Schedule I Financial Statements of Cleco Corporation

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only

CLECO CORPORATION (Parent Company Only) SCHEDULE I

Condensed Statements of Income
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2014			2013			2012
Operating expenses
Administrative and general	$	1,534		$	2,501		$	1,154
Merger transaction costs	17,848			—			—
Other operating expense	178			418			362
Total operating expenses	$	19,560		$	2,919		$	1,516
Operating loss	(19,560		)	(2,919		)	(1,516		)
Equity income from subsidiaries, net of tax	162,331			155,360			156,783
Interest, net	(303		)	(2,380		)	(3,350		)
Other income	2,457			3,392			2,068
Other expense	(158		)	(38		)	(13		)
Income before income taxes	144,767			153,415			153,972
Federal and state income tax benefit	(9,972		)	(7,270		)	(9,676		)
Net income applicable to common stock	$	154,739		$	160,685		$	163,648
The accompanying notes are an integral part of the condensed financial statements.

CLECO CORPORATION (Parent Company Only)  SCHEDULE I

Condensed Statements of Comprehensive Income
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2014			2013		2012
Net income	$	154,739		$	160,685	$	163,648
Other comprehensive income (loss), net of tax:
Postretirement benefits (loss) gain (net of tax benefit of $4,378 in 2014, tax expense of $3,137 in 2013, and tax benefit of $4,230 in 2012)	(7,001		)	5,016		(6,565		)
Net gain on cash flow hedges (net of tax expense of $132 in 2014, $925 in 2013, and $1,460 in 2012)	212			1,478		2,334
Total other comprehensive (loss) income, net of tax	(6,789		)	6,494		(4,231		)
Comprehensive income, net of tax	$	147,950		$	167,179	$	159,417
The accompanying notes are an integral part of the condensed financial statements.

CLECO CORPORATION (Parent Company Only) SCHEDULE I

Condensed Balance Sheets
	AT DEC. 31,
(THOUSANDS)	2014			2013
Assets
Current assets
Cash and cash equivalents	$	5,069		$	7,375
Accounts receivable - affiliate	8,967			9,549
Taxes receivable, net	2,288			—
Accumulated deferred federal and state income taxes, net	72,270			7,330
Cash surrender value of life insurance policies	51,489			45,394
Prepayments	1,229			—
Interest receivable	555			—
Other current assets	12			—
Total current assets	141,879			69,648
Equity investment in investees	1,549,063			1,553,543
Tax credit fund investment, net	7,251			—
Accumulated deferred federal and state income taxes, net	71,397			102,255
Other deferred charges	611			719
Total assets	$	1,770,201		$	1,726,165
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Accounts payable	$	4,386		$	3,218
Accounts payable - affiliate	59,014			60,590
Taxes payable, net	—			17,161
Interest accrued	—			38
Other current liabilities	12,123			11,081
Total current liabilities	75,523			92,088
Tax credit fund investment, net	—			41,840
Postretirement benefit obligations	8,337			—
Other deferred credits	2,071			1,040
Long-term debt	57,000			5,000
Total liabilities	142,931			139,968
Commitments and Contingencies (Note 5)
Shareholders’ equity
Common shareholders’ equity
Common stock, $1 par value, authorized 100,000,000 shares, issued 61,051,286 and 61,047,006 shares and outstanding 60,421,467 and 60,454,520 shares at December 31, 2014 and 2013, respectively	61,051			61,047
Premium on common stock	415,482			422,624
Retained earnings	1,208,712			1,149,003
Treasury stock, at cost, 629,819 and 592,486 shares at December 31, 2014 and 2013, respectively	(25,310		)	(20,601		)
Accumulated other comprehensive loss	(32,665		)	(25,876		)
Total shareholders’ equity	1,627,270			1,586,197
Total liabilities and shareholders’ equity	$	1,770,201		$	1,726,165
The accompanying notes are an integral part of the condensed financial statements.

CLECO CORPORATION (Parent Company Only)  SCHEDULE I

Condensed Statements of Cash Flows
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2014			2013			2012
Operating activities
Net cash provided by operating activities	$	108,754		$	159,430		$	79,606
Investing activities
Contributions to tax credit fund	(55,315		)	(51,011		)	(59,645		)
Return of equity investment in tax credit fund	2,579			1,619			37,652
Other investing	(2,831		)	(3,705		)	(2,973		)
Net cash used in investing activities	(55,567		)	(53,097		)	(24,966		)
Financing activities
Draws on credit facility	97,000			48,000			25,000
Payments on credit facility	(45,000		)	(68,000		)	(10,000		)
Repurchase of common stock	(12,449		)	—			(8,007		)
Dividends paid on common stock	(95,044		)	(86,376		)	(78,844		)
Other financing	—			—			1,987
Net cash used in financing activities	(55,493		)	(106,376		)	(69,864		)
Net decrease in cash and cash equivalents	(2,306		)	(43		)	(15,224		)
Cash and cash equivalents at beginning of period	7,375			7,418			22,642
Cash and cash equivalents at end of period	$	5,069		$	7,375		$	7,418
Supplementary cash flow information
Interest paid, net of amount capitalized	$	189		$	217		$	95
Income taxes paid (refunded), net	$	15,013		$	(46,928	)	$	59
Supplementary non-cash investing and financing activity
Issuance of common stock - ESPP	$	220		$	318		$	340
Non-cash contribution to subsidiary, net of tax	$	142,880		$	—		$	—
Non-cash distribution from subsidiary, net of tax	$	138,080		$	—		$	—
The accompanying notes are an integral part of the condensed financial statements.

