10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________________

FORM 10-Q

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

For the quarterly period ended September 30, 2008

Or

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

__________________

Commission file number 1-15759

CLECO CORPORATION

(Exact name of registrant as specified in its charter)

Louisiana (State or other jurisdiction of incorporation or organization)	72-1445282 (I.R.S. Employer Identification No.)
2030 Donahue Ferry Road, Pineville, Louisiana (Address of principal executive offices)	71360-5226 (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 (State or other jurisdiction of incorporation or organization)	72-0244480 (I.R.S. Employer Identification No.)
2030 Donahue Ferry Road, Pineville, Louisiana (Address of principal executive offices)	71360-5226 (Zip Code)
Registrant’s telephone number, including area code:  (318) 484-7400
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 x    No ¨
Indicate by check mark whether Cleco Corporation is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one): Large accelerated filer x           Accelerated filer ¨                  Non-accelerated filer ¨  (Do not check if a smaller reporting company)            Smaller reporting company ¨
Indicate by check mark whether Cleco Power LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one): Large accelerated filer ¨           Accelerated filer ¨                  Non-accelerated filer x  (Do not check if a smaller reporting company)            Smaller reporting company ¨
Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act)  Yes ¨    No x

Number of shares outstanding of each of Cleco Corporation’s classes of Common Stock, as of the latest practicable date.

Registrant	Description of Class	Shares Outstanding at October 31, 2008
Cleco Corporation	Common Stock, $1.00 Par Value	60,229,221

Cleco Power LLC, a wholly owned subsidiary of Cleco Corporation, 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 CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

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

This report should be read in its entirety as it pertains to each respective Registrant.  The Notes to the Unaudited Condensed Consolidated Financial Statements are combined.

TABLE OF CONTENTS

			PAGE
GLOSSARY OF TERMS			3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			5
PART I	Financial Information
ITEM 1.	Cleco Corporation — Condensed Consolidated Financial Statements	6
	Cleco Power — Condensed Consolidated Financial Statements	14
	Notes to the Unaudited Condensed Consolidated Financial Statements	19
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	54
ITEM 4 and 4T.	Controls and Procedures	55
PART II	Other Information
ITEM 1.	Legal Proceedings	56
ITEM 1A.	Risk Factors	56
ITEM 5.	Other Information	57
ITEM 6.	Exhibits	58
	Signatures	59

2 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

GLOSSARY OF TERMS

References in this filing, including all items in Parts I and II, to “Cleco” mean Cleco Corporation and its subsidiaries, including Cleco Power, and references to “Cleco Power” mean Cleco Power LLC and its subsidiary, unless the context clearly indicates otherwise. Additional abbreviations or acronyms used in this filing, including all items in Parts I and II are defined below:

ABBREVIATION OR ACRONYM	DEFINITION
401(k) Plan	Cleco Power 401(k) Savings and Investment Plan
Acadia	Acadia Power Partners, LLC and its combined-cycle, natural gas-fired power plant near Eunice, Louisiana, 50% owned by APH and 50% owned by Cajun.  Prior to September 13, 2007, Acadia was 50% owned by APH and 50% owned by Calpine Acadia Holdings, LLC.
AFUDC	Allowance for Funds Used During Construction
Amended EPC Contract	Amended and Restated EPC Contract between Cleco Power and Shaw, executed on May 12, 2006, for engineering, procurement, and construction of Rodemacher Unit 3, as amended by Amendment No. 1 thereto effective March 9, 2007 and Amendment No. 2 thereto dated as of July 2, 2008.
APB	Accounting Principles Board
APB Opinion No. 10	Consolidated Financial Statements, Poolings of Interest, Convertible Debt and Debt Issued with Stock Warrants Installment Method of Accounting
APB Opinion No. 18	The Equity Method of Accounting for Investments in Common Stock
APB Opinion No. 21	Interest on Receivables and Payables
APH	Acadia Power Holdings LLC, a wholly owned subsidiary of Midstream
ARB	Accounting Research Bulletin
ARB No. 51	Consolidated Financial Statements
Attala	Attala Transmission LLC, a wholly owned subsidiary of Cleco Corporation.  Prior to February 1, 2007, Attala was a wholly owned subsidiary of Midstream.
Attala Interconnection Agreement	Interconnection Agreement and Real Estate Agreements between Attala and Entergy Mississippi
Bear Energy	BE Louisiana LLC, an indirect wholly owned subsidiary of JPMorgan Chase & Co.
Bear Stearns Companies Inc.	The parent company of Bear, Stearns & Co. Inc.
CAH	Calpine Acadia Holdings, LLC
Cajun	Cajun Gas Energy L.L.C., an affiliate of pooled investment funds managed by King Street Capital Management, L.L.C.
Calpine	Calpine Corporation
CCN	Certificate of Public Convenience and Necessity
CES	Calpine Energy Services, L.P.
Cleco Energy	Cleco Energy LLC, a wholly owned subsidiary of Midstream
Cleco Katrina/Rita	Cleco Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of Cleco Power
Diversified Lands	Diversified Lands LLC, a wholly owned subsidiary of Cleco Innovations LLC, a wholly owned subsidiary of Cleco Corporation
EITF	Emerging Issues Task Force of the FASB
EITF No. 06-11	Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards
EITF No. 07-1	Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property
EITF No. 07-3	Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities
EITF No. 08-5	Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement
EITF No. 94-1	Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects
Entergy	Entergy Corporation
Entergy Gulf States	Entergy Gulf States, Inc.
Entergy Louisiana	Entergy Louisiana, Inc.
Entergy Mississippi	Entergy Mississippi, Inc.
Entergy Services	Entergy Services, Inc., as agent for Entergy Louisiana and Entergy Gulf States
EPA	United States Environmental Protection Agency
EPC	Engineering, Procurement, and Construction
ERO	Electric Reliability Organization
ESOP	Cleco Corporation Employee Stock Ownership Plan
ESPP	Cleco Corporation Employee Stock Purchase Plan
Evangeline	Cleco Evangeline LLC, a wholly owned subsidiary of Midstream, and its combined-cycle, natural gas-fired power plant located in Evangeline Parish, Louisiana
Evangeline Tolling Agreement	Capacity Sale and Tolling Agreement between Evangeline and BE Louisiana LLC (as successor to Williams Power Company, Inc. (formerly known as Williams Energy Marketing & Trading Company)) which expires in 2020.
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIN	FASB Interpretation No.
FIN 39	Offsetting of Amounts Related to Certain Contracts – an interpretation of APB Opinion No. 10 and FASB Statement No. 105

3 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

ABBREVIATION OR ACRONYM	DEFINITION
FIN 45	Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others
FIN 46R	Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51 (revised December 2003)
FIN 48	Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109
FSP	FASB Staff Position
FSP EITF No. 03-6-1	Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
FSP No. FAS 133-1 and FIN 45-4	Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161
FSP No. FAS 142-3	Determining the Useful Life of Intangible Assets
FSP No. FAS 157-1	Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13
FSP No. FAS 157-2	Effective date of FASB Statement No. 157
FSP No. FAS 157-3	Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
FSP No. FIN 39-1	Amendment of FASB Interpretation No. 39
GAAP	Generally Accepted Accounting Principles
ICT	Independent Coordinator of Transmission
IRP	Integrated Resource Planning
IRS	Internal Revenue Service
kWh	Kilowatt-hour(s) as applicable
LDEQ	Louisiana Department of Environmental Quality
LIBOR	London Interbank Offered Rate
Lignite Mining Agreement	Dolet Hills Mine Lignite Mining Agreement, dated as of May 31, 2001
LPSC	Louisiana Public Service Commission
LTICP	Cleco Corporation Long-Term Incentive Compensation Plan
Midstream	Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Corporation
Moody’s	Moody’s Investors Service
MW	Megawatt(s) as applicable
PCAOB	Public Company Accounting Oversight Board
PCB	Polychlorinated biphenyls
Perryville	Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Corporation.  Prior to February 1, 2007, Perryville was a wholly owned subsidiary of Perryville Energy Holdings LLC, a wholly owned subsidiary of Midstream.
Perryville Interconnection Agreement	Interconnection Agreement and Real Estate Agreements between Perryville and Entergy Louisiana
Power Purchase Agreement	Power Purchase Agreement, dated as of January 28, 2004, between Perryville and Entergy Services
PRP	Potentially responsible party
Registrant(s)	Cleco Corporation and Cleco Power
RFP	Request for Proposal
Rodemacher Unit 3	A 600-MW solid fuel generating unit under construction by Cleco Power at its existing Rodemacher plant site in Boyce, Louisiana
RTO	Regional Transmission Organization
Sale Agreement	Purchase and Sale Agreement, dated as of January 28, 2004, between Perryville and Entergy Louisiana
SEC	Securities and Exchange Commission
SERP	Cleco Corporation Supplemental Executive Retirement Plan
SFAS	Statement of Financial Accounting Standards
SFAS No. 13	Accounting for Leases
SFAS No. 71	Accounting for the Effects of Certain Types of Regulation
SFAS No. 109	Accounting for Income Taxes
SFAS No. 123(R)	Share-Based Payment
SFAS No. 131	Disclosures about Segments of an Enterprise and Related Information
SFAS No. 133	Accounting for Derivative Instruments and Hedging Activities
SFAS No. 141(R)	Business Combinations
SFAS No. 142	Goodwill and Other Intangible Assets
SFAS No. 149	Amendment of Statement 133 on Derivative Instruments and Hedging Activities
SFAS No. 157	Fair Value Measurements
SFAS No. 159	The Fair Value Option For Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115
SFAS No. 160	Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51
SFAS No. 161	Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
SFAS No. 162	The Hierarchy of Generally Accepted Accounting Principles
Shaw	Shaw Contractors, Inc., a subsidiary of The Shaw Group Inc.
Support Group	Cleco Support Group LLC, a wholly owned subsidiary of Cleco Corporation
SWEPCO	Southwestern Electric Power Company, a wholly owned subsidiary of American Electric Power Company, Inc.
VaR	Value-at-risk

4 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” about future events, circumstances, and results.  All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements, including, without limitation, statements regarding the construction, timing and cost of Rodemacher Unit 3; timing and outcome of Cleco Power’s proposed new rate plan; Bear Energy’s performance under the Evangeline Tolling Agreement; future capital expenditures; projections; business strategies; goals; competitive strengths; market and industry developments; development and operation of facilities; future environmental regulations and remediation liabilities; 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, 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:

§   Factors affecting utility operations, such as unusual weather conditions or other natural phenomena; catastrophic weather-related damage (such as hurricanes and other storms); unscheduled generation outages; unanticipated maintenance or repairs; unanticipated changes to fuel costs, cost of and reliance on natural gas as a component of Cleco’s generation fuel mix and their impact on competition and franchises, fuel supply costs or availability constraints due to higher demand, shortages, transportation problems or other developments; environmental incidents; environmental compliance costs; power transmission system constraints; or outcome of Cleco Power’s proposed new rate plan filed with the LPSC in July 2008;

§   Cleco Corporation’s holding company structure and its dependence on the earnings, dividends, or distributions from its subsidiaries to meet its debt obligations and pay dividends on its common stock;

§   Cleco Power’s ability to construct, operate, and maintain, within its projected costs (including financing) and timeframe, Rodemacher Unit 3, in addition to any other self-build projects identified in future IRP and RFP processes;

§   Dependence of Cleco Power for energy from sources other than its facilities and the uncertainty of future long-term sources of such additional energy;

§   Nonperformance by and creditworthiness of counterparties under tolling, power purchase, and energy service agreements, or the restructuring of those agreements, including possible termination;

§   Regulatory factors such as changes in rate-setting policies, recovery of investments made under traditional regulation, recovery of storm restoration costs, the frequency and timing of rate increases or decreases, the results of periodic fuel audits, the results of IRP and RFP processes, the formation of RTOs and ICTs, and the compliance with ERO reliability standards for bulk power systems by Cleco Power, Acadia, Attala, Evangeline, and Perryville;

§   Financial or regulatory accounting principles or policies imposed by the FASB, the SEC, the PCAOB, the FERC, the LPSC or similar entities with regulatory or accounting oversight;

§   Economic conditions, including the ability of customers to continue paying for high energy costs, related growth and/or down-sizing of businesses in Cleco’s service area, monetary fluctuations, changes in commodity prices, and inflation rates;

§   Credit ratings of Cleco Corporation, Cleco Power, and Evangeline;

§   Changing market conditions and a variety of other factors associated with physical energy, financial transactions, and energy service activities, including, but not limited to, price, basis, credit, liquidity, volatility, capacity, transmission, interest rates, and warranty risks;

§   Acts of terrorism;

§   Availability or cost of capital resulting from changes in Cleco’s business or financial condition, interest rates or market perceptions of the electric utility industry and energy-related industries;

§   The amount of uncertain tax positions;

§   Employee work force factors, including work stoppages and changes in key executives;

§   Legal, environmental, and regulatory delays and other obstacles associated with mergers, acquisitions, reorganizations, investments in joint ventures, or other capital projects;

§   Costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters;

§   Changes in federal, state, or local laws, and changes in tax laws or rates, regulating policies or environmental laws and regulations; and

§   Ability of Cleco Power to recover, from its retail customers, the costs of compliance with environmental laws and regulations.

For additional discussion of these factors and other factors that could cause actual results to differ materially from those contemplated in the Registrants’ forward-looking statements, please read “Risk Factors” in this report and in the Registrants’ second quarter Form 10-Q for the quarterly period ended June 30, 2008, and the Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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.

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.

5 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

PART I — FINANCIAL INFORMATION

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cleco Corporation

These unaudited condensed consolidated financial statements should be read in conjunction with Cleco Corporation’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.  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.”

6 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2008			2007
Operating revenue
Electric operations	$	333,936		$	300,862
Other operations		7,004			9,238
Affiliate revenue		2,735			1,591
Operating revenue		343,675			311,691
Operating expenses
Fuel used for electric generation		93,717			97,863
Power purchased for utility customers		150,502			108,649
Other operations		24,822			23,454
Maintenance		10,754			10,205
Depreciation		19,283			19,739
Taxes other than income taxes		9,033			10,620
Total operating expenses		308,111			270,530
Operating income		35,564			41,161
Interest income		1,669			2,873
Allowance for other funds used during construction		17,786			9,552
Equity income from investees		9,662			27,726
Other income		937			28,402
Other expense		(2,276	)		(1,284	)
Interest charges
Interest charges, including amortization of debt expenses, premium and discount, net of capitalized interest		20,619			13,752
Allowance for borrowed funds used during construction		(4,923	)		(3,444	)
Total interest charges		15,696			10,308
Income before income taxes		47,646			98,122
Federal and state income tax expense		10,513			30,077
Net income		37,133			68,045
Preferred dividends requirements, net of tax		12			12
Net income applicable to common stock	$	37,121		$	68,033
Average shares of common stock outstanding
Basic		60,031,962			59,669,692
Diluted		60,291,616			59,947,916
Basic earnings per share
From continuing operations	$	0.62		$	1.14
Net income applicable to common stock	$	0.62		$	1.14
Diluted earnings per share
From continuing operations	$	0.62		$	1.13
Net income applicable to common stock	$	0.62		$	1.13
Cash dividends paid per share of common stock	$	0.225		$	0.225
The accompanying notes are an integral part of the condensed consolidated financial statements.

7 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Net income	$	37,133		$	68,045
Other comprehensive income (loss), net of tax:
Net unrealized (loss) income from available-for-sale securities (net of tax (benefit) expense of $(11) in 2008 and $11 in 2007)		(24	)		18
Amortization of post-retirement benefit net losses (net of tax benefit of $130 in 2008 and $16 in 2007)		(153	)		(9	)
Other comprehensive (loss) income		(177	)		9
Comprehensive income, net of tax	$	36,956		$	68,054
The accompanying notes are an integral part of the condensed consolidated financial statements.

8 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2008			2007
Operating revenue
Electric operations	$	803,397		$	765,791
Other operations		29,826			26,478
Affiliate revenue		7,790			4,673
Operating revenue		841,013			796,942
Operating expenses
Fuel used for electric generation		162,140			204,671
Power purchased for utility customers		392,245			308,388
Other operations		69,958			74,493
Maintenance		35,456			35,386
Depreciation		57,970			59,827
Taxes other than income taxes		27,320			30,286
Gain on sales of assets		(99	)		-
Total operating expenses		744,990			713,051
Operating income		96,023			83,891
Interest income		4,544			8,030
Allowance for other funds used during construction		46,462			21,715
Equity income from investees		2,723			97,608
Other income		1,094			28,644
Other expense		(4,322	)		(2,536	)
Interest charges
Interest charges, including amortization of debt expenses, premium and discount, net of capitalized interest		49,884			41,786
Allowance for borrowed funds used during construction		(14,526	)		(7,502	)
Total interest charges		35,358			34,284
Income before income taxes		111,166			203,068
Federal and state income tax expense		22,573			63,187
Net income		88,593			139,881
Preferred dividends requirements, net of tax		35			446
Net income applicable to common stock	$	88,558		$	139,435
Average shares of common stock outstanding
Basic		59,975,190			58,914,141
Diluted		60,146,501			59,717,636
Basic earnings per share
From continuing operations	$	1.48		$	2.35
Net income applicable to common stock	$	1.48		$	2.35
Diluted earnings per share
From continuing operations	$	1.47		$	2.34
Net income applicable to common stock	$	1.47		$	2.34
Cash dividends paid per share of common stock	$	0.675		$	0.675
The accompanying notes are an integral part of the condensed consolidated financial statements.

9 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Net income	$	88,593		$	139,881
Other comprehensive loss, net of tax:
Net unrealized loss from available-for-sale securities (net of tax benefit of $38 in 2008 and $11 in 2007)		(68	)		(17	)
Amortization of post-retirement benefit net losses (net of tax benefit of $145 in 2008 and $ 22 in 2007)		(161	)		(13	)
Other comprehensive loss		(229	)		(30	)
Comprehensive income, net of tax	$	88,364		$	139,851
The accompanying notes are an integral part of the condensed consolidated financial statements.

10 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(THOUSANDS)	AT SEPTEMBER 30, 2008			AT DECEMBER 31, 2007
Assets
Current assets
Cash and cash equivalents	$	77,392		$	129,013
Restricted cash		43,779			17,866
Customer accounts receivable (less allowance for doubtful accounts of $2,182 in 2008 and $1,028 in 2007)		58,127			39,587
Accounts receivable – affiliate		3,297			9,367
Other accounts receivable		39,566			39,029
Unbilled revenue		19,342			17,759
Fuel inventory, at average cost		49,267			43,291
Material and supplies inventory, at average cost		37,556			39,195
Risk management assets, net		2,954			7,201
Accumulated deferred fuel		43,921			9,398
Cash surrender value of company-/trust-owned life insurance policies		25,588			28,857
Prepayments		3,061			3,661
Regulatory assets – other		2,553			20,194
Other current assets		758			1,098
Total current assets		407,161			405,516
Property, plant and equipment
Property, plant and equipment		1,997,485			1,926,848
Accumulated depreciation		(938,621	)		(917,043	)
Net property, plant and equipment		1,058,864			1,009,805
Construction work in progress		923,144			716,075
Total property, plant and equipment, net		1,982,008			1,725,880
Equity investment in investees		257,613			258,101
Prepayments		6,082			6,783
Restricted cash, less current portion		18,807			95
Regulatory assets and liabilities – deferred taxes, net		162,319			126,686
Regulatory assets – other		55,616			158,268
Intangible asset		171,179			-
Other deferred charges		35,036			25,294
Total assets	$	3,095,821		$	2,706,623
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)

11 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited) (Continued)

(THOUSANDS)	AT SEPTEMBER 30, 2008			AT DECEMBER 31, 2007
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Long-term debt due within one year	$	63,546		$	100,000
Accounts payable		151,549			123,061
Retainage		10,577			25
Accounts payable – affiliate		4,017			6,860
Customer deposits		26,886			25,989
Taxes accrued		7,228			12,411
Interest accrued		18,937			21,933
Accumulated deferred taxes, net		43,935			43,055
Risk management liability, net		15,486			3,881
Regulatory liabilities – other		523			538
Deferred compensation		5,935			6,366
Other current liabilities		14,833			13,348
Total current liabilities		363,452			357,467
Deferred credits
Accumulated deferred federal and state income taxes, net		384,695			366,305
Accumulated deferred investment tax credits		11,631			12,665
Regulatory liabilities – other		71,630			31,855
Restricted storm reserve		18,865			-
Uncertain tax positions		65,474			68,369
Other deferred credits		125,620			89,490
Total deferred credits		677,915			568,684
Long-term debt, net		992,869			769,103
Total liabilities		2,034,236			1,695,254
Commitments and Contingencies (Note 11)
Shareholders’ equity
Preferred stock
Not subject to mandatory redemption, $100 par value, authorized 1,491,900 shares, issued 10,288 shares at  September 30, 2008 and December 31, 2007		1,029			1,029
Common shareholders’ equity
Common stock, $1 par value, authorized 100,000,000 shares, issued 60,063,711 and 59,971,945 shares and outstanding 60,038,688 and 59,943,589 shares at September 30, 2008 and December 31, 2007, respectively		60,064			59,972
Premium on common stock		394,002			391,565
Retained earnings		615,562			567,724
Treasury stock, at cost, 25,023 and 28,356 shares at September 30, 2008 and December 31, 2007, respectively		(452	)		(530	)
Accumulated other comprehensive loss		(8,620	)		(8,391	)
Total common shareholders’ equity		1,060,556			1,010,340
Total shareholders’ equity		1,061,585			1,011,369
Total liabilities and shareholders’ equity	$	3,095,821		$	2,706,623
The accompanying notes are an integral part of the condensed consolidated financial statements.

12 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Operating activities
Net income	$	88,593		$	139,881
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		81,335			61,492
Gain on sales of assets		(99	)		-
Proceeds from sale of bankruptcy claims		-			78,200
Provision for doubtful accounts		2,906			1,799
Return on equity investment in investees		8,690			60,023
Income from equity investments		(2,723	)		(97,608	)
Unearned compensation expense		2,994			6,507
ESOP expense		-			2,140
Allowance for other funds used during construction		(46,462	)		(21,715	)
Amortization of investment tax credits		(1,035	)		(1,076	)
Net deferred income taxes		(10,098	)		10,295
Deferred fuel costs		(25	)		400
Loss (gain) on economic hedges		434			(706	)
Cash surrender value of company-/trust-owned life insurance		2,603			(1,486	)
Changes in assets and liabilities:
Accounts receivable		(24,414	)		(36,644	)
Accounts and notes receivable, affiliate		14,373			8,943
Unbilled revenue		(1,583	)		(2,288	)
Fuel, materials and supplies inventory		(4,336	)		(2,153	)
Prepayments		1,725			1,629
Accounts payable		6,456			(12,281	)
Accounts and notes payable, affiliate		(38,472	)		(7,415	)
Customer deposits		4,396			4,166
Regulatory assets and liabilities, net		32,119			17,156
Other deferred accounts		(63,971	)		(13,618	)
Retainage payable		10,551			(12,384	)
Taxes accrued		22,874			15,738
Interest accrued		(2,289	)		8,272
Risk management assets and liabilities, net		(8,827	)		14,814
Other, net		1,387			3,459
Net cash provided by operating activities		77,102			225,540
Investing activities
Additions to property, plant and equipment		(264,303	)		(343,458	)
Allowance for other funds used during construction		46,462			21,715
Proceeds from sale of property, plant and equipment		99			422
Return of equity investment in investee		95			-
Equity investment in investees		(14,697	)		(2,220	)
Premiums paid on company-/trust-owned life insurance		(629	)		(2,017	)
Settlements received from insurance policies		941			-
Transfer of cash (to) from restricted accounts		(44,625	)		24,358
Other investing		599			96
Net cash used in investing activities		(276,058	)		(301,104	)
Financing activities
Retirement of long-term obligations		(350,318	)		(25,290	)
Issuance of long-term debt		537,541			135,000
Deferred financing costs		(315	)		(876	)
Dividends paid on preferred stock		(35	)		(446	)
Dividends paid on common stock		(40,521	)		(39,805	)
Other financing		983			9,872
Net cash provided by financing activities		147,335			78,455
Net (decrease) increase in cash and cash equivalents		(51,621	)		2,891
Cash and cash equivalents at beginning of period		129,013			192,471
Cash and cash equivalents at end of period	$	77,392		$	195,362
Supplementary cash flow information
Interest paid (net of amount capitalized)	$	33,950		$	33,504
Income taxes paid	$	40,180		$	48,000
Supplementary non-cash investing and financing activities
Issuance of treasury stock – LTICP and ESOP plans	$	79		$	67
Issuance of common stock – LTICP/ESOP/ESPP 1	$	93		$	21,501
Accrued additions to property, plant and equipment not reported above	$	10,868		$	92,789
1  Includes conversion of preferred stock to common stock ($19,063/2007)
The accompanying notes are an integral part of the condensed consolidated financial statements.

13 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

PART I — FINANCIAL INFORMATION

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 2007.  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.”

14 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Operating revenue
Electric operations	$	333,936		$	300,862
Other operations		6,981			9,231
Affiliate revenue		425			511
Operating revenue		341,342			310,604
Operating expenses
Fuel used for electric generation		93,717			97,863
Power purchased for utility customers		150,502			108,649
Other operations		23,242			22,739
Maintenance		9,719			9,590
Depreciation		18,861			19,401
Taxes other than income taxes		8,732			10,053
Total operating expenses		304,773			268,295
Operating income		36,569			42,309
Interest income		1,545			1,082
Allowance for other funds used during construction		17,786			9,552
Other income		956			528
Other expense		(779	)		(189	)
Interest charges
Interest charges, including amortization of debt expenses, premium and discount		19,896			11,657
Allowance for borrowed funds used during construction		(4,923	)		(3,444	)
Total interest charges		14,973			8,213
Income before income taxes		41,104			45,069
Federal and state income taxes		10,566			10,871
Net income	$	30,538		$	34,198
The accompanying notes are an integral part of the condensed consolidated financial statements.

15 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Operating revenue
Electric operations	$	803,397		$	765,791
Other operations		29,757			26,413
Affiliate revenue		1,527			1,540
Operating revenue		834,681			793,744
Operating expenses
Fuel used for electric generation		162,140			204,671
Power purchased for utility customers		392,245			308,388
Other operations		65,862			71,318
Maintenance		32,556			33,587
Depreciation		56,886			58,784
Taxes other than income taxes		24,727			28,540
Total operating expenses		734,416			705,288
Operating income		100,265			88,456
Interest income		3,121			3,548
Allowance for other funds used during construction		46,462			21,715
Other income		1,172			812
Other expense		(1,643	)		(985	)
Interest charges
Interest charges, including amortization of debt expenses, premium and discount		45,961			35,385
Allowance for borrowed funds used during construction		(14,526	)		(7,502	)
Total interest charges		31,435			27,883
Income before income taxes		117,942			85,663
Federal and state income taxes		27,135			20,517
Net income	$	90,807		$	65,146
The accompanying notes are an integral part of the condensed financial statements.

16 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)

(THOUSANDS)	AT SEPTEMBER 30, 2008			AT DECEMBER 31, 2007
Assets
Utility plant and equipment
Property, plant and equipment	$	1,981,568		$	1,911,626
Accumulated depreciation		(927,968	)		(907,434	)
Net property, plant and equipment		1,053,600			1,004,192
Construction work in progress		921,934			714,978
Total utility plant, net		1,975,534			1,719,170
Current assets
Cash and cash equivalents		67,979			11,944
Restricted cash		43,779			17,866
Customer accounts receivable (less allowance for doubtful accounts of $2,182 in 2008 and $1,028 in 2007)		58,127			39,587
Other accounts receivable		39,414			38,527
Accounts receivable – affiliate		2,257			17,425
Unbilled revenue		19,342			17,759
Fuel inventory, at average cost		49,267			43,291
Material and supplies inventory, at average cost		37,556			39,195
Risk management assets, net		2,954			7,201
Prepayments		2,389			2,900
Regulatory assets – other		2,553			20,194
Accumulated deferred fuel		43,921			9,398
Cash surrender value of company-owned life insurance policies		5,453			5,333
Other current assets		275			439
Total current assets		375,266			271,059
Prepayments		6,082			6,783
Restricted cash, less current portion		18,711			-
Regulatory assets and liabilities – deferred taxes, net		162,319			126,686
Regulatory assets – other		55,616			158,268
Intangible asset		171,179			-
Other deferred charges		24,533			24,516
Total assets	$	2,789,240		$	2,306,482
Liabilities and member’s equity
Member’s equity	$	906,592		$	816,110
Long-term debt, net		944,869			769,103
Total capitalization		1,851,461			1,585,213
Current liabilities
Long-term debt due within one year		63,546			-
Accounts payable		147,945			117,640
Accounts payable – affiliate		6,242			18,881
Retainage		10,577			25
Customer deposits		26,886			25,989
Taxes accrued		24,830			6,958
Interest accrued		18,872			17,536
Accumulated deferred taxes, net		45,590			45,205
Risk management liability, net		15,486			3,881
Regulatory liabilities – other		523			538
Other current liabilities		11,634			9,690
Total current liabilities		372,131			246,343
Deferred credits
Accumulated deferred federal and state income taxes, net		344,939			321,747
Accumulated deferred investment tax credits		11,631			12,665
Regulatory liabilities – other		71,630			31,855
Restricted storm reserve		18,865			-
Uncertain tax positions		43,223			44,960
Other deferred credits		75,360			63,699
Total deferred credits		565,648			474,926
Total liabilities and member’s equity	$	2,789,240		$	2,306,482
The accompanying notes are an integral part of the condensed consolidated financial statements.

17 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007
Operating activities
Net income	$	90,807		$	65,146
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		63,543			60,019
Provision for doubtful accounts		2,901			1,799
Unearned compensation expense		867			3,044
Allowance for other funds used during construction		(46,462	)		(21,715	)
Amortization of investment tax credits		(1,035	)		(1,076	)
Net deferred income taxes		(4,577	)		(11,952	)
Deferred fuel costs		(25	)		400
Loss (gain) on economic hedges		434			(706	)
Cash surrender value of company-owned life insurance		(317	)		(221	)
Changes in assets and liabilities:
Accounts receivable		(24,760	)		(36,424	)
Accounts and notes receivable, affiliate		15,209			(10,693	)
Unbilled revenue		(1,583	)		(2,288	)
Fuel, materials and supplies inventory		(4,336	)		(2,153	)
Prepayments		1,636			1,440
Accounts payable		8,947			(10,753	)
Accounts and notes payable, affiliate		(12,990	)		(24,726	)
Customer deposits		4,396			4,166
Regulatory assets and liabilities, net		32,119			17,156
Other deferred accounts		(69,536	)		(14,468	)
Retainage payable		10,551			(12,384	)
Taxes accrued		17,872			13,592
Interest accrued		2,043			5,981
Risk management assets and liabilities, net		(8,827	)		14,814
Other, net		2,191			3,188
Net cash provided by operating activities		79,068			41,186
Investing activities
Additions to property, plant and equipment		(263,454	)		(342,688	)
Allowance for other funds used during construction		46,462			21,715
Proceeds from sale of property, plant and equipment		99			422
Premiums paid on company-owned life insurance		(424	)		(470	)
Transfer of cash (to) from restricted accounts		(44,624	)		24,361
Net cash used in investing activities		(261,941	)		(296,660	)
Financing activities
Retirement of long-term obligations		(250,318	)		(25,290	)
Issuance of long-term debt		489,541			135,000
Deferred financing costs		(315	)		(873	)
Contribution from parent		-			60,000
Net cash provided by financing activities		238,908			168,837
Net increase (decrease) in cash and cash equivalents		56,035			(86,637	)
Cash and cash equivalents at beginning of period		11,944			101,878
Cash and cash equivalents at end of period	$	67,979		$	15,241
Supplementary cash flow information
Interest paid (net of amount capitalized)	$	29,531		$	29,985
Income taxes paid		2,100			-
Supplementary non-cash investing and financing activities
Accrued additions to property, plant and equipment not reported above	$	10,868		$	92,789
The accompanying notes are an integral part of the condensed consolidated financial statements.

18 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

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

Note 1	Summary of Significant Accounting Policies	Cleco Corporation and Cleco Power
Note 2	Recent Accounting Standards	Cleco Corporation and Cleco Power
Note 3	Fair Value Measurement Disclosures	Cleco Corporation and Cleco Power
Note 4	Regulatory Assets and Liabilities	Cleco Corporation and Cleco Power
Note 5	Restricted Cash	Cleco Corporation and Cleco Power
Note 6	Debt	Cleco Corporation and Cleco Power
Note 7	Pension Plan and Employee Benefits	Cleco Corporation and Cleco Power
Note 8	Income Taxes	Cleco Corporation and Cleco Power
Note 9	Disclosures about Segments	Cleco Corporation
Note 10	Equity Investment in Investees	Cleco Corporation
Note 11	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco Corporation and Cleco Power
Note 12	Affiliate Transactions	Cleco Corporation and Cleco Power
Note 13	Intangible Asset	Cleco Corporation and Cleco Power
Note 14	Storm Restoration	Cleco Corporation and Cleco Power

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1 — Summary of Significant Accounting Policies

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.

Cleco has adopted the provisions of FIN 46R on its scheduled effective dates.  Through a review of equity interests and other contractual relationships, Cleco has determined that it is not the primary beneficiary of Evangeline, Perryville, Attala, and Acadia.  These are considered variable interest entities.  In accordance with FIN 46R, Cleco reports its investment in these entities on the equity method of accounting.  As a result, the assets and liabilities of these entities are represented by one line item corresponding to Cleco’s equity investment in these entities.  The pre-tax results of operations of these entities are reported as equity income from investees on Cleco Corporation’s Condensed Consolidated Statements of Income.  For additional information on the operations of these entities, see Note 10 — “Equity Investment in Investees.”

In March 2008, in connection with the closing of the securitization transaction, Cleco Power sold the right to bill and collect from customers unamortized storm damage costs to Cleco Katrina/Rita, a special purpose, wholly owned subsidiary of Cleco Power.  Cleco Power, through a review of its relationships with Cleco Katrina/Rita, has determined the entity should be consolidated with Cleco Power.  For additional information about Cleco Katrina/Rita, see Note 4 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs - Katrina/Rita.”

In August 2008, Cleco Corporation acquired an equity interest in a limited liability company.  Cleco will not be affected by the performance of the investment.  The investment is reported at the cost of the investment net of the liability incurred.  For additional information about this transaction, see Note 11 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees.” 

Basis of Presentation

The condensed consolidated financial statements of Cleco Corporation and Cleco Power have been prepared pursuant to the rules and regulations of the SEC.  Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although Cleco believes that the disclosures are adequate to make the information presented not misleading.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles.  The unaudited financial information included in the condensed consolidated financial statements of Cleco Corporation and Cleco Power reflects all adjustments of a normal recurring nature which are, in the opinion of the management of Cleco Corporation and Cleco Power, necessary for a fair statement of the financial position and the results of operations for the interim periods. Information for interim periods is affected by seasonal variations in sales, rate changes, timing of fuel expense recovery and other factors, and is not indicative necessarily of the results that may be expected for the full fiscal year.  For more information on recent accounting standards and their effect on financial results, see Note 2 — “Recent Accounting Standards.”

Reclassifications

Certain reclassifications have been made to prior period financial statements to conform them to the presentation used in the current year’s financial statements. These reclassifications had no effect on Cleco Corporation’s net income

19 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

 applicable to common stock or total common shareholders’ equity or Cleco Power’s net income or total member’s equity.

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values.  Certain 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 issuance.  Beginning with reporting periods ending after January 1, 2008, Cleco and Cleco Power are required to disclose the fair value of financial assets and liabilities by one of three levels.  For more information about fair value levels, see Note 3 — “Fair Value Measurement Disclosures.”

Risk Management 

Market risk inherent in Cleco’s market risk-sensitive instruments and positions includes potential changes arising from changes in interest rates and the commodity market prices of power and natural gas. Cleco’s Energy Risk Management Policy authorizes the use of various derivative instruments, including exchange traded futures and option contracts, forward purchase and sales contracts, and swap transactions to reduce exposure to fluctuations in the price of power and natural gas.  Cleco uses SFAS No. 133 to determine whether the market risk-sensitive instruments and positions are required to be marked-to-market.  Generally, Cleco Power’s market risk-sensitive instruments and positions qualify for the normal-purchase, normal-sale exception to mark-to-market accounting of SFAS No. 133, as modified by SFAS No. 149, since Cleco Power takes physical delivery and the instruments and positions are used to satisfy customer requirements.  

Cleco Power has entered into certain financial transactions it considers economic hedges to mitigate the risk associated with the fixed-price power to be provided to a wholesale customer through December 2010.  The economic hedges cover approximately 92% of the estimated daily peak-hour power sales to the wholesale customer.  These transactions are derivatives as defined by SFAS No. 133 but do not meet the accounting criteria to be considered hedges.  These transactions are marked-to-market with the resulting gain or loss recorded on the income statement as a component of operating revenue, net.  For the three and nine months ended September 30, 2008, and 2007, the following gains and losses related to these economic hedge transactions were recorded in other operations revenue.

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,						FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007			2008			2007
Realized gain (loss)	$	163		$	(189	)	$	950		$	(205	)
Mark-to-market  (loss) gain		(4,940	)		(522	)		(433	)		706
Total (loss) gain	$	(4,777	)	$	(711	)	$	517		$	501

Cleco Power has entered into other positions to mitigate the volatility in customer fuel costs. These positions are recorded as risk management assets or liabilities with the corresponding mark-to-market gain or loss recorded on the balance sheet as a component of accumulated deferred fuel.  When these positions close, actual gains or losses will be included in the fuel adjustment clause and reflected on customers’ bills as a component of the fuel cost adjustment.  Based on market prices at September 30, 2008, and December 31, 2007, the net mark-to-market impacts relating to these positions were losses of $31.8 million and $7.0 million, respectively.  The increase in losses is due to the decline in natural gas prices at September 30, 2008, compared to December 31, 2007.  Deferred losses relating to closed natural gas positions at September 30, 2008, and December 31, 2007, totaled $4.0 million and $3.1 million, respectively.

Cleco Power maintains margin accounts with commodity brokers used to partially fund the acquisition of natural gas futures, options and swap contracts.  These contracts/positions are used to mitigate the risks associated with the fixed-price power sales and volatility in customer fuel costs noted above.  At September 30, 2008, and December 31, 2007, Cleco Power had paid collateral of $11.8 million and $3.0 million, respectively, to cover margin requirements relating to open natural gas futures, options and swap positions.  These margin requirements are netted with the mark-to-market positions recorded in the risk management asset or liability and other deferred charges or credits on the balance sheet.

Cleco Power’s economic hedge positions and the positions used to mitigate the volatility in customer fuel costs are transacted through the use of futures positions on the NYMEX (New York Mercantile Exchange) and with OTC (over the counter) swap and option positions traded with major banks.  Exchange traded positions (NYMEX) mitigate counterparty risk; however, the positions require more liquidity due to the daily settlement provision.  OTC positions are executed under International Swap Dealers Association (ISDA) agreements.  

Cleco and Cleco Power maintain a master netting agreement policy and monitor credit risk exposure through review of counterparty credit quality, corporate-wide aggregate counterparty credit exposure and corporate-wide aggregate counterparty concentration levels.  Cleco actively manages these risks by establishing appropriate credit and concentration limits on transactions with counterparties and by requiring contractual guarantees, cash deposits or letters of credit from counterparties or their affiliates, as deemed necessary.  Cleco Power has agreements in place with various counterparties that authorize the netting of financial buys and sells and contract payments to mitigate credit risk for transactions entered into for risk management purposes. 

20 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

Earnings per Average Common Share

The following tables show the calculation of basic and diluted earnings per share.

							FOR THE THREE MONTHS ENDED SEPTEMBER 30,
					2008						2007
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Income from continuing operations	$	37,133					$	68,045
Deduct:  non-participating stock dividends (4.5% preferred stock)		12						12
Basic earnings per share
Income from continuing operations	$	37,121			$	0.62	$	68,033			$	1.14
Total basic net income applicable to common stock	$	37,121		60,031,962	$	0.62	$	68,033		59,669,692	$	1.14
Effect of dilutive securities
Add:  stock option grants		-		62,289				-		73,517
Add:  restricted stock (LTICP)		-		197,365				6		204,707
Diluted earnings per share
Income from continuing operations plus assumed conversions	$	37,121			$	0.62	$	68,039			$	1.13
Total diluted net income applicable to common stock	$	37,121		60,291,616	$	0.62	$	68,039		59,947,916	$	1.13

							FOR THE NINE MONTHS ENDED SEPTEMBER 30,
					2008						2007
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Income from continuing operations	$	88,593					$	139,881
Deduct:  non-participating stock dividends (4.5% preferred stock)		35						34
Deduct:  participating preferred stock dividends		-						412
Deduct:  amount allocated to participating preferred		-						921
Basic earnings per share
Income from continuing operations	$	88,558			$	1.48	$	138,514			$	2.35
Total basic net income applicable to common stock	$	88,558		59,975,190	$	1.48	$	138,514		58,914,141	$	2.35
Effect of dilutive securities
Add:  stock option grants		-		63,833				-		114,088
Add:  restricted stock (LTICP)		-		107,478				21		140,382
Add:  convertible ESOP preferred stock		-		-				1,333		549,025
Diluted earnings per share
Income from continuing operations plus assumed conversions	$	88,558			$	1.47	$	139,868			$	2.34
Total diluted net income applicable to common stock	$	88,558		60,146,501	$	1.47	$	139,868		59,717,636	$	2.34

Stock option grants are excluded from the computation of diluted earnings per share if the exercise price is higher than the average market price. 

There were no stock option grants excluded from the computation for the three and nine months ended September 30, 2008, or nine months ended September 30, 2007.  Stock option grants excluded from the computation for the three months ended September 30, 2007, are presented in the table below.

	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007
	STRIKE PRICE	AVERAGE MARKET PRICE	SHARES
Stock option grants excluded	$        24.25	$          24.14	37,433

Stock-Based Compensation

At September 30, 2008, Cleco had one share-based compensation plan:  the LTICP.  Options or restricted shares of stock, known as non-vested stock as defined by SFAS No. 123(R), common stock equivalents, and stock appreciation rights may be granted to certain officers, key employees, or directors of Cleco Corporation and its subsidiaries pursuant to the LTICP.  

On January 25, 2008, Cleco granted 82,993 shares of non-vested stock and 63,733 of common stock equivalent units to certain officers, key employees and directors of Cleco Corporation and its subsidiaries pursuant to the LTICP.  

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Cleco and Cleco Power reported pre-tax compensation expense for their share-based compensation plans as shown in the following table:

	CLECO CORPORATION				CLECO POWER				CLECO CORPORATION				CLECO POWER
			FOR THE THREE MONTHS ENDED SEPTEMBER 30,								FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008		2007		2008		2007		2008		2007		2008		2007
Equity classification
Non-vested stock	$	396	$	594	$	113	$	219	$	1,179	$	1,666	$	310	$	656
Stock options		14		14		-		1		42		23		-		(4	)
Non-forfeitable dividends		-		6		-		4		-		21		-		12
Total	$	410	$	614	$	113	$	224	$	1,221	$	1,710	$	310	$	664
Liability classification
Common stock equivalent units	$	827	$	516	$	308	$	208	$	1,504	$	949	$	557	$	381
Company-funded participants income tax obligations		-		274		-		202		-		3,629		-		2,001
Total	$	827	$	790	$	308	$	410	$	1,504	$	4,578	$	557	$	2,382
Total pre-tax compensation expense	$	1,237	$	1,404	$	421	$	634	$	2,725	$	6,288	$	867	$	3,046
Tax benefit	$	476	$	435	$	162	$	166	$	1,049	$	1,023	$	334	$	402

Note 2 — Recent Accounting Standards

The Registrants adopted, or will adopt, the recent accounting standards listed below on their respective effective dates.

In September 2006, the FASB issued SFAS No. 157, which provides guidance on how companies should measure fair value when required for recognition or disclosure purposes under generally accepted accounting principles.  Specifically, SFAS No. 157 creates a common definition of fair value throughout generally accepted accounting principles, establishes a fair value hierarchy, and requires companies to make expanded disclosures about fair value measurements.  This statement is effective for fiscal years beginning after November 15, 2007.  In February 2008, the FASB amended SFAS No. 157.  FSP No. FAS 157-1 excludes fair value lease calculations pursuant to SFAS No. 13, as amended, from SFAS No. 157, but does not exclude assets and liabilities acquired pursuant to SFAS No. 141(R).  FSP No. FAS 157-2 defers the effective date of SFAS No. 157 by one year for non-financial assets and liabilities that are not recognized or disclosed at fair value on a recurring basis.  The adoption of SFAS No. 157 and the related FSPs did not have a material impact on the financial condition or results of operations of the Registrants.  For more information regarding SFAS No. 157 related disclosures, see Note 3 — “Fair Value Measurement Disclosures.”

In February 2007, the FASB issued SFAS No. 159, which allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  The Registrants did not elect the fair value option for eligible items existing at the effective date.  The adoption of SFAS No. 159 did not have an impact on the financial condition or results of operations of the Registrants.

In April 2007, the FASB issued FSP No. FIN 39-1, which amends FIN 39.  The new guidance permits companies to offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments.  FSP No. FIN 39-1 is effective for fiscal years beginning after November 15, 2007.  Upon the adoption of FSP No. FIN 39-1, Cleco Corporation and Cleco Power adopted the policy to net the fair value of derivative instruments along with the right to reclaim cash collateral or obligation to return cash collateral.  In accordance with the provisions of this FSP, the netting was applied retrospectively to the prior balance sheet presented as a change to an accounting principle.  The following table represents the right to reclaim cash collateral netted against the fair value of derivative instruments for both Cleco Corporation and Cleco Power.

(THOUSANDS)	AT SEPTEMBER 30, 2008		AT DECEMBER 31, 2007
Cash collateral
Right to reclaim	$	11,793	$	2,966

Cleco Corporation and Cleco Power’s Condensed Consolidated Balance Sheets at December 31, 2007, have been retrospectively adjusted due to the adoption of FSP No. FIN 39-1.  The retrospective adjustments to the December 31, 2007, balance sheets are described in the following tables.

