013 14,549
Regulatory assets 26,495 21,041
Other current assets 23,292 11,048
Total current assets 1,022,674 664,892
Property, plant, and equipment
Property, plant, and equipment 5,596,964 5,337,190
Accumulated depreciation (887,107) (672,271)
Net property, plant, and equipment 4,709,857 4,664,919
Construction work in progress 134,130 124,622
Total property, plant, and equipment, net 4,843,987 4,789,541
Equity investment in investee 3,822 9,072
Goodwill 1,490,797 1,490,797
Prepayments 19,974 23,405
Operating lease right of use assets 24,689 26,172
Restricted cash and cash equivalents 745 744
Note receivable 13,941 14,506
Regulatory assets 756,343 554,609
Intangible assets 88,635 111,731
Energy risk management assets 83,427 323
Other deferred charges 46,773 39,777
Total assets $ 8,395,807 $ 7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.
(Continued on next page)


CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022			2021
Operating activities
Net income	$	225,479		$	219,059
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	220,591			195,619



Provision for credit losses	2,143			3,106
Regulatory disallowance	13,841			—
Electric customer credits	6,577			—
Unearned compensation expense	3,688			7,068
Allowance for equity funds used during construction	(2,704)			(2,703)
Gain on risk management assets and liabilities, net	(112,077)			(136,024)
Deferred lease revenue	(6,904)			(6,904)
Deferred income taxes	21,578			36,513
Cash surrender value of company-/trust-owned life insurance	5,775			(5,223)
Changes in assets and liabilities
Accounts receivable	(98,826)			(56,922)
Accounts receivable, affiliate	(10,069)			(1,375)
Unbilled revenue	(2,897)			3,368
Fuel inventory and materials and supplies	(61,518)			(3,198)
Prepayments	(10,908)			(8,573)
Accounts payable	8,164			(11,680)
Accounts payable - affiliate	(38,206)			—
Customer deposits	6,139			8,295
Provision for merger commitments	(500)			(1,881)
Postretirement benefit obligations	(746)			6,262
Regulatory assets and liabilities, net	(9,498)			(95,294)

Deferred fuel recoveries	(23,185)			(50,986)
Other deferred accounts	(4,885)			(9,163)
Taxes accrued	45,144			26,864
Interest accrued	29,673			23,961
Energy risk management collateral received	36,400			8,900

Other operating	2,856			(9,295)
Net cash provided by operating activities	245,125			139,794
Investing activities
Additions to property, plant, and equipment	(145,514)			(207,257)

Proceeds from sale of property, plant, and equipment	663			1,445






Return of equity investment in investee	—			5,250


Return of investment in company-owned life insurance	15,671			—

Other investing	630			1,469
Net cash used in investing activities	(128,550)			(199,093)
Financing activities
Draws on revolving credit facilities	127,000			185,000
Payments on revolving credit facilities	(40,000)			(260,000)
Issuances of long-term debt	424,946			325,000
Repayment of long-term debt	(325,000)			—

Payment of financing costs	(6,964)			(4,149)

Distributions to member	(219,588)			—
Other financing	(559)			(505)
Net cash (used in) provided by financing activities	(40,165)			245,346
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	76,410			186,047
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	$	227,392	(2)	$	276,312
(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 $103,117, current restricted cash and cash equivalents of $14,902, and non-current restricted cash and cash equivalents of $109,373.

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

(Continued on next page)

1314


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

CLECO
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt $ — $ 75,000
Long-term debt and finance leases due within one year 66,736 66,682
Accounts payable 226,785 161,357
Accounts payable - affiliate 41,283 41,283
Customer deposits 60,186 58,718
Provision for rate refund 5,465 9,444
Taxes payable 47,095 7,530
Interest accrued 39,544 15,583
Energy risk management liabilities 1,589 2,453
Regulatory liabilities 46,003 23,509
Deferred compensation 13,695 13,240
Other current liabilities 60,507 49,813
Total current liabilities 608,888 524,612
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net 734,717 661,376
Postretirement benefit obligations 320,504 314,653
Regulatory liabilities - deferred taxes, net 99,361 157,056
Deferred lease revenue 33,753 40,657
Intangible liabilities 20,257 24,859
Asset retirement obligations 71,390 27,986
Operating lease liabilities 21,739 23,333
Other deferred credits 25,008 28,627
Total long-term liabilities and deferred credits 1,326,729 1,278,547
Long-term debt and finance leases, net 3,483,804 3,165,387
Total liabilities 5,419,421 4,968,546
Commitments and contingencies (Note 13) 0 0
Member’s equity 2,976,386 2,757,023
Total liabilities and member’s equity $ 8,395,807 $ 7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

CLECO
Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating activities
Net income $ 219,059 $ 109,793
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 195,619 185,496
Provision for credit losses 3,106 6,134
Unearned compensation expense 7,068 5,113
Allowance for equity funds used during construction (2,703) (197)
Gain on risk management assets and liabilities, net (136,024) (23,254)
Deferred lease revenue (6,904) (6,904)
Deferred income taxes 36,513 39,657
Cash surrender value of company-/trust-owned life insurance (5,223) 3,586
Changes in assets and liabilities
Accounts receivable (56,922) (14,683)
Accounts receivable, affiliate (1,375) (39)
Unbilled revenue 3,368 (1,297)
Fuel inventory and materials and supplies (3,198) (26,747)
Prepayments (8,573) (12,895)
Accounts payable (11,680) (30,633)
Accounts payable - affiliate — 1,469
Customer deposits 8,295 4,688
Provision for merger commitments (1,881) 738
Postretirement benefit obligations 6,262 4,654
Regulatory assets and liabilities, net (95,294) (12,264)
Deferred fuel recoveries (50,986) (21,076)
Other deferred accounts (9,163) (13,799)
Taxes accrued 26,864 30,132
Interest accrued 23,961 21,063
Energy risk management collateral received 8,900 —
Other operating (9,295) 6,344
Net cash provided by operating activities 139,794 255,079
Investing activities
Additions to property, plant, and equipment (209,960) (215,692)
Allowance for equity funds used during construction 2,703 197
Proceeds from sale of property, plant, and equipment 1,445 259
Return of equity investment in investee 5,250 4,000
Other investing 1,469 562
Net cash used in investing activities (199,093) (210,674)
Financing activities
Draws on revolving credit facilities 185,000 238,000
Payments on revolving credit facilities (260,000) —
Issuances of long-term debt 325,000 125,000
Repayment of long-term debt — (11,055)
Payment of financing costs (4,149) (4,448)
Other financing (505) (456)
Net cash provided by financing activities 245,346 347,041
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents 186,047 391,446
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 $ 276,312 (2) $ 534,041
Supplementary cash flow information
Interest paid, net of amount capitalized $ 70,387 $ 73,714
Income taxes paid (refunded), net $ 205 $ (2,777)
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 45,646 $ 89,604
(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 $273,215, current restricted cash and cash equivalents of $2,352, and non-current restricted cash and cash equivalents of $745.
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021
Supplementary cash flow information
Interest paid, net of amount capitalized	$	72,772	$	70,387

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	7,098	$	45,646

Reduction in property, plant, and equipment due to regulatory disallowance	$	13,841	$	—
Reduction in property, plant, and equipment due to securitization of capitalized storm costs	$	197,689	$	—



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


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO	CLECO									CLECO

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)	Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)									Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS)	(THOUSANDS)	MEMBERSHIP INTEREST		RETAINED EARNINGS		AOCI		TOTAL MEMBER’S EQUITY		(THOUSANDS)	MEMBERSHIP INTEREST		RETAINED EARNINGS		AOCI		TOTAL MEMBER’S EQUITY
Balances, June 30, 2020		$	2,454,276	$	255,739	$	(16,657)	$	2,693,358

Net income		—		60,297		—		60,297
Other comprehensive income, net of tax		—		—		448		448
Balances, Sept. 30, 2020		$	2,454,276	$	316,036	$	(16,209)	$	2,754,103

Balances, June 30, 2021	Balances, June 30, 2021	$	2,454,276	$	427,692	$	(25,588)	$	2,856,380	Balances, June 30, 2021	$	2,454,276	$	427,692	$	(25,588)	$	2,856,380

Net income	Net income	—		119,910		—		119,910		Net income	—		119,910		—		119,910
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		96		96		Other comprehensive income, net of tax	—		—		96		96
Balances, Sept. 30, 2021	Balances, Sept. 30, 2021	$	2,454,276	$	547,602	$	(25,492)	$	2,976,386	Balances, Sept. 30, 2021	$	2,454,276	$	547,602	$	(25,492)	$	2,976,386

Balances, Dec. 31, 2019		$	2,454,276	$	206,243	$	(17,513)	$	2,643,006
Balances, June 30, 2022										Balances, June 30, 2022	$	2,454,276	$	547,778	$	(23,608)	$	2,978,446

Distributions to member										Distributions to member	—		(86,750)		—		(86,750)
Net income	Net income	—		109,793		—		109,793		Net income	—		68,372		—		68,372
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		1,304		1,304		Other comprehensive income, net of tax	—		—		10		10
Balances, Sept. 30, 2020		$	2,454,276	$	316,036	$	(16,209)	$	2,754,103
Balances, Sept. 30, 2022										Balances, Sept. 30, 2022	$	2,454,276	$	529,400	$	(23,598)	$	2,960,078

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

Net income	Net income	—		219,059		—		219,059		Net income	—		219,059		—		219,059
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		304		304		Other comprehensive income, net of tax	—		—		304		304
Balances, Sept. 30, 2021	Balances, Sept. 30, 2021	$	2,454,276	$	547,602	$	(25,492)	$	2,976,386	Balances, Sept. 30, 2021	$	2,454,276	$	547,602	$	(25,492)	$	2,976,386

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

Distributions to member										Distributions to member	—		(219,588)		—		(219,588)
Net income										Net income	—		225,479		—		225,479
Other comprehensive income, net of tax										Other comprehensive income, net of tax	—		—		31		31
Balances, Sept. 30, 2022										Balances, Sept. 30, 2022	$	2,454,276	$	529,400	$	(23,598)	$	2,960,078
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.									The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD 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						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)	Condensed Consolidated Statements of Income (Unaudited)					Condensed Consolidated Statements of Income (Unaudited)
		FOR THE THREE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	357,084	$	288,852	Electric operations	$	481,153	$	357,084
Other operations	Other operations	22,779		17,775		Other operations	24,757		22,779
Affiliate revenue	Affiliate revenue	1,380		1,506		Affiliate revenue	1,657		1,380
Gross operating revenue	Gross operating revenue	381,243		308,133		Gross operating revenue	507,567		381,243
Electric customer credits	Electric customer credits	(691)		(16,534)		Electric customer credits	(6,728)		(691)
Operating revenue, net	Operating revenue, net	380,552		291,599		Operating revenue, net	500,839		380,552
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	149,127		80,148		Fuel used for electric generation	192,010		149,127
Purchased power	Purchased power	38,211		32,096		Purchased power	111,764		38,211
Other operations and maintenance	Other operations and maintenance	56,720		52,595		Other operations and maintenance	58,581		56,720
Depreciation and amortization	Depreciation and amortization	43,526		40,268		Depreciation and amortization	44,368		43,526
Taxes other than income taxes	Taxes other than income taxes	12,891		11,408		Taxes other than income taxes	14,940		12,891
Regulatory disallowance						Regulatory disallowance	13,841		—

Total operating expenses	Total operating expenses	300,475		216,515		Total operating expenses	435,504		300,475
Operating income	Operating income	80,077		75,084		Operating income	65,335		80,077
Interest income	Interest income	936		789		Interest income	1,726		936
Allowance for equity funds used during construction	Allowance for equity funds used during construction	711		144		Allowance for equity funds used during construction	965		711

Other expense, net	Other expense, net	(6,106)		(3,408)		Other expense, net	(1,591)		(6,106)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	19,054		18,730		Interest charges, net	24,303		19,054
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(545)		(289)		Allowance for borrowed funds used during construction	(463)		(545)
Total interest charges	Total interest charges	18,509		18,441		Total interest charges	23,840		18,509
Income before income taxes	Income before income taxes	57,109		54,168		Income before income taxes	42,595		57,109
Federal and state income tax expense	Federal and state income tax expense	548		18,076		Federal and state income tax expense	1,862		548
Net income	Net income	$	56,561	$	36,092	Net income	$	40,733	$	56,561
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)	Condensed Consolidated Statements of Comprehensive Income (Unaudited)					Condensed Consolidated Statements of Comprehensive Income (Unaudited)
		FOR THE THREE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Net income	Net income	$	56,561	$	36,092	Net income	$	40,733	$	56,561
Other comprehensive income, net of tax	Other comprehensive income, net of tax					Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $123 in 2021 and $132 in 2020)		350		373
Amortization of interest rate derivatives to earnings (net of tax expense of $22 in both 2021 and 2020)		63		63
Postretirement benefits gain (net of tax expense of $113 in 2022 and $123 in 2021)						Postretirement benefits gain (net of tax expense of $113 in 2022 and $123 in 2021)	307		350
Amortization of interest rate derivatives to earnings (net of tax expense of $23 in 2022 and $22 in 2021)						Amortization of interest rate derivatives to earnings (net of tax expense of $23 in 2022 and $22 in 2021)	63		63
Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	413		436		Total other comprehensive income, net of tax	370		413
Comprehensive income, net of tax	Comprehensive income, net of tax	$	56,974	$	36,528	Comprehensive income, net of tax	$	41,103	$	56,974
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)	Condensed Consolidated Statements of Income (Unaudited)					Condensed Consolidated Statements of Income (Unaudited)
		FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	887,191	$	752,925	Electric operations	$	1,145,864	$	887,191
Other operations	Other operations	57,674		49,443		Other operations	62,528		57,674
Affiliate revenue	Affiliate revenue	4,259		3,852		Affiliate revenue	4,744		4,259
Gross operating revenue	Gross operating revenue	949,124		806,220		Gross operating revenue	1,213,136		949,124
Electric customer credits	Electric customer credits	(40,429)		(33,974)		Electric customer credits	(6,992)		(40,429)
Operating revenue, net	Operating revenue, net	908,695		772,246		Operating revenue, net	1,206,144		908,695
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	262,970		205,276		Fuel used for electric generation	442,249		262,970
Purchased power	Purchased power	151,499		74,737		Purchased power	213,586		151,499
Other operations and maintenance	Other operations and maintenance	162,448		164,207		Other operations and maintenance	159,588		162,448
Depreciation and amortization	Depreciation and amortization	126,534		125,541		Depreciation and amortization	133,907		126,534
Taxes other than income taxes	Taxes other than income taxes	36,707		33,132		Taxes other than income taxes	39,117		36,707
Regulatory disallowance						Regulatory disallowance	13,841		—

Total operating expenses	Total operating expenses	740,158		602,893		Total operating expenses	1,002,288		740,158
Operating income	Operating income	168,537		169,353		Operating income	203,856		168,537
Interest income	Interest income	2,404		2,498		Interest income	3,501		2,404
Allowance for equity funds used during construction	Allowance for equity funds used during construction	2,703		197		Allowance for equity funds used during construction	2,704		2,703

Other expense, net	Other expense, net	(16,064)		(9,498)		Other expense, net	(5,852)		(16,064)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	56,672		56,401		Interest charges, net	65,147		56,672
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(1,280)		(777)		Allowance for borrowed funds used during construction	(1,200)		(1,280)
Total interest charges	Total interest charges	55,392		55,624		Total interest charges	63,947		55,392
Income before income taxes	Income before income taxes	102,188		106,926		Income before income taxes	140,262		102,188
Federal and state income tax (benefit) expense		(219)		30,770
Federal and state income tax expense (benefit)						Federal and state income tax expense (benefit)	5,800		(219)
Net income	Net income	$	102,407	$	76,156	Net income	$	134,462	$	102,407
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)	Condensed Consolidated Statements of Comprehensive Income (Unaudited)					Condensed Consolidated Statements of Comprehensive Income (Unaudited)
		FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Net income	Net income	$	102,407	$	76,156	Net income	$	134,462	$	102,407
Other comprehensive income, net of tax	Other comprehensive income, net of tax					Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $386 in 2021 and $430 in 2020)		1,095		1,218
Amortization of interest rate derivatives to earnings (net of tax expense of $67 in both 2021 and 2020)		191		191
Postretirement benefits gain (net of tax expense of $339 in 2022 and $386 in 2021)						Postretirement benefits gain (net of tax expense of $339 in 2022 and $386 in 2021)	920		1,095
Amortization of interest rate derivatives to earnings (net of tax expense of $69 in 2022 and $67 in 2021)						Amortization of interest rate derivatives to earnings (net of tax expense of $69 in 2022 and $67 in 2021)	189		191
Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	1,286		1,409		Total other comprehensive income, net of tax	1,109		1,286
Comprehensive income, net of tax	Comprehensive income, net of tax	$	103,693	$	77,565	Comprehensive income, net of tax	$	135,571	$	103,693
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)	Condensed Consolidated Balance Sheets (Unaudited)					Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Assets	Assets					Assets
Utility plant and equipment	Utility plant and equipment					Utility plant and equipment
Property, plant, and equipment	Property, plant, and equipment	$	6,047,103	$	5,824,378	Property, plant, and equipment	$	5,672,636	$	5,745,489
Accumulated depreciation	Accumulated depreciation	(2,242,952)		(2,067,362)		Accumulated depreciation	(2,048,367)		(1,919,766)
Net property, plant, and equipment	Net property, plant, and equipment	3,804,151		3,757,016		Net property, plant, and equipment	3,624,269		3,825,723
Construction work in progress	Construction work in progress	128,765		110,613		Construction work in progress	115,252		94,573
Total utility plant and equipment, net	Total utility plant and equipment, net	3,932,916		3,867,629		Total utility plant and equipment, net	3,739,521		3,920,296
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	156,318		24,846		Cash and cash equivalents	36,290		85,667
Restricted cash and cash equivalents	Restricted cash and cash equivalents	2,352		4,545		Restricted cash and cash equivalents	14,902		1,674
Customer accounts receivable (less allowance for credit losses of $1,757 in 2021 and $2,758 in 2020)		68,581		43,852
Customer accounts receivable (less allowance for credit losses of $1,498 in 2022 and $1,302 in 2021)						Customer accounts receivable (less allowance for credit losses of $1,498 in 2022 and $1,302 in 2021)	103,839		48,551
Accounts receivable - affiliate	Accounts receivable - affiliate	13,982		14,605		Accounts receivable - affiliate	2,486		13,612
Other accounts receivable	Other accounts receivable	30,285		27,535		Other accounts receivable	28,517		21,931

Unbilled revenue	Unbilled revenue	36,759		40,127		Unbilled revenue	40,560		37,663
Fuel inventory, at average cost	Fuel inventory, at average cost	84,534		63,234		Fuel inventory, at average cost	85,600		46,121
Materials and supplies, at average cost	Materials and supplies, at average cost	105,090		105,340		Materials and supplies, at average cost	112,860		101,502
Energy risk management assets	Energy risk management assets	6,028		4,337		Energy risk management assets	5,195		5,515
Accumulated deferred fuel	Accumulated deferred fuel	78,847		28,194		Accumulated deferred fuel	81,928		56,826
Cash surrender value of company-owned life insurance policies	Cash surrender value of company-owned life insurance policies	16,245		16,184		Cash surrender value of company-owned life insurance policies	16,281		16,260
Prepayments	Prepayments	6,815		7,163		Prepayments	10,654		7,784
Regulatory assets	Regulatory assets	18,760		13,305		Regulatory assets	39,194		21,526
Other current assets	Other current assets	6,382		830		Other current assets	817		782
Total current assets	Total current assets	630,978		394,097		Total current assets	579,123		465,414
Equity investment in investee	Equity investment in investee	3,822		9,072		Equity investment in investee	2,072		2,072
Prepayments	Prepayments	1,306		1,496		Prepayments	1,324		1,243
Operating lease right of use assets	Operating lease right of use assets	24,642		26,006		Operating lease right of use assets	23,288		23,970

Restricted cash and cash equivalents						Restricted cash and cash equivalents	108,623		—
Note receivable	Note receivable	13,941		14,506		Note receivable	13,125		13,744

Regulatory assets	Regulatory assets	623,820		414,535		Regulatory assets	554,264		680,813
Intangible asset - securitization						Intangible asset - securitization	415,946		—

Other deferred charges	Other deferred charges	24,616		38,806		Other deferred charges	22,465		21,949
Total assets	Total assets	$	5,256,041	$	4,766,147	Total assets	$	5,459,751	$	5,129,501
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)	(Continued on next page)					(Continued on next page)


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)	Condensed Consolidated Balance Sheets (Unaudited)					Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Liabilities and member’s equity	Liabilities and member’s equity					Liabilities and member’s equity
Member’s equity	Member’s equity	$	1,911,572	$	1,807,879	Member’s equity	$	1,978,608	$	1,948,537
Long-term debt and finance leases, net	Long-term debt and finance leases, net	1,825,424		1,502,257		Long-term debt and finance leases, net	1,886,216		1,800,854
Total capitalization	Total capitalization	3,736,996		3,310,136		Total capitalization	3,864,824		3,749,391
Current liabilities	Current liabilities					Current liabilities
Short-term debt	Short-term debt	—		75,000		Short-term debt	77,000		—
Long-term debt and finance leases due within one year	Long-term debt and finance leases due within one year	736		682		Long-term debt and finance leases due within one year	35,382		25,755
Accounts payable	Accounts payable	177,356		106,089		Accounts payable	110,855		114,493
Accounts payable - affiliate	Accounts payable - affiliate	69,356		72,068		Accounts payable - affiliate	10,837		69,729
Customer deposits	Customer deposits	60,186		58,718		Customer deposits	59,101		60,852
Provision for rate refund	Provision for rate refund	5,465		8,630		Provision for rate refund	13,256		5,682

Taxes payable	Taxes payable	42,931		4,778		Taxes payable	46,841		5,494
Interest accrued	Interest accrued	21,251		5,357		Interest accrued	26,544		5,080

Energy risk management liabilities	Energy risk management liabilities	1,330		1,121		Energy risk management liabilities	457		597
Regulatory liabilities		46,003		23,509
Regulatory liabilities - deferred taxes, net						Regulatory liabilities - deferred taxes, net	44,129		44,072

Other current liabilities	Other current liabilities	26,940		24,754		Other current liabilities	32,200		23,467
Total current liabilities	Total current liabilities	451,554		380,706		Total current liabilities	456,602		355,221
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)
Long-term liabilities and deferred credits	Long-term liabilities and deferred credits					Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	Accumulated deferred federal and state income taxes, net	670,036		634,598		Accumulated deferred federal and state income taxes, net	755,253		707,479

Postretirement benefit obligations	Postretirement benefit obligations	237,818		230,825		Postretirement benefit obligations	206,669		205,214

Regulatory liabilities - deferred taxes, net	Regulatory liabilities - deferred taxes, net	99,361		157,056		Regulatory liabilities - deferred taxes, net	4,970		51,472

Storm reserves						Storm reserves	108,652		—

Asset retirement obligations	Asset retirement obligations	21,182		11,364		Asset retirement obligations	17,512		19,456
Operating lease liabilities	Operating lease liabilities	21,709		23,295		Operating lease liabilities	20,436		21,100
Other deferred credits	Other deferred credits	17,385		18,167		Other deferred credits	24,833		20,168
Total long-term liabilities and deferred credits	Total long-term liabilities and deferred credits	1,067,491		1,075,305		Total long-term liabilities and deferred credits	1,138,325		1,024,889
Total liabilities and member’s equity	Total liabilities and member’s equity	$	5,256,041	$	4,766,147	Total liabilities and member’s equity	$	5,459,751	$	5,129,501
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER						CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)	Condensed Consolidated Statements of Cash Flows (Unaudited)						Condensed Consolidated Statements of Cash Flows (Unaudited)
		FOR THE NINE MONTHS ENDED SEPT. 30,						FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021			2020		(THOUSANDS)	2022			2021
Operating activities	Operating activities						Operating activities
Net income	Net income	$	102,407		$	76,156	Net income	$	134,462		$	102,407
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	132,986			129,740		Depreciation and amortization	139,356			132,986

Provision for credit losses	Provision for credit losses	3,106			5,746		Provision for credit losses	2,143			3,106
Regulatory disallowance							Regulatory disallowance	13,841			—
Electric customer credits							Electric customer credits	6,577			—
Unearned compensation expense	Unearned compensation expense	1,746			1,135		Unearned compensation expense	570			1,746
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(2,703)			(197)		Allowance for equity funds used during construction	(2,704)			(2,703)
Deferred income taxes	Deferred income taxes	(1,737)			5,358		Deferred income taxes	918			(1,737)
Cash surrender value of company-owned life insurance		(61)			1,418

Changes in assets and liabilities	Changes in assets and liabilities						Changes in assets and liabilities
Accounts receivable	Accounts receivable	(38,558)			(29,942)		Accounts receivable	(70,688)			(38,558)
Accounts receivable - affiliate	Accounts receivable - affiliate	4,187			3,751		Accounts receivable - affiliate	13,488			4,187
Unbilled revenue	Unbilled revenue	3,368			(1,297)		Unbilled revenue	(2,897)			3,368
Fuel inventory and materials and supplies	Fuel inventory and materials and supplies	(21,326)			(9,511)		Fuel inventory and materials and supplies	(52,099)			(21,326)
Prepayments	Prepayments	210			1,107		Prepayments	(2,428)			210
Accounts payable	Accounts payable	(4,067)			(22,666)		Accounts payable	(7,505)			(4,067)
Accounts payable - affiliate	Accounts payable - affiliate	(2,389)			1,015		Accounts payable - affiliate	(58,462)			(2,389)
Customer deposits	Customer deposits	8,295			4,688		Customer deposits	6,139			8,295
Provision for merger commitments	Provision for merger commitments	(1,381)			(1,574)		Provision for merger commitments	—			(1,381)
Postretirement benefit obligations	Postretirement benefit obligations	4,910			2,581		Postretirement benefit obligations	353			4,910
Regulatory assets and liabilities, net	Regulatory assets and liabilities, net	(96,785)			(13,755)		Regulatory assets and liabilities, net	(10,989)			(96,785)

Deferred fuel recoveries	Deferred fuel recoveries	(50,986)			(21,076)		Deferred fuel recoveries	(23,185)			(50,986)
Other deferred accounts	Other deferred accounts	(6,394)			(14,490)		Other deferred accounts	(81)			(6,394)
Taxes accrued	Taxes accrued	30,789			50,638		Taxes accrued	40,394			30,789
Interest accrued	Interest accrued	15,893			13,589		Interest accrued	21,464			15,893
Other operating	Other operating	(6,807)			5,573		Other operating	(1,668)			(6,868)
Net cash provided by operating activities	Net cash provided by operating activities	74,703			187,987		Net cash provided by operating activities	146,999			74,703
Investing activities	Investing activities						Investing activities
Additions to property, plant, and equipment	Additions to property, plant, and equipment	(202,940)			(205,765)		Additions to property, plant, and equipment	(139,726)			(200,237)
Allowance for equity funds used during construction		2,703			197

Proceeds from sale of property, plant, and equipment	Proceeds from sale of property, plant, and equipment	1,445			259		Proceeds from sale of property, plant, and equipment	641			1,445
Return of equity investment in investee	Return of equity investment in investee	5,250			4,000		Return of equity investment in investee	—			5,250

Other investing	Other investing	1,469			562		Other investing	630			1,469
Net cash used in investing activities	Net cash used in investing activities	(192,073)			(200,747)		Net cash used in investing activities	(138,455)			(192,073)
Financing activities	Financing activities						Financing activities
Draws on revolving credit facility	Draws on revolving credit facility	185,000			150,000		Draws on revolving credit facility	117,000			185,000
Payments on revolving credit facility	Payments on revolving credit facility	(260,000)			—		Payments on revolving credit facility	(40,000)			(260,000)
Issuances of long-term debt	Issuances of long-term debt	325,000			125,000		Issuances of long-term debt	424,946			325,000
Repayment of long-term debt	Repayment of long-term debt	—			(11,055)		Repayment of long-term debt	(325,000)			—

Payment of financing costs	Payment of financing costs	(2,846)			(1,619)		Payment of financing costs	(6,957)			(2,846)

Distributions to member							Distributions to member	(105,500)			—
Other financing	Other financing	(505)			(456)		Other financing	(559)			(505)
Net cash provided by financing activities	Net cash provided by financing activities	246,649			261,870		Net cash provided by financing activities	63,930			246,649
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	129,279			249,110		Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	72,474			129,279
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	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 beginning of period	87,341		(1)	29,391
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	158,670	(2)	$	330,062	Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	159,815	(2)	$	158,670
Supplementary cash flow information

Supplementary cash flow information	Supplementary cash flow information						Supplementary cash flow information
		$	35,065		$	34,454	Interest paid, net of amount capitalized	$	37,198		$	35,065

Supplementary non-cash investing and financing activities	Supplementary non-cash investing and financing activities						Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	Accrued additions to property, plant, and equipment	$	45,305		$	88,939	Accrued additions to property, plant, and equipment	$	7,025		$	45,305

Reduction in property, plant, and equipment due to regulatory disallowance							Reduction in property, plant, and equipment due to regulatory disallowance	$	13,841		$	—
Reduction in property, plant, and equipment due to securitization of capitalized storm costs							Reduction in property, plant, and equipment due to securitization of capitalized storm costs	$	197,689		$	—

(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 $156,318 and current restricted cash and cash equivalents of $2,352.
(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 $36,290, current restricted cash and cash equivalents of $14,902, and non-current restricted cash and cash equivalents of $108,623.							(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 $36,290, current restricted cash and cash equivalents of $14,902, and non-current restricted cash and cash equivalents of $108,623.

