Prior to April 30, 2011, Cleco reported its investment in Cajun on the equity method of accounting. In conjunction with the disposition of Acadia Unit 2 to Entergy Louisiana, APH received 100% ownership in Acadia in exchange for its 50% ownership interest in Cajun, and Acadia became a consolidated subsidiary of APH. Following the disposition, Acadia’s assets, liabilities, revenues, expenses, and cash flows are presented on the corresponding line items of Cleco’s condensed consolidated financial statements, prospectively. For additional information on the Acadia Unit 2 transaction, see Note 15 — “Acadia Transactions — Acadia Unit 2.”

Cleco and Cleco Power report the investment in Oxbow on the equity method of accounting. Under the equity method, the assets and liabilities of this entity are reported as equity investment in investees on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets. The revenue and expenses of this entity are netted and reported as equity income or loss from investees on Cleco and Cleco Power’s Condensed Consolidated Statements of Income. For additional information on the operations of these entities, see Note 10 — “Variable Interest Entities.”

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 GAAP 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 GAAP. 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 additional information on recent authoritative guidance and its effect on financial results, see Note 2 — “Recent Authoritative Guidance.”

Property, plant and equipment consist primarily of regulated utility generation and energy transmission assets. Regulated assets, utilized primarily for retail operations and electric transmission and distribution, are stated at the cost of construction, which includes certain materials, labor, payroll taxes and benefits, administrative and general costs, and the estimated cost of funds used during construction. Jointly owned assets are reflected in property, plant and equipment at Cleco Power’s share of the cost to construct or purchase the assets. Property, plant and equipment consist of:

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, 2011, and December 31, 2010, $35.2 million and $41.0 million of cash, respectively, were restricted. At June 30, 2011, restricted cash consisted of $0.1 million under the Diversified Lands mitigation escrow agreement, $26.4 million reserved at Cleco Power for future storm restoration costs, $8.1 million at Cleco Katrina/Rita restricted for payment of operating expenses, interest, and principal on storm recovery bonds and $0.6 million reserved at Cleco Power for a renewable energy grant received from the Louisiana Department of Natural Resources. The $5.8 million net decrease in restricted cash from December 31, 2010, to June 30, 2011, is primarily due to the use of Cleco Katrina/Rita funds for a scheduled storm recovery bond payment of $6.3 million and related interest of $3.8 million made in March 2011 and the use of $6.1 million of GO Zone bond funds during the six months ended June 30, 2011. These decreases were partially offset by $9.4 million of collections for Cleco Katrina/Rita funds, $0.6 million of a renewable energy grant received, and $0.4 million in collections of storm recovery costs.

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes under GAAP. 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 additional information about fair value levels, see Note 4 — “Fair Value Accounting.”

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 applies the authoritative guidance as it relates to derivatives and hedging 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 because Cleco Power takes physical delivery and the instruments and positions are used to satisfy customer requirements. Cleco Power entered into certain financial transactions it considered economic hedges to mitigate the risk associated with a contract for fixed-price power provided to a wholesale customer through December 2010. These transactions were marked-to-market with the resulting gain or loss recorded on the income statement as a component of operating revenue. The contract expired on December 31, 2010 along with the economic hedges; therefore, no gain or loss related to the economic hedges was recorded during the three and six months ended June 30, 2011. For the three and six months ended June 30, 2010, Cleco Power had realized losses of $0.3 million and $0.5 million, and mark-to-market gains of $0.4 million and less than $0.1 million, respectively, recorded in other operations revenue.

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 risk management assets or liabilities. Such gain or loss is deferred as a component of deferred fuel 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, 2011, and December 31, 2010, the net mark-to-market impact relating to these positions were losses of $7.7 million and $15.1 million, respectively. Deferred losses relating to closed natural gas positions totaled $2.1 million and $1.6 million at June 30, 2011, and December 31, 2010, 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 volatility in customer fuel costs noted above. At June 30, 2011, and December 31, 2010, Cleco Power had deposited net collateral of $1.8 million and $4.3 million, respectively, to cover requirements relating to open natural gas futures, options, and swap positions. The current and long-term portions of collateral are reported as a component of risk management assets or liabilities and other deferred credits, respectively.

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.