(THOUSANDS)	AS REPORTED		AS ADJUSTED
Cleco Corporation
Current assets – margin deposits	$	2,966	$	-
Current assets – risk management asset	$	7,396	$	7,201
Assets – other deferred charges	$	26,245	$	25,294
Current liabilities – risk management liability	$	7,993	$	3,881

(THOUSANDS)	AS REPORTED		AS ADJUSTED
Cleco Power
Current assets – margin deposits	$	2,966	$	-
Current assets – risk management asset	$	7,396	$	7,201
Assets – other deferred charges	$	25,467	$	24,516
Current liabilities – risk management liability	$	7,993	$	3,881

The retrospective adoption of FSP No. FIN 39-1 had no effect on net income, earnings per share, shareholders’ equity or member’s equity.  

In June 2007, the FASB ratified EITF No. 06-11.  This consensus requires companies to record the realized income tax benefits from dividends or dividend equivalents that are

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charged to retained earnings and are paid to employees to the additional paid-in capital pool.  This consensus is effective prospectively for dividends declared in fiscal years beginning after September 15, 2007.  This consensus may be adopted early in financial periods for which financial statements have not been issued.  Entities shall disclose the nature of any change in their accounting policy for income tax benefits of dividends on share-based payment awards resulting from the adoption of this guidance.  The adoption of this EITF did not have an impact on the financial condition or results of operations of the Registrants.

In June 2007, the FASB ratified EITF No. 07-3.  This consensus requires companies that make non-refundable advance payments for future research and development activities to capitalize the payments until the goods have been delivered or the related services performed.  This consensus is effective for financial statements issued for fiscal years beginning after December 15, 2007.  Earlier application is not permitted.  The adoption of this EITF did not have an impact on the financial condition or results of operations of the Registrants.

In December 2007, the FASB released SFAS No. 141(R).  This revision requires the acquirer of a business to recognize assets acquired, liabilities assumed, and any non-controlling interests at their fair market values.  The statement gives guidance on the calculation of goodwill or gain from a bargain purchase and expands the required disclosures.  The provisions of this statement are applicable to acquisitions either through one transaction or through a step acquisition.  This SFAS is applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  This statement may not be adopted early.  The adoption of this statement will only impact the financial condition and results of operations of the Registrants, if they are involved in transactions within the scope of this statement after its effective date.

In December 2007, the FASB released SFAS No. 160.  This statement gives guidance on the presentation and disclosure of noncontrolling interests (currently known as minority interests) of consolidated subsidiaries.  This statement requires the noncontrolling interest to be included in the equity section of the balance sheet, requires disclosure on the face of the consolidated income statement of the amounts of consolidated net income attributable to the consolidated parent and the noncontrolling interest, and expands disclosures.  The provisions of this statement are to be applied prospectively to fiscal years beginning on or after December 15, 2008.  Early adoption is prohibited.  The adoption of SFAS No. 160 is not expected to have an impact on the financial condition or results of operations of the Registrants.

In December 2007, the FASB ratified EITF No. 07-1.  This EITF prescribes the income statement presentation and disclosures for participants in collaborative arrangements.  A collaborative arrangement is defined as a contractual arrangement that involves a joint operating activity, usually outside of a legal entity.  The provisions of this EITF are effective for fiscal years beginning after December 15, 2008, and shall be applied retrospectively for all collaborative arrangements existing as of the effective date.  Management currently is evaluating the impact this EITF will have on the financial condition or results of operations of the Registrants.

In March 2008, the FASB issued SFAS No. 161 which enhances the disclosures about an entity’s derivative and hedging activities.  The disclosures include how and why a derivative instrument is used, how the derivative instrument and the hedged item are related, and the impact of the derivative instrument and the hedged item on the entity’s financial statements.  SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008.  Since this SFAS is only a change in disclosure, the adoption will not have an impact on the financial condition or results of operations of the Registrants.

In April 2008, the FASB issued FSP No. FAS 142-3 which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset.  This FSP amends SFAS No. 142 to allow an entity’s own experience in renewing arrangements or to use market assumptions about renewal in determining the useful life of a recognized intangible asset.  This FSP also requires additional disclosure about the renewal costs.  FSP No. FAS 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008.  Early adoption is prohibited.  The adoption of FSP No. FAS 142-3 is not expected to have an impact on the financial condition or results of operations of the Registrants.

In May 2008, the FASB issued SFAS No. 162 which identifies, categorizes and ranks sources of GAAP.  This SFAS has four broad categories, with “a” being the highest source of GAAP, descending to category “d.”  An entity is required to use the highest category of GAAP specified by a pronouncement.  If a particular transaction is not specified by a pronouncement within the categories, an entity can then apply accounting pronouncements for similar transactions (unless such analogy is prohibited by a particular pronouncement) followed by other accounting literature.  This SFAS is effective 60 days following the SEC’s approval of the PCAOB’s amendments to Auditing Standard Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.”  The adoption of SFAS No. 162 is not expected to have an impact on the financial condition or results of operations of the Registrants.

In June 2008, the FASB issued FSP EITF 03-6-1 which gives guidance on determining whether non-vested instruments issued in share-based payment transactions are participating securities when calculating earnings per share.  This FSP states that non-vested share-based instruments that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and are required to be included in the computation of earnings per share pursuant to the two-class method.  This FSP is effective for fiscal years and interim periods beginning after December 15, 2008.  Earnings per share for prior periods presented are required to be adjusted

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retrospectively to conform to this FSP.  Early adoption of this FSP is prohibited.  Management currently is evaluating the impact this FSP will have on the financial condition and results of operations of the Registrants.

In September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4 which amends SFAS No. 133 and FIN 45 by expanding disclosure requirements for entities selling credit derivatives.  The disclosures include the nature of the derivative, the maximum potential amount of future payments, the fair value, the nature of any recourse or collateral, and the current status of the payment/performance risk.  The provisions of this FSP are effective for interim and annual periods ending after November 15, 2008.  Since this FSP is only a change in disclosure, the adoption will not have an impact on the financial condition or results of operations of the Registrants.

In September 2008, the FASB ratified EITF No. 08-5 which provides guidance on issuer’s accounting and disclosure at fair value for liabilities that contain inseparable third-party credit enhancements.  The EITF requires issuers of liabilities to exclude the third-party credit enhancement when calculating the fair value of the liability for both recognition and disclosure purposes.  Also, proceeds received by the issuer for liabilities within the scope of the EITF represent consideration for both the liability and the credit enhancement and shall be allocated to both the liability and the premium for the credit enhancement.  The provisions of this EITF are effective on a prospective basis in the first reporting period beginning on or after December 15, 2008.  Earlier application is permitted.  Management currently is evaluating the impact this FSP will have on the financial condition and results of operations of the Registrants.

On September 30, 2008, the SEC and the FASB issued a joint release clarifying fair value accounting.  The clarifications cover topics such as inactive markets, broker quotes, disorderly sales, internally generated assumptions and other-than-temporary impairment.  This joint release does not have a stated effective date, but its guidance should be considered for valuations made on or after its release date.  The application of this release did not have an impact on the financial condition and results of operations of the Registrants.

On October 10, 2008, the FASB issued FSP No. FAS 157-3 which provides guidance on calculating fair value in an inactive market.  This FSP is effective upon issuance, including prior periods for which financial statements have not been issued.  The adoption of this FSP did not have an impact on the financial condition or results of operations of the Registrants.

Note 3 — Fair Value Measurement Disclosures

SFAS No. 157 requires entities to classify assets and liabilities measured at their fair value according to three different levels, depending on the inputs used in determining fair value.

§   Level 1 – unadjusted quoted prices in active, liquid markets for the identical asset or liability;

§   Level 2 – quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the asset or liability, including inputs that can be corroborated by observable market data, observable interest rate yield curves and volatilities;

§   Level 3 – unobservable inputs based upon the entities own assumptions.

The tables below disclose for Cleco and Cleco Power the fair value of financial assets and liabilities measured on a recurring basis and within the scope of SFAS No. 157.

	CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT SEPTEMBER 30, 2008		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset Description
Derivatives	$	174,256	$	1,542	$	172,714	$	-
Institutional money market funds		113,753		-		113,753		-
Total	$	288,009	$	1,542	$	286,467	$	-

	CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT  SEPTEMBER 30, 2008		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL LIABILITIES (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Liability Description
Derivatives	$	204,475	$	5,368	$	199,107	$	-

	CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT SEPTEMBER 30, 2008		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset Description
Derivatives	$	174,256	$	1,542	$	172,714	$	-
Institutional money market funds		104,453		-		104,453		-
Total	$	278,709	$	1,542	$	277,167	$	-

	CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT SEPTEMBER 30, 2008		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL LIABILITIES (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Liability Description
Derivatives	$	204,475	$	5,368	$	199,107	$	-

Cleco chose to defer for one year the provisions of SFAS No. 157 for non-financial assets and liabilities in accordance with FSP No. FAS 157-2.

The derivative assets and liabilities are classified as either current or non-current depending on when the positions close.  All derivative current assets and current liabilities are reported as a net current risk management asset or liability.  All derivative non-current assets and non-current liabilities are reported net in other deferred charges or other deferred credits.  Net presentation is appropriate due to the right of offset included in the master netting agreements.  In accordance with FSP No. FIN 39-1, the net current and net non-current derivative positions are netted with the applicable margin deposits.  At September 30, 2008, a net current risk management asset of

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$2.9 million represented current derivative positions of $0.5 million reduced by current margin deposits of $0.2 million, and deferred option premiums of $2.6 million.  Non-current derivative asset positions were $1.0 million, reduced by non-current margin deposits of $0.4 million which was recorded in other deferred charges on the balance sheet.  At September 30, 2008, a net current risk management liability of $15.5 million represented the current derivative positions of $25.4 million reduced by current margin deposits of $9.9 million.  The non-current liability derivative positions of $6.4 million, reduced by non-current margin deposits of $2.5 million were recorded in other deferred charges.  The $113.8 million in institutional money market funds was reported on the Cleco Consolidated balance sheet in cash and cash equivalents, current restricted cash, and restricted non-current cash in the amounts of $51.3 million, $43.7 million, and $18.8 million, respectively.  At Cleco Power, cash and cash equivalents, current restricted cash, and restricted non-current cash contained $42.0 million, $43.7 million, and $18.7 million, respectively.  

Cleco utilizes different valuation techniques for fair value calculations.  In order to measure the fair value for Level 1 assets and liabilities, Cleco obtains the closing price from published indices in active markets for the various instruments and multiplies by the appropriate number of instruments held.  Level 2 fair values for assets and liabilities are determined by obtaining the closing price from published indices in active markets for instruments that are similar to Cleco’s assets and liabilities.  The fair value obtained is then discounted to the current period using a U.S. Treasury published interest rate as a proxy for a risk-free rate of return.  For some options, Cleco uses the Black-Scholes model using observable and available inputs to calculate the fair value, consistent with the income approach.  These techniques have been applied consistently from fiscal period to fiscal period.  Level 3 fair values allow for situations in which there is little, if any, market activity for the asset or liability at the measurement date.  Cleco had no Level 3 assets or liabilities at September 30, 2008.

Note 4 — Regulatory Assets and Liabilities

Cleco Power follows SFAS No. 71, which allows utilities to capitalize or defer certain costs based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered through the ratemaking process.

The following chart summarizes Cleco Power’s regulatory assets and liabilities at September 30, 2008, and December 31, 2007.

	AT SEPTEMBER 30,			AT DECEMBER 31,
(THOUSANDS)	2008			2007
Regulatory assets and liabilities – deferred taxes, net	$	162,319		$	126,686
Deferred mining costs	$	27,449		$	29,364
Deferred storm restoration costs - Katrina/Rita		-			127,578
Deferred interest costs		7,874			9,389
Deferred asset removal costs		646			608
Deferred postretirement plan costs		11,576			11,523
Deferred tree trimming costs		4,231			-
Deferred training costs		1,814			-
Deferred storm surcredit, net		4,579			-
Regulatory assets – other	$	58,169		$	178,462
Deferred fuel transportation revenue	$	(523	)	$	(930	)
Deferred construction carrying costs		(71,630	)		(31,463	)
Regulatory liabilities - other	$	(72,153	)	$	(32,393	)
Deferred fuel and purchased power		43,921			9,398
Total regulatory assets and liabilities, net	$	192,256		$	282,153

Deferred Taxes

Cleco Power has recorded a net regulatory asset related to deferred income taxes in accordance with SFAS No. 109.  The regulatory asset or liability is recorded under SFAS No. 71 and represents the effect of tax benefits or detriments that must be flowed through to customers as they are received or paid.  For the most part, the recovery periods for regulatory assets and liabilities are based on assets’ lives, which are typically 30 years or greater.  The amounts deferred are attributable to differences between book and tax recovery periods.  The $35.6 million increase in regulatory assets and liabilities – deferred taxes, net is primarily the result of AFUDC equity for Cleco Power’s construction of Rodemacher Unit 3.

Deferred Storm Restoration Costs - Katrina/Rita

At December 31, 2007, Cleco Power had approximately $127.6 million of unamortized storm restoration costs deferred as regulatory assets relating to damage caused by Hurricanes Katrina and Rita.  The restoration costs relating to Hurricanes Katrina and Rita were amortized to depreciation expense based on amounts collected monthly from customers through a surcharge, according to the terms of an interim storm recovery plan approved by the LPSC in February 2006.  In March 2007, after completing a review of the restoration costs, Cleco Power and the LPSC Staff filed a settlement agreement allowing recovery of essentially all of Cleco Power’s Hurricanes Katrina and Rita storm costs.  The agreement authorized the issuance of securitized storm recovery bonds to finance the restoration costs from Hurricanes Katrina and Rita and the collection of a special storm recovery charge from Cleco Power’s customers to pay principal, interest and other amounts related to the bonds.  The LPSC approved the settlement agreement and issued a securitization financing order in September 2007.  In March 2008, the securitization financing was completed, collection of the interim surcharge ceased and the right to bill and collect from customers unamortized storm damage costs was sold to Cleco Katrina/Rita, a special purpose, wholly owned subsidiary of Cleco Power.

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Cleco Katrina/Rita issued $180.6 million aggregate principal amount of senior secured storm recovery bonds.  A portion of the net proceeds of $176.0 million from the issuance of the bonds was used to pay Cleco Power the purchase price of its right to bill and collect from customers unamortized storm damage costs by Hurricanes Katrina and Rita reducing Cleco Power’s regulatory asset established for this purpose.  Cleco Power used $50.8 million of such proceeds to establish a storm reserve fund for future storm damage, with the remaining portion of the proceeds, which is reimbursement of previously unrecovered storm costs from Hurricanes Katrina and Rita, to be used for working capital and other general corporate purposes.  As of September 30, 2008, Cleco Power had earned $1.2 million in interest on the storm reserve balance.  Cleco received approval from the LPSC to offset $33.1 million of operations and maintenance costs related to Hurricanes Gustav and Ike against Cleco Power’s restricted storm reserves, leaving a balance of $18.9 million of storm reserve reflected on the balance sheet at September 30, 2008.  For additional information on storm costs, see Note 6 — “Debt” and Note 14 — “Storm Restoration.”

Deferred Fuel and Purchased Power Costs

The cost of fuel used for electric generation and the cost of power purchased for utility customers are recovered through the LPSC-established fuel adjustment clause, which enables Cleco Power to pass on to its customers substantially all such charges.  For the three months ended September 30, 2008, approximately 96% of Cleco Power’s total fuel cost was regulated by the LPSC, while the remainder was regulated by the FERC.  Deferred fuel and purchased power costs recorded at September 30, 2008, and December 31, 2007, were under-recoveries of $43.9 million and $9.4 million, respectively.  The $34.5 million increase in the unrecovered costs was primarily the result of a $24.8 million decrease in the market value of open natural gas positions and a $0.9 million loss on closed natural gas positions, both due to the decrease in natural gas prices since December 31, 2007, and deferral of $8.5 million in additional fuel and purchased power costs.

For additional information on Cleco Power’s treatment of natural gas positions, see Note 1 — “Summary of Significant Accounting Policies — Risk Management.”

Deferred Construction Carrying Costs

In February 2006, the LPSC approved Cleco Power’s plans to build Rodemacher Unit 3.  Terms of the approval included authorization for Cleco Power to collect from customers an amount equal to 75% of the LPSC-jurisdictional portion of the carrying costs of capital during the construction phase of the unit.  In any calendar year during the construction period, the amount collected from customers is not to exceed 6.5% of Cleco Power’s projected retail revenues.  Cleco Power began collection of the carrying costs in May 2006.  For the three- and nine-month periods ended September 30, 2008, Cleco Power collected $12.1 million and $40.2 million, respectively, compared to $7.5 million and $18.3 million for the three and nine months ended September 30, 2007, respectively.  A regulatory liability was established for the carrying costs due to the terms of the LPSC order which requires Cleco Power, as part of its base rate application to recover Rodemacher Unit 3 ownership costs, to submit a plan to return to customers the carrying costs over a shorter period than the life of the Rodemacher Unit 3 asset.

Deferred Tree Trimming Costs

In January 2008, the LPSC approved Cleco Power’s request to establish a regulatory asset which is being charged with actual expenditures at Cleco Power’s grossed-up rate of return for costs incurred to trim, cut or remove trees that were damaged by Hurricanes Katrina and Rita, but were not addressed as part of the restoration efforts.  The amount of expenditures subject to deferral as a regulatory asset was limited to $12.0 million by the LPSC.  Recovery of these expenditures was requested as part of Cleco Power’s base rate application filed July 14, 2008.  At September 30, 2008, Cleco Power had deferred $4.2 million in tree trimming expenditures.

Deferred Training Costs

In February 2008, the LPSC approved Cleco Power’s request to establish a regulatory asset which is being charged with training costs associated with existing processes and technology for new employees at Rodemacher Unit 3.  Normally these types of training costs would be expensed as incurred; however, this order by the LPSC allows Cleco Power to defer the training costs and seek recovery in rates when Rodemacher Unit 3 goes into service.  At September 30, 2008, Cleco Power had deferred $1.8 million of Rodemacher Unit 3 training costs.

Deferred Storm Surcredit, net

Cleco Power has recorded a storm surcredit as the result of a settlement with the LPSC that addressed, among other things, the recovery of the storm damages related to Hurricanes Katrina and Rita.  In the settlement, Cleco Power was required to implement a surcredit to provide the ratepayers the economic benefit of the carrying charges of all accumulated deferred income tax liabilities due to the storm damage costs at a 12.2% rate of return.  The accumulated deferred income tax liability includes deductions for operation and maintenance expense, casualty loss, and depreciation against taxable income in the year incurred and all subsequent periods.  The settlement, through a true-up mechanism, allows the surcredit to be adjusted to reflect the actual tax deductions allowed by the IRS.  During the second quarter of 2008, the regulatory liability was reduced by $4.2 million through this true-up mechanism to reflect the expected amounts to be refunded through the surcredit to ratepayers.  During the third quarter of 2008, the regulatory liability was reduced by an additional $0.4 million to represent the economic benefit of a reduction in the regulatory liability when the underlying tax positions are settled.

Cleco Power was also allowed to record a corresponding regulatory asset in an amount representing the flow back of the carrying charges to ratepayers.  This amount is being

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amortized over the life of the securitized storm recovery bonds. The corresponding regulatory asset will be adjusted through the same surcredit true-up mechanism at the time of a final determination of the tax benefit for storm damage costs by the IRS.

Note 5 — Restricted Cash

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 general corporate purposes.  At September 30, 2008, and December 31, 2007, $62.6 million and $18.0 million of cash, respectively, were restricted.  At September 30, 2008, restricted cash consisted of $0.1 million under the Diversified Lands mitigation escrow agreement, $51.9 million reserved at Cleco Power for future storm restoration costs, and $10.6 million at Cleco Katrina/Rita restricted for payment of operating expenses, and interest and principal on the Cleco Katrina/Rita storm recovery bonds.  On October 9, 2008, Cleco Power received approval from the LPSC to utilize a portion of the $51.9 million storm reserve to fund operations and maintenance expenses related to damage caused by Hurricanes Gustav and Ike.

Note 6 — Debt

Long-term Debt

At September 30, 2008, Cleco’s long-term debt outstanding was $1.1 billion, of which $63.5 million was long-term debt due within one year, compared to $869.1 million at December 31, 2007, which included $100.0 million of long-term debt due within one year.  At September 30, 2008, Cleco Power’s long-term debt outstanding was $1.0 billion, of which $63.5 million was long-term debt due within one year, compared to $769.1 million at December 31, 2007, none of which was due within one year.  The long-term debt due within one year represents $50.0 million of medium-term notes and a $13.5 million principal payment on the Cleco Katrina/Rita storm recovery bonds scheduled to be paid in the next twelve months.

For Cleco, the $187.3 million increase in long-term debt from December 31, 2007, was primarily due to $180.6 million of storm recovery bonds issued by Cleco Katrina/Rita in March 2008, the issuance by Cleco Power of $250.0 million aggregate principal amount of 6.65% notes due 2018 in June 2008, and $48.0 million in draws on Cleco’s $150.0 million, five-year credit facility.  These issuances were partially offset by a reduction of $190.0 million in draws against Cleco Power’s credit facility, which was classified as long-term debt, and the repayment at maturity of $100.0 million of 7% senior notes in May 2008, which was classified as long-term debt due within one year.

For Cleco Power, the $239.3 million increase in long-term debt from December 31, 2007, was primarily due to $180.6 million of storm recovery bonds issued by Cleco Katrina/Rita in March 2008 and the issuance by Cleco Power of $250.0 million of 6.65% notes due 2018 in June 2008.  These issuances were partially offset by a reduction of $190.0 million in draws against Cleco Power’s credit facility, which was classified as long-term debt.

On June 3, 2008, Cleco Power issued $250.0 million aggregate principal amount of senior unsecured notes at an interest rate of 6.65%.  The notes mature on June 15, 2018.  The proceeds from this offering were used for general corporate purposes, including financing a portion of the construction costs of Rodemacher Unit 3 and repaying borrowings under Cleco Power's $275.0 million, five-year credit facility, some of which were used to fund a portion of the construction costs of Rodemacher Unit 3.

The Cleco Katrina/Rita storm recovery bonds were issued in two tranches.  One tranche of $113.0 million initial principal amount of bonds with an expected average life of five years was issued with an interest rate of 4.41%, and one tranche of $67.6 million initial principal amount of bonds with an expected average life of 10.58 years was issued with an interest rate of 5.61%.  The resulting weighted average interest rate of both tranches is 4.86%, and the effective weighted average life is seven years.

The solid waste disposal bonds in the amount of $60.0 million that were issued in 2007 initially had a variable interest rate which was reset weekly via an auction agent.  In March 2008, Cleco Power exercised a provision in the bond indenture to change the method of interest through a reoffering of the bonds.  As a part of the reoffering, the holders of the original auction rate bonds were required to tender them.  The reoffered bonds have a five-year term with a fixed rate of 5.25% per annum, with the option to redeem the bonds or require that they be mandatorily tendered at the end of the five years.  If Cleco Power does not cause the bonds to be optionally redeemed or mandatorily tendered at the end of the five years, the bonds will become variable rate.  Cleco Power plans to remarket the bonds at the end of the five-year period.  The maturity date of the 2007 bonds is November 1, 2037.

In October 2008, Cleco Power applied to the Louisiana State Bond Commission for $32.0 million of volume cap allocation, which is the remainder of the $152.9 million of qualifying costs of the solid waste disposal facilities at Rodemacher Unit 3 that have been identified.  In July 2008, the Governor signed an order granting the $32.0 million of volume cap allocation.  On October 2, 2008, the Rapides Finance Authority issued for the benefit of Cleco Power $32.0 million of its revenue bonds with a maturity date of October 1, 2038.  The bonds bear interest at 6.0% per annum until October 1, 2011, at which time they are subject to mandatory tender for purchase at par.  Cleco Power plans to remarket the bonds at the end of the three-year period.

Note 7 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Most employees are covered by a noncontributory, defined benefit pension plan. Benefits under the plan reflect an employee’s years of service, age at retirement, and highest total average compensation for any consecutive five calendar years during the last 10 years of employment with Cleco

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Corporation. Cleco Corporation’s policy is to base its contributions to the employee pension plan upon actuarial computations utilizing the projected unit credit method, subject to the IRS’s full funding limitation.  Funding regulations do not require a contribution for 2008. No discretionary contributions were made during the nine months ended September 30, 2008.  A discretionary contribution may be made during 2008; however, the decision by management to make a contribution in 2008 and the amount, if any, have not been determined.  Due to current market conditions, the plan’s assets have been negatively affected and Cleco Corporation may potentially have a required payment after 2008.  Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.  In July 2007, Cleco Corporation’s Board of Directors and Cleco Power’s Board of Managers approved an amendment to the pension plan to provide that all employees hired on or after August 1, 2007, are not eligible for benefits under the pension plan.

Cleco Corporation’s retirees and their dependents are eligible to receive medical, dental, vision, and life insurance benefits (other benefits).  Cleco Corporation recognizes the expected cost of these other benefits during the periods in which the benefits are earned.

The components of net periodic pension and other benefit cost for the three and nine months ended September 30, 2008, and 2007, are as follows:

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007			2008			2007
Components of periodic benefit  costs
Service cost	$	1,470		$	1,990		$	359		$	339
Interest cost		3,964			3,919			570			454
Expected return on plan assets		(5,044	)		(4,740	)		-			-
Transition obligation		-			-			5			5
Prior period service cost		(18	)		209			(480	)		(518	)
Net loss		-			536			195			196
Net periodic benefit cost	$	372		$	1,914		$	649		$	476

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007			2008			2007
Components of periodic benefit  costs
Service cost	$	4,409		$	5,810		$	1,059		$	1,049
Interest cost		11,892			11,644			1,486			1,374
Expected return on plan assets		(15,133	)		(14,235	)		-			-
Transition obligation		-			-			15			15
Prior period service cost		(53	)		634			(1,549	)		(1,548	)
Net loss		-			1,471			695			696
Net periodic benefit cost	$	1,115		$	5,324		$	1,706		$	1,586

Since Cleco Power is the pension plan sponsor and the related trust holds the assets, the prepaid benefit cost of the pension plan is reflected at Cleco Power.  The liability of Cleco Corporation’s other subsidiaries is transferred, with a like amount of assets, to Cleco Power monthly.  The expense of the pension plan related to Cleco Corporation’s other subsidiaries for the three and nine months ended September 30, 2008, was $0.4 million and $1.1 million, respectively, compared to $0.4 million and $1.5 million for the same periods in 2007.  

Cleco Corporation 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 on Cleco Power’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2008, was $0.5 million and $1.4 million, respectively, compared to $0.4 million and $1.4 million for the same periods in 2007.  

SERP

Certain key executives and key managers of Cleco are covered by the SERP. The SERP is a non-qualified, non-contributory, defined benefit pension plan. Benefits under the plan reflect an employee’s years of service, age at retirement, and the sum of the highest base salary paid out of the last five calendar years and the average of the three highest bonuses paid during the last 60 months prior to retirement, reduced by benefits received from any other defined benefit pension plan. Cleco Corporation does not fund the SERP liability, but instead pays for current benefits out of the general funds available. Cleco Power has formed a rabbi trust designated as the beneficiary for life insurance policies issued on the SERP participants. Proceeds from the life insurance policies are expected to be used to pay SERP participants’ life insurance benefits, as well as future SERP payments. However, because this 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.  No contributions to the SERP were made during the nine months ended September 30, 2008, and 2007.  Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.

The components of the net SERP cost are as follows:

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,					FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007		2008		2007
Components of periodic benefit  costs
Service cost	$	329		$	496	$	1,046	$	1,076
Interest cost		534			459		1,424		1,334
Prior period service cost		13			15		40		40
Net (gain) loss		(15	)		277		492		762
Net periodic benefit  cost	$	861		$	1,247	$	3,002	$	3,212

The SERP has no assets, and liabilities are reported on the individual subsidiaries’ financial statements.  The expense related to the SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income was $0.2 million and $0.7 million for the three and nine months ended September 30, 2008, respectively, compared to $0.3 million and $0.8 million for the same periods in 2007.  

401(k) Plan/ESOP

Most employees are eligible to participate in the 401(k) Plan, which was amended in April 1991 to include a leveraged ESOP.  The ESOP was established with 300,000 shares of

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CLECO POWER	2008 3RD QUARTER FORM 10-Q

convertible preferred stock which served as Cleco Corporation’s match to employees’ 401(k) Plan contributions and funded dividend payments on allocated shares.  By late March 2006, substantially all of the shares of ESOP preferred stock were fully allocated to current and former 401(k) Plan participants.  Beginning January 2007, Cleco Corporation made matching contributions and funded dividend reinvestments with Cleco common stock.  On March 26, 2007, the ESOP trustee converted all outstanding 190,372 shares of ESOP preferred stock into 1.8 million shares of Cleco common stock.  Beginning January 2008, Cleco Corporation made matching contributions and funded dividend reinvestments with cash.

In August 2007, Cleco Corporation’s Board of Directors approved an amendment to the 401(k) Plan to provide an enhanced 401(k) benefit for employees not otherwise eligible to participate in Cleco’s pension plan.  

The table below contains information about the 401(k) Plan and the ESOP:

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,
(THOUSANDS)	2008		2007
401(k) Plan expense	$	970	$	667

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008		2007
401(k) Plan expense	$	2,661	$	2,166
Dividend requirements to ESOP on convertible preferred stock	$	-	$	412

Cleco Power is the plan sponsor for the 401(k) Plan.  The expense of the 401(k) Plan related to Cleco Corporation’s other subsidiaries for the three and nine months ended September 30, 2008, was $0.3 million and $0.7 million, respectively compared to $0.2 million and $0.6 million for the same periods in 2007.  The expense related to the payment of dividends on the shares of convertible preferred stock held in the ESOP is reflected on Cleco Corporation’s Condensed Consolidated Statements of Income for the nine months ended September 30, 2007. 

Note 8 — Income Taxes

The following table summarizes the effective income tax rates for Cleco Corporation and Cleco Power for the three- and nine-month periods ended September 30, 2008, and 2007.

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,
	2008			2007
Cleco Corporation		22.1	%		30.7	%
Cleco Power		25.7	%		24.1	%

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
	2008			2007
Cleco Corporation		20.3	%		31.1	%
Cleco Power		23.0	%		24.0	%

 For the three- and nine-month periods ended September 30, 2008, and 2007, the effective income tax rate for Cleco Corporation and Cleco Power was less than the federal statutory rate primarily due to the flow-through of tax benefits associated with AFUDC equity recorded as a result of the construction of Rodemacher Unit 3.  Cleco Corporation accounts for income taxes under SFAS No. 109 and records uncertain tax positions under FIN 48.  In the first quarter of 2008, Cleco and the IRS agreed to apply industry-wide guidelines as the basis for settling a potential dispute regarding the amount of indirect overhead costs required to be capitalized for tax purposes.  Based on acceptance of the settlement guidelines, Cleco recorded, in the first quarter of 2008, an interest benefit of approximately $2.1 million.  

Note 9 — Disclosures about Segments

Cleco’s reportable segments are based on its method of internal reporting, which disaggregates business units by first-tier subsidiary. Reportable segments were determined by applying SFAS No. 131. Cleco’s reportable segments are Cleco Power and Midstream. The reconciling items in the following tables consist of the holding company, a shared services subsidiary, two transmission interconnection facilities, and an investment subsidiary. 

Each reportable segment engages in business activities from which it earns revenue and incurs expenses. Segment managers report periodically to Cleco’s Chief Executive Officer (the chief operating decision-maker) with discrete financial information and, at least quarterly, present discrete financial information to Cleco Corporation’s Board of Directors. Each reportable segment prepared budgets for 2008 that were presented to and approved by Cleco Corporation’s Board of Directors. 

The financial results of Cleco’s segments are presented on an accrual basis. Management evaluates the performance of its segments and allocates resources to them based on segment profit and the requirements to implement new strategic initiatives and projects to meet current business objectives.  Material intercompany transactions occur on a regular basis.  These intercompany transactions relate primarily to joint and common administrative support services provided by Support Group.

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SEGMENT INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30,

	CLECO					RECONCILING
2008(THOUSANDS)	POWER		MIDSTREAM			ITEMS			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	333,936	$	-		$	-		$	-		$	333,936
Other operations		6,981		-			25			(2	)		7,004
Affiliate revenue		7		2,143			585			-			2,735
Intercompany revenue		418		(12	)		10,974			(11,380	)		-
Operating revenue	$	341,342	$	2,131		$	11,584		$	(11,382	)	$	343,675
Depreciation expense	$	18,861	$	78		$	344		$	-		$	19,283
Interest charges	$	14,973	$	1,566		$	722		$	(1,565	)	$	15,696
Interest income	$	1,545	$	-		$	1,689		$	(1,565	)	$	1,669
Equity income from investees	$	-	$	9,223		$	439		$	-		$	9,662
Federal and state income tax expense (benefit)	$	10,566	$	2,383		$	(2,436	)	$	-		$	10,513
Segment profit (1)	$	30,538	$	4,573		$	2,022		$	-		$	37,133
Additions to long-lived assets	$	61,327	$	23		$	242		$	-		$	61,592
Equity investment in investees	$	-	$	243,143		$	14,470		$	-		$	257,613
Total segment assets	$	2,789,240	$	260,161		$	342,881		$	(296,461	)	$	3,095,821
(1)Reconciliation of segment profit to consolidated profit:	Segment profit								$	37,133
	Unallocated items:
	Preferred dividends requirements, net of tax									12
	Net income applicable to common stock								$	37,121

	CLECO					RECONCILING
2007(THOUSANDS)	POWER		MIDSTREAM			ITEMS		ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	300,862	$	-		$	-	$	-		$	300,862
Other operations		9,231		4			1		2			9,238
Affiliate revenue		10		1,105			476		-			1,591
Intercompany revenue		501		-			8,214		(8,715	)		-
Operating revenue	$	310,604	$	1,109		$	8,691	$	(8,713	)	$	311,691
Depreciation expense	$	19,401	$	76		$	262	$	-		$	19,739
Interest charges	$	8,213	$	5,894		$	2,060	$	(5,859	)	$	10,308
Interest income	$	1,082	$	621		$	7,024	$	(5,854	)	$	2,873
Equity income from investees	$	-	$	27,532		$	194	$	-		$	27,726
Federal and state income tax expense	$	10,871	$	17,947		$	1,106	$	153		$	30,077
Segment profit (1)	$	34,198	$	30,415		$	3,432	$	-		$	68,045
Additions to long-lived assets	$	167,737	$	(4,992	)	$	342	$	-		$	163,087
Equity investment in investees (2)	$	-	$	249,758		$	8,342	$	1		$	258,101
Total segment assets (2)	$	2,306,482	$	265,918		$	459,139	$	(324,916	)	$	2,706,623
(1)Reconciliation of segment profit to consolidated profit:	Segment profit							$	68,045
(2)Balances as of December 31, 2007	Unallocated items:
	Preferred dividends requirements, net of tax								12
	Net income applicable to common stock							$	68,033

30 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30,

	CLECO					RECONCILING
2008(THOUSANDS)	POWER		MIDSTREAM			ITEMS			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	803,397	$	-		$	-		$	-		$	803,397
Other operations		29,757		1			76			(8	)		29,826
Affiliate revenue		21		5,892			1,877			-			7,790
Intercompany revenue		1,506		-			30,859			(32,365	)		-
Operating revenue	$	834,681	$	5,893		$	32,812		$	(32,373	)	$	841,013
Depreciation expense	$	56,886	$	230		$	854		$	-		$	57,970
Interest charges	$	31,435	$	5,057		$	3,943		$	(5,077	)	$	35,358
Interest income	$	3,121	$	-		$	6,498		$	(5,075	)	$	4,544
Equity income from investees	$	-	$	1,660		$	1,063		$	-		$	2,723
Federal and state income tax expense (benefit)	$	27,135	$	(2,298	)	$	(2,264	)	$	-		$	22,573
Segment profit (loss) (1)	$	90,807	$	(2,955	)	$	741		$	-		$	88,593
Additions to long-lived assets	$	244,143	$	63		$	786		$	-		$	244,992
Equity investment in investees	$	-	$	243,143		$	14,470		$	-		$	257,613
Total segment assets	$	2,789,240	$	260,161		$	342,881		$	(296,461	)	$	3,095,821
(1)Reconciliation of segment profit to consolidated profit:	Segment profit								$	88,593
	Unallocated items:
	Preferred dividends requirements, net of tax									35
	Net income applicable to common stock								$	88,558

	CLECO				RECONCILING
2007(THOUSANDS)	POWER		MIDSTREAM		ITEMS		ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	765,791	$	-	$	-	$	-		$	765,791
Other operations		26,413		15		60		(10	)		26,478
Affiliate revenue		35		3,251		1,387		-			4,673
Intercompany revenue		1,505		-		32,025		(33,530	)		-
Operating revenue	$	793,744	$	3,266	$	33,472	$	(33,540	)	$	796,942
Depreciation expense	$	58,784	$	230	$	813	$	-		$	59,827
Interest charges	$	27,883	$	16,457	$	6,309	$	(16,365	)	$	34,284
Interest income	$	3,548	$	1,044	$	19,797	$	(16,359	)	$	8,030
Equity (loss) income from investees	$	-	$	96,459	$	1,149	$	-		$	97,608
Federal and state income tax expense	$	20,517	$	40,008	$	2,509	$	153		$	63,187
Segment profit (1)	$	65,146	$	64,742	$	9,993	$	-		$	139,881
Additions to long-lived assets	$	388,545	$	8	$	762	$	-		$	389,315
Equity investment in investees (2)	$	-	$	249,758	$	8,342	$	1		$	258,101
Total segment assets (2)	$	2,306,482	$	265,918	$	459,139	$	(324,916	)	$	2,706,623
(1)Reconciliation of segment profit to consolidated profit:	Segment profit						$	139,881
(2)Balances as of December 31, 2007	Unallocated items:
	Preferred dividends requirements, net of tax							446
	Net income applicable to common stock						$	139,435

Note 10 — Equity Investment in Investees

Cleco reports its investment in Acadia, Evangeline and certain other subsidiaries on the equity method of accounting in accordance with APB Opinion No. 18, after consideration of FIN 46R.  Under the equity method, the assets and liabilities of these entities are reported as equity investment in investees on Cleco Corporation’s Condensed Consolidated Balance Sheets.  The revenue and expenses (excluding income taxes) of these entities are netted and reported as equity income from investees on Cleco Corporation’s Condensed Consolidated Statements of Income.

Equity investment in investees represents primarily Midstream’s $182.0 million investment in Acadia, owned 50% by APH and 50% by Cajun, and its $61.1 million investment in Evangeline, owned 100% by Midstream.  Equity investment in investees also represents a $7.2 million investment in Attala and a $7.3 million investment in Perryville, both owned 100% by Cleco Corporation.  

The table below presents the equity (loss) income from each investment accounted for using the equity method.

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,
(THOUSANDS)	2008			2007
Acadia	$	(1,091	)	$	14,146
Evangeline		10,314			13,386
Other subsidiaries 100% owned by Cleco Corporation		439			163
Other		-			31
Total equity income	$	9,662		$	27,726

31 

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	FOR THE NINE MONTHS ENDED  SEPTEMBER 30,
(THOUSANDS)	2008			2007
Acadia	$	(7,869	)	$	85,499
Evangeline		9,529			10,960
Other subsidiaries 100% owned by Cleco Corporation		1,063			1,128
Other		-			21
Total equity income	$	2,723		$	97,608

Acadia

Cleco’s current assessment of its maximum exposure to loss with respect to Acadia at September 30, 2008, consists of its equity investment of $182.0 million. 

The following table presents the components of Midstream's equity investment in Acadia.

	AT SEPTEMBER 30,			AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2008			2007
Contributed assets (cash and land)	$	259,019		$	259,019
Income before taxes		163,792			171,819
Impairment of investment		(45,847	)		(45,847	)
Capitalized interest and other		19,722			19,564
Less:  non-cash distribution		78,200			78,200
Less:  cash distributions		136,464			136,464
Total equity investment in investee	$	182,022		$	189,891

Midstream’s equity, as reported on the balance sheet of Acadia at September 30, 2008, was $208.1 million.  The difference between the $208.1 million and the equity investment in investee of $182.0 million as shown in the table above is $26.1 million, and consists of the $45.8 million other-than-temporary impairment of APH’s investment in Acadia, partially offset by $19.7 million of interest capitalized on funds contributed by Acadia.  The $45.8 million impairment was the result of management’s review of the carrying value of Midstream’s investment in Acadia after the sale of CAH’s assets to Cajun in 2007.

The tables below contain summarized financial information for Acadia.

	AT SEPTEMBER 30,		AT DECEMBER 31,
(THOUSANDS)	2008		2007
Current assets	$	11,630	$	13,672
Property, plant and equipment, net		408,973		419,882
Total assets	$	420,603	$	433,554
Current liabilities	$	4,308	$	1,206
Partners’ capital		416,295		432,348
Total liabilities and partners’ capital	$	420,603	$	433,554

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,						FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007			2008			2007
Operating revenue	$	45,542		$	32,016		$	70,479		$	57,507
Operating expenses		47,775			32,244			86,443			71,194
Gain on settlement		-			-			-			170,200
Other income (loss), net		51			21			(88	)		28
(Loss) income before taxes	$	(2,182	)	$	(207	)	$	(16,052	)	$	156,541

Income tax benefit recorded on APH’s financial statements related to Midstream’s 50% ownership interest in Acadia for the three and nine months ended September 30, 2008, was $1.2 million and $5.3 million, respectively, compared to income tax expense of $13.8 million and $37.3 million for the three and nine months ended September 30, 2007, respectively.  The decrease in income tax expense at APH is primarily due to the absence in 2008 of the settlement of Acadia’s pre-petition unsecured claims against CES and Calpine.

Evangeline

Cleco’s current assessment of its maximum exposure to loss with respect to Evangeline at September 30, 2008, consists of its equity investment of $61.1 million.

The table below presents the components of Midstream's equity investment in Evangeline.

	AT SEPTEMBER 30,		AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2008		2007
Contributed assets (cash)	$	49,962	$	49,156
Net income		156,947		147,418
Less:  non-cash distributions		16,907		15,685
Less:  cash distributions		128,881		121,022
Total equity investment in investee	$	61,121	$	59,867

The tables below contain summarized financial information for Evangeline. 

	AT SEPTEMBER 30,			AT DECEMBER 31,
(THOUSANDS)	2008			2007
Current assets	$	25,331		$	17,018
Accounts receivable - affiliate		2			2,280
Property, plant and equipment, net		179,072			181,604
Other assets		47,325			48,999
Total assets	$	251,730		$	249,901
Current liabilities	$	23,747		$	15,122
Accounts payable - affiliate		532			2,721
Long-term debt, net		161,762			168,866
Other liabilities		71,621			71,501
Member’s deficit		(5,932	)		(8,309	)
Total liabilities and member’s deficit	$	251,730		$	249,901

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,				FOR THE NINE MONTHS ENDED  SEPTEMBER 30,
(THOUSANDS)	2008		2007		2008		2007
Operating revenue	$	26,452	$	25,026	$	49,866	$	49,279
Operating expenses		9,844		5,946		22,068		18,840
Depreciation		1,339		1,317		4,032		3,902
Interest charges		4,526		4,719		13,863		15,497
Interest income		102		343		360		1,020
Other expense		531		1		734		1,100
Income before taxes	$	10,314	$	13,386	$	9,529	$	10,960

The difference between the equity investment in investee and member’s deficit shown in the tables above is due to income tax items being reported in the corresponding tax accounts on Midstream’s financial statements, rather than the equity investment account.

Income tax expense recorded on Midstream’s financial statements related to Midstream’s 100% ownership interest in Evangeline was $3.7 million and $3.4 million for the three and nine months ended September 30, 2008, respectively, compared to $4.7 million and $4.0 million for the three and nine months ended September 30, 2007, respectively.

Since its inception, Cleco has had 100% ownership and voting interest of Evangeline.  Prior to November 9, 2007, all of

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the capacity and output of the power plant had been tolled to Williams Power Company, Inc., which paid Evangeline certain fixed and variable amounts.  In November 2007, The Williams Companies, Inc. assigned all of its rights and interests in its tolling agreement with Evangeline to Bear Energy.  On March 16, 2008, JPMorgan Chase & Co. announced it was acquiring Bear Stearns Companies Inc., the parent company of Bear Energy.  On May 30, 2008, JPMorgan Chase & Co. completed the acquisition of Bear Stearns Companies Inc.  For more information regarding Bear Energy and the announced purchase by JPMorgan Chase & Co., see Note 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Other Subsidiaries 100% owned by Cleco Corporation

Cleco’s current assessment of its maximum exposure to loss with respect to Perryville and Attala at September 30, 2008, consists of its equity investment of $14.5 million.  

The table below presents the components of Cleco Corporation’s equity investments in Perryville and Attala.

	AT SEPTEMBER 30,		AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2008		2007
Contributed assets (cash)	$	132,960	$	126,591
Net income		53,764		52,735
Less:  non-cash distributions		20,869		20,555
Less:  cash distributions		151,388		150,433
Total equity investment in investee	$	14,467	$	8,338

The tables below contain summarized financial information for Perryville and Attala.

	AT SEPTEMBER 30,		AT DECEMBER 31,
(THOUSANDS)	2008		2007
Current assets	$	798	$	691
Accounts receivable - affiliate		3,746		493
Other assets		14,216		14,499
Total assets	$	18,760	$	15,683
Current liabilities	$	11	$	175
Accounts payable - affiliate		-		2,968
Other liabilities		441		328
Member’s equity		18,308		12,212
Total liabilities and member’s equity	$	18,760	$	15,683

	FOR THE THREE MONTHS ENDED  SEPTEMBER 30,				FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008		2007		2008		2007
Operating revenue	$	492	$	223	$	1,484	$	1,337
Operating expenses		53		60		421		209
Incomebefore taxes	$	439	$	163	$	1,063	$	1,128

The difference between the equity investment in investee and member’s equity shown in the tables above is due to income tax items being reported in the corresponding tax accounts on Cleco Corporation’s financial statements, rather than the equity investment account.

The transmission assets utilized by Perryville under the Perryville Interconnection Agreement are accounted for as a direct financing lease by Perryville and are included in other assets in the summarized financial information above. 