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


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


CLECO POWER	CLECO POWER							CLECO POWER

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)	Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)							Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS)	(THOUSANDS)	MEMBER’S EQUITY		AOCI		TOTAL MEMBER’S EQUITY		(THOUSANDS)	MEMBER’S EQUITY		AOCI		TOTAL MEMBER’S EQUITY
Balances, June 30, 2020		$	1,776,041	$	(21,612)	$	1,754,429

Net income		36,092		—		36,092
Other comprehensive income, net of tax		—		436		436
Balances, Sept. 30, 2020		$	1,812,133	$	(21,176)	$	1,790,957

Balances, June 30, 2021	Balances, June 30, 2021	$	1,878,478	$	(23,880)	$	1,854,598	Balances, June 30, 2021	$	1,878,478	$	(23,880)	$	1,854,598

Net income	Net income	56,561		—		56,561		Net income	56,561		—		56,561
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		413		413		Other comprehensive income, net of tax	—		413		413
Balances, Sept. 30, 2021	Balances, Sept. 30, 2021	$	1,935,039	$	(23,467)	$	1,911,572	Balances, Sept. 30, 2021	$	1,935,039	$	(23,467)	$	1,911,572

Balances, Dec. 31, 2019		$	1,735,977	$	(22,585)	$	1,713,392
Balances, June 30, 2022								Balances, June 30, 2022	$	2,008,449	$	(17,444)	$	1,991,005

Distributions to parent								Distributions to parent	(53,500)		—		(53,500)
Net income	Net income	76,156		—		76,156		Net income	40,733		—		40,733
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		1,409		1,409		Other comprehensive income, net of tax	—		370		370
Balances, Sept. 30, 2020		$	1,812,133	$	(21,176)	$	1,790,957
Balances, Sept. 30, 2022								Balances, Sept. 30, 2022	$	1,995,682	$	(17,074)	$	1,978,608

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

Net income	Net income	102,407		—		102,407		Net income	102,407		—		102,407
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		1,286		1,286		Other comprehensive income, net of tax	—		1,286		1,286
Balances, Sept. 30, 2021	Balances, Sept. 30, 2021	$	1,935,039	$	(23,467)	$	1,911,572	Balances, Sept. 30, 2021	$	1,935,039	$	(23,467)	$	1,911,572

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

Distributions to parent								Distributions to parent	(105,500)		—		(105,500)
Net income								Net income	134,462		—		134,462
Other comprehensive income, net of tax								Other comprehensive income, net of tax	—		1,109		1,109
Balances, Sept. 30, 2022								Balances, Sept. 30, 2022	$	1,995,682	$	(17,074)	$	1,978,608
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.							The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021~~2022 3RD 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 8	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 9	Income Taxes	Cleco and Cleco Power
Note 10	Disclosures about Segments	Cleco
Note 11	Regulation and Rates	Cleco and Cleco Power
Note 12	Variable Interest Entities	Cleco and Cleco Power
Note 13	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 14	Affiliate Transactions	Cleco and Cleco Power
Note 15	Intangible Assets, Intangible Liabilities, and ~~Liabilities~~Goodwill	Cleco and Cleco Power
Note 16	Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 17	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 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. Due to the decrease in the number of COVID-19 cases, effective October 27, 2021, the mandatory, state-wide mask mandate was once again revoked.

Cleco has modified some of its business operations, as these restrictions have significantly impacted many sectors of the economy. Impacts include record levels of unemployment, with businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. Cleco 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, OSHA, and other governmental and regulatory authorities. The COVID-19 pandemic may worsen in ~~the U.S. during the upcoming months, which may cause federal, state, and local governments to reconsider restrictions on business and social activities. In the event governments reinstate or~~

~~increase restrictions, the reopening of the economy may be further curtailed.~~

On September 9, 2021, the Presidential Administration announced mandatory COVID-19 vaccination plans impacting federal contractors and employees of companies having 100 or more employees. On November 4, 2021, OSHA announced a new emergency temporary standard requiring employers with 100 or more employees to develop, implement, and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to choose to either be vaccinated or undergo regular COVID-19 testing and wear a face covering at work. Cleco is closely monitoring updates concerning these vaccination mandates and any potential impacts they may have on its businesses and workforce. The impact of these vaccination standards could have an adverse impact on Cleco’s workforce, labor relations, and operations.

In March 2020 the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. On December 4, 2020, Cleco Power made a filing with the LPSC requesting the recovery of expenses incurred as a result of this executive order, as well as the lost revenue associated with the disconnection fees and incremental costs. Cleco Power anticipates approval of the recovery of these expenses in the first quarter of 2023. At September 30, ~~2021,~~2022, Cleco Power had a regulatory asset of $3.0 million recorded for expenses incurred related to the executive order, as allowed by the LPSC. ~~While~~

Cleco continues to assess the COVID-19 situation ~~Cleco~~and cannot predict the full impact that COVID-19, or ~~the~~any significant ~~disruption and volatility currently being experienced in the markets,~~related disruptions, will have on its business, cash flows, liquidity, financial condition, and results of operations at this time, due to numerous uncertainties. However, the ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the availability, 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, workforce availability, and the timing and extent to which normal economic and operating conditions resume.operations.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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.

Following the formation of Cleco Securitization I and the closing of the storm securitization financing on June 22, 2022, Cleco Power became the primary beneficiary of Cleco Securitization I, and as a result, the financial statements of Cleco Securitization I are consolidated with the financial statements of Cleco Power. For additional information about Cleco Securitization I, see Note 12 — “Variable Interest

Entities.” For additional information about the storm securitization financing and its regulatory impacts, see Note 5 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs” and Note 17 — “Storm Securitization and Cost Recovery.”

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.

These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary for a fair statement of the financial position and results of operations of Cleco and Cleco Power. Amounts reported in ~~Cleco~~Cleco’s 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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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.”

Restricted Cash and Cash Equivalents

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge	Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626	Cleco Katrina/Rita storm recovery surcharge	$	—	$	1,674

Cleco Power’s charitable contributions		678		1,718
Cleco Power’s rate credit escrow		—		201
Cleco Power’s storm restoration costs - Hurricane Ida						Cleco Power’s storm restoration costs - Hurricane Ida	9,350		—
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service						Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service	5,552		—
Total current	Total current	2,352		4,545		Total current	14,902		1,674
Non-current	Non-current					Non-current
Diversified Lands’ mitigation escrow	Diversified Lands’ mitigation escrow	22		22		Diversified Lands’ mitigation escrow	22		22
Cleco Cajun’s defense fund	Cleco Cajun’s defense fund	723		722		Cleco Cajun’s defense fund	728		723

Cleco Power’s future storm restoration costs						Cleco Power’s future storm restoration costs	102,586		—
Cleco Power’s storm restoration costs - Hurricane Ida						Cleco Power’s storm restoration costs - Hurricane Ida	6,037		—

Total non-current	Total non-current	745		744		Total non-current	109,373		745
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	3,097	$	5,289	Total restricted cash and cash equivalents	$	124,275	$	2,419


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge	Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626	Cleco Katrina/Rita storm recovery surcharge	$	—	$	1,674
Storm restoration costs - Hurricane Ida						Storm restoration costs - Hurricane Ida	9,350		—
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs						Cleco Securitization I’s operating expenses and storm recovery bond issuance costs	5,552		—
Total current						Total current	14,902		1,674
Non-current						Non-current
Future storm restoration costs						Future storm restoration costs	102,586		—
Storm restoration costs - Hurricane Ida						Storm restoration costs - Hurricane Ida	6,037		—

Charitable contributions		678		1,718
Rate credit escrow		—		201

Total non-current						Total non-current	108,623		—
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	2,352	$	4,545	Total restricted cash and cash equivalents	$	123,525	$	1,674

Prior to the repayment of the storm recovery bonds at their scheduled maturity in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash was collected, it was restricted for payment of administrative fees, interest, and principal on the 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 to be used to benefit retail customers in a manner to be approved by the LPSC. In September 2022, the remaining $1.6 million was refunded to Cleco Power’s retail customers.

On June 22, 2022, the storm securitization financing was completed. In connection with this financing, and ~~timing~~ as approved by the ~~LPSC.~~LPSC, newly funded storm reserves for future storm restoration costs and Hurricane Ida storm restoration costs were established at Cleco Power. The establishment of these reserves resulted in the establishment of corresponding restricted cash and cash equivalents accounts. Additionally, restricted cash and cash equivalents accounts were established for payment of Cleco Securitization I’s estimated operating expenses, storm recovery bond issuance costs, and payment of debt service on those storm recovery bonds. For more information on the storm securitization financing, see Note 17 — “Storm Securitization and Cost Recovery.”

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~~As a result of the market price volatility of natural gas experienced ~~a recent economic decline during 2020 and 2021, primarily related~~throughout 2022, Cleco has experienced significant increases to the ~~COVID-19 pandemic and weather-related events,~~pass-through fuel component of retail customer energy bills. Due to these increased customer fuel costs, along with the ~~economic outlook at September 30, 2021, was still within range~~impacts of ~~its historical~~a 40-year high inflation rate, Cleco has experienced increases in credit loss ~~analysis.~~reserves. These factors have not been and are not expected to be material to Cleco’s results of operations, financial condition, or cash flows.

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 SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Beginning of period	$	1,190	$	1,638	$	2,828	$	1,302	$	1,638	$	2,940

Current period provision	939		—		939		2,149		—		2,149
Charge-offs	(894)		—		(894)		(2,899)		—		(2,899)
Recovery	263		—		263		946		—		946
Balances, Sept. 30, 2022	$	1,498	$	1,638	$	3,136	$	1,498	$	1,638	$	3,136

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


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

Cleco
FOR THE THREE MONTHS ENDED SEPT. 30, 2021 FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS) ACCOUNTS
RECEIVABLE OTHER* TOTAL ACCOUNTS
RECEIVABLE OTHER* TOTAL
Balances, beginning of period $ 1,334 $ 1,638 $ 2,972 $ 2,758 $ 1,638 $ 4,396
Current period provision 567 — 567 3,057 — 3,057
Charge-offs (730) — (730) (5,172) — (5,172)
Recovery 586 — 586 1,114 — 1,114
Balances, Sept. 30, 2021 $ 1,757 $ 1,638 $ 3,395 $ 1,757 $ 1,638 $ 3,395

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


		FOR THE THREE MONTHS ENDED SEPT. 30, 2020						FOR THE NINE MONTHS ENDED SEPT. 30, 2020							FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL		(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period		$	3,486	$	1,638	$	5,124	$	3,005	$	1,250	$	4,255
CECL adoption		—		—		—		71		—		71
Beginning of period														Beginning of period	$	1,334	$	1,638	$	2,972	$	2,758	$	1,638	$	4,396

Current period provision	Current period provision	2,041		—		2,041		5,675		388		6,063		Current period provision	567		—		567		3,057		—		3,057
Charge-offs	Charge-offs	—		—		—		(4,091)		—		(4,091)		Charge-offs	(730)		—		(730)		(5,172)		—		(5,172)
Recovery	Recovery	54		—		54		921		—		921		Recovery	586		—		586		1,114		—		1,114
Balances, Sept. 30, 2020		$	5,581	$	1,638	$	7,219	$	5,581	$	1,638	$	7,219
Balances, Sept. 30, 2021														Balances, Sept. 30, 2021	$	1,757	$	1,638	$	3,395	$	1,757	$	1,638	$	3,395

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


Cleco Power	Cleco Power					Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30, 2021		FOR THE NINE MONTHS ENDED SEPT. 30, 2021			FOR THE THREE MONTHS ENDED SEPT. 30, 2022		FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE				(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, beginning of period		$	1,334	$	2,758
Beginning of period						Beginning of period	$	1,190	$	1,302

Current period provision	Current period provision	567		3,057		Current period provision	939		2,149
Charge-offs	Charge-offs	(730)		(5,172)		Charge-offs	(894)		(2,899)
Recovery	Recovery	586		1,114		Recovery	263		946
Balances, Sept. 30, 2021		$	1,757	$	1,757
Balances, Sept. 30, 2022						Balances, Sept. 30, 2022	$	1,498	$	1,498


		FOR THE THREE MONTHS ENDED SEPT. 30, 2020		FOR THE NINE MONTHS ENDED SEPT. 30, 2020			FOR THE THREE MONTHS ENDED SEPT. 30, 2021		FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE				(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, beginning of period		$	3,486	$	3,005
CECL adoption		—		71
Beginning of period						Beginning of period	$	1,334	$	2,758

Current period provision	Current period provision	2,041		5,675		Current period provision	567		3,057
Charge-offs	Charge-offs	—		(4,091)		Charge-offs	(730)		(5,172)
Recovery	Recovery	54		921		Recovery	586		1,114
Balances, Sept. 30, 2020		$	5,581	$	5,581
Balances, Sept. 30, 2021						Balances, Sept. 30, 2021	$	1,757	$	1,757


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. Certain debt contracts 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 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. In addition, a congressional appropriation has been secured, subject to ~~general principles included in~~ the ~~accounting guidance. Effective January 1, 2021,~~U.S. Department of Energy’s grant process, to help offset future costs associated with Cleco ~~adopted the amended accounting guidance. Adoption of~~Power’s 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 nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021 was as follows:


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Fixed payments	$	10,000	$	10,000	$	30,000	$	30,000
Variable payments	6,244		4,938		17,657		15,413
Amortization of deferred lease liability*	2,301		2,301		6,904		6,904
Total lease income	$	18,545	$	17,239	$	54,561	$	52,317


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Fixed payments $ 10,000 $ 10,000 $ 30,000 $ 30,000
Variable payments 4,938 5,190 15,413 15,950
Amortization of deferred lease liability*
2,301 2,301 6,904 6,904
Total lease income $ 17,239 $ 17,491 $ 52,317 $ 52,854

* 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.


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q


Note 4 — Revenue Recognition

Revenue from Contracts with Customers

On September 1, 2022, Cleco Power began billing and collecting a new storm recovery surcharge from its retail customers. This surcharge represents the recovery of costs incurred by Cleco Power as a result of Hurricanes Laura, Delta, Zeta, and Ida and Winter Storms Uri and Viola, as well as interest and associated expenses. Cleco Power remits the collected storm recovery surcharge to Cleco Securitization I to

service Cleco Securitization I’s storm recovery bonds. The storm recovery surcharge will continue to be billed and collected from Cleco Power’s retail customers through the life of the Cleco Securitization I storm recovery bonds. For information about the securitization of storm costs, see “Note 17 — Storm Securitization and Cost Recovery.”

Disaggregated Revenue

Operating revenue, net for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021 was as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30, 2021														FOR THE THREE MONTHS ENDED SEPT. 30, 2022
(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)	$	148,522		$	—		$	—		$	—	$	148,522	Residential (1)	$	190,023		$	—		$	—		$	—	$	190,023
Commercial (1)	Commercial (1)	82,711			—			—			—		82,711		Commercial (1)	113,176			—			—			—		113,176
Industrial (1)	Industrial (1)	45,446			—			—			—		45,446		Industrial (1)	64,486			—			—			—		64,486
Other retail (1)	Other retail (1)	4,479			—			—			—		4,479		Other retail (1)	5,213			—			—			—		5,213

Storm recovery surcharge															Storm recovery surcharge	5,025			—			—			—		5,025
Electric customer credits	Electric customer credits	(764)			—			—			—		(764)		Electric customer credits	(6,728)			—			—			—		(6,728)
Total retail revenue	Total retail revenue	280,394			—			—			—		280,394		Total retail revenue	371,195			—			—			—		371,195
Wholesale, net	Wholesale, net	74,831		(1)	107,501			(2,420)		(2)	—		179,912		Wholesale, net	97,933		(1)	140,767		(2)	(2,420)		(3)	—		236,280
Transmission, net	Transmission, net	17,235		(3)	17,903			—			(2,217)		32,921		Transmission, net	18,664			21,009			—			(2,560)		37,113
Other	Other	5,618			—			—			—		5,618		Other	6,094			—			—			—		6,094
Affiliate (4)	Affiliate (4)	1,380			—			32,116			(33,496)		—		Affiliate (4)	1,657			—			29,583			(31,240)		—
Total revenue from contracts with customers	Total revenue from contracts with customers	379,458			125,404			29,696			(35,713)		498,845		Total revenue from contracts with customers	495,543			161,776			27,163			(33,800)		650,682
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	1,094		(5)	17,254		(6)	1			—		18,349		Other	5,296		(5)	18,564		(6)	1			—		23,861
Total revenue unrelated to contracts with customers	Total revenue unrelated to contracts with customers	1,094			17,254			1			—		18,349		Total revenue unrelated to contracts with customers	5,296			18,564			1			—		23,861
Operating revenue, net	Operating revenue, net	$	380,552		$	142,658		$	29,697		$	(35,713)	$	517,194	Operating revenue, net	$	500,839		$	180,340		$	27,164		$	(33,800)	$	674,543

(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.

~~(3)~~ ~~Includes $0.1 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 ~~$14.9~~$16.2 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.


		FOR THE THREE MONTHS ENDED SEPT. 30, 2020														FOR THE THREE MONTHS ENDED SEPT. 30, 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)	$	128,981		$	—		$	—		$	—	$	128,981	Residential (1)	$	148,522		$	—		$	—		$	—	$	148,522
Commercial (1)	Commercial (1)	68,220			—			—			—		68,220		Commercial (1)	82,711			—			—			—		82,711
Industrial (1)	Industrial (1)	32,809			—			—			—		32,809		Industrial (1)	45,446			—			—			—		45,446
Other retail (1)	Other retail (1)	3,614			—			—			—		3,614		Other retail (1)	4,479			—			—			—		4,479

Electric customer credits	Electric customer credits	(16,534)			—			—			—		(16,534)		Electric customer credits	(764)			—			—			—		(764)
Total retail revenue	Total retail revenue	217,090			—			—			—		217,090		Total retail revenue	280,394			—			—			—		280,394
Wholesale, net	Wholesale, net	52,216		(1)	99,956			(2,420)		(2)	—		149,752		Wholesale, net	74,831		(1)	107,501		(2)	(2,420)		(3)	—		179,912
Transmission, net	Transmission, net	14,656			13,818			—			(1,510)		26,964		Transmission, net	17,235		(4)	17,903			—			(2,217)		32,921
Other	Other	3,118			—			—			—		3,118		Other	5,618			—			—			—		5,618
Affiliate ~~(3)~~(5)	Affiliate ~~(3)~~(5)	1,506			—			35,522			(37,028)		—		Affiliate ~~(3)~~(5)	1,380			—			32,116			(33,496)		—
Total revenue from contracts with customers	Total revenue from contracts with customers	288,586			113,774			33,102			(38,538)		396,924		Total revenue from contracts with customers	379,458			125,404			29,696			(35,713)		498,845
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	3,013		(4)	17,513		(5)	1			—		20,527		Other	1,094		(6)	17,254		(7)	1			—		18,349
Total revenue unrelated to contracts with customers	Total revenue unrelated to contracts with customers	3,013			17,513			1			—		20,527		Total revenue unrelated to contracts with customers	1,094			17,254			1			—		18,349
Operating revenue, net	Operating revenue, net	$	291,599		$	131,287		$	33,103		$	(38,538)	$	417,451	Operating revenue, net	$	380,552		$	142,658		$	29,697		$	(35,713)	$	517,194

(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.

~~(3)~~ ~~Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.~~

~~(4)~~ ~~Realized gains associated with FTRs.~~

~~(5)~~ ~~Includes $15.2 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.~~


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 348,918 $ — $ — $ — $ 348,918
Commercial (1)
214,129 — — — 214,129
Industrial (1)
119,497 — — — 119,497
Other retail (1)
11,925 — — — 11,925
Electric customer credits (40,794) — — — (40,794)
Total retail revenue 653,675 — — — 653,675
Wholesale, net 182,769 (1) 300,415 (7,260) (2) — 475,924
Transmission, net 44,530 (3) 46,733 (4) — (5,752) 85,511
Other 13,509 — — (1) 13,508
Affiliate (5)
4,259 — 85,392 (89,651) —
Total revenue from contracts with customers 898,742 347,148 78,132 (95,404) 1,228,618
Revenue unrelated to contracts with customers
Other 9,953 (6) 52,362 (7) 4 — 62,319
Total revenue unrelated to contracts with customers 9,953 52,362 4 — 62,319
Operating revenue, net $ 908,695 $ 399,510 $ 78,136 $ (95,404) $ 1,290,937

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

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

~~(3)~~ ~~Includes $0.4 million of electric customer credits.~~

(4) Includes ~~$0.2~~$0.1 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 ~~$45.4~~$14.9 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q


	FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	434,259		$	—		$	—		$	—	$	434,259
Commercial (1)	274,046			—			—			—		274,046
Industrial (1)	160,948			—			—			—		160,948
Other retail (1)	13,639			—			—			—		13,639
Storm recovery surcharge	5,025			—			—			—		5,025
Electric customer credits	(6,992)			—			—			—		(6,992)
Total retail revenue	880,925			—			—			—		880,925
Wholesale, net	245,231		(1)	370,489		(2)	(7,260)		(3)	—		608,460
Transmission, net	46,244			57,281			—			(7,388)		96,137
Other	16,285			—			1			—		16,286
Affiliate (4)	4,744			—			82,728			(87,472)		—
Total revenue from contracts with customers	1,193,429			427,770			75,469			(94,860)		1,601,808
Revenue unrelated to contracts with customers
Other	12,715		(5)	54,616		(6)	4			—		67,335
Total revenue unrelated to contracts with customers	12,715			54,616			4			—		67,335
Operating revenue, net	$	1,206,144		$	482,386		$	75,473		$	(94,860)	$	1,669,143

(1) Includes fuel recovery revenue.

(2) Includes $(10.8) 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 $47.7 million in lease revenue related to the Cottonwood Sale Leaseback and $6.9 million of deferred lease revenue amortization.


		FOR THE NINE MONTHS ENDED SEPT. 30, 2020														FOR THE NINE MONTHS ENDED SEPT. 30, 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)	$	308,525		$	—		$	—		$	—	$	308,525	Residential (1)	$	348,918		$	—		$	—		$	—	$	348,918
Commercial (1)	Commercial (1)	190,905			—			—			—		190,905		Commercial (1)	214,129			—			—			—		214,129
Industrial (1)	Industrial (1)	94,227			—			—			—		94,227		Industrial (1)	119,497			—			—			—		119,497
Other retail (1)	Other retail (1)	10,416			—			—			—		10,416		Other retail (1)	11,925			—			—			—		11,925
Surcharge		2,440			—			—			—		2,440

Electric customer credits	Electric customer credits	(33,219)			—			—			—		(33,219)		Electric customer credits	(40,794)			—			—			—		(40,794)
Total retail revenue	Total retail revenue	573,294			—			—			—		573,294		Total retail revenue	653,675			—			—			—		653,675
Wholesale, net	Wholesale, net	140,139		(1)	273,836			(7,260)		(2)	—		406,715		Wholesale, net	182,769		(1)	300,415		(2)	(7,260)		(3)	—		475,924
Transmission, net	Transmission, net	38,273		(3)	39,880		(4)	—			(4,966)		73,187		Transmission, net	44,530		(4)	46,733		(5)	—			(5,752)		85,511
Other	Other	10,416			—			—			1		10,417		Other	13,509			—			—			(1)		13,508
Affiliate ~~(5)~~(6)	Affiliate ~~(5)~~(6)	3,852			204			93,938			(97,994)		—		Affiliate ~~(5)~~(6)	4,259			—			85,392			(89,651)		—
Total revenue from contracts with customers	Total revenue from contracts with customers	765,974			313,920			86,678			(102,959)		1,063,613		Total revenue from contracts with customers	898,742			347,148			78,132			(95,404)		1,228,618
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	6,272		(6)	52,895		(7)	2			—		59,169		Other	9,953		(7)	52,362		(8)	4			—		62,319
Total revenue unrelated to contracts with customers	Total revenue unrelated to contracts with customers	6,272			52,895			2			—		59,169		Total revenue unrelated to contracts with customers	9,953			52,362			4			—		62,319
Operating revenue, net	Operating revenue, net	$	772,246		$	366,815		$	86,680		$	(102,959)	$	1,122,782	Operating revenue, net	$	908,695		$	399,510		$	78,136		$	(95,404)	$	1,290,937

(1) Includes fuel recovery revenue.

(2)Includes $(10.0) 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)~~(4) Includes ~~$0.8~~$0.4 million of electric customer credits.

~~(4)~~(5) Includes $0.2 million of electric customer credits.

~~(5)~~(6) Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.

~~(6)~~(7) Realized gains associated with FTRs.

~~(7)~~(8) Includes ~~$46.0~~$45.4 million in lease revenue related to the Cottonwood Sale Leaseback and $6.9 million of deferred lease revenue amortization.

Cleco and Cleco Power have unsatisfied performance obligations under contracts with cooperatives and municipalities with remaining durations ranging between 1 and 1412 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At September 30, ~~2021,~~2022, Cleco and Cleco Power had ~~$65.7~~$232.4 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 recognizes an asset for certain costs capitalized or deferred for recovery from customers and recognizes a liability for amounts expected to be returned to customers or collected for future expected costs. Cleco Power records these assets and liabilities based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


~~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

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	Cleco Power								Cleco Power
						REMAINING RECOVERY PERIOD (YRS.)												REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020			(THOUSANDS)	AT SEPT. 30, 2022				AT DEC. 31, 2021
Regulatory assets	Regulatory assets								Regulatory assets
Acadia Unit 1 acquisition costs	Acadia Unit 1 acquisition costs	$	1,939	$	2,019		18.5				Acadia Unit 1 acquisition costs	$	1,834			$	1,913		17.25
Accumulated deferred fuel (1)	Accumulated deferred fuel (1)	78,847		28,194		Various	(2)		Accumulated deferred fuel (1)	81,928				56,826				Various
Affordability study									Affordability study	12,060				13,094				8.75
AFUDC equity gross-up	AFUDC equity gross-up	67,348		69,670		Various	(3)		AFUDC equity gross-up	64,251				66,574				Various	(2)
Affordability study		13,438		—		10
AMI deferred revenue requirement	AMI deferred revenue requirement	2,181		2,591		4			AMI deferred revenue requirement	1,636				2,045				3.5
AROs ~~(7)~~(8)	AROs ~~(7)~~(8)	8,060		5,488					AROs ~~(7)~~(8)	16,653				15,141
Bayou Vista to Segura deferred revenue requirement (7)		287		—
Bayou Vista to Segura transmission project deferred revenue requirement									Bayou Vista to Segura transmission project deferred revenue requirement	3,765				1,392				0.75
Coughlin transaction costs	Coughlin transaction costs	853		876		28			Coughlin transaction costs	823				845				26.75
COVID-19 executive order ~~(7)~~(8)	COVID-19 executive order ~~(7)~~(8)	2,953		2,953					COVID-19 executive order ~~(7)~~(8)	2,953				2,953
Deferred storm restoration costs - Hurricane Delta ~~(7)~~(6)	Deferred storm restoration costs - Hurricane Delta ~~(7)~~(6)	17,866		17,051					Deferred storm restoration costs - Hurricane Delta ~~(7)~~(6)	21				17,113
Deferred storm restoration costs - Hurricane Ida (7)	Deferred storm restoration costs - Hurricane Ida (7)	36,836		—					Deferred storm restoration costs - Hurricane Ida (7)	9,350				37,617
Deferred storm restoration costs - Hurricane Laura ~~(7)~~(6)	Deferred storm restoration costs - Hurricane Laura ~~(7)~~(6)	56,815		54,406					Deferred storm restoration costs - Hurricane Laura ~~(7)~~(6)	90				54,282
Deferred storm restoration costs - Hurricane Zeta ~~(7)~~(6)	Deferred storm restoration costs - Hurricane Zeta ~~(7)~~(6)	3,496		3,493					Deferred storm restoration costs - Hurricane Zeta ~~(7)~~(6)	2				3,296
Deferred storm restoration costs - Winter Storms Uri & Viola ~~(7)~~	Deferred storm restoration costs - Winter Storms Uri & Viola ~~(7)~~	1,974		—					Deferred storm restoration costs - Winter Storms Uri & Viola ~~(7)~~	—				1,912
Dolet Hills Power Station closure costs ~~(7)~~(8)	Dolet Hills Power Station closure costs ~~(7)~~(8)	112,158		48,982					Dolet Hills Power Station closure costs ~~(7)~~(8)	147,021				145,844
Emergency declarations		—		270		—

Energy efficiency	Energy efficiency	1,998		2,820		1.5			Energy efficiency	588				1,645				0.5
Financing costs (1)	Financing costs (1)	6,919		7,184		Various	(4)		Financing costs (1)	6,549				6,826				Various	(3)
Interest costs	Interest costs	3,521		3,708		Various	(3)		Interest costs	3,272				3,459				Various	(2)
Lignite Mine closure costs ~~(7)~~(8)	Lignite Mine closure costs ~~(7)~~(8)	93,093		—					Lignite Mine closure costs ~~(7)~~(8)	136,071				136,980
Madison Unit 3 property taxes ~~(7)~~(9)	Madison Unit 3 property taxes ~~(7)~~(9)	6,272		—					Madison Unit 3 property taxes ~~(7)~~(9)	13,028				8,362
Non-service cost of postretirement benefits	Non-service cost of postretirement benefits	11,662		9,901		Various	(3)		Non-service cost of postretirement benefits	14,472				12,950				Various	(2)
Other		13,247		4,229		Various	(2)
Other assets									Other assets	8,792				11,224				Various
Postretirement costs	Postretirement costs	149,883		165,437		Various	(5)		Postretirement costs	108,524				117,773				Various	(4)
Production operations and maintenance expenses	Production operations and maintenance expenses	1,998		4,058		Various	(6)		Production operations and maintenance expenses	9,017				11,058				Various	(5)
Rodemacher Unit 2 deferred costs ~~(7)~~(8)	Rodemacher Unit 2 deferred costs ~~(7)~~(8)	5,519		1,333					Rodemacher Unit 2 deferred costs ~~(7)~~(8)	11,210				6,931
St. Mary Clean Energy Center	St. Mary Clean Energy Center	6,524		3,479		4			St. Mary Clean Energy Center	8,607				6,089				2.75

Training costs	Training costs	5,968		6,085		38.5			Training costs	5,813				5,929				37.25
Tree trimming costs	Tree trimming costs	9,771		11,807		3.5			Tree trimming costs	7,056				9,092				2.5
Total regulatory assets	Total regulatory assets	721,426		456,034					Total regulatory assets	675,386				759,165
Regulatory liabilities	Regulatory liabilities								Regulatory liabilities
AFUDC (7)		(6,500)		(4,218)
Corporate franchise tax, net		—		(763)		—

Deferred taxes, net	Deferred taxes, net	(138,864)		(175,584)		Various			Deferred taxes, net	(49,099)				(95,544)				Various

Storm reserves									Storm reserves	(118,002)				—
Total regulatory liabilities	Total regulatory liabilities	(145,364)		(180,565)					Total regulatory liabilities	(167,101)				(95,544)
Total regulatory assets, net	Total regulatory assets, net	$	576,062	$	275,469				Total regulatory assets, net	$	508,285			$	663,621
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment. (2) For more information related to the remaining recovery period, refer to the following disclosures for each specific regulatory asset or liability. (3) Amortized over the estimated lives of the respective assets. (4) Amortized over the terms of the related debt issuances. (5) Amortized over the average service life of the remaining plan participants. (6) Deferral is recovered over the following three year regulatory period. (7) Currently not in a recovery period.
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 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) From June 1, 2021, through August 31, 2022, these were being recovered through the interim storm recovery rate. For more information, see Note 17 — “Storm Securitization and Cost Recovery.” (7) Currently not in a recovery period. The balance remaining represents amounts under a prudency review by the LPSC. (8) Currently not in a recovery period. (9) Property taxes paid for the year ended December 31, 2021, are being recovered over 12 months beginning July 1, 2022.									(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 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) From June 1, 2021, through August 31, 2022, these were being recovered through the interim storm recovery rate. For more information, see Note 17 — “Storm Securitization and Cost Recovery.” (7) Currently not in a recovery period. The balance remaining represents amounts under a prudency review by the LPSC. (8) Currently not in a recovery period. (9) Property taxes paid for the year ended December 31, 2021, are being recovered over 12 months beginning July 1, 2022.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Total Cleco Power regulatory assets, net	Total Cleco Power regulatory assets, net	$	576,062	$	275,469	Total Cleco Power regulatory assets, net	$	508,285	$	663,621
2016 Merger adjustments *	2016 Merger adjustments *					2016 Merger adjustments *
Fair value of long-term debt	Fair value of long-term debt	114,001		119,553		Fair value of long-term debt	106,599		112,150
Postretirement costs	Postretirement costs	13,921		15,411		Postretirement costs	11,933		13,424
Financing costs	Financing costs	7,334		7,592		Financing costs	6,990		7,248
Debt issuance costs	Debt issuance costs	5,004		5,254		Debt issuance costs	4,671		4,920
Total Cleco regulatory assets, net	Total Cleco regulatory assets, net	$	716,322	$	423,279	Total Cleco regulatory assets, net	$	638,478	$	801,363

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

~~Accumulated~~ Deferred ~~Fuel~~Storm Restoration Costs

In ~~February~~2020 and 2021, Cleco Power’s distribution and transmission systems sustained damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, 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 U.S., 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,Viola. Cleco Power received approval from the LPSC to defer $50.0 million of these costs and recover them over 12 months through Cleco Power’s FAC 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.”

