UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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

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

Commission file number 1-15759

CLECO CORPORATE HOLDINGS LLC

(Exact name of registrant as specified in its charter)


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

2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226

(Address of principal executive offices) (Zip Code)

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

Commission file number 1-05663

CLECO POWER LLC

(Exact name of registrant as specified in its charter)


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

2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226

(Address of principal executive offices) (Zip Code)

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


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

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

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

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

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

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

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

Cleco Corporate Holdings LLC has no common stock outstanding. All of the outstanding equity of Cleco Corporate Holdings LLC is held by Cleco Group LLC, a wholly owned subsidiary of Cleco Partners L.P.

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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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

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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


GLOSSARY OF TERMS

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


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

Amended Lignite Mining Agreement			Amended and restated lignite mining agreement effective December 29, 2009
AMI			Advanced Metering Infrastructure
AOCI			Accumulated Other Comprehensive Income (Loss)

ARO			Asset Retirement Obligation

BCI


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


CARES Act			Coronavirus Aid, Relief, and Economic Security Act of March 2020
CCR			Coal combustion by-products or residual

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

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

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

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

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


Dolet Hills			A facility consisting of Dolet Hills Power Station, the Dolet Hills mine, and the Oxbow mine


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


~~ABBREVIATION OR ACRONYM~~			~~DEFINITION~~
Dolet Hills Power Station			A 650-MW generating unit at Cleco Power’s plant site in Mansfield, Louisiana. Cleco Power has a 50% ownership interest in the capacity of the Dolet Hills Power Station. The Dolet Hills Power Station was retired on December 31, 2021.
EAC			Environmental Adjustment Clause


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


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



Entergy Gulf States			Entergy Gulf States Louisiana, LLC
Entergy Louisiana			Entergy Louisiana, LLC
EPA			U.S. Environmental Protection Agency
ERO			Electric Reliability Organization
ESG			Environmental, Social, and Governance
~~Evangeline~~			~~Cleco Evangeline LLC, a wholly owned subsidiary of Midstream. Cleco Evangeline LLC was dissolved effective July 29, 2021.~~
FAC			Fuel Adjustment Clause
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
Fitch			Fitch Ratings, a credit rating agency
FTR			Financial Transmission Right
FRP			Formula Rate Plan
GAAP			Generally Accepted Accounting Principles in the U.S.
GHG			Greenhouse gas



IRS			Internal Revenue Service

kWh			Kilowatt-hour(s)

LDEQ			Louisiana Department of Environmental Quality

LIBOR			London Interbank Offered Rate
LMP			Locational Marginal Price
Louisiana Generating			Louisiana Generating, LLC, a wholly owned subsidiary of South Central Generating
LPSC			Louisiana Public Service Commission

LTSA			Long-Term Parts and Service Agreement between Cottonwood Energy and a third party, dated January 19, 2001, that Cleco Cajun assumed as a result of the Cleco Cajun Transaction to provide maintenance services related to the Cottonwood Plant
Madison Unit 3			A 641-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana
MAM			Macquarie Asset Management
MATS			Mercury and Air Toxics Standards
Merger Agreement			Agreement and Plan of Merger, dated as of October 17, 2014, by and among Cleco Partners, Merger Sub, and Cleco Corporation relating to the 2016 Merger
Merger Sub			Cleco MergerSub Inc., previously an indirect wholly owned subsidiary of Cleco Partners that was merged with and into Cleco Corporation, with Cleco Corporation surviving the 2016 Merger, and Cleco Corporation converting to a limited liability company and changing its name to Cleco Holdings
Midstream			Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Holdings


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

NAAQS
~~N/A~~			~~Not Applicable~~National Ambient Air Quality Standards
NERC			North American Electric Reliability Corporation



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


NRG Energy			NRG Energy, Inc.






OSHA			Occupational Safety and Health Administration
Other Benefits			Includes medical, dental, vision, and life insurance for Cleco’s retirees
Oxbow			Oxbow Lignite Company, LLC, 50% owned by Cleco Power and 50% owned by SWEPCO


Perryville			Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Holdings. Perryville Energy Partners, L.L.C. was dissolved effective September 8, 2021.



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

Registrant(s)			Cleco Holdings and/or Cleco Power
~~RFP~~			~~Request for Proposal~~
Rodemacher Unit 2			A 523-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana. Cleco Power has a 30% ownership interest in the capacity of Rodemacher Unit 2.
ROE			Return on Equity


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

SEC			U.S. Securities and Exchange Commission


SERP			Supplemental Executive Retirement Plan
SIP			State Implementation Plan

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


SSR			System Support Resource



Support Group			Cleco Support Group LLC, a wholly owned subsidiary of Cleco Holdings
~~SWEPCO~~			~~Southwestern Electric Power Company, an electric utility subsidiary of American Electric Power Company, Inc.~~


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


ABBREVIATION OR ACRONYM			DEFINITION
SWEPCO			Southwestern Electric Power Company, an electric utility subsidiary of American Electric Power Company, Inc.
TCJA			Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017
Teche Unit 3			A 359-MW generating unit at Cleco Power’s plant site in Baldwin, Louisiana
WHO			World Health Organization


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

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

•economic conditions in Cleco’s service areas, including inflation and the economy’s effects on customer demand for utility services,

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

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

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

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

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

•terrorist attacks, cyberattacks, or other malicious acts that may damage or disrupt operating or information technology systems,

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

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

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

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

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

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

•volatility and illiquidity in wholesale energy markets,

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

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

•the outcome of legal proceedings and other contingencies,

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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

•Cleco’s ability to remain in compliance with the commitments made to the LPSC in connection with the Cleco Cajun Transaction and the 2016 Merger,

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

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


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

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

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

For more discussion of these factors and other factors that could cause actual results to differ materially from those contemplated in the Registrants’ forward-looking statements, see Part II, Item 1A, “Risk Factors” in this report and in Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

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

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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


PART I — FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco

These unaudited condensed consolidated financial statements should be read in conjunction with Cleco’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. For more information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST 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 MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Operating revenue	Operating revenue					Operating revenue
Electric operations	Electric operations	$	462,164	$	386,388	Electric operations	$	397,309	$	366,245
Other operations	Other operations	55,721		47,597		Other operations	52,007		49,726

Gross operating revenue	Gross operating revenue	517,885		433,985		Gross operating revenue	449,316		415,971
Electric customer credits	Electric customer credits	(691)		(16,534)		Electric customer credits	(136)		(20,976)
Operating revenue, net	Operating revenue, net	517,194		417,451		Operating revenue, net	449,180		394,995
Operating expenses	Operating expenses					Operating expenses
Fuel used for electric generation	Fuel used for electric generation	69,318		74,142		Fuel used for electric generation	(2,506)		55,820
Purchased power	Purchased power	101,377		82,690		Purchased power	115,828		144,702
Other operations and maintenance	Other operations and maintenance	76,506		71,131		Other operations and maintenance	68,143		72,112
Depreciation and amortization	Depreciation and amortization	60,628		52,892		Depreciation and amortization	69,088		54,947
Taxes other than income taxes	Taxes other than income taxes	17,766		14,660		Taxes other than income taxes	16,448		21,117
Merger transaction and commitment costs		34		184

Total operating expenses	Total operating expenses	325,629		295,699		Total operating expenses	267,001		348,698
Operating income	Operating income	191,565		121,752		Operating income	182,179		46,297
Interest income	Interest income	941		910		Interest income	756		647
Allowance for equity funds used during construction	Allowance for equity funds used during construction	711		144		Allowance for equity funds used during construction	931		887

Other expense, net	Other expense, net	(8,109)		(3,374)		Other expense, net	(190)		(3,033)
Interest charges	Interest charges					Interest charges
Interest charges, net	Interest charges, net	35,174		34,349		Interest charges, net	33,903		34,091
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(545)		(289)		Allowance for borrowed funds used during construction	(384)		(200)
Total interest charges	Total interest charges	34,629		34,060		Total interest charges	33,519		33,891
Income before income taxes	Income before income taxes	150,479		85,372		Income before income taxes	150,157		10,907
Federal and state income tax expense		30,569		25,075
Federal and state income tax benefit						Federal and state income tax benefit	(5,587)		(9,420)
Net income	Net income	$	119,910	$	60,297	Net income	$	155,744	$	20,327
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST 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 MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		(THOUSANDS)	2022		2021
Net income	Net income	$	119,910	$	60,297	Net income	$	155,744	$	20,327
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 $34 in 2021 and $159 in 2020)		96		448
Postretirement benefits gain (net of tax expense of $5 in 2022 and $222 in 2021)						Postretirement benefits gain (net of tax expense of $5 in 2022 and $222 in 2021)	14		628

Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	96		448		Total other comprehensive income, net of tax	14		628
Comprehensive income, net of tax	Comprehensive income, net of tax	$	120,006	$	60,745	Comprehensive income, net of tax	$	155,758	$	20,955
The accompanying notes are an integral part of the condensed consolidated financial statements.	The accompanying notes are an integral part of the condensed consolidated financial statements.					The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


CLECO

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

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

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

(Continued on next page)


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


CLECO

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

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

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

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

Postretirement benefit obligations	291,606		291,606

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



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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


CLECO

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



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

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

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

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








Return of equity investment in investee	—			1,750




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






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






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

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




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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


CLECO

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














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


Net income	—		20,327		—		20,327
Other comprehensive income, net of tax	—		—		628		628
Balances, Mar. 31, 2021	$	2,454,276	$	348,870	$	(25,168)	$	2,777,978

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

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


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

CLECO
Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating activities
Net income $ 219,059 $ 109,793
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 195,619 185,496
Provision for credit losses 3,106 6,134
Unearned compensation expense 7,068 5,113
Allowance for equity funds used during construction (2,703) (197)
Gain on risk management assets and liabilities, net (136,024) (23,254)
Deferred lease revenue (6,904) (6,904)
Deferred income taxes 36,513 39,657
Cash surrender value of company-/trust-owned life insurance (5,223) 3,586
Changes in assets and liabilities
Accounts receivable (56,922) (14,683)
Accounts receivable, affiliate (1,375) (39)
Unbilled revenue 3,368 (1,297)
Fuel inventory and materials and supplies (3,198) (26,747)
Prepayments (8,573) (12,895)
Accounts payable (11,680) (30,633)
Accounts payable - affiliate — 1,469
Customer deposits 8,295 4,688
Provision for merger commitments (1,881) 738
Postretirement benefit obligations 6,262 4,654
Regulatory assets and liabilities, net (95,294) (12,264)
Deferred fuel recoveries (50,986) (21,076)
Other deferred accounts (9,163) (13,799)
Taxes accrued 26,864 30,132
Interest accrued 23,961 21,063
Energy risk management collateral received 8,900 —
Other operating (9,295) 6,344
Net cash provided by operating activities 139,794 255,079
Investing activities
Additions to property, plant, and equipment (209,960) (215,692)
Allowance for equity funds used during construction 2,703 197
Proceeds from sale of property, plant, and equipment 1,445 259
Return of equity investment in investee 5,250 4,000
Other investing 1,469 562
Net cash used in investing activities (199,093) (210,674)
Financing activities
Draws on revolving credit facilities 185,000 238,000
Payments on revolving credit facilities (260,000) —
Issuances of long-term debt 325,000 125,000
Repayment of long-term debt — (11,055)
Payment of financing costs (4,149) (4,448)
Other financing (505) (456)
Net cash provided by financing activities 245,346 347,041
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents 186,047 391,446
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 90,265 (1) 142,595
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 276,312 (2) $ 534,041
Supplementary cash flow information
Interest paid, net of amount capitalized $ 70,387 $ 73,714
Income taxes paid (refunded), net $ 205 $ (2,777)
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 45,646 $ 89,604
(1) Includes cash and cash equivalents of $84,976, current restricted cash and cash equivalents of $4,545, and non-current restricted cash and cash equivalents of $744.
(2) Includes cash and cash equivalents of $273,215, current restricted cash and cash equivalents of $2,352, and non-current restricted cash and cash equivalents of $745.
The accompanying notes are an integral part of the condensed consolidated financial statements.


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

CLECO
Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS) MEMBERSHIP
INTEREST RETAINED
EARNINGS AOCI TOTAL
MEMBER’S
EQUITY
Balances, June 30, 2020 $ 2,454,276 $ 255,739 $ (16,657) $ 2,693,358
Net income — 60,297 — 60,297
Other comprehensive income, net of tax — — 448 448
Balances, Sept. 30, 2020 $ 2,454,276 $ 316,036 $ (16,209) $ 2,754,103
Balances, June 30, 2021 $ 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, Dec. 31, 2019 $ 2,454,276 $ 206,243 $ (17,513) $ 2,643,006
Net income — 109,793 — 109,793
Other comprehensive income, net of tax — — 1,304 1,304
Balances, Sept. 30, 2020 $ 2,454,276 $ 316,036 $ (16,209) $ 2,754,103
Balances, Dec. 31, 2020 $ 2,454,276 $ 328,543 $ (25,796) $ 2,757,023
Net income — 219,059 — 219,059
Other comprehensive income, net of tax — — 304 304
Balances, Sept. 30, 2021 $ 2,454,276 $ 547,602 $ (25,492) $ 2,976,386
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cleco Power

These unaudited condensed consolidated financial statements should be read in conjunction with Cleco Power’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. For more information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


CLECO POWER

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


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

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


CLECO POWER

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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 357,084 $ 288,852
Other operations 22,779 17,775
Affiliate revenue 1,380 1,506
Gross operating revenue 381,243 308,133
Electric customer credits (691) (16,534)
Operating revenue, net 380,552 291,599
Operating expenses
Fuel used for electric generation 149,127 80,148
Purchased power 38,211 32,096
Other operations and maintenance 56,720 52,595
Depreciation and amortization 43,526 40,268
Taxes other than income taxes 12,891 11,408
Total operating expenses 300,475 216,515
Operating income 80,077 75,084
Interest income 936 789
Allowance for equity funds used during construction 711 144
Other expense, net (6,106) (3,408)
Interest charges
Interest charges, net 19,054 18,730
Allowance for borrowed funds used during construction (545) (289)
Total interest charges 18,509 18,441
Income before income taxes 57,109 54,168
Federal and state income tax expense 548 18,076
Net income $ 56,561 $ 36,092
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

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

Note receivable	13,543		13,744

Regulatory assets	673,672		680,813


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

(Continued on next page)


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


CLECO POWER

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

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

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

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

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

Postretirement benefit obligations	205,651		205,214

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




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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

CLECO POWER
Condensed Consolidated Statements of Income (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating revenue
Electric operations $ 887,191 $ 752,925
Other operations 57,674 49,443
Affiliate revenue 4,259 3,852
Gross operating revenue 949,124 806,220
Electric customer credits (40,429) (33,974)
Operating revenue, net 908,695 772,246
Operating expenses
Fuel used for electric generation 262,970 205,276
Purchased power 151,499 74,737
Other operations and maintenance 162,448 164,207
Depreciation and amortization 126,534 125,541
Taxes other than income taxes 36,707 33,132
Total operating expenses 740,158 602,893
Operating income 168,537 169,353
Interest income 2,404 2,498
Allowance for equity funds used during construction 2,703 197
Other expense, net (16,064) (9,498)
Interest charges
Interest charges, net 56,672 56,401
Allowance for borrowed funds used during construction (1,280) (777)
Total interest charges 55,392 55,624
Income before income taxes 102,188 106,926
Federal and state income tax (benefit) expense (219) 30,770
Net income $ 102,407 $ 76,156
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

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

Provision for credit losses	391			1,874

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

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


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


Return of equity investment in investee	—			1,750





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







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

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

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



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

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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


CLECO POWER	CLECO POWER					CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (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
		FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)		2021		2020

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

Net income	Net income	$	102,407	$	76,156	Net income	18,425		—		18,425
Other comprehensive income, net of tax	Other comprehensive income, net of tax					Other comprehensive income, net of tax	—		522		522
Postretirement benefits gain (net of tax expense of $386 in 2021 and $430 in 2020)		1,095		1,218
Amortization of interest rate derivatives to earnings (net of tax expense of $67 in both 2021 and 2020)		191		191
Total other comprehensive income, net of tax		1,286		1,409
Comprehensive income, net of tax		$	103,693	$	77,565
Balances, Mar. 31, 2021						Balances, Mar. 31, 2021	$	1,851,057	$	(24,231)	$	1,826,826

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

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


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

CLECO POWER
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Assets
Utility plant and equipment
Property, plant, and equipment $ 6,047,103 $ 5,824,378
Accumulated depreciation (2,242,952) (2,067,362)
Net property, plant, and equipment 3,804,151 3,757,016
Construction work in progress 128,765 110,613
Total utility plant and equipment, net 3,932,916 3,867,629
Current assets
Cash and cash equivalents 156,318 24,846
Restricted cash and cash equivalents 2,352 4,545
Customer accounts receivable (less allowance for credit losses of $1,757 in 2021 and $2,758 in 2020) 68,581 43,852
Accounts receivable - affiliate 13,982 14,605
Other accounts receivable 30,285 27,535
Unbilled revenue 36,759 40,127
Fuel inventory, at average cost 84,534 63,234
Materials and supplies, at average cost 105,090 105,340
Energy risk management assets 6,028 4,337
Accumulated deferred fuel 78,847 28,194
Cash surrender value of company-owned life insurance policies 16,245 16,184
Prepayments 6,815 7,163
Regulatory assets 18,760 13,305
Other current assets 6,382 830
Total current assets 630,978 394,097
Equity investment in investee 3,822 9,072
Prepayments 1,306 1,496
Operating lease right of use assets 24,642 26,006
Note receivable 13,941 14,506
Regulatory assets 623,820 414,535
Other deferred charges 24,616 38,806
Total assets $ 5,256,041 $ 4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.
(Continued on next page)


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

CLECO POWER
Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Liabilities and member’s equity
Member’s equity $ 1,911,572 $ 1,807,879
Long-term debt and finance leases, net 1,825,424 1,502,257
Total capitalization 3,736,996 3,310,136
Current liabilities
Short-term debt — 75,000
Long-term debt and finance leases due within one year 736 682
Accounts payable 177,356 106,089
Accounts payable - affiliate 69,356 72,068
Customer deposits 60,186 58,718
Provision for rate refund 5,465 8,630
Taxes payable 42,931 4,778
Interest accrued 21,251 5,357
Energy risk management liabilities 1,330 1,121
Regulatory liabilities 46,003 23,509
Other current liabilities 26,940 24,754
Total current liabilities 451,554 380,706
Commitments and contingencies (Note 13) 0 0
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net 670,036 634,598
Postretirement benefit obligations 237,818 230,825
Regulatory liabilities - deferred taxes, net 99,361 157,056
Asset retirement obligations 21,182 11,364
Operating lease liabilities 21,709 23,295
Other deferred credits 17,385 18,167
Total long-term liabilities and deferred credits 1,067,491 1,075,305
Total liabilities and member’s equity $ 5,256,041 $ 4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.


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

CLECO POWER
Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020
Operating activities
Net income $ 102,407 $ 76,156
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 132,986 129,740
Provision for credit losses 3,106 5,746
Unearned compensation expense 1,746 1,135
Allowance for equity funds used during construction (2,703) (197)
Deferred income taxes (1,737) 5,358
Cash surrender value of company-owned life insurance (61) 1,418
Changes in assets and liabilities
Accounts receivable (38,558) (29,942)
Accounts receivable - affiliate 4,187 3,751
Unbilled revenue 3,368 (1,297)
Fuel inventory and materials and supplies (21,326) (9,511)
Prepayments 210 1,107
Accounts payable (4,067) (22,666)
Accounts payable - affiliate (2,389) 1,015
Customer deposits 8,295 4,688
Provision for merger commitments (1,381) (1,574)
Postretirement benefit obligations 4,910 2,581
Regulatory assets and liabilities, net (96,785) (13,755)
Deferred fuel recoveries (50,986) (21,076)
Other deferred accounts (6,394) (14,490)
Taxes accrued 30,789 50,638
Interest accrued 15,893 13,589
Other operating (6,807) 5,573
Net cash provided by operating activities 74,703 187,987
Investing activities
Additions to property, plant, and equipment (202,940) (205,765)
Allowance for equity funds used during construction 2,703 197
Proceeds from sale of property, plant, and equipment 1,445 259
Return of equity investment in investee 5,250 4,000
Other investing 1,469 562
Net cash used in investing activities (192,073) (200,747)
Financing activities
Draws on revolving credit facility 185,000 150,000
Payments on revolving credit facility (260,000) —
Issuances of long-term debt 325,000 125,000
Repayment of long-term debt — (11,055)
Payment of financing costs (2,846) (1,619)
Other financing (505) (456)
Net cash provided by financing activities 246,649 261,870
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents 129,279 249,110
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 29,391 (1) 80,952
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 158,670 (2) $ 330,062
Supplementary cash flow information
Interest paid, net of amount capitalized $ 35,065 $ 34,454
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment $ 45,305 $ 88,939
(1) Includes cash and cash equivalents of $24,846 and current restricted cash and cash equivalents of $4,545.
(2) Includes cash and cash equivalents of $156,318 and current restricted cash and cash equivalents of $2,352.
The accompanying notes are an integral part of the condensed consolidated financial statements.


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

CLECO POWER
Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS) MEMBER’S
EQUITY AOCI TOTAL
MEMBER’S
EQUITY
Balances, June 30, 2020 $ 1,776,041 $ (21,612) $ 1,754,429
Net income 36,092 — 36,092
Other comprehensive income, net of tax — 436 436
Balances, Sept. 30, 2020 $ 1,812,133 $ (21,176) $ 1,790,957
Balances, June 30, 2021 $ 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, Dec. 31, 2019 $ 1,735,977 $ (22,585) $ 1,713,392
Net income 76,156 — 76,156
Other comprehensive income, net of tax — 1,409 1,409
Balances, Sept. 30, 2020 $ 1,812,133 $ (21,176) $ 1,790,957
Balances, Dec. 31, 2020 $ 1,832,632 $ (24,753) $ 1,807,879
Net income 102,407 — 102,407
Other comprehensive income, net of tax — 1,286 1,286
Balances, Sept. 30, 2021 $ 1,935,039 $ (23,467) $ 1,911,572
The accompanying notes are an integral part of the condensed consolidated financial statements.


~~CLECO~~
~~CLECO POWER~~						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


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

Note 1	Summary of Significant Accounting Policies	Cleco and Cleco Power
Note 2	Recent Authoritative Guidance	Cleco and Cleco Power
Note 3	Leases	Cleco and Cleco Power
Note 4	Revenue Recognition	Cleco and Cleco Power
Note 5	Regulatory Assets and Liabilities	Cleco and Cleco Power
Note 6	Fair Value Accounting and Financial Instruments	Cleco and Cleco Power
~~Note 7~~	~~Debt~~	~~Cleco and Cleco Power~~
Note 87	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 98	Income Taxes	Cleco and Cleco Power
Note 109	Disclosures about Segments	Cleco
Note 1110	Regulation and Rates	Cleco and Cleco Power
Note 1211	Variable Interest Entities	Cleco and Cleco Power
Note 1312	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 1413	Affiliate Transactions	Cleco and Cleco Power
Note 1514	Intangible Assets and Liabilities	Cleco and Cleco Power
Note 1615	Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 1716	Storm Restoration, Securitization, and Cost Recovery	Cleco and Cleco Power


Notes to the Unaudited Condensed Consolidated Financial Statements


Note 1 — Summary of Significant Accounting Policies

COVID-19 Impacts

In response to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, the governor of the state of Louisiana reduced restrictions that were previously in effect, eased capacity limits on businesses and social gatherings, and revoked the mandatory, state-wide mask mandate. However, effective August 4, 2021, the state-wide mask mandate was reinstated due to a surge in COVID-19 cases. Due to the decrease in the number of COVID-19 cases, effective October 27, 2021, the mandatory, state-wide mask mandate was once again revoked.

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

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

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

In March 2020 the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had a regulatory asset of $3.0 million recorded for expenses incurred related to the executive order, as allowed by the LPSC.

While most restrictions have now been lifted, Cleco continues to assess the COVID-19 situation ~~Cleco~~and cannot predict the full impact that COVID-19, or the significant disruption and volatility currently being experienced in the markets, will have on its business, cash flows, liquidity, financial condition, and results of operations, ~~at this time,~~ due to numerous uncertainties. ~~However, the~~The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the potential surges in COVID-19 infections, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the availability, timely distribution and acceptance of effective treatments and vaccines, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, and workforce ~~availability, and the timing and extent to which normal economic and operating conditions resume.~~availability.


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

Principles of Consolidation

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

Basis of Presentation

The condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements. Because the interim condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. For information on recent authoritative guidance and its effect on financial results, see Note 2 — “Recent Authoritative Guidance.”


