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, ~~2022~~2023

☐ 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						~~2022~~2023 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						~~2022~~2023 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~~SOFR 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.~~2014

Acadia Unit 1			Cleco Power’s 580-MW, natural gas-fired, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana
Acadia Unit 2			Entergy Louisiana’s 580-MW, natural gas-fired, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana, which is operated by Cleco Power

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			Cleco Cajun’s generating facility located in New Roads, Louisiana consisting of Unit 1, Unit 2, and Unit 3. Cleco Cajun has a 58% ownership interest in the capacity of Unit 3.3
~~CARES Act~~			~~Coronavirus Aid, Relief, and Economic Security Act of March 2020~~





CCR			Coal combustion by-products or residual


CEO			Chief Executive Officer
CFO			Chief Financial Officer
CIP			Critical Infrastructure Protection
Cleco			Cleco Holdings and its subsidiaries
Cleco Cajun			Cleco Cajun LLC, a wholly owned subsidiary of Cleco Holdings, and its subsidiaries
Cleco Cajun Sale Group			Cleco Cajun’s business for which Cleco Holdings’ management and Board of Managers have committed to a plan to divest through a sale to one or more parties, subject to Board of Managers approval

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 ~~MAM, BCI,~~Macquarie Asset Management, British Columbia Investment Management Corporation, John Hancock Financial, and other infrastructure investors
Cleco Power			Cleco Power LLC, ~~and its subsidiaries,~~ a wholly owned subsidiary of Cleco Holdings,
			and its subsidiaries
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.~~Generating
Cottonwood Plant			Cleco Cajun’s 1,263-MW, ~~natural-gas-fired~~natural gas-fired, combined cycle 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.~~2025
Coughlin			Cleco Power’s 775-MW, ~~combined-cycle~~natural gas-fired, combined cycle power plant located in St. Landry, Louisiana
COVID-19			Coronavirus disease 2019, including any ~~variants~~variant thereof, and the related global outbreak that was subsequently declared a pandemic by ~~WHO~~the World Health Organization in March 2020



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


Dolet Hills			A facility consisting of Dolet Hills Power Station, the Dolet Hills mine, and the Oxbow mine
Dolet Hills Power Station			A 650-MW lignite-fired, steam 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.~~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~~2023 3RD QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM			DEFINITION
Entergy Louisiana			Entergy Louisiana, LLC
EPA			U.S. Environmental Protection Agency

ESG			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

IRA of 2022			Federal tax legislation commonly referred to as the Inflation Reduction Act of 2022


IRS			Internal Revenue Service

kWh			Kilowatt-hour(s)



LIBOR			London Interbank Offered Rate
~~LMP~~			~~Locational Marginal Price~~

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 petroleum coke/coal-fired, steam 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)


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.







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.~~2021



Purchase and Sale Agreement			Purchase and Sale Agreement, dated as of February 6, 2018, by and among NRG Energy, South Central Generating, and Cleco Cajun

Registrant(s)			Cleco Holdings and/or Cleco Power

Rodemacher Unit 2			A 523-MW coal-fired, steam generating unit at Cleco Power’s plant site in Boyce, Louisiana. Cleco Power has a 30% ownership interest in the capacity of Rodemacher Unit 2.2
ROE			Return on Equity


RTO			Regional Transmission Organization
S&P			S&P Global Ratings, a division of S&P Global Inc, a credit rating agency

SEC			U.S. Securities and Exchange Commission


SERC			SERC Reliability Corporation
SERP			Supplemental Executive Retirement Plan


SOFR			Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York
South Central Generating			South Central Generating LLC, formerly NRG South Central Generating LLC, a wholly owned subsidiary of Cleco Cajun






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.~~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.
TCJA			Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017
Teche Unit 3			A 359-MW natural gas-fired, steam generating unit at Cleco Power’s plant site in Baldwin, Louisiana
~~WHO~~			~~World Health Organization~~


CLECO
CLECO POWER						~~2022~~2023 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:

•the uncertainty in the timing and ultimate outcome of the divestiture of the Cleco Cajun Sale Group,

•resolution of pending, upcoming, or future rate cases and related litigation, formula rate proceedings, and related negotiations, as well as delays in cost recovery resulting from these proceedings,

•changes in environmental laws, regulations, decisions and policies, including present and potential environmental remediation costs, restrictions on ~~greenhouse gas~~GHG emissions, 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 current armed conflict in Ukraine and the Middle East,

•the possibility of stranded costs with respect to assets that may be retired as a result of new climate legislation or regulations, 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, droughts, and ~~droughts,~~wildfires, and Cleco Power’s ability to recover restoration and stranded costs associated with these events,

•the ability of Cleco’s customers to pay their utility bills on time due to costs related to ~~rising~~volatile fuel prices, severe weather recoveries, or the costs of other 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~~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,

•adverse developments affecting financial institutions, including bank failures,

•changes to federal income tax laws, regulations, and interpretive guidance, including the IRA of 2022,

•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, or changes in customers’ operating or business models,


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

•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, or with whom Cleco enters into derivative contracts,

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

•the outcome of legal and regulatory 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 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 of skill areas, and Cleco’s ability to attract, recruit, and retain qualified employees.

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,~~2023, and Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

All ~~subsequent~~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						~~2022~~2023 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, ~~2021.~~2022. 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~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

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)	2022		2021		(THOUSANDS)	2023		2022
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	619,500	$	462,164	Electric operations	$	361,838	$	478,733
Other operations	Other operations	61,771		55,721		Other operations	31,984		24,759

Gross operating revenue	Gross operating revenue	681,271		517,885		Gross operating revenue	393,822		503,492
Electric customer credits	Electric customer credits	(6,728)		(691)		Electric customer credits	24		(6,728)
Operating revenue, net	Operating revenue, net	674,543		517,194		Operating revenue, net	393,846		496,764
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	167,068		69,318		Fuel used for electric generation	125,372		107,633
Purchased power	Purchased power	221,103		101,377		Purchased power	44,803		111,764
Other operations and maintenance	Other operations and maintenance	79,830		76,540		Other operations and maintenance	62,985		62,213
Depreciation and amortization	Depreciation and amortization	58,369		60,628		Depreciation and amortization	50,055		46,323
Taxes other than income taxes	Taxes other than income taxes	18,722		17,766		Taxes other than income taxes	16,746		15,611

Regulatory disallowance	Regulatory disallowance	13,841		—		Regulatory disallowance	—		13,841
Total operating expenses	Total operating expenses	558,933		325,629		Total operating expenses	299,961		357,385
Operating income	Operating income	115,610		191,565		Operating income	93,885		139,379
Interest income	Interest income	2,238		941		Interest income	1,283		1,766
Allowance for equity funds used during construction	Allowance for equity funds used during construction	965		711		Allowance for equity funds used during construction	1,617		965

Other expense, net	Other expense, net	(4,940)		(8,109)		Other expense, net	(2,404)		(4,952)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	40,353		35,174		Interest charges, net	42,212		38,169
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(463)		(545)		Allowance for borrowed funds used during construction	(178)		(463)
Total interest charges	Total interest charges	39,890		34,629		Total interest charges	42,034		37,706
Income before income taxes		73,983		150,479
Federal and state income tax expense		5,611		30,569
Income from continuing operations before income taxes						Income from continuing operations before income taxes	52,347		99,452
Federal and state income tax (benefit) expense						Federal and state income tax (benefit) expense	(246,494)		9,220
Income from continuing operations, net of income taxes						Income from continuing operations, net of income taxes	298,841		90,232
Loss from discontinued operations, net of income taxes						Loss from discontinued operations, net of income taxes	(142,729)		(21,860)
Net income	Net income	$	68,372	$	119,910	Net income	$	156,112	$	68,372
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

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)	2022		2021		(THOUSANDS)	2023		2022
Net income	Net income	$	68,372	$	119,910	Net income	$	156,112	$	68,372
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $4 in 2022 and $34 in 2021)		10		96
Other comprehensive (loss) income, net of tax						Other comprehensive (loss) income, net of tax
Postretirement benefits (loss) gain (net of tax benefit of $156 in 2023 and tax expense of $4 in 2022)						Postretirement benefits (loss) gain (net of tax benefit of $156 in 2023 and tax expense of $4 in 2022)	(422)		10

Total other comprehensive income, net of tax		10		96
Total other comprehensive (loss) income, net of tax						Total other comprehensive (loss) income, net of tax	(422)		10
Comprehensive income, net of tax	Comprehensive income, net of tax	$	68,382	$	120,006	Comprehensive income, net of tax	$	155,690	$	68,382
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

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)	2022		2021		(THOUSANDS)	2023		2022
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	1,509,093	$	1,180,345	Electric operations	$	916,554	$	1,138,604
Other operations	Other operations	167,042		150,777		Other operations	84,030		62,533

Gross operating revenue	Gross operating revenue	1,676,135		1,331,122		Gross operating revenue	1,000,584		1,201,137
Electric customer credits	Electric customer credits	(6,992)		(40,185)		Electric customer credits	(1,362)		(6,992)
Operating revenue, net	Operating revenue, net	1,669,143		1,290,937		Operating revenue, net	999,222		1,194,145
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	333,174		150,620		Fuel used for electric generation	389,216		191,985
Purchased power	Purchased power	481,728		336,573		Purchased power	126,086		213,586
Other operations and maintenance	Other operations and maintenance	222,657		221,234		Other operations and maintenance	181,260		170,233
Depreciation and amortization	Depreciation and amortization	195,639		169,892		Depreciation and amortization	148,612		139,774
Taxes other than income taxes	Taxes other than income taxes	50,592		50,769		Taxes other than income taxes	48,782		41,288

Regulatory disallowance	Regulatory disallowance	13,841		—		Regulatory disallowance	—		13,841
Total operating expenses	Total operating expenses	1,297,631		929,088		Total operating expenses	893,956		770,707
Operating income	Operating income	371,512		361,849		Operating income	105,266		423,438
Interest income	Interest income	4,236		2,416		Interest income	3,223		3,575
Allowance for equity funds used during construction	Allowance for equity funds used during construction	2,704		2,703		Allowance for equity funds used during construction	4,423		2,704

Other expense, net	Other expense, net	(13,604)		(15,112)		Other expense, net	(2,656)		(13,699)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	111,018		103,092		Interest charges, net	123,533		106,694
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(1,200)		(1,280)		Allowance for borrowed funds used during construction	(1,244)		(1,200)
Total interest charges	Total interest charges	109,818		101,812		Total interest charges	122,289		105,494
Income before income taxes		255,030		250,044
Federal and state income tax expense		29,551		30,985
(Loss) income from continuing operations before income taxes						(Loss) income from continuing operations before income taxes	(12,033)		310,524
Federal and state income tax (benefit) expense						Federal and state income tax (benefit) expense	(121,160)		30,472
Income from continuing operations, net of income taxes						Income from continuing operations, net of income taxes	109,127		280,052
Loss from discontinued operations, net of income taxes						Loss from discontinued operations, net of income taxes	(9,707)		(54,573)
Net income	Net income	$	225,479	$	219,059	Net income	$	99,420	$	225,479
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

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)	2022		2021		(THOUSANDS)	2023		2022
Net income	Net income	$	225,479	$	219,059	Net income	$	99,420	$	225,479
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $11 in 2022 and $107 in 2021)		31		304
Other comprehensive (loss) income, net of tax						Other comprehensive (loss) income, net of tax
Postretirement benefits (loss) gain (net of tax benefit of $466 in 2023 and tax expense of $11 in 2022)						Postretirement benefits (loss) gain (net of tax benefit of $466 in 2023 and tax expense of $11 in 2022)	(1,267)		31

Total other comprehensive income, net of tax		31		304
Total other comprehensive (loss) income, net of tax						Total other comprehensive (loss) income, net of tax	(1,267)		31
Comprehensive income, net of tax	Comprehensive income, net of tax	$	225,510	$	219,363	Comprehensive income, net of tax	$	98,153	$	225,510
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

Condensed Consolidated Balance Sheets (Unaudited)	Condensed Consolidated Balance Sheets (Unaudited)					Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	103,117	$	148,563	Cash and cash equivalents	$	181,908	$	54,541
Restricted cash and cash equivalents	Restricted cash and cash equivalents	14,902		1,674		Restricted cash and cash equivalents	6,356		23,549
Customer accounts receivable (less allowance for credit losses of $1,498 in 2022 and $1,302 in 2021)		160,201		91,869
Customer accounts receivable (less allowance for credit losses of $2,248 in 2023 and $1,147 in 2022)						Customer accounts receivable (less allowance for credit losses of $2,248 in 2023 and $1,147 in 2022)	72,778		72,646
Accounts receivable - affiliate	Accounts receivable - affiliate	13,111		3,041		Accounts receivable - affiliate	22,306		14,613
Other accounts receivable	Other accounts receivable	49,487		27,818		Other accounts receivable	28,975		38,332
Taxes receivable	Taxes receivable	—		564		Taxes receivable	80,273		—
Unbilled revenue	Unbilled revenue	40,560		37,663		Unbilled revenue	43,642		46,040
Fuel inventory, at average cost	Fuel inventory, at average cost	112,662		68,838		Fuel inventory, at average cost	63,128		57,078
Materials and supplies, at average cost	Materials and supplies, at average cost	146,625		133,666		Materials and supplies, at average cost	133,842		116,943
Energy risk management assets	Energy risk management assets	80,912		43,479		Energy risk management assets	27,107		49,321
Accumulated deferred fuel	Accumulated deferred fuel	81,928		56,826		Accumulated deferred fuel	20,241		57,881
Cash surrender value of company-/trust-owned life insurance policies	Cash surrender value of company-/trust-owned life insurance policies	74,163		98,576		Cash surrender value of company-/trust-owned life insurance policies	52,926		52,859
Prepayments	Prepayments	15,353		13,283		Prepayments	17,785		16,623
Regulatory assets	Regulatory assets	46,930		29,261		Regulatory assets	35,477		47,173
Assets held for sale - discontinued operations						Assets held for sale - discontinued operations	196,399		135,430
Other current assets	Other current assets	2,705		12,839		Other current assets	897		838
Total current assets	Total current assets	942,656		767,960		Total current assets	984,040		783,867
Property, plant, and equipment	Property, plant, and equipment					Property, plant, and equipment
Property, plant, and equipment	Property, plant, and equipment	5,350,425		5,416,722		Property, plant, and equipment	4,732,687		4,604,039
Accumulated depreciation	Accumulated depreciation	(891,468)		(700,991)		Accumulated depreciation	(879,236)		(752,376)
Net property, plant, and equipment	Net property, plant, and equipment	4,458,957		4,715,731		Net property, plant, and equipment	3,853,451		3,851,663
Construction work in progress	Construction work in progress	119,949		100,163		Construction work in progress	151,502		114,310
Total property, plant, and equipment, net	Total property, plant, and equipment, net	4,578,906		4,815,894		Total property, plant, and equipment, net	4,004,953		3,965,973
Equity investment in investee	Equity investment in investee	2,072		2,072		Equity investment in investee	1,992		2,072
Goodwill	Goodwill	1,490,797		1,490,797		Goodwill	1,490,797		1,490,797
Prepayments	Prepayments	31,819		21,598		Prepayments	1,469		1,512
Operating lease right of use assets	Operating lease right of use assets	23,336		24,014		Operating lease right of use assets	20,761		22,636
Restricted cash and cash equivalents	Restricted cash and cash equivalents	109,373		745		Restricted cash and cash equivalents	112,018		109,415
Note receivable	Note receivable	13,125		13,744		Note receivable	12,228		12,908

Regulatory assets - deferred taxes, net						Regulatory assets - deferred taxes, net	45,463		8,803
Regulatory assets	Regulatory assets	676,720		810,820		Regulatory assets	601,923		611,917
Intangible asset - securitization	Intangible asset - securitization	415,946		—		Intangible asset - securitization	402,444		413,123
Intangible assets - other	Intangible assets - other	63,035		82,235		Intangible assets - other	12,956		20,086
Assets held for sale - discontinued operations						Assets held for sale - discontinued operations	558,964		727,160

Energy risk management assets	Energy risk management assets	91,853		50,962		Energy risk management assets	10,085		58,895
Other deferred charges	Other deferred charges	44,883		44,177		Other deferred charges	32,006		24,585
Total assets	Total assets	$	8,484,521	$	8,125,018	Total assets	$	8,292,099	$	8,253,749
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

Condensed Consolidated Balance Sheets (Unaudited)	Condensed Consolidated Balance Sheets (Unaudited)					Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Liabilities and member’s equity	Liabilities and member’s equity					Liabilities and member’s equity
Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities					Current liabilities
Short-term debt	Short-term debt	$	87,000	$	—	Short-term debt	$	105,000	$	109,000
Long-term debt and finance leases due within one year	Long-term debt and finance leases due within one year	267,954		93,455		Long-term debt and finance leases due within one year	372,246		340,867
Accounts payable	Accounts payable	177,448		167,886		Accounts payable	100,284		132,778
Accounts payable - affiliate	Accounts payable - affiliate	13,092		51,297		Accounts payable - affiliate	20,926		13,092
Customer deposits	Customer deposits	59,101		60,852		Customer deposits	57,137		57,851
Provision for rate refund	Provision for rate refund	13,256		5,682		Provision for rate refund	1,988		3,074
Taxes payable	Taxes payable	51,844		6,311		Taxes payable	50,173		16,905
Interest accrued	Interest accrued	44,876		15,203		Interest accrued	40,205		25,540

Energy risk management liabilities	Energy risk management liabilities	5,521		834		Energy risk management liabilities	5,221		7,274
Regulatory liabilities - deferred taxes, net	Regulatory liabilities - deferred taxes, net	44,129		44,072		Regulatory liabilities - deferred taxes, net	31,215		42,890
Deferred compensation	Deferred compensation	11,433		14,420		Deferred compensation	13,071		12,162

Storm reserves						Storm reserves	—		9,409
Liabilities held for sale - discontinued operations						Liabilities held for sale - discontinued operations	61,229		72,541
Other current liabilities	Other current liabilities	54,409		53,150		Other current liabilities	35,830		29,314
Total current liabilities	Total current liabilities	830,063		513,162		Total current liabilities	894,525		872,697
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	823,798		755,764		Accumulated deferred federal and state income taxes, net	817,801		820,300

Postretirement benefit obligations	Postretirement benefit obligations	290,818		291,606		Postretirement benefit obligations	200,705		200,665

Regulatory liabilities - deferred taxes, net		4,970		51,472

Storm reserves	Storm reserves	108,652		—		Storm reserves	106,789		109,353

Deferred lease revenue		24,547		31,451
Intangible liabilities		15,216		18,997

Asset retirement obligations	Asset retirement obligations	68,852		69,667		Asset retirement obligations	10,145		15,429
Operating lease liabilities	Operating lease liabilities	20,465		21,128		Operating lease liabilities	17,916		19,790
Liabilities held for sale - discontinued operations						Liabilities held for sale - discontinued operations	75,848		94,467
Customer advances for construction						Customer advances for construction	25,265		9,783
Other deferred credits	Other deferred credits	31,046		27,582		Other deferred credits	34,002		25,104
Total long-term liabilities and deferred credits	Total long-term liabilities and deferred credits	1,388,364		1,267,667		Total long-term liabilities and deferred credits	1,288,471		1,294,891
Long-term debt and finance leases, net	Long-term debt and finance leases, net	3,306,016		3,390,033		Long-term debt and finance leases, net	3,093,883		3,139,094
Total liabilities	Total liabilities	5,524,443		5,170,862		Total liabilities	5,276,879		5,306,682
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)						Commitments and contingencies (Note 14)
Member’s equity	Member’s equity	2,960,078		2,954,156		Member’s equity	3,015,220		2,947,067
Total liabilities and member’s equity	Total liabilities and member’s equity	$	8,484,521	$	8,125,018	Total liabilities and member’s equity	$	8,292,099	$	8,253,749
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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO						CLECO

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)	2022			2021		(THOUSANDS)	2023			2022
Operating activities	Operating activities						Operating activities
Net income	Net income	$	225,479		$	219,059	Net income	$	99,420		$	225,479
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	220,591			195,619		Depreciation and amortization	181,672			220,591

Provision for credit losses	Provision for credit losses	2,143			3,106		Provision for credit losses	3,243			2,143
Regulatory disallowance	Regulatory disallowance	13,841			—		Regulatory disallowance	—			13,841
Electric customer credits	Electric customer credits	6,577			—		Electric customer credits	—			6,577
Unearned compensation expense	Unearned compensation expense	3,688			7,068		Unearned compensation expense	6,676			3,688
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(2,704)			(2,703)		Allowance for equity funds used during construction	(4,423)			(2,704)
Gain on risk management assets and liabilities, net		(112,077)			(136,024)
Loss (gain) on energy risk management assets and liabilities, net							Loss (gain) on energy risk management assets and liabilities, net	76,748			(112,077)
Loss on classification as held for sale							Loss on classification as held for sale	154,000			—
Deferred lease revenue	Deferred lease revenue	(6,904)			(6,904)		Deferred lease revenue	(2,301)			(6,904)
Deferred income taxes	Deferred income taxes	21,578			36,513		Deferred income taxes	(51,894)			21,578
Cash surrender value of company-/trust-owned life insurance	Cash surrender value of company-/trust-owned life insurance	5,775			(5,223)		Cash surrender value of company-/trust-owned life insurance	690			5,775
Changes in assets and liabilities	Changes in assets and liabilities						Changes in assets and liabilities
Accounts receivable	Accounts receivable	(98,826)			(56,922)		Accounts receivable	1,045			(98,826)
Accounts receivable, affiliate	Accounts receivable, affiliate	(10,069)			(1,375)		Accounts receivable, affiliate	(7,693)			(10,069)
Unbilled revenue	Unbilled revenue	(2,897)			3,368		Unbilled revenue	2,398			(2,897)
Fuel inventory and materials and supplies	Fuel inventory and materials and supplies	(61,518)			(3,198)		Fuel inventory and materials and supplies	(86,598)			(61,518)
Prepayments	Prepayments	(10,908)			(8,573)		Prepayments	(12,805)			(10,908)
Accounts payable	Accounts payable	8,164			(11,680)		Accounts payable	(40,162)			8,164
Accounts payable - affiliate	Accounts payable - affiliate	(38,206)			—		Accounts payable - affiliate	7,834			(38,206)
Customer deposits	Customer deposits	6,139			8,295		Customer deposits	3,607			6,139
Provision for merger commitments		(500)			(1,881)

Postretirement benefit obligations	Postretirement benefit obligations	(746)			6,262		Postretirement benefit obligations	(1,607)			(746)
Regulatory assets and liabilities, net	Regulatory assets and liabilities, net	(9,498)			(95,294)		Regulatory assets and liabilities, net	4,677			(9,498)

Asset retirement obligation							Asset retirement obligation	(6,115)			(449)
Deferred fuel recoveries	Deferred fuel recoveries	(23,185)			(50,986)		Deferred fuel recoveries	34,801			(23,185)
Other deferred accounts	Other deferred accounts	(4,885)			(9,163)		Other deferred accounts	516			(4,885)
Taxes accrued	Taxes accrued	45,144			26,864		Taxes accrued	(45,700)			45,144
Interest accrued	Interest accrued	29,673			23,961		Interest accrued	14,666			29,673
Energy risk management collateral received		36,400			8,900
Energy risk management collateral							Energy risk management collateral	(6,500)			36,400

Other operating	Other operating	2,856			(9,295)		Other operating	(5,022)			2,805
Net cash provided by operating activities	Net cash provided by operating activities	245,125			139,794		Net cash provided by operating activities	321,173			245,125
Investing activities	Investing activities						Investing activities
Additions to property, plant, and equipment	Additions to property, plant, and equipment	(145,514)			(207,257)		Additions to property, plant, and equipment	(165,750)			(145,514)

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	Return of investment in company-owned life insurance	15,671			—		Return of investment in company-owned life insurance	417			15,671

Other investing	Other investing	630			1,469		Other investing	1,651			1,293
Net cash used in investing activities	Net cash used in investing activities	(128,550)			(199,093)		Net cash used in investing activities	(163,682)			(128,550)
Financing activities	Financing activities						Financing activities
Draws on revolving credit facilities	Draws on revolving credit facilities	127,000			185,000		Draws on revolving credit facilities	107,000			127,000
Payments on revolving credit facilities	Payments on revolving credit facilities	(40,000)			(260,000)		Payments on revolving credit facilities	(111,000)			(40,000)
Issuances of long-term debt	Issuances of long-term debt	424,946			325,000		Issuances of long-term debt	—			424,946
Repayment of long-term debt	Repayment of long-term debt	(325,000)			—		Repayment of long-term debt	(9,574)			(325,000)

Payment of financing costs	Payment of financing costs	(6,964)			(4,149)		Payment of financing costs	(498)			(6,964)

Distributions to member	Distributions to member	(219,588)			—		Distributions to member	(30,000)			(219,588)
Other financing	Other financing	(559)			(505)		Other financing	(618)			(559)
Net cash (used in) provided by financing activities		(40,165)			245,346
Net cash used in financing activities							Net cash used in financing activities	(44,690)			(40,165)
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	76,410			186,047		Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	112,801			76,410
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	150,982		(1)	90,265		Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	191,572		(1)	150,982
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	$	227,392	(2)	$	276,312	Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	304,373	(2)	$	227,392
(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.
(1) Includes cash and cash equivalents of $54,541, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $109,415. Also includes cash, cash equivalents, and restricted cash equivalents in assets held for sale of $4,067. (2) Includes cash and cash equivalents of $181,908, current restricted cash and cash equivalents of $6,356, and non-current restricted cash and cash equivalents of $112,018. Also includes cash, cash equivalents, and restricted cash equivalents in assets held for sale of $4,091.							(1) Includes cash and cash equivalents of $54,541, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $109,415. Also includes cash, cash equivalents, and restricted cash equivalents in assets held for sale of $4,067. (2) Includes cash and cash equivalents of $181,908, current restricted cash and cash equivalents of $6,356, and non-current restricted cash and cash equivalents of $112,018. Also includes cash, cash equivalents, and restricted cash equivalents in assets held for sale of $4,091.

