UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

Cleco Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Proxy Statement

and

Notice of

Annual Meeting

of Shareholders

to be held on

April 25, 200824, 2009

March 13, 200812, 2009

CLECO CORPORATION

2030 Donahue Ferry Road

Pineville, Louisiana 71360-5226

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

March 13, 200812, 2009

PROXY STATEMENT

CLECO CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 25, 200824, 2009

Cleco Corporation is furnishing you this proxy statement because you are a holder of Cleco common stock or preferred stock. The Cleco board of directors is soliciting proxies for use at the Cleco annual meeting of shareholders and at any adjournments or postponements of the annual meeting. The annual meeting will be held at 9:00 a.m., Central time, on Friday, April 25, 2008,24, 2009, at the Country Inn & Suites by Carlson, 2727 Monroe Highway, Pineville Convention Center, Red RiverFt. Randolph Room, The Pines, Pineville, Louisiana 71360 (please see the map included as Appendix A). The voting stock of Cleco consists of shares of common stock and preferred stock, with each share of common stock and preferred stock entitling its owner to one vote. The holders of common stock and preferred stock vote together as a single class, except in the election of directors, where holders of common stock can cumulate their votes. At the annual meeting, holders of record of Cleco voting stock at the close of business on February 25, 200824, 2009 will be entitled to vote upon proposals relating to:

The board of directors recommends that you vote “FOR” the election of the three nominees for director, and “FOR” the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as Cleco Corporation’s independent registered public accounting firm.firm and “FOR” the approval of the Cleco Corporation 2010 Long-Term Incentive Compensation Plan.

This proxy statement and the accompanying proxy card are being mailed first on or about March 13, 200812, 2009 to record shareholders of Cleco as of the close of business on February 25, 2008.24, 2009.

TABLE OF CONTENTS

INTRODUCTION

General

This is the proxy statement of Cleco Corporation. Unless the context clearly indicates otherwise or unless otherwise noted, all references in this proxy statement to “Cleco” or the “Company” mean Cleco Corporation.

Proxy Solicitation

The enclosed proxy is solicited on behalf of the Cleco board of directors to be voted at the annual meeting. The management of Cleco will solicit proxies by mail, telephone, facsimile, the Internet or overnight delivery. Proxies also may be solicited in advertisements and in person by Cleco officers and employees. Cleco has hired Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, to assist in the solicitation of proxies. Morrow’s fee is approximately $7,500$8,000 plus expenses. Other than Morrow, no specially engaged solicitors will be retained to solicit proxies. Cleco is responsible for the payment of all expenses of the solicitation, including the cost of preparing and mailing this proxy statement and the reimbursement of brokerage firms and other nominees for their reasonable expenses in forwarding proxy material to beneficial owners of Cleco voting stock.

All duly executed proxies will be voted in accordance with their instructions. If no instructions are in an executed proxy, the shares represented by such proxy will be voted at the annual meeting or any adjournments or postponements thereof“FOR” each of the proposals and, in the discretion of the persons named in the proxy, on any other business that may properly come before the annual meeting. Management is not aware of any other matters that are likely to be brought before the annual meeting.

Cleco’s principal executive offices are located at 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226, and Cleco’s telephone number is (318) 484-7400. Cleco’s homepage on the Internet is located athttp://www.cleco.com.

RecordDateRecord Date and Voting Rights

Holders of record of outstanding voting stock as of the close of business on February 25, 200824, 2009 are entitled to receive notice of and to vote at the annual meeting. As of February 25, 2008,24, 2009, there were 60,174,28460,354,779 shares of Cleco common stock outstanding and 10,288 shares of Cleco preferred stock outstanding. As of February 25, 2008,24, 2009, all officers and directors of Cleco, as a group, beneficially owned 2.0%2.1% of the outstanding shares of Cleco common stock and none of the outstanding shares of Cleco preferred stock.

This proxy provides you with the opportunity to specify your approval or disapproval of, or abstention with respect to, the following proposals:

Generally, under Louisiana law and Cleco’s Amended and Restated Articles of Incorporation and Bylaws, an abstention by a shareholder who is either present in person at the annual meeting or represented by proxy is not a vote “cast” and is counted neither “for” nor “against” the matter subject to the abstention. Under Louisiana law and Cleco’s Bylaws, a quorum is based upon the number of outstanding shares of voting stock, including shares relating to abstentions. Broker non-votes on matters are treated as shares as to which voting power has been withheld by the beneficial holders of those shares and, therefore, as shares not entitled to vote. Under Louisiana law and Cleco’s Bylaws,The New York Stock Exchange (“NYSE”) precludes brokers from exercising voting discretion on certain proposals, including the proposal to adopt the 2010 Cleco Long-Term Incentive Compensation Plan, without specific instructions from the beneficial owner. This results in a quorum is based upon the number of outstanding shares of voting stock, including shares relating to abstentions.“broker non-vote” on such a proposal.

Election of directors is by plurality of the voting stock, with each holder of Cleco common stock being able to cast as many votes as equal the number of such holder’s shares of common stock multiplied by the number of directors to be elected. Each holder of Cleco common stock may cumulate all or any part of these votes for one or more of the nominees.

The total votes cast on the proposal to adopt the Cleco 2010 Long-Term Incentive Compensation Plan must represent a majority of the shares of Cleco common stock entitled to vote (including abstentions) on the proposal in accordance with the rules of the NYSE. Because the approval of the Cleco 2010 Long-Term Incentive Compensation Plan requires the affirmative vote of a majority of the shares of Cleco common stock present in person or by proxy at the annual meeting and entitled to vote on the matter, abstentions will have the same effect as votes against the proposal. Also, because under Louisiana law and Cleco’s Amended and Restated Articles of Incorporation and Bylaws, broker non-votes are treated as shares not entitled to vote, broker non-votes will not affect the outcome of the voting, except that they could prevent the total votes cast with respect to the proposal from representing a majority of the shares of Cleco common stock entitled to vote on the proposal, in which event the Cleco 2010 Long-Term Incentive Compensation Plan would not be approved.

The proxy enclosed for record holders of voting stock is for the number of shares registered in your name with Cleco, together with any additional full shares held in your name in Cleco’s Dividend Reinvestment Plan (“DRIP”).

If you are an employee of Cleco and participate in the Cleco Savings and Investment Plan (“401(k) Savings Plan”), you may vote the number of shares of Cleco common stock equivalent to your interest in the Cleco common stock fund of the 401(k) Savings Plan as of the close of business on February 25, 2008,24, 2009, the record date for the annual meeting. Additionally, if you are an employee of Cleco and participate in the Cleco Employee Stock Purchase Plan (“Stock Purchase Plan”), you may vote the number of shares of Cleco common stock purchased with your payroll deductions as of the record date. In any case, complete and return the proxy card being mailed with this proxy statement. The trustee under the 401(k) Savings Plan and/or the custodian under the Stock Purchase Plan will vote the shares allocated to your account(s) according to your instructions. If you do not send instructions within the time required, the share equivalents credited to your account(s) will not be voted.

Please call Cleco’s Office of Shareholder Assistance at 1-800-253-2652 with any questions relating to the proposals to be considered at the annual meeting.

Execution and Revocation of Your Proxy

Shares represented by proxies properly signed and returned will be voted at the annual meeting in accordance with the shareholder’s specifications. If a proxy is signed but no voting specification is made, then the shares represented by the proxy will be voted“FOR”the election of the three nominees for director, and“FOR” the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as Cleco’s independent registered public accounting firm, and“FOR” the approval of the Cleco Corporation 2010 Long-Term Incentive Compensation Plan, and in accordance with the recommendations of the Cleco board of directors on any other proposals that may properly come before the annual meeting.

