cnl-20210331


ABBREVIATION OR ACRONYM			DEFINITION
2016 Merger			Merger of Merger Sub with and into Cleco Corporation pursuant to the terms of the Merger Agreement which was completed on April 13, 2016
2016 Merger Commitments			Cleco Partners’, Cleco Group’s, Cleco Holdings’, and Cleco Power’s 77 commitments to the LPSC as defined in Docket No. U-33434
401(k) Plan			Cleco Power 401(k) Savings and Investment Plan
ABR			Alternate Base Rate which is the greater of the prime rate, the federal funds effective rate plus 0.50%, or LIBOR plus 1.0%
Acadia			Acadia Power Partners, LLC, previously a wholly owned subsidiary of Midstream. Acadia Power Partners, LLC was dissolved effective August 29, 2014.
Acadia Unit 1			Cleco Power’s 580-MW, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana
Acadia Unit 2			Entergy Louisiana’s 580-MW, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana, which is operated by Cleco Power
ACE			Affordable Clean Energy
ADIT			Accumulated Deferred Income Tax
AFUDC			Allowance for Funds Used During Construction

Amended Lignite Mining Agreement			Amended and restated lignite mining agreement effective December 29, 2009
AMI			Advanced Metering Infrastructure
AOCI			Accumulated Other Comprehensive Income (Loss)
ARO			Asset Retirement Obligation


BCI			British Columbia Investment Management Corporation


CARES Act			Coronavirus Aid, Relief, and Economic Security Act of March 2020


CECL			Current Expected Credit Losses
CEO			Chief Executive Officer
CFO			Chief Financial Officer
CIP			Critical Infrastructure Protection
Cleco			Cleco Holdings and its subsidiaries
Cleco Cajun			Cleco Cajun LLC (formerly Cleco Energy LLC, a wholly owned subsidiary of Cleco Holdings) and its subsidiaries
Cleco Cajun Transaction			The transaction between Cleco Cajun and NRG Energy in which Cleco Cajun acquired all the membership interest in South Central Generating, which closed on February 4, 2019, pursuant to the Purchase and Sale Agreement, which includes the Cottonwood Sale Leaseback
Cleco Corporation			Pre-2016 Merger entity that was converted to a limited liability company and changed its name to Cleco Corporate Holdings LLC on April 13, 2016

Cleco Group			Cleco Group LLC, a wholly owned subsidiary of Cleco Partners
Cleco Holdings			Cleco Corporate Holdings LLC, a wholly owned subsidiary of Cleco Group
Cleco Katrina/Rita			Cleco Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of Cleco Power
Cleco Partners			Cleco Partners L.P., a Delaware limited partnership that is owned by a consortium of investors, including funds or investment vehicles managed by MIRA, BCI, John Hancock Financial, and other infrastructure investors
Cleco Power			Cleco Power LLC and its subsidiaries, a wholly owned subsidiary of Cleco Holdings

Como 1			Como 1, L.P., currently known as Cleco Partners

Cottonwood Energy			Cottonwood Energy Company LP, a wholly owned subsidiary of Cleco Cajun. Prior to the closing of the Cleco Cajun Transaction on February 4, 2019, Cottonwood Energy was an indirect subsidiary of South Central Generating.
Cottonwood Plant			Cleco Cajun’s 1,263-MW, natural-gas-fired generating station located in Deweyville, Texas
Cottonwood Sale Leaseback			A lease agreement executed and delivered between Cottonwood Energy and a special-purpose entity that is a subsidiary of NRG Energy pursuant to which NRG Energy will lease back the Cottonwood Plant and will operate it until no later than May 2025.
Coughlin			Cleco Power’s 775-MW, combined-cycle power plant located in St. Landry, Louisiana
COVID-19			Novel coronavirus disease 2019 and the related global outbreak that was subsequently declared a pandemic by WHO in March 2020
CPP			Clean Power Plan
CSAPR			Cross-State Air Pollution Rule

DHLC			Dolet Hills Lignite Company, LLC, a wholly owned subsidiary of SWEPCO
Diversified Lands			Diversified Lands LLC, a wholly owned subsidiary of Cleco Holdings


Dolet Hills			A facility consisting of Dolet Hills Power Station, the Dolet Hills mine, and the Oxbow mine
Dolet Hills Power Station			A 650-MW generating unit at Cleco Power’s plant site in Mansfield, Louisiana. Cleco Power has a 50% ownership interest in the capacity of the Dolet Hills Power Station.
EAC			Environmental Adjustment Clause

EBITDA			Earnings before interest, income taxes, depreciation, and amortization



Entergy Gulf States			Entergy Gulf States Louisiana, LLC
Entergy Louisiana			Entergy Louisiana, LLC


ABBREVIATION OR ACRONYM			DEFINITION
EPA			U.S. Environmental Protection Agency
ERO			Electric Reliability Organization

Evangeline			Cleco Evangeline LLC, a wholly owned subsidiary of Midstream
FAC			Fuel Adjustment Clause
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
Fitch			Fitch Ratings, a credit rating agency
FTR			Financial Transmission Right
FRP			Formula Rate Plan
GAAP			Generally Accepted Accounting Principles in the U.S.




IRS			Internal Revenue Service

kWh			Kilowatt-hour(s)



LIBOR			London Interbank Offered Rate
LMP			Locational Marginal Price
Louisiana Generating			Louisiana Generating, LLC, a wholly owned subsidiary of South Central Generating
LPSC			Louisiana Public Service Commission

LTSA			Long-Term Parts and Service Agreement between Cottonwood Energy and a third party, dated January 19, 2001, that Cleco Cajun assumed as a result of the Cleco Cajun Transaction to provide maintenance services related to the Cottonwood Plant


Merger Agreement			Agreement and Plan of Merger, dated as of October 17, 2014, by and among Cleco Partners, Merger Sub, and Cleco Corporation relating to the 2016 Merger
Merger Sub			Cleco MergerSub Inc., previously an indirect wholly owned subsidiary of Cleco Partners that was 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
Midstream			Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Holdings

MIRA			Macquarie Infrastructure and Real Assets Inc.
MISO			Midcontinent Independent System Operator, Inc.
MMBtu			One million British thermal units
Moody’s			Moody’s Investors Service, a credit rating agency
MW			Megawatt(s)
MWh			Megawatt-hour(s)


NERC			North American Electric Reliability Corporation



Not Meaningful			A percentage comparison of these items is not statistically meaningful because the percentage difference is greater than 1,000%


NRG Energy			NRG Energy, Inc.






Other Benefits			Includes medical, dental, vision, and life insurance for Cleco’s retirees
Oxbow			Oxbow Lignite Company, LLC, 50% owned by Cleco Power and 50% owned by SWEPCO

Perryville			Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Holdings



Purchase and Sale Agreement			Purchase and Sale Agreement, dated as of February 6, 2018, by and among NRG Energy, South Central Generating, and Cleco Cajun

Registrant(s)			Cleco Holdings and/or Cleco Power

Rodemacher Unit 2			A 523-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana. Cleco Power has a 30% ownership interest in the capacity of Rodemacher Unit 2.
ROE			Return on Equity


RTO			Regional Transmission Organization
S&P			S&P Global Ratings, a division of S&P Global Inc, a credit rating agency

SEC			U.S. Securities and Exchange Commission

SERP			Supplemental Executive Retirement Plan

South Central Generating			South Central Generating LLC, formerly NRG South Central Generating LLC


SSR			System Support Resource



Support Group			Cleco Support Group LLC, a wholly owned subsidiary of Cleco Holdings
SWEPCO			Southwestern Electric Power Company, an electric utility subsidiary of American Electric Power Company, Inc.
TCJA			Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017
Teche Unit 3			A 359-MW generating unit at Cleco Power’s plant site in Baldwin, Louisiana
WHO			World Health Organization

This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements, including, without limitation, future capital expenditures; business strategies; goals, beliefs, plans, and objectives; competitive strengths; market developments; development and operation of facilities; growth in sales volume; meeting capacity requirements; expansion of service to existing customers and service to new customers; future environmental regulations and remediation liabilities; electric customer credits; and the anticipated outcome of various regulatory and legal proceedings. Although the Registrants believe that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are based on numerous assumptions (some of which may prove to be incorrect) and are subject to risks and uncertainties that could cause the actual results to differ materially from the Registrants’ expectations. In addition to any assumptions and other factors referred to specifically in connection with these forward-looking statements in this Quarterly Report on Form 10-Q, the following list identifies some of the factors that could cause the Registrants’ actual results to differ materially from those contemplated in any of the Registrants’ forward-looking statements:

•changes in environmental laws, regulations, decisions and policies, including present and potential environmental remediation costs, restrictions on greenhouse gas emissions to mitigate concerns over global climate changes, possible effects on Cleco’s generation resources, or prohibitions or restriction on new or existing services, and Cleco’s compliance with these matters,

•state and federal regulatory decisions or related judicial decisions disallowing or delaying recovery of capital investments, operating costs, commodity costs, the ordering of refunds to customers and discretion over allowed return on investment,

•the loss of regulatory accounting treatment, which could result in the write-off of regulatory assets and the loss of regulatory deferral and recovery mechanisms,

•pandemics, including the current COVID-19 pandemic,

•changes in climate and weather conditions, including natural disasters such as wind and ice storms, hurricanes, floods, and droughts, and Cleco Power’s ability to recover restoration costs associated with these events,

•the ability of Cleco’s customers to continue paying their utility bills due to rising costs related to hurricanes, ice storms, or other weather events,

•economic conditions in Cleco’s service areas, including the economy’s effects on customer demand for utility services,

•Cleco’s ability to recontract existing power purchase agreements or secure future power purchase agreements with wholesale customers,

•mechanical breakdowns or other incidents that could impair assets and disrupt operations of any of Cleco’s generation facilities, transmission and distribution systems, or other operations and may require Cleco to purchase replacement power or incur costs to repair the facilities,

•growth or decline of Cleco’s customer base, or decline in existing services, including, the effect of the trend toward distributed generation at customer sites, the loss of key suppliers for fuel, materials, or services or other disruptions to the supply chain,

•wholesale and retail competition, including alternative energy sources, growth in customer-owned power resource technologies that displace utility-supplied energy or that may be sold back to the utility, and alternative energy suppliers and delivery arrangements,

•blackouts or disruptions of interconnected transmission systems (the regional power grid),

•terrorist attacks, cyberattacks, or other malicious acts, including any effects of terrorism, cyberattacks, ransomware, or vandalism that may damage or disrupt information technology systems,

•changes in technology costs that impede Cleco’s ability to effectively implement new information systems or to operate and maintain current production technology,

•changes in Cleco’s strategic business plans, which could be affected by any of the factors discussed herein,

•the impact of Cleco’s credit ratings, changes in interest rates, other capital market conditions, and global market conditions on financing through the issuance of debt and/or equity securities,

•declining energy demand related to customer energy efficiency, conservation measures or increased distributed generation,

•industry and geographic concentrations of Cleco’s counterparties, suppliers, and customers,

•deterioration in the creditworthiness of Cleco’s customers,

•volatility and illiquidity in wholesale energy markets,

•default or nonperformance on the part of any parties from whom Cleco purchases and/or sells capacity or energy,

•Cleco Holdings’ and Cleco Power’s ability to remain in compliance with their respective debt covenants,

•the outcome of legal proceedings and other contingencies,

•changes in actuarial assumptions, interest rates and the actual return on plan assets for Cleco’s pension and other postretirement benefit plans,

•insufficient insurance coverage, more restrictive coverage terms, increasing insurance cost and Cleco’s ability to obtain insurance,

•Cleco’s ability to remain in compliance with the commitments made to the LPSC in connection with the Cleco Cajun Transaction and the 2016 Merger,

•Cleco Holdings’ dependence on the earnings, dividends, or distributions from its subsidiaries to meet its debt obligations,

•workforce factors, including aging workforce, changes in key members of management, availability of workers in a variety


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Assets
Current assets
Cash and cash equivalents	$	87,099	$	84,976
Restricted cash and cash equivalents	4,430		4,545
Customer accounts receivable (less allowance for credit losses of $2,040 in 2021 and $2,758 in 2020)	88,353		82,511

Other accounts receivable	41,681		32,076
Taxes receivable	2,743		—
Unbilled revenue	32,653		40,127
Fuel inventory, at average cost	112,379		109,494
Materials and supplies, at average cost	132,410		132,449
Energy risk management assets	11,299		13,081
Accumulated deferred fuel	69,832		28,194
Cash surrender value of company-/trust-owned life insurance policies	91,980		89,138
Prepayments	11,658		14,549
Regulatory assets	21,887		21,041
Other current assets	17,492		12,711
Total current assets	725,896		664,892
Property, plant, and equipment
Property, plant, and equipment	5,400,321		5,337,190
Accumulated depreciation	(746,201)		(672,271)
Net property, plant, and equipment	4,654,120		4,664,919
Construction work in progress	134,956		124,622
Total property, plant, and equipment, net	4,789,076		4,789,541
Equity investment in investee	7,322		9,072
Goodwill	1,490,797		1,490,797
Prepayments	16,458		23,405
Operating lease right of use assets	25,735		26,172
Restricted cash and cash equivalents	744		744
Note receivable	14,322		14,506

Regulatory assets	572,040		554,609
Intangible assets	105,268		111,731

Other deferred charges	43,618		40,100
Total assets	$	7,791,276	$	7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt	$	135,000	$	75,000
Long-term debt and finance leases due within one year	66,700		66,682
Accounts payable	119,892		161,357
Accounts payable - affiliate	41,283		41,283
Customer deposits	59,485		58,718
Provision for rate refund	8,933		9,444
Taxes payable	23,097		7,530
Interest accrued	39,742		15,583

Energy risk management liabilities	1,442		2,453
Regulatory liabilities	21,335		23,509
Deferred compensation	12,813		13,240

Other current liabilities	53,473		49,813
Total current liabilities	583,195		524,612
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	667,691		661,376

Postretirement benefit obligations	315,249		314,653

Regulatory liabilities - deferred taxes, net	147,179		157,056



Deferred lease revenue	38,355		40,657
Intangible liabilities	23,106		24,859
Asset retirement obligations	27,605		27,986
Operating lease liabilities	23,044		23,333
Other deferred credits	23,761		28,627
Total long-term liabilities and deferred credits	1,265,990		1,278,547
Long-term debt and finance leases, net	3,164,113		3,165,387
Total liabilities	5,013,298		4,968,546
Commitments and contingencies (Note 13)
Member’s equity	2,777,978		2,757,023
Total liabilities and member’s equity	$	7,791,276	$	7,725,569
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021			2020
Operating activities
Net income	$	20,327		$	6,328
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	62,549			63,307



Provision for credit losses	1,874			2,957
Unearned compensation expense	2,422			1,788
Allowance for equity funds used during construction	(887)			74
(Gain) loss on risk management assets and liabilities, net	(4,697)			6,509
Deferred lease revenue	(2,301)			(2,301)
Deferred income taxes	(6,684)			(2,900)
Deferred fuel costs	(41,121)			7,626
Cash surrender value of company-/trust-owned life insurance	(2,841)			10,686
Changes in assets and liabilities
Accounts receivable	(19,478)			13,310

Unbilled revenue	7,474			2,773
Fuel inventory and materials and supplies	(2,838)			(27,928)
Prepayments	263			(1,638)
Accounts payable	(47,838)			(55,131)

Customer deposits	3,236			2,731
Provision for merger commitments	(627)			1,018
Postretirement benefit obligations	1,446			1,315
Regulatory assets and liabilities, net	(19,459)			(721)
Other deferred accounts	(4,756)			(4,571)
Taxes accrued	12,459			14,563
Interest accrued	24,159			22,730

Deferred compensation	(427)			(2,743)
Other operating	(4,298)			424
Net cash (used in) provided by operating activities	(22,043)			60,206
Investing activities
Additions to property, plant, and equipment	(38,658)			(65,624)
Allowance for equity funds used during construction	887			(74)







Return of equity investment in investees	1,750			—




Other investing	356			285
Net cash used in investing activities	(35,665)			(65,413)
Financing activities
Draws on revolving credit facilities	60,000			238,000


Repayment of long-term debt	—			(11,055)




Other financing	(284)			(149)
Net cash provided by financing activities	59,716			226,796
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	2,008			221,589
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	90,265		(1)	142,595
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	92,273	(2)	$	364,184






Supplementary cash flow information
Interest paid, net of amount capitalized	$	7,225		$	9,077

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	14,246		$	11,854



(1) Includes cash and cash equivalents of $84,976, current restricted cash and cash equivalents of $4,545, and non-current restricted cash and cash equivalents of $744. (2) Includes cash and cash equivalents of $87,099, current restricted cash and cash equivalents of $4,430, and non-current restricted cash and cash equivalents of $744.

