Schedule I Financial Statements of Cleco Corporation

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

CLECO CORPORATION (Parent Company Only) SCHEDULE I

Condensed Statements of Income
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2015			2014			2013
Operating expenses
Administrative and general	$	1,891		$	1,534		$	2,501
Merger transaction costs	4,591			17,848			—
Other operating expense	490			178			418
Total operating expenses	6,972			19,560			2,919
Operating loss	(6,972		)	(19,560		)	(2,919		)
Equity income from subsidiaries, net of tax	141,636			162,331			155,360
Interest, net	(1,731		)	(303		)	(2,380		)
Other income	17			2,457			3,392
Other expense	(1,142		)	(158		)	(38		)
Income before income taxes	131,808			144,767			153,415
Federal and state income tax benefit	(1,861		)	(9,972		)	(7,270		)
Net income applicable to common stock	$	133,669		$	154,739		$	160,685
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)	2015		2014			2013
Net income	$	133,669	$	154,739		$	160,685
Other comprehensive income (loss), net of tax:
Postretirement benefits gain (loss) (net of tax expense of $3,670 in 2015, tax benefit of $4,378 in 2014, and tax expense of $3,137 in 2013)	5,869		(7,001		)	5,016
Net gain on cash flow hedges (net of tax expense of $132 in 2015, $132 in 2014, and $925 in 2013)	211		212			1,478
Total other comprehensive income (loss), net of tax	6,080		(6,789		)	6,494
Comprehensive income, net of tax	$	139,749	$	147,950		$	167,179
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)	2015			2014
Assets
Current assets
Cash and cash equivalents	$	2,236		$	5,069
Accounts receivable - affiliate	7,669			8,967
Taxes receivable, net	14,746			2,288
Accumulated deferred federal and state income taxes, net	—			72,270
Cash surrender value of trust-owned life insurance policies	53,821			51,489
Prepayments	—			1,229
Interest receivable	—			555
Other current assets	—			12
Total current assets	78,472			141,879
Equity investment in investees	1,516,310			1,549,063
Tax credit fund investment, net	13,741			7,251
Accumulated deferred federal and state income taxes, net	123,690			71,397
Total assets	$	1,732,213		$	1,769,590
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Accounts payable	$	908		$	4,386
Accounts payable - affiliate	5,389			59,014
Other current liabilities	10,975			12,123
Total current liabilities	17,272			75,523
Postretirement benefit obligations	5,848			8,337
Other deferred credits	587			2,071
Long-term debt	33,665			56,389
Total liabilities	57,372			142,320
Commitments and contingencies (Note 5)
Shareholders’ equity
Common shareholders’ equity
Common stock, $1 par value, authorized 100,000,000 shares, issued 61,058,918 and 61,051,286 shares and outstanding 60,482,468 and 60,421,467 shares at December 31, 2015, and 2014, respectively	61,059			61,051
Premium on common stock	418,518			415,482
Retained earnings	1,245,014			1,208,712
Treasury stock, at cost, 576,450 and 629,819 shares at December 31, 2015, and 2014, respectively	(23,165		)	(25,310		)
Accumulated other comprehensive loss	(26,585		)	(32,665		)
Total shareholders’ equity	1,674,841			1,627,270
Total liabilities and shareholders’ equity	$	1,732,213		$	1,769,590
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)	2015			2014			2013
Operating activities
Net cash provided by operating activities	$	128,909		$	108,754		$	159,430
Investing activities
Contributions to tax credit fund	(9,966		)	(55,315		)	(51,011		)
Return of equity investment in tax credit fund	2,128			2,579			1,619
Premiums paid on trust-owned life insurance	(3,607		)	(2,831		)	(3,705		)
Net cash used in investing activities	(11,445		)	(55,567		)	(53,097		)
Financing activities
Draws on credit facility	57,000			97,000			48,000
Payments on credit facility	(80,000		)	(45,000		)	(68,000		)
Repurchase of common stock	—			(12,449		)	—
Dividends paid on common stock	(97,283		)	(95,044		)	(86,376		)
Other financing	(14		)	—			—
Net cash used in financing activities	(120,297		)	(55,493		)	(106,376		)
Net decrease in cash and cash equivalents	(2,833		)	(2,306		)	(43		)
Cash and cash equivalents at beginning of period	5,069			7,375			7,418
Cash and cash equivalents at end of period	$	2,236		$	5,069		$	7,375
Supplementary cash flow information
Interest paid, net of amount capitalized	$	130		$	189		$	217
Income taxes paid (refunded), net	$	1,464		$	15,013		$	(46,928	)
Supplementary non-cash investing and financing activity
Issuance of common stock - ESPP	$	—		$	220		$	318
Non-cash contribution to subsidiary, net of tax	$	—		$	142,880		$	—
Non-cash distribution from subsidiary, net of tax	$	33,661		$	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, 2015, Cleco Corporation’s restricted net assets of consolidated subsidiaries were $733.1 million and exceeded 25% of its total consolidated net assets.