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Restricted Cash and Cash Equivalents

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge	Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626	Cleco Katrina/Rita storm recovery surcharge	$	1,675	$	1,674

Cleco Power’s charitable contributions		678		1,718
Cleco Power’s rate credit escrow		—		201

Total current	Total current	2,352		4,545		Total current	1,675		1,674
Non-current	Non-current					Non-current
Diversified Lands’ mitigation escrow	Diversified Lands’ mitigation escrow	22		22		Diversified Lands’ mitigation escrow	22		22
Cleco Cajun’s defense fund	Cleco Cajun’s defense fund	723		722		Cleco Cajun’s defense fund	723		723

Total non-current	Total non-current	745		744		Total non-current	745		745
Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	3,097	$	5,289	Total restricted cash and cash equivalents	$	2,420	$	2,419


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current					Current
Cleco Katrina/Rita storm recovery surcharge	Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626	Cleco Katrina/Rita storm recovery surcharge	$	1,675	$	1,674

Charitable contributions		678		1,718
Rate credit escrow		—		201

Total restricted cash and cash equivalents	Total restricted cash and cash equivalents	$	2,352	$	4,545	Total restricted cash and cash equivalents	$	1,675	$	1,674

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

Reserves for Credit Losses

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

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

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


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

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

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


Cleco														Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30, 2020						FOR THE NINE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL		(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period		$	3,486	$	1,638	$	5,124	$	3,005	$	1,250	$	4,255
CECL adoption		—		—		—		71		—		71
Balances, Dec. 31, 2021														Balances, Dec. 31, 2021	$	1,302	$	1,638	$	2,940

Current period provision	Current period provision	2,041		—		2,041		5,675		388		6,063		Current period provision	391		—		391
Charge-offs	Charge-offs	—		—		—		(4,091)		—		(4,091)		Charge-offs	(1,089)		—		(1,089)
Recovery	Recovery	54		—		54		921		—		921		Recovery	398		—		398
Balances, Sept. 30, 2020		$	5,581	$	1,638	$	7,219	$	5,581	$	1,638	$	7,219
Balances, Mar. 31, 2022														Balances, Mar. 31, 2022	$	1,002	$	1,638	$	2,640

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

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


		FOR THE THREE MONTHS ENDED SEPT. 30, 2020		FOR THE NINE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS)	(THOUSANDS)	ACCOUNTS RECEIVABLE				(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period		$	3,486	$	3,005
CECL adoption		—		71
Balances, Dec. 31, 2020						Balances, Dec. 31, 2020	$	2,758	$	1,638	$	4,396

Current period provision	Current period provision	2,041		5,675		Current period provision	1,874		—		1,874
Charge-offs	Charge-offs	—		(4,091)		Charge-offs	(2,859)		—		(2,859)
Recovery	Recovery	54		921		Recovery	267		—		267
Balances, Sept. 30, 2020		$	5,581	$	5,581
Balances, Mar. 31, 2021						Balances, Mar. 31, 2021	$	2,040	$	1,638	$	3,678

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


Cleco Power

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

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



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

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


Note 2 — Recent Authoritative Guidance

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

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

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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

Note 3 — Leases

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

Cottonwood Sale Leaseback Agreement

Upon closing the Cleco Cajun Transaction, the Cottonwood Sale Leaseback was executed. Under the terms of the lease, NRG Energy will operate the Cottonwood Plant, incur all costs, and receive all revenues from the operations of the plant. Cottonwood Energy will receive fixed lease payments of $40.0 million per year and variable lease payments for LTSA costs and property taxes paid by NRG Energy on behalf of Cleco. Cleco may terminate the lease contract under specific

circumstances stated in the lease contract. The residual value under the Cottonwood Sale Leaseback is expected to be recovered through sales of power generation from the plant. The residual value of the Cottonwood Plant has been determined using the plant’s estimated economic life.

Cleco Cajun is Cleco’s only ~~entity~~subsidiary with lessor arrangements. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback is included in Other operations within Cleco’s Condensed Consolidated Statement of Income. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020,~~ was as follows:


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


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Fixed payments	Fixed payments	$	10,000	$	10,000	$	30,000	$	30,000	Fixed payments	$	10,000	$	10,000
Variable payments	Variable payments	4,938		5,190		15,413		15,950		Variable payments	5,549		5,465
Amortization of deferred lease liability*	Amortization of deferred lease liability*	2,301		2,301		6,904		6,904		Amortization of deferred lease liability*	2,301		2,301
Total lease income	Total lease income	$	17,239	$	17,491	$	52,317	$	52,854	Total lease income	$	17,850	$	17,766

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

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


Note 4 — Revenue Recognition

Operating revenue, net for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020,~~ was as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30, 2021														FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL		(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers	Revenue from contracts with customers														Revenue from contracts with customers
Retail revenue	Retail revenue														Retail revenue
Residential (1)	Residential (1)	$	148,522		$	—		$	—		$	—	$	148,522	Residential (1)	$	112,423		$	—		$	—		$	—	$	112,423
Commercial (1)	Commercial (1)	82,711			—			—			—		82,711		Commercial (1)	76,534			—			—			—		76,534
Industrial (1)	Industrial (1)	45,446			—			—			—		45,446		Industrial (1)	46,274			—			—			—		46,274
Other retail (1)	Other retail (1)	4,479			—			—			—		4,479		Other retail (1)	4,129			—			—			—		4,129

Electric customer credits	Electric customer credits	(764)			—			—			—		(764)		Electric customer credits	(136)			—			—			—		(136)
Total retail revenue	Total retail revenue	280,394			—			—			—		280,394		Total retail revenue	239,224			—			—			—		239,224
Wholesale, net	Wholesale, net	74,831		(1)	107,501			(2,420)		(2)	—		179,912		Wholesale, net	55,364		(1)	103,633		(2)	(2,420)		(3)	—		156,577
Transmission, net	Transmission, net	17,235		(3)	17,903			—			(2,217)		32,921		Transmission, net	13,892			17,743			—			(2,690)		28,945
Other	Other	5,618			—			—			—		5,618		Other	5,193			—			—			—		5,193
Affiliate (4)	Affiliate (4)	1,380			—			32,116			(33,496)		—		Affiliate (4)	1,459			—			27,393			(28,852)		—
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	315,132			121,376			24,973			(31,542)		429,939
Revenue unrelated to contracts with customers	Revenue unrelated to contracts with customers														Revenue unrelated to contracts with customers
Other	Other	1,094		(5)	17,254		(6)	1			—		18,349		Other	1,372		(5)	17,869		(6)	1			(1)		19,241
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	1,372			17,869			1			(1)		19,241
Operating revenue, net	Operating revenue, net	$	380,552		$	142,658		$	29,697		$	(35,713)	$	517,194	Operating revenue, net	$	316,504		$	139,245		$	24,974		$	(31,543)	$	449,180

(1) Includes fuel recovery revenue.

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

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

~~(3)~~ ~~Includes $0.1 million of electric customer credits.~~

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

(5) Realized gains associated with FTRs.

(6) Includes ~~$14.9~~$15.5 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.

FOR THE THREE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 128,981 $ — $ — $ — $ 128,981
Commercial (1)
68,220 — — — 68,220
Industrial (1)
32,809 — — — 32,809
Other retail (1)
3,614 — — — 3,614
Electric customer credits (16,534) — — — (16,534)
Total retail revenue 217,090 — — — 217,090
Wholesale, net 52,216 (1) 99,956 (2,420) (2) — 149,752
Transmission, net 14,656 13,818 — (1,510) 26,964
Other 3,118 — — — 3,118
Affiliate (3)
1,506 — 35,522 (37,028) —
Total revenue from contracts with customers 288,586 113,774 33,102 (38,538) 396,924
Revenue unrelated to contracts with customers
Other 3,013 (4) 17,513 (5) 1 — 20,527
Total revenue unrelated to contracts with customers 3,013 17,513 1 — 20,527
Operating revenue, net $ 291,599 $ 131,287 $ 33,103 $ (38,538) $ 417,451


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


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

Electric customer credits	(20,976)			—			—			—		(20,976)
Total retail revenue	177,367			—			—			—		177,367
Wholesale, net	61,722		(1)	101,507		(2)	(2,420)		(3)	—		160,809
Transmission, net	13,982			15,257			—			(1,940)		27,299
Other	4,642			—			—			—		4,642
Affiliate (4)	1,655			—			27,156			(28,811)		—
Total revenue from contracts with customers	259,368			116,764			24,736			(30,751)		370,117
Revenue unrelated to contracts with customers
Other	7,095		(5)	17,782		(6)	1			—		24,878
Total revenue unrelated to contracts with customers	7,095			17,782			1			—		24,878
Operating revenue, net	$	266,463		$	134,546		$	24,737		$	(30,751)	$	394,995

(1) Includes fuel recovery revenue.

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

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

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

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

~~(5)~~(6) Includes ~~$15.2~~$15.5 million in lease revenue related to the Cottonwood Sale Leaseback and $2.3 million of deferred lease revenue amortization.

~~CLECO~~

~~CLECO POWER~~

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

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

~~(1)~~

~~Includes fuel recovery revenue.~~

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

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

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

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

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

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

FOR THE NINE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS) CLECO POWER CLECO CAJUN OTHER ELIMINATIONS TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)
$ 308,525 $ — $ — $ — $ 308,525
Commercial (1)
190,905 — — — 190,905
Industrial (1)
94,227 — — — 94,227
Other retail (1)
10,416 — — — 10,416
Surcharge 2,440 — — — 2,440
Electric customer credits (33,219) — — — (33,219)
Total retail revenue 573,294 — — — 573,294
Wholesale, net 140,139 (1) 273,836 (7,260) (2) — 406,715
Transmission, net 38,273 (3) 39,880 (4) — (4,966) 73,187
Other 10,416 — — 1 10,417
Affiliate (5)
3,852 204 93,938 (97,994) —
Total revenue from contracts with customers 765,974 313,920 86,678 (102,959) 1,063,613
Revenue unrelated to contracts with customers
Other 6,272 (6) 52,895 (7) 2 — 59,169
Total revenue unrelated to contracts with customers 6,272 52,895 2 — 59,169
Operating revenue, net $ 772,246 $ 366,815 $ 86,680 $ (102,959) $ 1,122,782

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

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

~~(3)~~ ~~Includes $0.8 million of electric customer credits.~~

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

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

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

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

Cleco and Cleco Power have unsatisfied performance obligations under contracts with cooperatives and municipalities with durations ranging between 1 and 1413 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At ~~September 30, 2021,~~March 31, 2022, Cleco and Cleco Power had ~~$65.7~~$64.5 million of unsatisfied fixed performance obligations that will be recognized as revenue over the term of such contracts as the stand-ready obligation to provide energy is provided.


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


Note 5 — Regulatory Assets and Liabilities

Cleco Power capitalizes or defers certain costs for recovery from customers and recognizes a liability for amounts expected to be returned to customers based on regulatory approval and management’s ongoing assessment that it is

probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or

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

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

Cleco Power
REMAINING
RECOVERY
PERIOD
(YRS.)
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Regulatory assets
Acadia Unit 1 acquisition costs $ 1,939 $ 2,019 18.5
Accumulated deferred fuel (1)
78,847 28,194 Various (2)
AFUDC equity gross-up 67,348 69,670 Various (3)
Affordability study 13,438 — 10
AMI deferred revenue requirement 2,181 2,591 4
AROs (1)(7)
8,060 5,488
Bayou Vista to Segura deferred revenue requirement (7)
287 —
Coughlin transaction costs 853 876 28
COVID-19 executive order (7)
2,953 2,953
Deferred storm restoration costs - Hurricane Delta (7)
17,866 17,051
Deferred storm restoration costs - Hurricane Ida (7)
36,836 —
Deferred storm restoration costs - Hurricane Laura (7)
56,815 54,406
Deferred storm restoration costs - Hurricane Zeta (7)
3,496 3,493
Deferred storm restoration costs - Winter Storms Uri & Viola (7)
1,974 —
Dolet Hills Power Station closure costs (7)
112,158 48,982
Emergency declarations — 270 —
Energy efficiency 1,998 2,820 1.5
Financing costs (1)
6,919 7,184 Various (4)
Interest costs 3,521 3,708 Various (3)
Lignite Mine closure costs (7)
93,093 —
Madison Unit 3 property taxes (7)
6,272 —
Non-service cost of postretirement benefits 11,662 9,901 Various (3)
Other 13,247 4,229 Various (2)
Postretirement costs 149,883 165,437 Various (5)
Production operations and maintenance expenses 1,998 4,058 Various (6)
Rodemacher Unit 2 deferred costs (7)
5,519 1,333
St. Mary Clean Energy Center 6,524 3,479 4
Training costs 5,968 6,085 38.5
Tree trimming costs 9,771 11,807 3.5
Total regulatory assets 721,426 456,034
Regulatory liabilities
AFUDC (7)
(6,500) (4,218)
Corporate franchise tax, net — (763) —
Deferred taxes, net (138,864) (175,584) Various
Total regulatory liabilities (145,364) (180,565)
Total regulatory assets, net $ 576,062 $ 275,469
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.
(2) For more information related to the remaining recovery period, refer to the following disclosures for each specific regulatory asset or liability.
(3) Amortized over the estimated lives of the respective assets.
(4) Amortized over the terms of the related debt issuances.
(5) Amortized over the average service life of the remaining plan participants.
(6) Deferral is recovered over the following three year regulatory period.
(7) Currently not in a recovery period.

3125


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


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

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

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


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

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Total Cleco Power regulatory assets, net	Total Cleco Power regulatory assets, net	$	576,062	$	275,469	Total Cleco Power regulatory assets, net	$	666,332	$	663,621
2016 Merger adjustments *	2016 Merger adjustments *					2016 Merger adjustments *
Fair value of long-term debt	Fair value of long-term debt	114,001		119,553		Fair value of long-term debt	110,300		112,150
Postretirement costs	Postretirement costs	13,921		15,411		Postretirement costs	12,927		13,424
Financing costs	Financing costs	7,334		7,592		Financing costs	7,161		7,248
Debt issuance costs	Debt issuance costs	5,004		5,254		Debt issuance costs	4,837		4,920
Total Cleco regulatory assets, net	Total Cleco regulatory assets, net	$	716,322	$	423,279	Total Cleco regulatory assets, net	$	801,557	$	801,363

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

~~Accumulated Deferred Fuel~~

In February 2021, Winter Storms Uri and Viola moved through Louisiana causing substantial damage to Cleco’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the U.S., primarily due to prolonged freezing temperatures. Incremental fuel and purchased power costs were incurred as a result of the winter storms. On March 29, 2021, Cleco Power received approval from the LPSC to defer $50.0 million of these costs and recover them over 12 months through Cleco Power’s FAC beginning in May 2021. For more information about the incremental fuel and purchased power costs related to Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

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

~~Affordability Study~~

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

~~Bayou Vista To Segura Deferred Revenue Requirement~~

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, Cleco Power was allowed to establish a regulatory asset and recover the revenue requirements, including interest at Cleco Power’s weighted average cost of capital, upon the completion of each phase of the Bayou Vista to Segura Transmission project. The northern phase of the project was completed in August 2021. At September 30, 2021, Cleco Power had a regulatory asset of $0.3 million related to deferred revenue associated with the northern phase of the Bayou Vista to Segura Transmission project. The regulatory asset will be amortized over 12 months beginning July 1, 2022.

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

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

On September 22, 2021, the LPSC approved Cleco Power’s establishment of a regulatory asset to track and defer non-capital expenses associated with the hurricane. For more information about Hurricane Ida, see Note 17 — “Storm Restoration — Hurricane Ida.”

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

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

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

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

On March 17, 2021, the LPSC approved utilities establishing a regulatory asset to track and defer non-capital expenses associated with these winter storms. For more information about Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

~~Lignite Mine Closure Cost~~

On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine. At September 30, 2021, Cleco Power had a regulatory asset of $93.1 million for these mine-related incurred costs. For more information on the Oxbow mine, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

~~Madison Unit 3 Property Taxes~~

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, beginning July 1, 2022, Cleco Power will be allowed to recover property taxes paid for Madison Unit 3, including a carrying charge at Cleco Power’s weighted average cost of capital, grossed up for income taxes. At September 30, 2021, Cleco Power had a regulatory asset of $6.3 million for the accrued 2021 Madison Unit 3 property taxes. The amount included in the cost recovery mechanism each year will amortize over 12 months.

~~Other~~

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan resulting in Cleco Power establishing several regulatory assets. Cleco Power was allowed to establish a regulatory asset to recover the undercollection of revenues related to the Northlake Transmission Agreement capped at $5.7 million. The amount recorded in the regulatory asset at June 30, 2021, began being amortized over 12 months on July 1, 2021. Amounts recorded in the regulatory asset after June 30, 2021, are being amortized over the remaining regulatory period ending June 30, 2022. At September 30, 2021, Cleco Power had a regulatory asset of $4.2 million relating to the Northlake Transmission Agreement.

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


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

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

In June 2017, and prior to the approval of Cleco Power’s new retail rate plan, the LPSC approved the establishment of a regulatory asset upon the completion of the Coughlin Pipeline project, for the revenue requirement associated with the project, until Cleco Power’s new retail rate plan was approved. As approved by the LPSC in Cleco Power’s new retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021. At September 30, 2021, Cleco Power had a regulatory asset of $5.1 million related to the deferred revenue associated with the Coughlin Pipeline project.

~~St. Mary Clean Energy Center~~

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


Note 6 — Fair Value Accounting and Financial Instruments

The amounts reflected on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, for cash equivalents, restricted cash

equivalents, accounts receivable, other accounts receivable, short-term debt, and accounts payable approximate fair value because of their short-term nature. Cleco applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including business combinations, as well as impairment related to goodwill and other long-lived assets.

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


Cleco	Cleco									Cleco
		AT SEPT. 30, 2021				AT DEC. 31, 2020					AT MAR. 31, 2022				AT DEC. 31, 2021
(THOUSANDS)	(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE		(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	Long-term debt	$	3,550,179	$	3,836,960	$	3,230,500	$	3,541,349	Long-term debt	$	3,480,631	$	3,536,846	$	3,482,405	$	3,752,220

* The carrying value of long-term debt does not include deferred issuance costs of ~~$14.1~~$12.4 million at
~~September 30, 2021,~~March 31, 2022, and ~~$13.4~~$13.2 million at December 31, ~~2020.~~2021.

Cleco Power
AT SEPT. 30, 2021 AT DEC. 31, 2020
(THOUSANDS) CARRYING
VALUE* FAIR VALUE CARRYING
VALUE* FAIR VALUE
Long-term debt $ 1,820,177 $ 2,100,029 $ 1,494,947 $ 1,794,799


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


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

* The carrying value of long-term debt does not include deferred issuance costs of ~~$8.5~~$7.5 million at
~~September 30, 2021,~~March 31, 2022, and ~~$7.0~~$7.9 million at December 31, ~~2020.~~

2021.

In order to fund capital requirements, Cleco issues fixed and variable rate long-term debt with various tenors. The fair value of this class fluctuates as the market interest rates for fixed and variable rate debt with similar tenors and credit ratings change. The fair value of the debt could also change from period to period due to changes in the credit rating of the Cleco entity by which the debt was issued. The fair value of long-term debt is classified as Level 2 in the fair value hierarchy.

Fair Value Measurements and Disclosures

Cleco classifies assets and liabilities that are measured at their fair value according to three different levels depending on the inputs used in determining fair value. Cleco elects not to designate derivatives as cash flow or fair value hedges, as allowed by accounting guidance. Cleco utilizes a mark-to-market approach recognizing changes in the fair value of FTRs and 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~~three months ended ~~September 30, 2021,~~March 31, 2022, and the year ended December 31, ~~2020,~~2021, Cleco did not experience any transfers ~~between levels within~~into or out of Level 3 of the fair value hierarchy.

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


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

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

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


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


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

Cleco
FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS) AT SEPT. 30, 2021 QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1) SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2) SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3) AT DEC. 31, 2020 QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1) SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2) SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
Asset description
Institutional money market funds $ 252,807 $ — $ 252,807 $ — $ 86,001 $ — $ 86,001 $ —
FTRs 9,338 — — 9,338 4,805 — — 4,805
Natural gas derivatives* 132,892 — 132,892 — 8,599 — 8,599 —
Total assets $ 395,037 $ — $ 385,699 $ 9,338 $ 99,405 $ — $ 94,600 $ 4,805
Liability description
FTRs $ 1,589 $ — $ — $ 1,589 $ 1,625 $ — $ — $ 1,625
Natural gas derivatives* — — — — 1,612 — 1,612 —
Total liabilities $ 1,589 $ — $ — $ 1,589 $ 3,237 $ — $ 1,612 $ 1,625

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

Cleco Power
FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS) AT SEPT. 30, 2021 QUOTED PRICES IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1) SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2) SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3) AT DEC. 31, 2020 QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1) SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2) SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
Asset description
Institutional money market funds $ 135,763 $ — $ 135,763 $ — $ 25,357 $ — $ 25,357 $ —
FTRs 6,028 — — 6,028 4,337 — — 4,337
Total assets $ 141,791 $ — $ 135,763 $ 6,028 $ 29,694 $ — $ 25,357 $ 4,337
Liability description
FTRs $ 1,330 $ — $ — $ 1,330 $ 1,121 $ — $ — $ 1,121
Total liabilities $ 1,330 $ — $ — $ 1,330 $ 1,121 $ — $ — $ 1,121

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


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021
Beginning balance	$	6,143	$	3,180
Unrealized (losses) gains*	(620)		16,123
Purchases	292		849
Settlements	(5,300)		(19,129)
Ending balance	$	515	$	1,023
* Cleco Power’s unrealized gains (losses) are reported through Accumulated deferred fuel on Cleco’s Condensed Consolidated Balance Sheet. Cleco Cajun’s unrealized gains (losses) are reported through Purchased power on Cleco’s Condensed Consolidated Income Statement.


Cleco
Cleco Power										Cleco Power
		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Beginning balance	Beginning balance	$	7,501	$	8,040	$	3,180	$	5,778	Beginning balance	$	4,918	$	3,216
Unrealized gains (losses)*		3,955		4		18,861		(736)
Unrealized losses*										Unrealized losses*	(263)		(37)
Purchases	Purchases	619		443		11,426		10,175		Purchases	292		849
Settlements	Settlements	(4,326)		(3,160)		(25,718)		(9,890)		Settlements	(4,380)		(2,940)
Ending balance	Ending balance	$	7,749	$	5,327	$	7,749	$	5,327	Ending balance	$	567	$	1,088
* 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.
* Unrealized losses are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.										* Unrealized losses are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Beginning balance $ 5,990 $ 7,511 $ 3,216 $ 5,725
Unrealized gains* 1,196 426 545 1,355
Purchases 619 443 9,236 8,219
Settlements (3,107) (2,968) (8,299) (9,887)
Ending balance $ 4,698 $ 5,412 $ 4,698 $ 5,412
* Unrealized gains are reported through Accumulated deferred fuel on Cleco Power’s Condensed Consolidated Balance Sheet.

Cleco Power and Cleco Cajun’s FTRs are valued using MISO’s monthly auction prices. Forward seasonal periods are not included in every monthly auction; therefore, the average of

the most recent seasonal auction prices is used for monthly valuation. FTRs are categorized as Level 3 fair value measurements because the only relevant value available


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

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

The following tables quantify the significant unobservable inputs used in developing the fair value of Level 3 positions for

Cleco and Cleco Power as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


Cleco	Cleco											Cleco
		FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE					FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH		(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Sept. 30, 2021		$	9,338	$	1,589	RTO auction pricing	FTR price - per MWh	$	(8.18)	$	9.16
FTRs at Dec. 31, 2020		$	4,805	$	1,625	RTO auction pricing	FTR price - per MWh	$	(3.49)	$	4.36
FTRs at Mar. 31, 2022												FTRs at Mar. 31, 2022	$	1,114	$	599	RTO auction pricing	FTR price - per MWh	$	(2.23)	$	11.77
FTRs at Dec. 31, 2021												FTRs at Dec. 31, 2021	$	6,977	$	834	RTO auction pricing	FTR price - per MWh	$	(3.94)	$	9.25


Cleco Power	Cleco Power											Cleco Power
		FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE					FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH		(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Sept. 30, 2021		$	6,028	$	1,330	RTO auction pricing	FTR price - per MWh	$	(3.26)	$	9.16
FTRs at Dec. 31, 2020		$	4,337	$	1,121	RTO auction pricing	FTR price - per MWh	$	(3.34)	$	4.36
FTRs at Mar. 31, 2022												FTRs at Mar. 31, 2022	$	840	$	273	RTO auction pricing	FTR price - per MWh	$	(2.23)	$	11.77
FTRs at Dec. 31, 2021												FTRs at Dec. 31, 2021	$	5,515	$	597	RTO auction pricing	FTR price - per MWh	$	(4.91)	$	9.25

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

Concentrations of Credit Risk

At ~~September 30, 2021,~~March 31, 2022, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents and restricted cash equivalents. The following tables present the ~~institutional~~ money market funds in cash and cash equivalents and restricted cash and cash equivalents as recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	249,711	$	80,712	Cash and cash equivalents	$	192,961	$	145,011
Current restricted cash and cash equivalents		$	2,352	$	4,545

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


Cleco Power
(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Cash and cash equivalents	$	103,711	$	82,411

Cleco Power
(THOUSANDS) AT SEPT. 30, 2021 AT DEC. 31, 2020
Cash and cash equivalents $ 133,411 $ 20,812
Current restricted cash and cash equivalents $ 2,352 $ 4,545

~~Institutional money~~Money market fund assets are discounted to the current period using a published U.S. Treasury interest rate as a proxy for a risk-free rate of return. If the money market funds failed to perform under the terms of the investments, Cleco and Cleco Power would be exposed to a loss of the invested amounts. Collateral on these types of investments is not required by either Cleco or Cleco Power. The Level ~~2 institutional~~1 money market funds asset consists of a single class. In order to capture interest income and minimize risk, cash is invested in money market funds that invest primarily in short-term securities issued by the U.S. ~~Treasury~~government to maintain liquidity and achieve the goal of a net asset value of a dollar. The risks associated with this class are counterparty risk of the fund manager and risk of price volatility associated with the underlying securities of the fund.