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						~~2022~~2023 3RD QUARTER FORM 10-Q


CLECO	CLECO					CLECO

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)	2022		2021		(THOUSANDS)	2023		2022
Supplementary cash flow information	Supplementary cash flow information					Supplementary cash flow information
Interest paid, net of amount capitalized	Interest paid, net of amount capitalized	$	72,772	$	70,387	Interest paid, net of amount capitalized	$	109,997	$	72,772

Income taxes paid, net						Income taxes paid, net	$	2,162	$	—
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	$	7,098	$	45,646	Accrued additions to property, plant, and equipment	$	3,506	$	7,098

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 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	$	—	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.	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						~~2022~~2023 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, 2021		$	2,454,276	$	427,692	$	(25,588)	$	2,856,380

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

Balances, June 30, 2022	Balances, June 30, 2022	$	2,454,276	$	547,778	$	(23,608)	$	2,978,446	Balances, June 30, 2022	$	2,454,276	$	547,778	$	(23,608)	$	2,978,446

Distributions to member	Distributions to member	—		(86,750)		—		(86,750)		Distributions to member	—		(86,750)		—		(86,750)
Net income	Net income	—		68,372		—		68,372		Net income	—		68,372		—		68,372
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		10		10		Other comprehensive income, net of tax	—		—		10		10
Balances, Sept. 30, 2022	Balances, Sept. 30, 2022	$	2,454,276	$	529,400	$	(23,598)	$	2,960,078	Balances, Sept. 30, 2022	$	2,454,276	$	529,400	$	(23,598)	$	2,960,078

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

Balances, June 30, 2023										Balances, June 30, 2023	$	2,454,276	$	436,040	$	(786)	$	2,889,530

Net income	Net income	—		219,059		—		219,059		Net income	—		156,112		—		156,112
Other comprehensive income, net of tax		—		—		304		304
Balances, Sept. 30, 2021		$	2,454,276	$	547,602	$	(25,492)	$	2,976,386

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

Distributions to member	Distributions to member	—		(219,588)		—		(219,588)		Distributions to member	—		(30,000)		—		(30,000)
Net income		—		225,479		—		225,479
Other comprehensive income, net of tax		—		—		31		31
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.
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	—		—		(422)		(422)
Balances, Sept. 30, 2023										Balances, Sept. 30, 2023	$	2,454,276	$	562,152	$	(1,208)	$	3,015,220




















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

Distributions to member	—		(219,588)		—		(219,588)
Net income	—		225,479		—		225,479
Other comprehensive income, net of tax	—		—		31		31
Balances, Sept. 30, 2022	$	2,454,276	$	529,400	$	(23,598)	$	2,960,078

Balances, Dec. 31, 2022	$	2,454,276	$	492,732	$	59	$	2,947,067

Net income	—		99,420		—		99,420
Distributions to member	—		(30,000)		—		(30,000)
Other comprehensive loss, net of tax	—		—		(1,267)		(1,267)
Balances, Sept. 30, 2023	$	2,454,276	$	562,152	$	(1,208)	$	3,015,220
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2022~~2023 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, ~~2021.~~2022. 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~~2023 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)	2022		2021		(THOUSANDS)	2023		2022
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	481,153	$	357,084	Electric operations	$	364,161	$	481,153
Other operations	Other operations	24,757		22,779		Other operations	31,984		24,757
Affiliate revenue	Affiliate revenue	1,657		1,380		Affiliate revenue	1,645		1,657
Gross operating revenue	Gross operating revenue	507,567		381,243		Gross operating revenue	397,790		507,567
Electric customer credits	Electric customer credits	(6,728)		(691)		Electric customer credits	24		(6,728)
Operating revenue, net	Operating revenue, net	500,839		380,552		Operating revenue, net	397,814		500,839
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	192,010		149,127		Fuel used for electric generation	117,175		192,010
Purchased power	Purchased power	111,764		38,211		Purchased power	44,803		111,764
Other operations and maintenance	Other operations and maintenance	58,581		56,720		Other operations and maintenance	59,452		58,581
Depreciation and amortization	Depreciation and amortization	44,368		43,526		Depreciation and amortization	48,012		44,368
Taxes other than income taxes	Taxes other than income taxes	14,940		12,891		Taxes other than income taxes	15,818		14,940
Regulatory disallowance	Regulatory disallowance	13,841		—		Regulatory disallowance	—		13,841

Total operating expenses	Total operating expenses	435,504		300,475		Total operating expenses	285,260		435,504
Operating income	Operating income	65,335		80,077		Operating income	112,554		65,335
Interest income	Interest income	1,726		936		Interest income	1,215		1,726
Allowance for equity funds used during construction	Allowance for equity funds used during construction	965		711		Allowance for equity funds used during construction	1,617		965
Other expense, net	Other expense, net	(1,591)		(6,106)		Other expense, net	(103)		(1,591)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	24,303		19,054		Interest charges, net	25,099		24,303
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(463)		(545)		Allowance for borrowed funds used during construction	(178)		(463)
Total interest charges	Total interest charges	23,840		18,509		Total interest charges	24,921		23,840
Income before income taxes	Income before income taxes	42,595		57,109		Income before income taxes	90,362		42,595
Federal and state income tax expense		1,862		548
Federal and state income tax (benefit) expense						Federal and state income tax (benefit) expense	(552)		1,862
Net income	Net income	$	40,733	$	56,561	Net income	$	90,914	$	40,733
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						~~2022~~2023 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)	2022		2021		(THOUSANDS)	2023		2022
Net income	Net income	$	40,733	$	56,561	Net income	$	90,914	$	40,733
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 $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)		63		63
Postretirement benefits gain (net of tax expense of $35 in 2023 and $113 in 2022)						Postretirement benefits gain (net of tax expense of $35 in 2023 and $113 in 2022)	97		307
Amortization of interest rate derivatives to earnings (net of tax expense of $23 in 2023 and 2022)						Amortization of interest rate derivatives to earnings (net of tax expense of $23 in 2023 and 2022)	62		63
Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	370		413		Total other comprehensive income, net of tax	159		370
Comprehensive income, net of tax	Comprehensive income, net of tax	$	41,103	$	56,974	Comprehensive income, net of tax	$	91,073	$	41,103
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						~~2022~~2023 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)	2022		2021		(THOUSANDS)	2023		2022
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	1,145,864	$	887,191	Electric operations	$	923,685	$	1,145,864
Other operations	Other operations	62,528		57,674		Other operations	84,028		62,528
Affiliate revenue	Affiliate revenue	4,744		4,259		Affiliate revenue	4,967		4,744
Gross operating revenue	Gross operating revenue	1,213,136		949,124		Gross operating revenue	1,012,680		1,213,136
Electric customer credits	Electric customer credits	(6,992)		(40,429)		Electric customer credits	(1,362)		(6,992)
Operating revenue, net	Operating revenue, net	1,206,144		908,695		Operating revenue, net	1,011,318		1,206,144
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	442,249		262,970		Fuel used for electric generation	298,586		442,249
Purchased power	Purchased power	213,586		151,499		Purchased power	126,086		213,586
Other operations and maintenance	Other operations and maintenance	159,588		162,448		Other operations and maintenance	170,827		159,588
Depreciation and amortization	Depreciation and amortization	133,907		126,534		Depreciation and amortization	142,467		133,907
Taxes other than income taxes	Taxes other than income taxes	39,117		36,707		Taxes other than income taxes	46,155		39,117
Regulatory disallowance	Regulatory disallowance	13,841		—		Regulatory disallowance	—		13,841

Total operating expenses	Total operating expenses	1,002,288		740,158		Total operating expenses	784,121		1,002,288
Operating income	Operating income	203,856		168,537		Operating income	227,197		203,856
Interest income	Interest income	3,501		2,404		Interest income	2,979		3,501
Allowance for equity funds used during construction	Allowance for equity funds used during construction	2,704		2,703		Allowance for equity funds used during construction	4,423		2,704
Other expense, net		(5,852)		(16,064)
Other income (expense), net						Other income (expense), net	198		(5,852)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	65,147		56,672		Interest charges, net	74,686		65,147
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(1,200)		(1,280)		Allowance for borrowed funds used during construction	(1,244)		(1,200)
Total interest charges	Total interest charges	63,947		55,392		Total interest charges	73,442		63,947
Income before income taxes	Income before income taxes	140,262		102,188		Income before income taxes	161,355		140,262
Federal and state income tax expense (benefit)		5,800		(219)
Federal and state income tax expense						Federal and state income tax expense	4,185		5,800
Net income	Net income	$	134,462	$	102,407	Net income	$	157,170	$	134,462
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						~~2022~~2023 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)	2022		2021		(THOUSANDS)	2023		2022
Net income	Net income	$	134,462	$	102,407	Net income	$	157,170	$	134,462
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 $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)		189		191
Postretirement benefits gain (net of tax expense of $106 in 2023 and $339 in 2022)						Postretirement benefits gain (net of tax expense of $106 in 2023 and $339 in 2022)	289		920
Amortization of interest rate derivatives to earnings (net of tax expense of $69 in 2023 and 2022)						Amortization of interest rate derivatives to earnings (net of tax expense of $69 in 2023 and 2022)	188		189
Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	1,109		1,286		Total other comprehensive income, net of tax	477		1,109
Comprehensive income, net of tax	Comprehensive income, net of tax	$	135,571	$	103,693	Comprehensive income, net of tax	$	157,647	$	135,571
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						~~2022~~2023 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, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Assets	Assets					Assets
Utility plant and equipment	Utility plant and equipment					Utility plant and equipment
Property, plant, and equipment	Property, plant, and equipment	$	5,672,636	$	5,745,489	Property, plant, and equipment	$	5,863,553	$	5,736,526
Accumulated depreciation	Accumulated depreciation	(2,048,367)		(1,919,766)		Accumulated depreciation	(2,201,179)		(2,082,153)
Net property, plant, and equipment	Net property, plant, and equipment	3,624,269		3,825,723		Net property, plant, and equipment	3,662,374		3,654,373
Construction work in progress	Construction work in progress	115,252		94,573		Construction work in progress	150,302		113,470
Total utility plant and equipment, net	Total utility plant and equipment, net	3,739,521		3,920,296		Total utility plant and equipment, net	3,812,676		3,767,843
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	36,290		85,667		Cash and cash equivalents	107,961		14,703
Restricted cash and cash equivalents	Restricted cash and cash equivalents	14,902		1,674		Restricted cash and cash equivalents	6,356		23,549
Customer accounts receivable (less allowance for credit losses of $1,498 in 2022 and $1,302 in 2021)		103,839		48,551
Customer accounts receivable (less allowance for credit losses of $2,248 in 2023 and $1,147 in 2022)						Customer accounts receivable (less allowance for credit losses of $2,248 in 2023 and $1,147 in 2022)	72,778		72,646
Accounts receivable - affiliate	Accounts receivable - affiliate	2,486		13,612		Accounts receivable - affiliate	2,140		3,771
Other accounts receivable	Other accounts receivable	28,517		21,931		Other accounts receivable	25,551		33,444

Unbilled revenue	Unbilled revenue	40,560		37,663		Unbilled revenue	43,642		46,040
Fuel inventory, at average cost	Fuel inventory, at average cost	85,600		46,121		Fuel inventory, at average cost	63,128		57,078
Materials and supplies, at average cost	Materials and supplies, at average cost	112,860		101,502		Materials and supplies, at average cost	133,842		116,943
Energy risk management assets	Energy risk management assets	5,195		5,515		Energy risk management assets	4,899		2,570
Accumulated deferred fuel	Accumulated deferred fuel	81,928		56,826		Accumulated deferred fuel	20,241		57,881
Cash surrender value of company-owned life insurance policies	Cash surrender value of company-owned life insurance policies	16,281		16,260		Cash surrender value of company-owned life insurance policies	9,711		9,471
Prepayments	Prepayments	10,654		7,784		Prepayments	11,816		11,765
Regulatory assets	Regulatory assets	39,194		21,526		Regulatory assets	27,742		39,438
Other current assets	Other current assets	817		782		Other current assets	897		838
Total current assets	Total current assets	579,123		465,414		Total current assets	530,704		490,137
Equity investment in investee	Equity investment in investee	2,072		2,072		Equity investment in investee	1,992		2,072
Prepayments	Prepayments	1,324		1,243		Prepayments	1,386		1,493
Operating lease right of use assets	Operating lease right of use assets	23,288		23,970		Operating lease right of use assets	20,761		22,628
Restricted cash and cash equivalents	Restricted cash and cash equivalents	108,623		—		Restricted cash and cash equivalents	111,995		109,392
Note receivable	Note receivable	13,125		13,744		Note receivable	12,228		12,908

Regulatory assets - deferred taxes, net						Regulatory assets - deferred taxes, net	45,463		8,803
Regulatory assets	Regulatory assets	554,264		680,813		Regulatory assets	489,534		491,978
Intangible asset - securitization	Intangible asset - securitization	415,946		—		Intangible asset - securitization	402,444		413,123

Other deferred charges	Other deferred charges	22,465		21,949		Other deferred charges	31,456		23,796
Total assets	Total assets	$	5,459,751	$	5,129,501	Total assets	$	5,460,639	$	5,344,173
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						~~2022~~2023 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, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Liabilities and member’s equity	Liabilities and member’s equity					Liabilities and member’s equity
Member’s equity	Member’s equity	$	1,978,608	$	1,948,537	Member’s equity	$	2,130,559	$	2,022,912
Long-term debt and finance leases, net	Long-term debt and finance leases, net	1,886,216		1,800,854		Long-term debt and finance leases, net	1,647,593		1,786,447
Total capitalization	Total capitalization	3,864,824		3,749,391		Total capitalization	3,778,152		3,809,359
Current liabilities	Current liabilities					Current liabilities
Short-term debt	Short-term debt	77,000		—		Short-term debt	—		45,000
Long-term debt and finance leases due within one year	Long-term debt and finance leases due within one year	35,382		25,755		Long-term debt and finance leases due within one year	240,271		110,344
Accounts payable	Accounts payable	110,855		114,493		Accounts payable	86,702		119,435
Accounts payable - affiliate	Accounts payable - affiliate	10,837		69,729		Accounts payable - affiliate	21,334		12,448
Customer deposits	Customer deposits	59,101		60,852		Customer deposits	57,137		57,851
Provision for rate refund	Provision for rate refund	13,256		5,682		Provision for rate refund	1,988		3,074

Taxes payable	Taxes payable	46,841		5,494		Taxes payable	50,485		15,277
Interest accrued	Interest accrued	26,544		5,080		Interest accrued	22,912		15,276

Energy risk management liabilities	Energy risk management liabilities	457		597		Energy risk management liabilities	4,609		4,864
Regulatory liabilities - deferred taxes, net	Regulatory liabilities - deferred taxes, net	44,129		44,072		Regulatory liabilities - deferred taxes, net	31,215		42,890

Storm reserves						Storm reserves	—		9,409
Other current liabilities	Other current liabilities	32,200		23,467		Other current liabilities	23,416		18,360
Total current liabilities	Total current liabilities	456,602		355,221		Total current liabilities	540,069		454,228
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)						Commitments and contingencies (Note 14)
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	755,253		707,479		Accumulated deferred federal and state income taxes, net	817,218		770,127

Postretirement benefit obligations	Postretirement benefit obligations	206,669		205,214		Postretirement benefit obligations	137,704		137,754

Regulatory liabilities - deferred taxes, net		4,970		51,472

Storm reserves	Storm reserves	108,652		—		Storm reserves	106,789		109,353

Asset retirement obligations	Asset retirement obligations	17,512		19,456		Asset retirement obligations	10,019		15,301
Operating lease liabilities	Operating lease liabilities	20,436		21,100		Operating lease liabilities	17,916		19,790
Customer advances for construction						Customer advances for construction	25,265		9,783
Other deferred credits	Other deferred credits	24,833		20,168		Other deferred credits	27,507		18,478
Total long-term liabilities and deferred credits	Total long-term liabilities and deferred credits	1,138,325		1,024,889		Total long-term liabilities and deferred credits	1,142,418		1,080,586
Total liabilities and member’s equity	Total liabilities and member’s equity	$	5,459,751	$	5,129,501	Total liabilities and member’s equity	$	5,460,639	$	5,344,173
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						~~2022~~2023 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)	2022			2021		(THOUSANDS)	2023			2022
Operating activities	Operating activities						Operating activities
Net income	Net income	$	134,462		$	102,407	Net income	$	157,170		$	134,462
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	139,356			132,986		Depreciation and amortization	146,703			139,356

Provision for credit losses	Provision for credit losses	2,143			3,106		Provision for credit losses	3,243			2,143
Regulatory disallowance	Regulatory disallowance	13,841			—		Regulatory disallowance	—			13,841
Electric customer credits	Electric customer credits	6,577			—		Electric customer credits	—			6,577
Unearned compensation expense	Unearned compensation expense	570			1,746		Unearned compensation expense	1,059			570
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(2,704)			(2,703)		Allowance for equity funds used during construction	(4,423)			(2,704)
Deferred income taxes	Deferred income taxes	918			(1,737)		Deferred income taxes	(3,117)			918

Changes in assets and liabilities	Changes in assets and liabilities						Changes in assets and liabilities
Accounts receivable	Accounts receivable	(70,688)			(38,558)		Accounts receivable	396			(70,688)
Accounts receivable - affiliate	Accounts receivable - affiliate	13,488			4,187		Accounts receivable - affiliate	3,056			13,488
Unbilled revenue	Unbilled revenue	(2,897)			3,368		Unbilled revenue	2,398			(2,897)
Fuel inventory and materials and supplies	Fuel inventory and materials and supplies	(52,099)			(21,326)		Fuel inventory and materials and supplies	(24,115)			(52,099)
Prepayments	Prepayments	(2,428)			210		Prepayments	238			(2,428)
Accounts payable	Accounts payable	(7,505)			(4,067)		Accounts payable	(27,286)			(7,505)
Accounts payable - affiliate	Accounts payable - affiliate	(58,462)			(2,389)		Accounts payable - affiliate	9,076			(58,462)
Customer deposits	Customer deposits	6,139			8,295		Customer deposits	3,607			6,139
Provision for merger commitments		—			(1,381)

Postretirement benefit obligations	Postretirement benefit obligations	353			4,910		Postretirement benefit obligations	(1,080)			353
Regulatory assets and liabilities, net	Regulatory assets and liabilities, net	(10,989)			(96,785)		Regulatory assets and liabilities, net	3,187			(10,989)

Asset retirement obligation							Asset retirement obligation	(5,923)			(1,656)
Deferred fuel recoveries	Deferred fuel recoveries	(23,185)			(50,986)		Deferred fuel recoveries	34,801			(23,185)
Other deferred accounts	Other deferred accounts	(81)			(6,394)		Other deferred accounts	6,291			(81)
Taxes accrued	Taxes accrued	40,394			30,789		Taxes accrued	33,824			40,394
Interest accrued	Interest accrued	21,464			15,893		Interest accrued	7,636			21,464
Other operating	Other operating	(1,668)			(6,868)		Other operating	(4,808)			(12)
Net cash provided by operating activities	Net cash provided by operating activities	146,999			74,703		Net cash provided by operating activities	341,933			146,999
Investing activities	Investing activities						Investing activities
Additions to property, plant, and equipment	Additions to property, plant, and equipment	(139,726)			(200,237)		Additions to property, plant, and equipment	(159,947)			(139,726)

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

Other investing	Other investing	630			1,469		Other investing	1,971			1,271
Net cash used in investing activities	Net cash used in investing activities	(138,455)			(192,073)		Net cash used in investing activities	(157,976)			(138,455)
Financing activities	Financing activities						Financing activities
Draws on revolving credit facility	Draws on revolving credit facility	117,000			185,000		Draws on revolving credit facility	25,000			117,000
Payments on revolving credit facility	Payments on revolving credit facility	(40,000)			(260,000)		Payments on revolving credit facility	(70,000)			(40,000)
Issuances of long-term debt	Issuances of long-term debt	424,946			325,000		Issuances of long-term debt	—			424,946
Repayment of long-term debt	Repayment of long-term debt	(325,000)			—		Repayment of long-term debt	(9,574)			(325,000)

Payment of financing costs	Payment of financing costs	(6,957)			(2,846)		Payment of financing costs	(97)			(6,957)

Distributions to member	Distributions to member	(105,500)			—		Distributions to member	(50,000)			(105,500)
Other financing	Other financing	(559)			(505)		Other financing	(618)			(559)
Net cash provided by financing activities		63,930			246,649
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(105,289)			63,930
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	72,474			129,279		Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	78,668			72,474
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	87,341		(1)	29,391		Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	147,644		(1)	87,341
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	$	159,815	(2)	$	158,670	Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	226,312	(2)	$	159,815

Supplementary cash flow information	Supplementary cash flow information						Supplementary cash flow information
Interest paid, net of amount capitalized	Interest paid, net of amount capitalized	$	37,198		$	35,065	Interest paid, net of amount capitalized	$	63,204		$	37,198

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	$	7,025		$	45,305	Accrued additions to property, plant, and equipment	$	2,825		$	7,025

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

(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 $14,703, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $109,392. (2) Includes cash and cash equivalents of $107,961, current restricted cash and cash equivalents of $6,356, and non-current restricted cash and cash equivalents of $111,995.							(1) Includes cash and cash equivalents of $14,703, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $109,392. (2) Includes cash and cash equivalents of $107,961, current restricted cash and cash equivalents of $6,356, and non-current restricted cash and cash equivalents of $111,995.

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						~~2022~~2023 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)	MEMBERSHIP INTEREST		AOCI		TOTAL MEMBER’S EQUITY
Balances, June 30, 2021		$	1,878,478	$	(23,880)	$	1,854,598

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

Balances, June 30, 2022	Balances, June 30, 2022	$	2,008,449	$	(17,444)	$	1,991,005	Balances, June 30, 2022	$	2,008,449	$	(17,444)	$	1,991,005

Distributions to parent		(53,500)		—		(53,500)
Distributions to member								Distributions to member	(53,500)		—		(53,500)
Net income	Net income	40,733		—		40,733		Net income	40,733		—		40,733
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		370		370		Other comprehensive income, net of tax	—		370		370
Balances, Sept. 30, 2022	Balances, Sept. 30, 2022	$	1,995,682	$	(17,074)	$	1,978,608	Balances, Sept. 30, 2022	$	1,995,682	$	(17,074)	$	1,978,608

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

Balances, June 30, 2023								Balances, June 30, 2023	$	2,072,533	$	(8,047)	$	2,064,486

Net income	Net income	102,407		—		102,407		Net income	90,914		—		90,914
Distributions to member								Distributions to member	(25,000)		—		(25,000)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		1,286		1,286		Other comprehensive income, net of tax	—		159		159
Balances, Sept. 30, 2021		$	1,935,039	$	(23,467)	$	1,911,572

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

Distributions to parent		(105,500)		—		(105,500)
Net income		134,462		—		134,462
Other comprehensive income, net of tax		—		1,109		1,109
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.
Balances, Sept. 30, 2023								Balances, Sept. 30, 2023	$	2,138,447	$	(7,888)	$	2,130,559




















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

Distributions to member	(105,500)		—		(105,500)
Net income	134,462		—		134,462
Other comprehensive income, net of tax	—		1,109		1,109
Balances, Sept. 30, 2022	$	1,995,682	$	(17,074)	$	1,978,608

Balances, Dec. 31, 2022	$	2,031,277	$	(8,365)	$	2,022,912

Net income	157,170		—		157,170
Distributions to member	(50,000)		—		(50,000)
Other comprehensive income, net of tax	—		477		477
Balances, Sept. 30, 2023	$	2,138,447	$	(7,888)	$	2,130,559
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2022~~2023 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~~Discontinued Operations	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	Derivative Instruments	Cleco and Cleco Power
Note 8	Debt	Cleco and Cleco Power
Note 89	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 910	Income Taxes	Cleco and Cleco Power
Note 1011	Segment Disclosures ~~about Segments~~	Cleco
Note 1112	Regulation and Rates	Cleco and Cleco Power
Note 1213	Variable Interest Entities	Cleco and Cleco Power
Note 1314	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 1415	Affiliate Transactions	Cleco and Cleco Power
Note 1516	Intangible Assets ~~Intangible Liabilities,~~ and Goodwill	~~Cleco and Cleco Power~~
~~Note 16~~	~~Accumulated Other Comprehensive Loss~~	Cleco and Cleco Power
Note 17	~~Storm Securitization and Cost Recovery~~Accumulated Other Comprehensive Loss	Cleco and Cleco Power


Notes to the Unaudited Condensed Consolidated Financial Statements


Note 1 — Summary of Significant Accounting Policies

~~COVID-19 Impacts~~Discontinued Operations

In 2022, Cleco Holdings engaged in a strategic review process related to its investment in Cleco Cajun. In March ~~2020, WHO declared~~2023, Cleco Holdings’ management, with the ~~outbreak~~support of ~~COVID-19~~its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and a ~~global pandemic,~~sale will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the ~~U.S. declared a national emergency. In response~~Cleco Cajun Sale Group is presented as discontinued operations. The financial information for historical periods provided in this report has been recast to present the results of operations and financial position of the Cleco Cajun Sale Group as discontinued operations. Cleco has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes 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.~~

~~In response to the COVID-19 pandemic, 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, 2022, Cleco Power had a regulatory asset of $3.0 million recorded for expenses incurredcondensed consolidated financial statements exclude amounts related to ~~the executive order, as allowed by the LPSC.~~

~~Cleco continues to assess the COVID-19 situation~~discontinued operations, assets held for sale, and ~~cannot predict the full impact that COVID-19, or any significant related disruptions, will have on its business, cash flows, liquidity, financial condition, and results of operations.~~liabilities held for sale for all periods presented. For more information, see Note 3 — “Discontinued Operations.”

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 recovery 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 1213 — “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.~~statements and adjusted for discontinued operations. 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, ~~2021.~~2022.

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’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 disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those


CLECO
CLECO POWER						~~2022~~2023 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.” For information on discontinued operations, see Note 3 — “Discontinued Operations.”

Restricted Cash and Cash Equivalents

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge		$	—	$	1,674
Cleco Power’s storm restoration costs - Hurricane Ida	Cleco Power’s storm restoration costs - Hurricane Ida	9,350		—		Cleco Power’s storm restoration costs - Hurricane Ida	$	—	$	9,409
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		—		Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service	6,356		14,140
Total current	Total current	14,902		1,674		Total current	6,356		23,549
Non-current	Non-current					Non-current
Diversified Lands’ mitigation escrow	Diversified Lands’ mitigation escrow	22		22		Diversified Lands’ mitigation escrow	23		23
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 future storm restoration costs	111,995		103,306
Cleco Power’s storm restoration costs - Hurricane Ida	Cleco Power’s storm restoration costs - Hurricane Ida	6,037		—		Cleco Power’s storm restoration costs - Hurricane Ida	—		6,086

Total non-current	Total non-current	109,373		745		Total non-current	112,018		109,415
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	124,275	$	2,419	Total restricted cash and cash equivalents	$	118,374	$	132,964


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge		$	—	$	1,674
Storm restoration costs - Hurricane Ida	Storm restoration costs - Hurricane Ida	9,350		—		Storm restoration costs - Hurricane Ida	$	—	$	9,409
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		—		Cleco Securitization I’s operating expenses and storm recovery bond issuance costs	6,356		14,140
Total current	Total current	14,902		1,674		Total current	6,356		23,549
Non-current	Non-current					Non-current
Future storm restoration costs	Future storm restoration costs	102,586		—		Future storm restoration costs	111,995		103,306
Storm restoration costs - Hurricane Ida	Storm restoration costs - Hurricane Ida	6,037		—		Storm restoration costs - Hurricane Ida	—		6,086

Total non-current	Total non-current	108,623		—		Total non-current	111,995		109,392
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	123,525	$	1,674	Total restricted cash and cash equivalents	$	118,351	$	132,941

~~In April 2021, after payments~~On September 20, 2023, the LPSC approved a settlement for ~~all final administrative and winding up activities~~the prudency review 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 as approved by the LPSC, newly funded storm reserves for future storm restoration costs and~~unrecovered Hurricane Ida storm restoration costs ~~were established at~~deferred as a regulatory asset. The settlement allowed Cleco ~~Power.~~Power to withdraw the remaining unrecovered Hurricane Ida storm restoration costs,

plus a carrying charge through September 2023, from the Hurricane Ida storm reserve. The ~~establishment~~settlement also approved the transfer of ~~these reserves resulted in~~ the ~~establishment~~remaining balance of the Hurricane Ida storm reserve to the restricted reserve for future storm restoration costs. As a result of the settlement, the corresponding Hurricane Ida restricted cash and cash equivalents ~~accounts. Additionally,~~was reduced by $10.3 million and the remaining balance was transferred to the restricted cash and cash equivalents ~~accounts were established~~account for ~~payment of Cleco Securitization I’s estimated operating expenses,~~future storm ~~recovery bond issuance costs, and payment of debt service on those storm recovery bonds.~~restoration costs. For more information onabout the regulatory asset and storm ~~securitization financing,~~reserves, see Note 175 — ~~“Storm Securitization~~“Regulatory Assets and ~~Cost Recovery.~~Liabilities — Storm Reserves.”

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.

As a result of the market price volatility of natural gas ~~experienced~~ throughout 2022, Cleco ~~has~~ experienced significant increases to the pass-through fuel component of retail customer energy bills. Due to these increased customer ~~fuel~~ costs, along with the impacts of a 40-year high inflation rate, Cleco ~~has~~ experienced increases in credit loss reserves. These factors have not been and are not expected to be material to Cleco’s results of operations, financial condition, or cash flows.

During the third quarter of 2023, Cleco's service territory experienced sustained record high temperatures resulting in an increase in usage by its customers. In anticipation of higher customer costs and high heat conditions, Cleco temporarily suspended disconnections and the utilization of collection agencies for the month of August and most of September 2023, resulting in no additional charge-offs during these months. On September 25, 2023, Cleco resumed disconnection and collection activities.

Although Cleco’s service territory experienced various external impacts, Cleco’s credit losses at September 30, 2023, were still within range of its historical credit loss analysis.

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


Cleco	Cleco													Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022							FOR THE THREE MONTHS ENDED SEPT. 30, 2023						FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL		(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Beginning of period		$	1,190	$	1,638	$	2,828	$	1,302	$	1,638	$	2,940
Balances, beginning of period														Balances, beginning of period	$	1,252	$	1,638	$	2,890	$	1,147	$	1,638	$	2,785

Current period provision	Current period provision	939		—		939		2,149		—		2,149		Current period provision	1,106		—		1,106		3,252		—		3,252
Charge-offs	Charge-offs	(894)		—		(894)		(2,899)		—		(2,899)		Charge-offs	(325)		—		(325)		(3,071)		—		(3,071)
Recovery	Recovery	263		—		263		946		—		946		Recovery	215		—		215		920		—		920
Balances, Sept. 30, 2022		$	1,498	$	1,638	$	3,136	$	1,498	$	1,638	$	3,136
Balances, Sept. 30, 2023														Balances, Sept. 30, 2023	$	2,248	$	1,638	$	3,886	$	2,248	$	1,638	$	3,886

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


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q


		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		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL		(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Beginning of period		$	1,334	$	1,638	$	2,972	$	2,758	$	1,638	$	4,396
Balances, beginning of period														Balances, beginning of period	$	1,190	$	1,638	$	2,828	$	1,302	$	1,638	$	2,940

Current period provision	Current period provision	567		—		567		3,057		—		3,057		Current period provision	939		—		939		2,149		—		2,149
Charge-offs	Charge-offs	(730)		—		(730)		(5,172)		—		(5,172)		Charge-offs	(894)		—		(894)		(2,899)		—		(2,899)
Recovery	Recovery	586		—		586		1,114		—		1,114		Recovery	263		—		263		946		—		946
Balances, Sept. 30, 2021		$	1,757	$	1,638	$	3,395	$	1,757	$	1,638	$	3,395
Balances, Sept. 30, 2022														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 Power	Cleco Power					Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30, 2022		FOR THE NINE MONTHS ENDED SEPT. 30, 2022			FOR THE THREE MONTHS ENDED SEPT. 30, 2023		FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE				(THOUSANDS)	ACCOUNTS RECEIVABLE
Beginning of period		$	1,190	$	1,302
Balances, beginning of period						Balances, beginning of period	$	1,252	$	1,147

Current period provision	Current period provision	939		2,149		Current period provision	1,106		3,252
Charge-offs	Charge-offs	(894)		(2,899)		Charge-offs	(325)		(3,071)
Recovery	Recovery	263		946		Recovery	215		920
Balances, Sept. 30, 2022		$	1,498	$	1,498
Balances, Sept. 30, 2023						Balances, Sept. 30, 2023	$	2,248	$	2,248


		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
Beginning of period		$	1,334	$	2,758
Balances, beginning of period						Balances, 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


Note 2 — Recent Authoritative Guidance

In March ~~2020,~~2023, FASB issued ~~optional~~ guidance ~~for a limited period of time,~~ that applies to leases between entities ~~meeting certain criteria~~under common control. The guidance provides a practical expedient for determining whether an arrangement between entities under common control is a lease as well as the ~~contract modifications or hedging relationships that are referencing LIBOR or another reference rate expected~~classification of the lease. In addition, the leasehold improvements amortization period is to be ~~discontinued due~~determined by the useful life 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 incommon group rather than the event LIBOR is discontinued or deemed to no longer be representative, or prior to such events, at the option of 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 November 2021, FASB issued guidance requiring annual disclosures about government assistance with the objective of increasing transparency and reducing existing diversity in practice. This guidance requires disclosureterm of the ~~types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on the entity’s financial statements. This~~lease. The new guidance is effective for ~~annual periods~~fiscal years beginning after December 15, ~~2021. Early adoption~~2023, including interim periods within those fiscal years. Cleco has arrangements between entities under common control and management is ~~permitted. Funding is being sought for relief~~evaluating the impacts of incurred storm costs. In addition, a congressional appropriation has been secured, subject to the U.S. Department of Energy’s grant process, to help offset future costs associated with Cleco 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 ~~to have a significant impact~~ on the results of operations, financial condition, orand cash flows of the Registrants.