In August 2009, Cleco Power entered into a $50.0 million bank loan with variable interest, paid monthly, calculated at 3.00% plus the one-month LIBOR. The loan was set to mature on August 19, 2012. In order to mitigate the risk of future floating interest rates, Cleco Power entered into an interest rate swap in the third quarter of 2009. Based on the notional amount of the bank loan, the swap required a monthly net settlement between Cleco Power’s fixed payment of 1.84% and the swap counterparty’s floating payment of the one-month LIBOR. The swap was set to mature on May 31, 2012. Under the authoritative guidance for derivatives and hedging, the swap met the criteria of a cash flow hedge. Changes in the swap’s fair value related to the effective portion of cash flow hedges were recognized in other comprehensive income, whereas changes in the fair value related to the ineffective portion were recognized in earnings. As settlements were made, the swap’s other comprehensive income fair values were reclassified into earnings as a component of interest expense. In November 2010, Cleco Power terminated the interest rate swap and repaid in full the associated $50.0 million bank loan. At the time of the termination, the remaining $1.1 million of losses in accumulated other comprehensive income were reclassified to other expense. For the three and six months ended June 30, 2010, there were $0.2 million and $0.4 million, respectively, of reclassification adjustments from accumulated other comprehensive loss to interest expense as a result of monthly settlements. There was no impact to earnings due to ineffectiveness for the three and six months ended June 30, 2010. For additional information on accounting for derivatives, see Note 4 — “Fair Value Accounting.”

The Registrants determined that an error existed in the statement of cash flow methodology for determining non-cash transactions related to property, plant and equipment, specifically the dollar amount of property, plant and equipment acquisitions included in accounts payable for each period. This caused errors between the operating activities section and investing activities section for prior periods, including 2008, 2009, and 2010.

Cleco and Cleco Power’s Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Cash Flows have been adjusted for each of the reporting periods shown below to correct the presentation of cash flows related to accruals for property, plant and equipment. These corrections had no impact on the Registrants’ financial condition or results of operations. Management believes that these corrections did not have a material effect on the Registrants’ Consolidated Statements of Cash Flows or Condensed Consolidated Statements of Cash Flows for each of the reporting periods. The corrections to the Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Cash Flows for each of the reporting periods are presented in the following tables.

	FOR THE YEAR ENDED
				2008						2009						2010
(THOUSANDS)	AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED
Accounts receivable	$	(5,557	)	$	(5,557	)	$	8,310		$	8,310		$	(35,156	)	$	(16,156	)
Accounts payable	$	2,806		$	(6,334	)	$	11,231		$	18,593		$	3,459		$	8,167
Retainage payable	$	12,709		$	(60	)	$	(11,921	)	$	(13,011	)	$	1,913		$	(27	)
Net cash provided by operating activities	$	89,526		$	67,618		$	135,179		$	141,452		$	193,405		$	215,173
Additions to property, plant and equipment	$	(335,757	)	$	(313,848	)	$	(250,286	)	$	(256,558	)	$	(283,389	)	$	(305,157	)
Net cash used in investing activities	$	(368,725	)	$	(346,817	)	$	(177,176	)	$	(183,449	)	$	(285,137	)	$	(306,905	)
Net decrease in cash and cash equivalents	$	(31,530	)	$	(31,530	)	$	47,710		$	47,710		$	45,935		$	45,935
Cash and cash equivalents at the beginning of the period	$	129,013		$	129,013		$	97,483		$	97,483		$	145,193		$	145,193
Cash and cash equivalents at the end of the period	$	97,483		$	97,483		$	145,193		$	145,193		$	191,128		$	191,128
Accrued additions to property, plant and equipment	$	16,935		$	36,074		$	3,069		$	11,396		$	17,765		$	6,032