A shareholder who gives a proxy may revoke it at any time before the proxy is voted at the annual meeting. To revoke a proxy, a written instrument signed in the same manner as the proxy must be delivered to the corporate secretary of Cleco at or before the annual meeting. Also, a shareholder who attends the annual meeting in person may vote by ballot at the meeting, thereby cancelingcancelling his or her proxy.

Internet Availability of Proxy Materials

Important Notice Regarding the Availability of Proxy Materials for Cleco’s Shareholder Meeting to be held on April 25, 2008.24, 2009. This proxy statement, the related proxy cards, the 20072008 Annual Report and the 20072008 Form 10-K are available on Cleco’s Web site.To access the documents, please go tohttp://www.cleco.com; For Investors—Investor Publications/Presentations—Proxy Statements.

PROPOSAL NUMBER 1—ELECTION OF THREE CLASS IIIII DIRECTORS

Cleco’s Bylaws provide for the division of Cleco’s board of directors into three classes, Class I, Class II and Class III, with each class consisting, as nearly as possible, of one-third of the number of directors constituting the whole board. Cleco’s board of directors currently has a total of 10 directors: four are in Class I, three are in Class II, and three are in Class III (including Mr. F. Ben James, Jr., who will retire immediately prior to the 2008 annual meeting, as discussed below).III. The term of each directorship is three years. The terms of the three classes are staggered in a manner so that only one class is elected by the shareholders annually. The three Class IIIII director positions are proposed for election this year to serve as members of Cleco’s board of directors until the annual meeting of shareholders in 2011,2012, or until their successors are elected and qualified.

The persons named in the accompanying proxy may act with discretionary authority to cumulate the votes attributable to shares of Cleco common stock represented by the proxy and to vote for other nominees upon the unavailability of a named nominee, although management is not aware of any circumstance likely to render any of the named nominees unavailable for election. Unless a shareholder specifies otherwise, the persons named in the accompanying proxy intend to vote in favor of the nominees listed below. The three persons who receive the most votes cast will be elected as directors.

All of the nominees listed below currently serve as directors of Cleco. Directors who are members of Classes I and III,II, who are continuing as directors at this time and whose terms of office expire in 2010 and 2009,2011, respectively, are named below following the information concerning the three nominees for election as Class IIIII directors. Mr. F. Ben James, Jr., who has served as a director since 1986, will retire from the board of directors effective immediately prior to the 2008 annual meeting of shareholders, since he has reached the retirement age for outside directors specified in Cleco’s Bylaws.

The Nominating/Governance Committee is following the steps discussed below under “Director Nomination Process” and has engaged an executive search firm to assist in the recruitment of new board members to fill the vacancy created by Mr. James’ retirement, as well as upcoming retirements. The Nominating/Governance Committee is working to identify attributes of potential new board members to determine those attributes that will be most useful in the work of the board. In anticipation of Mr. James’ retirement, the board has decreased the number of directors from ten to nine. Depending upon the outcome of the work of the search firm, the board may determine to increase the number of directors and appoint one or more board members identified in the search. At the time of the mailing of this proxy statement, this work is not complete and the Nominating/Governance Committee is not prepared to make a recommendation regarding a candidate to be nominated at the 2008 annual meeting of shareholders. Any new directors appointed by the board will be Class III directors with terms of office expiring in 2009.

Cleco’s board of directors unanimously has approved the nomination of the three nominees for Class IIIII director and recommends that you vote“FOR”the election of the three nominees for Class IIIII director.

Below is information concerning the three nominees for election as Class IIIII directors at the annual meeting, as well as the continuing Class I and Class IIIII directors, including the business experience of each during the past five years.

Class IIIII Directors (nominees to be elected at the 20082009 annual meeting; terms of office expire in 2011)

Class I Directors (terms of office expire in 2010)

Class III Directors (terms of office expire in 2009)2012)

Class I Directors (terms of office expire in 2010)

Class II Directors (terms of office expire in 2011)

Independence and Organization of the Board of Directors

Cleco’s board of directors has delegated some of its authority to six committees. These are the Executive Committee, the Audit Committee, the Compensation Committee, the Finance Committee, the Nominating/Governance Committee and the Qualified Legal Compliance Committee. The members of those committees are

identified, as appropriate, under “—Class IIII Directors,” “—Class III Directors” and “—Class IIIII Directors” above. In accordance with current listing standards of the New York Stock Exchange (“NYSE”),NYSE, Cleco’s board of directors has adopted categorical standards to assist it in making determinations of director independence that are required by the NYSE. These categorical standards which were last revised by the board of directors in January 2005 were included as Appendix B to the 2006 proxy statement and are posted on Cleco’s Web site atwww.cleco.com. www.cleco.com. A copy of the standards is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The board of directors has determined that all of its directors, except Mr. Madison, who is chief executive officer of Cleco, meet the categorical standards and are independent within the meaning of the current listing standards of the NYSE.

The Executive Committee exercises all powers of the board of directors, as defined and limited by Cleco’s Bylaws, between meetings of the full board whenever it is not desirable or practical to conduct a meeting of the full board. The Executive Committee operates under a written charter adopted by the board of directors in January 2003 and revised in May 2005, a copy of which is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Executive Committee held one telephone meetingno meetings in 2007.2008.

The Audit Committee selects Cleco’s independent registered public accounting firm, reviews the scope of audits, reviews and recommends to Cleco’s board of directors financial reporting and accounting practices, and reviews Cleco’s procedures for internal auditing and the adequacy of its system of internal accounting controls. On a quarterly basis, the Audit Committee reviews activity reported through Cleco’s Ethics Helpline, which provides a means for employees to anonymously seek guidance or report allegations of misconduct. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 and operates under a written charter adopted by the board of directors in April 2000 and last revised in July 2007,April 2008, a copy of which is attached as Appendix B and is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Audit Committee held eight meetings, four of which were formal telephone meetings, during 2007.2008.

The Compensation Committee approves, or in some cases recommends to Cleco’s board of directors, remuneration arrangements and compensation plans involving Cleco’s officers and employees and administers the annual incentive compensation program and the granting of stock options, restricted stock and other awards to eligible employees under Cleco’s 2000 Long-Term Incentive Compensation Plan (“LTIP”). The Compensation Committee operates under a written charter adopted by the board of directors in January 2003 and last revised in July 2007,2008, a copy of which is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Compensation Committee held five meetings, one of which was a formal telephone meeting, in 2007.2008.

The Finance Committee reviews and recommends to the board of directors actions related to Cleco’s dividend and investment policies, corporate financing plans and major financial undertakings. The Finance Committee operates under a written charter adopted by the board of directors in May 2005 and last revised in April 2008, a copy of which is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Finance Committee held five meetings in 2007.2008.

The Nominating/Governance Committee considers and makes recommendations to the board of directors with respect to the size and composition of the board, potential candidates for membership on the board,

compensation of directors, the effectiveness, structure and operation of the board, nominees for officers of Cleco and its affiliates, and changes to Cleco’s Corporate Governance Guidelines. The Nominating/Governance Committee operates under a written charter adopted by the board of directors in January 2003 and last revised in April 2007,2008, a copy of which is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Nominating/Governance Committee held four meetings in 2007.2008.