Income tax expense recorded on Cleco’s financial statements related to Cleco Corporation’s 100% interest in Perryville and Attala was $0.2 million and $0.4 million for the three and nine months ended September 30, 2008, respectively, compared to a benefit of $1.3 million and an expense of $0.4 million for the three and nine months ended September 30, 2007, respectively.

Note 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

On June 22, 2005, the City of Alexandria, Louisiana (the City), a current wholesale municipal customer of Cleco Power, filed a lawsuit in Ninth Judicial District Court against Cleco Corporation, Cleco Power, and certain other subsidiaries.  The lawsuit alleges unspecified damages as a result of certain sales made to the City, revenue derived by Cleco using the City’s power generating facilities under contracts with the City, and other alleged improper conduct, including, without limitation, allegations that Cleco fraudulently mishandled the management of the City’s power requirements under the contracts.  The lawsuit was removed to and currently is pending in the U.S. District Court for the Western District of Louisiana.  In June 2008, the City and Cleco agreed in principle to resolve all outstanding issues between them that were involved in the litigation.  The agreement in principle is subject to execution of definitive agreements, which the parties are currently negotiating and preparing, and serves to eliminate the March 3, 2009 termination of the current service agreement.  Management believes the dispute will not have a material adverse effect on the Registrants’ financial condition, results of operations, or cash flows.

On October 8, 2007, Cleco received a Special Notice for Remedial Investigation and Feasibility Study from the EPA.  The special notice requested that Cleco Corporation and Cleco Power, along with many other listed potentially responsible parties, enter into negotiations with the EPA for the performance of a Remedial Investigation and Feasibility Study at an area known as the Devil’s Swamp Lake just northwest of Baton Rouge, Louisiana.  The EPA has identified Cleco as one of many companies sending PCB wastes for disposal to the site.  The Devil’s Swamp Lake site has been proposed to be added to the National Priorities List (NPL) based on the release of PCBs to fisheries and wetlands located on the site.  The EPA will make a final decision on the listing of the site to the NPL after considering relevant comments.  Cleco has contacted the EPA in response to the special notice and is reviewing the available information.  The EPA and a number of PRPs met in January 2008, for an organizational meeting to discuss the background of the site.  Negotiations among the PRPs and the EPA are ongoing in regards to the remedial investigation and feasibility study at the Devil’s Swamp Lake site with little progress having been made since the January 2008 organizational meeting.  The PRPs, alleged to have disposed PCBs at the site, have proposed a tentative cost sharing formula with the facility owner to fund the remedial investigation.  At this

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time, management is unable to determine whether the costs associated with possible remediation of the facility site will have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Cleco is involved in regulatory, environmental, and legal proceedings before various courts, regulatory commissions, and governmental agencies regarding matters arising in the ordinary course of business.  Some of these proceedings, such as fuel review and environmental issues, could involve substantial amounts.  Management regularly analyzes current information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters.  Management believes the disposition of these matters will not have a material adverse effect on the Registrants’ financial condition, results of operations, or cash flows. 

Off-Balance Sheet Commitments and Disclosures about Guarantees

Cleco Corporation 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 Corporation’s subsidiaries and equity investees (affiliates). Cleco Corporation and Cleco Power also have agreed to contractual terms that require them to pay third parties if certain triggering events occur.  These contractual terms generally are defined as guarantees in FIN 45.  Guarantees issued or modified after December 31, 2002, that fall within the initial recognition scope of FIN 45 are required to be recorded as a liability.  Outstanding guarantees that fall within the disclosure scope of FIN 45 are required to be disclosed for all accounting periods ended after December 15, 2002.

Cleco Corporation 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 Corporation had not provided the off-balance sheet commitments, the desired counterparties may not have contracted with Cleco’s affiliates, or may have contracted with them at terms less favorable to its affiliates.

The off-balance sheet commitments are not recognized on Cleco’s Condensed Consolidated Balance Sheets, because it has been determined that Cleco’s affiliates are able to perform the obligations under their contracts and that it is not probable that payments by Cleco will be required. Some of these commitments reduce borrowings available to Cleco Corporation under its credit facility pursuant to the terms of the credit facility.  Cleco’s off-balance sheet commitments as of September 30, 2008, are summarized in the following table, and a discussion of the off-balance sheet commitments follows the table. The discussion should be read in conjunction with the table to understand the impact of the off-balance sheet commitments on Cleco’s financial condition.

							AT SEPTEMBER 30, 2008
							REDUCTIONS TO THE
							AMOUNT AVAILABLE
							TO BE DRAWN ON
	FACE				NET		CLECO CORPORATION’S
(THOUSANDS)	AMOUNT		REDUCTIONS		AMOUNT		CREDIT FACILITY
Cleco Corporation
Guarantee issued to Entergy companies for performance obligations of Perryville	$	277,400	$	135,000	$	142,400	$	328
Guarantees issued to purchasers of the assets of Cleco Energy		1,400		-		1,400		1,400
Obligations under standby letter of credit issued to the Evangeline Tolling Agreement counterparty		15,000		-		15,000		15,000
Guarantee issued to Entergy Mississippi on behalf of Attala		500		-		500		500
Cleco Power
Obligations under standby letter of credit issued to the Louisiana Department of Labor		525		-		525		-
Obligations under the Lignite Mining Agreement		6,070		-		6,070		-
Total	$	300,895	$	135,000	$	165,895	$	17,228

Cleco Corporation provided a limited guarantee and an indemnification, which fall within the recognition scope of FIN 45, to Entergy Louisiana and Entergy Gulf States for Perryville’s performance, indemnity, representation, and warranty obligations under the Sale Agreement, the Power Purchase Agreement, and other ancillary agreements related to the sale of the Perryville facility.  As of September 30, 2008, the aggregate guarantee of $277.4 million is limited to $142.4 million (other than with respect to the indemnification of environmental matters, to which there is no limit) due to the performance of some of the underlying obligations that were guaranteed.  It is unlikely that Cleco Corporation will have any other liabilities which would give rise to indemnity claims under the agreements providing for the Perryville disposition.  The discounted probability-weighted liability under the guarantees and indemnifications as of September 30, 2008, was $0.3 million, resulting in a corresponding reduction in the available credit under Cleco’s credit facility, which was determined in accordance with the facility’s definition of a contingent obligation.  The contingent obligation reduces the amount available under the credit facility by an amount equal to the maximum reasonably anticipated liability in respect of the contingent obligation as determined in good faith.  

In November 2004, Cleco completed the sale of substantially all of the assets of Cleco Energy.  Cleco Corporation provided guarantees to the buyers of Cleco Energy’s assets for the payment and performance of the indemnity obligations of Cleco Energy.  The aggregate amount of the guarantees is $1.4 million, and the guarantees expire in 2009.  These guarantees do not fall within the scope of FIN 45.  Cleco Energy issued guarantees and indemnifications that fall within the recognition scope of FIN 45, because they relate to the past performance obligations of the disposed assets and also contain provisions requiring payment for potential damages.  The

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CLECO POWER	2008 3RD QUARTER FORM 10-Q

maximum aggregate potential payment under the guarantees and indemnifications is $1.2 million.  The discounted probability-weighted liability under the FIN 45 guarantees and indemnifications as of September 30, 2008, was $0.1 million.

If Evangeline fails to perform certain obligations under its tolling agreement, Cleco Corporation will be required to make payments to the Evangeline Tolling Agreement counterparty. Cleco Corporation’s obligation under the Evangeline commitment is in the form of a standby letter of credit from investment grade banks and is limited to $15.0 million. Rating triggers do not exist in the Evangeline Tolling Agreement. Cleco expects Evangeline to be able to meet its obligations under the tolling agreement and does not expect Cleco Corporation to be required to make payments to the counterparty. However, under the covenants associated with Cleco Corporation’s credit facility, the entire net amount of the Evangeline commitment reduces the amount that can be borrowed under the credit facility. The letter of credit for Evangeline is expected to be renewed annually until 2020.

In January 2006, Cleco Corporation provided a $0.5 million guarantee to Entergy Mississippi for Attala’s obligations under the Attala Interconnection Agreement.  This guarantee will be effective through the life of the agreement.

The State of Louisiana allows employers of certain financial net worth to self-insure their workers’ compensation benefits.  Cleco Power has a certificate of self-insurance from the Louisiana Office of Workers’ Compensation and is required to post a $0.5 million letter of credit, an amount equal to 110% of the average losses over the previous three years, as surety.

As part of the Lignite Mining Agreement entered into in 2001, Cleco Power and SWEPCO, joint owners of Dolet Hills, have agreed to pay the lignite miner’s loan and lease principal obligations when due, if the lignite miner does not have sufficient funds or credit to pay. Any amounts paid on behalf of the miner would be credited by the lignite miner against the next invoice for lignite delivered. At September 30, 2008, Cleco Power’s 50% exposure for this obligation was approximately $6.1 million. The lignite mining contract is in place until 2011 and does not affect the amount Cleco Corporation can borrow under its credit facility.

The following table summarizes the expected termination dates of the guarantees and standby letters of credit discussed above:

							AT SEPTEMBER 30, 2008
			AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
	NET								MORE
	AMOUNT		LESS THAN						THAN
(THOUSANDS)	COMMITTED		ONE YEAR		1-3 YEARS		3-5 YEARS		5 YEARS
Guarantees	$	150,370	$	100,400	$	7,070	$	-	$	42,900
Standby letters of credit		15,525		525		-		-		15,000
Total commercial commitments	$	165,895	$	100,925	$	7,070	$	-	$	57,900

In its bylaws, Cleco Corporation has agreed to indemnify directors, officers, agents and employees who are made a party to a pending or completed suit, arbitration, investigation, or other proceeding whether civil, criminal, investigative or administrative, if the basis of inclusion arises as the result of acts conducted in the discharge of their official capacity.  Cleco Corporation has purchased various insurance policies to reduce the risks associated with the indemnification.  In its Operating Agreement, Cleco Power provides for the same indemnification as described above with respect to its managers, officers, agents, and employees.

Generally, neither Cleco Corporation nor Cleco Power has recourse that would enable them to recover amounts paid under their guarantee or indemnification obligations.  The one exception is the insurance contracts associated with the indemnification of directors, managers, officers, agents and employees.  There are no assets held as collateral for third parties that either Cleco Corporation or Cleco Power could obtain and liquidate to recover amounts paid pursuant to the guarantees.

Other Contingencies

General Electric Services Corporation

Cleco Power has entered into an operating lease agreement with General Electric Services Corporation for leasing of railcars in order to transport coal to its Rodemacher Power

Station.  The lease contains a provision for early termination, along with an associated termination fee.  The termination provision can only be exercised in December 2010.  If exercised by Cleco Power, the termination fee would be approximately $1.4 million.  At this time, Cleco Power has no plans to terminate this lease prior to the expiration of the lease term.

CBL Capital Corporation

Cleco Power has entered into an operating lease agreement with CBL Capital Corporation.  This is a master leasing agreement for company vehicles and other equipment.  The lease contains a provision for early termination, along with an associated termination fee.  Cleco Power may terminate the agreement at any time during the lease.  The termination fee is based upon the unamortized residual value of the equipment under lease at the end of the month of termination.  The fee is decreased by any sale proceeds obtained by CBL Capital Corporation.  Cleco Power would be liable for 87% of the termination fee net of any sale proceeds.  Cleco Power’s maximum obligation at September 30, 2008, was approximately $5.9 million.  At this time, Cleco Power has no plans to terminate this lease prior to expiration of the lease term.

LPSC Fuel Audit

In July 2006, the LPSC informed Cleco Power that it was planning to conduct a periodic fuel audit that included fuel adjustment clause filings for January 2003 through December

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2004.  Cleco Power believes that it has provided the LPSC Staff with all of the information requested.  The audit is pursuant to the Fuel Adjustment Clause General Order issued November 6, 1997, in Docket No. U-21497 which anticipates that an audit will be performed not less than every other year.  However, it is not anticipated that the LPSC Staff will begin another audit until the current audit is complete.  Management is unable to predict the time of completion or results of the LPSC audit, which could require Cleco Power to refund previously recovered revenue and could result in a significant material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

New Market Tax Credits

In August 2008, Cleco Corporation acquired a 99.9% equity interest in USB NMTC Fund 2008-1 LLC (the LLC).  The LLC was formed by U.S. Bancorp Community Development Corporation to provide capital for investments to businesses in distressed or low income areas.  These investments will generate new market tax credits and historical tax credits that can be used to reduce the federal income tax liability of Cleco Corporation.  The transaction obligates Cleco to make $213.1 million of delayed equity contributions to the entity, of which $204.7 million remains payable over the next five years:

(THOUSANDS)	CONTRIBUTION
2008	$	3,857
2009		25,044
2010		43,389
2011		48,634
2012		46,659
2013		37,133
Total	$	204,716

Of the $204.7 million, $19.6 million is due to be paid within the next twelve months.  The investment and associated debt are presented on the balance sheet, net in other deferred credits due to the right of offset.

The delayed equity contribution requirement did not contain a stated rate of interest.  In accordance with APB Opinion No. 21, Cleco has recorded the liability and investment at its calculated fair value within the framework of SFAS No. 157.  In order to calculate the fair value, management used an imputed rate of interest assuming that Cleco obtained the financing of similar nature from a third party.  The imputed rate was used in a net present value model in order to calculate the fair value of the remaining portion of the delayed equity contributions.  The table below contains the disclosures required by APB Opinion No. 21 for liabilities with an imputed interest.

(THOUSANDS)
Delayed equity contributions, imputed interest rate 9%
Principal payment schedule above:	$	204,716
Less:  unamortized discount		46,413
Total	$	158,303

The gross investment amortization expense is recognized over the seven-year compliance period using the cost method in accordance with EITF No. 94-1.

Other

Cleco has accrued for liabilities to third parties, employee medical benefits, and storm damages. Prior to Cleco Katrina/Rita’s issuance of the storm recovery bonds in March 2008, charges to Cleco Power’s operating expenses to provide a reserve for future storm damages were based upon the average amount of noncapital, uninsured storm damages experienced by Cleco Power during the previous six years, excluding costs for Hurricanes Katrina and Rita.  The settlement agreement signed with the LPSC in March 2007 allowed, among other items, the funding and securitization of $50.8 million for a reserve for future storm costs; at which time, the amount authorized to accrue for future storm damages was reduced.  For more information regarding storm restoration costs, see Note 4 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs - Katrina/Rita” and Note 14 — “Storm Restoration.”

Risks and Uncertainties

Cleco Corporation

Cleco Corporation could be subject to possible adverse consequences if Cleco’s counterparties fail to perform their obligations or if Cleco Corporation or its affiliates are not in compliance with loan agreements or bond indentures. 

Evangeline Tolling Agreement

In May 2008, JPMorgan Chase & Co. acquired Bear Stearns Companies Inc.  In connection with the acquisition, JPMorgan Chase & Co. has guaranteed certain obligations of its subsidiaries, including Bear Energy’s obligations under the Evangeline Tolling Agreement.  If JPMorgan Chase & Co. or any successor or assignee were to fail to perform its payment obligations, such failure could have a material adverse effect on Cleco Corporation’s results of operations, financial condition, and cash flows for the following reasons, among others:

§   If such failure to perform constituted a default under the tolling agreement, the holders of the Evangeline bonds would have the right to declare the outstanding principal amount ($168.9 million at September 30, 2008) and interest to be immediately due and payable, which could result in:

o   Cleco’s seeking to refinance the bonds, the terms of which may be less favorable than existing terms;

o   Cleco’s causing Evangeline to seek protection under federal bankruptcy laws; or

o   the trustee of the bonds foreclosing on the mortgage and assuming ownership of the Evangeline plant;

§   Cleco may not be able to enter into agreements in replacement of the Evangeline Tolling Agreement on terms as favorable as that agreement or at all;

§   Cleco’s equity investment in Evangeline may be impaired, requiring a write-down to its fair market value, which could be substantial; and

§   Cleco’s credit ratings could be downgraded, which would increase borrowing costs and limit sources of financing.

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Other

Access to capital markets is a significant source of funding for both short-term and long-term capital requirements not satisfied by operating cash flows.  Current market conditions have limited the availability and have increased the costs of capital for some companies.  The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its businesses.  After assessing Cleco’s current operating performance, liquidity, and credit ratings, management believes that Cleco will continue for the foreseeable future to have access to the capital markets at reasonable rates.  If Cleco Corporation’s or Cleco Power’s credit ratings were to be downgraded by Moody’s or by Standard & Poor’s, Cleco Corporation or Cleco Power, as the case may be, would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.

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 to be taken and Cleco’s financial condition could be materially adversely affected.

Cleco Power

Cleco Power supplies a portion of its customers’ electric power requirements from its own generation facilities.  In addition to power obtained from power purchase agreements, Cleco Power purchases power from other utilities and marketers to supplement its generation at times of relatively high demand or when the purchase price of power is less than its own cost of generation.  Due to its location on the transmission grid, Cleco Power relies on two main suppliers of electric transmission when accessing external power markets.  At times, constraints limit the amount of purchased power these transmission providers can deliver into Cleco Power’s service territory.

Access to capital markets is a significant source of funding for both short-term and long-term capital requirements not satisfied by operating cash flows.  Current market conditions have limited the availability and have increased the costs of capital for some companies.  The inability to raise capital on favorable terms could negatively affect Cleco Power’s ability to maintain and expand its businesses.  After assessing Cleco Power’s current operating performance, liquidity, and credit ratings, management believes that Cleco will continue for the foreseeable future to have access to the capital markets at reasonable rates.  If Cleco Power’s credit ratings were to be downgraded by Moody’s or by Standard & Poor’s, Cleco Power would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.

Note 12 — Affiliate Transactions

Cleco has affiliate balances that were not eliminated as of September 30, 2008.  The balances were not eliminated due to the use of the equity method of accounting for Evangeline, Perryville, Attala, and Acadia.  For information on the Evangeline, Perryville, Attala, and Acadia equity investments, see Note 10 — “Equity Investment in Investees.”  At September 30, 2008, the payable to Evangeline was $3.9 million, and the payable to Attala was $0.1 million.  Also, at September 30, 2008, the receivable from Evangeline was $2.9 million, and the receivable from Acadia was $0.4 million.

Cleco Power has affiliate balances that are payable to or due from its affiliates.  At September 30, 2008, the payable to Support Group was $5.3 million, the payable to Cleco Corporation was $0.7 million, and the payable to other affiliates was less than $0.3 million.  Also, at September 30, 2008, the receivable from Support Group was $1.7 million, and the receivable from other affiliates was less than $0.6 million.

Note 13 — Intangible Asset

During the first quarter of 2008, Cleco Katrina/Rita acquired a $177.5 million intangible asset which includes $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 is expected to have a life of 12 years, but could have a life of up to 15 years depending on the time period required to collect the required amount from Cleco Power’s customers.  The intangible asset is being amortized according to the estimated collections from Cleco Power’s customers.  At the end of its life, this asset will have no residual value.  During the three months and nine months ended September 30, 2008, Cleco Katrina/Rita recognized amortization expense of $2.7 million and $6.3 million, respectively.  For additional information on Cleco Katrina/Rita storm costs and securitization, see Note 4 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs - Katrina/Rita.”  The following tables provide additional information about this intangible asset.

(THOUSANDS)	AT SEPTEMBER 30, 2008
Gross carrying amount	$	177,507
Accumulated amortization		6,328
Intangible asset	$	171,179

(THOUSANDS)
Expected amortization expense
For the twelve months ending September 30, 2009	$	10,335
For the twelve months ending September 30, 2010	$	11,538
For the twelve months ending September 30, 2011	$	12,330
For the twelve months ending September 30, 2012	$	13,167

Note 14 — Storm Restoration

In September 2008, Cleco Power’s distribution and transmission systems sustained substantial damage from two separate hurricanes.

On September 1, 2008, Hurricane Gustav made landfall in southeastern Louisiana as a Category 2 hurricane, causing power outages to approximately 246,000, or 90%, of Cleco Power’s electric customers and affecting Cleco Power’s entire service territory.  By September 9, 2008, power was restored to all customers who lost service after Hurricane Gustav.

On September 13, 2008, Hurricane Ike made landfall in southeast Texas as a Category 2 hurricane, affecting power service to approximately 80,000 of Cleco Power’s electric customers in Cleco Power’s southern service territory.  By

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September 16, 2008, restoration efforts for all customers whose service could be reconnected were complete.

The current estimate of the cost of restoration for Hurricanes Gustav and Ike is approximately $85.0 million, of which approximately 80% relates to Hurricane Gustav and the remaining 20% to Hurricane Ike.

The damage to equipment from both storms required replacement, as well as repair of existing assets.  Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 53% of the restoration costs recorded at September 30, 2008, or approximately $45.0 million.  The remaining cost was offset against Cleco Power’s existing storm damage reserve.

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

The following discussion and analysis should be read in combination with the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and Cleco Corporation and Cleco Power’s Condensed Consolidated Financial Statements contained in this 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, 2008, and September 30, 2007.

OVERVIEW

Cleco is a regional energy services holding company that conducts substantially all of its business operations through its two primary subsidiaries:

§   Cleco Power, an integrated electric utility services company regulated by the LPSC, the FERC, and other regulators, that serves approximately 273,000 customers across Louisiana and also engages in energy management activities; and

§   Midstream, a merchant energy company regulated by the FERC, that owns and operates a merchant power plant (Evangeline).  Midstream also has 50 percent ownership in a merchant power plant (Acadia) and operates the plant on behalf of its partner.

Current market conditions have limited the availability and have increased the costs of capital for some companies.  The inability to raise capital on favorable terms could negatively affect Cleco and Cleco Power’s ability to maintain and expand its businesses.  After assessing the current operating performance, liquidity, and credit ratings of Cleco and Cleco Power, management believes that they will continue for the foreseeable future to have access to the capital markets at reasonable rates.

While management believes that Cleco remains a strong company, Cleco continues to focus on several challenges and factors that could affect its operations and financial condition in the near term.

Cleco Power

Many factors affect Cleco Power’s primary business of selling electricity.  These factors include the presence of a stable regulatory environment, which can impact cost recovery and return on equity, as well as the recovery of costs related to growing energy demand and rising fuel prices; the ability to increase energy sales while containing costs; and the ability to meet increasingly stringent regulatory and environmental standards. 

As part of a plan to diversify its fuel mix, combat rising fuel prices and resolve its long-term generation capacity needs, Cleco Power began constructing a 600-MW solid-fuel generating unit at its Rodemacher power plant in May 2006.  When complete, Rodemacher Unit 3 will meet a portion of the utility’s future power supply needs and help stabilize customer fuel costs.  The project’s capital cost, including carrying costs during construction, is estimated at $1.0 billion.  Cleco Power anticipates the plant will be substantially complete and operational by the summer of 2009.  Cleco Power’s current base rates have been extended through the start of Rodemacher Unit 3.

On July 14, 2008, Cleco Power filed a request with the LPSC for a new rate plan to establish rates that would allow Cleco Power to recover its Rodemacher Unit 3 investment and go into effect when the unit begins commercial operations.  Cleco Power has requested a 12.25% return on equity in the new rate plan.  Cleco Power’s current base rates allow it the opportunity to earn a maximum regulated return on equity of 11.65%, which is based on a return on equity of 11.25% and 12.25% shared between shareholders and customers in a 40/60 ratio.  Cleco Power is currently recording AFUDC associated with construction of Rodemacher Unit 3.  Once the unit begins commercial operations, Cleco Power will no longer record AFUDC related to Rodemacher Unit 3.  Recovery of the Rodemacher Unit 3 investment is the largest component in Cleco Power’s new rate plan proposal.  If the LPSC does not increase Cleco Power’s base rates or denies Cleco Power’s request to recover costs incurred in the construction of Rodemacher Unit 3, Cleco Power’s results of operations, financial condition, and cash flows could be materially adversely affected.  For additional information, see “— Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Cleco Power’s Rate Case” and — “Rodemacher Unit 3.”

In September 2008, Cleco Power's distribution and transmission systems sustained substantial damage from two separate hurricanes.  On September 1, 2008, Hurricane Gustav made landfall in southeastern Louisiana as a Category 2 hurricane, affecting Cleco Power's entire service territory leaving 90%, or approximately 246,000 customers (out of approximately 273,000 customers), without electricity.  On September 12, 2008, only three days after Cleco Power’s storm team restored service to customers affected by Hurricane Gustav, Hurricane Ike began moving toward the Texas

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coastline causing new power outages.  The storm officially made landfall in Texas on September 13, 2008, also as a Category 2 hurricane.  Hurricane Ike left approximately 80,000 customers without power and caused extensive flooding in the southern portion of Cleco Power’s service territory.  Crews restored power by September 16, 2008, to all customers whose service could be reconnected after Hurricane Ike.  The current estimate of the cost of restoration for Hurricanes Gustav and Ike is approximately $85.0 million, of which approximately 80% relates to Hurricane Gustav and the remaining 20% to Hurricane Ike.  Cleco Power and the LPSC have agreed on a plan to recover Hurricanes Gustav and Ike storm restoration costs.  The plan allows Cleco Power to capitalize approximately $45.0 million of the storm costs.  The remaining cost will be offset against Cleco Power's existing storm damage reserve.  Cleco Power will also pursue any federal funds made available to utilities.  For additional information on the financial impact of Hurricanes Gustav and Ike, see Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 14 — Storm Restoration.”

Midstream

Acadia resides in the Southeastern Electric Reliability Council (SERC)-Entergy sub-region.  For merchant generators, this sub-region is challenged both by the general oversupply of gas-fired generation available to serve the Entergy system needs and the physical transmission constraints that can limit the amount of power that Acadia can deliver.  The SERC-Entergy sub-region has reserve margins among the highest in the nation.  These high reserve margins can lead to lower capacity factors and lower profitability for Acadia.  In the coming years, the wholesale power market within the SERC-Entergy sub-region is expected to tighten as load grows.  The tightening wholesale power market is expected to result in higher wholesale power prices.  Due to Acadia’s location on the transmission grid, Acadia relies on two main suppliers of electric transmission when accessing external power markets.  At times, transmission availability limits the wholesale markets accessible by Acadia resulting in limited buyers for Acadia’s output.  

To address these risks, Acadia markets short-, mid- and long-term products where available.  Through its third-party energy marketer, Acadia pursues opportunities in the hourly, weekly, monthly, and annual markets.  In addition, Acadia actively participates in long-term requests for capacity and energy.  Acadia’s success in these marketing efforts is a primary driver of Acadia’s earnings and cash flow. 

In May 2008, Acadia was notified that Cleco Power selected its proposal to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power 2009 short-term RFP.  The proposal was for a 235-MW product beginning March 1, 2009, and ending September 30, 2009.  The definitive agreement between Acadia and Cleco Power was executed on July 31, 2008.  Approval of this agreement by both the LPSC and FERC is required.

Comparison of the Three Months Ended September 30, 2008, and 2007

Cleco Consolidated

				FOR THE THREE MONTHS ENDED SEPTEMBER 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008			2007			VARIANCE			CHANGE
Operating revenue, net	$	343,675		$	311,691		$	31,984			10.26	%
Operating expenses		308,111			270,530			(37,581	)		(13.89	)%
Operating income	$	35,564		$	41,161		$	(5,597	)		(13.60	)%
Interest income	$	1,669		$	2,873		$	(1,204	)		(41.91	)%
Allowance for other funds used during construction	$	17,786		$	9,552		$	8,234			86.20	%
Equity income from investees	$	9,662		$	27,726		$	(18,064	)		(65.15	)%
Other income	$	937		$	28,402		$	(27,465	)		(96.70	)%
Other expense	$	(2,276	)	$	(1,284	)	$	(992	)		(77.26	)%
Interest charges	$	15,696		$	10,308		$	(5,388	)		(52.27	)%
Federal and state income taxes	$	10,513		$	30,077		$	19,564			65.05	%
Net income applicable to common stock	$	37,121		$	68,033		$	(30,912	)		(45.44	)%

Consolidated net income applicable to common stock decreased $30.9 million, or 45.4%, in the third quarter of 2008 compared to the third quarter of 2007 primarily due to decreased Cleco Power, Midstream and corporate earnings.  

Operating revenue, net increased $32.0 million, or 10.3%, in the third quarter of 2008 compared to the third quarter of 2007, largely as a result of higher fuel cost recovery revenue at Cleco Power.

Operating expenses increased $37.6 million, or 13.9%, in the third quarter of 2008 compared to the third quarter of 2007 primarily due to higher fuel costs at Cleco Power.  

Interest income decreased $1.2 million, or 41.9%, in the third quarter of 2008 compared to the third quarter of 2007 largely as a result of lower rates of return and lower average investment balances.

Allowance for other funds used during construction increased $8.2 million, or 86.2%, in the third quarter of 2008 compared to the same period of 2007 primarily due to increased construction activity at Rodemacher Unit 3.

Equity income from investees decreased $18.1 million, or 65.2%, in the third quarter of 2008 compared to the same period of 2007.  Other income decreased $27.5 million, or 96.7%, in the third quarter of 2008 compared to the same period of 2007.  These decreases were primarily due to amounts received by APH in 2007 relating to Cajun’s purchase of CAH’s 50% equity ownership interest in Acadia, offset by a pre-tax impairment loss recorded during the third quarter of 2007.

Other expense increased $1.0 million, or 77.3%, in the third quarter of 2008 compared to the same period of 2007 primarily due to a decrease in the cash surrender value of life insurance policies at Cleco Corporation.  Partially offsetting this increase was the absence in 2008 of APH’s payment to acquire Calpine’s interest in Acadia’s claim against Cleco Power regarding a potential electric metering error at the facility.

Interest charges increased $5.4 million, or 52.3%, in the third quarter of 2008 compared to the same period of 2007 primarily due to interest related to the March 2008 issuance of

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storm recovery bonds, the carrying cost of the tax benefits of Hurricanes Katrina and Rita storm damage costs, the storm damage surcredit, and the issuance of senior notes and solid waste disposal facility bonds at Cleco Power.  Partially offsetting this increase was the allowance for borrowed funds used during construction associated with the construction activity at Rodemacher Unit 3, interest related to draws against Cleco Power’s credit facility, and repayments of medium-term and senior notes at Cleco Power and Cleco Corporation, respectively.

Federal and state income taxes decreased $19.6 million, or 65.1%, primarily due to a decrease in pre-tax income during the third quarter of 2008 compared to the same period of 2007.  

Results of operations for Cleco Power and Midstream are more fully described below.

Cleco Power

Cleco Power’s net income in the third quarter of 2008 decreased $3.7 million, or 10.7%, compared to the third quarter of 2007.  Contributing factors include:

§   higher interest charges,

§   lower base revenue,

§   lower other operations revenue, and

§   higher other operations and maintenance expenses.

These were partially offset by:

§   higher allowance for other funds used during construction, and

§   lower taxes other than income taxes.

			FOR THE THREE MONTHS ENDED SEPTEMBER 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008		2007		VARIANCE			CHANGE
Operating revenue
Base	$	99,090	$	104,476	$	(5,386	)		(5.16	)%
Fuel cost recovery		234,846		196,386		38,460			19.58	%
Other operations		6,981		9,231		(2,250	)		(24.37	)%
Affiliate revenue		7		10		(3	)		(30.00	)%
Intercompany revenue		418		501		(83	)		(16.57	)%
Operating revenue, net		341,342		310,604		30,738			9.90	%
Operating expenses
Fuel used for electricgeneration – recoverable		90,833		94,838		4,005			4.22	%
Power purchased for utilitycustomers – recoverable		144,000		101,508		(42,492	)		(41.86	)%
Non-recoverable fuel andpower purchased		9,386		10,166		780			7.67	%
Other operations		23,242		22,739		(503	)		(2.21	)%
Maintenance		9,719		9,590		(129	)		(1.35	)%
Depreciation		18,861		19,401		540			2.78	%
Taxes other than income taxes		8,732		10,053		1,321			13.14	%
Total operating expenses		304,773		268,295		(36,478	)		(13.60	)%
Operating income	$	36,569	$	42,309	$	(5,740	)		(13.57	)%
Allowance for other funds used during construction	$	17,786	$	9,552	$	8,234			86.20	%
Interest charges	$	14,973	$	8,213	$	(6,760	)		(82.31	)%
Federal and state income taxes	$	10,566	$	10,871	$	305			2.81	%
Net income	$	30,538	$	34,198	$	(3,660	)		(10.70	)%

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(MILLION kWh)	2008			2007			FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential		1,144			1,170			(2.22	)%
Commercial		721			733			(1.64	)%
Industrial		762			786			(3.05	)%
Other retail		36			35			2.86	%
Total retail		2,663			2,724			(2.24	)%
Sales for resale		153			165			(7.27	)%
Unbilled		(134	)		(44	)		(204.55	)%
Total retail and wholesale customer sales		2,682			2,845			(5.73	)%

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008			2007			FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	51,490		$	53,190			(3.20	)%
Commercial		25,195			25,270			(0.30	)%
Industrial		14,585			14,686			(0.69	)%
Other retail		1,469			1,456			0.89	%
Storm surcharge		5,455			6,644			(17.90	)%
Total retail		98,194			101,246			(3.01	)%
Sales for resale		5,759			4,744			21.40	%
Unbilled		(4,863	)		(1,514	)		(221.20	)%
Total retail and wholesale customer sales	$	99,090		$	104,476			(5.16	)%

Cleco Power’s residential customers’ demand for electricity largely is 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 available.  Normal heating-degree days and cooling-degree days are calculated for a month by separately calculating the average actual heating- and cooling-degree days for that month over a period of 30 years.

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

					FOR THE THREE MONTHS ENDED SEPTEMBER 30,
							2008 CHANGE
	2008		2007		NORMAL		PRIOR YEAR			NORMAL
Cooling-degree days		1,541		1,601		1,468		(3.75	)%		4.97	%

Base

Base revenue during the third quarter of 2008 decreased $5.4 million, or 5.2%, compared to the same period of 2007.  The decrease was primarily due to lower electric sales to retail and wholesale customers net, resulting from hurricane-related outages and cooler weather in the third quarter of 2008 as compared to the same period in 2007.  Also contributing to the decrease in base revenue was a decrease in the amount being recovered for storm restoration costs through a monthly customer surcharge and a base rate reduction related to storm damage expenses.  The monthly cost to customers was

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reduced in March 2008 when the storm costs were financed through the issuance of storm recovery bonds by Cleco Katrina/Rita.

For information on the effects of future energy sales on Cleco Power’s financial condition, results of operations, and cash flows, see “Risk Factors — Future Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers during the third quarter of 2008 compared to the same period in 2007 increased $38.5 million, or 19.6%, primarily due to increases in the per-unit cost of power purchased for utility customers.  Partially offsetting this increase was a decrease in the per-unit cost of fuel used for electric generation and lower volumes of fuel used for electric generation and power purchased for utility customers.  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 fuel adjustment clause, which enables Cleco Power to pass on to its customers substantially all such charges.  Approximately 96% of Cleco Power’s total fuel cost during the third quarter of 2008 was regulated by the LPSC, while the remainder was regulated by the FERC.  Recovery of fuel adjustment clause costs is subject to refund until approval is received from the LPSC.  For information on Cleco Power’s ongoing 2003 through 2004 fuel audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Contingencies — LPSC Fuel Audit.”

Other Operations

Other operations revenue decreased $2.3 million, or 24.4%, in the third quarter of 2008 compared to the third quarter of 2007 primarily due to a $4.9 million mark-to-market loss in the third quarter of 2008 compared to a $0.5 million mark-to-market loss in the third quarter of 2007 relating to economic hedge transactions associated with fixed-price power being provided to a wholesale customer.  These losses were primarily due to the volatility in natural gas prices.  Partially offsetting this decrease was $0.1 million of realized gains from these hedge transactions in the third quarter of 2008 compared to $0.2 million of realized losses in the third quarter of 2007 and $1.8 million of higher transmission revenue, customer fees, and pole attachment revenue.  For information on Cleco’s energy commodity activities, see Item 3, “Quantitative and Qualitative Disclosures about Market Risk — Risk Overview — Commodity Price Risks.”

Operating Expenses

Operating expenses increased $36.5 million, or 13.6%, in the third quarter of 2008 compared to the same period of 2007. Fuel used for electric generation (recoverable) decreased $4.0 million, or 4.2%, primarily due to lower per-unit costs and volumes of fuel used as compared to the same period of 2007.  Power purchased for utility customers (recoverable)

increased $42.5 million, or 41.9%, largely due to higher per-unit costs of purchased power.  Partially offsetting this increase was lower volumes of purchased power.  Fuel used for electric generation and power purchased for utility customers generally are influenced by natural gas prices, as well as availability of transmission.  However, other factors such as scheduled and/or unscheduled outages, unusual maintenance or repairs, or other developments may affect fuel used for electric generation and power purchased for utility customers.  Non-recoverable fuel and power purchased decreased $0.8 million, or 7.7%, primarily due to a $1.1 million reclassification from non-recoverable to recoverable fuel expense during the third quarter of 2008 and $0.1 million of lower other miscellaneous non-recoverable expenses.  Partially offsetting these decreases was $0.4 million of higher capacity payments made during the third quarter of 2008.  Other operations expense increased $0.5 million, or 2.2%, primarily due to higher employee benefit costs and higher professional fees.  Taxes other than income taxes decreased $1.3 million, or 13.1%, primarily due to a change in the accounting treatment of city franchise fees as a result of an LPSC order.

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction increased $8.2 million, or 86.2%, during the third quarter of 2008 compared to the same period of 2007 primarily due to increased construction activity at Rodemacher Unit 3.  Allowance for other funds used during construction comprised 58.2% of Cleco Power’s net income for the third quarter of 2008, compared to 27.9% for the third quarter of 2007.

Interest Charges

Interest charges increased $6.8 million, or 82.3%, during the third quarter of 2008 compared to the same period of 2007 primarily due to $4.2 million related to the May 2008 issuance of senior notes, $2.2 million related to the March 2008 issuance of storm recovery bonds, $0.8 million related to the November 2007 issuance of solid waste disposal facility bonds, $2.5 million related primarily to the carrying cost of the tax benefits of Hurricanes Katrina and Rita storm damage costs, and $0.6 million related primarily to the storm damage surcredit.  Partially offsetting this increase was $1.4 million of allowance for borrowed funds used during construction associated with the construction activity at Rodemacher Unit 3, $0.4 million related to the repayment of medium-term notes and $1.7 million related primarily to draws against Cleco Power’s credit facility.

Income Taxes

Income tax expense decreased $0.3 million, or 2.8%, primarily due to a decrease in pre-tax income during the third quarter of 2008 compared to the same period of 2007.  

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Midstream

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008			2007			VARIANCE			CHANGE
Operating revenue
Other operations	$	-		$	4		$	(4	)		(100.00	)%
Affiliate revenue		2,131			1,105			1,026			92.85	%
Operating revenue		2,131			1,109			1,022			92.16	%
Operating expenses
Other operations		1,717			1,024			(693	)		(67.68	)%
Maintenance		938			506			(432	)		(85.38	)%
Depreciation		78			76			(2	)		(2.63	)%
Taxes other than incometaxes		94			74			(20	)		(27.03	)%
Total operatingexpenses		2,827			1,680			(1,147	)		(68.27	)%
Operating loss	$	(696	)	$	(571	)	$	(125	)		(21.89	)%
Equity income from investees	$	9,223		$	27,532		$	(18,309	)		(66.50	)%
Other income	$	-		$	27,924		$	(27,924	)		(100.00	)%
Other expense	$	(5	)	$	(1,250	)	$	1,245			99.60	%
Interest charges	$	1,566		$	5,894		$	4,328			73.43	%
Federal and state income tax expense	$	2,383		$	17,947		$	15,564			86.72	%
Net income	$	4,573		$	30,415		$	(25,842	)		(84.96	)%

Midstream’s net income in the third quarter of 2008 decreased $25.8 million, or 85.0%, compared to the third quarter of 2007.  Factors affecting Midstream during the third quarter of 2008 are described below.

Operating Revenue and Operating Expenses

Operating revenue increased $1.0 million, or 92.2%, in the third quarter of 2008 compared to the third quarter of 2007.  Operating expenses increased $1.1 million, or 68.3%, in the third quarter of 2008 compared to the third quarter of 2007.  The increases were primarily due to the accounting treatment of Acadia's power plant operations, maintenance, and engineering services resulting from Cajun's purchase of Calpine’s 50% ownership interest in Acadia in September 2007.  Prior to September 2007, Calpine employees provided power plant operations, maintenance, and engineering services to Acadia.  Subsequent to September 2007, these services were provided by Midstream.  As a result, revenue and expenses associated with plant operations for Acadia are included in affiliate revenue and operating expenses, respectively.

Equity Income from Investees

Equity income from investees decreased $18.3 million, or 66.5%, during the third quarter of 2008 compared to the same period of 2007.  The decrease was due to a $15.2 million decrease in equity earnings at APH and a $3.1 million decrease in equity earnings at Evangeline.  The decrease at APH was primarily due to the absence of APH’s priority distributions from Acadia that were received at the closing of Cajun’s purchase of CAH’s 50% equity ownership interest in Acadia, partially offset by an impairment loss recorded in the third quarter of 2007.  The decrease at Evangeline was primarily due to higher maintenance expenses and write-offs of obsolete equipment, both related to an unplanned 2008 outage.  For additional information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Equity Investment in Investees.”  

Other Income

Other income decreased $27.9 million, or 100.0%, during the third quarter of 2008 compared to the same period of 2007 as a result of amounts received by APH during the third quarter of 2007 relating to Cajun's purchase of CAH's 50% equity ownership interest in Acadia.  Of this amount, $25.0 million represented consideration of APH's guaranteed payments from Acadia and $2.9 million represented break-up fees.

Other Expense

Other expense decreased $1.2 million, or 99.6%, during the third quarter of 2008 compared to the same period of 2007.  This decrease is primarily due to APH's payment during the third quarter of 2007 to acquire Calpine's interest in Acadia's claim against Cleco Power regarding a potential electric metering error at the Acadia facility.

Interest Charges

Interest charges decreased $4.3 million, or 73.4%, during the third quarter of 2008 compared to the same period of 2007 primarily due to lower interest rates and a lower balance on affiliate debt relating to APH’s investment in Acadia.

Income Taxes

Income tax expense decreased $15.6 million, or 86.7%, primarily due to a decrease in pre-tax income during the third quarter of 2008 compared to the same period of 2007.

Comparison of the Nine Months Ended September 30, 2008, and 2007

Cleco Consolidated

				FOR THE NINE MONTHS ENDED SEPTEMBER 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008			2007			VARIANCE			CHANGE
Operating revenue, net	$	841,013		$	796,942		$	44,071			5.53	%
Operating expenses		744,990			713,051			(31,939	)		(4.48	)%
Operating income	$	96,023		$	83,891		$	12,132			14.46	%
Interest income	$	4,544		$	8,030		$	(3,486	)		(43.41	)%
Allowance for other funds used during construction	$	46,462		$	21,715		$	24,747			113.96	%
Equity income from investees	$	2,723		$	97,608		$	(94,885	)		(97.21	)%
Other income	$	1,094		$	28,644		$	(27,550	)		(96.18	)%
Other expense	$	(4,322	)	$	(2,536	)	$	(1,786	)		(70.43	)%
Interest charges	$	35,358		$	34,284		$	(1,074	)		(3.13	)%
Federal and state income taxes	$	22,573		$	63,187		$	40,614			64.28	%
Net income applicable to common stock	$	88,558		$	139,435		$	(50,877	)		(36.49	)%

Consolidated net income applicable to common stock decreased $50.9 million, or 36.5%, in the first nine months of 2008 compared to the first nine months of 2007, primarily due to decreased Midstream and corporate earnings.  Partially offsetting these decreases were increased Cleco Power earnings.  

Operating revenue, net increased $44.1 million, or 5.5%, in the first nine months of 2008 compared to the same period of

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 2007 primarily as a result of higher fuel cost recovery and other operations revenues at Cleco Power.  

Operating expenses increased $31.9 million, or 4.5%, in the first nine months of 2008 compared to the first nine months of 2007 primarily due to higher fuel costs at Cleco Power.  

Interest income decreased $3.5 million, or 43.4%, in the first nine months of 2008 compared to the first nine months of 2007 primarily due to lower rates of return and lower average investment balances.

Allowance for other funds used during construction increased $24.7 million, or 114.0%, in the first nine months of 2008 compared to the same period of 2007 primarily due to increased construction activity at Rodemacher Unit 3.

Equity income from investees decreased $94.9 million, or 97.2%, in the first nine months of 2008 compared to the same period of 2007.  The decrease primarily was due to decreased equity earnings at APH, resulting from the absence of the 2007 settlement of Acadia’s claims against CES and Calpine and amounts received by APH during 2007 relating to Cajun’s purchase of CAH’s 50% equity ownership interest in Acadia, offset by a pre-tax impairment loss.

Other income decreased $27.6 million, or 96.2%, in the first nine months of 2008 compared to the first nine months of 2007 as a result of amounts received by APH during 2007 relating to Cajun’s purchase of CAH’s 50% equity ownership interest in Acadia.

Other expense increased $1.8 million, or 70.4%, in the first nine months of 2008 compared to the first nine months of 2007 primarily due to a decrease in the cash surrender value of life insurance policies at Cleco Corporation.  Partially offsetting this increase was the absence in 2008 of penalties related to the FERC Staff investigation and the absence in 2008 of APH’s payment to acquire Calpine’s interest in Acadia’s claim against Cleco Power regarding a potential electric metering error at the Acadia facility.

Interest charges increased $1.1 million, or 3.1%, in the first nine months of 2008 compared to the same period of 2007 primarily due to the carrying cost of the tax benefits of Hurricanes Katrina and Rita storm damage costs, and interest related to the issuances of new senior notes, solid waste disposal facility bonds and storm recovery bonds.  Partially offsetting this increase was the allowance for borrowed funds used during construction associated with the construction activity at Rodemacher Unit 3, the repayments of medium-term and senior notes at Cleco Power and Cleco Corporation, respectively, interest related to the storm damage surcredit, and interest related to retainage from Shaw.

Federal and state income taxes decreased $40.6 million, or 64.3%, during the first nine months of 2008 compared to the same period of 2007 primarily due to a decrease in pre-tax income.  

Results of operations for Cleco Power and Midstream are fully described below.

Cleco Power

Cleco Power’s net income in the first nine months of 2008 increased $25.7 million, or 39.4%, compared to the first nine months of 2007.  Contributing factors include:

§   higher allowance for other funds used during construction,

§   lower other operations and maintenance expenses,

§   lower taxes other than income taxes,

§   higher other operations revenue, and

§   lower depreciation expense.