The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO POWER

Condensed Consolidated Balance Sheets (Unaudited)
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Assets
Utility plant and equipment
Property, plant, and equipment	$	5,875,428	$	5,824,378
Accumulated depreciation	(2,128,642)		(2,067,362)
Net property, plant, and equipment	3,746,786		3,757,016
Construction work in progress	121,385		110,613
Total utility plant and equipment, net	3,868,171		3,867,629
Current assets
Cash and cash equivalents	38,059		24,846
Restricted cash and cash equivalents	4,430		4,545
Customer accounts receivable (less allowance for credit losses of $2,040 in 2021 and $2,758 in 2020)	52,316		43,852
Accounts receivable - affiliate	15,792		14,605
Other accounts receivable	32,367		27,535
Taxes receivable	2,713		—
Unbilled revenue	32,653		40,127
Fuel inventory, at average cost	64,652		63,234
Materials and supplies, at average cost	105,097		105,340
Energy risk management assets	1,986		4,337
Accumulated deferred fuel	69,832		28,194
Cash surrender value of company-owned life insurance policies	16,212		16,184
Prepayments	4,946		7,163
Regulatory assets	14,151		13,305
Other current assets	3,842		830
Total current assets	459,048		394,097
Equity investment in investee	7,322		9,072
Prepayments	1,433		1,496
Operating lease right of use assets	25,679		26,006

Note receivable	14,322		14,506

Regulatory assets	434,482		414,535


Other deferred charges	39,807		38,806
Total assets	$	4,850,264	$	4,766,147
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)


CLECO POWER

Condensed Consolidated Statements of Cash Flows (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021			2020
Operating activities
Net income	$	18,425		$	11,831
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	43,458			45,079

Provision for credit losses	1,874			2,569

Allowance for equity funds used during construction	(887)			74
Deferred income taxes	(6,975)			5,341
Deferred fuel costs	(41,121)			7,626

Changes in assets and liabilities
Accounts receivable	(17,179)			3,452
Accounts receivable - affiliate	(302)			2,863
Unbilled revenue	7,474			2,773
Fuel inventory and materials and supplies	(1,167)			(22,429)
Prepayments	2,176			1,209
Accounts payable	(24,222)			(33,749)
Accounts payable - affiliate	(155)			(3,817)
Customer deposits	3,236			2,731
Provision for merger commitments	(127)			(1,295)
Postretirement benefit obligations	720			1,181
Regulatory assets and liabilities, net	(19,956)			(1,218)
Other deferred accounts	(1,328)			(3,452)
Taxes accrued	10,893			7,691
Interest accrued	16,010			15,260
Other operating	(3,337)			330
Net cash (used in) provided by operating activities	(12,490)			44,050
Investing activities
Additions to property, plant, and equipment	(37,150)			(61,477)
Allowance for equity funds used during construction	887			(74)
Return of equity investment in investees	1,750			—






Other investing	356			285
Net cash used in investing activities	(34,157)			(61,266)
Financing activities
Draws on revolving credit facility	60,000			150,000


Repayment of long-term debt	—			(11,055)




Other financing	(255)			(148)
Net cash provided by financing activities	59,745			138,797
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	13,098			121,581
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	29,391		(1)	80,952
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	42,489	(2)	$	202,533
Supplementary cash flow information

Interest paid, net of amount capitalized	$	797		$	605

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	12,738		$	11,015



(1) Includes cash and cash equivalents of $24,846 and current restricted cash and cash equivalents of $4,545. (2) Includes cash and cash equivalents of $38,059 and current restricted cash and cash equivalents of $4,430.

The accompanying notes are an integral part of the condensed consolidated financial statements.


Note 1 — Summary of Significant Accounting Policies

COVID-19 Impacts

In March 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and the U.S. declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory. State and local authorities also subsequently implemented multistep policies to reopen various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. Due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, effective March 31, 2021, the governor of the state of Louisiana issued orders reducing some of the restrictions that were in effect and easing capacity limits on businesses as well as social gatherings. Effective April 28, 2021, the governor of the state of Louisiana further reduced restrictions by revoking the mandatory, state-wide mask mandate.

The COVID-19 pandemic may worsen in the U.S. during the upcoming months, which may cause federal, state, and local governments to reconsider restrictions on business and social activities. In the event governments increase restrictions, the reopening of the economy may be further curtailed.

Cleco has modified some of its business operations, as these restrictions have significantly impacted many sectors of the economy. Impacts include record levels of unemployment, with businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. Cleco has also modified and continues to adjust certain business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, and other governmental and regulatory authorities.

Cleco cannot predict the full impact that COVID-19, or the significant disruption and volatility currently being experienced

in the markets, will have on its business, cash flows, liquidity, financial condition, and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the availability and timely distribution of effective treatments and vaccines, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

Principles of Consolidation

The accompanying condensed consolidated financial statements of Cleco include the accounts of Cleco and its majority-owned subsidiaries after elimination of intercompany accounts and transactions.

Basis of Presentation

The condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements. Because the interim condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring

adjustments that are necessary to fairly state the financial position and results of operations of Cleco and Cleco Power. Amounts reported in Cleco and Cleco Power’s interim financial statements are not necessarily indicative of amounts expected for the annual periods due to the effects of seasonal temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices, discrete income tax items, and other factors.

In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. For information on recent authoritative guidance and its effect on financial results, see Note 2 — “Recent Authoritative Guidance.”

Restricted Cash and Cash Equivalents

Cleco and Cleco Power’s restricted cash and cash equivalents consisted of the following:


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current
Cleco Katrina/Rita’s storm recovery bonds	$	2,626	$	2,626

Cleco Power’s charitable contributions	1,603		1,718
Cleco Power’s rate credit escrow	201		201
Total current	4,430		4,545
Non-current
Diversified Lands’ mitigation escrow	22		22
Cleco Cajun’s defense fund	722		722




Total non-current	744		744
Total restricted cash and cash equivalents	$	5,174	$	5,289


Cleco Power
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Current
Cleco Katrina/Rita’s storm recovery bonds	$	2,626	$	2,626

Charitable contributions	1,603		1,718
Rate credit escrow	201		201






Total restricted cash and cash equivalents	$	4,430	$	4,545

Prior to the repayment of the storm recovery bonds in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash was collected, it was restricted for payment of administration fees, interest, and principal on the storm recovery bonds. The remaining $2.6 million of restricted cash at March 31, 2021, was used in April 2021 for final administrative and winding up activities of Cleco Katrina/Rita. Refunds to Cleco Power customers for amounts remaining after all other costs and expenses of Cleco Katrina/Rita are expected to be paid with the completion of Cleco Power’s current LPSC base rate case.

Reserves for Credit Losses

Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivables are generally considered to become past due 20 days after the billing date. Cleco recognizes write-offs within the allowance for credit losses once all recovery methods have been exhausted. It is the policy of management to review accounts receivable and unbilled revenue monthly using a reserve matrix based on historical bad debt write-offs as well as current and forecasted economic conditions to establish a credit loss estimate. Management’s historical credit loss analysis included periods of economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of electricity, none of these past events have significantly impacted Cleco’s credit loss rates.

Although Cleco’s service territory experienced a recent decline in the economy in 2020 and 2021 primarily related to the COVID-19 pandemic and weather-related events, the economic outlook at March 31, 2021, was still within range of its historical credit loss analysis.

The table below presents the changes in the allowance for credit losses by receivable for Cleco and Cleco Power:


Cleco
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, Dec. 31, 2020	$	2,758	$	1,638	$	4,396

Current period provision	1,874		—		1,874
Charge-offs	(2,859)		—		(2,859)
Recovery	267		—		267
Balances, Mar. 31, 2021	$	2,040	$	1,638	$	3,678

* Loan held at Diversified Lands that was fully reserved for at March 31, 2021.


(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, Dec. 31, 2019	$	3,005	$	1,250	$	4,255
CECL adoption	71		—		71
Current period provision	2,498		388		2,886
Charge-offs	(4,092)		—		(4,092)
Recovery	641		—		641
Balances, Mar. 31, 2020	$	2,123	$	1,638	$	3,761

* Loan held at Diversified Lands that was fully reserved for at March 31, 2020.


Cleco Power
(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, Dec. 31, 2020	$	2,758

Current period provision	1,874
Charge-offs	(2,859)
Recovery	267
Balances, Mar. 31, 2021	$	2,040


(THOUSANDS)	ACCOUNTS RECEIVABLE
Balances, Dec. 31, 2019	$	3,005
CECL adoption	71
Current period provision	2,498
Charge-offs	(4,092)
Recovery	641
Balances, Mar. 31, 2020	$	2,123


Note 2 — Recent Authoritative Guidance

In March 2020, FASB issued optional guidance for a limited period of time that applies to entities meeting certain criteria for the contract modifications or hedging relationships that are referencing LIBOR or another reference rate expected to be discontinued due to reference rate reform. The guidance includes a general principal that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The optional guidance may be applied from March 12, 2020, through December 31, 2022. Management has identified contracts with reference rates that will be discontinued and expects to apply this guidance on an on-going basis. Management does not expect this guidance to have a significant impact on the Registrants’ results of operations, financial condition, or cash flows.

In December 2019, FASB amended the guidance for accounting for income taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to general principles included in the accounting guidance. Effective January 1, 2021, Cleco adopted the amended accounting guidance. Adoption of this guidance did not materially impact the Registrants’ results of operations, financial condition, or cash flows.

Note 3 — Leases

Cleco maintains operating and finance leases in its ordinary course of business activities.

Cottonwood Sale Leaseback Agreement

Upon closing the Cleco Cajun Transaction, the Cottonwood Sale Leaseback was executed. Under the terms of the lease,

NRG Energy will operate the Cottonwood Plant, incur all costs, and receive all revenues from the operations of the plant. Cottonwood Energy will receive fixed lease payments of $40.0 million per year and variable lease payments for LTSA costs and property taxes paid by NRG Energy on behalf of Cleco. Cleco may terminate the lease contract under specific circumstances stated in the lease contract. The residual value under the Cottonwood Sale Leaseback is expected to be recovered through sales of power generation from the plant. The residual value of the Cottonwood Plant has been determined using the plant’s estimated economic life.

Cleco Cajun is Cleco’s only entity with lessor arrangements. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback is included in Other operations within Cleco’s Condensed Consolidated Statement of Income. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback for the three months ended March 31, 2021, and 2020, was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Fixed payments	$	10,000	$	10,000
Variable payments	5,465		5,566
Amortization of deferred lease liability*	2,301		2,302
Total lease income	$	17,766	$	17,868

* Consists of amortization of the deferred lease revenue resulting from the fair value of the lease between Cottonwood Energy and a special-purpose entity that is a subsidiary of NRG Energy.


Note 4 — Revenue Recognition

Operating revenue, net for the three months ended March 31, 2021, and 2020, was as follows:

Cleco and Cleco Power have unsatisfied performance obligations with durations ranging between 1 and 14 years that primarily relate to stand-ready obligations as part of fixed capacity minimums. At March 31, 2021, Cleco and Cleco Power had $70.7 million of unsatisfied fixed performance obligations that will be recognized as revenue over the term of such contracts as the stand-ready obligation to provide energy is provided.


Note 5 — Regulatory Assets and Liabilities

Cleco Power capitalizes or defers certain costs for recovery from customers and recognizes a liability for amounts expected to be returned to customers based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, Cleco Power’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable, Cleco Power would be required to write-down such assets. In addition, potential deregulation of the industry or possible future changes in the method of rate regulation of Cleco Power could require discontinuance of the application of the authoritative guidance on regulated operations.

The following table summarizes Cleco Power’s regulatory assets and liabilities:


Cleco Power
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,992	$	2,019
Accumulated deferred fuel	69,832		28,194
AFUDC equity gross-up *	68,896		69,670
AMI deferred revenue requirement	2,454		2,591
AROs	6,345		5,488
Coughlin transaction costs	869		876
COVID-19 executive order	2,953		2,953
Deferred storm restoration costs - Hurricane Delta	17,052		17,051
Deferred storm restoration costs - Hurricane Laura	54,744		54,406
Deferred storm restoration costs - Hurricane Zeta	3,613		3,493
Deferred storm restoration costs - Winter Storms Uri & Viola	1,938		—
Dolet Hills closure costs	70,192		48,982
Emergency declarations	131		270
Energy efficiency	2,703		2,820
Financing costs	7,091		7,184
Interest costs	3,646		3,708
Non-service cost of postretirement benefits	10,181		9,901
Other, net	4,682		4,229
Postretirement costs	160,674		165,437
Production operations and maintenance expenses	3,361		4,058
Rodemacher Unit 2 closure costs	2,722		1,333
St. Mary Clean Energy Center	5,219		3,479

Training costs	6,046		6,085
Tree trimming costs	11,129		11,807
Total regulatory assets	518,465		456,034
Regulatory liabilities
AFUDC	(4,574)		(4,218)
Corporate franchise tax, net	(1,133)		(763)
Deferred taxes, net	(162,807)		(175,584)
Total regulatory liabilities	(168,514)		(180,565)
Total regulatory assets, net	$	349,951	$	275,469
* Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.

The following table summarizes Cleco’s net regulatory assets and liabilities:


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Total Cleco Power regulatory assets, net	$	349,951	$	275,469
2016 Merger adjustments *
Fair value of long-term debt	117,703		119,553
Postretirement costs	14,915		15,411
Financing costs	7,506		7,592
Debt issuance costs	5,170		5,254
Total Cleco regulatory assets, net	$	495,245	$	423,279

* Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

Accumulated Deferred Fuel

In February 2021, Winter Storms Uri and Viola moved through Louisiana causing substantial damage to Cleco’s distribution

assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures. Incremental fuel and purchased power costs were incurred as a result of the winter storms. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. For more information about the incremental fuel and purchased power costs related to Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Deferred Storm Restoration Costs — Winter Storms

In February 2021, Cleco Power’s service territory experienced extreme and unprecedented winter weather.

On February 14, 2021, Winter Storm Uri reached Louisiana resulting in power outages for approximately 11,000 of Cleco Power’s electric customers located primarily in south Louisiana.

On February 17, 2021, Winter Storm Viola reached Louisiana resulting in power outages for approximately 43,000 of Cleco Power’s electric customers located primarily in central and south Louisiana.

On March 17, 2021, the LPSC approved utilities establishing a regulatory asset to track and defer non-capital expenses associated with these winter storms. For more information about Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”


Note 6 — Fair Value Accounting

The amounts reflected on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at March 31, 2021, and December 31, 2020, for cash equivalents, restricted cash equivalents, accounts receivable, other accounts receivable, short-term debt, and accounts payable approximate fair value because of their short-term nature. Cleco applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including business combinations, as well as impairment related to goodwill and other long-lived assets.

The following tables summarize the carrying value and estimated market value of Cleco and Cleco Power’s financial instruments not measured at fair value on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets:


Cleco
	AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	3,228,726	$	3,556,579	$	3,230,500	$	3,541,349

* The carrying value of long-term debt does not include deferred issuance costs of $12.7 million at
March 31, 2021, and $13.4 million at December 31, 2020.


Cleco Power
	AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	1,495,024	$	1,865,938	$	1,494,947	$	1,794,799

* The carrying value of long-term debt does not include deferred issuance costs of $6.8 million at
March 31, 2021, and $7.0 million at December 31, 2020.

In order to fund capital requirements, Cleco issues fixed and variable rate long-term debt with various tenors. The fair value of this class fluctuates as the market interest rates for

The total volume of FTRs that Cleco Power had outstanding at March 31, 2021, and December 31, 2020, was 3.7 million MWh and 9.5 million MWh, respectively. The total volume of FTRs that Cleco had outstanding at March 31, 2021, and December 31, 2020, was 6.0 million MWh and 15.3 million MWh, respectively. The total volume of other commodity derivatives Cleco had outstanding at March 31, 2021, and December 31, 2020, was 138.2 million MMBtus and 73.0 million MMBtus, respectively.


Note 7 — Debt

At March 31, 2021, Cleco Power had $135.0 million of borrowings outstanding under its $300.0 million revolving credit facility at an all-in interest rate of 1.35%. The borrowing costs under the agreement currently are equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%.


Note 8 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Employees hired before August 1, 2007, are covered by a non-contributory, defined benefit pension plan. In December 2020, Cleco made a $15.8 million required contribution to the pension plan. Based on the funding assumptions at December 31, 2020, and the funding relief provided by the American Rescue Plan Act, which was signed by the President on March 11, 2021, management estimates that no pension contributions will be required through 2025. As of March 31, 2021, Cleco expects to make $67.0 million in discretionary contributions to the pension plan in 2021, which offsets future required contributions.

Cleco Power is the plan sponsor and Support Group is the plan administrator. Benefits under the plan reflect an employee’s years of service, age at retirement, and accrued benefit at retirement.

401(k) Plan

Cleco’s 401(k) Plan is intended to provide active, eligible employees with voluntary, long-term savings and investment opportunities. The 401(k) Plan is a defined contribution plan and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974. In accordance with the 401(k) Plan, employer contributions are made in the form of cash. Cash contributions are invested in proportion to the participant’s voluntary contribution investment choices. Participation in the Plan is voluntary, and active Cleco employees are eligible to participate. Cleco’s 401(k) Plan expense for the three months ended March 31, 2021, and 2020 was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
401(k) Plan expense	$	2,759	$	3,256

Cleco Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan related to Cleco’s other subsidiaries for the three months ended March 31, 2021, and 2020 was as follows:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
401(k) Plan expense	$	1,380	$	1,662


Note 9 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three months ended March 31, 2021, and 2020:


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
	2021		2020
Effective tax rate	(86.4)	%	19.8	%


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
	2021		2020
Effective tax rate	(111.7)	%	22.0	%

For the three months ended March 31, 2021, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the amortization of excess ADIT.

For the three months ended March 31, 2020, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the adjustment to record tax expense at the projected annual effective tax rate; an adjustment for increased allowable interest expense deduction as a result of the CARES Act; permanent tax differences; the flowthrough of tax benefits, including AFUDC equity; and state tax expense.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At March 31, 2021, and December 31, 2020, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of March 31, 2021, for Cleco and Cleco Power would be unchanged in the next 12 months. The settlement of open tax years could involve the payment of additional taxes, and/or the recognition of tax benefits, which may have an effect on Cleco’s effective tax rate.

Income Tax Audits

Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal consolidated tax return. While the statute of limitations remains open for tax years 2017, 2018, and 2019, the IRS has completed its review of the year 2017 through 2019, and these tax returns were filed consistent with the IRS’s review. The IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for 2020. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances.

The state income tax years 2017, 2018, and 2019 remain subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expense. For the three months ended March 31, 2021, and 2020, no penalties were recognized.

CARES Act

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions such as an alternative minimum tax credit refund, a five-year net operating loss carryback from years 2018 through 2020, and deferred payments of employer payroll taxes.