The Qualified Legal Compliance Committee was formed in October 2003 to receive, consider and take action with respect to any report made or referred to the Qualified Legal Compliance Committee by an attorney, of evidence of a material violation of federal or state securities law, a material breach of fiduciary duty arising under federal or state law or similar material violation of any federal or state law, in each case by Cleco or by any officer, director, employee or agent of Cleco. Each board member who serves as a member of the Nominating/Governance Committee also serves as a member of the Qualified Legal Compliance Committee. If at any time the Nominating/Governance Committee does not include a member of the Audit Committee, the then-current chairman of the Audit Committee also shall be a member of the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee operates under a written charter adopted by the board of directors in October 2003 and last revised in April 2007, a copy of which is posted on Cleco’s Web site atwww.cleco.com. A copy of this charter is also available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000. The Qualified Legal Compliance Committee held no meetings in 2008.

Cleco’s board of directors held four regular meetings and two special meetings during 2007.2008. Generally, in months when a formal meeting is not held, members of Cleco’s board of directors are provided with written reports regarding the operations of Cleco, may hold informal telephone conference meetings if business needs dictate, and also are consulted informally from time to time with respect to pending business. When necessary, special meetings, including formal telephone meetings, are called as official board meetings to deal with specific action items. Cleco’s Corporate Governance Guidelines provide that executive sessions of non-management directors will be scheduled at the conclusion of all official in-person meetings of the board and its committees, although non-management directors may meet in executive session at any time. During 2007,2008, all directors attended at least 75% of the total number of formal meetings of Cleco’s board of directors and of the committees of Cleco’s board of directors on which such directors served. Directors also are expected to attend each annual meeting of shareholders. The 20072008 annual meeting of shareholders was attended by all directors serving at that time.

During 2007,2008, all members of Cleco’s board of directors served as members of the board of managers of Cleco Power LLC, Cleco’s wholly owned utility subsidiary.

Cleco’s Corporate Governance Guidelines

Cleco’s Corporate Governance Guidelines were adopted by the board of directors in January 2002. These guidelines are intended to complement Cleco’s Amended and Restated Articles of Incorporation and Bylaws and address, among other things, the mission, the structure, and the operation of the board of directors. The guidelines may change from time to time as the board of directors may determine such change to be in the best interest of Cleco and its shareholders. The Corporate Governance Guidelines were last revised in July 20072008 and are posted on Cleco’s Web site atwww.cleco.com. The Corporate Governance Guidelines are also are available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000.

Cleco’s Code of Business Conduct & Ethics

Cleco has adopted a Code of Conduct that applies to its principal executive officer, principal financial officer, principal accounting officer and treasurer. Cleco also has adopted Ethics & Business Standards applicable to all employees and the board of directors. In addition, the board of directors has adopted Conflicts of Interest and Related Policies to prohibit certain conduct and to reflect the expectation of the board of directors that its members engage in and promote honest and ethical conduct in carrying out their duties and responsibilities, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships and corporate opportunities. Under the Conflicts of Interest and Related Policies, which were last revised in April 2007, Cleco considers transactions that are reportable under the Securities and Exchange Commission’s (“SEC”) rules for transactions with related parties to be conflicts of interest and prohibits them. Any request, waiver, interpretation or other administration of the policy shall be referred to the Nominating/Governance Committee of Cleco’s board of directors.Committee. Any recommendations by the Nominating/Governance Committee to

implement a waiver shall be referred to the full board of directors for a final determination. The Code of Conduct, Ethics & Business Standards, and Conflicts of Interest and Related Policies are posted on Cleco’s Web site atwww.cleco.com. Each of these documents is also is available free of charge by request sent to: Shareholder Services, Cleco, P.O. Box 5000, Pineville, LA 71361-5000.

DirectorNominationDirector Nomination Process

Cleco’s Corporate Governance Guidelines set forth Cleco’s method of selecting director nominees and provide for annual evaluations of the board and the board committees as a whole. In connection with these evaluations, which were completed for the first time in 2004, Cleco’s board of directors identified, and the Nominating/Governance Committee compiled, attributes of the board’s incumbent members believed to contribute to the work of the board and its committees, including leadership, accomplishments, skills, diversity, integrity and commitment to board duties. When a position on the board of directors becomes vacant, or if the number of members on the board of directors is being increased, the Nominating/Governance Committee will review these attributes of the incumbent board members and determine the attributes that, if possessed by the new board member, would likely result in the most significant contribution to the board of directors. Persons recommended to the Nominating/Governance Committee for consideration as nominees for a vacant or new board position will then be evaluated with respect to the attributes determined by the committee to be optimal for the vacant or new position. Following the evaluation, which may involve interviews or other procedures the Nominating/Governance Committee deems appropriate, the committee will make a recommendation to the board of directors regarding a candidate either to be nominated at the next annual meeting of shareholders or elected by the board between such meetings. Mr. Kruger was elected through this process by the board of directors in October 2008.

Recommendations for potential nominees may come from any source, including members of the board of directors, shareholders, self-recommendations, members of the communities Cleco serves or search firms. All persons recommended for a vacant or new board position will be given equal consideration regardless of the source of the recommendation. Cleco’s Nominating/Governance Committee did not receive any nominees for election as director at the 20082009 annual meeting of shareholders from a shareholder or group of shareholders who individually, or in the aggregate, beneficially owned more than 5% of Cleco’s voting common stock for at least one year.

Any person wishing to make a recommendation for a person to be considered by the Nominating/Governance Committee pursuant to the process described above as a potential nominee to the board of directors should direct the recommendation to the chairman of the Nominating/Governance Committee in care of Cleco’s corporate secretary. However, Cleco is not obligated to nominate any nominee that is recommended to the Nominating/Governance Committee following these processes. Separately, Cleco’s Bylaws contain certain provisions concerning nomination of a director by a shareholder, which are described below under the caption “Proposals by Shareholders.”

Communications with the Board of Directors

The Corporate Governance Guidelines provide for communications with the board of directors by shareholders and other interested persons. In order that shareholders, employees and other interested persons may make their concerns known to the board, Cleco has established a procedure for communications with the board through the non-management chairman of the board. The procedure is intended to provide a method for confidential communication while at the same time protecting the privacy of the members of the board. Any shareholder or other interested person wishing to communicate with the board of directors, or the non-management members of the board, may do so by addressing such communication as follows:

Chairman of the Board of Directors

c/o Corporate Secretary

Cleco Corporation

P. O. Box 5000

Pineville, LA 71361-5000

Upon receipt, Cleco’s corporate secretary will forward the communication, unopened, directly to the non-management chairman of the board. The chairman of the board will, upon review of the communication, make a determination as to whether it should be brought to the attention of the other non-management members and/or the management member of the board of directors and whether any response should be made to the person sending the communication, unless the communication was made anonymously.

SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

The following table describes the Cleco common stock and Cleco preferred stock beneficially owned by Cleco directors and nominees, the executive officers named in the Summary Compensation Table below, and the directors and executive officers as a group. Shares of stock are “beneficially owned” by a person if the person directly or indirectly has or shares the power to vote or dispose of the shares, regardless of whether the person has any economic interest in the shares. A person also beneficially owns shares as to which the person has the right to acquire beneficial ownership within 60 days, as in the case of the stock options set forth under the “Options Exercisable Within 60 Days” column in the following table.

All information in the table is as of February 1, 2008,2, 2009, and is based upon information supplied by the directors and officers. Unless otherwise indicated in the footnotes and subject to community property laws where applicable, each of the shareholders named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned.

shown for all directors, nominees and executive officers as a group hold 42,38441,943 shares of common stock under the 401(k) Savings Plan. Shares of common stock awarded under the LTIP that were restricted as of February 1, 20082, 2009 were held by the persons in the table above as follows: Mr. Madison, 78,714;88,666; Mr. Davis, 14,226; Ms. Samil, 37,678; Mr. Bausewine, 20,754; Mr. Fontenot, 13,710; Ms. Nolen, 22,024; Ms. Samil, 35,666; Mr. Bausewine, 18,002; Mr. Fontenot, 13,302; Mr. Charlton, 4,838;4,500; and the other executive officers included in the amount shown for all directors, nominees and executive officers as a group, 91,364.107,768.

