Schedule I Financial Statements of Cleco Holdings (Parent Company Only)

12 Months Ended

Dec. 31, 2018

Condensed Financial Information Disclosure [Abstract]

Schedule I Financial Statements of Cleco Holdings (Parent Company Only)

CLECO HOLDINGS (Parent Company Only) SCHEDULE I

Condensed Statements of Income
	SUCCESSOR									PREDECESSOR
(THOUSANDS)	FOR THE YEAR ENDED DEC.31, 2018			FOR THE YEAR ENDED DEC. 31, 2017			APR. 13, 2016 - DEC. 31, 2016			JAN. 1, 2016 - APR. 12, 2016
Operating expenses
Administrative and general	$	1,269		$	602		$	285		$	319
Merger transaction costs	19,514			5,152			23,301			34,912
Other operating expense	318			260			(382		)	624
Total operating expenses	21,101			6,014			23,204			35,855
Operating loss	(21,101		)	(6,014		)	(23,204		)	(35,855		)
Equity income from subsidiaries, net of tax	149,543			170,706			9,357			21,789
Interest, net	(54,635		)	(53,684		)	(35,151		)	(286		)
Other income	650			3,978			1,948			702
Other expense	(2,337		)	—			—			—
Income (loss) before income taxes	72,120			114,986			(47,050		)	(13,650		)
Federal and state income tax benefit	(22,317		)	(23,094		)	(22,937		)	(9,690		)
Net income (loss)	$	94,437		$	138,080		$	(24,113	)	$	(3,960	)
The accompanying notes are an integral part of the Condensed Financial Statements.

CLECO HOLDINGS (Parent Company Only)  SCHEDULE I

Condensed Statements of Comprehensive Income
	SUCCESSOR								PREDECESSOR
(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2018		FOR THE YEAR ENDED DEC. 31, 2017			APR. 13, 2016 - DEC. 31, 2016			JAN. 1, 2016 - APR. 12, 2016
Net income (loss)	$	94,437	$	138,080		$	(24,113	)	$	(3,960	)
Other comprehensive income (loss), net of tax
Postretirement benefits gain (loss) (net of tax expense of $1,868, tax benefit of $2,764, and tax expense of $938 and $367, respectively)	5,296		(4,421		)	1,500			587
Amortization of interest rate derivatives to earnings (net of tax expense of $0, $0, $0, and $37, respectively)	—		—			—			60
Total other comprehensive income (loss), net of tax	5,296		(4,421		)	1,500			647
Comprehensive income (loss), net of tax	$	99,733	$	133,659		$	(22,613	)	$	(3,313	)
The accompanying notes are an integral part of the Condensed Financial Statements.

CLECO HOLDINGS (Parent Company Only) SCHEDULE I

Condensed Balance Sheets
	AT DEC. 31,
(THOUSANDS)	2018		2017
Assets
Current assets
Cash and cash equivalents	$	76,938	$	48,732
Accounts receivable - affiliate	8,374		6,880
Other accounts receivable	2,755		209
Taxes receivable, net	7,046		15,172
Cash surrender value of trust-owned life insurance policies	59,894		62,839
Total current assets	155,007		133,832
Equity investment in subsidiaries	3,247,809		3,226,780
Tax credit fund investment, net	—		4,355
Accumulated deferred federal and state income taxes, net	101,015		105,575
Other deferred charges	4,532		1,037
Total assets	$	3,508,363	$	3,471,579
Liabilities and member's equity
Liabilities
Current liabilities
Accounts payable	$	1,322	$	4,354
Accounts payable - affiliate	18,047		5,621
Interest accrued	7,576		7,621
Deferred compensation	10,753		12,132
Other current liabilities	273		272
Total current liabilities	37,971		30,000
Postretirement benefit obligations	3,894		4,404
Long-term debt, net	1,341,758		1,340,818
Total liabilities	1,383,623		1,375,222
Commitments and contingencies (Note 6)
Member's equity
Membership interest	2,069,376		2,069,376
Retained earnings	53,578		29,902
Accumulated other comprehensive loss	1,786		(2,921		)
Total member's equity	2,124,740		2,096,357
Total liabilities and member's equity	$	3,508,363	$	3,471,579
The accompanying notes are an integral part of the Condensed Financial Statements.