Cleco deferred $6.0 million in employer payroll tax payments for the period March 27, 2020, through December 31, 2020. Cleco will pay $3.0 million of the obligation by December 31, 2021, and the remaining $3.0 million by December 31, 2022.

Cleco Power deferred $3.6 million in employer payroll tax payments for the period March 27, 2020 through December 31, 2020. Cleco Power will pay $1.8 million of the obligation by December 31, 2021, and the remaining $1.8 million by December 31, 2022.

The CARES Act also includes modifications on the limitations of business interest for the 2020 and 2019 tax years. The modifications increase the allowable business interest deduction from 30% to 50% of adjusted taxable income. Cleco does not anticipate having any disallowed interest for the 2020 tax year.

Consolidated Appropriations Act of 2021

In December 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. The CAA includes COVID-19 tax relief and tax extender provisions including extensions of time to begin construction on and placed in-service assets generating production tax credits and income tax credits, 100% deductibility of business meals in 2021 and 2022, and an extension of the work opportunity tax credit. The income tax credit percentage has been increased for projects starting construction through 2023 and placed in service by the end of

2025. Management does not expect the CAA to have a material impact on the Registrants.

American Jobs Act of 2021

On March 31, 2021, the President announced the American Jobs Act. This proposal includes a number of incentives to encourage construction of certain transmission and energy storage property. The proposed act also proposes to raise the federal statutory corporate income tax rate from 21% to 28% and to introduce a minimum tax based on book income. Currently, management is unable to predict the impact of the proposed act on the Registrants.


Note 10 — Disclosures about Segments

Cleco’s reportable segments are based on its method of internal reporting, which disaggregates business units by its first-tier subsidiary. Cleco’s reportable segments are Cleco Power and Cleco Cajun.

Each reportable segment engages in business activities from which it earns revenue and incurs expenses. Segment managers report periodically to Cleco’s CEO, who is Cleco’s chief operating decision maker, with discrete financial information and, at least quarterly, present discrete financial information to Cleco and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The reportable segment prepares budgets that are presented to and approved by

Cleco and, in the case of Cleco Power, Cleco Power’s Boards of Managers. The column shown as Other in the following tables includes the holding company, a shared services subsidiary, and an investment subsidiary. There were no changes to Cleco’s existing reportable segments.

The financial results in the following tables are presented on an accrual basis. EBITDA is a key non-GAAP financial measure used by the CEO to assess the operating performance of Cleco’s segments. Management evaluates the performance of Cleco’s segments and allocates resources to them based on segment profit and the requirements to implement strategic initiatives and projects to meet current business objectives. EBITDA is defined as net income adjusted for interest, income taxes, depreciation, and amortization. Depreciation and amortization in the following tables includes amortization of intangible assets and liabilities recorded for the fair value adjustment of wholesale power supply agreements as a result of the 2016 Merger and the Cleco Cajun Transaction, as well as amortization of deferred lease revenue resulting from the Cleco Cajun Transaction. Material intercompany transactions occur on a regular basis. These intercompany transactions relate primarily to joint and common administrative support services as well as transmission services provided by Cleco Power to Cleco Cajun.


Note 11 — Regulation and Rates

Provision for rate refund on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets consisted primarily of the following:


(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
FRP	$	2,089	$	1,786
TCJA	$	2,057	$	2,057
Cleco Katrina/Rita storm recovery charges	$	1,609	$	1,617
FERC audit	$	951	$	1,912
Site-specific industrial customer	$	865	$	710
Transmission ROE	$	595	$	595

FRP

Cleco Power’s annual retail earnings are subject to an FRP that was approved by the LPSC in June 2014. Under the terms of Cleco Power’s current FRP, Cleco Power is allowed to earn a target ROE of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60.0% of retail earnings between 10.9% and 11.75%, and all retail earnings over 11.75%, are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC, annually. Credits are typically included on customers’ bills the following summer, but the amount and timing of the refunds are ultimately subject to LPSC approval. Cleco Power’s FRP had a four-year term, which was set to expire in June 2018. As a result of the 2016 Merger, the FRP was extended an additional two years with an expiration of June 2020, and Cleco Power was required to file a new base rate case in June 2019 with any change in rates to be implemented in July 2020. On June 28, 2019, Cleco Power filed an application with the LPSC for a new FRP. However, there has been a delay in the current base rate case. Cleco Power has responded to multiple sets of data requests relating to the new FRP. Unless the 2014 FRP were to be extended by order of the LPSC, the FRP rates established in July 2019 will remain in effect. Cleco Power anticipates new rates to be effective on July 1, 2021. However, management is unable to determine the outcome of the base rate case relating to the new FRP.

Cleco Power filed its monitoring report for the 12 months ended June 30, 2019, on October 31, 2019, indicating that no refund was due. Cleco Power has responded to data requests relating to the 2019 FRP monitoring report.

Cleco Power’s monitoring report also included a $1.2 million annual cost of service savings as a result of the 2016 Merger Commitments. The cost of service savings is not subject to the target ROE or any sharing mechanism. The cost of service savings is refunded annually in September and will continue until Cleco Power’s next FRP is in effect, which is

expected on July 1, 2021. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated cost of service savings refunds.

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. As a result of the tax rate reduction, on January 1, 2018, Cleco Power began accruing an estimated reserve for the reduction in the federal statutory corporate income tax rate. In February 2018, the LPSC directed utilities, including Cleco Power, to provide considerations of the appropriate manner to flow through to ratepayers the benefits of the reduction in corporate income taxes as a result of the TCJA. In July 2019, the LPSC approved Cleco Power’s rate refund of $79.2 million, plus interest, for the reduction in the statutory federal tax rate for the period from January 2018 to June 2020. The refund was credited to customers over 12 months beginning August 1, 2019.

In July 2019, the LPSC approved Cleco Power’s motion to address the rate redesign and the regulatory liability for excess ADIT, resulting from the enactment of the TCJA, in Cleco Power’s current base rate case.

As a result of the delay in the rate case, on July 15, 2020, the LPSC approved Cleco Power’s application to extend the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through November 2020. On November 13, 2020, Cleco Power again received approval for its application to extend the TCJA bill credits from November 30, 2020, until such a time that the rate case is complete. The $7.0 million monthly refund will consist of approximately $4.4 million, which is to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA. The mechanism to refund the remaining balance of the excess ADIT will be determined in Cleco Power’s current LPSC base rate case. At March 31, 2021, Cleco Power had $337.4 million accrued for the excess ADIT, of which $15.6 million is reflected in current regulatory liabilities. Cleco Power’s current base rate case is ongoing and management is unable to determine its outcome.

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the storm recovery bonds in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers to pay administrative fees, interest, and principal on the Cleco Katrina/Rita storm recovery bonds. Amounts remaining after the final principal and interest payments on the storm recovery bonds and payments for final administrative and winding up

activities are subject to refund. For more information on Cleco Katrina/Rita’s restricted cash, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

FERC Audit

For more information about the FERC audit, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — FERC Audit.”

Transmission ROE

Two complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco Power, may collect under the MISO tariff. As of March 31, 2021, Cleco Power had $0.6 million accrued for the change in ROE. For more information on the ROE complaints, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

SSR

In September 2016, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3 effective April 1, 2017. MISO conducted a study which determined the proposed retirement of Teche Unit 3 would result in violations of specific applicable reliability standards for which no mitigation is available. As a result, MISO designated Teche Unit 3 as an SSR unit until such time that an appropriate alternative solution could be implemented to mitigate reliability issues. One mitigating factor identified was Cleco Power’s Terrebonne to Bayou Vista Transmission project, which was completed in April 2019. Cleco Power received a termination notice, effective April 30, 2019, and filed paperwork to withdraw the filed Attachment Y. While operating as an SSR unit, Cleco Power received monthly payments that included recovery of expenses, including capital expenditures, related to the operations of Teche Unit 3. Additionally, MISO allocated SSR costs to the load serving entities that required the operation of the SSR unit, including Cleco Power. These payments and cost allocations were finalized as part of a MISO SSR settlement approved in December 2018. Cleco Power operated Teche Unit 3 as an SSR unit from April 2017 until April 2019.

Cleco Power expects Teche Unit 3 to continue to be available to run and to continue to offer the unit into MISO through 2024, barring a significant unit failure. At March 31, 2021, Cleco Power had $6.1 million accrued for the net capital refund for capital expenditures paid for by third parties while operating under the SSR agreement. As part of the settlement, one of the load serving entities agreed to reimburse Cleco Power for a portion of their capital refund. The capital refund is expected to be paid in late 2021.


Note 12 — Variable Interest Entities

Cleco and Cleco Power apply the equity method of accounting to report the investment in Oxbow in the consolidated financial statements. Under the equity method, the assets and liabilities of this entity are reported as Equity investment in investee on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets. The revenue and expenses (excluding income taxes) of this entity are netted and reported as equity income or loss from investees on Cleco and Cleco Power’s Condensed Consolidated Statements of Income.

Oxbow is owned 50% by Cleco Power and 50% by SWEPCO. Cleco Power is not the primary beneficiary because it shares the power to control Oxbow’s significant activities with SWEPCO. Cleco Power’s current assessment of its maximum exposure to loss related to Oxbow at March 31, 2021, consisted of its equity investment of $7.3 million. During the three months ended March 31, 2021, Cleco Power received $1.8 million from Oxbow as a return of equity investment.

The following table presents the components of Cleco Power’s equity investment in Oxbow:


INCEPTION TO DATE (THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Purchase price	$	12,873	$	12,873
Cash contributions	6,399		6,399
Dividends	(11,950)		(10,200)
Total equity investment in investee	$	7,322	$	9,072

The following table compares the carrying amount of Oxbow’s assets and liabilities with Cleco Power’s maximum exposure to loss related to its investment in Oxbow:


(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Oxbow’s net assets/liabilities	$	14,645	$	18,145
Cleco Power’s 50% equity	$	7,322	$	9,072
Cleco Power’s maximum exposure to loss	$	7,322	$	9,072

The following table contains summarized financial information for Oxbow:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Operating revenue	$	1,999	$	1,882
Operating expenses	1,999		1,882
Income before taxes	$	—	$	—

Prior to June 30, 2020, DHLC mined lignite reserves at Oxbow through the Amended Lignite Mining Agreement. The lignite reserves are intended to be used to provide fuel to the Dolet Hills Power Station. Under the Amended Lignite Mining Agreement, DHLC bills Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs. Oxbow bills Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. For more information on DHLC and the Oxbow mine, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Oxbow has no third-party agreements, guarantees, or other third-party commitments that contain obligations affecting Cleco Power’s investment in Oxbow.


Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees

Litigation

2016 Merger

In connection with the 2016 Merger, four actions were filed in the Ninth Judicial District Court for Rapides Parish, Louisiana and three actions were filed in the Civil District Court for Orleans Parish, Louisiana. The petitions in each action generally alleged, among other things, that the members of

Cleco Corporation’s Board of Directors breached their fiduciary duties by, among other things, conducting an allegedly inadequate sale process, agreeing to the 2016 Merger at a price that allegedly undervalued Cleco, and failing to disclose material information about the 2016 Merger. The petitions also alleged that Como 1, Cleco Corporation, Merger Sub, and, in some cases, certain of the investors in Como 1 either aided and abetted or entered into a civil conspiracy to advance those supposed breaches of duty. The petitions sought various remedies, including monetary damages, which includes attorneys’ fees and expenses.

The four actions filed in the Ninth Judicial District Court for Rapides Parish are captioned as follows:

•Braunstein v. Cleco Corporation, No. 251,383B (filed October 27, 2014),

•Moore v. Macquarie Infrastructure and Real Assets, No. 251,417C (filed October 30, 2014),

•Trahan v. Williamson, No. 251,456C (filed November 5, 2014), and

•L’Herisson v. Macquarie Infrastructure and Real Assets, No. 251,515F (filed November 14, 2014).

In November 2014, the plaintiff in the Braunstein action moved for a dismissal of the action without prejudice, and that motion was granted in November 2014. In December 2014, the Court consolidated the remaining three actions and appointed interim co-lead counsel, and dismissed the investors in Cleco Partners as defendants, per agreement of the parties. Also, in December 2014, the plaintiffs in the consolidated action filed a Consolidated Amended Verified Derivative and Class Action Petition for Damages and Preliminary and Permanent Injunction.

The three actions filed in the Civil District Court for Orleans Parish were captioned as follows:

•Butler v. Cleco Corporation, No. 2014-10776 (filed November 7, 2014),

•Creative Life Services, Inc. v. Cleco Corporation, No. 2014-11098 (filed November 19, 2014), and

•Cashen v. Cleco Corporation, No. 2014-11236 (filed November 21, 2014).

In December 2014, the directors and Cleco filed declinatory exceptions in each action on the basis that each action was improperly brought in Orleans Parish and should either be transferred to the Ninth Judicial District Court for Rapides Parish or dismissed. Also, in December 2014, the plaintiffs in each action jointly filed a motion to consolidate the three actions pending in Orleans Parish and to appoint interim co-lead plaintiffs and co-lead counsel. In January 2015, the Court in the Creative Life Services case sustained the defendants’ declinatory exceptions and dismissed the case so that it could be transferred to the Ninth Judicial District Court for Rapides Parish. In February 2015, the plaintiffs in Butler and Cashen also consented to the dismissal of their cases from Orleans Parish so they could be transferred to the Ninth Judicial District Court for Rapides Parish. By operation of the December 2014 order of the Ninth Judicial District Court for Rapides Parish, the Butler, Cashen, and Creative Life Services actions were consolidated into the actions pending in Rapides Parish.

In February 2015, the Ninth Judicial District Court for Rapides Parish held a hearing on a motion for preliminary

injunction filed by plaintiffs in the consolidated action seeking to enjoin the shareholder vote for approval of the Merger Agreement. The District Court heard and denied the plaintiffs’ motion. In June 2015, the plaintiffs filed their Second Consolidated Amended Verified Derivative and Class Action Petition. Cleco filed exceptions seeking dismissal of the second amended petition in July 2015. The LPSC voted to approve the 2016 Merger before the Court could consider the plaintiffs’ peremptory exceptions.

In March 2016 and May 2016, the plaintiffs filed their Third Consolidated Amended Verified Derivative Petition for Damages and Preliminary and Permanent Injunction and their Fourth Verified Consolidated Amended Class Action Petition, respectively. The fourth amended petition, which remains the operative petition and was filed after the 2016 Merger closed, eliminated the request for preliminary and permanent injunction and also named an additional executive officer as a defendant. The defendants filed exceptions seeking dismissal of the fourth amended Petition. In September 2016, the District Court granted the exceptions of no cause of action and no right of action and dismissed all claims asserted by the former shareholders. The plaintiffs appealed the District Court’s ruling to the Louisiana Third Circuit Court of Appeal. In December 2017, the Third Circuit Court of Appeal issued an order reversing and remanding the case to the District Court for further proceedings. In January 2018, Cleco filed a writ with the Louisiana Supreme Court seeking review of the Third Circuit Court of Appeal’s decision. The writ was denied in March 2018 and the parties are engaged in discovery in the District Court. In November 2018, Cleco filed renewed exceptions of no cause of action and res judicata, seeking to dismiss all claims. On December 21, 2018, the court dismissed Cleco Partners and Cleco Holdings as defendants per the agreement of the parties, leaving as the only remaining defendants certain former executive officers and independent directors. The District Court denied the defendants’ exceptions on January 14, 2019. A hearing on the plaintiffs’ motion for certification of a class was scheduled for August 26, 2019; however, prior to the hearing, the parties reached an agreement to certify a limited class. On September 7, 2019, the District Court certified a class limited to shareholders who voted against, abstained from voting, or did not vote on the 2016 Merger. Cleco believes that the allegations of the petitions in each action are without merit and that it has substantial meritorious defenses to the claims set forth in each of the petitions.

Gulf Coast Spinning

In September 2015, a potential customer sued Cleco for failure to fully perform an alleged verbal agreement to lend or otherwise fund its startup costs to the extent of $6.5 million. Gulf Coast Spinning Company, LLC (Gulf Coast), the primary plaintiff, alleges that Cleco promised to assist it in raising approximately $60.0 million, which Gulf Coast needed to construct a cotton spinning facility near Bunkie, Louisiana. According to the petition filed by Gulf Coast in the 12th Judicial District Court for Avoyelles Parish, Louisiana (the “District Court”), Cleco made such promises of funding assistance in order to cultivate a new industrial electric customer which would increase its revenues under a power supply agreement that it executed with Gulf Coast. Gulf Coast seeks unspecified damages arising from its inability to raise sufficient funds to complete the project, including lost profits.

Cleco filed an Exception of No Cause of Action arguing that the case should be dismissed. The District Court denied Cleco’s exception in December 2015, after considering briefs and arguments. In January 2016, Cleco appealed the District Court’s denial of its exception by filing with the Third Circuit Court of Appeal. In June 2016, the Third Circuit Court of Appeal denied the request to have the case dismissed. In July 2016, Cleco filed a writ to the Louisiana Supreme Court seeking a review of the District Court’s denial of Cleco’s exception. In November 2016, the Louisiana Supreme Court denied Cleco’s writ application.

In February 2016, the parties agreed to a stay of all proceedings pending discussions concerning settlement. In May 2016, the District Court lifted the stay at the request of Gulf Coast. The parties are currently participating in discovery. Cleco believes the allegations of the petition are contradicted by the written documents executed by Gulf Coast, are otherwise without merit, and that it has substantial meritorious defenses to the claims alleged by Gulf Coast.