(2)	“Options Exercisable Within 60 Days” reflects the number of shares that could be purchased by exercise of options at February 1, 20082, 2009 or within 60 days thereafter under Cleco’s long-term incentive plans.

(3)	“Other” represents the number of shares of common stock as to which the named individuals share voting and dispositive power with another person and shares of phantom stock related to shares of restricted stock granted under Cleco’s LTIP.

(4)

Represents shares of phantom stock related to shares of restricted stock granted under Cleco’s LTIP. General Cadoria, Mr. Garrett, Mr. Ratcliff, Mr. Walker and Mr. Westbrook have elected to defer receipt of these shares of restricted stock granted to them under the LTIP. Each share of phantom stock is the economic equivalent of one share of Cleco common stock.

(5)	Includes 130,615131,815 shares owned by members of Mr. Crowell’s family and family trusts, for which beneficial ownership is disclaimed.disclaimed, and 61,476 shares held by an LLC owned by Mr. Crowell and his wife.

(6)	Mr. Madison is also a director of Cleco.

(7)	Effective August 1, 2007, Mr. CharltonMay 31, 2008, Ms. Nolen ceased to be the Senior Vice President & COO –Chief Financial Officer of Cleco Midstream Resources.and Cleco Power LLC.

(8)

In last year’sthe 2007 and 2008 proxy statement,statements, the “Number of Shares” represented the number of shares of Cleco preferred stock allocated under the 401(k) Savings Plan that was convertible into shares of Cleco common stock. In March 2007, in order to comply with provisions of the Pension Protection Act of 2006, 190,372 shares of Employee Stock Ownership Plan (ESOP)(“ESOP”) preferred stock were converted into 1.8 million shares of Cleco common stock. The ESOP trustee holds the newly converted shares of Cleco common stock on behalf of the 401(k) Savings Plan participants.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth as of December 31, 2007,2008, each person known to Cleco to be the beneficial owner of more than 5% of the outstanding shares of any class of Cleco’s voting securities.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Cleco’s executive officers and directors, and persons who beneficially own more than 10% of a registered class of Cleco’s equity securities, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of Cleco’s equity securities. To Cleco’s knowledge, based solely on review of the copies of such reports furnished to Cleco, for the fiscal year ended December 31, 2007,2008, all Section 16(a) filing requirements applicable to its executive officers, directors and greater-than-10% shareholders were satisfied, except that General Cadoria, Mr. Garrett, Mr. Ratcliff, Mr. Walker and Mr. Westbrook each failed to timely file reports on Form 4 with respect to certain transactions involving the deferral of shares of restricted and unrestricted Cleco common stock under Cleco’s Deferred Compensation Plan. Under Section 16(a), such shares should be treated as shares of “phantom stock.” Upon discovery of the prior characterization of such deferred shares as non-derivative securities and upon receiving legal advice regarding such characterization, each of the named directors promptly filed amendments to various previously filed Form 4s and filed Form 4s relating to dividend shares credited to their deferred compensation accounts as follows: General Cadoria, one late report relating to eight transactions; Mr. Garrett, one late report relating to eight transactions; Mr. Ratcliff, one late report relating to four transactions; Mr. Walker, one late report relating to eight transactions; and Mr. Westbrook, one late report relating to eight transactions. Mr. Ratcliff also filed one late Form 4 relating to a reallocation of a portion of his deferred compensation account balance into shares of Cleco common stock.satisfied.

COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

Overview

Cleco’s Overall Program Design Philosophy

Cleco’s executive compensation and benefitbenefits philosophy is to provide market-based programs that pay or award our executive officers at levels approximating the competitive market. We also believe in paying above the market for superior performance and below the market for underperformance. Our Compensation Committee uses peer groups, including a “Base Peer Group” and an “Incentive Peer Group,” to evaluate the competitive market and to help design and track our executive compensation and benefit plans (see page 15,17, “Use of Market Data and Comparator Groups”). Our overall executive compensation design philosophy is to incorporate a higher level of “at-risk” pay than what our Base Peer Group typically provides. We define at-risk pay as pay that is dependent on our performance against pre-established measures. This philosophy reflects our Compensation Committee’s desire to align management’s actions with the interests of our shareholders. Our overall executive benefits philosophy is to offer plans and programs that allow us to attract and retain executive talent. Our supplemental executive retirement plan is a key executive benefit component in that regard.

One of the key analysisanalytical steps completed by the Compensation Committee each year is to confirm that our at-risk pay levels meet our overall design philosophy. Our overall 2007The resulting 2008 compensation program design was as follows for our executive officers as a group:

Actual pay allocation such as that reported in the “Summary Compensation Table” will differ from the values above because of actual performance versus our design (or target) performance. The table above also does not account for the value of retirement benefits earned in the current year. For 2007,2008, our 44%49% pay at-risk design value compared to the Base Peer Group median of 42%44%. The Stock Award pay at-risk value of 96%100% compared to the Base Peer Group median of 67%76%.

20072008 Results Were Aligned with Our Program Design

Cleco had a successful 2007.2008. We exceeded our 2008 earnings targets; we performed welltarget; our return on behalf of shareholders;invested capital and total shareholder return performance was favorable; we achieved favorable customer satisfaction scores; and importantly, we achieved high rankings for safe work practices. Each of these achievements impacted executive officer compensation paid in 2007.2008.

Our executive officers’ incentive pay is a function of our performance against pre-established financial and operational measures. Fully diluted earnings per share (“EPS”), return on invested capital and total shareholder return are the three primary measures. For 2007, fully diluted2008, EPS of $2.54$1.82 were 28%6% higher than our 2007 target;2008 target of $1.72; both actual and target EPS for incentive award purposes excluded the results of our non-regulated affiliate

Acadia Power Partners LLC. Our return on invested capital rank was slightly belowabove the Incentive Peer Group median;median, and we ranked near the top quartileof the Incentive Peer Group on our total shareholder return measure.return. The resulting actual paid compensation for our ongoing executive officer group (which includes 2007group—2008 base salary, the 20072008 cash bonus, and the long-term

incentive awardawards for the 20052006 to 20072008 performance cycle) cycle—exceeded our targetedoverall compensation philosophytargets by 20%18%. The primary reasonsreason for this positive variance was the total shareholder return performance measure that actual paid compensation versus targeted compensation was somewhat less favorable thanwe use in our EPS performance compared to target were:

Our Compensation Committee evaluates theseour historical performance characteristics when establishing performance targets and approving annual compensatory and award level changes. We believe the Company’s overall compensation program is working as intended and remains consistent with the practices at companies inwithin our peer groups.

OurExecutive Compensation and Benefit Actions Taken during 2008

Our Compensation and Benefits Philosophy

PhilosophyA Summary of Cleco’s Compensation and Benefits Components

Our executive compensation and benefitbenefits philosophy is to provide market-based programs that pay or award our executive officers at levels approximating the competitive market. We also believe in paying above the market for superior performance and below the market for underperformance. As such, we seek to provide a total compensation and benefits value that is similar to those of comparable electric utilities and energy service

companies; that has a greater portion of compensation “at-risk”; in comparison to our Base Peer Group; that ensures there is a direct link between compensation and our financial and operational performance; and, that rewards executives when Cleco’s performance exceeds that achieved by the companies in our Incentive Peer Group.