Note 3 — Discontinued Operations

In March 2023, Cleco Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and a sale will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the results of operations and financial position of the Cleco Cajun Sale Group are presented as discontinued operations, and the financial information for historical periods

provided in this report has been recast to reflect this presentation. Certain expenses incurred by the Cleco Cajun Sale Group as a result of common services provided by Support Group are reflected in Cleco’s results of continuing operations due to the expected ongoing nature of those expenses. In addition, revenue recognized by Cleco Power from transmission services provided to the Cleco Cajun Sale Group is no longer eliminated upon consolidation of Cleco's financial statements and is reflected in Cleco’s results of continuing operations due to the expected ongoing nature of these services.

In February 2019 in connection with the approval of the Cleco Cajun Transaction, Cleco made commitments to the LPSC that included the repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. Proceeds from the divestiture of the Cleco Cajun Sale Group must be used to satisfy the LPSC commitment. At September 30, 2023, $132.3 million of that debt remains outstanding. Interest expense on that debt is included in discontinued operations.

Cleco determined that the estimated fair value less the estimated cost to sell the Cleco Cajun Sale Group was less than the carrying value of the Cleco Cajun Sale Group at March 31, 2023, June 30, 2023, and September 30, 2023. These determinations resulted in an impairment charge of $154.0 million in the nine months ended September 30, 2023, of which $38.0 million was recognized in the three months ended September 30, 2023. The impairment charge recognized in the three months ended September 30, 2023, was primarily due to changes in assumptions related to the expected sale proceeds, probabilities assigned to potential sale scenarios, and the expected closing date. The impairment charge recognized in the nine months ended September 30, 2023, reduced the carrying value of the Cleco Cajun Sale Group to its estimated fair value less estimated cost to sell.

The impairment charge is recognized in Loss from discontinued operations, net of income taxes on Cleco's Condensed Consolidated Statement of Income. The estimated fair value was based on a weighted average of potential sale scenarios that were determined through the income and market approaches. The fair value estimates involved a number of judgments and assumptions including the future performance of the Cleco Cajun Sale Group through the expected divestiture date, the expected sale proceeds and the timing of such proceeds, replacement interconnection value, and the weighted average cost of capital or discount rate. The fair value measurement of the Cleco Cajun Sale Group is classified as Level 3 in the fair value hierarchy.

The following table presents the amounts that have been reclassified from continuing operations and included in discontinued operations within Cleco’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023, and 2022:


~~Note 3 — Leases~~CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
Operating revenue, net
Electric operations	$	153,025	$	140,767	$	385,249	$	370,489
Other operations	34,231		39,573		95,413		111,897
Operating revenue, net	187,256		180,340		480,662		482,386
Operating expenses
Fuel used for electric generation *	41,339		59,435		70,053		141,189
Purchased power	67,297		111,901		175,884		275,531
Other operations and maintenance	28,611		20,727		75,926		61,726
Depreciation and amortization	433		12,046		15,448		55,866
Total operating expenses	137,680		204,109		337,311		534,312
Operating income (loss)	49,576		(23,769)		143,351		(51,926)
Other (expense) income, net	(7)		12		125		96
Interest, net	(1,835)		(1,712)		(5,545)		(3,663)
Loss on classification as held for sale	(38,000)		—		(154,000)		—
Income (loss) from discontinued operations before income taxes	9,734		(25,469)		(16,069)		(55,493)
Federal and state income tax expense (benefit)*	152,463		(3,609)		(6,362)		(920)
Loss from discontinued operations, net of income taxes	$	(142,729)	$	(21,860)	$	(9,707)	$	(54,573)

*For the six months ended June 30, 2023, and 2022, net (losses) gains associated with Cleco ~~maintains operating~~Cajun’s natural gas derivatives of $(82.4) million and ~~finance leases~~$165.9 million, respectively, and the related income tax benefit (expense) of $22.2 million and $(44.7) million, respectively, were included in ~~its ordinary course~~discontinued operations. As a result of ~~business activities.~~the determination that potential buyers are no longer expected to acquire the natural gas derivative instruments in any of the potential sale scenarios, the net (losses) gains and related income tax benefit (expense) associated with the natural gas derivative instruments are no longer presented in discontinued operations.

~~Cottonwood Sale Leaseback Agreement~~

~~Upon closing~~

The following table presents the assets and liabilities of 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 paymentsGroup that have been reclassified as held 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 subsidiary with lessor arrangements. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback is included in Other operations~~sale within Cleco’s Condensed Consolidated ~~Statement~~Balance Sheets as of ~~Income.~~ September 30, 2023, and December 31, 2022:


(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Cash, cash equivalents, and restricted cash equivalents	$	4,091	$	4,067

Accounts receivable	58,733		57,822



Fuel inventory, at average cost	93,971		33,153
Materials and supplies, at average cost	35,860		34,195
Energy risk management assets	1,398		518




Property, plant, and equipment, net	636,523		649,067
Prepayments	24,655		23,601



Intangible assets - other	32,569		36,548

Other assets	21,563		23,619
Loss recognized on classification as held for sale	(154,000)		—

Total assets held for sale - discontinued operations	$	755,363	$	862,590

Accounts payable	$	46,209	$	59,434










Deferred lease revenue	19,945		22,246
Intangible liabilities	12,695		13,956
Asset retirement obligations	45,702		63,725

Other liabilities	12,526		7,647

Total liabilities held for sale - discontinued operations	$	137,077	$	167,008

Balances associated with natural gas derivative instruments are no longer presented as held for sale on Cleco’s Condensed Consolidated Balance Sheets as of September 30, 2023, and December 31, 2022, as a result of the determination that potential buyers are no longer expected to acquire the natural gas derivative instruments in any of the potential sale scenarios.

Cleco ~~Cajun’s lease income under~~has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. The following table presents the ~~Cottonwood~~cash flows from discontinued operations related to the Cleco Cajun Sale ~~Leaseback~~Group for the ~~three and~~ nine months ended September 30, ~~2022,~~2023, and ~~2021 was as follows:~~

2022:

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022
Net cash provided by operating activities - discontinued operations	$	5,425	$	4,849
Net cash used in investing activities - discontinued operations	$	(5,401)	$	(4,844)

* 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.

2829


CLECO
CLECO POWER						~~2022~~2023 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, ~~2022,~~2023, and ~~2021~~2022 was as follows:

FOR THE THREE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 190,023 $ — $ — $ — $ 190,023
Commercial (1)
113,176 — — — 113,176
Industrial (1)
64,486 — — — 64,486
Other retail (1)
5,213 — — — 5,213
Storm recovery surcharge 5,025 — — — 5,025
Electric customer credits (6,728) — — — (6,728)
Total retail revenue 371,195 — — — 371,195
Wholesale, net 97,933 (1) 140,767 (2) (2,420) (3) — 236,280
Transmission, net 18,664 21,009 — (2,560) 37,113
Other 6,094 — — — 6,094
Affiliate (4)
1,657 — 29,583 (31,240) —
Total revenue from contracts with customers 495,543 161,776 27,163 (33,800) 650,682
Revenue unrelated to contracts with customers
Other 5,296 (5) 18,564 (6) 1 — 23,861
Total revenue unrelated to contracts with customers 5,296 18,564 1 — 23,861
Operating revenue, net $ 500,839 $ 180,340 $ 27,164 $ (33,800) $ 674,543


	FOR THE THREE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)	CLECO POWER			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	166,638		$	—		$	—	$	166,638
Commercial (1)	85,137			—			—		85,137
Industrial (1)	45,214			—			—		45,214
Other retail (1)	4,126			—			—		4,126
Electric customer credits	24			—			—		24
Total retail revenue	301,139			—			—		301,139
Wholesale, net	60,844		(1)	(2,323)		(2)	(1)		58,520
Transmission	17,077			—			—		17,077
Other	4,923			—			—		4,923
Affiliate (3)	1,645			30,253			(31,898)		—
Total revenue from contracts with customers	385,628			27,930			(31,899)		381,659
Revenue unrelated to contracts with customers
Securitization revenue	9,984			—			—		9,984
Other	2,202		(4)	—			1		2,203
Total revenue unrelated to contracts with customers	12,186			—			1		12,187
Operating revenue, net	$	397,814		$	27,930		$	(31,898)	$	393,846

(1) Includes fuel recovery revenue.

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

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

~~(4)~~(3) Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.

~~(5)~~(4) Realized gains associated with FTRs.

~~(6)~~ ~~Includes $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, 2021														FOR THE THREE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL		(THOUSANDS)	CLECO POWER			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)	(2,420)		(3)	—		179,912		Wholesale, net	97,933		(1)	(2,420)		(2)	—		95,513
Transmission, net		17,235		(4)	17,903			—			(2,217)		32,921
Transmission															Transmission	18,664			—			—		18,664
Other	Other	5,618			—			—			—		5,618		Other	6,094			—			—		6,094
Affiliate ~~(5)~~(3)	Affiliate ~~(5)~~(3)	1,380			—			32,116			(33,496)		—		Affiliate ~~(5)~~(3)	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			27,163			(31,240)		491,466
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	1,094		(6)	17,254		(7)	1			—		18,349		Other	5,296		(4)	1			1		5,298
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			1			1		5,298
Operating revenue, net	Operating revenue, net	$	380,552		$	142,658		$	29,697		$	(35,713)	$	517,194	Operating revenue, net	$	500,839		$	27,164		$	(31,239)	$	496,764

(1) Includes fuel recovery revenue.

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

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

~~(4)~~ ~~Includes $0.1 million of electric customer credits.~~

~~(5)~~(3) Includes interdepartmental rents and support services. This revenue is eliminated upon consolidation.

~~(6)~~(4) Realized gains associated with FTRs.

~~(7)~~ ~~Includes $14.9 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.~~

2930


CLECO
CLECO POWER						~~2022~~2023 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, 2023
(THOUSANDS)	CLECO POWER			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	376,978		$	—		$	—	$	376,978
Commercial (1)	230,861			—			—		230,861
Industrial (1)	132,239			—			—		132,239
Other retail (1)	12,770			—			—		12,770
Electric customer credits	(1,362)			—			—		(1,362)
Total retail revenue	751,486			—			—		751,486
Wholesale, net	166,008		(1)	(7,131)		(2)	—		158,877
Transmission, net	43,562			—			—		43,562
Other	15,023			—			—		15,023
Affiliate (3)	4,967			86,669			(91,636)		—
Total revenue from contracts with customers	981,046			79,538			(91,636)		968,948
Revenue unrelated to contracts with customers
Securitization revenue	25,444			—			—		25,444
Other	4,828		(4)	1			1		4,830
Total revenue unrelated to contracts with customers	30,272			1			1		30,274
Operating revenue, net	$	1,011,318		$	79,539		$	(91,635)	$	999,222
(1) Includes fuel recovery revenue. (2) 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.


		FOR THE NINE MONTHS ENDED SEPT. 30, 2021														FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)	(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL		(THOUSANDS)	CLECO POWER			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)	$	348,918		$	—		$	—		$	—	$	348,918	Residential (1)	$	434,259		$	—		$	—	$	434,259
Commercial (1)	Commercial (1)	214,129			—			—			—		214,129		Commercial (1)	274,046			—			—		274,046
Industrial (1)	Industrial (1)	119,497			—			—			—		119,497		Industrial (1)	160,948			—			—		160,948
Other retail (1)	Other retail (1)	11,925			—			—			—		11,925		Other retail (1)	13,639			—			—		13,639

Storm recovery surcharge															Storm recovery surcharge	5,025			—			—		5,025
Electric customer credits	Electric customer credits	(40,794)			—			—			—		(40,794)		Electric customer credits	(6,992)			—			—		(6,992)
Total retail revenue	Total retail revenue	653,675			—			—			—		653,675		Total retail revenue	880,925			—			—		880,925
Wholesale, net	Wholesale, net	182,769		(1)	300,415		(2)	(7,260)		(3)	—		475,924		Wholesale, net	245,231		(1)	(7,260)		(2)	—		237,971
Transmission, net	Transmission, net	44,530		(4)	46,733		(5)	—			(5,752)		85,511		Transmission, net	46,244			—			—		46,244
Other	Other	13,509			—			—			(1)		13,508		Other	16,285			1			—		16,286
Affiliate ~~(6)~~(3)	Affiliate ~~(6)~~(3)	4,259			—			85,392			(89,651)		—		Affiliate ~~(6)~~(3)	4,744			82,728			(87,472)		—
Total revenue from contracts with customers	Total revenue from contracts with customers	898,742			347,148			78,132			(95,404)		1,228,618		Total revenue from contracts with customers	1,193,429			75,469			(87,472)		1,181,426
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	9,953		(7)	52,362		(8)	4			—		62,319		Other	12,715		(4)	4			—		12,719
Total revenue unrelated to contracts with customers	Total revenue unrelated to contracts with customers	9,953			52,362			4			—		62,319		Total revenue unrelated to contracts with customers	12,715			4			—		12,719
Operating revenue, net	Operating revenue, net	$	908,695		$	399,510		$	78,136		$	(95,404)	$	1,290,937	Operating revenue, net	$	1,206,144		$	75,473		$	(87,472)	$	1,194,145

(1) Includes fuel recovery revenue. (2) 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.															(1) Includes fuel recovery revenue. (2) 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.

~~(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.~~

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

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

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

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

~~(8)~~ ~~Includes $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 electric cooperatives, retail customers, and municipalities with remaining durations ranging between 13 and 12 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At September 30, ~~2022,~~2023, Cleco and Cleco Power had ~~$232.4~~$297.7 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.


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q


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~~						~~2022 3RD QUARTER FORM 10-Q~~

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~~Power may be required to ~~recover~~write down 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.~~recoverable. 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, 2022		AT DEC. 31, 2021			(THOUSANDS)	AT SEPT. 30, 2023				AT DEC. 31, 2022
Regulatory assets	Regulatory assets								Regulatory assets
Acadia Unit 1 acquisition costs	Acadia Unit 1 acquisition costs	$	1,834	$	1,913		17.25				Acadia Unit 1 acquisition costs	$	1,728			$	1,807		16.25
Accumulated deferred fuel (1)	Accumulated deferred fuel (1)	81,928		56,826		Various			Accumulated deferred fuel (1)	20,241				57,881				Various
Affordability study	Affordability study	12,060		13,094		8.75			Affordability study	10,682				11,715				7.75
AFUDC equity gross-up	AFUDC equity gross-up	64,251		66,574		Various	(2)		AFUDC equity gross-up	61,155				63,477				Various	(2)
AMI deferred revenue requirement	AMI deferred revenue requirement	1,636		2,045		3.5			AMI deferred revenue requirement	1,090				1,499				2.5
AROs (1)(8)		16,653		15,141
AROs (8)									AROs (8)	19,368				17,218
Bayou Vista to Segura transmission project deferred revenue requirement	Bayou Vista to Segura transmission project deferred revenue requirement	3,765		1,392		0.75			Bayou Vista to Segura transmission project deferred revenue requirement	—				2,510
Coughlin transaction costs	Coughlin transaction costs	823		845		26.75			Coughlin transaction costs	792				815				25.75
COVID-19 executive order (8)	COVID-19 executive order (8)	2,953		2,953					COVID-19 executive order (8)	3,007				2,953
Deferred lignite and mine closure costs (7)									Deferred lignite and mine closure costs (7)	135,624				133,587
Deferred storm restoration costs - Hurricane Delta (6)	Deferred storm restoration costs - Hurricane Delta (6)	21		17,113					Deferred storm restoration costs - Hurricane Delta (6)	88				109
Deferred storm restoration costs - Hurricane Ida (7)		9,350		37,617
Deferred storm restoration costs - Hurricane Ida									Deferred storm restoration costs - Hurricane Ida	—				9,409
Deferred storm restoration costs - Hurricane Laura (6)	Deferred storm restoration costs - Hurricane Laura (6)	90		54,282					Deferred storm restoration costs - Hurricane Laura (6)	367				457
Deferred storm restoration costs - Hurricane Zeta (6)	Deferred storm restoration costs - Hurricane Zeta (6)	2		3,296					Deferred storm restoration costs - Hurricane Zeta (6)	7				9
Deferred storm restoration costs - Winter Storms Uri & Viola		—		1,912
Dolet Hills Power Station closure costs (8)		147,021		145,844

Deferred taxes, net									Deferred taxes, net	45,463				8,803				Various
Dolet Hills Power Station closure costs (7)									Dolet Hills Power Station closure costs (7)	147,306				147,082

Energy efficiency	Energy efficiency	588		1,645		0.5			Energy efficiency	—				235
Financing costs (1)	Financing costs (1)	6,549		6,826		Various	(3)		Financing costs (1)	6,179				6,456				Various	(3)
Interest costs	Interest costs	3,272		3,459		Various	(2)		Interest costs	3,023				3,210				Various	(2)
Lignite Mine closure costs (8)		136,071		136,980
Madison Unit 3 property taxes (9)		13,028		8,362
Madison Unit 3 property taxes									Madison Unit 3 property taxes	13,139				13,038				Various	(9)
Non-service cost of postretirement benefits	Non-service cost of postretirement benefits	14,472		12,950		Various	(2)		Non-service cost of postretirement benefits	14,692				14,810				Various	(2)
Other assets		8,792		11,224		Various
Other									Other	13,345				14,114				Various
Postretirement costs	Postretirement costs	108,524		117,773		Various	(4)		Postretirement costs	47,317				47,317				Various	(4)
Production operations and maintenance expenses	Production operations and maintenance expenses	9,017		11,058		Various	(5)		Production operations and maintenance expenses	8,012				10,443				Various	(5)
Rodemacher Unit 2 deferred costs (8)	Rodemacher Unit 2 deferred costs (8)	11,210		6,931					Rodemacher Unit 2 deferred costs (8)	17,317				12,645

St. Mary Clean Energy Center	St. Mary Clean Energy Center	8,607		6,089		2.75			St. Mary Clean Energy Center	3,045				4,350				1.75

Training costs	Training costs	5,813		5,929		37.25			Training costs	5,657				5,774				36.25
Tree trimming costs	Tree trimming costs	7,056		9,092		2.5			Tree trimming costs	4,336				6,377				1.5
Total regulatory assets	Total regulatory assets	675,386		759,165					Total regulatory assets	582,980				598,100
Regulatory liabilities	Regulatory liabilities								Regulatory liabilities

Deferred taxes, net	Deferred taxes, net	(49,099)		(95,544)		Various			Deferred taxes, net	(31,215)				(42,890)				Various

Storm reserves	Storm reserves	(118,002)		—					Storm reserves	(106,789)				(118,762)
Total regulatory liabilities	Total regulatory liabilities	(167,101)		(95,544)					Total regulatory liabilities	(138,004)				(161,652)
Total regulatory assets, net	Total regulatory assets, net	$	508,285	$	663,621				Total regulatory assets, net	$	444,976			$	436,448
(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, 2023, and December 31, 2022. 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. The storm recovery surcharge became effective on September 1, 2022. (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) Beginning July 1, 2021, property taxes paid for the year ended December 31, are being amortized over the subsequent 12 months beginning July 1.									(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 2023, and December 31, 2022. 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. The storm recovery surcharge became effective on September 1, 2022. (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) Beginning July 1, 2021, property taxes paid for the year ended December 31, are being amortized over the subsequent 12 months beginning July 1.

3132


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Total Cleco Power regulatory assets, net	Total Cleco Power regulatory assets, net	$	508,285	$	663,621	Total Cleco Power regulatory assets, net	$	444,976	$	436,448
2016 Merger adjustments *	2016 Merger adjustments *					2016 Merger adjustments*
Fair value of long-term debt	Fair value of long-term debt	106,599		112,150		Fair value of long-term debt	99,196		104,748
Postretirement costs	Postretirement costs	11,933		13,424		Postretirement costs	9,945		11,436
Financing costs	Financing costs	6,990		7,248		Financing costs	6,646		6,904
Debt issuance costs	Debt issuance costs	4,671		4,920		Debt issuance costs	4,337		4,587
Total Cleco regulatory assets, net	Total Cleco regulatory assets, net	$	638,478	$	801,363	Total Cleco regulatory assets, net	$	565,100	$	564,123

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

Accumulated Deferred Fuel

Cleco Power is allowed to recover the cost of fuel used for electric generation and power purchased for utility customers through the LPSC established FAC or related wholesale contract provisions, which enable Cleco Power to pass on to its customers substantially all such expenses.

At September 30, 2023, Accumulated deferred fuel decreased $37.4 million as a result of lower fuel costs.

Deferred Storm Restoration Costs and Storm Reserves

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.At December 31, 2022, Cleco Power ~~established~~had $15.5 million recorded for the Hurricane Ida storm reserve and a ~~separate~~ regulatory asset ~~to track and defer~~of $9.4 million for non-capital expenses associated with ~~each corresponding storm, as approved by the 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~~Hurricane Ida 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 are currently under a prudency review by the LPSC. On September 20, 2023, the LPSC approved a settlement allowing Cleco Power ~~is unable~~ to ~~determine~~withdraw the ~~outcome or timing of such review. For more information on the 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 andremaining unrecovered Hurricane Ida storm restoration costs, ~~were established. Upon securitization, Cleco Power withdrew $79.6~~plus a carrying charge through September 2023, totaling $10.3 million from the ~~LPSC approved~~ Hurricane Ida storm reserve. ~~At September 30, 2022, Cleco Power had a~~The settlement also approved the transfer of the remaining balance of ~~$15.4 million related to~~ the Hurricane Ida storm reserve ~~with~~to 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~~restricted 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 — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”


Note 6 — Fair Value Accounting ~~and Financial~~ Instruments

~~The amounts reflected~~Fair value is a market-based measurement based on assumptions market participants would use in pricing an asset or a liability. Cleco’s valuation techniques maximize the use of observable market-based inputs and minimize the use of unobservable inputs. Credit risk of Cleco ~~Power’s Condensed Consolidated Balance Sheets at September 30, 2022,~~ and ~~December 31, 2021, for cash equivalents, restricted cash equivalents, accounts receivable, other accounts receivable, short-term debt,~~its counterparties is incorporated in the valuation of assets and ~~accounts payable approximate~~liabilities through the use of credit reserves.

Cleco utilizes a three-tier fair value ~~because~~hierarchy that prioritizes inputs that may be used to measure fair value. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities

and the lowest priority to unobservable inputs. In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their ~~short-term nature.~~ entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. Significant increases or decreases in any of those inputs in isolation could result in a significantly different fair value measurement. Cleco classifies fair value balances based on the fair value hierarchy defined as follows:

•Level 1 — observable inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that Cleco can observe as of the measurement date.

•Level 2 — observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 — unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

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. For information on the impairment related to discontinued operations, see Note 3 — “Discontinued Operations.”

Fair Value Measurements on a Recurring Basis

The amounts reflected in Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022, 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.

The following tables disclose the fair value of financial assets and liabilities measured on a recurring basis on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. These amounts are presented on a gross basis.


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q


Cleco
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT SEPT. 30, 2023		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Short-term investments	$	290,974	$	290,974	$	—	$	—	$	179,241	$	179,241	$	—	$	—
FTRs	4,814		—		—		4,814		2,570		—		—		2,570
Natural gas derivatives	32,379		—		32,379		—		105,646		—		105,646		—
Total assets	$	328,167	$	290,974	$	32,379	$	4,814	$	287,457	$	179,241	$	105,646	$	2,570
Liability description
FTRs	$	671	$	—	$	—	$	671	$	294	$	—	$	—	$	294
Natural gas derivatives	4,550		—		4,550		—		6,980		—		6,980		—
Total liabilities	$	5,221	$	—	$	4,550	$	671	$	7,274	$	—	$	6,980	$	294


Cleco Power
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT SEPT. 30, 2023		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Short-term investments	$	217,384	$	217,384	$	—	$	—	$	139,752	$	139,752	$	—	$	—
FTRs	4,814		—		—		4,814		2,570		—		—		2,570
Natural gas derivatives	166		—		166		—		—		—		—		—
Total assets	$	222,364	$	217,384	$	166	$	4,814	$	142,322	$	139,752	$	—	$	2,570
Liability description
FTRs	$	671	$	—	$	—	$	671	$	294	$	—	$	—	$	294
Natural gas derivatives	3,938		—		3,938		—		4,570		—		4,570		—
Total liabilities	$	4,609	$	—	$	3,938	$	671	$	4,864	$	—	$	4,570	$	294

Cleco has consistently applied the Level 2 and Level 3 fair value techniques between comparative fiscal periods. During the nine months ended September 30, 2023, and the year ended December 31, 2022, Cleco did not experience any transfers into or out of Level 3 of the fair value hierarchy.

Short-term Investments

At September 30, 2023, Cleco and Cleco Power had short-term investments in money market funds and treasury bills that have a maturity of three months or less when purchased. At December 31, 2022, Cleco and Cleco Power had short-term investments in money market funds that had a maturity of three months or less when purchased.

The following tables present the short-term investments as recorded on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022:


Cleco
(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Cash and cash equivalents	$	172,601	$	46,279
Current restricted cash and cash equivalents	$	6,356	$	23,548
Non-current restricted cash and cash equivalents	$	112,017	$	109,414


Cleco Power
(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Cash and cash equivalents	$	99,034	$	6,813
Current restricted cash and cash equivalents	$	6,356	$	23,548
Non-current restricted cash and cash equivalents	$	111,994	$	109,391

FTRs

FTRs are financial instruments used to provide a financial hedge to manage the risk of transmission congestion charges between MISO nodes in MISO’s Day-Ahead Energy Market. Cleco is awarded and/or purchases FTRs in auctions facilitated by MISO. FTRs are derivatives not designated as hedging instruments for accounting purposes.

FTRs are valued using MISO’s monthly auction prices as a price index reference (Level 3). Unrealized gains or losses are deferred as a component of Accumulated deferred fuel on the balance sheet in accordance with regulatory policy, and at settlement, realized gains or losses are included in Cleco Power’s FAC and reflected on customers’ bills as a component of the fuel charge.

The following table summarizes 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
CLECO POWER						2023 3RD QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
Balances, beginning of period	$	6,459	$	10,138	$	2,276	$	4,918
Unrealized (losses) gains*	114		(1,363)		(186)		189
Purchases	12		168		8,035		7,037
Settlements	(2,442)		(4,205)		(5,982)		(7,406)
Balances, end of period	$	4,143	$	4,738	$	4,143	$	4,738
* Unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets.

The following table quantifies the significant unobservable inputs used in developing the fair value of Level 3 positions for Cleco and Cleco Power as of September 30, 2023, and December 31, 2022:


	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Sept. 30, 2023	$	4,814	$	671	RTO auction pricing	FTR price - per MWh	$	(5.11)	$	7.02
FTRs at Dec. 31, 2022	$	2,570	$	294	RTO auction pricing	FTR price - per MWh	$	(5.11)	$	13.65

Natural Gas Derivatives

Cleco may enter into physical and financial fixed price or options contracts that financially settle or are physically delivered at a future date. Management has not elected to apply hedge accounting to these contracts as allowed under applicable accounting standards. Cleco Power’s natural gas derivative contracts are marked-to-market with the resulting unrealized gain or loss recorded as a component of Accumulated deferred fuel on the balance sheet. At settlement, realized gains or losses are included in Cleco Power’s FAC and reflected on customer’s bills as a component of the fuel charge. Cleco Cajun’s unrealized gains or losses as well as realized gains or losses at settlement are recorded on the income statements as a component of fuel expense.

Fair Value Measurements on a Nonrecurring Basis

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


Cleco	Cleco									Cleco
		AT SEPT. 30, 2022				AT DEC. 31, 2021					AT SEPT. 30, 2023				AT DEC. 31, 2022
(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	$	3,577,030	$	3,284,781	$	3,482,405	$	3,752,220	Long-term debt	$	3,467,666	$	3,064,760	$	3,482,556	$	3,180,208

* The carrying value of long-term debt does not include deferred issuance costs of ~~$16.9~~$14.4 million at
September 30, ~~2022,~~2023, and ~~$13.2~~$16.2 million at December 31, ~~2021.~~2022.


