1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrant specified in
Commission its charter state of incorporation, address I.R.S. Employer
File No. of principal executive offices and telephone Identification Number
-------------- ---------------------------------------------- ---------------------
333-71643-01 CLECO CORPORATION 72-1445282
A Louisiana Corporation
2030 Donahue Ferry Road
Pineville, Louisiana 71360-5226
Telephone: 318-484-7400
1-5663 CLECO UTILITY GROUP INC. 72-0244480
A Louisiana Corporation
2030 Donahue Ferry Road
Pineville, Louisiana 71360-5226
Telephone: 318-484-7400
Indicate by check mark whether the Registrant: (1) has 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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding at each of the issuer's classes of
Common Stock, as of the latest practicable date.
Description Shares Outstanding
Registrant Of Class At September 30, 1999
---------- ------------ ---------------------
Cleco Corporation Common Stock,
$2.00 Par Value 22,509,076
Cleco Utility Group Inc. Common Stock, 22,531,870 (all of which were
$2.00 Par Value held by Cleco Corporation)
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TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.......................................................................... 1
Report of Independent Accountants........................................................... 2
Cleco Corporation
Consolidated Interim Statements of Income............................................. 3
Consolidated Balance Sheets........................................................... 5
Consolidated Interim Statements of Cash Flows......................................... 7
Cleco Utility Group Inc.
Interim Statements of Income.......................................................... 8
Balance Sheets........................................................................ 10
Interim Statements of Cash Flows...................................................... 12
Notes to Consolidated Financial Statements.................................................. 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Disclosure Regarding Forward-Looking Statements............................................. 20
Results of Operations....................................................................... 20
Financial Condition......................................................................... 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 30
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........................................... 32
Item 5. Other Information............................................................................. 32
Item 6. Exhibits and Reports on Form 8-K.............................................................. 34
SIGNATURE................................................................................................. 36
3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated interim financial statements for Cleco Corporation (the
Company) and for Cleco Utility Group Inc. (Utility Group) included herein are
unaudited but reflect, in management's opinion, all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of
the Company's financial position and the results of its operations for the
interim periods presented. Because of the seasonal nature of the Company's
business, the results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the full
fiscal year. On July 1, 1999, a share exchange was consummated whereby Cleco
Corporation, formerly Cleco Holding Corporation, became a public utility holding
company with Cleco Utility Group Inc., formerly named Cleco Corporation, as its
principal public utility subsidiary. Consequently, results for periods ended
prior to July 1, 1999 are for Utility Group, but such results are not affected
by the formation of the holding company. References to "the Company" prior to
July 1, 1999 refers to Utility Group. The financial statements included herein
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998 (1998 Form 10-K).
The consolidated interim financial statements included herein have been
subjected to a limited review by PricewaterhouseCoopers LLP, independent
accountants for the Company, whose report is included herein.
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4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Cleco Corporation and the Board
of Directors and Shareholder of Cleco Utility Group Inc.
We have made a review of the consolidated balance sheet of Cleco Corporation as
of September 30, 1999, and the related consolidated statements of income for the
three-month and nine-month periods ended September 30, 1999 and 1998, and the
consolidated statements of cash flows for the nine-month period ended September
30, 1999 and 1998, and the balance sheet of Cleco Utility Group Inc. as of
September 30, 1999, and the related statements of income for the three-month and
nine-month periods ended September 30, 1999 and 1998, and the statement of cash
flows for the nine-month period ended September 30, 1999 and 1998 in accordance
with standards established by the American Institute of Certified Public
Accountants. These financial statements are the responsibility of the Cleco
Corporation's and Cleco Utility Group Inc.'s management.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, of Cleco
Utility Group Inc. (the predecessor company to Cleco Corporation) and the
related consolidated statements of income, cash flows and changes in common
shareholders' equity for the year then ended (not presented herein); and in our
report dated January 27, 1999, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 1998, is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
November 2, 1999
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5
CLECO CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands, except share and
per share amounts)
1999 1998
------------ ------------
OPERATING REVENUES $ 285,032 $ 172,553
------------ ------------
OPERATING EXPENSES
Fuel used for electric generation 49,462 44,034
Power purchased 132,012 31,914
Other operations 24,015 21,239
Maintenance 9,672 11,524
Depreciation 12,782 11,872
Taxes other than income taxes 9,798 9,488
------------ ------------
237,741 130,071
------------ ------------
OPERATING INCOME 47,291 42,482
Allowance for other funds used during construction 431 272
Other income and expenses, net (126) 722
------------ ------------
INCOME BEFORE INTEREST CHARGES 47,596 43,476
Interest charges, including amortization of debt expense, premium and
discount 7,325 7,243
Allowance for borrowed funds used during construction 292 (201)
------------ ------------
NET INCOME BEFORE INCOME TAXES AND
PREFERRED DIVIDENDS 39,979 36,434
Federal and state income taxes 14,364 13,580
------------ ------------
NET INCOME BEFORE PREFERRED DIVIDENDS 25,615 22,854
Preferred dividend requirements, net 463 534
------------ ------------
NET INCOME APPLICABLE TO COMMON STOCK $ 25,152 $ 22,320
============ ============
WEIGHTED AVERAGE COMMON SHARES
Basic 22,505,272 22,484,269
Diluted 23,842,136 23,866,497
EARNINGS PER SHARE
Basic $ 1.12 $ 0.99
Diluted $ 1.07 $ 0.95
CASH DIVIDENDS PAID PER SHARE $ 0.415 $ 0.405
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
3
6
CLECO CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands, except share and
per share amounts)
1999 1998
------------ ------------
OPERATING REVENUES $ 629,225 $ 398,060
------------ ------------
OPERATING EXPENSES
Fuel used for electric generation 103,344 106,135
Power purchased 277,704 64,678
Other operations 63,074 52,615
Maintenance 23,535 24,323
Depreciation 37,747 35,766
Taxes other than income taxes 27,531 26,877
------------ ------------
532,935 310,394
------------ ------------
OPERATING INCOME 96,290 87,666
Allowance for other funds used during construction 547 854
Other income and expenses, net (757) 1,200
------------ ------------
INCOME BEFORE INTEREST CHARGES 96,080 89,720
Interest charges, including amortization of debt expense, premium and
discount 21,201 21,491
Allowance for borrowed funds used during construction 108 (630)
------------ ------------
NET INCOME BEFORE INCOME TAXES AND
PREFERRED DIVIDENDS 74,771 68,859
Federal and state income taxes 26,375 23,988
------------ ------------
NET INCOME BEFORE PREFERRED DIVIDENDS 48,396 44,871
Preferred dividend requirements, net 1,510 1,591
------------ ------------
NET INCOME APPLICABLE TO COMMON STOCK $ 46,886 $ 43,280
============ ============
WEIGHTED AVERAGE COMMON SHARES
Basic 22,511,688 22,478,499
Diluted 23,861,981 23,866,259
EARNINGS PER SHARE
Basic $ 2.08 $ 1.93
Diluted $ 2.02 $ 1.87
CASH DIVIDENDS PAID PER SHARE $ 1.235 $ 1.215
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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CLECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
ASSETS
Current assets
Cash and cash equivalents $ 40,176 $ 19,457
Accounts receivable, net 131,993 50,584
Unbilled revenues 17,522 9,712
Fuel inventory, at average cost 14,866 9,725
Materials and supplies, inventory, at average cost 15,831 12,674
Accumulated deferred fuel 778 -
Other current assets 6,467 1,738
------------ ------------
Total current assets 227,633 103,890
------------ ------------
Property, plant and equipment
Property, plant and equipment 1,587,264 1,565,028
Accumulated depreciation (573,822) (551,705)
------------ ------------
1,013,442 1,013,323
Construction work-in-progress 144,053 76,475
------------ ------------
Total property, plant and equipment, net 1,157,495 1,089,798
------------ ------------
Investments and other assets 3,972 3,500
Prepayments 8,518 8,293
Regulatory assets - deferred taxes 146,596 95,199
Other deferred charges 31,119 30,975
Accumulated deferred federal and state income taxes 113,547 97,345
------------ ------------
TOTAL ASSETS $ 1,688,880 $ 1,429,000
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
(Continued on next page)
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8
CLECO CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