~~Higher lignite and natural gas costs also contributed to the increase in Cleco Power’s accumulated deferred fuel.~~

~~Affordability Study~~

~~On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As~~established 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.

~~Bayou Vista To Segura Deferred Revenue Requirement~~

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 and recover the revenue requirements, including interest at Cleco Power’s weighted average cost of capital, upon the completion of each phase of the Bayou Vista to Segura Transmission project. The northern phase of the project was completed in August 2021. At September 30, 2021, Cleco Power had a regulatory asset of $0.3 million related to deferred revenue associated with the northern phase of the Bayou Vista to Segura Transmission project. The regulatory asset will be amortized over 12 months beginning July 1, 2022.

~~Deferred Storm Restoration Costs~~ ~~— Hurricane Ida~~

On August 29, 2021, Hurricane Ida made landfall in southeast Louisiana as a Category 4 storm, causing power outages for approximately 100,000 of Cleco Power’s electric customers located primarily in southeastern Louisiana.

~~On September 22, 2021, the LPSC approved Cleco Power’s establishment of a~~separate regulatory asset to track and defer non-capital expenses associated with each corresponding storm, as approved by the ~~hurricane. For more information about~~LPSC.

On June 22, 2022, through Cleco Securitization I, Cleco Power completed a securitized financing of Storm Recovery Property, which included the previously mentioned storm restoration costs that were deferred as regulatory assets. In connection with that securitization financing, Cleco Securitization I used the net proceeds from its issuance of storm recovery bonds to purchase the Storm Recovery Property from Cleco Power. Prior to September 1, 2022, the costs for Hurricanes Laura, Delta, and Zeta were recovered through the interim storm recovery rate. The balances remaining at September 30, 2022, for Hurricanes Laura, Delta, and Zeta are due to the timing of collections of the interim storm rate and are expected to be funded by the storm reserve in the first quarter of 2023. The costs remaining at September 30, 2022, for Hurricane Ida ~~see Note 17 — “Storm Restoration — Hurricane Ida.”~~

~~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,~~are currently under a prudency review by 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.”

~~Lignite Mine Closure Cost~~

~~On October 6, 2020,~~LPSC. Cleco Power ~~and SWEPCO made a joint filing with~~is unable to determine 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 17, 2021, the LPSC approved the establishmentoutcome or timing of a regulatory asset for certain lignite costs that 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 September 30, 2021, Cleco Power had a regulatory asset of $93.1 million for these mine-related incurred costs.such review. For more information on the ~~Oxbow mine,~~storm securitization financing, see Note 17 — “Storm Securitization and Cost Recovery.”

Storm Reserves

On June 22, 2022, in conjunction with the storm securitization financing and pursuant to the financing order issued by the LPSC on April 1, 2022, newly funded storm reserves for future storm restoration costs and Hurricane Ida storm restoration costs were established. Upon securitization, Cleco Power withdrew $79.6 million from the LPSC approved Hurricane Ida storm reserve. At September 30, 2022, Cleco Power had a balance of $15.4 million related to the Hurricane Ida storm reserve, with the current portion of $9.4 million in Other current liabilities on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. The current portion represents those deferred storm costs recorded in the related Hurricane Ida regulatory asset that are currently under a prudency review by the LPSC. At September 30, 2022, Cleco Power had a storm reserve balance of $102.6 million for future storm restoration costs.

St. Mary Clean Energy Center

Cleco Power has a regulatory asset for the revenue requirements related to the planning and construction costs

incurred for the St. Mary Clean Energy Center. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The approved settlement also included refunding $10.4 million to Cleco Power’s retail customers. As a result, a regulatory asset of $3.8 million was recognized for the incurred refund liability for retail revenues that will continue to be collected until Cleco Power’s current base rates are reset in its next rate case, which is expected on July 1, 2024. At September 30, 2022, the St. Mary Clean Energy Center regulatory asset consisted of $4.8 million for the original revenue requirement included in current base rates and $3.8 million for the incurred refund liability. On October 1, 2022, Cleco Power began amortizing the $3.8 million regulatory asset to Electric customer credits on its Condensed Consolidated Statement of Income as amounts are collected from customers. For more information on the settlement and disallowance, see Note — 11 “Regulation and Rates — St. Mary Clean Energy Center” and Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — ~~Risks~~LPSC Audits and ~~Uncertainties.~~Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

~~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 income taxes. At September 30, 2021, Cleco Power had a regulatory asset of $6.3 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.

~~Other~~

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 a regulatory asset to recover the undercollection of revenues related to the Northlake Transmission Agreement capped at $5.7 million. The amount recorded in the regulatory asset at June 30, 2021, began being amortized over 12 months on July 1, 2021. Amounts recorded in the regulatory asset after June 30, 2021, are being amortized over the remaining regulatory period ending June 30, 2022. At September 30, 2021, Cleco Power had a regulatory asset of $4.2 million relating to the Northlake Transmission Agreement.

~~In addition, the LPSC approved recovery of other previously deferred costs associated with Cleco Power’s~~


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

~~recently approved retail rate plan, which began being amortized over four years on July 1, 2021. At September 30, 2021, Cleco Power had a regulatory asset of $3.9 million for deferred costs.~~

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 of the Coughlin Pipeline project, for the revenue requirement associated with the project, until Cleco Power’s new retail rate plan was approved. As approved by the LPSC in Cleco Power’s new retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021. At September 30, 2021, Cleco Power had a regulatory asset of $5.1 million related to the deferred revenue associated with the Coughlin Pipeline project.

~~St. Mary Clean Energy Center~~

Cleco Power had a regulatory asset for revenue requirements related to the St. Mary Clean Energy Center project. As approved by the LPSC in Cleco Power’s new retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021.


Note 6 — Fair Value Accounting and Financial Instruments

The amounts reflected on ~~Cleco~~Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, ~~2021,~~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~~Cleco’s and Cleco Power’s financial instruments not measured at fair value on ~~Cleco~~Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets:


Cleco	Cleco									Cleco
		AT SEPT. 30, 2021				AT DEC. 31, 2020					AT SEPT. 30, 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	$	3,550,179	$	3,836,960	$	3,230,500	$	3,541,349	Long-term debt	$	3,577,030	$	3,284,781	$	3,482,405	$	3,752,220

* The carrying value of long-term debt does not include deferred issuance costs of ~~$14.1~~$16.9 million at
September 30, ~~2021,~~2022, and ~~$13.4~~$13.2 million at December 31, ~~2020.~~2021.


Cleco Power	Cleco Power									Cleco Power
		AT SEPT. 30, 2021				AT DEC. 31, 2020					AT SEPT. 30, 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	$	1,820,177	$	2,100,029	$	1,494,947	$	1,794,799	Long-term debt	$	1,920,431	$	1,864,342	$	1,820,254	$	2,085,944

* The carrying value of long-term debt does not include deferred issuance costs of ~~$8.5~~$12.6 million at
September 30, ~~2021,~~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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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 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 nine months ended September 30, ~~2021,~~2022, and the year ended December 31, ~~2020,~~2021, Cleco did not experience any transfers ~~between levels within~~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 SEPT. 30, 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	$	218,259	$	218,259	$	—	$	—	$	145,033	$	145,033	$	—	$	—
FTRs	5,977		—		—		5,977		6,977		—		—		6,977
Natural gas derivatives*	166,226		—		166,226		—		87,464		—		87,464		—
Total assets	$	390,462	$	218,259	$	166,226	$	5,977	$	239,474	$	145,033	$	87,464	$	6,977
Liability description
FTRs	$	3,982	$	—	$	—	$	3,982	$	834	$	—	$	—	$	834
Natural gas derivatives*	977		—		977		—		—		—		—		—
Total liabilities	$	4,959	$	—	$	977	$	3,982	$	834	$	—	$	—	$	834

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


Cleco Power
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT SEPT. 30, 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	$	151,637	$	151,637	$	—	$	—	$	82,411	$	82,411	$	—	$	—
FTRs	5,195		—		—		5,195		5,515		—		—		5,515

Total assets	$	156,832	$	151,637	$	—	$	5,195	$	87,926	$	82,411	$	—	$	5,515
Liability description
FTRs	$	457	$	—	$	—	$	457	$	597	$	—	$	—	$	597

Total liabilities*	$	457	$	—	$	—	$	457	$	597	$	—	$	—	$	597

* Cleco Power entered into natural gas derivatives during the three months ended September 30, 2022. Natural gas derivatives include swap transactions. Cleco Power had a current liability for natural gas derivatives at September 30, 2022, of less than $0.1 million.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

Cleco
FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS) AT SEPT. 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 $ 252,807 $ — $ 252,807 $ — $ 86,001 $ — $ 86,001 $ —
FTRs 9,338 — — 9,338 4,805 — — 4,805
Natural gas derivatives* 132,892 — 132,892 — 8,599 — 8,599 —
Total assets $ 395,037 $ — $ 385,699 $ 9,338 $ 99,405 $ — $ 94,600 $ 4,805
Liability description
FTRs $ 1,589 $ — $ — $ 1,589 $ 1,625 $ — $ — $ 1,625
Natural gas derivatives* — — — — 1,612 — 1,612 —
Total liabilities $ 1,589 $ — $ — $ 1,589 $ 3,237 $ — $ 1,612 $ 1,625

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

Cleco Power
FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS) AT SEPT. 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 $ 135,763 $ — $ 135,763 $ — $ 25,357 $ — $ 25,357 $ —
FTRs 6,028 — — 6,028 4,337 — — 4,337
Total assets $ 141,791 $ — $ 135,763 $ 6,028 $ 29,694 $ — $ 25,357 $ 4,337
Liability description
FTRs $ 1,330 $ — $ — $ 1,330 $ 1,121 $ — $ — $ 1,121
Total liabilities $ 1,330 $ — $ — $ 1,330 $ 1,121 $ — $ — $ 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 SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Beginning balance	$	4,682	$	7,501	$	6,143	$	3,180
Unrealized gains (losses)*	1,821		3,955		(1,920)		18,861
Purchases	168		619		7,234		11,426
Settlements	(4,676)		(4,326)		(9,462)		(25,718)
Ending balance	$	1,995	$	7,749	$	1,995	$	7,749
* 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 SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Beginning balance $ 7,501 $ 8,040 $ 3,180 $ 5,778
Unrealized gains (losses)* 3,955 4 18,861 (736)
Purchases 619 443 11,426 10,175
Settlements (4,326) (3,160) (25,718) (9,890)
Ending balance $ 7,749 $ 5,327 $ 7,749 $ 5,327
* 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 Power	Cleco Power									Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021		2022		2021
Beginning balance	Beginning balance	$	5,990	$	7,511	$	3,216	$	5,725	Beginning balance	$	10,138	$	5,990	$	4,918	$	3,216
Unrealized gains*		1,196		426		545		1,355
Unrealized (losses) gains*										Unrealized (losses) gains*	(1,363)		1,196		189		545
Purchases	Purchases	619		443		9,236		8,219		Purchases	168		619		7,037		9,236
Settlements	Settlements	(3,107)		(2,968)		(8,299)		(9,887)		Settlements	(4,205)		(3,107)		(7,406)		(8,299)
Ending balance	Ending balance	$	4,698	$	5,412	$	4,698	$	5,412	Ending balance	$	4,738	$	4,698	$	4,738	$	4,698
* Unrealized gains are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.
* Unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.										* Unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

Cleco ~~Power~~Power’s 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

comes from MISO auctions, which occur monthly in the Multi-Period Monthly Auction.

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 September 30, ~~2021,~~2022, and December 31, ~~2020:~~2021:


Cleco	Cleco											Cleco
		FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE					FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH		(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Sept. 30, 2021		$	9,338	$	1,589	RTO auction pricing	FTR price - per MWh	$	(8.18)	$	9.16
FTRs at Dec. 31, 2020		$	4,805	$	1,625	RTO auction pricing	FTR price - per MWh	$	(3.49)	$	4.36
FTRs at Sept. 30, 2022												FTRs at Sept. 30, 2022	$	5,977	$	3,982	RTO auction pricing	FTR price - per MWh	$	(14.33)	$	18.50
FTRs at Dec. 31, 2021												FTRs at Dec. 31, 2021	$	6,977	$	834	RTO auction pricing	FTR price - per MWh	$	(3.94)	$	9.25


Cleco Power	Cleco Power											Cleco Power
		FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE					FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH		(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Sept. 30, 2021		$	6,028	$	1,330	RTO auction pricing	FTR price - per MWh	$	(3.26)	$	9.16
FTRs at Dec. 31, 2020		$	4,337	$	1,121	RTO auction pricing	FTR price - per MWh	$	(3.34)	$	4.36
FTRs at Sept. 30, 2022												FTRs at Sept. 30, 2022	$	5,195	$	457	RTO auction pricing	FTR price - per MWh	$	(6.64)	$	18.50
FTRs at Dec. 31, 2021												FTRs at Dec. 31, 2021	$	5,515	$	597	RTO auction pricing	FTR price - per MWh	$	(4.91)	$	9.25

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of a finite intangible asset relating to the Cleco Power trade name. In August 2021, a wholesale customer that is currently under contract with Cleco Power through March 31, 2024, informed Cleco Power that it was not selected through its RFP process as a provider of load after the first quarter of 2024. Cleco considered this to be a triggering event and determined that the carrying value of the trade name intangible asset may not be recoverable. Therefore, a valuation of the Cleco Power trade name was conducted to test for impairment. A discounted cash flow model utilizing an estimated weighted average cost of capital of 8% was used to determine the fair value of the Cleco Power trade name. As a result, Cleco determined that the fair value of the Cleco Power trade name was less than its carrying value and an impairment of $3.8 million was recognized reducing the carrying value to zero. The fair value measurement of the intangible asset is classified as Level 3 in the fair value hierarchy. For more information on the Cleco Power trade name intangible asset, see Note 15 — “Intangible Assets and Liabilities.”

Concentrations of Credit Risk

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

Cleco
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Cash and cash equivalents $ 249,711 $ 80,712
Current restricted cash and cash equivalents $ 2,352 $ 4,545
Non-current restricted cash and cash equivalents $ 744 $ 744
2021:


Cleco Power
Cleco						Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	133,411	$	20,812	Cash and cash equivalents	$	94,713	$	145,011
Current restricted cash and cash equivalents	Current restricted cash and cash equivalents	$	2,352	$	4,545	Current restricted cash and cash equivalents	$	14,902	$	—

Non-current restricted cash and cash equivalents						Non-current restricted cash and cash equivalents	$	108,644	$	22

~~Institutional money~~


Cleco Power
(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Cash and cash equivalents	$	28,113	$	82,411
Current restricted cash and cash equivalents	$	14,902	$	—
Non-current restricted cash and cash equivalents	$	108,622	$	—


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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.

help mitigate potential losses. Alternatively, 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 the amount of the initial contract, changes in the market price, changes in open contracts, ~~and~~ changes in the amounts counterparties owe to ~~Cleco.~~Cleco, and any prenegotiated unsecured thresholds agreed to in the master contract. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

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. ~~There were no offsetting amounts at December 31, 2020.~~ The following tables present the fair values of derivative instruments and their respective line items as recorded on ~~Cleco~~Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, ~~2021,~~2022, and December 31, ~~2020:~~2021:


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
		AT SEPT. 30, 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	$	5,977	$	—	$	5,977	$	—	$	5,977
Current	Energy risk management liabilities	(3,982)		—		(3,982)		—		(3,982)
Natural gas derivatives
Current	Energy risk management assets	105,206		(30,271)		74,935		(73,669)		1,266
Non-current	Energy risk management assets	97,982		(6,129)		91,853		(34,338)		57,515
Current	Energy risk management liabilities	(1,539)		—		(1,539)		—		(1,539)

Commodity-related contracts, net		$	203,644	$	(36,400)	$	167,244	$	(108,007)	$	59,237

(1) Represents letters of credit by counterparties.



	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
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

Cleco
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
AT SEPT. 30, 2021 AT DEC. 31, 2020
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 COLLATERAL NET ASSET (LIABILITY) ON THE BALANCE SHEET COLLATERAL NET AMOUNT
NET ASSET (LIABILITY) ON THE BALANCE SHEET (2)
Commodity-related contracts
FTRs
Current Energy risk management assets $ 9,338 $ — $ — $ 9,338 $ — $ 9,338 $ 4,805
Current Energy risk management liabilities (1,589) — — (1,589) — (1,589) (1,625)
Natural gas derivatives
Current Energy risk management assets 59,648 (1,283) (8,900) 49,465 (41,098) 8,367 8,276
Non-current Energy risk management assets 83,427 — — 83,427 (13,902) 69,525 323
Current Energy risk management liabilities (1,283) 1,283 — — — — (828)
Non-current Other deferred credits — — — — — — (784)
Commodity-related contracts, net $ 149,541 $ — $ (8,900) $ 140,641 $ (55,000) $ 85,641 $ 10,167


Cleco Power
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS)	BALANCE SHEET LINE ITEM	AT SEPT. 30, 2022		AT DEC. 31, 2021
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	5,195	$	5,515
Current	Energy risk management liabilities	(457)		(597)


Commodity-related contracts, net*		$	4,738	$	4,918

~~(1)~~ ~~Represents letters~~* Cleco Power entered into natural gas derivatives during the three months ended September 30, 2022. Cleco Power had a current liability for natural gas derivatives at September 30, 2022, of ~~credit by counterparties.~~

~~(2)~~ ~~There were no offsetting amounts on or off Cleco’s Condensed Consolidated Balance Sheet at December 31, 2020.~~less than $0.1 million.

Cleco Power
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS) BALANCE SHEET LINE ITEM AT SEPT. 30, 2021 AT DEC. 31, 2020
Commodity-related contracts
FTRs
Current Energy risk management assets $ 6,028 $ 4,337
Current Energy risk management liabilities (1,330) (1,121)
Commodity-related contracts, net $ 4,698 $ 3,216

At September 30, ~~2021,~~2022, cash collateral received from counterparties and held by Cleco was ~~$8.9~~$36.4 million, ~~all~~ of which

$30.3 million was netted against the current portion of Energy risk management assets on Cleco’s Condensed Consolidated Balance Sheet and $6.1 million was netted against the non-current portion of Energy risk management assets on Cleco’s Condensed Consolidated Balance Sheet. At December 31, ~~2020,~~2021, there was no cash collateral ~~paid~~posted with or received ~~by Cleco.~~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~~Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020:~~2021:


Cleco	Cleco										Cleco
		AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME										AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
			FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,						FOR THE THREE MONTHS ENDED SEPT. 30,					FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	INCOME STATEMENT LINE ITEM	2021		2020		2021		2020		(THOUSANDS)	INCOME STATEMENT LINE ITEM	2022		2021			2022		2021
Commodity-related contracts	Commodity-related contracts										Commodity-related contracts
FTRs(1)	FTRs(1)	Electric operations	$	1,959	$	3,013	$	11,167	$	6,262	FTRs(1)	Electric operations	$	5,297	$	1,959		$	12,960	$	11,167
FTRs(1)	FTRs(1)	Purchased power	(874)		(763)		(8,730)		(1,053)		FTRs(1)	Purchased power	2,137		(770)		(2)	(7,829)		(9,742)		(2)
Natural gas derivatives	Natural gas derivatives	Fuel used for electric generation	107,687		20,307		165,584		22,515		Natural gas derivatives	Fuel used for electric generation	84,377		107,687			250,264		165,584
Total(3)	Total(3)		$	108,772	$	22,557	$	168,021	$	27,724	Total(3)		$	91,811	$	108,876		$	255,395	$	167,009

(1) For the three and nine months ended September 30, 2022, unrealized (losses) gains associated with FTRs for Cleco Power of $(1.4) million and $0.2 million, respectively, were reported through Accumulated deferred fuel on the balance sheet. For the three and nine months ended September 30, 2021, unrealized gains associated with FTRs for Cleco Power of $1.2 million and $0.5 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

(2) Prior year balance has been revised to correct errors that were immaterial, both quantitatively and qualitatively, for the three and nine months ended September 30, 2021.

(3) Cleco Power entered into natural gas derivatives during the three months ended September 30, 2022, and unrealized losses associated with natural gas derivatives 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 SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2022		2021		2022		2021
Commodity-related contracts
FTRs(1)	Electric operations	$	5,297	$	1,959	$	12,960	$	11,167
FTRs(1)	Purchased power	$	(2,575)	$	(822)	$	(5,658)	$	(9,236)

Total (2)		$	2,722	$	1,137	$	7,302	$	1,931

(1) For the three and nine months ended September 30, ~~2020,~~2022, unrealized (losses) gains associated with FTRs ~~for Cleco Power~~ of ~~$0.4~~$(1.4) million and ~~$1.4~~$0.2 million, respectively, 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 SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) INCOME STATEMENT LINE ITEM 2021 2020 2021 2020
Commodity-related contracts
FTRs(1)
Electric operations $ 1,959 $ 3,013 $ 11,167 $ 6,262
FTRs(1)
Purchased power (822) (2,326) (9,236) (4,397)
Total $ 1,137 $ 687 $ 1,931 $ 1,865

~~(1)~~ For the three and nine months ended September 30, 2021, unrealized gains associated with FTRs of $1.2 million and $0.5 million, respectively, were reported through Accumulated deferred fuel on the balance sheet. ~~For~~

(2) Cleco Power entered into natural gas derivatives during the three ~~and nine~~ months ended September 30, ~~2020,~~2022, and unrealized ~~gains~~losses associated with ~~FTRs~~natural gas derivatives of ~~$0.4~~less than $0.1 million ~~and $1.4 million, respectively,~~ were reported through Accumulated deferred fuel on the balance sheet.

The following tables present the volume of commodity-related derivative contracts outstanding at September 30, 2022, and December 31, 2021, for Cleco and Cleco Power:

Cleco

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT SEPT. 30, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

23,678

14,055

Natural gas derivatives

MMBtus

91,710

109,306

Cleco Power

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT SEPT. 30, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

14,642

8,899

Natural gas derivatives

MMBtus

1,860

—


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

~~The following table presents the volume of commodity-related derivative contracts outstanding at September 30, 2021, and December 31, 2020, for Cleco and Cleco Power:~~

Cleco
TOTAL VOLUME OUTSTANDING
(THOUSAND) UNIT OF MEASURE AT SEPT. 30, 2021 AT DEC. 31, 2020
Commodity-related contracts
FTRs MWh 22,794 15,269
Natural gas derivatives MMBtus 118,712 73,000

Cleco Power
TOTAL VOLUME OUTSTANDING
(THOUSAND) UNIT OF MEASURE AT SEPT. 30, 2021 AT DEC. 31, 2020
Commodity-related contracts
FTRs MWh 14,596 9,521


Note 7 — Debt

~~On May 21, 2021,~~At September 30, 2022, Cleco Holdings ~~entered into a~~had $10.0 million of outstanding borrowings under its $175.0 million revolving credit ~~agreement and a $266.0 million term loan agreement. These agreements replaced~~facility at an all-in interest rate of 4.195%. At September 30, 2022, the borrowing costs for amounts drawn under 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 currentlyfacility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%~~. If~~ paid on the unused portion of the facility.

In May 2022, Cleco Holdings’ ~~credit ratings were to be downgraded~~$165.0 million senior notes due in May 2023 became due within one ~~level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and commitment fees of 0.125% and 0.05%, respectively.~~ year. This amount is reflected in long-term debt due within one year on Cleco’s Condensed Consolidated Balance Sheet at September 30, 2022.

At September 30, 2021, Cleco Holdings had no 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,~~2022, Cleco Power ~~entered into a~~had $77.0 million of outstanding borrowings under its $300.0 million revolving credit ~~agreement and~~facility at 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%weighted average all-in interest rate of ~~total capitalization. The~~4.33%. At September 30, 2022, the borrowing costs for amounts drawn under ~~this agreement are currently~~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~~ paid on the ~~credit rating~~

~~agencies, Cleco Power may be required to pay incremental interest and commitment fees~~unused portion of ~~0.125% and 0.025%, respectively. At September 30, 2021, Cleco Power had no borrowings outstanding under~~ the ~~revolving credit agreement. 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%.~~facility.

On ~~September 10, 2021,~~June 22, 2022, Cleco ~~Power completed the issuance and private sale of $325.0~~Securitization I issued $425.0 million aggregate principal amount of its ~~floating rate~~ senior ~~notes due 2023.~~secured storm recovery bonds. The ~~senior notes include an optional redemption,~~storm recovery bonds were issued in ~~whole or in part, at any time on or after March 15, 2022, at 100%~~two tranches. One tranche of ~~the~~$125.0 million aggregate principal amount ~~of the senior notes. The senior notes bear~~was issued with an interest ~~at a~~ rate of ~~three-month LIBOR plus 50 basis points per annum~~4.016% and ~~reset quarterly.~~an expected weighted average life of 4.79 years. A second tranche of $300.0 million aggregate principal amount was issued with an interest rate of 4.646% and an expected weighted average life of 15 years. The ~~net proceeds from the issuance were used for general limited liability company purposes, including the repayment of borrowings under Cleco Power’s revolving credit agreement. The senior notes~~bonds are governed by an indenture ~~entered into~~ between Cleco ~~Power~~Securitization I and athe indenture trustee. The indenture contains certain ~~customary~~ covenants that restrict Cleco ~~Power’s~~Securitization I’s ability to ~~merge, consolidate~~sell, transfer, convey, exchange, or ~~transfer or lease all or substantially all~~otherwise dispose of its ~~assets or create or incur certain liens securing indebtedness.~~assets. At September 30,

2022, $9.6 million of this newly issued debt was included in long-term debt due within one year on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. For more information on the storm securitization financing, see Note 17 — “Storm Securitization and Cost Recovery.”

On June 23, 2022, following the closing of the storm recovery bonds, Cleco Power redeemed its $325.0 million floating rate senior notes issued in September 2021 at par.


Note 8 — 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 no ~~pension~~ contributions will be required ~~through 2025.~~until 2026, at which time $5.4 million of required pension contributions are expected. Cleco has not made, and does not expect to make, any contributions to the pension plan in ~~2021.~~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~~Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income. The components of net periodic pension and Other Benefits cost for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020~~2021 were as follows:


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Components of periodic benefit costs
Service cost	$	2,146	$	2,629	$	551	$	629
Interest cost	4,960		4,667		371		317
Expected return on plan assets	(6,177)		(5,700)		—		—
Amortizations

Net loss	3,084		5,184		303		373
Net periodic benefit cost	$	4,013	$	6,780	$	1,225	$	1,319
Special/contractual termination benefits	—		3,270		—		—
Total benefit cost	$	4,013	$	10,050	$	1,225	$	1,319


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE NINE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Components of periodic benefit costs
Service cost	$	6,439	$	7,887	$	1,653	$	1,819
Interest cost	14,881		14,001		1,113		962
Expected return on plan assets	(18,531)		(17,101)		—		—
Amortizations

Net loss	9,251		15,553		908		1,143
Net periodic benefit cost	$	12,040	$	20,340	$	3,674	$	3,924
Special/contractual termination benefits	—		3,270		—		—
Total benefit cost	$	12,040	$	23,610	$	3,674	$	3,924


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

PENSION BENEFITS OTHER BENEFITS
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Components of periodic benefit costs
Service cost $ 2,629 $ 2,455 $ 629 $ 600
Interest cost 4,667 5,204 317 418
Expected return on plan assets (5,700) (6,244) — —
Amortizations
Prior period service credit — (15) — —
Net loss 5,184 4,073 373 362
Net periodic benefit cost 6,780 5,473 1,319 1,380
Special/contractual termination benefits 3,270 — — —
Total benefit cost $ 10,050 $ 5,473 $ 1,319 $ 1,380

PENSION BENEFITS OTHER BENEFITS
FOR THE NINE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Components of periodic benefit costs
Service cost $ 7,887 $ 7,365 $ 1,819 $ 1,615
Interest cost 14,001 15,612 962 1,238
Expected return on plan assets (17,101) (18,731) — —
Amortizations
Prior period service credit — (45) — —
Net loss 15,553 12,222 1,143 1,042
Net periodic benefit cost 20,340 16,423 3,924 3,895
Special/contractual termination benefits 3,270 — — —
Total benefit cost $ 23,610 $ 16,423 $ 3,924 $ 3,895

Effective September 30, 2021, the pension plan was amended to offer an enhanced pension benefit to certain employees participating in the plan that ~~elect~~elected to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced pension benefits ~~will receive~~received a 10% increase in calculated pension benefits. This resulted in a special termination benefit cost for Cleco Power and Support Group of $2.4 million and ~~$0.9~~$0.9 million,, respectively, included as an expense of the pension plan.

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 nine months ended September 30, ~~2021,~~2022, was ~~$1.8~~$0.8 million and ~~$3.6~~$2.4 million, respectively. The expense of the pension plan related to Cleco’s other subsidiaries for the three and nine months ended September 30, ~~2020,~~2021, was ~~$0.9~~$1.8 million and ~~$2.6~~$3.6 million, respectively.