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

open trading contracts that Cleco has entered into or may enter into in the future. The amount of credit support that Cleco may be required to provide at any point in the future is dependent on the amount of the initial contract, changes in the market price, changes in open contracts, and changes in the amounts counterparties owe to Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Commodity Contracts

On Cleco’s Condensed Consolidated Balance Sheets, the fair value of amounts associated with Cleco Cajun’s derivative instruments are offset with related cash collateral balances with the same counterparty. ~~There were no offsetting amounts at December 31, 2020.~~ The following tables present the fair values of derivative instruments and their respective line items as recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


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


Cleco	Cleco																Cleco
		DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS																DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
			AT SEPT. 30, 2021												AT DEC. 31, 2020				AT MAR. 31, 2022
					GROSS AMOUNTS OFFSET ON THE BALANCE SHEET						GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)										GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CONTRACT NETTING		COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT		NET ASSET (LIABILITY) ON THE BALANCE SHEET (2)		(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts	Commodity-related contracts																Commodity-related contracts
FTRs	FTRs																FTRs
Current	Current	Energy risk management assets	$	9,338	$	—	$	—	$	9,338	$	—	$	9,338	$	4,805	Current	Energy risk management assets	$	1,114	$	—	$	1,114	$	—	$	1,114
Current	Current	Energy risk management liabilities	(1,589)		—		—		(1,589)		—		(1,589)		(1,625)		Current	Energy risk management liabilities	(599)		—		(599)		—		(599)
Natural gas derivatives	Natural gas derivatives																Natural gas derivatives
Current	Current	Energy risk management assets	59,648		(1,283)		(8,900)		49,465		(41,098)		8,367		8,276		Current	Energy risk management assets	107,842		(26,300)		81,542		(75,919)		5,623
Non-current	Non-current	Energy risk management assets	83,427		—		—		83,427		(13,902)		69,525		323		Non-current	Energy risk management assets	84,898		—		84,898		(6,081)		78,817
Current		Energy risk management liabilities	(1,283)		1,283		—		—		—		—		(828)
Non-current		Other deferred credits	—		—		—		—		—		—		(784)

Commodity-related contracts, net	Commodity-related contracts, net		$	149,541	$	—	$	(8,900)	$	140,641	$	(55,000)	$	85,641	$	10,167	Commodity-related contracts, net		$	193,255	$	(26,300)	$	166,955	$	(82,000)	$	84,955

(1) Represents letters of credit by counterparties.


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

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

~~(2)~~(1) ~~There were no offsetting amounts on or off Cleco’s Condensed Consolidated Balance Sheet at December 31, 2020.~~Represents letters of credit by counterparties.

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT SEPT. 30, 2021

AT DEC. 31, 2020

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT MAR. 31, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

Current

Energy risk management assets

6,028

4,337

Current

Energy risk management assets

840

5,515

Current

Energy risk management liabilities

(1,330)

(1,121)

Current

Energy risk management liabilities

(273)

(597)

Commodity-related contracts, net

4,698

3,216

Commodity-related contracts, net

567

4,918

At ~~September 30, 2021,~~March 31, 2022, cash collateral received from counterparties and held by Cleco was ~~$8.9~~$26.3 million, all of which was netted against the current portion of Energy risk management assets on Cleco’s Condensed Consolidated Balance Sheet. At December 31, ~~2020,~~2021, there was no cash collateral ~~paid~~posted with or received ~~by Cleco.~~from counterparties that was netted on Cleco’s Condensed Consolidated Balance Sheet.

The following tables present the effect of derivatives not designated as hedging instruments on Cleco and Cleco Power’s Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, and ~~2020:~~2021:

Cleco
AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) INCOME STATEMENT LINE ITEM 2021 2020 2021 2020
Commodity-related contracts
FTRs(1)
Electric operations $ 1,959 $ 3,013 $ 11,167 $ 6,262
FTRs(1)
Purchased power (874) (763) (8,730) (1,053)
Natural gas derivatives Fuel used for electric generation 107,687 20,307 165,584 22,515
Total $ 108,772 $ 22,557 $ 168,021 $ 27,724

~~(1)~~ 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. For the three and nine months ended September 30, 2020, unrealized gains associated with FTRs for Cleco Power of $0.4 million and $1.4 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

Cleco Power
AMOUNT OF GAIN(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) INCOME STATEMENT LINE ITEM 2021 2020 2021 2020
Commodity-related contracts
FTRs(1)
Electric operations $ 1,959 $ 3,013 $ 11,167 $ 6,262
FTRs(1)
Purchased power (822) (2,326) (9,236) (4,397)
Total $ 1,137 $ 687 $ 1,931 $ 1,865

~~(1)~~ For the three and nine months ended September 30, 2021, unrealized gains associated with FTRs of $1.2 million and $0.5 million, respectively, were reported through Accumulated deferred fuel on the balance sheet. For the three and nine months ended September 30, 2020, unrealized gains associated with FTRs of $0.4 million and $1.4 million, respectively, were reported through Accumulated deferred fuel on the balance sheet.

3629


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


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

(1) For the three months ended March 31, 2022, unrealized losses associated with FTRs for Cleco Power of $0.3 million were reported through Accumulated deferred fuel on the balance sheet. For the three months ended March 31, 2021, unrealized losses associated with FTRs for Cleco Power of less than $0.1 million were reported through Accumulated deferred fuel on the balance sheet.


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

(1) For the three months ended March 31, 2022, unrealized losses associated with FTRs of $0.3 million were reported through Accumulated deferred fuel on the balance sheet. For the three months ended March 31, 2021, unrealized losses associated with FTRs of less than $0.1 million were reported through Accumulated deferred fuel on the balance sheet.

The following table presents the volume of commodity-related derivative contracts outstanding at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, for Cleco and Cleco Power:

Cleco

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT SEPT. 30, 2021

AT DEC. 31, 2020

(THOUSAND)

UNIT OF MEASURE

AT MAR. 31, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

22,794

15,269

FTRs

MWh

5,739

14,055

Natural gas derivatives

MMBtus

118,712

73,000

Natural gas derivatives

MMBtus

249,118

109,306

Cleco Power

TOTAL VOLUME OUTSTANDING

(THOUSAND)

UNIT OF MEASURE

AT SEPT. 30, 2021

AT DEC. 31, 2020

(THOUSAND)

UNIT OF MEASURE

AT MAR. 31, 2022

AT DEC. 31, 2021

Commodity-related contracts

FTRs

MWh

14,596

9,521

FTRs

MWh

3,646

8,899


Note 7 ~~— Debt~~

On May 21, 2021, Cleco Holdings entered into a $175.0 million revolving credit agreement and a $266.0 million term loan agreement. These agreements replaced Cleco Holdings’ existing revolving credit agreement and term loan agreement. The revolving credit agreement matures on May 21, 2026. Under this agreement, Cleco Holdings is required to maintain total indebtedness less than or equal to 65% of total capitalization. The borrowing costs under this agreement are currently equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and commitment fees of 0.125% and 0.05%, respectively. At September 30, 2021, Cleco Holdings had no borrowings outstanding under its revolving credit agreement. Cleco Holdings’ term loan agreement matures on May 21, 2024 and has an interest rate of LIBOR plus 1.625% or ABR plus 0.625%.

In addition, on May 21, 2021, Cleco Power entered into a $300.0 million revolving credit agreement and a $125.0 million term loan agreement. These agreements replaced Cleco Power’s existing revolving credit agreement and term loan agreement. The revolving credit agreement matures on May 21, 2026. Under this agreement, Cleco Power is required to maintain total indebtedness less than or equal to 65% of total capitalization. The borrowing costs under this agreement are currently equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating

agencies, Cleco Power may be required to pay incremental interest and commitment fees of 0.125% and 0.025%, respectively. At September 30, 2021, Cleco Power had no borrowings outstanding under the revolving credit agreement. Cleco Power’s term loan agreement matures on May 21, 2024 and has an interest rate of LIBOR plus 1.25% or ABR plus 0.25%.

On September 10, 2021, Cleco Power completed the issuance and private sale of $325.0 million aggregate principal amount of its floating rate senior notes due 2023. The senior notes include an optional redemption, in whole or in part, at any time on or after March 15, 2022, at 100% of the principal amount of the senior notes. The senior notes bear interest at a rate of three-month LIBOR plus 50 basis points per annum and reset quarterly. The net proceeds from the issuance were used for general limited liability company purposes, including the repayment of borrowings under Cleco Power’s revolving credit agreement. The senior notes are governed by an indenture entered into between Cleco Power and a trustee. The indenture contains certain customary covenants that restrict Cleco Power’s ability to merge, consolidate or transfer or lease all or substantially all of its assets or create or incur certain liens securing indebtedness.


~~Note 8~~ — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Employees hired before August 1, 2007, are covered by a non-contributory, defined benefit pension plan. Based on the

funding assumptions at December 31, ~~2020, and the funding relief provided by the American Rescue Plan Act, which was signed by the President on March 11,~~ 2021, management estimates that no pension contributions will be required through ~~2025.~~2026. Cleco has not made, and does not expect to make, any contributions to the pension plan in ~~2021.~~2022.

Cleco Power is the plan sponsor and Support Group is the plan administrator. Benefits under the plan reflect an employee’s years of service, age at retirement, and accrued benefit at retirement.

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

The non-service components of net periodic pension and Other Benefits cost are included in Other income (expense), net within Cleco 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,~~March 31, 2022, and 2021 ~~and 2020~~ were as follows:


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE THREE MONTHS ENDED MAR. 31,				FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2022		2021		2022		2021
Components of periodic benefit costs
Service cost	$	2,150	$	2,528	$	551	$	595
Interest cost	4,960		4,615		371		323
Expected return on plan assets	(6,177)		(5,703)		—		—
Amortizations

Net loss	3,085		4,763		303		384
Net periodic benefit cost	$	4,018	$	6,203	$	1,225	$	1,302


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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

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

Effective September 30, 2021, the pension plan was amended to offer an enhanced pension benefit to certain employees participating in the plan that elect to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced pension benefits will receive 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 nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 was ~~$1.8~~$0.8 million and ~~$3.6 million, respectively. The expense of the pension plan related to Cleco’s other subsidiaries for the three and nine months ended September 30, 2020, was~~ $0.9 ~~million and $2.6~~ million, respectively.

Cleco Holdings is the plan sponsor for the other benefit plans. There are no assets set aside in a trust, and the liabilities are reported on the individual subsidiaries’ financial statements. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 was $1.2 million and $3.6 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, 2020, was $1.1 million and ~~$3.6~~$1.2 million, respectively. The current and non-current portions of

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


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	4,463	$	4,463	Current	$	5,181	$	5,181
Non-current	Non-current	$	51,306	$	51,868	Non-current	$	49,605	$	50,093


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	3,865	$	3,865	Current	$	4,432	$	4,432
Non-current	Non-current	$	40,261	$	40,734	Non-current	$	38,943	$	39,315

SERP

Certain Cleco officers are covered by SERP. Cleco does not fund the SERP liability, but instead pays for current benefits out of general funds available. Cleco Power has formed a rabbi trust. The life insurance policies issued on SERP participants designate the rabbi trust as the beneficiary. Market conditions could have a significant impact on the cash surrender value of the life insurance policies. Proceeds from the life insurance policies are expected to be used to pay the SERP participants’ death benefits, as well as future SERP payments. However, because SERP is a non-qualified plan, the assets of the trust could be used to satisfy general creditors of Cleco Power in the event of insolvency. All SERP benefits are paid out of general cash available of the respective companies that employed the officer. Cleco Power is the plan sponsor and Support Group is the plan administrator.

The non-service components of net periodic benefit cost related to SERP are included in Other income (expense), net within Cleco and Cleco Power’s Condensed Consolidated


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

Statements of Income. The components of the net periodic benefit cost related to SERP for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020~~ were as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Components of periodic benefit costs	Components of periodic benefit costs									Components of periodic benefit costs
Service cost	Service cost	$	59	$	100	$	174	$	300	Service cost	$	57	$	55
Interest cost	Interest cost	634		733		1,903		2,199		Interest cost	670		625
Amortizations	Amortizations									Amortizations
Prior period service credit	Prior period service credit	(54)		(54)		(161)		(161)		Prior period service credit	(54)		(53)
Net loss	Net loss	307		796		921		2,388		Net loss	262		1,016
Net periodic benefit cost	Net periodic benefit cost	$	946	$	1,575	$	2,837	$	4,726	Net periodic benefit cost	$	935	$	1,643

The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 was $0.1 million and $0.4 million, respectively. The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2020, was $0.2 million and $0.7$0.3 million, respectively.

Liabilities relating to SERP are reported on the individual subsidiaries’ financial statements. The current and non-current portions of the SERP liability for Cleco and Cleco Power at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


Cleco	Cleco					Cleco
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	4,703	$	4,703	Current	$	4,654	$	4,654
Non-current	Non-current	$	90,880	$	92,522	Non-current	$	88,082	$	88,523


Cleco Power	Cleco Power					Cleco Power
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Current	Current	$	711	$	711	Current	$	679	$	679
Non-current	Non-current	$	19,240	$	19,828	Non-current	$	12,788	$	12,909

401(k) Plan

Cleco’s 401(k) Plan is intended to provide active, eligible employees with voluntary, long-term savings and investment opportunities. The 401(k) Plan is a defined contribution plan and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974. In accordance with the 401(k) Plan, employer contributions are made in the form of cash. Cash contributions are invested in proportion to the participant’s voluntary contribution investment choices. Participation in the Plan is voluntary, and active Cleco employees are eligible to participate. Cleco’s 401(k) Plan expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020~~ was as follows:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
401(k) Plan expense	401(k) Plan expense	$	2,512	$	2,356	$	7,391	$	7,509	401(k) Plan expense	$	2,591	$	2,759

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

subsidiaries for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020~~ was as follows:

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

Effective September 30, 2021, the 401(k) plan was amended to offer an enhanced 401(k) benefit to certain employees participating in the plan that elect to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced 401(k) benefits will receive 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 MAR. 31,
(THOUSANDS)	2022		2021
401(k) Plan expense	$	1,322	$	1,380


Note 98 — Income Taxes

Effective Tax Rates

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


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
		2021		2020		2021		2020			2022		2021
Effective tax rate	Effective tax rate	20.3	%	29.4	%	12.4	%	26.8	%	Effective tax rate	(3.7)	%	(86.4)	%

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q


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

For Cleco and Cleco Power, the effective income tax rate for the three ~~and nine~~ months ended ~~September 30, 2021, and 2020,~~March 31, 2022, were different than the federal statutory rate primarily due to the ~~flow through of tax benefits, including AFUDC; the amortization of excess ADIT;~~ adjustment to record tax expense at the projected annual effective tax rate; ~~adjustments for~~the amortization of excess ADIT; the flow through of state tax ~~returns as filed;~~benefits; and state tax expense.

For Cleco and Cleco Power, the effective income tax ~~rate~~rates for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, ~~and 2020,~~ were different than the federal statutory rate primarily due to the ~~flow through of tax benefits, including AFUDC equity;~~ amortization of excess ~~ADIT; adjustment to record tax expense at the projected annual effective tax rate; adjustments for tax returns as filed; and state tax expense.~~ADIT.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. For the three months ended March 31, 2022, and 2021, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of September 30, 2021, for Cleco and Cleco Power would be unchanged in the next 12 months. The settlement of open tax years could involve the payment of


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

~~additional taxes, and/or the recognition of tax benefits, which may have an effect on Cleco’s effective tax rate.~~

Income Tax Audits

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

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

Cleco classifies income tax penalties as a component of other expense. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ no penalties were recognized.

CARES Act

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions such as an alternative minimum tax credit refund, a five-year net operating loss

carryback from years 2018 through 2020, and deferred payments of employer payroll taxes.

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

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

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

~~Consolidated Appropriations Act of 2021~~

In December 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. The CAA includes COVID-19 tax relief and tax extender provisions. These include extensions of time to begin construction on certain solar assets eligible for the Investment Tax Credit (ITC), 100% deductibility of business meals in 2021 and 2022, and an extension of the work opportunity tax credit. The ITC percentage has been increased for projects starting construction through 2023 and placed in service by the end of 2025. Management does not expect the CAA to have a material impact on the Registrants.

~~Future Tax Reform~~

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

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


Note 109 — Disclosures about Segments

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

Each reportable segment engages in business activities from which it earns revenue and incurs expenses. Segment managers report periodically to Cleco’s CEO, who is Cleco’s chief operating decision maker, with discrete financial information and, at least quarterly, present discrete financial information to Cleco Holdings’ and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The reportable segment prepares budgets that are presented to and approved by Cleco Holdings’ and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The column shown as Other in the following tables includes the holding company, a shared services subsidiary, and an investment subsidiary. There were no changes to Cleco’s existing reportable segments.

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

4032


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


Segment Information for the Three Months Ended Sept. 30,
2021 (THOUSANDS)		CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Segment Information for the Three Months Ended Mar. 31,									Segment Information for the Three Months Ended Mar. 31,
2022 (THOUSANDS)									2022 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue	Revenue								Revenue
Electric operations	Electric operations	$	357,084	$	107,500		$	464,584	Electric operations	$	296,097	$	103,633		$	399,730
Other operations	Other operations	22,779		35,158			57,937		Other operations	19,084		35,612			54,696
Affiliate revenue	Affiliate revenue	1,380		—			1,380		Affiliate revenue	1,459		—			1,459
Electric customer credits	Electric customer credits	(691)		—			(691)		Electric customer credits	(136)		—			(136)
Operating revenue, net	Operating revenue, net	$	380,552	$	142,658		$	523,210	Operating revenue, net	$	316,504	$	139,245		$	455,749
Net income	Net income	$	56,561	$	86,744		$	143,305	Net income	$	39,024	$	93,381		$	132,405
Add: Depreciation and amortization	Add: Depreciation and amortization	43,526		12,623		(1)	56,149		Add: Depreciation and amortization	45,239		23,180		(1)	68,419
Less: Interest income	Less: Interest income	936		4			940		Less: Interest income	740		13			753
Add: Interest charges	Add: Interest charges	18,509		1,117			19,626		Add: Interest charges	18,801		(8)			18,793
Add: Federal and state income tax expense	Add: Federal and state income tax expense	548		29,888			30,436		Add: Federal and state income tax expense	724		33,641			34,365

EBITDA	EBITDA	$	118,208	$	130,368		$	248,576	EBITDA	$	103,048	$	150,181		$	253,229

Additions to property, plant, and equipment									Additions to property, plant, and equipment	$	38,492	$	1,471		$	39,963
Equity investment in investee									Equity investment in investee	$	2,072	$	—		$	2,072
Goodwill									Goodwill	$	1,490,797	$	—		$	1,490,797
Total segment assets									Total segment assets	$	6,621,574	$	1,194,748		$	7,816,322
(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.	(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.								(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


2021 (THOUSANDS)		TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
2022 (THOUSANDS)											2022 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue	Revenue										Revenue
Electric operations	Electric operations	$	464,584	$	(2,420)		$	—	$	462,164	Electric operations	$	399,730	$	(2,420)		$	(1)	$	397,309
Other operations	Other operations	57,937		1			(2,217)		55,721		Other operations	54,696		1			(2,690)		52,007
Affiliate revenue	Affiliate revenue	1,380		32,116			(33,496)		—		Affiliate revenue	1,459		27,393			(28,852)		—
Electric customer credits	Electric customer credits	(691)		—			—		(691)		Electric customer credits	(136)		—			—		(136)
Operating revenue, net	Operating revenue, net	$	523,210	$	29,697		$	(35,713)	$	517,194	Operating revenue, net	$	455,749	$	24,974		$	(31,543)	$	449,180
Depreciation and amortization	Depreciation and amortization	$	56,149	$	8,189	(1)	$	—	$	64,338	Depreciation and amortization	$	68,419	$	4,379	(1)	$	—	$	72,798
Interest income	Interest income	$	940	$	43		$	(42)	$	941	Interest income	$	753	$	31		$	(28)	$	756
Interest charges	Interest charges	$	19,626	$	15,044		$	(41)	$	34,629	Interest charges	$	18,793	$	14,753		$	(27)	$	33,519

Federal and state income tax expense		$	30,436	$	133		$	—	$	30,569
Federal and state income tax expense (benefit)											Federal and state income tax expense (benefit)	$	34,365	$	(39,952)		$	—	$	(5,587)
Net income (loss)	Net income (loss)	$	143,305	$	(23,396)		$	1	$	119,910	Net income (loss)	$	132,405	$	23,339		$	—	$	155,744

(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.
Additions to property, plant, and equipment											Additions to property, plant, and equipment	$	39,963	$	236		$	—	$	40,199
Equity investment in investee (2)											Equity investment in investee (2)	$	2,072	$	(66,901)		$	66,901	$	2,072
Goodwill (2)											Goodwill (2)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (2)											Total segment assets (2)	$	7,816,322	$	582,322		$	(148,417)	$	8,250,227
(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger. (2) At March 31, 2022.											(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger. (2) At March 31, 2022.


2020 (THOUSANDS)		CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
2021 (THOUSANDS)									2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue	Revenue								Revenue
Electric operations	Electric operations	$	288,852	$	99,956		$	388,808	Electric operations	$	267,158	$	101,507		$	368,665
Other operations	Other operations	17,775		31,331			49,106		Other operations	18,626		33,039			51,665
Affiliate revenue	Affiliate revenue	1,506		—			1,506		Affiliate revenue	1,655		—			1,655
Electric customer credits	Electric customer credits	(16,534)		—			(16,534)		Electric customer credits	(20,976)		—			(20,976)
Operating revenue, net	Operating revenue, net	$	291,599	$	131,287		$	422,886	Operating revenue, net	$	266,463	$	134,546		$	401,009
Net income	Net income	$	36,092	$	38,357		$	74,449	Net income	$	18,425	$	14,481		$	32,906
Add: Depreciation and amortization	Add: Depreciation and amortization	40,268		11,344		(1)	51,612		Add: Depreciation and amortization	42,076		11,653		(1)	53,729
Less: Interest income	Less: Interest income	789		10			799		Less: Interest income	642		3			645
Add: Interest charges	Add: Interest charges	18,441		(484)			17,957		Add: Interest charges	18,646		(152)			18,494
Add: Federal and state income tax expense		18,076		12,258			30,334
Add: Federal and state income tax (benefit) expense									Add: Federal and state income tax (benefit) expense	(9,723)		4,610			(5,113)
EBITDA	EBITDA	$	112,088	$	61,465		$	173,553	EBITDA	$	68,782	$	30,589		$	99,371

(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.
Additions to property, plant, and equipment									Additions to property, plant, and equipment	$	36,263	$	2,313		$	38,576
Equity investment in investees (2)									Equity investment in investees (2)	$	2,072	$	—		$	2,072
Goodwill (2)									Goodwill (2)	$	1,490,797	$	—		$	1,490,797
Total segment assets (2)									Total segment assets (2)	$	6,620,298	$	1,104,090		$	7,724,388
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) At December 31, 2021.									(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) At December 31, 2021.

4133


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 388,808 $ (2,420) $ — $ 386,388
Other operations 49,106 1 (1,510) 47,597
Affiliate revenue 1,506 35,522 (37,028) —
Electric customer credits (16,534) — — (16,534)
Operating revenue, net $ 422,886 $ 33,103 $ (38,538) $ 417,451
Depreciation and amortization $ 51,612 $ 4,497 (1) $ — $ 56,109
Interest income $ 799 $ 121 $ (10) $ 910
Interest charges $ 17,957 $ 16,115 $ (12) $ 34,060
Federal and state income tax expense (benefit) $ 30,334 $ (5,260) $ 1 $ 25,075
Net income (loss) $ 74,449 $ (14,154) $ 2 $ 60,297
(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.