Cleco Power	Cleco Power									Cleco Power
		AT SEPT. 30, 2022				AT DEC. 31, 2021					AT SEPT. 30, 2023				AT DEC. 31, 2022
(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	$	1,920,431	$	1,864,342	$	1,820,254	$	2,085,944	Long-term debt	$	1,886,170	$	1,750,841	$	1,895,508	$	1,825,192

* The carrying value of long-term debt does not include deferred issuance costs of ~~$12.6~~$11.2 million at
September 30, ~~2022,~~2023, and ~~$7.9~~$12.3 million at December 31, ~~2021.~~2022.

In order to fund capital requirements, Cleco ~~issues~~may issue 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 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, 2022, and the year ended December 31, 2021, Cleco did not experience any transfers into or out of Level 3 of the fair value hierarchy.

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

Cleco
FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS) AT 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~~						~~2022 3RD QUARTER FORM 10-Q~~

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

Cleco
FOR THE THREE MONTHS ENDED 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 Power
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2022 2021 2022 2021
Beginning balance $ 10,138 $ 5,990 $ 4,918 $ 3,216
Unrealized (losses) gains* (1,363) 1,196 189 545
Purchases 168 619 7,037 9,236
Settlements (4,205) (3,107) (7,406) (8,299)
Ending balance $ 4,738 $ 4,698 $ 4,738 $ 4,698
* Unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

Cleco 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

~~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, 2022, and December 31, 2021:~~

Cleco
FAIR VALUE VALUATION TECHNIQUE
SIGNIFICANT
UNOBSERVABLE INPUTS
FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE) ASSETS LIABILITIES LOW HIGH
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 $ 6,977 $ 834 RTO auction pricing FTR price - per MWh $ (3.94) $ 9.25

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

Concentrations of Credit Risk

At September 30, 2023, and December 31, 2022, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents and restricted cash equivalents. The following tables present the money market funds in cash and cash equivalents and restricted cash and cash equivalents as recorded on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, 2022, and December 31, 2021:

Cleco
(THOUSANDS) AT SEPT. 30, 2022 AT DEC. 31, 2021
Cash and cash equivalents $ 94,713 $ 145,011
Current restricted cash and cash equivalents $ 14,902 $ —
Non-current restricted cash and cash equivalents $ 108,644 $ 22

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~~short-term investments 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 1 money market funds asset consists of a single class.~~required. 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. 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~~bilateral transactions and contracts that Cleco has entered into or may enter into in the future. The amount of credit support ~~that Cleco~~required may ~~be required to provide at any point in the future is dependent~~change based on ~~the amount of the initial contract,~~margining formulas, changes in the market price, changes in open contracts, changes in the amounts counterparties owe to 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~~agency ratings, or ~~decrease.~~liquidity ratios.

~~Commodity Contracts~~

Note 7 — Derivative Instruments

In the normal course of business, Cleco utilizes derivative instruments, such as natural gas derivatives and FTRs, to mitigate volatility of overall fuel and purchased power costs.

Cleco has not elected to designate any of its current instruments as an accounting hedge. At September 30, 2023, there was no collateral posted with or received from counterparties that was netted on Cleco’s and Cleco Power’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.~~Sheets. The following ~~tables present~~table presents the fair values of derivative instruments and their ~~respective line items as recorded on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, 2022, and December 31, 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						~~2022~~2023 3RD QUARTER FORM 10-Q

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

*respective line items as recorded on Cleco’s and 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~~Power’s Condensed Consolidated Balance Sheets at September 30, ~~2022, of less than $0.1 million.~~2023, and at December 31, 2022:

~~At September 30, 2022, cash collateral received from counterparties and held~~


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
		AT SEPT. 30, 2023		AT DEC. 31, 2022
						GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	BALANCE SHEET LINE ITEM	NET ASSET (LIABILITY) ON THE BALANCE SHEET		GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	4,814	$	2,570	$	—	$	2,570	$	—	$	2,570
Current	Energy risk management liabilities	(671)		(294)		—		(294)		—		(294)
Natural gas derivatives
Current	Energy risk management assets	22,293		53,251		(6,500)		46,751		(32,578)		14,173
Non-current	Energy risk management assets	10,086		58,895		—		58,895		(20,422)		38,473
Current	Energy risk management liabilities	(4,550)		(6,980)		—		(6,980)		—		(6,980)
Commodity-related contracts, net		$	31,972	$	107,442	$	(6,500)	$	100,942	$	(53,000)	$	47,942

(1) Represents letters of credit by ~~Cleco was $36.4 million, of which~~counterparties.


Cleco Power
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
(THOUSANDS)	BALANCE SHEET LINE ITEM	AT SEPT. 30, 2023		AT DEC. 31, 2022
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	4,814	$	2,570
Current	Energy risk management liabilities	(671)		(294)
Natural gas derivatives
Current	Energy risk management assets	85		—
Non-current	Energy risk management assets	81		—
Current	Energy risk management liabilities	(3,938)		(4,570)
Commodity-related contracts, net		$	371	$	(2,294)

$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, 2021, there was no cash collateral posted with or received from counterparties that was netted on Cleco’s Condensed Consolidated Balance Sheet.

The following ~~tables present~~table presents the effect of derivatives not designated as hedging instruments on Cleco’s and Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2022,~~2023, and ~~2021:~~2022:


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	2022		2021			2022		2021			(THOUSANDS)	INCOME STATEMENT LINE ITEM	2023		2022		2023		2022
Commodity-related contracts	Commodity-related contracts												Commodity-related contracts
FTRs(1)	FTRs(1)	Electric operations	$	5,297	$	1,959		$	12,960	$	11,167		FTRs(1)	Electric operations	$	2,227	$	5,297	$	4,920	$	12,960
FTRs(1)	FTRs(1)	Purchased power	2,137		(770)		(2)	(7,829)		(9,742)		(2)	FTRs(1)	Purchased power	(1,690)		(2,575)		(3,786)		(5,658)
Natural gas derivatives		Fuel used for electric generation	84,377		107,687			250,264		165,584
Natural gas derivatives(2) (3)													Natural gas derivatives(2) (3)	Fuel used for electric generation	(10,250)		84,377		(110,506)		250,264
Total~~(3)~~	Total~~(3)~~		$	91,811	$	108,876		$	255,395	$	167,009		Total~~(3)~~		$	(9,713)	$	87,099	$	(109,372)	$	257,566

(1) For the three and nine months ended September 30, ~~2022,~~2023, unrealized gains (losses) ~~gains~~ associated with FTRs ~~for Cleco Power~~ of ~~$(1.4)~~$0.1 million and ~~$0.2~~$(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, 2022, unrealized (losses) gains associated with FTRs of $(1.4) million and $0.2 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

(2) For the three and nine months ended September 30, ~~2021,~~2023, unrealized (losses) gains associated with ~~FTRs~~natural gas derivatives for Cleco Power of ~~$1.2~~$(4.0) million and ~~$0.5~~$0.8 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

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

~~The following tables present~~(3) For the ~~volume~~three and nine months ended September 30, 2023, realized losses associated with natural gas derivatives for Cleco Power of ~~commodity-related derivative contracts outstanding at~~$(0.3) million were reported through Accumulated deferred fuel on the balance sheet. For the three and nine months ended September 30, 2022, ~~and December 31, 2021, for~~ Cleco ~~and Cleco Power:~~

Power had no realized gains (losses) associated with natural gas derivatives reported through Accumulated deferred fuel on the balance sheet.

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						~~2022~~2023 3RD QUARTER FORM 10-Q


~~Note 7 — Debt~~


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	2023		2022		2023		2022
Commodity-related contracts
FTRs(1)	Electric operations	$	2,227	$	5,297	$	4,920	$	12,960
FTRs(1)	Purchased power	(1,690)		(2,575)		(3,786)		(5,658)
Natural gas derivatives(2) (3)	Fuel used for electric generation	(2,053)		—		(19,876)		—
Total		$	(1,516)	$	2,722	$	(18,742)	$	7,302

At(1) For the three and nine months ended September 30, 2023, unrealized gains (losses) associated with FTRs of $0.1 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, 2022, ~~Cleco Holdings had $10.0~~unrealized (losses) gains associated with FTRs of $(1.4) million and $0.2 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

(2) For the three and nine months ended September 30, 2023, unrealized (losses) gains associated with natural gas derivatives of ~~outstanding borrowings under its $175.0~~$(4.0) million ~~revolving credit facility at an all-in interest rate of 4.195%. At~~and $0.8 million, respectively, were reported through Accumulated deferred fuel on the balance sheet. For the three and nine months ended September 30, 2022, ~~the borrowing costs for amounts drawn under Cleco Holdings’ revolving credit facility~~unrealized losses associated with natural gas derivatives of less than $0.1 million were ~~equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275% paid~~reported through Accumulated deferred fuel on the ~~unused portion of~~balance sheet.

(3) For the ~~facility.~~

In May 2022, Cleco Holdings’ $165.0 million senior notes due in May 2023 became due within one year. This amount is reflected in long-term debt due within one year on Cleco’s Condensed Consolidated Balance Sheet atthree and nine months ended September 30, ~~2022.~~

At2023, realized losses associated with natural gas derivatives of $(0.3) million were reported through Accumulated deferred fuel on the balance sheet. For the three and nine months ended September 30, 2022, Cleco Power had ~~$77.0 million~~no realized gains (losses) associated with natural gas derivatives reported through Accumulated deferred fuel on the balance sheet.

The following table presents the volume of commodity-related derivative contracts outstanding ~~borrowings under its $300.0 million revolving credit facility~~ at ~~a weighted average all-in interest rate of 4.33%. At~~ September 30, 2023, and December 31, 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.~~

~~On June 22, 2022,~~ Cleco Securitization I issued $425.0 million aggregate principal amount of its senior secured storm recovery bonds. The storm recovery bonds were issued in two tranches. One tranche of $125.0 million aggregate principal amount was issued with an interest rate of 4.016% and 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 bonds are governed by an indenture between Cleco Securitization I and the indenture trustee. The indenture contains certain covenants that restrict Cleco Securitization I’s ability to sell, transfer, convey, exchange, or otherwise dispose of its 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.”~~Power:

~~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.~~

Cleco

UNIT OF MEASURE

TOTAL VOLUME OUTSTANDING

(THOUSAND)

AT SEPT. 30, 2023

AT DEC. 31, 2022

Commodity-related contracts

FTRs

MWh

15,326

9,085

Natural gas derivatives

MMBtus

71,935

85,350

Cleco Power

UNIT OF MEASURE

TOTAL VOLUME OUTSTANDING

(THOUSAND)

AT SEPT. 30, 2023

AT DEC. 31, 2022

Commodity-related contracts

FTRs

MWh

15,326

9,085

Natural gas derivatives

MMBtus

26,315

4,840


Note 8 — Debt

On February 17, 2023, Cleco Holdings and Cleco Power amended their respective revolving credit facilities and bank term loans to transition the benchmark interest rate from LIBOR to SOFR.

On May 1, 2023, Cleco Holdings amended certain terms of the supplemental indenture governing its $165.0 million senior notes due in 2023. As a result, the interest rate of the senior notes changed to a floating interest rate equal to SOFR plus 1.725% and the maturity date was extended from May 1, 2023, to May 1, 2025.

At September 30, 2023, and December 31, 2022, Cleco’s long-term debt and finance leases outstanding due within one year was $372.2 million and $340.9 million, respectively. The increase of $31.4 million is primarily due to the reclassification of $125.0 million of Cleco Power’s bank term loan due in May 2024, $66.7 million of Cleco Holdings’ bank term loan due in May 2024, and an additional $4.9 million of scheduled principal payments on Cleco Securitization I’s storm recovery

bonds. These increases are partially offset by the reclassification of Cleco Holdings’ $165.0 million senior notes due in 2023 to long-term debt as a result of the extension of the maturity date of such senior notes to May 1, 2025.

At September 30, 2023, and December 31, 2022, Cleco Power’s long-term debt and finance leases outstanding due within one year was $240.3 million and $110.3 million, respectively. The increase of $129.9 million is primarily due to the reclassification of Cleco Power’s $125.0 million bank term loan due in May 2024 and an additional $4.9 million of scheduled principal payments on Cleco Securitization I’s storm recovery bonds.


Note 9 — 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, ~~2021,~~2022, management estimates that nopension contributions totaling $74.5 million will be required ~~until 2026, at which time $5.4~~through 2027. Cleco expects to make a $25.7 million ofminimum required contribution to the pension ~~contributions are expected.~~plan in 2024. Cleco ~~has~~is not ~~made, and does not expect~~required to make any contributions to the pension plan in ~~2022.~~2023.

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’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, ~~2022,~~2023, and ~~2021~~2022 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						~~2022~~2023 3RD QUARTER FORM 10-Q


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
Components of periodic benefit costs
Service cost	$	1,173	$	2,043	$	365	$	546
Interest cost	6,606		4,960		566		368
Expected return on plan assets	(7,386)		(6,177)		—		—
Amortizations

Net loss (gain)	—		3,083		(13)		298
Net periodic benefit cost	$	393	$	3,909	$	918	$	1,212


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE NINE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
Components of periodic benefit costs
Service cost	$	3,520	$	6,130	$	1,094	$	1,639
Interest cost	19,817		14,881		1,698		1,103
Expected return on plan assets	(22,158)		(18,531)		—		—
Amortizations

Net loss (gain)	—		9,252		(39)		894
Net periodic benefit cost	$	1,179	$	11,732	$	2,753	$	3,636

Effective September 30, 2021, the pension plan was amended to offer an enhanced pension benefit to certain employees participating in the plan that elected to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced pension benefits 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 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 ninemonths ended September 30, ~~2022,~~2023, was ~~$0.8~~$0.4 million and ~~$2.4~~$1.2 million, respectively. The expense of the pension plan related to Cleco’s other subsidiaries for the three and ninemonths ended September 30, ~~2021,~~2022, was ~~$1.8~~$0.7 million and ~~$3.6~~$2.1 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, ~~2022,~~2023, was ~~$1.1~~$0.9 million and ~~$3.3~~$2.6 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, ~~2021,~~2022, was ~~$1.2~~$1.1 million and ~~$3.6~~$3.3 million, respectively. The current and non-current portions of the Other Benefits liability for Cleco and Cleco Power at September 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current	$	5,181	$	5,181	Current	$	5,017	$	5,017
Non-current	Non-current	$	48,829	$	50,093	Non-current	$	37,236	$	38,366


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current	$	4,432	$	4,432	Current	$	4,310	$	4,310
Non-current	Non-current	$	38,344	$	39,315	Non-current	$	29,110	$	30,082

SERP

Certain Cleco officers are covered by SERP. Cleco does not fund the SERP liability, but instead pays for current benefits out

of cash available of the respective company of the employed officer. Because the SERP is a non-qualified plan, Cleco has 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 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 may be used to reimburse Cleco for benefits paid from general funds, pay the SERP participants’ death benefits, or pay future SERP payments. Market conditions could have a significant impact on the cash surrender value of these life insurance policies. 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. 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’s and Cleco Power’s Condensed Consolidated Statements of Income. The components of the net periodic benefit cost related to SERP for the three and ninemonths ended September 30, ~~2022,~~2023, and ~~2021~~2022 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)	2022		2021		2022		2021		(THOUSANDS)	2023		2022		2023		2022
Components of periodic benefit costs	Components of periodic benefit costs									Components of periodic benefit costs
Service cost	Service cost	$	57	$	59	$	170	$	174	Service cost	$	35	$	57	$	106	$	170
Interest cost	Interest cost	670		634		2,009		1,903		Interest cost	901		670		2,703		2,009
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		262		307		787		921
Net (gain) loss										Net (gain) loss	(16)		262		(47)		787
Net periodic benefit cost	Net periodic benefit cost	$	935	$	946	$	2,805	$	2,837	Net periodic benefit cost	$	866	$	935	$	2,601	$	2,805

The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and ninemonths ended September 30, ~~2022,~~2023, was $0.1 million and $0.4 million, respectively. The expense related to SERP


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and ninemonths ended September 30, ~~2021,~~2022, was $0.1 million and $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, ~~2022,~~2023, and December 31, ~~2021,~~2022, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current	$	4,654	$	4,654	Current	$	4,713	$	4,713
Non-current	Non-current	$	86,210	$	88,523	Non-current	$	63,270	$	63,714


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Current	Current	$	679	$	679	Current	$	672	$	672
Non-current	Non-current	$	12,546	$	12,909	Non-current	$	8,817	$	9,087

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 ninemonths ended September 30, ~~2022,~~2023, and ~~2021~~2022 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)	2022		2021		2022		2021		(THOUSANDS)	2023		2022		2023		2022
401(k) Plan expense	401(k) Plan expense	$	2,180	$	2,512	$	6,602	$	7,391	401(k) Plan expense	$	1,741	$	1,838	$	5,821	$	5,540

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 ninemonths ended September 30, ~~2022,~~2023, and ~~2021~~2022 was as follows:

FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS
ENDED SEPT. 30,
(THOUSANDS) 2022 2021 2022 2021
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 elected to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced 401(k) benefits 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.


	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
401(k) Plan expense	$	592	$	643	$	2,164	$	2,092


Note 910 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates from continuing operations for Cleco and Cleco Power for the three and ninemonths ended September 30, ~~2022,~~2023, and ~~2021~~2022:


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,
		2022		2021		2022		2021			2023		2022		2023		2022
Effective tax rate	Effective tax rate	7.6	%	20.3	%	11.6	%	12.4	%	Effective tax rate	(470.9)	%	9.3	%	1,006.9	%	9.8	%


Cleco Power
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
	2023		2022		2023		2022
Effective tax rate	(0.6)	%	4.4	%	2.6	%	4.1	%

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

For Cleco, 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 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 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,~~2023, and 2022, were different than the federal statutory rate primarily due to the ~~flow through of tax benefits, including AFUDC; the~~ amortization of excess ~~ADIT;~~ADIT, the adjustment to record tax expense at the projected annual effective tax ~~rate;~~rate, adjustments for tax returns as ~~filed;~~filed, flow through of state tax benefits, permanent deductions, 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,~~2023, and ~~2021,~~2022, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At September 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions.

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 ~~2019,~~ 2020, 2021, and ~~2021,~~2022, the ~~IRS has completed its review of tax year 2019, and this tax 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. These tax returns were filed consistent with the IRS’s review. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year and the Compliance Assurance Maintenance phase for the 2023 tax year. In this maintenance phase, the IRS typically will, at its discretion, reduce the level of its review of the tax year relative to the regular Compliance Assurance Process phase.

The state income tax years ~~2019,~~ 2020, 2021, and ~~2021~~2022 remain 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, ~~2022,~~2023, and ~~2021,~~2022, 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 in employer payroll tax payments for the period March 27, 2020, through December 31, 2020, which will be paid by December 31, 2022.


Note 1011 — Segment Disclosures ~~about Segments~~

~~Cleco’s reportable segments~~Segment disclosures are based on ~~its~~Cleco’s method of internal reporting, which disaggregates business units by ~~its~~ first-tier subsidiary. The financial information for historical periods provided in this report has been recast to reflect the presentation of the Cleco Cajun Sale Group as discontinued operations within the Other column. Cleco’s ~~reportable segments are~~segment structure and its allocation of corporate expenses were updated to reflect how management measures performance and allocates resources. Cleco ~~Power and Cleco Cajun.~~has recast data from prior periods to reflect this change to conform to the current year presentation. For more information, see Note 3 — “Discontinued Operations.”

~~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~~2023 3RD QUARTER FORM 10-Q

Cleco Power, Cleco Power’s Boards of Managers. The reportable segment prepares budgets that are presented to and approved by Cleco Holdings’ and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The column shown as Other in the following tables includes the holding company, a shared services subsidiary, ~~and~~ an investment ~~subsidiary. There were no changes to Cleco’s existing reportable segments.~~subsidiary, natural gas derivatives at Cleco Cajun, and discontinued operations.

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.~~segment. Management evaluates the

performance of Cleco’s ~~segments~~segment and allocates resources to ~~them~~it 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.~~Merger. 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.~~services.

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.


Segment Information
FOR THE THREE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)	CLECO POWER
Revenue
Electric operations	$	364,161
Other operations	31,984
Affiliate revenue	1,645
Electric customer credits	24
Operating revenue, net	$	397,814
Net income	$	90,914
Add: Depreciation and amortization	48,012
Less: Interest income	1,215
Add: Interest charges	24,921
Add: Federal and state income tax benefit	(552)



EBITDA	$	162,080


2022 (THOUSANDS)		TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
FOR THE THREE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)											FOR THE THREE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)	CLECO POWER		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue										Revenue
Electric operations	Electric operations	$	621,920	$	(2,420)		$	—	$	619,500	Electric operations	$	364,161	$	(2,323)		$	—	$	361,838
Other operations	Other operations	64,330		1			(2,560)		61,771		Other operations	31,984		—			—		31,984
Affiliate revenue	Affiliate revenue	1,657		29,583			(31,240)		—		Affiliate revenue	1,645		30,253			(31,898)		—
Electric customer credits	Electric customer credits	(6,728)		—			—		(6,728)		Electric customer credits	24		—			—		24
Operating revenue, net	Operating revenue, net	$	681,179	$	27,164		$	(33,800)	$	674,543	Operating revenue, net	$	397,814	$	27,930		$	(31,898)	$	393,846
Depreciation and amortization	Depreciation and amortization	$	57,704	$	4,375	(1)	$	—	$	62,079	Depreciation and amortization	$	48,012	$	4,365	(1)	$	1	$	52,378
Interest income	Interest income	$	2,198	$	58		$	(18)	$	2,238	Interest income	$	1,215	$	81		$	(13)	$	1,283
Interest charges	Interest charges	$	24,059	$	15,850		$	(19)	$	39,890	Interest charges	$	24,921	$	17,125		$	(12)	$	42,034

Federal and state income tax expense (benefit)	Federal and state income tax expense (benefit)	$	16,323	$	(10,712)		$	—	$	5,611	Federal and state income tax expense (benefit)	$	(552)	$	(245,942)		$	—	$	(246,494)
Net income (loss)		$	80,474	$	(12,103)		$	1	$	68,372
Income from continuing operations, net of income taxes											Income from continuing operations, net of income taxes	$	90,914	$	207,927		$	—	$	298,841
Loss from discontinued operations, net of income taxes											Loss from discontinued operations, net of income taxes	—		(142,729)			—		(142,729)
Net income											Net income	$	90,914	$	65,198		$	—	$	156,112

(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.
(1) Includes $2.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.											(1) Includes $2.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.

2021 (THOUSANDS)
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.


FOR THE THREE MONTHS ENDED SEPT. 30, 2022 (THOUSANDS)	CLECO POWER
Revenue
Electric operations	$	481,153
Other operations	24,757
Affiliate revenue	1,657
Electric customer credits	(6,728)
Operating revenue, net	$	500,839
Net income	$	40,733
Add: Depreciation and amortization	44,368
Less: Interest income	1,726
Add: Interest charges	23,840
Add: Federal and state income tax expense	1,862
EBITDA	$	109,077


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q


2021 (THOUSANDS)		TOTAL SEGMENTS		OTHER			ELIMINATIONS			TOTAL
FOR THE THREE MONTHS ENDED SEPT. 30, 2022 (THOUSANDS)												FOR THE THREE MONTHS ENDED SEPT. 30, 2022 (THOUSANDS)	CLECO POWER		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue											Revenue
Electric operations	Electric operations	$	464,584	$	(2,420)		$	—		$	462,164	Electric operations	$	481,153	$	(2,420)		$	—	$	478,733
Other operations	Other operations	57,937		1			(2,217)			55,721		Other operations	24,757		1			1		24,759
Affiliate revenue	Affiliate revenue	1,380		32,116			(33,496)			—		Affiliate revenue	1,657		29,583			(31,240)		—
Electric customer credits	Electric customer credits	(691)		—			—			(691)		Electric customer credits	(6,728)		—			—		(6,728)
Operating revenue, net	Operating revenue, net	$	523,210	$	29,697		$	(35,713)		$	517,194	Operating revenue, net	$	500,839	$	27,164		$	(31,239)	$	496,764
Depreciation and amortization	Depreciation and amortization	$	56,149	$	8,189	(1)	$	—		$	64,338	Depreciation and amortization	$	44,368	$	4,375	(1)	$	—	$	48,743
Interest income	Interest income	$	940	$	43		$	(42)		$	941	Interest income	$	1,726	$	58		$	(18)	$	1,766
Interest charges	Interest charges	$	19,626	$	15,044		$	(41)		$	34,629	Interest charges	$	23,840	$	13,884		$	(18)	$	37,706
Federal and state income tax expense (benefit)		$	30,436	$	133		$	—		$	30,569
Net income (loss)		$	143,305	$	(23,396)		$	1		$	119,910
Federal and state income tax expense												Federal and state income tax expense	$	1,862	$	7,358		$	—	$	9,220
Income from continuing operations, net of income taxes												Income from continuing operations, net of income taxes	$	40,733	$	49,499		$	—	$	90,232
Loss from discontinued operations, net of income taxes												Loss from discontinued operations, net of income taxes	—		(21,860)			—		(21,860)
Net income												Net income	$	40,733	$	27,639		$	—	$	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.	(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.								(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.


Segment Information
FOR THE NINE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)	CLECO POWER
Revenue
Electric operations	$	923,685
Other operations	84,028
Affiliate revenue	4,967
Electric customer credits	(1,362)
Operating revenue, net	$	1,011,318
Net income	$	157,170
Add: Depreciation and amortization	142,467
Less: Interest income	2,979
Add: Interest charges	73,442
Add: Federal and state income tax expense	4,185
EBITDA	$	374,285


2022 (THOUSANDS)		TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
FOR THE NINE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)											FOR THE NINE MONTHS ENDED SEPT. 30, 2023 (THOUSANDS)	CLECO POWER		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue										Revenue
Electric operations	Electric operations	$	1,516,353	$	(7,260)		$	—	$	1,509,093	Electric operations	$	923,685	$	(7,131)		$	—	$	916,554
Other operations	Other operations	174,425		5			(7,388)		167,042		Other operations	84,028		1			1		84,030
Affiliate revenue	Affiliate revenue	4,744		82,728			(87,472)		—		Affiliate revenue	4,967		86,669			(91,636)		—
Electric customer credits	Electric customer credits	(6,992)		—			—		(6,992)		Electric customer credits	(1,362)		—			—		(1,362)
Operating revenue, net	Operating revenue, net	$	1,688,530	$	75,473		$	(94,860)	$	1,669,143	Operating revenue, net	$	1,011,318	$	79,539		$	(91,635)	$	999,222
Depreciation and amortization	Depreciation and amortization	$	193,641	$	13,127	(2)	$	(1)	$	206,767	Depreciation and amortization	$	142,467	$	13,276	(2)	$	—	$	155,743
Interest income	Interest income	$	4,162	$	141		$	(67)	$	4,236	Interest income	$	2,979	$	357		$	(113)	$	3,223
Interest charges	Interest charges	$	64,200	$	45,684		$	(66)	$	109,818	Interest charges	$	73,442	$	48,961		$	(114)	$	122,289
Federal and state income tax expense (benefit)	Federal and state income tax expense (benefit)	$	52,936	$	(23,384)		$	(1)	$	29,551	Federal and state income tax expense (benefit)	$	4,185	$	(125,345)		$	—	$	(121,160)
Income (loss) from continuing operations, net of income taxes											Income (loss) from continuing operations, net of income taxes	$	157,170	$	(48,043)		$	—	$	109,127
Loss from discontinued operations, net of income taxes											Loss from discontinued operations, net of income taxes	—		(9,707)			—		(9,707)
Net income (loss)	Net income (loss)	$	266,652	$	(41,173)		$	—	$	225,479	Net income (loss)	$	157,170	$	(57,750)		$	—	$	99,420
Additions to property, plant, and equipment	Additions to property, plant, and equipment	$	144,570	$	944		$	—	$	145,514	Additions to property, plant, and equipment	$	159,947	$	5,803		$	—	$	165,750
Equity investment in investees (1)	Equity investment in investees (1)	$	2,072	$	(305,348)		$	305,348	$	2,072	Equity investment in investees (1)	$	1,992	$	370,348		$	(370,348)	$	1,992
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)	$	8,060,886	$	248,847		$	174,788	$	8,484,521	Total segment assets (1)	$	6,951,436	$	1,154,811		$	185,852	$	8,292,099
(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.
(1) Balances as of September 30, 2023. (2) Includes $7.1 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 September 30, 2023. (2) Includes $7.1 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						~~2022~~2023 3RD QUARTER FORM 10-Q

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.

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 $ 206,141 $ 1,116 $ — $ 207,257
Equity investment in investees (1)
$ 2,072 $ (46,901) $ 46,901 $ 2,072
Goodwill (1)
$ 1,490,797 $ — $ — $ 1,490,797
Total segment assets (1)
$ 7,724,388 $ 619,101 $ (218,471) $ 8,125,018
(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.

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.