Cleco Holdings is the plan sponsor for the other benefit plans. There are no 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 nine months ended September 30, ~~2021,~~2022, was ~~$1.2~~$1.1 million and ~~$3.6~~$3.3 million, respectively. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2020,~~2021, was ~~$1.1~~$1.2 million and $3.6 million, respectively. The current and non-current portions of

the Other Benefits liability for Cleco and Cleco Power at September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current	$	4,463	$	4,463	Current	$	5,181	$	5,181
Non-current	Non-current	$	51,306	$	51,868	Non-current	$	48,829	$	50,093


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current	$	3,865	$	3,865	Current	$	4,432	$	4,432
Non-current	Non-current	$	40,261	$	40,734	Non-current	$	38,344	$	39,315

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.~~cash available of the respective company of the employed officer. Because the SERP is a non-qualified plan, Cleco ~~Power~~ has ~~formed~~purchased life insurance policies on certain SERP participants as a mechanism to provide a source of funding. These policies are held in a rabbi ~~trust.~~trust formed by Cleco Power. The rabbi trust is the named beneficiary of the life insurance policies and, therefore, receives the proceeds upon the death of the insured participants. The life insurance policies ~~issued on~~may be used to reimburse Cleco for benefits paid from general funds, pay the SERP ~~participants designate the rabbi trust as the beneficiary.~~participants’ death benefits, or pay future SERP payments. Market conditions could have a significant impact on the cash surrender value of ~~the~~these 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~~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~~Cleco’s and Cleco Power’s Condensed Consolidated


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

Statements of Income. The components of the net periodic benefit cost related to SERP for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020~~2021 were as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(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	$	59	$	100	$	174	$	300	Service cost	$	57	$	59	$	170	$	174
Interest cost	Interest cost	634		733		1,903		2,199		Interest cost	670		634		2,009		1,903
Amortizations	Amortizations									Amortizations
Prior period service credit	Prior period service credit	(54)		(54)		(161)		(161)		Prior period service credit	(54)		(54)		(161)		(161)
Net loss	Net loss	307		796		921		2,388		Net loss	262		307		787		921
Net periodic benefit cost	Net periodic benefit cost	$	946	$	1,575	$	2,837	$	4,726	Net periodic benefit cost	$	935	$	946	$	2,805	$	2,837

The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2021,~~2022, was $0.1 million and $0.4 million, respectively. The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2020,~~2021, was ~~$0.2~~$0.1 million and ~~$0.7~~$0.4 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 September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current	$	4,703	$	4,703	Current	$	4,654	$	4,654
Non-current	Non-current	$	90,880	$	92,522	Non-current	$	86,210	$	88,523


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Current	Current	$	711	$	711	Current	$	679	$	679
Non-current	Non-current	$	19,240	$	19,828	Non-current	$	12,546	$	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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

expense for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020~~2021 was as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021		2022		2021
401(k) Plan expense	401(k) Plan expense	$	2,512	$	2,356	$	7,391	$	7,509	401(k) Plan expense	$	2,180	$	2,512	$	6,602	$	7,391

Cleco Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan related to Cleco’s other

subsidiaries for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020~~2021 was as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021		2022		2021
401(k) Plan expense	401(k) Plan expense	$	1,185	$	996	$	3,511	$	3,491	401(k) Plan expense	$	985	$	1,185	$	3,154	$	3,511

Effective September 30, 2021, the 401(k) plan was amended to offer an enhanced 401(k) benefit to certain employees participating in the plan that ~~elect~~elected to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced 401(k) benefits ~~will receive~~received a one-time contribution up to 30% of the employee’s 2021 base salary in accordance with IRS contribution limits. This resulted in a one-time benefit cost of $0.2 million included as an expense of the 401(k) plan.


Note 9 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three and nine months ended September 30, ~~2021,~~2022, and ~~2020~~2021:


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Effective tax rate	Effective tax rate	20.3	%	29.4	%	12.4	%	26.8	%	Effective tax rate	7.6	%	20.3	%	11.6	%	12.4	%


Cleco Power	Cleco Power									Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Effective tax rate	Effective tax rate	1.0	%	33.4	%	(0.2)	%	28.8	%	Effective tax rate	4.4	%	1.0	%	4.1	%	(0.2)	%

For Cleco, the effective income tax ~~rate~~rates for the three and nine months ended September 30, ~~2021,~~2022, were different than the federal statutory rate primarily due to an adjustment to record tax expense at the projected annual effective tax rate largely caused by mark-to-market gains on Cleco Cajun’s gas-related derivatives, the amortization of excess ADIT, the flow through of state tax benefits, adjustments for tax returns as filed, permanent deductions, and ~~2020,~~state tax expense.

For Cleco Power, the effective income tax rates for the three and nine months ended September 30, 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, adjustments for tax returns as filed, and state tax expense.

For Cleco and Cleco Power, the effective income tax rates for the three and nine months ended September 30, 2021, were different than the federal statutory rate primarily due to the flow through of tax benefits, including AFUDC; the amortization of excess ADIT; adjustment to record tax expense at the projected annual effective tax rate; adjustments for tax returns as filed; and state tax expense.

For Cleco Power, the effective income tax rate for the three and nine months ended September 30, 2021, and 2020, were different than the federal statutory rate primarily due to the flow through of tax benefits, including AFUDC equity; amortization of excess ADIT; adjustment to record tax expense at the projected annual effective tax rate; adjustments for tax returns as filed; and state tax expense.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. For the three and nine months ended September 30, 2022, and 2021, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At September 30, ~~2021,~~2022, and December 31, ~~2020,~~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 reasonably possible that the balance of unrecognized tax benefits as of September 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

~~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 ~~2018,~~ 2019, 2020, and ~~2020,~~2021, the IRS has completed its review of ~~years 2018 through 2020,~~tax year 2019, and ~~these~~this tax ~~returns were~~return was 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 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 ~~2018,~~ 2019, 2020, and ~~2020~~2021 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 nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, 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 September 30, 2022, Cleco and Cleco Power had $3.0 million and $1.8 million, respectively, 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~~be paid by December 31, ~~2021, and the remaining $3.0 million by December 31,~~ 2022.

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

The CARES Act also includes modifications on the limitations of business interest for the 2019 and 2020 tax years. The modifications increase the allowable business interest deduction from 30% to 50% of adjusted taxable income. Cleco does not have 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. These include extensions of time to begin construction on certain solar assets eligible for the Investment Tax Credit (ITC), 100% deductibility of business meals in 2021 and 2022, and an extension of the work opportunity tax credit. The ITC 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.

~~Future Tax Reform~~

Cleco is monitoring the President’s current tax reform proposals, as well as the current proposed infrastructure bill. The proposals have the potential to increase the federal statutory corporate income tax rate from the current rate of 21%. Currently, management is unable to predict the impact of the proposals on the Registrants.

~~Cleco is also monitoring possible updates related to a decreased Louisiana state corporate income tax rate proposal and a Louisiana state sales tax proposal to be voted on in November 2021.~~


Note 10 — 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
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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.


Segment Information for the Three Months Ended Sept. 30,
2022 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	481,153	$	140,767		$	621,920
Other operations	24,757		39,573			64,330
Affiliate revenue	1,657		—			1,657
Electric customer credits	(6,728)		—			(6,728)
Operating revenue, net	$	500,839	$	180,340		$	681,179
Net income	$	40,733	$	39,741		$	80,474
Add: Depreciation and amortization	44,368		13,336		(1)	57,704
Less: Interest income	1,726		472			2,198
Add: Interest charges	23,840		219			24,059
Add: Federal and state income tax expense	1,862		14,461			16,323



EBITDA	$	109,077	$	67,285		$	176,362




(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.


2022 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	621,920	$	(2,420)		$	—	$	619,500
Other operations	64,330		1			(2,560)		61,771
Affiliate revenue	1,657		29,583			(31,240)		—
Electric customer credits	(6,728)		—			—		(6,728)
Operating revenue, net	$	681,179	$	27,164		$	(33,800)	$	674,543
Depreciation and amortization	$	57,704	$	4,375	(1)	$	—	$	62,079
Interest income	$	2,198	$	58		$	(18)	$	2,238
Interest charges	$	24,059	$	15,850		$	(19)	$	39,890

Federal and state income tax expense (benefit)	$	16,323	$	(10,712)		$	—	$	5,611
Net income (loss)	$	80,474	$	(12,103)		$	1	$	68,372




(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.


2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	357,084	$	107,500		$	464,584
Other operations	22,779		35,158			57,937
Affiliate revenue	1,380		—			1,380
Electric customer credits	(691)		—			(691)
Operating revenue, net	$	380,552	$	142,658		$	523,210
Net income	$	56,561	$	86,744		$	143,305
Add: Depreciation and amortization	43,526		12,623		(1)	56,149
Less: Interest income	936		4			940
Add: Interest charges	18,509		1,117			19,626
Add: Federal and state income tax expense	548		29,888			30,436
EBITDA	$	118,208	$	130,368		$	248,576




(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.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

Segment Information for the Three Months Ended Sept. 30,
2021 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 357,084 $ 107,500 $ 464,584
Other operations 22,779 35,158 57,937
Affiliate revenue 1,380 — 1,380
Electric customer credits (691) — (691)
Operating revenue, net $ 380,552 $ 142,658 $ 523,210
Net income $ 56,561 $ 86,744 $ 143,305
Add: Depreciation and amortization 43,526 12,623 (1) 56,149
Less: Interest income 936 4 940
Add: Interest charges 18,509 1,117 19,626
Add: Federal and state income tax expense 548 29,888 30,436
EBITDA $ 118,208 $ 130,368 $ 248,576
(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
Revenue
Electric operations	$	464,584	$	(2,420)		$	—	$	462,164
Other operations	57,937		1			(2,217)		55,721
Affiliate revenue	1,380		32,116			(33,496)		—
Electric customer credits	(691)		—			—		(691)
Operating revenue, net	$	523,210	$	29,697		$	(35,713)	$	517,194
Depreciation and amortization	$	56,149	$	8,189	(1)	$	—	$	64,338
Interest income	$	940	$	43		$	(42)	$	941
Interest charges	$	19,626	$	15,044		$	(41)	$	34,629
Federal and state income tax expense (benefit)	$	30,436	$	133		$	—	$	30,569
Net income (loss)	$	143,305	$	(23,396)		$	1	$	119,910




(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.

2021 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 464,584 $ (2,420) $ — $ 462,164
Other operations 57,937 1 (2,217) 55,721
Affiliate revenue 1,380 32,116 (33,496) —
Electric customer credits (691) — — (691)
Operating revenue, net $ 523,210 $ 29,697 $ (35,713) $ 517,194
Depreciation and amortization $ 56,149 $ 8,189 (1) $ — $ 64,338
Interest income $ 940 $ 43 $ (42) $ 941
Interest charges $ 19,626 $ 15,044 $ (41) $ 34,629
Federal and state income tax expense $ 30,436 $ 133 $ — $ 30,569
Net income (loss) $ 143,305 $ (23,396) $ 1 $ 119,910
(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 Nine Months Ended Sept. 30,
2022 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	1,145,864	$	370,489		$	1,516,353
Other operations	62,528		111,897			174,425
Affiliate revenue	4,744		—			4,744
Electric customer credits	(6,992)		—			(6,992)
Operating revenue, net	$	1,206,144	$	482,386		$	1,688,530
Net income	$	134,462	$	132,190		$	266,652
Add: Depreciation and amortization	133,907		59,734		(2)	193,641
Less: Interest income	3,501		661			4,162
Add: Interest charges	63,947		253			64,200
Add: Federal and state income tax expense	5,800		47,136			52,936
EBITDA	$	334,615	$	238,652		$	573,267
Additions to property, plant, and equipment	$	139,726	$	4,844		$	144,570
Equity investment in investees (1)	$	2,072	$	—		$	2,072
Goodwill (1)	$	1,490,797	$	—		$	1,490,797
Total segment assets (1)	$	6,950,548	$	1,110,338		$	8,060,886
(1) Balances as of September 30, 2022. (2) Includes $10.8 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2020 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 288,852 $ 99,956 $ 388,808
Other operations 17,775 31,331 49,106
Affiliate revenue 1,506 — 1,506
Electric customer credits (16,534) — (16,534)
Operating revenue, net $ 291,599 $ 131,287 $ 422,886
Net income $ 36,092 $ 38,357 $ 74,449
Add: Depreciation and amortization 40,268 11,344 (1) 51,612
Less: Interest income 789 10 799
Add: Interest charges 18,441 (484) 17,957
Add: Federal and state income tax expense 18,076 12,258 30,334
EBITDA $ 112,088 $ 61,465 $ 173,553
(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.


2022 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	1,516,353	$	(7,260)		$	—	$	1,509,093
Other operations	174,425		5			(7,388)		167,042
Affiliate revenue	4,744		82,728			(87,472)		—
Electric customer credits	(6,992)		—			—		(6,992)
Operating revenue, net	$	1,688,530	$	75,473		$	(94,860)	$	1,669,143
Depreciation and amortization	$	193,641	$	13,127	(2)	$	(1)	$	206,767
Interest income	$	4,162	$	141		$	(67)	$	4,236
Interest charges	$	64,200	$	45,684		$	(66)	$	109,818
Federal and state income tax expense (benefit)	$	52,936	$	(23,384)		$	(1)	$	29,551
Net income (loss)	$	266,652	$	(41,173)		$	—	$	225,479
Additions to property, plant, and equipment	$	144,570	$	944		$	—	$	145,514
Equity investment in investees (1)	$	2,072	$	(305,348)		$	305,348	$	2,072
Goodwill (1)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (1)	$	8,060,886	$	248,847		$	174,788	$	8,484,521
(1) Balances as of September 30, 2022. (2) Includes $7.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 388,808 $ (2,420) $ — $ 386,388
Other operations 49,106 1 (1,510) 47,597
Affiliate revenue 1,506 35,522 (37,028) —
Electric customer credits (16,534) — — (16,534)
Operating revenue, net $ 422,886 $ 33,103 $ (38,538) $ 417,451
Depreciation and amortization $ 51,612 $ 4,497 (1) $ — $ 56,109
Interest income $ 799 $ 121 $ (10) $ 910
Interest charges $ 17,957 $ 16,115 $ (12) $ 34,060
Federal and state income tax expense (benefit) $ 30,334 $ (5,260) $ 1 $ 25,075
Net income (loss) $ 74,449 $ (14,154) $ 2 $ 60,297
(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.


2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	887,191	$	300,415		$	1,187,606
Other operations	57,674		98,851			156,525
Affiliate revenue	4,259		—			4,259
Electric customer credits	(40,429)		244			(40,185)
Operating revenue, net	$	908,695	$	399,510		$	1,308,205
Net income	$	102,407	$	153,719		$	256,126
Add: Depreciation and amortization	126,534		36,614		(2)	163,148
Less: Interest income	2,404		10			2,414
Add: Interest charges	55,392		786			56,178
Add: Federal and state income tax (benefit) expense	(219)		52,561			52,342
EBITDA	$	281,710	$	243,670		$	525,380
Additions to property, plant, and equipment	$	200,237	$	5,904		$	206,141
Equity investment in investees (1)	$	2,072	$	—		$	2,072
Goodwill (1)	$	1,490,797	$	—		$	1,490,797
Total segment assets (1)	$	6,620,298	$	1,104,090		$	7,724,388
(1) Balances as of December 31, 2021. (2) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


Segment Information for the Nine Months Ended Sept. 30,
2021 (THOUSANDS)		CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
2021 (THOUSANDS)									2021 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue								Revenue
Electric operations	Electric operations	$	887,191	$	300,415		$	1,187,606	Electric operations	$	1,187,606	$	(7,260)		$	(1)	$	1,180,345
Other operations	Other operations	57,674		98,851			156,525		Other operations	156,525		4			(5,752)		150,777
Affiliate revenue	Affiliate revenue	4,259		—			4,259		Affiliate revenue	4,259		85,392			(89,651)		—
Electric customer credits	Electric customer credits	(40,429)		244			(40,185)		Electric customer credits	(40,185)		—			—		(40,185)
Operating revenue, net	Operating revenue, net	$	908,695	$	399,510		$	1,308,205	Operating revenue, net	$	1,308,205	$	78,136		$	(95,404)	$	1,290,937
Net income		$	102,407	$	153,719		$	256,126
Add: Depreciation and amortization		126,534		36,614		(2)	163,148
Less: Interest income		2,404		10			2,414
Add: Interest charges		55,392		786			56,178
Add: Federal and state income tax (benefit) expense		(219)		52,561			52,342
EBITDA		$	281,710	$	243,670		$	525,380
Depreciation and amortization									Depreciation and amortization	$	163,148	$	17,052	(2)	$	(1)	$	180,199
Interest income									Interest income	$	2,414	$	100		$	(98)	$	2,416
Interest charges									Interest charges	$	56,178	$	45,732		$	(98)	$	101,812
Federal and state income tax expense (benefit)									Federal and state income tax expense (benefit)	$	52,342	$	(21,357)		$	—	$	30,985
Net income (loss)									Net income (loss)	$	256,126	$	(37,068)		$	1	$	219,059
Additions to property, plant, and equipment	Additions to property, plant, and equipment	$	202,940	$	5,904		$	208,844	Additions to property, plant, and equipment	$	206,141	$	1,116		$	—	$	207,257
Equity investment in investees (1)	Equity investment in investees (1)	$	3,822	$	—		$	3,822	Equity investment in investees (1)	$	2,072	$	(46,901)		$	46,901	$	2,072
Goodwill (1)	Goodwill (1)	$	1,490,797	$	—		$	1,490,797	Goodwill (1)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (1)	Total segment assets (1)	$	6,746,838	$	1,212,968		$	7,959,806	Total segment assets (1)	$	7,724,388	$	619,101		$	(218,471)	$	8,125,018
(1) Balances as of September 30, 2021. (2) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.
(1) Balances as of December 31, 2021. (2) Includes $7.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.									(1) Balances as of December 31, 2021. (2) Includes $7.3 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 $ 1,187,606 $ (7,260) $ (1) $ 1,180,345
Other operations 156,525 4 (5,752) 150,777
Affiliate revenue 4,259 85,392 (89,651) —
Electric customer credits (40,185) — — (40,185)
Operating revenue, net $ 1,308,205 $ 78,136 $ (95,404) $ 1,290,937
Depreciation and amortization $ 163,148 $ 17,052 (2) $ (1) $ 180,199
Interest income $ 2,414 $ 100 $ (98) $ 2,416
Interest charges $ 56,178 $ 45,732 $ (98) $ 101,812
Federal and state income tax expense (benefit) $ 52,342 $ (21,357) $ — $ 30,985
Net income (loss) $ 256,126 $ (37,068) $ 1 $ 219,059
Additions to property, plant, and equipment $ 208,844 $ 1,116 $ — $ 209,960
Equity investment in investees (1)
$ 3,822 $ 19,099 $ (19,099) $ 3,822
Goodwill (1)
$ 1,490,797 $ — $ — $ 1,490,797
Total segment assets (1)
$ 7,959,806 $ 685,410 $ (249,409) $ 8,395,807
(1) Balances as of September 30, 2021.
(2) Includes $7.3 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 SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Net income	$	68,372	$	119,910	$	225,479	$	219,059
Add: Depreciation and amortization	62,079		64,338		206,767		180,199

Less: Interest income	2,238		941		4,236		2,416
Add: Interest charges	39,890		34,629		109,818		101,812
Add: Federal and state income tax expense	5,611		30,569		29,551		30,985
Add: Other corporate costs and noncash items (1)	2,648		71		5,888		(4,259)
Total segment EBITDA	$	176,362	$	248,576	$	573,267	$	525,380
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

2020 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 752,925 $ 273,836 $ 1,026,761
Other operations 49,443 92,928 142,371
Affiliate revenue 3,852 204 4,056
Electric customer credits (33,974) (153) (34,127)
Operating revenue, net $ 772,246 $ 366,815 $ 1,139,061
Net income $ 76,156 $ 84,655 $ 160,811
Add: Depreciation and amortization 125,541 33,385 (2) 158,926
Less: Interest income 2,498 269 2,767
Add: Interest charges 55,624 (353) 55,271
Add: Federal and state income tax expense 30,770 27,280 58,050
EBITDA $ 285,593 $ 144,698 $ 430,291
Additions to property, plant, and equipment $ 205,765 $ 7,908 $ 213,673
Equity investment in investees (1)
$ 9,072 $ — $ 9,072
Goodwill (1)
$ 1,490,797 $ — $ 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 $9.3 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 1,026,761 $ (7,260) $ — $ 1,019,501
Other operations 142,371 2 (4,966) 137,407
Affiliate revenue 4,056 93,938 (97,994) —
Electric customer credits (34,127) — 1 (34,126)
Operating revenue, net $ 1,139,061 $ 86,680 $ (102,959) $ 1,122,782
Depreciation and amortization $ 158,926 $ 13,575 (2) $ 1 $ 172,502
Interest income $ 2,767 $ 276 $ (79) $ 2,964
Interest charges $ 55,271 $ 48,731 $ (79) $ 103,923
Federal and state income tax expense (benefit) $ 58,050 $ (17,821) $ 1 $ 40,230
Net income (loss) $ 160,811 $ (51,019) $ 1 $ 109,793
Additions to property, plant, and equipment $ 213,673 $ 2,019 $ — $ 215,692
Equity investment in investees (1)
$ 9,072 $ — $ — $ 9,072
Goodwill (1)
$ 1,490,797 $ — $ — $ 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 $7.3 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 SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Net income $ 119,910 $ 60,297 $ 219,059 $ 109,793
Add: Depreciation and amortization 64,338 56,109 180,199 172,502
Less: Interest income 941 910 2,416 2,964
Add: Interest charges 34,629 34,060 101,812 103,923
Add: Federal and state income tax expense 30,569 25,075 30,985 40,230
Add: Other corporate costs and noncash items (1)
71 (1,078) (4,259) 6,807
Total segment EBITDA $ 248,576 $ 173,553 $ 525,380 $ 430,291
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


Note 11 — Regulation and Rates

Regulatory Refunds

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


(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Cleco Katrina/Rita storm recovery charges	Cleco Katrina/Rita storm recovery charges	$	1,610	$	1,617	Cleco Katrina/Rita storm recovery charges	$	—	$	1,611
FERC audit		$	—	$	1,912

FRP	FRP	$	1,236	$	1,786	FRP	$	95	$	1,229
Site-specific industrial customer	Site-specific industrial customer	$	611	$	710	Site-specific industrial customer	$	752	$	833
St. Mary Clean Energy Center						St. Mary Clean Energy Center	$	10,400	$	—
TCJA	TCJA	$	2,057	$	2,057	TCJA	$	2,057	$	2,057
Transmission ROE		$	—	$	595

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~~In September ~~30, 2021, Cleco Power had~~2022, $1.6 million ~~accrued for amounts~~was refunded to ~~be used to benefit~~ retail customers in ~~a manner and timing~~the form of bill credits as approved by the ~~LPSC. For more information~~LPSC on ~~Cleco Katrina/Rita’s storm recovery, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”~~

~~FERC Audit~~

As of September 30, 2021, $4.4 million, including accrued interest, was fully refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments related to the FERC audit findings 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.”July 27, 2022.

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.~~ 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. A monitoring report was filed on October 31, 2022, for the 12 months ending June 30, 2022, indicating no refund was due. Cleco Power’s next base rate case is ~~required~~expected to be filed with the LPSC on or before March 31, 2023.

~~Cleco Power filed its monitoring report for the 12 months ended June 30, 2019, on October 31, 2019, indicating that no refund was due. On September 22, 2021, the LPSC approved~~

the 2019 monitoring report indicating no refund was due. 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. ~~In September 2021, Cleco Power refunded $1.2 million for the period of July 1, 2019, through June 30, 2020. At September 30, 2021,~~ Cleco Power had $1.2 million accrued for the period July 1, 2020, through June 30, 2021, which ~~is expected to be~~was refunded to customers in September 2022.

St. Mary Clean Energy Center

In August 2019, the St. Mary Clean Energy Center was placed in service. The planning and construction costs for this facility are currently being recovered through Cleco Power’s base rates and were subject to a prudency review by the LPSC. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million of those costs, which

resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The approved settlement also included refunding $10.4 million to Cleco Power’s retail customers, which was given back to customers as bill credits in October 2022. At September 30, 2022, the total $10.4 million refund liability consisted of $6.6 million for costs recovered in periods prior to September 30, 2022, and $3.8 million for costs to be recovered from October 1, 2022, until Cleco Power’s base rates reset in its next rate case, which is expected to be on July 1, 2024. For more information about the settlement and disallowance, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

TCJA

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

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

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 December 1, 2020, until such a time that the rate case was completed.~~June 30, 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 September 30, ~~2021,~~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 September 30, ~~2021,~~2022, Cleco Power had ~~$313.9~~$267.7 million accrued for the excess ADIT, of which ~~$39.5~~$44.1 million is reflected in current regulatory liabilities.

System Support Resource (SSR)

In April 2017, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution could be implemented to mitigate system reliability issues. While

4443


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

~~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. The complaints covered the period December 2013 through May 2016. As of September 30, 2021, the overcollection due to the change in ROE was fully refunded. For more information on the ROE complaints, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

~~SSR~~

In September 2016, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3 effective April 1, 2017. MISO conducted a study which determined the proposed retirement of Teche Unit 3 would result in violations of specific applicable reliability standards for which no mitigation is available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution 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 ~~made a filing~~filed an attachment Y with ~~the LPSC giving notice~~MISO requesting retirement of ~~its intent to consider retiring~~ Teche Unit 3, barring any violations of specific applicable reliability standards. ~~Assuming no violations are found, Teche Unit 3 could be retired in 2022. At September 30,~~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 refunded to 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 12 — Variable Interest Entities

Cleco Securitization I

Cleco Securitization I is a special-purpose, wholly owned subsidiary of Cleco Power that was formed for the purpose of issuing storm recovery bonds to finance the securitization of Storm Recovery Property at Cleco Power. On June 22, 2022, the securitized financing was complete. Cleco Securitization I’s assets cannot be used to settle Cleco Power’s obligations and the holders of the storm recovery bonds have no recourse against Cleco Power. For more information about the securitization financing, see Note 17 – “Storm Securitization and Cost Recovery.”

Because Cleco Securitization I’s equity at risk is less than 1% of its total assets, it is considered to be a variable interest entity. Through its equity ownership interest and role as servicer, Cleco Power has the power to direct the most significant financial and operating activities of Cleco Securitization I, including billing, collections, and remittance of retail customer cash receipts to enable Cleco Securitization I to service the principal and interest payments due under the storm recovery bonds. Cleco Power also has the obligation to absorb losses up to its equity investment and rights to receive returns from Cleco Securitization I. Therefore, management has determined that Cleco Power is the primary beneficiary of Cleco Securitization I, and as a result, Cleco Securitization I is included in the consolidated financial statements of Cleco Power. No gain or loss was recognized upon initial consolidation.

The following table summarizes the impact of Cleco Securitization I on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets:


(THOUSANDS)	AT SEPT. 30, 2022
Restricted cash - current	$	5,552
Accounts Receivable - affiliate	$	3,724
Intangible asset - securitization	$	415,946
Long-term debt due within one year	$	9,574
Accounts Payable - affiliate	$	85
Interest accrued	$	5,213
Long-term debt, net	$	408,622
Member’s equity	$	1,728

The following table summarizes the impact of Cleco Securitization I on Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income:


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Operating revenue	$	5,025	$	—	$	5,025	$	—
Operating expenses	90		—		90		—
Interest income	10		—		10		—
Interest charges, net	4,861		—		5,342		—
Income before taxes	$	84	$	—	$	(397)	$	—

Oxbow

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~~Cleco’s 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~~Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income.

Oxbow is owned 50% by Cleco Power and 50% by SWEPCO. Cleco Power is not the primary beneficiary because it shares the power to control Oxbow’s significant activities with SWEPCO. Cleco Power’s current assessment of its maximum exposure to loss related to Oxbow at September 30, ~~2021,~~2022, consisted of its equity investment of ~~$3.8~~$2.1 million. ~~During the nine months ended September 30, 2021, Cleco Power had a return of equity investment from Oxbow of $5.3 million.~~

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


INCEPTION TO DATE (THOUSANDS)	INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 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	(15,450)		(10,200)		Distributions	(17,200)		(17,200)
Total equity investment in investee	Total equity investment in investee	$	3,822	$	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 SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Oxbow’s net assets/liabilities	Oxbow’s net assets/liabilities	$	7,645	$	18,145	Oxbow’s net assets/liabilities	$	4,145	$	4,145
Cleco Power’s 50% equity	Cleco Power’s 50% equity	$	3,822	$	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	$	3,822	$	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 SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021		2022		2021
Operating revenue	Operating revenue	$	1,486	$	2,275	$	5,113	$	33,266	Operating revenue	$	65	$	1,486	$	215	$	5,113
Operating expenses	Operating expenses	1,486		2,275		5,113		33,266		Operating expenses	65		1,486		215		5,113
Income before taxes	Income before taxes	$	—	$	—	$	—	$	—	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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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. ~~In June 2020, management decided to retire the Dolet Hills Power Station.~~ On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. ~~As of September 30,~~At December 31, 2021, ~~Cleco Power estimates $1.8 million of its proportionate share of costs will be billed by Oxbow prior to the closure of~~ the Dolet Hills Power ~~Station.~~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 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

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


Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

2016 Merger

In connection with the 2016 Merger, 4four actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and 3three 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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

The 4four 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 3three 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 3three 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 3three 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.~~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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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 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~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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 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, which action has been consolidated with the litigation filed by Gulf Coast in the 12thJudicial District Court for Avoyelles Parish, Louisiana. Discovery is ongoing and no trial date has been set.

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.~~Parish. 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.~~Parish. Saulsbury Industries, Inc. asserted the same claim as the Western District ~~Litigation~~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~~appealed this ~~motion was held on February 5, 2021,~~decision.

On May 17, 2022, the Court of Appeal, First Circuit, ruled in favor of Cleco and affirmed the decision of the 16th Judicial District Court ~~judge~~for St. Mary Parish with respect to Cleco. However, the First Circuit Court reversed the 16th Judicial District Court for St. Mary Parish’s decision dismissing Cabot Corporation from the St. Mary Parish case. All parties filed applications for rehearing, which were denied ~~Saulsbury’s motion~~on June 29, 2022.


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CLECO POWER						2022 3RD QUARTER FORM 10-Q

Cabot Corporation applied for review by the Louisiana Supreme Court of the portion of the First Circuit Court's ruling that denied Cabot Corporation’s exception seeking dismissal from the St. Mary Parish litigation. On November 1, 2022, the Louisiana Supreme Court rendered a ~~new trial. Saulsbury~~decision in favor of Cabot Corporation. The Louisiana Supreme Court’s decision reversed the First Circuit Court’s decision and reinstated the decision of the 16th Judicial District Court granting Cabot Corporation’s declinatory exceptions of lis pendens. The St. Mary Parish case has ~~appealed this decision.~~been dismissed in full.