	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED						FOR THE NINE MONTHS ENDED						FOR THE THREE MONTHS ENDED
				MARCH 31, 2010						JUNE 30, 2010			SEPTEMBER 30, 2010									MARCH 31, 2011
(THOUSANDS)	AS REPORTED*			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED
Accounts receivable	$	(17,889	)	$	(17,889	)	$	(19,498	)	$	(19,498	)	$	(49,329	)	$	(30,329	)	$	5,042		$	(13,958	)
Accounts payable	$	(50,499	)	$	(53,362	)	$	(31,420	)	$	(25,684	)	$	(17,248	)	$	(13,277	)	$	(31,823	)	$	(35,617	)
Retainage payable	$	(862	)	$	-		$	195		$	-		$	745		$	-		$	1,004		$	(13	)
Net cash provided by operating activities	$	60,792		$	58,791		$	102,437		$	107,978		$	170,141		$	192,368		$	26,111		$	2,302
Additions to property, plant and equipment	$	(183,561	)	$	(181,560	)	$	(212,119	)	$	(217,660	)	$	(230,485	)	$	(252,711	)	$	(45,692	)	$	(21,883	)
Net cash used in investing activities	$	(149,609	)	$	(147,608	)	$	(191,363	)	$	(196,904	)	$	(212,592	)	$	(234,819	)	$	(43,346	)	$	(19,537	)
Net decrease in cash and cash equivalents	$	(52,971	)	$	(52,971	)	$	(93,038	)	$	(93,038	)	$	(77,357	)	$	(77,357	)	$	(53,937	)	$	(53,937	)
Cash and cash equivalents at the beginning of the period	$	145,193		$	145,193		$	145,193		$	145,193		$	145,193		$	145,193		$	191,128		$	191,128
Cash and cash equivalents at the end of the period	$	92,222		$	92,222		$	52,155		$	52,155		$	67,836		$	67,836		$	137,191		$	137,191
Accrued additions to property, plant and equipment	$	4,039		$	10,268		$	2,738		$	7,232		$	17,506		$	5,314		$	17,155		$	23,245
*These amounts were previously revised in the Registrants’ Combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011.

	FOR THE YEAR ENDED
				2008						2009						2010
(THOUSANDS)	AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED
Accounts receivable	$	(5,972	)	$	(5,972	)	$	9,646		$	9,646		$	(35,261	)	$	(16,261	)
Accounts payable	$	942		$	(8,197	)	$	10,831		$	18,254		$	3,936		$	8,934
Retainage payable	$	12,709		$	(60	)	$	(11,921	)	$	(13,011	)	$	1,913		$	(27	)
Net cash provided by operating activities	$	62,078		$	40,170		$	141,726		$	148,059		$	148,701		$	170,759
Additions to property, plant and equipment	$	(334,652	)	$	(312,744	)	$	(249,252	)	$	(255,585	)	$	(127,153	)	$	(149,211	)
Net cash used in investing activities	$	(353,248	)	$	(331,340	)	$	(141,998	)	$	(148,331	)	$	(112,614	)	$	(134,672	)
Net decrease in cash and cash equivalents	$	79,598		$	79,598		$	46,571		$	46,571		$	46,799		$	46,799
Cash and cash equivalents at the beginning of the period	$	11,944		$	11,944		$	91,542		$	91,542		$	138,113		$	138,113
Cash and cash equivalents at the end of the period	$	91,542		$	91,542		$	138,113		$	138,113		$	184,912		$	184,912
Accrued additions to property, plant and equipment	$	16,935		$	36,074		$	3,069		$	11,335		$	17,765		$	5,697

	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED						FOR THE NINE MONTHS ENDED						FOR THE THREE MONTHS ENDED
				MARCH 31, 2010						JUNE 30, 2010			SEPTEMBER 30, 2010									MARCH 31, 2011
(THOUSANDS)	AS REPORTED*			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED			AS REPORTED			AS ADJUSTED
Accounts receivable	$	(20,597	)	$	(20,597	)	$	(20,812	)	$	(20,812	)	$	(50,579	)	$	(31,579	)	$	8,280		$	(10,720	)
Accounts payable	$	(43,863	)	$	(46,245	)	$	(27,280	)	$	(21,494	)	$	(16,621	)	$	(12,137	)	$	(31,202	)	$	(34,966	)
Retainage payable	$	(862	)	$	-		$	195		$	-		$	745		$	-		$	1,004		$	(13	)
Net cash provided by operating activities	$	(12,130	)	$	(13,650	)	$	29,341		$	34,932		$	76,949		$	99,688		$	29,081		$	5,299
Additions to property, plant and equipment	$	(30,257	)	$	(28,737	)	$	(58,190	)	$	(63,781	)	$	(75,660	)	$	(98,399	)	$	(44,501	)	$	(20,720	)
Net cash used in investing activities	$	(12,126	)	$	(10,606	)	$	(40,796	)	$	(46,387	)	$	(49,780	)	$	(72,519	)	$	(32,737	)	$	(8,955	)
Net decrease in cash and cash equivalents	$	(55,625	)	$	(55,625	)	$	(93,339	)	$	(93,339	)	$	(110,729	)	$	(110,729	)	$	(60,472	)	$	(60,472	)
Cash and cash equivalents at the beginning of the period	$	138,113		$	138,113		$	138,113		$	138,113		$	138,113		$	138,113		$	184,912		$	184,912
Cash and cash equivalents at the end of the period	$	82,488		$	82,488		$	44,774		$	44,774		$	27,384		$	27,384		$	124,440		$	124,440
Accrued additions to property, plant and equipment	$	4,039		$	9,742		$	2,738		$	7,137		$	17,506		$	4,757		$	17,233		$	23,246
*These amounts were previously revised in the Registrants’ Combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011.

