Note 10 — 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 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.

Prior to April 30, 2011, Cleco Corporation 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.

Consolidated VIEs

Acadia

In October 2009, Acadia and Entergy Louisiana announced that definitive agreements had been executed whereby Entergy Louisiana would acquire Acadia Unit 2. 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 which Cleco assumed in the transaction. In conjunction with the transaction, APH received 100% ownership in Acadia in exchange for its 50% interest in Cajun, and Acadia became a consolidated subsidiary of APH. For more information on the Acadia Unit 2 transaction, see Note 13 — “Acadia Unit 2 Transaction.”

The following table contains summarized financial information for Cajun prior to the disposition of Acadia Unit 2.



(THOUSANDS)	FOR THE THREE MONTHS ENDED MARCH 31, 2011
Operating revenue		$	5,177
Operating expenses		4,824
Other income		872
Income before taxes		$	1,225

Prior to the reconsolidation, income tax expenses related to Cajun were recorded on APH’s financial statements. For the three months ended March 31, 2011, income tax expenses related to Cajun on APH’s financial statements were $0.3 million.

Equity Method VIEs

Equity investment in investees at March 31, 2012, 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 THE THREE MONTHS ENDED MARCH 31,
(THOUSANDS)	2012		2011
Cajun	$	—	$	612
Subsidiaries less than 100% owned by Cleco Innovations	1		(1		)
Total equity income	$	1	$	611

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 March 31, 2012, consisted of its equity investment of $14.5 million. The following table presents the components of Cleco Power’s equity investment in Oxbow.



INCEPTION TO DATE (THOUSANDS)	AT MARCH 31, 2012		AT DECEMBER 31, 2011
Purchase price	$	12,873	$	12,873
Cash contributions	1,659		1,659
Total equity investment in investee	$	14,532	$	14,532

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.



(THOUSANDS)	AT MARCH 31, 2012		AT DECEMBER 31, 2011
Oxbow’s net assets/liabilities	$	29,065	$	29,065
Cleco Power’s 50% equity	$	14,532	$	14,532
Cleco’s maximum exposure to loss	$	14,532	$	14,532

The following tables contain summarized financial information for Oxbow.



(THOUSANDS)	AT MARCH 31, 2012		AT DECEMBER 31, 2011
Current assets	$	1,641	$	1,711
Property, plant, and equipment, net	23,284		23,339
Other assets	4,255		4,128
Total assets	$	29,180	$	29,178
Current liabilities	$	42	$	40
Other liabilities	73		73
Partners’ capital	29,065		29,065
Total liabilities and partners’ capital	$	29,180	$	29,178



	FOR THE THREE MONTHS ENDED MARCH 31,
(THOUSANDS)	2012		2011
Operating revenue	$	381	$	205
Operating expenses	381		205
Income before taxes	$	—	$	—

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.