

Note 16 — Intangible Assets and Liabilities

During 2008, Cleco Katrina/Rita acquired a $177.5 million intangible asset which includes $176.0 million for the right to bill and collect storm recovery charges from customers of Cleco Power and $1.5 million of financing costs. This intangible asset is expected to have a life of 12 years, but could have a life up to 15 years depending on the time period required to collect the required amount from Cleco Power’s customers. The intangible asset’s expected amortization expense is based on the estimated collections from Cleco Power’s customers. At the end of its life, the asset will have no residual value. At the date of the 2016 Merger, the gross balance of the Cleco Katrina/Rita intangible asset for Cleco was adjusted to be net of accumulated amortization, as no accumulated amortization existed on the date of the 2016 Merger. Cleco Katrina/Rita records amortization expenses based on actual collections.

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of the Cleco trade name and long-term wholesale power supply agreements. At the end of their life, these intangible assets will have no residual value. The trade name intangible asset is being amortized over its estimated economic useful life of 20 years. The intangible assets related to the power supply agreements are amortized over the remaining life of each applicable contract ranging between 4 years and 16 years and the amortization is included in Electric operations.

As a result of the Cleco Cajun Transaction, preliminary fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the valuation of the acquired long-term wholesale power supply agreements. The preliminary fair value of intangible assets of $102.5 million and intangible liabilities of $7.8 million was reflected in the preliminary purchase price allocation. At the end of their life, these intangible assets and liabilities will have no residual value. These intangibles are amortized over the remaining life of each applicable contract of approximately six years. The amortization is included in Electric operations.

As part of the Cleco Cajun Transaction, Cleco assumed an LTSA for maintenance services related to the Cottonwood Plant. The preliminary fair value of the LTSA was estimated by applying the differential cash flows approach. An intangible liability of $24.1 million was reflected in the preliminary purchase price allocation and is being amortized using the straight-line method over the estimated remaining life of the LTSA of seven years. The amortization is included as a reduction to the acquired LTSA prepayments.

The following tables present Cleco and Cleco Power’s amortization of intangible assets and liabilities:



Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2019			2018
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	4,870		$	4,485
Trade name	$	64		$	64
Power supply agreements	$	5,190		$	2,420
Intangible liabilities
LTSA	$	(581	)	$	—
Power supply agreements	$	(211	)	$	—



Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2019		2018
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	4,870	$	4,485

The following tables summarize the balances for intangible assets and liabilities subject to amortization for Cleco and Cleco Power:



Cleco
(THOUSANDS)	AT MAR. 31, 2019			AT DEC. 31, 2018
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	70,594		$	70,594
Trade name	5,100			5,100
Power supply agreements	187,604			85,104
Total intangible assets carrying amount	263,298			160,798
Intangible liabilities
LTSA	$	(24,100	)	$	—
Power supply agreements	(7,800		)	—
Total intangible liability carrying amount	(31,900		)	—
Total intangible assets carrying amount, net	231,398			160,798
Accumulated amortization	(85,824		)	(76,491		)
Net intangible assets subject to amortization	$	145,574		$	84,307



Cleco Power
(THOUSANDS)	AT MAR. 31, 2019			AT DEC. 31, 2018
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	177,537		$	177,537
Accumulated amortization	(161,314		)	(156,444		)
Net intangible assets subject to amortization	$	16,223		$	21,093