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 June 30, 2009

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 the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files).  Yes ¨    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 July 31, 2009
Cleco Corporation	Common Stock, $1.00 Par Value	60,476,642

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	2009 2ND 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	7
	Cleco Power — Condensed Consolidated Financial Statements	15
	Notes to the Unaudited Condensed Consolidated Financial Statements	20
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	58
ITEM 4 and 4T.	Controls and Procedures	60
PART II	Other Information
ITEM 1.	Legal Proceedings	61
ITEM 1A.	Risk Factors	61
ITEM 4.	Submission of Matters to a Vote of Security Holders	61
ITEM 6.	Exhibits	62
	Signatures	63

2 

CLECO CORPORATION
CLECO POWER	2009 2ND 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
APH	Acadia Power Holdings LLC, a wholly owned subsidiary of Midstream
Attala	Attala Transmission LLC, a wholly owned subsidiary of Cleco Corporation.  Prior to February 1, 2007, Attala was a wholly owned subsidiary of Midstream.
Bear Energy	BE Louisiana LLC, an indirect wholly owned subsidiary of JPMorgan Chase & Co.  In September 2008, BE Louisiana LLC was merged into JPMVEC.
Bear Stearns Companies Inc.	The parent company of Bear, Stearns & Co. Inc.
Cajun	Cajun Gas Energy L.L.C., an affiliate of pooled investment funds managed by King Street Capital Management, L.P.
CES	Calpine Energy Services, L.P.
Cleco Energy	Cleco Energy LLC, a wholly owned subsidiary of Midstream
Cleco Innovations LLC	A wholly owned subsidiary of Cleco Corporation
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. 08-5	Issuer’s Accounting for Liabilities Measured at Fair Value with a Third Party Credit Enhancement
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
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.  In September 2008, BE Louisiana LLC was merged into JPMVEC.
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIN	FASB Interpretation No.
FIN 18	Accounting for Income Taxes in Interim Periods – an interpretation of APB Opinion No. 28
FIN 39	Offsetting of Amounts Related to Certain Contracts – an interpretation of APB Opinion No. 10 and FASB Statement No. 105
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 Accounting Research Bulletin 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 Shared Based Payment Transactions Are Participating Securities
FSP No. FAS 107-1 and APB 28-1	Interim Disclosures about Fair Value of Financial Instruments
FSP No. FAS 115-2 and FAS 124-2	Recognition and Presentation of Other-Than-Temporary Impairments
FSP No. FAS 132(R)-1	Employers’ Disclosures about Postretirement Benefit Plan Assets
FSP No. FAS 141(R)-1	Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies
FSP No. FAS 142-3	Determining the Useful Life of Intangible Assets
FSP No. FAS 157-4	Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly
FSP No. FIN 39-1	Amendment of FASB Interpretation No. 39
GAAP	Generally Accepted Accounting Principles in the United States

3 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

ABBREVIATION OR ACRONYM	DEFINITION
GO Zone	Gulf Opportunity Zone Act of 2005 (Public Law 109-135)
ICT	Independent Coordinator of Transmission
Interconnection Agreement	One of two Interconnection Agreement and Real Estate Agreements, one between Attala and Entergy Mississippi, and the other between Perryville and Entergy Louisiana
IRP	Integrated Resource Planning
IRS	Internal Revenue Service
JPMVEC	J.P. Morgan Ventures Energy Corporation.  In September 2008, Bear Energy was merged into JPMVEC.
kWh	Kilowatt-hour(s) as applicable
LIBOR	London Inter-Bank Offer 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
MMBtu	Million British thermal units
Moody’s	Moody’s Investors Service
MW	Megawatt(s) as applicable
Not meaningful	A percentage comparison of these items is not statistically meaningful because the percentage difference is greater than 1,000%.
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.
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. 5	Accounting for Contingencies
SFAS No. 71	Accounting for the Effects of Certain Types of Regulation
SFAS No. 107	Disclosures about Fair Value of Financial Instruments
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. 132(R)	Employers’ Disclosures about Postretirement Benefit Plan Assets
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. 161	Disclosures about Derivative Instruments and Hedging Activities
SFAS No. 162	The Hierarchy of Generally Accepted Accounting Principles
SFAS No. 165	Subsequent Events
SFAS No. 166	Accounting for Transfers of Financial Assets – an amendment of FASB Statement 140
SFAS No. 167	Consolidation of Variable Interest Entities, an amendment to FIN 46R
SFAS No. 168	The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
Shaw	Shaw Contractors, Inc., a subsidiary of The Shaw Group Inc.
SWEPCO	Southwestern Electric Power Company, a wholly owned subsidiary of American Electric Power Company, Inc.
VaR	Value-at-risk
Williams	Williams Power Company, Inc.

4 

CLECO CORPORATION
CLECO POWER	2009 2ND 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; JPMVEC’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; decreased customer load; environmental incidents; environmental compliance costs; power transmission system constraints; or the 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 the IRP and RFP processes, the formation of the RTOs and the ICTs, and the compliance with the ERO reliability standards for bulk power systems by Cleco Power, Acadia, and Evangeline;

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

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

§   The current global financial crisis and U.S. recession;

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

§   Ability to remain in compliance with debt covenants;

§   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;

§   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, including Rodemacher Unit 3, the joint project to upgrade the Acadiana Load Pocket transmission system, and Cleco Power’s acquisition of 50 percent of Acadia;

§   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.

5 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

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 the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2008.  

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.

6 

CLECO CORPORATION
CLECO POWER	2009 2ND 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, 2008.  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.”

7 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2009			2008
Operating revenue
Electric operations	$	195,651		$	259,581
Other operations		8,712			12,758
Affiliate revenue		2,863			2,448
Operating revenue		207,226			274,787
Operating expenses
Fuel used for electric generation		50,326			22,887
Power purchased for utility customers		56,547			151,949
Other operations		25,941			22,862
Maintenance		14,766			14,589
Depreciation		19,479			19,336
Taxes other than income taxes		8,300			9,455
Total operating expenses		175,359			241,078
Operating income		31,867			33,709
Interest income		271			1,258
Allowance for other funds used during construction		17,538			14,993
Equity loss from investees		(3,125	)		(2,365	)
Other income		1,633			91
Other expense		(480	)		(1,377	)
Interest charges
Interest charges, including amortization of debt expenses, premium, and discount, net of capitalized interest		20,150			14,947
Allowance for borrowed funds used during construction		(6,421	)		(5,026	)
Total interest charges		13,729			9,921
Income before income taxes		33,975			36,388
Federal and state income tax expense		6,949			6,999
Net income		27,026			29,389
Preferred dividends requirements, net of tax		12			12
Net income applicable to common stock	$	27,014		$	29,377
Average shares of common stock outstanding
Basic		60,175,528			59,998,227
Diluted		60,451,665			60,168,947
Basic earnings per share
From continuing operations	$	0.45		$	0.49
Net income applicable to common stock	$	0.45		$	0.49
Diluted earnings per share
From continuing operations	$	0.45		$	0.49
Net income applicable to common stock	$	0.45		$	0.49
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.

8 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008
Net income	$	27,026	$	29,389
Other comprehensive income (loss), net of tax:
Net unrealized loss from available-for-sale securities (net of tax benefit of $18 in 2008)		-		(29	)
Amortization of post-retirement benefit net gain (loss) (net of tax benefit of $14 in 2009 and $8 in 2008)		1		(5	)
Other comprehensive income (loss)		1		(34	)
Comprehensive income, net of tax	$	27,027	$	29,355
The accompanying notes are an integral part of the condensed consolidated financial statements.

9 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2009			2008
Operating revenue
Electric operations	$	398,517		$	469,462
Other operations		15,820			22,821
Affiliate revenue		5,825			5,054
Operating revenue		420,162			497,337
Operating expenses
Fuel used for electric generation		138,629			68,423
Power purchased for utility customers		102,265			241,743
Other operations		50,892			45,138
Maintenance		25,325			24,702
Depreciation		38,613			38,686
Taxes other than income taxes		15,333			18,286
Gain on sales of assets		-			(99	)
Total operating expenses		371,057			436,879
Operating income		49,105			60,458
Interest income		682			2,875
Allowance for other funds used during construction		34,529			28,677
Equity loss from investees		(14,876	)		(6,939	)
Other income		2,674			157
Other expense		(1,332	)		(2,046	)
Interest charges
Interest charges, including amortization of debt expenses, premium, and discount, net of capitalized interest		41,466			29,265
Allowance for borrowed funds used during construction		(12,634	)		(9,603	)
Total interest charges		28,832			19,662
Income before income taxes		41,950			63,520
Federal and state income tax expense		8,275			12,060
Net income		33,675			51,460
Preferred dividends requirements, net of tax		23			23
Net income applicable to common stock	$	33,652		$	51,437
Average shares of common stock outstanding
Basic		60,132,358			59,948,801
Diluted		60,279,903			60,068,682
Basic earnings per share
From continuing operations	$	0.56		$	0.86
Net income applicable to common stock	$	0.56		$	0.86
Diluted earnings per share
From continuing operations	$	0.56		$	0.86
Net income applicable to common stock	$	0.56		$	0.86
Cash dividends paid per share of common stock	$	0.450		$	0.450
The accompanying notes are an integral part of the condensed consolidated financial statements.

10 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008
Net income	$	33,675	$	51,460
Other comprehensive income (loss), net of tax:
Net unrealized loss from available-for-sale securities (net of tax benefit of $27 in 2008)		-		(43	)
Amortization of post-retirement benefit net gain (loss) (net of tax benefit of $27 in 2009 and $15 in 2008)		3		(9	)
Other comprehensive income (loss)		3		(52	)
Comprehensive income, net of tax	$	33,678	$	51,408
The accompanying notes are an integral part of the condensed consolidated financial statements.

11 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(THOUSANDS)	AT JUNE 30, 2009			AT DECEMBER 31, 2008
Assets
Current assets
Cash and cash equivalents	$	41,996		$	97,483
Restricted cash		31,874			62,311
Customer accounts receivable (less allowance for doubtful accounts of $2,085 in 2009 and $1,632 in 2008)		41,577			40,677
Accounts receivable – affiliate		13,247			3,428
Other accounts receivable		32,174			34,209
Taxes receivable		10,193			13,663
Unbilled revenue		26,718			19,713
Fuel inventory, at average cost		69,847			57,221
Material and supplies inventory, at average cost		40,472			37,547
Risk management assets, net		7,871			368
Accumulated deferred fuel		51,466			69,154
Cash surrender value of company-/trust-owned life insurance policies		25,804			22,934
Prepayments		2,121			3,751
Regulatory assets – other		2,553			2,553
Other current assets		1,881			1,367
Total current assets		399,794			466,379
Property, plant and equipment
Property, plant and equipment		2,075,516			2,015,269
Accumulated depreciation		(971,521	)		(948,581	)
Net property, plant and equipment		1,103,995			1,066,688
Construction work in progress		1,057,608			978,598
Total property, plant and equipment, net		2,161,603			2,045,286
Equity investment in investees		248,485			249,144
Prepayments		5,502			6,067
Restricted cash		38,815			40,671
Regulatory assets and liabilities – deferred taxes, net		208,143			174,804
Regulatory assets – other		160,932			158,206
Intangible asset		162,452			167,826
Other deferred charges		32,045			32,821
Total assets	$	3,417,771		$	3,341,204
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)

12 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited) (Continued)

(THOUSANDS)	AT JUNE 30, 2009			AT DECEMBER 31, 2008
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Long-term debt due within one year	$	11,087		$	63,546
Accounts payable		83,154			117,337
Retainage		28			12,734
Accounts payable – affiliate		2,861			8,229
Customer deposits		30,511			27,155
Interest accrued		11,123			16,787
Accumulated current deferred taxes, net		62,031			64,838
Risk management liability, net		29,858			30,109
Regulatory liabilities – other		131			392
Deferred compensation		5,791			5,118
Other current liabilities		13,146			14,588
Total current liabilities		249,721			360,833
Deferred credits
Accumulated deferred federal and state income taxes, net		371,559			373,825
Accumulated deferred investment tax credits		10,620			11,286
Postretirement benefit obligations		155,602			155,910
Regulatory liabilities – other		120,644			85,496
Restricted storm reserve		25,894			27,411
Uncertain tax positions		81,401			76,124
Other deferred credits		94,022			82,635
Total deferred credits		859,742			812,687
Long-term debt, net		1,238,757			1,106,819
Total liabilities		2,348,220			2,280,339
Commitments and Contingencies (Note 10)
Shareholders’ equity
Preferred stock
Not subject to mandatory redemption, $100 par value, authorized 1,491,000 shares, issued 10,288 shares at  June 30, 2009 and December 31, 2008, respectively		1,029			1,029
Common shareholders’ equity
Common stock, $1 par value, authorized 100,000,000 shares, issued 60,207,811 and 60,066,345 shares and outstanding 60,187,035  and 60,042,514 shares at June 30, 2009 and December 31, 2008, respectively		60,208			60,066
Premium on common stock		396,608			394,517
Retained earnings		621,902			615,514
Treasury stock, at cost, 20,776 and 23,831 shares at June 30, 2009 and December 31, 2008, respectively		(366	)		(428	)
Accumulated other comprehensive loss		(9,830	)		(9,833	)
Total common shareholders’ equity		1,068,522			1,059,836
Total shareholders’ equity		1,069,551			1,060,865
Total liabilities and shareholders’ equity	$	3,417,771		$	3,341,204
The accompanying notes are an integral part of the condensed consolidated financial statements.

13 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Operating activities
Net income	$	33,675		$	51,460
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		63,658			42,436
Gain on sale of assets		-			(99	)
Provision for doubtful accounts		1,365			1,228
Loss from equity investments		14,876			6,939
Unearned compensation expense		2,458			1,654
Allowance for other funds used during construction		(34,529	)		(28,677	)
Amortization of investment tax credits		(666	)		(690	)
Net deferred income taxes		(18,972	)		(20,920	)
Deferred fuel costs		16,600			(36,677	)
Loss (gain) on economic hedges		631			(4,506	)
Cash surrender value of company-/trust-owned life insurance		(1,940	)		772
Changes in assets and liabilities:
Accounts receivable		(3,100	)		(23,226	)
Accounts and notes receivable, affiliate		(9,819	)		2,020
Unbilled revenue		(7,005	)		(6,446	)
Fuel, materials and supplies inventory		(15,550	)		(2,504	)
Prepayments		1,892			1,971
Accounts payable		(25,610	)		20,023
Accounts and notes payable, affiliate		(19,305	)		(27,200	)
Customer deposits		5,823			2,816
Post retirement benefit obligation		(308	)		(1,201	)
Regulatory assets and liabilities, net		31,972			22,297
Other deferred accounts		(23,421	)		12,255
Retainage payable		(12,706	)		8,291
Taxes accrued		17,182			19,583
Interest accrued		(5,664	)		(9,309	)
Risk management assets and liabilities, net		(10,237	)		19,566
Other operating		(1,347	)		1,256
Net cash (used in) provided by operating activities		(47	)		53,112
Investing activities
Additions to property, plant and equipment		(131,690	)		(190,841	)
Allowance for other funds used during construction		34,529			28,677
Proceeds from sale of property, plant and equipment		366			287
Return of equity investment in investees		-			7,860
Equity investment in investees		(21,651	)		-
Premiums paid on company-/trust-owned life insurance		(400	)		(629	)
Settlements received from insurance policies		-			941
Transfer of cash from (to) restricted accounts		32,294			(38,915	)
Other investing		(2	)		661
Net cash used in investing activities		(86,554	)		(191,959	)
Financing activities
Retirement of long-term obligations		(60,017	)		(350,189	)
Repayment of capital leases		(643	)		(58	)
Issuance of long-term debt		118,000			537,541
Deferred financing costs		-			(281	)
Dividends paid on preferred stock		(23	)		(23	)
Dividends paid on common stock		(27,088	)		(27,007	)
Other financing		885			620
Net cash provided by financing activities		31,114			160,603
Net (decrease) increase in cash and cash equivalents		(55,487	)		21,756
Cash and cash equivalents at beginning of period		97,483			129,013
Cash and cash equivalents at end of period	$	41,996		$	150,769
Supplementary cash flow information
Interest paid (net of amount capitalized)	$	39,396		$	24,893
Income taxes paid	$	8,131		$	40,180
Supplementary non-cash investing and financing activities
Issuance of treasury stock – LTICP	$	62		$	47
Issuance of common stock – LTICP/ESPP	$	146		$	23
Accrued additions to property, plant and equipment not reported above	$	7,083		$	22,737
Incurrence of capital lease obligation – barges	$	22,050		$	-
The accompanying notes are an integral part of the condensed consolidated financial statements.

14 

CLECO CORPORATION
CLECO POWER	2009 2ND 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, 2008.  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.”

15 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Operating revenue
Electric operations	$	195,651		$	259,581
Other operations		8,688			12,714
Affiliate revenue		349			594
Operating revenue		204,688			272,889
Operating expenses
Fuel used for electric generation		50,326			22,887
Power purchased for utility customers		56,547			151,949
Other operations		24,229			21,706
Maintenance		13,675			13,645
Depreciation		19,184			19,007
Taxes other than income taxes		7,654			8,181
Total operating expenses		171,615			237,375
Operating income		33,073			35,514
Interest income		255			999
Allowance for other funds used during construction		17,538			14,993
Other income		204			115
Other expense		(443	)		(518	)
Interest charges
Interest charges, including amortization of debt expenses, premium, and discount		17,926			13,857
Allowance for borrowed funds used during construction		(6,421	)		(5,026	)
Total interest charges		11,505			8,831
Income before income taxes		39,122			42,272
Federal and state income taxes		8,916			9,610
Net income	$	30,206		$	32,662
The accompanying notes are an integral part of the condensed consolidated financial statements.

16 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Operating revenue
Electric operations	$	398,517		$	469,462
Other operations		15,774			22,775
Affiliate revenue		697			1,102
Operating revenue		414,988			493,339
Operating expenses
Fuel used for electric generation		138,629			68,423
Power purchased for utility customers		102,265			241,743
Other operations		47,649			42,620
Maintenance		23,104			22,838
Depreciation		38,029			38,025
Taxes other than income taxes		15,363			15,995
Total operating expenses		365,039			429,644
Operating income		49,949			63,695
Interest income		658			1,576
Allowance for other funds used during construction		34,529			28,677
Other income		1,600			216
Other expense		(2,155	)		(864	)
Interest charges
Interest charges, including amortization of debt expenses, premium, and discount		39,275			26,065
Allowance for borrowed funds used during construction		(12,634	)		(9,603	)
Total interest charges		26,641			16,462
Income before income taxes		57,940			76,838
Federal and state income taxes		12,716			16,569
Net income	$	45,224		$	60,269
The accompanying notes are an integral part of the condensed consolidated financial statements.

17 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)

(THOUSANDS)	AT JUNE 30, 2009			AT DECEMBER 31, 2008
Assets
Utility plant and equipment
Property, plant and equipment	$	2,059,300		$	1,999,119
Accumulated depreciation		(959,924	)		(937,568	)
Net property, plant and equipment		1,099,376			1,061,551
Construction work in progress		1,056,024			977,377
Total utility plant, net		2,155,400			2,038,928
Current assets
Cash and cash equivalents		31,875			91,542
Restricted cash		31,874			62,311
Customer accounts receivable (less allowance for doubtful accounts of $2,085 in 2009 and $1,632 in 2008)		41,577			40,677
Other accounts receivable		31,160			34,130
Taxes receivable		-			5,992
Accounts receivable – affiliate		2,096			2,059
Unbilled revenue		26,718			19,713
Fuel inventory, at average cost		69,847			57,221
Material and supplies inventory, at average cost		40,472			37,547
Risk management assets, net		7,871			368
Prepayments		1,919			3,099
Regulatory assets – other		2,553			2,553
Accumulated deferred fuel		51,466			69,154
Cash surrender value of life insurance policies		5,603			5,563
Other current assets		792			1,144
Total current assets		345,823			433,073
Prepayments		5,502			6,067
Restricted cash		38,718			40,574
Regulatory assets and liabilities – deferred taxes, net		208,143			174,804
Regulatory assets – other		160,932			158,206
Intangible asset		162,452			167,826
Other deferred charges		20,907			22,119
Total assets	$	3,097,877		$	3,041,597
Liabilities and member’s equity
Member’s equity	$	959,221		$	929,178
Long-term debt, net		1,120,757			1,076,819
Total capitalization		2,079,978			2,005,997
Current liabilities
Long-term debt due within one year		11,087			63,546
Accounts payable		79,916			109,450
Accounts payable – affiliate		6,181			7,536
Retainage		28			12,734
Customer deposits		30,511			27,155
Taxes accrued		56,739			-
Interest accrued		11,471			16,762
Accumulated deferred taxes, net		63,686			67,233
Risk management liability, net		29,858			30,109
Regulatory liabilities – other		131			392
Other current liabilities		10,339			10,200
Total current liabilities		299,947			345,117
Deferred credits
Accumulated deferred federal and state income taxes, net		330,569			337,148
Accumulated deferred investment tax credits		10,620			11,286
Postretirement benefit obligations		126,693			128,373
Regulatory liabilities – other		120,644			85,496
Restricted storm reserve		25,894			27,411
Uncertain tax positions		60,394			54,306
Other deferred credits		43,138			46,463
Total deferred credits		717,952			690,483
Total liabilities and member’s equity	$	3,097,877		$	3,041,597
The accompanying notes are an integral part of the condensed consolidated financial statements.