(In thousands, except share amounts)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 130,000 $ 68,416
Long-term debt due within one year 45,518 33,330
Accounts payable 111,092 61,786
Retainage payable 6,577 --
Customer deposits 20,114 20,120
Taxes accrued 43,319 11,942
Interest accrued 2,170 7,340
Accumulated deferred fuel -- 4,613
Other current liabilities 7,769 3,868
------------ ------------
Total current liabilities 366,559 211,415
------------ ------------
Deferred credits
Accumulated deferred federal and state income taxes 342,669 286,619
Accumulated deferred investment tax credits 26,441 27,784
Regulatory liabilities - deferred taxes 98,849 81,074
Other deferred credits 37,805 35,900
------------ ------------
Total deferred credits 505,764 431,377
------------ ------------
Long-term debt, net 361,915 343,042
------------ ------------
TOTAL LIABILITIES 1,234,238 985,834
Common shareholders' equity
Common stock, $2 par value, authorized 50,000,000
shares, issued 22,531,870 and 22,767,754 shares at
Sept. 30, 1999 and December 31, 1998, respectively 45,064 45,535
Premium on capital stock 112,602 113,871
Retained earnings 284,284 271,019
Treasury stock, at cost, 22,794 and 281,930 shares at
Sept. 30, 1999 and December 31, 1998, respectively (723) (5,734)
------------ ------------
Total Common Equity 441,227 424,691
------------ ------------
Preferred stock, cumulative, $100 par value
Not subject to mandatory redemption 29,204 29,718
Deferred compensation related to preferred stock held
by ESOP (15,789) (16,923)
------------ ------------
Total Preferred 13,415 12,795
Subject to mandatory redemption -- 5,680
------------ ------------
13,415 18,475
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 454,642 443,166
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 1,688,880 $ 1,429,000
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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9
CLECO CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands)
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 48,396 $ 44,871
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 38,213 37,236
Allowance for funds used during construction (439) (1,483)
Amortization of investment tax credits (1,343) (1,343)
Deferred income taxes (1,616) 2,119
Deferred fuel costs (5,391) (6,618)
Gain on disposition of utility plant, net (108) --
Changes in assets and liabilities
Accounts receivable, net (81,405) (18,442)
Unbilled revenues (7,810) 4,991
Fuel inventory, materials and supplies (8,298) 2,674
Accounts payable 55,883 (9,742)
Customer deposits (6) 41
Other deferred accounts 3,338 (16,221)
Taxes accrued 31,377 36,795
Interest accrued (5,170) (6,145)
Other, net 4,917 3,655
--------- ---------
Net cash provided by operating activities 70,538 72,388
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (114,262) (45,478)
Allowance for funds used during construction 439 1,483
Proceeds from sales of utility plant 208 395
Purchase of investments (240) (340)
--------- ---------
Net cash used in investing activities (113,855) (43,940)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 243 94
Reacquisition of common stock (1,545) --
Issuance of long-term debt 50,652 --
Retirement of long-term debt (10,639) (10,000)
Increase in short-term debt, net 61,146 13,531
Redemption of preferred stock (6,518) (212)
Dividends paid on common and preferred stock, net (29,303) (28,678)
--------- ---------
Net cash provided by (used in) financing activities 64,036 (25,265)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 20,719 3,183
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 19,457 18,015
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,176 $ 21,198
========= =========
Supplementary cash flow information
Interest paid (net of amount capitalized) $ 28,751 $ 27,201
========= =========
Income taxes paid $ 10,422 $ 2,640
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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10
CLECO UTILITY GROUP INC.
INTERIM STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands)
1999 1998
--------- ---------
OPERATING REVENUES
Customer revenues $ 270,810 $ 172,553
Affiliate revenues 4,259 --
--------- ---------
275,069 172,553
--------- ---------
OPERATING EXPENSES
Fuel used for electric generation 50,598 44,034
Power purchased 124,971 31,914
Other operations 20,686 21,239
Maintenance 9,457 11,524
Depreciation 12,370 11,872
Affiliate costs 3,880 --
Taxes other than income taxes 9,693 9,488
Federal and state income taxes 12,783 13,580
--------- ---------
244,438 143,651
--------- ---------
OPERATING INCOME 30,631 28,902
Allowance for other funds used during construction 431 272
Other income and (expenses), net (319) 722
--------- ---------
INCOME BEFORE INTEREST CHARGES 30,743 29,896
Interest charges, including amortization of debt expense, premium and
discount 6,914 7,243
Allowance for borrowed funds used during construction 292 (201)
--------- ---------
NET INCOME BEFORE PREFERRED DIVIDENDS 23,537 22,854
Preferred dividend requirements, net -- 534
--------- ---------
NET INCOME APPLICABLE TO COMMON STOCK $ 23,537 $ 22,320
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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11
CLECO UTILITY GROUP INC.
INTERIM STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands)
1999 1998
--------- ---------
OPERATING REVENUES
Customer revenues $ 615,003 $ 398,060
Affiliate revenues 4,259 --
--------- ---------
619,262 398,060
--------- ---------
OPERATING EXPENSES
Fuel used for electric generation 104,480 106,135
Power purchased 270,663 64,678
Other operations 59,745 52,615
Maintenance 23,320 24,323
Depreciation 37,335 35,766
Affiliate costs 3,880 --
Taxes other than income taxes 27,426 26,877
--------- ---------
Federal and state income taxes 24,794 23,988
--------- ---------
551,643 334,382
--------- ---------
OPERATING INCOME 67,619 63,678
Allowance for other funds used during construction 547 854
Other income and (expenses), net (950) 1,200
--------- ---------
INCOME BEFORE INTEREST CHARGES 67,216 65,732
Interest charges, including amortization of debt expense, premium and
discount 20,791 21,491
Allowance for borrowed funds used during construction 108 (630)
--------- ---------
NET INCOME BEFORE PREFERRED DIVIDENDS 46,317 44,871
Preferred dividend requirements, net 1,047 1,591
--------- ---------
NET INCOME APPLICABLE TO COMMON STOCK $ 45,270 $ 43,280
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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12
CLECO UTILITY GROUP INC.
BALANCE SHEETS
(UNAUDITED)
(In thousands)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
ASSETS
Utility and other property, plant and equipment
Property, plant and equipment $ 1,568,513 $ 1,565,028
------------------ -----------------
Accumulated depreciation (570,999) (551,705)
------------------ -----------------
997,514 1,013,323
Construction work-in-progress 31,861 76,475
------------------ -----------------
Total utility and other plant, net 1,029,375 1,089,798
------------------ -----------------
Investments and other assets 2,365 3,500
------------------ -----------------
Current assets
Cash and cash equivalents 24,918 19,457
Accounts receivable, net 118,165 50,584
Accounts receivable - affiliates 1,192 --
Unbilled revenues 15,358 9,712
Fuel inventory at average cost 14,866 9,725
Materials and supplies inventory at average cost 15,831 12,674
Accumulated deferred fuel 778 --
Other current assets 3,668 1,738
------------------ -----------------
Total current assets 194,776 103,890
------------------ -----------------
Prepayments 8,518 8,293
Regulatory assets - deferred taxes 146,596 95,199
Other deferred charges 30,393 30,975
Accumulated deferred federal and state income taxes 113,547 97,345
------------------ -----------------
TOTAL ASSETS $ 1,525,570 $ 1,429,000
================== =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
13
CLECO UTILITY GROUP INC.
BALANCE SHEETS (CONTINUED)
(UNAUDITED)
(In thousands)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
CAPITALIZATION AND LIABILITIES
Common shareholder's equity
Common stock, $2 par value, authorized 50,000,000
shares, issued 22,531,870 and 22,767,754 shares at
Sept. 30, 1999 and December 31, 1998, respectively $ 45,064 $ 45,535
Premium on capital stock 125,914 113,871
------------------ -----------------
Retained earnings 253,767 271,019
Treasury stock, at cost, -0- and 281,930 shares at
Sept. 30, 1999 and December 31, 1998, respectively -- (5,734)
------------------ -----------------
Total common equity 424,745 424,691
------------------ -----------------
Preferred stock, cumulative, $100 par value
Not subject to mandatory redemption -- 29,718
Deferred compensation related to preferred stock held
by ESOP -- (16,923)
------------------ -----------------
Total preferred -- 12,795
Subject to mandatory redemption -- 5,680
------------------ -----------------
-- 18,475
------------------ -----------------
Long-term debt, net 360,322 343,042
------------------ -----------------
Total capitalization 785,067 786,208
------------------ -----------------
Current liabilities
Short-term debt -- 68,416
Long-term debt due within one year 45,000 33,330
Accounts payable 103,007 61,786
Accounts payable to affiliates 11,717 --
------------------ -----------------
Customer deposits 20,114 20,120
Taxes accrued 48,785 11,942
Interest accrued 1,791 7,340
Accumulated deferred fuel -- 4,613
Other current liabilities 4,071 3,868
------------------ -----------------
Total current liabilities 234,485 211,415
------------------ -----------------
Deferred credits
Accumulated deferred federal and state income taxes 342,775 286,619
Accumulated deferred investment tax credits 26,441 27,784
Regulatory liabilities - deferred taxes 98,849 81,074
Other deferred credits 37,953 35,900
------------------ -----------------
Total deferred credits 506,018 431,377
------------------ -----------------
TOTAL CAPITALIZATION AND LIABILITIES $ 1,525,570 $ 1,429,000
================== =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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14
CLECO UTILITY GROUP INC.
