cnl-20221231


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
Big Cajun II			Cleco Cajun’s generating facility located in New Roads, Louisiana consisting of Unit 1, Unit 2, and Unit 3. Cleco Cajun has a 58% ownership interest in the capacity of Unit 3.
Big Cajun II, Unit 1			A 580-MW coal-fired generating unit at Cleco Cajun’s plant site in New Roads, Louisiana.


CAA			Clean Air Act
CARES Act			Coronavirus Aid, Relief, and Economic Security Act of March 2020
CCR			Coal combustion by-products or residual

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 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 Katrina Rita Hurricane Recovery Funding LLC was dissolved effective January 5, 2023.
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 MAM, BCI, John Hancock Financial, and other infrastructure investors
Cleco Power			Cleco Power LLC and its subsidiaries, a wholly owned subsidiary of Cleco Holdings
Cleco Securitization I			Cleco Securitization I LLC, a special-purpose, wholly owned subsidiary of Cleco Power
CO2			Carbon dioxide
Como 1			Como 1, L.P., currently known as Cleco Partners
Consent Decree			The Consent Decree, entered March 5, 2013, in Civil Action No. 09-100-JJB-DLD, U.S. District Court for the Middle District of Louisiana, by and among the EPA, the LDEQ, and Louisiana Generating relating to Big Cajun II, Unit 1 located in New Roads, Louisiana
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


ABBREVIATION OR ACRONYM			DEFINITION
COVID-19			Coronavirus disease 2019, including any variant thereof, 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. The Dolet Hills Power Station was retired on December 31, 2021.
EAC			Environmental Adjustment Clause
EAF			Equivalent Availability Factor
EBITDA			Earnings before interest, income taxes, depreciation, and amortization
EGU			Electric Generating Unit
EFORd			Equivalent Forced Outage Rate on demand
EMT			Executive Management Team
Entergy Gulf States			Entergy Gulf States Louisiana, LLC
Entergy Louisiana			Entergy Louisiana, LLC
EPA			U.S. Environmental Protection Agency
ERO			Electric Reliability Organization
ESG			Environmental, Social, and Governance
Evangeline			Cleco Evangeline LLC, a wholly owned subsidiary of Midstream. Cleco Evangeline LLC was dissolved effective July 29, 2021.
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.
GHG			Greenhouse gas
GO Zone			Gulf Opportunity Zone Act of 2005 (Public Law 109-135)
IRA of 2022			Federal tax legislation commonly referred to as the Inflation Reduction Act of 2022
IRC			Internal Revenue Code

IRS			Internal Revenue Service
ISO			Independent System Operator
kWh			Kilowatt-hour(s)
LCFC			Lost Contribution to Fixed Cost
LDEQ			Louisiana Department of Environmental Quality

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
LTIP			Long-Term Incentive Plan
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
Madison Unit 3			A 641-MW generating unit at Cleco Power’s plant site in Boyce, Louisiana
MAM			Macquarie Asset Management
MATS			Mercury and Air Toxics Standards
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

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)
N/A			Not Applicable
NAAQS			National Ambient Air Quality Standards
NERC			North American Electric Reliability Corporation


ABBREVIATION OR ACRONYM			DEFINITION
NMTC			New Markets Tax Credit


Not Meaningful			A percentage comparison of these items is not statistically meaningful because the percentage difference is greater than 1,000%
NO2			Nitrogen dioxide
NOx			Nitrogen oxide
NRG Energy			NRG Energy, Inc.
NRG South Central			NRG South Central Generating LLC




NSPS			New Source Performance Standards

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
Paris Agreement			The Paris Agreement, often referred to as the Paris Accords or the Paris Climate Accords, is an international treaty on climate change, adopted in 2015. It covers climate change mitigation, adaptation, and finance.
PCB			Polychlorinated biphenyl
Perryville			Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Holdings. Perryville Energy Partners, L.L.C. was dissolved effective September 8, 2021.
ppb			Parts per billion