18 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Operating activities
Net income	$	45,224		$	60,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,967			41,519
Provision for doubtful accounts		1,365			1,223
Unearned compensation expense		770			447
Allowance for other funds used during construction		(34,529	)		(28,677	)
Amortization of investment tax credits		(666	)		(690	)
Net deferred income taxes		(23,102	)		(18,407	)
Deferred fuel costs		16,600			(36,677	)
Loss (gain) on economic hedges		631			(4,506	)
Cash surrender value of company-owned life insurance		(523	)		(211	)
Changes in assets and liabilities:
Accounts receivable		(2,167	)		(23,641	)
Accounts and notes receivable, affiliate		84			(1,327	)
Unbilled revenue		(7,005	)		(6,446	)
Fuel, materials and supplies inventory		(15,550	)		(2,504	)
Prepayments		2,227			1,455
Accounts payable		(20,878	)		23,698
Accounts and notes payable, affiliate		(1,636	)		17,878
Customer deposits		5,823			2,816
Post retirement benefit obligations		(1,680	)		(349	)
Regulatory assets and liabilities, net		31,972			22,297
Other deferred accounts		(25,688	)		6,581
Retainage payable		(12,706	)		8,291
Taxes accrued		62,731			14,406
Interest accrued		(5,291	)		(4,973	)
Risk management assets and liabilities, net		(10,237	)		19,566
Other operating		331			566
Net cash provided by operating activities		50,067			92,604
Investing activities
Additions to property, plant and equipment		(131,262	)		(190,258	)
Allowance for other funds used during construction		34,529			28,677
Proceeds from sale of property, plant and equipment		366			286
Premiums paid on company-owned life insurance		-			(424	)
Transfer of cash from (to) restricted accounts		32,294			(38,913	)
Other investing		(1	)		-
Net cash used in investing activities		(64,074	)		(200,632	)
Financing activities
Retirement of long-term obligations		(60,017	)		(250,189	)
Repayment of capital leases		(643	)		(58	)
Issuance of long-term debt		30,000			489,541
Distribution to parent		(15,000	)		-
Deferred financing costs		-			(280	)
Net cash (used in) provided by financing activities		(45,660	)		239,014
Net (decrease) increase in cash and cash equivalents		(59,667	)		130,986
Cash and cash equivalents at beginning of period		91,542			11,944
Cash and cash equivalents at end of period	$	31,875		$	142,930
Supplementary cash flow information
Interest paid (net of amount capitalized)	$	38,643		$	21,206
Income taxes paid	$	8,104		$	2,100
Supplementary non-cash investing and financing activities
Accrued additions to property, plant and equipment not reported above	$	7,083		$	22,737
Incurrence of capital lease obligation – barges	$	22,050		$	-
The accompanying notes are an integral part of the condensed consolidated financial statements.

19 

CLECO CORPORATION
CLECO POWER	2009 2ND 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	Regulatory Assets and Liabilities	Cleco Corporation and Cleco Power
Note 4	Fair Value Accounting	Cleco Corporation and Cleco Power
Note 5	Debt	Cleco Corporation and Cleco Power
Note 6	Pension Plan and Employee Benefits	Cleco Corporation and Cleco Power
Note 7	Income Taxes	Cleco Corporation and Cleco Power
Note 8	Disclosures about Segments	Cleco Corporation
Note 9	Equity Investment in Investees	Cleco Corporation
Note 10	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco Corporation and Cleco Power
Note 11	Affiliate Transactions	Cleco Corporation and Cleco Power
Note 12	Intangible Asset	Cleco Corporation and Cleco Power
Note 13	Subsequent Event	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.  Cleco has determined that it is not the primary beneficiary of Evangeline, Perryville, Attala, and Acadia.  Cleco determined it was not the primary beneficiary by examining all interests that could absorb expected losses and expected gains.  This examination used assumptions about the expected rate of inflation, changes in the market price of natural gas as compared to the market price of electricity, length of contracts, variability of revenue stream as compared to variability of expenses, and maximum exposure to loss.  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 or loss from investees on Cleco Corporation’s Condensed Consolidated Statements of Income.  For additional information on the operations of these entities, see Note 9 — “Equity Investment in Investees.”

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; however, 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.”

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 June 30, 2009, and December 31, 2008, $70.7 million and $103.0 million of cash, respectively, were restricted.  At June 30, 2009, restricted cash consisted of $0.1 million under the Diversified Lands mitigation escrow agreement, $1.9 million held in escrow for the construction of Cleco Power’s solid waste disposal facilities at Rodemacher Unit 3, $32.6 million reserved at Cleco Power for GO Zone project costs, $27.8 million reserved at Cleco Power for future storm restoration costs, and $8.3 million at Cleco Katrina/Rita restricted for payment of operating expenses, interest, and principal on storm recovery bonds.  

20 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

Fair Value Measurements and Disclosures

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values.  Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or issuance.  Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes under generally accepted accounting principles.  Other financial assets and liabilities, such as long-term debt, are reported at their carrying values at their date of issuance on the condensed consolidated balance sheets with their fair values disclosed without regard to the three levels.  For more information about fair value levels, see Note 4 — “Fair Value Accounting.”

Risk Management

Market risk inherent in Cleco Power’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 on different energy exchanges.  Cleco’s Energy Market 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 98% 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 six months ended June 30, 2009, and 2008, the following gains and losses related to these economic hedge transactions were recorded in other operations revenue.  

	FOR THE THREE MONTHS ENDED JUNE 30,					FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008		2009			2008
Realized (loss) gain	$	(534	)	$	679	$	(882	)	$	788
Mark-to-market  gain (loss)		512			2,736		(631	)		4,506
Total (loss) gain	$	(22	)	$	3,415	$	(1,513	)	$	5,294

Cleco Power could experience realized losses in future periods as natural gas or power is purchased to meet its contractual obligations.

Cleco Power has entered into other positions to mitigate the volatility in customer fuel costs.  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 risk management assets or liabilities.  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 June 30, 2009, and December 31, 2008, the net mark-to-market impact relating to these positions were losses of $52.2 million and $57.4 million, respectively.  The decreased loss is primarily due to the closing of certain natural gas positions and the addition of new hedge positions.  Deferred losses relating to closed natural gas positions at June 30, 2009, and December 31, 2008, totaled $8.4 million and $6.4 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 June 30, 2009, and December 31, 2008, Cleco Power had deposited collateral of $19.6 million and $16.5 million, respectively, to cover margin requirements relating to open natural gas futures, options, and swap positions.

Cleco and Cleco Power maintain a master netting agreement policy and monitor credit risk exposure through review of counterparty credit quality, counterparty credit exposure, and counterparty concentration levels.  Cleco 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.  

For more information on accounting for derivatives, see Note 4 — “Fair Value Accounting.”

Earnings per Average Common Share

The following table shows the calculation of basic and diluted earnings per share.

21 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

							FOR THE THREE MONTHS ENDED JUNE 30
					2009						2008
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Net income	$	27,026					$	29,389
Deduct:  non-participating stock dividends (4.5% preferred stock)		12						12
Basic earnings per share
Net income applicable to common stock	$	27,014			$	0.45	$	29,377			$	0.49
Total basic net income applicable to common stock	$	27,014		60,175,528	$	0.45	$	29,377		59,998,227	$	0.49
Effect of Dilutive Securities
Add:  stock option grants				22,557						51,775
Add:  restricted stock (LTICP)				253,580						118,945
Diluted earnings per share
Net income applicable to common stock	$	27,014			$	0.45	$	29,377			$	0.49
Total diluted net income applicable to common stock	$	27,014		60,451,665	$	0.45	$	29,377		60,168,947	$	0.49

							FOR THE SIX MONTHS ENDED JUNE 30
					2009						2008
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Net income	$	33,675					$	51,460
Deduct:  non-participating stock dividends (4.5% preferred stock)		23						23
Basic earnings per share
Net income applicable to common stock	$	33,652			$	0.56	$	51,437			$	0.86
Total basic net income applicable to common stock	$	33,652		60,132,358	$	0.56	$	51,437		59,948,801	$	0.86
Effect of Dilutive Securities
Add:  stock option grants				24,855						61,744
Add:  restricted stock (LTICP)				122,690						58,137
Diluted earnings per share
Net income applicable to common stock	$	33,652			$	0.56	$	51,437			$	0.86
Total diluted net income applicable to common stock	$	33,652		60,279,903	$	0.56	$	51,437		60,068,682	$	0.86

During the first quarter of 2009, Cleco implemented FSP EITF No. 03-6-1 in connection with calculating basic earnings per share.  For additional information on Cleco’s implementation of FSP EITF No. 03-6-1, see Note 2 — “Recent Accounting Standards.”

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 of diluted earnings per share for the six months ended June 30, 2008, due to the average market price being higher than the exercise prices of the stock options.  Stock option grants excluded from the computation for the three and six months ended June 30, 2009, and three months ended June 30, 2008, are presented in the tables below.

	FOR THE THREE MONTHS ENDED JUNE 30, 2009
	STRIKE PRICE	AVERAGE MARKET PRICE	SHARES
Stock option grants excluded	$ 22.25-$24.25	$21.42	135,533

	FOR THE SIX MONTHS ENDED JUNE 30, 2009
	STRIKE PRICE	AVERAGE MARKET PRICE	SHARES
Stock option grants excluded	$ 22.25-$24.25	$21.69	135,533

	FOR THE THREE MONTHS ENDED JUNE 30, 2008
	STRIKE PRICE	AVERAGE MARKET PRICE	SHARES
Stock option grants excluded	$ 24.00-$24.25	$23.63	45,767

Employee Stock Purchase Plan

In July 2000, Cleco Corporation’s Board of Directors ratified the adoption of a procedure providing for the automatic reinvestment of dividends (the “DRIP Feature”) received with respect to the stock held by participants in the ESPP.  At that time, the Board of Directors reserved 20,000 shares of common stock (40,000 after giving effect for a 2-for-1 stock split) for issuance pursuant to the DRIP Feature.  In January 2009, the Board of Directors approved and authorized an additional 50,000 shares of common stock to be reserved for issuance under the DRIP Feature of the ESPP.

Stock-Based Compensation

At June 30, 2009, Cleco had one share-based compensation plan:  the LTICP.  Options or restricted shares of Cleco Corporation common 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 30, 2009, Cleco granted 97,149 shares of non-vested stock and 74,253 common stock equivalent units to certain officers, key employees, and directors of Cleco Corporation and its subsidiaries pursuant to the LTICP.  

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

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CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

	CLECO CORPORATION				CLECO POWER				CLECO CORPORATION				CLECO POWER
			FOR THE THREE MONTHS ENDED JUNE 30,								FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		2009		2008		2009		2008		2009		2008
Equity classification
Non-vested stock	$	480	$	330	$	122	$	80	$	1,055	$	783	$	281	$	197
Stock options		12		14		-		-		25		28		-		-
Total	$	492	$	344	$	122	$	80	$	1,080	$	811	$	281	$	197
Liability classification
Common stock equivalent units	$	211	$	781	$	74	$	297	$	1,174	$	677	$	489	$	250
Total pre-tax compensation expense	$	703	$	1,125	$	196	$	377	$	2,254	$	1,488	$	770	$	447
Tax benefit (excluding income tax gross-up)	$	271	$	433	$	75	$	145	$	867	$	573	$	296	$	172

Note 2 — Recent Accounting Standards

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

In April 2008, 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.  The adoption of FSP No. FAS 142-3 did not have an impact on the financial condition or results of operations of the Registrants.

In June 2008, FASB issued FSP EITF No. 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 retrospectively to conform to this FSP.  The implementation of this FSP did not have an impact on the financial condition or results of operations of the Registrants.

In September 2008, 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.  The implementation of this FSP did not have an impact on the financial condition or results of operations of the Registrants.

In December 2008, FASB issued FSP No. FAS 132(R)-1 which amends SFAS No. 132(R) which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan.  This FSP also includes a technical amendment to SFAS No. 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each annual period for which a statement of income is presented.  This FSP is effective for the first fiscal year ending after December 15, 2009.  Since the adoption of this FSP is only a change in disclosure, the adoption of the FSP will not have any effect on the financial condition or results of operations of the Registrants.

In February 2009, the SEC issued its final rules requiring public companies to provide the SEC with supplemental financial information in interactive data format using eXtensible Business Reporting Language or XBRL.  The information will be provided as an exhibit to the related SEC filing.  The Registrants are required to include certain financial information in XBRL format in certain SEC filings beginning with the fiscal period ending June 30, 2010.

On April 1, 2009, FASB issued FSP No. FAS 141(R)-1 which amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination.  This FSP applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5 if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141(R).  An acquirer shall develop a systematic and rational basis for subsequently measuring and accounting for assets and liabilities arising from contingencies depending on their nature.  An acquirer shall disclose information that enables users of its financial statements to evaluate the nature and financial effects of a business combination that occurs either during the current reporting period or after the reporting period but before the financial statements are issued.  This FSP shall be effective for assets or liabilities arising from contingencies in 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.  The adoption of this FSP had no impact on the financial condition or results of operations of the Registrants.

On April 9, 2009, FASB issued FSP No. FAS 115-2 and FAS 124-2 which amend the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance

23 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  If the fair value of a debt security is less than its amortized value, this FSP requires companies to assess whether the impairment is recognized depending on a combination of its intent to sell the security and its ability to hold the security until recovery of its amortized cost basis.  If an entity intends to sell the debt security or it is more likely than not the entity will be required to sell the security, an other-than-temporary impairment is considered to have occurred and an impairment expense equal to the difference between fair market value and amortized costs should be recognized.  If an entity does not intend to sell the security and it is not more likely than not the entity will be required to sell the security, then the entity will only recognize the credit loss as an expense.  The amount of loss relating to other factors will be recognized as a reduction in other comprehensive income.  This FSP also includes guidance on calculating credit loss and additional disclosures.  This FSP is effective for interim and annual reporting periods ending after June 15, 2009.  The implementation of this FSP did not have an impact on the financial condition and results of operations of the Registrants.  

On April 9, 2009, FASB issued FSP No. FAS 157-4 which provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased.  This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly.  This FSP applies to all assets and liabilities within the scope of SFAS No. 157.  When weighing indications of fair value resulting from the use of multiple valuation techniques, a reporting entity shall consider the reasonableness of the range of fair value estimates.  The objective is to determine the point within that range that is most representative of fair value under current market conditions.  A reporting entity shall evaluate the circumstances to determine whether the transaction is orderly based on the weight of the evidence.  In its determinations, a reporting entity need not undertake all possible efforts, but shall not ignore information that is available without undue cost and effort.  A reporting entity would be expected to have sufficient information to conclude whether a transaction is orderly when it is party to the transaction.  This FSP is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively.  This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption.  The implementation of this FSP did not have an impact on the financial condition and results of operations of the Registrants.  

On April 9, 2009, FASB issued FSP No. FAS 107-1 and APB 28-1 which require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies.  This FSP applies to all financial instruments within the scope of SFAS No. 107 held by publicly traded companies.  A publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods.  This FSP shall be effective for interim reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009.  This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption.  Since the adoption of this FSP is only a change in disclosure, the adoption of the FSP did not have any effect on the financial condition or results of operation of the Registrants.

On June 4, 2009, FASB issued SFAS No. 165 which gives guidance on accounting for events occurring subsequent to the balance sheet date, but before the issuance of financial statements.  Certain subsequent events would require an entity to make adjustments to the financial statements and disclosure, whereas other events would only require disclosure.  Additionally, all entities are required to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements.  SFAS No. 165 is effective for financial statements issued for fiscal years and interim periods beginning after June 15, 2009.  The implementation of this statement did not have an impact on the financial condition or results of operations of the Registrants.

On June 12, 2009, FASB issued SFAS No. 166 which is anticipated to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets.  This statement is effective for fiscal years beginning after November 15, 2009.  The implementation of this statement is not expected to have an impact on the financial condition or results of operations of the Registrants.

On June 12, 2009, FASB issued SFAS No. 167 which amends FIN 46R to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity.  In order to be the primary beneficiary of a variable interest entity, an enterprise must have (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.  Along with these criteria, an enterprise is now required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining (a) above.  Also, the enterprise is required to perform ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity.  The quantitative approach previously required for determining the primary beneficiary has been eliminated.  Additional disclosures are now required in order

24 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

to provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity.  This statement is effective for the first fiscal year beginning after November 15, 2009.  Management is currently evaluating the impact this statement will have on the financial condition and results of operations of the Registrants.

On June 29, 2009, FASB issued SFAS No. 168 which replaces SFAS No. 162, which identified the sources of accounting principles and the framework for selecting them.  The FASB Accounting Standards Codification will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities.  This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Note 3 — 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 June 30, 2009, and December 31, 2008:

	AT JUNE 30,			AT DECEMBER 31,
(THOUSANDS)	2009			2008
Regulatory assets and liabilities – deferred taxes, net	$	208,143		$	174,804
Deferred mining costs	$	25,490		$	26,811
Deferred interest costs		7,590			7,779
Deferred asset removal costs		685			658
Deferred postretirement plan costs		111,251			112,213
Deferred tree trimming costs		9,420			5,915
Deferred training costs		3,522			2,520
Deferred storm surcredit, net		5,527			4,863
Regulatory assets – other	$	163,485		$	160,759
Deferred fuel transportation revenue	$	(131	)	$	(392	)
Deferred construction carrying costs		(120,644	)		(85,496	)
Regulatory liabilities – other	$	(120,775	)	$	(85,888	)
Deferred fuel and purchased power		51,466			69,154
Total regulatory assets and liabilities, net	$	302,319		$	318,829

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.  Generally, 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.  At June 30, 2009, Cleco Power had regulatory assets and liabilities – deferred taxes, net of $208.1 million.  The $33.3 million increase from December 31, 2008, was primarily the result of the collection and deferral of carrying costs for Cleco Power’s construction of Rodemacher Unit 3.

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 in Cleco Power’s base rate application filed on July 14, 2008, and will be covered by the rate case settlement.  At June 30, 2009, Cleco Power had deferred $9.4 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.  Recovery of these expenditures was requested in Cleco Power’s base rate application filed on July 14, 2008, and will be covered by the rate case settlement.  At June 30, 2009, Cleco Power had deferred $3.5 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 ratepayers with 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.  

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

As a result of the settlement with the LPSC, Cleco Power was required to implement a surcredit when funds were withdrawn from the restricted storm reserve.  In October 2008, Cleco Power withdrew funds from the restricted storm reserve to pay for damage caused by Hurricanes Gustav and Ike resulting in the establishment of a surcredit.  However, rather than refunding this amount, Cleco Power requested and received approval from the LPSC to replenish the restricted storm reserve.  At June 30, 2009, Cleco Power had $5.5 million in deferred storm surcredit, net.

25 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

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 six-month periods ended June 30, 2009, Cleco Power collected $19.4 million and $35.1 million, respectively, compared to $16.3 million and $28.1 million for the three- and six-month periods ended June 30, 2008, 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.  In July 2009, Cleco Power notified the Administrative Law Judge that Cleco Power, the LPSC Staff, and the intervenors in Cleco Power’s retail base rate case had made significant progress toward a full resolution of all issues in the case and that the parties anticipate they will be successful in their efforts to achieve an uncontested stipulated settlement in the case.

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 June 30, 2009, approximately 94% of Cleco Power’s total fuel cost was regulated by the LPSC, while the remainder was regulated by FERC.  Deferred fuel and purchased power costs recorded at June 30, 2009, and December 31, 2008, were under-recoveries of $51.5 million and $69.2 million, respectively, and are scheduled to be collected from customers in future months.  The $17.7 million decrease in the unrecovered funds was primarily the result of the collection of $14.8 million in additional fuel and purchased power costs.  In addition, the increase in the mark-to-market on natural gas hedge positions contributed $5.2 million of decreased losses due to the closing of certain natural gas positions and the addition of future hedge positions.  The decrease in the loss was partially offset by a $2.0 million increase in losses on closed natural gas hedge positions due to a decrease in natural gas prices since December 31, 2008.  For additional information on Cleco Power’s treatment of natural gas hedges, see Note 1 — “Summary of Significant Accounting Policies — Risk Management.”

Note 4 — Fair Value Accounting

The amounts reflected in the Condensed Consolidated Balance Sheets of Cleco and Cleco Power at June 30, 2009, and December 31, 2008, for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and short-term debt approximate fair value because of their short-term nature.  Estimates of the fair value of Cleco and Cleco Power’s long-term debt and Cleco’s nonconvertible preferred stock are based upon the quoted market price for the same or similar issues or by a discounted present value analysis of future cash flows using current rates obtained by Cleco and Cleco Power for debt and by Cleco for preferred stock with similar maturities. 

The estimated fair value of energy market positions is based upon observed market prices when available.  When such market prices are not available, management estimates market value at a discrete point in time by assessing market conditions and observed volatility.  These estimates are subjective in nature and involve uncertainties.  Therefore, actual results may differ from these estimates.

Cleco

			AT JUNE 30,		AT DECEMBER 31,
			2009				2008
(THOUSANDS)	CARRYING VALUE		ESTIMATED FAIR VALUE		CARRYING VALUE		ESTIMATED FAIR VALUE
Financial instruments not marked-to-market
Cash and cash equivalents	$	41,996	$	41,996	$	97,483	$	97,483
Restricted cash	$	70,689	$	70,689	$	102,982	$	102,982
Long-term debt, excluding debt issuance costs	$	1,232,298	$	1,214,714	$	1,172,874	$	1,110,171
Preferred stock not subject to mandatory redemption	$	1,029	$	679	$	1,029	$	699

						AT JUNE 30,				AT DECEMBER 31,
						2009							2008
(THOUSANDS)	ORIGINAL VALUE		OTHER UNREALIZED GAINS (LOSSES) DURING THE PERIOD			ESTIMATED FAIR VALUE		ORIGINAL  VALUE		OTHER UNREALIZED GAINS (LOSSES) DURING THE PERIOD			ESTIMATED FAIR VALUE
Financial instruments marked-to-market
Energy market positions
Assets	$	138,950	$	(35,155	)	$	103,441	$	159,432	$	(47,293	)	$	117,851
Liabilities	$	199,536	$	(17,916	)	$	181,620	$	221,083	$	(10,315	)	$	210,768

26 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

Cleco Power

			AT JUNE 30,		AT DECEMBER 31,
			2009				2008
(THOUSANDS)	CARRYING VALUE		ESTIMATED FAIR VALUE		CARRYING VALUE		ESTIMATED FAIR VALUE
Financial instruments not marked-to-market
Cash and cash equivalents	$	31,875	$	31,875	$	91,542	$	91,542
Restricted cash	$	70,592	$	70,592	$	102,885	$	102,885
Long-term debt, excluding debt issuance costs	$	1,114,298	$	1,096,714	$	1,142,874	$	1,080,171

						AT JUNE 30,				AT DECEMBER 31,
						2009							2008
(THOUSANDS)	ORIGINAL VALUE		OTHER UNREALIZED GAINS (LOSSES) DURING THE PERIOD			ESTIMATED FAIR VALUE		ORIGINAL VALUE		OTHER UNREALIZED GAINS (LOSSES) DURING THE PERIOD			ESTIMATED FAIR VALUE
Financial instruments marked-to-market
Energy market positions
Assets	$	138,950	$	(35,155	)	$	103,441	$	159,432	$	(47,293	)	$	117,851
Liabilities	$	199,536	$	(17,916	)	$	181,620	$	221,083	$	(10,315	)	$	210,768

The financial instruments not marked-to-market are reported on Cleco’s and Cleco Power’s Consolidated Balance Sheets at carrying value.  The financial instruments marked-to-market represent market risk recorded in the financial statements because, to the extent Cleco and Cleco Power have an open position, they are exposed to the risk that fluctuating market prices may adversely affect their financial condition or results of operations upon settlement.  Original value represents the fair value of the positions at the time originated.