Segment Information for the Nine Months Ended Sept. 30,
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 $ 202,940 $ 5,904 $ 208,844
Equity investment in investees (1)
$ 3,822 $ — $ 3,822
Goodwill (1)
$ 1,490,797 $ — $ 1,490,797
Total segment assets (1)
$ 6,746,838 $ 1,212,968 $ 7,959,806
(1) Balances as of September 30, 2021.
(2) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2021 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 1,187,606 $ (7,260) $ (1) $ 1,180,345
Other operations 156,525 4 (5,752) 150,777
Affiliate revenue 4,259 85,392 (89,651) —
Electric customer credits (40,185) — — (40,185)
Operating revenue, net $ 1,308,205 $ 78,136 $ (95,404) $ 1,290,937
Depreciation and amortization $ 163,148 $ 17,052 (2) $ (1) $ 180,199
Interest income $ 2,414 $ 100 $ (98) $ 2,416
Interest charges $ 56,178 $ 45,732 $ (98) $ 101,812
Federal and state income tax expense (benefit) $ 52,342 $ (21,357) $ — $ 30,985
Net income (loss) $ 256,126 $ (37,068) $ 1 $ 219,059
Additions to property, plant, and equipment $ 208,844 $ 1,116 $ — $ 209,960
Equity investment in investees (1)
$ 3,822 $ 19,099 $ (19,099) $ 3,822
Goodwill (1)
$ 1,490,797 $ — $ — $ 1,490,797
Total segment assets (1)
$ 7,959,806 $ 685,410 $ (249,409) $ 8,395,807
(1) Balances as of September 30, 2021.
(2) Includes $7.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.


2021 (THOUSANDS)	TOTAL SEGMENTS		OTHER			ELIMINATIONS		TOTAL
Revenue
Electric operations	$	368,665	$	(2,420)		$	—	$	366,245
Other operations	51,665		1			(1,940)		49,726
Affiliate revenue	1,655		27,156			(28,811)		—
Electric customer credits	(20,976)		—			—		(20,976)
Operating revenue, net	$	401,009	$	24,737		$	(30,751)	$	394,995
Depreciation and amortization	$	53,729	$	4,435	(1)	$	—	$	58,164
Interest income	$	645	$	43		$	(41)	$	647
Interest charges	$	18,494	$	15,440		$	(43)	$	33,891
Federal and state income tax benefit	$	(5,113)	$	(4,307)		$	—	$	(9,420)
Net income (loss)	$	32,906	$	(12,579)		$	—	$	20,327
Additions to property, plant, and equipment	$	38,576	$	(805)		$	—	$	37,771
Equity investment in investees (2)	$	2,072	$	(46,901)		$	46,901	$	2,072
Goodwill (2)	$	1,490,797	$	—		$	—	$	1,490,797
Total segment assets (2)	$	7,724,388	$	619,101		$	(218,471)	$	8,125,018
(1) Includes $2.4 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger. (2) At December 31, 2021.

~~CLECO~~

~~CLECO POWER~~

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

2020 (THOUSANDS)
CLECO POWER CLECO CAJUN TOTAL SEGMENTS
Revenue
Electric operations $ 752,925 $ 273,836 $ 1,026,761
Other operations 49,443 92,928 142,371
Affiliate revenue 3,852 204 4,056
Electric customer credits (33,974) (153) (34,127)
Operating revenue, net $ 772,246 $ 366,815 $ 1,139,061
Net income $ 76,156 $ 84,655 $ 160,811
Add: Depreciation and amortization 125,541 33,385 (2) 158,926
Less: Interest income 2,498 269 2,767
Add: Interest charges 55,624 (353) 55,271
Add: Federal and state income tax expense 30,770 27,280 58,050
EBITDA $ 285,593 $ 144,698 $ 430,291
Additions to property, plant, and equipment $ 205,765 $ 7,908 $ 213,673
Equity investment in investees (1)
$ 9,072 $ — $ 9,072
Goodwill (1)
$ 1,490,797 $ — $ 1,490,797
Total segment assets (1)
$ 6,256,944 $ 1,029,812 $ 7,286,756
(1) Balances as of December 31, 2020.
(2) Includes $9.3 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

2020 (THOUSANDS)
TOTAL SEGMENTS OTHER ELIMINATIONS TOTAL
Revenue
Electric operations $ 1,026,761 $ (7,260) $ — $ 1,019,501
Other operations 142,371 2 (4,966) 137,407
Affiliate revenue 4,056 93,938 (97,994) —
Electric customer credits (34,127) — 1 (34,126)
Operating revenue, net $ 1,139,061 $ 86,680 $ (102,959) $ 1,122,782
Depreciation and amortization $ 158,926 $ 13,575 (2) $ 1 $ 172,502
Interest income $ 2,767 $ 276 $ (79) $ 2,964
Interest charges $ 55,271 $ 48,731 $ (79) $ 103,923
Federal and state income tax expense (benefit) $ 58,050 $ (17,821) $ 1 $ 40,230
Net income (loss) $ 160,811 $ (51,019) $ 1 $ 109,793
Additions to property, plant, and equipment $ 213,673 $ 2,019 $ — $ 215,692
Equity investment in investees (1)
$ 9,072 $ — $ — $ 9,072
Goodwill (1)
$ 1,490,797 $ — $ — $ 1,490,797
Total segment assets (1)
$ 7,286,756 $ 595,217 $ (156,404) $ 7,725,569
(1) Balances as of December 31, 2020.
(2) Includes $7.3 million of amortization of intangible assets related to Cleco Power’s wholesale power supply agreements as a result of the 2016 Merger.

FOR THE THREE MONTHS ENDED SEPT. 30, FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS) 2021 2020 2021 2020
Net income $ 119,910 $ 60,297 $ 219,059 $ 109,793
Add: Depreciation and amortization 64,338 56,109 180,199 172,502
Less: Interest income 941 910 2,416 2,964
Add: Interest charges 34,629 34,060 101,812 103,923
Add: Federal and state income tax expense 30,569 25,075 30,985 40,230
Add: Other corporate costs and noncash items (1)
71 (1,078) (4,259) 6,807
Total segment EBITDA $ 248,576 $ 173,553 $ 525,380 $ 430,291
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.

~~CLECO~~

~~CLECO POWER~~

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



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

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


Note 1110 — Regulation and Rates

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


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

FRP	FRP	$	1,236	$	1,786	FRP	$	1,230	$	1,229
Site-specific industrial customer	Site-specific industrial customer	$	611	$	710	Site-specific industrial customer	$	995	$	833
TCJA	TCJA	$	2,057	$	2,057	TCJA	$	2,057	$	2,057
Transmission ROE		$	—	$	595

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the Cleco Katrina/Rita storm recovery bonds in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers to pay administrative fees, interest, and principal on the Cleco Katrina/Rita storm recovery bonds. In April 2021, after payments for all final administrative and winding up activities of Cleco Katrina/Rita were made, Cleco Katrina/Rita transferred its remaining restricted cash to Cleco Power. As a result, at ~~September 30, 2021,~~March 31, 2022, Cleco Power had $1.6 million accrued for amounts to be used to benefit retail customers in a manner and timing as approved by the LPSC. For more information on Cleco Katrina/Rita’s storm recovery, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

~~FERC Audit~~

As of September 30, 2021, $4.4 million, including accrued interest, was fully refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments related to the FERC audit findings and a reduction in Attachment O of the MISO tariff and grandfathered agreement rates over the preceding 12 months. For more information about the FERC audit, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — FERC Audit.”

FRP

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

2014 FRP allowed Cleco Power to earn a target ROE of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60.0% of retail earnings between 10.9% and 11.75%, and all retail earnings over 11.75%, were required to be refunded to customers. ~~In June 2019, Cleco Power filed an application with the LPSC for a new FRP.~~ On June 16, 2021, the LPSC approved Cleco Power’s new ~~retail rate plan.~~FRP. Effective July 1, 2021, under the terms of the new FRP, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC annually. Cleco Power’s next base rate case is required to be filed with the LPSC on or before March 31, 2023.

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

~~the 2019 monitoring report indicating no refund was due. Monitoring reports for the 12 months ended June 30, 2020, and 2021, were~~ not required due to the expiration of the 2014 FRP. The next monitoring report will be filed on or before October 31, 2022, for the 12 months ending June 30, 2022.

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

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. As a result of the tax rate reduction, on January 1, 2018, Cleco Power began


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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

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

AsIn 2020 and as a result of the delay in the rate case, ~~on July 15, 2020,~~ the LPSC approved Cleco Power’s ~~application to extend~~extension of the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through ~~November 2020. On November 13, 2020, Cleco Power again received approval for its application to extend the TCJA bill credits from December 1, 2020, until such a time that the rate case was completed.~~June 30, 2021. The $7.0 million monthly refund consisted of approximately $4.4 million, which was to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had $2.1 million accrued for the ~~estimated~~remaining balance of federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan which includes the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1, 2021, all retail customers ~~will continue~~continued receiving bill credits resulting from the TCJA. The target retail portion of the unprotected excess ADIT is approximately $2.5 million monthly and will be credited over a period of three years concluding on June 30, 2024. The retail portion of the protected excess ADIT will be credited until the full amount of the protected excess ADIT has been returned to Cleco Power’s customers through bill credits. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had ~~$313.9~~$291.0 million accrued for the excess ADIT, of which ~~$39.5~~$44.1 million is reflected in current regulatory liabilities.


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

~~Transmission ROE~~

NaN complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco Power, may collect under the MISO tariff. The complaints covered the period December 2013 through May 2016. As of September 30, 2021, the overcollection due to the change in ROE was fully refunded. For more information on the ROE complaints, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

SSR

In September 2016, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3 effective April 1, 2017. MISO ~~conducted a study which~~ determined the proposed retirement of Teche Unit 3 would result in violations of specific applicable reliability standards for which no mitigation iswas available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution could be implemented to mitigate reliability issues. One mitigating factor identified was Cleco Power’s Terrebonne to Bayou Vista Transmission project, which was completed in April 2019. Cleco Power received a termination notice, effective April 30, 2019, and filed paperwork to withdraw the filed Attachment Y. While operating as an SSR unit, Cleco Power received monthly payments that included recovery of expenses, including capital expenditures, related to the operations of Teche Unit 3. Additionally, MISO allocated SSR costs to the load serving entities that required the operation of the SSR unit, including Cleco Power. These payments and cost allocations were finalized as part of a MISO SSR settlement approved in December 2018. Cleco Power operated Teche Unit 3 as an SSR unit from April 2017 until April 2019.

On September 7, 2021, Cleco Power ~~made a filing~~filed an attachment Y with ~~the LPSC giving notice~~MISO requesting retirement of ~~its intent to consider retiring~~ Teche Unit 3, barring any violations of specific applicable reliability standards. ~~Assuming no violations are found, Teche Unit 3 could be retired in 2022. At September 30,~~In December 2021, Cleco Power ~~had~~filed notice with the LPSC and MISO to suspend the retirement of Teche Unit 3. On March 15, 2022, Cleco Power paid MISO $4.3 million ~~accrued for the net capital refund~~ for capital

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


Note 1211 — Variable Interest Entities

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

Oxbow is owned 50% by Cleco Power and 50% by SWEPCO. Cleco Power is not the primary beneficiary because it shares the power to control Oxbow’s significant activities with SWEPCO. Cleco Power’s current assessment of its maximum exposure to loss related to Oxbow at ~~September 30, 2021,~~March 31, 2022, consisted of its equity investment of ~~$3.8~~$2.1 million. ~~During the nine months ended September 30, 2021, Cleco Power had a return of equity investment from Oxbow of $5.3 million.~~

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


INCEPTION TO DATE (THOUSANDS)	INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		INCEPTION TO DATE (THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Purchase price	Purchase price	$	12,873	$	12,873	Purchase price	$	12,873	$	12,873
Cash contributions	Cash contributions	6,399		6,399		Cash contributions	6,399		6,399
Distributions	Distributions	(15,450)		(10,200)		Distributions	(17,200)		(17,200)
Total equity investment in investee	Total equity investment in investee	$	3,822	$	9,072	Total equity investment in investee	$	2,072	$	2,072

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


(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020		(THOUSANDS)	AT MAR. 31, 2022		AT DEC. 31, 2021
Oxbow’s net assets/liabilities	Oxbow’s net assets/liabilities	$	7,645	$	18,145	Oxbow’s net assets/liabilities	$	4,145	$	4,145
Cleco Power’s 50% equity	Cleco Power’s 50% equity	$	3,822	$	9,072	Cleco Power’s 50% equity	$	2,072	$	2,072
Cleco Power’s maximum exposure to loss	Cleco Power’s maximum exposure to loss	$	3,822	$	9,072	Cleco Power’s maximum exposure to loss	$	2,072	$	2,072

The following table contains summarized financial information for Oxbow:


		FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,					FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		2021		2020		(THOUSANDS)	2022		2021
Operating revenue	Operating revenue	$	1,486	$	2,275	$	5,113	$	33,266	Operating revenue	$	66	$	1,999
Operating expenses	Operating expenses	1,486		2,275		5,113		33,266		Operating expenses	66		1,999
Income before taxes	Income before taxes	$	—	$	—	$	—	$	—	Income before taxes	$	—	$	—

Prior to June 30, 2020, DHLC mined lignite reserves at Oxbow through the Amended Lignite Mining Agreement. The lignite reserves were intended to be used to provide fuel to the Dolet Hills Power Station. Under the Amended Lignite Mining Agreement, DHLC ~~bills~~billed Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs. Oxbow ~~bills~~billed Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. ~~In June 2020, management decided to retire the Dolet Hills Power Station.~~ On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. ~~As of September 30,~~At December 31, 2021, ~~Cleco Power estimates $1.8 million of its proportionate share of costs will be billed by Oxbow prior to the closure of~~ the Dolet Hills Power ~~Station.~~Station was retired, and all of Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. For more information on DHLC and the Oxbow mine, see Note 1312 — ~~“Litigation,~~


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

“Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

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


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

Litigation

2016 Merger

In connection with the 2016 Merger, 4 actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and 3 actions were filed in the Civil District Court for Orleans Parish, Louisiana. The petitions in each action generally alleged, among other things, that the members of Cleco Corporation’s Board of Directors breached their fiduciary duties by, among other things, conducting an


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

allegedly inadequate sale process, agreeing to the 2016 Merger at a price that allegedly undervalued Cleco, and failing to disclose material information about the 2016 Merger. The petitions also alleged that Como 1, Cleco Corporation, Merger Sub, and, in some cases, certain of the investors in Como 1 either aided and abetted or entered into a civil conspiracy to advance those supposed breaches of duty. The petitions sought various remedies, including monetary damages, which includes attorneys’ fees and expenses.

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

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

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

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

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

In November 2014, the plaintiff in the Braunstein action moved for a dismissal of the action without prejudice, and that motion was granted in November 2014. In December 2014, the ~~Court~~court consolidated the remaining 3 actions and appointed interim co-lead counsel, and dismissed the investors in Cleco Partners as defendants, per agreement of the parties. Also, in December 2014, the plaintiffs in the consolidated action filed a Consolidated Amended Verified Derivative and Class Action Petition for Damages and Preliminary and Permanent Injunction.

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

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

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

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

In December 2014, the directors and Cleco filed declinatory exceptions in each action on the basis that each action was improperly brought in Orleans Parish and should

either be transferred to the Ninth Judicial District Court for Rapides Parish or dismissed. Also, in December 2014, the plaintiffs in each action jointly filed a motion to consolidate the 3 actions pending in Orleans Parish and to appoint interim co-lead plaintiffs and co-lead counsel. In January 2015, the Court in the Creative Life Services case sustained the defendants’ declinatory exceptions and dismissed the case so that it could be transferred to the Ninth Judicial District Court for Rapides Parish. In February 2015, the plaintiffs in Butler and Cashen also consented to the dismissal of their cases from Orleans Parish so they could be transferred to the Ninth Judicial District Court for Rapides Parish. By operation of the December 2014 order of the Ninth Judicial District Court for Rapides Parish, the Butler, Cashen, and Creative Life Services actions were consolidated into the actions pending in Rapides Parish.

In February 2015, the Ninth Judicial District Court for Rapides Parish held a hearing on a motion for preliminary injunction filed by plaintiffs in the consolidated action seeking to enjoin the shareholder vote for approval of the Merger

Agreement. The District Court heard and denied the plaintiffs’ motion. In June 2015, the plaintiffs filed their Second Consolidated Amended Verified Derivative and Class Action Petition. Cleco filed exceptions seeking dismissal of the second amended petition in July 2015. The LPSC voted to approve the 2016 Merger before the ~~Court~~court could consider the plaintiffs’ peremptory exceptions.

In March 2016 and May 2016, the plaintiffs filed their Third Consolidated Amended Verified Derivative Petition for Damages and Preliminary and Permanent Injunction and their Fourth Verified Consolidated Amended Class Action Petition, respectively. The fourth amended petition, which remains the operative petition and was filed after the 2016 Merger closed, eliminated the request for preliminary and permanent injunction and ~~also~~ named an additional executive officer as a defendant. The defendants filed exceptions seeking dismissal of the fourth amended Petition. In September 2016, the District Court granted the exceptions of no cause of action and no right of action and dismissed all claims asserted by the former shareholders. The plaintiffs appealed the District Court’s ruling to the Louisiana Third Circuit Court of Appeal. In December 2017, the Third Circuit Court of Appeal issued an order reversing and remanding the case to the District Court for further proceedings. In January 2018, Cleco filed a writ with the Louisiana Supreme Court seeking review of the Third Circuit Court of Appeal’s decision. The writ was denied in March 2018 and the parties are engaged in discovery in the District Court. In November 2018, Cleco filed renewed exceptions of no cause of action and res judicata, seeking to dismiss all claims. On December 21, 2018, the court dismissed Cleco Partners and Cleco Holdings as defendants per the agreement of the parties, leaving as the only remaining defendants certain former executive officers and independent directors. The District Court denied the defendants’ exceptions on January 14, 2019. A hearing on the plaintiffs’ motion for certification of a class was scheduled for August 26, 2019; however, prior to the hearing, the parties reached an agreement to certify a limited class. On September 7, 2019, the District Court certified a class limited to shareholders who voted against, abstained from voting, or did not vote on the 2016 Merger. On October 18, 2021, the District Court issued an order consistent with a joint motion by the parties to dismiss all claims against the former independent directors leaving two former executives as the only remaining defendants. Cleco


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believes that the allegations of the petitions in each action are without merit and that it has substantial meritorious defenses to the claims set forth in each of the petitions.

Gulf Coast Spinning

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


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

In February 2016, the parties agreed to a stay of all proceedings pending discussions concerning settlement. In May 2016, the 12th Judicial District Court lifted the stay at the request of Gulf Coast. The parties are currently participating in discovery.

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

Cleco believes the allegations of the petition are contradicted by the written documents executed by Gulf Coast, are otherwise without merit, and that it has substantial meritorious defenses to the claims alleged by Gulf Coast.

Dispute with Saulsbury Industries

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

join the case pending in the Ninth Judicial District Court for Rapides Parish.

In January 2019, Cleco Power was served with a summons in Saulsbury Industries, Inc. v. Cabot Corporation and Cleco Power LLC, in the U.S. District Court for the Western District of Louisiana. Saulsbury Industries, Inc. alleged that Cleco Power and Cabot Corporation caused delays in the St. Mary Clean Energy Center project, resulting in alleged impacts to Saulsbury Industries, Inc.’s direct and indirect costs. On June 5, 2019, Cleco Power and Cabot Corporation each filed separate motions to dismiss. On October 24, 2019, the District Court denied Cleco’s motion as premature and ruled that Saulsbury Industries, Inc. had six weeks to conduct discovery on specified jurisdictional issues. The Magistrate Judge presiding over the Western District of Louisiana consolidated cases issued a report and recommendation to the District Judge that the case instituted by Saulsbury Industries, Inc. be dismissed without prejudice and the case initiated by Cleco Power be remanded to the Ninth Judicial District Court for Rapides Parish. Saulsbury Industries, Inc. did not oppose the Magistrate Judge’s report and recommendation, and the District Judge issued a ruling that adopted the Magistrate Judge’s report and recommendation, which included reasoning consistent with Cleco Power’s arguments. Thus, the federal consolidated cases are now closed.

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

court granted Cleco’s motion, which stay order remains in place until lifted. The 16th Judicial District Court for the St. Mary Parish case held a hearing on October 16, 2020, and the judge granted Cleco’s declinatory exceptions of lis pendens. Thus, the St. Mary’s Parish case has been dismissed. Saulsbury filed a motion for a new trial. The hearing on this motion was held on February 5, 2021, and the 16th Judicial District Court judge denied Saulsbury’s motion for a new trial. Saulsbury has appealed this decision. The Rapides Parish case remains stayed during the pendency of Saulsbury’s appeal of the 16th Judicial District Court decision.

LPSC Audits

Fuel Audits

Generally, Cleco Power’s cost of fuel used for electric generation and the cost of purchased power are recovered through the LPSC-established FAC that enables Cleco Power to pass on to its customers substantially all such charges. Recovery of FAC costs is subject to periodic fuel audits by the LPSC. The LPSC FAC General Order issued in November 1997, in Docket No. U-21497 provides that an audit of FAC filings will be performed at least every other year. In March 2020, Cleco Power received a notice of audit from the LPSC for the period of January 2018 to December 2019. The total amount of fuel expense included in the audit is $565.8 million. Cleco Power has responded to several sets of data requests from the LPSC. Cleco Power has FAC filings for January 2020 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings.


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Historically, the disallowances have not been material. If a disallowance of fuel cost is ordered resulting in a refund, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

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

Environmental Audit

In 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides Cleco Power an EAC to recover from its customers certain costs of environmental compliance. The costs eligible for recovery are those for prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the costs of reagents such as ammonia and limestone that are a part of the fuel mix used to reduce air emissions, among other things. On October 20, 2021, the LPSC approved the EAC audit for the period January 2018 to December 2019 with no findings. The total amount of environmental expense that was included in the audit was $26.2 million. Cleco Power has EAC filings for January 2020 and thereafter that remain subject to audit. Management is


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unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not been material. If a disallowance of environmental cost is ordered resulting in a refund to Cleco Power’s customers, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco Power incurs environmental compliance expenses for reagents associated with the compliance standards of ~~Mercury and Air Toxics Standards (MATS).~~MATS. These expenses are also eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. In May 2020, the EPA finalized a rule that concluded that it is not appropriate and necessary to regulate hazardous air pollutants from coal- and oil-fired electric generating units. However, the EPA concluded that coal- and oil-fired electric generating units would not be removed from the list of regulated sources of hazardous air pollutants and would remain subject to MATS. The EPA also determined that the results of its risk and technology review did not require any revisions to the emissions standards. Several petitions for review of the rule’s findings were filed between May and July 2020 in the D.C. Circuit Court of Appeals. On January 20, 2021, the Presidential Administration issued an executive order, ~~directing~~which directs federal agency heads to review regulations and other actions over the past four years to determine if they are inconsistent with the policies announced in the executive order. The order specifically ~~directs~~directed the EPA to consider issuing a proposed rule to suspend, revise, or rescind the rule. The EPA ~~has not issued a proposed rule, and management is unable to determine when a proposed rule will be issued. The EPA~~ determined the most environmentally protective course is to implement the rules in the executive order. On February 9, 2022, the EPA published in the Federal

Register a proposed rule to revoke the agency’s May 2020 finding with respect to whether it is appropriate and necessary to regulate coal and oil-fired generating units under MATS, but the EPA has not yet acted on a review of the risk and technology determination from the May 2020 rule. Management is unable to determine whether the outcome of the D.C. Circuit Court of ~~Appeals~~Appeals’ review or the EPA’s review of the rule as a result of the executive order will result in changes to the MATS standards.

~~FERC Audit~~

Generally, Cleco Power records wholesale transmission revenue through approved formula rates, Attachment O of the MISO tariff and certain grandfathered agreements. The calculation of the rate formulas, as well as FERC accounting and reporting requirements, are subject to periodic audits by FERC. In March 2018, the Division of Audits and Accounting, within the Office of Enforcement of FERC, initiated an audit of Cleco Power for the period of January 1, 2014, through June 30, 2019. On September 27, 2019, Cleco Power received the final audit report, which indicated 12 findings of noncompliance with a combination of FERC accounting and reporting requirements and computation of revenue requirements along with 59 recommendations associated with the audit period. Cleco Power submitted a plan for implementing the audit recommendations on October 28, 2019. Cleco Power also submitted the refund analysis on November 7, 2019, which resulted in a refund related to the FERC audit findings, pending final assessment by the FERC Division of Audits and Accounting, which is expected in the fourth quarter of 2021. As of June 30, 2021, the refund of $4.4 million was fully refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments and a reduction in Attachment O of the MISO tariff and grandfathered agreement rates over the preceding 12 months.