Dispute with Saulsbury Industries

In October 2018, Cleco Power sued Saulsbury Industries, Inc., the former general contractor for the St. Mary Clean Energy Center project, seeking damages for Saulsbury Industries, Inc.’s failure to complete the St. Mary Clean Energy Center project on time and for costs incurred by Cleco Power in hiring a replacement general contractor. The action was filed in the Ninth Judicial District Court for Rapides Parish, No. 263339. Saulsbury Industries, Inc. removed the case to the U.S. District Court for the Western District of Louisiana, on March 1, 2019. On September 14, 2020, Cabot Industries was allowed to join the case pending in the Ninth Judicial District Court for Rapides Parish.

In January 2019, Cleco Power was served with a summons in Saulsbury Industries, Inc. v. Cabot Corporation and Cleco Power LLC, in the U.S. District Court for the Western District of Louisiana. Saulsbury Industries, Inc. alleged that Cleco Power and Cabot Corporation caused delays in the St. Mary Clean Energy Center project, resulting in alleged impacts to Saulsbury Industries, Inc.’s direct and indirect costs. On June 5, 2019, Cleco Power and Cabot Corporation each filed separate motions to dismiss. On October 24, 2019, the District Court denied Cleco’s motion as premature and ruled that Saulsbury Industries, Inc. had six weeks to conduct discovery on specified jurisdictional issues. The Magistrate Judge presiding over the Western District of Louisiana consolidated cases issued a report and recommendation to the District Judge that the case instituted by Saulsbury Industries, Inc. be dismissed without prejudice and the case initiated by Cleco Power be remanded to the Ninth Judicial District Court for Rapides Parish. Saulsbury Industries, Inc. did not oppose the Magistrate Judge’s report and recommendation, and the District Judge issued a ruling that adopted the Magistrate Judge’s report and recommendation, which included reasoning consistent with Cleco Power’s arguments. Thus, the federal consolidated cases are now closed.

On October 10, 2019, Cleco Power was served with a summons in Saulsbury Industries, Inc. v. Cabot Corporation and Cleco Power LLC in the 16th Judicial District Court for St. Mary Parish, No. 133910-A. Saulsbury Industries, Inc. asserted the same claim as the Western District Litigation and further asserts claims for payment on an open account. On December 9, 2019, Cleco moved to stay the case, arguing that the Rapides Parish suit should proceed. On February 14, 2020, the

court granted Cleco’s motion, which stay order remains in place until lifted. The 16th Judicial District Court for the St. Mary Parish case held a hearing on October 16, 2020, and the judge granted Cleco’s declinatory exceptions of lis pendens. Thus, the St. Mary’s Parish case has been dismissed. Saulsbury filed a motion for a new trial. The hearing on this motion was held on February 5, 2021, and the 16th Judicial District Court judge denied Saulsbury’s motion for a new trial. Saulsbury has appealed this decision.

LPSC Audits

Fuel Audit

Generally, Cleco Power’s cost of fuel used for electric generation and the cost of purchased power are recovered through the LPSC-established FAC that enables Cleco Power to pass on to its customers substantially all such charges. Recovery of FAC costs is subject to periodic fuel audits by the LPSC. The LPSC FAC General Order issued in November 1997, in Docket No. U-21497 provides that an audit of FAC filings will be performed at least every other year. In March 2020, Cleco Power received a notice of audit from the LPSC for the period of January 2018 to December 2019. The total amount of fuel expense included in the audit is $565.8 million. Cleco Power has responded to several sets of data requests from the LPSC. Cleco Power has FAC filings for January 2020 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not been material. If a disallowance of fuel cost is ordered resulting in a refund, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Environmental Audit

In 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides Cleco Power an EAC to recover from its customers certain costs of environmental compliance. The costs eligible for recovery are those for prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the costs of reagents such as ammonia and limestone that are a part of the fuel mix used to reduce air emissions, among other things. In March 2020, Cleco Power received notice from the LPSC of the EAC audit for the period of January 2018 to December 2019. The total amount of environmental expense included in the audit is $26.2 million. Cleco Power has responded to several sets of data requests from the LPSC. Cleco Power has EAC filings for January 2020 and thereafter that remain subject to audit. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to these filings. Historically, the disallowances have not been material. If a disallowance of environmental cost is ordered resulting in a refund to Cleco Power’s customers, any such refund could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco Power incurs environmental compliance expenses for reagents associated with the compliance standards of Mercury and Air Toxics Standards (MATS). These expenses

are also eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. In May 2020, the EPA finalized a rule that concluded that it is not appropriate and necessary to regulate hazardous air pollutants from coal- and oil-fired electric generating units. However, the EPA concluded that coal- and oil-fired electric generating units would not be removed from the list of regulated sources of hazardous air pollutants and would remain subject to MATS. The EPA also determined that the results of its risk and technology review did not require any revisions to the emissions standards. Several petitions for review of the rule’s findings were filed between May and July 2020 in the D.C. Circuit Court of Appeals. On January 20, 2021, the new Administration issued an executive order, which directs federal agency heads to review regulations and other actions over the past four years to determine if they are inconsistent with the policies announced in the executive order. The order specifically directs the EPA to consider issuing a proposed rule by August 2021 to suspend, revise, or rescind the rule. Management is unable to determine whether the outcome of the D.C. Circuit Court of Appeals review or the EPA’s review of the rule as a result of the executive order will result in changes to the MATS standards.

FERC Audit

Generally, Cleco Power records wholesale transmission revenue through approved formula rates, Attachment O of the MISO tariff and certain grandfathered agreements. The calculation of the rate formulas, as well as FERC accounting and reporting requirements, are subject to periodic audits by FERC. In March 2018, the Division of Audits and Accounting, within the Office of Enforcement of FERC, initiated an audit of Cleco Power for the period of January 1, 2014, through June 30, 2019. On September 27, 2019, Cleco Power received the final audit report, which indicated 12 findings of noncompliance with a combination of FERC accounting and reporting requirements and computation of revenue requirements along with 59 recommendations associated with the audit period. Cleco Power submitted a plan for implementing the audit recommendations on October 28, 2019. Cleco Power also submitted the refund analysis on November 7, 2019, which resulted in a refund related to the FERC audit findings, pending final assessment by the FERC Division of Audits and Accounting, which is expected in the third quarter of 2021. On June 1, 2020, this amount began being refunded to Cleco Power’s wholesale transmission customers as a combination of refund payments and a reduction in Attachment O and grandfathered agreement rates over 12 months. At March 31, 2021, Cleco Power had $1.0 million recorded in Provision for rate refund on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets for the estimated refund.

Transmission ROE

Two complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. The complaints sought to reduce the 12.38% ROE used in MISO’s transmission rates to a proposed 6.68%. The complaints covered the period December 2013 through May 2016. In June 2016, an administrative law judge issued an initial decision in the second rate case docket recommending a 9.70% base ROE. In September 2016, FERC issued a Final Order in response to the first complaint establishing a 10.32%

ROE. However, on November 21, 2019, FERC voted to adopt a new methodology for evaluating base ROE for public utilities under the Federal Power Act. In addition, FERC set the MISO transmission owners’ region-wide base ROE at 9.88% for the refund period covered in the first complaint and going forward. The draft FERC order further found that complainants in the second complaint proceeding failed to show that the 9.88% base ROE was unjust and unreasonable and thus dismissed the second complaint. On May 21, 2020, FERC issued Opinion No. 569-A, which granted rehearing in part of Opinion No. 569, which had revised FERC’s methodology for analyzing the base ROE component of public utility rates under section 206 of the Federal Power Act. Opinion No. 569-A further refines FERC’s ROE methodology and finds that the MISO Transmission Owners’ base ROE should be set at 10.02% instead of 9.88%. Cleco Power is unable to determine when a final FERC Order will be issued. As of March 31, 2021, Cleco Power had $0.6 million accrued for the change in the ROE.

In November 2014, the MISO transmission owners committee, of which Cleco is a member, filed a request with FERC for an incentive to increase the new ROE by 50 basis points for RTO participation as allowed by the MISO tariff. In January 2015, FERC granted the request. Beginning January 1, 2020, the collection of the adder was included in MISO’s transmission rates for a total ROE of 10.38%. On June 1, 2020, the total ROE included in MISO’s transmission rate was 10.52%.

South Central Generating

In 2017, Louisiana Generating received insurance settlement proceeds for costs incurred to resolve a lawsuit which was brought by the EPA and the Louisiana Department of Environmental Quality against Louisiana Generating related to Big Cajun II, Unit 3. Entergy Gulf States, as co-owner of Big Cajun II, Unit 3, is expected to be allocated a portion of the insurance settlement proceeds. Any amount allocated to Entergy Gulf States will be determined by ongoing litigation and negotiations. South Central Generating estimated this amount to be $10.0 million. As part of the Cleco Cajun Transaction, Cleco Cajun assumed the $10.0 million contingent liability and NRG Energy indemnified Cleco for losses associated with this litigation matter. As a result, Cleco also recorded a $10.0 million indemnification asset in Other current assets on Cleco’s Condensed Consolidated Balance Sheets as part of the Cleco Cajun Transaction.

Prior to the Cleco Cajun Transaction, South Central Generating was involved in various litigation matters, including environmental and contract proceedings, before various courts regarding matters arising out of the ordinary course of business. At March 31, 2021, management estimates potential losses to be $1.5 million with respect to one of these matters. Management is unable to estimate any potential losses Cleco Cajun may be ultimately responsible for with respect to any of the remaining matters. As part of the Cleco Cajun Transaction, NRG Energy indemnified Cleco for losses as of the closing date associated with matters that existed as of the closing date, including pending litigation.

Other

Cleco is involved in various litigation matters, including regulatory, environmental, and administrative proceedings before various courts, regulatory commissions, arbitrators, and governmental agencies regarding matters arising in the ordinary course of business. The liability Cleco may ultimately

incur with respect to any one of these matters may be in excess of amounts currently accrued. Management regularly analyzes current information and, as of March 31, 2021, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are $4.5 million and has accrued this amount.

Off-Balance Sheet Commitments and Guarantees

Cleco Holdings and Cleco Power have entered into various off-balance sheet commitments, in the form of guarantees and standby letters of credit, in order to facilitate their activities and the activities of Cleco Holdings’ subsidiaries and equity investees (affiliates). Cleco Holdings and Cleco Power have also agreed to contractual terms that require the Registrants to pay third parties if certain triggering events occur. These contractual terms generally are defined as guarantees.

Cleco Holdings entered into these off-balance sheet commitments in order to entice desired counterparties to contract with its affiliates by providing some measure of credit assurance to the counterparty in the event Cleco’s affiliates do not fulfill certain contractual obligations. If Cleco Holdings had not provided the off-balance sheet commitments, the desired counterparties may not have contracted with Cleco’s affiliates, or may have contracted with them at terms less favorable to its affiliates.

The off-balance sheet commitments are not recognized on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets because management has determined that Cleco and Cleco Power’s affiliates are able to perform the obligations under their contracts and that it is not probable that payments by Cleco or Cleco Power will be required.

Cleco Holdings provided guarantees and indemnities to Entergy Louisiana and Entergy Gulf States as a result of the sale of the Perryville generation facility in 2005. The remaining indemnifications relate to environmental matters that may have been present prior to closing. These remaining indemnifications have no time limitations. The maximum amount of the potential payment to Entergy Louisiana and Entergy Gulf States is $42.4 million. Management does not expect to be required to pay Entergy Louisiana and Entergy Gulf States under these guarantees.

On behalf of Acadia, Cleco Holdings provided guarantees and indemnifications as a result of the sales of Acadia Unit 1 to Cleco Power and Acadia Unit 2 to Entergy Louisiana in 2010 and 2011, respectively. The remaining indemnifications relate to the fundamental organizational structure of Acadia. These remaining indemnifications have no time limitations or maximum potential future payments. Management does not expect to be required to pay Cleco Power or Entergy Louisiana under these guarantees.

Cleco Holdings provided indemnifications to Cleco Power as a result of the transfer of Coughlin to Cleco Power in March 2014. Cleco Power also provided indemnifications to Cleco Holdings and Evangeline as a result of the transfer of Coughlin to Cleco Power. The maximum amount of the potential payment to Cleco Power, Cleco Holdings, and Evangeline for their respective indemnifications is $40.0 million, except for indemnifications relating to the fundamental organizational structure of each respective entity, of which the maximum amount is $400.0 million. Management does not expect to be required to make any payments under these indemnifications.

As part of the Amended Lignite Mining Agreement, Cleco Power and SWEPCO, joint owners of the Dolet Hills Power Station, have agreed to pay the loan and lease principal

obligations of the lignite miner, DHLC, when due if DHLC does not have sufficient funds or credit to pay. Any amounts paid on behalf of the miner would be credited by the lignite miner against future invoices for lignite delivered. As of March 31, 2021, the maximum projected payment by Cleco Power under this guarantee is estimated to be $25.0 million; however, the Amended Lignite Mining Agreement does not contain a cap. The projection is based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for purchases of equipment. Cleco Power has the right to dispute the incurrence of loan and lease obligations through the review of the mining plan before the incurrence of such loan and lease obligations. In April 2020, Cleco Power and SWEPCO mutually agreed to not develop additional mining areas for future lignite extraction and subsequently provided notice to the LPSC of the intent to cease mining at the Dolet Hills and Oxbow mines by June 2020. The mine closures are subject to LPSC review and approval. As of December 31, 2020, all lignite reserves intended to be extracted from the Oxbow mine had been extracted. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. The Amended Lignite Mining Agreement does not affect the amount the Registrants can borrow under their credit facilities. Currently, management does not expect to be required to pay DHLC under this guarantee.

Cleco Holdings, in relation to Cleco Cajun’s participation in MISO, and Cleco Power have letters of credit to MISO pursuant to energy market requirements. The letters of credit automatically renew each year and have no impact on Cleco Holdings’ or Cleco Power’s revolving credit facility. In February 2021, Cleco Power posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net purchased power costs related to Winter Storms Uri and Viola exceeding respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively. For more information on these winter storms, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Generally, neither Cleco Holdings nor Cleco Power has recourse that would enable them to recover amounts paid under their guarantee or indemnification obligations. There are no assets held as collateral for third parties that either Cleco Holdings or Cleco Power could obtain and liquidate to recover amounts paid pursuant to the guarantees or indemnification obligations.

Other Commitments

Cleco has accrued for liabilities related to third parties, employee medical benefits, and AROs.

Risks and Uncertainties

Cleco could be subject to possible adverse consequences if Cleco’s counterparties fail to perform their obligations or if Cleco or its affiliates are not in compliance with loan agreements or bond indentures.

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows.

Changes in the regulatory environment or market forces could cause Cleco to determine its assets have suffered an other-than-temporary decline in value, whereby an impairment would be required and Cleco’s financial condition could be materially adversely affected.

Cleco Power and Cleco Cajun are participants in the MISO market. Energy prices in the MISO market are based on LMP, which includes a component directly related to congestion on the transmission system. Pricing zones with greater transmission congestion may have higher LMPs. Physical transmission constraints present in the MISO market could increase energy costs within pricing zones. Cleco Power and Cleco Cajun use FTRs to mitigate transmission congestion price risks. Changes to anticipated transmission paths may result in an unexpected increase in energy costs.

On March 1, 2019, Cleco Power began to operate the Dolet Hills Power Station from June through September of each year; however, the Dolet Hills Power Station will continue to be available to operate in other months, if needed. In June 2020, after thorough evaluation, management decided to retire the Dolet Hills Power Station.

In April 2020, Cleco Power and SWEPCO mutually agreed to not develop additional mining areas for future lignite extraction and subsequently provided notice to the LPSC of the intent to cease mining at the Dolet Hills and Oxbow mines by June 2020, subject to LPSC review and approval. As of December 31, 2020, all lignite reserves intended to be extracted from the Oxbow mine had been extracted. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine, and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. The expected early closure of the mines has resulted in increased costs that will be billed through the fuel adjustment clause, which management currently believes are recoverable. Management does not believe the early closure of the mines will have an adverse impact on the recovery value of the Dolet Hills Power Station. Cleco Power expects to have sufficient lignite fuel available to continue seasonal operations of the Dolet Hills Power Station through the end of 2021.

Cleco Power anticipates filing an application in the second quarter of 2021 with the LPSC giving notice that the Dolet Hills Power Station will be retired at the end of 2021 and requesting the approval of the regulatory treatment and recovery of the stranded costs and decommissioning costs over 20 years.

In June 2020, Cleco Power remeasured its ARO liabilities due to the expected retirement of the Dolet Hills Power Station. Cleco Power’s ARO liability increased $3.3 million as a result of this remeasurement. At March 31, 2021, Cleco Power’s undivided interest in the Dolet Hills Power Station was $76.4 million and was included in base rates.

Fuel costs incurred by the Dolet Hills Power Station are recoverable by Cleco Power through active fuel adjustment clauses. Under the Amended Lignite Mining Agreement, DHLC bills Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs as fuel is delivered. As of March 31, 2021, DHLC estimates $144.5 million of costs will be billed to Cleco Power prior to the closure of the Dolet Hills Power Station. In 2009, Cleco Power acquired an interest in Oxbow, which owns mineral rights and land leases. Under a joint operating agreement pertaining to the

Oxbow mineral rights and land leases, Oxbow bills Cleco Power its proportionate share of incurred costs. As of March 31, 2021, Oxbow estimates approximately $12.2 million of costs will be billed to Cleco Power prior to the closure of the Dolet Hills Power Station. If any of these costs are not recoverable, it could materially impact the Registrants’ results of operations, financial condition, or cash flows.


Note 14 — Affiliate Transactions

At both March 31, 2021, and December 31, 2020, Cleco Holdings had an affiliate payable of $41.3 million to Cleco Group primarily for settlement of taxes payable.