At June 30, 2009, Cleco and Cleco Power were exposed to concentration of credit risk through their short-term investments classified as cash equivalents.  Cleco had $10.0 million in short-term investments in an institutional money market fund.  If the money market funds failed to perform under the terms of the investment, Cleco would be exposed to a loss of the invested amounts.  Cleco Power had $28.0 million in short-term investments in several institutional money market funds.  If the money market funds failed to perform under the terms of the investments, Cleco Power would be exposed to a loss of the invested amounts.  Collateral on these types of investments is not required by either Cleco or Cleco Power.  In order to mitigate potential credit risk, Cleco and Cleco Power have established guidelines for short-term investments.  Money market funds must have at least $1.0 billion in assets under management; must have been in existence for not less than two years; must have portfolios not comprised of more than 50% of securities issued by foreign entities; and must be rated in the top two ratings’ categories by at least one nationally recognized rating agency.  Commercial paper must be issued by a company with headquarters in the U.S. which is rated not less than A1 by Standard & Poor’s or P1 by Moody’s.  For split-rated issuers, the second rating must not be lower than either A2 or P2; the issuer’s long-term debt must be rated not lower than A by Standard & Poor’s or A2 by Moody’s; and the issuer cannot be on negative credit watch.  Investments in commercial paper rated A2 by Standard & Poor’s or P2 by Moody’s may be made if approved by the appropriate level of management.  

Cleco Power was exposed to concentration of credit risk through its energy marketing assets.  At June 30, 2009, Cleco Power had energy marketing assets with an estimated fair value of $103.4 million.  These energy marketing assets represent open natural gas purchase positions, primarily financial hedge transactions.  Cleco Power entered into these positions to mitigate the volatility in the cost of fuel purchased for utility generation and the risk associated with the fixed-price power that is being provided to a wholesale customer through December 2010.  If the counterparties to these assets fail to perform under the terms of the investment, Cleco would be exposed to a loss of $103.4 million.  For information about credit risk management and how these risks are mitigated on energy marketing assets, see Note 1 — “Summary of Significant Accounting Policies — Risk Management.”

SFAS No. 157

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.

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CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

Cleco

CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT JUNE 30, 2009		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DECEMBER 31, 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	$	305	$	9	$	296	$	-	$	3,687	$	-	$	3,687	$	-
Institutional money market  funds		108,548		-		108,548		-		204,789		-		204,789		-
Total	$	108,853	$	9	$	108,844	$	-	$	208,476	$	-	$	208,476	$	-

CLECO CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT JUNE 30, 2009		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL LIABILITIES (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DECEMBER 31, 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	$	53,376	$	16,132	$	37,244	$	-	$	61,295	$	13,757	$	47,538	$	-

Cleco Power

CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT JUNE 30, 2009		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DECEMBER 31, 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	$	305	$	9	$	296	$	-	$	3,687	$	-	$	3,687	$	-
Institutional money market  funds		98,548		-		98,548		-		198,989		-		198,989		-
Total	$	98,853	$	9	$	98,844	$	-	$	202,676	$	-	$	202,676	$	-

CLECO POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:
(THOUSANDS)	AT JUNE 30, 2009		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL LIABILITIES (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DECEMBER 31, 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	$	53,376	$	16,132	$	37,244	$	-	$	61,295	$	13,757	$	47,538	$	-

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 June 30, 2009, a net current risk management asset of $7.9 million represented current deferred options.  At June 30, 2009, a net current risk management liability of $29.9 million represented the current derivative positions of $47.5 million reduced by current margin deposits of $17.6 million.  The non-current liability derivative positions of $5.6 million, reduced by non-current margin deposits of $2.0 million were recorded in other deferred charges.  The $108.5 million in institutional money market funds was reported on the Cleco Consolidated balance sheet in cash and cash equivalents, current restricted cash, and non-current restricted cash in the amounts of $37.8 million, $31.9 million, and $38.8 million, respectively.  At Cleco Power, cash and cash equivalents, current restricted cash, and restricted non-current cash were $27.9 million, $31.9 million, and $38.7 million, respectively, as of June 30, 2009.  

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 June 30, 2009, or December 31, 2008.

28 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

SFAS No. 161

SFAS No. 161 became effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  SFAS No. 161 requires enhanced disclosures about a company’s derivative activities and how the related hedged items affect a company’s financial position, financial performance and cash flows.  To meet the disclosure requirements, SFAS No. 161 requires qualitative disclosures about Cleco’s fair value amounts of gains and losses associated with derivative instruments, as well as disclosures about credit-risk-related contingent features in derivative agreements.  

The following table presents the fair values of derivative instruments and their respective line item as recorded on the Condensed Consolidated Balance Sheets of Cleco and Cleco Power at June 30, 2009:

	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
	LIABILITY DERIVATIVES
(THOUSANDS) AT JUNE 30, 2009	BALANCE SHEET LINE ITEM	FAIR VALUE
Commodity contracts
Economic hedges:
Current	Risk management liability, net	$	803
Long-term	Other deferred credits		66
Fuel cost hedges:
Current	Risk management liability, net		46,663
Long-term	Other deferred credits		5,539
Total		$	53,071

The following table presents the effect of derivatives not designated as hedging instruments on Cleco and Cleco Power’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2009:

(THOUSANDS)	LOSS IN INCOME OF DERIVATIVES LINE ITEM	AMOUNT OF LOSS RECOGNIZED IN INCOME ON DERIVATIVES THREE MONTHS ENDED JUNE 30, 2009			AMOUNT OF LOSS RECOGNIZED IN INCOME ON DERIVATIVES  SIX MONTHS ENDED  JUNE 30, 2009
Commodity contracts
Economic hedges	Other operations revenue	$	22	(1)	$	1,513	(2)
Fuel cost hedges(3)	Fuel used for electric generation		22,511			46,380
Total		$	22,533		$	47,893
(1)For the three months ended June 30, 2009, Cleco recognized $0.5 million of mark-to-market gains related to economic hedges.
(2)For the six months ended June 30, 2009, Cleco recognized $0.6 million of mark-to-market losses related to economic hedges.
(3)In accordance with SFAS No. 71, an additional $52.2 million of unrealized losses and $8.4 million of deferred losses associated with fuel cost hedges are reported in Accumulated Deferred Fuel on the balance sheet. As gains and losses are realized in future periods, they will be recorded as Fuel Used for Electric Generation on the Income Statement. For more information, see Note 3 — “Regulatory Assets and Liabilities — Deferred Fuel and Purchased Power Costs.”

At June 30, 2009, Cleco had 2,106 MMBtus of natural gas fuel cost hedge contracts, which is approximately 31% of the natural gas requirements for a two-year period.  Cleco had an additional 68 MMBtus hedged through 2010, resulting from economic hedges, which is approximately 89% of the estimated daily peak-hour sales to a wholesale customer.

Note 5 — Debt

Long-term Debt

Cleco had no short-term debt outstanding at June 30, 2009, or December 31, 2008.  At June 30, 2009, Cleco’s long-term debt outstanding was $1.2 billion, of which $11.1 million was due within one year, compared to $1.2 billion outstanding at December 31, 2008, which included $63.5 million due within one year.  The long-term debt due within one year at June 30, 2009, represents $11.1 million of principal payments for the Cleco Katrina/Rita storm recovery bonds scheduled to be paid in the next twelve months.  For Cleco, long-term debt increased $79.5 million primarily due to an $88.0 million increase in Cleco’s credit facility draws, a $30.0 million increase in Cleco Power’s credit facility draws and a $20.0 million increase in long-term capital leases.  These increases were partially offset by the $50.0 million repayment of medium-term notes at maturity in May 2009 and $8.4 million related to a scheduled Cleco Katrina/Rita storm recovery bond principal payment made in March 2009.  During January 2009, Cleco Power entered into a lease agreement for barges to be used for fuel transportation for Rodemacher Unit 3.  For additional information, see Note 10 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Contingencies — Fuel Transportation Agreement.”

Cleco Power had no short-term debt outstanding at June 30, 2009, or December 31, 2008.  At June 30, 2009, Cleco Power’s long-term debt outstanding was $1.1 billion, of which $11.1 million was due within one year, compared to $1.1 billion outstanding at December 31, 2008, of which $63.5 million was due within one year. The long-term debt due within one year at June 30, 2009, represents principal payments for the Cleco Katrina/Rita storm recovery bonds scheduled to be paid in the next twelve months.  For Cleco Power, long-term debt decreased $8.5 million primarily due to the $50.0 million repayment of medium-term notes at maturity in May 2009 and $8.4 million related to a scheduled Cleco Katrina/Rita storm recovery bond principal payment made in March 2009.  These decreases were partially offset by an increase of $30.0 million in Cleco Power’s credit facility draws and a $20.0 million increase in long-term capital leases.  During January 2009, Cleco Power entered into a lease agreement for barges to be used for fuel transportation for Rodemacher Unit 3.  For additional information, see Note 10 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Contingencies — Fuel Transportation Agreement.”

During July 2009, Cleco Power elected to redeem $49.5 million principal amount of its outstanding 6.05% insured quarterly notes due June 2012.  For additional information regarding the redemption, see Note 13 — “Subsequent Event.”

29 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

Note 6 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Most employees hired before August 1, 2007 are covered by a non-contributory, 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 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.  During the six months ended June 30, 2009, a discretionary contribution in the amount of $3.7 million was made to the pension plan for the 2008 plan year.  Currently, Cleco Power anticipates making additional discretionary contributions totaling $15.1 million to the pension plan on or before September 15, 2009 for the 2008 plan year.  Cleco Power expects to be required to make an additional $80.0 million in contributions to the pension plan over the next five years.  The required contributions are driven by liability funding target percentages set by law which could cause the required contributions to be uneven among the years.  The ultimate amount and timing of the contributions will be affected by changes in the discount rate, changes in the funding regulations, and actual returns on fund assets.  Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.  

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 six months ended June 30, 2009, and 2008, are as follows:

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008			2009			2008
Components of periodic benefit costs
Service cost	$	1,729		$	1,470		$	353		$	350
Interest cost		4,095			3,964			495			458
Expected return on plan assets		(5,073	)		(5,044	)		-			-
Transition obligation		-			-			5			5
Prior period service credit (cost)		481			(18	)		(516	)		(534	)
Net loss		-			-			231			250
Net periodic benefit cost	$	1,232		$	372		$	568		$	529

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008			2009			2008
Components of periodic benefit costs
Service cost	$	3,459		$	2,939		$	706		$	699
Interest cost		8,190			7,928			990			916
Expected return on plan assets		(10,147	)		(10,089	)		-			-
Transition obligation		-			-			10			10
Prior period service credit (cost)		962			(35	)		(1,032	)		(1,068	)
Net loss		-			-			463			500
Net periodic benefit cost	$	2,464		$	743		$	1,137		$	1,057

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 six months ended June 30, 2009, was $0.4 million and $0.9 million, respectively, compared to $0.4 million and $0.7 million for the same periods in 2008.  

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 in Cleco Power’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2009, was $0.5 million and $1.0 million, respectively, net of Medicare Part D subsidy of $0.1 million and $0.1 million, respectively.  For the same periods in 2008, Cleco Power recognized $0.5 million and $0.9 million of expense, respectively, net of Medicare Part D subsidy of $0.1 million and $0.2 million, respectively.

SERP

Certain Cleco executive officers 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 annual bonuses paid during the 60 months prior to retirement, reduced by benefits received from any other defined benefit pension plan, SERP Plan or Cleco contributions under the enhanced 401(k) Plan to the extent such contributions exceed the limits of the 401(k) 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 the SERP participants’ life insurance benefits, as well as future SERP benefit payments.  However, since SERP is a non-qualified plan, the assets of the trust could be used to satisfy general creditors of Cleco Power in the event of insolvency.  All SERP benefits are paid out of the general cash available of the respective companies from which the officer retired.  No contributions to the SERP were made during the six months ended June 30, 2009, and 2008.  Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.

30 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

The components of the net SERP cost are as follows:

	FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		2009		2008
Components of periodic benefit costs
Service cost	$	375	$	359	$	750	$	717
Interest cost		700		445		1,400		889
Prior period service cost		14		13		27		27
Net loss		254		254		508		508
Net periodic benefit cost	$	1,343	$	1,071	$	2,685	$	2,141

The SERP liabilities are reported on the individual subsidiaries’ financial statements.  The expense related to the SERP reflected on Cleco Power’s Consolidated Statements of Income was $0.3 million and $0.7 million for the three and six months ended June 30, 2009, respectively, compared to $0.3 million and $0.5 million for the same periods in 2008.  

401(k) Plan

Most employees are eligible to participate in the 401(k) Plan.  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.  Beginning January 2008, Cleco Corporation made matching contributions and funded dividend reinvestments related to Cleco Corporation common stock with cash.

The table below contains information about the 401(k) Plan.

	FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		2009		2008
401(k) Plan expense	$	811	$	681	$	1,950	$	1,692

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 six months ended June 30, 2009, was $0.2 million and $0.5 million, respectively, compared to $0.2 million and $0.5 million for the same periods in 2008.  

Note 7 — Income Taxes

The following tables summarize the effective income tax rates for Cleco Corporation and Cleco Power for the three- and six-month periods ended June 30, 2009, and 2008.

	FOR THE THREE MONTHS ENDED JUNE 30,
	2009			2008
Cleco Corporation		20.5	%		19.2	%
Cleco Power		22.8	%		22.7	%

	FOR THE SIX MONTHS ENDED JUNE 30,
	2009			2008
Cleco Corporation		19.7	%		19.0	%
Cleco Power		21.9	%		21.6	%

For the three- and six-month periods ended June 30, 2009 and 2008, 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.  During the second quarter of 2009, the IRS completed its field work for tax years 2001 through 2003.  The settlement of issues arising from this audit were recorded during the second quarter of 2009 as a discrete item.  Additional issues from this audit were appealed by Cleco and are appropriately included in tax reserves in the financial statements.  Cleco is appealing issues from the 2001 through 2003 audit and is under federal and state audits for fiscal years 2004 through 2007; therefore, it is reasonably possible that unrecognized tax benefits could change significantly over the next twelve months.  Cleco does not expect that any such change would have a material impact on its annual effective tax rate.

Note 8 — 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 2009 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.

31 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

SEGMENT INFORMATION FOR THE THREE MONTHS ENDED JUNE 30,

	CLECO					RECONCILING
2009 (THOUSANDS)	POWER		MIDSTREAM			ITEMS		ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	195,651	$	-		$	-	$	-		$	195,651
Other operations		8,688		-			28		(4	)		8,712
Affiliate revenue		6		2,177			665		-			2,848
Intercompany revenue		343		-			10,530		(10,858	)		15
Operating revenue	$	204,688	$	2,177		$	11,223	$	(10,862	)	$	207,226
Depreciation expense	$	19,184	$	44		$	251	$	-		$	19,479
Interest charges	$	11,505	$	3,338		$	239	$	(1,353	)	$	13,729
Interest income	$	255	$	-		$	1,369	$	(1,353	)	$	271
Equity (loss) income from investees	$	-	$	(3,741	)	$	616	$	-		$	(3,125	)
Federal and state income tax expense (benefit)	$	8,916	$	(2,975	)	$	1,008	$	-		$	6,949
Segment profit (loss) (1)	$	30,206	$	(4,757	)	$	1,577	$	-		$	27,026
Additions to long-lived assets	$	59,974	$	48		$	201	$	-		$	60,223
Equity investment in investees	$	-	$	232,605		$	15,880	$	-		$	248,485
Total segment assets	$	3,097,877	$	254,857		$	398,653	$	(333,616	)	$	3,417,771
(1)Reconciliation of segment profit to consolidated profit:	Segment profit							$	27,026
	Unallocated items:
	Preferred dividends requirements, net of tax								12
	Net income applicable to common stock							$	27,014

	CLECO					RECONCILING
2008 (THOUSANDS)	POWER		MIDSTREAM			ITEMS			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	259,581	$	-		$	-		$	-		$	259,581
Other operations		12,714		-			47			(3	)		12,758
Affiliate revenue		8		1,831			609			-			2,448
Intercompany revenue		586		11			10,406			(11,003	)		-
Operating revenue, net	$	272,889	$	1,842		$	11,062		$	(11,006	)	$	274,787
Depreciation expense	$	19,007	$	76		$	253		$	-		$	19,336
Interest charges	$	8,831	$	1,522		$	1,099		$	(1,531	)	$	9,921
Interest income	$	999	$	-		$	1,789		$	(1,530	)	$	1,258
Equity (loss) income from investees	$	-	$	(2,549	)	$	184		$	-		$	(2,365	)
Federal and state income tax expense (benefit)	$	9,610	$	(1,879	)	$	(732	)	$	-		$	6,999
Segment profit (loss) (1)	$	32,662	$	(2,912	)	$	(361	)	$	-		$	29,389
Additions to long-lived assets	$	77,748	$	37		$	421		$	-		$	78,206
Equity investment in investees (2)	$	-	$	234,273		$	14,871		$	-		$	249,144
Total segment assets (2)	$	3,041,597	$	250,882		$	324,232		$	(275,507	)	$	3,341,204
(1)Reconciliation of segment profit to consolidated profit:	Segment profit								$	29,389
(2)Balances as of December 31, 2008	Unallocated items:
	Preferred dividends requirements, net of tax									12
	Net income applicable to common stock								$	29,377

32 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

SEGMENT INFORMATION FOR THE SIX MONTHS ENDED JUNE 30,

	CLECO					RECONCILING
2009 (THOUSANDS)	POWER		MIDSTREAM			ITEMS		ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	398,517	$	-		$	-	$	-		$	398,517
Other operations		15,774		-			52		(6	)		15,820
Affiliate revenue		12		4,540			1,258		-			5,810
Intercompany revenue		685		-			20,631		(21,301	)		15
Operating revenue	$	414,988	$	4,540		$	21,941	$	(21,307	)	$	420,162
Depreciation expense	$	38,029	$	88		$	496	$	-		$	38,613
Interest charges	$	26,641	$	4,637		$	204	$	(2,650	)	$	28,832
Interest income	$	658	$	-		$	2,674	$	(2,650	)	$	682
Equity (loss) income from investees	$	-	$	(15,891	)	$	1,015	$	-		$	(14,876	)
Federal and state income tax expense (benefit)	$	12,716	$	(8,392	)	$	3,951	$	-		$	8,275
Segment profit (loss) (1)	$	45,224	$	(13,409	)	$	1,860	$	-		$	33,675
Additions to long-lived assets	$	121,410	$	52		$	377	$	-		$	121,839
Equity investment in investees	$	-	$	232,605		$	15,880	$	-		$	248,485
Total segment assets	$	3,097,877	$	254,857		$	398,653	$	(333,616	)	$	3,417,771
(1)Reconciliation of segment profit to consolidated profit:	Segment profit							$	33,675
	Unallocated items:
	Preferred dividends requirements, net of tax								23
	Net income applicable to common stock							$	33,652

	CLECO					RECONCILING
2008 (THOUSANDS)	POWER		MIDSTREAM			ITEMS			ELIMINATIONS			CONSOLIDATED
Revenue
Electric operations	$	469,462	$	-		$	-		$	-		$	469,462
Other operations		22,775		1			51			(6	)		22,821
Affiliate revenue		14		3,749			1,291			-			5,054
Intercompany revenue		1,088		12			19,886			(20,986	)		-
Operating revenue	$	493,339	$	3,762		$	21,228		$	(20,992	)	$	497,337
Depreciation expense	$	38,025	$	152		$	509		$	-		$	38,686
Interest charges	$	16,462	$	3,491		$	3,221		$	(3,512	)	$	19,662
Interest income	$	1,576	$	-		$	4,809		$	(3,510	)	$	2,875
Equity (loss) income from investees	$	-	$	(7,563	)	$	624		$	-		$	(6,939	)
Federal and state income tax expense (benefit)	$	16,569	$	(4,681	)	$	172		$	-		$	12,060
Segment profit (loss) (1)	$	60,269	$	(7,528	)	$	(1,281	)	$	-		$	51,460
Additions to long-lived assets (2)	$	182,816	$	39		$	544		$	-		$	183,399
Equity investment in investees (2)	$	-	$	234,273		$	14,871		$	-		$	249,144
Total segment assets	$	3,041,597	$	250,882		$	324,232		$	(275,507	)	$	3,341,204
(1)Reconciliation of segment profit to consolidated profit:	Segment profit								$	51,460
(2)Balances as of December 31, 2008	Unallocated items:
	Preferred dividends requirements, net of tax									23
	Net income applicable to common stock								$	51,437

Note 9 — 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 or loss from investees on Cleco Corporation’s Condensed Consolidated Statements of Income.

Equity investment in investees at June 30, 2009, represents primarily Midstream’s $181.7 million investment in Acadia, owned 50% by APH and 50% by Cajun, and its $50.9 million investment in Evangeline, owned 100% by Midstream.  Equity investment in investees also represents a $7.7 million investment in Attala and an $8.2 million equity investment in Perryville, both owned 100% by Cleco Corporation.  Equity investments which are less than 100% owned by Cleco Innovations LLC represent less than $0.1 million of the total balance.

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

	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Acadia	$	(5,672	)	$	(3,407	)
Evangeline		1,931			858
Other subsidiaries 100% owned by Cleco Corporation		616			184
Total equity loss	$	(3,125	)	$	(2,365	)

33 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008
Acadia	$	(10,888	)	$	(6,778	)
Evangeline		(5,003	)		(785	)
Other subsidiaries 100% owned by Cleco Corporation		1,015			624
Total equity loss	$	(14,876	)	$	(6,939	)

Acadia

Since Acadia is owned 50% by APH and 50% by Cajun, neither owner is the primary beneficiary, and Acadia is accounted for as an equity method investment.  Cleco’s current assessment of its maximum exposure to loss related to Acadia at June 30, 2009, consists of its equity investment of $181.7 million.  The table below presents the components of Midstream's equity investment in Acadia.

	AT JUNE 30,			AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2009			2008
Contributed assets (cash and land)	$	272,956		$	259,019
Income before taxes		149,555			160,444
Impairment of investment		(45,847	)		(45,847	)
Capitalized interest and other		19,722			19,722
Less:  non-cash distribution		78,200			78,200
Less:  cash distributions		136,464			136,464
Total equity investment in investee	$	181,722		$	178,674

The $78.2 million non-cash distribution is the distribution of the CES claim from Acadia to APH.  The cash distributions of $136.5 million were used to pay interest and repay principal on a loan from Cleco Corporation relating to this investment.  Midstream’s equity, as reported on the balance sheet of Acadia at June 30, 2009, was $207.8 million.  The difference between the $207.8 million and the equity investment in investee of $181.7 million as shown in the previous table 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 following tables contain summarized financial information for Acadia.