INTERIM STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(In thousands)
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,317 $ 44,871
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 38,192 37,236
Allowance for funds used during construction (439) (1,483)
Amortization of investment tax credits (1,343) (1,343)
Deferred income taxes (1,616) 2,119
Deferred fuel costs (5,391) (6,618)
Gain on disposition of utility plant, net (108) --
Changes in assets and liabilities
Accounts receivable, net (34,624) (18,442)
Unbilled revenues (5,646) 4,991
Fuel inventory, materials and supplies (8,629) 2,674
Accounts payable 58,177 (9,742)
Customer deposits (6) 41
Other deferred accounts 4,045 (16,221)
Taxes accrued 36,825 36,795
Interest accrued (5,549) (6,145)
Other, net 4,463 3,655
--------- ---------
Net cash provided by operating activities 124,668 72,388
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to utility plant (37,264) (45,478)
Allowance for funds used during construction 439 1,483
Proceeds from sales of utility plant 208 395
Purchase of investments (200) (340)
--------- ---------
Net cash used in investing activities (36,817) (43,940)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 243 94
Issuance of long-term debt 50,000 --
Retirement of long-term debt (10,000) (10,000)
Increase (decrease) in short-term debt, net (68,416) 13,531
Redemption of preferred stock (6,518) (212)
Cost of refinancing debt (639) --
Dividends paid on common and preferred stock, net (29,676) (28,678)
--------- ---------
Net cash used in financing activities (65,006) (25,265)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 22,845 3,183
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,073 18,015
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,918 $ 21,198
========= =========
Supplementary cash flow information
Interest paid (net of amount capitalized) $ 28,378 $ 27,201
========= =========
Income taxes paid $ 3,402 $ 2,640
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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15
CLECO CORPORATION
CLECO UTILITY GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A. RECLASSIFICATION
Certain prior-period amounts have been reclassified to conform with the
presentation shown in the current year's financial statements. These
reclassifications had no effect on net income applicable to common stock or
common shareholders' equity.
NOTE B. HOLDING COMPANY STRUCTURE
Effective July 1, 1999, Cleco Utility Group Inc. (Utility Group)
reorganized into a holding company structure. This reorganization resulted in
the creation of a holding company, Cleco Corporation (the Company), which holds
investments in several subsidiaries, one of which, Utility Group, contains the
LPSC jurisdictional generation, transmission and distribution electric utility
operations serving Utility Group's traditional retail and wholesale customers.
Another subsidiary, Cleco Midstream Resources LLC (Midstream), operates
competitive LPSC non-jurisdictional electric generation, oil and natural gas
production, energy marketing and natural gas pipeline businesses. A third
subsidiary, Utility Construction & Technology Solutions LLC (formerly Cleco
Services LLC), sells utility support services related to distribution and retail
service to municipal governments, rural electric cooperatives and investor-owned
electric companies. There was no impact to the Company's Consolidated Financial
Statements due to the fact that the exchange was accounted for similarly to a
pooling of interest.
Under the terms of the reorganization, the newly organized holding
company, Cleco Corporation, became the owner of all of the Utility Group's
outstanding common and preferred stock and holders of existing common and
preferred stock in two series that approved the restructuring of the Utility
Group exchanged their stock in the Utility Group for stock in the Company.
Shares of preferred stock in three series that did not approve the holding
company proposal were redeemed. The proposal received LPSC approval on December
18, 1998, and FERC approval on January 29, 1999. Approval was obtained from the
Shareholders at the Annual Meeting of Shareholders held on May 14, 1999. See the
Company's 1999 Notice of Annual Meeting of Shareholders and Proxy Statement,
dated April 9, 1999, incorporated herein by reference.
NOTE C. LEGAL PROCEEDING: FUEL SUPPLY - LIGNITE
The Utility Group and Southwestern Electric Power Company (SWEPCO), each
a 50% owner of Dolet Hills Power Station Unit 1 (Dolet Hills Unit 1), jointly
own lignite reserves in the Dolet Hills area of northwestern Louisiana. In 1982
the Utility Group and SWEPCO entered into a Lignite Mining Agreement (LMA) with
the Dolet Hills Mining Venture (DHMV), a partnership for the mining and delivery
of lignite from a portion of these reserves (Dolet Hills Mine). The LMA expires
in 2011. The price of lignite delivered pursuant to the LMA is a base price per
ton, subject to escalation based on certain inflation indices, plus specified
"pass-through" costs.
Currently, the Utility Group is receiving annually a minimum delivery of
1,187,500 tons under the LMA. Since the late 1980s, additional spot lignite
deliveries have been obtained
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16
through competitive bidding from DHMV and another lignite supplier. In 1998 the
Utility Group and SWEPCO received deliveries which approximated 28% of the
annual lignite consumption at Dolet Hills Unit 1 from the other lignite
supplier.
On April 15, 1997, the Utility Group and SWEPCO filed suit against DHMV
and its partners in the United States District Court for the Western District of
Louisiana (Federal Court Suit) seeking to enforce various obligations of DHMV to
the Utility Group and SWEPCO under the LMA, including provisions relating to the
quality of the delivered lignite, pricing, and mine reclamation practices. On
June 15, 1997, DHMV filed an answer denying the allegations in the Utility
Group's suit and filed a counterclaim asserting various contract-related claims
against the Utility Group and SWEPCO. The Utility Group and SWEPCO have denied
the allegations in the counterclaims on the grounds the counterclaims have no
merit.
The counterclaims filed by DHMV in the Federal Court Suit resulted in the
Utility Group and SWEPCO filing a separate lawsuit against the parent companies
of DHMV, namely, Jones Capital Corporation and Philipp Holzmann USA, Inc., on
August 13, 1997, in the First Judicial District Court for Caddo Parish,
Louisiana (State Court Suit). The State Court Suit seeks to enforce a separate
1995 agreement by Jones Capital Corporation and Philipp Holzmann USA, Inc.
related to the LMA. Jones Capital Corporation and Philipp Holzmann USA, Inc.
have asked the State Court to stay that proceeding until the Federal Court Suit
is resolved.
On January 8, 1999, the Utility Group and SWEPCO filed an amended complaint
in the Federal Court Suit seeking, among other things, a termination of the LMA
after trial based on DHMV's breach of the contract. DHMV has answered the
amended complaint and denied all claims of breach. The parties have engaged in
pre-trial motion practice and are in the fact witness deposition phase of
discovery at this time.
Federal Court has issued a revised scheduling order which has set the
Federal Court Suit for trial beginning May 22, 2000. A general discovery cut-off
date of February 29, 2000 has also been established.
The Utility Group and SWEPCO will continue to aggressively prosecute the
claims against DHMV and defend against the counterclaims which DHMV has
asserted. The Utility Group and SWEPCO continue to pay DHMV for lignite
delivered pursuant to the LMA. Normal day-to-day operations continue at the
Dolet Hills Mine and Dolet Hills Unit 1. Although the ultimate outcome of this
litigation cannot be predicted at this time, based on information currently
available to the Utility Group, management does not believe that the
counterclaims asserted by DHMV in the Federal Court Suit will have a significant
adverse effect on the Utility Group's financial position or results of
operations.
NOTE D. ACCRUAL FOR ESTIMATED CUSTOMER CREDITS
The Company's reported year-to-date third quarter earnings reflect a $5.1
million accrual within the Utility Group for estimated customer credits which
may be required under terms of an earnings review settlement reached with the
Louisiana Public Service Commission (LPSC) in 1996. Of the $5.1 million, $2.2
million relates to the 12-month-ended September 30, 1998 cycle and the remaining
$2.9 million relates to an increase in the estimated refund for the
12-month-ended September 30, 1999 cycle. The adjustment for the prior year's
estimate of the refund for
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the 1998 cycle was due to the LPSC's final report on the 1998 cycle. The $5.1
million was recorded as a reduction in revenue due to the nature of the
customer credits.
The settlement reached with the LPSC in 1996, and a subsequent amendment,
set the Utility Group's rates until the year 2004, and also provided for annual
base rate tariff reductions of $3 million in 1997 and an additional $2 million
in 1998. As part of the settlement, Utility Group is allowed to retain all
regulated earnings up to a 12.25% return on equity, and to share equally with
customers as credits on their bills all regulated earnings between 12.25% and
13% return on equity. All regulated earnings above a 13% return on equity are
credited to customers. The amount of credits due customers, if any, is
determined by the LPSC annually based on 12-month-ending results as of September
30 of each year. The settlement provides for such credits to be made on
customers' bills the following summer.