CLECO HOLDINGS (Parent Company Only)  SCHEDULE I

Condensed Statements of Cash Flows
	SUCCESSOR									PREDECESSOR
(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2018			FOR THE YEAR ENDED DEC. 31, 2017			APR. 13, 2016 - DEC. 31, 2016			JAN. 1, 2016 - APR. 12, 2016
Operating activities
Net cash provided by operating activities	$	97,614		$	124,817		$	36,811		$	34,904
Investing activities
Contributions to tax credit fund	—			(630		)	—			—
Return of equity investment in tax credit fund	2,775			7,502			901			476
Contribution to subsidiary	(1,250		)	—			(50,000		)	—
Other investing	442			—			—			—
Net cash provided by (used in) investing activities	1,967			6,872			(49,099		)	476
Financing activities
Draws on credit facility	—			73,000			—			3,000
Payments on credit facility	—			(73,000		)	—			(10,000		)
Issuance of long-term debt	—			—			1,350,000			—
Repayment of long-term debt	—			—			(1,350,000		)	—
Payment of financing costs	(25		)	(269		)	(3,755		)	—
Dividends paid on common stock	—			—			(572		)	(24,579		)
Contribution from member	—			—			100,720			—
Distributions to member	(71,350		)	(84,065		)	(88,765		)	—
Net cash (used in) provided by financing activities	(71,375		)	(84,334		)	7,628			(31,579		)
Net increase (decrease) in cash and cash equivalents	28,206			47,355			(4,660		)	3,801
Cash and cash equivalents at beginning of period	48,732			1,377			6,037			2,236
Cash and cash equivalents at end of period	$	76,938		$	48,732		$	1,377		$	6,037
Supplementary cash flow information
Interest paid, net of amount capitalized	$	53,798		$	52,026		$	26,264		$	126
Income taxes paid (refunded), net	$	2		$	(6	)	$	4,263		$	1
Supplementary non-cash investing and financing activity
Non-cash contribution to subsidiary, net of tax	$	3,865		$	—		$	—		$	—
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 Holdings, 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, 2018, Cleco Holdings’ restricted net assets of consolidated subsidiaries were $1.25 billion and exceeded 25% of its total consolidated net assets.

Cleco Holdings’ 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.

The accompanying financial statements have been prepared to present the results of operations, financial condition, and cash flows of Cleco Holdings 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 — Business Combinations

On April 13, 2016, Cleco Holdings completed its merger with Merger Sub whereby Merger Sub merged with and into Cleco Corporation, with Cleco Corporation surviving the 2016 Merger, and Cleco Corporation converting to a limited liability company and changing its name to Cleco Holdings, as a direct, wholly owned subsidiary of Cleco Group and an indirect, wholly owned subsidiary of Cleco Partners. At the effective time of the 2016 Merger, each outstanding share of Cleco Corporation common stock, par value $1.00 per share (other than shares that were owned by Cleco Corporation, Cleco Partners, Merger Sub, or any other direct or indirect wholly owned subsidiary of Cleco Partners or Cleco Corporation), were cancelled and converted into the right to receive $55.37 per share in cash, without interest, with all dividends payable before the effective time of the 2016 Merger. For more information regarding the 2016 Merger, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 4 — Business Combinations.”

Note 3 — Debt

At December 31, 2018, and 2017, Cleco Holdings had no short-term debt outstanding.

At December 31, 2018, Cleco Holding’s long-term debt outstanding was $1.34 billion, of which none was due within one year.

On July 31, 2018, Cleco Holdings amended its $300.0 million bank term loan agreement and its $100.0 million revolving credit facility agreement to release any and all collateral from all of its debt obligations under those agreements. As a result of the release of collateral, Moody’s and Fitch replaced Cleco Holdings’ senior secured debt rating with a senior unsecured debt rating. For more information on Cleco’s credit ratings and their impacts, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 16 — “Litigation, Other Commitment and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

In connection with the Cleco Cajun Transaction on February 4, 2019, Cleco Holdings issued $300.0 million under a new bridge loan agreement and $100.0 million under a new term loan agreement. Both loan agreements are variable rate debt and have a three-year term. Both loan agreements contain certain financial covenants, including requiring Cleco Holdings to maintain (i) a debt to capital ratio (as defined in the applicable agreement) below 65% and (ii) a rating applicable to the company’s senior debt rating (as defined in the applicable agreement). Cleco Holdings anticipates that some or all of the variable rate debt may be replaced or repaid with long-term financing, markets permitting, within 12 months of the closing of the Cleco Cajun Transaction.