	AT JUNE 30,		AT DECEMBER 31,
(THOUSANDS)	2009		2008
Current assets	$	19,851	$	5,413
Property, plant and equipment, net		409,523		405,565
Total assets	$	429,374	$	410,978
Current liabilities	$	13,679	$	1,380
Partners’ capital		415,695		409,598
Total liabilities and partners’ capital	$	429,374	$	410,978

	FOR THE THREE MONTHS ENDED JUNE 30,						FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009			2008			2009			2008
Operating revenue	$	17,744		$	17,169		$	21,948		$	24,937
Operating expenses		25,442			23,785			37,636			38,668
Other expense		(3,646	)		(198	)		(6,088	)		(139	)
Loss before taxes	$	(11,344	)	$	(6,814	)	$	(21,776	)	$	(13,870	)

Income taxes recorded on APH’s financial statements related to Midstream’s 50% ownership interest in Acadia were benefits of $3.3 million and $5.9 million for the three and six months ended June 30, 2009, respectively, compared to benefits of $2.0 million and $4.2 million for the three and six months ended June 30, 2008, respectively.

In 2009, Cleco Power announced Acadia was selected as the winning bidder in Cleco Power’s 2007 long-term request for capacity beginning in 2010.  Cleco Power will own and operate one of Acadia’s two 580-MW units.  Cleco Power will also operate the second unit on behalf of Acadia.  Cleco Power has completed its due diligence and the parties have executed the definitive agreements.  However, prior to closing the transaction, valued at approximately $300 million, Cleco Power must receive approvals from the LPSC and FERC.  In a process that remains under the supervision of an independent monitor appointed by the LPSC, Cleco Power and Acadia plan to complete the transaction in the first quarter of 2010.  Beginning in January 2010, the agreements provide that Acadia will continue to operate the plant and serve Cleco Power under a tolling agreement covering 50 percent of the Acadia power station until the transaction is closed.  This tolling agreement must also be approved by the LPSC and FERC.

Evangeline

Since its inception, Cleco has had 100% ownership and voting interest of Evangeline.  Through an analysis of variable interests, such as Cleco’s investment, the long-term debt, the tolling counterparty, and the potential to absorb expected losses and gains, Cleco has determined that it is not the primary beneficiary.  The determination is driven by several factors such as:

§   The tolling counterparty is at risk to absorb market losses and gains, which are primarily determined by the relative price of electricity and natural gas.

§   The debt is non-recourse to Cleco; therefore, the debt-holders main security is the underlying assets of Evangeline.

§   Cleco’s risk of loss is limited to its investment plus the $15.0 million letter of credit issued on behalf of the tolling counterparty.

§   The size of Evangeline’s debt compared to the size of Cleco’s investment at risk.  

Since Cleco is not the primary beneficiary, Evangeline is accounted for as an equity method investment.

Cleco’s current assessment of its maximum exposure to loss related to Evangeline at June 30, 2009, consists of its equity investment of $50.9 million and $15.0 million of possible draws on the letter of credit Cleco has posted on Evangeline’s behalf, for a total of $65.9 million.  The following table presents the components of Midstream's equity investment in Evangeline.

	AT JUNE 30,		AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2009		2008
Contributed assets (cash)	$	49,961	$	49,961
Net income		146,596		151,599
Less:  non-cash distributions		16,620		16,907
Less:  cash distributions		129,054		129,054
Total equity investment in investee	$	50,883	$	55,599

34 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

The following tables contain summarized financial information for Evangeline.  

	AT JUNE 30,			AT DECEMBER 31,
(THOUSANDS)	2009			2008
Current assets	$	17,760		$	25,750
Accounts receivable - affiliate		1			1
Property, plant and equipment, net		184,947			180,051
Other assets		45,203			42,528
Total assets	$	247,911		$	248,330
Current liabilities	$	30,523		$	20,244
Accounts payable - affiliate		499			3,512
Long-term debt, net		157,663			161,762
Other liabilities		71,335			71,845
Member’s deficit		(12,109	)		(9,033	)
Total liabilities and member’s deficit	$	247,911		$	248,330

	FOR THE THREE MONTHS ENDED JUNE 30,					FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008			2009			2008
Operating revenue	$	12,902	$	12,984		$	23,235		$	23,413
Operating expenses		5,410		6,010			15,724			12,225
Depreciation		1,359		1,337			2,740			2,692
Interest charges		4,239		4,674			8,443			9,337
Interest income		-		95			-			258
Other income (expense)		37		(200	)		(1,331	)		(202	)
Income (loss) before taxes	$	1,931	$	858		$	(5,003	)	$	(785	)

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.

Cleco Corporation has posted a $15.0 million letter of credit on behalf of the Evangeline Tolling Agreement counterparty.  The letter of credit can be drawn in the event Evangeline defaults on the tolling agreement.

Evangeline’s restricted cash at June 30, 2009, and December 31, 2008, was $19.0 million and $25.0 million, respectively.  This cash is restricted under Evangeline’s senior secured bond indenture.

Income taxes recorded on Midstream’s financial statements related to Midstream’s 100% ownership interest in Evangeline were $0.7 million expense and $1.9 million benefit for the three and six months ended June 30, 2009, respectively, compared to $0.2 million expense and $0.3 million benefit for the three and six months ended June 30, 2008, respectively.

Prior to November 9, 2007, all of the capacity and output of the power plant had been tolled to Williams, 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.  In May 2008, JPMorgan Chase & Co. completed the acquisition of Bear Stearns Companies Inc., the parent company of Bear Energy.  In September 2008, Bear Energy was merged into JPMVEC.  For more information regarding the Evangeline Tolling Agreement, see Note 10 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Other Subsidiaries 100% owned by Cleco Corporation

The information about these entities is aggregated because their method of operation, size, and risk are materially similar.  Both entities own transmission assets, provide transmission services to one customer under a long-term contract at a FERC-approved cost of service rate, and are capitalized with 100% equity.

Through an analysis of variable interests, such as Cleco’s investment and the single counterparty that has a long-term lease of the facilities, Cleco has determined that it is not the primary beneficiary of either entity.  The determination is driven by several factors such as:

§   Each entity has only one customer under the long-term agreements accounted for as direct financing leases.

§   Both entities can only charge FERC-approved tariffs.

§   Both entities have the ability to change the tariff if actual expenses are materially different than expected expenses.

§   The lease counterparty is required to make lease payments regardless of the use of the assets.

§   Cleco’s risk of loss is limited to its investment.

Since Cleco is not the primary beneficiary, the investments in Perryville and Attala are accounted for as equity method investments.

Cleco’s current assessment of its maximum exposure to loss with respect to Perryville and Attala at June 30, 2009, consists of its equity investment of $15.9 million.  The following table presents the components of Cleco Corporation’s equity investment in Perryville and Attala.

	AT JUNE 30,		AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2009		2008
Contributed assets (cash)	$	132,962	$	132,960
Net income		55,181		54,166
Less:  non-cash distributions		20,874		20,869
Less:  cash distributions		151,389		151,389
Total equity investment in investee	$	15,880	$	14,868

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

	AT JUNE 30,		AT DECEMBER 31,
(THOUSANDS)	2009		2008
Current assets	$	5,671	$	4,905
Other assets		14,210		14,166
Total assets	$	19,881	$	19,071
Current liabilities	$	284	$	9
Accounts payable - affiliate		2		2
Other liabilities		395		484
Member’s equity		19,200		18,576
Total liabilities and member’s equity	$	19,881	$	19,071

	FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		2009		2008
Operating revenue	$	492	$	496	$	983	$	992
Operating expense		301		312		393		367
Interest income (expense)		425		-		425		(1	)
Income before taxes	$	616	$	184	$	1,015	$	624

35

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

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 and Attala are accounted for as direct financing leases 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 six months ended June 30, 2009, respectively, compared to $0.1 million and $0.2 million for the three and six months ended June 30, 2008, respectively.

Note 10 — 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 moved to and currently is pending in the U.S. District Court for the Western District of Louisiana.  Effective December 30, 2008, the City Council of Alexandria passed an ordinance authorizing the mayor to settle the litigation by executing a new 13-year power supply agreement with Cleco.  Cleco expects to complete final negotiations and satisfaction of conditions precedent for the agreement to commence later in 2009.  Pending execution of this new supply agreement, the presiding judge has agreed to dismiss the claims asserted in the litigation without prejudice.  In the event the new supply agreement is not executed by August 29, 2009, the litigation will be resolved by trial, which has been scheduled to commence on February 22, 2010.  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 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 has yet to make a final determination on whether to add Devil’s Swamp Lake to the NPL.  The EPA and a number of PRPs met on January 31, 2008, for an organizational meeting to discuss the background of the site.  The PRPs began discussing a potential proposal to the EPA on February 19, 2008.  Negotiations among the PRPs and the EPA are ongoing in regard to the remedial investigation and feasibility study at the Devil’s Swamp site, with little progress having been made since the January 2008 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.  The response to the proposal has been pending for months.  Since this investigation is in the preliminary stages, 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.  

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 these 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 June 30, 2009, 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

36 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

understand the impact of the off-balance sheet commitments on Cleco’s financial condition.

							AT JUNE 30, 2009
							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	$	177,400	$	135,000	$	42,400	$	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
Guarantee issued to Tenaska Gas Storage, LLC on behalf of Acadia		10,000		-		10,000		10,000
Cleco Power
Obligations under standby letter of credit issued to the Louisiana Department of Labor		3,525		-		3,525		-
Obligations under the Lignite Mining Agreement		4,039		-		4,039		-
Total	$	211,864	$	135,000	$	76,864	$	27,228

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 June 30, 2009, the aggregate guarantee of $177.4 million is limited to $42.4 million due to the performance of some of the underlying obligations that were guaranteed.  Management believes it is unlikely that Cleco Corporation will have any other liabilities which would give rise to indemnity claims.  The discounted probability-weighted liability under the guarantees and indemnifications as of June 30, 2009, 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, of which $0.4 million expires on September 27, 2009, and $1.0 million expires on October 20, 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 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 June 30, 2009, 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 Interconnection Agreement.  This guarantee will be effective through the life of the agreement.

In February 2009, Cleco Corporation provided a $10.0 million guarantee to Tenaska Gas Storage, LLC for Acadia’s obligation under the Energy Management Services Agreement.  This guarantee will expire on October 31, 2009.

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 $3.5 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 June 30, 2009, Cleco Power’s 50% exposure for this obligation was approximately $4.0 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:

37 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

							AT JUNE 30, 2009
			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	$	58,339	$	11,400	$	4,039	$	-	$	42,900
Standby letters of credit		18,525		3,525		-		-		15,000
Total commercial commitments	$	76,864	$	14,925	$	4,039	$	-	$	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 Equipment Services Corporation

Cleco Power has entered into an operating lease agreement with General Electric Equipment Services Corporation for leasing railcars in order to transport coal to its Rodemacher Power Station Unit 2.  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 $1.3 million.  At this time, Cleco Power has no plans to early terminate this lease, which expires in March 2017.

CBL Capital Corporation

Cleco Power has entered into an operating lease agreement with CBL Capital Corporation, which was acquired by GE Capital Commercial, Inc. (GE Capital).  This is a master leasing agreement for company vehicles and other equipment.  On November 14, 2008, Cleco Power was notified by GE Capital that it was electing to terminate the lease.  Pursuant to the terms of the lease agreement, the termination date was effective January 13, 2009.  Cleco Power has one year from the termination date to enter into a new operating lease with a third party and/or negotiate the purchase of such equipment for the unamortized balance.  The unamortized balance of equipment under the GE Capital lease was $5.6 million at June 30, 2009.  Cleco Power expects to purchase the vehicles and equipment under the lease agreement during the fourth quarter of 2009.

LPSC Fuel Audit

The LPSC Fuel Adjustment Clause General Order issued November 6, 1997, in Docket No. U-21497 provides that an audit will be performed not less than every other year.  Cleco Power currently has fuel adjustment clause filings for 2003 through 2009 subject to 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 2004.  In March 2009, the LPSC indicated its intent to proceed with the audit for the years 2003 through 2008.  However, this review is still pending and Cleco Power does not anticipate the LPSC to proceed until after completion of the rate case.  Cleco Power could be required to make a substantial refund of previously recorded revenue as a result of these audits, and such refund could result in a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Fuel Transportation Agreement

Cleco Power has entered into an agreement that meets the accounting definition of a capital lease for barges in order to transport petroleum coke and limestone to Rodemacher Unit 3.  The 42 dedicated barges were delivered between January 6 and February 12, 2009.  

The lease rate contains a fixed portion of $225 per day per barge and a variable component of $75 adjusted by Producer Price Index (PPI) annually for executory costs.  If the barges are idle, the lessor is required to attempt to sublease the barges to third parties with the revenue reducing Cleco Power’s lease payment.  During the three and six months ended June 30, 2009, Cleco Power did not receive any revenue from subleases.

The initial term of this agreement is five years and the agreement will terminate December 31, 2013.  Cleco will have an option to renew this agreement for a second five-year term in full or in part and, at its option, purchase any or all of the dedicated barges.  If Cleco does not renew this agreement for the renewal term, then the lessor has the option to require Cleco to purchase any or all of the barges.  If Cleco Power purchases the barges on December 31, 2013, the purchase price of all 42 barges will be $21.7 million.

This agreement contains a provision for early termination upon the occurrence of any one of four cancellation events.

The following is an analysis of the leased property under capital leases by major classes:

38 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

	AT JUNE 30,		AT DECEMBER 31,
CLASSES OF PROPERTY (THOUSANDS)	2009		2008
Barges	$	22,050	$	-
Other		555		555
Total capital leases		22,605		555
Less: accumulated amortization		1,379		342
Net capital leases	$	21,226	$	213

The amount listed as other in the chart above includes a capital lease agreement for miscellaneous equipment by Cleco Power.  This lease terminates December 31, 2010.

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2009.

(THOUSANDS)
Six months ending December 31, 2009	$	2,393
Years ending December 31,
2010		4,748
2011		4,622
2012		4,634
2013		4,622
2014		4,622
Thereafter		18,499
Total minimum lease payments		44,140
Less:  executory costs		11,149
Net minimum lease payments		32,991
Less:  amount representing interest		11,340
Present value of net minimum lease payments	$	21,651
Current liabilities	$	1,561
Non-current liabilities	$	20,090

During the three and six months ended June 30, 2009, Cleco Power incurred immaterial amounts of contingent rent related to the increase in the PPI.

Oxbow Lignite Mine Acquisition

In April 2009, Cleco Power entered into an agreement with SWEPCO to purchase the Oxbow Lignite Company from North American Coal Corporation (NAC).  The purchase price of approximately $42.0 million includes the lignite reserves, mining equipment, and related assets and permits.  Cleco Power’s 50 percent portion of the purchase price is approximately $12.9 million for the lignite reserves.  The lignite reserves of approximately 120 million tons acquired under this agreement are expected to fuel the Dolet Hills Power Station through 2026.  SWEPCO’s subsidiary, Dolet Hills Lignite Company, LLC, will operate the new mine along with its current operations at the Dolet Hills Lignite Mine on similar terms.  The existing Red River Lignite Supply and Transportation Agreement with NAC will terminate upon the closing of this transaction.  Pending LPSC approval, the closing of this transaction is expected to occur in the fourth quarter of 2009.

Rodemacher Unit 3

In August 2005, Cleco Power entered into an EPC contract with Shaw to construct Rodemacher Unit 3.  Cleco Power began construction of Rodemacher Unit 3 in May 2006.  In May 2006, Cleco Power and Shaw entered into an Amended EPC Contract, which provided for substantial completion of construction of Rodemacher Unit 3 by September 30, 2009.  On July 2, 2008, Cleco Power and Shaw amended this contract to provide for substantial completion as early as June 30, 2009.

In December 2008, Cleco Power received correspondence from Shaw providing damage estimates due to alleged force majeure events related to Hurricanes Gustav and Ike of $12.3 million and a schedule extension of fifteen days.  In April 2009, Shaw withdrew such estimates and in July 2009, Shaw submitted a formal claim for such events in the amount of $23.0 million and a schedule extension of 48 days.  Cleco Power is reviewing the documentation for validity and applicability.  Additionally, in June 2009, Shaw notified Cleco of an alleged event of default claiming that the on-site fuel for Rodemacher Unit 3 did not meet the specifications under the Amended EPC Contract.  The parties have submitted this claim through the dispute resolution provisions of the Amended EPC Contract.  The Registrants do not believe the resolution of these claims will have a material adverse effect on the Registrants’ results of operations, financial condition, or cash flows.  

Other

Cleco has accrued for liabilities to third parties, employee benefits, and storm damages.

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

During 2008, JPMorgan Chase & Co. acquired The Bear Stearns Companies Inc.  In connection with the acquisition, JPMorgan Chase & Co. guaranteed certain obligations of The Bear Stearns Companies Inc. and its subsidiaries, including obligations under the Evangeline Tolling Agreement.  In September 2008, Bear Energy was merged into JPMVEC.  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 entire outstanding principal amount ($165.3 million at June 30, 2009) and interest to be immediately due and payable, which could result in:

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

o   Cleco 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;

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§   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.

Other

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows.  Recent market conditions have limited the availability and have increased the costs of capital for many companies.  The inability to raise capital on favorable terms could negatively affect Cleco Corporation’s and Cleco Power’s ability to maintain and expand their businesses.  After assessing the current operating performance, liquidity, and credit ratings of Cleco, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.  At June 30, 2009, Moody’s and Standard & Poor’s outlooks for Cleco Corporation were stable.  If Cleco Corporation’s credit ratings were to be downgraded by Moody’s and Standard & Poor’s, Cleco Corporation 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- and long-term capital requirements not satisfied by operating cash flows.  Recent market conditions have limited the availability and have increased the costs of capital for many companies.  The inability to raise capital on favorable terms could negatively affect Cleco Power’s ability to maintain and expand its businesses.  After assessing the current operating performance, liquidity, and credit ratings of Cleco Power, management believes that Cleco Power will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.  At June 30, 2009, Standard & Poor’s outlook for Cleco Power was stable.  In June 2009, Moody’s placed Cleco Power’s rating under review for possible downgrade.  Cleco Power is currently rated one level higher by Moody's than by Standard & Poor's.  Cleco Power pays fees and interest under its bank credit and other debt agreements based on the higher of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Moody’s, Cleco Power would be required to pay additional fees and higher interest rates.  Cleco Power’s collateral for derivatives is based on the lower of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Standard & Poor’s, Cleco Power would be required to pay additional collateral for derivatives.

In August 2005, Cleco Power entered into an EPC contract with Shaw to construct Rodemacher Unit 3.  In May 2006, Cleco Power and Shaw entered into an Amended EPC Contract.  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.

Note 11 — Affiliate Transactions

Cleco has affiliate balances that were not eliminated as of June 30, 2009.  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 9 — “Equity Investment in Investees.”  At June 30, 2009, the payable to Evangeline was $2.9 million and the payable to Perryville, Attala, and Acadia was less than $0.1 million combined.  Also, at June 30, 2009, the receivable from Evangeline was $12.7 million and the receivable from Acadia was $0.5 million.  The receivable from Perryville and Attala combined was less than $0.1 million.

Cleco Power has affiliate balances that are payable to or due from its affiliates.  At June 30, 2009, the payable to Support Group was $5.5 million, the payable to Cleco Corporation was $0.7 million, and the payable to other affiliates was less than $0.1 million.  Also, at June 30, 2009, the receivable from Support Group was $2.0 million, the receivable from Cleco Corporation was less than $0.1 million, and the receivable from other affiliates was $0.1 million.

Note 12 — 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

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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.  For the three and six months ended June 30, 2009, Cleco Katrina/Rita recognized amortization expense of $2.6 million and $5.4 million, respectively, compared to $2.9 million and $3.6 million, respectively, for the same periods in 2008.  The tables below provide additional information about this intangible asset.

(THOUSANDS)	AT JUNE 30, 2009
Gross carrying amount		$	177,537
Accumulated amortization			15,085
Intangible asset		$	162,452

(THOUSANDS)
Expected amortization expense
For the twelve months ending June 30, 2010	$	11,154
For the twelve months ending June 30, 2011	$	11,928
For the twelve months ending June 30, 2012	$	12,745
For the twelve months ending June 30, 2013	$	13,589
Thereafter	$	113,036

Note 13 — Subsequent Event

As of August 5, 2009, management has evaluated the potential recognition or disclosure of events or transactions that occurred in the period after the balance sheet date of June 30, 2009.  The date August 5, 2009, represents the date that Cleco issued the financial statements for the period ended June 30, 2009.

During July 2009, Cleco Power elected to redeem all $49.5 million principal amount of its outstanding 6.05% insured quarterly notes due June 2012.  The redemption date for the notes will be August 21, 2009.  Once redeemed, the bonds will be replaced with LIBOR plus 3.00% floating rate bank loans. On July 10, 2009, Cleco Power entered into a three-year $50.0 million interest rate swap arrangement which will convert the floating rate bank loans to a fixed rate of 4.84%.  These swaps mature on May 31, 2012, concurrent with the maturity of the bank loans.

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, 2008, 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 six months ended June 30, 2009, and June 30, 2008.

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, FERC, and other regulators, which serves approximately 276,000 customers across Louisiana and also engages in energy management activities; and

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

While management believes that Cleco remains a strong company, Cleco continues to focus on several challenges and factors that could affect its results of 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 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 in the fourth quarter of 2009.  Cleco Power’s current base rates have been extended through the commercial operation 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 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 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.  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

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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.  On July 27, 2009, Cleco Power notified the Administrative Law Judge that Cleco Power, the LPSC Staff, and the intervenors in the case had made significant progress toward a full resolution of all issues in the case that was filed in July 2008.  The settlement includes a target return on equity of 10.7% with sharing occurring after 11.3%.  The settlement will now be presented to the LPSC for approval.  For additional information, see “— Financial Condition — Liquidity and Capital Resources — Regulatory Matters — Retail Rates of Cleco Power” and — “Rodemacher Unit 3.”