FOR THE NINE MONTHS ENDED SEPT. 30, 2022 (THOUSANDS)	CLECO POWER
~~CLECO POWER~~Revenue
Electric operations	~~2022 3RD QUARTER FORM 10-Q~~$	1,145,864
Other operations	62,528
Affiliate revenue	4,744
Electric customer credits	(6,992)
Operating revenue, net	$	1,206,144
Net income	$	134,462
Add: Depreciation and amortization	133,907
Less: Interest income	3,501
Add: Interest charges	63,947
Add: Federal and state income tax expense	5,800
EBITDA	$	334,615


FOR THE NINE MONTHS ENDED SEPT. 30, 2022 (THOUSANDS)	CLECO POWER		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	1,145,864	$	(7,260)		$	—	$	1,138,604
Other operations	62,528		5			—		62,533
Affiliate revenue	4,744		82,728			(87,472)		—
Electric customer credits	(6,992)		—			—		(6,992)
Operating revenue, net	$	1,206,144	$	75,473		$	(87,472)	$	1,194,145
Depreciation and amortization	$	133,907	$	13,127	(2)	$	—	$	147,034
Interest income	$	3,501	$	141		$	(67)	$	3,575
Interest charges	$	63,947	$	41,614		$	(67)	$	105,494
Federal and state income tax expense	$	5,800	$	24,672		$	—	$	30,472
Income from continuing operations, net of income taxes	$	134,462	$	145,591		$	(1)	$	280,052
Loss from discontinued operations, net of income taxes	—		(54,573)			—		(54,573)
Net income	$	134,462	$	91,018		$	(1)	$	225,479
Additions to property, plant, and equipment	$	139,726	$	5,788		$	—	$	145,514
Equity investment in investees (1)	$	2,072	$	(320,348)		$	320,348	$	2,072
Goodwill (1)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (1)	$	6,834,970	$	1,237,096		$	181,683	$	8,253,749
(1) Balances as of December 31, 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.



	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		2023		2022
Net income	$	156,112	$	68,372	$	99,420	$	225,479
Less: income (loss) from discontinued operations, net of income taxes	(142,729)		(21,860)		(9,707)		(54,573)
Income from continuing operations, net of income taxes	$	298,841	$	90,232	$	109,127	$	280,052
Add: Depreciation and amortization	52,378		48,743		155,743		147,034

Less: Interest income	1,283		1,766		3,223		3,575
Add: Interest charges	42,034		37,706		122,289		105,494
Add: Federal and state income tax (benefit) expense	(246,494)		9,220		(121,160)		30,472
Add: Other corporate costs and noncash items (1)	16,604		(75,058)		111,509		(224,862)
Total segment EBITDA	$	162,080	$	109,077	$	374,285	$	334,615
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


Note 1112 — Regulation and Rates

~~Regulatory Refunds~~

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

(THOUSANDS) AT SEPT. 30, 2022 AT DEC. 31, 2021
Cleco Katrina/Rita storm recovery charges $ — $ 1,611
FRP $ 95 $ 1,229
Site-specific industrial customer $ 752 $ 833
St. Mary Clean Energy Center $ 10,400 $ —
TCJA $ 2,057 $ 2,057

~~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. In September 2022, $1.6 million was refunded to retail customers in the form of bill credits as approved by the LPSC on 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. On June 16, 2021, the LPSC approved Cleco Power’s ~~new~~current 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. AOn June 30, 2023, Cleco Power filed an application with the LPSC for a

new FRP, with anticipated new rates being effective July 1, 2024. Cleco Power has responded to its first set of LPSC data requests.

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

2023, Cleco Power ~~continued to accrue~~filed its monitoring report for the ~~annual cost of service savings resulting from the 2016 Merger Commitments through~~12 months ended June 30, 2021. Beginning July 1, 2021, the annual cost of service savings are included in Cleco Power’s retail rate plan. Cleco Power had $1.2 million accrued for the period July 1, 2020, through June 30, 2021, which2023, indicating no refund 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.”due.

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 base rate case.

In 2020 and as a result of the delay in the rate case, the LPSC approved Cleco Power’s 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 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, 2022, Cleco Power had $2.1 million accrued for the remaining balance of federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan which includes the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1,


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

2021, all retail customers 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, ~~2022,~~2023, Cleco Power had ~~$267.7~~$222.3 million accrued for the excess ADIT, of which ~~$44.1~~$31.2 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~~


~~CLECO~~
~~CLECO POWER~~						In July 2022, ~~3RD QUARTER FORM 10-Q~~

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 filed an ~~attachment~~Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. ~~In December 2021,~~On January 31, 2023, Cleco Power filed a notice with the LPSC to retire Teche Unit 3 in May 2023. However, in April 2023, Cleco Power filed notices with MISO and ~~MISO~~the LPSC to ~~suspend~~delay the retirement of Teche Unit 3. ~~On March 15, 2022, Cleco Power refunded~~Management continues to ~~MISO $4.3 million for capital expenditures paid for by third parties while operating under~~monitor regulatory capacity requirements and customer needs to determine the ~~SSR agreement.~~appropriate timing of the retirement of Teche Unit 3.


Note 1213 — 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~~pay the principal and interest payments ~~due under~~on 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~~


(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Restricted cash - current	$	6,356	$	14,139
Accounts receivable - affiliate	4,262		3,348
Intangible asset - securitization	402,444		413,123
Total assets	$	413,062	$	430,610
Long-term debt due within one year	$	14,499	$	9,574

Accounts payable - affiliate	95		165
Interest accrued	1,548		9,953
Long-term debt, net	394,787		408,741
Total liabilities	410,929		428,433
Member’s equity	2,133		2,177
Total liabilities and member’s equity	$	413,062	$	430,610

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,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2022		2021		2022		2021		(THOUSANDS)	2023		2022		2023		2022
Operating revenue	Operating revenue	$	5,025	$	—	$	5,025	$	—	Operating revenue	$	9,946	$	5,025	$	25,329	$	5,025
Operating expenses	Operating expenses	90		—		90		—		Operating expenses	(5,264)		(90)		(11,017)		(90)
Interest income	Interest income	10		—		10		—		Interest income	188		10		430		10
Interest charges, net	Interest charges, net	4,861		—		5,342		—		Interest charges, net	(4,845)		(4,861)		(14,668)		(5,342)
Income before taxes		$	84	$	—	$	(397)	$	—
Income (loss) before taxes										Income (loss) before taxes	$	25	$	84	$	74	$	(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’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’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, ~~2022,~~2023, consisted of its equity investment of ~~$2.1~~approximately $2.0 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, 2022		AT DEC. 31, 2021		INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
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	(17,200)		(17,200)		Distributions	(17,280)		(17,200)
Total equity investment in investee	Total equity investment in investee	$	2,072	$	2,072	Total equity investment in investee	$	1,992	$	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, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Oxbow’s net assets/liabilities	Oxbow’s net assets/liabilities	$	4,145	$	4,145	Oxbow’s net assets/liabilities	$	3,985	$	4,145
Cleco Power’s 50% equity	Cleco Power’s 50% equity	$	2,072	$	2,072	Cleco Power’s 50% equity	$	1,992	$	2,072
Cleco Power’s maximum exposure to loss	Cleco Power’s maximum exposure to loss	$	2,072	$	2,072	Cleco Power’s maximum exposure to loss	$	1,992	$	2,072


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The following table contains summarized financial information for Oxbow:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2022		2021		2022		2021		(THOUSANDS)	2023		2022		2023		2022
Operating revenue	Operating revenue	$	65	$	1,486	$	215	$	5,113	Operating revenue	$	78	$	65	$	311	$	215
Operating expenses	Operating expenses	65		1,486		215		5,113		Operating expenses	(78)		(65)		(311)		(215)
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 billed Cleco Power its proportionate share


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of incurred lignite extraction and associated mining-related costs. Oxbow billed Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. At December 31, 2021, the Dolet Hills Power Station was retired, and all of Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. For more information on DHLC and the Oxbow mine, see Note 1314 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — ~~Risks~~Off-Balance Sheet Commitments and ~~Uncertainties.~~Guarantees.”

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


Note 1314 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

2016 Merger

In connection with the 2016 Merger, four actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and three actions were filed in the Civil District Court for Orleans Parish, Louisiana. The petitions in each action generally alleged, among other things, that the members of Cleco Corporation’s Board of Directors breached their fiduciary duties by, among other things, conducting an allegedly inadequate sale process, agreeing to the 2016 Merger at a price that allegedly undervalued Cleco, and failing to disclose material information about the 2016 Merger. The petitions also alleged that Como 1, Cleco Corporation, Merger Sub, and, in some cases, certain of the investors in Como 1 either aided and abetted or entered into a civil conspiracy to advance those supposed breaches of duty. The petitions sought various remedies, including monetary damages, which includes attorneys’ fees and expenses.

The four 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 consolidated the remaining three 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 three 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 three 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 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


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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


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~~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 two former executives filed motions for summary judgment in June 2023, which the ~~allegations~~District Court denied in September 2023. In October 2023, the two former executives and plaintiffs, after mediation, entered into a memorandum of understanding for a class action settlement under which all disputes and claims asserted against the two former executives would be dismissed. The District Court’s final approval of the ~~petitions in each action are without merit and that it has substantial meritorious defenses to~~settlement is required before the ~~claims set forth in each of the petitions.~~settlement becomes effective.

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 (the Bunkie ~~Project)~~project). According to the petition filed by Gulf Coast in the 12th Judicial District Court for Avoyelles Parish, Louisiana, Cleco made such promises of funding assistance in order to cultivate a new industrial electric customer which would increase its revenues under a power supply agreement that it executed with Gulf Coast. Gulf Coast seeks unspecified damages arising from its inability to raise sufficient funds to complete the project, including lost profits.

Cleco filed an Exception of No Cause of Action arguing that the case should be dismissed. The 12th Judicial District Court denied Cleco’s exception in December 2015, after considering briefs and arguments. In January 2016, Cleco appealed the 12th Judicial District Court’s denial of its exception by filing with the Third Circuit Court of Appeal. In June 2016, the Third Circuit Court of Appeal denied the request to have the case dismissed. In July 2016, Cleco filed a writ to the Louisiana Supreme Court 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.~~project. The loan was secured by a mortgage on the Bunkie ~~Project~~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 12th Judicial District Court for Avoyelles Parish, Louisiana. Discovery is ongoing and nothe trial date has been ~~set.~~set for October 2024.

Cleco believes ~~the~~all allegations ~~of the petition~~made by Gulf Coast 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. 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 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~~Cleco Power’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.


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Mary Parish. Saulsbury Industries, Inc. asserted the same claim as the Western District litigation and further asserts claims for payment on an open account. On December 9, 2019, Cleco Power 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.~~Cleco Power’s motion. The 16th Judicial District Court for the St. Mary Parish case held a hearing on October 16, 2020, and the judge granted ~~Cleco’s~~Cleco Power’s declinatory exceptions of lis pendens. Thus, the St. Mary’s Parish case has been dismissed. Saulsbury appealed this decision.

On May 17, 2022, the Court of Appeal, First Circuit, ruled in favor of Cleco Power and affirmed the decision of the 16th Judicial District Court for St. Mary Parish with respect to ~~Cleco.~~Cleco Power. 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 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 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 been dismissed in full.

The stay was lifted in the Rapides Parish case ~~remains stayed until the stay is lifted by further order of~~and the Rapides Parish ~~Court.~~case is proceeding. The parties are currently participating in discovery.

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.~~expenses. 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~~which are performed at least every other year.

In ~~March 2020,~~January 2023, Cleco Power received a notice of audit from the LPSC for the period of January ~~2018~~2020 to December ~~2019.~~2022. The total amount of fuel expense included in the audit is ~~$565.8 million. Management expects~~$1.10 billion. Cleco Power has responded to the first set of LPSC ~~to approve the audit report by the end of 2022.~~data requests. Cleco Power has FAC filings for January ~~2020~~2023 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.

OnIn 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. OnIn 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. On March 27, 2023, Cleco Power ~~has responded~~received a draft audit report from the LPSC

indicating no material findings. Management expects the draft audit report to ~~several data requests. Management is unable to determine~~be approved in the ~~outcome or completion~~fourth quarter of ~~the audit.~~2023.

Environmental Audit

In 2009, the LPSC ~~issued Docket No. U-29380 Subdocket A, which provides~~approved Cleco Power ~~an EAC~~ to recover ~~from its customers~~ certain costs of environmental ~~compliance.~~compliance through an EAC. The costs eligible for recovery are those for prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the costs of reagents such as ammonia and limestone that are a part of the fuel mix used to reduce air emissions, among other things. In April 2023, Cleco Power received a notice of audit from the LPSC for the period of January 2020 to December 2022. The total amount of environmental fuel expense included in the audit is $38.3 million. In October 2023, Cleco Power received a draft audit report from the LPSC indicating no material findings. Cleco Power has EAC filings for January ~~2020~~2023 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not

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

Cleco Power incurs environmental compliance expenses for reagents associated with the compliance standards of 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, which directs federal agency heads to review regulations and other actions ~~over~~from the past four years to determine if they are inconsistent with the policies announced in the executive order. The order specifically directed the EPA to consider issuing a proposed rule to suspend, revise, or rescind the rule. The EPA determined the most environmentally protective course is to implement the rules in the executive order. On ~~February 9, 2022,~~March 6, 2023, the EPA published in the Federal Register a ~~proposed~~final rule ~~to revoke~~that reinstates the ~~agency’s May 2020~~April 25, 2016, finding ~~with respect to whether~~that it is appropriate and necessary to regulate hazardous air pollutants from coal and oil-fired electric generating units ~~under MATS, but~~through MATS. On April 24, 2023, the EPA ~~has not yet acted on a~~published in the Federal Register proposed amendments to MATS that are the result of the EPA’s review of the May 2020 residual risk and technology ~~determination from the May 2020 rule.~~review of MATS. Management is unable to determine whether the outcome of the D.C. Circuit Court of Appeals’ review or the EPA’s review of the rule as a result of the executive order will result in changes to the MATS standards.

~~Prudency Reviews~~


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Energy Efficiency Audit

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. Through an approved rate tariff, Cleco Power recovered $8.5 million and $6.8 million for the 2022 and 2021 program years, respectively.

In September 2023, Cleco Power received a notice of audit from the LPSC for the program years 2021 and 2022. Cleco Power has received the first set of LPSC data requests. Program years 2023 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.

~~Lignite Mine Closure Costs~~Dolet Hills Prudency Review

Cleco Power is seeking recovery for stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station as well as 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 filed by the LPSC Staff advisors ~~filed~~ in August 2022 indicates disagreement with the ~~prudency~~recoverability of these incurred ~~costs.~~costs, quantifying up to $217.0 million of related costs as potentially imprudent. Cleco Power filed rebuttal testimony onin September ~~23,~~ 2022 rebutting the LPSC Staff’s ~~accusations of the lignite mining agreement not being approved by the LPSC, the prudency of the costs incurred, and the recoverability of such costs.~~testimony. A hearing ~~date is expected~~was held in May 2023, with the ~~second quarter of 2023.~~outcome pending. Due to the nature ~~and timing~~ of the regulatory process, Cleco Power is currently unable to determine the timing of this process and 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~~continues to ~~a prudency review by the LPSC. On September 21, 2022, the LPSC approved a settlement disallowing~~assert that recovery of ~~$15.0 million, which resulted in~~those costs is probable; however, management is seeking a ~~$13.8 million impairment charge~~potential settlement to resolve this matter and ~~a reduction of~~move forward with 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 to 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 $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. The total refund is reflected as a liability in Provision for refund on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets, with $6.6 million reflected in Electric customer credits on Cleco’s and Cleco Power’s Statements of Income and $3.8 million reflected in Regulatory assets on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets.securitization process.

South Central Generating

Prior to the Cleco Cajun Transaction, South Central Generating was involved in various litigation matters, including environmental and contract proceedings, before various courts regarding matters arising out of the ordinary course of business. ~~As of September 30, 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 certain 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, ~~2022,~~2023, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are ~~$8.3 million and~~$8.1 million. Cleco 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’s and Cleco Power’s Condensed Consolidated Balance Sheets because management has determined that 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~~indemnities relate to environmental matters that may have been present prior to closing. These remaining ~~indemnifications~~indemnities 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~~indemnities 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~~indemnities relate to the fundamental organizational structure of Acadia. These remaining ~~indemnifications~~indemnities 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~~indemnities to Cleco Power as a result of the transfer of Coughlin to Cleco Power in March 2014. Cleco Power also provided ~~indemnifications~~indemnities to Cleco Holdings as a result of the transfer of Coughlin to Cleco Power. The maximum amount of the potential payment to Cleco Power and Cleco Holdings, for their respective ~~indemnifications~~indemnities is $40.0 million, except for ~~indemnifications~~indemnities 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.~~indemnities.

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 would be based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for ~~the~~ 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.obligations. As of September 30, ~~2022,~~2023, Cleco Power does not expect any payments to be made under this guarantee. Cleco Power has the right to dispute the incurrence of such loan and lease obligations through the review of the mining reclamation plan before ~~their~~the incurrence ~~but cannot unreasonably withhold approval thereof.~~of such obligations. The Amended Lignite Mining Agreement does not


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affect the amount the Registrants can borrow under their credit facilities.

In April 2020, Cleco Power and SWEPCO mutually agreed not 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 June 30, 2020, all lignite reserves intended to be extracted from the 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.For more ~~information on the joint filing, see “— Risks and Uncertainties.” For~~ information on the LPSC prudency review associated with the mine closure costs, see “— LPSC Audits and Reviews — Dolet Hills Prudency ~~Reviews — Lignite Mine Closure Costs.~~Review.”

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.

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 no assets held as collateral for third parties that either Cleco Holdings or Cleco Power could obtain and liquidate to recover amounts paid pursuant to the guarantees or indemnification obligations.

Other Commitments

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

In April 2015, the EPA published a final rule in the Federal Register for regulating the disposal and management of CCRs from coal-fired power plants (CCR Rule). The CCR Rule established extensive requirements for existing and new CCR landfills and surface impoundments and all lateral expansions consisting of location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. In August 2018, the D.C. Court of Appeals vacated several requirements in the CCR regulation, which included eliminating the previous acceptability of compacted clay material as a liner for impoundments. As a result, in August 2020, the EPA published a final rule in the Federal Register that would set deadlines for costly modifications including retrofitting of clay-lined impoundments with compliant liners or closure of the impoundments. In November 2020, ~~Cleco~~demonstrations were submitted ~~demonstrations~~ to the EPA specifying ~~its~~an intended course of action for the ash disposal facilities at Big Cajun II, Rodemacher Unit 2, and the Dolet Hills Power Station ~~and Big Cajun II~~ in order to comply with the final CCR Rule. ~~During 2021, additional information was submitted to the 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~~had been deemed complete. ~~However,~~Cleco Power withdrew the Dolet Hills demonstration due to the cessation of receiving waste. The two remaining demonstrations are still subject to EPA approval based on pending technical ~~reviews.~~ review.

At ~~September 30, 2022,~~March 31, 2023, Cleco ~~and~~Cajun recorded a decrease of $19.5 million in its ARO balance due to revised cost estimates. Cleco ~~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.~~Cajun’s ARO is recorded in Liabilities held for sale on Cleco’s Condensed Consolidated Balance Sheet.

As part of the Cleco Cajun Transaction, NRG Energy agreed to indemnify Cleco for certain environmental costs up to $25.0 million associated with the CCR ~~rule.~~Rule, for both ARO

and non-ARO related expenses. At September 30, ~~2022,~~2023, Cleco Cajun had ~~indemnification assets totaling $22.6 million. The current portion of the~~an indemnification asset ~~of $1.1~~totaling $18.0 million, which was substantially related to AROs associated with ash pond remediation. This asset is ~~reflected~~recorded in ~~Other current assets and the non-current portion of $21.5 million is reflected in Other deferred charges~~Assets held for sale on Cleco’s Condensed Consolidated Balance Sheet. As additional periodic expenses related to covered costs are incurred, the associated indemnification asset will be recognized. The indemnification

asset is expected to be collected as ~~closure~~indemnified costs, either recognized in the ARO or as periodic expenses, 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 fluctuate. Cleco Power and Cleco Cajun use FTRs to mitigate transmission congestion price ~~risks. Recovery of these costs included in Cleco Power’s FAC is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC.~~

The Dolet Hills Power Station was retired on December 31, 2021. On January 31, 2022, Cleco Power 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. This filing also requested to include and defer certain accelerated mine closing costs in fuel and related rate-making treatment. Cleco Power has responded to several data requests related to the joint filing.

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 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, 2022, Cleco Power had a regulatory asset of $136.1 million for deferred fuel and mine-related closure costs, which was included in the application filed on January 31, 2022. These costs are also under a prudency review by the


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

LPSC. Pending the outcome of the prudency review and under the terms of the new securitization law mentioned above, Cleco Power intends to include the final costs in its filing for securitization. Cleco Power expects to make this filing in the first quarter of 2023. For more information on this prudency review, see “— Litigation — LPSC Audits and Reviews — Prudency Reviews — Lignite Mine Closure Costs.”


Note 1415 — Affiliate Transactions

At September 30, 2023, and December 31, 2022, Cleco Holdings had an affiliate receivable of ~~$13.1~~$22.3 million and $14.6 million, respectively, primarily for ~~estimated~~ income ~~taxes paid on behalf of Cleco Group. At December 31, 2021, Cleco Holdings had an affiliate receivable of $3.0 million primarily for franchise~~ taxes paid on behalf of Cleco Group. At September 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, Cleco Holdings had an affiliate payable of ~~$13.1~~$20.9 million and ~~$51.3~~$13.1 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, 2022				AT DEC. 31, 2021					AT SEPT. 30, 2023				AT DEC. 31, 2022
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	Cleco Holdings	$	8	$	1,029	$	10,347	$	59,627	Cleco Holdings	$	9	$	9,429	$	5	$	1,138
Support Group	Support Group	1,255		9,806		2,473		10,038		Support Group	1,101		11,903		2,299		11,305
Cleco Cajun	Cleco Cajun	1,223		2		792		64		Cleco Cajun	1,030		2		1,467		5
Total	Total	$	2,486	$	10,837	$	13,612	$	69,729	Total	$	2,140	$	21,334	$	3,771	$	12,448

Cleco Power’s affiliate payable to Support Group at both September 30, 2023, and December 31, 2022, primarily consisted of amounts due for intercompany services. Of the affiliate payable ~~balance~~balances at ~~December 31, 2021,~~September 30 2023, Cleco Power had ~~$59.4~~$9.1 million payable to Cleco Holdings for the settlement of income taxes.

Note 1516 — Intangible Assets ~~Intangible Liabilities,~~ and Goodwill

Securitized Intangible Asset

On June 22, 2022, Cleco Securitization I acquired the Storm Recovery Property from Cleco Power ~~in the amount~~for a purchase price of $415.9 million. The Storm Recovery Property is classified as a securitized intangible asset on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. This securitized intangible asset ~~will be~~is being amortized ~~over~~ratably each period consistent with actual collections of the ~~estimated periods needed~~asset’s portion of the


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

revenue requirement billed to ~~collect the required amounts from~~ Cleco Power’s ~~customers to service Cleco Securitization I’s storm recovery bonds, currently estimated through September 2044. There was no~~customers. Amortization is included in Depreciation and amortization ~~during the current period because collections from~~on Cleco’s and Cleco Power’s ~~customers were allocated to expenses that take priority to~~Condensed Consolidated Statements of Income. During the ~~storm recovery bonds as allowed by the storm recovery bond indenture.~~three and nine months ended September 30, 2023, amortization expense of $5.1 million and $10.7 million, respectively, was recognized. At the end of its life, this securitized intangible asset will have no residual value. ~~For additional information~~

The following table summarizes the balance of the securitized intangible asset subject to amortization included on Cleco’s and 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.”~~Condensed Consolidated Balance Sheets:


(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Storm Recovery Property intangible asset	$	415,946	$	415,946
Accumulated amortization	(13,502)		(2,823)
Net intangible asset subject to amortization	$	402,444	$	413,123

Other ~~Intangibles~~Intangible Assets

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 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 78 and 19 years, and the amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

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 request for proposal 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 at September 30, 2021.

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 table presents ~~Cleco’s~~the amortization ~~of other intangible assets~~expense recognized during the three and ~~liabilities included in its Condensed Consolidated Income Statements:~~nine months ended September 30, 2023, and 2022:


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,
(THOUSANDS)	(THOUSANDS)	2022		2021		2022		2021		(THOUSANDS)	2023		2022		2023		2022
Intangible assets

Trade name		$	—	$	3,770	$	—	$	3,897
Amortization expense										Amortization expense
Power supply agreements	Power supply agreements	$	6,400	$	6,400	$	19,200	$	19,200	Power supply agreements	$	2,323	$	2,420	$	7,131	$	7,260
Intangible liabilities
LTSA		$	871	$	871	$	2,613	$	2,613
Power supply agreements		$	389	$	389	$	1,168	$	1,989


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

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021		(THOUSANDS)	AT SEPT. 30, 2023		AT DEC. 31, 2022
Intangible assets

Power supply agreements	Power supply agreements	$	184,004	$	184,004	Power supply agreements	$	85,104	$	85,104
Total intangible assets carrying amount		184,004		184,004
Intangible liabilities
LTSA		24,100		24,100
Power supply agreements		14,200		14,200
Total intangible liability carrying amount		38,300		38,300
Net intangible assets carrying amount		145,704		145,704

Accumulated amortization	Accumulated amortization	(97,885)		(82,466)		Accumulated amortization	(72,148)		(65,018)
Net intangible assets subject to amortization	Net intangible assets subject to amortization	$	47,819	$	63,238	Net intangible assets subject to amortization	$	12,956	$	20,086

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 or whenever events or circumstances indicate that 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, an impairment loss

would be recognized. A goodwill impairment loss is measured as the amount by which a reporting unit's carrying value exceeds fair value, not to exceed the carrying amount of goodwill.

Cleco estimates the reporting unit's fair value 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. The income approach cash flow valuations involve a number of estimates that require broad assumptions and significant judgment by management regarding future performance, including estimation of future cash flows related to capital expenditures, the weighted average cost of capital or discount 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 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,~~long-term growth rates, U.S. Treasury rates, or other factors outside of Cleco’s control may impact Cleco’s projected results, Cleco may be required to reduce all or a portion of the carrying value of ~~goodwill, which could adversely impact earnings.~~goodwill.

Cleco conducted its ~~2022~~2023 annual impairment test using an August 1, ~~2022,~~2023, measurement date and determined that the estimated fair value of the reporting unit exceeded its carrying value, and no impairment existed.

Note 1617 — 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	Cleco					Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30, 2022		FOR THE NINE MONTHS ENDED SEPT. 30, 2022			FOR THE THREE MONTHS ENDED SEPT. 30, 2023		FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)	(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS				(THOUSANDS)	POSTRETIREMENT BENEFIT NET GAIN (LOSS)
Balance, beginning of period		$	(23,608)	$	(23,629)
Balances, beginning of period						Balances, beginning of period	$	(786)	$	59

Amounts reclassified from AOCI	Amounts reclassified from AOCI					Amounts reclassified from AOCI
Amortization of postretirement benefit net loss		10		31
Amortization of postretirement benefit net gain						Amortization of postretirement benefit net gain	(422)		(1,267)

Balance, Sept. 30, 2022		$	(23,598)	$	(23,598)
Balances, Sept. 30, 2023						Balances, Sept. 30, 2023	$	(1,208)	$	(1,208)

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

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, 2022 FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(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 $ (12,272) $ (5,172) $ (17,444) $ (12,885) $ (5,298) $ (18,183)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 307 — 307 920 — 920
Reclassification of net loss to interest charges — 63 63 — 189 189
Balances, Sept. 30, 2022 $ (11,965) $ (5,109) $ (17,074) $ (11,965) $ (5,109) $ (17,074)

5149


CLECO
CLECO POWER						~~2022~~2023 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)


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



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


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


Cleco Power
	FOR THE THREE MONTHS ENDED SEPT. 30, 2023						FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(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	$	(3,126)	$	(4,921)	$	(8,047)	$	(3,318)	$	(5,047)	$	(8,365)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	97		—		97		289		—		289
Reclassification of net loss to interest charges	—		62		62		—		188		188

Balances, Sept. 30, 2023	$	(3,029)	$	(4,859)	$	(7,888)	$	(3,029)	$	(4,859)	$	(7,888)

~~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 i~~mpacted 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.


	FOR THE THREE MONTHS ENDED SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(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	$	(12,272)	$	(5,172)	$	(17,444)	$	(12,885)	$	(5,298)	$	(18,183)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	307		—		307		920		—		920
Reclassification of net loss to interest charges	—		63		63		—		189		189

Balances, Sept. 30, 2022	$	(11,965)	$	(5,109)	$	(17,074)	$	(11,965)	$	(5,109)	$	(17,074)


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,~~2022, 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,~~2023, and ~~2021.~~2022.


OVERVIEW

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

•segment, Cleco Power. Cleco Power is a regulated electric utility company that owns nine generating units with a total rated capacity of 3,035 MW and serves approximately ~~291,000~~293,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and ~~Mississippi;~~Mississippi.

Many factors affect Cleco’s primary business of generating, delivering, and selling electricity. These factors include the ability to increase energy sales while containing

costs and the ability to successfully perform in MISO while subject to the related operating challenges and uncertainties, including increased wholesale competition. In addition, factors affecting Cleco Power include weather and the presence of a stable regulatory environment, which impacts the ROE and the current rate case, as well as the recovery of costs related to storms, growing energy demand, and volatile fuel prices; the ability to reliably deliver power to its jurisdictional customers; and the ability to comply with increasingly stringent regulatory and environmental standards. Significant events and major initiatives impacting Cleco and Cleco Power are discussed below.