These were partially offset by:

§   higher interest charges,

§   lower base revenue, and

§   higher non-recoverable fuel and power purchased.

			FOR THE NINE MONTHS ENDED SEPTEMBER 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008		2007		VARIANCE			CHANGE
Operating revenue
Base	$	270,933	$	272,765	$	(1,832	)		(0.67	)%
Fuel cost recovery		532,464		493,026		39,438			8.00	%
Other operations		29,757		26,413		3,344			12.66	%
Affiliate revenue		21		35		(14	)		(40.00	)%
Intercompany revenue		1,506		1,505		1			0.07	%
Operating revenue, net		834,681		793,744		40,937			5.16	%
Operating expenses
Fuel used for electricgeneration – recoverable		154,296		196,872		42,576			21.63	%
Power purchased for utilitycustomers – recoverable		378,137		296,071		(82,066	)		(27.72	)%
Non-recoverable fuel andpower purchased		21,952		20,116		(1,836	)		(9.13	)%
Other operations		65,862		71,318		5,456			7.65	%
Maintenance		32,556		33,587		1,031			3.07	%
Depreciation		56,886		58,784		1,898			3.23	%
Taxes other than incometaxes		24,727		28,540		3,813			13.36	%
Total operatingexpenses		734,416		705,288		(29,128	)		(4.13	)%
Operating income	$	100,265	$	88,456	$	11,809			13.35	%
Allowance for other funds used during construction	$	46,462	$	21,715	$	24,747			113.96	%
Interest charges	$	31,435	$	27,883	$	(3,552	)		(12.74	)%
Federal and state income taxes	$	27,135	$	20,517	$	(6,618	)		(32.26	)%
Net income	$	90,807	$	65,146	$	25,661			39.39	%

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(MILLION kWh)	2008		2007		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential		2,789		2,789		-
Commercial		1,874		1,869		0.27	%
Industrial		2,177		2,255		(3.46	)%
Other retail		101		102		(0.98	)%
Total retail		6,941		7,015		(1.05	)%
Sales for resale		327		384		(14.84	)%
Unbilled		12		67		(82.09	)%
Total retail and wholesale customer sales		7,280		7,466		(2.49	)%

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2008		2007		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	121,236	$	122,567		(1.09	)%
Commercial		71,258		70,219		1.48	%
Industrial		41,580		42,398		(1.93	)%
Other retail		4,205		4,323		(2.73	)%
Storm surcharge		15,641		18,295		(14.51	)%
Total retail		253,920		257,802		(1.51	)%
Sales for resale		15,430		12,675		21.74	%
Unbilled		1,583		2,288		(30.81	)%
Total retail and wholesale customer sales	$	270,933	$	272,765		(0.67	)%

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

					FOR THE NINE MONTHS ENDED SEPTEMBER 30,
							2008 CHANGE
	2008		2007		NORMAL		PRIOR YEAR			NORMAL
Heating-degree days		860		950		1,035		(9.47	)%		(16.91	)%
Cooling-degree days		2,699		2,635		2,437		2.43	%		10.75	%

Base

Base revenue during the first nine months of 2008 decreased $1.8 million, or 0.7%, compared to the same period in 2007. The decrease was primarily due to lower electric sales to retail and wholesale customers, generally resulting from milder winter weather, hurricane-related outages, and a decrease in the amount being recovered for storm restoration costs through a monthly customer surcharge and a base rate reduction related to storm damage expenses.  The monthly cost to customers was reduced in March 2008 when the storm costs were financed through the issuance of storm recovery bonds by Cleco Katrina/Rita.  These decreases were partially offset by higher sales to municipal customers.

For information on the effects of future energy sales on Cleco Power’s financial condition, results of operations, and cash flows, see “Risk Factors — Future Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers during the first nine months of 2008 compared to the same period in 2007 increased $39.4 million, or 8.0%, primarily due to increases in the per-unit cost of power purchased for utility customers and higher volumes of fuel used for electric generation.  Partially offsetting the increase were decreased volumes of power purchased for utility customers and decreases in the per-unit cost of fuel used for electric generation.  For information on Cleco Power’s ability to recover fuel and purchase power costs, see “— Comparison of the Three Months Ended September 30, 2008, and 2007 — Cleco Power — Fuel Cost Recovery.”

Other Operations

Other operations revenue increased $3.3 million, or 12.7%, in the first nine months of 2008 compared to the first nine months of 2007 primarily due to higher transmission revenue, customer fees, and pole attachment revenue.  

Operating Expenses

Operating expenses increased $29.1 million, or 4.1%, in the first nine months of 2008 compared to the same period of 2007. Fuel used for electric generation (recoverable) decreased $42.6 million, or 21.6%, primarily due to lower per-unit costs of fuel used as compared to the same period of 2007, as a result of realized gains on fuel hedging due to the price volatility of natural gas.  Partially offsetting this decrease were higher volumes of fuel used for electric generation, primarily from the absence in 2008 of plant outages as compared to the same period of 2007.  Power purchased for utility customers (recoverable) increased $82.1 million, or 27.7%, primarily due to higher per-unit costs of purchased power.  Partially offsetting this increase were lower volumes of purchased power.  Fuel used for electric generation and power purchased for utility customers generally are influenced by natural gas prices, as well as availability of transmission.  However, other factors such as scheduled and/or unscheduled outages, unusual maintenance or repairs, or other developments may affect fuel used for electric generation and power purchased for utility customers.  Non-recoverable fuel and power purchased increased $1.8 million, or 9.1%, primarily due to higher capacity payments made during the first nine months of 2008.  Other operations expense decreased $5.5 million, or 7.7%, primarily due to lower professional fees, and lower employee benefit costs and administrative expenses. Maintenance expenses during the first nine months of 2008 decreased $1.0 million, or 3.1%, compared to the same period of 2007 primarily due to less generating station maintenance work performed during the first nine months of 2008.  Depreciation expense decreased $1.9 million, or 3.2%, primarily due to $2.9 million of lower storm amortization costs, partially offset by $1.0 million related to normal recurring additions to fixed assets.  Taxes other than income taxes decreased $3.8 million, or 13.4%, primarily due to a change in the accounting treatment of city franchise fees as a result of an LPSC order.

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction increased $24.7 million, or 114.0%, during the first nine months of 2008 compared to the same period of 2007 primarily due to increased construction activity at Rodemacher Unit 3.  Allowance for other funds used during construction comprised 51.2% of Cleco Power’s net income for the first nine months of 2008, compared to 33.3% for the first nine months of 2007.

Interest Charges

Interest charges increased $3.6 million, or 12.7%, during the first nine months of 2008 compared to the same period of 2007 primarily due to $5.0 million related to the March 2008 issuance of storm recovery bonds, $5.5 million related to the May 2008 issuance of senior notes, $2.8 million related to the November 2007 issuance of solid waste disposal facility

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

bonds, and $5.1 million related primarily to the carrying cost of the tax benefits of Hurricanes Katrina and Rita storm damage costs.  Partially offsetting this increase was $6.9 million of allowance for borrowed funds used during construction associated with the construction activity at Rodemacher Unit 3, $5.2 million related primarily to the storm damage surcredit, $1.7 million related to the repayment of medium-term notes during 2007, and $1.0 million related to interest on retainage from Shaw.

Income Taxes

Income tax expense increased $6.6 million, or 32.3%, during the first nine months of 2008 compared to the same period of 2007, primarily due to an increase in pre-tax income.

Midstream

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2008			2007			VARIANCE			CHANGE
Operating revenue
Other operations	$	1		$	15		$	(14	)		(93.33	)%
Affiliate revenue		5,892			3,251			2,641			81.24	%
Operating revenue		5,893			3,266			2,627			80.43	%
Operating expenses
Other operations		4,662			4,231			(431	)		(10.19	)%
Maintenance		2,667			1,568			(1,099	)		(70.09	)%
Depreciation		230			230			-			-
Taxes other than incometaxes		272			206			(66	)		(32.04	)%
Gain on sales of assets		(99	)		-			99			-
Total operatingexpenses		7,732			6,235			(1,497	)		(24.01	)%
Operating loss	$	(1,839	)	$	(2,969	)	$	1,130			38.06	%
Interest income	$	-		$	1,044		$	(1,044	)		(100.00	)%
Equity income from investees	$	1,660		$	96,460		$	(94,800	)		(98.28	)%
Other income	$	-		$	27,924		$	(27,924	)		(100.00	)%
Other expense	$	(17	)	$	(1,252	)	$	1,235			98.64	%
Interest charges	$	5,057		$	16,457		$	11,400			69.27	%
Federal and state income tax (benefit) expense	$	(2,298	)	$	40,008		$	42,306			105.74	%
Net (loss) income	$	(2,955	)	$	64,742		$	(67,697	)		(104.56	)%

Factors affecting Midstream during the first nine months of 2008 are described below.

Operating Revenue and Operating Expenses

Operating revenue increased $2.6 million, or 80.4%, in the first nine months of 2008 compared to the first nine months of 2007.  Operating expenses increased $1.5 million, or 24.0%, in the first nine months of 2008 compared to the first nine months of 2007.  The increases were primarily due to the accounting treatment of Acadia’s power plant operations, maintenance, and engineering services resulting from Cajun’s purchase of Calpine’s 50% ownership interest in Acadia in September 2007.  Prior to September 2007, Calpine employees provided power plant operations, maintenance, and engineering services to Acadia.  Subsequent to September 2007, these services were provided by Midstream.  As a result, revenue and expenses associated with plant operations for Acadia are included in affiliate revenue and operating expenses, respectively.

Interest Income

Interest income decreased $1.0 million, or 100.0%, in the first nine months of 2008 compared to the first nine months of 2007.  The decrease was primarily due to lower investment balances at APH.

Equity Income from Investees

Equity income from investees decreased $94.8 million, or 98.3%, in the first nine months of 2008 compared to the first nine months of 2007.  The decrease was due to a $93.4 million decrease in equity earnings at APH and a $1.4 million decrease in equity earnings at Evangeline.  This decrease at APH was primarily due to the absence in 2008 of the settlement of Acadia’s pre-petition unsecured claims against CES and Calpine and amounts received by APH in 2007 relating to CAH’s 50% equity ownership interest in Acadia.  Partially offsetting these decreases was an impairment loss recorded during 2007.  The decrease at Evangeline was primarily due to higher maintenance expenses.  For additional information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Equity Investment in Investees.”

Other Income

Other income decreased $27.9 million, or 100.0%, in the first nine months of 2008 compared to the first nine months of 2007 as a result of amounts being received by APH during 2007 relating to Cajun’s purchase of CAH’s 50% equity ownership interest in Acadia.  Of this amount, $25.0 million represented consideration of APH’s guaranteed payments from Acadia and $2.9 million represented break-up fees.

Other Expense

Other expense decreased $1.2 million, or 98.6%, in the first nine months of 2008 compared to the first nine months of 2007.  This decrease is primarily due to APH’s payment during 2007 to acquire Calpine’s interest in Acadia’s claim against Cleco Power regarding a potential electric metering error at the Acadia facility.

Interest Charges

Interest charges decreased $11.4 million, or 69.3%, during the first nine months of 2008 compared to the same period of 2007 primarily due to a lower interest rate and a lower balance on affiliate debt relating to APH’s investment in Acadia.

Income Taxes

Income tax expense decreased $42.3 million, or 105.7%, during the first nine months of 2008 compared to the same period of 2007 primarily due to a decrease in pre-tax income.

45 

CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

At September 30, 2008, Moody’s and Standard & Poor’s outlooks for both Cleco Corporation and Cleco Power were stable.  If Cleco Corporation’s or Cleco Power’s credit rating were to be downgraded by Moody’s or Standard & Poor’s, Cleco Corporation and/or Cleco Power would be required to pay additional fees and higher interest rates under their bank credit, other debt agreements, and collateral for derivatives.  

On May 30, 2008, JPMorgan Chase & Co. announced it completed the acquisition of the Bear Stearns Companies Inc.  JPMorgan Chase & Co. is guaranteeing the obligations of Bear Stearns Companies Inc. and its subsidiaries, including obligations under the Evangeline Tolling Agreement.  At September 30, 2008, Moody’s outlook for Evangeline was stable.  The tolling agreement is the principal source of cash flow for Evangeline.  For more information regarding Evangeline’s tolling agreement, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risk and Uncertainties — Evangeline Tolling Agreement.”

In August 2005, Cleco Power entered into an EPC contract with Shaw to construct Rodemacher Unit 3.  Under the terms of the Amended EPC Contract, in the event Cleco Power does not maintain a senior unsecured credit rating of either: (i) Baa3 or better from Moody’s or (ii) BBB- or better from Standard & Poor’s, Cleco Power will be required to provide a letter of credit to Shaw in the amount of $20.0 million.  In the event of further downgrade to both of its credit ratings to: (i) Ba2 or below from Moody’s, and (ii) BB or below from Standard & Poor’s, Cleco Power will be required to provide an additional $15.0 million letter of credit to Shaw.

With respect to any open power or natural gas hedging positions that Cleco may initiate in the future, Cleco may be required to provide credit support (or pay liquidated damages).  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 transaction, changes in the market price of power and natural gas, the changes in open power and gas positions, 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.  For additional information, as well as a discussion of other factors affecting Cleco’s financial condition relating to its credit ratings, the credit ratings of its counterparties, and other credit-related risks, please read Note 1 — “Summary of Significant Accounting Policies — Risk Management” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and Credit-Related Risks — Credit Ratings and Counterparties” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Debt

At September 30, 2008, Cleco Corporation and Cleco Power were in compliance with the covenants in their credit facilities.  If Cleco Corporation were to default under the covenants in its various credit facilities, it would be unable to borrow additional funds under the facilities.  Further, if Cleco Power were to default under its credit facility, Cleco Corporation would be considered in default under its credit facility.  The bonds issued by Evangeline are non-recourse to Cleco Corporation, and a default on these bonds would not be considered a default under Cleco Corporation’s credit facility.  If Cleco Corporation’s credit rating were to be downgraded one level below investment grade, Cleco Corporation would be required to pay fees and interest at a rate of 0.45% higher than the current level for its $150.0 million credit facility.  The same downgrade at Cleco Power would require Cleco Power to pay fees and interest at a rate of 0.70% higher than the current level on its $275.0 million credit facility.  

Cleco Consolidated

Cleco had no short-term debt outstanding at September 30, 2008, or December 31, 2007.  At September 30, 2008, Cleco’s long-term debt outstanding was $1.1 billion, of which $63.5 million was long-term debt due within one year, compared to $869.1 million at December 31, 2007, which included $100.0 million of long-term debt due within one year.  For additional information, see “— Cleco Corporation (Holding Company Level)” and “— Cleco Power” below.

At September 30, 2008, Cleco had a working capital surplus of $43.7 million compared to $48.1 million at December 31, 2007.  The $4.4 million decrease in working capital is primarily due to additions to property, plant and equipment, construction costs for Rodemacher Unit 3, payment of dividends, and the mark-to-mark losses on gas hedges, partially offset by the movement of $33.1 million non-current restricted cash reserved at Cleco Power for storm restoration costs to current restricted cash.  An uncommitted bank line of credit up to $10.0 million also is available to support Cleco’s working capital needs.

Cash and cash equivalents available at September 30, 2008, were $77.4 million combined with $362.0 million facility capacity ($87.0 million from Cleco Corporation and $275.0 million from Cleco Power) for total liquidity of $439.4 million.  Cash and cash equivalents decreased $51.6 million, when compared to December 31, 2007, primarily due to additions to property, plant and equipment, including Rodemacher Unit 3, partially offset by cash received from the issuance of bonds.

Cleco Corporation (Holding Company Level)

Cleco Corporation had no short-term debt outstanding at September 30, 2008, or December 31, 2007. At September 30, 2008, Cleco Corporation’s long-term debt outstanding was $48.0 million, of which none was due within one year, compared to $100.0 million due within one year at December 31,

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

2007.  Cleco Corporation’s 7.00% Senior Notes were repaid May 1, 2008 upon maturity.

Cleco Corporation’s $150.0 million five-year credit facility matures on June 2, 2011.  This facility provides for working capital and other needs.  Cleco Corporation’s borrowing costs under the facility are equal to LIBOR plus 0.65%, including facility fees.  

At September 30, 2008, Cleco Corporation’s capacity was reduced by $48.0 million in draws on Cleco Corporation’s $150.0 million, five-year facility with an interest rate of 3.02%, and off-balance sheet commitments of $15.0 million, leaving available capacity of $87.0 million.  For more information about these commitments, see “— Off-Balance Sheet Commitments.”  An uncommitted bank line of credit up to $10.0 million also is available to support Cleco’s working capital needs.

Cash and cash equivalents available at September 30, 2008, were $9.4 million, combined with $87.0 million facility capacity for total liquidity of $96.4 million.  Cash and cash equivalents decreased $107.7 million, when compared to December 31, 2007, primarily due to the payment of dividends and the settlement of affiliate payables and receivables.  

Cleco Power

There was no short-term debt outstanding at Cleco Power at September 30, 2008, or December 31, 2007.  At September 30, 2008, Cleco Power’s long-term debt outstanding was $1.0 billion, of which $63.5 million was long-term debt due within one year, compared to $769.1 million at December 31, 2007, of which none was due within one year.

At September 30, 2008, there were no borrowings under Cleco Power’s $275.0 million, five-year facility, which matures in June 2011.  An uncommitted bank line of credit up to $10.0 million also is available to support Cleco Power’s working capital needs.

On June 3, 2008, Cleco Power issued $250.0 million aggregate principal amount of senior unsecured notes at an interest rate of 6.65%.  The notes mature on June 15, 2018.  The proceeds from this offering were used for general corporate purposes, including financing a portion of the construction costs of Rodemacher Unit 3 and repaying borrowings under Cleco Power’s $275.0 million, five-year credit facility, a portion of which was used to fund some of the construction costs of Rodemacher Unit 3.

On March 6, 2008, Cleco Katrina/Rita issued $180.6 million aggregate principal amount of senior secured storm recovery bonds.  The bonds were issued in two tranches, with one tranche of $113.0 million initial principal amount with an expected average life of five years and bearing interest of 4.41% per annum.  The other tranche was for $67.6 million initial principal amount with an expected average life of 10.58 years and bearing interest at 5.61% per annum.  The resulting weighted average interest rate of both tranches is 4.86% per annum, and the effective weighted average life is seven years.  Proceeds from the bonds were used to repay loans under Cleco Power’s revolving credit facility and for general corporate purposes.  Debt service for the bonds will be paid by a special monthly storm recovery surcharge paid by all Cleco Power's retail customers, as discussed below.

Cash and cash equivalents available at September 30, 2008, were $68.0 million, combined with $275.0 million facility capacity for total liquidity of $343.0 million.  Cash and cash equivalents increased $56.0 million when compared to December 31, 2007, primarily due to cash received from the issuance of bonds, partially offset by additions to property, plant and equipment, including Rodemacher Unit 3.

In February 2006, the LPSC approved Cleco Power’s plans to build Rodemacher Unit 3.  Terms of the approval included acceptance of an LPSC Staff recommendation that Cleco Power collect from customers an amount equal to 75% of the carrying costs of capital during the construction phase of the unit.  Cleco Power had collected $71.6 million and $31.5 million at September 30, 2008, and December 31, 2007, respectively.  In addition to this recovery, Cleco Power plans to fund the construction costs related to Rodemacher Unit 3 by utilizing cash on hand, available funds from its credit facility, the issuance of long-term debt, and the receipt of equity contributions from Cleco Corporation.

The Louisiana State Bond Commission has approved the issuance of up to $200.0 million of tax-exempt bonds to finance the qualifying costs of the solid waste disposal facilities at Rodemacher Unit 3.  The Governor’s office allocated $60.0 million for issuance in 2006, and another $60.0 million for issuance in 2007.  These bonds were issued by the Rapides Finance Authority in November 2006 and November 2007, respectively.  The bonds issued in 2006 have a fixed interest rate of 4.70% per annum, and the maturity date is November 1, 2036.  The 2006 bonds may be called at the option of the issuer at the direction of Cleco Power after November 1, 2016.  The bonds issued in 2007 initially had a variable interest rate which was reset weekly via an auction agent.  In March 2008, Cleco Power exercised a provision in the bond indenture to change the variable interest rate to a fixed interest rate through a reoffering of the bonds.  As a part of the reoffering, the holders of the original auction rate bonds were required to tender them.  The reoffered bonds have a five-year term with a fixed rate of 5.25% per annum, with the option to call at the end of the five years.  If Cleco Power does not call the bonds at the end of the five years, the bonds will become variable rate.  Cleco Power currently plans to remarket the bonds at the end of the five-year period.  The maturity date of the 2007 bonds is November 1, 2037.  Again in 2008, Cleco Power applied for $32.0 million of volume cap allocation, which is the remainder of the $152.9 million of qualifying costs that have been identified.  In July 2008, the Governor signed an order granting the $32.0 million of volume cap allocation.  On October 2, 2008, the Rapides Finance Authority issued, for the benefit of Cleco Power, $32.0 million of its revenue bonds with a maturity date of October 1, 2038.  The bonds bear interest at 6.0% per annum until October 1, 2011, at which time they are subject to mandatory tender for purchase at par.  Cleco Power plans to remarket the bonds at the end of the three-year period.

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

Storm restoration costs from Hurricanes Katrina and Rita totaled $158.0 million.  During 2006, the LPSC agreed to an interim increase in rates of $23.4 million annually over a ten-year period to recover approximately $161.8 million of estimated storm restoration costs, until a review of the costs by the LPSC was completed.  In March 2007, after completing this review, Cleco Power and the LPSC Staff signed a settlement term sheet allowing the recovery and securitization of essentially all of Cleco Power’s Hurricanes Katrina and Rita storm costs, along with the funding and securitization of an approximately $50.0 million reserve for future storm costs.  The agreement also allowed Cleco Power to recover debt service costs and other storm related expenses through a customer billing surcharge.  For each of the nine-month periods ended September 30, 2008, and 2007, Cleco Power collected $15.6 million and $18.3 million, respectively, of storm recovery surcharges.  For more information regarding storm restoration costs, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 4 — Regulatory Assets and Liabilities — Deferred Storm Restoration Costs - - Katrina/Rita.”

Cleco Power has identified certain generating, transmission, and distribution construction projects in the Gulf Opportunities Zone (GO Zone) areas.  Cleco Power filed an application with the Louisiana State Bond Commission requesting $100.0 million to fund these projects, and approval was received in May 2008.  Management continues to monitor the tax-exempt municipal bond market and is working toward the Louisiana Public Facilities Authority issuing the GO Zone bonds on behalf of Cleco Power later this year.

Midstream

Midstream had no debt outstanding at September 30, 2008, or December 31, 2007.

Evangeline, which is accounted for under the equity method, had no short-term debt outstanding at September 30, 2008, or December 31, 2007.  Evangeline had $168.9 million and $177.1 million of long-term debt outstanding at September 30, 2008, and December 31, 2007, respectively, in the form of 8.82% senior secured bonds due in 2019.  Of these amounts, $7.1 million and $8.2 million were due within one year at September 30, 2008, and December 31, 2007, respectively.  The bonds issued by Evangeline are non-recourse to Cleco Corporation. 

Restricted Cash

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 general corporate purposes.  At September 30, 2008, and December 31, 2007, $62.6 million and $18.0 million of cash, respectively, were restricted.  At September 30, 2008, the $62.6 million of restricted cash consisted of $0.1 million under the Diversified Lands mitigation escrow, $51.9 million reserved at Cleco Power for future storm restoration costs, and $10.6 million at Cleco Katrina/Rita restricted for payment of operating expenses, interest and principal on storm securitization bonds under the storm recovery bonds loan agreement.  Restricted cash at Cleco Power at September 30, 2008, increased $44.6 million compared to December 31, 2007, primarily due to the establishment of the reserve for future storm restoration costs, partially offset by the release of funds for construction at Rodemacher Unit 3.  On October 9, 2008, Cleco Power received approval from the LPSC to utilize a portion of the $51.9 million storm reserve to fund operations and maintenance expenses related to damage caused by Hurricanes Gustav and Ike, which will occur in the fourth quarter of 2008.  Restricted cash at Cleco Katrina/Rita at September 30, 2008, increased $10.6 million compared to December 31, 2007, due to the issuance of the storm recovery bonds.  

The restricted cash at Evangeline is not included in restricted cash on Cleco Corporation’s Condensed Consolidated Balance Sheets due to the equity method of accounting.  Evangeline’s restricted cash at September 30, 2008, and December 2007, was $31.5 million and $33.3 million, respectively.  This cash is restricted under Evangeline’s senior secured bond indenture.

Contractual Obligations and Other Commitments

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 the Consolidated Balance Sheets while other commitments, some firm and some based on uncertainties, are not reflected in the consolidated financial statements.  

For additional information regarding Cleco’s Contractual Obligations and Other Commitments, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements — Contractual Obligations and Other Commitments” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Contingencies — New Market Tax Credits” of this Form 10-Q.

Off-Balance Sheet Commitments

Cleco Corporation 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 Corporation’s subsidiaries and equity investees (affiliates). Cleco Corporation 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 Corporation had not provided the off-balance sheet commitments, the desired counterparties may not have contracted with Cleco’s affiliates, or may have contracted with them at terms less favorable to its affiliates.

The off-balance sheet commitments are not recognized on Cleco’s Condensed Consolidated Balance Sheets, because it

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has been determined that Cleco’s affiliates are able to perform the obligations under their contracts and that it is not probable that payments by Cleco will be required. Some of these commitments reduce borrowings available to Cleco Corporation under its credit facility pursuant to the terms of the credit facility.  Cleco’s off-balance sheet commitments as of September 30, 2008, are summarized in the following table, and a discussion of the off-balance sheet commitments follows the table. The discussion should be read in conjunction with the table to understand the impact of the off-balance sheet commitments on Cleco’s financial condition.

							AT SEPTEMBER 30, 2008
							REDUCTIONS TO THE
							AMOUNT AVAILABLE
							TO BE DRAWN ON
	FACE				NET		CLECO CORPORATION’S
(THOUSANDS)	AMOUNT		REDUCTIONS		AMOUNT		CREDIT FACILITY
Cleco Corporation
Guarantee issued to Entergy companies for performance obligations of Perryville	$	277,400	$	135,000	$	142,400	$	328
Guarantees issued to purchasers of the assets of Cleco Energy		1,400		-		1,400		1,400
Obligations under standby letter of credit issued to the Evangeline Tolling Agreement counterparty		15,000		-		15,000		15,000
Guarantee issued to Entergy Mississippi on behalf of Attala		500		-		500		500
Cleco Power
Obligations under standby letter of credit issued to the Louisiana Department of Labor		525		-		525		-
Obligations under the Lignite Mining Agreement		6,070		-		6,070		-
Total	$	300,895	$	135,000	$	165,895	$	17,228

Cleco Corporation provided a limited guarantee to Entergy Louisiana and Entergy Gulf States for Perryville’s performance, indemnity, representation, and warranty obligations under the Sale Agreement, the Power Purchase Agreement, and other ancillary agreements related to the sale of the Perryville facility.  As of September 30, 2008, the aggregate guarantee of $277.4 million is limited to $142.4 million (other than with respect to the indemnification of environmental matters, to which there is no limit) due to the performance of some of the underlying obligations that were guaranteed.  It is unlikely that Cleco Corporation will have any other liabilities which would give rise to indemnity claims under the agreements providing for the Perryville disposition.  The discounted probability-weighted liability under the guarantees and indemnifications as of September 30, 2008, was $0.3 million, resulting in a corresponding reduction in the available credit under Cleco’s credit facility, which was determined in accordance with the facility’s definition of a contingent obligation.  The contingent obligation reduces the amount available under the credit facility by an amount equal to the maximum reasonably anticipated liability in respect of the contingent obligation as determined in good faith.  

In November 2004, Cleco completed the sale of substantially all of the assets of Cleco Energy.  Cleco Corporation provided guarantees to the buyers of Cleco Energy’s assets for the payment and performance of the indemnity obligations of Cleco Energy.  The aggregate amount of the guarantees is $1.4 million, and the guarantees expire in 2009.  

If Evangeline fails to perform certain obligations under its tolling agreement, Cleco Corporation will be required to make payments to the Evangeline Tolling Agreement counterparty. Cleco Corporation’s obligation under the Evangeline commitment is in the form of a standby letter of credit from investment grade banks and is limited to $15.0 million. Rating triggers do not exist in the Evangeline Tolling Agreement. Cleco expects Evangeline to be able to meet its obligations under the tolling agreement and does not expect Cleco Corporation to be required to make payments to the counterparty. However, under the covenants associated with Cleco Corporation’s credit facility, the entire net amount of the Evangeline commitment reduces the amount that can be borrowed under the credit facility. The letter of credit for Evangeline is expected to be renewed annually until 2020.

In January 2006, Cleco Corporation provided a $0.5 million guarantee to Entergy Mississippi for Attala’s obligations under the Attala Interconnection Agreement.  This guarantee will be in effect through the life of the agreement.

The State of Louisiana allows employers of certain financial net worth to self-insure their workers’ compensation benefits.  Cleco Power has a certificate of self-insurance from the Louisiana Office of Workers’ Compensation and is required to post a $0.5 million letter of credit, an amount equal to 110% of the average losses over the previous three years, as surety.

As part of the Lignite Mining Agreement entered into in 2001, Cleco Power and SWEPCO, joint owners of Dolet Hills, have agreed to pay the lignite miner’s loan and lease principal obligations when due, if the lignite miner does not have sufficient funds or credit to pay. Any amounts paid on behalf of the miner would be credited by the lignite miner against the next invoice for lignite delivered. At September 30, 2008, Cleco Power’s 50% exposure for this obligation was approximately $6.1 million. The lignite mining contract is in place until 2011 and does not affect the amount Cleco Corporation can borrow under its credit facility.

The following table summarizes the expected termination date of the guarantees and standby letters of credit discussed above:

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							AT SEPTEMBER 30, 2008
			AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
	NET								MORE
	AMOUNT		LESS THAN						THAN
(THOUSANDS)	COMMITTED		ONE YEAR		1-3 YEARS		3-5 YEARS		5 YEARS
Guarantees	$	150,370	$	100,400	$	7,070	$	-	$	42,900
Standby letters of credit		15,525		525		-		-		15,000
Total commercial commitments	$	165,895	$	100,925	$	7,070	$	-	$	57,900

Regulatory Matters

Wholesale Rates of Cleco

For information on the wholesale rates of Cleco, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Wholesale Rates of Cleco” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Retail Rates of Cleco Power

In March 2007, after completing a review of restoration costs related to Hurricanes Katrina and Rita, Cleco Power and the LPSC Staff filed a settlement agreement allowing recovery of essentially all of Cleco Power's Hurricanes Katrina and Rita storm costs.  The agreement authorized the issuance of securitized bonds to finance the restoration costs and collection of a special storm recovery charge from Cleco Power's customers to pay principal, interest and other amounts related to the bonds.  The LPSC approved the settlement agreement and issued a securitization financing order in September 2007.  In March 2008, securitization financing was completed.  For additional information about the recovery of storm restoration costs, see Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 4 — Regulatory Assets and Liabilities — Deferred Storm Restoration Costs - Katrina/Rita.”

In January 2008, Cleco Power filed its monitoring report for the 12-month period ended September 30, 2007.  Cleco Power anticipates that the LPSC Staff will complete their review of this report by the end of the fourth quarter of 2008.

For additional information on other regulatory aspects of retail rates concerning Cleco Power, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Retail Rates of Cleco Power” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Wholesale Electric Markets

For information on regulatory aspects of wholesale electric markets affecting Cleco, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Market Restructuring — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Retail Electric Markets

For a discussion of the regulatory aspects of retail electric markets affecting Cleco Power, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Cleco Power's Rate Case

On July 14, 2008, Cleco Power filed a request for a new rate plan with the LPSC to increase its base rates for electricity.  The LPSC directed Cleco Power to file a full base rate case at least 12 months prior to the expected in-service date for Rodemacher Unit 3.  If the new rate plan proposed by Cleco Power is approved by the LPSC, it is expected to result in a net decrease in billings to its retail customers of approximately $72.0 million in the first normal year of commercial operation of Rodemacher Unit 3.  Cleco Power primarily is seeking recovery of revenues sufficient to cover the addition of Rodemacher Unit 3 to its existing expense and rate base levels.  Although base revenues will increase under Cleco Power's proposed rate plan, overall retail billings are expected to decrease.  Factors contributing to this net decrease are:  (i) anticipated additional retail revenues of approximately $250.0 million recoverable through its base rates and proposed riders; (ii) an expected decrease in projected costs recoverable through its retail fuel clause of approximately $224.0 million; and (iii) an expected decrease of $98.0 million of Rodemacher Unit 3 financing costs which includes a refund of the cash collected from retail customers and the absence of previously collected Rodemacher Unit 3 financing costs.  If Cleco Power's proposed rate plan is approved, Cleco Power's customers would begin realizing benefits of lower fuel costs immediately upon commercial operation of Rodemacher Unit 3.  Seven industrial customers have filed interventions in the rate case.  The rate case is currently in the discovery phase.  Cleco Power currently expects a settlement of the rate case with new rates to coincide with the commercial operation date of Rodemacher Unit 3, currently projected to be the summer of 2009.

Generation RFP

2007 Long-Term RFP

In June 2007, Cleco Power filed draft documents with the LPSC for up to approximately 600 MW of intermediate and/or peaking resources to meet projected load growth over a 10-year period beginning in 2010.  To meet these needs, Cleco Power is looking for products for a term of 2 to 30 years.  Out of the approximately 600-MW total, up to approximately 350

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MW may be sourced from a peaking resource.  The final version of the RFP was issued in October 2007, and bids were received in December 2007.  Cleco Power has notified bidders if their bids have been selected for the short list.  Cleco Power expects to have an agreement with the winning bidder by the end of this year or in early 2009.  Cleco Power will seek approval by the LPSC of the final selections after negotiations with the bidder/bidders have been completed.  The LPSC filing is targeted for the first quarter of 2009. 

2008 Short-Term RFP for 2009 Resources

On March 5, 2008, Cleco Power issued a RFP for a minimum of 50 MW up to 450 MW to meet its 2009 capacity and energy requirements.  Cleco Power has selected and negotiated a 235-MW product with Acadia.  The product is for supply starting March 2009 and ending September 2009.  Cleco Power has filed for CCN with the LPSC for this capacity.  Approval of this agreement by both the LPSC and the FERC is required.

For additional information on Cleco Power’s generation RFPs, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Generation RFP” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Rodemacher Unit 3

In May 2006, Cleco Power began construction of Rodemacher Unit 3 which will provide a portion of the utility’s future power supply needs.  Rodemacher Unit 3 will be capable of burning various solid fuels, but primarily is expected to burn petroleum coke produced by several refineries throughout the Gulf Coast region.  All environmental permits for the unit have been received.  Cleco Power has entered into contracts with suppliers to collectively supply over 900,000 tons per year of petroleum coke for a three to five-year period beginning in 2009.  This is two-thirds of Rodemacher Unit 3 fuel requirements for such period.  Cleco Power is in late stage negotiations to procure the remaining Rodemacher Unit 3 fuel requirements for such period.

In May 2006, Cleco Power and Shaw entered into an Amended EPC Contract, which provided for substantial completion of the construction by September 30, 2009.  On July 2, 2008, Cleco Power and Shaw amended this contract further to provide for substantial completion and commencement of commercial operation as of June 30, 2009, as well as changes to other commercial terms.  As a result of the amendment, Cleco Power is no longer liable for excess labor costs as contemplated under the original agreement.  The total capital cost estimate for the project, including AFUDC, Amended EPC Contract costs, and other development expenses, remains at $1.0 billion.  The lump sum price under the scope of the Amended EPC Contract, including accepted change orders under the contract, is $794.5 million.  As of September 30, 2008, Cleco Power had incurred approximately $816.1 million in project costs.  Shaw is subject to payment of liquidated damages if certain operating performance criteria and

schedule dates are not met.  The Amended EPC Contract allows for termination at Cleco Power’s sole discretion, which would require payment of termination fees, or if certain milestones, approvals, or other typical commercial terms and conditions are not met.  As of September 30, 2008, the maximum termination costs would have been $738.1 million, or an additional $28.2 million more than the capital expended to date.  Upon issuance of the notice to start construction in May 2006, and in support of its performance obligations, Shaw provided a $58.9 million letter of credit to Cleco Power.  In addition to the letter of credit, Shaw also posted a $200.0 million payment and performance bond in favor of Cleco Power in support of its performance obligations under the Amended EPC Contract.  The Amended EPC Contract also provides for Shaw to:  (a) allow retention, or (b) issue an additional letter of credit, in an amount equal to 7.5% of the payments made by Cleco Power under the contract.  Effective January 31, 2008, Shaw had issued an additional letter of credit in the amount of $42.0 million and Cleco has retained amounts of $10.6 million.  The retention and letters of credit are provided in support of Shaw’s potential payment of liquidated damages, or other payment performance obligations.  

In October 2008, Cleco Power received correspondence from Shaw indicating its intent to file a force majeure claim alleging schedule disruptions and additional costs due to Hurricanes Gustav and Ike.  As of the date of this Report, Cleco Power has received no documentation to support these allegations.  The Registrants do not believe the resolution of this potential claim will have a material adverse impact to the Registrants' results of operations or financial condition.  Additionally, the Registrants do not believe the resolution of this potential claim will have a material adverse impact on the cost of Rodemacher Unit 3.

For additional information on the CCN and construction of Rodemacher Unit 3, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources —Regulatory Matters — Rodemacher Unit 3” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.  For a discussion of risks associated with the Rodemacher Unit 3 project, see “Risk Factors — Rodemacher Unit 3 Construction Costs,” — “Rodemacher Unit 3 Technical Specifications,” and — “Termination of the Rodemacher Unit 3 Project or the Amended EPC Contract” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Lignite Deferral

At September 30, 2008, and December 31, 2007, Cleco Power had $27.4 million and $29.4 million, respectively, in deferred costs remaining uncollected.  

For additional information on Cleco Power’s deferred lignite mining expenditures, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Other Matters — Lignite

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Deferral” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Franchises

On May 14, 2008, the Town of Elizabeth entered into a lease/franchise agreement with Cleco Power under which its electrical system will be leased to Cleco Power.  The agreement is for 10 years with two 10-year renewal terms.  Approximately 225 Cleco Power customers are located in Elizabeth.

For additional information on Cleco Power’s electric service franchises, please read “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, 2007. 

Environmental Matters

Cleco is subject to extensive environmental regulation by federal, state and local authorities and is required to comply with numerous environmental laws and regulations, and to obtain and to 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.  Cleco may incur significant additional costs to comply with these revisions, reinterpretations and requirements.  If Cleco fails to comply with these revisions, reinterpretations and requirements, it could be subject to civil or criminal liabilities and fines. 

On February 8, 2008, the U.S. Court of Appeals for the D.C. Circuit in New Jersey v. EPA vacated both the EPA's rule delisting coal-fired electric generating units (EGUs) from regulation under section 112 of the Clean Air Act (CAA) and the entire Clean Air Mercury Rule (CAMR).  As a result of the court's action, EGUs are subject to regulation under section 112, which will require the EPA to promulgate Maximum Achievable Control Technology (MACT) standards for hazardous air pollutants for coal and oil-fired EGUs.  

On May 20, 2008, the U.S. Court of Appeals for the D.C. Circuit denied the EPA’s and industry intervenors’ petitions asking all of the judges of the D.C. Circuit to re-hear the decision in New Jersey v. EPA vacating CAMR and the EPA’s rule delisting coal and oil-fired EGUs from regulation under section 112 of the CAA (Delisting Rule).  The court also denied the industry intervenors’ petition requesting rehearing by the three-judge panel that decided New Jersey.  On September 17, 2008, Industry intervenors filed a petition with the U.S. Supreme Court requesting a review of the D.C. Circuit’s decision in New Jersey v. EPA vacating CAMR and the EPA’s rule delisting coal- and oil-fired EGUs from regulation under section 112 of the CAA (Delisting Rule).  On October 17, 2008, the EPA filed a similar petition with the U.S. Supreme Court.

On July 11, 2008, the D.C. Circuit Court of Appeals vacated the Clean Air Interstate Rule (CAIR).  On September 24, 2008, the EPA, industry groups and environmental groups filed petitions with the D.C. Circuit Court, requesting a rehearing in the matter of the CAIR vacature.  The environmental groups filed a petition asking the D.C. Circuit for a rehearing en banc (by the full Court) while the EPA and industry groups filed separate petitions seeking rehearing en banc or, in the alternative, rehearing by the three-judge panel that heard the case.  The D.C. Circuit is not required to rule on petitions for rehearing in a specified time; however, it is expected that the court will grant or deny the petitions within the next few months.  The 90-day time period in which parties may file a petition for certiorari with the Supreme Court will run from the date the D.C. Circuit denies rehearing or, if rehearing is granted, the subsequent entry of judgment.

On March 19, 2008, Cleco Power received a consolidated compliance order and notice of potential penalty (CO/NOPP) from the LDEQ for alleged violations of the air quality rules at its Dolet Hills and Rodemacher Power Stations.  For Dolet Hills, the CO/NOPP alleges that upon a file review conducted on or about February 26, 2008, the LDEQ found that Cleco Power was in violation of conditions in its Title V permit regarding compliance assurance tests to be conducted upon its continuous monitoring systems.  Upon review of the LDEQ findings and the Part 75 regulations, Cleco Power contends that the actions taken by Cleco Power were allowed under the Part 75 regulations, as well as the Title V permit.  In regard to the Rodemacher Power Station violations, the CO/NOPP states that a file review of the Rodemacher facility was conducted on or about September 14, 2007, and that upon the agency’s review of the Quarterly Stack Emissions Reports required under 40 CFR Part 60 submitted by Cleco Power, the LDEQ found that Rodemacher Unit 2 exceeded opacity limits at various times during the second, third and fourth quarters of 2007.  Cleco Power has met with the LDEQ in regard to these alleged violations and is responding to LDEQ’s requests for additional information.  On April 16, 2008, Cleco filed a Request for Administrative Hearing with the LDEQ with regard to the CO/NOPP, because Cleco contends that there are several factual errors in the CO/NOPP.  On May 15, 2008, Cleco Power and the LDEQ entered into a dispute resolution agreement to give the parties additional time to discuss resolution of this CO/NOPP.  The parties initially had until September 26, 2008 to resolve the matter.  The agreement was amended to extend the September 26, 2008, deadline until December 15, 2008.  Cleco continues to negotiate a settlement with the LDEQ and anticipates reaching a final agreement by the new deadline.  Cleco is unable to determine what, if any, action the LDEQ will take with respect to the CO/NOPP.

For a discussion of other Cleco environmental matters, please read “Business — Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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Recent Accounting Standards

For a discussion of recent accounting standards, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 2 — Recent Accounting Standards” of this Form 10-Q, which discussion is incorporated herein by reference.

CRITICAL ACCOUNTING POLICIES

Cleco’s critical accounting policies include those accounting policies that are both important to Cleco’s financial condition and results of operations and those 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 Corporation’s segments or to Cleco as a consolidated entity.  The financial statements contained in this report are prepared in accordance with accounting principles generally accepted in the United States of America, which require Cleco to make estimates and assumptions.  Estimates and assumptions about future events and their effects cannot be made with certainty.  Management bases its current estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances.  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 a discussion of Cleco’s critical accounting policies, see “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, 2007.

CLECO POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Set forth below is information concerning the results of operations of Cleco Power for the three and nine months ended September 30, 2008, and September 30, 2007. The following narrative analysis should be read in combination with Cleco Power’s Unaudited Condensed Consolidated Financial Statements and the Notes contained in this Form 10-Q.

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).  Pursuant to the General Instructions, Cleco Power has included an explanation of the reasons for material changes in the amount of revenue and expense items of Cleco Power between the first nine months of 2008 and the first nine months of 2007.  Reference is made to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

For an explanation of material changes in the amount of revenue and expense items of Cleco Power between the third quarter of 2008 and the third quarter of 2007, see “— Results of Operations — Comparison of the Three Months Ended September 30, 2008, and 2007 — Cleco Power” of this Form 10-Q, which discussion is incorporated herein by reference.

For an explanation of material changes in the amount of revenue and expense items of Cleco Power between the first nine months of 2008 and the first nine months of 2007, see “— Results of Operations — Comparison of the Nine Months Ended September 30, 2008, and 2007 — Cleco Power” of this Form 10-Q, which discussion is incorporated herein by reference.

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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Overview

Market risk inherent in Cleco’s market risk-sensitive instruments and positions includes potential changes arising from changes in interest rates and the commodity market prices of power and natural gas in the industry on different energy exchanges.  Cleco is subject to market risk associated with economic hedges relating to open natural gas contracts.  Cleco also is subject to market risk associated with its remaining tolling agreement counterparty.  For additional information concerning Cleco’s market risk associated with its remaining counterparty, 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.”

Cleco uses SFAS No. 133 to determine whether the market risk-sensitive instruments and positions are required to be marked-to-market.  Generally, Cleco Power’s market risk-sensitive instruments and positions qualify for the normal-purchase, normal-sale exception to mark-to-market accounting of SFAS No. 133, as modified by SFAS No. 149, since Cleco Power takes physical delivery and the instruments and positions are used to satisfy customer requirements.  

Cleco’s exposure to market risk, as discussed below, represents an estimate of possible changes in the fair value or future earnings that would occur, assuming possible future movements in the interest rates and commodity prices of power and natural gas.  Management’s views on market risk are not necessarily indicative of actual results, nor do they represent the maximum possible gains or losses.  The views do represent, within the parameters disclosed, what management estimates may happen.

Cleco monitors credit risk exposure through reviews of counterparty credit quality, corporate-wide aggregate counterparty credit exposure and corporate-wide aggregate counterparty concentration levels.  Cleco actively manages these risks by establishing appropriate credit and concentration limits on transactions with counterparties and requiring contractual guarantees, cash deposits or letters of credit from counterparties or their affiliates, as deemed necessary.  Cleco Power has agreements in place with various counterparties that authorize the netting of financial transactions and contract payments to mitigate credit risk for transactions entered into for risk management purposes.