~~Transmission ROE~~

In November 2013 and February 2015, customers filed complaints with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. The complaints covered the period December 2013 through May 2016 and sought to reduce the 12.38% ROE used in MISO’s transmission rates to a proposed 6.68%. In June 2016, an administrative law judge issued an initial decision in the second rate case docket recommending a 9.70% base ROE. In September 2016, FERC issued a Final Order in response to the first complaint establishing a 10.32% ROE. However, on November 21, 2019, FERC voted to adopt a new methodology for evaluating base ROE for public utilities under the Federal Power Act. In addition, FERC set the MISO transmission owners’ region-wide base ROE at 9.88% for the refund period covered in the first complaint and going forward. The draft FERC order further found that complainants in the second complaint proceeding failed to show that the 9.88% base ROE was unjust and unreasonable and thus dismissed the second complaint. On May 21, 2020, FERC issued Opinion No. 569-A, which granted rehearing in part of Opinion No. 569, which had revised FERC’s methodology for analyzing the base ROE component of public utility rates under section 206 of the Federal Power Act. Opinion No. 569-A further refines FERC’s ROE methodology and finds that the MISO Transmission Owners’ base ROE should be set at 10.02% instead of 9.88%. Cleco Power is unable to determine when a final FERC Order will be issued. As of September 30, 2021, the overcollection due to the change in the ROE was fully refunded.

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

South Central Generating

In 2017, Louisiana Generating received insurance settlement proceeds for remediation costs, as defined in the policy of insurance, incurred to install selective non-catalytic reduction equipment on Big Cajun II, Unit 3. This installation served a dual purpose of being a prudent utility practice for compliance with environmental laws and aiding in the settlement of a lawsuit, which was brought by the EPA and the Louisiana Department of Environmental Quality against Louisiana Generating, related to Big Cajun II, Units 1 and 2. Entergy Gulf States, as co-owner of Big Cajun II, Unit 3, expected to be allocated a portion of the insurance settlement proceeds. Litigation between Entergy Gulf States and Louisiana Generating ensued to determine Entergy Gulf States’ allocated amount of insurance proceeds, among other claims pursuant to the Joint Ownership Participation and Operating Agreement between Louisiana Generating and Entergy Gulf States. In August 2021, Louisiana Generating and Entergy Gulf States entered an agreement to settle all claims asserted in this litigation. Upon payment of the settlement amount in January 2022, the lawsuit will be dismissed. NRG Energy will indemnify Cleco for losses associated with this litigation matter.

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


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

regarding matters arising out of the ordinary course of business. As of ~~September 30, 2021,~~March 31, 2022, management estimates potential losses to be $1.5 million with respect to one of these matters. Management is unable to estimate any potential losses Cleco Cajun may be ultimately responsible for with respect to any of the remaining matters. As part of the Cleco Cajun Transaction, NRG Energy indemnified Cleco for losses as of the closing date associated with matters that existed as of the closing date, including pending litigation.

Other

Cleco is involved in various litigation matters, including regulatory, environmental, and administrative proceedings before various courts, regulatory commissions, arbitrators, and governmental agencies regarding matters arising in the ordinary course of business. The liability Cleco may ultimately incur with respect to any one of these matters may be in excess of amounts currently accrued. Management regularly analyzes current information and, as of ~~September 30, 2021,~~March 31, 2022, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are ~~$4.1~~$6.7 million and has accrued this amount.

Off-Balance Sheet Commitments and Guarantees

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

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

The off-balance sheet commitments are not recognized on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets because management has determined that Cleco and Cleco Power’s affiliates are able to perform the obligations under their contracts and that it is not probable that payments by Cleco or Cleco Power will be required.

Cleco Holdings provided guarantees and indemnities to Entergy Louisiana and Entergy Gulf States as a result of the sale of the Perryville generation facility in 2005. The remaining


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indemnifications relate to environmental matters that may have been present prior to closing. These remaining indemnifications have no time limitations. The maximum amount of the potential payment to Entergy Louisiana and Entergy Gulf States is $42.4 million. Management does not expect to be required to pay Entergy Louisiana and Entergy Gulf States under these guarantees.

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

expect to be required to pay Cleco Power or Entergy Louisiana under these guarantees.

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

As part of the Amended Lignite Mining Agreement, Cleco Power and SWEPCO, joint owners of the Dolet Hills Power Station, have agreed to pay the loan and lease principal obligations of the lignite miner, DHLC, when due if DHLC does not have sufficient funds or credit to pay. Any amounts projected to be paid ~~on behalf of the miner~~ would be ~~credited~~based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for the ~~lignite miner against future invoices for lignite delivered.~~reclamation of land used in DHLC’s mining operations prior to its termination of such operations or in support of such mining operations, and the fulfillment of DHLC’s mine closing and environmental obligations under its mining plan. As of ~~September 30, 2021,~~March 31, 2022, Cleco Power does not expect any payments to be made under this guarantee. ~~The projection is based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for purchases of equipment.~~ Cleco Power has the right to dispute the incurrence of such loan and lease obligations ~~through~~before their incurrence but cannot unreasonably withhold approval thereof. The Amended Lignite Mining Agreement does not affect the ~~review of~~amount the ~~mining plan before the incurrence of such loan and lease obligations.~~ Registrants can borrow under their credit facilities.

In April 2020, Cleco Power and SWEPCO mutually agreed to not develop additional mining areas for future lignite extraction and subsequently provided notice to the LPSC of the intent to cease mining at the Dolet Hills and Oxbow mines by June 2020. The mine closures are subject to LPSC review and approval. As of ~~December 31,~~June 30, 2020, all lignite reserves intended to be extracted from the ~~Oxbow mine~~mines had been extracted. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine ~~closing costs in fuel and related ratemaking treatment. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for the deferral of certain accelerated mine~~ costs in fuel and related ratemaking treatment. For more information on the ~~Dolet Hills regulatory asset,~~joint filing, see ~~Note 5 — “Regulatory Assets~~“— Risks and ~~Liabilities — Lignite Mine Closure Cost.~~Uncertainties.” Cleco Power is currently responding to data requests related to the joint filing. The Amended Lignite Mining Agreement does not affect the amount the Registrants can borrow under their credit facilities. Currently, management does not expect to be required to pay DHLC under this guarantee.

Cleco has letters of credit to MISO pursuant to energy market requirements. The letters of credit automatically renew each year and have no impact on Cleco Holdings’ or Cleco Power’s revolving credit facility.In February 2021, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March 2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral postings of ~~$24.9 million~~ ~~and~~ ~~$6.5 million~~ ~~to Cleco Power and Cleco Holdings, respectively.~~ ~~For more information on these winter storms, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”~~

Generally, neither Cleco Holdings nor Cleco Power has recourse that would enable them to recover amounts paid under their guarantee or indemnification obligations. There are


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

Other Commitments

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

In April 2015, the EPA published a final rule in the Federal Register for regulating the disposal and management of CCRs from coal-fired power plants (CCR Rule). The ~~rule~~CCR Rule established extensive requirements for existing and new CCR landfills and surface impoundments and all lateral expansions consisting of location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. In August 2018, the D.C. Court of Appeals vacated several requirements in the CCR regulation, which included eliminating the previous ~~acceptability~~acceptability of compacted clay material as a liner for impoundments. As a result, ~~on December 2, 2019,~~in August 2020, the EPA published a ~~proposed~~final rule in the Federal Register that would set deadlines for costly modifications including retrofitting of clay-lined impoundments with compliant liners or closure of the impoundments. ~~The rule was finalized and published in the Federal Register on August 28, 2020.~~ In November 2020, Cleco submitted demonstrations to the EPA specifying its intended course of action for the ash disposal facilities at Rodemacher Unit 2, Dolet Hills Power Station, and Big Cajun II in order to comply with the final ~~rule.~~CCR Rule. During 2021, additional information was submitted to the LDEQ to revise and update Cleco Power’s compliance strategy. On January 11, 2022, Cleco Power and Cleco Cajun received communication from the EPA that the demonstrations have ~~also engaged independent engineering specialists~~been deemed complete. However, the demonstrations are still subject to ~~conduct studies~~EPA approval based on the efforts and costs expected to be incurred in order to comply with the final CCR rule. During the third quarter of 2021, management received additional information in connection with Cleco Power’s and Cleco Cajun’s compliance strategies resulting in a revision to the estimated cash flows expected to be required to settle the respective AROs. Therefore, Cleco Power and Cleco Cajun recorded an increase of $13.1 million and $35.5 million, respectively, in their ARO balances.

~~The following tables summarize the net changes in the ARO for~~pending technical reviews. At March 31, 2022, Cleco and Cleco ~~Power:~~

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

Power had AROs of $74.4 million and $23.0 million, respectively. At December 31, 2021, Cleco and Cleco Power had AROs of $74.3 million and $23.0 million, respectively.

As part of the Cleco Cajun Transaction, NRG agreed to indemnify Cleco for environmental costs up to $25.0 million associated with the CCR rule. At ~~September 30, 2021,~~March 31, 2022, Cleco Cajun recognized indemnification assets totaling ~~$22.1~~$22.4 million. The current portion of the indemnification asset of $1.1 million is reflected in Other current assets and the non-current portion of ~~$21.0~~$21.3 million is reflected in Other deferred charges on Cleco’s Condensed Consolidated Balance Sheet. The indemnification asset is expected to be collected as closure costs are incurred.

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


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

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

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

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

retired on December 31, 2021. On January 31, 2022, Cleco Power ~~made a filing with the LPSC on September 7, 2021, giving notice that the Dolet Hills Power Station will be retired at the end of 2021. Cleco Power anticipates filing in the fourth quarter of 2021~~filed an application with the LPSC requesting recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station. At March 31, 2022, Cleco Power had $146.0 million deferred as a regulatory asset for stranded costs.

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~~rate-making treatment. Cleco Power has responded to several data requests related to the joint filing.

The expected early closure of the mines ~~has~~ resulted in increased lignite costs. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that ~~will~~would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine. At March 31, 2022, Cleco Power had a regulatory asset of $135.9 million for deferred fuel ~~adjustment clause,~~and mine-related incurred costs, which ~~management~~were included in the application filed on January 31, 2022. Management currently believes these costs are recoverable. Management does not believe the early closure of the mines will have an adverse impact on the recovery value of the Dolet Hills Power Station. ~~Cleco Power is currently responding to data requests related to the joint filing.~~

Fuel costs incurred by the Dolet Hills Power Station are recoverable by Cleco Power through active fuel adjustment clauses. Under the Amended Lignite Mining Agreement, DHLC ~~bills~~billed Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs as fuel is delivered. ~~As of September 30, 2021, Cleco Power estimates $10.1 million of its proportionate share of costs will be billed by DHLC prior to the closure of the Dolet Hills Power Station.~~ In 2009, Cleco Power acquired an interest in Oxbow, which owns mineral rights and land leases. Under a joint operating agreement pertaining to the Oxbow mineral rights and land leases, Oxbow ~~bills~~billed Cleco Power its proportionate share of incurred costs. AsAt December 31, 2021, all of ~~September 30, 2021,~~ Cleco ~~Power estimates $1.8 million of its proportionate~~Power’s proportional share of lignite-related costs ~~will be~~


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

had been billed by ~~Oxbow prior to the closure of the Dolet Hills Power Station.~~DHLC and Oxbow. If any of these costs are not recoverable, it could materially impact the Registrants’ results of operations, financial condition, or cash flows.


Note 1413 — Affiliate Transactions

At ~~September 30, 2021,~~both March 31, 2022, and December 31, ~~2020,~~2021, Cleco Holdings had an affiliate receivable of $3.0 million ~~and $1.7 million, respectively, from Cleco Group~~ primarily for franchise ~~taxes.~~taxes paid on behalf of Cleco Group. At ~~both September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco Holdings had an affiliate payable of ~~$41.3~~$11.3 million and $51.3 million, respectively, to Cleco Group primarily for settlement of taxes payable.

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

AT SEPT. 30, 2021 AT DEC. 31, 2020
(THOUSANDS) ACCOUNTS
RECEIVABLE ACCOUNTS
PAYABLE ACCOUNTS
RECEIVABLE ACCOUNTS
PAYABLE
Cleco Holdings $ 10,712 $ 57,825 $ 10,353 $ 57,713
Support Group 2,388 11,514 3,248 14,355
Cleco Cajun 882 17 1,004 —
Total $ 13,982 $ 69,356 $ 14,605 $ 72,068


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

Of the affiliate payable balances at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco Power had ~~$57.6~~$9.1 million and $59.4 million, respectively, payable to Cleco Holdings for the settlement of income taxes.

Oxbow bills Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. These costs are included in fuel inventory and are recoverable from Cleco Power customers through the LPSC-established FAC or related wholesale contract provisions. During the three and nine months ended September 30, 2021, Cleco Power recorded $0.7 million and $2.7 million, respectively, of its proportionate share of incurred costs. During the three and nine months ended September 30, 2020, Cleco Power recorded $1.1 million and $16.6 million, respectively, of its proportionate share of incurred costs. At September 30, 2021, and December 31, 2020, Cleco Power had $0.2 million and $0.3 million, respectively, payable to Oxbow. For more information on Cleco Power’s variable interest in Oxbow, see Note 1211 — “Variable Interest Entities.”

Note 1514 — Intangible Assets and Liabilities

During 2008, Cleco Katrina/Rita acquired a $177.5 million intangible asset which included $176.0 million for the right to bill and collect storm recovery charges from customers of Cleco Power and $1.5 million of financing costs. This intangible asset was fully amortized in March 2020 and had no residual value at the end of its life.

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of finite intangible assets relating to ~~the Cleco Power trade name and~~ long-term wholesale power supply agreements. At the end of their lives, these power supply agreement intangible assets will have no residual value. The intangible assets related to the power supply agreements are amortized over the estimated life of each applicable contract ranging between 7 and 19 years, and the amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

During the third quarter of 2021, Cleco determined that the fair value of the Cleco Power trade name was less than its carrying value and an impairment of $3.8 million was recognized reducing the carrying value to zero. The impairment resulted in an increase in amortization expense and was reflected in Depreciation and amortization on Cleco’s Condensed Consolidated Statements of Income at September 30, 2021. For more information on the the trade name intangible asset impairment, see Note 6 — “Fair Value Accounting and Financial Instruments.”

As a result of the Cleco Cajun Transaction, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the difference between the contract and market price of acquired long-term wholesale power agreements. At the end of their lives, these intangible assets and liabilities will have no residual value. These intangibles are amortized over the estimated life of each applicable contract ranging between 6 and 8 years. The amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

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

The following ~~tables present Cleco and Cleco Power’s~~table presents Cleco’s amortization of intangible assets and ~~liabilities:~~liabilities for the three months ended March 31, 2022, and 2021:

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

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


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

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

5140


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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

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

~~Goodwill~~

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

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

approach, which estimates fair value based on market comparables within the utility and energy industries. Significant assumptions used in these fair value estimates include estimation of future cash flows related to capital expenditures, long-term rate of growth, and weighted-average cost of capital or discount rate. Changes in these assumptions could materially affect the determination of fair value and goodwill impairment at Cleco Power. Based on the tests performed, management has determined that the fair value of the Cleco Power reporting unit exceeds the carrying value resulting in no impairment of Cleco Power’s goodwill as of August 1, 2021.


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

Power supply agreements	$	184,004	$	184,004
Total intangible assets carrying amount	184,004		184,004
Intangible liabilities
LTSA	24,100		24,100
Power supply agreements	14,200		14,200
Total intangible liability carrying amount	38,300		38,300
Net intangible assets carrying amount	145,704		145,704
Accumulated amortization	(87,606)		(82,466)
Net intangible assets subject to amortization	$	58,098	$	63,238

Note 1615 — Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are summarized in the following tables for Cleco and Cleco Power.

All amounts are reported net of income taxes. Amounts in parentheses indicate debits.

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


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


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	14


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

FOR THE THREE MONTHS ENDED
SEPT. 30, 2020 FOR THE NINE MONTHS ENDED
SEPT. 30, 2020
(THOUSANDS) POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period $ (16,657) $ (17,513)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 448 1,304
Balances, Sept. 30, 2020 $ (16,209) $ (16,209)

Cleco Power
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, 2020 FOR THE NINE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS) POSTRETIREMENT
BENEFIT
NET LOSS NET LOSS
ON CASH FLOW
HEDGES TOTAL AOCI POSTRETIREMENT
BENEFIT
NET LOSS NET LOSS
ON CASH FLOW
HEDGES TOTAL AOCI
Balances, beginning of period $ (15,872) $ (5,740) $ (21,612) $ (16,717) $ (5,868) $ (22,585)
Amounts reclassified from AOCI
Amortization of postretirement benefit net loss 373 — 373 1,218 — 1,218
Reclassification of net loss to interest charges — 63 63 — 191 191
Balances, Sept. 30, 2020 $ (15,499) $ (5,677) $ (21,176) $ (15,499) $ (5,677) $ (21,176)


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



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	628


Balance, Mar. 31, 2021 ~~3RD QUARTER FORM 10-Q~~	$	(25,168)


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



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

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


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


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

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

Note 1716 — Storm Restoration, Securitization, and Cost Recovery

Hurricanes Laura, Delta, and Zeta

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

Cleco Power’s total storm restoration costs related to the hurricanes is approximately ~~$242.6~~$239.9 million. The damage to equipment from the hurricanes required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 63%, or approximately ~~$152.2~~$150.4 million, of the total restoration costs recorded at ~~September 30, 2021.~~March 31, 2022. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling ~~$78.2~~$73.0 million.

On December 4, 2020, Cleco Power filed an application with the LPSC requesting an interim rate recovery for return on certain storm restoration costs associated with the hurricanes until securitization of such costs can be completed. On May 19, 2021, the LPSC issued an order authorizing Cleco Power to recover $16.0 million annually for interim storm recovery costs. This order is effective until such time that the LPSC issues its order authorizing the recovery of the verified final storm costs and securitization of those costs, which is expected in the first quarter of 2022. Cleco Power began collecting this amount

through rates on June 1, 2021.This order is in effect until such time that the securitization financing closes, which is expected in mid-2022. For more information on the storm securitization, see “— Storm Securitization and Cost Recovery.”

Winter Storms Uri and Viola

In February 2021, Winter Storms Uri and Viola ~~reached Louisiana causing~~caused Cleco’s service ~~territories~~territory to experience extreme and unprecedented winter weather that resulted in damage to Cleco Power’s distribution assets and caused electricity generation supply shortages, natural gas supply shortages, and increases in ~~wholesale~~ prices of natural gas in the U.S., primarily due to prolonged freezing temperatures. Cleco Power’s total storm restoration costs related to Winter Storms Uri and Viola is ~~approximately $10.5~~$10.1 million. The damage to equipment from the storms required replacement, as well as repair of the existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately ~~$8.4~~$8.1 million, of the estimated total restoration costs recorded at ~~September 30, 2021.~~March 31, 2022. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had a


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

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

Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is approximately $55.0 million. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs over a period of 12 months beginning with the May 2021 bills. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for the fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Cleco Power has responded to ~~its first set of~~several data requests. Management is unable to determine the outcome or timing of the audit.

~~In February 2021, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March~~

2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively.

Hurricane Ida

OnIn August ~~29,~~ 2021, ~~Hurricane Ida made landfall in southeast Louisiana as a Category 4 storm, causing power outages for approximately 100,000 of~~ Cleco Power’s ~~electric customers located primarily in southeastern Louisiana. By September 11, 2021, power was restored to 100% of customers who could receive power.~~distribution and transmission systems sustained substantial damage from Hurricane Ida.

Cleco Power’s ~~current estimate of~~ total storm restoration costs related to Hurricane Ida is ~~between $85.0 million and $95.0~~approximately $92.6 million. The damage to equipment from the hurricane required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately ~~56%~~57%, or approximately ~~$49.1~~$52.5 million, of the total restoration costs recorded at ~~September 30, 2021.~~March 31, 2022. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had a regulatory asset for non-capital expenses related to Hurricane Ida, as allowed by the LPSC, totaling ~~$36.8~~$37.8 million.

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

Storm Securitization and Cost Recovery

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

On March 24, 2022, Cleco Power ~~continues to respond to several sets of data requests received from~~and the LPSC ~~related~~Staff filed a settlement agreement allowing securitization of $424.1 million. This amount includes the balance of storm costs of $220.1 million, after adjustments and collections through rates for interim storm recovery, for Hurricanes Laura, Delta, and Zeta and Winter Storms Uri and Viola; $95.0 million for a reserve for Hurricane Ida storm costs; $100.0 million for a reserve to cover future storm costs; and $9.0 million for estimated upfront securitization costs and ongoing costs. On March 30, 2022, the LPSC approved the settlement agreement. On April 1, 2022, the LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in the aggregate principal amount of up to $425.0 million. Cleco Power expects the securitization ~~filing.~~financing to close by mid-2022.

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


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


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

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

The following discussion and analysis should be read in combination with the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, and Cleco and Cleco Power’s Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. The information included therein is essential to understanding the following discussion and analysis. Below is information concerning the consolidated results of operations of Cleco for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, and ~~2020.~~2021.


OVERVIEW

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

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

and serves approximately ~~290,000~~291,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and Mississippi; and

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

Significant Events

~~Hurricane Ida~~Storm Restoration and Recovery

~~On August 29,~~During 2020 and 2021, ~~Hurricane Ida made landfall in southeast Louisiana as a Category 4 storm, causing power outages for approximately 100,000 of~~ Cleco Power’s ~~electric customers located primarily in southeastern Louisiana. By September 11, 2021, power was restored to 100% of customers who could receive power.~~

~~Cleco Power’s current estimate of total storm restoration costs related to Hurricane Ida is between $85.0 million~~distribution and ~~$95.0 million.~~transmission systems sustained substantial damage from four separate hurricanes and two severe winter storms. The damage to equipment from the ~~hurricane~~hurricanes required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 56%, or approximately $49.1 million, of the total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricane Ida, as allowed by the LPSC, totaling $36.8 million. For more information on Cleco Power’s storm securitization, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Restoration — Storm Securitization.”

~~Winter Storms Uri and Viola~~

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

Cleco Power’s total storm restoration costs ~~related~~relating to ~~Winter Storms Uri and Viola is~~these weather events are approximately ~~$10.5~~$342.6 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.4 million, of the estimated total restoration costs recorded at September 30, 2021. At September 30, 2021, Cleco Power had a regulatory asset for the remaining operations and maintenance costs of $2.0 million, as allowed by the LPSC. Cleco Power has requested recovery of these costs through the storm securitization filing that was made with the LPSC on August 5, 2021.

Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is approximately $55.0 million. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs over a period of 12 months beginning with the May 2021 bills. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for the fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Cleco Power has responded to its first set of data requests. Management is unable to determine the outcome or timing of the audit.

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

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

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

5442


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

balance sheets of Cleco and Cleco Power reflect the capitalization of approximately $211.0 million of the total restoration costs recorded at March 31, 2022. At March 31, 2022, Cleco Power had regulatory assets for non-capital expenses related to these weather events, as allowed by the LPSC, totaling $112.8 million. For more information on these weather events that significantly affected Cleco, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 16 — Storm Restoration, Securitization, and Cost Recovery.”

On May 19, 2021, the LPSC issued an order authorizing Cleco Power to recover $16.0 million annually for interim storm recovery. Cleco Power began collecting this amount through rates on June 1, 2021. This order is effective until such time that the securitization financing closes, which is expected in mid-2022. On March 30, 2022, the LPSC approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power relating to securitization of 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. For more information on Cleco Power’s storm securitization, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 16 — Storm Restoration, Securitization, and Cost Recovery — Storm Securitization and Cost Recovery.”

COVID-19

In March 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and the U.S. declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19. These restrictions significantly impacted many sectors of the economy with record levels of unemployment driven by businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. State and local authorities also subsequently implemented multistep policies to reopen various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. During March and April 2021, due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, the governor of the state of Louisiana reduced restrictions that were previously in effect, eased capacity limits on businesses and social gatherings, and revoked the mandatory, state-wide mask mandate. However, effective August 4, 2021, the state-wide mask mandate was reinstated due to a surge in COVID-19 cases. Due to the decrease in the number of COVID-19 cases, effective October 27, 2021, the mandatory, state-wide mask mandate was once again revoked.

Cleco is monitoring the ongoing COVID-19 pandemic and continues to adjust certain business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, OSHA, and other governmental and regulatory authorities. The first priority in Cleco’s response to this crisis has been the health and safety of its employees, its customers, and other business counterparties. Cleco has implemented preventative measures and developed corporate response plans to minimize unnecessary risk of exposure and prevent infection, while supporting its customers’ operations to the best of its ability in the circumstances.