Cleco Power continues to evaluate a range of other power supply options for the remainder of 2009 and beyond.  As such, Cleco Power is continuing to update its IRP to look at future sources of supply.  Cleco Power released a RFP in October 2007 seeking long-term resources to fill the needs identified by the latest IRP.  On February 26, 2009, Cleco Power announced that it had chosen the acquisition of 50 percent of the Acadia power station, or one of its two 580-MW units, as the lowest bid in its 2007 long-term RFP for capacity beginning in 2010. Cleco Power will own and operate one unit and operate the other 580-MW unit on behalf of Acadia.  Cleco Power has completed its due diligence and the parties have executed the definitive agreements.  However, prior to closing the transaction, valued at approximately $300.0 million, Cleco Power must receive approvals from the LPSC and FERC.  In a process that remains under the supervision of an independent monitor appointed by the LPSC, Cleco Power and Acadia plan to complete the transaction in the first quarter of 2010.  Beginning in January 2010, the agreements provide that Acadia will continue to operate the plant and serve Cleco Power under a tolling agreement covering 50 percent of the Acadia power station until the transaction is closed.  This tolling agreement must also be approved by the LPSC and FERC.

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 can be delivered.  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.  At times, transmission availability limits the wholesale markets accessible by Acadia resulting in limited buyers for Acadia’s output.  Because of Acadia’s location on the transmission grid, Acadia has interconnections with two main suppliers of electric transmission when accessing external power markets.

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 its 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 that began March 1, 2009, and will end October 1, 2009.  

On February 26, 2009, Cleco Power announced that it had selected Acadia’s proposal to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power 2007 long-term RFP.  Under the proposed arrangement, Cleco Power would acquire and operate one of Acadia’s generating units and operate the other unit, as described further above under “— Cleco Power.”  

Midstream’s other principal source of revenue is the Evangeline Tolling Agreement, under which the counterparty has the right to dispatch the electric generation capacity of the facility.  Profitability of Midstream’s investment in Evangeline depends principally upon continued performance by JPMVEC of its payment obligations under the tolling agreement and controlling maintenance expenses associated with the facility.

Comparison of the Three Months Ended June 30, 2009, and 2008

Cleco Consolidated

				FOR THE THREE MONTHS ENDED JUNE 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009			2008			VARIANCE			CHANGE
Operating revenue, net	$	207,226		$	274,787		$	(67,561	)		(24.6	)%
Operating expenses		175,359			241,078			65,719			27.3	%
Operating income	$	31,867		$	33,709		$	(1,842	)		(5.5	)%
Interest income	$	271		$	1,258		$	(987	)		(78.5	)%
Allowance for other funds used during construction	$	17,538		$	14,993		$	2,545			17.0	%
Equity loss from investees	$	(3,125	)	$	(2,365	)	$	(760	)		(32.1	)%
Other income	$	1,633		$	91		$	1,542			*
Other expense	$	480		$	1,377		$	897			65.1	%
Interest charges	$	13,729		$	9,921		$	(3,808	)		(38.4	)%
Federal and state income taxes	$	6,949		$	6,999		$	50			0.7	%
Net income applicable to common stock	$	27,014		$	29,377		$	(2,363	)		(8.0	)%
* Not meaningful

Consolidated net income applicable to common stock decreased $2.4 million, or 8.0%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to decreased earnings at Cleco Power and higher losses at Midstream.  Partially offsetting these decreases were higher corporate earnings.

Operating revenue, net decreased $67.6 million, or 24.6%, in the second quarter of 2009 compared to the second quarter

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of 2008 largely as a result of lower fuel cost recovery revenue at Cleco Power.

Operating expenses decreased $65.7 million, or 27.3%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to lower per-unit costs of purchased power and lower volumes of purchased power and fuel used for electric generation at Cleco Power.  Partially offsetting this decrease were higher per-unit costs of fuel used for electric generation.  

Interest income decreased $1.0 million, or 78.5%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to a lower recovery of interest costs relating to Cleco Power’s lower deferred lignite mining costs.

Allowance for other funds used during construction increased $2.5 million, or 17.0%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to increased construction activity at Rodemacher Unit 3.

Equity loss from investees increased $0.8 million, or 32.1%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to increased equity losses at APH, partially offset by increased equity income at Evangeline.

Other income increased $1.5 million during the second quarter of 2009 compared to the second quarter of 2008 primarily due to the recognition of an increase in the cash surrender value of life insurance policies at Cleco Corporation.

Other expense decreased $0.9 million, or 65.1%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to the absence in 2009 of decreases in the cash surrender value of life insurance policies at Cleco Corporation during the second quarter of 2008.

Interest charges increased $3.8 million, or 38.4%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to higher net interest charges at Cleco Power as discussed below, partially offset by lower interest charges at Cleco Corporation from the repayment of senior notes.

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

Cleco Power

			FOR THE THREE MONTHS ENDED JUNE 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009		2008		VARIANCE			CHANGE
Operating revenue
Base	$	94,920	$	92,653	$	2,267			2.4	%
Fuel cost recovery		100,731		166,928		(66,197	)		(39.7	)%
Other operations		8,688		12,714		(4,026	)		(31.7	)%
Affiliate revenue		6		8		(2	)		(25.0	)%
Intercompany revenue		343		586		(243	)		(41.5	)%
Operating revenue, net		204,688		272,889		(68,201	)		(25.0	)%
Operating expenses
Fuel used for electric generation – recoverable		48,672		19,874		(28,798	)		(144.9	)%
Power purchased for utility customers – recoverable		52,204		146,760		94,556			64.4	%
Non-recoverable fuel and power purchased		5,997		8,202		2,205			26.9	%
Other operations		24,229		21,706		(2,523	)		(11.6	)%
Maintenance		13,675		13,645		(30	)		(0.2	)%
Depreciation		19,184		19,007		(177	)		(0.9	)%
Taxes other than income taxes		7,654		8,181		527			6.4	%
Total operating expenses		171,615		237,375		65,760			27.7	%
Operating income	$	33,073	$	35,514	$	(2,441	)		(6.9	)%
Interest income	$	255	$	999	$	(744	)		(74.5	)%
Allowance for other funds used during construction	$	17,538	$	14,993	$	2,545			17.0	%
Interest charges	$	11,505	$	8,831	$	(2,674	)		(30.3	)%
Federal and state income taxes	$	8,916	$	9,610	$	694			7.2	%
Net income	$	30,206	$	32,662	$	(2,456	)		(7.5	)%

Cleco Power’s net income in the second quarter of 2009 decreased $2.5 million, or 7.5%, compared to the second quarter of 2008.  Contributing factors include:

§   lower other operations revenue,

§   higher interest charges,

§   higher other operations and maintenance expenses, and

§   lower interest income.

These were partially offset by:

§   higher allowance for other funds used during construction,

§   higher base revenue, and

§   lower non-recoverable fuel and purchased power expenses.

	FOR THE THREE MONTHS ENDED JUNE 30
(MILLION kWh)	2009		2008		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential		791		804		(1.6	)%
Commercial		596		599		(0.5	)%
Industrial		469		729		(35.7	)%
Other retail		34		33		3.0	%
Total retail		1,890		2,165		(12.7	)%
Sales for resale		144		103		39.8	%
Unbilled		325		203		60.1	%
Total retail and wholesale customer sales		2,359		2,471		(4.5	)%

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	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	36,320	$	36,702		(1.0	)%
Commercial		23,119		23,027		0.4	%
Industrial		12,314		13,995		(12.0	)%
Other retail		1,410		1,372		2.8	%
Storm surcharge		4,405		4,335		1.6	%
Total retail		77,568		79,431		(2.3	)%
Sales for resale		5,488		5,583		(1.7	)%
Unbilled		11,864		7,639		55.3	%
Total retail and wholesale customer sales	$	94,920	$	92,653		2.4	%

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- 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- 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 THREE MONTHS ENDED JUNE 30,
							2009 CHANGE
	2009		2008		NORMAL		PRIOR YEAR			NORMAL
Cooling-degree days		1,053		1,047		898		0.6	%		17.3	%

Base

Base revenue increased $2.3 million, or 2.4%, during the second quarter of 2009 compared to the second quarter of 2008.  The increase was primarily due to higher unbilled sales due to the above normal temperatures in the latter part of June 2009.  Partially offsetting the increase were lower sales to industrial customers as a result of decreased production at one of Cleco Power’s large industrial customers and the start of a large industrial customer cogenerating a portion of its electricity requirements.  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, 2008.

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers decreased $66.2 million, or 39.7%, during the second quarter of 2009 compared to the second quarter in 2008 primarily due to decreases in the per-unit cost of power purchased for utility customers and lower volumes of fuel used for electric generation and power purchased for utility customers.  Partially offsetting this decrease were increases in the per-unit cost of fuel used for electric generation.  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 94% of Cleco Power’s total fuel cost during the second quarter of 2009 was regulated by the LPSC, while the remainder was regulated by FERC.  Recovery of fuel adjustment clause costs is subject to refund until approval is received from the LPSC.  

Other Operations

Other operations revenue decreased $4.0 million, or 31.7%, in the second quarter of 2009 compared to the second quarter of 2008 primarily due to $3.4 million of realized losses and lower mark-to-market gains relating to economic hedge transactions associated with fixed-price power being provided to a wholesale customer.  Also contributing to this decrease was $0.6 million of lower other miscellaneous 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 decreased $65.8 million, or 27.7%, in the second quarter of 2009 compared to the second quarter of 2008.  Fuel used for electric generation (recoverable) increased $28.8 million, or 144.9%, primarily due to recovery of higher fuel costs deferred in prior periods and higher per-unit costs of fuel used as compared to the second quarter of 2008, as a result of realized losses on fuel hedging due to the price volatility of natural gas.  Partially offsetting this increase were lower volumes of fuel used for electric generation.  Power purchased for utility customers (recoverable) decreased $94.6 million, or 64.4%, largely due to lower per-unit costs and 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 $2.2 million, or 26.9%, primarily due to the absence in 2009 of a $1.1 million reclassification from recoverable to non-recoverable fuel expense during the second quarter of 2008 and $1.1 million of lower other non-recoverable expenses primarily related to fixed-price power being provided to a wholesale customer.  Other operations expense increased $2.5 million, or 11.6%, primarily due to higher employee benefit costs, training, and administrative expenses.  

Interest income

Interest income decreased $0.7 million, or 74.5%, during the second quarter of 2009 compared to the second quarter of

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CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

2008 primarily due to a lower recovery of interest costs relating to Cleco Power's lower deferred lignite mining costs.

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction increased $2.5 million, or 17.0%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to increased construction activity at Rodemacher Unit 3.  Allowance for other funds used during construction comprised 58.1% of Cleco Power’s net income for the second quarter of 2009, compared to 45.9% for the second quarter of 2008.

Interest Charges

Interest charges increased $2.7 million, or 30.3%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to $2.9 million related to the May 2008 issuance of senior notes, $1.8 million related to the December 2008 issuance of GO Zone bonds, and $0.5 million related to the solid waste disposal facility bonds.  Partially offsetting this increase was $1.4 million of allowance for borrowed funds used during construction associated with Rodemacher Unit 3 and $1.1 million primarily from lower interest on medium-term notes and lower rates and borrowings under Cleco Power’s credit facility.

Income Taxes

Federal and state income taxes decreased $0.7 million, or 7.2%, during the second quarter of 2009 compared to the second quarter of 2008 due to a decrease in pre-tax income, including the effects of equity AFUDC, partially offset by an increase in tax expense required under FIN 18.

Midstream

	FOR THE THREE MONTHS ENDED JUNE 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009			2008			VARIANCE			CHANGE
Operating revenue
Affiliate revenue	$	2,177		$	1,842		$	335		$	18.2	%
Operating revenue		2,177			1,842			335			18.2	%
Operating expenses
Other operations		1,634			1,504			(130	)		(8.6	)%
Maintenance		1,060			880			(180	)		(20.5	)%
Depreciation		44			76			32			42.1	%
Taxes other than income taxes		102			91			(11	)		(12.1	)%
Total operating expenses		2,840			2,551			(289	)		(11.3	)%
Operating loss	$	(663	)	$	(709	)	$	46			6.5	%
Equity loss from investees	$	(3,741	)	$	(2,549	)	$	(1,192	)		(46.8	)%
Interest charges	$	3,338		$	1,522		$	(1,816	)		(119.3	)%
Federal and state income tax benefit	$	(2,975	)	$	(1,879	)	$	1,096			58.3	%
Net loss	$	(4,757	)	$	(2,912	)	$	(1,845	)		(63.4	)%

Factors affecting Midstream during the second quarter of 2009 are described below.

Equity Loss from Investees

Equity loss from investees increased $1.2 million, or 46.8%, during the second quarter of 2009 compared to the second quarter of 2008.  The increase was due to a $2.3 million increase in equity losses at APH, partially offset by a $1.1 million increase in equity income at Evangeline.  The increased loss at APH was primarily due to an unplanned outage at the facility during 2009.  This outage resulted in higher removal and retirement costs and higher turbine and general maintenance expenses.  These decreases were partially offset by higher net revenue from Acadia’s short-term tolling agreement with Cleco Power.  The increased income at Evangeline was primarily due to lower gas tax expenses and lower interest charges.  Effective July 1, 2009, Evangeline will no longer incur state tax on natural gas purchases.  In prior periods, Evangeline was responsible for payment of 50 percent of the state tax, up to an annual amount of $1.5 million.  For additional information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Equity Investment in Investees.”  

Interest Charges

Interest charges increased $1.8 million, or 119.3%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to additional estimated interest costs relating to an IRS audit.

Income Taxes

Federal and state income taxes decreased $1.1 million, or 58.3%, during the second quarter of 2009 compared to the second quarter of 2008 primarily due to a decrease in pre-tax income.

Comparison of the Six Months Ended June 30, 2009, and 2008

Cleco Consolidated

				FOR THE SIX MONTHS ENDED JUNE 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009			2008			VARIANCE			CHANGE
Operating revenue, net	$	420,162		$	497,337		$	(77,175	)		(15.5	)%
Operating expenses		371,057			436,879			65,822			15.1	%
Operating income	$	49,105		$	60,458		$	(11,353	)		(18.8	)%
Interest income	$	682		$	2,875		$	(2,193	)		(76.3	)%
Allowance for other funds used during construction	$	34,529		$	28,677		$	5,852			20.4	%
Equity loss from investees	$	(14,876	)	$	(6,939	)	$	(7,937	)		(114.4	)%
Other income	$	2,674		$	157		$	2,517			*
Other expense	$	1,332		$	2,046		$	714			34.9	%
Interest charges	$	28,832		$	19,662		$	(9,170	)		(46.6	)%
Federal and state income taxes	$	8,275		$	12,060		$	3,785			31.4	%
Net income applicable to common stock	$	33,652		$	51,437		$	(17,785	)		(34.6	)%
* Not meaningful

Consolidated net income applicable to common stock decreased $17.8 million, or 34.6%, in the first six months of 2009 compared to the first six months of 2008 primarily due to decreased earnings at Cleco Power and higher losses at Midstream.  Partially offsetting these decreases were higher corporate earnings.

Operating revenue, net decreased $77.2 million, or 15.5%, in the first six months of 2009 compared to the first six months

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CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

of 2008 largely as a result of lower fuel cost recovery revenue at Cleco Power.

Operating expenses decreased $65.8 million, or 15.1%, in the first six months of 2009 compared to the first six months of 2008 primarily due to lower per-unit costs of purchased power and lower volumes of purchased power and fuel used for electric generation at Cleco Power.  Partially offsetting this decrease was higher per-unit costs of fuel used for electric generation.

Interest income decreased $2.2 million, or 76.3%, in the first six months of 2009 compared to the first six months of 2008 primarily due to lower interest rates and lower average investment balances.  Also contributing to the decrease was a lower recovery of interest costs relating to Cleco Power’s lower deferred lignite mining costs.

Allowance for other funds used during construction increased $5.9 million, or 20.4%, in the first six months of 2009 compared to the first six months of 2008 primarily due to increased construction activity at Rodemacher Unit 3.

Equity loss from investees increased $7.9 million, or 114.4%, in the first six months of 2009 compared to the first six months of 2008 primarily due to increased equity losses at APH and Evangeline.

Other income increased $2.5 million in the first six months of 2009 compared to the first six months of 2008 primarily due to the recognition of an increase in the cash surrender value of life insurance policies at Cleco Corporation and higher mutual assistance revenue at Cleco Power.

Other expense decreased $0.7 million, or 34.9% in the first six months of 2009 compared to the first six months of 2008 primarily due to the absence in 2009 of decreases in the cash surrender value of life insurance policies at Cleco Corporation during 2008.  Partially offsetting this decrease were higher mutual assistance expenses at Cleco Power.

Interest charges increased $9.2 million, or 46.6%, during the first six months of 2009 compared to the first six months of 2008 primarily due to higher net interest charges at Cleco Power as discussed below, partially offset by lower interest charges at Cleco Corporation from the repayment of senior notes.

Federal and state income taxes decreased $3.8 million, or 31.4%, during the first six months of 2009 compared to the first six months of 2008 due to a decrease in pre-tax income, including the effects of equity AFUDC, partially offset by an increase in tax expense required under FIN 18.

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

Cleco Power

			FOR THE SIX MONTHS ENDED JUNE 30,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009		2008		VARIANCE			CHANGE
Operating revenue
Base	$	167,738	$	171,842	$	(4,104	)		(2.4	)%
Fuel cost recovery		230,779		297,620		(66,841	)		(22.5	)%
Other operations		15,774		22,775		(7,001	)		(30.7	)%
Affiliate revenue		12		14		(2	)		(14.3	)%
Intercompany revenue		685		1,088		(403	)		(37.0	)%
Operating revenue, net		414,988		493,339		(78,351	)		(15.9	)%
Operating expenses
Fuel used for electric generation – recoverable		135,146		63,204		(71,942	)		(113.8	)%
Power purchased for utility customers – recoverable		95,821		234,137		138,316			59.1	%
Non-recoverable fuel and power purchased		9,927		12,825		2,898			22.6	%
Other operations		47,649		42,620		(5,029	)		(11.8	)%
Maintenance		23,104		22,838		(266	)		(1.2	)%
Depreciation		38,029		38,025		(4	)		-
Taxes other than income taxes		15,363		15,995		632			4.0	%
Total operating expenses		365,039		429,644		64,605			15.0	%
Operating income	$	49,949	$	63,695	$	(13,746	)		(21.6	)%
Interest income	$	658	$	1,576	$	(918	)		(58.2	)%
Allowance for other funds used during construction	$	34,529	$	28,677	$	5,852			20.4	%
Other income	$	1,600	$	216	$	1,384			640.7	%
Other expense	$	2,155	$	864	$	(1,291	)		(149.4	)%
Interest charges	$	26,641	$	16,462	$	(10,179	)		(61.8	)%
Federal and state income taxes	$	12,716	$	16,569	$	3,853			23.3	%
Net income	$	45,224	$	60,269	$	(15,045	)		(25.0	)%

Cleco Power’s net income in the first six months of 2009 decreased $15.0 million, or 25.0%, compared to the first six months of 2008.  Contributing factors include:

§   higher interest charges,

§   lower other operations revenue,

§   higher other operations and maintenance expenses,

§   lower base revenue,

§   higher other expense, and

§   lower interest income.

These were partially offset by:

§   higher allowance for other funds used during construction,

§   lower non-recoverable fuel and power purchased expenses, and

§   higher other income.

46 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

	FOR THE SIX MONTHS ENDED JUNE 30
(MILLION kWh)	2009		2008		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential		1,607		1,644		(2.3	)%
Commercial		1,139		1,153		(1.2	)%
Industrial		1,056		1,416		(25.4	)%
Other retail		66		65		1.5	%
Total retail		3,868		4,278		(9.6	)%
Sales for resale		233		173		34.7	%
Unbilled		192		147		30.6	%
Total retail and wholesale customer sales		4,293		4,598		(6.6	)%

	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2009		2008		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	68,516	$	69,746		(1.8	)%
Commercial		46,068		46,063		-
Industrial		25,133		26,995		(6.9	)%
Other retail		2,797		2,737		2.2	%
Storm surcharge		9,620		10,185		(5.5	)%
Total retail		152,134		155,726		(2.3	)%
Sales for resale		8,599		9,670		(11.1	)%
Unbilled		7,005		6,446		8.7	%
Total retail and wholesale customer sales	$	167,738	$	171,842		(2.4	)%

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 SIX MONTHS ENDED JUNE 30,
							2009 CHANGE
	2009		2008		NORMAL		PRIOR YEAR			NORMAL
Heating-degree days		779		860		1,026		(9.4	)%		(24.1	)%
Cooling-degree days		1,179		1,158		968		1.8	%		21.8	%

Base

Base revenue decreased $4.1 million, or 2.4%, during the first six months of 2009 compared to the first six months of 2008.  The decrease was primarily due to lower electric sales to retail and wholesale customers, generally resulting from milder winter weather and lower sales to industrial customers as a result of decreased production at one of Cleco Power’s large industrial customers and the start of a large industrial customer cogenerating a portion of its electricity requirements.  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, 2008.

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers decreased $66.8 million, or 22.5%, during the first six months of 2009 compared to the first six months in 2008 primarily due to decreases in the per-unit cost of power purchased for utility customers and lower volumes of fuel used for electric generation and power purchased for utility customers.  Partially offsetting the decrease were increases 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 June 30, 2009, and 2008 — Cleco Power — Fuel Cost Recovery.”

Other Operations

Other operations revenue decreased $7.0 million, or 30.7%, in the first six months of 2009 compared to the first six months of 2008 primarily due to a $6.8 million net loss relating to economic hedge transactions associated with fixed-price power being provided to a wholesale customer.  Also contributing to this decrease was $0.2 million of lower other miscellaneous 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 decreased $64.6 million, or 15.0%, in the first six months of 2009 compared to the first six months of 2008.  Fuel used for electric generation (recoverable) increased $71.9 million, or 113.8%, primarily due to recovery of higher fuel costs deferred in prior periods and higher per-unit costs of fuel used as compared to the first six months of 2008, as a result of realized losses on fuel hedging due to the price volatility of natural gas.  Partially offsetting this increase were lower volumes of fuel used for electric generation.  Power purchased for utility customers (recoverable) decreased $138.3 million, or 59.1%, largely due to lower per-unit costs and 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 purchased power decreased $2.9 million, or 22.6%, primarily due to the absence in 2009 of a $1.1 million reclassification from recoverable to non-recoverable fuel expense during 2008 and $1.8 million of lower other non-recoverable expenses primarily related to fixed-price power being provided to a wholesale customer.  Other operations expense increased $5.0 million, or 11.8%, primarily due to higher general liability expense, higher employee benefit costs, training, and administrative expenses.  

Interest Income

Interest income decreased $0.9 million, or 58.2%, during the first six months of 2009 compared to the first six months of 2008 primarily due to a lower recovery of interest costs relating to Cleco Power’s lower deferred lignite mining costs.

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction increased $5.9 million, or 20.4%, during the first six months of 2009 compared to the first six months of 2008 primarily due to increased construction activity at Rodemacher Unit 3.  Allowance for

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CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

other funds used during construction comprised 76.4% of Cleco Power’s net income for the first six months of 2009, compared to 47.6% for the first six months of 2008.

