

Note 12 — 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.

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. Following the transaction, ongoing operations at Acadia are minimal, relating only to settling accounts receivable, accounts payable, and servicing indemnifications 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 18 — “Acadia Transactions — Acadia Unit 2.”

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



(THOUSANDS)	AT DEC. 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



(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2011
Operating revenue		$	5,227
Operating expenses		5,914
Gain on sale of assets		71,422
Other income		929
Income before taxes		$	71,664

* 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 recorded 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.”

Equity Method VIEs

Equity investment in investees at December 31, 2013, primarily represented Cleco Power’s $14.5 million investment in Oxbow. Equity investments which are less than 100% owned by Diversified Lands represented less than $0.1 million of the total balance.

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



	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2013		2012		2011
Cajun	$	—	$	—	$	62,053
Subsidiaries less than 100% owned by Diversified Lands	—		—		(3		)
Total equity income	$	—	$	—	$	62,050

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, 2013, consisted of its equity investment of $14.5 million. The following table presents the components of Cleco Power’s equity investment in Oxbow.



	AT DEC. 31,
INCEPTION TO DATE (THOUSANDS)	2013		2012
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.



	AT DEC. 31,
(THOUSANDS)	2013		2012
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.



	AT DEC. 31,
(THOUSANDS)	2013		2012
Current assets	$	2,289	$	1,814
Property, plant, and equipment, net	22,611		23,029
Other assets	4,256		4,248
Total assets	$	29,156	$	29,091
Current liabilities	$	91	$	26
Partners’ capital	29,065		29,065
Total liabilities and partners’ capital	$	29,156	$	29,091



	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2013		2012		2011
Operating revenue	$	2,558	$	1,126	$	1,781
Operating expenses	2,558		1,126		1,781
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.