NOTE E. DISCLOSURES ABOUT SEGMENTS
The Cleco Corporation has determined that its reportable segment is based
on the Company's method of internal reporting, which disaggregates its business
units by regulatory jurisdiction. The Company's reportable segment is the LPSC
Jurisdictional Utility. This segment contains the revenues, expenses and assets
over which the LPSC may have material effect based upon state statutes. The
effects include rate-making powers, determination of depreciable lives,
determination of the cost of fuel permitted to be passed through the fuel cost
adjustment clauses, determination of prudent capital expenditures, authorization
of transfers of assets, as well as authorization of the issuance of securities
and incurrence of long term debt.
The financial results of the Company's segment is presented on an accrual
basis. Significant differences among the accounting policies of the segments as
compared to the Company's consolidated financial statements principally involve
the classification of revenue and expense between operating and other
income/expense. Management evaluates the performance of its segments and
allocates resources to them based on segment profit/(loss) before income taxes
and preferred stock dividends. Material intersegment transactions occur on a
regular basis.
The table below presents information about the reported operating results
and net assets of the Company's reportable segments.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
LPSC
JURISDICTIONAL ALL
UTILITY OTHER TOTAL
-------------- ---------- ----------
Operating revenues from external customers .............. $ 270,810 $ 14,222 $ 285,032
Operating intersegment revenues.......................... $ 4,259 $ 4,749 $ 9,008
Segment profit........................................... $ 36,320 $ 3,838 $ 40,158
Segment assets........................................... $ 1,525,570 $ 185,985 $1,711,555
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LPSC
JURISDICTIONAL ALL
UTILITY OTHER TOTAL
-------------- ---------- ----------
Reconciliation between segment amounts and
Consolidated amounts
PROFIT OR LOSS
Total profit on reportable segments...................... $ 36,320
Other profit............................................. 3,838
Unallocated items
Income taxes......................................... (14,364)
Preferred dividend requirements, net................. (463)
Intercompany profits (179)
--------------
Net income to common................................. $ 25,152
==============
For the Three Months Ended September 30, 1998
(In thousands)
LPSC
JURISDICTIONAL ALL
UTILITY OTHER TOTAL
-------------- ---------- ----------
Operating revenues from external customers .... $ 172,553 $ 11,895 $ 184,448
Operating intersegment revenues ............... $ -- $ 358 $ 358
Segment profit ................................ $ 34,757 $ 1,678 $ 36,435
Segment assets ................................ 1,399,688 35,604 1,435,292
Reconciliation between segment amounts and
Consolidated amounts
Profit or Loss
Total profit on reportable segments ........... $ 34,757
Other profit .................................. 1,678
Unallocated items
Income taxes .............................. (13,581)
Preferred dividend requirements, net ...... (534)
--------------
Net income to common ...................... $ 22,320
==============
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
LPSC
JURISDICTIONAL ALL
UTILITY OTHER TOTAL
-------------- ---------- ----------
Operating revenues from external customers.................. $ 615,003 $ 14,222 $ 629,225
Operating intersegment revenues............................. $ 4,259 $ 8,546 $ 12,805
Segment profit ............................................. $ 71,111 $ 3,838 $ 74,949
Reconciliation between segment amounts and
Consolidated amounts
PROFIT OR LOSS
Total profit on reportable segments......................... $ 71,111
Other profit ............................................... 3,838
Unallocated items
Income taxes............................................ (26,375)
Preferred dividend requirements, net.................... (1,510)
Intercompany profits (178)
--------------
Net income to common.................................... $ 46,886
==============
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For the Nine Months Ended September 30, 1998
(In thousands)
LPSC
JURISDICTIONAL ALL
UTILITY OTHER TOTAL
-------------- ---------- ----------
Operating revenues from external customers.................. $ 398,060 $ 22,496 $ 420,556
Operating intersegment revenues............................. $ -- $ 1,919 $ 1,919
Segment profit ............................................. $ 66,472 $ 2,387 $ 68,859
Reconciliation between segment amounts and
Consolidated amounts
PROFIT OR LOSS
Total profit on reportable segments......................... $ 66,472
Other profit................................................ 2,387
Unallocated items
Income taxes............................................ 2,387
Preferred dividend requirements, net.................... (23,988)
--------------
Net income to common.................................... $ 43,280
==============
NOTE F. ASSETS HELD FOR SALE
Oil and gas properties held by Cleco Energy LLC (Cleco Energy), an LPSC
non-regulated subsidiary of the Company, have been identified as "Assets held
for Sale" and are accounted for in accordance with the provisions of Emerging
Issues Task Force (EITF) Consensus No. 87-11 "Allocation of Purchase Price to
Assets to Be Sold". Oil and gas properties held for sale are reflected net of
working capital and debt specifically identified with the purchase of the oil
and gas properties. These properties are periodically reviewed to determine if
they have been impaired. In accordance with EITF No. 87-11, a net loss relative
to the operations of these assets of $338,779 has been excluded from the
Consolidated Interim Statement of Income and capitalized as a component of
assets held for sale for the nine months ended September 30, 1999.
NOTE G. DEBT
Utility Group terminated its $80 million revolving credit facility on
August 25, 1999, leaving Utility Group with a remaining $100 million revolving
credit facility and the Utility Group's commercial paper program which had
a zero balance outstanding at September 30, 1999.
Utility Group has agreed to repay $14 million out of $20 million of an
issuance of medium term notes with a put option. The repayment is scheduled to
take place on November 18, 1999. Management expects to repay the remaining $6
million by November 30, 1999. At September 30, 1999, the entire $20 million was
classified as long-term debt due within one year on the balance sheets of
Utility Group and Cleco Corporation's Consolidated Balance Sheet.
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Three issues of Utility Group's 1991 series pollution control bonds
totaling $61.3 million were refinanced on September 2, 1999. Two new series were
issued to replace the old bonds, which were retired using the legal defeasance
method and removed from the balance sheet as permitted under SFAS 125. The new
bonds were issued at a fixed rate with a coupon of 5.875%, and were discounted
and sold at 98.956%, with a final maturity of September 1, 2029, subject to
optional redemption by Utility Group after September 1, 2009. The bonds are
insurance-backed, thereby fixing the cost of the credit support for the life of
the bonds. In a related transaction, an interest rate lock agreement was entered
into for the notional amount of the bonds, effectively locking the rate of the
bonds at 5.663% for the 30-year period. The Utility Group received approximately
$1.8 million from the interest rate lock counterparty upon settlement, which
will be amortized over the life of the bonds.
The Company entered into a new $120 million, 364-day revolving credit
on August 25, 1999. The new $120 million facility provides for borrowings at
interest rates based on either competitive bid, prime rate, or London Interbank
Offered Rate and will expire on August 25, 2000. Compensating balances are not
required for the facility. The commitment fees for the new facility are based
upon the Company's lowest secured debt ratings and are currently 0.1%.
The Company also entered into a new $80 million, three year revolving
credit facility on August 25, 1999. The new $80 million facility provides for
borrowings at interest rates based on either competitive bid, prime rate, or
London Interbank Offered Rate and will expire on August 25, 2002. Compensating
balances are not required for the facility. The commitment fees for the new
facility are based upon the Company's lowest secured debt ratings and are
currently 0.125 %.
There is one provision that may limit the ability of the Company to
utilize the facilities to the full face amount. This provision deals with the
guaranties issued to third parties. Guaranties issued by the Company to third
parties for certain types of transactions between those parties and the
Company's subsidiaries, other than Utility Group, will reduce the amount of the
facilities available to the Company. At September 30, 1999, the amount of
guaranties, provided by the Company reducing the amount of the facilities
available to be utilized, was $10 million.
NOTE H. SIGNIFICANT NON-CASH TRANSACTIONS
Effective August 3, 1999, Midstream purchased additional ownership in
Cleco Energy from the other members, bringing the subsidiary's total ownership
interest from 44% to 93.63%. The total purchase price of the additional
ownership interest included $688,000 in common stock issued, and to be issued,
to one member out of treasury shares held by the Company and cancelled a note
receivable of $930,000 due from to another member.
On July 1, 1999, 246,684 shares of treasury stock with a cost of
approximately $5 million were cancelled as a part of the holding company
restructuring.