Beginning on March 13, 2020, and as a result of an LPSC executive order, Cleco Power suspended the assessment of late fees, disconnections, and the utilization of collection agencies to help customers facing financial challenges related to the COVID-19 pandemic. Cleco resumed disconnections and late fees beginning October 1, 2020, as allowed by the LPSC. On December 4, 2020, Cleco Power made a filing with the LPSC requesting the recovery of expenses incurred as a result of an LPSC executive order, issued in response to the ~~regulatory asset~~COVID-19 pandemic, prohibiting the disconnection of utilities for non-payment, as well as the lost revenue associated with the disconnection fees and incremental costs. At ~~September 30, 2021,~~March 31, 2022, Cleco Power had a regulatory asset of $3.0 million for expenses incurred. ~~Cleco expects LPSC approval for the recovery of the regulatory asset in the first half of 2022.~~

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

Cleco has implemented certain measures that it believes will provide financial flexibility and help maintain its liquidity. Cleco will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as warranted. While most restrictions have now been lifted, Cleco continues to assess the COVID-19 situation ~~Cleco~~and cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the markets will have on its business, cash flows, liquidity, financial condition, and results of operations. For additional discussion regarding certain risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors — Operational Risks — ~~COVID-19”~~Pandemics, Epidemics, or Other Outbreaks” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Future Tax Reform

~~Cleco is monitoring~~On November 19, 2021, the ~~President’s~~U.S. House of Representatives passed the Build Back Better Act (BBBA); however, the U.S. Senate declined to vote on it in its current form. The BBBA targets individual tax ~~reform proposals, as well as~~relief, clean energy incentives, and increased spending on healthcare, education, childcare, and other programs. There are several tax and renewables provisions in this legislation that could have a material effect on the ~~current proposed infrastructure bill. The proposals have~~results of operations, financial conditions, or cash flows of the ~~potential~~Registrants. Management continues to ~~increase~~monitor the ~~federal statutory~~legislative status of the BBBA and any successor legislation.

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

ESG Goals

Cleco is accelerating its efforts to protect the environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco aims to increase electrification initiatives and reduce GHG emissions by incorporating renewable energy resources into its generating fleet, as it replaces coal-fired generation units retired after serving their useful lives. Cleco aims to sustainably reduce its GHG emissions 60.0% by 2030 with aspirations of ~~21%.~~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 the governance framework. To ensure accountability, Cleco has created an ESG Steering Committee and has appointed a Chief Sustainability Officer to oversee the continued implementation of the ESG goals. Currently, management is unable to predict the impact of ~~the proposals~~implementing these ESG goals on the Registrants.

For more information on these ESG goals, see Part I, Item 1, “Business — Human Capital — Diversity and Inclusion,” “— Communities,” and “— Oversight and Governance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2021. For more information about Cleco’s environmental initiatives, see “— Cleco ~~is also monitoring possible updates related to a decreased Louisiana state corporate income tax rate proposal and a Louisiana state sales tax proposal to be voted on in November 2021.~~Power — Project Diamond Vault.”

Cleco Power

Many factors affect Cleco Power’s primary business of generating, delivering, and selling electricity. These factors include weather and the presence of a stable regulatory environment, which ~~impacts~~impact the ROE, as well as the recovery of costs related to storms, growing energy demand, and rising fuel prices; the ability to increase energy sales while containing costs; the ability to reliably deliver power to its jurisdictional customers; the ability to comply with increasingly stringent regulatory and environmental standards; and the ability to successfully perform in MISO while subject to the related operating challenges and uncertainties, including increased wholesale competition. Cleco Power’s current key initiatives are ~~continuing construction~~pursuing solar-related projects, initiating work on the ~~Bayou Vista to Segura Transmission project;~~winterization of generation assets, beginning Project Diamond Vault, continuing the DSMART ~~project;~~project, and maintaining and growing its wholesale and retail businesses. These and other initiatives are discussed below.

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

new ~~FRP,~~retail rate plan, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC, annually. For more information on the new ~~FRP~~retail rate plan for Cleco Power, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1110 — Regulation and Rates — FRP.”

~~In 2021,~~

Project Diamond Vault

On April 11, 2022, Cleco Power announced Project Diamond Vault, a ~~wholesale customer~~carbon capture and sequestration facility that is ~~currently under contract with Cleco Power through March 31, 2024, conducted a request for proposal for load beginning April 1, 2024, in which Cleco Power participated. In August 2021,~~anticipated to be constructed at the ~~wholesale customer informed Cleco Power that it was not selected as a~~


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

provider of load after the first quarter of 2024 and filed a notice with the LPSC to certify the results of the request for proposal. Cleco Power subsequently filed a notice of intervention with the LPSC requesting further review prior to certifying the wholesale customer’s notice. The certification process is ongoing, and the LPSC procedural schedule extends into the third quarter of 2022. Cleco Power will continue to support the process and cannot predict the outcome of the process. Failure to recontract this or other agreements may affect jurisdictional retail rates that will be subject to review by the LPSC in conjunction with Cleco Power’s next rate case.

~~Bayou Vista to Segura Transmission Project~~

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

The Front End Engineering Design (FEED) study for Project Diamond Vault has begun and is projected to cost approximately ~~$125.7~~$12.0 million. A $9.0 million congressional appropriation has been secured to offset the costs of the study. The ~~project~~FEED study is expected to ~~increase reliability, provide transmission system redundancy,~~be completed by the end of 2023 and provide hurricane hardening for customers in south Louisiana. Cleco Power received MISO approval for the project in December 2017. As part of Cleco Power’s new retail rate plan, the LPSC approved the establishment of a regulatory asset and recovery of the revenue requirements associated with the Bayou Vista to Segura Transmission project upon completion of each phase of the project. Construction has already been completed on expansions to existing substations. The northern phase was completed in August 2021, and the southern phasepermitting is expected to be completed in the ~~fourth quarter~~second half of ~~2021. At September 30, 2021, Cleco Power had a regulatory asset of $0.3 million for recovery~~2025. Construction of the ~~revenue requirements for~~project is expected to begin by the ~~northern phase~~end of 2025. Management expects the total project will be completed by the end of 2028. After the cost of the ~~project. As~~FEED study, the current total estimated project cost is $900.0 million. Cleco anticipates funding this project through one or more sources including tax credits, Department of ~~September 30, 2021, Cleco Power had spent $108.1 million on the project.~~Energy grants, and private equity investment.

DSMART Project

~~The~~In 2019, Cleco Power initiated the DSMART project. This project includes modernization of Cleco Power’s distribution system by replacing or upgrading distribution line equipment ~~utilizing~~to utilize new and emerging technologies to facilitate 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. In January 2019, Cleco Power initiated~~phases, and management expects the ~~project.~~total project will be completed by the end of 2025. As of ~~September 30, 2021,~~March 31, 2022, Cleco Power had spent ~~$29.1~~$33.9 million on the project.

Other

Cleco Power is working to secure load growth opportunities that include renewing existing franchises and wholesale contracts, pursuing new wholesale contracts and franchises, and adding new retail load opportunities with large industrial, commercial, and residential loads. The retail opportunities include sectors such as agriculture, oil and gas, chemicals, metals, national accounts, government and military, wood and

paper, health care, information technology, transportation, and other manufacturing.

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

Cleco Cajun

Cleco Cajun currently has 12 power purchase agreements totaling approximately 2,100 MW with 12 wholesale customers, which consist of a mixture of electric cooperatives, municipal bodies, a utility, and a ~~utility.~~non-profit corporation. Cleco Cajun routinely seeks to grow the amount of power sold pursuant to these existing agreements. These contracts provide Cleco Cajun with predictable cash flow and market risk mitigation through at least the first quarter of 2025 but may prevent Cleco Cajun from taking advantage of rising market rates for power.

In 2020, a group of electric cooperatives, which are currently under contract with Cleco Cajun through the first quarter of 2025, conducted a request for proposal for ~~load after~~capacity, energy, and resources beginning in the second quarter of 2025 in which Cleco Cajun participated. ~~In March 2021, the group of cooperatives informed Cleco Cajun that it was not selected as a provider of load after the first quarter of 2025 and filed a notice with~~On January 25, 2022, the LPSC ~~to certify~~certified the results of the electric cooperatives’ request for ~~proposal.~~proposal, which did not include any of Cleco Cajun subsequently filed a notice of intervention with the LPSC requesting further review prior to certifying the cooperatives’ notice. The certification process is ongoing, and the LPSC procedural schedule extends into the first quarter of 2022. Cleco Cajun continues to advance its position in the process and cannot predict the outcome of the process. Failure to recontract theseCajun’s assets or ~~other agreements could have a material adverse effect on Cleco’s results of operations, financial condition, cash flows, and liquidity as early as 2025.~~contracts.

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

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


CLECO
CLECO POWER						2022 1ST QUARTER FORM 10-Q

Failure to recontract ~~this~~these or other agreements or failure to enter into new contracts to replace the existing agreements 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. Cleco Cajun is working to secure load growth opportunities that include renewing existing wholesale contracts with electric cooperatives in Louisiana, pursuing new wholesale contracts with other utilities and municipalities in MISO South, and continuing support of economic development with existing customers throughout the state.

Many factors affect Cleco Cajun’s primary business of providing wholesale power and capacity. These factors include weather, the market price of power, the sales volume of power through existing contracts, the ability to recontract existing contracts at or before their expiration or enter into new wholesale power agreements with new customers, the ability to comply with increasingly stringent environmental standards, and compliance with the commitments made to the LPSC as a result of the Cleco Cajun Transaction.


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


RESULTS OF OPERATIONS

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


Cleco	Cleco									Cleco
		FOR THE THREE MONTHS ENDED SEPT. 30,									FOR THE THREE MONTHS ENDED MAR. 31,
						FAVORABLE/(UNFAVORABLE)									FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	(THOUSANDS)	2021		2020		VARIANCE		CHANGE		(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue, net	Operating revenue, net	$	517,194	$	417,451	$	99,743	23.9	%	Operating revenue, net	$	449,180	$	394,995	$	54,185	13.7	%
Operating expenses	Operating expenses	325,629		295,699		(29,930)		(10.1)	%	Operating expenses	267,001		348,698		81,697		23.4	%
Operating income	Operating income	191,565		121,752		69,813		57.3	%	Operating income	182,179		46,297		135,882		293.5	%
Interest income	Interest income	941		910		31		3.4	%	Interest income	756		647		109		16.8	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	711		144		567		393.8	%	Allowance for equity funds used during construction	931		887		44		5.0	%

Other expense, net	Other expense, net	(8,109)		(3,374)		(4,735)		(140.3)	%	Other expense, net	(190)		(3,033)		2,843		93.7	%
Interest charges	Interest charges	34,629		34,060		(569)		(1.7)	%	Interest charges	33,519		33,891		372		1.1	%
Federal and state income tax expense		30,569		25,075		(5,494)		(21.9)	%
Federal and state income tax benefit										Federal and state income tax benefit	(5,587)		(9,420)		(3,833)		(40.7)	%
Net income	Net income	$	119,910	$	60,297	$	59,613	98.9	%	Net income	$	155,744	$	20,327	$	135,417	666.2	%

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

Operating Revenue, Net

Operating revenue, net increased ~~$99.7~~$54.2 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$70.9~~$24.5 million of higher fuel cost recovery revenue, ~~$15.8~~$20.8 million of lower electric customer credits, and ~~$5.0~~$4.4 million of higher ~~other operations~~base revenue at Cleco Power. Also contributing to the increase was ~~$7.5~~$2.6 million of higher other operations revenue and $2.1 million of higher electric operations revenue ~~and $3.8 million of higher other operations revenue~~ at Cleco Cajun. ~~These increases were partially offset by $2.7 million of lower base revenue at Cleco Power.~~

Operating Expenses

Operating expenses ~~increased $29.9~~decreased $81.7 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$70.9~~$100.6 million of higher mark-to-market gains on gas-related derivative contracts at Cleco Cajun. Also contributing to the decrease was $4.8 million of lower depreciation and amortization expense and $3.9 million of lower taxes other than

income taxes at Cleco Power. These decreases were partially offset by $24.4 million of higher recoverable fuel and purchased power expense, ~~$4.2~~$3.2 million of higher depreciation and amortization expense, and $2.4 million of higher non-recoverable fuel and purchased power expense ~~$4.1 million of higher other operations and maintenance expense, and $3.3~~at Cleco Power, as well as $11.0 million of higher depreciation and amortization expense at Cleco Power. Also contributing to the increase was $13.3 million of higher purchased power expense at Cleco Cajun and $3.7 million for the impairment loss on the Cleco Power trade name intangible asset at Cleco Holdings. These increases were partially offset by $73.8 million of lower fuel used for electric generation at Cleco Cajun.

Other Expense, Net

Other expense, net ~~increased $4.7~~decreased $2.8 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$3.4 million of higher~~lower pension non-service costs at Cleco ~~Power and $1.7 million for the decrease in cash surrender value of certain trust-owned life insurance policies as a result of less favorable market conditions at Cleco Holdings.~~Power.

Income Taxes

Federal and state income tax ~~expense increased $5.5~~benefit decreased $3.8 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$13.5~~$29.2 million for the change in pretax income, excluding AFUDC equity, ~~$3.3~~$8.7 million for state tax expense, and $3.1 million for the ~~flow through~~amortization of ~~state tax benefits.~~excess ADIT. These ~~increases~~decreases were partially offset by ~~$11.0 million for adjustments to tax returns as filed, $2.0~~$32.0 million to record tax expense at the projected annual effective tax rate, ~~and $1.3~~$4.3 million for ~~the amortization~~flow through of ~~excess ADIT.~~state tax benefits, and $0.9 million for permanent tax deductions.

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

Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Base $ 182,928 $ 185,597 $ (2,669) (1.4) %
Fuel cost recovery 174,156 103,255 70,901 68.7 %
Electric customer credits (691) (16,534) 15,843 95.8 %
Other operations 22,779 17,775 5,004 28.2 %
Affiliate revenue 1,380 1,506 (126) (8.4) %
Operating revenue, net 380,552 291,599 88,953 30.5 %
Operating expenses
Recoverable fuel and purchased power 174,332 103,426 (70,906) (68.6) %
Non-recoverable fuel and purchased power 13,006 8,818 (4,188) (47.5) %
Other operations and maintenance 56,720 52,595 (4,125) (7.8) %
Depreciation and amortization 43,526 40,268 (3,258) (8.1) %
Taxes other than income taxes 12,891 11,408 (1,483) (13.0) %
Total operating expenses 300,475 216,515 (83,960) (38.8) %
Operating income 80,077 75,084 4,993 6.6 %
Interest income 936 789 147 18.6 %
Allowance for equity funds used during construction 711 144 567 393.8 %
Other expense, net (6,106) (3,408) (2,698) (79.2) %
Interest charges 18,509 18,441 (68) (0.4) %
Federal and state income tax expense 548 18,076 17,528 97.0 %
Net income $ 56,561 $ 36,092 $ 20,469 56.7 %


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


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

5745


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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


		FOR THE THREE MONTHS ENDED SEPT. 30,						FOR THE THREE MONTHS ENDED MAR. 31,
(MILLION kWh)	(MILLION kWh)	2021	2020	FAVORABLE/ (UNFAVORABLE)			(MILLION kWh)	2022	2021	FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales						Electric sales
Residential	Residential	1,109	1,159		(4.3)	%	Residential	890	916		(2.8)	%
Commercial	Commercial	738	741		(0.4)	%	Commercial	599	580		3.3	%
Industrial	Industrial	537	481		11.6	%	Industrial	544	520		4.6	%
Other retail	Other retail	34	32		6.3	%	Other retail	30	31		(3.2)	%
Total retail	Total retail	2,418	2,413		0.2	%	Total retail	2,063	2,047		0.8	%
Sales for resale	Sales for resale	866	917		(5.6)	%	Sales for resale	683	696		(1.9)	%
Total retail and wholesale customer sales	Total retail and wholesale customer sales	3,284	3,330		(1.4)	%	Total retail and wholesale customer sales	2,746	2,743		0.1	%

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


		FOR THE THREE MONTHS ENDED SEPT. 30,								FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	(THOUSANDS)	2021		2020		FAVORABLE/ (UNFAVORABLE)			(THOUSANDS)	2022		2021		FAVORABLE/ (UNFAVORABLE)
Electric sales	Electric sales								Electric sales
Residential	Residential	$	95,368	$	98,236		(2.9)	%	Residential	$	69,916	$	67,811		3.1	%
Commercial	Commercial	48,246		48,539			(0.6)	%	Commercial	48,264		46,465			3.9	%
Industrial	Industrial	22,902		21,470			6.7	%	Industrial	21,358		22,427			(4.8)	%
Other retail	Other retail	2,928		2,800			4.6	%	Other retail	2,702		2,667			1.3	%
Surcharge		—		(2)			100.0	%

Total retail	Total retail	169,444		171,043			(0.9)	%	Total retail	142,240		139,370			2.1	%
Sales for resale	Sales for resale	13,484		14,554			(7.4)	%	Sales for resale	14,784		13,241			11.7	%
Total base revenue	Total base revenue	$	182,928	$	185,597		(1.4)	%	Total base revenue	$	157,024	$	152,611		2.9	%

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

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

FOR THE THREE MONTHS ENDED SEPT. 30,
2021 CHANGE
2021 2020 NORMAL PRIOR YEAR NORMAL
Cooling degree-days 1,591 1,604 1,511 (0.8) % 5.3 %


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

Base

Base revenue ~~decreased $2.7~~increased $4.4 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$11.1~~$4.0 million of ~~lower~~new interim rate recovery for return on certain

storm costs relating to Hurricanes Laura, Delta, and Zeta and $2.5 million of higher rates as a result of the implementation of Cleco Power’s new retail rate plan. ~~The lower rates are largely~~

~~due to TCJA bill credits that will expire in 2024. This decrease was~~These increases were partially offset by ~~$4.6~~$2.3 million of ~~new interim rate recovery~~lower demand charges for ~~return on certain storm costs relating to Hurricanes Laura, Delta, and Zeta, and $3.6 million of higher revenue due to the absence of impacts from lower usage as a result of Hurricane Laura in 2020.~~industrial customers.

For information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco Power, see Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately ~~75%~~78% of Cleco Power’s total fuel cost during the ~~third~~first quarter of ~~2021~~2022 was regulated by the LPSC. Recovery of FAC costs is subject to periodic fuel audits by the LPSC which may result in a refund to customers. Generally, fuel and purchased power expenses are impacted by customer usage, the per unit cost of fuel used for electric generation, and the dispatch of Cleco Power’s generating facilities by MISO. During the three months ended March 31, 2021, Cleco Power’s incremental fuel and purchased power costs were impacted significantly as a result of Winter Storms Uri and Viola. On March 29, 2021, Cleco Power received approval from the LPSC to recover a portion of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. Cleco Power’s incremental fuel and purchased power costs for the three months ended March 31, 2021, were also impacted by higher costs of lignite at the Dolet Hills Power Station. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.” For more information on lignite costs at the Dolet Hills Power Station, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees ~~— Litigation~~ — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits decreased ~~$15.8~~$20.8 million during the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020~~2021 primarily due to lower ~~refunds~~credits to retail customers for the federal tax-related benefits of the TCJA now being a component of rates as a result of the settlement of Cleco Power’s retail rate ~~case.~~plan. After the implementation of Cleco Power’s retail rate plan, these credits offset base revenue on Cleco Power’s Condensed Consolidated Statement of Income. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1110 — Regulation and Rates — TCJA.”

~~Other Operations Income~~Non-Recoverable Fuel and Purchased Power

~~Other operations income~~Non-recoverable fuel and purchased power increased ~~$5.0~~$2.4 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$2.2 million of~~ higher MISO transmission ~~revenue, $1.4 million of higher forfeited discounts, and $0.7 million of higher reconnection fees.~~costs.

5846


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

~~Non-Recoverable Fuel and Purchased Power~~

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

Other Operations and Maintenance Expense

Other operations and maintenance expense ~~increased $4.1~~decreased $4.8 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~$3.4~~$3.2 million of higher routine distribution maintenance expense, largely the result of Hurricane Ida, $2.6 million of higher customer services expenses relating to an increase in temporary staffing and increased collection efforts, $1.1 million of higher routinelower outage generation maintenance expenses and ~~$1.2 million of higher generation operations expenses. These amounts were partially offset by $3.1~~$1.7 million of lower ~~expenses related~~routine generation maintenance expenses. Also contributing to ~~employee benefits and~~the decrease was $1.5 million of lower uncollectible expenses largely the result of the expiration of deferred financing agreements which were put into place due to ~~collections on~~ the ~~deferred financing arrangements entered into as a result~~COVID-19 disconnection moratorium order issued by the LPSC in March 2020. These decreases were partially offset by $1.7 million of ~~COVID-19.~~higher expenses related to employee benefits.

Depreciation and Amortization Expense

Depreciation and amortization expense increased ~~$3.3~~$3.2 million during the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared to the third quarter of 2020~~ primarily due to ~~higher normal recurring additions to fixed assets.~~

~~Other expense, net~~

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

~~Income Taxes~~

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

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

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

~~Electric Operations~~

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

~~Other Operations Income~~

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

~~Fuel Used for Electric Generation~~

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

~~Purchased Power~~

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

~~Income Taxes~~

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

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


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

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

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

Cleco
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue, net $ 1,290,937 $ 1,122,782 $ 168,155 15.0 %
Operating expenses 929,088 856,170 (72,918) (8.5) %
Operating income 361,849 266,612 95,237 35.7 %
Interest income 2,416 2,964 (548) (18.5) %
Allowance for equity funds used during construction 2,703 197 2,506 *
Other expense, net (15,112) (15,827) 715 4.5 %
Interest charges 101,812 103,923 2,111 2.0 %
Federal and state income tax expense 30,985 40,230 9,245 23.0 %
Net income $ 219,059 $ 109,793 $ 109,266 99.5 %
*Not meaningful

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

~~Operating Revenue, Net~~

Operating revenue, net increased $168.2 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $132.2 million of higher fuel cost recovery revenue and $8.2 million of higher other operations revenue at Cleco Power. Also contributing to the increase was $26.6 million of higher electric operations income and $5.9 million of higher other operations revenue at Cleco Cajun. These increases were partially offset by $6.5 million of higher electric customer credits at Cleco Power.

~~Operating Expenses~~

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

~~Allowance for equity funds used during construction~~

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

~~Interest Charges~~

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

~~Income Taxes~~

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

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

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


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

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

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

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

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

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

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

~~Base~~

Base revenue increased $2.1 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to $5.9 million of new interim rate recovery for return on certain storm costsregulatory assets relating to Hurricanes Laura, Delta, and Zeta, $4.7 million of higher usage from colder winter weather, and $3.6 million of higher revenue due to the absence of impacts from lower usage as a result of Hurricane Laura in 2020. These increases were partially offset by $10.0 million of lower rates as a result of the implementation of Cleco Power’s new retail rate plan. The lower rates are largely due to TCJA bill credits that will expire in 2024. Also offsetting these increases is the absence of $2.4 million of Cleco Katrina/Rita storm restoration surcharge revenue as a result of the final principal and interest payments on the Cleco Katrina/Rita bonds in March 2020.

~~For information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco~~

~~Power, see Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.~~Zeta.

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

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately 74% of Cleco Power’s total fuel cost during the first nine months of 2021 was regulated by the LPSC. Recovery of FAC costs is subject to periodic fuel audits by the LPSC which may result in a refund to customers. Generally, fuel and purchased power expenses are impacted by customer usage, the per unit cost of fuel used for electric generation, and the dispatch of Cleco Power’s generating facilities by MISO. Cleco Power’s incremental fuel and purchased power costs were impacted significantly as a result of Winter Storms Uri and Viola. On March 29, 2021, Cleco Power received approval from the LPSC to recover a portion of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. Cleco Power’s incremental fuel and purchased power costs were also impacted by higher costs of lignite at the Dolet Hills Power Station. For more information on Cleco Power’s most current fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.” 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 increased $6.5 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher refunds for the federal tax-related benefits of the TCJA. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — TCJA.”

~~Other Operations Revenue~~

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

~~Non-Recoverable Fuel and Purchased Power~~

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


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

~~Other Operations and Maintenance Expense~~

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

~~Depreciation and Amortization~~

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

Taxes Other Than Income Taxes

Taxes other than income taxes ~~increased $3.6~~decreased $3.9 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to ~~$1.7 million of higher~~lower property ~~taxes and $1.4 million of higher franchise~~ taxes.

~~Allowance for Equity Funds Used During Construction~~

Other ~~Expense, Net~~expense, net

Other expense, net ~~increased $6.6~~decreased $2.2 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to ~~$5.3 million of higher~~lower pension non-service costs as a result of a lower discount rate and a special termination benefit relating to an enhanced pension benefit amendment. Also contributing to the increase was $1.0 million for disallowed costs as a result of the settlement of Cleco Power’s retail rate case. For more information on the enhanced pension benefit amendment, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 8 — Pension Plan and Employee Benefits — Pension Plan and Other Benefits.”costs.

Income Taxes

Federal and state income tax ~~benefit~~expense (benefit) increased ~~$31.0~~$10.4 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to ~~$21.9~~$6.5 million ~~for the amortization of excess ADIT, $10.7 million for adjustments to tax returns as filed, and $1.7 million~~

for the change in pretax income, excluding AFUDC ~~equity.~~equity, $3.6 million to record tax expense at the projected annual effective tax rate, $3.1 million for the amortization of excess ADIT, and $1.7 million for state tax expense. These increases were partially offset by ~~$3.2~~$4.3 million for the flow through of state tax benefits.