The Rapides Parish case remains stayed until the stay is lifted by further order of the Rapides Parish Court.

LPSC Audits and Reviews

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~~Management expects the LPSC to ~~several sets~~approve the audit report by the end of ~~data requests from the LPSC.~~2022. 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. 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 with the May 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 ~~its first set of~~several data requests. Management is unable to determine the outcome or ~~timing~~completion of the audit. ~~For more information on these winter storms, see Note 17 — “Storm Restoration — 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. On October 20, 2021, the LPSC approved the EAC audit for the period January 2018 to December 2019 with no findings. The total amount of environmental expense that was included in the audit was $26.2 million. Cleco Power has EAC filings for January 2020 and thereafter that remain subject to audit. Management is


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~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not

been material. If a disallowance of environmental cost is ordered resulting in a refund to Cleco Power’s customers, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

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 Presidential Administration issued an executive order, ~~directing~~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 to suspend, revise, or rescind the rule. The EPA ~~has not issued a proposed rule, and management is unable to determine when a proposed rule will be issued. 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~~Prudency Reviews

~~Generally,~~

Lignite Mine Closure Costs

Cleco Power ~~records wholesale transmission revenue through approved formula rates, Attachment O~~is seeking recovery for deferred fuel and other mine-related closure costs. Recovery of these costs is subject to a prudency review by the LPSC, which is currently in progress. Cleco Power believes these costs are prudent and recoverable. However, initial testimony by the LPSC Staff advisors filed in August 2022 indicates disagreement with the prudency of these incurred costs. Cleco Power filed rebuttal testimony on September 23, 2022, rebutting the LPSC Staff’s accusations of the ~~MISO tariff and certain grandfathered agreements. The calculation~~lignite mining agreement not being approved by the LPSC, the prudency of the ~~rate formulas, as well as FERC accounting~~costs incurred, and ~~reporting requirements,~~the recoverability of such costs. A hearing date is expected in the second quarter of 2023. Due to the nature and timing of the regulatory process, Cleco Power is currently unable to determine if any portion of the incurred costs will be disallowed for recovery.

St. Mary Clean Energy Center

In August 2019, the St. Mary Clean Energy Center was placed in service. The St. Mary Clean Energy Center is a partnership with Cabot Corporation, whereby Cleco Power generates power through waste heat recovered from Cabot Corporation’s carbon black manufacturing process. The planning and


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CLECO POWER						2022 3RD QUARTER FORM 10-Q

construction costs incurred for this facility are currently being recovered through Cleco Power’s base rates and were subject to ~~periodic audits~~a prudency review 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.~~LPSC. On September ~~27, 2019, Cleco Power received~~21, 2022, the ~~final audit report, which indicated 12 findings~~LPSC approved a settlement disallowing recovery 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,$15.0 million, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The impairment charge is recorded in Regulatory disallowance on Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income. The settlement also resulted in a refund ~~related~~ to ~~the FERC audit findings, pending final assessment by the FERC Division~~Cleco Power’s retail customers totaling $10.4 million, which was given back to customers as bill credits in October 2022. The $10.4 million refund liability consists of ~~Audits~~$6.6 million for costs recovered in periods prior to September 30, 2022, and ~~Accounting,~~$3.8 million for costs to be recovered from October 1, 2022, until Cleco Power’s base rates reset in its next rate case, which is expected to be on July 1, 2024. The total refund is reflected as a liability in ~~the fourth quarter of 2021. As of June 30, 2021, the~~Provision for refund ~~of $4.4 million was fully refunded to~~on Cleco’s and Cleco Power’s ~~wholesale transmission customers as a combination~~Condensed Consolidated Balance Sheets, with $6.6 million reflected in Electric customer credits on Cleco’s and Cleco Power’s Statements of ~~refund payments~~Income and ~~a reduction~~$3.8 million reflected in ~~Attachment O of the MISO tariff~~Regulatory assets on Cleco’s and ~~grandfathered agreement rates over the preceding 12 months.~~Cleco Power’s Condensed Consolidated Balance Sheets.

~~Transmission ROE~~

In November 2013 and February 2015, customers filed complaints 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 covered the period December 2013 through May 2016 and sought to reduce the 12.38% ROE used in MISO’s transmission rates to a proposed 6.68%. 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 September 30, 2021, the overcollection due to the change in the ROE was fully refunded.

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 remediation costs, as defined in the policy of insurance, incurred to install selective non-catalytic reduction equipment on Big Cajun II, Unit 3. This installation served a dual purpose of being a prudent utility practice for compliance with environmental laws and aiding in the settlement of a lawsuit, which was brought by the EPA and the Louisiana Department of Environmental Quality against Louisiana Generating, related to Big Cajun II, Units 1 and 2. Entergy Gulf States, as co-owner of Big Cajun II, Unit 3, expected to be allocated a portion of the insurance settlement proceeds. Litigation between Entergy Gulf States and Louisiana Generating ensued to determine Entergy Gulf States’ allocated amount of insurance proceeds, among other claims pursuant to the Joint Ownership Participation and Operating Agreement between Louisiana Generating and Entergy Gulf States. In August 2021, Louisiana Generating and Entergy Gulf States entered an agreement to settle all claims asserted in this litigation. Upon payment of the settlement amount in January 2022, the lawsuit will be dismissed. NRG Energy will indemnify Cleco for losses associated with this litigation matter.

Prior to the Cleco Cajun Transaction, South Central Generating was involved in various litigation matters, including environmental and contract proceedings, before various courts


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

regarding matters arising out of the ordinary course of business. As of September 30, ~~2021,~~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.

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 September 30, ~~2021,~~2022, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are ~~$4.1~~$8.3 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~~Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets because management has determined that ~~Cleco~~Cleco’s 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 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~~based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for the ~~lignite miner against future invoices for lignite delivered.~~reclamation of 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 September 30, ~~2021,~~2022, Cleco Power does not expect any payments to be made under this guarantee. ~~The projection is based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for purchases of equipment.~~ Cleco Power has the right to dispute the incurrence of 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


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CLECO POWER						2022 3RD QUARTER FORM 10-Q

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 17, 2021, the LPSC approved the establishment of a regulatory asset for the deferral of certain accelerated mine~~ costs in fuel and related ratemaking treatment. For more information on the ~~Dolet Hills regulatory asset,~~joint filing, see ~~Note 5~~“— Risks and Uncertainties.” For information on the LPSC prudency review associated with the mine closure costs, see “— LPSC Audits and Reviews — ~~“Regulatory Assets and Liabilities~~Prudency Reviews — Lignite Mine Closure ~~Cost.~~Costs.” Cleco Power is currently responding to data requests related to 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.

Cleco 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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 ~~rule~~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~~acceptability of compacted clay material as a liner for impoundments. As a result, ~~on December 2, 2019,~~in August 2020, the EPA published a ~~proposed~~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. ~~The rule was finalized and published in the Federal Register on August 28, 2020.~~ 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 ~~rule.~~CCR Rule. During 2021, additional information was submitted to the ~~LDEQ~~Louisiana Department of Environmental Quality 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 ~~also engaged independent engineering specialists~~been deemed complete. However, the demonstrations are still subject to ~~conduct studies~~EPA approval based on the efforts and costs expected to be incurred in order to comply with the final CCR rule. During the third quarter of 2021, management received additional information in connection with Cleco Power’s and Cleco Cajun’s compliance strategies resulting in a revision to the estimated cash flows expected to be required to settle the respective AROs. Therefore, Cleco Power and Cleco Cajun recorded an increase of $13.1 million and $35.5 million, respectively, in their ARO balances.

~~The following tables summarize the net changes in the ARO for~~pending technical reviews. At September 30, 2022, Cleco and Cleco ~~Power:~~Power had AROs of $73.5 million and $21.0 million, respectively. At December 31, 2021, Cleco and Cleco Power had AROs of $74.3 million and $23.0 million, respectively.

(THOUSANDS) CLECO CAJUN CLECO POWER CLECO
Balance, Dec. 31, 2020 $ 16,658 $ 11,364 $ 28,022
Liabilities settled (1,316) $ — (1,316)
Accretion 466 $ 249 715
Revisions and adjustments 35,540 $ 13,101 48,641
Balance, Sept. 30, 2021 $ 51,348 $ 24,714 $ 76,062

As part of the Cleco Cajun Transaction, NRG agreed to indemnify Cleco for environmental costs up to $25.0 million associated with the ~~CCR~~CCR rule. At September 30, ~~2021,~~2022, Cleco Cajun ~~recognized~~had indemnification assets totaling ~~$22.1~~$22.6 million. The current portion of the indemnification asset of $1.1 million is reflected in Other current assets and the non-current portion of ~~$21.0~~$21.5 million is reflected in Other deferred charges on Cleco’s Condensed Consolidated Balance ~~Sheet.~~Sheet. The indemnification

asset is expected to be collected as closure costs are incurred.

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. Power purchases in the MISO market are made at prevailing market prices, also referred to as LMP. LMP includes a component directly related to congestion on the transmission system and, as a result, can be different based on the location and time of the day the energy is dispatched causing energy costs to ~~increase.~~fluctuate. Cleco Power and Cleco Cajun use FTRs to mitigate transmission congestion price risks.

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

~~In June 2020, Cleco Power remeasured its ARO liabilities due to the expected retirement of the Dolet Hills Power Station.~~ Cleco Power’s ~~ARO liability increased $3.3 million~~FAC is subject to, and may be disallowed as part of, a ~~result of this remeasurement. At September 30, 2021, Cleco Power’s undivided interest in~~prudency review or a periodic fuel audit conducted by the LPSC.

The Dolet Hills Power Station was ~~$38.6 million and was included in base rates.~~

retired on December 31, 2021. On January 31, 2022, Cleco Power ~~made a filing with the LPSC on September 7, 2021, giving notice that the Dolet Hills Power Station will be retired at the end of 2021. Cleco Power anticipates filing in the fourth quarter of 2021~~filed an application with the LPSC requesting recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station. On June 3, 2022, the Louisiana Electric Utility Energy Transition Securitization Act was passed into law. Through authorization of an LPSC financing order, this law enables Louisiana electric utilities to use securitization financing for certain energy transition costs, including mine closure costs and stranded costs. Such a securitization would create a contract right constituting incorporeal movable property of the right to bill and collect from Louisiana customers the costs of securitization.

At September 30, 2022, Cleco Power had $147.0 million deferred as a regulatory asset for stranded costs related to the Dolet Hills Power Station retirement. These costs are currently under a prudency review by the LPSC. Pending the outcome of the prudency review and under the terms of this new law, Cleco Power intends to seek a financing order in 2023 to securitize these stranded Dolet Hills Power Station closure costs.

On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow ~~mine, and~~mine. This filing also requested to include and defer certain accelerated mine closing costs in fuel and related ~~ratemaking~~rate-making treatment. The expected early closure of the mines has resulted in increased costs that will be billed through the fuel adjustment clause, which management currently believes are recoverable. Management does not believe the early closure of the mines will have an adverse impact on the recovery value of the Dolet Hills Power Station. Cleco Power ~~is currently responding~~has responded to several data requests related to the joint filing.

~~Fuel~~The expected early closure of the mines resulted in increased lignite costs. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs incurred by the Dolet Hills Power Station are recoverable by Cleco Power through active fuel adjustment clauses. Under the Amended Lignite Mining Agreement, DHLC bills Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs as fuel is delivered. As of September 30, 2021, Cleco Power estimates $10.1 million of its proportionate share of costs willthat would otherwise be billed ~~by DHLC prior~~through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the ~~Dolet Hills Power Station. In 2009,~~mine. At September 30, 2022, Cleco Power ~~acquired an interest~~had a regulatory asset of $136.1 million for deferred fuel and mine-related closure costs, which was included in ~~Oxbow, which owns mineral rights and land leases. Under~~the application filed on January 31, 2022. These costs are also under a ~~joint operating agreement pertaining to~~prudency review by the Oxbow mineral rights and land leases, Oxbow bills Cleco Power its proportionate share of incurred costs. As of September 30, 2021, Cleco Power estimates $1.8 million of its proportionate share of costs will be

5049


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

~~billed by Oxbow prior to~~LPSC. Pending the ~~closure~~outcome of the ~~Dolet Hills~~prudency review and under the terms of the new securitization law mentioned above, Cleco Power ~~Station. If any~~intends to include the final costs in its filing for securitization. Cleco Power expects to make this filing in the first quarter of ~~these costs are not recoverable, it could materially impact the Registrants’ results of operations, financial condition, or cash flows.~~2023. For more information on this prudency review, see “— Litigation — LPSC Audits and Reviews — Prudency Reviews — Lignite Mine Closure Costs.”


Note 14 — Affiliate Transactions

At September 30, ~~2021, and~~2022, Cleco Holdings had an affiliate receivable of $13.1 million, primarily for estimated income taxes paid on behalf of Cleco Group. At December 31, ~~2020,~~2021, Cleco Holdings had an affiliate receivable of $3.0 million ~~and $1.7 million, respectively, from Cleco Group~~ primarily for franchise ~~taxes.~~taxes paid on behalf of Cleco Group. At ~~both~~ September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, Cleco Holdings had an affiliate payable of ~~$41.3~~$13.1 million and $51.3 million, respectively, to Cleco Group primarily for settlement of taxes payable.

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


		AT SEPT. 30, 2021				AT DEC. 31, 2020					AT SEPT. 30, 2022				AT DEC. 31, 2021
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	Cleco Holdings	$	10,712	$	57,825	$	10,353	$	57,713	Cleco Holdings	$	8	$	1,029	$	10,347	$	59,627
Support Group	Support Group	2,388		11,514		3,248		14,355		Support Group	1,255		9,806		2,473		10,038
Cleco Cajun	Cleco Cajun	882		17		1,004		—		Cleco Cajun	1,223		2		792		64
Total	Total	$	13,982	$	69,356	$	14,605	$	72,068	Total	$	2,486	$	10,837	$	13,612	$	69,729

Of the affiliate payable ~~balances~~balance at ~~September 30, 2021, and~~ December 31, ~~2020,~~2021, Cleco Power had ~~$57.6~~$59.4 million 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 nine months ended September 30, 2021, Cleco Power recorded $0.7 million and $2.7 million, respectively, of its proportionate share of incurred costs. During the three and nine months ended September 30, 2020, Cleco Power recorded $1.1 million and $16.6 million, respectively, of its proportionate share of incurred costs. At September 30, 2021, and December 31, 2020, Cleco Power had $0.2 million and $0.3 million, respectively, payable to Oxbow. For more information on Cleco Power’s variable interest in Oxbow, see Note 12 — “Variable Interest Entities.”

Note 15 — Intangible Assets, Intangible Liabilities, and ~~Liabilities~~Goodwill

~~During 2008,~~

Securitized Intangible

On June 22, 2022, Cleco ~~Katrina/Rita~~Securitization I acquired the Storm Recovery Property from Cleco Power in the amount of $415.9 million. The Storm Recovery Property is classified as a ~~$177.5 million~~securitized intangible asset ~~which included $176.0 million for~~on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. This securitized intangible asset will be amortized over the ~~right~~estimated periods needed to ~~bill and~~ collect the required amounts from Cleco Power’s customers to service Cleco Securitization I’s storm recovery ~~charges~~bonds, currently estimated through September 2044. There was no amortization during the current period because collections from Cleco Power’s customers ~~of Cleco Power and $1.5 million of financing costs. This intangible asset was fully amortized in March 2020 and had no residual value at~~were allocated to expenses that take priority to the storm recovery bonds as allowed by the storm recovery bond indenture. At the end of its ~~life.~~life, this securitized intangible asset will have no residual value. For additional information on Cleco Power’s storm costs and the securitization financing, see Note 5 — “Regulatory Assets and Liabilities,” Note 7 — “Debt,” and Note 17 — “Storm Securitization and Cost Recovery.”

Other Intangibles

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of finite intangible assets relating to ~~the Cleco Power trade name and~~ long-term wholesale power supply agreements. At the end of their lives, these power supply agreement intangible assets will have no

residual value. 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.

~~During~~As a result of the ~~third~~2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of a finite intangible asset relating to the Cleco Power trade name. In August 2021, a wholesale customer that is currently under contract with Cleco Power through March 31, 2024, informed Cleco Power that it was not selected through its request for proposal process as a provider of load after the first quarter of ~~2021,~~2024. Cleco considered this to be a triggering event and determined that the carrying value of the trade name intangible asset may not be recoverable. Therefore, a valuation of the Cleco Power trade name was conducted to test for impairment. A discounted cash flow model utilizing an estimated weighted average cost of capital of 8% was used to determine the fair value of the Cleco Power trade name. As a result, Cleco determined that the fair value of the Cleco Power trade name was less than its carrying value and an impairment of $3.8 million was recognized reducing the carrying value to ~~zero. The impairment resulted in an increase in amortization expense and was reflected in Depreciation and amortization on Cleco’s Condensed Consolidated Statements of Income~~zero at September 30, 2021. ~~For more information on the the trade name intangible asset impairment, see Note 6 — “Fair Value Accounting and Financial Instruments.”~~

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 no residual value. These intangibles are amortized over the estimated life of each applicable contract ranging between 6 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 other intangible assets and ~~liabilities:~~liabilities included in its Condensed Consolidated Income Statements:

Cleco
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges $ — $ — $ — $ 517
Trade name $ 3,770 $ 64 $ 3,897 $ 191
Power supply agreements $ 6,400 $ 6,400 $ 19,200 $ 19,200
Intangible liabilities
LTSA $ 871 $ 871 $ 2,613 $ 2,613
Power supply agreements $ 389 $ 882 $ 1,989 $ 2,646

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS
ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Cleco Katrina/Rita right to bill and collect storm recovery charges $ — $ — $ — $ 517


Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		2022		2021
Intangible assets

Trade name	$	—	$	3,770	$	—	$	3,897
Power supply agreements	$	6,400	$	6,400	$	19,200	$	19,200
Intangible liabilities
LTSA	$	871	$	871	$	2,613	$	2,613
Power supply agreements	$	389	$	389	$	1,168	$	1,989

5150


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

The following ~~tables summarize~~table summarizes the ~~balances for~~balance of other intangible assets and liabilities subject to amortization for ~~Cleco:~~Cleco included in its Condensed Consolidated Balance Sheets:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Intangible assets	Intangible assets					Intangible assets
Trade name		$	—	$	5,100
Power supply agreements	Power supply agreements	184,004		184,004		Power supply agreements	$	184,004	$	184,004
Total intangible assets carrying amount	Total intangible assets carrying amount	184,004		189,104		Total intangible assets carrying amount	184,004		184,004
Intangible liabilities	Intangible liabilities					Intangible liabilities
LTSA	LTSA	24,100		24,100		LTSA	24,100		24,100
Power supply agreements	Power supply agreements	14,200		14,200		Power supply agreements	14,200		14,200
Total intangible liability carrying amount	Total intangible liability carrying amount	38,300		38,300		Total intangible liability carrying amount	38,300		38,300
Net intangible assets carrying amount	Net intangible assets carrying amount	145,704		150,804		Net intangible assets carrying amount	145,704		145,704
Accumulated amortization	Accumulated amortization	(77,326)		(63,932)		Accumulated amortization	(97,885)		(82,466)
Net intangible assets subject to amortization	Net intangible assets subject to amortization	$	68,378	$	86,872	Net intangible assets subject to amortization	$	47,819	$	63,238

Goodwill

On April 13, 2016, in connection with the completion of the 2016 Merger, Cleco recognized goodwill of $1.49 billion. Management assigned the recognized goodwill to the Cleco Power reporting unit. Goodwill is required to be tested for impairment at the reporting unit level on an annual basis ~~and between annual tests if an event occurs~~or whenever events or circumstances ~~change~~indicate that ~~would more likely than not reduce~~the value of goodwill may be impaired.

In performing the impairment test, Cleco compares the fair value of the reporting unit to its carrying value including goodwill. If the carrying value including goodwill were to exceed the fair value of a reporting unit, ~~below its carrying value. Application of the~~an impairment loss would be recognized. A goodwill impairment ~~test requires significant judgments, including~~loss is measured as the ~~identification of~~amount by which a reporting ~~units, assignments of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the~~unit's carrying value exceeds fair value, not to exceed the carrying amount of goodwill.

Cleco estimates the reporting ~~units.~~

~~Cleco conducted its 2021 annual impairment test using an August 1, 2021, measurement date. The~~unit's fair value ~~of the Cleco Power reporting unit was estimated~~ using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market

approach, which estimates fair value based on market comparables within the utility and energy industries. ~~Significant~~The income approach cash flow valuations involve a number of estimates that require broad assumptions ~~used in these fair value estimates include~~and significant judgment by management regarding future performance, including estimation of future cash flows related to capital expenditures, ~~long-term rate of growth, and weighted-average~~the weighted average cost of capital or discount ~~rate. Changes~~rate and the assumed long-term growth rate approach, which incorporates management's assumptions regarding sustainable long-term growth. The market approach includes significant assumptions around the implied market multiples for

certain peer companies. Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of the test date.

Cleco performs an annual impairment test each August. In between annual tests, Cleco monitors its estimates and assumptions regarding estimated future cash flows, including the impact of movements in ~~these~~market indicators in future quarters, and will update the impairment analyses if a

triggering event occurs. While Cleco believes the assumptions are reasonable, actual results may differ from projections. To the extent projected results or cash flows are revised downward, Cleco may be required to reduce all or a portion of the carrying value of goodwill, which could ~~materially affect the determination of fair value~~adversely impact earnings.

Cleco conducted its 2022 annual impairment test using an August 1, 2022, measurement date and ~~goodwill impairment at Cleco Power. Based on the tests performed, management has~~ determined that the estimated fair value of the ~~Cleco Power~~ reporting unit ~~exceeds the~~exceeded its carrying value, ~~resulting in~~and no impairment ~~of Cleco Power’s goodwill as of August 1, 2021.~~existed.

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
SEPT. 30, 2021 FOR THE NINE
MONTHS ENDED
SEPT. 30, 2021
(THOUSANDS) POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period $ (25,588) $ (25,796)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 96 304
Balances, Sept. 30, 2021 $ (25,492) $ (25,492)


Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30, 2022		FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balance, beginning of period	$	(23,608)	$	(23,629)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	10		31


Balance, Sept. 30, 2022	$	(23,598)	$	(23,598)


		FOR THE THREE MONTHS ENDED SEPT. 30, 2020		FOR THE NINE MONTHS ENDED SEPT. 30, 2020			FOR THE THREE MONTHS ENDED SEPT. 30, 2021		FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS				(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period		$	(16,657)	$	(17,513)
Balance, beginning of period						Balance, beginning of period	$	(25,588)	$	(25,796)

Amounts reclassified from AOCI	Amounts reclassified from AOCI					Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	Amortization of postretirement benefit net loss	448		1,304		Amortization of postretirement benefit net loss	96		304

Balances, Sept. 30, 2020		$	(16,209)	$	(16,209)
Balance, Sept. 30, 2021						Balance, Sept. 30, 2021	$	(25,492)	$	(25,492)


Cleco Power	Cleco Power													Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 30, 2021							FOR THE THREE MONTHS ENDED SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	(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		(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	Balances, beginning of period	$	(18,394)	$	(5,486)	$	(23,880)	$	(19,139)	$	(5,614)	$	(24,753)	Balances, beginning of period	$	(12,272)	$	(5,172)	$	(17,444)	$	(12,885)	$	(5,298)	$	(18,183)

Amounts reclassified from AOCI	Amounts reclassified from AOCI													Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	Amortization of postretirement benefit net loss	350		—		350		1,095		—		1,095		Amortization of postretirement benefit net loss	307		—		307		920		—		920
Reclassification of net loss to interest charges	Reclassification of net loss to interest charges	—		63		63		—		191		191		Reclassification of net loss to interest charges	—		63		63		—		189		189

Balances, Sept. 30, 2021		$	(18,044)	$	(5,423)	$	(23,467)	$	(18,044)	$	(5,423)	$	(23,467)
Balances, Sept. 30, 2022														Balances, Sept. 30, 2022	$	(11,965)	$	(5,109)	$	(17,074)	$	(11,965)	$	(5,109)	$	(17,074)

FOR THE THREE MONTHS ENDED SEPT. 30, 2020 FOR THE NINE MONTHS ENDED SEPT. 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 $ (15,872) $ (5,740) $ (21,612) $ (16,717) $ (5,868) $ (22,585)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 373 — 373 1,218 — 1,218
Reclassification of net loss to interest charges — 63 63 — 191 191
Balances, Sept. 30, 2020 $ (15,499) $ (5,677) $ (21,176) $ (15,499) $ (5,677) $ (21,176)


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 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	$	(18,394)	$	(5,486)	$	(23,880)	$	(19,139)	$	(5,614)	$	(24,753)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	350		—		350		1,095		—		1,095
Reclassification of net loss to interest charges	—		63		63		—		191		191

Balances, Sept. 30, 2021	$	(18,044)	$	(5,423)	$	(23,467)	$	(18,044)	$	(5,423)	$	(23,467)

Note 17 — Storm Securitization and Cost Recovery

In 2020 and 2021, Cleco Power’s distribution and transmission systems sustained damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola. Cleco Power’s total restoration costs related to the hurricanes and winter storms totaled approximately $342.7 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. As a result, approximately $211.1 million of the total restoration costs were capitalized on Cleco Power’s balance sheet. Cleco Power also had regulatory assets totaling approximately $124.3 million for non-capital expenses related to these storms, as allowed by the LPSC. There was also $7.3 million for storm restoration costs related to wholesale operations and maintenance that was expensed on Cleco’s and Cleco Power’s Condensed Consolidated Income Statements in the period the costs were incurred.

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 for the securitization of Storm Recovery Property. This included:

•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;

•$95.0 million for a reserve to fund Hurricane Ida storm restoration costs;

•$100.9 million for a reserve to fund future storm restoration costs; and

•$9.0 million for estimated upfront securitization costs and ongoing costs.

On June 22, 2022, Cleco Power completed a securitized financing of the Storm Recovery Property through Cleco Securitization I. Cleco Securitization I used the net proceeds from its issuance of $425.0 million aggregate principal amount of its senior secured storm recovery bonds to purchase the Storm Recovery Property from Cleco Power, pay for debt issuance costs, and reimburse Cleco Power for upfront securitization costs paid by Cleco Power on behalf of Cleco Securitization I. Cleco Power utilized the proceeds received from Cleco Securitization I to fund reserves for storm restoration costs and redeem its $325.0 million floating rate notes issued in September 2021. For more information about the storm recovery bonds, see Note 7 — “Debt.” For more information about the storm reserves and regulatory assets associated with the storms, see Note 5 — “Regulatory Assets and Liabilities.” For more information about the cash restricted for the storm reserves, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

On June 1, 2021, Cleco Power began collecting through rates $16.0 million annually for interim storm recovery costs associated with Hurricanes Laura, Delta, and Zeta. The interim storm rate recovery continued until the new storm recovery surcharge became effective on September 1, 2022.

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


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, 2021, and Cleco’s 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 nine months ended September 30, 2022, and 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 nine generating units with a total rated capacity of 3,035 MW and serves approximately 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 a mixture of electric


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

~~Note 17 — Storm Restoration~~

cooperatives, municipal bodies, a utility, and a non-profit corporation.

~~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 $242.6 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 $152.2 million, of the total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling $78.2 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, which is expected in the first quarter of 2022. Cleco Power began collecting this amount through rates on June 1, 2021.Significant Events

~~Winter Storms Uri and Viola~~

In February 2021, Winter Storms Uri and Viola reached Louisiana causing Cleco’s service territories 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 U.S., primarily due to prolonged freezing temperatures. Cleco Power’s total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.5 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 million, of the estimated total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had a regulatory asset for the remaining operations and maintenance costs of $2.0 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.

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 with the May 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 its first set of data requests. Management is unable to determine the outcome or timing of the audit.

~~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.Securitization

~~Hurricane Ida~~

Cleco Power’s current estimate of total storm restoration costs related to Hurricane Ida is between $85.0 million and $95.0 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 56%, or approximately $49.1 million, of the total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had a regulatory asset for non-capital expenses related to Hurricane Ida, as allowed by the LPSC, totaling $36.8 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.~~

Storm Securitization

~~On August 5,~~During 2020 and 2021, Cleco ~~Power filed testimony with the LPSC relating to securitization of the final storm costs for~~Power’s distribution and transmission systems sustained damage from four separate hurricanes, Hurricanes Laura, Delta, ~~and~~ Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola, 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. Cleco Power continues to respond to several sets of data requests received from the LPSC related to the securitization filing.

Cleco Power, in line with other impacted utilities, will seek available funds from the U.S. government for relief of costs incurred from Hurricanes Laura, Delta, and Zeta. Cleco Power cannot predict the likelihood that any funding from the U.S. government ultimately will be approved.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~


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

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, 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 nine months ended September 30, 2021, and 2020.


~~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 10 generating units with a total rated capacity of 3,360 MW and serves approximately 290,000 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 cooperatives, two wholesale municipal customers, and one electric utility. Upon the closing of the Cleco Cajun Transaction, Cottonwood Energy entered into the Cottonwood Sale Leaseback.

~~Significant Events~~

~~Hurricane Ida~~

~~Cleco Power’s current estimate of total storm restoration costs related to Hurricane Ida is between $85.0 million and $95.0 million.~~Viola. The damage to equipment from the ~~hurricane~~storms required replacement, as well as repair of existing assets. ~~Therefore,~~

On March 30, 2022, the ~~balance sheets of Cleco~~LPSC approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power ~~reflect~~relating to securitization of these storm costs. On April 1, 2022, the ~~capitalization~~LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in the aggregate principal amount of ~~approximately 56%, or approximately $49.1 million,~~up to $425.0 million. On June 22, 2022, Cleco Power completed a securitized financing of the ~~total restoration~~deferred storm costs ~~recorded at September 30, 2021. At September 30, 2021,~~through Cleco ~~Power had regulatory assets for non-capital expenses related to Hurricane Ida, as allowed by the LPSC, totaling $36.8 million.~~Securitization I. For more information on ~~Cleco Power’s~~the storm securitization financing, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm ~~Restoration — Storm Securitization.”~~

~~Winter Storms Uri~~Securitization and ~~Viola~~

Cleco Power’s total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.5 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.4 million, of the estimated total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had a regulatory asset for the remaining operations and maintenance costs of $2.0 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.

~~Hurricanes Laura, Delta, and Zet~~aDolet Hills Securitization

~~In August and~~On October 6, 2020, Cleco ~~Power’s distribution~~Power and ~~transmission systems sustained substantial damage from three separate hurricanes.~~

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 ~~total storm restoration~~proportionate share of lignite-related costs related to the hurricanes is approximately $242.6 million. The damage to equipment from the hurricanes required replacement, as well as repair of existing assets. Therefore, the balance sheets of Clecohad been billed by DHLC and Cleco Power reflect the capitalization of approximately 63%, or approximately $152.2 million, of the total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling $78.2 million.