Cleco Power has balances that are payable to or due from its affiliates. The following table is a summary of those balances:


	AT MAR. 31, 2021				AT DEC. 31, 2020
(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	$	10,513	$	57,697	$	10,353	$	57,713
Support Group	4,589		13,665		3,248		14,355
Cleco Cajun	690		27		1,004		—
Total	$	15,792	$	71,389	$	14,605	$	72,068

Oxbow bills Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. These costs are included in fuel inventory and are recoverable from Cleco Power customers through the LPSC-established FAC or related wholesale contract provisions. During the three months ended March 31, 2021, Cleco Power recorded $1.0 million of its proportionate share of incurred costs. During the three months ended March 31, 2020, Cleco Power recorded $0.9 million of its proportionate share of incurred costs. At both March 31, 2021, and December 31, 2020, Cleco Power had $0.3 million payable to Oxbow. For more information on Cleco Power’s variable interest in Oxbow, see Note 12 — “Variable Interest Entities.”

Note 15 — 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 was fully amortized in March 2020 and had no residual value at the end of its life.

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 lives, 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 7 and 19 years, and the amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

As a result of the Cleco Cajun Transaction, fair value adjustments were recorded on Cleco’s Condensed Consolidated Balance Sheet for the difference between the contract and market price of acquired long-term wholesale power agreements. At the end of their lives, these intangible

assets and liabilities will have no residual value. These intangibles are amortized over the estimated life of each applicable contract ranging between 2 and 8 years. The amortization is included in Electric operations on Cleco’s Condensed Consolidated Statements of Income.

As part of the Cleco Cajun Transaction, Cleco assumed an LTSA for maintenance services related to the Cottonwood Plant. This intangible liability is being amortized using the straight-line method over the estimated life of the LTSA of seven years. The amortization is included as a reduction to the LTSA prepayments on Cleco’s Condensed Consolidated Balance Sheet.

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


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Intangible assets
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	—	$	517
Trade name	$	64	$	64
Power supply agreements	$	6,400	$	6,400
Intangible liabilities
LTSA	$	871	$	871
Power supply agreements	$	882	$	882


Cleco Power
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Cleco Katrina/Rita right to bill and collect storm recovery charges	$	—	$	517

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


Cleco
(THOUSANDS)	AT MAR. 31, 2021		AT DEC. 31, 2020
Intangible assets
Trade name	5,100		5,100
Power supply agreements	184,004		184,004
Total intangible assets carrying amount	189,104		189,104
Intangible liabilities
LTSA	24,100		24,100
Power supply agreements	14,200		14,200
Total intangible liability carrying amount	38,300		38,300
Net intangible assets carrying amount	150,804		150,804
Accumulated amortization	(68,642)		(63,932)
Net intangible assets subject to amortization	$	82,162	$	86,872

Note 16 — Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are summarized in the following tables for Cleco and Cleco Power. All amounts are reported net of income taxes. Amounts in parentheses indicate debits.


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(25,796)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	628


Balances, Mar. 31, 2021	$	(25,168)


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS
Balances, beginning of period	$	(17,513)



Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	414


Balances, Mar. 31, 2020	$	(17,099)

Note 17 — Storm Restoration

Hurricanes Laura, Delta, and Zeta

In August and October 2020, Cleco Power’s distribution and transmission systems sustained substantial damage from three separate hurricanes.

Cleco Power’s total storm restoration costs related to the hurricanes is approximately $240.7 million. The damage to equipment from the hurricanes required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 63%, or approximately $150.8 million, of the total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power had regulatory assets for non-capital expenses related to Hurricanes Laura, Delta, and Zeta, as allowed by the LPSC, totaling $75.4 million.

On December 4, 2020, Cleco Power filed an application with the LPSC requesting an interim rate recovery for return on certain storm restoration costs associated with the hurricanes until securitization of such costs can be completed. Cleco Power has responded to multiple sets of data requests related to this filing. Cleco Power, in line with other impacted utilities, will seek available funds from the U.S. government for relief of costs incurred from Hurricanes Laura, Delta, and Zeta. Cleco Power cannot predict the likelihood that any reimbursement from the U.S. government ultimately will be approved. In addition to securitization, other recovery options are being analyzed.

Winter Storms Uri and Viola

In February 2021, Cleco’s service territories experienced extreme and unprecedented winter weather that resulted in damage to Cleco Power’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures.

On February 14, 2021, Winter Storm Uri reached Louisiana resulting in power outages for approximately 11,000 of Cleco Power’s electric customers located primarily in south Louisiana. By February 17, 2021, power was restored to 100% of customers who could receive power. On February 17, 2021, Winter Storm Viola reached Louisiana resulting in power

outages for approximately 43,000 of Cleco Power’s electric customers located primarily in central and south Louisiana. By February 22, 2021, power was restored to 100% of customers who could receive power. Cleco Power’s current estimate of the total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.2 million. The damage to equipment from the storms required replacement, as well as repair of the existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.3 million, of the estimated total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power recorded a regulatory asset for the remaining operations and maintenance costs of $1.9 million, as allowed by the LPSC.

On February 16, 2021, Cleco was notified by the regional reliability coordinator, MISO, that extremely cold temperatures were causing an increase in demand for power, which resulted in an overload of the power grid. The electricity generation shortages necessitated MISO to implement controlled outages in certain of its service areas. To help protect the stability of the power grid and prevent prolonged outages, MISO instructed Cleco to reduce demand on the power grid by initiating periodic outages to customers across Louisiana. The periodic power outages were minimal and suspended within one hour of initiation at the direction of MISO because the power shortage was no longer threatening the reliability of the power grid.

Cleco Power’s incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola is approximately $55.0 million. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs over a period of 12 months beginning in May 2021. These amounts are subject to final settlement.

Cleco Cajun currently estimates the incremental negative impact of Winter Storms Uri and Viola on operations to be approximately $11.2 million. The incremental impact to Cleco Cajun’s operations is an estimate and subject to final settlement.

In February 2021, Cleco Power posted collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net

Cleco uses its website, https://www.cleco.com, as a routine channel for distribution of important information, including news releases and financial information. Cleco’s website is the primary source of publicly disclosed news about Cleco. Cleco is providing the address to its website solely for informational purposes and does not intend for the address to be an active link. The contents of the website are not incorporated into this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in combination with the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and Cleco and Cleco Power’s Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. The information included therein is essential to understanding the following discussion and analysis. Below is information concerning the consolidated results of operations of Cleco for the three months ended March 31, 2021, and 2020.


OVERVIEW

Cleco is a regional energy company that conducts substantially all of its business operations through its two principal operating business segments:

•Cleco Power, a regulated electric utility company that owns 10 generating units with a total rated capacity of 3,360 MW and serves approximately 290,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and Mississippi; and

•Cleco Cajun, an unregulated electric utility company that owns 14 generating units with a total rated capacity of 3,379 MW and wholesale contracts serving nine Louisiana cooperatives, three wholesale municipal customers, and one electric utility. Upon the closing of the Cleco Cajun Transaction, Cottonwood Energy entered into the Cottonwood Sale Leaseback.

Significant Events

Winter Storms Uri and Viola

In February 2021, Winter Storms Uri and Viola reached Louisiana causing Cleco’s service territory to experience extreme and unprecedented winter weather that resulted in damage to Cleco Power’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures.

Cleco Power’s current estimate of the total storm restoration costs related to Winter Storms Uri and Viola is approximately $10.2 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. Therefore, the balance sheets of Cleco and Cleco Power reflect the capitalization of approximately 80%, or approximately $8.3 million, of the estimated total restoration costs recorded at March 31, 2021. At March 31, 2021, Cleco Power recorded a regulatory asset for the remaining operations and maintenance costs of $1.9 million, as allowed by the LPSC.

In February 2021, Cleco Power posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net purchased power costs relating to Winter Storms Uri and Viola exceeding respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively.

For more information on Winter Storms Uri and Viola, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Restoration — Winter Storms Uri and Viola.”

Hurricanes Laura, Delta, and Zeta

In August and October 2020, Cleco Power’s distribution and transmission systems sustained substantial damage from three separate hurricanes.

COVID-19

In March 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and the U.S. declared a national

emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19. These restrictions significantly impacted many sectors of the economy with record levels of unemployment driven by businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. State and local authorities also subsequently implemented multistep policies to reopen various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. Due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, effective March 31, 2021, the governor of the state of Louisiana issued orders reducing some of the restrictions that were in effect and easing capacity limits on businesses, as well as social gatherings. Effective April 28, 2021, the governor of the state of Louisiana further reduced restrictions by revoking the mandatory, state-wide mask mandate.

The first priority in Cleco’s response to this crisis has been the health and safety of its employees and those of its customers and other business counterparties. Cleco has implemented preventative measures and developed corporate response plans to minimize unnecessary risk of exposure and prevent infection, while supporting its customers’ operations to the best of its ability in the circumstances.

Beginning on March 13, 2020, and as a result of an LPSC executive order, Cleco Power suspended the assessment of late fees, disconnections, and the utilization of collection agencies to help customers facing financial challenges related to the COVID-19 pandemic. Cleco resumed disconnections and late fees beginning October 1, 2020, as allowed by the LPSC. On December 4, 2020, Cleco Power made a filing with the LPSC requesting the recovery of the regulatory asset as well as the lost revenue associated with the disconnect fees and incremental costs. At March 31, 2021, Cleco Power had a regulatory asset of $3.0 million for expenses incurred.

Cleco is also working with its suppliers to understand the potential impacts to its supply chain. Cleco will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as Cleco deems warranted.

Cleco has implemented certain measures that it believes will provide financial flexibility and help maintain its liquidity, including drawing on Cleco Holdings’ and Cleco Power’s revolving credit facilities. At March 31, 2021, there was no balance outstanding on Cleco Holdings’ revolving credit facility and $135.0 million outstanding on Cleco Power’s revolving credit facility. While Cleco continues to assess the COVID-19 situation, Cleco cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the markets will have on its business, cash flows, liquidity, financial condition, and results of operations. For additional discussion regarding certain risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors — Operational Risks — COVID-19” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

American Jobs Act of 2021

federal statutory corporate income tax rate from 21% to 28% and to introduce a minimum tax based on book income. Currently, management is unable to predict the impact of the proposed act on the Registrants.

Cleco Cajun

Cleco Cajun has 13 power purchase agreements totaling nearly 2,200 MW with a mixture of cooperatives, municipal bodies, and a utility. Cleco Cajun routinely seeks to grow the amount of power sold pursuant to these existing agreements. These contracts provide Cleco Cajun with predictable cash flow and market risk mitigation through at least 2025, but may prevent Cleco Cajun from taking advantage of rising market rates for power.

In 2020, a group of cooperatives, which are currently under contract with Cleco Cajun through 2025, conducted a request for proposal for load after 2025 in which Cleco Cajun participated. In March 2021, the group of cooperatives informed Cleco Cajun that it was not selected as a provider of load after 2025 and filed a notice with the LPSC to certify the results of the request for proposal. Cleco Cajun subsequently filed a notice of intervention with the LPSC requesting further review prior to certifying the cooperatives’ notice. The certification process is in the early stages and, on April 20, 2021, the LPSC issued a procedural schedule that extends into the first quarter of 2022. Cleco Cajun will continue to support the process and cannot predict the outcome of the process. Failure to recontract these or other agreements could have a material adverse effect on Cleco Cajun’s results of operations, financial condition, and cash flows.

Many factors affect Cleco Cajun’s primary business of providing wholesale power and capacity. These factors include weather, the market price of power, the sales volume of power through existing contracts, the ability to recontract existing contracts at or before their expiration or enter into new wholesale power agreements with new customers, the ability to comply with increasingly stringent environmental standards, and compliance with the commitments made to the LPSC as a result of the Cleco Cajun Transaction.

Cleco Power

Many factors affect Cleco Power’s primary business of generating, delivering, and selling electricity. These factors include weather and the presence of a stable regulatory environment, which impacts the ROE and the current rate case, as well as the recovery of costs related to storms, growing energy demand, and rising fuel prices; the ability to increase energy sales while containing costs; the ability to reliably deliver power to its jurisdictional customers; the ability to comply with increasingly stringent regulatory and environmental standards; and the ability to successfully perform in MISO while subject to the related operating challenges and uncertainties, including increased wholesale competition. Cleco Power’s current key initiatives are continuing construction on the Bayou Vista to Segura Transmission project; continuing the DSMART project; and maintaining and growing its wholesale and retail business. These and other initiatives are discussed below.

Bayou Vista to Segura Transmission Project

The Bayou Vista to Segura Transmission project includes the construction of 48 miles of 230kV transmission line, a 230/138kV substation, and three substation expansions in south Louisiana. The project is expected to cost approximately

$130.6 million. The project is expected to increase reliability, provide transmission system redundancy, and provide hurricane hardening for customers in south Louisiana. Cleco Power received MISO approval for the project in December 2017. Construction was completed on expansions to existing substations. The northern phase is expected to be completed in the third quarter of 2021, and the southern phase is expected to be completed in the fourth quarter of 2021. As of March 31, 2021, Cleco Power had spent $66.0 million on the project.

DSMART Project

The DSMART project includes modernization of Cleco Power’s distribution system by replacing or upgrading distribution line equipment utilizing new and emerging technologies to facilitate automatic fault isolation, service restoration, and fault location. The project is expected to provide savings through a reduction in outage restoration time, time to locate faults, and improved operational efficiencies. The project is also expected to improve safety and reliability of Cleco Power’s distribution assets by minimizing outage patrols and improving situational awareness in the distribution operations center. The total estimated project cost is $90.2 million. The project implementation will be completed in phases and management expects the total project will be completed by the end of 2025. In January 2019, Cleco Power began the first phase of the project. As of March 31, 2021, Cleco Power had spent $19.2 million on the project.

Other

Cleco Power is working to secure load growth opportunities that include renewing existing franchises and wholesale contracts, pursuing new wholesale contracts and franchises, and adding new retail load opportunities with large industrial, commercial, and residential load. The retail opportunities include sectors such as agriculture, oil and gas, chemicals, metals, national accounts, government and military, wood and paper, health care, information technology, transportation, and other manufacturing. Failure to renew existing franchises and wholesale contracts could have a material adverse effect on Cleco Power’s results of operations, financial condition, cash flows, and liquidity.


RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, 2021, and 2020


Cleco
	FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020		VARIANCE		CHANGE
Operating revenue, net	$	394,995	$	347,572	$	47,423	13.6	%
Operating expenses	348,698		292,907		(55,791)		(19.0)	%
Operating income	46,297		54,665		(8,368)		(15.3)	%
Interest income	647		1,157		(510)		(44.1)	%
Allowance for equity funds used during construction	887		(74)		961		*

Other expense, net	(3,033)		(12,709)		9,676		76.1	%
Interest charges	33,891		35,149		1,258		3.6	%
Federal and state income tax (benefit) expense	(9,420)		1,562		10,982		703.1	%
Net income	$	20,327	$	6,328	$	13,999	221.2	%
* Not meaningful

Results of operations for Cleco Power and Cleco Cajun are more fully described following the discussion of Cleco’s results of operations.

COVID-19 Impacts

The rapid spread of COVID-19 and the varying degrees of restrictions on business and social activities imposed by federal, state, and local governments to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory, have caused Cleco to experience adverse business conditions. These directives include an executive order issued on March 13, 2020, by the LPSC prohibiting the disconnection of utilities for nonpayment. The LPSC is allowing utilities to establish a regulatory asset for the expenses incurred related to the executive order. At March 31, 2021, Cleco Power had a regulatory asset of $3.0 million for expenses incurred. While Cleco continues to assess the COVID-19 situation, at this time Cleco cannot estimate with any degree of certainty the full impact of the COVID-19 pandemic on its financial condition and future results of operations. For additional discussion regarding certain risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors — Operational Risks — COVID-19” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Operating Revenue, Net

Operating revenue, net increased $47.4 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $38.1 million of higher fuel cost recovery revenue and $4.6 million of higher base revenue at Cleco Power. Also contributing to the increase was $12.4 million of higher electric operations revenue at Cleco Cajun. These increases were partially offset by $12.6 million of higher electric customer credits at Cleco Power.

Operating Expenses

Operating expenses increased $55.8 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $37.7 million of higher recoverable fuel and purchased power and $4.2 million of higher taxes other than income taxes

at Cleco Power. Also contributing to the increase was $22.9 million of higher purchased power at Cleco Cajun. These increases were partially offset by $5.0 million of lower fuel used for electric generation at Cleco Cajun and $3.4 million of lower other operations and maintenance expenses at Cleco Power.

Other Expense, Net

Other expense, net decreased $9.7 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $12.2 million for the increase in cash surrender value of certain trust-owned life insurance policies as a result of favorable market conditions at Cleco Holdings, partially offset by $1.0 million of higher pension non-service costs at Cleco Power.

Income Taxes

Federal and state income tax expense decreased $11.0 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $11.1 million for the amortization of excess ADIT and $3.4 million to record tax expense at the projected annual effective tax rate. These decreases were partially offset by $2.1 million for the flowthrough of state tax benefits, $0.4 million for the absence of an adjustment as a result of the CARES Act, $0.4 million for permanent tax deductions, and $0.4 million for the change in pretax income, excluding AFUDC equity.