Cleco Corporation’s only major, first-tier subsidiary is Cleco Power. Cleco Power contains the LPSC-jurisdictional generation, transmission, and distribution electric utility operations serving Cleco’s traditional retail and wholesale customers.

Prior to March 2014, when Evangeline owned and operated Coughlin, Midstream was also considered a first-tier subsidiary of Cleco Corporation. Subsequent to the transfer of Coughlin from Evangeline to Cleco Power in March 2014, Midstream was no longer considered a first-tier subsidiary.

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, 2015, and 2014, Cleco Corporation had no short-term debt outstanding.

At December 31, 2015, Cleco Corporation’s long-term debt outstanding was $34.0 million, of which none was due within one year, compared to $57.0 million of long-term debt at December 31, 2014, of which none was due within one year. The long-term debt at December 31, 2015, and 2014 was the result of outstanding draws on its $250.0 million credit facility.

At December 31, 2015, Cleco Corporation had $34.0 million of borrowings outstanding under its $250.0 million credit facility at an all-in interest rate of 1.465%, leaving an available borrowing capacity of $216.0 million. The borrowings under the credit facility are considered to be long-term because the credit facility expires in 2018. The borrowing costs under the facility are equal to LIBOR plus 1.075% or ABR plus 0.075%, plus facility fees of 0.175%. At December 31, 2015, 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, 2015, $884.3 million of member’s equity was unrestricted.

The following table summarizes the cash distributions Cleco Corporation received from affiliates during 2015, 2014, and 2013:

	AT DEC. 31,
(THOUSANDS)	2015		2014		2013
Cleco Power	$	135,000	$	115,000	$	105,000
Perryville	500		975		700
Attala	350		750		400
Total	$	135,850	$	116,725	$	106,100

Cleco Corporation made no contributions to affiliates during 2015 and 2013. 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.

Note 4 — Income Taxes

Cleco Corporation (Parent Company Only) Condensed Statements of Income reflect income tax benefits of $1.9 million, $10.0 million, and $7.3 million for the years ended December 31, 2015, 2014, and 2013, respectively. In addition to these amounts, income tax expense of $79.6 million, $77.1 million, and $86.8 million is reflected in equity income of subsidiaries, net of tax for the years ended December 31, 2015, 2014, and 2013, 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.

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.

The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired on May 4, 2015. On June 12, 2015, the Committee on Foreign Investment in the U.S. cleared the Merger to proceed without further review. On July 17, 2015, Cleco Power, Perryville, Attala, and Cleco Partners received approval of the Merger from FERC. On July 28, 2015, the FCC’s consent to Cleco Corporation’s request to transfer certain licenses to Cleco Power became final. On December 1, 2015, the FCC granted Cleco Corporation’s request for an extension to transfer the licenses until June 11, 2016.

On February 10, 2015, Cleco Power filed an application with the LPSC seeking approval of the Merger. An ALJ hearing on the proposed Merger was held in November 2015, and on February 17, 2016, the ALJ issued a recommendation stating that the transaction as structured at the time of the hearing was not in the public interest. However, the ALJ ruled that, if the LPSC, within its broad discretion over mergers and acquisitions, determined that the transaction was in the public interest, approval should be conditioned on (1) the regulatory commitments made by Cleco Power and Cleco Partners be

made a part of the transaction; and (2) consideration of double

leveraging and tax issues be deferred for consideration in a future ratemaking proceeding, no later than 2017. On February 24, 2016, the LPSC denied the application to approve the Merger. Management is currently evaluating options relating to the Merger. If the Merger Agreement is terminated due to lack of regulatory approval, neither Cleco Corporation nor Cleco Partners would be required to pay a termination fee. If the Merger is completed, Cleco Corporation will pay an additional $12.0 million in contingency fees to its financial advisors.

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.”