Other Income

Other income increased $1.4 million, or 640.7%, in the first six months of 2009 compared to the first six months of 2008 primarily due to higher revenue from mutual assistance to other utilities for restoration efforts.

Other Expense

Other expense increased $1.3 million, or 149.4%, in the first six months of 2009 compared to the first six months of 2008 primarily due to higher expenses from mutual assistance to other utilities for restoration efforts.

Interest Charges

Interest charges increased $10.2 million, or 61.8%, during the first six months of 2009 compared to the first six months of 2008 primarily due to $7.0 million related to the May 2008 issuance of senior notes, $3.5 million related to the December 2008 issuance of GO Zone bonds, $1.5 million related to the March 2008 issuance of storm recovery bonds, $0.6 million related to solid waste disposal facility bonds, and $0.6 million of other miscellaneous interest charges.  Partially offsetting this increase was $3.0 million of allowance for borrowed funds used during construction associated with Rodemacher Unit 3.

Income Taxes

Federal and state income taxes decreased $3.9 million, or 23.3%, during the first six months of 2009 compared to the first six months of 2008 due to a decrease in pre-tax income, including the effects of equity AFUDC, partially offset by an increase in tax expense required under FIN 18.

Midstream

	FOR THE SIX MONTHS ENDED JUNE 30,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2009			2008			VARIANCE			CHANGE
Operating revenue
Other operations	$	-		$	1		$	(1	)		(100.0	)%
Affiliate revenue		4,540			3,761			779			20.7	%
Operating revenue		4,540			3,762			778			20.7	%
Operating expenses
Other operations		3,378			2,945			(433	)		(14.7	)%
Maintenance		2,154			1,729			(425	)		(24.6	)%
Depreciation		88			152			64			42.1	%
Taxes other than income taxes		218			178			(40	)		(22.5	)%
Gain on sales of assets		-			(99	)		(99	)		(100.0	)%
Total operating expenses		5,838			4,905			(933	)		(19.0	)%
Operating loss		(1,298	)		(1,143	)		(155	)		(13.6	)%
Equity loss from investees	$	(15,891	)	$	(7,563	)	$	(8,328	)		(110.1	)%
Interest charges	$	4,637		$	3,491		$	(1,146	)		(32.8	)%
Federal and state income tax benefit	$	(8,392	)	$	(4,681	)	$	3,711			79.3	%
Net loss	$	(13,409	)	$	(7,528	)	$	(5,881	)		(78.1	)%

Factors affecting Midstream during the first six months of 2009 are described below.

Operating Revenue and Operating Expenses

Operating revenue increased $0.8 million, or 20.7%, during the first six months of 2009 compared to the first six months of 2008.  Operating expenses increased $0.9 million, or 19.0%, during the first six months of 2009 compared to the first six months of 2008.  The increases were primarily due to additional employees hired by Cleco Generation Services LLC for the benefit of Midstream to provide power plant operations, maintenance, and engineering services to Acadia and Evangeline.  As a result, revenue and expenses associated with these services are included in affiliate revenue and operating expenses, respectively.

Equity Loss from Investees

Equity loss from investees increased $8.3 million, or 110.1%, during the first six months of 2009 compared to the first six months of 2008.  The increase was due to a $4.2 million increase in equity losses at Evangeline and a $4.1 million increase in equity losses at APH.  The increased loss at Evangeline was primarily due to higher maintenance expenses largely relating to a planned major outage during 2009.  The increased loss at APH was primarily due to an unplanned outage at the facility during 2009.  This outage resulted in higher removal and retirement costs and higher turbine and general maintenance expenses.  These decreases were partially offset by higher net revenue from Acadia’s short-term tolling agreement with Cleco Power.  For additional information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Equity Investment in Investees.”  

Interest Charges

Interest charges increased $1.1 million, or 32.8%, during the first six months of 2009 compared to the first six months of 2008 primarily due to additional estimated interest costs related to an IRS audit.  Partially offsetting this increase was a lower interest rate and a lower balance on affiliate debt relating to APH’s investment in Acadia.

Income Taxes

Federal and state income taxes decreased $3.7 million, or 79.3%, during the first six months of 2009 compared to the first six months of 2008 primarily due to a decrease in pre-tax income.

48 

CLECO CORPORATION
CLECO POWER	2009 2ND QUARTER FORM 10-Q

FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

At June 30, 2009, Standard & Poor’s outlooks for both Cleco Corporation and Cleco Power were stable.  In June 2009, Moody’s affirmed Cleco Corporation’s rating with a stable outlook and placed Cleco Power’s ratings under review for possible downgrade.  If Cleco Corporation’s credit ratings were to be downgraded by Moody’s and Standard & Poor’s, Cleco Corporation would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.  Cleco Power is currently rated one level higher by Moody’s than by Standard & Poor's.  Cleco Power pays fees and interest under its bank credit and other debt agreements based on the higher of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Moody’s, Cleco Power would be required to pay additional fees and higher interest rates.  Cleco Power’s collateral for derivatives is based on the lower of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Standard & Poor’s, Cleco Power would be required to pay additional collateral for derivatives.

During 2008, JPMorgan Chase & Co. acquired The Bear Stearns Companies Inc.  In connection with the acquisition, JPMorgan Chase & Co. guaranteed certain obligations of The Bear Stearns Companies Inc. and its subsidiaries, including obligations under the Evangeline Tolling Agreement.  In September 2008, Bear Energy was merged into JPMVEC.  At June 30, 2009, 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 10 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risk and Uncertainties — Cleco Corporation — Evangeline Tolling Agreement.”

In August 2005, Cleco Power entered into an EPC contract with Shaw to construct Rodemacher Unit 3.  In May 2006, Cleco Power and Shaw entered into an Amended EPC Contract.  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 trading 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 “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, 2008.

Global Financial Crisis

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 markets may be severely restricted at a time when Cleco 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 Cleco’s flexibility to react to changing economic and business conditions.  The credit crisis could have a material negative impact on Cleco’s lenders or Cleco’s customers causing them to fail to meet their obligations to Cleco or to delay payment of such obligations.  Moreover, as a result of the global financial crisis, the pension plan portfolio could continue to experience significant losses in the future.  

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values.  Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or issuance.  Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes under generally accepted accounting principles.  Other financial assets and liabilities, such as long-term debt, are reported at their carrying values at their date of issuance on the condensed consolidated balance sheets with their fair values disclosed without regard to the three levels.  For more information about fair value levels, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 4 — “Fair Value Accounting.”

Debt

At June 30, 2009, 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

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default on these bonds would not be considered a default under Cleco Corporation’s credit facility.  If Cleco Corporation’s credit ratings 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.  A similar downgrade to credit ratings of 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 June 30, 2009, or December 31, 2008.  At June 30, 2009, Cleco’s long-term debt outstanding was $1.2 billion, of which $11.1 million was due within one year, compared to $1.2 billion outstanding at December 31, 2008, which included $63.5 million due within one year.  The long-term debt due within one year at June 30, 2009, represents principal payments for the Cleco Katrina/Rita storm recovery bonds scheduled to be paid in the next twelve months.  

For Cleco, long-term debt increased $79.5 million primarily due to an $88.0 million increase in Cleco’s credit facility draws, a $30.0 million increase in Cleco Power’s credit facility draws, and a $20.0 million increase in long-term capital leases.  These increases were partially offset by the $50.0 million repayment of medium-term notes at maturity in May 2009 and $8.4 million related to a scheduled Cleco Katrina/Rita storm recovery bond principal payment made in March 2009.  During January 2009, Cleco Power entered into a lease agreement for barges to be used for fuel transportation for Rodemacher Unit 3.  For additional information, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Contingencies — Fuel Transportation Agreement” and “— Cleco Corporation (Holding Company Level)” and “— Cleco Power” below.

During July 2009, Cleco Power elected to redeem all $49.5 million principal amount of its outstanding 6.05% insured quarterly notes due June 2012.  The redemption date for the notes will be August 21, 2009.  Once redeemed, the bonds will be replaced with LIBOR plus 3.00% floating rate bank loans. On July 10, 2009, Cleco Power entered into a three-year $50.0 million interest rate swap arrangement which will convert the floating rate bank loans to a fixed rate of 4.84%.  These swaps mature on May 31, 2012, concurrent with the maturity of the bank loans.

At June 30, 2009, and December 31, 2008, Cleco had a working capital surplus of $150.1 million and $105.5 million, respectively.  Included in working capital at June 30, 2009, and December 31, 2008, was $31.9 million and $62.3 million, respectively, which was restricted for the use of debt payments and other restricted uses.  The $44.6 million increase in working capital is primarily due to the repayment of medium-term notes and the decreases in accounts payable.  These increases were partially offset by the payment of dividends, and additions to property, plant and equipment, including  Rodemacher Unit 3.  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 June 30, 2009, were $42.0 million combined with $262.0 million facility capacity ($17.0 million from Cleco Corporation and $245.0 million from Cleco Power) for total liquidity of $304.0 million.  Cash and cash equivalents decreased $55.5 million as compared to December 31, 2008.  This decrease is primarily due to additions to property, plant and equipment, including Rodemacher Unit 3.

Cleco Corporation (Holding Company Level)

Cleco Corporation had no short-term debt outstanding at June 30, 2009 or December 31, 2008.  At June 30, 2009, and December 31, 2008, Cleco Corporation had $118.0 million and $30.0 million, respectively, of long-term debt outstanding.  The increase in long-term debt was due to the increase in draws on Cleco Corporation’s credit facility.  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 June 30, 2009, credit facility draws and off-balance sheet commitments reduced available borrowings by $118.0 million and $15.0 million, respectively, leaving available capacity of $17.0 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 Corporation’s working capital needs.

Cash and cash equivalents available at June 30, 2009, were $10.1 million, combined with $17.0 million facility capacity for total liquidity of $27.1 million.  Cash and cash equivalents increased $4.2 million, when compared to December 31, 2008, primarily due to draws under Cleco Corporation’s credit facility, partially offset by the use of those funds for general operating needs.

Cleco Power

There was no short-term debt outstanding at Cleco Power at June 30, 2009, or December 31, 2008.  At June 30, 2009, Cleco Power’s long-term debt outstanding was $1.1 billion, of which $11.1 million was long-term debt due within one year, compared to $1.1 billion at December 31, 2008, of which $63.5 million was due within one year.

For Cleco Power, long-term debt decreased $8.5 million primarily due to the $50.0 million repayment of medium-term notes at maturity in May 2009 and $8.4 million related to a scheduled Cleco Katrina/Rita storm recovery bond principal payment made in March 2009.  These decreases were partially offset by an increase of $30.0 million in Cleco Power’s credit facility draws and $20.0 million increase in long-term capital leases.  During January 2009, Cleco Power entered into a lease agreement for barges to be used for fuel transportation for Rodemacher Unit 3.  For additional information, see Note 10 — “Litigation, Other Commitments and Contingen-

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cies, and Disclosures about Guarantees — Other Contingencies — Fuel Transportation Agreement.”

During July 2009, Cleco Power elected to redeem all $49.5 million principal amount of its outstanding 6.05% insured quarterly notes due June 2012.  The redemption date for the notes will be August 21, 2009.  Once redeemed, the bonds will be replaced with LIBOR plus 3.00% floating rate bank loans. On July 10, 2009, Cleco Power entered into a three-year $50.0 million interest rate swap arrangement which will convert the floating rate bank loans to a fixed rate of 4.84%.  These swaps mature on May 31, 2012 concurrent with the maturity of the bank loans.

At June 30, 2009, and December 31, 2008, Cleco Power had a working capital surplus of $45.9 million and $88.0 million, respectively.  Included in working capital at June 30, 2009, and December 31, 2008 was $31.9 million and $62.3 million, respectively, which was restricted for the use of debt payments.  The $42.1 million decrease in working capital is primarily due to increased federal income taxes payable and additions to property plant and equipment, including Rodemacher Unit 3.

Cleco Power’s $275.0 million five-year credit facility matures on June 2, 2011.  This facility provides for working capital and other needs.  Cleco Power’s borrowing costs under the facility are equal to LIBOR plus 0.400%, including facility fees.  At June 30, 2009, $30.0 million was outstanding under Cleco Power’s $275.0 million, five-year revolving facility.  An uncommitted line of credit with a bank in an amount up to $10.0 million also is available to support Cleco Power’s working capital needs.

Cash and cash equivalents available at June 30, 2009, were $31.9 million, combined with $245.0 million facility capacity for total liquidity of $276.9 million.  Cash and cash equivalents decreased $59.7 million as compared to December 31, 2008.  This decrease is primarily due to 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 $120.6 million and $85.5 million at June 30, 2009, and December 31, 2008, respectively.  In addition to this recovery, Cleco Power is funding 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 equity contributions from Cleco Corporation.

Midstream

Midstream had no debt outstanding at June 30, 2009, or December 31, 2008.

Evangeline, which is accounted for under the equity method, had no short-term debt outstanding at June 30, 2009, or December 31, 2008.  Evangeline had $165.3 million and $168.9 million of long-term debt outstanding at June 30, 2009, and December 31, 2008, respectively, in the form of 8.82% Senior Secured Bonds due 2019.  Of these amounts, $7.7 million and $7.1 million were due within one year at June 30, 2009, and December 31, 2008, 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 June 30, 2009, and December 31, 2008, $70.7 million and $103.0 million of cash, respectively, were restricted.  At June 30, 2009, the $70.7 million of restricted cash consisted of $0.1 million under the Diversified Lands mitigation escrow agreement, $1.9 million held in escrow for the construction of Cleco Power’s solid waste disposal facilities at Rodemacher Unit 3, $32.6 million reserved at Cleco Power for GO Zone project costs, $27.8 million reserved at Cleco Power for future storm restoration costs, and $8.3 million at Cleco Katrina/Rita restricted for payment of operating expense, interest and principal on storm recovery bonds.  

Evangeline’s restricted cash is not reflected in Cleco Corporation’s Condensed Consolidated Balance Sheets due to the equity method of accounting.  Evangeline’s restricted cash at June 30, 2009, and December 31, 2008, was $19.0 million and $25.0 million, respectively.  This cash is restricted under Evangeline’s senior secured bond indenture.

Net Operating Activities Cash Flows

Cleco’s net cash used in operating activities was less than $0.1 million during the first six months of 2009 compared to cash provided by operating activities of $53.1 million during the first six months of 2008.  Cash from operating activities during the first six months of 2009 decreased $53.2 million from that reported for the first six months of 2008, primarily due to lower net income, new Rodemacher Unit 3 petroleum coke and lignite inventories, higher gas and power purchase payments, and higher retainage payments.  These were partially offset by higher collections of customer accounts.

Cleco Power’s net cash provided by operating activities was $50.1 million during the first six months of 2009 compared to $92.6 million during the first six months of 2008.  Cash from operating activities during the first six months of 2009 decreased $42.5 million from that reported for the first six months of 2008, primarily due to lower net income, new Rodemacher Unit 3 petroleum coke and lignite inventories, higher gas and power purchase payments, and higher retainage payments.  These were partially offset by higher collections of customer accounts.

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.  

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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, 2008.

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 and Cleco Power have also agreed to contractual terms that require them to pay third parties if certain triggering events occur.  These contractual terms generally are defined as guarantees in FIN 45.  

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 these 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 June 30, 2009, 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 JUNE 30, 2009
							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	$	177,400	$	135,000	$	42,400	$	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
Guarantee issued to Tenaska Gas Storage, LLC on behalf of Acadia		10,000		-		10,000		10,000
Cleco Power
Obligations under standby letter of credit issued to the Louisiana Department of Labor		3,525		-		3,525		-
Obligations under the Lignite Mining Agreement		4,039		-		4,039		-
Total	$	211,864	$	135,000	$	76,864	$	27,228

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 June 30, 2009, the aggregate guarantee of $177.4 million is limited to $42.4 million due to the performance of some of the underlying obligations that were guaranteed.  Management believes it is unlikely that Cleco Corporation will have any other liabilities which would give rise to indemnity claims.  The discounted probability-weighted liability under the guarantees and indemnifications as of June 30, 2009, 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, of which $0.4 million expires on September 27, 2009 and $1.0 million expires on October 20, 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 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 June 30, 2009, 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

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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 Interconnection Agreement.  This guarantee will be effective through the life of the agreement.

In February 2009, Cleco Corporation provided a $10.0 million guarantee to Tenaska Gas Storage, LLC for Acadia’s obligation under the Energy Management Services Agreement.  This guarantee will expire on October 31, 2009.

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 $3.5 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 June 30, 2009, Cleco Power’s 50% exposure for this obligation was approximately $4.0 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 JUNE 30, 2009
			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	$	58,339	$	11,400	$	4,039	$	-	$	42,900
Standby letters of credit		18,525		3,525		-		-		15,000
Total commercial commitments	$	76,864	$	14,925	$	4,039	$	-	$	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 of such individual 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 for 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.

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, 2008.

Retail Rates of Cleco Power

In January 2008, Cleco Power filed its monitoring report for the 12-month period ended September 30, 2007.  On June 1, 2009, Cleco Power filed its monitoring report for the year ended September 30, 2008.  Cleco Power does not anticipate that the LPSC will proceed with its review of these reports until after completion of the rate case.

The LPSC directed Cleco Power to file a base rate case at least 12 months prior to the expected in-service date of Rodemacher Unit 3.  On July 14, 2008, Cleco Power filed a request for a new rate plan with the LPSC to increase its base rates for electricity.  Cleco Power is seeking recovery of revenues sufficient to cover the addition of Rodemacher Unit 3 to its existing expense and rate base levels.  The discovery phase of the rate case is substantially complete.  

On July 27, 2009, Cleco Power notified the Administrative Law Judge that Cleco Power, the LPSC Staff, and the intervenors in the case had made significant progress toward a full resolution of all issues in the case and that the parties anticipate they would be successful in their efforts to achieve an uncontested stipulated settlement in the case.

The anticipated uncontested stipulated settlement with all parties, if approved by the LPSC, is expected to increase retail base revenues, in the first twelve months of Rodemacher Unit 3 commercial operations, by approximately $173.0 million with an anticipated net billing decrease for retail customers of approximately $106.0 million, or 11.0%, including a reduction of approximately $89.0 million resulting from the cessation of collection of and the refund of Rodemacher Unit 3 construction financing based on a five-year crediting period.  The settlement provides for the placement of Rodemacher Unit 3 in rate base and recovery of the operating costs of Rodemacher

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Unit 3 and other costs including costs associated with damage caused by Hurricanes Gustav and Ike.

The settlement includes a Formula Rate Plan (FRP) that has a target return on equity of 10.7%, including returning to retail customers 60.0% of earnings over 11.3% and all earnings over 12.3%.  The capital structure assumes an equity ratio of 51.0%.  The FRP also has a mechanism allowing for recovery of future revenue requirements for the Acadiana Load Pocket transmission project and, if approved, the acquisition of the Acadia power plant as a result of the Cleco Power 2007 Long-Term RFP.  The settlement allows Cleco Power to propose additional projects to the LPSC during the FRP’s initial four-year term.

Cleco Power proposed that the LPSC Staff, Cleco Power, and the intervenors in the case file testimony in support of the settlement on August 24, 2009.  The Administrative Law Judge has reserved September 11, 2009, for an uncontested stipulated settlement hearing.  The results of the uncontested stipulated settlement hearing are expected to be presented to the LPSC.  If approved by the LPSC, the settlement rates are expected to be effective upon the commercial operation of Rodemacher Unit 3, currently anticipated in the fourth quarter of 2009.  For information relating to the risks associated with Cleco Power’s rate increase request, see Part 1, Item 1A, “Risk Factors — Rodemacher Unit 3 Construction Costs” and “— Cleco Power’s Rates and Rate Case” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 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, 2008.

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, 2008.

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, 2008.

Generation RFP

2008 Short-Term RFP for 2009 Resources

In March 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 selected and negotiated a 235-MW peaking product with Acadia.  The product is for supply that started March 1, 2009, and will end October 1, 2009.  

On January 6, 2009, Cleco Power issued a RFP for a minimum capacity amount of 50 MW up to 200 MW in order to serve additional load.  Cleco Power has selected and negotiated a 200-MW intermediate product with NRG Power Marketing, Inc.  The product is for supply that started April 1, 2009, and will end November 1, 2009.

2007 Long-Term RFP

In June 2007, Cleco Power filed a proposed RFP 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 asked for products with a term of 2 to 30 years.  Out of the approximately 600-MW total, up to approximately 350 MW may be sourced from a peaking resource.  After the LPSC review, the RFP was issued in October 2007, and bids were received in December 2007.  On February 26, 2009, Cleco Power announced that it had chosen the acquisition of 50 percent of the Acadia power station, or one of its two 580-MW units, as the lowest bid in its 2007 long-term RFP.  Cleco Power will own and operate one unit and operate the other 580-MW unit on behalf of Acadia.  Cleco Power has completed its due diligence and the parties have executed the definitive agreements.  However, prior to closing the transaction, valued at approximately $300.0 million, Cleco Power must receive approvals from the LPSC and FERC.  In a process that remains under the supervision of an independent monitor appointed by the LPSC, Cleco Power and Acadia plan to complete the transaction in the first quarter of 2010.  Beginning in January 2010, the agreements provide that Acadia will continue to operate the plant and serve Cleco Power under a tolling agreement covering 50 percent of the Acadia power station until the transaction is closed.  This tolling agreement must also be approved by the LPSC and FERC.

Rodemacher Unit 3

In May 2006, Cleco Power began construction of Rodemacher Unit 3 which will provide a portion of the utility’s 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.  Cleco Power has entered into contracts with suppliers to collectively supply over 1.4 million tons of petroleum coke annually for a three-to-five year period beginning in 2009, representing over 90% of Rodemacher Unit 3 fuel requirements for such period.  All environmental permits for the unit have been received.  By Shaw’s estimations, physical construction is estimated at 92% complete as of June 30, 2009.  Cleco Power

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 anticipates the plant will be substantially complete and operational in the fourth quarter of 2009.

In May 2006, Cleco Power and Shaw entered into an Amended EPC Contract, which provided for substantial completion of the construction of Rodemacher Unit 3 by September 30, 2009.  On July 2, 2008, Cleco Power and Shaw amended this contract further to provide for substantial completion as early as June 30, 2009, as well as changes to other commercial terms for a lump-sum price of $794.5 million.  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.  As of June 30, 2009, Cleco Power had incurred approximately $938.9 million in project costs, including AFUDC.  Under the Amended EPC Contract, 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 if certain milestones, approvals, or other terms and conditions are not met, or at Cleco Power’s sole discretion, which would require payment of termination fees.  As of June 30, 2009, the maximum termination costs would have been $790.7 million or an additional $16.4 million more than the capital expended to date.  In support of its performance obligations, Shaw has 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 June 30, 2009, Shaw had issued an additional letter of credit in the amount of $57.2 million with no retained amounts outstanding.  The retention and letters of credit are provided in support of Shaw’s potential payment of liquidated damages, or other payment performance obligations.  The Amended EPC Contract also provides 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, that 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.