Note 1 — Summary of Significant Accounting Policies

The condensed financial statements represent the financial information required by SEC Regulation S-X 5-04 for Cleco Corporation, which requires the inclusion of parent company only financial statements if the restricted net assets of consolidated subsidiaries exceed 25% of total consolidated net assets as of the last day of its most recent fiscal year. As of December 31, 2014, Cleco Corporation’s restricted net assets of consolidated subsidiaries were $673.9 million and exceeded 25% of its total consolidated net assets.

Cleco Corporation’s only major, first-tier subsidiary is Cleco Power. Prior to the transfer of Coughlin from Evangeline to Cleco Power on March 15, 2014, Midstream (which owns Evangeline) was also considered a first-tier subsidiary of Cleco Corporation.

Cleco Power contains the LPSC-jurisdictional generation, transmission, and distribution electric utility operations serving Cleco’s traditional retail and wholesale customers. Prior to March 15, 2014, Midstream owned and operated a merchant power plant (Coughlin).

The accompanying financial statements have been prepared to present the results of operations, financial condition, and cash flows of Cleco Corporation on a stand-alone basis as a holding company. Investments in subsidiaries and other investees are presented using the equity method. These financial statements should be read in conjunction with Cleco’s consolidated financial statements.

Note 2 — Debt

At December 31, 2014 and 2013, Cleco Corporation had no short-term debt outstanding.

At December 31, 2014, Cleco Corporation’s long-term debt outstanding was $57.0 million, of which none was due within one year, compared to $5.0 million of long-term debt at December 31, 2013, of which none was due within one year. The long-term debt at December 31, 2014 and 2013, was the result of outstanding draws on its $250.0 million credit facility.

In October 2013, Cleco Corporation entered into a new, amended and restated $250.0 million revolving credit facility. The credit facility is set to mature on October 16, 2018, and provides for working capital and other needs. In connection with the credit facility, $1.0 million of unamortized debt expense related to Cleco Corporation’s previous credit facility was expensed. At December 31, 2014, the all-in interest rate under the facility was equal to one-month LIBOR plus 1.075% or ABR plus 0.075%, plus facility fees of 0.175%. At December 31, 2014, Cleco Corporation had $57.0 million borrowings outstanding under its existing credit facility at an all-in interest rate of 1.245%, leaving an available borrowing capacity of $193.0 million. At December 31, 2014, Cleco Corporation was in compliance with the covenants in its credit facility.

Note 3 — Cash Distributions and Equity Contributions

Some provisions in Cleco Power’s debt instruments restrict the amount of equity available for distribution to Cleco Corporation by Cleco Power under specified circumstances. The most restrictive covenant requires Cleco Power’s total indebtedness to be less than or equal to 65% of total capitalization. At December 31, 2014, $852.1 million of member’s equity was unrestricted. The following table summarizes the cash distributions Cleco Corporation received from affiliates during 2014, 2013, and 2012:

	AT DEC. 31,
(THOUSANDS)	2014		2013		2012
Cleco Power	$	115,000	$	105,000	$	58,000
Diversified Lands	—		—		2,900
Perryville	975		700		1,500
Attala	750		400		1,300
Total	$	116,725	$	106,100	$	63,700

Cleco Corporation made a $138.1 million non-cash contribution to Cleco Power during 2014 related to the transfer of Coughlin from Evangeline to Cleco Power. Cleco Corporation made no contributions to affiliates during 2013. During 2012, Cleco Corporation contributed $16.2 million to Midstream.

Note 4 — Income Taxes

Cleco Corporation (Parent Company Only) Condensed Statements of Income reflect income tax benefits of $10.0 million, $7.3 million, and $9.7 million for the years ended December 31, 2014, 2013, and 2012, respectively. In addition to these amounts, income tax expense of $77.1 million, $86.8 million, and $75.0 million is reflected in equity income of subsidiaries, net of tax for the years ended December 31, 2014, 2013, and 2012, respectively.

Note 5 — Commitments and Contingencies

For information regarding commitments and contingencies related to Cleco Corporation, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees.”

Note 6 — Agreement and Plan of Merger

On October 17, 2014, Cleco Corporation entered into the Merger Agreement with Cleco Partners and Merger Sub providing for the merger of Merger Sub with and into Cleco Corporation, with Cleco Corporation surviving the Merger as an indirect, wholly-owned subsidiary of Cleco Partners. Pursuant to the Merger Agreement, at the effective time of the Merger each outstanding share of Cleco Corporation common stock, par value $1.00 per share (other than shares that are owned by Cleco Corporation, Cleco Partners, Merger Sub, or any other direct or indirect wholly-owned subsidiary of Cleco Partners or Cleco Corporation), will be converted into the right to receive $55.37 per share in cash, without interest, with all dividends payable before the effective time of the Merger.

The Merger is subject to several conditions, including among others, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the receipt of approvals from FERC, the LPSC, the Federal Communications Commission, and the Committee on Foreign Investment in the United States. In addition, the obligations of Cleco Partners and Merger Sub to consummate the Merger are subject to the required regulatory approvals not, individually or in the aggregate, imposing terms, conditions, liabilities, obligations, commitments, or sanctions that constitute a “burdensome effect” (as defined in the Merger Agreement). On February 10, 2015, Cleco Power filed an application with the LPSC seeking approval of the Merger.

A Special Meeting of Shareholders of Cleco Corporation was held on February 26, 2015, in Pineville, Louisiana to obtain shareholder approval of the Merger Agreement. Cleco Corporation received approval of the Merger Agreement by a

vote of approximately 77% of shares of common stock of Cleco Corporation entitled to be cast. Upon completion of the Merger, Cleco Corporation will pay an additional $12.0 million in contingency fees.

For more information regarding the Merger see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 20 — Agreement and Plan of Merger.”