We implement our philosophy by utilizing the following compensation and benefit components:

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Periodic stock options based on individual or overall company performance, Base Peer Group trends, or to aid achievement of our overall compensation philosophy.

Stock Ownership Requirements for Executive Officers

We do not maintainhave a formal equity ownership policy or guideline for executive officers, but insteadofficers. Instead, we rely on the three-year restricted stock performance cycles and theour ensuing three-year holding periods to accomplish the samea similar outcome. This enables our executive officers to build stock ownership over time rather than to mandate stock purchases outside the LTIP. Our Compensation Committee relies on its outside independent consultant, Hewitt Associates LLC (“Hewitt”), for guidance on typical ownership levels, and they annually review the ownership levels of our executive officers, including the named executives. The last review was conducted in December 2007.2008. No changes to our executive officers’ current ownership levels were recommended as a result of this review.

Recoupment of Prior Awards Paid

Our Compensation Committee and board of directors approved a Recovery Policy in October 2007. If the Company is required to restate its financial statements or other financial results, the Compensation Committee is permitted to adjust or otherwise recover an award, provided that the amount of the award is based on financial performance and the Compensation Committee determines that its recipient engaged in misconduct or in an intentional act or omission with respect to the restatement. Awards subject to the policy include any payment, accrual or other benefit paid or earned on or after January 1, 2008. Each of our executive officers has signed a notice acknowledging application of this policy, and we have conditioned their annual AIP agreements and LTIP grants on the policy.

How We Design and Evaluate Our Compensation and Benefit Program Design and AnalysisPrograms

Use of Market Data and Comparator Groups

Our Compensation Committee uses two comparator groupsa Base Peer Group and an Incentive Peer Group to help design our executive officer compensation plans and benefit plans. We use the Incentive Peer Group to track comparable performance of those plans. These groups also are referred to as comparator group(s), peer group(s), peers, or the competitive market or market data throughout this discussion. Data from the peer groups are an integrala central part of the decision process used by the Compensation Committee in determining the design, component parts, and levels of awards contained in our executive officer compensation programs.

The Base Peer Group wasis selected based on the companies being of approximate size and scope to Cleco, employing similar labor and talent pools, and having their executive officer compensation data available to

Hewitt. The Compensation Committee considers the availability of such detailed market data to be critical in making comparative compensation decisions. As such, compensation policy and program design decisions as well as annual performance targets, are established against the Base Peer Group.

The Incentive Peer Group wasis selected by the Compensation Committee in order to measure the actual relative performance results of our incentive plans. The Incentive Peer Group is based on the companies being part of a recognized stock market index, as well as being in the same general industry classification system.system as Cleco. As compared to the Base Peer Group, thisthe Incentive Peer Group helps the Compensation Committee evaluate our actual incentive plan performance against a group of companies whose scope of operations and market capitalization is similar to Cleco’s.

Composition of the Base Peer Group

For 20072008 and 2008,2009, executive officer compensation levels were evaluated using the Base Peer Group. This includes base salary, annual and long-term incentive plan targets, other potential equity awards, and total compensation. The Base Peer Group consists of companies that are generally either in the Edison Electric Institute (“EEI”) Index or the S&P Small and MidCap Electric Utilities Index. We are included in both indices. The Base Peer Group in 2007 consistedconsists of the following 1718 companies: Allete, Inc.; Alliant Energy Corporation; Ameren Corporation; Black Hills Corporation; CH Energy Group, Inc.; DPL, Inc.; Duquesne Light Holdings, Inc.; El Paso Electric Company; Entergy Corporation; Great Plains Energy Inc.; IDACORP, Inc.; NSTAR; Otter Tail Corporation; Pinnacle West Capital Corporation; PNM Resources, Inc.; Portland General Electric Co.; PPL Corporation; SCANA Corporation; and UniSource Energy Corporation. Due to an acquisition, Duquesne Light Holdings will no longer be in the Base Peer Group. For 2008, the Compensation Committee approved the addition of Allete, Inc. and Portland General Electric to the Base Peer Group. As with the existing Base Peer Group companies, compensation data for Allete, Inc. and Portland General Electric is available to Hewitt. The Base Peer Group data are further refined through a regression analysis of total revenues in orderrevenues. We do this to better relate revenuesour revenue and compensation levels amongto the Base Peer Group companies. This regression analysis more accurately reflects the fact that we are smaller than some companies in the peer group.Base Peer Group.

Composition of the Incentive Peer Group

For 2007,2008, the relative actual performance of the financial measures used in our annual and long-term incentive plans was determined using the Incentive Peer Group. The Incentive Peer Group consisted of the following 1519 companies contained in the S&P Small and MidCap Electric Utilities Index: Allete, Inc.; Alliant Energy Corporation; Avista Corporation; Central Vermont Public Service; DPL,CH Energy Group, Inc.; Duquesne Light Holdings,DPL, Inc.; El Paso Electric Company; Great Plains Energy Inc.; Green Mountain Power Corporation; Hawaiian Electric Industries; IDACORP, Inc.; NSTAR; NV Energy, Inc.; Northeast Utilities; Pepco Holdings,PNM Resources, Inc.; Sierra Pacific Resources;SCANA Corporation; UIL Holdings Corporation; UniSource Energy Corporation; and Westar Energy, Inc. Due to an acquisition, Duquesne Light Holdings; and Green Mountain Power Corporation will no longer be in the Incentive Peer Group.Wisconsin Energy Corporation. For 2008,2009, the Compensation Committee approved the additionan Incentive Peer Group of Alliant Energy Corporation, Avista Corporation, CH Energy Group, Inc., NSTAR,17 companies. PNM Resources, Inc., SCANA Corporation, and Wisconsin Energy Corporation towere removed as each is no longer in the Incentive Peer Group. Our Compensation Committee approved these additions so that there are more companies similar to us against which to compare our results.S&P Small and MidCap Electric Utilities Index.

Program DesignOur Annual Process for Making Compensation and Approval ProcessBenefit Changes

Our Compensation Committee met five times during 2007.2008. Compensation program market data, compensation pay range decisions, and compensation component design decisions are typically made each December for the upcoming year. Compensation adjustments are reviewed and approved by our Compensation Committee each January. The Compensation Committee’s other meetings are devoted to issues analysis, market analysis, and performance tracking of the Company’s various compensation and benefit programs. Our CEO Chief Financial Officer (“CFO”), and Senior Vice President, Corporate Services attend the Compensation Committee’s meetings on behalf of management.

The Compensation Committee reviews and approves all executive compensation and benefit market information, base salary recommendations, and awards under incentive programs. Our CEO is responsible for making recommendations regarding executive compensation adjustments, as well as awards under our annual cash bonus and long-term incentive compensation plans. All compensation adjustments and award calculations are reviewed by Hewitt on behalf of our Compensation Committee. As such, ourOur CEO also recommends incentive plan measures for the committee’sCompensation Committee’s approval. TheThese measures and performance targets also are reviewed by Hewitt prior to adoption by the Compensation Committee.

Our Compensation Committee has delegated limited authority to our CEO to extend employment offers to executive officers at the vice president or lower level. The CEO may make such offers without prior approval of the board of directors provided no compensation component falls outside our Compensation Committee’s approved policy limits as described on pages 1819 through 21.24. Additionally, the Compensation Committee must approvestill approves any grant of the Company’sCleco common stock or other equity award prior to its award. No employment offers were made in 20072008 under this delegation of authority.