Interest Rate Risks

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, by refinancing balances outstanding under its variable-rate credit facility with fixed-rate debt.  Calculations of the changes in fair market value and interest expense of the debt securities are made over a one-year period.

Access to capital markets is a significant source of funding for both short-term and long-term capital requirements not satisfied by operating cash flows.  Current market conditions have limited the availability and have increased the costs of capital for some companies.  The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its businesses.  After assessing Cleco’s current operating performance, liquidity, and credit ratings, management believes that Cleco will continue for the foreseeable future to have access to the capital markets at reasonable rates.  If Cleco Corporation’s or Cleco Power’s credit ratings were to be downgraded by Moody’s or by Standard & Poor’s, Cleco Corporation or Cleco Power, as the case may be, would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.

Sensitivity to changes in interest rates for fixed-rate obligations is computed by calculating the current fair market value using a net present value model based upon a 1% change in the average interest rate applicable to such debt. 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.

As of September 30, 2008, Cleco had no short-term variable-rate debt.  However, at September 30, 2008, Cleco Corporation had borrowings of $48.0 million outstanding, classified as long-term debt, under its $150.0 million five-year credit facility at an interest rate of 3.02%.  The borrowing costs under the facility are equal to LIBOR plus 0.65%, including facility fees.  The existing borrowings have 30-day terms and various maturity dates.  If the amounts of the individual borrowings are renewed at maturity, rather than repaid, each 1% change in the average interest rates applicable to such debt would result in a change of approximately $0.5 million in Cleco's annual pre-tax earnings.

Commodity Price Risks

Management believes Cleco has controls in place to minimize the risks involved in its financial and energy commodity activities.  Independent controls over energy commodity functions consist of a middle office (risk management), a back office (accounting), regulatory compliance staff, as well as oversight by a risk management committee comprised of officers and the General Manager – Internal Audit, who are appointed by Cleco Corporation’s Board of Directors.  Risk limits are recommended by the Risk Management Committee and monitored through a daily risk report that identifies the current VaR, market conditions, and concentration of energy market transactions.

During 2005, Cleco Power entered into certain financial hedge transactions it considers economic hedges to mitigate the risk associated with fixed-price power to be provided to a wholesale customer through December 2010.  These transactions are derivatives as defined by SFAS No. 133 but do not meet the accounting criteria to be considered hedges.  These transactions are marked-to-market with the resulting gain or loss recorded on the income statement as a component of operating revenue, net.  At September 30, 2008, the positions had a mark-to-market value of $1.5 million, which is a

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decrease of $0.5 million from the mark-to-market value of $2.0 million at December 31, 2007.  In addition, these positions resulted in a realized gain of $1.0 million for the nine-month period ended September 30, 2008.  In light of these economic hedge transactions, volatility in natural gas prices will likely cause fluctuations in the market value of open natural gas positions and ultimately in Cleco Power’s future earnings.

Cleco Power provides fuel for generation and purchases power to meet the power demands of customers. Cleco Power has entered into positions to mitigate the volatility in customer fuel costs, as encouraged by an LPSC order.  In December 2004, Cleco Power implemented a fuel stabilization policy (which was filed with the LPSC and subsequently amended in June 2006) to target higher levels of minimum hedging percentages and mitigate the volatility in customer fuel costs.  The change in positions could result in increased volatility in the marked-to-market amounts for the financial positions.  These positions are marked-to-market with the resulting gain or loss recorded on the balance sheet as a component of the accumulated deferred fuel asset or liability and a component of the risk management assets or liabilities.  When these positions close, actual gains or losses are deferred and included in the fuel adjustment clause in the month the physical contract settles.  Based on market prices at September 30, 2008, the net mark-to-market impact related to open natural gas positions was a loss of $31.8 million.  Deferred losses relating to closed natural gas positions at September 30, 2008, totaled $4.0 million.  

Cleco utilizes a VaR model to assess the market risk of its hedging portfolios, including derivative financial instruments. VaR represents the potential loss in fair value for an instrument from adverse changes in market factors over a defined period of time with a specified confidence level. VaR is calculated daily, using the variance/covariance method with delta approximation, assuming a holding period of one day, and a 95% confidence level for natural gas and power positions.  Volatility is calculated daily from historical forward prices using the exponentially weighted moving average method.

Based on these assumptions, the VaR relating to the economic hedge transactions for the three and nine months ended September 30, 2008, as well as the VaR at September 30, 2008, and December 31, 2007, is summarized below:

	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
(THOUSANDS)	HIGH		LOW		AVERAGE
Cleco Power	$	425.0	$	233.8	$	321.9

	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008						AT SEPTEMBER 30,		AT DECEMBER 31,
(THOUSANDS)	HIGH		LOW		AVERAGE		2008		2007
Cleco Power	$	502.3	$	167.3	$	328.8	$	270.2	$	160.1

 Cleco Power

Please refer to “— Risk Overview” above for a discussion of market risk inherent in Cleco Power’s market risk-sensitive instruments.

Cleco Power has entered into various fixed-rate debt obligations.  Please refer to “— Interest Rate Risks” above for a discussion of Cleco Power’s borrowing under its credit facility and how it monitors its mix of fixed-rate debt obligations and the manner of calculating changes in fair market value and interest expense of its debt obligations.  

As of September 30, 2008, Cleco Power had no long-term or short-term variable-rate debt. 

Please refer to “— Commodity Price Risks” above for a discussion of controls, transactions, VaR, and market value maturities associated with Cleco Power’s energy commodity activities.  

ITEM 4 AND 4T.     CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a–15 and 15d–15 under the Securities Exchange Act of 1934, each of Cleco Corporation’s and Cleco Power’s management has evaluated, as of the end of the period covered by this report, with the supervision and participation of each of Cleco Corporation’s and Cleco Power’s chief executive officer and chief financial officer, the effectiveness of Cleco Corporation’s and Cleco Power’s disclosure controls and procedures as defined by Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934 (Disclosure Controls), as the case may be.  Based on that evaluation, such officers concluded that each of Cleco Corporation’s and Cleco Power’s disclosure controls were effective as of the date of that evaluation.

During Cleco Corporation’s and Cleco Power’s third fiscal quarter of 2008, there have been no changes in either Cleco Corporation’s or Cleco Power’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, respectively, each of Cleco Corporation’s or Cleco Power’s internal control over financial reporting.

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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 11 — 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 11 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”

ITEM 1A.     RISK FACTORS

Other than the changes to the risk factors described below, there have been no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A of the Registrants’ second quarter Form 10-Q for the quarterly period ended June 30, 2008 and the Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 Annual Report on Form 10-K”).  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 “Risk Factors” in Item 1A of the second quarter Form 10-Q for the quarterly period ended June 30, 2008, and the 2007 Annual Report on Form 10-K.  The risk factors below should be read in conjunction with the risk factors disclosed in the second quarter Form 10-Q for the quarterly period ended June 30, 2008, and the 2007 Annual Report on Form 10-K.

Storm Restoration Cost

The recovery of costs resulting from Hurricanes Gustav and Ike is subject to LPSC review and approval, and recovery of some of the costs could be disallowed.

Restoration costs incurred by Cleco Power from damage caused by Hurricanes Gustav and Ike during the third quarter of 2008 are subject to a prudency review by the LPSC in which Cleco Power will be required to demonstrate that the costs were prudently incurred.  Accordingly, Cleco Power may not be able to recover some of the storm costs incurred, which could be material.

The costs will be reviewed by the LPSC as part of Cleco’s pending rate case.  If the LPSC were to deny Cleco Power’s request to recover substantial restoration costs incurred, such a decision could have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Cleco Power’s Rates and Rate Case

The LPSC and the FERC regulate the rates that Cleco Power can charge its customers.  On July 14, 2008, Cleco Power filed a new rate plan for its rates that is expected to go into effect when Rodemacher Unit 3 starts commercial operations.  The LPSC could disallow the recovery of material costs or an adequate return on capital.

Cleco Power’s ongoing financial viability depends on its ability to recover its costs from its LPSC customers in a timely manner through its LPSC-approved rates and its ability to pass through to its FERC customers in rates its FERC-authorized revenue requirements.  Cleco Power’s financial viability also depends on its ability to recover in rates an adequate return on capital, including long-term debt and equity.  If Cleco Power is unable to recover any material amount of its costs in rates in a timely manner or recover an adequate return on capital, its results of operations, financial condition and cash flows could be materially adversely affected.

Cleco Power’s revenues and earnings are substantially affected by regulatory proceedings known as rate cases.  During those cases, the LPSC determines Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its retail customers through its rates.  These proceedings may examine, among other things, the prudence of the company's operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures.  The LPSC has the authority to disallow costs found not to have been prudently incurred.  These regulatory proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or reducing rates.  Rate cases generally have long timelines, which may or may not be limited by statute.  Decisions are typically subject to appeal, potentially leading to additional uncertainty.

Cleco Power’s current base rates have been extended through the start of Rodemacher Unit 3.  On July 14, 2008, Cleco Power filed a rate plan to establish new rates to be effective upon commercial operation of the Rodemacher Unit 3.  As part of the new rate plan, Cleco Power has requested a return on equity of 12.25%.  Cleco Power’s current base rates

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allow it the opportunity to earn a maximum regulated return on equity of 11.65%, which is based on a return on equity of 11.25%, with any regulated earnings between 11.25% and 12.25% shared between shareholders and customers in a 40/60 ratio.  Seven industrial customers have filed interventions in the rate case.  The rate case is currently in the discovery phase.  Cleco Power currently expects a settlement of the rate case with new rates to coincide with the commercial operation date of Rodemacher Unit 3, currently projected to be the summer of 2009.  Cleco Power currently is recording AFUDC associated with construction of Rodemacher Unit 3.  Once the plant begins commercial operations, Cleco Power will no longer record AFUDC related to Rodemacher Unit 3.  Recovery of the Rodemacher Unit 3 investment is the largest component in Cleco Power’s general rate plan that was filed with the LPSC July 14, 2008.  If the LPSC does not increase Cleco Power’s base rates or denies Cleco Power’s request to recover costs incurred in the construction of Rodemacher Unit 3, Cleco Power’s results of operations, financial condition, and cash flows could be materially adversely affected.  For additional information on Cleco Power’s rate case, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Cleco Power’s Rate Case.”

Global Financial Crisis

The global financial crisis may negatively impact Cleco's business and financial condition.

The continued credit crisis and related turmoil in the global financial system may have an impact on Cleco’s business and financial condition.  Cleco may face significant challenges if conditions in the financial markets do not improve.  Cleco’s ability to access the capital market may be severely restricted at a time when the company would like, or need, to do so, which could have a material impact on its ability to fund capital expenditures or debt service or on the company’s flexibility to react to changing economic and business conditions. If Cleco Corporation’s or Cleco Power’s credit ratings were to be downgraded by Moody’s or by Standard & Poor’s, Cleco Corporation or Cleco Power, as the case may be, would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.  The credit crisis could have a material negative impact on Cleco’s lenders or the company’s customers causing them to fail to meet their obligations to Cleco or to delay payment of such obligations.  Additionally, the crisis could lead to reduced electricity usage, which could have a material negative impact on Cleco’s results of operations and financial condition. 

ITEM 5.     OTHER INFORMATION

On October 30, 2008, the Compensation Committee of the Cleco Corporation Board of Directors authorized and approved amendments to the Company’s Annual Incentive Compensation Plan, the Deferred Compensation Plan, the 2000 Long-Term Incentive Compensation Plan and the Supplemental Executive Retirement Plan primarily to reflect changes necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("Section “409A”). The amendments were authorized by the Board of Directors on October 31, 2008 and generally affect the timing, but not the amount, of compensation that could be received, the definition of certain payment triggers and other definition changes.  Copies of the form of amendments are attached hereto and incorporated herein by reference.

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CLECO POWER	2008 3RD QUARTER FORM 10-Q

ITEM 6.     EXHIBITS

CLECO CORPORATION
3.1	Bylaws of Cleco Corporation, revised effective October 1, 2008
10.1	First Amendment to Annual Incentive Compensation Plan, effective as of January 1, 2005
10.2	First Amendment to Cleco Corporation Deferred Compensation Plan, effective as of January 1, 2005
10.3	2000 Long-Term Incentive Compensation Plan, Amendment Number 4, effective as of January 1, 2005
10.4	Supplemental Executive Retirement Plan amended and restated, effective January 1, 2005
12(a)	Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the three-, nine-, and twelve-month periods ended September 30, 2008, for Cleco Corporation
31.1	CEO Certification in accordance with section 302 of the Sarbanes-Oxley Act of 2002
31.2	CFO Certification in accordance with 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
CLECO POWER
3.2	Operating Agreement of Cleco Power LLC, revised effective October 1, 2008
12(b)	Computation of Ratios of Earnings to Fixed Charges for the three-, nine-, and twelve-month periods ended September 30, 2008, for Cleco Power
31.3	CEO Certification in accordance with section 302 of the Sarbanes-Oxley Act of 2002
31.4	CFO Certification in accordance with 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

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

SIGNATURE

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 CORPORATION

(Registrant)

By: /s/ R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer & Interim CFO

Date:  November 5, 2008

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CLECO CORPORATION
CLECO POWER	2008 3RD QUARTER FORM 10-Q

SIGNATURE

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/ R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer & Interim CFO

Date:  November 5, 2008

60

EX-3.1

Exhibit 3.1

BYLAWS

OF

CLECO CORPORATION

(Revised effective October 1, 2008)

ARTICLE I	Registered Office; Registered Agents; Corporate Seal	1
Section 1.	Registered Office and Registered Agent(s)	1
Section 2.	Corporate Seal	1
ARTICLE II	Shareholders	1
Section 1.	Place of Holding Meetings	1
Section 2.	Quorum: Adjournment of Meetings	1
(a)	General Rule	1
(b)	Special Rule	1
(c)	Adjournments	2
Section 3.	Annual Meeting	2
Section 4.	Special Meeting	2
Section 5.	Conduct of Meetings	3
Section 6.	Voting	4
Section 7.	Notice	5
Section 8.	Amendment of Articles of Incorporation	6
(a)	Shareholders Proposals	6
(b)	Effectiveness	7
Section 9.	Effectiveness of Other Amendments to Articles of Incorporation	7
ARTICLE III	Directors	8
Section 1.	Certain General Provisions	8
(a)	Number	8
(b)	Classifications	8
(c)	Nominations	8
(d)	Qualifications; Declaration of Vacancy	9
(e)	Removal	11
(f)	Powers	12
(g)	Change in Number of Directors	12
(h)	Rights of Preferred Shareholders, etc.	12
Section 2.	Filling of Vacancies	12
Section 3.	Annual and Regular Meetings	13
Section 4.	Special Meetings	13
Section 5.	Place of Meetings; Telephone Meetings	13
Section 6.	Quorum	13
Section 7.	Compensation	14
Section 8.	Committees	14
ARTICLE IV	Indemnification	14
Section 1.	Right to Indemnification – General	14

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Section 2.	Certain Provisions Respecting Indemnification for and Advancement of Expenses	14
Section 3.	Procedure for Determination of Entitlement to Indemnification	15
Section 4.	Presumptions and Effect of Certain Proceedings	16
Section 5.	Right of Claimant to Bring Suit	17
Section 6.	Non-Exclusivity and Survival of Rights	17
Section 7.	Definitions	18
ARTICLE V	Executive Committee	19
Section 1.	Election and Tenure	19
Section 2.	Executive Committee	19
Section 3.	Meetings	19
Section 4.	Compensation	20
ARTICLE VI	Audit Committee	20
Section 1.	Election and Tenure	20
Section 2.	Audit Committee	20
Section 3.	Meetings	20
Section 4.	Compensation	20
ARTICLE VII	Compensation Committee	20
Section 1.	Election and Tenure	20
Section 2.	Compensation Committee	20
Section 3.	Meetings	21
Section 4.	Compensation	21
ARTICLE VII.A.	Nominating/Governance Committee	21
Section 1.	Election and Tenure	21
Section 2.	Nominating / Governance Committee	21
Section 3.	Meetings	21
Section 4.	Compensation	21
ARTICLE VIII	Officers	22
Section 1.	Election, Tenure, and Compensation	22
Section 2.	Powers and Duties of Chairman of Board of Directors	22
Section 3.	Powers and Duties of President	22
Section 4.	Powers and Duties of Vice President	22
Section 5.	Powers and Duties of Secretary	22
Section 6.	Powers and Duties of Treasurer	23
Section 7.	Delegation of Duties	23
ARTICLE IX	Capital Stock	23

ii

Section 1.	Stock Certificates	23
Section 2.	Lost or Destroyed Certificates	24
Section 3.	Transfer of Shares	24
Section 4.	Dividends	24
Section 5.	Closing Transfer Books; Fixing Record Date	24
ARTICLE X	Fair-Price Provisions	24
Section 1.	Definitions	24
Section 2.	Vote Required in Business Combinations	28
Section 3.	When Voting Requirements Not Applicable	28
(a)	Definitions	28
(b)	Conditions	29
(c)	Other Provisions	31
ARTICLES XI	Notices	32
Section 1.	Manner of Giving Notice	32
Section 2.	Waiver of Notice	32
ARTICLE XII	Miscellaneous	32
Section 1.	Fiscal Year	32
Section 2.	Checks and Drafts	32
Section 3.	Books and Records	32
Section 4.	Separability	32
ARTICLE XIII	Amendment of Bylaws	33
Section 1.	Voting	33
Section 2.	Shareholder Proposals	33
Section 3.	Effective Date	33
ARTICLE XIV	Other Amendments to Bylaws	34
Section 1.	Effective Date	34
ARTICLE XV	Control Share Acquisition Statute	34
Section 1.		34

iii

BYLAWS

OF

CLECO CORPORATION

ARTICLE I

Registered Office; Registered Agents; Corporate Seal

Section 1.           Registered Office and Registered Agent(s).  The registered office of the Corporation is 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226, and its registered agents are the president and chief executive officer of the Corporation, the general counsel, and the manager of insurance and claims of the Corporation, post office address 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226.  The Corporation may also have offices at such other places as the board of directors, the chief executive officer or the president may from time to time designate.

Section 2.           Corporate Seal.  The corporate seal of the Corporation shall be circular in form and have inscribed on its periphery the words “Cleco Corporation 1999" and in its center the words “Corporate”, “Seal” and “Louisiana.”

ARTICLE II

Shareholders

Section 1.           Place of Holding Meetings.   All meetings of the shareholders shall be held  at the principal office of the Corporation in the City of Pineville, State of Louisiana, except in cases in which the notices thereof designate some other place, which may be within or without the State of Louisiana.

Section 2.           Quorum; Adjournment of Meetings.

(a)           General Rule.   Except as otherwise provided in these bylaws, the presence in person or by proxy at a meeting of shareholders of the holders of record of a number of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat that represents a majority of the votes entitled to be cast thereat shall constitute a quorum at such meeting.

(b)           Special Rule.   At a meeting of shareholders at least one purpose of which is to amend or repeal a provision of or to supplement these bylaws or the articles of incorporation of the Corporation or to act on a merger, consolidation, reclassification, repurchase, or exchange of securities, transfer of all or substantially all of the assets of the Corporation, dissolution, “business combination” as defined in article X of these bylaws, or similar transaction, a quorum shall for all purposes consist of the presence in person or by proxy at such meeting of the holders of the

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number of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat that represents 80% of the votes entitled to be cast thereat.  At a meeting described in the preceding sentence, the quorum for any class of shares entitled to vote as a class shall be the holders of the number of shares of such class that represents 80% of the votes entitled to be cast by all holders of all shares of such class. Notwithstanding the foregoing, if the change in the articles of incorporation or bylaws, merger, consolidation, reclassification, repurchase, or exchange of securities, transfer of all or substantially all of the assets of the Corporation,  dissolution, “business combination” as defined in article X of these bylaws, or similar transaction in question shall have been approved, before submission of a proposal relating thereto to a vote of shareholders, by at least 80% of the “continuing directors” (hereinafter defined) of the Corporation, then, instead of subsection (b), subsection (a) of this section 2 shall determine the quorum at the meeting of shareholders at which such proposal is considered by shareholders.  For purposes of the preceding, a “continuing director” shall mean a director elected pursuant to a solicitation of proxies by the board of directors of the Corporation at an annual meeting of shareholders held at least 90 days before the date of determination and who has served continuously since such election, or a director elected by continuing directors to fill a vacancy.

(c)           Adjournments.  If less than a quorum shall be in attendance at the time for which a meeting shall have been called, such meeting may, without any notice other than by announcement at such meeting, be adjourned from time to time by the vote of the shareholders present in person or by proxy representing a majority of the votes so present, for a period not exceeding one month at any one time, without notice other than by announcement at the meeting, until a quorum shall attend; provided, however, that a meeting at which a director or directors are to be elected shall be adjourned only from day to day until such director or directors have been elected.  A meeting at which a quorum is present may also be adjourned in like manner.  At an adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted if such meeting had been held as originally called.

Section 3.         Annual Meeting.  Except as otherwise provided by resolution of the board of directors, the annual meeting of shareholders for the election of directors shall be held on the third Friday after the first Monday in April of each year.  At each annual meeting, the shareholders shall elect directors to succeed those whose terms have expired as of the date of such annual meeting.  Such other matters as may properly come before a meeting may be acted upon at an annual meeting.

Section 4.        Special Meeting.

(a)           Special meetings of the shareholders for any purpose or purposes may be called by the chief executive officer or president, by a majority of the board of directors, or by a majority of the executive committee, if any, of the board of directors; provided, however, that if and whenever dividends payable on any series of the Corporation’s preferred stock shall be in default in an amount equal to the aggregate dividends payable in any period of 12 consecutive calendar months, a special meeting shall be called on the demand in writing of the holders of record of a majority of the outstanding shares of preferred stock; and, provided further, that a special meeting of shareholders may be called by a shareholder or shareholders as provided in the Corporation’s articles of incorporation, these bylaws, or otherwise by law.

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(b)           Any shareholder requesting that a special meeting of shareholders be called (the “Requesting Person”) shall, at the time of making the request, submit written evidence, reasonably satisfactory to the secretary of the Corporation, that the Requesting Person is a shareholder of the Corporation and shall identify in writing (i) the reason or reasons for which the special meeting is to be called, (ii) the number of shares of each class of capital stock of the Corporation owned beneficially by the Requesting Person, (iii) all other persons with whom the Requesting Person is acting in concert, and (iv) the number of shares of capital stock beneficially owned by each such person with whom the Requesting Person is acting in concert.  Within 15 days after the Requesting Person has submitted the aforesaid items to the secretary of the Corporation, the secretary of the Corporation shall determine whether the evidence of the Requesting Person’s status as a shareholder submitted by the Requesting Person is reasonably satisfactory and shall notify the Requesting Person in writing of his determination.  If the Requesting Person fails to submit the requisite information in the form or at the time indicated, or if the secretary of the Corporation fails to find such evidence of shareholder status reasonably satisfactory, then the request to call a special meeting of shareholders shall be deemed invalid (by reason of failure to comply with these bylaws) and no special meeting of shareholders shall be held pursuant to such request.  Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws.  Nothing in this subsection (b) shall affect the rights of the Corporation’s shareholders as provided in section 3(b) of article 6 of the Corporation’s articles of incorporation or as provided in subsection (a) immediately preceding with respect to the rights of the Corporation’s preferred shareholders.

Section 5.       Conduct of Meetings.  Meetings of shareholders shall be presided over by the chief executive officer or president of the Corporation or, if the chief executive officer or president is not present at a meeting, by such other person as the board of directors shall designate or, if no such person is designated by the board of directors, the most senior officer of the Corporation present at the meeting.  The secretary of the Corporation, if present, shall act as secretary of each meeting of shareholders; if he is not present at a meeting, then such person as may be designated by the presiding officer shall act as secretary of the meeting.  Meetings of shareholders shall follow reasonable and fair procedure.  Subject to the foregoing, the conduct of any meeting of shareholders and the determination of procedure and rules shall be within the absolute discretion of the presiding officer (the “Chairman of the Meeting”), and there shall be no appeal from any ruling of the Chairman of the Meeting with respect to procedure or rules.  Accordingly, in any meeting of shareholders or part thereof, the Chairman of the Meeting shall have the sole power to determine appropriate rules or to dispense with theretofore prevailing rules.  Without limiting the foregoing, the following rules shall apply:

(a)           The Chairman of the Meeting may ask or require that anyone not a bona fide shareholder or proxy leave the meeting.

(b)           A resolution or motion shall be considered for vote only if proposed by a shareholder or duly authorized proxy, and seconded by an individual, who is a shareholder or a duly authorized proxy, other than the individual who proposed the resolution or motion, subject to compliance with any other requirements concerning such a proposed resolution or motion contained in these bylaws.  The Chairman of the Meeting may propose any motion for vote.  The order of business at all meetings of shareholders shall be determined by the Chairman of the Meeting.

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(c)           The Chairman of the Meeting may impose any reasonable limits with respect to participation in the meeting by shareholders, including, but not limited to, limits on the amount of time at the meeting taken up by the remarks or questions of any shareholder, limits on the numbers of questions per shareholder, and limits as to the subject matter and timing of questions and remarks by shareholders.

(d)           Before any meetings of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment.  If no inspectors of election are so appointed, the Chairman of the Meeting may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election at the meeting of shareholders. The number of inspectors shall be three.  If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the Meeting may, and upon the request of any shareholder or a shareholder’s proxy shall, appoint a person to fill such vacancy.

The duties of these inspectors shall be as follows:

(1)           Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies;

(2)           Receive votes or ballots;

(3)           Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(4)           Count and tabulate all votes;

(5)           Report to the board of directors the results based on the information assembled by the inspectors; and

(6)Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

Notwithstanding the foregoing, the final certification of the results of any election or other matter acted upon at a meeting of shareholders shall be made by the board of directors.

Section 6.      Voting.  Except as otherwise provided by the articles of incorporation, each holder of shares of capital stock of the Corporation shall be entitled, at each meeting of shareholders, to one vote for each share of such stock standing in his name on the books of the corporation on the date of such meeting or, if the board of directors, pursuant to section 5 of article IX of these bylaws, shall have fixed a record date for the purpose of such meeting or shall have fixed a date as of which the books of the Corporation shall be temporarily closed against transfers of shares, then as of such date; except that in the election of directors of the Corporation, each holder of shares of common stock of the Corporation shall have the right to multiply the number of votes to which he may be entitled by the number of directors to be elected, and he may cast all such votes for one candidate or he may distribute them among any two or more candidates.  A shareholder may vote either in person or by proxy appointed by an instrument in writing,

4

subscribed by such shareholder or by his duly authorized attorney.  Except as otherwise provided by law, the articles of incorporation, or these bylaws, all elections shall be had and all questions shall be decided by a majority of the votes cast at a duly constituted meeting at which a quorum is present.

Section 7.        Notice.

(a)           Unless otherwise provided by the articles of incorporation, written or printed notice, stating the place, day, and hour of each meeting of shareholders, and, in the case of a special meeting, the business proposed to be transacted thereat, shall be given in the manner provided in article XI of these bylaws to each shareholder entitled to vote at such meeting, at least 15 days before an annual meeting and at least five days before a special meeting.

(b)           Except as provided in subsection (c) of this section, to be properly brought before any meeting of the shareholders, business must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors pursuant to subsection (a) of this section 7, (ii) otherwise properly brought before the meeting by or at the direction of the board of directors, or (iii) otherwise properly brought before the meeting by a shareholder.  In addition to any other applicable requirements, including (without limitation) requirements imposed by federal securities laws pertaining to proxies, for business to be properly brought before any meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the Corporation.  To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation at least 120 days prior to the meeting; provided, however, that in the event that less than 135 days’ notice or prior public disclosure of the date of any meeting of shareholders is given or made to shareholders by the Corporation, notice by the shareholder to be timely must be so received not later than the close of business of the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs.  A shareholder’s notice to the secretary of the Corporation shall set forth in writing as to each matter the shareholder proposes to bring before any meeting of the shareholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the name of all other persons with whom the shareholder is acting in concert, (iv)  the class and number of shares of the Corporation which are beneficially owned by the shareholder, (v) the class and number of shares of the Corporation which are beneficially owned by each such person with whom the shareholder is acting in concert, and (vi) any material interest of the shareholder, or any such person with whom the shareholder is acting in concert, in such business.  Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws.

Except as provided in subsection (c) of this section 7, notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any meeting of the shareholders except in accordance with the procedures set forth in this section 7 of article II, provided, however, that nothing in this section 7 of article II shall be deemed to preclude discussion by any shareholder as to any business properly brought before any meeting of the shareholders.

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The Chairman of the Meeting shall, if the facts warrant, determine and declare at any meeting of the shareholders that business was not properly brought before the meeting of shareholders in accordance with the provisions of this section 7 of article II, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.  A determination whether a matter is or is not properly before the meeting shall not depend on whether such proposal has been or will be included in any proxy statement delivered or to be delivered to the Corporation’s shareholders.

Nothing in this subsection (b) shall affect the rights of the Corporation’s shareholders as provided in section 3(b) of article 6 of the Corporation’s articles of incorporation or as provided in subsection (a) of section 4 of article II of these bylaws with respect to the rights of the Corporation’s preferred shareholders.

(c)           Nothing in subsection (b) of this section 7 shall apply to the following provisions of these bylaws or any proposal by a shareholder or shareholders with respect to any matter governed by any of the following provisions:

Article II, section 8(a);

Article III, section 1(c);

Article III, section 1(e); and

Article XIII, section 2.

Section 8.              Amendment of Articles of Incorporation.

(a)           Shareholder Proposals.  No proposal by a shareholder to amend or supplement the articles of incorporation of the Corporation shall be voted upon at a meeting of shareholders unless, at least 180 days before such meeting of shareholders, such shareholder shall have delivered in writing to the secretary of the Corporation (i) notice of such proposal and the text of such amendment or supplement, (ii) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder’s status as such and of the number of shares of each class of the capital stock of the Corporation beneficially owned by such shareholder, (iii) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and of the number of shares of each class of the capital stock of the Corporation beneficially owned by each such beneficial owner, and (iv) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation, to the effect that the articles of incorporation of the Corporation, as proposed to be so amended or supplemented, would not be in conflict with the laws of the State of Louisiana.  Within 30 days after such shareholder shall have delivered the aforesaid items to the secretary of the Corporation, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations.  If such shareholder fails to submit a required item in the form or within the time indicated, or if the secretary or the board of directors of the Corporation determines that the items to be ruled upon by them are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders.  

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Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws.

(b)           Effectiveness.   No provision amending or supplementing, or purporting to amend or supplement, the articles of incorporation of the Corporation that would have an effect, direct or indirect, on any of the following items may be included in articles of amendment signed by any officer, agent or representative of the Corporation on behalf of the Corporation or delivered to the Secretary of State of Louisiana for filing of record until the later of (i) one year following the adoption by the shareholders of such amendment or supplement or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption by the shareholders of the Corporation of such amendment or supplement:

(1)           quorum at a regular or special meeting of shareholders;

(2)           procedures for amendment of the articles of incorporation or bylaws of the Corporation upon a proposal by a shareholder of the Corporation;

(3)           the effective date of an amendment to the articles of incorporation or bylaws of the Corporation, or the time at which steps may be taken to effect an amendment to the articles of incorporation or bylaws of the Corporation; or

(4)           votes of shareholders of the Corporation required to approve (i) an amendment or supplement to or repeal of the bylaws of the Corporation, (ii) an amendment or supplement to the articles of incorporation of the Corporation, or (iii) a merger, consolidation, share exchange, reclassification of securities, repurchase of shares, transfer of all or substantially all of the assets of the Corporation, dissolution, “business combination” as defined in article X of these bylaws, or similar transaction.

Section 9.               Effectiveness of Other Amendments to Articles of Incorporation.  No provision amending or supplementing, or purporting to amend or supplement, the articles of incorporation of the Corporation that would have an effect, direct or indirect, on any of the following items may be included in articles of amendment signed by any officer, agent or representative of the Corporation on behalf of the Corporation or delivered to the Secretary of State of Louisiana for filing of record until the later of (i) one year following the adoption by the shareholders of such amendment or supplement or (ii) 10 days after the adjournment sine die of the annual meeting of the shareholders next succeeding the adoption by the shareholders of the Corporation of such amendment or supplement:

(1)           the number of directors of the Corporation;

(2)           the classification of the board of directors of the Corporation into three classes of as nearly as possible equal size;

(3)           the procedures for nomination by a shareholder of persons to be elected as directors of the Corporation;

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(4)           qualifications of directors of the Corporation or the declaration by the board of directors of a vacancy in the office of director;

(5)           removal of directors or officer of the Corporation;

(6)           power of directors of the Corporation;

(7)           the filling of vacancies on the board of directors of the Corporation and the election of directors to fill newly created directorships;

(8)           powers of committees of the board of directors of the Corporation;

(9)           the calling of special meetings of shareholders;

(10)           determinations of the presiding person at a meeting of shareholders;

or

(11)           votes of shareholders of the Corporation required to approve the removal of a director.

ARTICLE III

Directors

Section 1.           Certain General Provisions.

(a)           Number.  The corporate powers of the Corporation shall be vested in and exercised, and the business and affairs of the Corporation shall be managed, by a board of directors which shall consist of ten (10) directors.

(b)           Classification.  The board of directors of the Corporation shall be divided into three classes of as nearly as possible equal size, with the term of office of directors of one class expiring each year.  At the 2000 annual meeting of shareholders, the Class III directors shall be elected to hold office for a term expiring at the third succeeding annual meeting.  At the 2001 annual meeting of shareholders, the Class I directors shall be elected to hold office for a term expiring at the third succeeding annual meeting.  At the 2002 annual meeting of shareholders, the Class II directors shall be elected to hold office for a term expiring at the third succeeding annual meeting.  Thereafter, at each annual meeting of shareholders, the successors to the class of directors whose terms shall have expired at such meeting shall be elected to hold office for a term expiring at the third annual meeting succeeding such meeting.

(c)           Nominations.  Nominations for election of members of the board of directors may be made by the board of directors or by a shareholder.  The name of a person to be nominated by a shareholder (a “Nominator”) as a member of the board of directors of the Corporation must  be submitted in writing to the secretary of the Corporation not fewer than 180 days before the date of the meeting of shareholders at which such person is proposed to be nominated.  The Nominator

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shall also submit written evidence, reasonably satisfactory to the secretary of the Corporation, that the Nominator is a shareholder of the Corporation and shall identify in writing (i) the number of shares of each class of capital stock of the Corporation beneficially owned by the Nominator, (ii) all other persons with whom the Nominator is acting in concert, and (iii) the number of shares of capital stock of the corporation beneficially owned by each such person with whom the Nominator is acting in concert. At such time, the Nominator shall also submit in writing (1) the information with respect to each such proposed nominee which would be required to be provided in a proxy statement prepared in accordance with regulation 14A under the Securities Exchange Act of 1934, as amended, (2) to the extent not provided in the information submitted pursuant to (1) immediately preceding or otherwise provided pursuant to this subsection (c), (w) a description of all arrangements or understandings between the Nominator and each such proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Nominator, (x) the name, age, business address and residence address, business experience or other qualifications of each such proposed nominee, (y) the principal occupation or employment of each such proposed nominee, and (z) the number of shares of capital stock beneficially owned by each such proposed nominee, and (3) a notarized affidavit executed by each such proposed nominee to the effect (x) that, if elected as a member of the board of directors, he will serve, (y) that he has reviewed the provisions of section 1 of this article III of these bylaws, and (z) that he is eligible for election as a member of the board of directors. Within 30 days after the Nominator has submitted the aforesaid items to the secretary of the Corporation, the secretary of the Corporation shall determine whether the evidence of the Nominator's status as a shareholder submitted by the Nominator is reasonably satisfactory and shall notify the Nominator in writing of his determination with respect thereto. The failure of the secretary of the Corporation to find such evidence reasonably satisfactory, or the failure of the Nominator to submit the requisite information in the form or within the time indicated, shall make the person to be nominated ineligible for nomination at the meeting of shareholders at which such person is proposed to be nominated. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws.

(d)           Qualifications; Declaration of Vacancy.

(1)           No person shall be eligible for election or reelection as a director after attaining age 72, and no person who is or shall have been a full-time officer or employee of the Corporation or any subsidiary thereof shall be eligible for election or reelection as a director after attaining age 65 or (even if under 65) after such director's employment by the Corporation has terminated.

(2)           Upon attaining the age of 72 or 65, as specified in paragraph (1) immediately preceding, a director may continue to serve as a director of the Corporation until no later than the next succeeding annual meeting of shareholders, at which time, unless he has previously ceased to be a member of the board of directors of the Corporation, his position as a director shall cease.  Notwithstanding the foregoing, with regard to a director of the Corporation who is also an officer or employee of the Corporation or any subsidiary thereof, such director's position as a director shall cease immediately upon termination of such director's employment by the Corporation.

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(3)           No person shall be eligible for election or reelection or to continue to serve as a member of the board of directors who is an officer, director, agent, representative, partner, employee, or nominee of, or otherwise acting at the direction of, or acting in concert with, (y) a "public utility company" (other than one that is an “affiliate” of the Corporation) or "holding company" (other than one that is an “affiliate” of  the Corporation) as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or "public utility" (other than one that is an “affiliate” (as defined in 18 C.F.R. §161.2) of the Corporation) as such term is defined in Section 201(e) of the Federal Power Act of 1920, as amended, or (z) an "affiliate" (as defined in 17 C.F.R. § 230.405) under the Securities Act of 1933, as amended) of any of the persons or entities specified in clause (y) immediately preceding.

(4)           Upon the occurrence of any of the events described in paragraph (2) of this subsection (d), the affected director shall cease to be a director of the Corporation at the time specified in such paragraph. Determination of the eligibility of a person for election, reelection, or continued service on the board of directors under other provisions of this subsection (d) or otherwise as provided by applicable law including, but not limited to, occurrence of an event specified in Section 81.C(2) of the Louisiana Business Corporation Law, shall, subject to the provisions of paragraph (6) below, be made by vote of a majority of the members of the board of directors. If the board of directors, pursuant to such a determination, determines that a person is ineligible for election, reelection, or continued service on the board of directors, such ineligibility shall be effective immediately upon such determination, and, if the affected person is a director of the Corporation at the time of such determination, his position as a director shall cease at such time.

Within 30 days after a Nominator has submitted the name of a person to be nominated as a member of the board of directors, the board of directors shall determine whether the proposed nominee is eligible for election under this subsection (d) and shall notify the Nominator in writing of its determination. If the board of directors shall determine that such proposed nominee is not eligible for election, such person shall be ineligible to be nominated at the meeting of shareholders for which his nomination was proposed.

(5)           If a director of the Corporation ceases to be a director (x) at the annual meeting of shareholders next succeeding the day upon which he attained the age of 72 or 65, as specified in paragraphs (1), (2), and (4) of this subsection (d), and if there is time remaining in the regularly scheduled term of office of such director, (y) because of termination of employment, as provided in paragraphs (1), (2), and (4) of this subsection (d), or (z) upon the determination of the board of directors of the Corporation pursuant to paragraph (4) of this subsection (d) that a director of the Corporation is no longer qualified to continue serving as a director of the Corporation, the board of directors shall declare the office held by such director vacant and may fill such vacancy as provided in section 2 of this article III of these bylaws.

(6)           Without limiting the ability of the board of directors as provided by applicable law to declare vacant the position of a director on the board of directors, if a

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member of the board of directors has been adjudged by a court of competent jurisdiction to be guilty of fraud, criminal conduct (other than minor traffic violations), gross abuse of office amounting to a breach of trust, or similar misconduct, and no appeal (or further appeal) therefrom is permitted under applicable law, the other directors then in office, by unanimous vote, may declare the position occupied by such director vacant, and such other directors may fill such vacancy as provided in section 2 of this article III of these bylaws.

(e)           Removal.  In this subsection (e), the terms "remove" and "removal" and their related grammatical forms shall refer only to the process of dismissal provided for in this subsection, and shall not be deemed to refer to disqualification of a director, cessation of a director to be such, or declaration of a vacancy in the office of director as provided for in subsection (d) of this section 1 or otherwise as permitted by law.

A member of the board of directors may be removed by the shareholders of the Corporation only for cause. Any such removal for cause shall be at a special meeting of shareholders called for such purpose. The vote of the holders of shares conferring 80% of the total votes of all shares of capital stock of the Corporation voting as a single class shall be necessary to remove a director; provided, however, that if a director has been elected by the exercise of the privilege of cumulative voting, such director may not be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the class of directors of which he is a part. For purposes of this subsection (e), cause for removal shall exist only if a director shall have been adjudged by a court of competent jurisdiction to be guilty of fraud, criminal conduct (other than minor traffic violations), gross abuse of office amounting to a breach of trust, or similar misconduct, and no appeal (or further appeal) therefrom shall be permitted under applicable law.

No proposal by a shareholder to remove a director of the Corporation shall be voted upon at a meeting of shareholders unless, at least 180 days before such meeting, such shareholder shall have delivered in writing to the secretary of the Corporation (1) notice of such proposal, (2) a statement of the grounds on which such director is proposed to be removed, (3) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder's status as such and of the number of shares of each class of the capital stock of the Corporation beneficially owned by such shareholder, (4) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and of the number of shares of each class of the capital stock of the Corporation beneficially owned by each such beneficial owner, and (5) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation (excluding the director proposed to be removed), to the effect that, if adopted at a  duly called special meeting of the shareholders of the Corporation by the vote of the holders of shares conferring 80% of the total votes of all shares of the capital stock of the Corporation voting as single class, such removal would not be in conflict with the laws of the State of Louisiana, the articles of incorporation of the Corporation, or these bylaws. Within 30 days after such shareholder shall have delivered the aforesaid items to the secretary of the Corporation, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations.  If such shareholder fails to submit a required item in the form or within

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the time indicated, or if the secretary or the board of directors of the Corporation determines that the items to be ruled upon by them, respectively, as provided above are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders. Beneficial ownership shall be determined as specified in section 1 of article X of these bylaws.

(f)           Powers.  Subject to the provisions of the laws of the State of Louisiana, the articles of incorporation of the Corporation, and these bylaws, the board of directors shall have and exercise, in addition to such powers as are set forth in the articles of incorporation, all of the powers which may be exercised by the Corporation, including, but without thereby limiting the generality of the above, the power to create and to delegate, with power to subdelegate, any of its powers to any committee, officer, or agent; provided, however, that the board of directors shall not have the power to delegate its authority to:

(1)           amend, repeal, or supplement the bylaws of the Corporation; 

(2) take definitive action on a merger, consolidation, reclassification or exchange of securities, repurchase by the Corporation of any of its equity securities, transfer of all or substantially all of the assets of the Corporation, dissolution, "business combination" as defined in article X of these  bylaws, or similar action;

(3)           elect or remove a director or officer of the Corporation;

(4)           submit a proposal to shareholders for action by shareholders;

(5)           appoint a director to or remove a director from a committee of the board of directors; or

(6)           declare a dividend on the capital stock of the Corporation.

(g)           Change in Number of Directors. No amendment or supplement to or repeal of subsection (a) of section 1 of article III of these bylaws that would have the effect of increasing the number of authorized directors of the Corporation by more than two during any 12-month period shall be permitted unless at least 80% of the "continuing directors" then in office (as defined in subsection (b) of section 2 of article II of these bylaws) shall authorize such action. If the number of directorships is changed for any reason, any increase or decrease in the number of directorships shall be apportioned among the classes so as to make all classes as nearly equal in number as possible.

(h)           Rights of Preferred Shareholders, etc.  Nothing in this section 1 of this article III of these bylaws shall affect the rights of the Corporation's shareholders as provided in section 3(b) of article 6 of the Corporation's articles of incorporation.

Section 2.             Filling of Vacancies.   Except to the extent required by law or section 3(b) of article 6 of the articles of incorporation of the Corporation, newly created directorships  resulting from any increase in the authorized number of directors and any vacancies in the board of

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directors resulting from the attainment by a director of the age of 72 or 65, as specified in paragraphs (1), (2), (4), and (5) of subsection (d) of section 1 of this article III, or from death, resignation, disqualification or removal of a director, or from failure of the shareholders to elect the full number of authorized directors, or from any other cause shall be filled by the affirmative vote of at least a majority of the remaining directors (or director) then in office, even though less than a quorum of the whole board. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred. Except to the extent required by law or section 3(b) of article 6 of the articles of incorporation of the Corporation, the shareholders shall have no right to fill any vacancies in the board of directors.

Section 3.         Annual and Regular Meetings.  Within 45 days after each annual meeting of shareholders, and if possible on the date of each annual meeting of shareholders immediately following each such meeting, the board of directors shall hold an annual meeting for the purpose of electing officers and transacting other corporate business. Such meeting shall be called in the manner for calling regular or special meetings of the board of directors.

Except as otherwise provided by resolution of the board of directors, other regular meetings of the board of directors shall be held on the last Friday in January, July and October at such places as the chief executive officer or president may direct in the notices of such meetings. At least five days' notice by mail or written telecommunication shall be given to each director of the time and place of holding each regular meeting of the board of directors.

Section 4.         Special Meetings. A special meeting of the board of directors may be called by the chief executive officer or president, to be held at such place as he may direct in the notice of such meeting, on four days' notice by mail or three days' notice by written telecommunication, to each director. A special meeting shall be called by the chief executive officer or president in like manner on the written request of at least 50% of the members of the board.

Section 5.          Place of Meetings; Telephone Meetings. A meeting of the board of directors may be held either within or without the State of Louisiana. The time and place of holding a regular or special meeting of the board of directors may be changed and another place and time fixed for such regular or special meeting by a majority of the members of the board.

The members of the board of directors, and a committee thereof, may participate in and hold a meeting of the board or of such committee by means of conference telephone or similar communications equipment provided that all persons participating in such meeting can hear and communicate with one another. Participation in a meeting pursuant to this provision shall constitute presence in person at such meeting, except where a person participates in such meeting for the express purpose of objecting to the transaction of any business on the grounds that such meeting was not lawfully called or convened.

Section 6.           Quorum. A majority of the directors shall constitute a quorum, but a smaller number may adjourn a meeting from time to time without further notice until a quorum is secured.  If a quorum is present, the directors present can continue to do business until adjournment

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notwithstanding the subsequent withdrawal of enough directors to leave less than a quorum or the refusal of any director present to vote.