In connection with the Cleco Cajun Transaction, Cleco Holdings increased its credit facility capacity by $75.0 million, for a total credit facility of $175.0 million. All other terms remained the same. Also in connection with the Cleco Cajun Transaction on February 4, 2019, Cleco Holdings made a $75.0 million draw on its credit facility, which was repaid on February 5, 2019.

The principal amounts payable under long-term debt agreements for each year through 2023 and thereafter are as follows:

AMOUNTS PAYABLE UNDER LONG-TERM DEBT ARRANGEMENTS	(THOUSANDS)
For the year ending Dec. 31,
2019	$	—
2020	$	—
2021	$	300,000
2022	$	—
2023	$	165,000
Thereafter	$	885,000

Note 4 — Cash Distributions and Equity Contributions

Some provisions in Cleco Power’s debt instruments restrict the amount of equity available for distribution to Cleco Holdings by Cleco Power by requiring Cleco Power’s total indebtedness to be less than or equal to 65% of total capitalization. In addition, the 2016 Merger Commitments provide for limitations on the amount of distributions that may be paid from Cleco Power to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings.

The following table summarizes the cash distributions Cleco Holdings received from affiliates during 2018, 2017, and 2016:

	SUCCESSOR						PREDECESSOR
(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2018		FOR THE YEAR ENDED DEC. 31, 2017		APR. 13, 2016 - DEC. 31, 2016		JAN. 1, 2016 - APR. 12, 2016
Cleco Power	$	121,400	$	135,000	$	85,000	$	25,000
Perryville	225		6,850		150		200
Attala	217		7,160		100		$	125
Total	$	121,842	$	149,010	$	85,250	$	25,325

During the year ended December 31, 2018, Cleco Holdings made $1.8 million and $2.1 million in non-cash equity contributions to Perryville and Attala, respectively. During the year ended December 31, 2017, Cleco Holdings made no non-cash equity contributions to affiliates. During the successor period April 13, 2016, through December 31, 2016, Cleco Holdings made no non-cash equity contributions to affiliates.

During the year ended December 31, 2018, Cleco Holdings made $1.3 million of contributions to Cleco Cajun. During the year ended December 31, 2017, Cleco Holdings made no contributions to affiliates. During the successor period April 13, 2016, through December 31, 2016, Cleco Holdings made a contribution of $50.0 million to Cleco Power. During the predecessor period January 1, 2016, through April 12, 2016, Cleco Holdings made no contributions to affiliates.

During both years ended December 31, 2018, and 2017, Cleco Holdings received no equity contributions from Cleco Group. During the successor period April 13, 2016, through December 31, 2016, Cleco Holdings received $100.7 million of equity contributions from Cleco Group.

During the years ended December 31, 2018, and 2017, Cleco Holdings made $71.4 million and $84.1 million, respectively, of distribution payments to Cleco Group. During the successor period April 13, 2016, through December 31, 2016, Cleco Holdings made $88.8 million of distribution payments to Cleco Group.

Note 5 — Income Taxes

Cleco Holdings’ (Parent Company Only) Condensed Statements of Income reflect income tax expense (benefit) for the following line items:

	SUCCESSOR									PREDECESSOR
(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2018			FOR THE YEAR ENDED DEC. 31, 2017			APR. 13, 2016 - DEC. 31, 2016			JAN. 1, 2016 - APR. 12, 2016
Federal and state income tax expense (benefit)	$	(22,317	)	$	(23,094	)	$	(22,937	)	$	(9,690	)
Equity income from subsidiaries - Federal and state income tax expense	$	51,699		$	30,173		$	115		$	13,158

For information regarding the TCJA, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Income Taxes — TCJA.”

Note 6 — Commitments and Contingencies

For information regarding commitments and contingencies related to Cleco Holdings, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 16 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees.”