NOTE I. SUBSEQUENT EVENTS
On November 2, 1999, Cleco Corporation and International Energy
Partners, L.P.(IEP), announced plans to develop a 1,000-megawatt natural
gas-fired power plant near Eunice, La. The combined-cycle plant would be owned
by Acadia Power Partners, LLC, a joint venture between
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Cleco Midstream and IEP USA Holdings, LLC, a subsidiary of Bethesda, Md.-based
IEP. It is anticipated the estimated $450 million facility will be
project-financed with nonrecourse debt. Permitting is under way and construction
is expected to begin as early as midyear 2000, pending approvals from local,
state and regulatory officials. Commercial operations are planned to start
mid-year 2002. Power from the plant is anticipated to be sold in the region
under a combination of arrangements as well as to retail markets in deregulated
states in the region. The project is named the Acadia Power Project. It would be
built on a 61.5-acre site owned by Midstream. Several nearby natural gas
pipelines would provide ready access to fuel for the plant, which would be
adjacent to the existing 500/138 kV Richard substation. The location next to the
substation would give the plant the ability to dispatch power directly to the
Southwest Power Pool and the Southeastern Electric Reliability Council through
both Utility Group and Entergy's transmission systems.
On November 10, 1999, Cleco Evangeline, a non-LPSC jurisdictional
subsidiary of Midstream, executed the Capacity Sale and Tolling Agreement with
Williams Energy Marketing & Trading (Williams). Under the terms of the
agreement, for 20 years, Williams has the right to own and market the
electricity produced by the Evangeline facility and would supply the natural gas
fuel required by the facility. Cleco Evangeline will collect a fee from Williams
for operating and maintaining the Evangeline facility.
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CLECO CORPORATION
CLECO UTILITY GROUP INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in combination with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of Cleco Corporation's 1998 Form 10-K, the financial
statements and notes contained in Item 8 of the Cleco Corporation's 1998 Form
10-K and the interim financial statements and notes thereto contained elsewhere
in this Report.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical fact included in this Report, are forward-looking
statements. Although the Company believes 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 which could cause the actual results to
differ materially from the Company's expectations. Such risks and uncertainties
include, without limitation, the effects of competition in the power industry,
legislative and regulatory changes affecting electric utilities, fluctuations in
the weather and changes in general economic and business conditions, as well as
other factors discussed in this and the Company's other filings with the
Securities and Exchange Commission (Cautionary Statements). All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
RESULTS OF OPERATIONS
For the Three Months Ended September 30, 1999
Cleco Corporation consolidated net income applicable to common stock
totaled $25.2 million or $1.12 per basic average common share for the third
quarter of 1999, as compared to $22.3 million or $0.99 per basic average common
share for the corresponding period in 1998. The following principal factors
contributed to these results:
Operating revenues for the quarter increased $112.5 million or 65.2%
compared to the same period in 1998. This increase is primarily due to a $96.2
million increase in sales from energy marketing activities (electric and gas)
within Utility Group, the public utility subsidiary regulated by the Louisiana
Public Service Commission (LPSC). Sales from electric marketing activities
within Utility Group increased $79.4 million over the same period in 1998. The
increase was due to several factors. The first factor was that the electric
marketing operation was not operational until late in the second quarter of 1998
and was still in start up mode in the third quarter of 1998. The second factor
is that in 1998 the operations only traded in the Into Entergy
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market whereas in 1999, they also traded in the Cinergy market. Sales from the
gas marketing activities within the Utility Group increased $16.8 million over
the same period in 1998 due to the fact that gas marketing operations were not
engaged in 1998.
Fuel cost recovery revenues within Utility Group increased 5.7%, or $3.6
million, compared to the same period in 1998. Fuel cost recovery revenues from
sales to industrial customers increased $3.0 million in relation to the same
period in 1998. The increase in fuel cost recovery revenues is related to an
increase in kilowatt-hour sales in the third quarter of 1999 to industrial
customers, compared to the third quarter of 1998. Changes in fuel cost have
historically had no effect on net income, as fuel costs are generally recovered
through a fuel cost adjustment clause that enables the Utility Group to pass on
to customers substantially all changes in the cost of generating fuel and
purchased power. These adjustments are audited monthly and are regulated by the
LPSC (representing about 99% of the total fuel cost adjustment) while the
remaining portion, regulated by the Federal Energy Regulatory Commission (FERC),
is audited periodically for several years at a time. Until approval is received,
the adjustments are subject to refund.
Within the Utility Group, a $0.2 million accrual for estimated customer
credits, which may be required under terms of an earnings review settlement
reached with the LPSC in 1996, reduced customer revenue. The $0.2 million
relates to the 12-month-ending September 30, 1998 cycle due to the final
determination by the LPSC for the 12-month-ending cycle September 30, 1998. The
amount of credits due customers, if any, is determined by the LPSC annually
based on 12-month ending results as of September 30 of each year. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - Financial Condition - Retail Rates" in Item 7 of the 1998 Form 10-K
for a discussion of the LPSC settlement.
Also contributing to the increase in operating revenues was a $11.9
million increase in revenues from energy marketing activities within Cleco
Marketing and Trading LLC, the energy marketing subsidiary not regulated by the
LPSC. The increase is due to the fact that it started operations on July 1,
1999.
Operating revenues from other subsidiaries had immaterial effects.
Operating expenses increased $107.6 million, or 82.7%, during the third
quarter of 1999 compared to the same period in 1998. The rise in operating
expenses is primarily the result of an increase in purchased energy related to
energy marketing activities (electric and gas) within Utility Group. Energy
marketing purchases increased by $92.4 million within Utility Group compared to
the same period in 1998 due to the fact that power marketing operations were not
fully operational until late in the second quarter of 1998 and gas marketing
operations were not engaged until the second quarter of 1999.
The Utility Group purchases power from other electric power generators
when the price of the energy purchased is less than the cost to the Utility
Group of generating such energy from its own facilities, or when the Utility
Group's generating units are unable to provide electricity to satisfy the
Utility Group's load. Nineteen percent of Utility Group's energy requirements
during the third quarter of 1999 were met with purchased power, compared to 22%
for the corresponding period in 1998.
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Energy marketing purchases increased by $7.0 million within Cleco
Marketing and Trading LLC due to the fact that it started operations on July 1,
1999.
For the Nine Months Ended September 30, 1999
Cleco Corporation consolidated net income applicable to common stock
totaled $46.9 million or $2.08 per basic average common share for the first nine
months of 1999, as compared to $43.3 million or $1.93 per basic average common
share for the corresponding period in 1998. The following principal factors
contributed to these results:
Operating revenues for the nine months increased $231.2 million or 58.1%
compared to the same period in 1998. This increase is primarily due to a $202.3
million increase in sales from energy marketing activities (electric and gas)
within Utility Group. Sales from electric marketing activities within Utility
Group increased $178.4 million over the same period in 1998. The increase was
due to several factors. The first factor was that the electric marketing
operation was not operational until late in the second quarter of 1998. The
second factor is that in 1998 the operations only traded in the Into Entergy
market whereas in 1999, they also traded in the Cinergy market. Sales from the
gas marketing activities within the Utility Group increased $23.9 million over
the same period in 1998 due to the fact that gas marketing was not taking place
in 1998.
Other factors within Utility Group affecting operating revenues include
an increase in fuel revenue of $5.9 million and an increase in base revenues of
$8.7 million over the same period in 1998.
Fuel cost recovery revenues within Utility Group increased 4.1%, or $5.9
million, compared to the same period in 1998. Fuel cost recovery revenues from
sales to commercial customers increased $1.6 million and sales to industrial
customers rose $3.3 million in relation to the same period in 1998. The increase
in fuel cost recovery revenues is related to higher natural gas prices and an
increase in kilowatt-hour sales in the first nine months of 1999, compared to
the same period of 1998. Changes in fuel cost have historically had no effect on
net income, as fuel costs are generally recovered through a fuel cost adjustment
clause that enables the Utility Group to pass on to customers substantially all
changes in the cost of generating fuel and purchased power. These adjustments
are audited monthly and are regulated by the LPSC (representing about 99% of the
total fuel cost adjustment) while the remaining portion, regulated by the
Federal Energy Regulatory Commission (FERC), is audited periodically for several
years at a time. Until approval is received, the adjustments are subject to
refund.
Base revenues within Utility Group increased 4.2%, or $8.7 million, over
the same period in 1998. This increase is primarily the result of a $2.2 million
increase in base revenues from increased kilowatt-hour sales to residential
customers, a $2.8 million increase in sales to commercial customers and a $2.3
million increase in industrial. Kilowatt-hour sales to regular customers for the
first nine months of 1999 improved 5.92% over the same period in 1998.
