Variable Interest Entities

Cleco reports its investments in VIEs in accordance with the authoritative guidance. 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 Corporation and Cleco Power’s Consolidated Balance Sheets. The revenue and expenses (excluding income taxes) of this entity are netted and reported as equity income or loss from investees on Cleco Corporation and Cleco Power’s Consolidated Statements of Income.

Prior to April 30, 2011, Cleco also reported its investment in Cajun on the equity method of accounting. In conjunction with the disposition of Acadia Unit 2, APH received 100% ownership in Acadia in exchange for its 50% interest in Cajun, and Acadia became a consolidated subsidiary of APH.

Prior to January 1, 2010, Cleco also reported its investment in Evangeline and certain other subsidiaries on the equity method of accounting. In compliance with authoritative guidance, Cleco prospectively reconsolidated these subsidiaries on January 1, 2010. Beginning January 1, 2010, Evangeline’s and certain other subsidiaries’ assets, liabilities, revenues, expenses, and cash flows are prospectively presented on the corresponding line items of Cleco’s financial statements.

Consolidated VIEs

Acadia

On April 29, 2011, Acadia completed its disposition of Acadia Unit 2 to Entergy Louisiana for $298.8 million. Following the disposition, Acadia no longer owns any materials and supply inventory, property, plant, and equipment, or land. Acadia has minimal ongoing operations relating only to settling accounts receivable and accounts payable resulting from operations prior to the closing of the transaction and servicing indemnifications Cleco assumed in the transaction. For more information on the Acadia Unit 2 transaction, see Note 18 — “Acadia Transactions — Acadia Unit 2.”

The following tables contain summarized financial information for Cajun through the disposition of Acadia Unit 2.



(THOUSANDS)	AT DECEMBER 31, 2010
Current assets	$	7,133
Property, plant, and equipment, net	203,793
Total assets	$	210,926
Current liabilities	$	1,950
Other liabilities	9,429
Partners’ capital	199,547
Total liabilities and partners’ capital	$	210,926



	FOR THE YEAR ENDED DECEMBER 31,
(THOUSANDS)	2011		*	2010
Operating revenue	$	5,227		$	49,273
Operating expenses	5,914			57,496
Gain on sale of assets	71,422			81,845
Other income	929			4,074
Income before taxes	$	71,664		$	77,696

* The 2011 income statement includes only activity prior to the April 29, 2011, reconsolidation.

Other liabilities at December 31, 2010, represented an indemnification liability related to the Cleco Power transaction. For more information on Acadia’s indemnification liability, see Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Disclosures about Guarantees.”

Prior to the reconsolidation, income tax expenses related to Cajun were recorded on APH’s financial statements. For the four months ended April 30, 2011, income taxes related to Cajun on APH’s financial statements were $24.0 million. For the year ended December 31, 2010, tax expenses recorded on APH’s financial statements were $14.7 million.

In connection with the Entergy Louisiana transaction, APH has agreed to indemnify the third-party owners of Cajun and their affiliates against their share of Acadia’s contingent obligations related to the transaction. For more information on the Entergy Louisiana indemnification, see Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Disclosures about Guarantees.”

Evangeline

Based on an analysis using authoritative guidance regarding consolidations in effect prior to January 1, 2010, Cleco determined it was not the primary beneficiary of Evangeline and used the equity method to account for its investment in the prior periods. Upon implementation of amended authoritative guidance regarding consolidations effective January 1, 2010, Cleco determined it was the primary beneficiary and began to prospectively consolidate Evangeline. Cleco’s determination was primarily based on Cleco’s ability to control Evangeline’s significant activities. Cleco recognized no gain or loss upon the consolidation of Evangeline.

Evangeline’s creditors do not have recourse to Cleco’s general credit and there are no terms of agreement that could require Cleco to provide financial support to Evangeline.

The following table contains summarized financial information for Evangeline.



(THOUSANDS)	FOR THE YEAR ENDED DECEMBER 31, 2009
Operating revenue		$	59,852
Operating expenses		27,721
Depreciation		5,535
Interest charges		28,675
Other expense		(17		)
Loss before taxes		$	(2,096	)

Evangeline recorded an income tax benefit of $0.7 million for the year ended December 31, 2009.