							FOR THE THREE MONTHS ENDED JUNE 30,
					2011						2010
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Income from continuing operations	$	70,348					$	35,186
Deduct: non-participating stock dividends (4.5% preferred stock)		15						12
Deduct: non-participating stock redemption costs (4.5% preferred stock)		112						-
Basic net income applicable to common stock	$	70,221		60,655,538	$	1.16	$	35,174		60,431,930	$	0.58
Effect of dilutive securities
Add: stock option grants				21,634						28,742
Add: restricted stock (LTICP)				346,267						244,597
Diluted net income applicable to common stock	$	70,221		61,023,439	$	1.15	$	35,174		60,705,269	$	0.58

							FOR THE SIX MONTHS ENDED JUNE 30,
					2011						2010
(THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)	INCOME		SHARES		PER SHARE AMOUNT		INCOME		SHARES		PER SHARE AMOUNT
Income from continuing operations	$	99,363					$	185,155
Deduct: non-participating stock dividends (4.5% preferred stock)		26						23
Deduct: non-participating stock redemption costs (4.5% preferred stock)		112						-
Basic net income applicable to common stock	$	99,225		60,613,371	$	1.64	$	185,132		60,374,233	$	3.07
Effect of dilutive securities
Add: stock option grants				21,067						29,713
Add: restricted stock (LTICP)				163,107						115,120
Diluted net income applicable to common stock	$	99,225		60,797,545	$	1.63	$	185,132		60,519,066	$	3.06

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 three and six months ended June 30, 2011 and 2010, due to the average market price being higher than the exercise prices of the stock options.

On June 24, 2011, Cleco Corporation redeemed all 10,288 outstanding shares of its 4.5% preferred stock. The redemption price was $101 per share plus accrued and unpaid dividends to the redemption date, or $101.296 per share. As of the redemption date, no shares of 4.5% preferred stock were outstanding. Holders are no longer entitled to dividends and all rights of such holders as shareholders of Cleco Corporation by reason of their ownership of such 4.5% preferred stock have ceased.

At June 30, 2011, Cleco had two stock-based compensation plans: the ESPP and the LTICP. Substantially all employees, excluding officers and general managers, may choose to participate in the ESPP and purchase a limited amount of common stock at a discount through a stock option agreement. Options or restricted shares of stock, known as non-vested stock as defined by the authoritative guidance on stock-based compensation, 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.

	CLECO CORPORATION				CLECO POWER				CLECO CORPORATION				CLECO POWER
			FOR THE THREE MONTHS ENDED JUNE 30,								FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2011		2010		2011		2010		2011		2010		2011		2010
Equity classification
Non-vested stock	$	796	$	468	$	201	$	98	$	1,947	$	1,130	$	522	$	268
Stock options		23		13		-		-		36		25		-		-
Total equity classification	$	819	$	481	$	201	$	98	$	1,983	$	1,155	$	522	$	268
Liability classification
Common stock equivalent units	$	364	$	481	$	154	$	174	$	1,559	$	630	$	586	$	348
Total pre-tax compensation expense	$	1,183	$	962	$	355	$	272	$	3,542	$	1,785	$	1,108	$	616
Tax benefit (excluding income tax gross-up)	$	455	$	370	$	137	$	105	$	1,363	$	687	$	426	$	237