Kilowatt-hour Sales to residential customers rose 1.9%, sales to commercial
customers improved 8.1% and sales to industrial customers rose 9.7% over the
first nine months in 1998. The increase in kilowatt-hour sales can be attributed
to the above-normal additions of new commercial customers and continued overall
health of the economy in the Utility Group's service territory.
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Reducing customer revenue was a $5.1 million accrual within Utility Group
for estimated customer credits which may be required under terms of an earnings
review settlement reached with the LPSC in 1996. Of the $5.1 million, $2.2
million related to the 12-month-ending September 30, 1998 cycle. The remaining
$2.9 million relates to the current cycle ending September 30, 1999. The $2.2
million for the 1998 cycle was due to the final ruling by the LPSC on the amount
of credits due for that cycle year. The amount of credits due customers for the
1999 cycle, if any, will be determined by the LPSC based on 12-month ending
results as of September 30, 1999. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Financial Condition - Retail
Rates" in Item 7 of the 1998 Form 10-K for a discussion of the LPSC settlement.
Also contributing to the increase in operating revenues was a $11.9
million increase in revenues from energy marketing activities within Cleco
Marketing and Trading LLC, the energy marketing subsidiary not regulated by the
LPSC. This increase is due to the fact that it started operations on July 1,
1999.
Operating revenues from other subsidiaries had immaterial effects.
Operating expenses increased $222.5 million, or 71.7%, during the first
nine months of 1999 compared to the same period in 1998. The rise in operating
expenses is primarily the result of an increase in purchased energy related to
energy marketing activities (electric and gas) within Utility Group. Energy
marketing purchases increased by $200.1 million within Utility Group compared to
the same period in 1998 due to the fact that power marketing operations were not
fully operational until late in the second quarter of 1998 and gas marketing
operations were not engaged until the second quarter of 1999.
The Utility Group purchases power from other electric power generators
when the price of the energy purchased is less than the cost to the Utility
Group of generating such energy from its own facilities, or when the Utility
Group generating units are unable to provide electricity to satisfy the Utility
Group's load. Thirty percent of the Utility Group's energy requirements during
the first nine months of 1999 were met with purchased power, compared to 23% for
the corresponding period in 1998. The increase was caused by a scheduled major
maintenance at the Dolet Hills Power Station. The power station did not produce
electricity from March 1999 to June 1999. Consequently, the Utility Group
purchased power to meet load requirements.
Energy marketing purchases increased by $7.0 million within Cleco
Marketing and Trading LLC due to the fact that it did not start operations until
July 1, 1999.
FINANCIAL CONDITION
Liquidity and Capital Resources
At September 30, 1999 and December 31, 1998, the Company had $130.0
million and $68.4 million, respectively, of short-term debt outstanding in the
form of commercial paper borrowing and bank loans. An existing $100 million
revolving credit facility within Utility Group is scheduled to terminate on June
15, 2000 and an $80 million 364-day credit facility within Utility Group was
terminated on August 25, 1999. These facilities provided support for the
issuance of
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commercial paper and working capital needs. Two new credit facilities, totaling
$200 million, within Cleco Corporation were finalized concurrently with the
termination of the $80 million 364-day facility. These new facilities are
structured so that $120 million is for a term of 364 days and $80 million is for
a term of three years. The facilities will provide for working capital and other
needs of the Cleco Corporation and its subsidiaries. There is one provision that
may limit the ability of the Company to utilize the facilities to the full face
amount. This provision deals with the guaranties issued to third parties.
Guaranties issued by the Company to third parties for certain types of
transactions between those parties and the Company's subsidiaries, other than
Utility Group, will reduce the amount of the facilities available to the
Company. At September 30, 1999, the amount of guaranties, provided by the
Company reducing the amount of the facilities available to be utilized, was $10
million. Uncommitted lines of credit with banks totaling $15 million are also
available to support working capital needs.
Three issues of 1991 Series pollution control bonds totaling
$61,260,000 were refinanced by the Utility Group on September 2, 1999. Two new
series were issued to replace the old bonds, which were retired using the legal
defeasance method. The new bonds were issued at a fixed rate with a coupon of
5.875%, and were discounted and sold at 98.956%, with a final maturity of
September 1, 2029. The bonds are insurance-backed, thereby fixing the cost of
the credit support for the life of the bonds. In a related transaction, an
interest rate lock agreement was entered into for the notional amount of the
bonds, effectively locking the rate of the bonds at 5.663% for the 30-year
period. The Utility Group received approximately $1.8 million from the
counterparty upon settlement, amortized over the life of the bonds.
At September 30, 1999, CLE Resources, Inc., a non-LPSC regulated
subsidiary of the Company, had $12.8 million of cash and temporary cash
investments in securities with original maturities of 90 days or less. $10
million has been committed to provide credit support for working capital and
electricity or natural gas commodity positions for Cleco Energy LLC. In
addition, CLE Resources, Inc. has committed up to $25 million over a five-year
period for acquisitions, strategic alliances, and investments in capital
projects to be made by Cleco Energy LLC, subject to the satisfaction of certain
conditions. Cleco Energy LLC has drawn $2.5 million of the $25 million.
The cost of the repowering project at the Coughlin Power Station (CPS)
is estimated to be $256 million. It is anticipated that the structure of
permanent financing for the project will be determined and finalized during
1999. Currently, the Company is using its bank loans under its $200 million
credit facilities to fund the interim needs of the project. As of September 30,
1999, the Company has spent approximately $120.7 million on the project.
Accounts payable and receivable have had a material increase on Utility
Group's Balance Sheet and Cleco Corporation's Consolidated Balance sheet. The
increase is due to the increased activity in the energy marketing operations of
Utility Group and Cleco Marketing and Trading LLC. The accounts receivable for
the Utility Group and Cleco Marketing and Trading LLC are considered collectable
by the respective management for both entities.
Utility Group has agreed to repay $14 million out of $20 million of an
issuance of medium term notes with a put option. The repayment is scheduled to
take place on November 18, 1999. Management expects to repay the remaining $6
million by November 30, 1999. At September 30, 1999, the entire $20 million was
classified as long-term debt due within one year on the balance sheets of
Utility Group and Cleco Corporation's Consolidated Balance Sheet.
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Regulatory Matters - Retail Electric Competition
The LPSC continues its deliberations over the potential of
restructuring the retail electricity market in Louisiana. The LPSC has deferred
making a final public interest determination. It has, however, directed the LPSC
Staff to develop a transition to competition plan to be presented on or before
January 1, 2001. The Company has, and will continue to, actively participate in
these planning sessions. Louisiana has not adopted any specific legislation on
retail electric competition or restructuring, and no bills were introduced in
the 1999 Legislative session.
Several restructuring bills have been introduced at the federal level.
In April, the Clinton Administration introduced the "Comprehensive Electricity
Competition Act". This act would require nationwide implementation of retail
choice of electric generation suppliers by January 1, 2003, with provisions for
consumer protection, and various degrees of renewable generation requirements.
The most notable restructuring bill to date is H.R. 2944. This bill was approved
by the House Commerce Subcommittee on Energy and Power on October 27, the first
of several stages in the enactment process.. Renewable requirements and consumer
protections are minimal, ceding most of this decision making to individual
states.
Regulatory Matters - Wholesale Electric Competition
Wholesale power markets, as regulated by the FERC, involve sales of
power between power suppliers, marketers, and brokers for subsequent resale to
retail, or end-use customers. Competition in this market has increased since the
FERC mandated, through its Order No. 888 and subsequent interpretations thereof,
open access to transmission facilities that are necessary to complete these
sales. The Utility Group, under FERC rules, has an open access transmission
tariff through which it offers wholesale transmission service to other parties
that is comparable to the service that it provides itself from its facilities.
The Utility Group, as a member of the Southwest Power Pool, may also provide
certain specialized transmission services under an open access tariff
administered by the pool, and as approved by the FERC. In recent years, the
Utility Group has purchased a part of its power requirements from the wholesale
market when it is economical to do so or when the Utility Group's generating
units are unable to provide electricity to satisfy the Utility Group's load. In
this role, the Utility Group has also been a purchaser of open access
transmission service from other parties, and expects to continue to do so in the
immediate future.
In early April, Entergy proposed to FERC the creation of the country's
first for-profit regional transmission organization (RTO), commonly called a
transco. Unique to Entergy's proposal is its request to transfer all of its
transmission assets to a fully independent and incentive-driven transmission
company. This transco would control, operate and maintain all member
transmission assets as well as plan for the region's transmission needs. A
declaratory order was issued July 28 by FERC stating that the proposed RTO would
probably meet the principles set out in Order No. 888, but said it would need
far more detail in any transco filing to demonstrate independence and receive
FERC approval. Entergy officials have expressed an interest in including other
regional companies participating in the "Transco".