Section 7.          Compensation.  Each director shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending any regular or special meeting of the board and, by resolution of the board, such other compensation as it may approve. Such reimbursement and compensation shall be payable whether or not an adjournment be had because of the absence of a quorum.  Nothing herein contained shall be construed to preclude any director from serving the Corporation in another capacity and receiving compensation therefor.

Section 8.          Committees.  From time to time, the board of directors may appoint, from its own number, in addition to the committees provided for in these bylaws, such other committee or committees for such purpose or purposes as it shall determine. Subject to the limitations imposed by these bylaws, the articles of incorporation, and the laws of the State of Louisiana, each committee of the board of directors shall have such powers as shall be specified in the resolution of appointment.

ARTICLE IV

Indemnification

Section 1.           Right to Indemnification - General.  The Corporation shall indemnify any person who was or is, or is threatened to be made, a party to or otherwise involved in any pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative (any such threatened, pending or completed proceeding being hereinafter called a "Proceeding") by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another business, foreign or nonprofit corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (whether the basis of his involvement in such Proceeding is alleged action in an official capacity or in any other capacity while serving as such), to the fullest extent permitted by applicable law in effect from time to time, and to such greater extent as applicable law may from time to time permit, from and against expenses, including attorney's fees, judgments, fines, amounts paid or to be paid in settlement, liability and loss, ERISA excise taxes, actually and reasonably incurred by him or on his behalf or suffered in connection with such Proceeding or any claim, issue or matter therein; provided, however, that, except as provided in section 5 of this article, the Corporation shall indemnify any such person claiming indemnity in connection with a Proceeding initiated by such person only if such Proceeding was authorized by the board of directors.

Section 2. Certain Provisions Respecting Indemnification for and Advancement of Expenses.

(a)           To the extent that a person referred to in section 1 of this article is required to serve as a witness in any Proceeding referred to therein, he shall be indemnified against all Expenses (as

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hereinafter defined) actually and reasonably incurred by him or on his behalf in connection with serving as a witness.

 (b)           The Corporation shall from time to time pay, in advance of final disposition, all Expenses incurred by or on behalf of any person referred to in section 1 of this article claiming indemnity thereunder in respect of any Proceeding referred to therein. Each such advance shall be made within ten days after the receipt by the Corporation of a statement from the claimant requesting the advance, which statement shall reasonably evidence the relevant Expenses and be accompanied or preceded by any such undertaking as may be required by applicable law respecting the contingent repayment of such Expenses. Whenever and to the extent applicable law requires the board of directors to act in the specific case with respect to the payment of Expenses in advance of the final disposition of any Proceeding, the board of directors shall act with respect thereto within the period specified in the preceding sentence and shall withhold the payment of Expenses in advance only if there is a reasonable and prompt determination by the board of directors by a majority vote of a quorum of Disinterested Directors (as hereinafter defined), or (if such quorum is not obtainable or, even if obtainable, a quorum of Disinterested Directors so directs) by Independent Counsel (as hereinafter defined) in a written opinion, that advancement  of Expenses is inappropriate, even taking into account any undertaking given with respect to the repayment of such Expenses, because based on the facts then known there is no reasonable likelihood that the claimant would be able ultimately to demonstrate that he met the standard of conduct necessary for indemnification with respect to such Expenses.

Section 3.           Procedure for Determination of Entitlement to Indemnification.

(a)           To obtain indemnification under this article, a claimant shall submit to the Corporation a written application. The secretary of the Corporation shall, promptly upon receipt of such an application for indemnification, advise the board of directors in writing of the application. In connection with any such application, the claimant shall provide such documentation and information as is reasonably requested by the Corporation and reasonably available to him and relevant to a determination of entitlement to indemnification.

(b)           A person's entitlement to indemnification under this article, unless ordered by a court, shall be determined, as required or permitted by applicable law: (i) by the board of directors by a majority vote of a quorum consisting of Disinterested Directors, (ii) if a quorum of the board of directors consisting of Disinterested Directors is not obtainable or, even if obtainable, a quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion, or (iii) by the shareholders of the Corporation; provided, however, that if a Change of Control (as hereinafter defined) shall have occurred, no determination of entitlement to indemnification adverse to the claimant shall be made other than one made or concurred in by Independent Counsel, selected as provided in paragraph (d) of this section, in a written opinion.

(c)           If the determination of entitlement to indemnification is to be made by Independent Counsel in the absence of a Change of Control, the Corporation shall furnish notice to the claimant within ten days after receipt of the application for indemnification specifying the identity and address of Independent Counsel.  The claimant may, within fourteen days after receipt of such written notice of selection, deliver to the Corporation a written objection to such selection, subject

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to paragraph (e) of this section.  If such an objection is made, either the Corporation or the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court.

(d)           If there has been a Change of Control, Independent Counsel to act as and to the extent required by paragraph (b) of this section or paragraph (b) of section 2 shall be selected by the claimant, who shall give the Corporation written notice advising of the identity and address of the Independent Counsel so selected.  The Corporation may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection to such selection, subject to paragraph (e) of this section.  The claimant may, within five days after the receipt of such objection, select other counsel to act as Independent Counsel, and the Corporation may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection, as aforesaid, to such second selection.  In the case of any such objection the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court.

(e)Any objection to the selection of Independent Counsel may be asserted only on the ground that the counsel so selected does not qualify as Independent Counsel under the definition contained in section 7 of this article, and the objection shall set forth with particularity the basis of such assertion.  No counsel selected by the Corporation or by the claimant may serve as Independent Counsel if a timely objection has been made to his selection unless a court has determined that such objection has no reasonable basis.

(f)The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel acting pursuant to this article and in any proceeding in which such counsel is a party or a witness in respect of its investigation and report. The Corporation shall pay all reasonable fees and expenses incident to the procedures of this section regardless of the manner in which Independent Counsel is selected or appointed.

 Section 4.            Presumptions and Effect of Certain Proceedings.

(a)           A person referred to in section 1 of this article claiming a right to indemnification under this article shall be presumed (except as may be otherwise expressly provided in this article or required by applicable law) to be entitled to such indemnification upon submission of an application for indemnification in accordance with section 3, and the Corporation shall have the burden of proof to overcome the presumption in any determination contrary to the presumption.

(b)           Unless the determination is to be made by Independent Counsel, if the person or persons empowered under section 3 of this article to determine entitlement to indemnification shall not have made and furnished the determination in writing to the claimant within 60 days after receipt by the Corporation of the application for indemnification, the determination of entitlement to indemnification shall be deemed to have been made in favor of the claimant unless the claimant knowingly misrepresented a material fact in connection with the application or such indemnification is prohibited by law. The termination of any Proceeding, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contender or its

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equivalent, shall not of itself adversely affect the right of a claimant to indemnification or create a presumption that a claimant did not act in a manner which would deny him the right to indemnification.

Section 5.          Right of Claimant to Bring Suit.

(a)           If (i) a determination is made pursuant to the procedures contemplated by section 3 of this article that a claimant is not entitled to indemnification under this article, (ii)  advancement of Expenses is not timely made pursuant to paragraph (b) of section 2 of this article, (iii) Independent Counsel has not made and delivered a written opinion as to entitlement to indemnification within 90 days after the selection or appointment of counsel has become final by virtue of the lapse of time for objection or the overruling of objections or appointment of counsel by a court, or (iv) payment of a claim for indemnification is not made within five days after a favorable determination of entitlement to indemnification has been made or deemed to have been made pursuant to section 3 or 4 of this article, the claimant shall be entitled to bring suit against the Corporation to establish his entitlement to such indemnification or advancement of Expenses and to recover the unpaid amount of his claim. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending any Proceeding in  advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant did not meet the applicable standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be upon the Corporation. Neither the failure of the Corporation (including its board of directors, Independent Counsel or its shareholders) to have made a determination before the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met such applicable standard of conduct, nor an actual determination by the Corporation (including its board of directors, Independent Counsel or its shareholders) that the claimant has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct, and the claimant shall be entitled to a de novo trial on the merits as to any such matter as to which no determination or an adverse determination has been made.

(b)           If a claimant is successful in whole or in part in prosecuting any claim referred to in paragraph (a) of this section, the claimant shall also be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him in prosecuting such claim.

Section 6.          Non-Exclusivity and Survival of Rights.  The rights of indemnification and to receive advancement of Expenses contemplated by this article shall not be deemed exclusive of any other rights to which any person may at any time be entitled under any bylaw, agreement, authorization of shareholders or directors (regardless of whether directors authorizing such indemnification are beneficiaries thereof), or otherwise, both as to action in his official capacity and as to action in another capacity; provided that no other indemnification measure shall permit indemnification of any person for the results of such person's willful or intentional misconduct.

The Corporation may procure or maintain insurance or other similar arrangement, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or other

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corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against or incurred by such person, whether or not the Corporation would have the power to indemnify such person against such expense or liability.

In considering the cost and availability of such insurance, the Corporation, in the exercise of its business judgment, may purchase insurance which provides for any and all of (i) deductibles, (ii) limits on payments required to be made by the insurer, or (iii) coverage which may not be as comprehensive as that previously included in insurance purchased by the Corporation. The purchase of insurance with deductibles, limits on payments and coverage exclusions will be deemed to be in the best interest of the Corporation but may not be in the best interest of certain of the persons covered thereby. As to the Corporation, purchasing insurance with deductibles, limits on payments, and coverage exclusions is similar to the Corporation's practice of self-insurance in other areas. In order to protect the officers and directors of the Corporation, the Corporation shall indemnify and hold each of them harmless as provided in section 1 of this article IV, without regard to whether the Corporation would otherwise be entitled to indemnify such officer or director under the other provisions of this article IV, to the extent  (i) of such deductibles, (ii) of amounts exceeding payments required to be made by an insurer or (iii) that prior policies of officers and directors liability insurance held by the Corporation would have provided for payment to such officer or director. Notwithstanding the foregoing provisions of this section 6, no person shall be entitled to indemnification for the results of such person's willful or intentional misconduct.

The right to indemnification conferred in this article shall be a contract right, and no amendment, alteration or repeal of this article or any provision thereof shall restrict the indemnification rights granted by this article as to any person claiming indemnification with respect to acts, events and circumstances that occurred, in whole or in part, before such amendment, alteration or repeal. The provisions of this article shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his heirs, executors and legal representatives.

Section 7.              Definitions. For purposes of this article:

(a)           "Change of Control" means the occurrence of any of the following events or circumstances: (1) there shall have occurred an event required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Corporation is then subject to such reporting requirement; (2) (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Act) shall have become the “beneficial owner”, (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation's then outstanding voting securities without the prior approval of at least two-thirds of the members of the board of directors in office immediately before such person's attaining such percentage interest; (3) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or the subject of a proxy contest, as a consequence of which members of the board of directors in office immediately before such transaction or event constitute less than a majority  of the board of directors thereafter; (4) during any period of two consecutive years, individuals who at the

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beginning of such period constituted the board of directors (including for this purpose any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the board of directors.

(b)           "Disinterested Director" means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought as provided in this article.

(c)           "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(d)           "Independent Counsel" means a law firm, or a member of a law firm, with substantial experience in matters of corporation law that neither presently is, nor in the five years before his selection or appointment has been, retained to represent: (i) the Corporation or person claiming indemnification in any matter material to either, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder, and is not otherwise precluded under applicable professional standards from acting in the capacity herein contemplated.

ARTICLE V

Executive Committee

Section 1.          Election and Tenure. The board of directors may appoint an executive committee consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors. The board may at any time, without notice, remove and replace any member of the executive committee.

Section 2.          Executive Committee.  Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the executive committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

Section 3.          Meetings.  The executive committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth.  The executive committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of a majority of the whole committee shall be necessary in every case. The executive committee shall keep regular minutes of its proceedings and report the same to the board of directors.

 

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Section 4.       Compensation. Members of the executive committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors.  Each member of the executive committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of such committee.

ARTICLE VI

Audit Committee

Section 1.          Election and Tenure. The board of directors may appoint an audit committee, consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors.  The board may at any time, without notice, remove and replace any member of the audit committee.

Section 2.          Audit Committee.  Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the audit committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

Section 3.          Meetings.  The audit committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth. The audit committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of a majority of the whole committee shall be necessary in every case. The audit committee shall keep regular minutes of its proceedings and report the same to the board of directors.

Section 4.          Compensation. Members of the audit committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors. Each member of the audit committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of the audit committee.

ARTICLE VII

Compensation Committee

Section 1.         Election and Tenure. The board of directors may appoint a compensation committee, consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors. The board may at any time, without notice, remove and replace any member of the compensation committee.

Section 2.         Compensation Committee. Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the compensation committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In

 

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general terms, the functions of the committee shall be those as set forth in the charter.

Section 3.        Meetings. The compensation committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth. The compensation committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of the majority of the whole committee shall be necessary in every case. The compensation committee shall keep regular minutes of its proceedings and report the same to the board of directors.

Section 4.         Compensation. Members of the compensation committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors. Each member of the compensation committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of the compensation committee.

Article VII.A.

Nominating/Governance Committee

Section 1.         Election and Tenure.  The board of directors may appoint a nominating / governance committee consisting of such number of directors as it may appoint, to serve at the pleasure of the board of directors, but in any event not beyond the next annual meeting of the board of directors.  The board may at anytime, without notice remove and replace any member of the nominating / governance committee.

Section 2.          Nominating / Governance Committee.  Subject to the provisions of subsection (f) of section 1 of article III of these bylaws, the nominating/governance committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

Section 3.          Meetings.  The nominating/governance committee shall meet at stated times or on notice to all by one of its number, in which notice the time and place of the meeting shall be set forth.  The nominating/governance committee shall fix its own rules of procedure, and a majority shall constitute a quorum; but the affirmative vote of a majority of the whole committee shall be necessary in every case.  The nominating/governance committee shall keep regular minutes of its proceedings and report the same to the board of directors.

Section 4.          Compensation. Members of the nominating/governance committee, other than officers of the Corporation, shall receive such compensation for their services as shall be prescribed by the board of directors.  Each member of the nominating/governance committee shall be entitled to receive from the Corporation reimbursement of his expenses incurred in attending a meeting of such committee.

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ARTICLE VIII

Officers

Section l.           Election, Tenure, and Compensation. The officers of the Corporation shall consist of a president, one or more vice presidents, a secretary, a treasurer, and such other officers, including a chairman of the board of directors, as may from time to time be elected or appointed by the board of directors. Officers of the Corporation shall be elected annually by the board of directors as provided in section 3 of article III of these bylaws. If such annual election is not held, the officers then in office shall remain as such until their respective successors shall be elected and qualify. No officer, except the chairman of the board of directors, need be a director, and any two or more offices, except the offices of president and vice president, may be held by one person. The powers of all officers of the Corporation shall be subject to the provisions of subsection (f) of section 1 of article III of these bylaws.

Section 2.          Powers and Duties of Chairman of Board of Directors. The board of directors may elect a non-employee chairman to give leadership to the board and to serve as liaison between management and the board of directors.  In collaboration with the chief executive officer, the chairman will establish an agenda for each board meeting which covers all matters which should come before the board in the proper exercise of its duties.  The chairman will be accountable and will provide leadership for all issues of corporate governance which should come to the attention of the board and its committees.  The chairman will provide leadership to the board in the establishment of positions which the board should take on issues to come before the annual meeting of shareholders.  The chairman shall perform such other duties as from time to time may be delegated to him/her by the board of directors.

Section 3.          Powers and Duties of President. The president shall be the chief executive officer and/or the chief operating officer of the Corporation and, subject to the direction of the board of directors, shall (a) have general and active management of the administration and operation of the business of the Corporation, (b) have the general supervision and direction of the other officers of the Corporation and shall see that their duties are properly performed, (c) see that all orders and resolutions of the board of directors are carried into effect, (d) have the power to execute contracts and conveyances on behalf of the Corporation (including without limitation conveyances of real and personal property to and by the Corporation), and (e) perform such other functions normally performed by a chief executive officer.

Section 4.          Powers and Duties of Vice President. The board of directors may appoint one ormore vice presidents. Each vice president shall have the power to execute contracts and conveyances on behalf of the Corporation, and shall have such other powers and shall perform such other duties as may be assigned to him by the board of directors or by the president.

Section 5.          Powers and Duties of Secretary. The secretary shall attend and record, in a book kept for such purpose, the proceedings of all meetings of the shareholders of the Corporation and of the board of directors. He shall keep an account of stock registered and transferred in such manner as the board of directors may prescribe. He shall keep the seal of the Corporation and, when authorized by the board of directors or the executive committee, he shall affix the seal of the

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Corporation to any instrument requiring the same, and attest the same by his signature, or cause the same to be attested by the signature of an assistant secretary. He shall give proper notice of meetings of shareholders and directors and shall perform such other duties as shall be assigned to him. Assistant secretaries shall have such duties as the board of directors may from time to time prescribe.

Section 6.         Powers and Duties of Treasurer. The treasurer shall have custody of the funds and securities of the Corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors. He shall disburse or cause to be disbursed the funds of the Corporation as may be ordered by the board of directors, executive committee, chief executive officer or president, taking proper vouchers for such disbursements, and shall render to the chief executive officer, the president, and the directors at the regular meetings of the board of directors, or whenever they require it, an account of all his transactions as treasurer and of the financial condition of the Corporation, and at the regular meeting of the board of directors next preceding the annual shareholders' meeting, a like report for the preceding fiscal year. He shall give the Corporation a bond, if required by the board of directors, in such sum and in form and with security satisfactory to the board of directors, for the faithful performance of the duties of his office and the restoration to the Corporation, in case of his death, resignation, or removal from office, of all books, papers, vouchers, moneys, and other property of whatever kind in his possession belonging to the Corporation. He shall perform such other duties as the board of directors or executive committee may from time to time prescribe. Assistant treasurers shall have such duties as the board of directors may from time to time prescribe.

Section 7.        Delegation of Duties. In case of the absence or disability of any officer of the Corporation, or for any other reason deemed sufficient by the board of directors, the board of directors may delegate such officer's powers or duties for the time being to any other officer, to any employee with management responsibility, or to any director.

ARTICLE IX

Capital Stock

Section l.        Stock Certificates. The shares of capital stock of the Corporation may be represented by certificates in such form as may be approved by the board of directors, which certificates shall be signed by the chief executive officer, the president or one of the vice presidents of the Corporation and also by the secretary or an assistant secretary, or the treasurer or an assistant treasurer. Such certificates shall have affixed an impression of the seal of the Corporation.  Where such certificates are countersigned by a transfer agent and by a registrar, both of which may be the same institution, the signatures of such officers and the seal of the Corporation thereon may be facsimiles, engraved or printed.  If an officer of the Corporation who shall have signed a certificate of capital stock, or whose facsimile signature has been affixed for such purpose, shall cease to be such officer of the Corporation before the stock certificate so signed shall have been issued by the Corporation, such stock certificate may nevertheless be issued and delivered with the same force and effect as though the person who signed such certificate or

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whose facsimile signature has been affixed for such purpose had not ceased to be such officer of the Corporation.  Notwithstanding the foregoing regarding share certificates, officers of the Corporation may provide that some or all of any or all classes or series of the Corporation’s capital stock may be uncertificated shares.

Section 2.       Lost or Destroyed Certificates. The board of directors may determine the conditions upon which a new certificate for capital stock of the Corporation may be issued in place of a certificate which is alleged to have been lost, stolen, or destroyed and may, in its discretion, require the owner of such certificate or his legal representative to give bond with sufficient surety to the Corporation to indemnify it against any loss or claim which may arise by reason of the issue of a new certificate in the place of the one so alleged to have been lost, stolen, or destroyed.

Section 3.       Transfer of Shares. The shares of capital stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates, if such shares are represented by certificates,  shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock or transfer books and ledgers, or to such other person as the board of directors may designate, by whom they shall be canceled.  New stock certificates or uncertificated shares may thereupon be issued, representing the shares so transferred.  A record shall be made of each transfer.

Section 4.       Dividends. Dividends upon the capital stock may be declared by the board of directors at a regular or special meeting out of the net profits or surplus of the Corporation. Before paying a dividend or making a distribution of profits, there may be set aside out of the accumulated profits of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund for meeting contingencies or for equalizing dividends or for repairing or maintaining property of the Corporation or for such other purpose as the directors shall think conducive to the interests of the Corporation.

Section 5.       Closing Transfer Books; Fixing Record Date. The board of directors may fix the time, not exceeding 60 days preceding the date of a meeting of shareholders, a dividend payment date, or a date for the allotment of rights, during which the books of the Corporation shall be temporarily closed against transfers of stock; or, in lieu thereof, the board of directors may fix a date, not exceeding 60 days preceding the date of a meeting of shareholders, a dividend payment date, or a date for the allotment of rights, as a date for the taking of a record of the shareholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or such rights, as the case may be; and only shareholders of record on such date shall be entitled to notice of and to vote at such meeting, or to receive such dividends or rights, as the case may be.

ARTICLE X

Fair-Price Provisions

Section 1.           Definitions. As used in article X of these bylaws, the following terms shall have the indicated meanings:

 

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(a)           "Affiliate," including the term "affiliated person," means a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, a specified person.

(b)           “Associate,” when used to indicate a relationship with any person, means any of the following:

(1)           A corporation or organization, other than the Corporation or a subsidiary of the Corporation, of which such person is an officer, director, or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities.

(2)           A trust or other estate on which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity.

(3)           A relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or any of its affiliates.

(c)           “Beneficial owner,” when used with respect to voting stock, means any of the following:

(1)           A person who individually or with any of his affiliates or associates beneficially owns voting stock, directly or indirectly.

(2)           A person who individually or with any of his affiliates or associates has either of the following rights:

(A)           To acquire voting stock, whether such right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise.

(B)           To vote voting stock pursuant to any agreement, arrangement, or understanding.

(3)           A person who has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing voting stock with any other person who beneficially owns or whose affiliates beneficially own, directly or indirectly, such shares of voting stock.

(d)           "Business combination" means any of the following:

(1)           Except for a merger, consolidation, or share exchange that does not alter the contract rights of the stock as expressly set forth in the articles of incorporation of the Corporation or change or convert in whole or in part the outstanding shares of the

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Corporation, any merger, consolidation, or share exchange of the Corporation or any subsidiary with:

(A)           An interested shareholder; or

(B)           Another corporation, whether or not itself an interested shareholder, which is, or after the merger, consolidation, or share exchange would be, an affiliate of an interested shareholder that was an interested shareholder before the transaction.

(2)           A sale, lease, transfer, or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions in any twelve-month period, to an interested shareholder or any affiliate of an interested shareholder, other than the Corporation or any of its subsidiaries, of any assets of the Corporation or any subsidiary having, measured at the time the transaction or transactions are approved by the board of directors of the Corporation, an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10% or more of the total market value of the outstanding stock of the Corporation or of its net worth as of the end of its most recently ended fiscal quarter.

(3)           The issuance or transfer by the Corporation or any subsidiary, in one transaction or a series of transactions, of any equity securities of the Corporation or any subsidiary which has an aggregate market value of five percent or more of the total market value of the outstanding stock of the Corporation, to any interested shareholder or any affiliate of any interested shareholder, other than the Corporation or any of its subsidiaries, except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the Corporation's voting stock or any other method affording substantially proportionate treatment of the holders of voting stock.

(4)           The adoption of a plan or proposal for the liquidation or dissolution of the Corporation in which anything other than cash will be received by an interested shareholder or an affiliate of an interested shareholder.

(5)           A reclassification of securities, including a reverse stock split or recapitalization of the Corporation, or any merger, consolidation, or share exchange of the Corporation with any of its subsidiaries which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by five percent or more of the total number of outstanding shares the proportionate amount of the outstanding shares of any class of equity securities of the Corporation or any subsidiary which is directly or indirectly owned by an interested shareholder or an affiliate of an interested shareholder.

(e)           "Common stock" means stock other than preferred or preference stock.

(f)           "Control," including the terms "controlling," "controlled by," and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting

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securities, by contract, or otherwise. The beneficial ownership of 10% or more of the votes entitled to be cast of a corporation’s voting stock creates a presumption of control.

(g)           “Equity security” means any of the following:

(1)           Stock or a similar security, certificate of interest, or participation on any profit sharing agreement, voting trust certificate, or certificate of deposit for an equity security.

(2)           A security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security.

(3)           Any put, call, straddle, or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so.

(h)           (l )           "Interested shareholder" means any person other than the Corporation or any subsidiary that is either of the following:

(A)           The beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting stock of the Corporation.

(B)           An affiliate of the Corporation who at any time within the two-year period immediately before the date in question was the beneficial owner, directly or indirectly, of l0% or more of the voting power of the then outstanding voting stock of the Corporation.

(2)           For the purpose of determining whether a person is an interested shareholder, the number of shares of voting stock deemed to be outstanding shall include shares deemed owned by the person through application of subsection (c) of this section, but may not include any other shares of voting stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise.

(i)           "Market value" means the following:

(A)           In the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the board of directors of the Corporation in good faith.

 

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(B)           In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the board of directors of the Corporation in good faith.

(j)           "Subsidiary" means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Corporation.

(k)           "Voting stock" means shares of capital stock of a corporation entitled to vote generally in the election of directors.

Section 2.            Vote Required in Business Combinations. In addition to any vote otherwise required by law or the articles of incorporation of the Corporation, a business combination shall be recommended by the board of directors and approved by the affirmative vote of at least each of the following:

(a)           80% of the votes entitled to be cast by outstanding shares of voting stock of the Corporation voting together as a single voting group.

(b)           Two-thirds of the votes entitled to be cast by holders of voting stock other than voting stock held by the interested shareholder who is or whose affiliate is a party to the business combination or an affiliate or associate of the interested shareholder, voting together as a single voting group.

Section 3.            When Voting Requirements Not Applicable.

(a)           Definitions. For purposes of subsection (b) of this section, the following terms shall have the indicated meanings:

(1)           "Announcement date" means the first general public announcement of a proposal or intention to make a proposal of a business combination or its first communication generally to shareholders of the Corporation, whichever is earlier.

(2)           "Determination date" means the date on which an interested shareholder first became an interested shareholder.

(3)           "Valuation date" means the following:

(A)           For a business combination voted upon by shareholders, the later of (i) the day before the day of the shareholders' vote or (ii) the day 20 days before the consummation of the business combination.

(B) For a business combination not voted upon by shareholders, the date of the consummation of the business combination.

 

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(b)           Conditions. The vote required by section 2 of this article X shall not apply to a business combination, as defined in section 1 of this article X, if each of the following conditions is met:

(1 )           The aggregate amount of the cash and the market value as of the valuation date of consideration other than cash to be received per share by holders of common stock in such business combination is at least equal to the highest of the following:

(A) The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for any shares of common stock of the same class or series that he acquired:

(i)           within the two-year period immediately before the announcement date of the proposal of the business combination; or

(ii)           in the transaction in which he became an interested shareholder, whichever is higher; or

(B)           The market value per share of common stock of the same class or series on the announcement date or on the determination date, whichever is higher; or

(C) The price per share equal to the market value per share of common stock of the same class or series determined pursuant to subparagraph (B) immediately preceding, multiplied by the fraction of:

(i)           The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for shares of common stock of the same class or series that he acquired within the two-year period immediately before the announcement date, over

(ii)           The market value per share of common stock of the same class or series on the first day in such two-year period on which the interested shareholder acquired shares of common stock.

(2)           The aggregate amount of the cash and the market value as of the valuation date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than common stock is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired shares of a particular class or series of stock:

(A)           The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for any shares of such class of stock that he acquired:

 

29

(i) within the two-year period immediately before the announcement date of the proposal of the business combination; or

(ii) in the transaction in which he became an interested shareholder, whichever is higher; or

(B)           The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation; or

(C)           The market value per share of such class of stock on the announcement date or on the determination date, whichever is higher; or

    (D)The price per share equal to the market value per share of such class of stock determined pursuant to subparagraph (C) immediately preceding, multiplied by the fraction of:

(i)           The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the interested shareholder for such shares of voting stock acquired by him within the two-year period immediately before the announcement date, over

(ii)           The market value per share of the same class of voting stock on the first day on such two-year period on which the interested shareholder acquired shares of the same class of voting stock.

(3)           The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the interested shareholder previously paid for shares of the same class or series of stock. If the interested shareholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock that he previously acquired.

(4)           (A)           After the interested shareholder has become an interested shareholder and before the consummation of such business combination:

(i)           There shall have been no failure to declare and pay at the regular date therefor any full periodic dividends, cumulative or not, on any outstanding preferred stock of the Corporation;

(ii)           There shall have been:

(aa)           No reduction in the annual rate of dividends paid on any class or series of stock of the Corporation that is not preferred stock except as necessary to reflect any subdivision of such stock; and

 

30

(bb)           An increase in such annual rate of dividends as shall have been necessary to reflect reclassification, including reverse stock split, recapitalization, reorganization, or similar transaction, which shall have the effect of reducing the number of outstanding shares of such stock; and

(iii) The interested shareholder did not become the beneficial owner of additional shares of stock of the Corporation except as part of the transaction which resulted in such interested shareholder's becoming an interested shareholder or by virtue of proportionate stock splits or stock dividends.

(B)           The provisions of (i) and (ii) of subparagraph (A) shall not apply if neither an interested shareholder nor an affiliate or associate of an interested shareholder voted as a director of the Corporation in a manner inconsistent with (i) and (ii), and the interested shareholder, within 10 days after an act or failure to act inconsistent with such subparagraphs, shall have notified the board of directors of the Corporation in writing that the interested shareholder disapproves thereof and requests in good faith that the board of directors rectify such act or failure to act.

(5)           After the interested shareholder has become an interested shareholder, the interested shareholder may not have received the benefit, directly or indirectly, except proportionately as a shareholder, of loans, advances, guarantees, pledges, or other financial assistance, or tax credits or other tax advantages, provided by the Corporation or any of its subsidiaries, whether in anticipation of or in connection with such business combination or otherwise.

(c)           Other Provisions.

(1)           Section 2 of this article X shall not apply to a business combination with a particular interested shareholder or his existing or future affiliates that has been approved or exempted therefrom by resolution of the board of directors of the Corporation; provided, however, that any such resolution shall have been adopted before the time that such interested shareholder first became an interested shareholder.

(2)           Unless by its terms a resolution adopted under this subsection is made irrevocable, it may be altered or repealed by the board of directors, but this shall not affect a business combination that has been consummated or is the subject of an existing agreement entered into before the alteration or repeal.

 

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ARTICLE XI

Notices

Section 1.            Manner of Giving Notice. Notice required to be given under the provisions of these bylaws to a director, officer, or shareholder shall not be construed to mean personal notice, but may be given by depositing written or printed notice in a post office or letter box in a postpaid wrapper addressed to such director, officer, or shareholder at such address as appears on the books of the Corporation, such notice to be deemed to have been given at the time when the same shall have been thus mailed; or, if such person has provided a telecommunications address to the Corporation, such notice may be given by prepaid written telecommunication sent  to such address and in such event shall be deemed to have been given at the time when the same shall have been transmitted.

Section 2.            Waiver of Notice. Any shareholder, officer, or director may waive, in writing or by written telecommunication, whether before or after the time stated, any notice required to be given under these bylaws.

ARTICLE XII

Miscellaneous

Section 1.            Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December in each year.

Section 2.            Checks and Drafts. All checks, drafts, and orders for the payment of money shall be signed by the treasurer, in person or by facsimile or other authorized means, or by such other officer or officers or agents as the board of directors may from time to time designate. No check shall be signed in blank.

Section 3.            Books and Records. The books, accounts, and records of the Corporation shall, subject to the limitations fixed by law, be open to inspection by the shareholders at such times and subject to such regulations as the board of directors may prescribe.

Section 4.           Separability. If one or more of the provisions of these bylaws shall be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof and these bylaws shall be construed as if such invalid, illegal, or unenforceable provision or provisions had never been contained herein.

 

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ARTICLE XIII

Amendment of Bylaws

Section 1.         Voting. These bylaws may be amended, repealed, or supplemented at any regular meeting of the board of directors, or at any special meeting called for such purpose, by the affirmative vote of a majority of the board of directors, or by unanimous written consent; provided, however, that in each instance an amendment, repeal, or supplement shall not be inconsistent with the law or the articles of incorporation of the Corporation and shall be subject to the power of the shareholders to amend, repeal, or supplement the bylaws so made but only upon the affirmative vote of at least 80% of all shares of capital stock entitled to vote thereon.

Section 2.         Shareholder Proposals. No proposal by a shareholder to amend, repeal, or supplement the bylaws of the Corporation may be voted upon at a meeting of shareholders unless, at least 180 days before such meeting of shareholders, such shareholder shall have delivered in writing to the secretary of the Corporation (a) notice of such proposal and the text of the proposed amendment, repeal, or supplement, (b) evidence, reasonably satisfactory to the secretary of the Corporation, of such shareholder's status as such and of the number of shares of each class of capital stock of the Corporation of which such shareholder is the beneficial owner, (c) a list of the names of other beneficial owners of shares of the capital stock of the Corporation, if any, with whom such shareholder is acting in concert, and the number of shares of each class of capital stock of the Corporation beneficially owned by each such beneficial owner, and (d) an opinion of counsel, which counsel and the form and substance of which opinion shall be reasonably satisfactory to the board of directors of the Corporation, to the effect that the bylaws (if any) resulting from the adoption of such proposal would not be in conflict with the articles of incorporation of the Corporation or the laws of the State of Louisiana. Within 30 days after such shareholder shall have submitted the aforesaid items, the secretary and the board of directors of the Corporation shall respectively determine whether the items to be ruled upon by them are reasonably satisfactory and shall notify such shareholder in writing of their respective determinations. If such shareholder fails to submit a required item in the form or within the time indicated, or if the secretary or the board of directors of the Corporation determine that the items to be ruled upon by them are not reasonably satisfactory, then such proposal by such shareholder may not be voted upon by the shareholders of the Corporation at such meeting of shareholders. Beneficial ownership shall be determined in accordance with section 1 of article X of these bylaws.

Section 3.      Effective Date. No amendment or supplement to or repeal of any of the following provisions of these bylaws, whether resulting from action of the directors or the shareholders, shall take effect until the later of (i) one year following the adoption of such amendment, supplement, or repeal, or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption of such amendment, supplement, or repeal:

Article II, section 2;

Article II, section 8;

Article X; and

Article XIII.

 

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ARTICLE XIV

Other Amendments to Bylaws

Section 1.         Effective Date. No amendment or supplement to or repeal of any of the following provisions of these bylaws, whether resulting from action of the directors or the shareholders, shall take effect until the later of (i) one year following the adoption of such amendment, supplement, or repeal, or (ii) 10 days after the adjournment sine die of the annual meeting of shareholders next succeeding the adoption of such amendment, supplement, or repeal:

Article II, section 4;

Article II, section 5;

Article II, section 7;

Article II, section 9;

Article III, section 1;

Article III, section 2; and

Article XIV;

provided, however, that the board of directors shall have the power at any time, free from the foregoing restrictions, but subject to the provisions of subsection (g) of section 1 of article III of these bylaws, to amend or otherwise change subsections (a) and (d)(1) of section 1 of article III of these bylaws, and, with respect to any amendments to or changes in such subsection (d)(1), to make appropriate conforming changes in such section 1.

ARTICLE XV

Control Share Acquisition Statute

Section 1.         Pursuant to Section 136 of the Louisiana Business Corporation Law, the provisions of Sections 135 through 140.2 of the Louisiana Business Corporation Law, enacted as part of Title 12 of the Louisiana Revised Statutes, shall not apply to "control share acquisitions" (as defined therein) of this Corporation.

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EX-3.2

         Exhibit 3.2

OPERATING AGREEMENT

OF

CLECO POWER LLC

(Revised effective October 1, 2008)

Section 1.		Formation	1
Section 2.		Principal Place of Business	1
Section 3.		Other Business of Members	1
Section 4.		Accounting and Reports for the Company	1
a.	Records and Accounting		1
b.	Access to Records		1
c.	Outside Consultants		1
Section 5.		Membership Interests and Capital Accounts	2
a.	Membership Interests and Organization		2
b.	Admission of Additional Members		2
c.	Certificates for Membership Interest		2
d.	Addition to or Withdrawal of Capital Contributions		2
Section 6.		Member Meetings	2
a.	Place of Holding Meetings		2
b.	Quorum		2
c.	Adjournments		2
d.	Annual Meeting		2
e.	Special Meetings		3
f.	Conduct of Meetings		3
g.	Voting		4
h.	Proxies		4
i.	Notice		5
j.	Consents		5
Section 7.		Management and Control of the Company	5
a.	Management of the Company by Managers		5
b.	Classification		5
c.	Nominations		5
d.	Qualifications; Declaration of Vacancy		5
e.	Removal		6
f.	Powers		7
g.	Filling of Vacancies		7
h.	Annual and Regular Meetings		7
i.	Special Meetings		8
j.	Place of Meetings; Telephone Meetings		8
k.	Quorum		8
l.	Compensation		8
m.	Committees		8
n.	Consents		8
Section 8.		Officers	9
a.	Election, Tenure and Compensation		9
b.	Powers and Duties of the Chairman of the Board of Managers		9

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c.	Powers and Duties of President		9
d.	Powers and Duties of Vice President		9
e.	Power and Duties of Secretary		9
f.	Powers and Duties of Treasurer		10
g.	Delegation of Duties		10
h.	Removal		10
Section 9.		Committees	10
a.	Executive, Audit, Compensation and Nominating/Governance Committees		10
b.	Powers and Duties of the Executive Committee		10
c.	Powers and Duties of the Audit Committee		10
d.	Powers and Duties of the Compensation Committee		11
d.(1)	Powers and Duties of the Nominating/Governance Committee		11
e.	Meetings		11
f.	Compensation		11
Section 10.		Profits or Losses	11
Section 11.		Distributions	11
Section 12.		Dissolution	11
a.	Events Causing Dissolution		11
b.	Winding Up the Company		11
c.	Gains or Losses in Winding Up		12
Section 13.		Indemnity	12
a.	Right to Indemnification – General		12
b.	Certain Provisions Respecting Indemnification for and Advancement of Expenses		12
c.	Procedure for Determination of Entitlement to Indemnification		13
d.	Presumptions and Effect of Certain Proceedings		14
e.	Right of Claimant to Bring Suit		14
f.	Non-Exclusivity and Survival of Rights		15
g.	Definitions		16
Section 14.		Notices	17
a.	Manner of Giving Notice		17
b.	Waiver of Notice		17
Section 15.		General Provisions	17
a.	Choice of Law		17
b.	Binding Effect		17
c.	Gender and Plurality		17
d.	Captions		17
e.	Severability		17
f.	Integration		18

ii 

OPERATING AGREEMENT

OF

CLECO POWER LLC

THIS OPERATING AGREEMENT (this “Agreement”), effective as of the 13th day of December, 2000, is entered into by and between Cleco Power LLC, a Louisiana limited liability company (the “Company”), organized pursuant to Title 12, Chapter 22 of the Louisiana Revised Statutes, the Louisiana Limited Liability Company Law (the “LaLLCL”), and Cleco Corporation, a Louisiana corporation, the Company’s sole member on the date hereof (the “Initial Member”), who agree as follows:

Section 1.          Formation.  The Initial Member executed the Articles of Organization (the “Articles”) of the Company on the 12th day of December, 2000, which Company was formed under the provisions of the LaLLCL and other applicable law, as amended.  Pursuant to the LaLLCL, the Initial Member and the Company hereby adopt an Operating Agreement to govern and control the contractual relationship between them.  Accordingly, the rights and liabilities of the Members (as hereinafter defined) and the Company shall be as provided herein.  These rights and liabilities supplement and are in addition to the rights set forth in the Articles.

Section 2.          Principal Place of Business.  Both the registered office in Louisiana and the principal business office of the Company (the “Principal Business Office”) shall be located at 2030 Donahue Ferry Road, Pineville, Louisiana, 71360, or at such other location as may be designated by the Members from time to time.

Section 3.          Other Business of Members.  The Members may engage in and/or possess interests in other business ventures of every nature and description, independently or with others; and the Company shall not have any rights by virtue of this Agreement or the existence of this Company in or to such ventures or to the income or profits derived therefrom.

Section 4.          Accounting and Reports for the Company.

a.           Records and Accounting.  The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with the accounting methods selected by the Members from time to time, and if not so selected, the books and records shall be maintained in accordance with generally accepted accounting principles consistently applied.  The books and records of the Company shall reflect all the Company’s transactions and shall be appropriate and adequate for the Company’s business.  The accounting year of the Company for financial reporting and for federal income tax purposes shall be the calendar year.

b.           Access to Records.  All books, records, files, securities and other documents or information maintained by the Company shall be maintained at the Principal Business Office or at any other office of the Company chosen by the Members.

c.           Outside Consultants.  The Company may obtain the services of outside accountants, attorneys and other consultants.

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Section 5. Membership Interests and Capital Accounts.

a.           Membership Interests and Organization.  Exhibit A to this Agreement states the initial interest of the Initial Member (the “Membership Interest”) in the Company, and the initial contribution of cash or property by such Initial Member.

b.           Admission of Additional Members.  The Members may, by unanimous vote, admit to the Company additional members (the Initial Member and additional members, if any, collectively the “Members”, individually a “Member”).  Any additional Members shall execute an appropriate supplement to this Agreement to be bound by the terms and shall execute such other documents as the board of managers deems necessary or advisable.

c.           Certificates for Membership Interest.  The Membership Interests shall not be represented by any certificate of membership or other evidence of membership other than the Articles and this Agreement.

d.           Addition to or Withdrawal of Capital Contributions.  The Members shall not have the right to withdraw their capital contribution at any time.  The Members shall not be required to make any additional contributions to the capital of the Company.  Additional capital may be contributed to the Company, or capital may be withdrawn, but only as authorized by appropriate action under this Agreement.

Section 6.          Member Meetings.

a.           Place of Holding Meetings.  All meetings of the Members shall be held at the principal business office of the Company in the City of Pineville, State of Louisiana, except in cases in which the notices thereof designate some other place, which may be within or without the State of Louisiana.

b.           Quorum.  The presence in person, or by proxy as provided in Subsection (h) of this Section, by the Members having a majority in interest of the Membership Interests shall constitute quorum at such meeting.

c.           Adjournments.  If a quorum shall not be present or represented at any meeting of the Members, such meeting may, without any notice other than by announcement at such meeting, be adjourned from time to time by the affirmative vote of a majority in interest of the Membership Interests by the authorized representatives of the Members present in person or by proxy, for a period not exceeding one month at any one time, without notice other than by announcement at the meeting, until a quorum shall attend; provided, however, that a meeting at which a manager or managers are to be elected shall be adjourned only from day to day until such manager or managers have been elected.  A meeting at which a quorum is present may also be adjourned in like manner.  At an adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted if such meeting had been held or originally called.

d.           Annual Meeting.  Except as otherwise provided by resolution of the board of managers, the annual meeting of the Members for the election of managers shall be held on the third Friday after the first Monday in April of each year.  At each annual meeting of the

2 

Members, the Members shall elect, by an affirmative vote of a majority in interest of the Membership Interests, managers to succeed those whose terms have expired as of the date of such annual meeting.  Such other matters as may properly come before a meeting may be acted upon at an annual meeting.

e.           Special Meetings.  Special meetings of the Members for any purpose or purposes may be called by a Member or the chief executive officer, the president, a majority of the board of managers, or by a majority of the executive committee, if any, of the board of managers of the Company.

f.           Conduct of Meetings.  Meetings of the Members shall be presided over by the chief executive officer or president of the Company or, if the chief executive officer or president is not present at a meeting, by such other person as the board of managers shall designate or, if no such person is designated by the board of managers, the most senior officer of the Company present at the meeting.  The secretary of the Company, if present, shall act as secretary of each meeting of the Members; if he is not present at a meeting, then such person as may be designated by the presiding officer shall act as secretary of the meeting.  Meetings of the Members shall follow reasonable and fair procedure.  Subject to the foregoing, the conduct of any meeting of the Members and the determination of procedure and rules shall be in the absolute discretion of the presiding officer (the “Chairman of the Meeting”) and there shall be no appeal from any ruling of the Chairman of the Meeting with respect to procedure or rules.  Accordingly, in any meeting of the Members or part thereof, the Chairman of the Meeting shall have the sole power to determine appropriate rules or to dispense with theretofore prevailing rules.  Without limiting the foregoing, the following rules shall apply:

(i)           The Chairman of the Meeting may ask or require that anyone not a bona fide Member or authorized representative or proxy of a Member leave the meeting.

(ii)           A resolution or motion shall be considered for vote only if proposed by a Member or duly authorized proxy, subject to compliance with any other requirements concerning such a proposed resolution or motion contained in this Agreement.  The Chairman of the Meeting may propose any motion for vote.  The order of business at all meetings of the Members shall be determined by the Chairman of the Meeting.

(iii)           The Chairman of the Meeting may impose any reasonable limits with respect to participation in the meetings of the Members, including, but not limited to, limits on the amount of time at the meeting taken up by the remarks or questions of a Member and limits as to the subject matter and timing of questions and remarks by a Member.

(iv)           Before any meetings of the Members, the board of managers may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment.  If no inspectors of election are so appointed, the Chairman of the Meeting may, and on request of a Member or a Member’s proxy shall, appoint inspectors of election at the meeting of the Members.  The number of inspectors shall be three.  If any person appointed as inspector fails to appear or refuses to act, the Chairman of the Meeting may, and upon the request of a Member or a Member’s proxy shall, appoint a person to fill such vacancy.

The duties of these inspectors shall be as follows:

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(1) Determine the Membership Interests outstanding and the voting power of each, the Membership Interests represented at the meeting, the existence of quorum, and the authenticity, validity and effect of proxies;

(2)        Receive votes or ballots;

     (3)        Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(4)       Count and tabulate all votes;

(5) Report to the board of managers the results based on the information assembled by the inspectors; and

(6) Do any other acts that may be proper to conduct the election or vote with fairness to the Members.