For our CEO, our Compensation Committee, jointly with our Nominating/Governance Committee, formulates a performance evaluation document in the fall of each year. The evaluation assesses our CEO’s performance related to leadership, financial and operating results, board relations, and other material considerations as specified by the committees. The CEO’s evaluation results, as well as prior years’ compensation changes, are incorporated into our Compensation Committee’s compensation adjustment decisions in January. CEO market information and guidance on compensation adjustment decisions are provided to the Compensation Committee by Hewitt.

For the remaining executive officers, our CEO works with Hewitt and our Senior Vice President, Corporate Services to update position descriptions for any job duty changes; to review compensation market information; to review prior years’ compensation adjustments; and to recommend compensation adjustments to our Compensation Committee each January. Additionally, a performance evaluation is completed each December for every executive officer by the officer’s supervisor, which is incorporated into the recommendations. Executive officers also are required to complete performance plans in January. These performance plans generally contain business unit specific financial and operating goals and/or completion requirements for major business unit-level projects. These plans are used as part of the performance evaluation process that results in base salary adjustments each January. Senior vice presidents who have officer direct reports also participate in this compensation adjustment process. The senior vice president will complete performance evaluations; review job-specific compensation market information; review prior compensation decisions; and make recommendations to our CEO regarding compensation adjustments. Generally, this process governs all compensation adjustments. Material changes to compensation typically result from promotions, one-time special awards for outstanding individual performance, or in the case of a downward material change, a failure to achieve individual performance targets.

Our Compensation Committee has engaged Hewitt to consult on matters concerning executive officer compensation. Hewitt acts at the direction of our Compensation Committee and is independent of management. Our Compensation Committee determines Hewitt’s ongoing engagement activities, including the preparation of

compensation comparisons based on information regarding comparable businesses of a similar size and operational scope to Cleco. Hewitt endeavors to keep our Compensation Committee informed of executive officer compensation trends and regulatory/compliance developments.

Use of Analytical Tools We Use to Aid Compensation and Benefit Plan Decisions

Our Compensation Committee incorporates various analyses into our executive compensation and benefits program design process. These are described throughout this CD&A, but the primary analysis toolsones are the following:

The Base Peer Group data is used to establish the ranges for base salary, the annual cash bonus, and long-term incentives. These ranges are set for each executive officer position individually. The ranges also bound the recommendations for compensatory adjustment recommendations made by management.

How Each of Our Compensation and Benefit Program Components Was Applied in 2008

Base Salary

Our policy is to set base salary levels for our executive officers as a group, including the named executives, at a level approximating 90% to 92% of the Base Peer Group median. The Base Peer Group data is compiled by Hewitt and provided to the Compensation Committee. Our Compensation Committee has adopted this policy so that a greater percent of our compensation is at-risk.at-risk in comparison to our Base Peer Group. When base salary and the annual cash bonus are combined, our philosophy is to provide total cash compensation that approximates the Base Peer Group median. We adjust the Base Peer Group data for size differences using regression analysis based on sales revenue. This lowers the median compensation level since our revenues are smaller, on average, than the Base Peer Group.

Base salary increases for our named executives in 2007,2008, including lump sum merit increases, averaged 5.4%6.1%. The increases ranged from 3.5%2.4% to 8.1%10.0%. Merit lump-sum payments are payments made in lieu of a base salary increase when base salary has reached or exceeded our policy target. The sizeamount of a base salary increase or lump-sum payment is based on an assessment of individual performance and contributions, as well as position-specific market data provided by Hewitt to the Compensation Committee. Merit lump-sum payments are payments made in lieu of a base salary increase when base salary has reached or exceeded our policy target. The comparable Base Peer Group median for our named executives as a group increased 4.9%increase was 5.5%.

Base salary adjustments for our individual named executives in 20072008 are shown in the table below:

Mr. Madison, Ms. Nolen, Ms. Samil, and Mr. Bausewine each assumed their current positions in May 2005. In the case of Mr. Madison Ms. Nolen, and Mr. Bausewine, their base salary level at that time was set below the 90% to 92% philosophy in recognition of these beingbecause they assumed significant new job duties. Ms. Samil also assumed significant new job duties, in 2005, but her prior assignment as our CFO resulted in her post-promotion base salary being at philosophy. Mr. Fontenot was appointed to his current position in July 2005. Mr. Fontenot’s base salary was above our philosophy at that time. Mr. Davis’ base salary was also above our philosophy until being appointed as our interim CFO. The compensation amounts shown in the table for Mr. Davis reflect his position at the time of Vice President and Chief Accounting Officer. As such, the base salary increases for Mr. Madison Ms. Nolen, and Mr. Bausewine have been higher than those of Mr. Davis, Ms. Samil and Mr. Fontenot. The higher increases also reflect timelength of service in the job,named position and the results of theireach executive’s annual performance reviews, and the fact that these individuals have been below our target philosophy for base salary.review. The decision to provide Mr. Davis and Mr. Fontenot a lump-sum payment resulted from his 2007their respective 2008 base salary being at our policy target. Together these facts were part of our Compensation Committee’s evaluation of internal equity among our named executives.

That base pay as a percent of the Base Peer Group median was 95.5% for our named executives reflects their collective time in the job, performance reviews and our assessment of internal equity. Base pay for our executive officers as a group was 89.8% of the Base Peer Group median. The percentage increase in base salaries for our executive officers as a group was 5.9% in 2008.

Annual Cash Bonus

We maintain a short-term, performance-based cash bonus plan called the Annual Incentive Plan (“AIP”). It applies to our executive officers, as well as other key employees nominated by our CEO and approved each January by our Compensation Committee. The AIP combines Cleco-specific performance measures with Base Peer Group market data to establish target award levels. Our policy is to target AIP award levelsawards for executive officers between the 50^th and 75^th percentile of the Base Peer Group. Executive officers proficient in their jobs, and who

consistently meet or exceed performance expectations, willcan reach the 75^th percentile target award level.amount. This aligns with our philosophy of having a higher amount of compensation at-risk.at-risk in comparison to our Base Peer Group. Added to base salary, an executive officer having a 75^th percentileour AIP target will earnphilosophy enables total cash compensation approximatingto approximate the Base Peer Group median. This also is consistent with our design goal that approximately 70% of total compensation be in the form of cash with the remaining 30% in the form of equity.

A key analytical step takes placeIn January of each January whenfiscal year, our CEO recommends the AIP measures to the Compensation Committee. AIP measures are a combination of financial and operational targets that we use to determine the total AIP award. The CEO’s recommendation for AIP measures includes a financial measure for budgeted EPS. Based on our historical AIP performance relative to budget and our relative historical performance versus the Base Peer Group, the Compensation Committee reviews, revises, and approves the AIP measures for the upcoming year. In determining the measure, the Compensation Committee also considers the level of risk contained in the measures based on the current business climate. In particular, the committeeCompensation Committee evaluates management’s EPS budget and may revise the financial performance matrix. For 2007,2008, the Compensation Committee approved an EPS target that excluded our Acadia Power Partners subsidiary. The reason for this was that several potential material transactions were being contemplated for Acadia. The range of anticipated earnings for Acadia was judged to be too large and too uncertain for inclusion in the projected settlement of our bankruptcy claim against Calpine Corporation. The Compensation Committee determined that excluding the Calpine claim would be most representative of our ongoing operational activity.AIP. The resulting approved 20072008 EPS target was $1.26$1.72 per fully diluted share.