•Cleco Cajun ~~an unregulated electric utility company that owns 14 generating units~~Divestiture

In 2022, Cleco Holdings engaged in a strategic review process related to its investment in Cleco Cajun. In March 2023, Cleco Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a ~~total rated capacity~~sale probable and subject to customary regulatory and Board of ~~3,379 MW~~Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and ~~wholesale contracts serving~~ a ~~mixture~~sale will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the Cleco Cajun Sale Group is presented as discontinued operations, and the results of ~~electric~~operations and financial position for historical periods provided in this report have been recast to reflect this presentation. For more information, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

5250


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

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

~~Significant Events~~

~~Securitization~~

~~Storm Securitization~~

During 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. The damage to equipment from the storms required replacement, as well as repair of existing assets.

On March 30, 2022, the LPSC approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power relating to securitization of these storm costs. 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. On June 22, 2022, Cleco Power completed a securitized financing of the deferred storm costs through Cleco Securitization I. For ~~more information on the storm securitization financing, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Securitization and Cost Recovery.”~~

Dolet Hills ~~Securitization~~

On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. At December 31, 2021, the Dolet Hills Power Station was retired, and all of Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. On January 31, 2022, Cleco Power filed an application with the LPSC requesting recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station as well as deferred fuel and other costs associated with the closure of the Oxbow mine. These costs are currently under a prudency review by the LPSC. For more information on 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 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — 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~~completion 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.~~as well as deferred fuel costs. Due to the nature of the regulatory process, Cleco Power is currently unable to determine the timing of this process and if any portion of the incurred costs will be disallowed for recovery. Cleco Power continues to assert that recovery of those costs is probable; however, management is seeking a potential settlement to resolve this matter and move forward with the securitization process. For more information on the ~~retirement of the Dolet Hills Power Station and the closure of the Oxbow mine,~~prudency review, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — ~~Risks~~LPSC Audits and ~~Uncertainties.~~Reviews — Dolet Hills Prudency Review.”

ESG

~~COVID-1~~9

~~In March 2020, WHO declared~~Cleco is accelerating its efforts to protect the ~~outbreak~~environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco is increasing its renewable and electrification initiatives. Cleco is also aiming to reduce GHG emissions in ways such as incorporating renewable energy resources into its generating fleet, as it replaces coal-fired generation units retired after serving their useful lives. Cleco aims to sustainably reduce its GHG emissions by approximately 60.0% by 2030, with aspirations of ~~COVID-19~~net zero emissions by 2050. To manage social relationships, Cleco plans to beensure that the electricity that it generates is affordable, reliable, and sustainable. Cleco also continues to support community investment opportunities across its service territory and has created a ~~global pandemic,~~workforce culture that rewards inclusion, safety, and innovation. To govern responsibly, Cleco plans to continue operating according to policies and practices that support 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.

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 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, 2022, Cleco Power had a regulatory asset of $3.0 million for expenses incurred.

governance framework. To ensure accountability, Cleco has ~~implemented certain measures that it believes will provide financial flexibility~~created an ESG Steering Committee and ~~help maintain its liquidity. Cleco~~appointed a Chief Sustainability Officer to oversee the continued implementation of ESG initiatives. Currently, management is ~~working with its suppliers~~unable to mitigate the pandemic stimulated impacts to its supply chain. Cleco will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as warranted. ~~Cleco continues to assess the COVID-19 situation and cannot~~ predict the ~~full~~ impact ~~that COVID-19, or any significant related disruptions, will have~~of implementing these ESG initiatives on ~~its business, cash flows, liquidity, financial condition, and results of operations.~~the Registrants. For ~~additional discussion regarding certain risks associated with the COVID-19 pandemic,~~more information on these ESG initiatives, see Part I, Item ~~1A, “Risk Factors~~1, “Business — ~~Operational Risks~~Human Capital — ~~Pandemics, Epidemics, or Other Outbreaks”~~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.~~2022. For more information about Cleco’s environmental initiatives, see “— Renewable and Electrification Initiatives.”

Tax Reform

On August 16, 2022, the ~~Inflation Reduction Act~~IRA of 2022 ~~(IRA)~~ became law. The IRA of 2022 seeks to lower gasoline and electricity prices, increase energy security, and help consumers afford emissions-cutting technologies. In addition, the IRA of 2022 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 of 2022 could have on the Registrants.

~~ESG Goals~~

Cleco is accelerating its efforts to protect the environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco aims to 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 governance framework. To ensure accountability, Cleco has created an ESG Steering Committee and has appointed a Chief Sustainability Officer to oversee the continued implementation of the ESG goals. Currently, management is unable to predict the impact of implementing these ESG goals on the Registrants. For more information on these ESG goals, see Part I, Item 1, “Business — Human Capital — Diversity and Inclusion,” “— Communities,” and “— Oversight and Governance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2021. For more information about Cleco’s environmental initiatives, see “— Cleco Power — Project Diamond Vault.”

~~Cleco Power~~

Many factors affect Cleco Power’s primary business of generating, delivering, and selling electricity. These factors include weather and the presence of a stable regulatory environment, which 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 include initiating work on the winterization~~IRA of generation assets, beginning Project Diamond Vault, continuing the DSMART project, and maintaining and growing its retail business. Cleco Power is also pursuing renewable and electrification initiatives. These and other initiatives are discussed below.

Effective July 1, 2021, 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 Cleco Power’s retail rate plan, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — FRP.”2022 could increase business growth in Cleco’s service territory.

Renewable and Electrification Initiatives

Project Diamond Vault

On April 11, 2022, Cleco Power announced Project Diamond Vault, a carbon capture and sequestration facility that is anticipated to be constructed at the 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 dioxide output of Madison Unit 3 by ~~approximately~~up to 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 $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 FEED study is expected to be completed in ~~the first quarter of 2024~~mid-2024 and major permitting is expected to be completed in the second half of 2025. Construction of the project is expected to begin byin the ~~end~~first quarter of ~~2025.~~2026. Management expects the total project will be completed ~~by the end of 2028.~~in early 2029. After the cost of the FEED study, the remaining project cost is currently estimated to be ~~$900.0 million.~~between $1.40 billion and $1.70 billion. 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~~IRA of 2022, Department of Energy grants, ~~and~~debt financing, private equity ~~investment.~~investment, and partnership interests.

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, Louisiana 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.~~2026.

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.


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

Cleco Power is seeking available funds from the U.S. government for funding of these electrification initiatives. Cleco Power cannot predict the likelihood that any funding from the U.S. government ultimately will be approved.

DSMART Project

The DSMART project includes modernization of Cleco Power’s distribution system by replacing or upgrading distribution line equipment 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, and management expects the total project will be completed by the end of ~~2027. In January 2019,~~2028. Cleco Power ~~began~~is currently in the ~~first~~second phase of the project. As of September 30, ~~2022,~~2023, Cleco Power had spent ~~$38.4~~$51.8 million on the project.

Other

Cleco Power is working to secure load growth opportunities that include renewing existing franchises, pursuing new 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 through a request for proposal process, a significant 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. Onon October 19, 2022, the LPSC certified ~~the results of the request for proposal. Failure~~these results. Cleco Power’s failure to recontract this ~~or other agreements~~agreement is expected to affect jurisdictional retail rates that will be subject to review by the LPSC in conjunction with Cleco Power’s next rate case. On June 30, 2023, Cleco Power filed an application with the LPSC for its next rate case, ~~which is expected to be~~with anticipated new rates being effective on July 1, 2024.

~~Cleco Cajun~~

Cleco Cajun currently has power purchase agreements totaling approximately 1,915 MW with 12 wholesale customers, which consist of a mixture of electric cooperatives, municipal bodies, a utility, and a 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.

Cleco Cajun’s cooperative customers have finalized their recontracting decisions beyond the first quarter of 2025 and have notified Cleco Cajun that it was not selected as a provider. This non-selection is believed to be the result of a trend toward cooperatives favoring shorter-term, market-based solutions and intermittent renewables rather than asset-backed, long-term full-service contracts.

Cleco is exploring options related to its investment in Cleco Cajun, including the potential sale of part or all of Cleco Cajun’s assets. Failure to enter into new contracts to replace existing agreements or failure to take other 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 the second quarter of 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.


RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, ~~2022,~~2023, and ~~2021~~2022


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30,									FOR THE THREE MONTHS ENDED SEPT. 30,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2022		2021		VARIANCE		CHANGE		(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue, net	Operating revenue, net	$	674,543	$	517,194	$	157,349	30.4	%	Operating revenue, net	$	393,846	$	496,764	$	(102,918)	(20.7)	%
Operating expenses	Operating expenses	558,933		325,629		(233,304)		(71.6)	%	Operating expenses	299,961		357,385		57,424		16.1	%
Operating income	Operating income	115,610		191,565		(75,955)		(39.6)	%	Operating income	93,885		139,379		(45,494)		(32.6)	%
Interest income	Interest income	2,238		941		1,297		137.8	%	Interest income	1,283		1,766		(483)		(27.3)	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	965		711		254		35.7	%	Allowance for equity funds used during construction	1,617		965		652		67.6	%

Other expense, net	Other expense, net	(4,940)		(8,109)		3,169		39.1	%	Other expense, net	(2,404)		(4,952)		2,548		51.5	%
Interest charges	Interest charges	39,890		34,629		(5,261)		(15.2)	%	Interest charges	42,034		37,706		(4,328)		(11.5)	%
Federal and state income tax expense		5,611		30,569		24,958		81.6	%
Federal and state income tax (benefit) expense										Federal and state income tax (benefit) expense	(246,494)		9,220		255,714		2,773.5	%
Income from continuing operations, net of income taxes										Income from continuing operations, net of income taxes	298,841		90,232		208,609		231.2	%
Loss from discontinued operations, net of income taxes										Loss from discontinued operations, net of income taxes	(142,729)		(21,860)		(120,869)		(552.9)	%
Net income	Net income	$	68,372	$	119,910	$	(51,538)	(43.0)	%	Net income	$	156,112	$	68,372	$	87,740	128.3	%

~~Results of operations for Cleco Power and Cleco Cajun are more fully described following the discussion of~~The increase in Cleco’s results of ~~operations.~~operations is primarily attributable to the following:

~~Operating Revenue, Net~~

~~Operating revenue, net increased $157.3 million during the third quarter~~•activity of 2022 compared to the third quarter of 2021 primarily due to $109.4 million of higher fuel cost recovery revenue and $14.7 million of higher base revenue, partially offset by $6.0 million of higher electric customer credits atits reportable segment, Cleco Power. ~~Also contributing to the increase was $33.3 million~~For detailed discussions of ~~higher electric operations revenue and $4.4 million of other operations revenue at~~those impacts, see “— Cleco ~~Cajun.~~Power.”

•

~~Operating Expenses~~

~~Operating expenses increased $233.3 million during~~ the ~~third quarter~~effects of ~~2022 compared to~~ the ~~third quarter~~presentation of ~~2021 primarily due to $109.5 million of higher recoverable fuel~~the Cleco Cajun Sale Group as discontinued operations and, purchased power expense, $13.8 million of regulatory disallowance, and $6.9 million of higher non-recoverable fuel and purchased power expense at Cleco Power. Also contributing to the increase was $54.9 million of higher fuel used for electric generation and $46.5 million of higher purchased power expense at Cleco Cajun.

~~Other Expense, Net~~

~~Other expense, net decreased $3.2 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 at Cleco 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 unfavorable market conditions at~~ Cleco ~~Holdings.~~Cajun no longer being reflected as a reportable segment. For information on discontinued operations, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

~~Interest Charges~~

~~Interest charges increased $5.3 million during the third quarter of 2022 compared~~For more information on Cleco’s effective income tax rates on continuing operations, see Item 1, “Notes to the ~~third quarter of 2021 primarily due to~~Unaudited Condensed Consolidated Financial Statements — Note 10 — Income Taxes — Effective Tax Rates.”

5552


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

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


Cleco Power
			FOR THE THREE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022			VARIANCE		CHANGE
Operating revenue
Base	$	218,566	$	192,560		$	26,006	13.5	%
Fuel cost recovery	145,595		283,568			(137,973)		(48.7)	%
Electric customer credits	24		(6,728)			6,752		100.4	%
Securitization revenue	9,984		5,025			4,959		98.7	%
Other operations	22,000		24,757			(2,757)		(11.1)	%
Affiliate revenue	1,645		1,657			(12)		(0.7)	%
Operating revenue, net	397,814		500,839			(103,025)		(20.6)	%
Operating expenses
Recoverable fuel and purchased power	145,664		283,848			138,184		48.7	%
Non-recoverable fuel and purchased power	16,314		19,926			3,612		18.1	%
Other operations and maintenance	59,452		58,581			(871)		(1.5)	%
Depreciation and amortization	48,012		44,368			(3,644)		(8.2)	%
Taxes other than income taxes	15,818		14,940			(878)		(5.9)	%


Regulatory disallowance	—		13,841			13,841		100.0	%
Total operating expenses	285,260		435,504			150,244		34.5	%
Operating income	112,554		65,335			47,219		72.3	%
Interest income	1,215		1,726			(511)		(29.6)	%
Allowance for equity funds used during construction	1,617		965			652		67.6	%
Other expense, net	(103)		(1,591)			1,488		93.5	%
Interest charges	24,921		23,840			(1,081)		(4.5)	%
Federal and state income tax (benefit) expense	(552)		1,862			2,414		129.6	%
Net income	$	90,914	$	40,733		$	50,181	123.2	%

~~Income Taxes~~

Federal and state income tax expense decreased $25.0 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to $16.1 million for the change in pretax income, excluding AFUDC equity, $6.3 million for flow through of tax benefits largely comprised of state taxes, $2.5 million for state tax expense, $2.2 million to record tax expense at the projected annual effective tax rate, and $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 2022 and 2021 for Cleco may not be indicative of the full-year income tax rates. For more information on Cleco’s effective income tax rates, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2022 2021 VARIANCE CHANGE
Operating revenue
Base $ 197,585 $ 182,928 $ 14,657 8.0 %
Fuel cost recovery 283,568 174,156 109,412 62.8 %
Electric customer credits (6,728) (691) (6,037) (873.7) %
Other operations 24,757 22,779 1,978 8.7 %
Affiliate revenue 1,657 1,380 277 20.1 %
Operating revenue, net 500,839 380,552 120,287 31.6 %
Operating expenses
Recoverable fuel and purchased power 283,848 174,332 (109,516) (62.8) %
Non-recoverable fuel and purchased power 19,926 13,006 (6,920) (53.2) %
Other operations and maintenance 58,581 56,720 (1,861) (3.3) %
Depreciation and amortization 44,368 43,526 (842) (1.9) %
Taxes other than income taxes 14,940 12,891 (2,049) (15.9) %
Regulatory disallowance 13,841 — (13,841) (100.0) %
Total operating expenses 435,504 300,475 (135,029) (44.9) %
Operating income 65,335 80,077 (14,742) (18.4) %
Interest income 1,726 936 790 84.4 %
Allowance for equity funds used during construction 965 711 254 35.7 %
Other expense, net (1,591) (6,106) 4,515 73.9 %
Interest charges 23,840 18,509 (5,331) (28.8) %
Federal and state income tax expense 1,862 548 (1,314) (239.8) %
Net income $ 40,733 $ 56,561 $ (15,828) (28.0) %

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)	2022	2021	FAVORABLE/ (UNFAVORABLE)			(MILLION kWh)	2023	2022	FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales						Electric sales
Residential	Residential	1,115	1,109		0.5	%	Residential	1,329	1,115		19.2	%
Commercial	Commercial	780	738		5.7	%	Commercial	849	780		8.8	%
Industrial	Industrial	572	537		6.5	%	Industrial	582	572		1.7	%
Other retail	Other retail	30	34		(11.8)	%	Other retail	33	30		10.0	%
Total retail	Total retail	2,497	2,418		3.3	%	Total retail	2,793	2,497		11.9	%
Sales for resale	Sales for resale	906	866		4.6	%	Sales for resale	973	906		7.4	%
Total retail and wholesale customer sales	Total retail and wholesale customer sales	3,403	3,284		3.6	%	Total retail and wholesale customer sales	3,766	3,403		10.7	%

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)	2022		2021		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2023		2022		FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales								Electric sales
Residential	Residential	$	100,964	$	95,368		5.9	%	Residential	$	119,697	$	100,964		18.6	%
Commercial	Commercial	52,457		48,246			8.7	%	Commercial	55,697		52,457			6.2	%
Industrial	Industrial	21,519		22,902			(6.0)	%	Industrial	25,908		21,519			20.4	%
Other retail	Other retail	2,820		2,928			(3.7)	%	Other retail	2,983		2,820			5.8	%
Storm recovery surcharge		5,025		—			100.0	%
Total retail	Total retail	182,785		169,444			7.9	%	Total retail	204,285		177,760			14.9	%
Sales for resale	Sales for resale	14,800		13,484			9.8	%	Sales for resale	14,281		14,800			(3.5)	%
Total base revenue	Total base revenue	$	197,585	$	182,928		8.0	%	Total base revenue	$	218,566	$	192,560		13.5	%

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-days may indicate consumers will use more air conditioning, while a high number of heating 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,
2022 CHANGE
2022 2021 NORMAL PRIOR YEAR NORMAL
Cooling degree-days 1,632 1,591 1,511 2.6 % 8.0 %


	FOR THE THREE MONTHS ENDED SEPT. 30,
				2023 CHANGE
	2023	2022	NORMAL	PRIOR YEAR		NORMAL

Cooling degree-days	2,023	1,632	1,564	24.0	%	29.3	%

Base

Base revenue increased ~~$14.7~~$26.0 million ~~during the third quarter of 2022 compared to the third quarter of 2021~~ primarily due to ~~$9.5 million for higher rates, $3.6 million for higher storm~~


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

~~recovery revenue, and $2.9~~$20.3 million of higher usage ~~from~~as a result of warmer summer weather. Also contributing to the increase was $5.1 million of higher industrial and commercial customer usage and demand, partially due to new industrial customers in 2023.

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, ~~2021.~~2022.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

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 recoverable fuel and purchased power expenses for the three months ended September 30, 2023, were impacted primarily by lower natural gas costs as compared to the three months ended September 30, 2022. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.”

Electric Customer Credits

Electric customer credits decreased $6.8 million primarily due to the absence of a 2022 refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund was the result of the LPSC approved settlement disallowing the recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center.

Securitization Revenue

Securitization revenue increased $5.0 million primarily due to the collection of storm recovery charges beginning in September 2022.

Other Operations Revenue

Other operations revenue decreased $2.8 million primarily due to $1.6 million of lower transmission revenue primarily due to the expiration of wholesale contracts in December 2022 and May 2023. Also contributing to the decrease was $0.9 million of lower forfeited discounts due to an adjustment for COVID-19 lost revenue as well as lower customer bills in 2023.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power decreased $3.6 million primarily due to $1.8 million of lower fuel expense primarily due to the expiration of wholesale contracts in December 2022 and May 2023 and $1.6 million for the timing of recovery of transmission costs.

Depreciation and Amortization

Depreciation and amortization increased $3.6 million primarily due to $5.1 million for the amortization of the securitized intangible asset that began in November 2022 and $2.0 million of higher normal recurring additions to fixed assets. These increases were partially offset by $3.2 million for the absence of the amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta.

Regulatory Disallowance

Regulatory disallowance decreased $13.8 million due to the absence of the impairment charge resulting from the LPSC approved settlement disallowing the recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center.

Income Taxes

For more information on Cleco Power’s effective income tax rates, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Income Taxes — Effective Tax Rates.”

Comparison of the Nine Months Ended September 30, 2023, and 2022


Cleco
	FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue, net	$	999,222	$	1,194,145	$	(194,923)	(16.3)	%
Operating expenses	893,956		770,707		(123,249)		(16.0)	%
Operating income	105,266		423,438		(318,172)		(75.1)	%
Interest income	3,223		3,575		(352)		(9.8)	%
Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other expense, net	(2,656)		(13,699)		11,043		80.6	%
Interest charges	122,289		105,494		(16,795)		(15.9)	%
Federal and state income tax (benefit) expense	(121,160)		30,472		151,632		497.6	%
Income from continuing operations, net of income taxes	109,127		280,052		(170,925)		(61.0)	%
Loss from discontinued operations, net of income taxes	(9,707)		(54,573)		44,866		82.2	%
Net income	$	99,420	$	225,479	$	(126,059)	(55.9)	%

The decrease in Cleco’s results of operations is primarily attributable to the following:

•activity of its reportable segment, Cleco Power. For detailed discussions of those impacts, see “— Cleco Power.”

•the effects of the presentation of the Cleco Cajun Sale Group as discontinued operations and, as a result, Cleco Cajun no longer being reflected as a reportable segment. For information on discontinued operations, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

For more information on Cleco’s effective income tax rates on continuing operations, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Income Taxes — Effective Tax Rates.”


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q


Cleco Power
			FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue
Base	$	532,878	$	528,298	$	4,580	0.9	%
Fuel cost recovery	390,807		612,541		(221,734)		(36.2)	%
Electric customer credits	(1,362)		(6,992)		5,630		80.5	%
Securitization revenue	25,444		5,025		20,419		406.3	%
Other operations	58,584		62,528		(3,944)		(6.3)	%
Affiliate revenue	4,967		4,744		223		4.7	%
Operating revenue, net	1,011,318		1,206,144		(194,826)		(16.2)	%
Operating expenses
Recoverable fuel and purchased power	390,843		612,791		221,948		36.2	%
Non-recoverable fuel and purchased power	33,829		43,044		9,215		21.4	%
Other operations and maintenance	170,827		159,588		(11,239)		(7.0)	%
Depreciation and amortization	142,467		133,907		(8,560)		(6.4)	%
Taxes other than income taxes	46,155		39,117		(7,038)		(18.0)	%


Regulatory disallowance	—		13,841		13,841		100.0	%
Total operating expenses	784,121		1,002,288		218,167		21.8	%
Operating income	227,197		203,856		23,341		11.4	%
Interest income	2,979		3,501		(522)		(14.9)	%
Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other income (expense), net	198		(5,852)		6,050		103.4	%
Interest charges	73,442		63,947		(9,495)		(14.8)	%
Federal and state income tax expense	4,185		5,800		1,615		27.8	%
Net income	$	157,170	$	134,462	$	22,708	16.9	%

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)	2023	2022	FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	3,003	2,978		0.8	%
Commercial	2,118	2,084		1.6	%
Industrial	1,661	1,690		(1.7)	%
Other retail	95	91		4.4	%
Total retail	6,877	6,843		0.5	%
Sales for resale	2,372	2,378		(0.3)	%
Total retail and wholesale customer sales	9,249	9,221		0.3	%

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	259,806	$	257,710		0.8	%
Commercial	151,242		151,595			(0.2)	%
Industrial	68,620		65,057			5.5	%
Other retail	8,970		8,268			8.5	%
Total retail	488,638		482,630			1.2	%
Sales for resale	44,240		45,668			(3.1)	%
Total base revenue	$	532,878	$	528,298		0.9	%

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,
				2023 CHANGE
	2023	2022	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	542	1,099	889	(50.7)	%	(39.0)	%
Cooling degree-days	3,404	2,787	2,647	22.1	%	28.6	%

Base

Base revenue increased $4.6 million primarily due to $3.6 million of higher usage as a result of warmer summer weather. Also contributing to the increase was $3.1 million of higher industrial and commercial customer usage and demand, partially due to new industrial customers in 2023. These increases were partially offset by $1.4 million of lower wholesale customer revenue largely due to the expiration of wholesale contracts in December 2022 and May 2023.

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 expenses. Approximately 77% of Cleco Power’s total fuel cost during the first nine months of 2023 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 recoverable 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 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 with the May 2021 bills. Cleco Power’s incremental fuel and purchased power costsexpenses for the ~~three~~nine months ended September 30, ~~2021,~~2023, were ~~also~~ impacted primarily by ~~higher~~lower natural gas costs ~~of lignite at~~as compared to the ~~Dolet Hills Power Station.~~nine months ended September 30, 2022. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — Litigation, Other Commitments and


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

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 — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits ~~increased $6.0~~decreased $5.6 million ~~during the third quarter of 2022 compared to the third quarter of 2021~~ primarily due to ~~$6.6 million for~~the absence of a 2022 refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund ~~is a~~was the result of the LPSC approved settlement disallowing the recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center. ~~For more information about the settlement and disallowance, see Item 1, “Notes~~

Securitization Revenue

Securitization revenue increased $20.4 million primarily due to the ~~Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation,~~ collection of storm recovery charges beginning in September 2022.

Other ~~Commitments~~Operations Revenue

Other operations revenue decreased $3.9 million primarily due to $2.5 million of lower transmission revenue. Also contributing to the decrease was $0.7 million of lower forfeited discounts due to an adjustment for COVID-19 lost revenue as well as lower customer bills in 2023. In addition, there was $0.5 million of lower reconnect fees largely due to the suspension of disconnections and ~~Contingencies,~~collection efforts in August and ~~Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”~~September 2023 due to high temperatures.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power ~~increased $6.9~~decreased $9.2 million ~~during the third quarter of 2022 compared to the third quarter of 2021~~ primarily due to ~~higher MISO~~$4.9 million for the timing of recovery of transmission ~~costs.~~costs and $3.7 million of lower fuel expense primarily due to the expiration of wholesale contracts in December 2022 and May 2023.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased ~~$1.9~~$11.2 million ~~during the third quarter of 2022 compared to the third quarter of 2021~~ primarily due to ~~$4.1~~$8.5 million of higher employee-related expenses largely related to ~~employee benefits, $1.3~~higher salaries and lower pension non-service costs. Also contributing to the increase was $2.1 million of higher ~~distribution operations expense~~outside service costs primarily related to information technology support and ~~$1.0~~consulting and $2.0 million of higher ~~generation outage maintenance~~materials and supplies expense. These increases were partially offset by ~~$2.3~~$2.0 million of lower ~~generation~~ routine ~~maintenance expense, $1.3 million of lower~~ generation ~~operations expense, and $1.1 million of lower distribution~~ maintenance expense.

Depreciation and Amortization

Depreciation and amortization increased $8.6 million primarily due to $10.7 million for the amortization of the securitized intangible asset that began in November 2022, $4.2 million related to a change in the estimated useful life of internal software, and $3.1 million of higher normal recurring additions to fixed assets. These increases were partially offset by $7.9 million for the absence of amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta and $2.0 million for the absence of amortization related to costs associated with lignite mining.

~~Taxes Other Than Income Taxes~~

~~Taxes other than income taxes increased $2.0 million during the third quarter of 2022 compared to the third quarter of 2021 primarily due to higher property taxes.~~

Regulatory Disallowance

Regulatory disallowance ~~increased~~decreased $13.8 million ~~during the third quarter of 2022 compared~~due to the ~~third quarter~~absence of ~~2021 for~~ the impairment charge resulting from the LPSC approved settlement disallowing the 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 $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 expense increased $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 910 — Income Taxes — Effective Tax Rates.”

Comparison of the Nine Months Ended September 30, 2023, and 2022


Cleco
	FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue, net	$	999,222	$	1,194,145	$	(194,923)	(16.3)	%
Operating expenses	893,956		770,707		(123,249)		(16.0)	%
Operating income	105,266		423,438		(318,172)		(75.1)	%
Interest income	3,223		3,575		(352)		(9.8)	%
Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other expense, net	(2,656)		(13,699)		11,043		80.6	%
Interest charges	122,289		105,494		(16,795)		(15.9)	%
Federal and state income tax (benefit) expense	(121,160)		30,472		151,632		497.6	%
Income from continuing operations, net of income taxes	109,127		280,052		(170,925)		(61.0)	%
Loss from discontinued operations, net of income taxes	(9,707)		(54,573)		44,866		82.2	%
Net income	$	99,420	$	225,479	$	(126,059)	(55.9)	%

The decrease in Cleco’s results of operations is primarily attributable to the following:

•activity of its reportable segment, Cleco Power. For detailed discussions of those impacts, see “— Cleco Power.”

5754


CLECO
CLECO POWER						~~2022~~2023 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, 2022, compared to the nine months ended September 30, 2021, primarily due to $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 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 $1.0 million for the change in pretax income, excluding AFUDC equity.