In April 2009, Shaw withdrew its request for recovery of $12.3 million in force majeure related costs and a schedule extension of fifteen days allegedly incurred as a result of Hurricanes Gustav and Ike.  In July 2009, Shaw submitted a formal claim covering the same events in the amount of $23.0 million and a schedule extension of 48 days.  Cleco Power is reviewing the documentation for validity and applicability.  Additionally, in June 2009, Shaw notified Cleco of an alleged event of default claiming that the on-site fuel for Rodemacher Unit 3 did not meet the specifications under the Amended EPC Contract.  The parties have submitted this claim through the dispute resolution provisions of the Amended EPC Contract.  The Registrants do not believe the resolution of these claims will have a material adverse effect to the Registrants’ results of operations, financial condition, or cash flows.

Lignite Deferral

At June 30, 2009, and December 31, 2008, Cleco Power had $25.5 million and $26.8 million, respectively, in deferred lignite 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 Deferral” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Oxbow Lignite Mine Acquisition

In April 2009, Cleco Power entered into an agreement with SWEPCO to purchase the Oxbow Lignite Company from North American Coal Corporation (NAC).  The purchase price of approximately $42.0 million includes the lignite reserves, mining equipment, and related assets and permits.  Cleco Power’s 50 percent portion of the purchase price is approximately $12.9 million for the lignite reserves.  The lignite reserves of approximately 120 million tons acquired under this agreement are expected to fuel the Dolet Hills Power Station through 2026.  SWEPCO’s subsidiary, Dolet Hills Lignite Company, LLC, will operate the new mine along with its current operations at the Dolet Hills Lignite Mine on similar terms.  The existing Red River Lignite Supply and Transportation Agreement with NAC will terminate upon the closing of this transaction.  Pending LPSC approval, the closing of this transaction is expected to occur in the fourth quarter of 2009.

Acadiana Load Pocket

In September 2008, Cleco Power entered into an agreement with Lafayette Utilities System, a municipal utility, and Entergy Gulf States Louisiana, a subsidiary of Entergy Corporation, to upgrade interconnected transmission systems in south Louisiana.  The project received the LPSC’s approval in February 2009 and confirmation that it is in the public’s interest.  Also in February 2009, approval was received from Southwest Power Pool, Cleco Power’s reliability coordinator, to begin construction.  The joint project includes expanding and upgrading the electric transmission infrastructure in south central Louisiana in an area known as the “Acadiana Load Pocket.”

The project includes upgrades to certain existing electric facilities as well as the construction of new substations, transmission lines, and capacitor banks.  The total estimated cost is approximately $200.0 million.  Each utility is responsible for various components of the project.  Cleco Power’s portion of the cost is approximately $140.0 million, including AFUDC.  Construction is anticipated to begin in 2009 with the final phase completed in 2012.  Upgrading the interconnected transmission system is expected to increase capacity, reduce

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transmission constraints, and improve electric service for customers served by all three utilities.

Franchises

On January 13, 2009, the Coushatta City Council voted to accept the early renewal of its franchise agreement with Cleco Power.  The Coushatta agreement was set to expire in November 2010.  The renewal extends the agreement for 30 years until January 2039.  Approximately 1,400 Cleco Power customers are located in Coushatta.

On May 14, 2009, the Bunkie City Council voted to accept the early renewal of its franchise agreement with Cleco Power.  The Bunkie agreement was set to expire in September 2012. The renewal extends the agreement for 27 years until May 2036.  Approximately 2,200 Cleco Power customers are located in Bunkie.

On May 19, 2009, the mayor of Abita Springs signed into ordinance a new franchise agreement with Cleco Power.  This franchise agreement replaced the previous Abita Springs agreement which was set to expire in July 2012.  The new agreement term is for 25 years and is set to expire May 2034.  Approximately 710 Cleco Power customers are located in Abita Springs.

On July 22, 2009, the Simmesport City Council voted to accept the early renewal of its franchise agreement with Cleco Power.  The Simmesport agreement was set to expire in January 2012.  The renewal extends the agreement for 28 years until July 2037.  Approximately 1,200 Cleco Power customers are located in Simmesport.

In July 2009, the City of Opelousas notified Cleco Power that it will begin formally requesting proposals from other power companies to supply its electricity needs. The current agreement is set to expire in August 2011.  The City of Opelousas has until December 31, 2009, to notify Cleco of its intent to terminate the agreement at the end of its current term.  If notification is not received, the franchise agreement will automatically renew for an additional ten years.  For the twelve-month period ended June 30, 2009, Cleco Power’s base revenue was $8.1 million from the City of Opelousas.  Approximately 10,000 customers are located in the City of Opelousas.  While the City of Opelousas owns the power system, Cleco Power has performed upgrades and expansions since the inception of the agreement. If the franchise agreement is not renewed by the City of Opelousas, the City of Opelousas will be liable to Cleco Power for the cost of the upgrades and expansions.

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, 2008.

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 March 19, 2008, Cleco Power received a consolidated compliance order and notice of potential penalty (CO/NOPP) from the Louisiana Department of Environmental Quality (LDEQ) for alleged violations of the air quality rules at its Dolet Hills and Rodemacher Power Stations.  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 dispute resolution agreement has been extended on several occasions.  Cleco and the LDEQ recently reached a tentative agreement to settle the pending enforcement action for approximately $22,850.  Because the one year statutory time limit has been reached on the dispute resolution agreement, the LDEQ recently granted Cleco’s request for hearing on the matter until the mandatory public notice is conducted and the tentative settlement agreement is signed.  The matter is currently pending before the Administrative Law Judge until the settlement agreement is finally executed.  Cleco expects the tentative agreement to be executed during the third quarter of 2009, at which time the matter will be closed.

Recent catastrophic events involving coal ash at the Tennessee Valley Authority’s coal ash management impoundments have prompted closer scrutiny by the EPA of coal ash management facilities.  Cleco Power has received a formal request for information under Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act regarding the safety and structural integrity of its coal ash management units.  Cleco has fully responded to the EPA’s request.  Any new, stricter requirements imposed on coal ash management units by the EPA, as a result of this information request, could increase the cost of operating existing units or require them to be upgraded.  At this time, management is unable to determine whether the costs associated with potential stricter requirements will have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

On April 24, 2009, EPA published its proposed finding that greenhouse gas emissions from new motor vehicles and new motor vehicle engines may reasonably be anticipated to endanger public health and welfare.  This proposal is the first step in setting greenhouse gas emission standards for motor vehicles and motor vehicle engines. Although this proposal does not include any greenhouse gas emission standards or make a finding with regard to stationary emission sources, a final positive endangerment finding for mobile sources could lead to the same finding with respect to stationary sources

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such as large power plants.  Because this proposed finding is in the early stages of the regulatory process, management is unable to determine the impact, if any, this proposal may have on the Registrants’ results of operations, financial condition, and cash flows.

On June 26, 2009, the U.S. House of Representatives voted 219-212 to pass the “American Clean Energy and Security Act of 2009” (ACES), which was originally introduced by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA) on March 31, 2009.  The bill imposes a renewable electricity standard for utilities of up to 20% by 2020, and addresses other issues such as energy efficiency, carbon capture and sequestration, and performance standards for new coal units permitted after 2009.  It also includes an economy-wide greenhouse gas (GHG) cap and trade program that requires a reduction in GHG emissions from major U.S. sources of 17% by 2020 and 83% by 2050 compared to 2005 levels.  Under ACES, approximately 80% of emission allowances would be freely allocated during the early years of the cap and trade program.  Over time, however, a greater percentage of allowances would be auctioned, eventually phasing out all free allocations to covered entities, except “trade-vulnerable” industries, and requiring the auction of about 70% of the allowances after 2030.  The Senate is expected to begin drafting its own climate change legislation, which is likely to be based upon ACES.  Cleco anticipates that the Senate Environment and Public Works Committee will attempt to complete hearings and mark-up of a Senate climate bill by early August 2009.  A September 18, 2009 deadline has been set for Senate committees with jurisdiction on climate legislation to complete their mark-ups.

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, 2008.

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, 2008.

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 six months ended June 30, 2009, and June 30, 2008.  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 six months of 2009 and the first six months of 2008.  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, 2008.

For an explanation of material changes in the amount of revenue and expense items of Cleco Power between the second quarter of 2009 and the second quarter of 2008, see “— Results of Operations — Comparison of the Three Months Ended June 30, 2009, and 2008 — 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 six months of 2009 and the first six months of 2008, see “ — Results of Operations — Comparison of the Six Months Ended June 30, 2009, and 2008 — 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, aggregate counterparty credit exposure, and aggregate counterparty concentration levels.  Cleco 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.

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows.  Recent market conditions have limited the availability and have increased the costs of capital for many companies.  The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its businesses.  After assessing the current operating performance, liquidity, and credit ratings, management believes that it will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.  If Cleco Corporation’s credit ratings were to be downgraded by Moody’s and Standard & Poor’s, Cleco Corporation would be required to pay additional fees and higher interest rates under its bank credit and other debt agreements.  Cleco Power is currently rated one level higher by Moody’s than by Standard & Poor’s.  Cleco Power pays fees and interest under its bank credit and other debt agreements based on the higher of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Moody’s, Cleco Power would be required to pay additional fees and higher interest rates.  Cleco Power’s collateral for derivatives is based on the lower of the two credit ratings.  If Cleco Power’s credit ratings were to be downgraded by Standard & Poor’s, Cleco Power would be required to pay additional collateral for derivatives.

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, 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.

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.

At June 30, 2009, Cleco had $118.0 million principal amount of long-term variable-rate debt outstanding under its $150.0 million five-year credit facility at a weighted average interest rate of 0.842%.  The borrowings under the credit facility are considered long-term as the credit facility does not expire until 2011.  The borrowing costs under the facility are equal to LIBOR plus 0.65%, including facility fees.  The existing borrowings had 30-day terms and matured on July 17, 2009, and July 30, 2009.  The amounts of the borrowings were renewed at maturity, rather than repaid.  Each 1% increase in the interest rate applicable to such debt would have resulted in a $1.0 million decrease in pre-tax earnings of Cleco.  Cleco had no short-term variable-rate debt as of June 30, 2009.

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 monitoring 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, current market conditions, and concentration of energy market positions.

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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 June 30, 2009, the positions had a negative mark-to-market value of $0.9 million, which is a decrease of $0.7 million from the negative mark-to-market value of $0.2 million at December 31, 2008.  In addition, these positions resulted in a realized loss of $0.9 million for the six-month period ended June 30, 2009.  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.  Cleco Power’s fuel stabilization policy targets higher levels of minimum hedging percentages and mitigates 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 June 30, 2009, the net mark-to-market impact related to open natural gas positions was a loss of $52.2 million.  Deferred losses relating to closed natural gas positions at June 30, 2009, and December 31, 2008, totaled $8.4 million and $6.4 million, respectively.  

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 Cleco Power’s hedge transactions for the three and six months ended June 30, 2009, as well as the VaR at December 31, 2008, is summarized below:

	FOR THE THREE MONTHS  ENDED JUNE 30, 2009
(THOUSANDS)	HIGH		LOW		AVERAGE
Economic hedges	$	208.6	$	78.2	$	146.9
Fuel cost hedges	$	6,407.5	$	2,076.3	$	4,230.2

	FOR THE SIX MONTHS  ENDED JUNE 30, 2009						AT JUNE 30,		AT DECEMBER 31,
(THOUSANDS)	HIGH		LOW		AVERAGE		2009		2008
Economic hedges	$	268.1	$	78.2	$	161.2	$	122.4	$	239.0
Fuel cost hedges	$	7,292.8	$	2,076.3	$	4,470.6	$	3,677.1	$	6,519.0

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.  

At June 30, 2009, Cleco Power had $30.0 million principal amount of long-term variable-rate debt outstanding under its $275.0 million five-year credit facility at a weighted average interest rate of 0.63%.  The borrowings under the credit facility are considered long-term as the credit facility does not expire until 2011.  The borrowing costs under the facility are equal to LIBOR plus 0.40%, including facility fees.  The existing borrowing has a 30-day term and matured on July 27, 2009.  The amounts of the borrowings were renewed at maturity, rather than repaid.  Each 1% increase in the interest rate applicable to such debt would have resulted in a $0.3 million decrease in pre-tax earnings of Cleco Power.  Cleco Power had no short-term variable-rate debt as of June 30, 2009.

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.  

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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 second fiscal quarter of 2009, there have been no changes in either Cleco Corporation’s and 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 and 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 10 — 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 10 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”

ITEM 1A.     RISK FACTORS

There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A of the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “2008 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 2008 Annual Report on Form 10-K.  

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  (a) The Annual Meeting of Shareholders of Cleco Corporation was held April 24, 2009, in Pineville, Louisiana.

  (b) Proxies for the election of directors were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.  There was no solicitation in opposition to management’s nominees, and all nominees listed in the Proxy Statement were elected.

  (c) The following is a tabulation of the votes cast upon each proposal presented at the Annual Meeting of Shareholders of Cleco Corporation on April 24, 2009.

      (1) Election of Directors to serve until the 2012 Annual Meeting of Shareholders:

CLASS III DIRECTORS	FOR	WITHHELD	BROKER NON-VOTES
J. Patrick Garrett	55,257,286	1,465,811	0
Elton R. King	55,485,928	1,237,169	0
Logan W. Kruger	55,716,172	1,006,925	0

The term of office as a director of each of Messrs. Richard B. Crowell, Michael H. Madison, William L. Marks, Robert T. Ratcliff, Sr., William H. Walker, Jr., W. Larry Westbrook, and General Sherian G. Cadoria continued after the meeting.  

     (2) Ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as Cleco’s independent registered public accounting firm for the fiscal year ending December 31, 2009:

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
55,417,098	1,148,420	157,579	0

        (3)   Adoption of the Cleco Corporation 2010 LTICP:

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
42,764,752	7,696,458	423,119	5,838,768

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ITEM 6.     EXHIBITS

CLECO CORPORATION
3.1	Bylaws of Cleco Corporation, revised effective July 1, 2009
10.1	Executive Employment Agreement between Cleco Corporation and George W. Bausewine effective as of May 5, 2009
12(a)	Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the three-, six-, and twelve-month periods ended June 30, 2009, 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 July 1, 2009
12(b)	Computation of Ratios of Earnings to Fixed Charges for the three-, six-, and twelve-month periods ended June 30, 2009, 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 POWER	2009 2ND 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 - Investor Relations & Chief Accounting Officer

Date:  August 5, 2009

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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 - Investor Relations & Chief Accounting Officer

Date:  August 5, 2009

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EX-3.1

EXHIBIT 3.1

BYLAWS

OF

CLECO CORPORATION

(Revised effective July 1, 2009)

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

i

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

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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
ARTICLE 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

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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,

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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 eleven (11) 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

23

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

25

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

26

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.

27

(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.

28

(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 July 1, 2009)

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

i 

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		12
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                                                                                                                                 < /td>		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

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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 eleven (11) 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

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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

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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.          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.

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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 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

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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 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

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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 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

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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 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

15 

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 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,

16 

preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(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

17 

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 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

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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

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EX-10.1

EXHIBIT 10.1

CLECO CORPORATION

EXECUTIVE EMPLOYMENT AGREEMENT

(Level One)

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between George W. Bausewine (“Executive”), and Cleco Corporation, a Louisiana corporation (the “Company”), and is intended to amend, restate, and replace, in its entirety, that certain Executive Employment Agreement (Level 1) by and between the Company and Executive dated May 5, 2005 (the “Prior Agreement”).

1.           Employment; Term:

1.1       Position.  The Company shall employ and retain Executive as its Senior Vice President – Corporate Services or in such other capacity or capacities as shall be mutually agreed upon, from time to time, by Executive and the Company, and Executive agrees to be so employed, subject to the terms and conditions set forth herein.  Executive’s duties and responsibilities shall be those assigned to him or her hereunder, from time to time, by the Chief Executive Officer of the Company and shall include such duties as are the type and nature normally assigned to similar executive officers of a corporation of the size, type and stature of the Company.  Executive shall report to the Company’s Chief Executive Officer.

1.2       Term.  Executive’s employment hereunder shall commence as of May 5, 2009 (the “Effective Date”) and shall continue for two successive years; provided that on the first anniversary of the Effective Date and each succeeding anniversary thereafter, this Agreement shall be renewed for an additional one-year term unless either party provides written notice to the other that this Agreement shall not be further renewed, such notice to be provided not later than 30 days prior to the end of the then-current term hereof (the period between the Effective Date and the expiration or termination of this Agreement referred to herein as the “Employment Term”).

1.3       Full Time and Attention.  During the Employment Term, Executive shall devote his or her full time and attention to the business of the Company and will not, without the prior written consent of the Chief Executive Officer of the Company, be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activities are pursued for gain, profit or other pecuniary advantage.

Notwithstanding the foregoing, Executive shall not be prevented from (a) engaging in any civic or charitable activity for which Executive receives no compensation or other pecuniary advantage, (b) investing his or her personal assets in businesses which do not compete with the Company, provided that such investments will not require any services on the part of Executive in the operation of the affairs of the businesses and that Executive’s participation is solely that of an investor, or (c) purchasing securities in any corporation whose securities are regularly traded, provided that such purchases will not result in Executive owning beneficially at any time 5% or more of the equity securities of any corporation engaged in a business competitive with that of the Company.

2.           Compensation and Benefits:

2.1       Base Compensation.  The Company shall pay Executive an annual salary equal to his or her annual base salary in effect as of the Effective Date, such amount shall be prorated and paid in equal installments in accordance with the Company’s regular payroll practices and policies (Executive’s “Base Compensation”).  Executive’s Base Compensation shall be reviewed not less often than annually and may be increased or reduced by the Board of Directors of the Company (the “Board”), in its sole discretion;

provided, however, that Executive’s Base Compensation may not be reduced at any time unless such reduction is part of a reduction in pay uniformly applicable to all officers of the Company.

2.2       Bonuses, Incentives and Other Benefits.  During the Employment Term, Executive shall be eligible for participation in the Company’s:

a. Annual Incentive Compensation Plan (referred to as the “Incentive Plan”; any bonus paid thereunder referred to as an “Incentive Bonus”);

b.           2000 Long-Term Incentive Compensation Plan (the “Equity Incentive Plan”); and

c.           Supplemental Executive Retirement Plan (the “SERP”),

each as may be amended, restated, supplemented or replaced, from time to time, in accordance with its terms.

Executive further shall participate in such plans, policies, and programs as may be maintained, from time to time, by the Company or any affiliate thereof, at least 80% of the common stock or other equity interests of which is owned, directly or indirectly, by the Company (an “Affiliate”), for the benefit of senior executives or employees of the Company.  Such plans, policies and programs may include, without limitation, profit sharing, life insurance, and group medical and other welfare benefit plans.  Any payments or benefits thereunder shall be subject to and determined in accordance with the specific terms and conditions of the documents evidencing any such separate plans, policies, and programs.

2.3       Reimbursement of Expenses.  The Company shall reimburse Executive for such reasonable and necessary expenses as are incurred in carrying out his or her duties hereunder, consistent with the Company’s standard policies and annual budget.  The Company’s obligation to reimburse Executive hereunder shall be contingent upon the presentment by Executive of an itemized accounting of such expenditures.

3.         Termination:

3.1       Termination Payments to Executive.  As otherwise provided in this Section 3, in the event of his or her termination of employment with the Company (the date of such termination referred to herein as Executive’s “Termination Date”), Executive may be paid:

a. Executive’s Base Compensation in effect as of his or her Termination Date for the remainder of his or her Employment Term, such term determined as if the notice of nonrenewal described in Section 1.2 hereof was furnished to Executive as of the Termination Date, but in no event less than his or her annualized Base Compensation.

b. Executive’s Incentive Bonus for the year in which his or her Termination Date occurs,  prorated to reflect Executive’s actual period of service during such year.

c. The Company shall, at the written request of Executive:

i. Purchase of the principal residence occupied by Executive as of his or her Termination Date (Executive’s “Principal Residence”), provided such Principal Residence is located within 60 miles of Executive’s primary work location, for an amount equal to the greater of (x) the fair market value of such residence as determined by the Company’s third party relocation service, or (y) the purchase

2

price of such residence and the documented cost of any capital improvements made to the such residence made by Executive, but not more than 120% of such purchase price; and

ii. Pay or reimburse Executive for the cost of relocating Executive, his or her immediate family and their household goods and other personal property, in accordance with the Company’s usual relocation practice, to any location in the continental United States.

Notwithstanding the foregoing, the Company shall not be obligated hereunder, unless Executive actually relocates to a new principal residence that is more than 60miles from his or her Principal Residence and Executive submits his or her written request to the Company for the purchase of such residence not later than 12 months after Executive’s Termination Date.  In any event, payment hereunder shall be made not later than December 31st of the calendar year following the year in which Executive’s Termination Date occurs.

d. If Executive timely elects to continue coverage under the Company’s group medical plan within the meaning of Code Section 4980B(f)(2), the Company shall pay to the Executive an amount equal to the continuation coverage premium for the same type and level of coverage elected by Executive and/or his or her spouse or dependents for a period of 18 months or until the Executive secures other employment where group health insurance is provided, whichever period is shorter.

e. Executive’s Incentive Bonus in the target amount, determined with respect to the year in which his or her Termination Date occurs.

Any amount or benefit provided hereunder shall be in lieu of any severance or other cash payment available under any severance pay plan or similar arrangement maintained by the Company or an Affiliate.  The amount and benefits described herein shall be in addition to any amount or benefit the Company is required by law to provide, including, without limitation, Executive’s accrued but unpaid wages, and any amount or benefit to which Executive may be entitled as of his or her Termination Date under any separation benefit or retirement plan maintained by the company or its Affiliates.

3.2       Waiver and Release.  Any amount payable to Executive under this Section 3, other than a payment on account of Executive’s death or Disability, shall be contingent upon Executive’s timely execution and delivery to the Company of a waiver and release in form and substance satisfactory to the Company.   If Executive fails to execute such a waiver and release at the time and in the manner requested by the Company, no payment, benefit or reimbursement shall be due hereunder.

