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. During March and April 2021, due to the reduction in new COVID-19 cases and hospitalizations and the availability of COVID-19 vaccines, the governor of the state of Louisiana reduced restrictions that were previously in effect, eased capacity limits on businesses and social gatherings, and revoked the mandatory, state-wide mask mandate. However, effective August 4, 2021, the state-wide mask mandate was reinstated due to a surge in COVID-19 cases. Due to the decrease in the number of COVID-19 cases, effective October 27, 2021, the mandatory, state-wide mask mandate was once again revoked.

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 is monitoring the ongoing COVID-19 pandemic and continues to adjust certain business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, OSHA, and other governmental and regulatory authorities. 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 reinstate or

On September 9, 2021, the Presidential Administration announced mandatory COVID-19 vaccination plans impacting federal contractors and employees of companies having 100 or more employees. On November 4, 2021, OSHA announced a new emergency temporary standard requiring employers with 100 or more employees to develop, implement, and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to choose to either be vaccinated or undergo regular COVID-19 testing and wear a face covering at work. Cleco is closely monitoring updates concerning these vaccination mandates and any potential impacts they may have on its businesses and workforce. The impact of these vaccination standards could have an adverse impact on Cleco’s workforce, labor relations, and operations.

In March 2020, the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. At September 30, 2021, Cleco Power had a regulatory asset of $3.0 million recorded for expenses incurred related to the executive order, as allowed by the LPSC. 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 at this time, due to numerous uncertainties. However, 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, timely distribution and acceptance 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.

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 for a fair statement of 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.”

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.


Cleco
(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020
Current
Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626

Cleco Power’s charitable contributions	678		1,718
Cleco Power’s rate credit escrow	—		201
Total current	2,352		4,545
Non-current
Diversified Lands’ mitigation escrow	22		22
Cleco Cajun’s defense fund	723		722




Total non-current	745		744
Total restricted cash and cash equivalents	$	3,097	$	5,289


Cleco Power
(THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020
Current
Cleco Katrina/Rita storm recovery surcharge	$	1,674	$	2,626

Charitable contributions	678		1,718
Rate credit escrow	—		201






Total restricted cash and cash equivalents	$	2,352	$	4,545

Prior to the repayment of the storm recovery bonds at their scheduled maturity 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 administrative fees, interest, and principal on the storm recovery bonds. In April 2021, after payments for all final administrative and winding up activities of Cleco Katrina/Rita were made, Cleco Katrina/Rita transferred its remaining restricted cash to Cleco Power to be used to benefit retail customers in a manner and timing as approved by the LPSC.

Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivable 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 economic decline during 2020 and 2021, primarily related to the COVID-19 pandemic and weather-related events, the economic outlook at September 30, 2021, was still within range of its historical credit loss analysis.


Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30, 2021						FOR THE NINE MONTHS ENDED SEPT. 30, 2021
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period	$	1,334	$	1,638	$	2,972	$	2,758	$	1,638	$	4,396

Current period provision	567		—		567		3,057		—		3,057
Charge-offs	(730)		—		(730)		(5,172)		—		(5,172)
Recovery	586		—		586		1,114		—		1,114
Balances, Sept. 30, 2021	$	1,757	$	1,638	$	3,395	$	1,757	$	1,638	$	3,395


	FOR THE THREE MONTHS ENDED SEPT. 30, 2020						FOR THE NINE MONTHS ENDED SEPT. 30, 2020
(THOUSANDS)	ACCOUNTS RECEIVABLE		OTHER*		TOTAL		ACCOUNTS RECEIVABLE		OTHER*		TOTAL
Balances, beginning of period	$	3,486	$	1,638	$	5,124	$	3,005	$	1,250	$	4,255
CECL adoption	—		—		—		71		—		71
Current period provision	2,041		—		2,041		5,675		388		6,063
Charge-offs	—		—		—		(4,091)		—		(4,091)
Recovery	54		—		54		921		—		921
Balances, Sept. 30, 2020	$	5,581	$	1,638	$	7,219	$	5,581	$	1,638	$	7,219