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

Cleco Cajun
FOR THE NINE MONTHS ENDED SEPT. 30,
FAVORABLE/(UNFAVORABLE)
(THOUSANDS) 2021 2020 VARIANCE CHANGE
Operating revenue
Electric operations $ 300,415 $ 273,836 $ 26,579 9.7 %
Electric customer credits 244 (153) 397 259.5 %
Other operations 98,851 92,928 5,923 6.4 %
Affiliate revenue — 204 (204) (100.0) %
Operating revenue, net 399,510 366,815 32,695 8.9 %
Operating expenses
Fuel used for electric generation (112,350) 13,366 125,716 940.6 %
Purchased power 190,825 138,744 (52,081) (37.5) %
Other operations and maintenance 68,398 62,894 (5,504) (8.8) %
Depreciation and amortization 33,567 30,995 (2,572) (8.3) %
Taxes other than income taxes 11,366 9,585 (1,781) (18.6) %
Total operating expenses 191,806 255,584 63,778 25.0 %
Operating income 207,704 111,231 96,473 86.7 %
Interest income 10 269 (259) (96.3) %
Other (expense) income, net (648) 82 (730) (890.2) %
Interest charges 786 (353) (1,139) (100.0) %
Federal and state income tax expense 52,561 27,280 (25,281) (92.7) %
Net income $ 153,719 $ 84,655 $ 69,064 81.6 %


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

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

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

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

Electric Operations

Electric operations revenue increased ~~$26.6~~$2.1 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to ~~$16.6~~$8.3 million of higher fuel rates ~~$5.5 million of higher MISO make-whole payments, $4.8~~and $2.2 million of higher load ~~volumes, $3.3 million of higher capacity contract rates, and $1.3 million for the absence of a 2020 customer demand adjustment.~~volumes. These ~~amounts~~increases were partially offset by ~~$2.6~~$4.7 million of lower MISO ~~pass-through recoveries~~make-whole payments and ~~$2.0~~$3.9 million for the expiration of a power supply agreement in May 2021.

Other Operations ~~Revenue~~Income

Other operations ~~revenue~~income increased ~~$5.9~~$2.6 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to higher transmission revenue.

Fuel Used for Electric Generation

Fuel used for electric generation decreased ~~$125.7~~$113.7 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to $100.6 million of higher mark-to-market gains on gas-related derivative contracts. Increased natural gas prices have resulted in the unrealized gains related to these gas-related derivative contracts. Also contributing to the decrease was $21.7 million of settlements related to gas swaps activity and $2.0 million of lower natural gas consumption due to lower natural gas generating unit dispatch largely due to higher natural gas prices. These decreases were partially offset by $9.9 million of higher coal consumption which was largely the result of higher generating unit dispatch.

Depreciation and Amortization

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

6247


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

to $112.3 million of higher mark-to-market gains on gas related derivative contracts, $30.8 million of settlements related to gas swaps activity, and $14.2 million of lower natural gas consumption due to higher natural gas prices. These decreases were partially offset by $28.9 million of higher coal consumption which was largely the result of higher generating unit dispatch.

~~Purchased Power~~

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

~~Other Operations and Maintenance Expense~~

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

~~Depreciation and Amortization~~

Depreciation and amortization increased $2.6 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to normal recurring additions to fixed assets.

Income Taxes

Federal and state income tax expense increased ~~$25.3~~$29.0 million during the ~~nine months ended September 30, 2021,~~first quarter of 2022 compared to the ~~nine months ended September 30, 2020,~~first quarter of 2021 primarily due to ~~$19.8~~$22.7 million for the change in pretax income and ~~$5.2~~$7.2 million for state tax ~~expenses.~~expense. These increases were partially offset by $0.7 million for permanent tax deductions.

The effective income tax rates for the ~~nine months ended June 30,~~first quarters of 2022 and 2021 were 26.5% and ~~2020 were 25.5% and 24.5%~~24.1%, respectively. ~~These~~The estimated annual effective income tax rates used during the first quarter of 2022 and 2021 for Cleco Cajun may not be indicative of the full-year income tax rates.

Non-GAAP Measure

The financial results in the following tables are presented on an accrual basis. EBITDA is a key non-GAAP financial measure

used by the CEO to assess the operating performance of Cleco’s segments; however, it is not indicative of future performance. Management evaluates the performance of Cleco’s segments and allocates resources to them based on segment profit and the requirements to implement strategic initiatives and projects to meet current business objectives. EBITDA is defined as net income adjusted for interest, income taxes, depreciation, and amortization.

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


		FOR THE THREE MONTHS ENDED SEPT. 30,											FOR THE THREE MONTHS ENDED MAR. 31,
		2021					2020						2022					2021
(THOUSANDS)	(THOUSANDS)	CLECO POWER		CLECO CAJUN			CLECO POWER		CLECO CAJUN			(THOUSANDS)	CLECO POWER		CLECO CAJUN			CLECO POWER		CLECO CAJUN
Net income	Net income	$	56,561	$	86,744		$	36,092	$	38,357		Net income	$	39,024	$	93,381		$	18,425	$	14,481
Add: Depreciation and amortization	Add: Depreciation and amortization	43,526		12,623		(1)	40,268		11,344		(2)	Add: Depreciation and amortization	45,239		23,180		(1)	42,076		11,653		(2)
Less: Interest income	Less: Interest income	936		4			789		10			Less: Interest income	740		13			642		3
Add: Interest charges	Add: Interest charges	18,509		1,117			18,441		(484)			Add: Interest charges	18,801		(8)			18,646		(152)
Add: Federal and state income tax (benefit) expense	Add: Federal and state income tax (benefit) expense	548		29,888			18,076		12,258			Add: Federal and state income tax (benefit) expense	724		33,641			(9,723)		4,610
EBITDA	EBITDA	$	118,208	$	130,368		$	112,088	$	61,465		EBITDA	$	103,048	$	150,181		$	68,782	$	30,589
(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.	(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.											(1) Includes $3.6 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

FOR THE NINE MONTHS ENDED SEPT. 30,
2021 2020
(THOUSANDS) CLECO POWER CLECO CAJUN CLECO POWER CLECO CAJUN
Net income $ 102,407 $ 153,719 $ 76,156 $ 84,655
Add: Depreciation and amortization 126,534 36,614 (1) 125,541 33,385 (2)
Less: Interest income 2,404 10 2,498 269
Add: Interest charges 55,392 786 55,624 (353)
Add: Federal and state income tax expense (219) 52,561 30,770 27,280
EBITDA $ 281,710 $ 243,670 $ 285,593 $ 144,698
(1) Includes $10.0 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.
(2) Includes $9.3 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(6.9) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.

~~CLECO~~

~~CLECO POWER~~

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


FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

Financing for operational needs and capital expenditure requirements not satisfied by operating cash flows depends upon the cost and availability of external funds through both short- and long-term financing. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain or expand its businesses. Access to funds is dependent upon factors such as general economic and capital market conditions, including the impact of COVID-19, regulatory authorizations and policies, Cleco Holdings’ and Cleco Power’s credit ratings, cash flows from routine operations, and credit ratings of project counterparties. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. The following table presents the credit ratings of Cleco Holdings and Cleco Power at ~~September 30, 2021:~~March 31, 2022:

SENIOR UNSECURED DEBT

CORPORATE/LONG-TERM ISSUER

S&P

MOODY’S

FITCH

S&P

MOODY’S

FITCH

Cleco Holdings

BBB-

Baa3

BBB-

Baa3

BBB-

Cleco Power

BBB+

BBB

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

~~Following Hurricane Ida in August 2021,~~

On April 1, 2022, and following the LPSC’s authorization of the securitization financing of Cleco Power’s storm restoration costs, S&P revised its outlook on Cleco Holdings and Cleco Power to ~~negative~~stable from ~~stable. This revision was attributable to Cleco Power’s ongoing exposure to severe weather, including hurricanes,~~negative. S~~&P’s expectation for weaker financial measures~~&P revised its outlook due to ~~delayed recovery of most of the costs related to the 2020 hurricanes, the incurrence of additional costs related to Hurricane Ida, as well as~~its expectation that Cleco’s ~~lack of access to public equity markets. S&P expects that~~ financial measures will ~~remain weak until Cleco Power receives authorization from~~improve and have a stronger balance sheet given the ~~LPSC to issue~~anticipated securitization of storm restoration financing. It is possible that S&P could revise their outlook to stable if Cleco’s financial measures materially strengthen without any weakening in its business risk profile, which may occur upon the completion of the storm restoration costs securitization expected in early 2022. However, the risk of significant weather events may continue to influence rating agencies’ perception of risk, and could potentially impact the thresholds that Cleco Holdings and Cleco Power are held to, which could have subsequent implications for their respective capital structures in the future.costs.

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

Cleco may be required to provide credit support with respect to any open trading contracts that Cleco has or may initiate in the future. The amount of credit support that Cleco

may be required to provide at any point in the future is dependent on the notional value of the initial contract, changes in forward market prices, changes in the volume of open contracts, changes in credit ratings or credit quality where netting agreements ~~take~~are in place, and changes in the amount counterparties owe Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco Power and Cleco Cajun participate in the MISO market. MISO requires Cleco Power and Cleco Cajun to provide credit support which may increase or decrease due to the timing of the settlement schedules and MISO margining formulas. In February 2021, as a result of Winter Storms Uri and Viola, Cleco Power and Cleco Holdings, on behalf of Cleco Cajun, were required to post collateral with MISO. In March 2021, Cleco Power and Cleco Cajun settled with MISO the purchased power obligations associated with Winter Storms Uri and Viola. MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively. For more information about MISO, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the Registrants’


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. For more information about credit support see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees.” For more information on Winter Storms Uri and Viola, see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Storm Restoration — Winter Storms Uri and Viola.”

Global and U.S. Economic Environment

Global and domestic economic conditions may have an impact on Cleco’s business and financial condition. Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. During periods of capital market volatility, the availability of capital could be limited and the costs of capital may increase for many companies. Although the Registrants have not experienced restrictions in the financial markets, their ability to access the capital markets may be restricted at a time when the Registrants would like, or need, to do so. Any restrictions could have a material impact on the Registrants’ ability to fund capital expenditures or debt service, or on their flexibility to react to changing economic and business conditions. Credit constraints could have a material negative impact on the Registrants’ lenders or customers, causing them to fail to meet their obligations to the Registrants or to delay payment of such obligations. The lower interest rates to which the Registrants have been exposed have been beneficial with regard to debt issuances; however, ~~lower~~these rates have negatively affected interest income for the Registrants’ short-term investments.

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

TCJA

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


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

Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1110 — Regulation and ~~Rates.~~Rates — TCJA.”

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels. Other financial assets and liabilities are reported at their carrying values at their date of issuance on the consolidated balance sheets with their fair values as of the balance sheet date disclosed within the three levels. For more information about fair value levels, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 6 — Fair Value Accounting and Financial Instruments.”

Cash Generation and Cash Requirements

Restricted Cash and Cash Equivalents

Various agreements to which Cleco is subject contain covenants that restrict its use of cash. As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its intended purposes and/or general ~~corporate~~company purposes. For more information on Cleco 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,~~March 31, 2022, and December 31, 2021, Cleco had no short-term debt ~~outstanding under its $475.0 million revolving credit facilities. Cleco had $75.0 million of short-term debt outstanding at December 31, 2020.~~outstanding.

At ~~September 30, 2021,~~March 31, 2022, Cleco’s long-term debt and finance leases outstanding totaled ~~$3.55~~$3.48 billion, of which ~~$66.7~~$93.5 million was due within one year. The long-term debt due within one year at ~~September 30, 2021,~~March 31, 2022, primarily represents ~~$66.0~~$67.7 million of principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the ~~LPSC. Cleco Holdings repaid the $66.0~~LPSC and $25.0 million of ~~principal payments on October 29, 2021. Long-term debt increased by $318.5 million from December 31, 2020, primarily due to the issuance of $325.0 million floating rate~~Cleco Power’s senior notes ~~on September 10, 2021 by Cleco Power. For more information on the senior notes, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 7 — Debt.”~~due in December 2022.

Cash and cash equivalents available at ~~September 30, 2021,~~March 31, 2022, were ~~$273.2~~$197.8 million, combined with $475.0 million available revolving credit facility capacity ($175.0 million from Cleco Holdings and $300.0 million from Cleco Power) for total liquidity of ~~$748.2~~$672.8 million. For more information on the credit facility capacity, see “— Credit Facilities.”

established guidelines for short-term investments. For more information on the concentration of credit risk through short-term investments classified as cash equivalents, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 6 — Fair Value Accounting and Financial Instruments.”

At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco had a working capital surplus of ~~$413.8~~$420.5 million and ~~$140.3~~$254.8 million, respectively. The ~~$273.5~~$165.7 million increase in working capital is primarily due to:

•a ~~$188.2~~$49.2 million increase in cash and cash equivalents, ~~primarily due to the issuance of $325.0 million floating rate senior notes by Cleco Power, partially offset by payments made on Cleco Power’s revolving credit facility,~~

•a ~~$75.0 million decrease in short-term debt due to repayment of Cleco Power’s revolving credit facility,~~

•a $50.7 million increase in accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to additional deferrals through a fuel surcharge at Cleco Power for incremental costs related to Winter Storms Uri and Viola,

•~~a $44.0~~$43.9 million increase in energy risk management assets, excluding Cleco Power FTRs, primarily due to market value changes on gas-related derivative contracts at Cleco Cajun,

•a ~~$31.9~~$40.0 million decrease in affiliate accounts payable primarily due to settlement of intercompany taxes payable,

•a $33.0 million increase in ~~customer accounts~~taxes receivable primarily due to an increase in fuel cost recovery mainly due to Winter Storms Uri and Viola, as well as an increase in usage due to the hot weather conditions, partially offset by payments made by Cleco Power’s customers on their payment plans originating in 2020 as a result of COVID-19,higher accrual for federal income taxes,

•a ~~$13.8~~$29.7 million increase in other accounts receivable primarily due to a receivable for a life insurance death benefit and the settlement of gas-related derivative contracts at Cleco Cajun, ~~and~~

•a ~~$12.2~~$27.9 million ~~increase in other current assets primarily due to timing of employee benefit payments.~~

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

•~~a $64.0 million increase~~decrease in accounts payable, excluding Cleco Power FTR purchases, primarily due to ~~an increase~~short-term incentive plan payments in ~~storm~~March 2022, lower accruals ~~and payables~~for generating station outage maintenance at Cleco Power, lower accruals related to the restoration efforts for Hurricane ~~Ida,~~

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

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

•a $22.5 million increase in regulatory liabilities primarily due to the reclassification of the short-term portion of the regulatory liability related to the TCJA, partially offset by credits to Cleco Power’s customers for the TCJA refunds.

~~Cleco Holdings~~

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

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

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

6549


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CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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

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

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

These increases in working capital were partially offset by:

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

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

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

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

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

Cleco Holdings

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

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

At March 31, 2022, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For more information on Cleco Holdings’ revolving credit facility, see “— Credit Facilities.” Cleco Holdings has an uncommitted line of credit that allows up to $10.0 million in short-term borrowings, but no more than $10.0 million in the aggregate with Cleco Power’s similar line of credit, to support its working capital needs. There were no amounts outstanding under the uncommitted line of credit at ~~September 30, 2021.~~March 31, 2022.

Cash and cash equivalents available at Cleco Holdings at ~~September 30, 2021,~~March 31, 2022, were ~~$25.4~~$2.3 million, combined with $175.0 million revolving credit facility capacity for total liquidity of ~~$200.4~~$177.3 million.

Cleco Power

At ~~September 30,~~March 31, 2022, and December 31, 2021, Cleco Power had no short-term debt outstanding under its $300.0 million revolving credit facility. For more information on Cleco Power’s revolving credit facility, see “— Credit Facilities.” Cleco Power had $75.0 million short-term debt outstanding at December 31, 2020. Following the restoration efforts for Hurricanes Laura, Delta, Zeta, and Ida, Cleco Power believes it has sufficient liquidity to meet its current obligations using a combination of cash on hand and available capacity under its revolving credit facilities. On ~~August 5, 2021,~~ Cleco Power filed testimony with the LPSC relating to securitization of the final storm costs for Hurricanes Laura, Delta, and Zeta, and Winter Storms Uri and Viola, totaling $342.0 million, which included the establishment of a newly funded $100.0 million storm reserve to cover future storm costs. In addition, on September 28, 2021, Cleco Power made a supplemental filing to its application requesting an additional $100.0 million for a separate storm reserve to cover costs associated with Hurricane Ida. The approval order for the securitization is anticipated in December 2021, with the financing order to follow in January 2022, and the securitization to be complete by March 2022. For more information on Hurricanes Laura, Delta, Zeta, and Ida, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Restoration.” outstanding.

Cleco Power has an uncommitted line of credit that allows up to $10.0 million in short-term borrowings, but no more than $10.0 million in the aggregate with Cleco Holdings’ similar line of credit, to support their working capital needs. There were no amounts outstanding under the uncommitted line of credit at ~~September~~March 31, 2022.

On March 30, ~~2021.~~

~~On September 10, 2021,~~2022, the LPSC approved a settlement agreement filed by the LPSC Staff and Cleco Power ~~completed~~allowing securitization of $424.1 million. On April 1, 2022, the ~~issuance and private sale of $325.0 million~~LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in the aggregate principal amount of ~~its floating rate senior notes due June 15, 2023. The proceeds from~~up to $425.0 million. Cleco Power expects the ~~issuance were used for general limited liability company purposes, which included the repayment of $245.0 million of borrowings under its revolving credit agreement.~~

At September 30, 2021, Cleco Power’s long-term debt outstanding was $1.83 billion, of which $0.7 million was due within one year. Cleco Power’s long-term debt increased $323.2 million from December 31, 2020, primarily duesecuritization financing to ~~the issuance of $325.0 million floating rate senior notes on September 10, 2021~~close by ~~Cleco Power.~~mid-2022. For more information on the ~~senior notes,~~securitization, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 716 — ~~Debt.~~Storm Restoration, Securitization, and Cost Recovery — Storm Securitization and Cost Recovery.”

At March 31, 2022, Cleco Power’s long-term debt outstanding was $1.83 billion, of which $25.8 million was due within one year. The amount due within one year primarily represents $25.0 million of senior notes due in December 2022.

Cash and cash equivalents available at ~~September 30, 2021,~~March 31, 2022, were ~~$156.3~~$108.2 million, combined with $300.0 million revolving credit facility capacity for total liquidity of ~~$456.3~~$408.2 million.

At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, Cleco Power had a working capital surplus of ~~$179.4~~$160.0 million and a surplus of ~~$13.4~~$110.2 million, respectively. The ~~$166.0~~$49.9 million increase in working capital is primarily due to:

•a ~~$131.5~~$50.2 million decrease in affiliate accounts payable primarily due to the settlement of intercompany taxes payable,

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

•an $18.5 million decrease in accounts payable, excluding FTR purchases, primarily due to short-term incentive plan payments in March 2022, lower accruals for generating station outage maintenance, lower accruals related to the ~~issuance of $325.0 million floating rate senior notes,~~restoration efforts for Hurricane Ida, and lower MISO power purchases, partially offset by ~~payments made on the revolving credit facility,~~

•~~a $75.0 million decrease in short-term debt due to repayment of the revolving credit facility,~~

•~~a $50.7 million increase in accumulated deferred fuel, excluding FTRs, primarily due to additional deferrals through a fuel surcharge~~higher accruals for ~~incremental costs related to Winter Storms Uri and Viola,~~

•a $24.7 million increase in customer accounts receivable primarily due to an increase in fuel cost recovery mainly due to Winter Storms Uri and Viola, as well as an increase in usage due to the hot weather conditions, partially offset by payments made by Cleco Power’s customers on their payment plans originating in 2020 as a result of COVID-19,natural gas, and

•~~a $21.3~~an $8.1 million increase in fuel inventory, excluding Cleco Power FTRs, primarily due to ~~decreases~~higher petroleum coke as a result of an increase in ~~usage, as well as~~volume at a higher price per ~~unit costs of both lignite and petroleum coke.~~ton.

These increases in working capital were partially offset by:

•a ~~$69.9~~$16.2 million increase in ~~accounts payable, excluding FTR purchases,~~interest accrued primarily due to ~~an increase in storm accruals and payables related to~~ the ~~restoration efforts for Hurricane Ida,~~timing of interest payments on long-term debt,

•a ~~$38.2~~$13.2 million increase in taxes payable primarily due to accruals of property taxes,

•~~a $22.5~~an $11.9 million ~~increase~~decrease in ~~regulatory liabilities~~affiliate accounts receivable primarily due to the ~~reclassification~~settlement of ~~the short-term portion of the regulatory liability related~~intercompany receivables,

•a $10.1 million decrease in accumulated deferred fuel, excluding FTRs, primarily due to the ~~TCJA, partially offset by credits to Cleco Power’s customers for the TCJA refunds,~~timing of collections, and

•~~a $15.9~~an $8.8 million ~~increase~~decrease in ~~interest accrued~~customer accounts receivable primarily due to the timing of ~~interest payments on long-term debt.~~collections from customers.

Credit Facilities

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

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


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

facility includes restrictive financial covenants and expires in May 2026. Under covenants contained in Cleco Holdings’ revolving credit facility, Cleco is required to maintain total indebtedness less than or equal to 65% of total capitalization. At ~~September 30, 2021,~~March 31, 2022, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At ~~September 30, 2021,~~March 31, 2022, the borrowing costs under the facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275%. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and


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

commitment fees of 0.125% and 0.05%, respectively, under the pricing levels of its revolving credit facility.

Cleco Power’s revolving credit facility provides for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in May 2026. Under covenants contained in Cleco Power’s revolving credit facility, Cleco Power is required to maintain total indebtedness less than or equal to 65% of total capitalization. At ~~September 30, 2021,~~March 31, 2022, Cleco Power was in compliance with the covenants of its revolving credit facility. At ~~September 30, 2021,~~March 31, 2022, the borrowing costs under the facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating agencies, Cleco Power may be required to pay incremental interest and commitment fees of 0.125% and 0.025%, respectively, under the pricing levels of its revolving credit facility.

If Cleco Holdings or Cleco Power were to default under the covenants in their respective revolving credit facilities or other debt agreements, they would be unable to borrow additional funds under the facilities, and the lenders could accelerate all principal and interest outstanding. Further, if Cleco Power were to default under its revolving credit facility or other debt agreements, Cleco Holdings would be considered in default under its revolving credit facility.

Debt and Distribution Limitations

The 2016 Merger Commitments include provisions for limiting the amount of distributions that can be made from Cleco Holdings to Cleco Group, depending on Cleco Holdings’ debt to EBITDA ratio and its corporate credit ratings. Cleco Holdings may not make any distribution unless, after giving effect to such distribution, Cleco Holdings’ debt to EBITDA ratio is equal to or less than 6.50 to 1.00 and Cleco Holdings’ corporate credit rating is investment grade with one or more of the three credit rating agencies. At ~~September 30, 2021,~~March 31, 2022, Cleco Holdings was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. Additionally, in accordance with the 2016 Merger Commitments, Cleco Power is subject to certain provisions limiting the amount of distributions that may be paid to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings. Cleco Power may not make any distribution unless, after giving effect to such distribution, Cleco Power’s common equity ratio would not be less than 48% and Cleco Power’s corporate credit rating is investment grade with two of the three credit rating agencies. At ~~September 30, 2021,~~March 31, 2022, Cleco Power was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. The 2016 Merger Commitments also prohibit Cleco from incurring additional long-term debt, excluding non-recourse debt, unless certain financial ratios are achieved. For more information on the 2016

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

Cleco ~~Consolidated~~ Cash Flows

Net Operating Cash Flow

Net cash provided by operating activities was ~~$139.8~~$99.1 million and ~~$255.1~~$22.0 million ~~during~~for the ~~nine~~three months ended ~~September~~

~~30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash provided by operating activities ~~decreased $115.3~~increased $121.1 million primarily due to:

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

•~~higher recoverable~~lower fuel and purchased power costs at Cleco Power of ~~$29.9~~$50.7 million primarily due to the absence of costs associated with Winter Storms Uri and Viola, ~~not yet collected from Cleco Power customers,~~

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

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

•higher collections from Cleco ~~Cajun’s~~Power customers of ~~$16.4~~$9.3 million due to timing of collections,

•lower vendor payments of $6.7 million primarily due to timing of invoices related to outside services,

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

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

These increases were partially offset by:

•higher payments for affiliate settlements of $40.0 million,

•lower collections from Cleco Cajun’s joint owners of ~~$16.2~~$5.5 million primarily due to ~~timing of receipts for their portions of generating station expenditures,~~

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

•~~the absence of Cleco Katrina/Rita storm restoration surcharge~~lower collections from Cleco ~~Power customers~~Power’s joint owners of ~~$2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.~~

~~These decreases were partially offset by:~~

•~~lower payments for fuel inventory at Cleco Cajun of $36.5 million due to lower coal deliveries,~~

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

•~~lower payments for fuel inventory at Cleco Power of $4.1~~$3.9 million primarily due to ~~lower gas purchases, and~~

•~~lower payments~~the timing of receipts for ~~employee benefits~~their portions of ~~$3.2 million.~~generating station expenditures.