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The Administration's proposed federal restructuring bills would expand
FERC's authority. The "Comprehensive Electricity Competition Act" reaffirms FERC
Order No. 888, as amended. It also authorizes the agency to order establishment
of RTOs, and to order a transmitting utility to relinquish control over
operation of its transmission facility to such a entity. Conversely, H.R. 2944
would inhibit much of FERC's power over interstate transmission, favoring
instead a deference to state jurisdiction. Also included is an amendment to
allow a single transmitting utility to form an RTO.
REPOWERING PROJECT
In July 1998, the Utility Group's Board of Directors approved the
construction of a 750-megawatt repowering project (Project) by its then
wholly-owned subsidiary, Cleco Evangeline LLC (Cleco Evangeline) to be
implemented at The Coughlin Power Station (CPS). The Project will use three new
natural gas-fueled combustion turbine generators and three related heat recovery
system generators to repower two existing units at CPS. The project is well
underway with physical construction 28% complete. The construction schedule has
the potential for a 4 week slippage as a result of a manufacturing delay at the
combustion turbine factory.
Cleco Evangeline, now a wholly-owned subsidiary of Midstream, will own
and operate, through a contract with Cleco Generation Services LLC, the Project.
The total cost of the Project is expected to be $256 million and is scheduled to
be completed and in service by June 1, 2000. As of September 30, 1999, the
Company has spent approximately $120.7 million on the Project, which is
currently being funded through the Company's bank loans under its $200 million
credit facilities. Permanent financing for the Project has not yet been
determined and is expected to be finalized during the fourth quarter of 1999.
When Cleco Evangeline obtains the permanent financing, it is expected that the
proceeds, as necessary, will be used to repay the Company's indebtedness
incurred on account of the Project. Cleco Evangeline has received all necessary
approvals from the LPSC and FERC. In February 1999, the LPSC approved the
transfer of the existing CPS assets out of the LPSC regulated rate base of the
Utility Group into Cleco Evangeline. The actual transfer is expected to occur in
the fourth quarter of 1999. In return for the approval of the asset transfer,
Utility Group agreed to extend the terms of its 1996 rate settlement with the
LPSC for an additional three years, to the year 2004. The agreement also
contains specific provisions designed to hold harmless the Utility Group's
ratepayers from negative impacts resulting from the removal of the generating
assets from the rate base. In return, the Utility Group is authorized to
transfer the assets at their net book value of approximately $10 million to
Cleco Evangeline.
On November 10, 1999, Cleco Evangeline executed the Capacity Sale and
Tolling Agreement with Williams Energy Marketing & Trading (Williams). Under the
terms of the Agreement, for 20 years, Williams has the right to own and market
electricity produced by the plant and be required to supply the fuel required by
the plant. Cleco Evangeline would collect a fee from Williams for operating and
maintaining the Evangeline facility
YEAR 2000 READINESS DISCLOSURE
The year 2000 (Y2K) problem occurs because many systems, both hardware
and software, were designed to accept only two digits instead of four digits for
the year in a date field. Having two digits instead of four digits may cause the
system to read "00" as 1900 instead of
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2000. This may cause calculations that are date sensitive to arrive at an
incorrect or impossible solution. This may affect items such as delivery dates,
interest calculations, pension benefit calculations, and a variety of other
date-dependent calculations.
The Company is aware of the issues surrounding Y2K and the problems
that may occur and has completed its efforts to address these issues. The
Company is aware that the Y2K problem may affect both internal information
technology (IT) and non-IT systems. IT systems consist of software programs such
as the operating system, spreadsheets, accounting and other programs. Non-IT
systems refer to embedded technology such as micro controllers found in
computers and other hardware systems. The Company has divided the IT and non-IT
systems into two categories: mission critical and non-mission critical. Mission
critical systems are those that would affect the health and safety of the public
by causing a disruption in supplying electricity. Non-mission critical systems
are those that would not cause a disruption in supplying electricity, but may
still have a material, negative impact on the liquidity and financial condition
of the Company. The following tables show the initiatives and the completion
percentage of the various stages for the mission critical systems:
MISSION CRITICAL SYSTEMS
ESTIMATED
PLANNING- DATE OF
INITIATIVES ASSESSMENT CORRECTION TESTING IMPLEMENT COMPLETION
----------- ---------- ---------- ------- --------- ----------
Distribution 100% 100% 100% 100% N/A
Generation 100% 100% 100% 100% N/A
IT Services* 100% 100% 100% 100% N/A
Transmission 100% 100% 100% 100% N/A
*IT Services includes business applications and telecommunications.
The description of the stages are:
Planning-Assessment: Develop a project plan, compile a complete list of
affected systems, and prepare a detailed technical
plan.
Correction: Make the required changes identified in Planning-
Assessment.
Testing: Test all changes made in the Correction stage to
ensure that systems will meet the compliance criteria
and the systems will be accepted by user management.
Implementation: Integrate the changed systems into a production
environment and begin use. Monitor subsequent changes
to other systems to ensure overall system integrity.
Management considers the Company's mission critical and non-mission critical
systems to be Y2K compliant.
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Internal systems are not the only ones that may have a material effect
on the Company. Institutions external to the Company, such as vendors and
customers, may also impact the Company's operations if their systems are not Y2K
compliant. Vendors could impact the Company by their inability to deliver goods
and services required by the Company to operate. Customers could impact the
Company by their inability to operate, or their inability to pay the Company for
the products/services consumed. The Company has addressed this issue by
identifying major vendors and customers and sending surveys to discover their
level of Y2K compliance. Major vendors are defined as those that provide
critical goods or services to the Company, or those that provide critical
components to the Company (such as fuel suppliers and financial institutions).
Major customers are identified as those customers that are at the greatest risk
of being impacted by the Y2K problem and are large consumers of power (mainly
industrial and commercial customers). All of the customers and vendors we
identified as major have responded to the survey. They responded that they are
aware of the importance of being Y2K compliant in a timely manner and are
working to minimize the potential impact on their business. The Company will
continue to monitor the Y2K readiness of its major vendors and customers and
will take steps in order to minimize the impact of foreseeable failures on the
part of its major vendors and customers.
The Company's cost to address its Y2K problem was at $1.5 million. No
further expenditures are expected. The expenses associated with Y2K were funded
through cash flows from operations. Only a nominal amount of the Y2K budget was
expended on hardware. Most of the budget was expended on software. The Company's
overall IT operating budget for the year ended December 31, 1999, is
approximately $11 million; however, the bulk of the Y2K expenses were budgeted
and expended by the various departments that were affected by Y2K issues.
The Utility Group has been reporting to the LPSC on a quarterly basis
starting in 1998 and on a monthly basis starting in April 1999. Also, monthly
reports are sent to the SPP, which summarizes their members' reports and
forwards them to the North American Electric Reliability Council (NERC). The
U.S. Department of Energy receives its reporting from the NERC. The Utility
Group is in full compliance with the NERC reporting requirements and is
conforming with the NERC contingency planning requirements for the electrical
system. The Utility Group participated in one NERC planned system test in April.
The test brought to light minor issues which were subsequently addressed. The
Utility Group has participated in another NERC test in September with positive
results in all areas.
The risks of not addressing the Y2K problem include the failure to bill
customers, collect payments, pay invoices, operate generation facilities,
operate substations, and order and receive critical materials. Each of these
risks, should they materialize, could have a material, negative impact on the
operations, liquidity and financial condition of the Company. It is the opinion
of management that the action plan outlined above has adequately addressed the
Y2K risks facing the Company and has reduced them to manageable levels so that
Y2K issues will not materially impact the Company. There was no impact to the
Company's Consolidated Financial Statements due to the fact that the exchange
was accounted for similarly to a pooling of interest.
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A worst case scenario would be the entire SPP grid collapsing due to
the lack of available power. Management believes the Company is capable of
disconnecting from the SPP grid and restarting its power generation stations.
However, other regional grids may also collapse, which in turn could cause a
disruption in the supply of fuel or critical parts. During a possible
disruption, the Company would have to rely on its inventory of fuel and critical
parts. The Company keeps approximately a 30-day supply of coal at the two
coal-fired plants, which are considered the Company's base load plants. If
deliveries of fuel were interrupted for more than 30 days or if certain critical
parts should fail, the Company's ability to generate power would be severely
curtailed.
The Utility Group has contingency plans for mission critical systems
against normal operating hazards such as major storms or fires. These plans were
designed to minimize the impact to customers by providing alternatives and
solutions to possible adverse conditions. These plans are required by several
oversight agencies, such as the LPSC and the NERC. The existing contingency
plans were reviewed and evaluated by the Utility Group's staff to find out if
they adequately addressed possible failures due to Y2K noncompliance. It was
determined that amendments to the plan were needed. Plan amendments were
finalized and incorporated into the Utility Group's overall contingency plans.
