Variable Interest Entities

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

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 September 30, 2021, consisted of its equity investment of $3.8 million. During the nine months ended September 30, 2021, Cleco Power had a return of equity investment from Oxbow of $5.3 million.

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

INCEPTION TO DATE (THOUSANDS)	AT SEPT. 30, 2021		AT DEC. 31, 2020
Purchase price	$	12,873	$	12,873
Cash contributions	6,399		6,399
Distributions	(15,450)		(10,200)
Total equity investment in investee	$	3,822	$	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 SEPT. 30, 2021		AT DEC. 31, 2020
Oxbow’s net assets/liabilities	$	7,645	$	18,145
Cleco Power’s 50% equity	$	3,822	$	9,072
Cleco Power’s maximum exposure to loss	$	3,822	$	9,072

The following table contains summarized financial information for Oxbow:

	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)	2021		2020		2021		2020
Operating revenue	$	1,486	$	2,275	$	5,113	$	33,266
Operating expenses	1,486		2,275		5,113		33,266
Income before taxes	$	—	$	—	$	—	$	—

Prior to June 30, 2020, DHLC mined lignite reserves at Oxbow through the Amended Lignite Mining Agreement. The lignite reserves were 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. In June 2020, management decided to retire the Dolet Hills Power Station. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. As of September 30, 2021, Cleco Power estimates $1.8 million of its proportionate share of costs will be billed by Oxbow prior to the closure of the Dolet Hills Power Station. 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.