Net Investing Cash Flow

Net cash used in investing activities was ~~$199.1~~$39.7 million and ~~$210.7~~$35.7 million ~~during~~for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash used in investing activities ~~decreased $11.6~~increased $4.0 million primarily due to:

•~~lower~~higher additions to property, plant, and equipment, net of AFUDC, of ~~$8.2~~$2.4 million and

•lower returns of equity investment ~~in investees~~from Oxbow of ~~$1.3 million, and~~

•~~higher proceeds from sale of property, plant, and equipment of $1.2~~$1.8 million.

Net Financing Cash Flow

Net cash ~~provided by~~used in financing activities was ~~$245.3~~$10.2 million ~~and $347.0 million during~~for the ~~nine~~three months ended ~~September 30, 2021, and 2020, respectively.~~March 31, 2022. Net cash provided by financing activities ~~decreased $101.7~~was $59.7 million for the three months ended March 31, 2021. Net cash used in financing activities increased $69.9 million primarily due to:

•~~higher payments on revolving credit facilities of $260.0 million,~~

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

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

~~These decreases were partially offset by:~~

•~~the issuance of $325.0~~$60.0 million ~~floating rate senior notes at Cleco Power in September 2021~~ and

•~~the absence~~higher distributions to Cleco Group of ~~the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1~~$10.0 million.

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CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

Cleco Power Cash Flows

Net Operating Cash Flow

Net cash provided by operating activities was ~~$74.7~~$60.8 million ~~and $188.0~~for the three months ended March 31, 2022. Net cash used in operating activities was $12.5 million during the ~~nine~~three months ended ~~September 30, 2021, and 2020, respectively.~~March 31, 2021. Net cash provided by operating activities ~~decreased $113.3~~increased $73.3 million primarily due to:

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

•~~higher recoverable~~lower fuel and purchased power costs at Cleco Power of ~~$29.9~~$50.7 million p~~rimarily~~ primarily due to the absence of costs associated with Winter Storms Uri and Viola, ~~not yet collected from customers,~~

•~~lower collections from joint owners of $5.1 million primarily due to~~ ~~timing of receipts for their portions of generating station expenditures,and~~

•the absence of Cleco Katrina/Rita storm restoration surcharge collections from customers of $2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

~~These decreases were partially offset by:~~

•lower operations and maintenance payments related to storm restoration activities of ~~$12.5~~$42.2 million,

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

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

•lower payments for fuel inventory at Cleco Power of ~~$4.1~~$2.8 million primarily due to lower gas ~~purchases.~~purchases, partially offset by higher coal and petroleum coke purchase.

These increases were partially offset by:

•higher payments for affiliate settlements of $36.5 million and

•lower collections from joint owners of $3.9 million primarily due to the timing of receipts for their portions of generating station expenditures.

Net Investing Cash Flow

Net cash used in investing activities was ~~$192.1~~$38.0 million and ~~$200.7~~$34.2 million ~~during~~for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively. Net cash used in investing activities ~~decreased $8.6~~increased $3.8 million primarily due to:

•~~lower~~higher additions to property, plant, and equipment, net of AFUDC, of ~~$5.3~~$2.2 million and

•lower returns of equity investment ~~in investees~~from Oxbow of ~~$1.3 million, and~~

•~~higher proceeds from sale of property, plant, and equipment of $1.2~~$1.8 million.

Net Financing Cash Flow

Net cash ~~provided by~~used in financing activities was ~~$246.6~~$0.2 million ~~and $261.9 million during~~for the ~~nine~~three months ended ~~September 30, 2021, and 2020, respectively.~~March 31, 2022. Net cash provided by financing activities ~~decreased $15.3~~was $59.7 million for the three months ended March 31, 2021. Net cash used in financing activities increased $59.9 million primarily due ~~to:~~

•~~higher payments on revolving credit facilities of $260.0 million,~~

•~~the absence of borrowing a $125.0 million term loan in August 2020, and~~

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

~~These decreases were partially offset by:~~

•~~the issuance of $325.0 million floating rate senior notes in September 2021 and~~

•~~the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.~~facilities.

Contractual Obligations

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

Consolidated Balance Sheets while others are commitments, some firm and some based on uncertainties, that are not reflected in the Condensed Consolidated Financial Statements. For more information regarding Cleco’s Contractual Obligations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Contractual Obligations” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Off-Balance Sheet Commitments and Guarantees

Cleco Holdings and Cleco Power have entered into various off-balance sheet commitments, in the form of guarantees and standby letters of credit in order to facilitate their activities and the activities of Cleco Holdings’ subsidiaries and equity investees (affiliates). Cleco Holdings and Cleco Power have also agreed to contractual terms that require them to pay third parties if certain triggering events occur. These contractual terms generally are defined as guarantees. For more information about off-balance sheet commitments and ~~on-balance sheet~~ guarantees, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments and Guarantees.”

Cybersecurity

The operation of Cleco’s electrical systems relies on evolving operational and information technology systems and network infrastructures that are complex. The failure of Cleco or its vendors’ operational and information technology systems and networks, due to a physical attack, ~~or cyber attack~~cyberattack, or other event, could significantly disrupt operations; cause harm to the public or employees; result in outages or reduced generating output; result in damage to Cleco’s assets or operations, or those of third parties; result in damage to Cleco’s reputation; and subject Cleco to claims by customers or third parties, any of which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. Cleco continues to assess its cybersecurity tools and processes and has taken a variety of actions to monitor and address cyber-related risks. Cleco’s Chief Information and Supply Chain Officer leads Cleco’s cybersecurity team and oversees Cleco’s cybersecurity maturity plan. Each month, management provides cybersecurity updates to Cleco’s Asset Management Committee. Cleco’s third party providers are susceptible to data breaches, which could potentially allow an attacker to compromise the third party servers on which the products run. Cleco could have potential impacts to the confidentiality, integrity, or availability of its data or systems. The third party providers and Cleco investigate data breach incidents. Past instances have resulted in no negative impacts to Cleco’s confidentiality, integrity, or availability of its data or systems. For more information on risks related to Cleco’s cybersecurity, see Part I, Item 1A, “Risk Factors — Operational Risks — Technology and Terrorism Threats” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Regulatory and Other Matters

Environmental Matters

Cleco is subject to extensive environmental regulation by federal, state, and local authorities and is required to comply


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

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


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

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

For a discussion of other Cleco environmental matters, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental Audit” in this Quarterly Report on Form 10-Q and Part I, Item 1, “Business — Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

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

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

~~CPP and ACE~~

~~On January 19, 2021, the D.C. Circuit Court~~outcome of ~~Appeals ruled that~~ the EPA’s ~~repeal of~~decision regarding the ~~CPP and its 2019 promulgation of ACE were unlawful. Therefore, the court issued an order to~~

vacate and remand the ACE rule to the EPA. On February 22, 2021, the court granted the EPA’s unopposed motion for a partial stay of the issuance of the mandate on vacating the CPP repeal ordering that it will withhold issuance of the mandate with respect to the vacatur of the CPP repeal until the EPA responds to the court’s remand by promulgating a new rule to regulate greenhouse gas emissions from existing electric generating units. This means that the CPP will not take effect during the EPA’s rulemaking process. In addition, on March 5, 2021, the court issued the partial mandate effectuating the court’s vacatur of the ACE rule which makes effective the court’s decision to vacate the ACE rule. At the end of April 2021, several parties filed petitions for a writ of certiorari asking the U.S. Supreme Court to review the decision by the D.C. Circuit Court of Appeals. On October 29, 2021, the U.S. Supreme Court granted four petitions for certiorari asking the Court to review the decision by the D.C. Circuit Court of Appeals to vacate and remand the ACE Rule.

~~CSAPR~~

On September 13, 2019, the D.C. Circuit Court of Appeals partially remanded the CSAPR update rule to the EPA because the rule did not set a deadline by which upwind states must eliminate their significant contribution to downwind states’ National Ambient Air Quality Standards (NAAQS) nonattainment. In response to the remand of the rule, on October 30, 2020, the EPA published a proposed rule in the Federal Register, Revised CSAPR Update for the 2008 ozone NAAQS. On April 30, 2021, the EPA issued in the Federal Register the final rule. Cleco does not foresee the final regulation having a material impact on the results of operations, financial condition, or cash flow of the Registrants.

~~Water Quality~~

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

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

~~Solid Waste Disposal~~

On January 20, 2021, the President issued an executive order which directs federal agency heads to review regulations and other actions over the past four years to determine if they are inconsistent with the policies announced in the executive order. The administration also released a nonexhaustive list of agency actions to be reviewed, which includes the CCR rules promulgated in July 2018, August 2020, and November 2020. It is now indicated on the EPA coal ash rule website that the EPA completed review of the three CCR rules in response to the executive order. The EPA determined that the most environmentally protective course is to implement these rules.


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

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

Retail Rates of Cleco Power

Base Rates

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

Fuel Rates

Generally, Cleco Power’s cost of fuel used for electric generation and the cost of purchased power are recovered through the LPSC-established FAC that enables Cleco Power to pass on to its customers substantially all such charges. Recovery of FAC costs is subject to periodic fuel audits by the LPSC. Management is unable to determine the outcome or timing of these audits. For more information on the FAC and the most recent fuel audits, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audits.”

Environmental Rates

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

Energy Efficiency

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

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

Generally, utility companies are allowed to recover from customers the accumulated decrease in revenues associated with the energy efficiency programs. On October 21, 2019, Cleco Power received notice of approval from the LPSC allowing recovery of the accumulated Lost Contribution to Fixed Cost revenues until base rates reset, which took effect on July 1, 2021.

Wholesale Rates

The rates Cleco, through Cleco Power and Cleco Cajun, charges its wholesale customers are subject to FERC’s triennial market power analysis. FERC requires a utility to pass a screening test as a condition for securing and/or retaining approval to sell electricity in wholesale markets at market-based rates. An updated market power analysis must be filed with FERC every three years or upon the occurrence of a change in status as defined by FERC regulation. Cleco filed its most recent triennial market power analysis on December 23, ~~2020.~~2020, and it is currently pending FERC approval. The next triennial market power analysis is expected to be filed in December 2023.

Transmission Rates

Two complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. The complaints covered the period December 2013 through May 2016. For more information about the ROE complaints, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

For information about the risks associated with Cleco’s participation in MISO, see Part I, Item 1A, “Risk Factors — Regulatory Risks — MISO” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

For information on transmission rates of Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

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

Market ~~Restructuring~~Structure

Wholesale Electric Markets

RTO

For information on Cleco Power’s operations within MISO and for information on regulatory aspects of wholesale electric markets affecting Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market ~~Restructuring~~Structure — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.


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CLECO POWER						2022 1ST QUARTER FORM 10-Q

ERO

~~The Energy Policy Act~~NERC, subject to oversight by FERC, is the ERO responsible for developing and enforcing mandatory reliability standards for users, owners, and operators of ~~2005 added Section 215 to~~ the ~~Federal Power Act, which provides for a uniform system of mandatory, enforceable reliability standards. In 2006, FERC named~~bulk power system. NERC, as the ERO, ~~that will be required~~delegates authority to ~~develop and enforce the mandatory reliability standards.~~SERC Reliability Corporation.

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


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

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

Management is ~~also~~ unable to predict the final financial outcome of ~~the most recent CIP audits,~~ any future audits or whether any findings will have a material adverse effect on the results of operations, ~~financial~~financial condition, or cash flows of the Registrants. For a discussion of risks associated with FERC’s regulation of Cleco Power’s transmission system, see Part I, Item 1A, “Risk Factors — Regulatory Risks — Reliability and CIP Standards Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~

2021.

Retail Electric Markets

For information on the regulatory aspects of retail electric markets affecting Cleco Power, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market ~~Restructuring~~Structure — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Integrated Resource Plan (IRP)

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

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

Service Quality Plan (SQP)

In October 2015, the LPSC proposed an SQP containing 21 requirements for Cleco Power. The SQP has provisions relating to employee headcount, customer service, reliability, vegetation management, and reporting. In April 2016, the SQP was approved by the LPSC. The SQP expired on December 31, 2020. Cleco Power is currently working to complete a new five-year program to submit to the LPSC for approval. On April 29, 2022, Cleco Power filed its annual SQP monitoring report for 2021 based on the expired reporting requirements.

Franchises

Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities and parishes (counties), and is enforced by state law. These franchises are for fixed terms, which vary from 10 years to more than 50 years. Historically, Cleco Power has been successful in the timely renewal of substantially all franchises as each neared the end of its term. Cleco Power’s next municipal franchise expires in April ~~2022.~~2023.

For more information on franchises, see Part I, Item 1, “Business Regulatory Matters, Industry Developments, and Franchises — Franchises” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Recent Authoritative Guidance

For a discussion of recent authoritative guidance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 2 — Recent Authoritative Guidance.”


CRITICAL ACCOUNTING POLICIES

Cleco’s critical accounting policies include accounting policies that are important to Cleco’s financial condition and results of operations and that require management to make difficult, subjective, or complex judgments about future events, which could result in a material impact to the financial statements of Cleco. The preparation of financial statements contained in this report requires management to make estimates and assumptions. Estimates and assumptions about future events and their effects cannot be made with certainty. These estimates involve judgments regarding many factors that in and of themselves could materially affect the financial statements and disclosures. On an ongoing basis, these estimates and assumptions are evaluated and, if necessary, adjustments are made when warranted by new or updated information or by a change in circumstances or environment. Actual results may differ significantly from these estimates under different assumptions or conditions.

For more information on Cleco’s critical accounting policies, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.


CLECO POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Cleco Power meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q and is, therefore, permitted to use the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, Cleco Power has omitted from this report the information called for by Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following Part II items of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3 (Defaults upon Senior Securities).

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


RISK OVERVIEW

Cleco is exposed to counterparty credit risk, liquidity risk, interest rate risk, and commodity price risk. Cleco has implemented a governance framework, inclusive of risk policies and procedures to help manage these and other risks.

Counterparty Credit Risk

When Cleco enters into commodity derivative or physical commodity transactions directly with market participants, Cleco may be exposed to counterparty credit risk. Cleco is exposed to counterparty credit risk when a counterparty fails to meet their financial obligations causing Cleco to incur replacement cost losses. Cleco may be required to provide credit support or pay liquidated damages with respect to any open trading contracts that Cleco has entered into or may enter into in the future. The amount of credit support that Cleco may be required to provide at any point in the future is dependent on credit terms and thresholds in master agreements, the notional value of the initial contract, changes in the market prices, changes in open contracts, and changes in the amounts counterparties owe to Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

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

•routine review of counterparty credit quality and credit exposure,

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

•measuring expected and potential future exposure regularly, and

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

For more information, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and Credit-Related Risks.”

Liquidity Risk

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. ~~Future actions or inactions of~~Disruption in the ~~federal government, including a failure to~~capital and credit markets may potentially increase the government debt limit, could increase the actual or perceived risk that the U.S. may not pay its obligations when due and may disrupt financial markets, including capital markets, potentially limiting availability and increasing costs of ~~capital.~~capital and limit the ability to access the capital markets. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its ~~businesses.~~business. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. Cleco Holdings and Cleco Power pay fees and interest under their respective credit facilities based on the highest rating held. For more information, see Item 2, “Management’s

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

Resources — General Considerations and Credit-Related Risks.”

Interest Rate Risk

Cleco monitors its mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix, for example, refinancing balances outstanding under its variable-rate ~~revolving credit facility~~bank facilities with fixed-rate ~~debt.~~debt or vice versa. Calculations of the changes in fair market value and interest expense of the debt securities are made over a one-year period.

Sensitivity to changes in interest rates for variable-rate obligations is computed by assuming a 1% change in the current interest rate applicable to such debt.

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

At ~~September 30, 2021,~~March 31, 2022, Cleco Holdings had a ~~$266.0~~$200.0 million long-term variable rate bank term loan outstanding at an interest rate of LIBOR plus 1.625%, for an all-in interest rate of ~~1.715%~~2.085%. Each 1% increase in the interest rate applicable to Cleco Holdings’ long-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of ~~$2.7~~$2.0 million on an annualized basis. The weighted average rate for all outstanding term loan debt at Cleco Holdings for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was ~~1.87%~~1.77%.

At ~~September 30, 2021,~~March 31, 2022, Cleco Power had no short-term debt outstanding under its $300.0 million revolving credit facility. At ~~September 30, 2021,~~March 31, 2022, Cleco Power’s borrowing costs under its $300.0 million revolving credit facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%.

At ~~September 30, 2021,~~March 31, 2022, Cleco Power had a $125.0 million long-term variable rate bank term loan outstanding, at an interest rate of LIBOR plus 1.25%, for an all-in interest rate of ~~1.34%~~1.71%. The weighted average rate for the outstanding term loan debt at Cleco Power for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was ~~1.36%~~1.40%.

At ~~September 30, 2021,~~March 31, 2022, Cleco Power had $325.0 million long-term floating rate senior notes outstanding. These notes bear interest at a rate of three-month LIBOR plus 50 basis points per annum, for an ~~initial~~ all-in interest rate of ~~0.616%.~~0.716% at March 31, 2022. The weighted average rate for the outstanding floating rate senior notes at Cleco Power for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was ~~0.62%~~0.85%. Each 1% increase in the interest rate applicable to Cleco Power’s long-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of $4.5 million on an annualized basis.

Each 1% increase in the interest rate applicable to Cleco’s short- and long-term variable rate debt would result in a decrease in Cleco’s consolidated pretax earnings of ~~$7.2~~$6.5 million on an annualized basis.

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

7255


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q

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

Commodity Price Risk

~~Cleco Power and Cleco Cajun’s~~Cleco’s financial performance can be impacted by changes in commodity prices that can impact fuel costs, generation ~~revenues,~~revenue, costs to serve its contracted wholesale electricity customers, and ~~customer supply costs and customer revenues.~~revenue from those customers. Cleco’s risk management policies and procedures authorize hedging commodity price risk with physical or financially settled derivative instruments within approved guidelines and limits of authority. Some of these transactions may qualify for the normal purchase, normal sale (NPNS) exception under derivative accounting guidance. Contracts that do not qualify for NPNS accounting treatment or are not elected for NPNS accounting treatment are marked-to-market and recorded on the balance sheet at their fair value.

Cleco Power and Cleco Cajun, each separately and individually, may be exposed to transmission congestion price

risk as a result of physical transmission constraints present between MISO LMP nodes when serving customer load. Cleco Power and Cleco Cajun are awarded and/or purchase FTRs in auctions facilitated by MISO. FTRs are accounted for as derivatives not designated as hedging instruments for accounting purposes.

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

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


Cleco	Cleco														Cleco
		DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS														DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
			AT SEPT. 30, 2021														AT MAR. 31, 2022
					GROSS AMOUNTS OFFSET ON THE BALANCE SHEET						GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)								GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CONTRACT NETTING		COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT		(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts	Commodity-related contracts														Commodity-related contracts
FTRs	FTRs														FTRs
Current	Current	Energy risk management assets	$	9,338	$	—	$	—	$	9,338	$	—	$	9,338	Current	Energy risk management assets	$	1,114	$	—	$	1,114	$	—	$	1,114
Current	Current	Energy risk management liabilities	(1,589)		—		—		(1,589)		—		(1,589)		Current	Energy risk management liabilities	(599)		—		(599)		—		(599)
Natural gas derivatives	Natural gas derivatives														Natural gas derivatives
Current	Current	Energy risk management assets	59,648		(1,283)		(8,900)		49,465		(41,098)		8,367		Current	Energy risk management assets	107,842		(26,300)		81,542		(75,919)		5,623
Non-current	Non-current	Energy risk management assets	83,427		—		—		83,427		(13,902)		69,525		Non-current	Energy risk management assets	84,898		—		84,898		(6,081)		78,817
Current		Energy risk management liabilities	(1,283)		1,283		—		—		—		—
Non-current		Other deferred credits	—		—		—		—		—		—

Commodity-related contracts, net	Commodity-related contracts, net		$	149,541	$	—	$	(8,900)	$	140,641	$	(55,000)	$	85,641	Commodity-related contracts, net		$	193,255	$	(26,300)	$	166,955	$	(82,000)	$	84,955

(1) Represents letters of credit by counterparties.

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

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

Commodity-related contracts

FTRs

Current

Energy risk management assets

~~6,028~~840

Current

Energy risk management liabilities

~~(1,330)~~(273)

Commodity-related contracts, net

~~4,698~~567

Cleco monitors the Value at Risk (VaR) of its ~~other commodity~~natural gas derivative contracts requiring derivative accounting treatment. VaR is defined as the minimum expected loss over a given holding period at a given confidence level based on

observable market price volatilities. Cleco uses a parametric variance-covariance model methodology to estimate VaR. VaR is calculated using historical volatilities within a 5-day holding period at a 95% confidence interval. Given Cleco’s reliance on historical data, VaR is effective in estimating risk exposures in markets in which there are no sudden fundamental changes or abnormal shifts in market conditions. An inherent limitation of VaR is that past changes in market risk factors, even when weighted toward more recent observations, may not produce accurate predictions of future market risk. VaR should be evaluated in light of this and the methodology’s other limitations.

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


				FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 30, 2021									FOR THE THREE MONTHS ENDED MAR. 31, 2022
(THOUSANDS)	(THOUSANDS)	AT SEPT. 30, 2021		HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE		(THOUSANDS)	AT MAR. 31, 2022		HIGH		LOW		AVERAGE
Cleco	Cleco	$	16,393	$	16,393	$	7,685	$	9,846	$	16,393	$	7,199	$	9,318	Cleco	$	31,161	$	32,717	$	21,025	$	25,818

For more information on the accounting treatment and fair value of FTRs and other commodity derivatives, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial

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

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CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of Cleco Holdings and Cleco Power (individually, “Registrant” and collectively, the “Registrants”) management, including the CEO and CFO, the Registrants have evaluated the effectiveness of their disclosure controls and procedures as of ~~September 30, 2021.~~March 31, 2022. Based on the evaluations, the CEO and CFO have concluded that the Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in

SEC rules and forms; and that the Registrants’ disclosure controls and procedures are also effective in ensuring that such information is accumulated and communicated to the Registrants’ management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Registrants’ internal control over financial reporting that occurred during the quarter ended ~~September 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

7457


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


CLECO

For information on legal proceedings affecting Cleco, see Part I, Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”


CLECO POWER

For information on legal proceedings affecting Cleco Power, see Part I, Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1312 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”


ITEM 1A. RISK FACTORS

~~There~~Other than the update to the risk factor below, there have been no material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. For risks that could affect actual results and cause results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Registrants, see the risk factors disclosed under Part I, Item 1A, “Risk Factors” of the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Commodity Prices

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

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

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

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

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

7558


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


ITEM 6. EXHIBITS

CLECO
~~4.1~~			Indenture, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 10, 2021).
~~4.2~~			Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed September 10, 2021).
~~4.3~~10.1			Form of ~~Note (included in Supplemental Indenture No.~~Sixth Agreement to Extend the Board of Managers Services Agreement, effective May 1, ~~dated as of September 10, 2021,~~2022, by and ~~between~~among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and ~~Regions Bank, as trustee) (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed September 10, 2021).~~Manager.
31.1			CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2			CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1			CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2			CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

CLECO POWER
~~4.1~~			Indenture, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 10, 2021).
~~4.2~~			Supplemental Indenture No. 1, dated as of September 10, 2021, by and between Cleco Power LLC and Regions Bank, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed September 10, 2021).
~~4.3~~10.1			Form of ~~Note (included in Supplemental Indenture No.~~Sixth Agreement to Extend the Board of Managers Services Agreement, effective May 1, ~~dated as of September 10, 2021,~~2022, by and ~~between~~among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and ~~Regions Bank, as trustee) (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed September 10, 2021).~~Manager.
31.3			CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.4			CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.3			CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.4			CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


CLECO
CLECO POWER						~~2021 3RD~~2022 1ST QUARTER FORM 10-Q


SIGNATURES

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


			CLECO CORPORATE HOLDINGS LLC
			(Registrant)

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

Date: ~~November 5, 2021~~May 12, 2022

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


			CLECO POWER LLC
			(Registrant)

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

Date: ~~November 5, 2021~~May 12, 2022

7760


TABLE OF CONTENTS
		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		6

PART I	Financial Information
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)	8
	Cleco Power — Condensed Consolidated Financial Statements (Unaudited)	1715
	Notes to the Unaudited Condensed Consolidated Financial Statements	2622
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5442
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	7255
ITEM 4.	Controls and Procedures	7357

PART II	Other Information
ITEM 1.	Legal Proceedings	7558
ITEM 1A.	Risk Factors	7558



ITEM 6.	Exhibits	7659
	Signatures	7760


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


Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30, 2021		FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(25,588)	$	(25,796)


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


Balances, Sept. 30, 2021	$	(25,492)	$	(25,492)


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



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


Balances, Sept. 30, 2020	$	(16,209)	$	(16,209)


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

Cooling degree-days	1,591	1,604	1,511	(0.8)	%	5.3	%