Oxbow. On ~~December 4, 2020,~~January 31, 2022, Cleco Power filed an application with the LPSC requesting ~~an interim rate~~ recovery ~~for return on certain storm restoration~~of stranded and decommissioning 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 recoveryretirement of the ~~verified final storm~~Dolet Hills Power Station as well as deferred fuel and other costs ~~and securitization~~associated with the closure of ~~those~~the Oxbow mine. These costs ~~which is expected in~~are currently under a prudency review by the ~~first quarter of 2022. Cleco Power began collecting this amount through rates on June 1, 2021.~~LPSC. For more information on ~~Cleco Power’s storm securitization,~~the prudency review of the deferred fuel and other mine-related closure costs, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1713 — ~~Storm Restoration~~Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — ~~Storm Securitization.~~LPSC Audits and Reviews — Prudency Reviews — Lignite Mine Closure Costs.”

On June 3, 2022, the Louisiana Electric Utility Energy Transition Securitization Act was passed into law. Through authorization of an LPSC financing order, this law enables Louisiana electric utilities to use securitization financing for certain energy transition costs, including mine closure costs and stranded costs. Such a securitization would create a contract right constituting incorporeal movable property of the right to bill and collect from Louisiana customers the costs of securitization. Pending the outcome of the prudency review and under the terms of the new law, Cleco Power intends to seek a financing order to securitize the unrecovered Dolet Hills Power Station closure costs and Oxbow mine closure costs in 2023. For more information on the retirement of the Dolet Hills Power Station and the closure of the Oxbow mine, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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 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. Due to the decrease in the number of COVID-19 cases, effective October 27, 2021, the mandatory, state-wide mask mandate was once again revoked.

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, OSHA, 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. Cleco Power anticipates approval of the recovery of these expenses in the first quarter of 2023. At September 30, ~~2021,~~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 the first half of 2022.~~

has implemented certain measures that it believes will provide financial flexibility and help maintain its liquidity. Cleco is ~~also~~ working with its suppliers to ~~understand~~mitigate the ~~potential~~pandemic stimulated 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.~~ ~~While~~ Cleco continues to assess the COVID-19 situation ~~Cleco~~and cannot predict the full impact that COVID-19, or ~~the~~any significant ~~disruption and volatility currently being experienced in the markets~~related disruptions, 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.

~~Future~~ Tax Reform

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) became law. The IRA seeks to lower gasoline and electricity prices, increase energy security, and help consumers afford emissions-cutting technologies. In addition, the IRA provides tax credits for clean electricity sources and energy storage, as well as creates programs to enable states and electric utilities to transition to clean power. There are several tax and renewables provisions in this legislation that could have a material effect on the results of operations, financial condition, or cash flows of the Registrants. These include provisions related to direct pay and credit transferability, enhanced carbon capture and sequestration credits, new technology-neutral clean energy investment credits, and new technology-neutral clean energy production credits. These credits are expected to help fund Cleco Power’s Project Diamond Vault as well as future renewable and electrification projects. Management continues to monitor any potential impact the IRA could have on the Registrants.

ESG Goals

Cleco is ~~monitoring~~accelerating its efforts to protect the ~~President’s current tax reform proposals,~~environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco aims to 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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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 workforce culture that rewards inclusion, safety, and innovation. To govern responsibly, Cleco plans to continue operating according to policies and practices that support the ~~current proposed infrastructure bill. The proposals have~~governance framework. To ensure accountability, Cleco has created an ESG Steering Committee and has appointed a Chief Sustainability Officer to oversee the ~~potential to increase~~continued implementation of the ~~federal statutory corporate income tax rate from the current rate of 21%.~~ESG goals. Currently, management is unable to predict the impact of ~~the proposals~~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 ~~is also monitoring possible updates related to a decreased Louisiana state corporate income tax rate proposal and a Louisiana state sales tax proposal to be voted on in November 2021.~~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. In addition to the ESG goals previously discussed, Cleco Power’s current key initiatives ~~are continuing construction~~include 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~~retail business. Cleco Power is also pursuing renewable and ~~retail businesses.~~electrification initiatives. 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 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. For more information on ~~the new FRP for~~ Cleco ~~Power,~~Power’s retail rate plan, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — FRP.”

In 2021, a wholesale customer that is currently under contract with Cleco Power through March 31, 2024, conducted a request for proposal for load 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

~~provider of load after the first quarter of 2024~~Renewable 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 will continue to support the process and cannot predict the outcome of the process. Failure to 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 next rate case.Electrification Initiatives

~~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 ~~$125.7~~$12.0 million. A $9.0 million congressional appropriation has been secured, subject to the U.S. Department of Energy’s grant process, to help offset future costs of this study. The project is expected to increase reliability, provide transmission system redundancy, 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 phase was completed in August 2021, and the southern phaseFEED study is expected to be completed in the ~~fourth~~first quarter of ~~2021. At September 30, 2021, Cleco Power had a regulatory asset~~2024 and permitting is expected to be completed in the second half of ~~$0.3 million for recovery~~2025. Construction of the ~~revenue requirements for~~project is expected to begin by the ~~northern phase~~end of 2025. Management expects the total project will be completed by the end of 2028. After the cost of the ~~project. As~~FEED study, the remaining project cost is currently estimated to be $900.0 million. This estimate will be refined throughout the FEED study process as additional information and cost estimates become available. Cleco anticipates funding this project through one or more sources including tax credits provided by the Inflation Reduction Act of ~~September 30, 2021, Cleco Power had spent $108.1 million on the project.~~2022, Department of Energy grants, and private equity investment.

Other Renewable and Electrification Initiatives

On July 22, 2022, Cleco Power entered into a long-term agreement to purchase, among other things, the output, capacity, and current and future environmental resource credits of a 240-MW solar electric generation facility to be constructed in DeSoto Parish and owned by a third party. The agreement is subject to LPSC approval and other conditions precedent. If approved, Cleco Power expects to begin receiving output from this facility in 2025.

Cleco Power is also pursuing electrification initiatives such as gas compression, e-trucking, green tariffs, residential heating programs, and increasing the supply of light duty electric vehicles and forklifts, among others.

DSMART Project

The DSMART 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 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. 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.~~phases, and management expects the total project will be completed by the end of 2027. In January 2019, Cleco Power ~~initiated~~began the first phase of the project. As of September 30, ~~2021,~~2022, Cleco Power had spent ~~$29.1~~$38.4 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 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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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. On October 19, 2022, the LPSC certified the results of the request for proposal. Failure to ~~renew existing franchises and wholesale contracts could have a material adverse effect on~~recontract this or other agreements is expected to 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, which is expected to be effective on July 1, 2024.

Cleco Cajun

Cleco Cajun currently has 12 power purchase agreements totaling approximately ~~2,100~~1,915 MW with 12 wholesale customers, which consist of a mixture of electric cooperatives, municipal bodies, a utility, and a ~~utility. Cleco Cajun routinely seeks to grow the amount of power sold pursuant to these existing agreements.~~non-profit corporation. 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 cooperatives, which are currently under contract with~~ Cleco ~~Cajun through~~Cajun’s cooperative customers have finalized their recontracting decisions beyond the first quarter of 2025 ~~conducted a request for proposal for load after 2025 in which Cleco Cajun participated. In March 2021, the group of cooperatives informed~~and have notified Cleco Cajun that it was not selected as a ~~provider~~provider. This non-selection is believed to be the result of ~~load after the first quarter of 2025~~a trend toward cooperatives favoring shorter-term, market-based solutions and ~~filed a notice with the LPSC~~intermittent renewables rather than asset-backed, long-term full-service contracts.

Cleco is exploring options related to ~~certify the results of the request for proposal.~~its investment in Cleco Cajun, ~~subsequently filed a notice~~including the potential sale of intervention with the LPSC requesting further review prior to certifying the cooperatives’ notice. The certification process is ongoing, and the LPSC procedural schedule extends into the first quarterpart or all of ~~2022.~~ Cleco ~~Cajun continues to advance its position in the process and cannot predict the outcome of the process.~~Cajun’s assets. Failure to ~~recontract these~~enter into new contracts to replace existing agreements or failure to take other ~~agreements~~mitigating measures for the loss of existing contracts could have a material adverse effect on Cleco’s results of operations, financial condition, cash flows and liquidity as early as ~~2025.~~

~~In 2021, a separate cooperative, which is currently under contract with Cleco Cajun through~~ the ~~first~~second quarter of 2025, conducted a request for proposal for load after March 27, 2025, in which Cleco Cajun participated. In August 2021, the 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 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 the potential certification of the cooperative’s notice. The certification process is ongoing, and the LPSC procedural schedule extends into the third quarter of 2022. Cleco Cajun will continue to support the process and cannot predict the outcome of the process. Failure to recontract this or other agreements could have a material adverse effect on Cleco’s results of operations, financial condition, cash flows, and liquidity as early as 2025.

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, availability of fuel for generation, and compliance with the commitments made to the LPSC as a result of the Cleco Cajun Transaction.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~


RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, ~~2021,~~2022, and ~~2020~~2021


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30,									FOR THE THREE MONTHS ENDED SEPT. 30,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2021		2020		VARIANCE		CHANGE		(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue, net	Operating revenue, net	$	517,194	$	417,451	$	99,743	23.9	%	Operating revenue, net	$	674,543	$	517,194	$	157,349	30.4	%
Operating expenses	Operating expenses	325,629		295,699		(29,930)		(10.1)	%	Operating expenses	558,933		325,629		(233,304)		(71.6)	%
Operating income	Operating income	191,565		121,752		69,813		57.3	%	Operating income	115,610		191,565		(75,955)		(39.6)	%
Interest income	Interest income	941		910		31		3.4	%	Interest income	2,238		941		1,297		137.8	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	711		144		567		393.8	%	Allowance for equity funds used during construction	965		711		254		35.7	%

Other expense, net	Other expense, net	(8,109)		(3,374)		(4,735)		(140.3)	%	Other expense, net	(4,940)		(8,109)		3,169		39.1	%
Interest charges	Interest charges	34,629		34,060		(569)		(1.7)	%	Interest charges	39,890		34,629		(5,261)		(15.2)	%
Federal and state income tax expense	Federal and state income tax expense	30,569		25,075		(5,494)		(21.9)	%	Federal and state income tax expense	5,611		30,569		24,958		81.6	%
Net income	Net income	$	119,910	$	60,297	$	59,613	98.9	%	Net income	$	68,372	$	119,910	$	(51,538)	(43.0)	%

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 ~~$99.7~~$157.3 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~$70.9~~$109.4 million of higher fuel cost recovery revenue ~~$15.8 million of lower electric customer credits,~~ and ~~$5.0~~$14.7 million of higher ~~other operations~~base revenue, partially offset by $6.0 million of higher electric customer credits at Cleco Power. Also contributing to the increase was ~~$7.5~~$33.3 million of higher electric operations revenue and ~~$3.8~~$4.4 million of ~~higher~~ other operations revenue at Cleco Cajun. ~~These increases were partially offset by $2.7 million of lower base revenue at Cleco Power.~~

Operating Expenses

Operating expenses increased ~~$29.9~~$233.3 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~$70.9~~$109.5 million of higher recoverable fuel and purchased power expense, ~~$4.2~~$13.8 million of regulatory disallowance, and $6.9 million of higher non-recoverable fuel and purchased power ~~expense, $4.1 million of higher other operations and maintenance expense, and $3.3 million of higher depreciation and amortization~~ expense at Cleco Power. Also contributing to the increase was ~~$13.3~~$54.9 million of higher fuel used for electric generation and $46.5 million of higher purchased power expense at Cleco Cajun and $3.7 million for the impairment loss on the Cleco Power trade name intangible asset at Cleco Holdings. These increases were partially offset by $73.8 million of lower fuel used for electric generation at Cleco Cajun.

Other Expense, Net

Other expense, net ~~increased $4.7~~decreased $3.2 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~$3.4~~$2.4 million for the absence of a special termination benefit and $2.3 million of ~~higher~~lower non-service pension ~~non-service~~ costs at Cleco ~~Power and $1.7~~Power. Also contributing to the decrease was $0.9 million for the absence of a special termination benefit at Cleco Holdings. These decreases were partially offset by $2.3 million for the decrease in the cash surrender value of certain trust-owned life insurance policies as a result of ~~less favorable~~unfavorable market conditions at Cleco Holdings.

Interest Charges

Interest charges increased $5.3 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

the storm recovery bonds issued in June 2022 by Cleco Securitization I.

Income Taxes

Federal and state income tax expense ~~increased $5.5~~decreased $25.0 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~$13.5~~$16.1 million for the change in pretax income, excluding AFUDC equity, ~~$3.3~~$6.3 million for flow through of tax benefits largely comprised of state taxes, $2.5 million for state tax expense, ~~and $3.1 million for the flow through of state tax benefits. These increases were partially offset by $11.0 million for adjustments to tax returns as filed, $2.0~~$2.2 million to record tax expense at the projected annual effective tax rate, and ~~$1.3~~$1.4 million for the amortization of excess ADIT. These decreases were partially offset by $4.0 million for adjustments to tax returns as filed.

The estimated annual effective income tax rates used during the third quarter of ~~2021~~2022 and ~~2020~~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 the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Power	Cleco Power										Cleco Power
				FOR THE THREE MONTHS ENDED SEPT. 30,										FOR THE THREE MONTHS ENDED SEPT. 30,
						FAVORABLE/(UNFAVORABLE)										FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2021		2020			VARIANCE		CHANGE		(THOUSANDS)	2022		2021			VARIANCE		CHANGE
Operating revenue	Operating revenue										Operating revenue
Base	Base	$	182,928	$	185,597		$	(2,669)	(1.4)	%	Base	$	197,585	$	182,928		$	14,657	8.0	%
Fuel cost recovery	Fuel cost recovery	174,156		103,255			70,901		68.7	%	Fuel cost recovery	283,568		174,156			109,412		62.8	%
Electric customer credits	Electric customer credits	(691)		(16,534)			15,843		95.8	%	Electric customer credits	(6,728)		(691)			(6,037)		(873.7)	%
Other operations	Other operations	22,779		17,775			5,004		28.2	%	Other operations	24,757		22,779			1,978		8.7	%
Affiliate revenue	Affiliate revenue	1,380		1,506			(126)		(8.4)	%	Affiliate revenue	1,657		1,380			277		20.1	%
Operating revenue, net	Operating revenue, net	380,552		291,599			88,953		30.5	%	Operating revenue, net	500,839		380,552			120,287		31.6	%
Operating expenses	Operating expenses										Operating expenses
Recoverable fuel and purchased power	Recoverable fuel and purchased power	174,332		103,426			(70,906)		(68.6)	%	Recoverable fuel and purchased power	283,848		174,332			(109,516)		(62.8)	%
Non-recoverable fuel and purchased power	Non-recoverable fuel and purchased power	13,006		8,818			(4,188)		(47.5)	%	Non-recoverable fuel and purchased power	19,926		13,006			(6,920)		(53.2)	%
Other operations and maintenance	Other operations and maintenance	56,720		52,595			(4,125)		(7.8)	%	Other operations and maintenance	58,581		56,720			(1,861)		(3.3)	%
Depreciation and amortization	Depreciation and amortization	43,526		40,268			(3,258)		(8.1)	%	Depreciation and amortization	44,368		43,526			(842)		(1.9)	%
Taxes other than income taxes	Taxes other than income taxes	12,891		11,408			(1,483)		(13.0)	%	Taxes other than income taxes	14,940		12,891			(2,049)		(15.9)	%

Regulatory disallowance											Regulatory disallowance	13,841		—			(13,841)		(100.0)	%
Total operating expenses	Total operating expenses	300,475		216,515			(83,960)		(38.8)	%	Total operating expenses	435,504		300,475			(135,029)		(44.9)	%
Operating income	Operating income	80,077		75,084			4,993		6.6	%	Operating income	65,335		80,077			(14,742)		(18.4)	%
Interest income	Interest income	936		789			147		18.6	%	Interest income	1,726		936			790		84.4	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	711		144			567		393.8	%	Allowance for equity funds used during construction	965		711			254		35.7	%
Other expense, net	Other expense, net	(6,106)		(3,408)			(2,698)		(79.2)	%	Other expense, net	(1,591)		(6,106)			4,515		73.9	%
Interest charges	Interest charges	18,509		18,441			(68)		(0.4)	%	Interest charges	23,840		18,509			(5,331)		(28.8)	%
Federal and state income tax expense	Federal and state income tax expense	548		18,076			17,528		97.0	%	Federal and state income tax expense	1,862		548			(1,314)		(239.8)	%
Net income	Net income	$	56,561	$	36,092		$	20,469	56.7	%	Net income	$	40,733	$	56,561		$	(15,828)	(28.0)	%


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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


		FOR THE THREE MONTHS ENDED SEPT. 30,						FOR THE THREE MONTHS ENDED SEPT. 30,
(MILLION kWh)	(MILLION kWh)	2021	2020	FAVORABLE/ (UNFAVORABLE)			(MILLION kWh)	2022	2021	FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales						Electric sales
Residential	Residential	1,109	1,159		(4.3)	%	Residential	1,115	1,109		0.5	%
Commercial	Commercial	738	741		(0.4)	%	Commercial	780	738		5.7	%
Industrial	Industrial	537	481		11.6	%	Industrial	572	537		6.5	%
Other retail	Other retail	34	32		6.3	%	Other retail	30	34		(11.8)	%
Total retail	Total retail	2,418	2,413		0.2	%	Total retail	2,497	2,418		3.3	%
Sales for resale	Sales for resale	866	917		(5.6)	%	Sales for resale	906	866		4.6	%
Total retail and wholesale customer sales	Total retail and wholesale customer sales	3,284	3,330		(1.4)	%	Total retail and wholesale customer sales	3,403	3,284		3.6	%

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


		FOR THE THREE MONTHS ENDED SEPT. 30,								FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2021		2020		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2022		2021		FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales								Electric sales
Residential	Residential	$	95,368	$	98,236		(2.9)	%	Residential	$	100,964	$	95,368		5.9	%
Commercial	Commercial	48,246		48,539			(0.6)	%	Commercial	52,457		48,246			8.7	%
Industrial	Industrial	22,902		21,470			6.7	%	Industrial	21,519		22,902			(6.0)	%
Other retail	Other retail	2,928		2,800			4.6	%	Other retail	2,820		2,928			(3.7)	%
Surcharge		—		(2)			100.0	%
Storm recovery surcharge									Storm recovery surcharge	5,025		—			100.0	%
Total retail	Total retail	169,444		171,043			(0.9)	%	Total retail	182,785		169,444			7.9	%
Sales for resale	Sales for resale	13,484		14,554			(7.4)	%	Sales for resale	14,800		13,484			9.8	%
Total base revenue	Total base revenue	$	182,928	$	185,597		(1.4)	%	Total base revenue	$	197,585	$	182,928		8.0	%

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 high number of cooling ~~degree-day is an indication of the likelihood that a consumer~~degree-days may indicate consumers will use more air conditioning, while a high number of heating ~~degree-day is an indication of the likelihood that a consumer~~degree-days may indicate consumers will use more 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 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 SEPT. 30,
2021 CHANGE
2021 2020 NORMAL PRIOR YEAR NORMAL
Cooling degree-days 1,591 1,604 1,511 (0.8) % 5.3 %


	FOR THE THREE MONTHS ENDED SEPT. 30,
				2022 CHANGE
	2022	2021	NORMAL	PRIOR YEAR		NORMAL

Cooling degree-days	1,632	1,591	1,511	2.6	%	8.0	%

Base

Base revenue ~~decreased $2.7~~increased $14.7 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~$11.1~~$9.5 million ~~of lower~~for higher rates, ~~as a result of the implementation of Cleco Power’s new retail rate plan. The lower rates are largely~~$3.6 million for higher storm

~~due to TCJA bill credits that will expire in 2024. This decrease was partially offset by $4.6 million of new interim rate~~


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

recovery ~~for return on certain storm costs relating to Hurricanes Laura, Delta,~~revenue, and ~~Zeta, and $3.6~~$2.9 million of higher ~~revenue due to the absence of impacts~~usage from ~~lower usage as a result of Hurricane Laura in 2020.~~warmer summer weather.

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

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately ~~75%~~76% of Cleco Power’s total fuel cost during the third quarter of ~~2021~~2022 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. During 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~~the incremental fuel and purchased power costs resulting from Winter Storms Uri and Viola through Cleco Power’s FAC over a period of 12 months beginning inwith the May ~~2021.~~2021 bills. Cleco Power’s incremental fuel and purchased power costs for the three months ended September 30, 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — ~~Litigation —~~ Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits ~~decreased $15.8~~increased $6.0 million during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 primarily due to ~~lower refunds~~$6.6 million for ~~the federal tax-related benefits of the TCJA as~~a refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund is a result of the LPSC approved settlement disallowing the recovery of ~~Cleco Power’s retail rate case.~~planning and construction costs incurred for the St. Mary Clean Energy Center. For more information onabout the ~~TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation~~settlement and ~~Rates — TCJA.”~~

~~Other Operations Income~~

Other operations income increased $5.0 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $2.2 million of higher transmission revenue, $1.4 million of higher forfeited discounts, and $0.7 million of higher reconnection fees.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

~~Non-Recoverable Fuel and Purchased Power~~

~~Non-recoverable fuel and purchased power increased $4.2 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher MISO transmission costs.~~

~~Other Operations and Maintenance Expense~~

~~Other operations and maintenance expense increased $4.1 million~~during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $3.4 million of higher routine distribution maintenance expense, largely the result of Hurricane Ida, $2.6 million of higher customer services expenses relating to an increase in temporary staffing and increased collection efforts, $1.1 million of higher routine generation maintenance expenses, and $1.2 million of higher generation operations expenses. These amounts were partially offset by $3.1 million of lower expenses related to employee benefits and $1.5 million of lower uncollectible expenses due to collections on the deferred financing arrangements entered into as a result of COVID-19.

~~Depreciation and Amortization Expense~~

~~Depreciation and amortization expense increased $3.3 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher normal recurring additions to fixed assets.~~

~~Other expense, net~~

Other expense, net increased $2.7 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher pension non-service costs as a result of a special termination benefit relating to an enhanced pension benefit amendment. For more information on the enhanced pension benefit amendment, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 8 — Pension Plan and Employee Benefits — Pension Plan and Other Benefits.”

~~Income Taxes~~

Federal and state income tax expense decreased $17.5 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $10.7 million for adjustments to tax returns as filed, $8.5 million to record tax expense at the projected annual effective tax rate, and $1.3 million for the amortization of excess ADIT. These decreases were partially offset by $3.1 million for the flow through of state tax benefits.

The estimated annual effective income tax rates used during the third quarter of 2021 and 2020 for Cleco Power may not be indicative of the full-year income tax rates. For more information on Cleco Power’s 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 SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Electric operations $ 107,500 $ 99,956 $ 7,544 7.5 %
Other operations 35,158 31,331 3,827 12.2 %
Operating revenue, net 142,658 131,287 11,371 8.7 %
Operating expenses
Fuel used for electric generation (79,809) (6,006) 73,803 *
Purchased power 65,382 52,104 (13,278) (25.5) %
Other operations and maintenance 24,174 22,205 (1,969) (8.9) %
Depreciation and amortization 11,333 10,547 (786) (7.5) %
Taxes other than income taxes 3,844 2,320 (1,524) (65.7) %
Total operating expenses 24,924 81,170 56,246 69.3 %
Operating income 117,734 50,117 67,617 134.9 %
Interest income 4 10 (6) (60.0) %
Other income, net 11 4 7 175.0 %
Interest charges 1,117 (484) (1,601) (330.8) %
Federal and state income tax expense 29,888 12,258 (17,630) (143.8) %
Net income $ 86,744 $ 38,357 $ 48,387 126.1 %
* Not meaningful

~~Electric Operations~~

Electric operations revenue increased $7.5 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $10.1 million of higher fuel rates, partially offset by $3.1 million for the expiration of a power supply agreement in May 2021.

~~Other Operations Income~~

~~Other operations income increased $3.8 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher transmission revenue from wholesale customers.~~

~~Fuel Used for Electric Generation~~

Fuel used for electric generation decreased $73.8 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $65.7 million of higher mark-to-market gains on gas related derivative contracts, $21.7 million of settlements related to gas swaps activity, and $7.5 million of lower natural gas consumption due to higher natural gas prices. These decreases were partially offset by $19.8 million of higher coal consumption which was largely the result of higher generating unit dispatch.

~~Purchased Power~~

~~Purchased power increased $13.3 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher costs of purchased power from MISO and higher usage.~~

~~Income Taxes~~

Federal and state income tax expense increased $17.6 million during the third quarter of 2021 compared to the third quarter of 2020 primarily due to $13.9 million for the change in pretax income and $3.4 million for state tax expense.

~~The effective income tax rates for the third quarters of 2021 and 2020 were 25.6% and 23.4%, respectively. The~~


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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

~~Comparison of the Nine Months Ended September 30, 2021, and 2020~~

Cleco
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue, net $ 1,290,937 $ 1,122,782 $ 168,155 15.0 %
Operating expenses 929,088 856,170 (72,918) (8.5) %
Operating income 361,849 266,612 95,237 35.7 %
Interest income 2,416 2,964 (548) (18.5) %
Allowance for equity funds used during construction 2,703 197 2,506 *
Other expense, net (15,112) (15,827) 715 4.5 %
Interest charges 101,812 103,923 2,111 2.0 %
Federal and state income tax expense 30,985 40,230 9,245 23.0 %
Net income $ 219,059 $ 109,793 $ 109,266 99.5 %
*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 $168.2 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $132.2 million of higher fuel cost recovery revenue and $8.2 million of higher other operations revenue at Cleco Power. Also contributing to the increase was $26.6 million of higher electric operations income and $5.9 million of higher other operations revenue at Cleco Cajun. These increases were partially offset by $6.5 million of higher electric customer credits at Cleco Power.

~~Operating Expenses~~

Operating expenses increased $72.9 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $131.7 million of higher recoverable fuel and purchased power expense, $3.6 million of higher taxes other than income taxes, and $2.7 million of higher non-recoverable fuel and purchased power expense at Cleco Power. Also contributing to the increase was $52.1 million of higher purchased power expense, $5.5 million of higher other operations and maintenance expense, and $2.6 million of higher depreciation and amortization expense at Cleco Cajun and $3.7 million for the impairment loss on the Cleco Power trade name intangible asset at Cleco Holdings. These increases were partially offset by $125.7 million of lower fuel expense at Cleco Cajun.

~~Allowance for equity funds used during construction~~

Allowance for equity funds used during construction increased $2.5 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher AFUDC rates driven by the timing of the election of the FERC modified formula authorized in March 2020.

~~Interest Charges~~

Interest charges decreased $2.1 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020 primarily due to lower rates on Cleco Holdings’ variable rate debt incurred in connection with the 2016 Merger.

~~Income Taxes~~

Federal and state income tax expense decreased $9.2 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $21.9 million for the amortization of excess ADIT, $11.0 million for adjustments to tax returns as filed, and $5.8 million to record tax expense at the projected annual effective tax rate. These decreases were partially offset by $20.4 million for the change in pretax income, excluding AFUDC equity, $5.5 million for state tax expense, and $3.2 million for the flow through of state tax benefits.

The estimated annual effective income tax rates used during the nine months ended September 30, 2021, and 2020 for Cleco might 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 the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”

Cleco Power
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Base $ 499,653 $ 497,589 $ 2,064 0.4 %
Fuel cost recovery 387,538 255,336 132,202 51.8 %
Electric customer credits (40,429) (33,974) (6,455) (19.0) %
Other operations 57,674 49,443 8,231 16.6 %
Affiliate revenue 4,259 3,852 407 10.6 %
Operating revenue, net 908,695 772,246 136,449 17.7 %
Operating expenses
Recoverable fuel and purchased power 387,730 256,017 (131,713) (51.4) %
Non-recoverable fuel and purchased power 26,739 23,996 (2,743) (11.4) %
Other operations and maintenance 162,448 164,207 1,759 1.1 %
Depreciation and amortization 126,534 125,541 (993) (0.8) %
Taxes other than income taxes 36,707 33,132 (3,575) (10.8) %
Total operating expenses 740,158 602,893 (137,265) (22.8) %
Operating income 168,537 169,353 (816) (0.5) %
Interest income 2,404 2,498 (94) (3.8) %
Allowance for equity funds used during construction 2,703 197 2,506 *
Other expense, net (16,064) (9,498) (6,566) (69.1) %
Interest charges 55,392 55,624 232 0.4 %
Federal and state income tax (benefit) expense (219) 30,770 30,989 100.7 %
Net income $ 102,407 $ 76,156 $ 26,251 34.5 %
* Not meaningful


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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

FOR THE NINE MONTHS ENDED SEPT. 30,
(Million kWh) 2021 2020
FAVORABLE/
(UNFAVORABLE)
Electric sales
Residential 2,897 2,843 1.9 %
Commercial 1,968 1,959 0.5 %
Industrial 1,564 1,417 10.4 %
Other retail 98 94 4.3 %
Total retail 6,527 6,313 3.4 %
Sales for resale 2,253 2,289 (1.6) %
Total retail and wholesale customer sales 8,780 8,602 2.1 %

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

FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
FAVORABLE/
(UNFAVORABLE)
Electric sales
Residential $ 241,433 $ 239,196 0.9 %
Commercial 142,075 143,516 (1.0) %
Industrial 65,083 61,220 6.3 %
Other retail 8,380 8,146 2.9 %
Surcharge — 2,440 (100.0) %
Total retail 456,971 454,518 0.5 %
Sales for resale 42,682 43,071 (0.9) %
Total base revenue $ 499,653 $ 497,589 0.4 %

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

FOR THE NINE MONTHS ENDED SEPT. 30,
2021 CHANGE
2021 2020 NORMAL PRIOR YEAR NORMAL
Heating degree-days 985 615 942 60.2 % 4.6 %
Cooling degree-days 2,715 2,866 2,531 (5.3) % 7.3 %

~~Base~~

Base revenue increased $2.1 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $5.9 million of new interim rate recovery for return on certain storm costs relating to Hurricanes Laura, Delta, and Zeta, $4.7 million of higher usage from colder winter weather, and $3.6 million of higher revenue due to the absence of impacts from lower usage as a result of Hurricane Laura in 2020. These increases were partially offset by $10.0 million of lower rates as a result of the implementation of Cleco Power’s new retail rate plan. The lower rates are largely due to TCJA bill credits that will expire in 2024. Also offsetting these increases is 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.

