Storm Securitization and Cost Recovery

6 Months Ended

Jun. 30, 2022

Unusual or Infrequent Items, or Both [Abstract]

Storm Securitization and Cost Recovery

Note 17 — Storm Securitization and Cost Recovery

In 2020 and 2021, Cleco Power’s distribution and transmission systems sustained damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola. Cleco Power’s total restoration costs related to the hurricanes and winter storms totaled approximately $342.7 million. The damage to equipment from the storms required replacement, as well as repair of existing assets. As a result, approximately $211.1 million of the total restoration costs were capitalized on Cleco Power’s balance sheet. Cleco Power also had regulatory assets totaling approximately $124.3 million for non-capital expenses related to these storms, as allowed by the LPSC. There was also $7.3 million for storm restoration costs related to wholesale operations and maintenance that was expensed on Cleco’s and Cleco Power’s Condensed Consolidated Income Statements in the period the costs were incurred.

On March 30, 2022, the LPSC Staff approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power allowing securitization of $424.1 million of Storm Recovery Property. This included:

•the balance of storm costs of $220.1 million, after adjustments and collections through rates for interim storm recovery, for Hurricanes Laura, Delta, and Zeta and Winter Storms Uri and Viola;

•$95.0 million for a reserve for Hurricane Ida storm costs;

•$100.0 million for a reserve to cover future storm costs; and

•$9.0 million for estimated upfront securitization costs and ongoing costs.

On April 1, 2022, the LPSC issued the financing order authorizing Cleco Power to issue storm recovery bonds in the aggregate principal amount of up to $425.0 million. On June 22, 2022, Cleco Power completed a securitized financing of the Storm Recovery Property through Cleco Securitization I. Cleco Securitization I used the net proceeds from its issuance of $425.0 million aggregate principal amount of senior secured storm recovery bonds to purchase the Storm Recovery Property from Cleco Power, pay for debt issuance costs, and reimburse Cleco Power for upfront securitization costs paid by Cleco Power on behalf of Cleco Securitization I. Cleco Power

utilized the proceeds received from Cleco Securitization I to fund reserves for storm restoration costs and redeem its $325.0 million floating rate notes issued in September 2021. For more information about the storm recovery bonds, see Note 7 — “Debt.” For more information about the storm reserves and regulatory assets associated with the storms, see Note 5 — “Regulatory Assets and Liabilities.” For more information about the cash restricted for the storm reserves, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

On June 1, 2021, Cleco Power began collecting through rates $16.0 million annually for interim storm recovery costs associated with Hurricanes Laura, Delta, and Zeta. The interim storm rate recovery will continue until the new storm surcharge becomes effective on September 1, 2022.

Cleco Power, in line with other impacted utilities, will seek available funds from the U.S. government for customer relief of costs incurred from the storms. Cleco Power cannot predict the likelihood that any funding from the U.S. government ultimately will be approved.