XML 43 R26.htm IDEA: XBRL DOCUMENT v3.20.4
Intangible Assets, Intangible Liabilities, and Goodwill
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets, Intangible Liabilities and Goodwill
Note 17 — Intangible Assets, Intangible Liabilities, and Goodwill
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 was fully amortized in March 2020 and had no residual value at the end of its life. The intangible asset’s amortization expense was based on the estimated collections from Cleco Power’s customers. Cleco Katrina/Rita records amortization expense based on actual collections. 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 at such date.
As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s 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 estimated life of each applicable contract ranging between seven and 19 years and the amortization is included in Electric operations on Cleco’s Consolidated Statements of Income.
As a result of the Cleco Cajun Transaction, fair value adjustments were recorded on Cleco’s Consolidated Balance Sheet for the difference between the contract and market price of acquired long-term wholesale power agreements. The fair value of intangible assets of $98.9 million and intangible liabilities of $14.2 million was reflected in the 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 estimated life of each applicable contract ranging between two and eight years. The amortization is included in Electric operations on Cleco’s Consolidated Statement of Income.
As part of the Cleco Cajun Transaction, Cleco assumed an LTSA for maintenance services related to the Cottonwood Plant. An intangible liability of $24.1 million was reflected in the 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 LTSA prepayments on Cleco’s Consolidated Balance Sheet. For more information on the fair value adjustments of intangible assets and liabilities related to the Cleco Cajun Transaction, see Note 3 — “Business Combinations.”
The following tables present Cleco and Cleco Power’s amortization of intangible assets and liabilities:

Cleco
 
FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)202020192018
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recover charges
$517 $20,576 $20,608 
Trade name$255 $255 $255 
Power supply agreements$25,600 $24,273 $9,680 
Intangible liabilities
LTSA$3,484 $3,234 $— 
Power supply agreements$3,528 $3,194 $— 
No impairments for intangibles in the table above for 2020, 2019, and 2018.

Cleco Power
 
FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)202020192018
Cleco Katrina/Rita right to bill and collect storm recovery charges
$517 $20,576 $20,608 

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

Cleco
AT DEC. 31,
(THOUSANDS)20202019
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges
$70,594 $70,594 
Trade name5,100 5,100 
Power supply agreements184,004 184,004 
Total intangible assets carrying amount259,698 259,698 
Intangible liabilities
LTSA24,100 24,100 
Power supply agreements14,200 14,200 
Total intangible liabilities carrying amount38,300 38,300 
Net intangible assets carrying amount221,398 221,398 
Accumulated amortization(134,526)(115,167)
Net intangible assets subject to amortization$86,872 $106,231 

Cleco Power
AT DEC. 31,
(THOUSANDS)20202019
Cleco Katrina/Rita right to bill and collect storm recovery charges
$177,537 $177,537 
Accumulated amortization(177,537)(177,020)
Net intangible assets subject to amortization$— $517 
The following table summarizes the amortization expense related to intangible assets and liabilities expected to be recognized in Cleco’s Consolidated Statements of Income:

Cleco
(THOUSANDS)INTANGIBLE ASSETSINTANGIBLE LIABILITIES
For the year ending Dec. 31,
2021$25,855 $(5,862)
2022$25,855 $(5,041)
2023$25,628 $(5,041)
2024$19,056 $(5,041)
2025$5,292 $(3,875)
Thereafter$10,046 $— 

Goodwill
In connection with the completion of the 2016 Merger, Cleco recognized goodwill of $1.49 billion. Management assigned the recognized goodwill to the Cleco Power reporting unit. Goodwill is required to be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Application of the goodwill impairment test requires significant judgments, including the identification of reporting units, assignments of assets and liabilities to
reporting units, assignment of goodwill to reporting units, and the determination of the fair value of the reporting units.
Cleco conducted its 2020 annual impairment test using an August 1, 2020, measurement date. The fair value of the Cleco Power reporting unit was estimated using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. Significant assumptions used in these fair value estimates include estimation of future cash flows related to capital expenditures, long-term rate of growth, and weighted-average cost of capital or discount rate. Changes in these assumptions could materially affect the determination of fair value and goodwill impairment at Cleco Power. Based on the tests performed, management has determined that the fair value of Cleco Power reporting unit exceeds the carrying value resulting in no impairment of Cleco Power’s goodwill for 2020.