~~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.~~

~~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 74% of Cleco Power’s total fuel cost during the first nine 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 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 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,disallowance, 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 and Reviews — ~~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~~Prudency Reviews — ~~Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Risks and Uncertainties.~~St. Mary Clean Energy Center.”

~~Electric Customer Credits~~

Electric customer credits increased $6.5 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due 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 $8.2 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $4.5 million of higher transmission revenue, $1.7 million of higher reconnection fees, and $1.6 million of higher forfeited discounts.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power increased ~~$2.7~~$6.9 million during the ~~nine months ended September 30, 2021,~~third quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~third quarter of 2021 primarily due to ~~$1.5 million of higher fuel costs largely due to the winter storms in 2021, and $1.3 million of~~ higher MISO transmission costs.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

Other Operations and Maintenance Expense

Other operations and maintenance expense ~~decreased $1.8~~increased $1.9 million during the ~~nine months ended September 30, 2021,~~third quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~third quarter of 2021 primarily due to ~~$5.9~~$4.1 million of ~~lower fees for outside services mostly relating to START project expenses, audit services, and consulting expenses, $5.6 million of lower~~higher expenses related to employee benefits, ~~$2.7~~$1.3 million of higher distribution operations expense and $1.0 million of higher generation outage maintenance expense. These increases were partially offset by $2.3 million of lower ~~uncollectible~~generation routine maintenance expense, ~~due to collections on the deferred financing arrangements entered into as a result~~$1.3 million of ~~COVID-19,~~lower generation operations expense, and ~~$1.8~~$1.1 million of lower distribution ~~operations~~maintenance expense. These decreases were partially offset by $6.5 million of higher routine distribution maintenance expenses largely the result of Hurricane Ida and $3.1 million of higher customer service expenses relating to an increase in temporary staffing and increased collection efforts. Also offsetting these decreases were $1.0 million of higher administrative and general maintenance expenses, $0.9 million of higher generating outage maintenance expenses, and $0.8 million of higher generating routine maintenance expenses.

~~Depreciation and Amortization~~

Depreciation and amortization expense increased $1.0 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $3.6 million of higher normal recurring additions to fixed assets, partially offset by $2.2 million for the absence of amortization of storm damages as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

Taxes Other Than Income Taxes

Taxes other than income taxes increased ~~$3.6~~$2.0 million during the ~~nine months ended September 30, 2021,~~third quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~third quarter of 2021 primarily due to ~~$1.7 million of~~ higher property ~~taxes and $1.4 million of higher franchise~~ taxes.

~~Allowance for Equity Funds Used During Construction~~Regulatory Disallowance

~~Allowance for equity funds used during construction~~Regulatory disallowance increased ~~$2.5~~$13.8 million during the ~~nine months ended September 30, 2021,~~third quarter of 2022 compared to the ~~nine months ended September 30, 2020, primarily due to higher AFUDC rates driven by~~third quarter of 2021 for the ~~timing of~~impairment charge resulting from the ~~election of the FERC modified formula authorized in March 2020.~~

~~Other Expense, Net~~

Other expense, net increased $6.6 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $5.3 million of higher pension non-service costs as a resultLPSC approved settlement disallowing recovery of a ~~lower discount rate~~portion of planning and ~~a special termination benefit relating to an enhanced pension benefit amendment. Also contributing to~~construction costs incurred for the ~~increase was $1.0 million for disallowed costs as a result of the settlement of Cleco Power’s retail rate case.~~St. Mary Clean Energy Center. For more information onabout the ~~enhanced pension benefit amendment,~~LPSC settlement and disallowance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 813 — ~~Pension Plan~~Litigation, Other Commitments and ~~Employee Benefits~~Contingencies, and Disclosures about Guarantees — ~~Pension Plan~~LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Other ~~Benefits.”~~Expense, Net

Other expense, net decreased $4.5 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $2.4 million for the absence of a special termination benefit and $2.3 million of lower non-service pension costs.

Interest Charges

Interest charges increased $5.3 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to the storm recovery bonds issued in June 2022 by Cleco Securitization I.

Income Taxes

Federal and state income tax ~~benefit~~expense increased ~~$31.0~~$1.3 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $7.8 million to record tax expense at the projected annual effective tax rate, $3.8 million for the adjustments to tax returns as filed, and $0.7 million of state tax expense. These increases were partially offset by $6.3 million for the flow through of tax benefits largely comprised of state taxes, $3.1 million for the change in pretax income, excluding AFUDC equity, and $1.4 million for the amortization of excess ADIT.

The estimated annual effective income tax rates used during the third quarter of 2022 and 2021 for Cleco Power may not be indicative of the full-year income tax rates. For more information on Cleco Power’s 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						2022 3RD QUARTER FORM 10-Q


Cleco Cajun
			FOR THE THREE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021			VARIANCE		CHANGE
Operating revenue
Electric operations	$	140,767	$	107,500		$	33,267	30.9	%

Other operations	39,573		35,158			4,415		12.6	%

Operating revenue, net	180,340		142,658			37,682		26.4	%
Operating expenses
Fuel used for electric generation	(24,941)		(79,809)			(54,868)		(68.7)	%
Purchased power	111,901		65,382			(46,519)		(71.1)	%
Other operations and maintenance	24,284		24,174			(110)		(0.5)	%
Depreciation and amortization	12,046		11,333			(713)		(6.3)	%
Taxes other than income taxes	3,111		3,844			733		19.1	%

Total operating expenses	126,401		24,924			(101,477)		(407.1)	%
Operating income	53,939		117,734			(63,795)		(54.2)	%
Interest income	472		4			468		*
Other income, net	10		11			(1)		(9.1)	%
Interest charges	219		1,117			898		80.4	%
Federal and state income tax expense	14,461		29,888			15,427		51.6	%
Net income	$	39,741	$	86,744		$	(47,003)	(54.2)	%
* Not Meaningful

Electric Operations

Electric operations revenue increased $33.3 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $29.0 million of higher fuel rates and $3.1 million of higher load volumes.

Other Operations Revenue

Other operations revenue increased $4.4 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $3.1 million of higher transmission revenue and $1.3 million of higher variable lease revenue from the Cottonwood Sale Leaseback.

Fuel Used for Electric Generation

Fuel used for electric generation increased $54.9 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $67.1 million of lower mark-to-market gains on gas-related derivative contracts. Also contributing to the increase was $29.2 million of higher natural gas consumption which was largely the result of higher generating unit dispatch due to warmer summer weather. These increases were partially offset by $43.7 million of settlements related to gas swaps activity.

Purchased Power

Purchased power increased $46.5 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to higher costs of purchased power from MISO.

Income Taxes

Federal and state income tax expense decreased $15.4 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $13.1 million for the change in pretax income and $2.9 million for state tax expense.

The effective income tax rates for the third quarters of 2022 and 2021 were 26.7% and 25.6%, respectively. The

estimated annual effective income tax rates used during the third quarter of 2022 and 2021 for Cleco Cajun may not be indicative of the full-year income tax rates.

Comparison of the Nine Months Ended September 30, 2022, and 2021


Cleco
	FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue, net	$	1,669,143	$	1,290,937	$	378,206	29.3	%
Operating expenses	1,297,631		929,088		(368,543)		(39.7)	%
Operating income	371,512		361,849		9,663		2.7	%
Interest income	4,236		2,416		1,820		75.3	%
Allowance for equity funds used during construction	2,704		2,703		1		—	%
Other expense, net	(13,604)		(15,112)		1,508		10.0	%
Interest charges	109,818		101,812		(8,006)		(7.9)	%
Federal and state income tax expense	29,551		30,985		1,434		4.6	%
Net income	$	225,479	$	219,059	$	6,420	2.9	%

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 $378.2 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to ~~$21.9~~$225.0 million of higher fuel cost recovery revenue, $33.7 million of higher base revenue, $33.4 million of lower electric customer credits, and $4.9 million of higher other operations revenue at Cleco Power. Also contributing to the increase was $70.1 million of higher electric operations income and $13.0 million of higher other operations revenue at Cleco Cajun.

Operating Expenses

Operating expenses increased $368.5 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $225.1 million of higher recoverable fuel and purchased power expense, $16.3 million of higher non-recoverable fuel and purchased power expense, $13.8 million of regulatory disallowance, and $7.4 million of higher depreciation and amortization expense at Cleco Power. Also contributing to the increase was $84.7 million of higher purchased power expense and $22.3 million of higher depreciation and amortization expense at Cleco Cajun.

Interest Income

Interest income increased$1.8 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 primarily due to $0.7 million of higher interest on accumulated deferred fuel as a result of higher fuel costs and higher interest rates and $0.4 million of higher average investment balances at Cleco Power. Also


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

contributing to the increase was $0.6 million of higher average investment balances at Cleco Cajun.

Other Expense, Net

Other expense, net decreased $1.5 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $6.9 million of lower non-service pension costs and $2.4 million for the absence of a special termination benefit at Cleco Power. Also contributing to the decrease was $1.0 million for the absence of disallowed costs in 2021 as a result of the settlement of Cleco Power’s retail rate case and $0.9 million for the absence of a special termination benefit at Cleco Holdings. These decreases were partially offset by $10.3 million for the decrease in the cash surrender value of certain trust-owned life insurance policies as a result of unfavorable market conditions at Cleco Holdings.

Interest Charges

Interest charges increased $8.0 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 primarily due to $5.2 million for the storm recovery bonds issued in June 2022 by Cleco Securitization I and $1.8 million for the floating rate senior notes issued in September 2021, which were redeemed at par on June 23, 2022. Also contributing to the increase was $1.2 million of amortization of ~~excess ADIT, $10.7~~debt expense.

Income Taxes

Federal and state income tax expense decreased $1.4 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $12.8 million for the flow through of tax benefits largely comprised of state taxes and $5.8 million for permanent tax deductions. These increases were partially offset by $5.1 million to record tax expense at the projected annual effective tax rate, $4.0 million for adjustments to tax returns as filed, $3.5 million for state tax expense, $3.4 million for the amortization of excess ADIT, and ~~$1.7~~$1.0 million

for the change in pretax income, excluding AFUDC equity. ~~These increases were partially offset by $3.2 million for the flow through of state tax benefits.~~

The estimated annual effective income tax rates used during the nine months ended ~~June~~September 30, 2022, and 2021 for Cleco might 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 the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Power
			FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue
Base	$	533,323	$	499,653	$	33,670	6.7	%
Fuel cost recovery	612,541		387,538		225,003		58.1	%
Electric customer credits	(6,992)		(40,429)		33,437		82.7	%
Other operations	62,528		57,674		4,854		8.4	%
Affiliate revenue	4,744		4,259		485		11.4	%
Operating revenue, net	1,206,144		908,695		297,449		32.7	%
Operating expenses
Recoverable fuel and purchased power	612,791		387,730		(225,061)		(58.0)	%
Non-recoverable fuel and purchased power	43,044		26,739		(16,305)		(61.0)	%
Other operations and maintenance	159,588		162,448		2,860		1.8	%
Depreciation and amortization	133,907		126,534		(7,373)		(5.8)	%
Taxes other than income taxes	39,117		36,707		(2,410)		(6.6)	%


Regulatory disallowance	13,841		—		(13,841)		(100.0)	%
Total operating expenses	1,002,288		740,158		(262,130)		(35.4)	%
Operating income	203,856		168,537		35,319		21.0	%
Interest income	3,501		2,404		1,097		45.6	%
Allowance for equity funds used during construction	2,704		2,703		1		—	%
Other expense, net	(5,852)		(16,064)		10,212		63.6	%
Interest charges	63,947		55,392		(8,555)		(15.4)	%
Federal and state income tax expense (benefit)	5,800		(219)		(6,019)		*
Net income	$	134,462	$	102,407	$	32,055	31.3	%
* Not meaningful

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(Million kWh)	2022	2021	FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	2,978	2,897		2.8	%
Commercial	2,084	1,968		5.9	%
Industrial	1,690	1,564		8.1	%
Other retail	91	98		(7.1)	%
Total retail	6,843	6,527		4.8	%
Sales for resale	2,378	2,253		5.5	%
Total retail and wholesale customer sales	9,221	8,780		5.0	%


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2022		2021		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	257,710	$	241,433		6.7	%
Commercial	151,595		142,075			6.7	%
Industrial	65,057		65,083			—	%
Other retail	8,268		8,380			(1.3)	%
Storm recovery surcharge	5,025		—			100.0	%
Total retail	487,655		456,971			6.7	%
Sales for resale	45,668		42,682			7.0	%
Total base revenue	$	533,323	$	499,653		6.7	%


			FOR THE NINE MONTHS ENDED SEPT. 30,
				2022 CHANGE
	2022	2021	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	1,099	985	942	11.6	%	16.7	%
Cooling degree-days	2,787	2,715	2,531	2.7	%	10.1	%

Base

Base revenue increased $33.7 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $14.9 million of higher usage from warmer summer weather and ~~2020~~colder winter weather, $12.0 million for higher rates as a result of the implementation of Cleco Power’s new retail rate plan, and $10.1 million for higher storm recovery revenue. These increases were partially offset by $2.9 million of lower demand charges for industrial customers.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power

Viola through Cleco Power’s FAC over a period of 12 months beginning with the May 2021 bills. Cleco Power’s incremental fuel and purchased power costs for the nine months ended September 30, 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits decreased $33.4 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $39.9 million of lower credits to retail customers for the federal tax-related benefits of the TCJA now being a component of rates as a result of the implementation 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. Partially offsetting this decrease was $6.6 million for a refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund is a result of the LPSC approved settlement disallowing the recovery of planning and construction costs incurred for the St. Mary Clean Energy Center. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — TCJA.” For more information about the LPSC settlement and disallowance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Other Operations Revenue

Other operations revenue increased $4.9 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $2.4 million of higher transmission revenue, $1.6 million of higher forfeited discounts, and $1.0 million of higher pole attachment rental income.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power increased $16.3 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to higher MISO transmission costs.

Other Operations and Maintenance Expense

Other operations and maintenance expense decreased $2.9 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $4.9 million of lower generating routine maintenance expenses, $3.0 million of lower generating outage maintenance expenses, $3.0 million of lower generation operations expense, and $2.6 million of lower distribution maintenance expense. These decreases were partially offset


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

by $7.3 million of higher expenses related to employee benefits and $2.7 million of higher distribution operations expense.

Depreciation and Amortization

Depreciation and amortization increased $7.4 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $7.9 million for the amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta and $1.3 million for the absence of an adjustment to the corporate franchise tax regulatory asset. These amounts were partially offset by $3.3 million of normal recurring additions to fixed assets.

Taxes Other Than Income Taxes

Taxes other than income taxes increased $2.4 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to higher property taxes

Regulatory Disallowance

Regulatory disallowance increased $13.8 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, for the impairment charge resulting from the LPSC approved settlement disallowing recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center. For more information about the LPSC settlement and disallowance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Other Expense, Net

Other expense, net decreased $10.2 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $6.9 million of lower non-service pension costs, $2.4 million for the absence of a special termination benefit, and $1.0 million for the absence of disallowed costs in 2021 as a result of the settlement of Cleco Power’s retail rate case.

Interest Charges

Interest charges increased $8.6 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $5.2 million for the storm recovery bonds issued in June 2022 by Cleco Securitization I and $1.8 million for the floating rate senior notes issued in September 2021, which were redeemed at par on June 23, 2022. Also contributing to the increase was $1.5 million of amortization of debt expense.

Income Taxes

Federal and state income tax expense increased $6.0 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $7.8 million for the change in pretax income, excluding AFUDC equity, $4.0 million for state tax expense, $3.8 million for adjustments to tax returns as filed, and $3.4 million for the amortization of excess ADIT. These increases were partially offset by $12.8 million for the flow through of tax benefits largely comprised of state taxes.

The estimated annual effective income tax rates used during the nine months ended September 30, 2022, and 2021 for Cleco Power might not be indicative of the full-year income tax rates. For more information on Cleco Power’s effective income tax rates, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Cajun	Cleco Cajun									Cleco Cajun
		FOR THE NINE MONTHS ENDED SEPT. 30,									FOR THE NINE MONTHS ENDED SEPT. 30,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2021		2020		VARIANCE		CHANGE		(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue	Operating revenue									Operating revenue
Electric operations	Electric operations	$	300,415	$	273,836	$	26,579	9.7	%	Electric operations	$	370,489	$	300,415	$	70,074	23.3	%
Electric customer credits	Electric customer credits	244		(153)		397		259.5	%	Electric customer credits	—		244		(244)		(100.0)	%
Other operations	Other operations	98,851		92,928		5,923		6.4	%	Other operations	111,897		98,851		13,046		13.2	%
Affiliate revenue		—		204		(204)		(100.0)	%

Operating revenue, net	Operating revenue, net	399,510		366,815		32,695		8.9	%	Operating revenue, net	482,386		399,510		82,876		20.7	%
Operating expenses	Operating expenses									Operating expenses
Fuel used for electric generation	Fuel used for electric generation	(112,350)		13,366		125,716		940.6	%	Fuel used for electric generation	(109,075)		(112,350)		(3,275)		(2.9)	%
Purchased power	Purchased power	190,825		138,744		(52,081)		(37.5)	%	Purchased power	275,531		190,825		(84,706)		(44.4)	%
Other operations and maintenance	Other operations and maintenance	68,398		62,894		(5,504)		(8.8)	%	Other operations and maintenance	71,942		68,398		(3,544)		(5.2)	%
Depreciation and amortization	Depreciation and amortization	33,567		30,995		(2,572)		(8.3)	%	Depreciation and amortization	55,866		33,567		(22,299)		(66.4)	%
Taxes other than income taxes	Taxes other than income taxes	11,366		9,585		(1,781)		(18.6)	%	Taxes other than income taxes	9,292		11,366		2,074		18.2	%

Total operating expenses	Total operating expenses	191,806		255,584		63,778		25.0	%	Total operating expenses	303,556		191,806		(111,750)		(58.3)	%
Operating income	Operating income	207,704		111,231		96,473		86.7	%	Operating income	178,830		207,704		(28,874)		(13.9)	%
Interest income	Interest income	10		269		(259)		(96.3)	%	Interest income	661		10		651		*
Other (expense) income, net		(648)		82		(730)		(890.2)	%
Other income (expense), net										Other income (expense), net	88		(648)		736		113.6	%
Interest charges	Interest charges	786		(353)		(1,139)		(100.0)	%	Interest charges	253		786		533		67.8	%
Federal and state income tax expense	Federal and state income tax expense	52,561		27,280		(25,281)		(92.7)	%	Federal and state income tax expense	47,136		52,561		5,425		10.3	%
Net income	Net income	$	153,719	$	84,655	$	69,064	81.6	%	Net income	$	132,190	$	153,719	$	(21,529)	(14.0)	%

* Not meaningful										* Not meaningful

Electric Operations

Electric operations revenue increased ~~$26.6~~$70.1 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to ~~$16.6~~$66.8 million of higher fuel rates, ~~$5.5~~$5.4 million of higher MISO ~~make-whole payments, $4.8~~pass-through revenue, and $3.7 million of higher load ~~volumes, $3.3 million of higher capacity contract rates, and $1.3~~volumes. These increases were partially offset by $6.4 million for the absence of ~~a 2020 customer demand adjustment. These amounts were partially offset by $2.6 million of lower MISO pass-through recoveries and $2.0 million for the expiration of a~~two power supply ~~agreement in May 2021.~~agreements.

Other Operations Revenue

Other operations revenue increased ~~$5.9~~$13.0 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to $10.8 million of higher transmission ~~revenue.~~revenue and $2.2 million of higher variable lease revenue from the Cottonwood Sale Leaseback.

Fuel Used for Electric Generation

Fuel used for electric generation ~~decreased $125.7~~increased $3.3 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to $51.1 million of higher natural gas consumption which was largely the result of higher generating unit dispatch due to warmer summer weather and $30.2 million of higher coal consumption, which was largely the result of higher natural gas

6261


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

prices and higher generating unit dispatch due to ~~$112.3~~warmer summer weather. Also contributing to the increase was $20.6 million of ~~higher~~lower mark-to-market gains on gas related derivative contracts ~~$30.8~~and $7.2 million of reagent expense. These increases were offset by $105.3 million of settlements related to gas swaps activity, and $14.2 million of lower natural gas consumption due to higher natural gas prices. These decreases were partially offset by $28.9 million of higher coal consumption which was largely the result of higher generating unit dispatch.activity.

Purchased Power

Purchased power increased ~~$52.1~~$84.7 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to $69.9 million of higher costs of purchased power from MISO ~~largely the result~~and $11.4 million of ~~Winter Storms Uri and Viola and~~ higher ~~usage.~~transmission costs.

Other Operations and Maintenance Expense

Other operations and maintenance increased ~~$5.5~~$3.5 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to ~~$7.9~~$2.0 million of higher generating outage maintenance expense ~~partially offset by $2.2~~and $1.5 million of ~~lower generation operations~~higher generating routine maintenance expense.

Depreciation and Amortization

Depreciation and amortization increased ~~$2.6~~$22.3 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to ~~normal recurring additions~~higher depreciation on ARO assets as a result of an increase to ~~fixed~~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.

Taxes Other Than Income Taxes

Taxes other than income taxes decreased $2.1 million during the nine months ended September 30, 2022, compared to the

nine months ended September 30, 2021, primarily due to lower property taxes.

Income Taxes

Federal and state income tax expense ~~increased $25.3~~decreased $5.4 million during the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020,~~2021, primarily due to ~~$19.8 million for~~ the change in pretax ~~income and $5.2 million for state tax expenses.~~income.

The effective income tax rates for the nine months ended ~~June~~September 30, 2022, and 2021 were 26.3% and ~~2020 were~~ 25.5% ~~and 24.5%~~, respectively. ~~These~~The estimated annual effective income tax rates used during the nine months ended September 30, 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 nine months ended September 30, ~~2021,~~2022, and ~~2020:~~2021:


		FOR THE THREE MONTHS ENDED SEPT. 30,											FOR THE THREE MONTHS ENDED SEPT. 30,
		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		$	56,561	$	86,744		$	36,092	$	38,357
Net income (loss)												Net income (loss)	$	40,733	$	39,741		$	56,561	$	86,744
Add: Depreciation and amortization	Add: Depreciation and amortization	43,526		12,623		(1)	40,268		11,344		(2)	Add: Depreciation and amortization	44,368		13,336		(1)	43,526		12,623		(2)
Less: Interest income	Less: Interest income	936		4			789		10			Less: Interest income	1,726		472			936		4
Add: Interest charges	Add: Interest charges	18,509		1,117			18,441		(484)			Add: Interest charges	23,840		219			18,509		1,117
Add: Federal and state income tax (benefit) expense		548		29,888			18,076		12,258
Add: Federal and state income tax expense												Add: Federal and state income tax expense	1,862		14,461			548		29,888
EBITDA	EBITDA	$	118,208	$	130,368		$	112,088	$	61,465		EBITDA	$	109,077	$	67,285		$	118,208	$	130,368
(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 $3.6 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. (2) 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.


		FOR THE NINE MONTHS ENDED SEPT. 30,											FOR THE NINE MONTHS ENDED SEPT. 30,
		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	$	102,407	$	153,719		$	76,156	$	84,655		Net income	$	134,462	$	132,190		$	102,407	$	153,719
Add: Depreciation and amortization	Add: Depreciation and amortization	126,534		36,614		(1)	125,541		33,385		(2)	Add: Depreciation and amortization	133,907		59,734		(1)	126,534		36,614		(2)
Less: Interest income	Less: Interest income	2,404		10			2,498		269			Less: Interest income	3,501		661			2,404		10
Add: Interest charges	Add: Interest charges	55,392		786			55,624		(353)			Add: Interest charges	63,947		253			55,392		786
Add: Federal and state income tax expense		(219)		52,561			30,770		27,280
Add: Federal and state income tax expense (benefit)												Add: Federal and state income tax expense (benefit)	5,800		47,136			(219)		52,561
EBITDA	EBITDA	$	281,710	$	243,670		$	285,593	$	144,698		EBITDA	$	334,615	$	238,652		$	281,710	$	243,670
(1) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $9.3 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.
(1) Includes $10.8 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.												(1) Includes $10.8 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

6362


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CLECO POWER						~~2021~~2022 3RD 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 September 30, ~~2021:~~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.

~~Following Hurricane Ida in August 2021,~~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 ~~negative~~stable from ~~stable. This revision was attributable to Cleco Power’s ongoing exposure to severe weather, including hurricanes,~~negative. S~~&P’s expectation for weaker financial measures~~&P revised its outlook due to ~~delayed recovery~~its expectation that Cleco’s financial metrics and balance sheet would improve given the upcoming securitization of most of the costs related to the 2020 hurricanes, the incurrence of additional costs related to Hurricane Ida, as well as Cleco’s lack of access to public equity markets. S&P expects that financial measures will remain weak until Cleco Power receives authorization from the LPSC to issue storm restoration financing. It is possible that S&P could revise their outlook to stable if Cleco’s financial measures materially strengthen without any weakening in its business risk profile, which may occur upon the completion ofcosts. On June 22, 2022, the storm ~~restoration costs~~ securitization expected in early 2022. However, the risk of significant weather events may continue to influence rating agencies’ perception of risk, and could potentially impact the thresholds that Cleco Holdings and Cleco Power are held to, which could have subsequent implications for their respective capital structures in the future.financing was completed.

Cleco Holdings and Cleco Power pay fees and interest under their bank credit agreements based on the highest ratings held. 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’ 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 13 — 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~~rising interest rates ~~to which~~ the Registrants have recently been exposed ~~have been beneficial~~ to ~~debt issuances; however, lower rates~~ have negatively affected interest expense on variable rate debt and positively 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. For information on the impacts of inflation and market price volatility of natural gas on credit loss reserves related to customer accounts receivable, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Reserves for Credit Losses.”

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. On June 16, 2021, the LPSC approved Cleco Power’s ~~new~~current retail rate plan, which ~~includes~~included the settlement of the TCJA protected and unprotected excess ADIT. ~~Effective July 1, 2021,~~As a result of this settlement, all retail customers will continue receiving bill credits resulting from the TCJA. For more information on the regulatory impact of the TCJA, see


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and ~~Rates.~~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


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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 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~~Cleco’s 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 September 30, ~~2021,~~2022, Cleco had ~~no short-term debt~~$87.0 million of outstanding borrowings under its $475.0 million revolving credit facilities. At December 31, 2021, Cleco had ~~$75.0 million of~~no short-term debt ~~outstanding at December 31, 2020.~~outstanding.

At September 30, ~~2021,~~2022, Cleco’s long-term debt and finance leases outstanding totaled ~~$3.55~~$3.57 billion, of which ~~$66.7~~$268.0 million was due within one year. The long-term debt due within one year at September 30, ~~2021,~~2022, primarily represents ~~$66.0~~$165.0 million of Cleco Holdings’ senior notes due in May 2023, $67.7 million of principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the ~~LPSC. Cleco Holdings repaid the $66.0~~LPSC, $25.0 million of Cleco Power’s senior notes due in December 2022, and $9.6 million of Cleco Securitization I storm recovery bond principal payments ~~on October 29, 2021. Long-term debt increased by $318.5 million from December 31, 2020, primarily~~ due ~~to the issuance of $325.0 million floating rate senior notes on~~in March and September ~~10, 2021 by Cleco Power.~~2023. For more information onabout the ~~senior notes,~~storm recovery bonds, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 7 — Debt.”

Cash and cash equivalents available at September 30, ~~2021,~~2022, were ~~$273.2~~$103.1 million, combined with ~~$475.0~~$388.0 million available revolving credit facility capacity ($~~175.0~~165.0 million from Cleco Holdings and ~~$300.0~~$223.0 million from Cleco Power) for total liquidity of ~~$748.2~~$491.1 million. For more information on the credit facility capacity, see “— Credit Facilities.”

At September 30, ~~2021,~~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 and Financial Instruments.”

At September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, Cleco had a working capital surplus of ~~$413.8~~$112.6 million and ~~$140.3~~$254.8 million, respectively. The ~~$273.5~~$142.2 million ~~increase~~decrease in working capital is primarily due to:

•a ~~$188.2~~$174.5 million increase in long-term debt due within one year primarily due to the reclassification of Cleco Holdings’ $165.0 million senior notes due in May 2023 and $9.6 million of Cleco Securitization I’s storm recovery bond principal payments due in March and September 2023,

•a $87.0 million increase in short-term debt due to outstanding draws on Cleco’s and Cleco Power’s revolving credit facilities,

•a $45.5 million increase in taxes payable primarily due to accruals of property taxes and federal and state income taxes,

•a $45.4 million decrease in cash and cash equivalents,

•a $29.7 million increase in interest payable primarily due to timing of payments of long-term debt,

•a $24.4 million decrease in the cash surrender value of a life insurance policy primarily due to the ~~issuance~~recognition of ~~$325.0 million floating rate senior notes by~~a death benefit and unfavorable market conditions at Cleco ~~Power, partially offset by payments made on Cleco Power’s revolving credit facility,~~Holdings, and

•a ~~$75.0~~$10.1 million decrease in ~~short-term debt~~other current assets primarily due to ~~repayment~~the settlement of ~~Cleco Power’s revolving credit facility,~~the indemnification asset as a result of the settlement of a South Central Generating lawsuit in January 2022.

These decreases in working capital were partially offset by:

•a ~~$50.7~~$68.3 million increase in ~~accumulated deferred fuel, excluding Cleco Power FTRs,~~customer accounts receivable primarily due to ~~additional deferrals through a fuel surcharge at Cleco Power for incremental costs related to Winter Storms Uri~~warmer summer weather and ~~Viola,~~timing of collections from customers,

•a ~~$44.0~~$43.8 million increase in fuel inventory primarily due to higher petroleum coke at Cleco Power as a result of an increase in volume at a higher price per ton and higher natural gas volume at a higher price per MMBtu,

•a $38.2 million decrease in affiliate accounts payable primarily due to the settlement of intercompany taxes payable,

•a $37.8 million increase in energy risk management assets, excluding Cleco Power FTRs, primarily due to market value changes on gas-related derivative contracts at Cleco Cajun,

•a ~~$31.9~~$22.5 million increase in ~~customer accounts receivable~~accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to ~~an increase in~~higher fuel ~~cost recovery mainly due to Winter Storms Uri~~costs and ~~Viola, as well as an increase in usage due to~~ the ~~hot weather conditions, partially offset by payments made by Cleco Power’s customers on their payment plans originating in 2020 as a result~~timing of ~~COVID-19,~~collections,

•a ~~$13.8~~$21.7 million increase in other accounts receivable primarily due to the settlement of gas-related derivative contracts at Cleco Cajun and an increase in rents receivable for pole attachments at Cleco Power,

•a ~~$12.2 million increase in other current assets primarily due to timing of employee benefit payments.~~

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

•~~a $64.0 million increase in accounts payable, excluding Cleco Power FTR purchases, primarily due to an increase in storm accruals and payables related to the restoration efforts for Hurricane Ida,~~

•~~a $39.6 million increase in taxes payable primarily due to accruals of property taxes,~~

•~~a $24.0 million increase in interest accrued primarily due to timing of interest payments on long-term debt, and~~

•~~a $22.5~~$17.7 million increase in regulatory ~~liabilities~~assets primarily due to the reclassification of the short-term portion of the regulatory ~~liability~~assets related to ~~the TCJA, partially offset by credits~~deferred storm restoration costs, Madison Unit 3 property tax, and Bayou Vista to ~~Cleco Power’s customers for the TCJA refunds.~~Segura,

•a $13.2 million increase in restricted cash and cash equivalents primarily due to amounts restricted for Hurricane Ida storm restoration costs,

~~Cleco Holdings~~•a $13.0 million increase in materials and supplies inventory primarily due to higher purchases at higher costs per unit, and

~~At September 30, 2021, and December 31, 2020~~•a $10.1 million increase in affiliate accounts receivable due to estimated income taxes paid by Cleco Holdings ~~had no short-term debt outstanding.~~

~~At September 30, 2021,~~on behalf of Cleco Holdings’ long-term debt outstanding was $1.61 billion, of which $66.0 million was due within one year. The long-term debt due within one year at September 30, 2021, represents principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC. Cleco Holdings repaid the $66.0 million of principal payments on October 29, 2021.