The estimated annual effective income tax rates used during the first quarter of 2021 and 2020 for Cleco may not be indicative of the full-year income tax rates. For more information on the effective income tax rates for the first quarters of 2021 and 2020, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Power
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020			VARIANCE		CHANGE
Operating revenue
Base	$	152,611	$	147,999		$	4,612	3.1	%
Fuel cost recovery	114,547		76,431			38,116		49.9	%
Electric customer credits	(20,976)		(8,340)			(12,636)		(151.5)	%
Other operations	18,626		15,764			2,862		18.2	%
Affiliate revenue	1,655		1,106			549		49.6	%
Operating revenue, net	266,463		232,960			33,503		14.4	%
Operating expenses
Recoverable fuel and purchased power	114,573		76,834			(37,739)		(49.1)	%
Non-recoverable fuel and purchased power	9,670		7,692			(1,978)		(25.7)	%
Other operations and maintenance	53,565		56,944			3,379		5.9	%
Depreciation and amortization	42,076		43,677			1,601		3.7	%
Taxes other than income taxes	16,502		12,276			(4,226)		(34.4)	%


Total operating expenses	236,386		197,423			(38,963)		(19.7)	%
Operating income	30,077		35,537			(5,460)		(15.4)	%
Interest income	642		954			(312)		(32.7)	%
Allowance for equity funds used during construction	887		(74)			961		*
Other expense, net	(4,258)		(2,667)			(1,591)		(59.7)	%
Interest charges	18,646		18,581			(65)		(0.3)	%
Federal and state income tax (benefit) expense	(9,723)		3,338			13,061		391.3	%
Net income	$	18,425	$	11,831		$	6,594	55.7	%
* Not meaningful

The following table shows the components of Cleco Power’s retail and wholesale customer sales related to base revenue:


	FOR THE THREE MONTHS ENDED MAR. 31,
(MILLION kWh)	2021	2020	FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	916	780		17.4	%
Commercial	580	582		(0.3)	%
Industrial	520	484		7.4	%
Other retail	31	31		—	%
Total retail	2,047	1,877		9.1	%
Sales for resale	696	650		7.1	%
Total retail and wholesale customer sales	2,743	2,527		8.5	%

The following table shows the components of Cleco Power’s base revenue:


	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020		FAVORABLE/ (UNFAVORABLE)
Electric sales
Residential	$	67,811	$	61,890		9.6	%
Commercial	46,465		47,056			(1.3)	%
Industrial	22,427		20,580			9.0	%
Other retail	2,667		2,679			(0.4)	%
Surcharge	—		2,442			(100.0)	%
Total retail	139,370		134,647			3.5	%
Sales for resale	13,241		13,352			(0.8)	%
Total base revenue	$	152,611	$	147,999		3.1	%

Cleco Power’s residential customers’ demand for electricity is largely affected by weather. Weather generally is measured in cooling degree-days and heating degree-days. A cooling degree-day is an indication of the likelihood that a consumer will use air conditioning, while a heating degree-day is an indication of the likelihood that a consumer will use heating. An increase in heating degree-days does not produce the same increase in revenue as an increase in cooling degree-days because alternative heating sources are more readily available, and winter energy is typically priced below the rate charged for energy used in the summer. Normal heating degree-days and cooling degree-days are calculated for a month by separately calculating the average actual heating and cooling degree-days for that month over a period of 30 years.

The following chart shows how heating and cooling degree-days varied from normal conditions and from the prior period. Cleco Power uses weather data provided by the National Oceanic and Atmospheric Administration to determine degree-days.


	FOR THE THREE MONTHS ENDED MAR. 31,
				CHANGE
	2021	2020	NORMAL	PRIOR YEAR		NORMAL
Heating degree-days	935	586	890	59.6	%	5.1	%
Cooling degree-days	140	264	78	(47.0)	%	79.5	%

Base

Base revenue increased $4.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $5.9 million of higher usage from colder winter weather and $3.4 million of higher unbilled revenue largely due to colder winter weather. These increases were partially offset by the absence of $2.4 million of Cleco Katrina/Rita storm restoration surcharge revenue as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020, $0.6 million of lower revenue related to the St. Mary Clean Energy Center project, $0.5 million of lower revenue for the over collection of revenue related to the energy efficiency program, and $0.4 million related to the absence of the amortization of shared services associated with the Cleco Cajun Transaction.

For information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco Power, see Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales” in the Registrants’ Combined

Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Fuel Cost Recovery/Recoverable Fuel and Purchased Power

Changes in fuel costs historically have not significantly affected Cleco Power’s net income. Generally, fuel and purchased power expenses are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. Approximately 76% of Cleco Power’s total fuel cost during the first quarter of 2021 was regulated by the LPSC. Recovery of FAC costs is subject to periodic fuel audits by the LPSC which may result in a refund to customers. Generally, fuel and purchased power expenses are impacted by customer usage, the per unit cost of fuel used for electric generation, and the dispatch of Cleco Power’s generating facilities by MISO. Cleco Power’s incremental fuel and purchased power costs were impacted significantly as a result of Winter Storms Uri and Viola. On March 29, 2021, Cleco Power received approval from the LPSC to recover a portion of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. For more information on Cleco Power’s most current fuel audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Fuel Audit.”

Electric Customer Credits

Electric customer credits increased $12.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher estimated refunds for the federal tax-related benefits of the TCJA. For more information on the TCJA, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 — Regulation and Rates — TCJA.”

Other Operations Revenue

Other operations revenue increased $2.9 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $1.8 million of higher transmission revenue and $0.6 million of higher forfeited discounts.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power increased $2.0 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $1.4 million of higher transmission costs and $0.5 million of higher fuel expenses.

Other Operations and Maintenance Expense

Other operations and maintenance expense decreased $3.4 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $1.7 million of lower expenses related to employee benefits and $0.7 million for the absence of adjustments to the provision for credit losses. Also contributing to the decrease was $0.5 million of lower outside services and $0.5 million of lower materials and supplies expense.

Depreciation and Amortization

Depreciation and amortization expense decreased $1.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to the absence of amortization of storm damages as a result of the final principal and interest

payments on Cleco Katrina/Rita storm recovery bonds in March 2020.

Taxes Other Than Income Taxes

Taxes other than income taxes increased $4.2 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher property taxes.

Other expense, net

Other expense, net increased $1.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher pension non-service costs as a result of a lower discount rate.

Income Taxes

Federal and state income tax expense decreased $13.1 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $11.1 million for the amortization of excess ADIT, $2.8 million to record tax expense at the projected annual effective tax rate, and $1.6 million for the change in pretax income, excluding AFUDC equity. These decreases were partially offset by $2.1 million for the flowthrough of state tax benefits and $0.4 million for the absence of an adjustment as a result of the CARES Act.

The estimated annual effective income tax rates used during the first quarter of 2021 and 2020 for Cleco Power may not be indicative of the full-year income tax rates. For more information on the effective income tax rates for the first quarters of 2021 and 2020, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 9 — Income Taxes — Effective Tax Rates.”


Cleco Cajun
			FOR THE THREE MONTHS ENDED MAR. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020			VARIANCE		CHANGE
Operating revenue
Electric operations	$	101,507	$	89,147		$	12,360	13.9	%
Electric customer credits	—		(153)			153		100.0	%
Other operations	33,039		30,961			2,078		6.7	%
Affiliate revenue	—		161			(161)		(100.0)	%
Operating revenue, net	134,546		120,116			14,430		12.0	%
Operating expenses
Fuel used for electric generation	10,610		15,572			4,962		31.9	%
Purchased power	67,608		44,675			(22,933)		(51.3)	%
Other operations and maintenance	22,114		20,516			(1,598)		(7.8)	%
Depreciation and amortization	10,856		10,103			(753)		(7.5)	%
Taxes other than income taxes	3,770		3,473			(297)		(8.6)	%

Total operating expenses	114,958		94,339			(20,619)		(21.9)	%
Operating income	19,588		25,777			(6,189)		(24.0)	%
Interest income	3		155			(152)		(98.1)	%
Other (expense) income, net	(652)		34			(686)		*
Interest charges	(152)		10			162		*
Federal and state income tax expense	4,610		6,421			1,811		28.2	%
Net income	$	14,481	$	19,535		$	(5,054)	(25.9)	%
* Not meaningful

Electric Operations

Electric operations revenue increased $12.4 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $6.0 million of higher revenue resulting from an increase in load volumes, $4.5 million of higher MISO make-whole payments, and $3.4 million of higher revenue as a result of higher fuel rates, partially offset by $2.6 million of lower MISO pass-through recoveries.

Other Operations Revenue

Other operations revenue increased $2.1 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher transmission revenue.

Fuel Used for Electric Generation

Fuel used for electric generation decreased $5.0 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $11.8 million of higher mark-to-market gains on gas related derivative contracts, partially offset by $7.4 million of higher fuel consumption.

Purchased Power

Purchased power increased $22.9 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to higher cost of purchased power from MISO, largely the result of Winter Storms Uri and Viola.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased $1.6 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $4.0 million of higher generating outage maintenance expense, partially offset by $2.3 million of lower generation operations expense.

Income Taxes

Federal and state income tax expense decreased $1.8 million during the first quarter of 2021 compared to the first quarter of 2020 primarily due to $1.4 million for the change in pretax income and $0.6 million for state tax expense.

The effective income tax rates for the first quarters of 2021 and 2020 were 24.1% and 25.0%, respectively. The estimated annual effective income tax rates used during the first quarter of 2021 and 2020 for Cleco Cajun may not be indicative of the full-year income tax rates.

Non-GAAP Measure


FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

Financing for operational needs and capital expenditure requirements not satisfied by operating cash flows depends upon the cost and availability of external funds through both short- and long-term financing. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain or expand its businesses. Access to funds is dependent upon factors such as general economic and capital market conditions, including the impact of COVID-19, regulatory authorizations and policies, Cleco Holdings’ and Cleco Power’s credit ratings, cash flows from routine operations, and credit ratings of project counterparties. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. The following table presents the credit ratings of Cleco Holdings and Cleco Power at March 31, 2021:

SENIOR UNSECURED DEBT

CORPORATE/LONG-TERM ISSUER

S&P

MOODY’S

FITCH

S&P

MOODY’S

FITCH

Cleco Holdings

BBB-

Baa3

BBB-

Baa3

BBB-

Cleco Power

BBB+

BBB

Credit ratings are not recommendations to buy, sell, or hold securities, and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

Cleco Holdings and Cleco Power pay fees and interest under their bank credit agreements based on the highest ratings held. Savings are dependent upon the level of borrowings. If Cleco Holdings’ or Cleco Power’s credit ratings were to be downgraded, Cleco Holdings or Cleco Power, respectively, could be required to pay additional fees and incur higher interest rates for borrowings under their respective revolving credit facilities.

Cleco may be required to provide credit support with respect to any open trading contracts that Cleco has or may initiate in the future. The amount of credit support that Cleco may be required to provide at any point in the future is dependent on the notional value of the initial contract, changes

in forward market prices, changes in the volume of open contracts, changes in credit ratings or credit quality where netting agreements take place, and changes in the amount counterparties owe Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco Power and Cleco Cajun participate in the MISO market. MISO requires Cleco Power and Cleco Cajun to provide credit support which may increase or decrease due to the timing of the settlement schedules and MISO margining formulas. In February 2021, Cleco Power posted incremental collateral in the amount of $25.0 million with MISO. Also in February 2021, Cleco Holdings, on behalf of Cleco Cajun, posted incremental collateral in the amount of $8.8 million with MISO. These incremental collateral postings were a result of the increase in net purchased power costs related to Winter Storms Uri and Viola exceeding the respective unsecured credit capacity with MISO. In March 2021, Cleco Power and Cleco Cajun settled the majority of those purchased power obligations with MISO, and MISO returned associated collateral postings of $24.9 million and $6.5 million to Cleco Power and Cleco Holdings, respectively. For more information about MISO, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020. For more information about credit support see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Litigation — Off-Balance Sheet Commitments and Guarantees.” For more information on Winter Storms Uri and Viola, see Item 1, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Storm Restoration — Winter Storms Uri and Viola.”

Global and U.S. Economic Environment

Global and domestic economic conditions may have an impact on Cleco’s business and financial condition. Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. During periods of capital market volatility, the availability of capital could be limited and the costs of capital may increase for many companies. Although the Registrants have not experienced restrictions in the financial markets, their ability to access the capital markets may be restricted at a time when the Registrants would like, or need, to do so. Any

restrictions could have a material impact on the Registrants’ ability to fund capital expenditures or debt service, or on their flexibility to react to changing economic and business conditions. Credit constraints could have a material negative impact on the Registrants’ lenders or customers, causing them to fail to meet their obligations to the Registrants or to delay payment of such obligations. The lower interest rates to which the Registrants have been exposed have been beneficial to debt issuances; however, these rates have negatively affected interest income for the Registrants’ short-term investments.

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. As a result of the tax rate reduction, on January 1, 2018, Cleco Power began accruing an estimated reduction in reserve for the federal statutory corporate income tax rate. In February 2018, the LPSC directed utilities, including Cleco Power, to provide considerations of the appropriate manner to flowthrough to ratepayers the benefits of the reduction in corporate income taxes as a result of the TCJA. In July 2019, the LPSC approved Cleco Power’s rate refund of $79.2 million, plus interest, for the reduction in the statutory federal tax rate for the period from January 2018 to June 2020. The refund was credited to customers over 12 months beginning August 1, 2019.

In July 2019, the LPSC also approved Cleco Power’s motion to address the rate redesign and the regulatory liability for excess ADIT, resulting from the enactment of the TCJA, in Cleco Power’s current base rate case.

As a result of the delay in the rate case, on July 15, 2020, the LPSC approved Cleco Power’s application to extend the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through November 2020. On November 13, 2020, Cleco Power again received approval of its application to extend the TCJA bill credits from November 30, 2020, until such time that the rate case is complete. The $7.0 million monthly refund will consist of approximately $4.4 million, which is to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At March 31, 2021, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA. The mechanism to refund the remaining balance of the excess ADIT will be determined in Cleco Power’s current LPSC base rate case. At March 31, 2021, Cleco Power had $337.4 million accrued for the excess ADIT, of which $15.6 million is reflected in current regulatory liabilities. Cleco Power’s current base rate case is ongoing and management is unable to determine its outcome.

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels. Other financial assets and liabilities are reported at their carrying values at their date of issuance on the consolidated balance sheets with their fair values as of the balance sheet date disclosed within the three levels. For more information about fair value levels, see Item 1, “Notes to the

Unaudited Condensed Consolidated Financial Statements — Note 6 — Fair Value Accounting.”

Cash Generation and Cash Requirements

Restricted Cash and Cash Equivalents

Various agreements to which Cleco is subject contain covenants that restrict its use of cash. As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its intended purposes and/or general corporate purposes. For more information on Cleco and Cleco Power’s restricted cash and cash equivalents, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

Debt

Cleco

At March 31, 2021, Cleco had $135.0 million of short-term debt outstanding under its $475.0 million revolving credit facilities, at an average all-in interest rate of 1.35%. Cleco had $75.0 million of short-term debt outstanding at December 31, 2020.

At March 31, 2021, Cleco’s long-term debt and finance leases outstanding was $3.23 billion, of which $66.7 million was due within one year. The long-term debt due within one year at March 31, 2021, primarily represents $66.0 million of principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC. Long-term debt decreased by $1.3 million from December 31, 2020.

Cash and cash equivalents available at March 31, 2021, were $87.1 million combined with $340.0 million available revolving credit facility capacity ($175.0 million from Cleco Holdings and $165.0 million from Cleco Power) for total liquidity of $427.1 million. For more information on the credit facility capacity, see “— Credit Facilities.”

At March 31, 2021, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents. In order to mitigate potential credit risk, Cleco and Cleco Power have established guidelines for short-term investments. For more information on the concentration of credit risk through short-term investments classified as cash equivalents, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 6 — Fair Value Accounting.”

At March 31, 2021, and December 31, 2020, Cleco had a working capital surplus of $142.7 million and $140.3 million, respectively. The $2.4 million increase in working capital is primarily due to:

•a $41.4 million increase in accumulated deferred fuel, excluding Cleco Power FTRs, primarily due to additional deferrals through a fuel surcharge at Cleco Power for incremental costs related to Winter Storms Uri and Viola and

•a $39.6 million decrease in accounts payable, excluding Cleco Power FTR purchases, primarily due to short-term incentive plan payments in March 2021, the timing of MISO purchased power payments, and lower accruals for outage maintenance.

These increases in working capital were partially offset by:

•a $60.0 million increase in short-term debt due to draws on Cleco Power’s revolving credit facility,

•a $24.2 million increase in interest accrued primarily due to the timing of interest payments on long-term debt, and

•a $15.6 million increase in taxes payable primarily due to accruals of property taxes.

Cleco Holdings

At March 31, 2021, and December 31, 2020 Cleco Holdings had no short-term debt outstanding.

At March 31, 2021, Cleco Holding’s long-term debt outstanding was $1.60 billion, of which $66.0 million was due within one year. The long-term debt due within one year at March 31, 2021, represents principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC.

At March 31, 2021, Cleco Holdings had no borrowings outstanding under its $175.0 million revolving credit facility. For more information on Cleco Holding’s revolving credit facility, see “— Credit Facilities.” Cleco Holdings has an uncommitted line of credit that allows up to $10.0 million in short-term borrowings, but no more than $10.0 million in the aggregate with Cleco Power’s similar line of credit, to support its working capital needs. There were no amounts outstanding under the uncommitted line of credit at March 31, 2021.

Cash and cash equivalents available at Cleco Holdings at March 31, 2021, were $4.4 million, combined with $175.0 million revolving credit facility capacity for total liquidity of $179.4 million.

Cleco Power

At March 31, 2021, Cleco Power had $135.0 million of short-term debt outstanding under its $300.0 million revolving credit facility, at an all-in interest rate of 1.35%. For more information on Cleco Power’s revolving credit facility, see “— Credit Facilities.” Cleco Power had $75.0 million short-term debt outstanding at December 31, 2020. Although Cleco Power believes it has sufficient liquidity to meet its current obligations as well as funding Hurricanes Laura, Delta, and Zeta restoration efforts from a combination of cash on hand and available capacity under its revolving credit facilities, Cleco Power is exploring options to supplement its liquidity until such time securitization of such costs can be completed. For more information on Hurricanes Laura, Delta, and Zeta, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 17 — Storm Restoration.” Cleco Power has an uncommitted line of credit that allows up to $10.0 million in short-term borrowings, but no more than $10.0 million in the aggregate with Cleco Holdings’ similar line of credit, to support their working capital needs. There were no amounts outstanding under the uncommitted line of credit at March 31, 2021.