Notwithstanding the foregoing, the final certification of the results of any election or other matter acted upon at a meeting of the Members shall be made by the board of managers.

g.           Voting.  The affirmative vote of a majority in interest of the Membership Interests shall be required to approve any action or matter submitted to the Member for approval.  Except as otherwise provided by law, the Articles, or this Agreement, all elections shall be had and all questions shall be decided, at a duly constituted meeting at which a quorum is present, by a majority in interest of the Membership Interests.

h.           Proxies.  A Member may vote either in person or by proxy executed in writing by such Member.  A telegram, telex, cablegram or similar transmission by a Member, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by a Member shall be treated as an execution in writing for purposes of this Subsection. Proxies for use at any meeting of the Members or in connection with the taking of any action by written consent shall be filed with the Managers, before or at the time of the meeting or execution of the written consent, as the case may be.  All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the board of managers, who shall decide all matters touching upon the qualification of voters, the validity of proxies, and the acceptance or rejection of votes, unless an inspector or inspectors of election shall have been appointed by the Chairman of the Meeting, in which event such inspector or inspectors shall decide all such questions.  No proxy shall be valid after 11 months after the date of its execution unless otherwise provided in the proxy.  A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest.  Should a proxy designate two or more persons to act as proxies, unless that instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or if an even number attend and a majority do not agree on any particular issue, the Company shall not be required to recognize such proxy with respect to such issue if such proxy does not specify how such vote is to be cast with respect to such issue.

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i.           Notice.                      

(i)           Unless otherwise provided by the Articles, written or printed notice, stating the place, day, and hour of each meeting of the Members, and, in the case of a special meeting, the business proposed to be transacted thereat, shall be given in the manner provided in Section 14 of this Agreement to each Member at least 15 days before an annual meeting and at least 5 days before a special meeting.

(ii)           To be properly brought before any meeting of the Members, business must be either (x) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of managers pursuant to paragraph (i) of this Subsection, (y) otherwise properly brought before the meeting by or at the direction of the board of managers, or (z) otherwise properly before the meeting by a Member.

(iii)           The Chairman of the Meeting shall, if the facts warrant, determine and declare at any meeting of the Members that business was not properly brought before the meeting of the Members in accordance with the provisions of this Subsection, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

j.           Consents.  Any action of the Members, which may be taken at a meeting thereof, may be taken without a meeting if authorized by a writing signed by all the Members.

Section 7.          Management and Control of the Company

a.           Management of the Company by Managers.  The powers of the Company shall be vested in and exercised, and the business and affairs of the Company shall be managed, by a board of managers which shall consist of ten (10) managers.

b.           Classification.  The board of managers of the Company shall be divided into three classes of as nearly as possible equal size, with the term of office of managers of one class expiring each year.  At each annual meeting of the Members, the successors to the class of managers whose term shall have expired at such meeting shall be elected to hold office for a term expiring at the third annual meeting of the Members succeeding such meeting.

c.           Nominations.  Nominations for election of managers of the board of managers may be made by the board of managers or by a Member.

d.           Qualifications; Declaration of Vacancy.

(i)           No person shall be eligible for election or reelection as a manager after attaining the age of 72, and no person who is or shall have been a full-time officer or employee of the Company or any subsidiary thereof shall be eligible for election or reelection as a manager after attaining age 65 or (even if under 65) after such manager’s employment by the Company has terminated.

(ii)           Upon attaining the age of 72 or 65, as specified in paragraph (i) immediately preceding, a manager may continue to serve as a manager of the Company until no later than the next succeeding annual meeting of the Members, at which time, unless he has

5 

previously ceased to be a manager on the board of managers of the Company, his position as a manager shall cease.  Notwithstanding the foregoing, with regard to a manager of the Company who is also an officer or employee of the Company or any subsidiary thereof, such manager’s position as a manager shall cease immediately upon termination of such manager’s employment by the Company.

(iii)           No person shall be eligible for election or reelection or to continue to serve as a manager on the board of managers who is an officer, director, agent, representative, partner, employee, or nominee of, or otherwise acting at the direction of, or acting in concert with, (y) a "public utility company" (other than one that is an “affiliate” of the Company) or "holding company" (other than one that is an “affiliate” of the Company) as such terms are defined in the Public Utility Holding Company Act of  1935, as amended, or "public utility" (other than one that is an “affiliate” (as defined in 18 C.F.R. § 161.2) of the Company) as such term is defined in Section 201(e) of the Federal Power Act of 1920, as amended, or (z) an "affiliate" (as defined in 17 C.F.R. § 230.405) under the Securities Act of 1933, as amended) of any of the persons or entities specified in clause (y) immediately preceding.

(iv)           Upon the occurrence of any of the events described in paragraph (ii) of this Subsection, the affected manager shall cease to be a manager of the Company at the time specified in such paragraph. Determination of the eligibility of a person for election, reelection, or continued service on the board of managers under other provisions of this Subsection or otherwise as provided by applicable law shall, subject to the provisions of paragraph (vi) below, be made by vote of a majority of the managers of the board of managers. If the board of managers, pursuant to such a determination, determines that a person is ineligible for election, reelection, or continued service on the board of managers, such ineligibility shall be effective immediately upon such determination, and, if the affected person is a manager of the Company at the time of such determination, his position as a manager shall cease at such time.

(v)           If a manager of the Company ceases to be a manager (x) at the annual meeting of the Member next succeeding the day upon which he attained the age of 72 or 65, as specified in paragraphs (i), (ii), and (iv) of this Subsection, and if there is time remaining in the regularly scheduled term of office of such manager, (y) because of termination of employment, as provided in paragraphs (i), (ii), and (iv) of this Subsection, or (z) upon the determination of the board of managers of the Company pursuant to paragraph (iv) of this Subsection that a manager of the Company is no longer qualified to continue serving as a manager of the Company, the board of managers shall declare the office held by such manager vacant and may fill such vacancy as provided in Subsection (g) of this Section.

(vi)           If a member of the board of managers has been adjudged by a court of competent jurisdiction to be guilty of fraud, criminal conduct (other than minor traffic violations), gross abuse of office amounting to a breach of trust, or similar misconduct, and no appeal (or further appeal) therefrom is permitted under applicable law, the other managers then in office, by unanimous vote, may declare the position occupied by such manager vacant, and such other managers may fill such vacancy as provided in Subsection (g) of this Section.

e.           Removal. In this Subsection, the terms "remove" and "removal" and their related grammatical forms shall refer only to the process of dismissal provided for in this Subsection, and shall not be deemed to refer to disqualification of a manager, cessation of a

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manager to be such, or declaration of a vacancy in the office of manager as provided for in Subsection (d) of this Section or otherwise as permitted by law.

A manager on the board of managers may be removed at any time by the Members by an affirmative vote of a majority in interest of the Membership Interests.

f.           Powers.  Subject to the provisions of the laws of Louisiana, the Articles, and this Agreement, the board of managers shall have and exercise all of the powers which may be exercised by the Company, including, but without thereby limiting the generality of the above, the power to create and delegate, with the power to subdelegate, any of its powers to any committee, officer, or agent; provided, however, that the board of managers shall not have the power to delegate its authority to:

(i) declare an office held by a manager vacant, fill a vacancy on the board of managers or remove an officer of the Company;

(ii)   submit a proposal to the Members for action by the Members;

(iii)   appoint a manager to or remove a manager from a committee of the board of managers; or

  (iv)  declare a distribution on the Membership Interests of the Company.

g.           Filling of Vacancies. Newly created directorships resulting from any increase in the authorized number of managers and any vacancies in the board of managers resulting from the attainment by a manager of the age of 72 or 65, as specified in paragraphs (i), (ii), (iv), and (v) of Subsection (d) of this Section, or from death, resignation, disqualification or removal of a manager, or from failure of the Members to elect the full number of authorized managers, or from any other cause shall be filled by the affirmative vote of at least a majority of the remaining managers (or manager) then in office, even though less than a quorum of the whole board of managers. Any manager elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of managers in which the new management position was created or the vacancy occurred.  The Members shall have no right to fill any vacancies in the board of managers, unless there are not any remaining managers to fill such vacancy.

h.           Annual and Regular Meetings.  Within 45 days after each annual meeting of the Members, and if possible on the date of each annual meeting of the Members immediately following each such meeting, the board of managers shall hold an annual meeting for the purpose of electing officers and transacting other Company business.  Such meeting shall be called in the manner for calling regular or special meetings of the board of managers.

Except as otherwise provided by resolution of the board of managers, other regular meetings of the board of managers shall be held on the last Friday in January, July and October at such places as the chief executive officer or president may direct in the notices of such meetings.  At least five days’ notice by mail or written telecommunication shall be given to each manager of the time and place of holding each regular meeting of the board of managers.

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The failure to hold a regular meeting shall have no effect on the Company, its managers or officers.

i.           Special Meetings. A special meeting of the board of managers may be called at any time by the chief executive officer or the president, to be held at such place as he may direct in the notice of such meeting, on four days' notice by mail or three days' notice by written telecommunication, to each manager. A special meeting shall be called by the chief executive officer or president in like manner on the written request of at least 50% of the managers of the board.

j.           Place of Meetings; Telephone Meetings.  A meeting of the board of managers may be held either within or without the State of Louisiana. The time and place of holding a regular or special meeting of the board of managers may be changed and another place and time fixed for such regular or special meeting by a majority of the managers of the board.

The board of managers, and a committee thereof, may participate in and hold a meeting of the board or of such committee by means of telephone conference or similar communications equipment provided that all persons participating in such meeting can hear and communicate with one another. Participation in a meeting pursuant to this provision shall constitute presence in person at such meeting, except where a person participates in such meeting for the express purpose of objecting to the transaction of any business on the grounds that such meeting was not properly called or convened in accordance with this Agreement.

k.           Quorum.  A majority of the managers shall constitute a quorum, but a smaller number may adjourn a meeting from time to time without further notice until a quorum is secured. If a quorum is present, the managers present can continue to do business until adjournment notwithstanding the subsequent withdrawal of enough managers to leave less than a quorum or the refusal of any manager present to vote.

l.           Compensation. Each manager shall be entitled to receive from the Company reimbursement of his expenses incurred in attending any regular or special meeting of the board and, by resolution of the board, such other compensation as it may approve. Such reimbursement and compensation shall be payable whether or not an adjournment be had because of the absence of a quorum. Nothing herein contained shall be construed to preclude any manager from serving the Company in another capacity and receiving compensation therefor.

m.           Committees.  From time to time, the board of managers may appoint, from its own number, in addition to the committees provided for in this Agreement, such other committee or committees for such purpose or purposes as it shall determine. Subject to the limitations imposed by this Agreement, the Articles, and the laws of the State of Louisiana, each committee of the board of managers shall have such powers as shall be specified in the resolution of appointment.

n.           Consents.  Any action of the board of managers or any committee designated by the managers which may be taken at a meeting thereof, may be taken without a meeting if authorized by a writing signed by all of the managers or all of the members of such committee, as the case may be; provided, however, that the foregoing shall not be construed to alter or modify any provision of law or the Articles pursuant to which the written consent of less than all of the managers is sufficient for action by the managers.

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Section 8.           Officers.

a.           Election, Tenure and Compensation.  The officers of the Company shall consist of a president, one or more vice presidents, a secretary, a treasurer, and such other officers, including a chairman of the board of managers, as may from time to time be elected or appointed by the board of managers.  Officers of the Company shall be elected annually by the board of managers as provided in Subsection (h) of Section 7 of this Agreement.  If such annual election is not held, the officers then in office shall remain as such until their respective successors shall be elected.  If an office becomes vacant or an officer is removed for any reason, the board of managers may elect a successor for such office at any annual, regular or special meeting.  No officer, except the chairman of the board of managers, need be a manager, and any two or more offices, except for the offices of president and vice president, may be held by one person.  The powers of all officers of the Company shall be subject to the provisions of the Articles of Organization.

b.           Powers and Duties of the Chairman of the Board of Managers. The board of managers may elect a non-employee chairman to give leadership to the board and to serve as liaison between management and the board of managers.  In collaboration with the chief executive officer, the chairman will establish an agenda for each board meeting which covers all matters which should come before the board in the proper exercise of its duties.  The chairman will be accountable and will provide leadership for all issues of corporate governance which should come to the attention of the board and its committees. The chairman shall perform such other duties as from time to time may be delegated tohim/her by the board of managers.

c.           Powers and Duties of President. The president shall be the chief executive officer and/or the chief operating officer of the Company and, subject to the direction of the board of managers, shall (a) have general and active management of the administration and operation of the business of the Company, (b) have the general supervision and direction of the other officers of the Company and shall see that their duties are properly performed, (c) see that all orders and resolutions of the board of managers are carried into effect, (d) have the power to execute contracts and conveyances on behalf of the Company (including without limitation conveyances of real and personal property to and by the Company), and (e) perform such other functions normally performed by a chief executive officer.

d.           Powers and Duties of Vice President. The board of managers may appoint one or more vice presidents. Each vice president shall have the power to execute contracts and conveyances on behalf of the Company, and shall have such other powers and shall perform such other duties as may be assigned to him by the board of managers or by the president.

e.           Power and Duties of Secretary. The secretary shall attend all meetings of the managers and record all votes and the proceedings of the meetings in a book or books to be kept at the principal business office of the Company for that purpose.  He shall give, or cause to be given, proper notice of meetings of the managers and all other notices required by law or by this Agreement, and in case of his absence or refusal or neglect to do so, any such notice may be given by themanager or officer upon whose request a meeting is called as provided in this Agreement.  The secretary shall also perform such other duties as may be assigned to him.

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Assistant secretaries shall have such duties as the board of managers may from time to time prescribe.

f.           Powers and Duties of Treasurer. The treasurer shall have custody of the funds, securities, evidences of indebtedness and other valuable documents of the Company.  The treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company, and shall deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the board of managers. He shall disburse or cause to be disbursed the funds of the Company as may be ordered by the board of managers, executive committee, chief executive officer or president, taking proper vouchers for such disbursements, and shall render to the chief executive officer, the president, and the managers at the regular meetings of the board of managers, or whenever they require it, an account of all his transactions as treasurer and of the financial condition of the Company, and at the annual meeting of the board of managers, a like report for the preceding fiscal year. He shall give the Company a bond, if required by the board of managers, in such sum and in form and with security satisfactory to the board of managers, for the faithful performance of the duties of his office and the restoration to the Company, in case of his death, resignation, or removal from office, of all books, papers, vouchers, moneys, and other property of whatever kind in his possession belonging to the Company. He shall perform such other duties as the board of managers or executive committee may from time to time prescribe. Assistant treasurers shall have such duties as the board of managers may from time to time prescribe.

g.           Delegation of Duties.  In case of the absence or disability of any officer of the Company, or for any other reason deemed sufficient by the board of managers, the board of managers may delegate such officer's powers or duties for the time being to any other officer, to any employee with management responsibility, or to any manager.

h.           Removal.  Any officer elected or appointed by the managers may be removed, with or without cause, at any time by a majority vote of the board of managers.

Section 9.          Committees.

a.           Executive, Audit, Compensation and Nominating/Governance Committees.   The board of managers may appoint an executive committee, an audit committee, a compensation committee and/or a nominating/governance committee, each consisting of such number of managers as it may appoint, to serve at the pleasure of the board of managers, but in any event not beyond the next annual meeting ofthe board of managers. The board may at anytime, without notice, remove and replace any member of such committees.

b.           Powers and Duties of the Executive Committee.  Subject to the provisions of subsection (f) of Section 7 of this Operating Agreement, the executive committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

c.           Powers and Duties of the Audit Committee.  Subject to the provisions of subsection (f) of Section 7 of this Operating Agreement, the audit committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the

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 charter.

d.           Powers and Duties of the Compensation Committee.  Subject to the provisions of subsection (f) of Section 7 of this Operating Agreement, the compensation committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

d.(1)      Powers and Duties of the Nominating/Governance Committee.  Subject to the provisions of subsection (f) of Section 7 of this Operating Agreement, the nominating/governance committee shall have a charter that will be approved, and revised as appropriate, from time to time by the committee and the board.  In general terms, the functions of the committee shall be those as set forth in the charter.

e.           Meetings.  Each committee shall meet at stated times or by notice to all members of such committee by one of its number, in which notice the time and place of the meeting shall be set forth.  Each committee shall fix its own rules of procedure, and a majority shall constitute quorum; but the affirmative vote of the majority of the whole committee shall be necessary in every case.  Each committee shall keep regular minutes of its proceedings and report the same to the board of managers.

f.           Compensation.  Members of each committee, other than officers of the Company, shall receive such compensation for their services as shall be prescribed by the board of managers.  Each member of a committee shall be entitled to receive from the Company reimbursement of his expenses incurred in attending a meeting of the committee.

Section 10.       Profits or Losses.  The net profits or net losses (and any separately stated items, including without limitation, depreciation, amortization and tax credits) of the Company shall be allocated to the Members in accordance with their respective Membership Interests.

Section 11.       Distributions.  From time to time, the board of managers shall authorize the Company to make distributions to the Members for the purpose of defraying the annual tax liability caused by the Company’s profits.  The Company may make other distributions to the Members as and when authorized by the board of managers.

Section 12.        Dissolution.

a.           Events Causing Dissolution.  The following events (each a “Dissolution Event”) shall cause a dissolution of the Company:

(i) The filing of an affidavit in accordance with Section 1335.1 of the LaLLCL; or

(ii) The entry of a judicial decree of dissolution under Section 1335 of the LaLLCL.

b.           Winding Up the Company.  Upon the occurrence of a Dissolution Event, the Members shall wind up the Company and liquidate its assets and liabilities according to Sections 1336 through 1341 of the LaLLCL.  After the Dissolution Event and until completion of

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the winding up, the Members may continue to conduct the business of the Company.  The Members shall at all times retain the maximum limitation of liability with respect to claims against the Company as is allowed by the LaLLCL.  This limitation of liability shall not be diminished by the fact that the Members have not formally commenced the winding up of the Company after a Dissolution Event.

c.           Gains or Losses in Winding Up.  Any gains or losses on disposition of Company properties in the process of liquidation will be credited or charged to the Members.  Any property distributed in kind in the winding up must be valued and treated as though the property were sold and the cash proceeds were distributed.  The difference between the value of the property distributed in kind and its book value will be treated as a gain or loss on the sale of the property and credited or charged to the Members.

Section 13.         Indemnity.

a.           Right to Indemnification – General. The Company shall indemnify any person who was or is, or is threatened to be made, a party to or otherwise involved in any pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative (any such threatened, pending or completed proceeding being hereinafter called a "Proceeding") by reason of the fact that he is or was a manager, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, manager, officer, employee or agent of another business, foreign or nonprofit corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (whether the basis of his involvement in such Proceeding is alleged action in an official capacity or in any other capacity while serving as such), to the fullest extent permitted by applicable law in effect from time to time, and to such greater extent as applicable law may from time to time permit, from and against expenses, including attorney's fees, judgments, fines, amounts paid or to be paid in settlement, liability and loss, ERISA excise taxes, actually and reasonably incurred by him or on his behalf or suffered in connection with such Proceeding or any claim, issue or matter therein; provided, however, that, except as provided in Subsection (e) of this Section, the Company shall indemnify any such person claiming indemnity in connection with a Proceeding initiated by such person only if such Proceeding was authorized by the board of managers.

b.          Certain Provisions Respecting Indemnification for and Advancement of Expenses.

(i)           To the extent that a person referred to in Subsection (a) of this Section is required to serve as a witness in any Proceeding referred to therein, he shall be indemnified against all Expenses (as hereinafter defined) actually and reasonably incurred by him or on his behalf in connection with serving as a witness.

(ii)           The Company shall from time to time pay, in advance of final disposition, all Expenses incurred by or on behalf of any person referred to in Subsection (a) of this Section claiming indemnity thereunder in respect of any Proceeding referred to therein. Each such advance shall be made within ten days after the receipt by the Company of a statement from the claimant requesting the advance, which statement shall reasonably evidence the relevant Expenses and be accompanied or preceded by any such undertaking as may be required by applicable law respecting the contingent repayment of such Expenses. Whenever and to the

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extent applicable law requires the board of managers to act in the specific case with respect to the payment of Expenses in advance of the final disposition of any Proceeding, the board of managers shall act with respect thereto within the period specified in the preceding sentence and shall withhold the payment of Expenses in advance only if there is a reasonable and prompt determination by the board of managers by a majority vote of a quorum of Disinterested Managers (as hereinafter defined), or (if such quorum is not obtainable or, even if obtainable, a quorum of Disinterested Managers so directs) by Independent Counsel (as hereinafter defined) in a written opinion, that advancement of Expenses is inappropriate, even taking into account any undertaking given with respect to the repayment of such Expenses, because based on the facts then known there is no reasonable likelihood that the claimant would be able ultimately to demonstrate that he met the standard of conduct necessary for indemnification with respect to such Expenses.

c.           Procedure for Determination of Entitlement to Indemnification.

(i)           To obtain indemnification under this Section, a claimant shall submit to the Company a written application. The secretary of the Company shall, promptly upon receipt of such an application for indemnification, advise the board of managers in writing of the application. In connection with any such application, the claimant shall provide such documentation and information as is reasonably requested by the Company and reasonably available to him and relevant to a determination of entitlement to indemnification.

(ii)           A person's entitlement to indemnification under this Section, unless ordered by a court, shall be determined, as required or permitted by applicable law: (x) by the board of managers by a majority vote of a quorum consisting of Disinterested Managers, (y) if a quorum of the board of managers consisting of Disinterested Managers is not obtainable or, even if obtainable, a quorum of Disinterested Managers so directs, by Independent Counsel in a written opinion, or (z) by the Members of the Company by a vote of a majority in interest of the Membership Interests; provided, however, that if a Change of Control (as hereinafter defined) shall have occurred, no determination of entitlement to indemnification adverse to the claimant shall be made other than one made or concurred in by Independent Counsel, selected as provided in paragraph (iv) of this Subsection, in a written opinion.

(iii)           If the determination of entitlement to indemnification is to be made by Independent Counsel in the absence of a Change of Control, the Company shall furnish notice to the claimant within ten days after receipt of the application for indemnification specifying the identity and address of Independent Counsel. The claimant may, within fourteen days after receipt of such written notice of selection, deliver to the Company a written objection to such selection, subject to paragraph (v) of this Subsection. If such an objection is made, either the Company or the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court.

(iv)           If there has been a Change of Control, Independent Counsel to act as and to the extent required by paragraph (ii) of this Subsection or paragraph (ii) of Subsection (b) shall be selected by the claimant, who shall give the Company written notice advising of the identity and address of the Independent Counsel so selected. The Company may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection to such selection, subject to paragraph (v) of this Subsection. The claimant may, within five days after

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the receipt of such objection, select other counsel to act as Independent Counsel, and the Company may, within seven days after receipt of such written notice of selection, deliver to the claimant a written objection, as aforesaid, to such second selection. In the case of any such objection the claimant may petition any court of competent jurisdiction for a determination that the objection has no reasonable basis or for the appointment as Independent Counsel of counsel selected by the court.

(v)           Any objection to the selection of Independent Counsel may be asserted only on the ground that the counsel so selected does not qualify as Independent Counsel under the definition contained in Subsection (g) of this Section, and the objection shall set forth with particularity the basis of such assertion. No counsel selected by the Company or by the claimant may serve as Independent Counsel if a timely objection has been made to his selection unless a court has determined that such objection has no reasonable basis.

(vi)           The Company shall pay any and all reasonable fees and expenses of Independent Counsel acting pursuant to this Section and in any proceeding in which such counsel is a party or a witness in respect of its investigation and report. The Company shall pay all reasonable fees and expenses incident to the procedures of this Section regardless of the manner in which Independent Counsel is selected or appointed.

d.           Presumptions and Effect of Certain Proceedings.

(i)           A person referred to in Subsection (a) of this Section claiming a right to indemnification under this Section shall be presumed (except as may be otherwise expressly provided in this Section or required by applicable law) to be entitled to such indemnification upon submission of an application for indemnification in accordance with Subsection (c), and the Company shall have the burden of proof to overcome the presumption in any determination contrary to the presumption.

(ii)           Unless the determination is to be made by Independent Counsel, if the person or persons empowered under Subsection (c) of this Section to determine entitlement to indemnification shall not have made and furnished the determination in writing to the claimant within 60 days after receipt by the Company of the application for indemnification, the determination of entitlement to indemnification shall be deemed to have been made in favor of the claimant unless the claimant knowingly misrepresented a material fact in connection with the application or such indemnification is prohibited by law. The termination of any Proceeding, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of a claimant to indemnification or create a presumption that a claimant did not act in a manner which would deny him the right to indemnification.

e.           Right of Claimant to Bring Suit.

(i)           If (w) a determination is made pursuant to the procedures contemplated by Subsection (c) of this Section that a claimant is not entitled to indemnification under this Section, (x) advancement of Expenses is not timely made pursuant to paragraph (ii) of Subsection (b) of this Section, (y) Independent Counsel has not made and delivered a written opinion as to entitlement to indemnification within 90 days after the selection or appointment of counsel has become final by virtue of the lapse of time for objection or the overruling of objections or

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appointment of counsel by a court, or (z) payment of a claim for indemnification is not made within five days after a favorable determination of entitlement to indemnification has been made or deemed to have been made pursuant to Subsection (c) or (d) of this Section, the claimant shall be entitled to bring suit against  the Company to establish his entitlement to such indemnification or advancement of Expenses and to recover the unpaid amount of his claim. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the claimant did not meet the applicable standard of conduct which makes it permissible for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be upon the Company. Neither the failure of the Company (including its board of managers, Independent Counsel or its Members) to have made a determination before the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met such applicable standard of conduct, nor an actual determination by the Company (including its board of managers, Independent Counsel or its Members) that the claimant has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct, and the claimant shall be entitled to a de novo trial on the merits as to any such matter as to which no determination or an adverse determination has been made.

(ii)           If a claimant is successful in whole or in part in prosecuting any claim referred to in paragraph (i) of this Subsection, the claimant shall also be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in prosecuting such claim.

f.           Non-Exclusivity and Survival of Rights. The rights of indemnification and to receive advancement of Expenses contemplated by this Section shall not be deemed exclusive of any other rights to which any person may at any time be entitled under any agreement, this Agreement, authorization of the Members or managers (regardless of whether managers authorizing such indemnification are beneficiaries thereof), or otherwise, both as to action in his official capacity and as to action in another capacity; provided that no other indemnification measure shall permit indemnification of any person for the results of such person's willful or intentional misconduct.

The Company may procure or maintain insurance or other similar arrangement, at its expense, to protect itself and any manager, officer, employee or agent of the Company or other corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against or incurred by such person, whether or not the Company would have the power to indemnify such person against such expense or liability.

In considering the cost and availability of such insurance, the Company, in the exercise of its business judgment, may purchase insurance which provides for any and all of (x) deductibles, (y) limits on payments required to be made by the insurer, or (z) coverage which may not be as comprehensive as that previously included in insurance purchased by the Company. The purchase of insurance with deductibles, limits on payments and coverage exclusions will be deemed to be in the best interest of the Company but may not be in the best interest of certain of the persons covered thereby. As to the Company, purchasing insurance with deductibles, limits on payments, and coverage exclusions is similar to the Company's practice of self-insurance in other areas. In order to protect the officers and managers of the Company, the Company shall

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indemnify and hold each of them harmless as provided in Subsection (a) of this Section, without regard to whether the Company would otherwise be entitled to indemnify such officer or manager under the other provisions of this Section, to the extent (x) of such deductibles, (y) of amounts exceeding payments required to be made by an insurer or (z) that prior policies of officer’s and manager’s liability insurance held by the Company would have provided for payment to such officer or manager. Notwithstanding the foregoing provisions of this Subsection, no person shall be entitled to indemnification for the results of such person's willful or intentional misconduct.

The right to indemnification conferred in this Section shall be a contract right, and no amendment, alteration or repeal of this Section or any provision thereof shall restrict the indemnification rights granted by this Section as to any person claiming indemnification with respect to acts, events and circumstances that occurred, in whole or in part, before such amendment, alteration or repeal. The provisions of this Section shall continue as to a person who has ceased to be a manager, officer, employee or agent and shall inure to the benefit of his heirs, executors and legal representatives.

g.           Definitions.  For purposes of this Section:

(i)           "Change of Control" means the occurrence of any of the following events or circumstances: (1) there shall have occurred an event required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Company is then subject to such reporting requirement; (2) any "person" (as such term is used in Section 13(d) and 14(d) of the Act) shall have become the “beneficial owner”, (as defined in Rule 13d-3 under the Act), directly or indirectly, of a Membership Interest in the Company representing 30% or more of the combined Member voting power without the prior approval of at least two-thirds of the members of the board of managers in office immediately before such person's attaining such percentage interest; (3) the Company is a party to a merger, consolidation, or sale of assets or other reorganization as a consequence of which members of the board of managers in office immediately before such transaction or event constitute less than a majority of the board of managers thereafter; (4) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of managers (including for this purpose any new manager whose election or nomination for election by the Company's Members was approved by a vote of at least two-thirds of the managers then still in office who were managers at the beginning of such period) cease for any reason to constitute at least a majority of the board of managers.

(ii)           "Disinterested Manager" means a manager of the Company who is not and was  not a party to the Proceeding in respect of which indemnification is sought as provided in this Section.

(iii)           "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

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(iv)           "Independent Counsel" means a law firm, or a member of a law firm, with substantial experience in matters of corporation law that neither presently is, nor in the five years before his selection or appointment has been, retained to represent: (i) the Company or person claiming indemnification in any matter material to either, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder, and is not otherwise precluded under applicable professional standards from acting in the capacity herein contemplated.

Section 14. Notices.

a.           Manner of Giving Notice.  Notice required to be given under the provisions of this Agreement to a manager, officer, or a Member shall not be construed to mean personal notice, but may be given by depositing written or printed notice in a post office or letter box a postpaid wrapper addressed to such manager, officer, or Member at such address as appears on the books of the Company, such notice to be deemed to have been given at the time when the same shall have been thus mailed; or, if such person has provided a telecommunications address to the Company, such notice may be given by prepaid written telecommunication sent to such address and in such event shall be deemed to have been given at the time when the same shall have been transmitted.

                      b.           Waiver of Notice.  Any officer, manager, or Member may waive, in writing or by written telecommunication, whether before or after the time stated, any notice required to be given under this Agreement.  Attendance at any meeting by a manager or a Member without first objecting to lack of notice shall constitute waiver of notice.

Section 15. General Provisions.

a.           Choice of Law.  The validity of this Agreement is to be determined under, and the provisions of this Agreement are to be construed in accordance with, the laws of the State of Louisiana.

b.           Binding Effect.  This Agreement is to be binding upon, and inure to the benefit of the successors and permitted assigns of the Members.

c.           Gender and Plurality.  Wherever applicable, the pronouns designating the masculine or neuter will equally apply to the feminine, neuter or masculine genders.  Furthermore, wherever applicable within this Agreement, the singular will include the plural and vice versa.  The term “person” when used herein shall include a natural person and all forms of entities, including, without limitation, a corporation, trust, association, partnership, limited partnership, partnership in commendam, limited liability company or limited liability partnership.

d.           Captions.  Section, subsection and paragraph captions are for reference purposes only and will not be considered to affect context.

e.           Severability.  If any part of this Agreement is found by a court of competent jurisdiction to be void, against public policy or otherwise unenforceable, that part shall be reformed by the court to the extent necessary to make such provision enforceable.  If the entire provision is deemed unenforceable by the court, the provision shall be deleted.  In either

17 

event, this Agreement and each of the remaining provisions of it, as so amended, shall remain in full force and effect.

f.           Integration.  This Agreement and the Articles embody the entire agreement and understanding between the Members and the Company and supersede all prior agreements and understandings, if any, between the Members and the Company, relating to the subject matter hereof.

COMPANY:	CLECO POWER LLC
	By:           /s/ Michael H. Madison
	Name:  Michael H. Madison
	Title:    Manager & CEO

MEMBER:	CLECO CORPORATION
	By:           /s/ Michael H. Madison
	Name:  Michael H. Madison
	Title:    Director, President & CEO

18 

EXHIBIT A TO OPERATING AGREEMENT OF

CLECO POWER LLC

Initial Membership Interest and Contribution

Member	Membership Interest	Cash Contribution
Cleco Corporation	100%	$1,000.00

19

EX-10.1

EXHIBIT 10.1

CLECO CORPORATION

ANNUAL INCENTIVE COMPENSATION PLAN

Amendment

(Code Section 409A Compliance)

Whereas, Cleco Corporation, a corporation organized and existing under the laws of the State of Louisiana (the “Company”), maintains the Annual Incentive Compensation Plan, which plan was most recently amended and restated as of January 23, 2003 (the “Plan”);

Whereas, such Plan may be deemed to constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder and must now be amended to comply with the provisions thereof and to provide for the return of certain awards made thereunder;

Now, Therefore, effective as of January 1, 2009, Section 12 of the Plan shall be amended and restated in its entirety as follows:

“12.   Timing of Payment.  Any Payout hereunder shall be paid as of March 15th of the calendar year immediately following the Plan Year.”

This Amendment was approved by the Company’s Board of Directors on October 31, 2008, to be effective as of the date or dates set forth herein.

Cleco Corporation

By:          /s/ G. W. Bausewine           

Its:           S.V.P., Corporate Services

Date:       November 4, 2008             

EX-10.2

EXHIBIT 10.2

CLECO CORPORATION

DEFERRED COMPENSATION PLAN

Amendment

(Code Section 409A Compliance)

Whereas, Cleco Corporation, a corporation organized and existing under the laws of the State of Louisiana (the “Company”), maintains the Cleco Corporation Deferred Compensation Plan, which plan was first effective as of August 1, 2000 (the “Plan”);

Whereas, such Plan constitutes a “deferred compensation” arrangement within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and must now be amended to comply with the provisions thereof;

Now, Therefore, the Plan shall be amended effective as of January 1, 2009 or such other date or dates as may be provided below.

1.         Definitions:

1.1           Section 2.1 of the Plan shall be amended and restated in its entirety as follows:

“2.1          Accounts or Account means the aggregate of a Participant’s Deferred Benefit Account, Directors’ Predecessor Account and/or Nesbitt Deferred Benefit Account, as the case may be; the term Prior Plan Balance means the balance of a Participant’s Account determined as of December 31, 2004, as adjusted for earnings, gains or losses thereafter in accordance with Article VI hereof; the term Current Balance means the portion of any such Account attributable to deferrals and other contributions made after December 31, 2004, as adjusted for earnings, gains or losses thereafter in accordance with Article VI hereof.

1.2           Section 2.4 of the Plan shall be amended and restated in its entirety as follows:

“2.4          Benefit Commencement Date means the date on which a Participant’s Retirement Benefit is first eligible for distribution hereunder.  Such date shall be designated by each Participant and shall be no earlier than a Participant’s Separation Date and no later than the last day of the calendar year in which a Participant attains age 75.  Any designation hereunder shall be made in accordance with the provisions of Article VII hereof and shall be subject to modification as provided therein.”

1.3           The first sentence of Section 2.12 of the Plan shall be restated as follows:

“2.12        Compensation shall mean base salary paid by the Company or an Affiliate to a Participant for services rendered during a calendar year, but only for complete payroll periods ending and paid within such year, which amount shall be determined before reduction for compensation deferred pursuant to this Plan or any other plan of deferred compensation maintained by the Company or an Affiliate, including any such plan maintained in accordance with Code Section 401(k) or 125.”

1.4           Section 2.15 of the Plan shall be amended and restated to read in its entirety as follows:

“2.15        The term “Disability” shall mean that a Participant, by reason of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months, (a) has been receiving income replacement benefits

for a period of not less than three months under a separate long-term disability plan or policy maintained by the Company or an Affiliate, or (b) is unable to engage in any substantial gainful employment.”

1.5           Section 2.19 of the Plan shall be amended and restated to read in its entirety as follows:

“2.19        Financial Hardship shall mean that a Participant has suffered a severe financial hardship as a result of (a) an illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary, or the Participant’s dependent, (b) the loss of property due to casualty that is not covered by insurance, or (c) the occurrence of similar, extraordinary and unforeseeable circumstances arising as a result of an event beyond the Participant’s control.”

1.6           Section 2.21 of the Plan shall be amended and restated in its entirety:

“2.21        Participant means an executive officer, manager, or other officer or key employee of the Company or an Affiliate or an Eligible Director for whom an Account is maintained hereunder.  A New Participant is a Participant first designated as such on or after January 1, 2005.  A Continuing Participant is a Participant who is credited with a Prior Plan Balance as of January 1, 2005 and is not in pay status as of such date.”

1.7           Section 2.28 shall be added to the Plan to read in its entirety as follows:

“2.28        Retirement Benefit shall mean a benefit, other than a Short Term Deferral, payable in accordance with Article VII hereof.”

1.8           Section 2.29 shall be added to the Plan to read in its entirety as follows:

“2.29        Compliance Definitions.  The following terms shall have the meanings ascribed to them herein:

a. Specified Employee shall be determined in accordance with Code Section 409A and shall generally mean that a Participant is a ‘key employee’ of the Company or an Affiliate within the meaning of Code Section 416(i), (ii) or (iii), but determined without regard to paragraph (i)(5) thereof, as of his or her Separation Date. A Participant who satisfies such requirement as of a December 31st shall be considered a Specified Employee hereunder during the 12-month period commencing on the immediately following April 1st.

b. Separation Date shall mean the later of the date on which (a) a Participant’s employment with the Company and its Affiliates ceases, or (b) the Company and such Participant reasonably anticipate that the Participant will perform no further services for the Company and its Affiliates, whether as a common law employee or independent contractor.  Notwithstanding the foregoing, a Participant may be deemed to incur a Separation Date if he or she continues to provide services to the Company or an Affiliate, provided such services are not more than 20% of the average level of services performed by such Participant, whether as an employee or independent contractor, during the immediately preceding 36-month period.

c. Prior Plan means this Plan as in effect October 4, 2004.

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2.         Deferrals:

2.1       The following Section 4.1d shall be added to the Plan to read in its entirety as follows:

“d. As to any Bonus that is ‘performance based compensation’ within the meaning of Code Section 409A, the Committee may permit the deferral of such amount not later than the last day of the seventh calendar month preceding the end of the performance cycle with respect to which such Bonus is payable.”

2.2       The text of Section 4.2 of the Plan shall be deleted and such section marked “Reserved.”

2.3       The last sentence of Section 4.3a of the Plan shall be amended and restated as follows:

“a. Any such election shall be irrevocable and shall be received and accepted by the Committee not later than (i) the first day of the service or performance period during which such designated option shall be vested, or (ii) if such designated option may be deemed performance based compensation within the meaning of Code Section 409A, the last day of the seventh calendar month preceding the end of the performance cycle applicable to such option.”

2.4       Section 4.4 of the Plan shall be amended to exclude the Short Term Deferral of any Bonus thereunder.

3.         Distribution of Retirement Benefits:

3.1       The text of Section 7.4 of the Plan shall be deleted and the following shall be substituted:

“7.4      New Participants.Each New Participant shall execute a Schedule A designating, with respect to any Retirement Benefit payable hereunder, (a) his or her Benefit Commencement Date, (b) the form in which such benefit shall be paid, and (c) whether his or her Account shall be distributed in the event of a Change in Control or Business Transaction, as follows:

a. Such schedule shall first be completed and delivered to the Committee within the time determined under Section 4.1a hereof;

b. Prior to the earlier of December 31, 2008, or his or her Benefit Commencement Date, a New Participant may amend his or her Schedule A by designating, subject to any limitations imposed under Code Section 409A, (x) a new Benefit Commencement Date, which may precede his or her Separation Date, (y) a new form of payment, and/or (z) whether his or her Account shall be distributed on account of a Change in Control or Business Transaction;

c. After December 31, 2008, such Participant may modify his or her designation of a Benefit Commencement Date or form of payment in accordance with Section 7.5 hereof; any designation with respect to a Change in Control or Business Transaction shall be irrevocable; and

d. If a New Participant fails to timely complete and deliver to the Company his or her Schedule A, he or she shall be deemed to have (x) designated his or her Separation Date as his or her Benefit Commencement Date, (y) elected distribution in the form of five

-3-

substantially equal installment payments, and (z) elected not to receive benefits on account of a Change in Control or Business Transaction.

Unless the Committee otherwise provides, a New Participant shall execute only one Schedule A with respect to his or her Retirement Benefit.”

3.2       Section 7.5 of the Plan shall be amended and restated to read in its entirety as follows:

“7.5      Modification of Schedule A.  After December 31, 2008, a Participant shall be entitled to modify his or her Benefit Commencement Date or form of payment with respect to his or her Current Balance on Schedule A hereto or such other form as may be acceptable to the Committee, provided that any such modification:

a. Shall be given effect 12 months after the date on which it is received and accepted by the Committee or its designee;

b. Shall operate to postpone the Participant’s Benefit Commencement Date for a period of not less than five years, measured from the Benefit Commencement Date in effect immediately prior to such modification; and

c. Shall be made not less than 12 months prior to the date on which such Participant’s Retirement Benefits are otherwise scheduled to be paid hereunder.

For purposes of this Section 7.5, a series of installment payments shall be treated as a single payment made on a Participant’s Benefit Commencement Date.

As to any Prior Plan Balance, a Continuing Participant shall be entitled to modify his or her Schedule A or similar elective document at the time or times permitted and subject to any further limitations imposed under the Prior Plan.”

3.3        The following section 7.8 shall be added to the Plan to read in its entirety as follows:

“7.8       Continuing Participants.  Notwithstanding any provision of the Plan to the contrary, as to the Account of a Participant who is credited with a Prior Plan Balance as of January 1, 2005 and is not in pay status as of such date (a “Continuing Participant”):

a. The portion of such Participant’s Retirement Benefit consisting of his or her Prior Plan Balance shall be distributed in accordance with the terms of the Prior Plan and any Schedule A executed or deemed made thereunder, as the same may be modified in accordance with Section 7.5 hereof;

b. The portion of such Participant’s Retirement Benefit consisting of his or her Current Balance, if any, shall be subject to the following special rules:

i. Prior to the earlier of December 31, 2008, or his or her Benefit Commencement Date, such Continuing Participant may deliver to the Committee a Schedule A designating, subject to any limitations imposed under Code Section 409A, (x) his or her Benefit Commencement Date, which may precede his or her Separation Date, (y) the form in which such benefit shall be paid, and (z) whether distribution shall be made on account of a Change in Control or Business Transaction;

-4-

ii. After December 31, 2008, any designation as to the form of payment or Benefit Commencement Date shall be subject to modification as provided in Section 7.5 hereof; any election with respect to a Change in Control or Business Transaction shall be irrevocable; and

iii. If such Continuing Participant fails to timely deliver a Schedule A as provided herein or has not previously completed as Schedule A as to his or her Current Balance, he or she shall be deemed to have (x) designated his or her Separation Date as his or her Benefit Commencement Date, (y) elected distribution in the form of five substantially equal installment payments, and (z) elected not to receive benefits on account of a Change in Control or Business Transaction.”

4.         Death Benefits:

4.1       Section 8.2 of the Plan shall be amended and restated as follows:

“8.2      Participant’s Death Before Benefit Commencement Date. If a Participant dies before his or her Benefit Commencement Date, such Participant’s Prior Plan Balance, if any, shall be paid in accordance with the terms of the Prior Plan, and his or her Current Balance shall be paid in the form of a single sum as of the first business day of the second calendar month following the Participant’s date of death.”

4.2       The text of Section 8.6 of the Plan shall be deleted and such section shall be marked “Reserved.”

5.        Other Distributions and Payments:

5.1       The following sentence shall be added to Section 9.3 of the Plan to read in its entirety as follows:

“Notwithstanding any provision of this Plan to the contrary, any amount payable to a Participant hereunder shall be distributed in accordance with the terms of the Participant’s Schedule A in effect as of his or her Separation Date, which shall be deemed irrevocable as of such date.”

5.2       The second paragraph of Section 9.4 of the Plan shall be deleted and the second sentence of the first paragraph of Section 9.4 of the Plan shall be restated to read in its entirety as follows:

“For this purpose, the term ‘Adverse Determination’ shall mean that, based upon Federal tax or revenue law, a published or private ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury, a decision by a court of competent jurisdiction, a closing agreement made under Section 7121 of the Code that is approved by the Internal Revenue Service and involves such Participant or a determination of counsel, this plan has failed to comply with Code Section 409A and, as a result, such Participant has or will recognize income for Federal income tax purposes with respect to any amount that is or will be payable under this Plan before it is otherwise to be paid hereunder.”

5.3       The following provisions shall be added to Section 9.5 of the Plan, to read in their entirety as follows:

“Notwithstanding any provision of this Plan to the contrary:

-5-

a. A Participant’s Prior Plan Balance shall be distributed upon the occurrence of a Change in Control or Business Transaction at the election of each Participant in accordance with and subject to the limitations of the Prior Plan; and

b. A Participant’s Current Balance shall be distributed in the form of a single-sum, without diminution or reduction, if (i) as to a Change in Control, such Participant’s Separation Date occurs within the 60-days preceding or the 36-month period following a Change in Control, and (ii) in any event, such Participant has elected to receive a distribution on account of a Change in Control or Business Transaction on Schedule A hereto, which election shall be made at the time or times permitted under Article VII hereof.”

5.4       The following sentence shall be added to Section 9.6 of the Plan, to read in its entirety as follows:

“Notwithstanding any provision of this Plan to the contrary, if a Participant becomes Disabled, his or her Prior Plan Balance shall be distributed in accordance with the terms of the Prior Plan, and his or her Current Balance shall be distributed in the form of a single sum payment as of the first business day of the second calendar month following his or her Disability.”

6.         Other Provisions:

1.         The last sentence of the first paragraph of Section 11.6 of the Plan shall be deleted and the second paragraph of such section shall be deleted.

2.         Section 12.1 of the Plan shall be amended and restated to read in its entirety as follows:

“12.1    Termination.  The Board of Directors shall have the right, at any time, to terminate this Plan and, in the event of any such termination, shall provide written notice of any such action to each Participant hereunder.In the event of any such termination:

a. All deferrals and any Company Contributions hereunder shall cease;

b. Each Participant shall be fully vested and nonforfeitable in his or her Accounts;

c. Each Participant’s Prior Plan Balance shall be distributed in accordance with the terms of the Prior Plan; and

d. Each Participant’s Current Balance shall be distributed in accordance with the provisions of his or her Schedule A hereto, which shall remain subject to modification in accordance with Section 7.5 hereof.”