The AIP measures are a combination of financial and operational targets. Financial performance accounts for 55% of the total AIP award and is defined throughby a matrix format that contains (1) actual fully diluted EPS compared to the $1.26 fully diluted$1.72 EPS target, and (2) our relative return on invested capital ranking versus the Incentive Peer Group. Award levels range from 0% to 200% of target. The Compensation Committee adopted the use of return on invested capital in February 2007. Return on invested capital replaced the use in recent years of

return on average common equity. We define return on invested capital to be earnings before interest and income taxes divided by average invested capital. We define invested capital as total assets minus current liabilities. The Compensation Committee believes the usefinancial award level ranges from 0% to 200% of return on invested capital more accurately reflects the Company’s financial performance compared to the Incentive Peer Group. This is because we completed a $159 million issuance of common equity in 2006 for purposes of constructing our new Rodemacher 3 power plant. This equity issuance altered our debt-to-equity ratio compared to the Incentive Peer Group. Using return on invested capital addresses this issue.

target. Operational performance accounts for 45% of the AIP award and is defined by (1) a 30% weighting forif our ability to achieve a level of “very satisfied” customers compared tois 10 percentage points or higher than the other Louisiana electric utilities and electric cooperatives and (2) a 15% weighting forif our ability to achieve safety performance that ranks in the top quartile ranking of the Edison Electric Institute’s indices for vehicle accidents and personal injuries. These two operational measures are paid on an all or none basis.

For 2007,2008, the target AIP award levels for our executive officers ranged from 20%22.5% to 70%75% of base salary. Our Compensation Committee approved an overall 20072008 AIP award of 113.3%116.5% of target. The table below shows the recent history of our performance relative to our targets along with the resulting AIP award ratios.

In December 2007,January 2009, our Compensation Committee approved the use of the same measures and the same weightings for the 20082009 AIP.

The AIP authorizes the Compensation Committee to use discretion under certain circumstances. Discretion may be used in determining an award level for all participants if there are changes in accounting practices or if extraordinary or unanticipated circumstances have a material adverse effect on the achievement of performance measures. The committeeCompensation Committee did not exercise such discretion in 2007.2008. The committeeCompensation Committee also has the authority to adjust any individual AIP award by up to 25% upon

recommendation by the CEO. Downward adjustments are at the discretion of the CEO. Such recommendations are based on our annual performance review process. For 2007,2008, the committeeCompensation Committee approved individual AIP adjustments for approximately 9%9.5% of the AIP participants, including fourtwo of our named executives. The aggregate value of the adjustments added 2.0%approximately 1% to the award pool. The named executive adjustments were based on our annual performance review process described on page 16, “Program Design18, “Our Annual Process for Making Compensation and Approval Process.Benefit Changes.”

Additional details on the 20072008 AIP measures and AIP target levels regarding our named executives may be found on page 30,31, “Non-Equity Incentive Plan Compensation” and page 33,34, “Estimated Future Payments under Non-Equity Incentive Plan Awards (AIP).”

Equity Incentives

Our executive officers and other key employees are eligible to receive performance-based and other grants of restricted stock, common stock equivalent units (“CEUs”), stock options and stock appreciation rights. These grants are made pursuant to our LTIP. A grant gives the recipient the right to receive or purchase shares of our common stock under specified circumstances or to receive cash awards based on our common stock price appreciation or the achievement of pre-established long-term performance goals. The number of shares of our common stock and other awards granted to our executive officers under the LTIP is based on the review process described on page 16, “Program Design18, “Our Annual Process for Making Compensation and Approval Process.Benefit Changes.”

Performance-Based Restricted Stock and CEUs

Our primary equity incentive mechanism is an annual grant of performance-based restricted stock and CEUs. We commonly refer to these grants as the “LTIP award.” Restricted stock is 50% of the overall grant and is made in shares of Cleco common stock. The cost basis of this stock to the executive is zero. CEUs comprise the other 50% of this annual grant and are paid in cash upon award. The Compensation Committee uses CEUs to provide the grantee a means to pay taxes on the restricted shares,shares. We do this because the restricted shares are subject to a 3-year holding period after the performance cycle ends.

The LTIP performance cycle is three years – years—the grant year plus the two fiscal years following the grant year. For the 20072008 grant year, the performance cycle covers January 1, 20072008 to December 31, 2009.2010. A participant’s LTIP award is determined according to the following formula:

Our philosophy is to issue LTIP grants at a target level approximating the Base Peer Group’s 50^th percentile. When added to our base salary and target AIP components, a 50^th percentile LTIP target provides our named executives with target total compensation approximating the market median. For 2007,2008, target total compensation for our named executives, as well as our executive officers as a group was 3.9%2.0% below the market median. As such, the Compensation Committee concluded the present LTIP design continues to meet its objective.

Consistent with our Compensation Committee’s philosophy to have a higher degree of “at-risk” pay, our LTIP grantsawards are heavily oriented toward performance-based restricted stock. This is a key element our Compensation Committee monitors with the aim of further aligning management actions to shareholder interests. Our use of performance-based restricted stock versus time-based restricted stock is higher than that of the Base Peer Group. There is also no award when total shareholder return is below the Incentive Peer Group 30^th percentile. The Compensation Committee also evaluates our historical LTIP performance, the Base Peer Group’s performance and any other factors the Compensation Committee believes impact the LTIP.

For the recently completed performance cycle covering January 1, 20052006 to December 31, 2007,2008, grant levels for our then-executive officers ranged from 12% to 75% of base salary. For the performance cycle covering January 1, 2007 to December 31, 2009, target grant levels for our executive officers ranged from 25%15% to 110% of base salary. The increase to the award range results from our Compensation Committee’s decision in 2006 to remove the tax gross-up feature for performance-based restricted stock awards beginning with the 2006 grant. This decision was based upon review of and comparison to the Base Peer Group’s practices. The higher award percentage going forward, on an after-tax basis, is intended to yield essentially the same value as previous periods since our executive officers will now carry the tax burden on such awards. These features were considered as part of our comparison to the pay levels of the Base Peer Group.

Our Compensation Committee

approved an overall award level of 144.4%163.6% of target for the LTIP performance cycle which ended on December 31, 2007.2008. For the performance cycle covering January 1, 2008 to December 31, 2010, target grant levels for our executive officers ranged from 30% to 120% of base salary. The table below summarizes our recent LTIP award history.

The Compensation Committee may adjust our LTIP awards if it determines that circumstances warrant. Any adjustment applies to all participants. No such adjustment was made for the latest LTIP award approved in December 2007.2008. There are no provisions in the LTIP for individual award adjustment. Details on how our LTIP grants and awards are calculated are included on page 36, “Stock Awards.”

Time-Based Restricted Stock

We may grantGrants of time-based restricted shares or unrestricted shares of our common stock to our executive officers. Such grants are typically associated with mid-year promotions or at the time of hiring an external executive officer from outside Cleco.hiring. Our Compensation Committee uses such grants to increase ownership and encourage retention. For an external hires, grantsexecutive hiring, a grant may also be made to offset comparable awards or other value forfeited byas a result of the executive leaving the former employer. The grant of time-based restricted shares or unrestricted shares of our common stock is recommended by the CEO and approved by our Compensation Committee and our board of directors, or in the case of a grant to the CEO, is recommended jointly by our Compensation Committee and Nominating/Governance Committee to our board of directors. The award condition is continued employment at the time of vesting, which is typically three years after the grant date. Taxes on time-based restricted stock are borne by the executive officer. NoOne time-based grants weregrant was made to ourduring 2008 as part of an external executive officers during 2007.hiring.