The estimated annual effective income tax rates used during the nine months ended 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	Cleco Power									Cleco Power
				FOR THE NINE MONTHS ENDED SEPT. 30,									FOR THE NINE MONTHS ENDED SEPT. 30,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2022		2021		VARIANCE		CHANGE		(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue	Operating revenue									Operating revenue
Base	Base	$	533,323	$	499,653	$	33,670	6.7	%	Base	$	532,878	$	528,298	$	4,580	0.9	%
Fuel cost recovery	Fuel cost recovery	612,541		387,538		225,003		58.1	%	Fuel cost recovery	390,807		612,541		(221,734)		(36.2)	%
Electric customer credits	Electric customer credits	(6,992)		(40,429)		33,437		82.7	%	Electric customer credits	(1,362)		(6,992)		5,630		80.5	%
Securitization revenue										Securitization revenue	25,444		5,025		20,419		406.3	%
Other operations	Other operations	62,528		57,674		4,854		8.4	%	Other operations	58,584		62,528		(3,944)		(6.3)	%
Affiliate revenue	Affiliate revenue	4,744		4,259		485		11.4	%	Affiliate revenue	4,967		4,744		223		4.7	%
Operating revenue, net	Operating revenue, net	1,206,144		908,695		297,449		32.7	%	Operating revenue, net	1,011,318		1,206,144		(194,826)		(16.2)	%
Operating expenses	Operating expenses									Operating expenses
Recoverable fuel and purchased power	Recoverable fuel and purchased power	612,791		387,730		(225,061)		(58.0)	%	Recoverable fuel and purchased power	390,843		612,791		221,948		36.2	%
Non-recoverable fuel and purchased power	Non-recoverable fuel and purchased power	43,044		26,739		(16,305)		(61.0)	%	Non-recoverable fuel and purchased power	33,829		43,044		9,215		21.4	%
Other operations and maintenance	Other operations and maintenance	159,588		162,448		2,860		1.8	%	Other operations and maintenance	170,827		159,588		(11,239)		(7.0)	%
Depreciation and amortization	Depreciation and amortization	133,907		126,534		(7,373)		(5.8)	%	Depreciation and amortization	142,467		133,907		(8,560)		(6.4)	%
Taxes other than income taxes	Taxes other than income taxes	39,117		36,707		(2,410)		(6.6)	%	Taxes other than income taxes	46,155		39,117		(7,038)		(18.0)	%

Regulatory disallowance	Regulatory disallowance	13,841		—		(13,841)		(100.0)	%	Regulatory disallowance	—		13,841		13,841		100.0	%
Total operating expenses	Total operating expenses	1,002,288		740,158		(262,130)		(35.4)	%	Total operating expenses	784,121		1,002,288		218,167		21.8	%
Operating income	Operating income	203,856		168,537		35,319		21.0	%	Operating income	227,197		203,856		23,341		11.4	%
Interest income	Interest income	3,501		2,404		1,097		45.6	%	Interest income	2,979		3,501		(522)		(14.9)	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	2,704		2,703		1		—	%	Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other expense, net		(5,852)		(16,064)		10,212		63.6	%
Other income (expense), net										Other income (expense), net	198		(5,852)		6,050		103.4	%
Interest charges	Interest charges	63,947		55,392		(8,555)		(15.4)	%	Interest charges	73,442		63,947		(9,495)		(14.8)	%
Federal and state income tax expense (benefit)		5,800		(219)		(6,019)		*
Federal and state income tax expense										Federal and state income tax expense	4,185		5,800		1,615		27.8	%
Net income	Net income	$	134,462	$	102,407	$	32,055	31.3	%	Net income	$	157,170	$	134,462	$	22,708	16.9	%
* 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,						FOR THE NINE MONTHS ENDED SEPT. 30,
(Million kWh)	(Million kWh)	2022	2021	FAVORABLE/ (UNFAVORABLE)			(Million kWh)	2023	2022	FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales						Electric sales
Residential	Residential	2,978	2,897		2.8	%	Residential	3,003	2,978		0.8	%
Commercial	Commercial	2,084	1,968		5.9	%	Commercial	2,118	2,084		1.6	%
Industrial	Industrial	1,690	1,564		8.1	%	Industrial	1,661	1,690		(1.7)	%
Other retail	Other retail	91	98		(7.1)	%	Other retail	95	91		4.4	%
Total retail	Total retail	6,843	6,527		4.8	%	Total retail	6,877	6,843		0.5	%
Sales for resale	Sales for resale	2,378	2,253		5.5	%	Sales for resale	2,372	2,378		(0.3)	%
Total retail and wholesale customer sales	Total retail and wholesale customer sales	9,221	8,780		5.0	%	Total retail and wholesale customer sales	9,249	9,221		0.3	%


~~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,								FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	(THOUSANDS)	2022		2021		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2023		2022		FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales								Electric sales
Residential	Residential	$	257,710	$	241,433		6.7	%	Residential	$	259,806	$	257,710		0.8	%
Commercial	Commercial	151,595		142,075			6.7	%	Commercial	151,242		151,595			(0.2)	%
Industrial	Industrial	65,057		65,083			—	%	Industrial	68,620		65,057			5.5	%
Other retail	Other retail	8,268		8,380			(1.3)	%	Other retail	8,970		8,268			8.5	%
Storm recovery surcharge		5,025		—			100.0	%
Total retail	Total retail	487,655		456,971			6.7	%	Total retail	488,638		482,630			1.2	%
Sales for resale	Sales for resale	45,668		42,682			7.0	%	Sales for resale	44,240		45,668			(3.1)	%
Total base revenue	Total base revenue	$	533,323	$	499,653		6.7	%	Total base revenue	$	532,878	$	528,298		0.9	%


				FOR THE NINE MONTHS ENDED SEPT. 30,								FOR THE NINE MONTHS ENDED SEPT. 30,
					2022 CHANGE								2023 CHANGE
		2022	2021	NORMAL	PRIOR YEAR		NORMAL			2023	2022	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	Heating degree-days	1,099	985	942	11.6	%	16.7	%	Heating degree-days	542	1,099	889	(50.7)	%	(39.0)	%
Cooling degree-days	Cooling degree-days	2,787	2,715	2,531	2.7	%	10.1	%	Cooling degree-days	3,404	2,787	2,647	22.1	%	28.6	%

Base

Base revenue increased ~~$33.7~~$4.6 million ~~during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021,~~ primarily due to ~~$14.9~~$3.6 million of higher usage ~~from warmer summer weather and colder winter weather, $12.0 million for higher rates~~ as a result of warmer summer weather. Also contributing to the ~~implementation~~increase was $3.1 million of ~~Cleco Power’s~~higher industrial and commercial customer usage and demand, partially due to new ~~retail rate plan, and $10.1 million for higher storm recovery revenue.~~industrial customers in 2023. These increases were partially offset by ~~$2.9~~$1.4 million of lower ~~demand charges for industrial customers.~~wholesale customer revenue largely due to the expiration of wholesale contracts in December 2022 and May 2023.

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~~expenses for the nine months ended September 30, ~~2021,~~2023, were ~~also~~ impacted primarily by ~~higher~~lower natural gas costs ~~of lignite at~~as compared to the ~~Dolet Hills Power Station.~~nine months ended September 30, 2022. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — 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

6055


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

~~by $7.3~~Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.”

Electric Customer Credits

Electric customer credits decreased $5.6 million primarily due to the absence of a 2022 refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund was the result of the LPSC approved settlement disallowing the recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center.

Securitization Revenue

Securitization revenue increased $20.4 million primarily due to the collection of storm recovery charges beginning in September 2022.

Other Operations Revenue

Other operations revenue decreased $3.9 million primarily due to $2.5 million of lower transmission revenue. Also contributing to the decrease was $0.7 million of lower forfeited discounts due to an adjustment for COVID-19 lost revenue as well as lower customer bills in 2023. In addition, there was $0.5 million of lower reconnect fees largely due to the suspension of disconnections and collection efforts in August and September 2023 due to high temperatures.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power decreased $9.2 million primarily due to $4.9 million for the timing of recovery of transmission costs and $3.7 million of lower fuel expense primarily due to the expiration of wholesale contracts in December 2022 and May 2023.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased $11.2 million primarily due to $8.5 million of higher employee-related expenses largely related to ~~employee benefits~~higher salaries and ~~$2.7~~lower pension non-service costs. Also contributing to the increase was $2.1 million of higher ~~distribution operations~~outside service costs primarily related to information technology support and consulting and $2.0 million of higher materials and supplies expense. These increases were partially offset by $2.0 million of lower routine generation maintenance expense.

Depreciation and Amortization

Depreciation and amortization increased ~~$7.4~~$8.6 million ~~during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021,~~ primarily due to $10.7 million for the amortization of the securitized intangible asset that began in November 2022, $4.2 million related to a change in the estimated useful life of internal software, and $3.1 million of higher normal recurring additions to fixed assets. These increases were partially offset by $7.9 million for the absence of amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta and ~~$1.3~~$2.0 million for the absence of ~~an adjustment~~amortization related to ~~the corporate franchise tax regulatory asset. These amounts were partially offset by $3.3 million of normal recurring additions to fixed assets.~~costs associated with lignite mining.

~~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~~decreased $13.8 million ~~during the nine months ended September 30, 2022, compared~~due to the ~~nine months ended September 30, 2021, for~~absence of the impairment charge resulting from the LPSC approved settlement disallowing the 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 910 — Income Taxes — Effective Tax Rates.”

Cleco Cajun
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2022 2021 VARIANCE CHANGE
Operating revenue
Electric operations $ 370,489 $ 300,415 $ 70,074 23.3 %
Electric customer credits — 244 (244) (100.0) %
Other operations 111,897 98,851 13,046 13.2 %
Operating revenue, net 482,386 399,510 82,876 20.7 %
Operating expenses
Fuel used for electric generation (109,075) (112,350) (3,275) (2.9) %
Purchased power 275,531 190,825 (84,706) (44.4) %
Other operations and maintenance 71,942 68,398 (3,544) (5.2) %
Depreciation and amortization 55,866 33,567 (22,299) (66.4) %
Taxes other than income taxes 9,292 11,366 2,074 18.2 %
Total operating expenses 303,556 191,806 (111,750) (58.3) %
Operating income 178,830 207,704 (28,874) (13.9) %
Interest income 661 10 651 *
Other income (expense), net 88 (648) 736 113.6 %
Interest charges 253 786 533 67.8 %
Federal and state income tax expense 47,136 52,561 5,425 10.3 %
Net income $ 132,190 $ 153,719 $ (21,529) (14.0) %
* Not meaningful

Comparison of the Nine Months Ended September 30, 2023, and 2022

~~Electric Operations~~

Electric operations revenue increased $70.1 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to $66.8 million of higher fuel rates, $5.4 million of higher MISO pass-through revenue, and $3.7 million of higher load volumes. These increases were partially offset by $6.4 million for the absence of two power supply agreements.


Cleco
	FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue, net	$	999,222	$	1,194,145	$	(194,923)	(16.3)	%
Operating expenses	893,956		770,707		(123,249)		(16.0)	%
Operating income	105,266		423,438		(318,172)		(75.1)	%
Interest income	3,223		3,575		(352)		(9.8)	%
Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other expense, net	(2,656)		(13,699)		11,043		80.6	%
Interest charges	122,289		105,494		(16,795)		(15.9)	%
Federal and state income tax (benefit) expense	(121,160)		30,472		151,632		497.6	%
Income from continuing operations, net of income taxes	109,127		280,052		(170,925)		(61.0)	%
Loss from discontinued operations, net of income taxes	(9,707)		(54,573)		44,866		82.2	%
Net income	$	99,420	$	225,479	$	(126,059)	(55.9)	%

~~Other Operations Revenue~~

~~Other~~The decrease in Cleco’s results of operations ~~revenue increased $13.0 million during the nine months ended September 30, 2022, compared~~is primarily attributable to the ~~nine months ended September 30, 2021, primarily due to $10.8 million of higher transmission revenue and $2.2 million of higher variable lease revenue from the Cottonwood Sale Leaseback.~~following:

~~Fuel Used for Electric Generation~~•activity of its reportable segment, Cleco Power. For detailed discussions of those impacts, see “— Cleco Power.”

~~Fuel used for electric generation increased $3.3 million during~~ •the ~~nine months ended September 30, 2022, compared~~effects of the presentation of the Cleco Cajun Sale Group as discontinued operations and, as a result, Cleco Cajun no longer being reflected as a reportable segment. For information on discontinued operations, see Item 1, “Notes to the ~~nine months ended September 30, 2021, primarily due~~Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

For more information on Cleco’s effective income tax rates on continuing operations, see Item 1, “Notes 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~~Unaudited Condensed Consolidated Financial Statements — Note 10 — Income Taxes — Effective Tax Rates.”

6154


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

~~prices~~


Cleco Power
			FOR THE NINE MONTHS ENDED SEPT. 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2023		2022		VARIANCE		CHANGE
Operating revenue
Base	$	532,878	$	528,298	$	4,580	0.9	%
Fuel cost recovery	390,807		612,541		(221,734)		(36.2)	%
Electric customer credits	(1,362)		(6,992)		5,630		80.5	%
Securitization revenue	25,444		5,025		20,419		406.3	%
Other operations	58,584		62,528		(3,944)		(6.3)	%
Affiliate revenue	4,967		4,744		223		4.7	%
Operating revenue, net	1,011,318		1,206,144		(194,826)		(16.2)	%
Operating expenses
Recoverable fuel and purchased power	390,843		612,791		221,948		36.2	%
Non-recoverable fuel and purchased power	33,829		43,044		9,215		21.4	%
Other operations and maintenance	170,827		159,588		(11,239)		(7.0)	%
Depreciation and amortization	142,467		133,907		(8,560)		(6.4)	%
Taxes other than income taxes	46,155		39,117		(7,038)		(18.0)	%


Regulatory disallowance	—		13,841		13,841		100.0	%
Total operating expenses	784,121		1,002,288		218,167		21.8	%
Operating income	227,197		203,856		23,341		11.4	%
Interest income	2,979		3,501		(522)		(14.9)	%
Allowance for equity funds used during construction	4,423		2,704		1,719		63.6	%
Other income (expense), net	198		(5,852)		6,050		103.4	%
Interest charges	73,442		63,947		(9,495)		(14.8)	%
Federal and state income tax expense	4,185		5,800		1,615		27.8	%
Net income	$	157,170	$	134,462	$	22,708	16.9	%

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(Million kWh)	2023	2022	FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	3,003	2,978		0.8	%
Commercial	2,118	2,084		1.6	%
Industrial	1,661	1,690		(1.7)	%
Other retail	95	91		4.4	%
Total retail	6,877	6,843		0.5	%
Sales for resale	2,372	2,378		(0.3)	%
Total retail and wholesale customer sales	9,249	9,221		0.3	%

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


	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	259,806	$	257,710		0.8	%
Commercial	151,242		151,595			(0.2)	%
Industrial	68,620		65,057			5.5	%
Other retail	8,970		8,268			8.5	%
Total retail	488,638		482,630			1.2	%
Sales for resale	44,240		45,668			(3.1)	%
Total base revenue	$	532,878	$	528,298		0.9	%


			FOR THE NINE MONTHS ENDED SEPT. 30,
				2023 CHANGE
	2023	2022	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	542	1,099	889	(50.7)	%	(39.0)	%
Cooling degree-days	3,404	2,787	2,647	22.1	%	28.6	%

Base

Base revenue increased $4.6 million primarily due to $3.6 million of higher usage as a result of warmer summer weather. Also contributing to the increase was ~~$20.6~~$3.1 million of higher industrial and commercial customer usage and demand, partially due to new industrial customers in 2023. These increases were partially offset by $1.4 million of lower ~~mark-to-market gains~~wholesale customer revenue largely due to the expiration of wholesale contracts in December 2022 and May 2023.

For information on ~~gas related derivative contracts and $7.2 million~~the effects of ~~reagent expense. These increases were offset by $105.3 million~~future energy sales on the results of ~~settlements related to gas swaps activity.~~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, 2022.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power

~~Purchased~~Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power ~~increased $84.7 million~~expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such expenses. Approximately 77% of Cleco Power’s total fuel cost during the first nine months of 2023 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 recoverable fuel and purchased power expenses for the nine months ended September 30, ~~2022,~~2023, were impacted primarily by lower natural gas costs as compared to the nine months ended September 30, ~~2021,~~2022. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 14 — Litigation, Other Commitments and


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.”

Electric Customer Credits

Electric customer credits decreased $5.6 million primarily due to ~~$69.9~~the absence of a 2022 refund to Cleco Power’s retail customers for costs recovered in periods prior to September 30, 2022. The refund was the result of the LPSC approved settlement disallowing the recovery of a portion of planning and construction costs incurred for the St. Mary Clean Energy Center.

Securitization Revenue

Securitization revenue increased $20.4 million primarily due to the collection of storm recovery charges beginning in September 2022.

Other Operations Revenue

Other operations revenue decreased $3.9 million primarily due to $2.5 million of ~~higher costs~~lower transmission revenue. Also contributing to the decrease was $0.7 million of lower forfeited discounts due to an adjustment for COVID-19 lost revenue as well as lower customer bills in 2023. In addition, there was $0.5 million of lower reconnect fees largely due to the suspension of disconnections and collection efforts in August and September 2023 due to high temperatures.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power ~~from MISO~~decreased $9.2 million primarily due to $4.9 million for the timing of recovery of transmission costs and ~~$11.4~~$3.7 million of ~~higher transmission costs.~~lower fuel expense primarily due to the expiration of wholesale contracts in December 2022 and May 2023.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased ~~$3.5~~$11.2 million ~~during the nine months ended September 30, 2022, compared~~primarily due to $8.5 million of higher employee-related expenses largely related to higher salaries and lower pension non-service costs. Also contributing to the ~~nine months ended September 30, 2021,~~increase was $2.1 million of higher outside service costs primarily ~~due~~related to information technology support and consulting and $2.0 million of higher ~~generating outage maintenance expense~~materials and ~~$1.5~~supplies expense. These increases were partially offset by $2.0 million of ~~higher generating~~lower routine generation maintenance expense.

Depreciation and Amortization

Depreciation and amortization increased ~~$22.3~~$8.6 million ~~during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021,~~ primarily due to ~~higher depreciation on ARO assets as~~$10.7 million for the amortization of the securitized intangible asset that began in November 2022, $4.2 million related to a ~~result of an increase to those assets recorded~~change in the ~~third quarter~~estimated useful life of ~~2021~~internal software, and $3.1 million of higher normal recurring additions to ~~comply~~fixed assets. These increases were partially offset by $7.9 million for the absence of amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta and $2.0 million for the absence of amortization related to costs associated with ~~the final CCR Rule, as well as a reduction to the remaining lives of those assets.~~lignite mining.

Taxes Other Than Income Taxes

Taxes other than income taxes ~~decreased $2.1~~increased $7.0 million ~~during~~primarily due to the ~~nine months ended September 30, 2022, compared to~~amortization of the Madison Unit 3 property tax regulatory asset that began in July 2022.

~~nine months ended September 30, 2021,~~Regulatory Disallowance

Other Income (Expense), Net

Other income (expense), net increased $6.1 million primarily due to ~~lower property taxes.~~the absence of non-service pension costs amortization as a result of an increase in the discount rate which caused actuarial gains.

Interest Charges

Interest charges increased $9.5 million primarily due to $8.9 million for interest on storm recovery bonds issued in June 2022 by Cleco Securitization I and $3.7 million related to higher interest rates on variable rate debt. These increases were partially offset by $2.7 million for the absence of interest on floating rate senior notes that were redeemed at par in June 2022.

Income Taxes

Federal and state income tax expense decreased $5.4 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to the change in pretax income.

~~The~~For more information on Cleco Power’s effective income tax rates, ~~for~~see Item 1, “Notes to the nine months ended September 30, 2022, and 2021 were 26.3% and 25.5%, respectively. 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.Unaudited Condensed Consolidated Financial Statements — Note 10 — Income Taxes — Effective Tax Rates.”

Non-GAAP Measure

The financial results in the following ~~tables~~table 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;~~segment; however, it is not indicative of future performance. Management evaluates the performance of Cleco’s ~~segments~~segment and allocates resources to ~~them~~it 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 financial information for historical periods provided in this report has been recast to reflect the presentation of the Cleco Cajun Sale Group as discontinued operations. Cleco’s segment structure and its allocation of corporate expenses were updated to reflect how management makes financial decisions and allocates resources. Cleco has recast data from prior periods to reflect this change to conform to the current year presentation. For more information, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

The following ~~tables set~~table sets forth a reconciliation of net income, the nearest comparable GAAP financial performance measure, to EBITDA for the three and nine months ended September 30, 2023, and 2022 ~~and 2021:~~

for the Cleco Power reportable segment:

FOR THE THREE MONTHS ENDED SEPT. 30,
2022 2021
(THOUSANDS) CLECO POWER CLECO CAJUN CLECO POWER CLECO CAJUN
Net income (loss) $ 40,733 $ 39,741 $ 56,561 $ 86,744
Add: Depreciation and amortization 44,368 13,336 (1) 43,526 12,623 (2)
Less: Interest income 1,726 472 936 4
Add: Interest charges 23,840 219 18,509 1,117
Add: Federal and state income tax expense 1,862 14,461 548 29,888
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 $3.6 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,
2022 2021
(THOUSANDS) CLECO POWER CLECO CAJUN CLECO POWER CLECO CAJUN
Net income $ 134,462 $ 132,190 $ 102,407 $ 153,719
Add: Depreciation and amortization 133,907 59,734 (1) 126,534 36,614 (2)
Less: Interest income 3,501 661 2,404 10
Add: Interest charges 63,947 253 55,392 786
Add: Federal and state income tax expense (benefit) 5,800 47,136 (219) 52,561
EBITDA $ 334,615 $ 238,652 $ 281,710 $ 243,670
(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.

6256


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q


	FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022

Net income	$	90,914	$	40,733
Add: Depreciation and amortization	48,012		44,368
Less: Interest income	1,215		1,726
Add: Interest charges	24,921		23,840
Add: Federal and state income tax (benefit) expense	(552)		1,862
EBITDA	$	162,080	$	109,077


	FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022
Net income	$	157,170	$	134,462
Add: Depreciation and amortization	142,467		133,907
Less: Interest income	2,979		3,501
Add: Interest charges	73,442		63,947
Add: Federal and state income tax expense	4,185		5,800
EBITDA	$	374,285	$	334,615


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, ~~2022:~~2023:

SENIOR UNSECURED DEBT

CORPORATE/LONG-TERM ISSUER

S&P

MOODY’S

FITCH

S&P

MOODY’S

FITCH

Cleco Holdings

BBB-

Baa3

BBB-

Baa3

BBB-

Cleco Power

BBB+

BBB

Credit ratings are not recommendations to buy, sell, or hold securities, and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

On April 1, 2022, and following the LPSC’s authorization of the securitization financing of Cleco Power’s storm restoration costs, S&P revised its outlook on Cleco Holdings and Cleco Power to stable from negative. S&P revised its outlook due to its expectation that Cleco’s financial metrics and balance sheet would improve given the upcoming securitization of storm restoration costs. On June 22, 2022, the storm securitization 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~~bilateral transactions and contracts that Cleco has entered into or may ~~initiate~~enter into in the future. The amount of

credit support ~~that Cleco~~required may ~~be required to provide at any point in the future is dependent~~change based on ~~the notional value of the initial contract, changes in forward market prices, changes in the volume of open contracts,~~margining formulas, changes in credit agency ratings, or credit quality where netting agreements 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.liquidity ratios.

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. 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, ~~2021.~~2022. For more information about credit support see Item 1, “Financial Statements and Supplementary Data — Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees.”

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 rising interest rates the Registrants have recently been exposed to have negatively affected interest expense on variable rate debt and positively affected interest income for the Registrants’ short-term investments.

~~Recently,~~In recent years, 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 current retail rate plan, which included the settlement of the TCJA protected and unprotected excess ADIT. 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 Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1112 — Regulation and Rates — TCJA.”


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

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 company purposes. For ~~more~~ information on 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, 2023, and December 31, 2022, Cleco had ~~$87.0~~$105.0 million and $109.0 million, respectively, of short-term debt for outstanding borrowings under its aggregate $475.0 million revolving credit facilities. ~~At December 31, 2021, Cleco had no short-term debt outstanding.~~For more information on Cleco’s revolving credit facilities, see “— Credit Facilities.”

At September 30, ~~2022,~~2023, Cleco’s long-term debt and finance leases outstanding ~~totaled $3.57~~was $3.47 billion, of which ~~$268.0~~$372.2 million was due within one year. The long-term debt due within one year at September 30, ~~2022,~~2023, primarily represents ~~$165.0~~$132.3 million of Cleco Holdings’ ~~senior notes~~bank term loan due in May ~~2023, $67.7~~2024, of which $65.6 million ~~of principal payments on Cleco Holdings’ debt~~is due by December 2023 as required by the Cleco Cajun Transaction commitments to the ~~LPSC, $25.0~~LPSC; $125.0 million of Cleco Power’s bank term loan due in May 2024; $100.0 million of Cleco Power’s senior notes due in December ~~2022,~~2023; and ~~$9.6~~$14.5 million of Cleco Securitization I storm recovery bond principal payments ~~due~~scheduled to be paid in March and September 2024.

On February 17, 2023, Cleco Holdings and Cleco Power amended their respective bank term loans to transition the benchmark interest rate from LIBOR to SOFR.

Proceeds from the divestiture of the Cleco Cajun Sale Group, which is subject to customary regulatory and Board of Managers approvals, must be used to satisfy the LPSC commitment related to the debt that funded the Cleco Cajun Transaction. For more information, ~~about the storm recovery bonds,~~ see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 73 — ~~Debt.~~Discontinued Operations.”

~~Cash~~At September 30, 2023, cash and cash equivalents available ~~at September 30, 2022, were $103.1~~of $181.9 million combined with ~~$388.0~~$370.0 million of available revolving credit facility capacity ($~~165.0~~70.0 million from Cleco Holdings and ~~$223.0~~$300.0 million from Cleco Power) ~~for~~provided a total liquidity of ~~$491.1~~$551.9 million. ~~For more information on the credit facility capacity, see “— Credit Facilities.”~~

At September 30, 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, ~~2022,~~2023, and December 31, ~~2021,~~2022, Cleco had a working capital surplus of ~~$112.6~~$89.5 million and ~~$254.8~~deficit of $88.8 million, respectively. The ~~$142.2~~$178.3 million ~~decrease~~increase in working capital is primarily due to:

•a ~~$174.5~~$110.2 million increase in ~~long-term debt~~cash, cash equivalents, restricted cash, and restricted cash equivalents,

•an $80.3 million increase in taxes receivable primarily due ~~within one year~~to an accrual to record federal income taxes at the projected annual effective rate,

•a $72.3 million increase in the net assets and liabilities held for sale primarily due to the reclassification of all assets and liabilities related to the 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,~~Cajun Sale Group,

•a ~~$87.0~~$36.4 million ~~increase~~decrease in ~~short-term debt~~accounts payable, excluding Cleco Power’s FTRs, primarily due to ~~outstanding draws on Cleco’s~~lower accruals for natural gas, solid fuels, and ~~Cleco Power’s revolving credit facilities,~~generating station outage maintenance,

•a ~~$45.5~~$16.9 million increase in ~~taxes payable~~materials and supplies inventory primarily due to ~~accruals~~higher purchases of ~~property taxes~~transmission and ~~federal~~distribution inventory in order to support future needs and ~~state income taxes,~~mitigate future supply chain uncertainty, and

•~~a $45.4~~an $11.7 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~~regulatory liabilities primarily due to the ~~recognition of a death benefit and unfavorable market conditions at Cleco Holdings, and~~

•~~a $10.1 million decrease in other current assets primarily due to the settlement~~reclassification of the ~~indemnification asset as a result~~short-term portion of the ~~settlement of a South Central Generating lawsuit in January 2022.~~TCJA regulatory liability amortization.

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

•a ~~$68.3~~$37.4 million ~~increase~~decrease in ~~customer accounts receivable~~accumulated deferred fuel, excluding Cleco Power’s FTRs, primarily due to ~~warmer summer weather and timing of collections from customers,~~lower fuel costs,

•a ~~$43.8~~$33.3 million increase in ~~fuel inventory~~taxes payable primarily due to an accrual for property tax payments and higher ~~petroleum coke at~~provision for federal and state income taxes,

•a $31.4 million increase in long-term debt and finance leases due within one year primarily due to the reclassification of $125.0 million of Cleco ~~Power~~Power’s bank term loan due in May 2024, $66.7 million of Cleco Holdings’ bank term loan due in May 2024, and an additional $4.9 million of scheduled principal payments on Cleco Securitization I’s storm recovery bonds, partially offset by the reclassification of Cleco Holdings’ $165.0 million senior notes due in 2023 to long-term debt 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,~~the extension of the maturity date of such senior notes to May 1, 2025,

•a ~~$38.2~~$27.0 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 ~~$22.5~~$14.7 million increase in ~~accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to higher fuel costs and the timing of collections,~~

•~~a $21.7 million increase in other accounts receivable~~accrued interest primarily due to the ~~settlement~~accrual of ~~gas-related derivative contracts at~~interest on Cleco ~~Cajun~~Holdings’ and ~~an increase in rents receivable for pole attachments at~~ Cleco ~~Power,~~Power’s bonds, and

•~~a $17.7~~an $11.7 million ~~increase~~decrease in regulatory assets primarily due to withdrawing the ~~reclassification~~remaining balance of the ~~short-term portion~~Hurricane Ida regulatory asset from the related storm reserve following the settlement of the ~~regulatory assets related to deferred storm restoration costs, Madison Unit 3 property tax, and Bayou Vista to Segura,~~prudency review.

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

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

•~~a $10.1 million increase in affiliate accounts receivable due to estimated income taxes paid by Cleco Holdings on behalf of Cleco Group.~~


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

Cleco Holdings

At September 30, 2023, and December 31, 2022, Cleco Holdings had ~~$10.0~~$105.0 million and $64.0 million, respectively, of short-term debt for 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, ~~2022.~~2023.