3. The following Section 12.7 shall be added to the Plan to read in its entirety as follows:

“12.7    Small Accounts.  If the value of a Participant’s Accounts is not more than the applicable limit determined under Code Section 402(g) as of his or her Disability, death, Separation Date or Benefit Commencement Date, as the case may be, then notwithstanding any provision of the Plan to the contrary, the Committee shall distribute such amount to the Participant in the form of an immediate single-sum payment as of such date.”

4. The following Section 12.8 shall be added to the Plan to read in its entirety as follows:

-6-

“12.8    Specified Employee Delay.  Notwithstanding any provision of the Plan to the contrary, if a Participant is a Specified Employee as of his or her Separation Date, the commencement of any benefit or distribution attributable to his or her Current Balance that is made on account of his or her separation from service within the meaning of Code Section 409A, shall be delayed until the later of (a) the first business day of the seventh whole calendar month following his or her Separation Date, or (b) his or her Benefit Commencement Date.  In the event of any delay hereunder, the first payment shall include, without liability for interest or loss of investment opportunity thereon, the principal amount of any benefits otherwise payable between the actual commencement of such benefits and such Participant’s Benefit Commencement Date.”

This Compliance Amendment was approved by the Company’s Board of Directors on October 31, 2008, to be effective as of the date or dates set forth herein.

Cleco Corporation

By:       /s/ G. W. Bausewine         

Its:       S.V.P., Corporate Services

Date:   November 4, 2008             

-7-

EX-10.3

EXHIBIT 10.3

CLECO CORPORATION

2000 LONG-TERM INCENTIVE COMPENSATION PLAN

Amendment No. 4

(Code Section 409A Compliance)

Whereas, Cleco Corporation, a corporation organized and existing under the laws of the State of Louisiana (the “Company”), maintains the Cleco Corporation 2000 Long-Term Incentive Compensation Plan, which plan was first effective as of  January 1, 2000, and has been amended from time to time (the “Plan”);

Whereas, certain awards under such Plan may constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and must now be amended to comply with the provisions thereof;

Now, therefore, the Plan shall be amended as provided below.

1.           Definitions:

1.1       Section 2.3 of the Plan shall be amended and restated to read in its entirety as follows:

“2.3      The term ‘Cause,’ unless otherwise specified in an employment or similar agreement between a Participant and the Company, means that a Participant has:

a. Committed an intentional act of fraud, embezzlement or theft in the course of employment or otherwise engaged in any intentional misconduct which is materially injurious to the financial condition or business reputation of the Company or its Affiliates;

b. Committed intentional damage to the property of the Company and its Affiliates or committed intentional wrongful disclosure of proprietary information or confidential information, which is materially injurious to the financial condition or business reputation of the Company or its Affiliates;

c. Been convicted with no further possibility of appeal, or entered a guilty or nolo contendere plea, for a felony or a crime involving moral turpitude;

d. Willfully and substantially refused to perform the essential duties of his or her position after written notice from the Company;

e. Intentionally, recklessly or negligently violated any material provision of the Company’s code of conduct or equivalent code of policy that is applicable to the Participant;

f. Intentionally, recklessly or negligently violated any material provision of the Sarbanes-Oxley Act of 2002 or any of the rules adopted by the Securities and Exchange Commission implementing any such provision; or

g. Failed to fully cooperate to the extent requested by the Company or an Affiliate with investigations by government or independent agencies involving the Company or an Affiliate.

No act or failure to act on the part of a Participant will be deemed ‘intentional’ if it was due primarily to an error in judgment or negligence, but will be deemed ‘intentional’ only if done or omitted to be done by a Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company or an Affiliate.”

1.2        Section 2.10 of the Plan shall be amended and restated to read in its entirety as follows:

“2.10     The term ‘Disability’ shall mean that a Participant, by reason of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months, (a) has been receiving income replacement benefits for a period of not less than three months under a separate long-term disability plan or policy maintained by the Company or an Affiliate, or (b) is unable to engage in any substantial gainful employment.”

1.3 The following Section 2.28 shall be added to the Plan to read in its entirety as follows:

            “2.28 The term ‘Dividend Equivalent Unit’ shall mean an amount equal to cash dividends paid with respect to the Company’s Common Stock.  Such units shall be awarded in the discretion of the Committee and shall be allocated to a Ledger Account established hereunder.  Dividend Equivalent Units may relate to Restricted Stock or to Common Stock Equivalent Units awarded hereunder.”

1.4 The following Section 2.29 shall be added to the Plan to read in its entirety as follows:

“2.29    Compliance Definitions:

a. The term ‘409A Incentive’ shall mean an Incentive that (i) is first awarded under the Plan after December 31, 2004, or awarded prior to such date and vested or payable after such date, and (ii) is awarded in the form of Common Stock Equivalent Units, whether as ‘opportunity shares’ or ‘opportunity CEUs’ or otherwise, or in the form of Dividend Equivalent Units, without regard to whether any such unit is settled in the form of cash or Common Stock.”

b. The term ‘Separation Date’ shall mean the later of the date on which (a) a Participant’s employment with the Company and its Affiliates ceases, or (b) the Company and such Participant reasonably anticipate that he or she will perform no further services for the Company and its Affiliates, whether as a common law employee or independent contractor.  Notwithstanding the foregoing, a Participant may be deemed to have separated from service if he or she continues to provide services to the Company or an Affiliate, whether as an employee or an independent contractor, provided such continuing services are not more than 20% of the average level of services performed by such Participant during the immediately preceding 36-month period.  If a termination of employment or other separation from service, including Retirement, is required as a condition of any certification of Common Stock or cash payment hereunder, such termination or separation shall be determined with reference to such Participant’s Separation Date.”

c. “The term ‘Specified Employee’ shall be determined in accordance with Code Section 409A and shall generally mean that a Participant is a ‘key employee’ of the Company or an Affiliate, within the meaning of Code Section 416(i), (ii) or (iii), but determined without regard to paragraph (i)(5) thereof, as of his or her Separation Date.  A Participant

 

-2-

who satisfies such requirement as of a December 31st shall be considered a Specified Employee hereunder during the 12-month period commencing on the immediately following April 1st.”

2.          Administration:

2.1       The following Section 5.3 shall be added to the Plan to read in its entirety as follows:

“5.3      Administration of 409A Incentives.  With respect to any 409A Incentive awarded hereunder and notwithstanding any provision of this Plan or the terms of any such Incentive to the contrary, the Committee (or its designee) shall:

a. Exercise discretion with respect to the administration of any such 409A Incentive only to the extent such discretion is permitted to be exercised hereunder and such discretion may be exercised in accordance with the provisions of Code Section 409A.

b. At the end of each Performance Cycle, cause any Common Stock to be certificated and delivered or cash payment to be made as of the first business day of the second calendar month following the end of such cycle.”

2.2       The following section 5.5 shall be added to the Plan to read in its entirety as follows:

“5.5      Specified Employee Delay.  If a Participant is a Specified Employee as of his or her Separation Date, any Common Stock to be certificated and delivered or cash payment to be made with respect to a 409A Incentive on account of such Participant’s termination of employment or other separation from service, including Retirement, shall be postponed until the first business day of the seventh calendar month following such Separation Date. The Company shall make such payment at the time provided herein without liability for interest or other loss of investment opportunity.

3.         Change in Control; Business Transaction:

3.1 Section 12.5 of the Plan shall be amended and restated to read in its entirety as follows:

“12.5    Change in Control.  Unless otherwise provided by the Committee at the time of grant or award hereunder, in the event of a Change in Control:

a. All outstanding Options shall be and remain fully vested and exercisable during the six-month period following such change or such longer period provided in any agreement evidencing an individual grant hereunder, but in no event more than ten years following the date of such grant;

b. Any further restrictions or conditions, whether on transfer or otherwise, imposed with respect to Restricted Stock awarded hereunder shall be deemed lapsed; any such award shall be promptly certificated and delivered to each affected Participant hereunder;

c. Any Dividend Equivalent Units then allocated to a Ledger Account shall be determined at the target level;

d. Any Performance Objectives then applicable to any 409A Incentive, other than Dividend Equivalent Units, shall be deemed satisfied at the maximum level; and

-3-

e. Any cash payment to be made or Common Stock to be certificated and delivered with respect to any 409A Incentive shall be paid or delivered, as the case may be, free of further restriction or limitation, upon the earlier of:

i.          Each affected Participant’s death, Disability or Separation Date; or

ii. The first business day of the second calendar month following the end of the Performance Cycle with respect to which such Incentive relates.

3.2           The following paragraph shall be added to Section 12.6 of the Plan to read in its entirety as follows:

“Notwithstanding the generality of the foregoing, the amount of any cash payment to be made or the number of shares of Common Stock to be certificated hereunder shall be determined in accordance with the provisions of Section 12.5 hereof and shall be paid or delivered as of an affected Participant’s Separation Date.”

4.           Effectiveness:

This Amendment No. 4 is generally effective for grants and awards made on or after January 1, 2009; provided, however, that with respect to 409A Incentives granted prior to January 1, 2009, such grants and awards shall be made and administered in good faith compliance with Code Section 409A, including the applicable guidance promulgated thereunder.

This Amendment No. 4 was approved by the Company’s Board of Directors on October 31, 2008, to be effective as of the date or dates set forth herein.

Cleco Corporation

By:           /s/ G. W. Bausewine         

Its:           S.V.P., Corporate Services

Date:       November 4, 2008             

-4-

EX-10.4

EXHIBIT 10.4

CLECO CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Amended and Restated, Effective January 1, 2009)

CLECO CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Amended and Restated, Effective January 1, 2009)

INDEX

	Page
ARTICLE I – PURPOSE	1
ARTICLE II – DEFINITIONS	1
ARTICLE III – ELIGIBILITY	3
ARTICLE IV – VESTING	3
Vesting Provisions	3
Forfeiture	4
Termination for Cause	4
ARTICLE V - RETIREMENT BENEFITS	4
Time of Payment	4
Payment Delay Applicable to Specified Employees	4
Form of Payment	4
Amount of Payment	4
Actuarial Reduction for Early Commencement of Retirement Benefits	5
Subsequent Increase in Benefits	5
ARTICLE VI - DEATH BENEFITS	6
Definitions	6
Death While Employed	6
Death After Retirement Benefit Commencement	6
Death After Termination of Employment and Before Retirement Benefit Commencement	6
Payment to Beneficiary	7
Death Benefit Adjustments	7
Supplemental Death Benefit	8
ARTICLE VII - OTHER BENEFITS	8
Disability Benefits	8
Change in Control	9
Benefits Upon a Business Transaction	9
ARTICLE VIII - PARTICIPANTS RIGHTS	10
Spendthrift Provision	10
Offset	10
Obligation for Benefit Payments	10
Taxes	10
Company’s Protection	10
Unsecured Creditor Status	10

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ARTICLE IX - PLAN ADMINISTRATION	11
Powers of the Committee	11
Delegation of Administrative Authority; Experts	11
Claims for Benefits	11
Cash Out of Small Benefits	12
Arbitration	12
Amendment and Termination	12
ARTICLE X - GENERAL PROVISIONS	12
Funding	12
Entire Agreement	13
Binding Effect	13
Governing Law	13
Severability	13
Not an Employment Agreement	13

ii 

CLECO CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Cleco Corporation, a corporation organized and existing under the laws of the State of Louisiana (the “Company”), hereby amends and restates, in its entirety, the Cleco Corporation Supplemental Executive Retirement Plan, which plan was first effective as of July 1, 1992, and amended thereafter, from time to time (the “Prior Plan”); this amendment and restatement shall be effective January 1, 2009 (the “Effective Date”) (the “Plan”).

ARTICLE I

PURPOSE

This Plan is intended to be an unfunded deferred compensation arrangement for the benefit of designated key management employees of the Company and its affiliates and subsidiaries, within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  As such, this Plan is not intended to constitute an employee benefit plan that is subject to the provisions of Parts 2, 3, and 4 of Title I of ERISA.  In accordance with such intent, any obligation to pay benefits hereunder shall be deemed to be an unsecured promise, and any right of a Participant (as defined herein) or Beneficiary (as defined herein) hereunder to enforce such obligation shall be solely as a general creditor of the Company.  This Plan is not intended to constitute a qualified employee benefit plan within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), but is intended to comply with the provisions of Code Section 409A.

ARTICLE II

DEFINITIONS

2.1         Affiliate means a subsidiary corporation or other entity with respect to which the Company owns, directly or indirectly, 80% or more of the total combined voting power of all classes of stock or other equity.

2.2         Beneficiary means the person, persons, entity or entities designated by a Participant, in writing, to receive death benefits payable under the Plan as provided herein. Any such designation shall be effective upon its receipt and acceptance by the Committee or its designee.  A Participant shall be entitled to modify his or her designation at any time, by delivery of a new writing to the Committee. Any such modification shall be effective upon its receipt and acceptance by the Committee or its designee.

2.3         Board of Directors or Board means the Board of Directors of the Company, as constituted from time to time.

2.4         Business Transaction shall have the meaning ascribed to it in the Company’s 2000 Long-Term Incentive Compensation Plan, as amended, restated or replaced, from time to time.

2.5         Cause shall have the meaning ascribed to it under any separate employment or similar agreement between the Company or an Affiliate and a Participant hereunder, such agreement in effect as of his or her Separation Date.  To the extent a Participant is not a party to such an agreement as of his or her Separation Date, “Cause” shall have the meaning ascribed to it in the Company’s 2000 Long-Term Incentive Compensation Plan, as amended, restated or replaced, from time to time.

2.6         Change in Control shall have the meaning ascribed to it in the Company’s 2000 Long-Term Incentive Compensation Plan, as amended, restated or replaced, from time to time.

2.7         Committee means the administrator of this Plan, which shall be the Compensation Committee of the Board of Directors.

2.8         Company Pension Plan means the tax qualified defined benefit pension plan maintained by the Company or its Affiliates, from time to time.

2.9         Disabled or Disability means that a Participant by reason of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months (a) has been receiving income replacement benefits for a period of not less than three months under a separate long-term disability plan or policy maintained by the Company or an Affiliate, or (b) is unable to engage in any substantial gainful employment.

2.10       Eligible Participant means a Participant who is vested as of his or her Separation Date, determined in accordance with Article IV hereof.

2.11       Final Compensation means an amount determined by dividing a Participant’s Annual Compensation by 12.  For this purpose, “Annual Compensation” means the sum of:

a.           Such Participant’s Highest Base Compensation; and

b. The average of the Participant’s three highest awards made under the Company’s Annual Incentive Compensation Plan or similar arrangement during the 60-month period preceding his or her Separation From Service; provided that if fewer than three such awards have been made, such average shall be determined using zero for the amount of such unpaid awards.

2.12        Good Reason shall have the meaning ascribed to it in any executive employment agreement or similar agreement between a Participant and the Company.  If and to the extent a Participant hereunder is not a party to any such agreement or a Change in Control payment or benefit is not provided thereunder on account of Good Reason, any amount, benefit, right or feature that is payable or accrued hereunder on account of Good Reason shall not be applicable to such Participant.

            2.13        Highest Base Compensation means annual base salary paid by the Company or an Affiliate to a Participant hereunder, including the amount of any deferral by such Participant to any plan of deferred compensation, whether qualified or nonqualified, maintained by the Company or an Affiliate, including any such plan maintained under Code Section 401(a) or 125.  Such amount shall be determined with respect to the calendar year in which such base salary was the highest during the five calendar years preceding the year in which such Participant Separates From Service, including the year in which such separation occurs.

2.14        Normal Retirement Date means the date on which a Participant attains age 65.

2.15        Other Employer Plan means a defined benefit pension plan or similar arrangement, whether or not qualified within the meaning of Code Section 401(a), either maintained by an employer, other than the Company or an Affiliate, in which a Participant hereunder accrues or has accrued benefits, whether before or after his or her Separation Date.  As a condition of the receipt of benefits hereunder, each Participant shall provide to the Committee such information about any such Other Employer Plan as the Committee may reasonably request.

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2.16        Payment Date means the first business day of the calendar month following the later of (a) the month in which a Participant attains age 55, or (b) the month in which a Participant’s Separation Date occurs.

2.17        Prior Plan Benefit means a Participant’s benefit vested and accrued under the Prior Plan, determined as of December 31, 2004.

2.18        Separation From Service or Separation Date means the later of the date on which (a) a Participant’s employment with the Company and its Affiliates ceases for any reason, or (b) the Company and such Participant reasonably anticipate that the Participant will perform no further services for the Company and its Affiliates, whether as a common law employee or independent contractor.  Notwithstanding the foregoing, a Participant may be deemed to incur a Separation From Service if he or she continues to provide services to the Company or an Affiliate, provided such services are not more than 20% of the average level of services performed by such Participant, whether as an employee or independent contractor, during the immediately preceding 36-month period.

2.19        Retirement Benefit means a benefit payable under Article V hereof.

2.20        Specified Employee shall be determined in accordance with Code Section 409A and generally shall mean a Participant who is a “key employee” of the Company and its Affiliates, as defined in Code Section 416(i), (ii), or (iii), but determined without regard to paragraph (i)(5) thereof, as of his or her Separation Date.  A Participant who satisfies such requirements as of a December 31st shall be considered a Specified Employee hereunder during the 12-month period commencing on the immediately following April 1st.

2.21        Years of Service means the number of whole and fractional years during which a Participant is employed by the Company or an Affiliate, including service with any immediate predecessor entity that was acquired by or merged or consolidated with the Company or an Affiliate.

ARTICLE III

ELIGIBILITY

The Committee, in its discretion, shall designate executives, officers, and key employees of the Company and its Affiliates as Participants hereunder, who may be designated individually or by groups or categories.  Any such determination shall be conclusive and binding upon all persons.  The Committee, or its designee, shall notify each such executive, officer or employee of his or her designation hereunder.

ARTICLE IV

VESTING

4.1         Vesting Provisions.  Unless otherwise provided by the Committee in a separate employment or participation agreement or similar document or, except as to a “named executive officer” within the meaning of Item 401 of Regulation S-K promulgated under the Securities Act of 1933, as amended, as otherwise provided by the Company’s Chief Executive Officer, a Participant’s benefits hereunder shall be fully vested and nonforfeitable upon the earlier of:

a. The completion of ten whole Years of Service;

b. The Participant’s death or Disability while employed by the Company or an Affiliate;

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c. The date on which a Participant’s employment with the Company and its Affiliates is involuntarily terminated, without Cause, in connection with a Business Transaction; or

d. The date on which a Participant’s employment is involuntarily terminated by the Company, without Cause, or a Participant terminates his or her employment on account of Good Reason, either within the time provided in Section 7.2 hereof.

4.2         Forfeiture.  If a Participant’s Separation Date occurs before his or her benefits are vested and nonforfeitable in accordance with Section 4.1 hereof, then notwithstanding any provision of the Plan to the contrary, he or she shall forfeit all benefits hereunder.  In such event, the obligations of the Company and its Affiliates with respect to such Participant and any person claiming a right or benefit through such Participant shall be extinguished.

4.3         Termination for Cause.  Notwithstanding any provision of this Plan to the contrary, a Participant who is terminated by the Company for Cause shall forfeit all rights and benefits hereunder, whether or not then vested; no benefit shall be payable to such Participant, his or her Surviving Spouse (as defined below), Beneficiary, estate or any other person claiming a benefit through or on behalf of such Participant.

ARTICLE V

RETIREMENT BENEFITS

5.1         Time of Payment.  Payment of an Eligible Participant’s Retirement Benefit shall commence as of his or her Payment Date.  Notwithstanding the foregoing, if such Participant is a Specified Employee as of his or her Separation Date, the commencement of his or her Retirement Benefit, other than his or her Prior Plan Benefit, if any, shall be delayed until the later of (a) first business day of the seventh whole calendar month following his or her Separation Date, or (b) his or her Payment Date.  In the event of any delay hereunder, the first monthly payment shall include, without liability for interest or loss of investment opportunity thereon, the principal amount of all Retirement Benefits otherwise payable between the actual commencement of such benefits and such Participant’s Payment Date.

5.2         Form of Payment.  A Retirement Benefit hereunder shall be paid in the form of equal monthly payments during the life of each Eligible Participant.

5.3         Amount of Payment.  Benefits payable hereunder shall be determined as of an Eligible Participant’s Separation Date as (a) the product of such Eligible Participant’s Final Compensation multiplied by his or her Benefits Percentage, reduced by (b) the value of such Participant’s Benefit Offsets.  For this purpose, an Eligible Participant’s “Benefit Percentage” shall be determined as of his or her Separation Date as follows:

Attained Age  at Separation Date	Benefit Percentage
65 or Older	65%
64	63%
63	61%
62	59%
61	57%
60	55%
59	53%
58	51%
57	49%

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Attained Age  at Separation Date	Benefit Percentage
56	47%
Between age 55 and 45	45%
Less than age 45	Attained age of the Participant

An Eligible Participant’s “Benefit Offsets” shall mean, unless the Committee otherwise provides, each of the following applicable amounts:

a. Such Participant’s benefit accrued under the Company Pension Plan (i) determined without regard to any domestic relations order qualified under Code Section 414(p) or other law, (ii) assuming that the Participant elects to receive such benefits in the form of a joint and 100% survivor annuity payable to his or her spouse, if he or she is married, or a single life annuity with guaranteed payments for a period of ten years if he or she is not married, and (iii) assuming that the payment of such benefit commences as of the Participant’s Payment Date.

b. Such Participant’s allocable employer contributions, whether discretionary, nondiscretionary or matching, made under the Company’s or an Affiliate’s tax qualified plan that includes a cash or deferred arrangement, provided that (i) such Eligible Participant shall have first commenced employment with the Company or an Affiliate on or after August 1, 2007, (ii) only matching contributions in excess of those in effect as of July 31, 2007, shall be taken into account, (iii) such contributions shall be determined as if each affected Participant deferred the maximum amount permitted under Code Section 402(g) and made any additional deferral permitted under Code Section 414(v), (iv) earnings shall be imputed to such contributions at the actuarial interest rate specified in the Company Pension Plan, from time to time, and (v) for purposes of determining the amount of the Benefit Offset required hereunder, such amount shall be expressed in the form of an annuity determined in accordance with the provisions and assumptions set forth in subparagraph a hereto.

c. Such Participant’s benefits payable from an Other Employer Plan, expressed in the form described in and determined in accordance with the provisions of subparagraph a hereof.

d. Any benefit payments payable from the Company’s Long-Term Disability Plan.

5.4         Actuarial Reduction for Early Commencement of Retirement Benefits.  If (a) an Eligible Participant has not attained age 55 as of his or her Separation Date, and (b) such Participant’s Payment Date precedes his or her Normal Retirement Date, his or her Retirement Benefit hereunder shall be actuarially reduced to reflect such early commencement.  Any reduction required hereunder shall be determined using the interest rate, group mortality table and other reduction factors in effect under the Company Pension Plan, from time to time.

5.5         Subsequent Increase in Benefits.  Any Retirement Benefit payable hereunder shall not be subject to increase or other adjustment on account of an increase in the amount payable to a Participant under the Company Pension Plan  or any Other Employer Plan.

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ARTICLE VI

DEATH BENEFITS

6.1         Definitions.  As used herein:

a.           Death Benefit means a benefit payable to the Surviving Spouse or other Beneficiary of an Eligible Participant in accordance with this Article VI.

b. Minimum Benefit Period means the minimum period during which Death Benefits will be paid hereunder, which period shall commence as of a Participant’s Payment Date and end on the later of (i) the tenth anniversary of such date, or (ii) such Participant’s Normal Retirement Date.

c. Surviving Spouse means (i) if a Participant dies before his or her Payment Date, the person to whom the Participant is lawfully married as of the date of his or her death, or (ii) if such Participant dies after his or her Payment Date, the person to whom such Participant was lawfully married on his or her Payment Date and on the date of his or her death.

           6.2          Death While Employed.  If an Eligible Participant dies while he or she is employed by the Company or an Affiliate, such Participant’s Surviving Spouse shall receive a Death Benefit in an amount determined as follows:

a. During the 12 months immediately following such Participant’s date of death, the greater of (i) the Participant’s vested Retirement Benefit determined in accordance with Article V hereof, subject to adjustment as provided in Section 6.6 hereof, or (ii) 100% of the annual Base Compensation of the deceased Participant, determined as of his or her date of death, including the adjustments provided in Section 2.12 hereof; and

b. Thereafter, the deceased Participant’s Retirement Benefit determined in accordance with Article V hereof,  subject to adjustment as provided in Section 6.6 hereof.

Payment of such benefit shall be made in equal monthly installments commencing on the first business day of the second calendar month following the Participant’s date of death and ending as of the date of death of the Surviving Spouse.

6.3         Death After Retirement Benefit Commencement.  If an Eligible Participant dies after his or her Retirement Benefit commences, the Participant’s Surviving Spouse shall continue to receive such benefit, subject to adjustment as provided in Section 6.6 hereof, commencing on the first business day of the second calendar month following such Participant’s date of death and ending on the date of death of the Surviving Spouse.

           6.4          Death After Termination of Employment and Before Retirement Benefit Commencement. If an Eligible Participant dies after his or her Separation From Service, but before the commencement of his or her Retirement Benefit, a Death Benefit shall be payable to his or her Surviving Spouse in the amount equal to the deceased Participant’s vested Retirement Benefit determined in accordance with Article V hereof, subject to adjustment as provided in Section 6.6 hereof.  Such benefit shall be paid in equal monthly installments commencing as of such deceased Participant’s Payment Date and ending on the date of death of the Surviving Spouse.

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6.5         Payment to Beneficiary.  Subject to adjustment as provided in Section 6.6 hereof, Death Benefits payable to a Surviving Spouse hereunder shall be payable to a deceased Participant’s Beneficiary, or if no Beneficiary has been designated or survives the Participant, to the Participant’s estate, in the following circumstances:

a. If an Eligible Participant dies while employed by the Company or an Affiliate, with no Surviving Spouse;

b. If an Eligible Participant dies after his or her Payment Date, but the Participant and his or her Surviving Spouse (if any) die before the expiration of the Minimum Benefit Period; or

c. If a death benefit payable to a Surviving Spouse has commenced, but such spouse dies before the expiration of the Minimum Benefit Period.

Any Death Benefit payable to a Beneficiary or estate under this Section 6.5 shall commence on the first business day of the second calendar month following the date of death of the Participant or his or her Surviving Spouse, as the case may be, and shall cease as of the expiration of the Minimum Benefit Period.

6.6         Death Benefit Adjustments.  Notwithstanding any provision of this Plan to the contrary:

a. If a Surviving Spouse is more than ten years younger than his or her spouse, any Death Benefit payable to such spouse shall equal 50% of the amount of the deceased Participant’s Retirement Benefit; provided, however, that the amount of any benefit provided under Section 6.2a(ii) shall not be subject to such reduction.

b. If a deceased Eligible Participant commenced payment of his or her Retirement Benefit before the date of his or her death, any Death Benefit payable to his or her Surviving Spouse hereunder shall be reduced by the survivor’s portion of the joint and 100% survivor annuity, calculated as of the deceased Participant’s Payment Date under the Company Pension Plan and any Other Employer Plan.

c. If a deceased Participant commenced his or her Retirement Benefit before the date of his or her death and he or she was unmarried as of such commencement date, any Death Benefit payable hereunder shall be reduced by the survivor portion of the ten-year certain and life annuity, determined as of such deceased Participant’s Payment Date under the Company Pension Plan  and any Other Employer Plan.

d. If Death Benefits are payable to a Surviving Spouse hereunder and such spouse dies before the expiration of the Minimum Benefit Period, any Death Benefit payable thereafter shall be reduced only by the actual amount of any survivor benefits paid after the death of such spouse under the Company Pension Plan  and any Other Employer Plan.

e. If a Participant dies before his or her Payment Date, any Death Benefit payable hereunder shall be reduced by the actual amount of any survivor benefits paid to the Surviving Spouse or other Beneficiary under the Company Pension Plan  and any Other Employer Plan.

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f. Death Benefits payable hereunder shall not be adjusted to reflect any increase in any benefit payable under the Company Pension Plan  or Other Employer Plan occurring after a Participant’s Payment Date.

 6.7        Supplemental Death Benefit.  If (a) Participant was employed by the Company or its Affiliates on or after December 17, 1999, and (b) as of the date of his or her Separation Date he or she is an Eligible Participant hereunder (a “Supplemental Eligible Participant”), in addition to any Death Benefit provided herein, the following supplemental benefit shall be paid:

a. Such benefit shall be paid to the Beneficiary of such Supplemental Eligible Participant, which Beneficiary need not be such Participant’s Surviving Spouse or the same Beneficiary designated with respect to Death Benefits otherwise payable hereunder.

b. The amount of such benefit shall be determined as follows:

i. If a Supplemental Eligible Participant dies while actively employed by the Company or an Affiliate, the benefit shall equal the sum of (x) 200% of such Participant’s annual base salary then in effect, and (y) such Supplemental Eligible Participant’s target bonus payable under the Company’s Annual Incentive Compensation Plan (or its successor) for the year in which the Participant’s date of death occurs; or

ii. If a Supplemental Eligible Participant dies after his or her Separation Date, the benefit shall equal the sum of (x) 100% of such Participant’s annual base salary in effect as of his or her Separation Date, and (y) such Participant’s target bonus payable under the Annual Incentive Compensation Plan for the year in which his or her Separation Date occurs.

c. Such benefit shall be paid in the form of a single-sum payment.

d. Such benefit shall be paid as of the first business day of the second calendar month following the Supplemental Eligible Participant’s date of death.

ARTICLE VII

OTHER BENEFITS

7.1         Disability Benefits. If a Participant becomes Disabled while employed by the Company or its Affiliates, he or she shall be entitled to receive a Disability Benefit hereunder, subject to the following:

a. The amount of such benefit shall equal the vested Retirement Benefit that he or she would have been eligible to receive if his or her Separation Date occurred as of the date on which he or she became Disabled, without the actuarial reduction required under Section 5.4 hereof.

b. Payment shall be made in equal monthly installments commencing on the first business day of the second calendar month following the date on which such Participant is deemed to be Disabled.

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c. Payment hereunder shall cease as of the earlier of (i) the date on which the Participant is reinstated as an active employee of the Company or an Affiliate, (ii) the date on which a Participant ceases to be Disabled, or (iii) the Participant’s Payment Date.

d. In the event the Participant dies while receiving a Disability Benefit, Death Benefits under Section 6.2 or 6.3 hereof shall be based upon the greater of his or her Disability Benefit or such Participant’s Retirement Benefit determined as if his or her Payment Date occurred immediately before the date of his or her death; provided, however, that any Disability Benefit payable hereunder shall be subject to any applicable Benefit Offset described in Section 5.3 hereof and the actuarial reduction described in Section 5.4 hereof.

If a Disability Benefit ceases on account of subparagraph c(iii) hereof, such Participant’s Retirement Benefit determined under Article IV hereof shall commence as of his or her Payment Date, based upon his or her attained age as of his or her Separation Date.

7.2         Change in Control Benefits.  If a Participant’s employment is involuntarily terminated by the Company or an Affiliate, without Cause, or a Participant terminates his or her employment on account of Good Reason, either occurring within the 60-day period preceding or the 36-month period following a Change in Control, and he or she is then a party to an Executive Employment Agreement or similar agreement with the Company or an Affiliate:

a. He or she shall be credited with three years of age for purposes of determining his or her Benefit Percentage in accordance with Section 5.3 hereof; provided, however that in no event shall such Benefit Percentage be less than 50%; and

b. He or she shall be credited with three years of age for purposes of applying any reduction required under Section 5.4 hereof on account of the commencement of benefits prior to his or her Normal Retirement Date.

A Participant shall further be entitled to accelerate the payment of his or her Prior Plan Benefit in the event of a Change in Control, subject to the terms, conditions, and limitations set forth in the Prior Plan.

7.3         Benefits Upon a Business Transaction.  If a Participant’s employment is involuntarily terminated by the Company or an Affiliate, without Cause, in connection with a Business Transaction and  such Participant is then a party to an Executive Employment Agreement or similar agreement with the Company or an Affiliate:

a. He or she shall be credited with three years of age for purposes of determining his or her Benefit Percentage in accordance with Section 5.3 hereof; provided, however that in no event shall such Benefit Percentage be less than 50%; and

b. He or she shall be credited with three years of age for purposes of applying any reduction required under Section 5.4 hereof on account of the commencement of benefits prior to his or her Normal Retirement Date.

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ARTICLE VIII

PARTICIPANTS RIGHTS

8.1         Spendthrift Provision.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber any benefit or amount payable hereunder.  No amount payable under this Plan shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debt, judgment, alimony or separate maintenance owed by a Participant or any other person.  No amount payable under this Plan shall be transferable by operation of law in the event of a Participant’s or other person’s bankruptcy or insolvency.

8.2         Offset.  If, at any time of any distribution hereunder, a Participant, his or her Surviving Spouse or Beneficiary, or both, are indebted to the Company, then any distribution hereunder may be reduced by the amount of such indebtedness; provided, however, that (a) any such reduction shall be made no later than the last day of the calendar year in which a Participant’s Payment Date occurs, and (b) the aggregate amount of such offset shall not exceed $5,000.

8.3         Obligation for Benefit Payments.  Notwithstanding any provision of this Plan to the contrary, the payment of benefits under this Plan shall be the obligation of the Company or the Affiliate with respect to which the Participant is employed.  In the event the Company or such Affiliate designates a third-party as the payor of the benefits and the assets of such third-party are insufficient to meet the payment obligations under this Plan, the Company or such Affiliate, as the case may be, shall remain responsible for such deficiency.

8.4         Taxes.  The Company, an Affiliate or any third-party payor shall deduct from the amount of any benefits payable under this Plan any taxes required to be withheld under applicable federal or state tax laws.

Notwithstanding the foregoing, the Company shall pay on behalf of each Participant hereunder an amount such that after the payment of all income and employment taxes due with respect to such amount, the remainder equals the amount of any employment tax due with respect to the periodic accrual of benefits hereunder.  Such amount shall be paid by the Company as and when such taxes are required to be remitted to the Internal Revenue Service in accordance with the provisions of Code Section 3121, but in no event later than December 31st following the year in which a Participant is required to remit the amount of any such tax.

8.5         Company’s Protection.  By commencing participation herein, each Participant shall be deemed to have agreed to cooperate with the Company by furnishing any and all information reasonably requested by the Committee in order to facilitate the funding or payment of benefits hereunder, including, without limitation, the taking of such physical examinations as the Company or the Plan may deem necessary to obtain insurance to fund the payment of benefits hereunder.  If a Participant refuses to cooperate, is uninsurable or is insurable at other than standard rates, the Committee, in its sole discretion, may determine that the Participant is ineligible to participate hereunder.

8.6         Unsecured Creditor Status.  The right of a Participant or his or her Surviving Spouse or Beneficiary to receive benefits hereunder shall be solely those of an unsecured creditor of the Company and its Affiliates.  Any insurance policy, including the proceeds thereof, or other asset acquired or held by the Company or an Affiliate in connection with its benefit obligations hereunder shall not be deemed to be held under any trust for the benefit of the Participant or his or her Surviving Spouse or Beneficiary or to be security for the performance of the obligations of the Company and its Affiliates, but shall be a general unpledged and unrestricted asset.  

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ARTICLE IX

PLAN ADMINISTRATION

9.1         Powers of the Committee.  The Committee shall have the discretionary power and authority to interpret the provisions of this Plan an any form or other document ancillary thereto, to determine all questions arising under this Plan including, without limitation, all questions concerning administration, eligibility, and the amount or payment of any benefit payable hereunder.  In addition, the Committee shall have the authority to prescribe, amend, and rescind rules and administrative procedures relating to the operation of this Plan, adopt forms and execute agreements required hereunder, and to correct any defect, supply any omission or reconcile any inconsistency in this Plan or any related form or agreement.

Any determination by the Committee need not be uniform as to all or any Participants hereunder.  Any such determination shall be conclusive and binding on all persons claiming any interest in the Plan or a benefit hereunder.  Neither the Company nor its officers, employees, members of the Committee or any member of the Board of Directors shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan.

9.2         Delegation of Administrative Authority; Experts.  The Committee, in its sole discretion, may delegate such nondiscretionary, ministerial duties as it deems appropriate to such officers or employees of the Company as it deems necessary or appropriate.  When acting in accordance with such delegation (whether made orally or in writing), any such officer or employee shall be deemed to possess the power and authority granted to the Committee hereunder.  The Committee shall engage the services of such independent actuaries, accountants, attorneys and other administrative personnel as it deems necessary or advisable to administer this Plan.

9.3         Claims for Benefits.  If a Participant or Surviving Spouse or Beneficiary believes a benefit or distribution is due under the Plan, he or she may request the distribution of such benefit, in writing, from the Committee.  If the request for distribution is disputed or denied by the Committee, the following action shall be taken:

a. Such Participant or Surviving Spouse or Beneficiary shall be notified, in writing, of the dispute or denial as soon as possible (but no later than 90 days) after receipt of the request for a distribution.  The notice shall set forth the specific reasons for the denial, including any relevant provisions of the Agreement, and shall explain the review procedure of the Plan.

b. Such Participant or Surviving Spouse or Beneficiary shall be entitled to full review of his or her claim after receipt of written notification of a denial.  A Participant (or Surviving Spouse or Beneficiary) desiring a review of a dispute or denial must request such a review, in writing, not later than 60 days after notification from the Committee.  During the review, the Participant (or Surviving Spouse or Beneficiary) may be represented and shall have the right to inspect all documents pertaining to the dispute or denial.

The Committee shall render its decision within 60 days after receipt of the request for the review.  In the event special circumstances require an extension of time, the Committee shall notify the Participant (or Surviving Spouse or Beneficiary), in writing, and the decision shall be rendered no later than 120 days after the receipt of the request.  The decision of the Committee shall be in writing and include specific reasons for the action taken and specific references to the Plan provisions on which the decision is based.

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           9.4          Cash Out of Small Benefits.  Notwithstanding the provisions of this Plan to the contrary, if the present value of a Retirement or Death Benefit payable as of a Participant’s Payment Date, Separation Date or date of death, as the case may be, is less than the amount determined under Code Section 402(g) as of such date, the Committee shall distribute such amount to the Participant or Surviving Spouse or Beneficiary, as the case may be, in the form of a single-sum payment as of the first business day of the second calendar month thereafter.  No additional benefit shall be payable with respect to such Participant hereunder. The amount of such benefit shall be determined using the interest rate, group mortality table and other actuarial factors in effect under the Company Pension Plan , from time to time, to determine the amount of single-sum payments thereunder.

9.5         Arbitration.  After any administrative review or approval provided hereunder has been exhausted, any controversy or claim arising out of or relating to this Plan shall be settled by binding arbitration administered by the American Arbitration Association under its Employment Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  Both the Company and Executive hereby consent to this binding arbitration provision.   Site for such arbitration shall be Pineville, Louisiana or such other location as may mutually be agreed upon by the Company and each affected Participant hereunder.

9.6         Amendment and Termination.  Subject to the following, the Board shall have the right, at any time, to amend or terminate this Plan, in whole or in part:

a. No such amendment or termination shall reduce any benefits or rights accrued as of the effective date of such termination or amendment, without the prior written consent of each affected Participant, Surviving Spouse or Beneficiary hereunder;

b. If the Plan is terminated benefit accruals hereunder shall cease and payments hereunder shall be made or at such time and in such manner as may be prescribed under the terms of the Plan;

c. If the Plan is terminated, Years of Service following the termination date shall be credited to any Participant who is not then an Eligible Participant for purposes of Article IV hereof; and

d. As to any Participant hereunder, the Committee (or its designee), in its discretion, may provide for a modification of the Benefit Percentage or the Benefit Offsets otherwise provided herein; any such modification shall be included in a separate participation or similar agreement executed by the affected Participant and the Committee.

ARTICLE X

GENERAL PROVISIONS

10.1       Funding.  The Company may establish a trust in connection with the adoption of this Plan.  Each year during the continuance of this Plan, the Committee may designate amounts to be added to the trust.  The property comprising the assets of any such trust, including any insurance policy on the life of a Participant purchased by any such trust or contributed to any such trust by the Company, shall at all times remain the property of such trust.  The trustee of any such trust shall distribute the assets comprising such trust in accordance with the provisions of the Plan and the trust agreement, all as instructed by the Committee, but in no event shall such trustee distribute the assets of any such trust to or for the benefit of the Company, except as provided in any applicable trust agreement.

-12- 

10.2       Entire Agreement.  This Plan, together with the agreement of participation entered into by the Participant, shall constitute the entire understanding between the Company and the Participant with respect to the benefits provided hereunder.

10.3       Binding Effect.  The rights, privileges, benefits and obligations under this Plan are intended to be legal obligations of the Company and binding upon the Company, including its successors and assigns, whether by corporate merger, consolidation, reorganization or otherwise.

10.4       Governing Law.  The provisions of this Plan shall be construed according to the laws of the State of Louisiana, excluding the provisions of any such laws that would require the application of the laws of another jurisdiction.

10.5       Severability.  Each provision of this Plan is intended to be severable.  In the event that any one or more of the provisions contained in this Plan shall for any reason be held to be invalid, illegal or unenforceable, the same shall not affect the validity or enforceability of any other provision of this Plan, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision was not contained herein.  Notwithstanding the foregoing, however, no provision shall be severed if it is clearly apparent under the circumstances that the parties would not have entered into this Plan without such provision.

10.6       Not an Employment Agreement.  Nothing contained herein shall be deemed to constitute an employment agreement between the Company or an Affiliate and any Participant hereunder or to otherwise constitute a promise or guarantee of any term of employment or rate of compensation.

This Supplemental Executive Retirement Plan was approved by the Board of Directors of Cleco Corporation on the 31st day of October 2008, to be effective as of the date first written above.

CLECO CORPORATION

By:           /s/ G. W. Bausewine         

Title:        S.V.P., Corporate Services

Date:       November 4, 2008             

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EX-12.A

CLECO CORPORATION  EXHIBIT 12(a)

Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined

Fixed Charges and Preferred Stock Dividends 

	FOR THE THREE MONTHS ENDED			FOR THE NINE MONTHS ENDED			FOR THE TWELVE  MONTHS ENDED
(THOUSANDS, EXCEPT RATIOS)				SEPTEMBER 30, 2008
Earnings from continuing operations	$	37,133		$	88,593		$	100,501
Equity income/loss and dividends from investees		(8,832	)		5,967			22,962
Income taxes		10,513			22,573			30,158
Earnings from continuing operations before income taxes	$	38,814		$	117,133		$	153,621
Fixed charges:
Interest, long-term debt	$	14,747		$	38,340		$	48,410
Interest, other (including interest on short-term debt)		5,299			9,876			8,633
Amortization of debt expense, premium, net		573			1,668			2,166
Portion of rentals representative of an interest factor		130			375			502
Total fixed charges	$	20,749		$	50,259		$	59,711
Earnings from continuing operations before income taxes	$	38,814		$	117,133		$	153,621
Plus:  total fixed charges from above		20,749			50,259			59,711
Plus:  amortization of capitalized interest		102			305			407
Earnings from continuing operations before income taxes and fixed charges	$	59,665		$	167,697		$	213,739
Ratio of earnings to fixed charges		2.88	X		3.34	X		3.58	X
Total fixed charges from above		20,749			50,259			59,711
Preferred stock dividends		15			44			60
Total fixed charges and preferred stock dividends		20,764			50,303			59,771
Ratio of earnings to combined fixed charges and preferred stock dividends		2.87	X		3.33	X		3.58	X

EX-12.B

CLECO POWER  EXHIBIT 12(b)

Computation of Ratios of Earnings to Fixed Charges

	FOR THE THREE MONTHS ENDED			FOR THE NINE MONTHS ENDED			FOR THE TWELVE MONTHS ENDED
(THOUSANDS, EXCEPT RATIOS)				SEPTEMBER 30, 2008
Earnings from continuing operations	$	30,538		$	90,807		$	110,333
Income taxes		10,566			27,135			36,230
Earnings from continuing operations before income taxes	$	41,104		$	117,942		$	146,563
Fixed charges:
Interest, long-term debt	$	14,747		$	36,007		$	44,327
Interest, other (including interest on short-term debt)		4,623			8,588			7,239
Amortization of debt expense, premium, net		526			1,366			1,720
Portion of rentals representative of an interest factor		130			375			502
Total fixed charges	$	20,026		$	46,336		$	53,788
Earnings from continuing operations before income taxes	$	41,104		$	117,942		$	146,563
Plus:  total fixed charges from above		20,026			46,336			53,788
Earnings from continuing operations before income taxes and fixed charges	$	61,130		$	164,278		$	200,351
Ratio of earnings to fixed charges		3.05	X		3.55	X		3.72	X

EX-31.1

CLECO CORPORATION  EXHIBIT 31.1

Certification

I, Michael H. Madison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cleco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2008

/s/ Michael H. Madison

Michael H. Madison

President and Chief Executive Officer

EX-31.2

CLECO CORPORATION  EXHIBIT 31.2

Certification

I, R. Russell Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cleco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2008

/s/  R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer

& Interim CFO

EX-31.3

CLECO POWER LLC   EXHIBIT 31.3

Certification

I, Michael H. Madison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cleco Power LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2008

/s/  Michael H. Madison

Michael H. Madison

Chief Executive Officer

EX-31.4

CLECO POWER LLC  EXHIBIT 31.4

Certification

I, R. Russell Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cleco Power LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2008

/s/  R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer

& Interim CFO

EX-32.1

CLECO CORPORATION  EXHIBIT 32.1

Cleco Corporation

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cleco Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael H. Madison, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 5, 2008

/s/  Michael H. Madison

Michael H. Madison

President and Chief Executive Officer

EX-32.2

CLECO CORPORATION  EXHIBIT 32.2

Cleco Corporation

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cleco Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Russell Davis, Vice President, Chief Accounting Officer & Interim CFO of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 5, 2008

/s/  R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer

& Interim CFO

EX-32.3

CLECO POWER LLC   EXHIBIT 32.3

Cleco Power LLC

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cleco Power LLC (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael H. Madison, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 5, 2008

/s/  Michael H. Madison

Michael H. Madison

Chief Executive Officer

EX-32.4

CLECO POWER LLC   EXHIBIT 32.4

Cleco Power LLC

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cleco Power LLC (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Russell Davis, Vice President, Chief Accounting Officer & Interim CFO of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 5, 2008

/s/  R. Russell Davis

R. Russell Davis

Vice President, Chief Accounting Officer

& Interim CFO