Stock Options

We may grant stock options to our executive officers. Stock option grants are designed to provide long-term (up to ten years) incentives and rewards linked directly to the price of our common stock. Stock options addhave value tofor the recipient only when shareholders benefit from stock price appreciation and, as such,appreciation. Therefore, we believe stock options align management’s interests with those of our shareholders. Stock option grants typically vest in increments of one-third beginning on the third anniversary of the grant date. Consequently, grants may start to be exercised beginning in year four extending through year ten. The grant of stock options is recommended by our CEO and approved by our Compensation Committee and our board of directors, or in the case of a grant to the CEO, is recommended jointly by our Compensation Committee and Nominating/Governance Committee to our board of directors.

Stock option grants made to a group of employees, including one or more executive officers have been approved typically at regularly scheduled board meetings in April or July. Such grants have been made to encourage employee retention, to compensate certain key contributing employees whose job levels do not otherwise qualify them to participate in the LTIP, to increase certain key contributing employees’ total direct cash compensation relative to the Base Peer Group when total direct compensation is below market, and/or to recognize otherwise outstanding individual performance.

Stock options granted to our executive officers are made typically at the time we complete the annual review of officer compensation compared to the Base Peer Group, or upon hiring or promotion. Such grants are determined not only with the intent to link incentives and rewards directly to the price of our commonWe may also grant stock but also to provide further incentivesoptions in support of major ongoing strategic initiatives when our Compensation Committee determines actual total compensation would otherwise be below the 50^th percentile of the Base Peer Group. As such, the balance between stock options and performance-based restricted stock is, in part, a function of our executive officers’ total compensation compared to the Base Peer Group. Our Compensation Committee also may grant stock options to partially offset other employers’ awards forfeited when we hire an executive officer externally. The value of such a grant is based on our analysis of the forfeited award and its likelihood of payout.

Our Compensation Committee and our board of directors routinely review potential material non-public information during the timeframe grant decisions are deliberated. Customarily, such potential material non-public information does not impact grant decision timing.

The exercise price of all stock options is set on the grant date and equals the average of the high and low trading prices of our common stock on the grant date, rounded to the nearest eighth.

Stock Appreciation Rights

We have not granted any stock appreciation rights under the terms of the LTIP since its adoption.

Nonqualified Deferred Compensation Plan

We maintain a Deferred Compensation Plan so that provides a mechanism for directors, executive officers, and certain key employees tomay defer receipt and taxation of certain forms of compensation. Directors may defer up to 100% of their compensation; executive officers and other key employees may defer up to 50% of their base salary and up to 100% of their annual cash bonus. We find the use of deferred compensation plans prevalent within our industry and within the companies in the Base Peer Group. We offer this plan to provide eligible participants the opportunity to defer taxable income beyond what is possible through our 401(k) Savings Plan. As such, participantsParticipants are able to maintain 401(k)-like tax deferral rates given their higher compensation levels, although nolevels. No matching contributions on deferrals are made by Cleco. We believe this is an appropriate support mechanism for our executive compensation design. The executive officers and other key employees eligible to participate in this plan are allowed to defer up to 50% of their base salary and up to 100% of their annual cash bonus. Non-officer eligibility generally is determined on the basis of position level, salary level, and whether the employee is taking full advantage of the savings and matching opportunities available through the 401(k) Savings Plan. Actual participation in the plan is discretionary at the participant’s election. The fundsinvestment options made available to participants are selected by our CFO, such that the fund group provides investment diversity similar to our 401(k) Savings Plan, excluding investment inCFO. They include money market, fixed income and equity funds; Cleco common stock. Individual funds are selected bystock is currently not an investment option under the participant.plan. Additional discussion of our deferred compensation plan is included on page 40.

Supplemental Executive Retirement Plan (SERP)

We maintain a SERP for the benefit of our executive officers, other than assistant officers.who are eligible to participate when designated by the Compensation Committee. The SERP is designed to attract and retain executive officers who have contributed and will continue to contribute to our overall success.success by ensuring that adequate compensation will be provided or “replaced” during retirement. Supplemental retirement benefits are prevalent within our industry and the companies in thecomprising our Base Peer Group. We view the SERP as a key recruiting tool, given that we otherwise target overall executive compensation at the market median. As such, benefits

Benefits under our SERP do not accumulate evenly based on years of service. Instead, our participants vest fully in their SERP benefit after ten (10) years of service. Thisservice or upon death or disability while a participant is referred to as “cliff-vesting.” Our CEO or our board of directors alsoemployed by Cleco. The Compensation Committee may reduce the cliff-vestingvesting period to less than ten (10) years for recruiting purposes. Benefits, whether or not vested, are forfeited in the event a participant is terminated for cause.

Benefits are based upon a participant’s attained age at the time of separation from service. The maximum benefit payable from the SERP provides retirement income up tois 65% of an executive officer’s final compensation, atif separation occurs on or after age 65. Payments from our defined benefit pension plan, certain employer contributions to our 401(k) Savings Plan, and payments received from prior employers’ retirement plans are netted from thereduce or offset SERP payment. The SERP benefit is reduced by two percent per year for each yearbenefits. If a participant retires in service prior to age 65. The minimum benefit is 45% of final compensation for an in-service retirement at age 55. The benefit is reduced further if a vested participant terminates prior tohas not attained age 55 at the time of separation and electsreceives SERP benefits before attaining age 65, SERP benefits will be actuarially reduced to commence payments prior to age 62. The SERP also contains a supplemental death benefit.reflect early payment. The “Pension Benefits” table on page 38 lists the present value of accumulated SERP benefit for theour named executives.executives as of December 31, 2008. Additional narrative discussion of the SERP plan design is included on page 39.

Change in Employment Status and Change in Control Events

We enter into employment agreements with our executive officers and certain other key employees. We use employment agreements in an effort to attract and retain executive talent and to ensure their actions align with the interests of Cleco and its shareholders in the event of a change in control. Additionally, theseThe agreements are structured to include payments for various separation events whereinprovided the executive

officer agrees to certain post-employment conditions intended to protect our business and proprietary interests, including our intellectual property, human capital, and confidential information. The level of exit payments and benefits provided under the executive employment agreements is determined by position within the organization.

We find that agreements are used by other companies in the Base Peer Group, in particular regarding change in control. See the section beginning on page 40 titled “Potential Payments at Termination or Change in Control”

for a quantification and discussion of the material terms, potential payments, and benefits associated with the employment agreements with our named executives.

Perquisites and Other Benefits

We may make available the following perquisites to our executive officers:

Our Compensation Committee approves the perquisites based on what it believes is prevailing market practice, as well as specific Company needs. Hewitt assists the Compensation Committee in this regard. We believe the relocation program is an important element in attracting executive talent to the central Louisiana area. As such, the home purchase feature also is included in our executive employment agreements. In the case of Mr. Madison, perquisite expenses related to business and spousal travel are reviewed by our Audit Committee. See the section beginning on page 3233 titled “All Other Compensation” for details of specificthese perquisites and their value for theour named executives.

Our executive officers, including the named executives, also participate in our other benefit plans on the same terms as all of our other employees. These plans include paid time off for vacation, sick leave and bereavement; group medical, dental, vision and prescription drug coverage; basic life insurance; supplemental life insurance; dependent life insurance; accidental death and dismemberment insurance; defined benefit pension plan; and the 401(k) Savings Plan.

Other

20082009 Compensation Actions – Actions—Named Executives

Our Compensation Committee approved the following 20082009 compensation components for our named executives in January 2008:2009. While we followed our normal process in making these adjustments, we also have taken into account the general prevailing economic climate. We believe our salary adjustment decisions strike an appropriate balance between the current economic conditions and Cleco’s recent and anticipated performance.