~~At September 30, 2021, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For more information on Cleco Holdings’~~Group.

6564


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CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q

Cleco Holdings

At September 30, 2022, Cleco Holdings had $10.0 million of outstanding borrowings under its $175.0 million revolving credit facility. At December 31, 2021, Cleco Holdings had no short-term debt outstanding. 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 September 30, ~~2021.~~2022.

At September 30, 2022, Cleco Holdings’ long-term debt outstanding was $1.54 billion, of which $232.6 million was due within one year. The long-term debt due within one year at September 30, 2022, represents $165.0 million of Cleco Holdings’ senior notes due in May 2023 and $67.7 million of principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC.

Cash and cash equivalents available at Cleco Holdings at September 30, ~~2021,~~2022, were ~~$25.4~~$7.6 million, combined with ~~$175.0~~$165.0 million revolving credit facility capacity for total liquidity of ~~$200.4~~$172.6 million.

Cleco Power

At September 30, 2022, Cleco Power had $77.0 million of outstanding borrowings under its $300.0 million revolving credit facility. At December 31, 2021, Cleco Power had no short-term debt outstanding under its $300.0 million revolving credit facility. 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, Zeta, and Ida, 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. 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, totaling $342.0 million, which included the establishment of a newly funded $100.0 million storm reserve to cover future storm costs. In addition, on September 28, 2021, Cleco Power made a supplemental filing to its application requesting an additional $100.0 million for a separate storm reserve to cover costs associated with Hurricane Ida. The approval order for the securitization is anticipated in December 2021, with the financing order to follow in January 2022, and the securitization to be complete by March 2022. For more information on Hurricanes Laura, Delta, Zeta, and Ida, 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~~its working capital needs. There were no amounts outstanding under the uncommitted line of credit at September 30, ~~2021.~~2022.

On ~~September 10, 2021,~~June 22, 2022, Cleco ~~Power completed the issuance and private sale of $325.0~~Securitization I issued $425.0 million aggregate principal amount of its ~~floating rate~~ senior notes due June 15, 2023. The proceeds from the issuance were used for general limited liability company purposes, which included the repayment of $245.0 million of borrowings under its revolving credit agreement.

At September 30, 2021, Cleco Power’s long-term debt outstanding was $1.83 billion, of which $0.7 million was due within one year. Cleco Power’s long-term debt increased $323.2 million from December 31, 2020, primarily due to the issuance of $325.0 million floating rate senior notes on September 10, 2021 by Cleco Power.secured storm recovery bonds. For more information on the ~~senior notes,~~storm recovery bonds, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 7 — Debt.”

On June 23, 2022, following the closing of the storm recovery bonds, Cleco Power redeemed its $325.0 million floating rate senior notes issued in September 2021 at par.

At September 30, 2022, Cleco Power’s long-term debt outstanding was $1.92 billion, of which $35.4 million was due within one year. The amount due within one year primarily represents $25.0 million of senior notes due in December 2022 and $9.6 million of Cleco Securitization I storm recovery bond principal payments due in March and September 2023.

Cash and cash equivalents available at September 30, ~~2021,~~2022, were ~~$156.3~~$36.3 million, combined with ~~$300.0~~$223.0 million revolving credit facility capacity for total liquidity of ~~$456.3~~$259.3 million.

At September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, Cleco Power had a working capital surplus of ~~$179.4~~$122.5 million and ~~a surplus of $13.4~~$110.2 million, respectively. The ~~$166.0~~$12.3 million increase in working capital is primarily due to:

•a ~~$131.5~~$58.9 million ~~increase~~decrease in ~~cash and cash equivalents~~affiliate accounts payable primarily due to the ~~issuance~~settlement of ~~$325.0 million floating rate senior notes, partially offset by payments made on the revolving credit facility,~~intercompany taxes payable,

•a ~~$75.0~~$55.3 million ~~decrease~~increase in ~~short-term debt~~customer accounts receivable primarily due to ~~repayment~~warmer summer weather and timing of ~~the revolving credit facility,~~collections from customers,

•a $39.5 million increase in fuel inventory primarily due to higher petroleum coke as a result of an increase in volume at a higher price per ton and higher natural gas volume at a higher price per MMBtu,

•a ~~$50.7~~$22.5 million increase in accumulated deferred fuel, excluding FTRs, primarily due to ~~additional deferrals through a~~rising fuel ~~surcharge for incremental~~ costs ~~related to Winter Storms Uri~~ and ~~Viola,~~the timing of collections,

•a ~~$24.7~~$17.7 million increase in ~~customer accounts receivable~~regulatory assets primarily due to anthe reclassification of the short-term portion of the regulatory assets related to deferred storm restoration costs, Madison Unit 3 property tax, and Bayou Vista to Segura,

•a $13.2 million increase in ~~fuel cost recovery mainly~~restricted cash and cash equivalents primarily due to Winter Storms Uri and Viola, as well as an increase in usage due to the hot weather conditions, partially offset by payments made by Cleco Power’s customers on their payment plans originating in 2020 as a result of COVID-19,amounts restricted for Hurricane Ida storm restoration costs, and

•~~a $21.3~~an $11.4 million increase in ~~fuel~~materials and supplies inventory primarily due to ~~decreases in usage, as well as~~ higher purchases at higher costs per ~~unit costs of both lignite and petroleum coke.~~unit.

These increases in working capital were partially offset by:

•a ~~$69.9~~$77.0 million increase in ~~accounts payable, excluding FTR purchases,~~short-term debt primarily due to ~~an increase in storm accruals and payables related to~~outstanding draws on the ~~restoration efforts for Hurricane Ida,~~revolving credit facility,

•a ~~$38.2~~$49.4 million decrease in cash and cash equivalents,

•a $41.3 million increase in taxes payable primarily due to accruals of property taxes and federal and state income taxes,

•a $22.5 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, and

•~~a $15.9~~$21.5 million increase in interest accrued primarily due to timing of ~~interest~~ payments onof long-term ~~debt.~~debt, and

•an $11.1 million decrease in affiliate accounts receivable primarily due to the settlement of intercompany receivables.

Credit Facilities

At September 30, ~~2021,~~2022, Cleco had two separate revolving credit facilities, one for Cleco Holdings in the amount of $175.0 million with no$10.0 million of outstanding borrowings and one for Cleco Power in the amount of $300.0 million with no$77.0 million of outstanding 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.

Cleco Holdings’ revolving credit facility provides funding 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 Holdings’ revolving credit facility, Cleco is required to maintain total indebtedness less than or equal to 65% of total capitalization. At September 30, ~~2021,~~2022, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At September 30, ~~2021,~~2022, the borrowing costs for amounts drawn under the facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. paid on the unused portion of the facility. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and commitment fees of 0.125% and 0.05%, respectively, under the pricing levels of its revolving credit facility.

Cleco Power’s revolving credit facility provides funding for working capital and other financing needs. The outstanding borrowings on Cleco Power’s revolving credit facility at September 30, 2022, were primarily attributable to rising fuel costs and the delay in recovery from customers. The revolving credit facility includes restrictive financial covenants and expires in May 2026. Under covenants contained in Cleco

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~~commitment fees of 0.125% and 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 September 30, ~~2021,~~2022, Cleco Power was in compliance with the covenants of its revolving credit facility. At September 30, ~~2021,~~2022, the borrowing costs for amounts drawn under the facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%. paid on the unused portion of the facility. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating agencies, Cleco Power may be required to pay incremental interest and commitment fees of 0.125% and 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 September 30, ~~2021,~~2022, Cleco Holdings was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. Additionally, in accordance with the 2016 Merger Commitments, Cleco Power is subject to certain provisions limiting the amount of distributions that may be paid to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings. Cleco Power may not make any distribution unless, after giving effect to such distribution, Cleco Power’s common equity ratio would not be less than 48% and Cleco Power’s corporate credit rating is investment grade with two of the three credit rating agencies. At September 30, ~~2021,~~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 $245.1 million and $139.8 million ~~and $255.1 million during~~for the nine months ended September

30, ~~2021,~~2022, and ~~2020,~~2021, respectively. Net cash provided by operating activities ~~decreased $115.3~~increased $105.3 million primarily due to:

•~~higher fuel costs~~the absence of $92.5 million ~~at Cleco Power primarily related to~~of accelerated mine closure costs

•~~higher recoverable fuel and purchased power costs of $29.9 million primarily associated with Winter Storms Uri and Viola not yet collected from~~ at Cleco Power, ~~customers,~~

•~~lower collections from Cleco Cajun’s customers of $16.4 million due to timing of receipts,~~

•~~lower collections from Cleco Cajun’s joint owners of $16.2 million primarily due to timing of receipts for their portions of generating station expenditures,~~

•~~lower collections from Cleco Power’s joint owners of $5.1 million primarily due to timing of receipts for their portions of generating station expenditures, 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 Cajun of $36.5 million due to lower coal deliveries,~~

•lower operations and maintenance payments related to storm restoration activities of ~~$12.5~~$33.3 million at Cleco Power,

•~~lower payments for~~higher recoveries of net fuel ~~inventory~~and purchased power costs at Cleco Power of ~~$4.1~~$27.8 million primarily due the timing of collections, and

•collateral of $27.5 million received from counterparties related to Cleco Cajun’s natural gas derivatives.

These increases were partially offset by:

•higher payments for affiliate settlements of $46.9 million and

•higher fuel inventory costs of $28.9 million primarily due to ~~lower~~purchases at higher price per unit for petroleum coke and natural gas ~~purchases,~~at Cleco Power and

•~~lower payments~~ higher per ton costs for ~~employee benefits of $3.2 million.~~coal at Cleco Cajun.

Net Investing Cash Flow

Net cash used in investing activities was $128.6 million and $199.1 million ~~and $210.7 million during~~for the nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, respectively. Net cash used in investing activities decreased ~~$11.6~~$70.5 million primarily due to:

•lower additions to property, plant, and equipment, net of AFUDC, of ~~$8.2~~$61.7 million and

•~~lower~~life insurance proceeds of $15.7 million.

These decreases were partially offset by higher returns of equity investment in investees of ~~$1.3 million, and~~

•~~higher proceeds from sale of property, plant, and equipment of $1.2~~$5.3 million.

Net Financing Cash Flow

Net cash used in financing activities was $40.2 million for the nine months ended September 30, 2022. Net cash provided by financing activities was $245.3 million ~~and $347.0 million during~~for the nine months ended September 30, ~~2021, and 2020, respectively.~~2021. Net cash ~~provided by~~used in financing activities ~~decreased $101.7~~increased $285.5 million primarily due to:

•~~higher payments on revolving credit facilities~~the absence of ~~$260.0~~the issuance of Cleco Power’s $325.0 million floating rate senior notes in 2021, and the subsequent redemption of those $325.0 million senior notes in 2022,

•~~the absence~~higher distributions to Cleco Group of ~~borrowing a $125.0~~$219.6 million, ~~term loan at Cleco Power in August 2020,~~ and

•lower draws on revolving credit facilities of ~~$53.0~~$58.0 million.

These ~~decreases~~increases were partially offset by:

•proceeds of $424.9 million, net of discount, from the issuance of ~~$325.0 million floating rate senior notes at~~ Cleco Securitization I’s storm recovery bonds and

•lower payments on credit facilities of $220.0 million.

Cleco Power inCash Flows

Net Operating Cash Flow

Net cash provided by operating activities was $147.0 million and $74.7 million during the nine months ended September 30, 2022, and 2021, ~~and~~respectively. Net cash provided by operating activities increased $72.3 million primarily due to:

•the absence of $92.5 million of accelerated mine closure costs,

•lower operations and maintenance payments related to storm restoration activities of $33.3 million, and

•higher recoveries of net fuel and purchased power costs of $27.8 million primarily due to the ~~final repayment~~timing of ~~Cleco Katrina/Rita storm recovery bonds of $11.1 million.~~collections.

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~~Cleco Power Cash Flows~~

~~Net Operating Cash Flow~~

Net cash provided by operating activities was $74.7 million and $188.0 million during the nine months ended September 30, 2021, and 2020, respectively. Net cash provided by operating activities decreased $113.3 million primarily due to:

•~~higher fuel costs of $92.5 million primarily related to accelerated mine closure costs,~~

•~~higher recoverable fuel and purchased power costs~~ ~~of $29.9 million~~ p~~rimarily associated with Winter Storms Uri and Viola not yet collected from customers,~~

•~~lower collections from joint owners of $5.1 million primarily due to~~ ~~timing of receipts for their portions of generating station expenditures,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~~increases were partially offset by:

•~~lower operations and maintenance~~higher payments ~~related to storm restoration activities~~for affiliate settlements of ~~$12.5~~$46.8 million and

•~~lower payments for~~higher fuel inventory costs of ~~$4.1~~$14.5 million primarily due to ~~lower gas purchases.~~purchases at higher price per unit for petroleum coke and natural gas.

Net Investing Cash Flow

Net cash used in investing activities was $138.5 million and $192.1 million ~~and $200.7 million during~~for the nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, respectively. Net cash used in investing activities decreased ~~$8.6~~$53.6 million primarily due ~~to:~~

•to lower additions to property, plant, and equipment, net of AFUDC, of ~~$5.3 million,~~

•~~lower~~$60.5 million. These decreases were partially offset by higher returns of equity investment in investees of ~~$1.3 million, and~~

•~~higher proceeds from sale of property, plant, and equipment of $1.2~~$5.3 million.

Net Financing Cash Flow

Net cash provided by financing activities was $63.9 million and $246.6 million ~~and $261.9 million during~~for the nine months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, respectively. Net cash provided by financing activities decreased ~~$15.3~~$182.7 million primarily due to:

•~~higher payments on revolving credit facilities~~the absence of ~~$260.0~~the issuance of $325.0 million floating rate senior notes in 2021, and the subsequent redemption of those $325.0 million senior notes in 2022,

•~~the absence~~higher distributions to Cleco Holdings of ~~borrowing a $125.0~~$105.5 million, ~~term loan in August 2020,~~ and

•lower draws on the revolving credit ~~facilities~~facility of ~~$53.0~~$68.0 million.

These decreases were partially offset by:

•proceeds of $424.9 million, net of discount, from the issuance of ~~$325.0 million floating rate senior notes in September 2021~~Cleco Securitization I’s storm recovery bonds and

•lower payments on the ~~absence~~credit facility of ~~the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1~~$220.0 million.

Capital Expenditures

Cleco Power’s regulated operations and Cleco Cajun’s unregulated operations are Cleco’s primary sources of internally generated funds. These funds, along with issuances of additional debt received in future years, will be used for general company purposes, capital expenditures, debt service, human capital expenditures, contractual obligations, and off-balance sheet arrangements, if required.

Cleco also anticipates receipt of grant funds in the future for renewable and electrification projects, including Project Diamond Vault. For more information on renewable and electrification initiatives see “Item 2 — Management Discussion and Analysis of Financial Condition and Results of Operations — Overview — Cleco Power — Renewable and Electrification Initiatives.”

Contractual Obligations

Cleco, in the normal course of business activities, enters into a variety of contractual obligations. Some of these result in direct obligations that are reflected in Cleco’s Condensed

Consolidated Balance Sheets while others are commitments, some firm and some based on uncertainties, that are not reflected in the Condensed Consolidated Financial Statements. For more information regarding Cleco’s Contractual Obligations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Contractual Obligations” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~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 13 — 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. Cleco’s third party providers are susceptible to data breaches, which could potentially allow an attacker to compromise the third party servers on which the products run. Cleco could have potential impacts to the confidentiality, integrity, or availability of its data or systems. The third party 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


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~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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 3RD 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — 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 National Ambient Air Quality Standards (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 multiple organizations, 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 for 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 has not been submitted to the EPA. 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~~ CPP/ACE

On ~~January 19, 2021,~~June 30, 2022, the U.S. Supreme Court released its opinion on the D.C. Circuit Court of Appeals ~~ruled that the EPA’s repeal of the CPP~~vacating and ~~its 2019 promulgation of ACE were unlawful. Therefore, the court issued an order to~~

vacate and remand the ACE rule to the EPA. On February 22, 2021, the court granted the EPA’s unopposed motion for a partial stay of the issuance of the mandate on vacating the CPP repeal ordering that it will withhold issuance of the mandate with respect to the vacatur of the CPP repeal until the EPA responds to the court’s remand by promulgating a new rule to regulate greenhouse gas emissions from existing electric generating units. This means that the CPP will not take effect during the EPA’s rulemaking process. In addition, on March 5, 2021, the court issued the partial mandate effectuating the court’s vacatur ofremanding the ACE rule, which ~~makes effective~~requires state agencies to set standards of performance for affected generating units and submit the ~~court’s decision~~implementation plan to ~~vacate~~ the ~~ACE rule. At the end of April 2021, several parties filed petitions~~EPA for ~~a writ of certiorari asking the~~approval. The U.S. Supreme Court indicated in its opinion that the EPA does not have the authority to ~~review~~apply generation shifting in the ~~decision by~~regulation of GHG emissions as in the Clean Power Plan. The case was returned to the D.C. Circuit Court of Appeals. ~~On October 29, 2021, the U.S. Supreme Court granted four petitions for certiorari asking the Court to review the decision by the D.C. Circuit Court of Appeals to vacate and remand the ACE Rule.~~

~~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.

~~Water Quality~~

The Clean Water Act requires the EPA to periodically review and, if appropriate, revise technology-based effluent limitations guidelines for categories of industrial facilities, including power generating facilities.

On October 13, 2020, the EPA published final revisions to the Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category rule (ELG rule) that revised the technology-based effluent limitation guidelines and standards applicable to flue gas desulfurization and bottom ash transport waste waters. The rule also allows a unit to come into compliance with the ELG rule by qualifying as an electric generating unit that will achieve permanent cessation of coal combustion by December 31, 2028. Under this compliance option, Cleco submitted a Notice of Planned Participation by the October 13, 2021, submittal deadline for the Dolet Hills Power Station, Rodemacher Unit 2, and Big Cajun II Unit 1.

~~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 CCR rules promulgated in July 2018, August 2020, and November 2020. It is ~~now indicated on the EPA coal ash rule website~~expected that the EPA ~~completed review of~~will issue a new GHG rule taking the ~~three CCR rules~~Court’s opinion into consideration sometime in ~~response to~~ the ~~executive order. The EPA determined that the most environmentally protective course is to implement these rules.~~


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~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

For more information on Cleco’s compliance with the coal combustion residual rules, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments.”future.

Retail Rates of Cleco Power

Base Rates

From June 1, 2021, through August 31, 2022, Cleco Power recovered incurred costs associated with Hurricanes Laura, Delta, and Zeta through an interim storm recovery rate. Effective September 1, 2022, those costs are being recovered through the new storm recovery surcharge . For information on the storm securitization financing, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Securitization and Cost Recovery.”

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 11 — “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. Management is unable to determine the outcome or timing of 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — 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. On January 12, 2022, Cleco Power ~~has responded to several sets of data requests regarding~~received a draft audit report from the ~~audit.~~LPSC indicating no material findings. The draft report was approved on September 14, 2022. 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. The complaints covered the period December 2013 through May 2016. 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 Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the


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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.

~~ERO~~Electric Reliability Organization (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 Operations and Planning Reliability Standards audit is ~~conducted~~conducted every three years for Cleco Power and Cleco Cajun. The ~~next~~most recent NERC Operations and Planning Reliability Standards audits for Cleco Power and Cleco Cajun ~~are scheduled~~concluded on September 15, 2022. Management is unable to ~~begin in 2022.~~

determine when a final report will be issued, but expects no material findings from the audits.


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~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

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. Management is unable~~Cajun are scheduled to ~~determine the timing of NERC’s approval of the final reports.~~begin in 2023.

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 ~~is scheduled to file~~filed its initial data assumptions to be used in its IRP analysis inon February 21, 2022. The IRP process includes conducting stakeholder meetings and receiving feedback from ~~stakeholders with the~~stakeholders. The first stakeholders meeting ~~proposed~~was conducted on March 24, 2022. The

first draft of the IRP was filed on October 26, 2022. The next stakeholders meeting is to ~~take place~~be held by the end of 2022. A final IRP is due in ~~March 2022.~~ May 2023.

The IRP report describes how Cleco Power plans to meet its forecasted load requirements on a reliable and economic ~~basis.~~basis, while reducing Cleco Power’s carbon footprint. 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.~~

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, 2020.2023.

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
CLECO POWER						2022 3RD QUARTER FORM 10-Q


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 3RD 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 enters into master agreements with counterparties that govern the risk of credit default and allow for collateralization above prenegotiated thresholds to help mitigate potential losses. Alternatively, 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~~amount of the initial contract, changes in the market ~~prices,~~price, changes in open contracts, ~~and~~ changes in the amounts counterparties owe to ~~Cleco.~~Cleco, and any prenegotiated unsecured thresholds agreed to in the master contract. 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 September 30, ~~2021,~~2022, Cleco Holdings had no$10.0 million of short-term debt outstanding under its $175.0 million revolving credit ~~facility.~~facility at an all-in interest rate of 4.195%. At September 30, ~~2021,~~2022, the borrowing costs for amounts drawn under Cleco Holdings’ revolving credit facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. paid on the unused portion of the facility. Each 1% increase in the interest rate applicable to Cleco Holdings’ short-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of $0.1 million on an annualized basis.

At September 30, ~~2021,~~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 ~~1.715%~~4.745%. 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~~the outstanding term loan debt at Cleco Holdings for the nine months ended September 30, ~~2021,~~2022, was ~~1.87%~~2.68%.

At September 30, ~~2021,~~2022, Cleco Power had no$77.0 million of short-term debt outstanding under its $300.0 million revolving credit ~~facility.~~facility at a weighted average all-in interest rate of 4.33%. At September 30, ~~2021,~~2022, Cleco Power’s borrowing costs for amounts drawn 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%. paid on the unused portion of


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

the facility. Each 1% increase in the interest rate applicable to Cleco Power’s short-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of $0.8 million on an annualized basis.

At September 30, ~~2021,~~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 ~~1.34%. The weighted average rate for the outstanding term loan debt at Cleco Power for the nine months ended September 30, 2021, was 1.36%.~~

At September 30, 2021, 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 initial all-in interest rate of 0.616%. The weighted average rate for the outstanding floating rate senior notes at Cleco Power for the nine months ended September 30, 2021, was 0.62%4.37%. Each 1% increase in the interest rate applicable to Cleco Power’s long-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of ~~$4.5~~$1.2 million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Power for the nine months ended September 30, 2022, was 2.31%.

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 ~~$7.2~~$4.1 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


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD QUARTER FORM 10-Q~~

reporting period presented, the Registrants did not enter into any contracts to mitigate the volatility in interest rate risk.

Commodity Price Risk

~~Cleco Power and Cleco Cajun’s~~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 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 nine months ended~~At September 30, ~~2021,~~2022, Cleco Cajun ~~entered into~~had gas-related derivative contracts including fixed price physical ~~forwards~~forwards. At September 30, 2022, Cleco Power and Cleco Cajun had gas-related derivative contracts including financially settled swap transactions. These are included in natural gas derivatives in the following tables.

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


Cleco	Cleco														Cleco
		DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS														DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
			AT SEPT. 30, 2021														AT SEPT. 30, 2022
					GROSS AMOUNTS OFFSET ON THE BALANCE SHEET						GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)								GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CONTRACT NETTING		COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT		(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	$	9,338	$	—	$	—	$	9,338	$	—	$	9,338	Current	Energy risk management assets	$	5,977	$	—	$	5,977	$	—	$	5,977
Current	Current	Energy risk management liabilities	(1,589)		—		—		(1,589)		—		(1,589)		Current	Energy risk management liabilities	(3,982)		—		(3,982)		—		(3,982)
Natural gas derivatives	Natural gas derivatives														Natural gas derivatives
Current	Current	Energy risk management assets	59,648		(1,283)		(8,900)		49,465		(41,098)		8,367		Current	Energy risk management assets	105,206		(30,271)		74,935		(73,669)		1,266
Non-current	Non-current	Energy risk management assets	83,427		—		—		83,427		(13,902)		69,525		Non-current	Energy risk management assets	97,982		(6,129)		91,853		(34,338)		57,515
Current	Current	Energy risk management liabilities	(1,283)		1,283		—		—		—		—		Current	Energy risk management liabilities	(1,539)		—		(1,539)		—		(1,539)
Non-current		Other deferred credits	—		—		—		—		—		—

Commodity-related contracts, net	Commodity-related contracts, net		$	149,541	$	—	$	(8,900)	$	140,641	$	(55,000)	$	85,641	Commodity-related contracts, net		$	203,644	$	(36,400)	$	167,244	$	(108,007)	$	59,237

(1) Represents letters of credit by counterparties.

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT SEPT. 30, ~~2021~~2022

Commodity-related contracts

FTRs

Current

Energy risk management assets

~~6,028~~5,195

Current

Energy risk management liabilities

~~(1,330)~~(457)

Commodity-related contracts, ~~net~~net*

~~4,698~~4,738

* Cleco Power entered into natural gas derivatives during the three months ended September 30, 2022. Cleco Power had a current liability for natural gas derivatives at September 30, 2022, of less than $.01 million.

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.


CLECO
CLECO POWER						2022 3RD QUARTER FORM 10-Q

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


				FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 30, 2021									FOR THE THREE MONTHS ENDED SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE		(THOUSANDS)	AT SEPT. 30, 2022		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE
Cleco	Cleco	$	16,393	$	16,393	$	7,685	$	9,846	$	16,393	$	7,199	$	9,318	Cleco	$	46,009	$	75,712	$	45,974	$	59,718	$	75,712	$	22,223	$	44,597
Cleco Power																Cleco Power	$	1,212	$	1,465	$	1,198	$	1,338	$	1,465	$	1,198	$	1,338

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~~						~~2021 3RD 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 September 30, ~~2021.~~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 September 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

7472


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


CLECO

For information on legal proceedings affecting Cleco, see Part I, Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — 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 13 — 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 II, Item 1A, “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and Part I, Item 1A, “Risk Factors” inof 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”~~in the aforementioned reports.

Taxes

Changes in taxation due to uncertain effects of tax reform legislation could have a material adverse effect on the results of operations, financial condition, or cash flows of the ~~Registrants’ Combined Annual Report~~Registrants.

The Inflation Reduction Act of 2022 (IRA) was signed into law on ~~Form 10-K~~August 16, 2022. The IRA proposes significant changes to the federal tax law. These include extensions and refinements of credits for ~~the fiscal year ended December 31, 2020.~~renewable electricity, alternative fuel vehicles, and carbon capture, as well as several new renewable energy and fuels credits and a fundamental pivot after 2024 to

renewable electricity credits based on greenhouse gas emissions of generation technology. In addition, new credits for manufacturing and recycling related to the renewable energy sector may help drive increased investment in American manufacturing.

There are several tax and renewable provisions in this legislation that could have a material effect on the results of operations, financial conditions, or cash flows of the Registrants. These include:

•provisions related to direct pay and credit transferability,

•increased enhanced carbon capture and sequestration credit bonus credit rate,

•new technology-neutral Clean Electricity Investment Tax Credit, and

•new technology-neutral Clean Electricity Production Tax Credit.

Management continues to monitor any potential impact the IRA could have on the Registrants.

7573


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


ITEM 6. EXHIBITS

CLECO
~~4.1~~			Indenture, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 10, 2021).
~~4.2~~			Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed September 10, 2021).
~~4.3~~			Form of Note (included in Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee) (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed September 10, 2021).
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
~~4.1~~			Indenture, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 10, 2021).
~~4.2~~			Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed September 10, 2021).
~~4.3~~			Form of Note (included in Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee) (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed September 10, 2021).
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)


CLECO
CLECO POWER						~~2021~~2022 3RD QUARTER FORM 10-Q


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			CLECO CORPORATE HOLDINGS LLC
			(Registrant)

			By:			/s/ F. Tonita Laprarie
						F. Tonita Laprarie
						Controller and Chief Accounting Officer

Date: November ~~5, 2021~~7, 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: November ~~5, 2021~~7, 2022

7775


TABLE OF CONTENTS
		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		65

PART I	Financial Information
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)	87
	Cleco Power — Condensed Consolidated Financial Statements (Unaudited)	17
	Notes to the Unaudited Condensed Consolidated Financial Statements	26
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5452
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	7270
ITEM 4.	Controls and Procedures	7372

PART II	Other Information
ITEM 1.	Legal Proceedings	7573
ITEM 1A.	Risk Factors	7573



ITEM 6.	Exhibits	7673
	Signatures	7775


2020 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	288,852	$	99,956		$	388,808
Other operations	17,775		31,331			49,106
Affiliate revenue	1,506		—			1,506
Electric customer credits	(16,534)		—			(16,534)
Operating revenue, net	$	291,599	$	131,287		$	422,886
Net income	$	36,092	$	38,357		$	74,449
Add: Depreciation and amortization	40,268		11,344		(1)	51,612
Less: Interest income	789		10			799
Add: Interest charges	18,441		(484)			17,957
Add: Federal and state income tax expense	18,076		12,258			30,334
EBITDA	$	112,088	$	61,465		$	173,553




(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30, 2021		FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(25,588)	$	(25,796)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	96		304


Balances, Sept. 30, 2021	$	(25,492)	$	(25,492)


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

Cooling degree-days	1,591	1,604	1,511	(0.8)	%	5.3	%