At March 31, 2021, Cleco Power’s long-term debt outstanding was $1.50 billion, of which $0.7 million was due within one year. For Cleco Power, long-term debt increased $0.1 million from December 31, 2020.

Cash and cash equivalents available at March 31, 2021, were $38.1 million, combined with $165.0 million revolving credit facility capacity for total liquidity of $203.1 million.

At March 31, 2021, and December 31, 2020, Cleco Power had a working capital surplus of $9.5 million and $13.4 million, respectively. The $3.9 million decrease in working capital is primarily due to:

•a $60.0 million increase in short-term debt due to draws on the revolving credit facility,

•a $16.0 million increase in interest accrued primarily due to the timing of interest payments on long-term debt, and

•a $14.0 million increase in taxes payable primarily due to accruals of property taxes.

These decreases in working capital were partially offset by:

•a $41.4 million increase in accumulated deferred fuel, excluding FTRs, primarily due to additional deferrals through a fuel surcharge for incremental costs related to Winter Storms Uri and Viola,

•a $16.2 million decrease in accounts payable, excluding FTR purchases, primarily due to short-term incentive plan payments in March 2021, the timing of MISO purchased power payments, and lower accruals for outage maintenance, and

•a $13.2 million increase in cash and cash equivalents.

Credit Facilities

At March 31, 2021, Cleco had two separate revolving credit facilities, one for Cleco Holdings in the amount of $175.0 million with no outstanding borrowings and one for Cleco Power in the amount of $300.0 million with outstanding borrowings of $135.0 million. The total of all revolving credit facilities creates a maximum aggregate capacity of $475.0 million with outstanding borrowings of $135.0 million.

Cleco Holdings’ revolving credit facility provides for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in June 2022. Under covenants contained in Cleco Holdings’ revolving credit facility, Cleco is required to maintain total indebtedness less than or equal to 65% of total capitalization. At March 31, 2021, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At March 31, 2021, the borrowing costs under the facility were equal to LIBOR plus 1.875% or ABR plus 0.875%, plus commitment fees of 0.30%. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay higher fees and additional interest of 0.50% under the pricing levels of its revolving credit facility.

Cleco Power’s revolving credit facility provides for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in June 2022. Under covenants contained in Cleco Power’s revolving credit facility, Cleco Power is required to maintain total indebtedness less than or equal to 65% of total capitalization. At March 31, 2021, Cleco Power was in compliance with the covenants of its revolving credit facility. At March 31, 2021, the borrowing costs under the facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating agencies, Cleco Power may be required to pay higher fees and additional interest of 0.125% under the pricing levels of its revolving credit facility.

If Cleco Holdings or Cleco Power were to default under the covenants in their respective revolving credit facilities or

other debt agreements, they would be unable to borrow additional funds under the facilities, and the lenders could accelerate all principal and interest outstanding. Further, if Cleco Power were to default under its revolving credit facility or other debt agreements, Cleco Holdings would be considered in default under its revolving credit facility.

Debt and Distribution Limitations

The 2016 Merger Commitments include provisions for limiting the amount of distributions that can be made from Cleco Holdings to Cleco Group, depending on Cleco Holdings’ debt to EBITDA ratio and its corporate credit ratings. Cleco Holdings may not make any distribution unless, after giving effect to such distribution, Cleco Holdings’ debt to EBITDA ratio is equal to or less than 6.50 to 1.00 and Cleco Holdings’ corporate credit rating is investment grade with one or more of the three credit rating agencies. At March 31, 2021, Cleco Holdings was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. Additionally, in accordance with the 2016 Merger Commitments, Cleco Power is subject to certain provisions limiting the amount of distributions that may be paid to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings. Cleco Power may not make any distribution unless, after giving effect to such distribution, Cleco Power’s common equity ratio would not be less than 48% and Cleco Power’s corporate credit rating is investment grade with two of the three credit rating agencies. At March 31, 2021, Cleco Power was in compliance with the provisions of the 2016 Merger Commitments that would restrict the amount of distributions available. The 2016 Merger Commitments also prohibit Cleco from incurring additional long-term debt, excluding non-recourse debt, unless certain financial ratios are achieved. For more information on the 2016 Merger Commitments, see Part I, Item 1A, “Risk Factors — Structural Risks — Holding Company” and “— Regulatory Risks — Regulatory Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Cleco Consolidated Cash Flows

Net Operating Cash Flow

Net cash used in operating activities was $22.0 million during the three months ended March 31, 2021. Net cash provided by operating activities was $60.2 million during the three months ended March 31, 2020. Net cash used in operating activities increased $82.2 million primarily due to:

•lower net fuel and purchased power collections at Cleco Power of $59.5 million primarily due to timing of collections primarily the result of the deferral of the recovery of incremental costs, as approved by the LPSC, related to Winter Storms Uri and Viola,

•lower receipts of $16.2 million primarily due to timing of receipts of joint owners’ portion of generating station expenditures,

•higher operations and maintenance payments related to storm restoration activities of $4.5 million at Cleco Power,

•lower collections from Cleco Power customers of $3.6 million due to the rate refund for the tax-related benefits from the TCJA, which began being credited to customers in August 2019, and

•the absence of Cleco Katrina/Rita storm restoration surcharge collections from Cleco Power customers of $2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

These decreases were partially offset by lower payments for fuel inventory of $27.4 million primarily due to lower coal and petroleum coke purchases.

Net Investing Cash Flow

Net cash used in investing activities was $35.7 million and $65.4 million during the three months ended March 31, 2021, and 2020, respectively. Net cash used in investing activities decreased $29.7 million primarily due to lower additions to property, plant, and equipment, net of AFUDC, of $27.9 million.

Net Financing Cash Flow

Net cash provided by financing activities was $59.7 million and $226.8 million during the three months ended March 31, 2021, and 2020, respectively. Net cash provided by financing activities decreased $167.1 million primarily due to lower draws on revolving credit facilities of $178.0 million, partially offset by the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.

Cleco Power Cash Flows

Net Operating Cash Flow

Net cash used in operating activities was $12.5 million during the three months ended March 31, 2021. Net cash provided by operating activities was $44.1 million during the three months ended March 31, 2020. Net cash used in operating activities increased $56.6 million primarily due to:

•lower net fuel and purchased power collections of $59.5 million primarily due to timing of collections primarily the result of the deferral of the recovery of incremental costs, as approved by the LPSC, related to Winter Storms Uri and Viola,

•lower receipts of $4.7 million primarily due to timing of receipts of joint owners’ portion of generating station expenditures,

•higher operations and maintenance payments related to storm restoration activities of $4.5 million,

•lower collections from customers of $3.6 million due to the rate refund for the tax-related benefits from the TCJA, which began being credited to customers in August 2019, and

•the absence of Cleco Katrina/Rita storm restoration surcharge collections from customers of $2.4 million as a result of the final principal and interest payments on the Cleco Katrina/Rita storm recovery bonds in March 2020.

These decreases were partially offset by lower payments for fuel inventory of $21.4 million primarily due to lower coal and petroleum coke purchases.

Net Investing Cash Flow

Net cash used in investing activities was $34.2 million and $61.3 million during the three months ended March 31, 2021, and 2020, respectively. Net cash used in investing activities decreased $27.1 million primarily due to lower additions to property, plant, and equipment, net of AFUDC, of $25.3 million.

Net Financing Cash Flow

Net cash provided by financing activities was $59.7 million and $138.8 million during the three months ended March 31, 2021, and 2020, respectively. Net cash provided by financing activities decreased $79.1 million primarily due to lower draws on revolving credit facilities of $90.0 million, partially offset by the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.

Contractual Obligations

Cleco, in the normal course of business activities, enters into a variety of contractual obligations. Some of these result in direct obligations that are reflected in Cleco’s Condensed Consolidated Balance Sheets while others are commitments, some firm and some based on uncertainties, that are not reflected in the Condensed Consolidated Financial Statements. For more information regarding Cleco’s Contractual Obligations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Contractual Obligations” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Off-Balance Sheet Commitments and Guarantees

Cleco Holdings and Cleco Power have entered into various off-balance sheet commitments, in the form of guarantees and standby letters of credit in order to facilitate their activities and the activities of Cleco Holdings’ subsidiaries and equity investees (affiliates). Cleco Holdings and Cleco Power have also agreed to contractual terms that require them to pay third parties if certain triggering events occur. These contractual terms generally are defined as guarantees. For more information about off-balance sheet commitments and on-balance sheet guarantees, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments and Guarantees.”

Cybersecurity

The operation of Cleco’s electrical systems relies on evolving operational and information technology systems and network infrastructures that are complex. The failure of Cleco or its vendors’ operational and information technology systems and networks due to a physical attack or cyber attack or other event could significantly disrupt operations; cause harm to the public or employees; result in outages or reduced generating output; result in damage to Cleco’s assets or operations, or those of third parties; result in damage to Cleco’s reputation; and subject Cleco to claims by customers or third parties, any of which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. Cleco continues to assess its cybersecurity tools and processes and has taken a variety of actions to monitor and address cyber-related risks. Cleco’s Chief Information and Supply Chain Officer leads Cleco’s cybersecurity team and oversees Cleco’s cybersecurity maturity plan. Each month, management provides cybersecurity updates to Cleco’s Asset Management Committee. On December 13, 2020, Cleco’s third party provider publicly confirmed a breach of its monitoring products in which a vulnerability was inserted and, if present and activated, could have potentially allowed an attacker to compromise the server on which the products run. Cleco found no impact to the confidentiality, integrity, or availability of its

data or systems. The incident investigation has been closed by the third party provider. For more information on risks related to Cleco’s cybersecurity, see Part I, Item 1A, “Risk Factors — Operational Risks — Technology and Terrorism Threats” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Regulatory and Other Matters

Environmental Matters

Cleco is subject to extensive environmental regulation by federal, state, and local authorities and is required to comply with numerous environmental laws and regulations, and to obtain and comply with numerous governmental permits, in operating its facilities. In addition, existing environmental laws, regulations, and permits could be revised or reinterpreted; new laws and regulations could be adopted or become applicable to Cleco or its facilities; and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air emissions, water and/or waste management. Cleco may incur significant additional costs to comply with these revisions, reinterpretations, and requirements. Cleco Power could then seek recovery of additional environmental compliance costs as riders through the LPSC’s EAC or FRP. If Cleco fails to comply with these revisions, reinterpretations, and requirements, it could be subject to civil or criminal liabilities and fines.

For a discussion of other Cleco environmental matters, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental Audit” in this Quarterly Report on Form 10-Q and Part I, Item 1, “Business — Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

CPP and ACE

On January 19, 2021, the D.C. Circuit Court of Appeals ruled that the EPA’s repeal of the CPP and its 2019 promulgation of ACE were unlawful. Therefore, the court issued an order to vacate and remand the ACE rule to the EPA. On February 22, 2021, the court granted the EPA’s unopposed motion for a partial stay of the issuance of the mandate on vacating the CPP repeal ordering that it will withhold issuance of the mandate with respect to the vacatur of the CPP repeal until the EPA responds to the court’s remand by promulgating a new rule to regulate greenhouse gas emissions from existing electric generating units. This means that the CPP will not take effect during the EPA’s rulemaking process. In addition, on March 5, 2021, the court issued the partial mandate effectuating the court’s vacatur of the ACE rule which makes effective the court’s decision to vacate the ACE rule. At the end of April 2021, two parties filed petitions for a writ of certiorari asking the Supreme Court to review the decision by the D.C. Circuit Court of Appeals.

CSAPR

On September 13, 2019, the D.C. Circuit Court of Appeals partially remanded the CSAPR update rule to the EPA because the rule did not set a deadline by which upwind states must eliminate their significant contribution to downwind states’ NAAQS nonattainment. In response to the remand of the rule,

on October 30, 2020, the EPA published a proposed rule in the Federal Register, Revised Cross-State Air Pollution Rule Update for the 2008 ozone NAAQS. On April 30, 2021, the EPA issued in the Federal Register the final rule. Until a review of the final regulation has been completed, Cleco is unable to predict if this will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

Retail Rates of Cleco Power

Fuel Rates

Environmental Rates

In July 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides Cleco Power an EAC to recover from customers certain costs of environmental compliance. These expenses are eligible for recovery through Cleco Power’s EAC and are subject to periodic review by the LPSC. For more information on the EAC and the most recent environmental audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits — Environmental Audit.”

Energy Efficiency

In 2013, the LPSC issued a General Order adopting rules promoting energy efficiency programs. Cleco Power began participating in energy efficiency programs in November 2014. Cleco Power has recovered approximately $3.3 million annually for each of the program years through an approved rate tariff. In January 2018, Cleco began recovering an additional $3.3 million annually for estimated costs related to programs specific to political subdivisions.

On December 17, 2019, the LPSC initiated an audit on program years three and four to consider all program costs. Cleco Power responded to several sets of data requests regarding the audit. In October 2020, a preliminary report was received by Cleco Power with no material findings. The LPSC approved the audit report in November 2020. Program year five and program years thereafter are still subject to audit. Management is unable to predict or give a reasonable estimate of the outcome of any future audit.

Generally, utility companies are allowed to recover from customers the accumulated decrease in revenues associated with the energy efficiency programs. On October 21, 2019, Cleco Power received notice of approval from the LPSC allowing recovery of the accumulated Lost Contribution to Fixed Cost revenues until such a time that base rates reset, which is expected to take effect on July 1, 2021.

Wholesale Rates

The rates Cleco, through Cleco Power and Cleco Cajun, charges its wholesale customers are subject to FERC’s

triennial market power analysis. FERC requires a utility to pass a screening test as a condition for securing and/or retaining approval to sell electricity in wholesale markets at market-based rates. An updated market power analysis must be filed with FERC every three years or upon the occurrence of a change in status as defined by FERC regulation. Cleco filed its most recent triennial market power analysis on December 23, 2020.

Transmission Rates

Two complaints were filed with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. For more information about the ROE complaints, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 13 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

For information about the risks associated with Cleco’s participation in MISO, see Part I, Item 1A, “Risk Factors — Regulatory Risks — MISO” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

For information on transmission rates of Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Transmission Rates” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Transmission, Distribution, and Generation Projects

Cleco Power’s significant ongoing projects include the Bayou Vista to Segura transmission project and the DSMART distribution project. For information on these projects, see “— Overview — Cleco Power.”

Market Restructuring

Wholesale Electric Markets

RTO

For information on Cleco Power’s operations within MISO and for information on regulatory aspects of wholesale electric markets affecting Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Wholesale Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

ERO

The Energy Policy Act of 2005 added Section 215 to the Federal Power Act, which provides for a uniform system of mandatory, enforceable reliability standards. In 2006, FERC named NERC as the ERO that will be required to develop and enforce the mandatory reliability standards.

A NERC Reliability Standards audit is conducted every three years for Cleco Power and Cleco Cajun. The next NERC Reliability Standards audits for Cleco Power and Cleco Cajun are scheduled to begin in 2022.

A NERC CIP audit is also conducted every three years for Cleco Power and Cleco Cajun. Cleco Power’s current NERC CIP audit was completed on August 14, 2020, and the final report was issued by SERC on November 5, 2020. Cleco

Cajun’s most recent CIP audit occurred during June 2019, and the final report was issued by SERC on June 27, 2019. Management is unable to determine the timing of NERC’s approval of the final reports.

Management is also unable to predict the final financial outcome of the most recent CIP audits, any future audits, or whether any findings will have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. For a discussion of risks associated with FERC’s regulation of Cleco Power’s transmission system, see Part I, Item 1A, “Risk Factors — Regulatory Risks — Reliability and CIP Standards Compliance” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Retail Electric Markets

For information on the regulatory aspects of retail electric markets affecting Cleco Power, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Retail Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Franchises

Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities and parishes (counties), and enforced by state law. These franchises are for fixed terms, which vary from 10 years to more than 50 years. Historically, Cleco Power has been successful in the timely renewal of substantially all franchises as each neared the end of its term. Cleco Power’s next municipal franchise expires in April 2022.

For more information on franchises, see Part I, Item 1, “Business Regulatory Matters, Industry Developments, and Franchises — Franchises” in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Recent Authoritative Guidance

For a discussion of recent authoritative guidance, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 2 — Recent Authoritative Guidance.”


CRITICAL ACCOUNTING POLICIES

Cleco’s critical accounting policies include accounting policies that are important to Cleco’s financial condition and results of operations and that require management to make difficult, subjective, or complex judgments about future events, which could result in a material impact to the financial statements of Cleco. The preparation of financial statements contained in this report requires management to make estimates and assumptions. Estimates and assumptions about future events and their effects cannot be made with certainty. These estimates involve judgments regarding many factors that in and of themselves could materially affect the financial statements and disclosures. On an ongoing basis, these estimates and assumptions are evaluated and, if necessary, adjustments are made when warranted by new or updated information or by a change in circumstances or environment. Actual results may differ significantly from these estimates under different assumptions or conditions.

For more information on Cleco’s critical accounting policies, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2020.


CLECO POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Cleco Power meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q and is, therefore, permitted to use the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, Cleco Power has omitted from this report the information called for by Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following Part II items of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3 (Defaults upon Senior Securities).


RISK OVERVIEW

Cleco is exposed to counterparty credit risk, liquidity risk, interest rate risk, and commodity price risk. Cleco has implemented a governance framework, inclusive of risk policies and procedures to manage these and other risks.