At September 30, ~~2022,~~2023, Cleco Holdings’ long-term debt outstanding was ~~$1.54~~$1.58 billion, of which ~~$232.6~~$132.0 million was due within one year. The long-term debt due within one year at


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

September 30, ~~2022,~~2023, primarily represents ~~$165.0~~the $132.3 million ~~of Cleco Holdings’ senior notes~~bank term loan due in May ~~2023 and $67.7~~2024, of which $65.6 million ~~of principal payments on Cleco Holdings’ debt~~is due by December 2023 as required by the Cleco Cajun Transaction commitments to the LPSC.

~~Cash~~At September 30, 2023, cash and cash equivalents available at Cleco Holdings ~~at September 30, 2022, were $7.6~~of $6.6 million combined with ~~$165.0~~$70.0 million of available revolving credit facility capacity ~~for~~provided a total liquidity of ~~$172.6~~$76.6 million.

Cleco Power

At September 30, 2023, Cleco Power had no short-term debt. At December 31, 2022, Cleco Power had ~~$77.0~~$45.0 million, of short-term debt for outstanding borrowings under its $300.0 million revolving credit facility. ~~At December 31, 2021,~~For more information on Cleco ~~Power had no short-term debt outstanding.~~Power’s revolving credit facility, see “— Credit Facilities.”

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 its working capital needs. There were no amounts outstanding under the uncommitted line of credit at September 30, ~~2022.~~

On June 22, 2022, Cleco Securitization I issued $425.0 million aggregate principal amount of its senior secured storm recovery bonds. For more information on the 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.~~2023.

At September 30, ~~2022,~~2023, Cleco Power’s long-term debt and finance leases outstanding was ~~$1.92~~$1.89 billion, of which ~~$35.4~~$240.3 million was due within one year. The ~~amount~~long-term debt due within one year at September 30, 2023, primarily represents ~~$25.0~~the $125.0 million bank term loan due in May 2024, $100.0 million of senior notes due in December ~~2022~~2023, and ~~$9.6~~$14.5 million of Cleco Securitization I storm recovery bond principal payments ~~due~~scheduled to be paid in March and September ~~2023.~~2024.

~~Cash~~At September 30, 2023, cash and cash equivalents available ~~at September 30, 2022, were $36.3~~of $108.0 million combined with ~~$223.0~~$300.0 million of available revolving credit facility capacity ~~for~~provided a total liquidity of ~~$259.3~~$408.0 million.

At September 30, ~~2022, and~~2023, Cleco Power had a working capital deficit of $9.4 million. At December 31, ~~2021,~~2022, Cleco Power had a working capital surplus of ~~$122.5~~$35.9 million. The $45.3 million ~~and $110.2 million, respectively. The $12.3 million increase~~decrease in working capital is primarily due to:

•a ~~$58.9~~$129.9 million ~~decrease~~increase in ~~affiliate accounts payable~~long-term debt and finance leases due within one year primarily due to the ~~settlement~~reclassification of ~~intercompany taxes payable,~~Cleco Power’s $125.0 million bank term loan due in May 2024 and an additional $4.9 million of scheduled principal payments on Cleco Securitization I’s storm recovery bonds,

•a ~~$55.3~~$37.4 million ~~increase in customer accounts receivable primarily due to warmer summer weather and timing of 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 $22.5 million increase~~decrease in accumulated deferred fuel, excluding FTRs, primarily due to ~~rising~~lower fuel costs, ~~and the timing of collections,~~

•a ~~$17.7~~$35.2 million increase in taxes payable primarily due to an accrual for property tax payments, and

•an $11.7 million decrease in regulatory assets primarily due to withdrawing the ~~reclassification~~remaining balance of the ~~short-term portion~~Hurricane Ida regulatory asset from the storm reserve following the completion 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 restricted cash and cash equivalents primarily due to amounts restricted for Hurricane Ida storm restoration costs, and~~

•~~an $11.4 million increase in materials and supplies inventory primarily due to higher purchases at higher costs per unit.~~prudency review.

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

•a ~~$77.0~~$76.1 million increase in cash, cash equivalents, restricted cash, and restricted cash equivalents,

•a $45.0 million decrease in short-term debt primarily due to lower outstanding draws on the revolving credit facility,

•a ~~$49.4~~$36.6 million decrease in ~~cash~~accounts payable, excluding FTRs, primarily due to lower accruals for natural gas, solid fuels, and ~~cash equivalents,~~generating station outage maintenance,

•a ~~$41.3~~$16.9 million increase in ~~taxes payable~~materials and supplies inventory primarily due to ~~accruals~~higher purchases of ~~property taxes~~transmission and ~~federal~~distribution inventory in order to support future needs and ~~state income taxes,~~

•~~a $21.5 million increase in interest accrued primarily due to timing of payments of long-term debt,~~mitigate future supply chain uncertainty, and

•an ~~$11.1~~$11.7 million decrease in ~~affiliate accounts receivable~~regulatory liabilities primarily due to the ~~settlement~~reclassification of ~~intercompany receivables.~~the short-term portion of the TCJA regulatory liability amortization.

Credit Facilities

At September 30, ~~2022,~~2023, Cleco had two separate revolving credit facilities, one for Cleco Holdings in the amount of $175.0 million with ~~$10.0~~$105.0 million of outstanding borrowings and one for Cleco Power in the amount of $300.0 million with ~~$77.0 million of~~no outstanding borrowings. ~~These~~On February 17, 2023, Cleco Holdings and Cleco Power amended their respective revolving credit ~~agreements were entered into on May 21, 2021, and replaced~~facilities to transition the ~~respective previously existing agreements.~~benchmark interest rate from LIBOR to SOFR. The total of all revolving credit facilities ~~creates~~maintains a maximum aggregate capacity of $475.0 million. Cleco and Cleco Power had no amounts outstanding under their uncommitted lines of credit at September 30, 2023.

Cleco Holdings’ revolving credit facility provides funding for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and ~~expires~~matures 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, ~~2022,~~2023, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At September 30, ~~2022,~~2023, the borrowing costs for amounts drawn under the facility were equal to ~~LIBOR~~SOFR plus ~~1.625%~~1.725% 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~~matures in May 2026. Under covenants contained in Cleco


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

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, ~~2022,~~2023, Cleco Power was in compliance with the covenants of its revolving credit facility. At September 30, ~~2022,~~2023, the borrowing costs for amounts drawn under the facility were equal to ~~LIBOR~~SOFR plus ~~1.25%~~1.35% 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~~not comply with certain 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 under the respective credit facility or debt agreement 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.


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

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, ~~2022,~~2023, 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, ~~2022,~~2023, 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, ~~2021.~~2022.

~~Cleco~~ Cash Flows

Cleco’s operating, investing, and financing cash flows include both continuing and discontinued operations. For information on the cash flows from discontinued operations, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

Cleco’s and Cleco Power’s net cash activities are as follows for the nine months ended September 30, 2023, and 2022:


	CLECO						CLECO POWER
	FOR THE NINE MONTHS ENDED SEPT. 30,						FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2023		2022		VARIANCE			2023		2022		VARIANCE
Net cash provided by operating activities	$	321,173	$	245,125	$	76,048		$	341,933	$	146,999	$	194,934
Net cash used in investing activities	$	(163,682)	$	(128,550)	$	(35,132)		$	(157,976)	$	(138,455)	$	(19,521)
Net cash (used in) provided by financing activities	$	(44,690)	$	(40,165)	$	(4,525)		$	(105,289)	$	63,930	$	(169,219)

Cleco - Net Operating Cash ~~Flow~~Flows

Net cash provided by operating activities ~~was $245.1~~increased $76.1 million, ~~and $139.8~~which includes $0.6 million ~~for the nine months ended September 30, 2022, and 2021, respectively. Net cash provided by operating activities increased $105.3 million~~related to discontinued operations, primarily due to:

•~~the absence of $92.5~~$72.7 million of ~~accelerated mine closure costs at~~higher collections from Cleco Power and Cleco Cajun's customers,

•~~lower operations~~$58.0 million of higher recoveries of fuel and ~~maintenance payments related~~purchased power costs primarily due to ~~storm restoration activities~~the timing of ~~$33.3 million~~collections at a higher fuel rate at Cleco Power,

•$48.4 million of higher ~~recoveries~~receipts of ~~net fuel and purchased power costs at~~affiliate settlements primarily for income taxes paid on behalf of Cleco ~~Power of $27.8 million primarily due the timing of collections,~~Group, and

•~~collateral~~$14.1 million of ~~$27.5 million received~~higher collections from ~~counterparties related~~joint owners primarily due to ~~Cleco Cajun’s natural gas derivatives.~~the timing of receipts for their portions of generating station expenses.

These increases were partially offset by:

•$87.1 million of higher payments for ~~affiliate settlements~~fuel inventory primarily due to higher volume of ~~$46.9 million~~purchases of coal and

•~~higher fuel inventory costs~~$42.9 million of ~~$28.9 million primarily due~~lower collateral received from counterparties related to ~~purchases at higher price per unit for petroleum coke and~~Cleco Cajun’s natural gas ~~at Cleco Power and higher per ton costs for coal at Cleco Cajun.~~derivatives.

Cleco - Net Investing Cash ~~Flow~~Flows

Net cash used in investing activities ~~was $128.6~~increased $35.2 million, ~~and $199.1~~which includes $0.6 million ~~for the nine months ended September 30, 2022, and 2021, respectively. Net cash used in investing activities decreased $70.5 million~~related to discontinued operations, primarily due to:

•~~lower~~$20.2 million for higher additions to property, plant, and equipment, net of AFUDC ~~of $61.7 million~~ and

•$15.3 million for lower life insurance proceeds ~~of $15.7 million.~~received.

~~These decreases were partially offset by higher returns of equity investment in investees of $5.3 million.~~

Cleco - Net Financing Cash ~~Flow~~Flows

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 for the nine months ended September 30, 2021. Net cash used in financing activities increased ~~$285.5~~$4.5 million primarily due to:

•the absence of proceeds of $424.9 million, net of discount, from the issuance of Cleco ~~Power’s $325.0 million floating rate~~Securitization I’s senior ~~notes in 2021, and the subsequent redemption of those $325.0 million senior notes in 2022,~~secured storm recovery bonds,

•$71.0 million of higher ~~distributions to Cleco Group of $219.6 million,~~payments on revolving credit facilities, and

•$20.0 million of lower draws on ~~revolving~~ credit ~~facilities of $58.0 million.~~facilities.

These increases were partially offset by:

•~~proceeds~~$315.4 million of ~~$424.9 million, net of discount, from the issuance of Cleco Securitization I’s storm recovery bonds~~lower repayments on long-term debt and

•$189.6 million of lower ~~payments on credit facilities of $220.0 million.~~distributions to Cleco Group.

Cleco Power ~~Cash Flows~~

- Net Operating Cash ~~Flow~~Flows

Net cash provided by operating activities ~~was $147.0 million and $74.7 million during the nine months ended September 30, 2022, and 2021, respectively. Net cash provided by operating activities~~ increased ~~$72.3~~$194.9 million primarily due to:

•~~the absence of $92.5~~$59.0 million of ~~accelerated mine closure costs,~~higher collections from customers,

•~~lower operations and maintenance payments related to storm restoration activities~~$58.0 million of ~~$33.3 million, and~~

•higher recoveries of ~~net~~ fuel and purchased power costs ~~of $27.8 million~~ primarily due to the timing of ~~collections.~~collections at a higher fuel rate,

•higher receipts of $57.1 million for affiliate settlements,

•$13.0 million of higher collections from joint owners primarily due to the timing of receipts for their portions of generating station expenses, and

•lower fuel inventory costs of $6.8 million due to purchases at a lower price per unit for petroleum coke and natural gas.

6660


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q

These increases were partially offset by:

•$13.8 million of higher ~~payments for affiliate settlements of $46.8 million~~interest paid on debt and

•$3.5 million of higher ~~fuel~~purchases of materials and supplies inventory ~~costs of $14.5 million primarily due~~ to ~~purchases at higher price per unit for petroleum coke and natural gas.~~mitigate future supply chain issues.

Cleco Power - Net Investing Cash ~~Flow~~Flows

Net cash used in investing activities ~~was $138.5 million and $192.1 million for the nine months ended September 30, 2022, and 2021, respectively. Net cash used in investing activities decreased $53.6~~increased $19.5 million primarily due to ~~lower~~higher additions to property, plant, and equipment, net of AFUDC, of ~~$60.5 million. These decreases were partially offset by higher returns of equity investment in investees of $5.3~~$20.2 million.

Cleco Power - Net Financing Cash ~~Flow~~Flows

Net cash ~~provided by~~used in financing activities ~~was $63.9 million and $246.6 million for the nine months ended September 30, 2022, and 2021, respectively. Net cash provided by financing activities decreased $182.7~~increased $169.2 million primarily due to:

•the absence of ~~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,~~

•~~higher distributions to Cleco Holdings of $105.5 million, and~~

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

~~These decreases were partially offset by:~~

•proceeds of $424.9 million, net of discount, from the issuance of Cleco Securitization I’s senior secured storm recovery bonds,

•$92.0 million of lower draws on revolving credit facilities, and

•~~lower~~$30.0 million of higher payments on ~~the~~revolving credit ~~facility~~facilities.

These increases were partially offset by:

•$315.4 million of ~~$220.0 million.~~lower repayments on long-term debt and

•$55.5 million of lower distributions to Cleco Holdings.

Capital Expenditures

In March 2023, Cleco ~~Power’s regulated operations~~Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco updated its estimated capital expenditures related to the Cleco Cajun Sale Group.

During the nine months ended September 30, 2023, Cleco 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,Cajun had capital expenditures ~~debt service, human~~of $165.8 million and $5.4 million, respectively. Cleco’s estimated capital expenditures, ~~contractual obligations,~~excluding the Cleco Cajun Sale Group, and ~~off-balance sheet arrangements, if required.~~debt maturities for the three months ending December 31, 2023, and for the remainder of the five-year period ending December 31, 2027, were $235.8 million and $2.69 billion, respectively. All amounts exclude AFUDC.

~~Cleco also anticipates receipt of grant funds in the future for renewable and electrification projects, including Project Diamond Vault.~~ For more information on ~~renewable~~the Cleco Cajun Sale Group, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 3 — Discontinued Operations.”

For more information on Cleco’s and ~~electrification initiatives~~Cleco Power’s estimated capital expenditures for 2023 and the five-year period ending December 31, 2027, see ~~“Item 2 — Management~~Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — ~~Overview~~Financial Condition — ~~Cleco Power~~Liquidity and Capital Resources — ~~Renewable~~Cash Generation and ~~Electrification Initiatives.”~~Cash Requirements — Capital Expenditures” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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, ~~2021.~~

2022.

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 guarantees, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments and Guarantees.”

Cybersecurity

~~The operation of~~Cleco's Chief Operations and Sustainability Officer leads cybersecurity teams for Cleco’s ~~electrical systems relies on evolving operational~~transmission 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, 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’sgeneration operations. Cleco's Chief Information and ~~Supply Chain~~Services Officer (CISO) leads cybersecurity teams for Cleco’s ~~cybersecurity team~~information technology and distribution operations. The CISO also 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.plans. For ~~more~~ information ~~on risks~~ related to Cleco’s cybersecurity, see Part I,II, Item ~~1A, “Risk Factors~~7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — ~~Operational Risks~~Financial Condition — ~~Technology and Terrorism Threats”~~Cybersecurity” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Regulatory and Other Matters

Environmental Matters

Cleco is subject to extensive environmental regulation by federal, state, and local authorities and is required to comply with numerous environmental laws and regulations, and to obtain and comply with numerous governmental permits in operating its facilities. In addition, existing environmental laws, regulations, and permits could be revised or reinterpreted; new laws and regulations could be adopted or become applicable to Cleco or its facilities; and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air emissions, water and/or waste management. Cleco may incur significant additional costs to comply with these revisions,


~~CLECO~~
~~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.

On May 23, 2023, the EPA published in the Federal Register a proposed rule targeting carbon emissions from power plants. Cleco is currently evaluating the possible impacts this proposed rule may have on its generating units. For a discussion of other Cleco environmental matters, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — 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


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

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

~~Cross-State Air Pollution Rule~~

~~On April 6, 2022, the EPA published in the federal register a proposed federal implementation plan (FIP) that~~

if finalized would be applied to address the “good neighbor” requirements for the 2015 ozone National Ambient Air Quality Standards (NAAQS) for those states that do not have an approved state implementation plan (SIP). If the EPA 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 2015 ozone NAAQS, which might result in the allocation of fewer emission allowances to generating units and may cause Cleco to buy additional allowances and/or take other measures to comply. Management is unable to predict or give a reasonable estimate of the outcome of the EPA’s decision regarding the “good neighbor” provision.

~~CPP/ACE~~

On June 30, 2022, the U.S. Supreme Court released its opinion on the D.C. Circuit Court of Appeals vacating and remanding the ACE rule, which requires state agencies to set standards of performance for affected generating units and submit the implementation plan to the EPA for approval. The U.S. Supreme Court indicated in its opinion that the EPA does not have the authority to apply generation shifting in the regulation of GHG emissions as in the Clean Power Plan. The case was returned to the D.C. Circuit Court of Appeals. It is expected that the EPA will issue a new GHG rule taking the Court’s opinion into consideration sometime in the future.2022.

Retail ~~Rates of Cleco Power~~

~~Base~~and Wholesale 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 Cleco Power’s base rates, fuel rates, and environmental rates, see Part I, Item 1, “Regulatory Matters, Industry Developments, and Franchises — Rates” in the ~~storm securitization financing,~~Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

For information on Cleco Power’s FRP, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1712 — ~~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 this FRP, see Note 11 — “Regulation~~Regulation and Rates — FRP.”

~~Fuel Rates~~

~~Generally,~~For information on 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,~~audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — 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~~Cleco Power’s EAC, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1314 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Environmental Audit.”

~~Energy Efficiency~~

~~In 2013,~~For information on Cleco Power’s and Cleco Cajun’s wholesale rates, see Part I, Item 1, “Regulatory Matters, Industry Developments, and Franchises — Rates” in 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 annuallyRegistrants’ Combined Annual Report on Form 10-K 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 2019 and 2020 to consider all program costs. On January 12, 2022, Cleco Power received a draft audit report from the LPSC indicating no material findings. The draft report was approved on September 14, 2022~~. Program years 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.~~fiscal year ended December 31, 2022.

~~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, and it is currently pending FERC approval. The next triennial market power analysis is expected to be filed in December 2023.

Transmission Rates

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, ~~2021.~~2022.

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


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

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

~~Distribution Projects~~

~~Cleco Power’s significant ongoing projects includes the DSMART distribution project. For information on this project, see “— Overview — Cleco Power.”~~2022.

Market Structure

Wholesale Electric Markets

RTO

For information on ~~Cleco Power’s~~Cleco’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 Structure — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Electric Reliability Organization (ERO)

NERC, subject to oversight by FERC, is the ERO responsible for developing and enforcing mandatory reliability standards for users, owners, and operators of the bulk power system. NERC, as the ERO, delegates authority to ~~SERC Reliability Corporation.~~SERC.

A revised NERC reliability standard relating to the winterization of generation assets became effective on April 1, 2023. This revised standard requires the implementation of

cold weather preparedness plans that include geographical based freeze protection measures, annual inspections, unit design temperature basis, and employee training. A new winterization standard requiring additional freeze protection measures has been approved by FERC with an effective date of October 1, 2024, and a targeted implementation period of 60 months from the effective date. Currently, management is unable to determine the impact this new standard will have on Cleco’s results of operations, financial condition, or cash flows.

A NERC Operations and Planning Reliability Standards audit is conducted every three years for Cleco Power and Cleco Cajun. The ~~most recent NERC Operations and Planning~~next Reliability Standards ~~audits~~audit for Cleco Power ~~and Cleco Cajun concluded on September 15, 2022. Management~~ is ~~unable~~scheduled to ~~determine when a final report will be issued, but expects no material findings from the audits.~~begin in 2025.

A NERC CIP audit is also conducted every three years for Cleco Power and Cleco Cajun. The ~~next~~ NERC CIP audits for Cleco Power and Cleco Cajun began in the fourth quarter of 2022 and concluded on February 23, 2023. Final reports to SERC were issued in the second quarter of 2023, and are ~~scheduled~~pending to ~~begin~~be affirmed by NERC. Management does not expect any financial penalties, and the next audit will be in ~~2023.~~2025.

Management is unable to predict the final financial outcome of any future audits or whether any findings will have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. 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, ~~2021.~~2022.

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 Structure — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Integrated Resource Plan (IRP)

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

~~first draft of the~~final IRP was filed with the LPSC on ~~October 26, 2022. The next~~May 31, 2023. Disputes and alternative recommendations may be filed by stakeholders ~~meeting is to be held by the end of 2022. A final IRP is due in May~~through November 30, 2023.

The IRP report describes how Cleco Power plans to meet its forecasted load requirements on a reliable and economic 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. A request to renew the conditions of the expired SQP was included in Cleco ~~Power is currently working to complete a new five-year program to submit to~~Power’s application for its next rate case, which was filed with the LPSC ~~for approval.~~on June 30, 2023. On ~~April 29, 2022,~~March 31, 2023, Cleco Power filed its annual SQP monitoring report for ~~2021~~2022 based on the expired reporting requirements.


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

Franchises

~~Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities~~For information on franchises, see Part I, Item 1, “Business — Regulatory Matters, Industry Developments, 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~~Franchises — Franchises” in the ~~timely renewal of substantially all franchises as each neared~~Registrants’ Combined Annual Report on Form 10-K for the ~~end of its term. Cleco Power’s next municipal franchise expires in April 2023.~~fiscal year ended December 31, 2022.

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~~ESTIMATES

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~~Cleco’s and Cleco Power’s Consolidated Financial Statements in ~~this report~~conformity with GAAP requires management to apply appropriate accounting policies and 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~~could have a material impact on the results of ~~themselves could materially affect~~operations, financial condition, or cash flows of 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.Registrants.

For more information on Cleco’s critical accounting ~~policies,~~estimates, see Part II, Item 7, “Management’s Discussion and

Analysis of Financial Condition and Results of Operations — Critical Accounting ~~Policies”~~Estimates” in the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.


~~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).


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 long-form contract and master agreements with counterparties that govern the risk of counterparty 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~~bilateral transactions and contracts that Cleco has entered into or may enter into in the future. The amount of credit support ~~that Cleco~~required may ~~be required to provide at any point in the future is dependent~~change based on ~~the amount of the initial contract,~~margining formulas, changes in the market price, changes in open contracts, changes in the amounts counterparties owe to 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~~agency ratings or ~~decrease.~~liquidity ratios.

Cleco monitors and manages its credit risk exposure through credit risk management policies and procedures that ~~include:~~

•~~routine~~require counterparty credit quality review and monitoring, establishment of credit and default terms in bilateral contracts and master agreements, monitoring changing credit exposure as compared to fair value, and collateralization and other methods 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. Disruption in the capital and credit

markets may potentially increase the costs of 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 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 bank facilities with fixed-rate 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, ~~2022,~~2023, Cleco Holdings had ~~$10.0~~$105.0 million of short-term debt outstanding under its $175.0 million revolving credit facility at ana weighted average all-in interest rate of ~~4.195%~~7.047%. At September 30, ~~2022,~~2023, the borrowing costs for amounts drawn under Cleco Holdings’ revolving credit facility were equal to ~~LIBOR~~SOFR plus ~~1.625%~~1.725% 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~~$1.0 million on an annualized basis.

At September 30, ~~2022,~~2023, Cleco Holdings had a ~~$200.0~~$132.3 million long-term variable rate bank term loan outstanding at an interest rate of ~~LIBOR~~SOFR plus ~~1.625%~~1.725%, for an all-in interest rate of ~~4.745%~~7.041%. Each 1% increase in the interest rate applicable to Cleco Holdings’ long-term variable rate debt would result in a


CLECO
CLECO POWER						2023 3RD QUARTER FORM 10-Q

decrease in Cleco Holdings’ pretax earnings of $1.3 million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Holdings for the nine months ended September 30, 2023, was 6.629%.

On May 1, 2023, Cleco Holdings amended certain terms of the supplemental indenture governing its $165.0 million senior notes changing the terms to a floating interest rate. At September 30, 2023, the senior notes had an interest rate of SOFR plus 1.725%, for an all-in interest rate of 7.043%. 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 ~~$2.0~~$1.7 million on an annualized basis. The weighted average rate for the outstanding ~~term loan debt~~senior notes at Cleco ~~Holdings~~Power for the ~~nine months ended~~period May 1, 2023, through September 30, ~~2022,~~2023, was ~~2.68%~~6.908%.

At September 30, ~~2022,~~2023, Cleco Power had ~~$77.0 million of~~no short-term debt outstanding under its $300.0 million revolving ~~credit facility at a weighted average all-in interest rate of 4.33%. At September 30, 2022,~~credit. The borrowing costs under Cleco Power’s ~~borrowing costs for amounts drawn under its~~ $300.0 million revolving credit facility ~~were~~are equal to ~~LIBOR~~SOFR plus ~~1.25%~~1.35% 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, ~~2022,~~2023, Cleco Power had a $125.0 million long-term variable rate bank term loan outstanding, at an interest rate of ~~LIBOR~~SOFR plus ~~1.25%~~1.35%, for an all-in interest rate of ~~4.37%~~6.666%. 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 ~~$1.2~~$1.3 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,~~2023, was ~~2.31%~~6.254%.

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 ~~$4.1~~$5.3 million on an annualized basis.

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

Commodity Price Risk

Cleco’s financial performance can be impacted by changes in commodity prices that can impact fuel costs, generation

revenue, costs to serve its contracted wholesale electricity customers, and 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~~locational marginal price 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.

At September 30, 2022, Cleco Cajun had gas-related derivative contracts including fixed price physical 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 inDuring the ~~following tables.~~

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

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.~~

~~Cleco Power~~

~~DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS~~

~~(THOUSANDS)~~

~~BALANCE SHEET LINE ITEM~~

~~AT SEPT. 30, 2022~~

~~Commodity-related contracts~~

~~FTRs~~

~~Current~~

~~Energy risk management assets~~

~~5,195~~

~~Current~~

~~Energy risk management liabilities~~

~~(457)~~

Commodity-related contracts, net*

~~4,738~~

* Cleco Power entered into natural gas derivatives during the threenine months ended September 30, ~~2022.~~2023, Cleco Cajun and Cleco Power had ~~a current liability for~~ natural gas ~~derivatives at September 30, 2022,~~derivative contracts consisting of ~~less than $.01 million.~~

fixed price physical forwards and financially settled swap transactions.

Cleco monitors the Value at Risk (VaR) of its natural gas derivative contracts requiring derivative accounting treatment. VaR is defined as the ~~minimum~~maximum expected loss over a given

holding period at a given confidence level based on observable market ~~price~~prices and volatilities. Cleco uses a parametric variance-covariance model methodology to estimate VaR. VaR is calculated using a combination of implied and 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 natural gas derivative contracts based on these assumptions:


				FOR THE THREE MONTHS ENDED SEPT. 30, 2022						FOR THE NINE MONTHS ENDED SEPT. 30, 2022									FOR THE THREE MONTHS ENDED SEPT. 30, 2023						FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2022		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE		(THOUSANDS)	AT SEPT. 30, 2023		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE
Cleco	Cleco	$	46,009	$	75,712	$	45,974	$	59,718	$	75,712	$	22,223	$	44,597	Cleco	$	14,942	$	22,025	$	14,903	$	18,488	$	27,620	$	14,903	$	20,663
Cleco Power	Cleco Power	$	1,212	$	1,465	$	1,198	$	1,338	$	1,465	$	1,198	$	1,338	Cleco Power	$	9,105	$	10,639	$	8,411	$	9,647	$	10,639	$	1,628	$	6,263

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 Instruments” and ~~Financial Instruments~~“Note 7 — ~~Commodity Contracts.~~Derivative Instruments.”


CLECO
CLECO POWER						2023 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, ~~2022.~~2023. 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, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

7265


CLECO
CLECO POWER						~~2022~~2023 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 1314 — 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,~~14 —Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”


ITEM 1A. RISK FACTORS

Other than the ~~update~~updates 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~~2023, there have been no other material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors” of the Registrants’ Combined Annual

Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. 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 in the aforementioned reports.

~~Taxes~~


ITEM 5.OTHER INFORMATION

During the three months ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of Cleco Holdings or Cleco Power adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

~~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~~.

The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022. The IRA proposes significant changes to the federal tax law. These include extensions and refinements of credits for 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.~~


CLECO
CLECO POWER						~~2022~~2023 3RD QUARTER FORM 10-Q


ITEM 6. EXHIBITS

CLECO
	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
	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)

7467


CLECO
CLECO POWER						~~2022~~2023 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/ Tonita Laprarie
						Tonita Laprarie
						Controller and Chief Accounting Officer

Date: November ~~7, 2022~~6, 2023

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/ Tonita Laprarie
						Tonita Laprarie
						Controller and Chief Accounting Officer

Date: November ~~7, 2022~~6, 2023

7568


TABLE OF CONTENTS
		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		5

PART I	Financial Information
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)	7
	Cleco Power — Condensed Consolidated Financial Statements (Unaudited)	17
	Notes to the Unaudited Condensed Consolidated Financial Statements	26
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5250
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	7063
ITEM 4.	Controls and Procedures	7265

PART II	Other Information
ITEM 1.	Legal Proceedings	7366
ITEM 1A.	Risk Factors	7366


ITEM 5.	Other Information	66
ITEM 6.	Exhibits	7367
	Signatures	7568



	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