3.3       Death or Disability.  If Executive dies or becomes Disabled during the Employment Term, Executive’s employment hereunder shall immediately terminate and the Company’s obligations hereunder shall cease.  In such event, the Company shall pay to Executive (or his or her estate) an amount determined in accordance with Section 3.1b hereof in the form of a single-sum at the time Executive would have otherwise received such bonus notwithstanding his or her death or Disability.   For purposes of this Section 3.2, Executive shall be deemed “Disabled” or a “Disability” shall be deemed to occur if Executive is actually receiving benefits under the Company’s separate long-term disability plan.

3.4       Company’s Termination for Cause.  This Agreement and Executive’s employment hereunder may be terminated by the Company on account of Cause.  In such event, no payments or benefits shall be due to Executive from the Company, except as may be required under a separate plan,

3

policy or program evidencing a retirement or other benefit arrangement or as may be required by law to be provided.

For purposes of this Agreement, “Cause” means that Executive 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 Executive has committed intentional wrongful disclosure of proprietary information or Confidential Information (as defined in Section 5.2 hereof), 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 Executive;

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 Executive 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 Executive 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.

3.5       Executive’s Constructive Termination.  Executive may terminate this Agreement and his or her employment on account of a Constructive Termination. In such event, the Company shall pay or provide to Executive:

a. The amounts determined under Sections 3.1a, 3.1d and 3.1e hereof, which shall be payable in the form of a single-sum 45 days after Executive’s Termination Date, provided that Executive has then satisfied all applicable conditions; and

b. The benefit described in Section 3.1c hereof, subject to the terms and conditions set forth therein.

For purposes of this Agreement, “Constructive Termination” means:

4

a. A material reduction (other than a reduction in pay uniformly applicable to all officers of the Company) in the amount of Executive’s Base Compensation;

b. A material reduction in Executive’s authority, duties or responsibilities from those contemplated in Section 1.1 of this Agreement; or

c.           A material breach of this Agreement by the Company.

No event or condition described in this Section 3.5 shall constitute a Constructive Termination unless (a) Executive provides to the Company written notice of his or her objection to such event or condition not later than 60 days after Executive first learns of such event or condition, (b) such event or condition is not corrected by the Company promptly after receipt of such notice, but in no event more than 30 days after receipt of notice, and (c) Executive resigns his or her employment with the Company and all Affiliates not more than 15 days following the expiration of the 30-day period described in subparagraph (b) hereof.

3.6       Termination by the Company, Without Cause.  The Company may terminate this Agreement and Executive’s employment hereunder, without Cause, upon 30 days prior written notice to Executive (or such shorter period as may be agreed upon by Executive and the Chief Executive Officer.  In such event, the Company shall pay or provide to Executive the amounts and benefits described in Section 3.5 hereof, subject to the terms and conditions set forth therein.

3.7       Termination by Executive.  Executive may terminate this Agreement and his or her employment hereunder, other than on account of Constructive Termination, upon 30 days prior written notice to the Company or such shorter period as may be agreed upon by the Chief Executive Officer and Executive.  In such event, no additional payments or benefits shall be due hereunder, except as may be provided under a separate plan, policy or program evidencing a retirement or other benefit plan or as may be required by law to be provided.

3.8       Return of Property.  Upon termination of this Agreement for any reason, Executive  shall promptly return to the Company all of the property of the Company and its Affiliates, including, without limitation, automobiles, equipment, computers, fax machines, portable telephones, printers, software, credit cards, manuals, customer lists, financial data, letters, notes, notebooks, reports and copies of any of the above and any Confidential Information that is in the possession or under the control of Executive, regardless of the form in which it is held or maintained.

3.9       Expiration of Agreement.  Upon expiration of the term of this Agreement, including any renewal thereof, the obligations of the Company hereunder shall cease.  Executive shall then be deemed to be an at-will employee of the Company or an Affiliate, as the case may be, subject to the rights and limitations attendant to such status.  He or she shall be and remain bound by the provisions of Section 5 hereof, which shall survive such expiration.

4.           Change in Control:

4.1       Waiver and Release.  Any amount payable to Executive under this Section 4, whether on account of Change in Control or a Business Transaction, shall be contingent upon Executive’s timely execution and delivery to the Company of a waiver and release in form and substance satisfactory to the Company.  If Executive fails to execute such a waiver and release at the time and in the manner requested by the Company, no payment, benefit or reimbursement shall be due hereunder.

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4.2       Definitions.  The terms “Change in Control” and “Business Transaction” shall have the meanings ascribed to them in the Equity Incentive Plan, as the same may be amended from time to time.  The term “Good Reason” shall mean that in connection with a Change in Control:

a. Executive’s Base Compensation in effect immediately before such Change in Control is reduced or there is a significant reduction or termination of Executive’s rights to any employee benefit in effect immediately prior to the change;

b. Executive’s authority, duties or responsibilities are significantly reduced from those contemplated in Section 1.1 hereof or Executive has reasonably determined that, as a result of a change in circumstances that significantly affects his or her employment with the Company or an Affiliate, he or she is unable to exercise the authority, power, duties and responsibilities contemplated in such section;

c. Executive is required to be away from his or her office in the course of discharging his or her duties and responsibilities under this Agreement significantly more than was required prior to the Change in Control; or

d. Executive is required to transfer to an office or business location located more than 60 miles from the primary location to which he or she was assigned prior to the Change in Control.

No event or condition described in this Section 4.2 shall constitute Good Reason unless (a) Executive gives the Company written notice of his or her objection to such event or condition within 60 days after Executive first learns of it, (b) such event or condition is not promptly corrected by the Company, but in no event later than 30 days after receipt of such notice, and (c) Executive resigns his or her employment with the Company and its Affiliates not more than 60 days following the expiration of the 30-day period described in subparagraph (b) hereof.

4.3       Termination In Connection With a Change in Control.  If Executive’s employment is involuntarily terminated by the Company, without Cause, and other than on account of Executive’s death or Disability or Executive terminates his or her employment hereunder for Good Reason, either occurring during the 60-day period preceding or the 36-month period following a Change in Control, then notwithstanding any provision of this Agreement to the contrary and in lieu of any compensation or benefits otherwise provided or payable hereunder:

a. The Company shall pay to Executive an amount equal to three times the sum of Executive’s annualized Base Compensation and target bonus, each determined immediately before the consummation of the Change in Control, which amount shall be payable in the form of a single-sum 30 days after Executive’s Termination Date or the first business day thereafter;

b. The Company shall provide to Executive the benefit described in Section 3.1c hereof, subject to the terms and conditions set forth therein;

c. The Company shall pay to Executive the amount described in Section 3.1d hereof, subject to the terms and conditions set forth therein, but for a period of 36 months, which amount shall be payable in the form of a single-sum 30 days after Executive’s Termination Date or the first business day thereafter;

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d. The Company shall pay to Executive an amount equal to three times the maximum matching contribution determined under the Cleco Corporation 401(k) Savings and Investment Plan, as the same may be amended or restated from time to time, determined as if Executive deferred thereunder the maximum amount permitted under Code Section 402(g); such amount shall be paid in the form of a single-sum payment 30 days after Executive’s Termination Date or the first business day thereafter;

e. Vesting shall be accelerated, any restrictions shall lapse, and all target and opportunity performance objectives shall be deemed satisfied at the maximum level as to any then outstanding grant or award made under the Equity Incentive Plan and/or the 1990 Long-Term Incentive Compensation Plan; Executive shall further be entitled to such additional benefits or rights as may be provided in the documents evidencing such plans or the terms of any agreement evidencing such grant or award; and

f. Executive shall be fully vested for purposes of any service or similar requirement imposed under the SERP, regardless of the actual number of his or her years of service; Executive shall be credited with an additional three years of age for purposes of determining his or her benefit percentage under the SERP, but in no event shall such benefit percentage be less than 50%; and Executive shall be credited with an additional three years of age for purposes of determining any reduction taken with respect to benefits commencing before Executive’s normal retirement date (as defined in such plan).

4.4       Tax Payment. If any payment to Executive pursuant to this Agreement or any other payment or benefit made for the benefit of Executive by the Company or an Affiliate in connection with a Change in Control is subject to the excise tax imposed under Code Section 4999 or any similar excise or penalty tax payable under any United States federal, state, local or other law, the Company shall pay to Executive an amount such that, after the payment by Executive of all taxes due on such amount, there remains a balance sufficient to pay the principal amount of such excise or penalty tax.  Executive shall promptly submit to the Company the amount to be paid under this Section 4.4, together with supporting documentation.  If Executive and the Company disagree as to such amount, an independent public accounting firm appointed by the Company shall make such determination, and such determination shall be final and binding on the parties hereto.  Any payment due hereunder shall be made by the Company in the form of a single-sum promptly, but in no event later than December 31st of the calendar year following the year in which Executive remits the amount of such excise or penalty tax to the Internal Revenue Service or other taxing authority.

4.5       Business Transaction Benefit.  If Executive’s employment with the Company and its Affiliates is involuntarily terminated by the Company in connection with a Business Transaction, other than on account of Cause, then Executive shall receive the benefits described in Sections 4.3e and 4.3f hereof.  Further, if Executive is not rehired by the successor or surviving entity involved in such transaction, the Company shall pay to Executive the amount described in Section 3.6 hereof, subject to the terms and conditions set forth therein.

5.           Limitations on Activities:

5.1.      Consideration for Limitation on Activities.  Executive acknowledges that the execution of this Agreement and the payments described herein constitute consideration for the limitations on activities set forth in this Section 5, the adequacy of which is hereby acknowledged.

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5.2       Confidential Information.  Executive recognizes and acknowledges that during the terms of his or her employment, he or she has and will have access to confidential, proprietary, non-public information concerning the Company and its Affiliates, which may include, without limitation, (a) books and records relating to operations, finance, accounting, personnel and management, (b) price, rate and volume data, future price and rate plans, and test data, (c) information related to product design and development, (d) computer software, customer lists, information obtained on competitors, and sales tactics, and (e) various other non-public trade or business information, including business opportunities, marketing or business diversification plans, acquisitions, methods and processes, and financial data and the like (collectively, the “Confidential Information”).  Executive agrees that he or she will not at any time, either while employed by the Company or afterwards, make any independent use of, or disclose to any other person or organization (except as authorized by the Company or pursuant to court order) any of the Confidential Information.

5.3       Non-Solicitation.  Executive agrees that during the one-year period commencing as of the date of voluntary termination by Executive as described in Section 3.7 hereof or the involuntary termination of Executive on account of Cause as described in Section 3.4 hereof, he or she shall not, directly or indirectly, for his or her own benefit or on behalf of another or to the Company’s or an Affiliate’s detriment:

a. Hire or offer to hire any of the Company’s or Affiliate’s officers, employees or agents;

b. Persuade or attempt to persuade in any manner any officer, employee or agent of the Company or an Affiliate to discontinue any relationship with the Company; or

c. Solicit or divert or attempt to divert any customer or supplier of the Company or an Affiliate.

The provisions of this Section 5.3 shall apply in the locations set forth on Exhibit A hereto, as the same may be amended by the Company from time to time.  Executive acknowledges that the Company and its Affiliates are presently doing business in such locations and that during the Employment Term Executive will be required to provide services to or for the benefit of the Company or its Affiliates in such locations.

5.4       Business Reputation.  Executive agrees that during the Employment Term and at all times thereafter, he or she shall refrain from performing any act, engaging in any conduct or course of action or making or publishing an adverse, untrue or misleading statement which has or may reasonably have the effect of demeaning the name or business reputation of the Company or its Affiliates or which adversely affects (or may reasonably adversely affect) the best interests, economic or otherwise, of the Company or an Affiliate.

5.5       Restrictions Reasonable.  The parties agree that each of the restrictions set forth in this Section 5 is intended to constitute a separate restriction.  Accordingly, should any such prohibition be declared invalid or unenforceable, such prohibition shall be deemed severable from and shall not affect the remainder thereof.  The parties further agree that each of the foregoing restrictions is reasonable in both time and geographic scope.  The parties further agree that should a court or arbitrator determine that any restriction set forth herein is unenforceable, such court of arbitrator may reform such restriction to the extent necessary to provide for its enforcement under applicable law.

5.6       Remedies.  In the event of a breach or threatened breach by Executive of the provisions of Sections 5.2, 5.3 or 5.4 hereof, Executive agrees that (a) the Company shall be entitled to a temporary restraining order or a preliminary injunction, without the necessity of posting bond in connection therewith, which may be obtained by means of a judicial proceeding notwithstanding the provisions of

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Section 6.16 hereof, and (b) any additional payments or benefits due to Executive or his or her spouse or dependents under Sections 3 and 4 hereof shall be canceled and forfeited, except any amount tendered to Executive as consideration for his or her waiver and release.  Nothing herein shall be construed as prohibiting the Company from pursuing any other remedy available to it for such breach or threatened breach, including the recovery of damages from Executive.

6.           General:

6.1       Specified Executive Delay.  In the event the Company determines that Executive is a “specified employee” within the meaning of Code Section 409A as of his or her Termination Date, then, notwithstanding any provision of this Agreement to the contrary, the Company shall postpone until the first business day of the seventh calendar month following Executive’s Termination Date (the “Delayed Payment Date”) any payment or benefit hereunder which is deemed on account of Executive’s separation from service and not otherwise permitted to be paid or furnished under Code Section 409A, including any regulation or guidance promulgated thereunder.  Any payment made as of Executive’s Delayed Payment Date shall include the principal amount of all payments suspended between Executive’s Termination Date and such date, without liability for interest or other loss of investment opportunity.

6.2       Mitigation Not Required.  Except as provided in Section 3.1d hereof, as a condition of any payment hereunder, Executive shall not be required to mitigate the amount of such payment by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of Executive under this Agreement.

6.3       Attorneys’ Fees and Costs.  In the event any dispute in connection with this Agreement arises with respect to obligations of Executive or the Company that were required prior to the occurrence of a Change in Control, all costs, fees and expenses, including attorney fees, of any arbitration or other legal action in connection with such matters in which Executive substantially prevails, shall be borne by the Company.

After a Change in Control has occurred, Executive shall not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive’s rights under this Agreement.  Accordingly, if, following a Change in Control, the Company fails to comply with any of its obligations under this Agreement or the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, Executive shall be entitled to retain counsel of Executive’s choice, at the expense of the Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, except as to any action brought to enforce the provisions of Section 5 hereof.  In such event, the Company shall pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by Executive in connection with any of the foregoing, without regard to whether Executive prevails, in whole or in part.

In no event shall Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration, litigation or other legal action in connection with this Agreement.

If Executive claims the reimbursement of fees, costs or expenses hereunder, Executive’s claim shall be made not later than the last day of the calendar year following the year in which the expense was incurred.  The Company shall pay such amount promptly, but not later than the last day of the calendar year following the year in which Executive claims reimbursement hereunder.

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6.4       No Set-Off.  There shall be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to Executive provided for in this Agreement.

6.5       Assistance with Litigation.  After Executive’s Termination Date and for a period of one year after the end of the last period with respect to which Executive will have received any compensation under this Agreement, Executive will furnish such information and proper assistance as may be reasonably necessary in connection with any litigation in which the Company or an Affiliate is then or may become involved.

6.6       Headings.  Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

6.7       Entire Agreement.  This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no other agreements, understandings, restrictions, representations or warranties among the parties other than those set forth herein.  Executive expressly acknowledges that this Agreement extinguishes, in their entirety, the rights and obligations of the parties under Executive’s Prior Agreement.

6.8       Amendments.  This Agreement may be amended or modified at any time in any or all respects, but only by an instrument in writing executed by the parties hereto.

6.9       Choice of Law.  The validity of this Agreement, the construction of its terms, and the determination of the rights and duties of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Louisiana applicable to contracts made to be performed wholly within such state.

6.10     Notices.  All notices and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier to a telecopier number given below, provided that a copy is sent by a nationally recognized overnight delivery service (receipt requested), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case as follows:

If to Executive:             Last address on file with the Company

If to the Company:        Cleco Corporation

2030 Donahue Ferry Road

Pineville, LA 71360

Telecopier: 318- 484-7777

Attention: Chief Executive Officer

or to such other addresses as a party may designate by notice to the other party.

6.11           Assignment.  This Agreement will inure to the benefit of and be binding upon the Company, its Affiliates, and their successors and assigns, including, without limitation, any person, partnership, company, corporation or other entity that may acquire substantially all of the Company’s assets or business or with or into which the Company may be liquidated, consolidated, merged or otherwise combined, and will inure to the benefit of and be binding upon Executive, his or her heirs, estate, legatees and legal representatives.  If payments become payable to Executive’s surviving spouse or other assigns and such person thereafter dies, such payment will revert to Executive’s estate.

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6.12     Severability.  Each provision of this Agreement is intended to be severable.  In the event that any one or more of the provisions contained in this Agreement 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 Agreement, 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 Agreement without such provision.

6.13     Withholding.  As a condition of the receipt of any payment or benefit hereunder, the Company or an Affiliate shall be entitled to withhold any federal, state or local taxes required by law to be withheld.

6.14     Survival.  Notwithstanding anything herein to the contrary, to the extent applicable, the rights and obligations of the Company under Sections 3, 4, and 6 hereof and the rights and obligations of Executive under Sections 5 and 6, shall remain operative and in full force and effect regardless of the expiration or termination of this Agreement.

6.15     Waiver.  The failure of either party to insist in any one or more instances upon performance of any terms or conditions of this Agreement will not be construed as a waiver of future performance of any such term, covenant, or condition and the obligations of either party with respect to such term, covenant or condition will continue in full force and effect.

6.16     Arbitration.  Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, 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.

The existence of any claim or cause of action by Executive, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any provision hereof.  The Company’s remedies for breach of this Agreement shall be cumulative and the pursuit of one remedy shall not be deemed to exclude any other remedies.

This Executive Employment Agreement is executed in multiple counterparts as of the dates set forth below, each of which shall be deemed an original, to be effective as of the Effective Date designated above.

Cleco Corporation:                                                                                     Executive:

By:     /s/  Michael H. Madison                                                                      /s/ George W. Bausewine

Its:      President and CEO                                                                             Date:  April 28, 2009      

Date:     April 28, 2009                                                                                        

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CLECO CORPORATION

EXECUTIVE EMPLOYMENT AGREEMENT

EXHIBIT A

This Exhibit A is intended to form a part of that certain Executive Employment Agreement by and between Cleco Corporation and George W. Bausewine effective as of May 5, 2009.  The parties agree that the proscriptions set forth in Section 5.3 thereof shall apply in the State of Louisiana, Parishes of:

Acadia

Allen

Avoyelles

Beauregard

Calcasieu

Catahoula

DeSoto

Evangeline

Grant

Iberia

Jefferson Davis

Lafayette

Natchitoches

Rapides

Red River

Sabine

St. Landry

St. Martin

St. Mary

St. Tammany

Vernon

Washington

Executive and the Company agree that the Company shall amend this Exhibit A, from time to time, to eliminate Parishes in which the Company is no longer doing business and to add Parishes in which the Company is currently doing business.

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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 SIX MONTHS ENDED			FOR THE TWELVE MONTHS ENDED
(THOUSANDS, EXCEPT RATIOS)				JUNE 30, 2009
Earnings from continuing operations	$	27,026		$	33,675		$	84,356
Equity income/loss and dividends from investees		3,125			14,876			14,405
Income taxes		6,949			8,275			14,673
Earnings from continuing operations before income taxes	$	37,100		$	56,826		$	113,434
Fixed charges:
Interest, long-term debt	$	16,465		$	33,409		$	55,132
Interest, other (including interest on short-term debt)		3,104			6,888			26,795
Amortization of debt expense, premium, net		581			1,169			2,317
Portion of rentals representative of an interest factor		134			197			513
Total fixed charges	$	20,284		$	41,663		$	84,757
Earnings from continuing operations before income taxes	$	37,100		$	56,826		$	113,434
Plus:  total fixed charges from above		20,284			41,663			84,757
Plus:  amortization of capitalized interest		102			204			407
Earnings from continuing operations before income taxes and fixed charges	$	57,486		$	98,693		$	198,598
Ratio of earnings to fixed charges		2.83	x		2.37	x		2.34	x
Total fixed charges from above		20,284			41,663			84,757
Preferred stock dividends		15			29			54
Total fixed charges and preferred stock dividends		20,299			41,692			84,811
Ratio of earnings to combined fixed charges and preferred stock dividends		2.83	x		2.37	x		2.34	x

EX-12.B

CLECO POWER  EXHIBIT 12(b)

Computation of Ratios of Earnings to Fixed Charges

	FOR THE THREE MONTHS ENDED			FOR THE SIX  MONTHS ENDED			FOR THE TWELVE MONTHS ENDED
(THOUSANDS, EXCEPT RATIOS)				JUNE 30, 2009
Earnings from continuing operations	$	30,206		$	45,224		$	98,787
Income taxes		8,916			12,716			24,103
Earnings from continuing operations before income taxes	$	39,122		$	57,940		$	122,890
Fixed charges:
Interest, long-term debt	$	16,465		$	33,409		$	55,132
Interest, other (including interest on short-term debt)		926			4,790			22,876
Amortization of debt expense, premium, net		535			1,076			2,127
Portion of rentals representative of an interest factor		134			197			513
Total fixed charges	$	18,060		$	39,472		$	80,648
Earnings from continuing operations before income taxes	$	39,122		$	57,940		$	122,890
Plus:  total fixed charges from above		18,060			39,472			80,648
Earnings from continuing operations before income taxes and fixed charges	$	57,182		$	97,412		$	203,538
Ratio of earnings to fixed charges		3.17	x		2.47	x		2.52	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:  August 5, 2009

/s/ Michael H. Madison

Michael H. Madison

President and Chief Executive Officer

EX-31.2

CLECO CORPORATION  EXHIBIT 31.2

Certification

I, Darren J. Olagues, 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:  August 5, 2009

/s/  Darren J. Olagues

Darren J. Olagues

Senior Vice President & 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: August 5, 2009

/s/  Michael H. Madison

Michael H. Madison

Chief Executive Officer

EX-31.4

CLECO POWER LLC  EXHIBIT 31.4

Certification

I, Darren J. Olagues, 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:  August 5, 2009

/s/  Darren J. Olagues

Darren J. Olagues

Senior Vice President & 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 June 30, 2009, 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:  August 5, 2009

/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 June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darren J. Olagues, Senior Vice President & 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:  August 5, 2009

/s/  Darren J. Olagues

Darren J. Olagues

Senior Vice President & 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 June 30, 2009, 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:  August 5, 2009

/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 June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darren J. Olagues, Senior Vice President & 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:  August 5, 2009

/s/  Darren J. Olagues

Darren J. Olagues

Senior Vice President & CFO