Counterparty Credit Risk

When Cleco enters into commodity derivative or physical commodity transactions directly with market participants, Cleco may be exposed to counterparty credit risk. Cleco is exposed to counterparty credit risk when a counterparty fails to meet their financial obligations causing Cleco to incur replacement cost losses. Cleco may be required to provide credit support or pay liquidated damages with respect to any open trading contracts that Cleco has entered into or may enter into in the future. The amount of credit support that Cleco may be required to provide at any point in the future is

dependent on credit terms and thresholds in master agreements, the notional value of the initial contract, changes in the market prices, changes in open contracts, and changes in the amounts counterparties owe to Cleco. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Cleco monitors and manages its credit risk exposure through credit risk management policies and procedures that include:

•routine review of counterparty credit quality and credit exposure,

•entering into industry standard master agreements with specific terms and conditions for credit exposure and non-performance,

•measuring expected and potential future exposure regularly, and

•exchanging guarantees or forms of cash equivalent collateral for financial assurance.

For more information, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and Credit-Related Risks.”

Liquidity Risk

Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. Future actions or inactions of the federal government, including a failure to increase the government debt limit, could increase the actual or perceived risk that the U.S. may not pay its obligations when due and may disrupt financial markets, including capital markets, potentially limiting availability and increasing costs of capital. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its businesses. After assessing the current operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. Cleco Holdings and Cleco Power pay fees and interest under their respective credit facilities based on the highest rating held. For more information, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and Credit-Related Risks.”

Interest Rate Risk

Cleco monitors its mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix, for example, refinancing balances outstanding under its variable-rate revolving credit facility with fixed-rate debt. Calculations of the changes in fair market value and interest expense of the debt securities are made over a one-year period.

Sensitivity to changes in interest rates for variable-rate obligations is computed by assuming a 1% change in the current interest rate applicable to such debt.

At March 31, 2021, Cleco Holdings had no short-term debt outstanding under its $175.0 million revolving credit facility. At March 31, 2021, the borrowing costs under Cleco Holdings’ revolving credit facility were equal to LIBOR plus 1.875% or ABR plus 0.875%, plus commitment fees of 0.30%.

At March 31, 2021, Cleco Holdings had a $266.0 million long-term variable rate bank term loan outstanding at an interest rate of LIBOR plus 1.875%, for an all-in interest rate of 1.985%. Each 1% increase in the interest rate applicable to Cleco Holdings’ long-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of $2.7 million on an annualized basis. The weighted average rate for all outstanding term loan debt at Cleco Holdings for the three months ended March 31, 2021, was 2.01%.

At March 31, 2021, Cleco Power had $135.0 million of short-term debt outstanding under its $300.0 million revolving credit facility at an all-in interest rate of 1.35%. At March 31, 2021, Cleco Power’s borrowing costs under its $300.0 million revolving credit facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15%.

At March 31, 2021, Cleco Power had a $125.0 million long-term variable rate bank term loan outstanding, at an interest rate of LIBOR plus 1.25%, for an all-in interest rate of 1.36%. Each 1% increase in the interest rate applicable to Cleco Power’s short- and long-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of $2.6

million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Power for the three months ended March 31, 2021, was 1.36%.

Each 1% increase in the interest rate applicable to Cleco’s short- and long-term variable rate debt would result in a decrease in Cleco’s pretax earnings of $5.3 million on an annualized basis.

Cleco may enter into contracts to mitigate the volatility in interest rate risk. These contracts include, but are not limited to, interest rate swaps and treasury rate locks. For each reporting period presented, the Registrants did not enter into any contracts to mitigate the volatility in interest rate risk.

Commodity Price Risk

Cleco Power and Cleco Cajun’s financial performance can be impacted by changes in commodity prices that impact fuel costs, generation revenues, and customer supply costs and customer revenues. Cleco’s risk management policies and procedures authorizes hedging commodity price risk with physical or financially settled derivative instruments within approved guidelines and limits of authority. Some of these transactions may qualify for the normal purchase, normal sale (NPNS) exception under derivative accounting guidance. Contracts that do not qualify for NPNS accounting treatment or are not elected for NPNS accounting treatment are marked-to-market and recorded on the balance sheet at their fair value.

Cleco Power and Cleco Cajun, individually, may be exposed to transmission congestion price risk as a result of physical transmission constraints present between MISO LMP nodes when serving customer load. Cleco Power and Cleco Cajun are awarded and/or purchase FTRs in auctions facilitated by MISO. FTRs are accounted for as derivatives not designated as hedging instruments for accounting purposes.

During the three months ended March 31, 2021, Cleco Cajun entered into gas-related derivative contracts including fixed price physical forwards and financially settled swap transactions. These are included in other commodity derivatives in the following tables.

The following tables present the fair values of derivative instruments and their respective line items as recorded on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at March 31, 2021:

Cleco

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT MAR. 31, 2021

Commodity-related contracts

FTRs

Current

Energy risk management assets

2,140

Current

Energy risk management liabilities

(1,117)

Other commodity derivatives

Current

Energy risk management assets

9,159

Non-current

Other deferred charges

2,966

Current

Energy risk management liabilities

(325)

Non-current

Other deferred credits

(103)

Commodity-related contracts, net

12,720

Cleco Power

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

(THOUSANDS)

BALANCE SHEET LINE ITEM

AT MAR. 31, 2021

Commodity-related contracts

FTRs

Current

Energy risk management assets

1,986

Current

Energy risk management liabilities

(898)

Commodity-related contracts, net

1,088

Cleco monitors the Value at Risk (VaR) of its other commodity derivative contracts requiring derivative accounting treatment. VaR is defined as the minimum expected loss over a given holding period at a given confidence level based on observable market price volatilities. Cleco uses a parametric variance-covariance model methodology to estimate VaR. VaR is calculated using historical volatilities within a 5-day holding period at a 95% confidence interval. Given Cleco’s reliance on historical data, VaR is effective in estimating risk exposures in markets in which there are no sudden fundamental changes or

abnormal shifts in market conditions. An inherent limitation of VaR is that past changes in market risk factors, even when weighted toward more recent observations, may not produce accurate predictions of future market risk. VaR should be evaluated in light of this and the methodology’s other limitations.

The following table presents the VaR of other commodity derivative contracts based on these assumptions:


			FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	AT MAR. 31, 2021		HIGH		LOW		AVERAGE
Cleco	$	11,558	$	12,234	$	7,199	$	9,159

For more information on the accounting treatment and fair value of FTRs and other commodity derivatives, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 6 — Fair Value Accounting — Commodity Contracts.


ITEM 6. EXHIBITS

CLECO
10.1			Form of Fifth Agreement to Extend the Board of Managers Services Agreement, effective as of May 1, 2021, by and among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and Manager
31.1			CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2			CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1			CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2			CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

CLECO POWER
10.1			Form of Fifth Agreement to Extend the Board of Managers Services Agreement, effective as of May 1, 2021, by and among Cleco Group LLC, Cleco Corporate Holdings LLC, and Cleco Power LLC and Manager
31.3			CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.4			CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.3			CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.4			CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


Louisiana			72-1445282
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Louisiana			72-0244480
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


TABLE OF CONTENTS
		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		5

PART I	Financial Information
ITEM 1.	Cleco — Condensed Consolidated Financial Statements (Unaudited)	7
	Cleco Power — Condensed Consolidated Financial Statements (Unaudited)	14
	Notes to the Unaudited Condensed Consolidated Financial Statements	21
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	54
ITEM 4.	Controls and Procedures	56

PART II	Other Information
ITEM 1.	Legal Proceedings	57
ITEM 1A.	Risk Factors	57



ITEM 6.	Exhibits	57
	Signatures	58


	FOR THE THREE MONTHS ENDED MAR. 31, 2021
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	95,081		$	—		$	—		$	—	$	95,081
Commercial (1)	63,026			—			—			—		63,026
Industrial (1)	36,666			—			—			—		36,666
Other retail (1)	3,570			—			—			—		3,570

Electric customer credits	(20,976)			—			—			—		(20,976)
Total retail revenue	177,367			—			—			—		177,367
Wholesale, net	61,722		(1)	101,507			(2,420)		(2)	—		160,809
Transmission, net	13,982			15,257			—			(1,940)		27,299
Other	4,642			—			—			—		4,642
Affiliate (3)	1,655			—			27,156			(28,811)		—
Total revenue from contracts with customers	259,368			116,764			24,736			(30,751)		370,117
Revenue unrelated to contracts with customers
Other	7,095		(4)	17,782		(5)	1			—		24,878
Total revenue unrelated to contracts with customers	7,095			17,782			1			—		24,878
Operating revenue, net	$	266,463		$	134,546		$	24,737		$	(30,751)	$	394,995


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	81,571		$	—		$	—		$	—	$	81,571
Commercial (1)	61,110			—			—			—		61,110
Industrial (1)	32,210			—			—			—		32,210
Other retail (1)	3,461			—			—			—		3,461
Surcharge	2,443			—			—			—		2,443
Electric customer credits	(8,340)			—			—			—		(8,340)
Total retail revenue	172,455			—			—			—		172,455
Wholesale, net	42,229		(1)	89,147			(2,420)		(2)	—		128,956
Transmission, net	12,069			12,931		(3)	—			(1,818)		23,182
Other	3,695			—			1			—		3,696
Affiliate (4)	1,106			161			29,278			(30,545)		—
Total revenue from contracts with customers	231,554			102,239			26,859			(32,363)		328,289
Revenue unrelated to contracts with customers
Other	1,406		(5)	17,877		(6)	—			—		19,283
Total revenue unrelated to contracts with customers	1,406			17,877			—			—		19,283
Operating revenue, net	$	232,960		$	120,116		$	26,859		$	(32,363)	$	347,572


Securities registered pursuant to Section 12(b) of the Act:
Cleco Corporate Holdings LLC: None			Cleco Power LLC: None


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CLECO

Condensed Consolidated Statements of Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Operating revenue
Electric operations	$	366,245	$	311,157
Other operations	49,726		44,908

Gross operating revenue	415,971		356,065
Electric customer credits	(20,976)		(8,493)
Operating revenue, net	394,995		347,572
Operating expenses
Fuel used for electric generation	55,820		76,637
Purchased power	144,702		66,320
Other operations and maintenance	72,165		74,766
Depreciation and amortization	54,947		55,873
Taxes other than income taxes	21,117		16,536
Merger transaction and commitment costs	(53)		2,775

Total operating expenses	348,698		292,907
Operating income	46,297		54,665
Interest income	647		1,157
Allowance for equity funds used during construction	887		(74)


Other expense, net	(3,033)		(12,709)
Interest charges
Interest charges, net	34,091		35,328
Allowance for borrowed funds used during construction	(200)		(179)
Total interest charges	33,891		35,149
Income before income taxes	10,907		7,890
Federal and state income tax (benefit) expense	(9,420)		1,562
Net income	$	20,327	$	6,328
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020
Net income	$	20,327	$	6,328
Other comprehensive income, net of tax
Postretirement benefits gain (net of tax expense of $222 in 2021 and $146 in 2020)	628		414

Total other comprehensive income, net of tax	628		414
Comprehensive income, net of tax	$	20,955	$	6,742
The accompanying notes are an integral part of the condensed consolidated financial statements.


CLECO

Condensed Consolidated Statements of Changes in Member’s Equity (Unaudited)
(THOUSANDS)	MEMBERSHIP INTEREST		RETAINED EARNINGS		AOCI		TOTAL MEMBER’S EQUITY














Balances, Dec. 31, 2019	$	2,454,276	$	206,243	$	(17,513)	$	2,643,006


Net income	—		6,328		—		6,328
Other comprehensive income, net of tax	—		—		414		414
Balances, Mar. 31, 2020	$	2,454,276	$	212,571	$	(17,099)	$	2,649,748

Balances, Dec. 31, 2020	$	2,454,276	$	328,543	$	(25,796)	$	2,757,023


Net income	—		20,327		—		20,327
Other comprehensive income, net of tax	—		—		628		628
Balances, Mar. 31, 2021	$	2,454,276	$	348,870	$	(25,168)	$	2,777,978
The accompanying notes are an integral part of the condensed consolidated financial statements.


Index to Applicable Notes to the Unaudited Condensed Consolidated Financial Statements of Registrants

Note 1	Summary of Significant Accounting Policies	Cleco and Cleco Power
Note 2	Recent Authoritative Guidance	Cleco and Cleco Power
Note 3	Leases	Cleco and Cleco Power
Note 4	Revenue Recognition	Cleco and Cleco Power
Note 5	Regulatory Assets and Liabilities	Cleco and Cleco Power
Note 6	Fair Value Accounting	Cleco and Cleco Power
Note 7	Debt	Cleco and Cleco Power
Note 8	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 9	Income Taxes	Cleco and Cleco Power
Note 10	Disclosures about Segments	Cleco and Cleco Power
Note 11	Regulation and Rates	Cleco
Note 12	Variable Interest Entities	Cleco and Cleco Power
Note 13	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 14	Affiliate Transactions	Cleco and Cleco Power
Note 15	Intangible Assets and Liabilities	Cleco and Cleco Power
Note 16	Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 17	Storm Restoration	Cleco and Cleco Power


Cleco
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT MAR. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2020		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset description
Institutional money market funds	$	87,686	$	—	$	87,686	$	—	$	86,001	$	—	$	86,001	$	—
FTRs	2,140		—		—		2,140		4,805		—		—		4,805
Other commodity derivatives*	12,125		—		12,125		—		8,599		—		8,599		—
Total assets	$	101,951	$	—	$	99,811	$	2,140	$	99,405	$	—	$	94,600	$	4,805
Liability description
FTRs	$	1,117	$	—	$	—	$	1,117	$	1,625	$	—	$	—	$	1,625
Other commodity derivatives*	428		—		428		—		1,612		—		1,612		—
Total liabilities	$	1,545	$	—	$	428	$	1,117	$	3,237	$	—	$	1,612	$	1,625


Cleco
	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT FORWARD PRICE RANGE)	ASSETS		LIABILITIES				LOW		HIGH
FTRs at Mar. 31, 2021	$	2,140	$	1,117	RTO auction pricing	FTR price - per MWh	$	(1.18)	$	4.09
FTRs at Dec. 31, 2020	$	4,805	$	1,625	RTO auction pricing	FTR price - per MWh	$	(3.49)	$	4.36


Cleco
	AMOUNT OF GAIN(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
		FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	INCOME STATEMENT LINE ITEM	2021		2020
Commodity-related contracts
FTRs(1)	Electric operations	$	7,444	$	1,396
FTRs(1)	Purchased power	(8,560)		(381)
Other commodity derivatives	Fuel used for electric generation	(4,710)		(7,108)
Total		$	(5,826)	$	(6,093)


	PENSION BENEFITS				OTHER BENEFITS
	FOR THE THREE MONTHS ENDED MAR. 31,				FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2021		2020		2021		2020
Components of periodic benefit costs
Service cost	$	2,528	$	2,328	$	595	$	508
Interest cost	4,615		5,130		323		410
Expected return on plan assets	(5,703)		(6,245)		—		—
Amortizations
Prior period service cost (credit)	—		(15)		—		—
Net loss	4,763		3,672		384		339
Net periodic benefit cost	$	6,203	$	4,870	$	1,302	$	1,257


Segment Information For The Three Months Ended Mar. 31,
2021 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	267,158	$	101,507		$	368,665
Other operations	18,626		33,039			51,665
Affiliate revenue	1,655		—			1,655
Electric customer credits	(20,976)		—			(20,976)
Operating revenue, net	$	266,463	$	134,546		$	401,009
Net income	$	18,425	$	14,481		$	32,906
Add: Depreciation and amortization	42,076		11,653		(1)	53,729
Less: Interest income	642		3			645
Add: Interest charges	18,646		(152)			18,494
Add: Federal and state income tax (benefit) expense	(9,723)		4,610			(5,113)



EBITDA	$	68,782	$	30,589		$	99,371
Additions to property, plant, and equipment	$	37,150	$	2,313		$	39,463
Equity investment in investee	$	7,322	$	—		$	7,322
Goodwill	$	1,490,797	$	—		$	1,490,797
Total segment assets	$	6,341,061	$	1,031,541		$	7,372,602
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


2020 (THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	224,430	$	89,147		$	313,577
Other operations	15,764		30,961			46,725
Affiliate revenue	1,106		161			1,267
Electric customer credits	(8,340)		(153)			(8,493)
Operating revenue, net	$	232,960	$	120,116		$	353,076
Net income	$	11,831	$	19,535		$	31,366

Add: Depreciation and amortization	43,677		10,900		(1)	54,577

Less: Interest income	954		155			1,109
Add: Interest charges	18,581		10			18,591
Add: Federal and state income tax expense	3,338		6,421			9,759
EBITDA	$	76,473	$	36,711		$	113,184
Additions to property, plant, and equipment	$	61,477	$	3,341		$	64,818
Equity investment in investees (2)	$	9,072	$	—		$	9,072
Goodwill (2)	$	1,490,797	$	—		$	1,490,797
Total segment assets (2)	$	6,256,944	$	1,029,812		$	7,286,756
(1) Includes $3.1 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(2.3) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction. (2) Balances as of December 31, 2020.


	FOR THE THREE MONTHS ENDED MAR. 31, 2020
(THOUSANDS)	POSTRETIREMENT BENEFIT NET LOSS		NET LOSS ON CASH FLOW HEDGES		TOTAL AOCI
Balances, beginning of period	$	(16,717)	$	(5,868)	$	(22,585)


Amounts reclassified from AOCI
Amortization of postretirement benefit net loss	426		—		426
Reclassification of net loss to interest charges	—		64		64

Balances, Mar. 31, 2020	$	(16,291)	$	(5,804)	$	(22,095)


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


			CLECO CORPORATE HOLDINGS LLC
			(Registrant)

			By:			/s/ F. Tonita Laprarie
						F. Tonita Laprarie
						Controller and Chief Accounting Officer


			CLECO POWER LLC
			(Registrant)

			By:			/s/ F. Tonita Laprarie
						F. Tonita Laprarie
						Controller and Chief Accounting Officer