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
ROIC			Return on Invested Capital
ROU			Right of Use
RTO			Regional Transmission Organization
S&P			S&P Global Ratings, a division of S&P Global Inc, a credit rating agency
SAIDI			System Average Interruption Duration Index
SEC			U.S. Securities and Exchange Commission


SERP			Supplemental Executive Retirement Plan
SIP			State Implementation Plan
SO2			Sulfur dioxide
SOFR			Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York
South Central Generating			South Central Generating LLC, formerly NRG South Central Generating LLC, a wholly owned subsidiary of Cleco Cajun



START			Strategic Alignment and Real-Time Transformation
STIP			Short-Term Incentive Plan

Storm Recovery Property			Storm Recovery Property as defined in the financing order issued by the LPSC in April 2022, which includes the right to impose, bill, charge, collect, and receive unamortized storm recovery costs from Cleco Power’s retail customers.
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 Annual Report on Form 10-K includes forward-looking statements. All statements other than statements of historical fact included in this Annual Report on Form 10-K 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 Annual Report on Form 10-K, 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, possible effects on Cleco’s generation resources, or prohibitions or restrictions 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, and 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,

•economic, regulatory, or workforce impacts related to pandemics, epidemics, or other outbreaks,

•economic impacts related to conflicts and hostilities, including the current armed conflict in Ukraine,

•the possibility of stranded costs with respect to assets that may be retired as a result of new climate legislation, technological advances, a shift in demand, or legal action, and Cleco Power’s ability to recover stranded costs associated with these events,

•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 and stranded costs associated with these events,

•the ability of Cleco’s customers to pay their utility bills on time due to costs related to rising fuel prices, severe weather recoveries, or the costs of other events that are passed through to Cleco Power’s customers,

•economic conditions in Cleco’s service areas, including inflation and the economy’s effects on customer demand for and payment of 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 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 that may damage or disrupt operating or 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 and/or key initiatives, 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,

•failure to meet expectations and report progress on ESG initiatives and GHG targets, as well as the increased focus on and activism related to ESG, which could limit Cleco’s access to capital and/or financing,

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

•industry and geographic concentrations of Cleco’s counterparties, suppliers, and 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, energy, or fuel,

•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, and

•workforce factors, including aging workforce, changes in key members of management, availability of workers in a variety of skill areas, and Cleco’s ability to attract, recruit, and retain qualified employees.

For more discussion of these factors and other factors that could cause actual results to differ materially from those

contemplated in the Registrants’ forward-looking statements,

see Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Comparison of the Years Ended December 31, 2022, and 2021 — Cleco Power — Significant Factors Affecting Cleco Power” in this Annual Report on Form 10-K.

All subsequent written and oral forward-looking statements attributable to the Registrants, or persons acting on their

behalf, are expressly qualified in their entirety by the factors identified above.

Any forward-looking statement is considered only as of the date of this Annual Report on Form 10-K and, except as required by law, the Registrants undertake no obligation to update any forward-looking statements, whether as a result of changes in actual results, changes in assumptions, or other factors affecting such statements.

GENERAL

Cleco Holdings is a public utility holding company that holds investments in several subsidiaries, including Cleco Power and Cleco Cajun. Cleco Holdings, subject to certain limited exceptions, is exempt from regulation as a public utility holding company pursuant to provisions of the Public Utility Holding Company Act of 2005. Cleco Holdings’ predecessor was incorporated on October 30, 1998, under the laws of the state of Louisiana. In 2016, Cleco Holdings became a direct, wholly owned subsidiary of Cleco Group and an indirect, wholly owned subsidiary of Cleco Partners.