The amendments were based on a set of scenarios sent by NERC. The scenarios
consisted of situations that may arise because of a failure due to Y2K
non-compliance by both the Utility Group and others the Utility Group relies
upon. Amendments were designed to address each scenario sent by NERC. The plan
was then sent to the SPP. The plans of all the participants of the SPP were
aggregated to design an overall plan for the SPP. The plan for the SPP was then
filed with NERC.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL RISK MANAGEMENT
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential change arising from increases or
decreases in the short, medium and long term interest rates, the commodity price
of electricity traded on the Into Entergy and the Cinergy exchanges and the
commodity price of natural gas traded. Generally, the Utility Group's market
risk sensitive instruments and positions are characterized as "other than
trading", however, Utility Group does have positions that are considered trading
as defined by EITF 98-10. All of Cleco Marketing and Trading LLC's (CMT)
positions are characterized as trading under EITF 98-10. The Company's exposure
to market risk, as discussed below, represents an estimate of possible changes
in the fair value or future earnings that would occur assuming possible future
movements in the interest rates and the commodity price of electricity and
natural gas. The market risk estimates have materially changed from those
disclosed in Cleco Corporation's 1998 Form 10-K, herein incorporated by
reference. The changes are presented below.
Interest Rate
As of September 30, 1999, the carrying value of the Company's
long-term, fixed-rate debt was approximately $382 million, of which
approximately $380 million is held at Utility Group. Each 0.5% change in the
average interest rates applicable to such debt would result in a change of
approximately $12.6 million in the fair values of these instruments. If these
instruments are held to maturity, no change in fair value will be realized.
As of September 30, 1999, the carrying value of the Company's
short-term, variable-rate debt was approximately $130 million. Each 0.5% change
in the average interest rates applicable to such debt would result in a change
of approximately $0.7 million in the Company's pre-tax earnings.
Market Risks
One of the subsidiaries of the Company, CMT, engages in marketing and
trading of power and natural gas. This subsidiary has trades that are
marked-to-market. The mark-to-market procedures may introduce volatility The
Company does have in place controls to help minimize the risks involved in
marketing and trading. The mark-to-market of trading positions of CMT at
September 30, 1999 was immaterial to both the Company and CMT.
Utility Group had financial positions that were defined as trading
under EITF 98-10. Controls similar to the ones in place for CMT are in place for
Utility Group to minimize risk. At September 30, 1999 the mark-to-market for
those positions was a positive $411,000.
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The Company utilizes a value-at-risk (VAR) model to assess the market
risk of its derivative financial instruments. The VAR is calculated at two
levels. The first level is the VAR as it relates to the instruments of the
individual subsidiary, specifically, CMT and Utility Group. The second level of
VAR is calculated on a consolidated level. At September 30, 1999 the VAR was
immaterial at the individual subsidiary level and at the consolidated level.
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PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the three
months ended September 30, 1999.
ITEM 5. OTHER INFORMATION
NEW ACCOUNTING STANDARD
Periodically, the Financial Accounting Standards Board (FASB) issues
Statements of Financial Accounting Standards (SFAS). These standards reflect
accounting, reporting, and disclosure requirements the Company should follow in
the accumulation of financial data and in the presentation of financial
statements. The FASB, a nongovernmental organization, is the primary source of
generally accepted accounting principles within the United States.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. This Statement establishes accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133." This statement delays
the effective date until all fiscal years beginning after June 15, 2000. The
effect of adopting this Statement has not been determined.
HOLDING COMPANY
Effective July 1, 1999, Cleco Utility Group Inc. (Utility Group)
reorganized into a holding company structure. This reorganization resulted in
the creation of a holding company, Cleco Corporation (the Company), which holds
investments in several subsidiaries, one of which, Utility Group, contains the
LPSC jurisdictional generation, transmission and distribution electric utility
operations serving Utility Group's traditional retail and wholesale customers.
Another subsidiary, Cleco Midstream Resources LLC (Midstream), operates
competitive LPSC non-jurisdictional electric generation, oil and natural gas
production, energy marketing and natural gas pipeline businesses. A third
subsidiary, Utility Construction & Technology Solutions LLC (formerly Cleco
Services LLC), sells utility support services related to distribution and retail
service to municipal governments, rural electric cooperatives and investor-owned
electric companies.
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Under the terms of the reorganization, the newly organized holding
company, Cleco Corporation, became the owner of all of the Utility Group's
outstanding common and preferred stock and holders of existing common and
preferred stock in two series that approved the restructuring of the Utility
Group exchanged their stock in the Utility Group for stock in the Company.
Shares of preferred stock in three series that did not approve the holding
company proposal were redeemed. The proposal received LPSC approval on December
18, 1998, and FERC approval on January 29, 1999. Approval was obtained from the
Shareholders at the Annual Meeting of Shareholders held on May 14, 1999. See the
Cleco Corporation's 1999 Notice of Annual Meeting of Shareholders and Proxy
Statement, dated April 9, 1999, incorporated herein by reference.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4(a) $120,000,000 364-Day Credit Agreement dated August
25, 1999 among the Company, the lenders party
thereto, the First National Bank of Chicago, as
Syndication Agent, Westdeutsche Landesbank
Girozentrale, as Documentation Agent, Fleet National
Bank, as Managing Agent and the Bank of New York, as
Administrative Agent.
4(b) $80,000,000 Three year Revolving Credit Agreement
dated August 25, 1999 among the Company, the lenders
party thereto, the First National Bank of Chicago,
as Syndication Agent, Westdeutsche Landesbank
Girozentrale, as Documentation Agent, Fleet National
Bank, as Managing Agent and the Bank of New York, as
Administrative Agent.
4(c) Agreement Under Regulation S-K Item
601(b)(4)(iii)(A)
10(a) Form of Notice and Acceptance of Grant of
Nonqualified Stock Option, with fixed option
prices.
10(b) Form of Notice and Acceptance of Grant of
Nonqualified Stock Options, with variable option
price.
10(c) Form of Notice and Acceptance of Grant of
Nonqualified Stock Options, awarded to Gregory L.
Nesbitt.
11 Computation of Net Income Per Common Share for the
three and nine months ended September 30, 1999 and
September 30, 1998.
12 Computation of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred
Stock Dividends for the twelve months ended
September 30, 1999.
15 Awareness letter, dated November 15, 1999, from
PricewaterhouseCoopers LLP regarding review of the
unaudited interim financial statements.
27 Financial Data Schedules.
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(b) Reports on Form 8-K
Cleco Utility Group Inc. filed a report on Form 8-K dated as of July 1,
1999 to announce the formation of an energy services holding company. For
more information, see "Item 5, Other Information - Holding Company"
above.
Cleco Corporation filed a report on Form 8-K dated as of July 1, 1999 to
announce the formation of an energy services holding company. For more
information, see "Item 5, Other Information - Holding Company" above.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLECO CORPORATION
CLECO UTILITY GROUP INC.
(Registrants)
BY: /s/ Thomas J. Howlin
-------------------------------
Thomas J. Howlin
Senior Vice President of Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: November 15, 1999
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4(a) $120,000,000 364-Day Credit Agreement dated August 25, 1999 among the
Company, the lenders party thereto, the First National Bank of
Chicago, as Syndication Agent, Westdeutsche Landesbank Girozentrale,
as Documentation Agent, Fleet National Bank, as Managing Agent and
the Bank of New York, as Administrative Agent.
4(b) $80,000,000 Three year Revolving Credit Agreement dated August 25,
1999 among the Company, the lenders party thereto, the First National
Bank of Chicago, as Syndication Agent, Westdeutsche Landesbank
Girozentrale, as Documentation Agent, Fleet National Bank, as
Managing Agent and the Bank of New York, as Administrative Agent.
4(c) Agreement Under Regulation S-K Item 601(b)(4)(iii)(A).
10(a) Form of Notice and Acceptance of Grant of Nonqualified Stock Option,
with fixed option prices.
10(b) Form of Notice and Acceptance of Grant of Nonqualified Stock Options,
with variable option price.
10(c) Form of Notice and Acceptance of Grant of Nonqualified Stock Options,
awarded to Gregory L. Nesbitt.
11 Computation of Net Income Per Common Share for the three and nine
months ended September 30, 1999 and September 30, 1998.
12 Computation of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends for the twelve months
ended September 30, 1999.
15 Awareness letter, dated November 15, 1999, from
PricewaterhouseCoopers LLP regarding review of the unaudited interim
financial statements.
27 Financial Data Schedules.