Other Subsidiaries 100% owned by Cleco Corporation

The information for Perryville and Attala 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.

Based on an analysis using authoritative guidance regarding consolidations in effect prior to January 1, 2010, Cleco determined it was not the primary beneficiary of these entities and used the equity method to account for its investment in the prior periods. Upon implementation of amended authoritative guidance regarding consolidations effective January 1, 2010, Cleco determined it was the primary beneficiary and began to prospectively consolidate these two entities. Cleco’s determination was primarily based on Cleco’s ability to control Perryville and Attala’s significant activities. Cleco recognized no gain or loss upon the consolidation of Perryville and Attala.

Perryville and Attala’s creditors do not have recourse to Cleco’s general credit, and there are no terms of agreement that could require Cleco to provide financial support to Perryville and Attala.

The following table contains summarized financial information for Perryville and Attala.



(THOUSANDS)	FOR THE YEAR ENDED DECEMBER 31, 2009
Operating revenue		$	1,959
Operating expense		586
Other income		34
Interest income		501
Income before taxes		$	1,908

Interest income for the year ended December 31, 2009, includes $0.5 million of interest related to amended tax returns. Perryville and Attala recorded income tax expense of $0.7 million for the year ended December 31, 2009.

Equity Method VIEs

Equity investment in investees at December 31, 2011, primarily represented Cleco Power’s $14.5 million investment in Oxbow. Equity investments which are less than 100% owned by Cleco Innovations LLC represented less than $0.1 million of the total balance.

The following table presents the equity income (loss) from each investment accounted for using the equity method. For more information regarding the balances for Cleco’s equity investments in Cajun, Evangeline, and certain other subsidiaries, see “— Consolidated VIEs” above.



	FOR THE YEAR ENDED DECEMBER 31,
(THOUSANDS)	2011			2010		2009
Cajun	$	62,053		$	38,848	$	(17,243	)
Evangeline	—			—		(2,096		)
Other subsidiaries 100% owned by Cleco Corporation	—			—		1,908
Subsidiaries less than 100% owned by Innovations LLC	(3		)	1		8
Total equity income (loss)	$	62,050		$	38,849	$	(17,423	)

Oxbow

Oxbow is owned 50% by Cleco Power and 50% by SWEPCO and is accounted for as an equity method investment. Cleco Power is not the primary beneficiary because it shares the power to control Oxbow’s significant activities with SWEPCO. Cleco’s current assessment of its maximum exposure to loss related to Oxbow at December 31, 2011, consisted of its equity investment of $14.5 million. The following table presents the components of Cleco Power’s equity investment in Oxbow.



	AT DECEMBER 31,
INCEPTION TO DATE (THOUSANDS)	2011		2010
Purchase price	$	12,873	$	12,873
Cash contributions	1,659		200
Total equity investment in investee	$	14,532	$	13,073

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



	AT DECEMBER 31,
(THOUSANDS)	2011		2010
Oxbow’s net assets/liabilities	$	29,065	$	26,146
Cleco Power’s 50% equity	$	14,532	$	13,073
Cleco’s maximum exposure to loss	$	14,532	$	13,073

The following tables contain summarized financial information for Oxbow.



	AT DECEMBER 31,
(THOUSANDS)	2011		2010
Current assets	$	1,711	$	583
Property, plant, and equipment, net	23,339		23,597
Other assets	4,128		2,141
Total assets	$	29,178	$	26,321
Current liabilities	$	40	$	175
Other liabilities	73		—
Partners’ capital	29,065		26,146
Total liabilities and partners’ capital	$	29,178	$	26,321



	FOR THE YEAR ENDED DECEMBER 31,
(THOUSANDS)	2011		2010		*	2009
Operating revenue	$	1,781	$	931		$	—
Operating expenses	1,781		931			—
Income before taxes	$	—	$	—		$	—

* 2010 was Oxbow’s first full year of operation.

Oxbow’s property, plant, and equipment, net consists of land and lignite reserves. The lignite reserves are intended to be used to provide fuel to the Dolet Hills Power Station. DHLC mines the lignite reserves at Oxbow through the Amended Lignite Mining Agreement.

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