Cleco Power is a regulated electric utility engaged principally in the generation, transmission, distribution, and sale of electricity within Louisiana. Cleco Power owns nine generating units with a total rated capacity of 3,035 MW and serves approximately 293,000 customers in Louisiana through its retail business. Additionally, Cleco Power supplies wholesale power in Louisiana and Mississippi. Cleco Power was organized as a limited liability company under the laws of the state of Louisiana on December 12, 2000. Cleco Power’s predecessor was incorporated on January 2, 1935, under the laws of the state of Louisiana.

Cleco Cajun, organized as a limited liability company on December 28, 2017, under the laws of the state of Louisiana, is an unregulated electric utility that owns 14 generating units with a total rated capacity of 3,379 MW and wholesale contracts serving a mixture of wholesale customers, which consists of electric cooperatives, a municipal body, a utility, and a non-profit corporation.

Cleco’s and Cleco Power’s mailing address is P.O. Box 5000, Pineville, Louisiana 71361-5000, and its telephone number is (318) 484-7400. Cleco’s website is located at https://www.cleco.com. Cleco’s and Cleco Power’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC are available, free of charge, through Cleco’s website after those reports or filings are filed electronically with or furnished to the SEC. Cleco’s electronically filed reports can also be obtained on the SEC’s website located at https://www.sec.gov. Cleco’s Governance Guidelines, Code of Conduct for Financial Managers, Ethics Guide, Conflicts of Interest and Related Policies, and the charters of its Boards of Managers’ Audit, Leadership Development and Compensation, Business Planning and Budget Review, Governance and Public Affairs, and Asset Management committees are available on its website and available in print upon request. Information on Cleco’s website or any other website is not incorporated by reference into this Annual Report on Form 10-K and does not constitute a part of this Annual Report on Form 10-K.

Cleco Power meets the conditions specified in General Instructions I(1)(a) and (b) to Form 10-K and, therefore, is permitted to use the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, Cleco Power has omitted from this Annual Report on Form 10-K the information called for by the following Part II item of Form 10-K: Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations); and the

following Part III items of Form 10-K: Item 10 (Directors, Executive Officers, and Corporate Governance of the Registrants), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), and Item 13 (Certain Relationships and Related Transactions, and Director Independence).

HUMAN CAPITAL

Cleco’s key human capital management objectives are to attract, retain, and develop top talent while providing a diverse, inclusive, healthy, and safe workplace. Cleco’s programs are designed to create a high-performing, diverse workforce; reward and support employees through competitive pay and benefits, as well as safety and wellness programs; enhance culture through efforts aimed at making the workplace more engaging and inclusive; facilitate programs that build connections between employees and communities; and evolve and invest in technology, tools, and resources to enable employees at work.

As of December 31, 2022, Cleco employed 1,330 employees, of whom 1,080 were professional, technical and craft employees, 127 were field management, and 123 were corporate management. At December 31, 2022, Cleco Power employed 779 employees, of whom 666 were professional, technical and craft employees, 83 were field management, and 30 were corporate management. All of these employees were full-time. Approximately 9% of Cleco’s employees are covered by collective bargaining agreements. Cleco has not experienced strikes or work stoppages and believes it has good relations with its employees.

Diversity and Inclusion

Cleco believes that diverse teams working in an inclusive environment are the primary drivers of better employee engagement, increased innovation, and higher customer satisfaction. With greater workplace diversity and inclusion, Cleco seeks to create the conditions for high performing teams to do their best work. Cleco’s efforts have been focused in three areas: making observable changes in leadership diversity and inclusion behaviors; Employee Resource Group (ERG) advisory; and strengthening an inclusive culture. The following are some of Cleco’s diversity and inclusion achievements related to such focus areas:

•Cleco’s Chief Human Resources and Diversity Officer was named an IDEAL (Inclusive, Diverse, Equitable, Accessible, and Learning) Black Woman Leader by Icarus Consulting LLC in February 2022 and was also named a Top 100 Human Resources Professional in April 2022 by the Energy Diversity and Inclusion Council,

•empowered the Cleco Diversity and Inclusion Council as a group of leaders to leverage diversity and inclusion to help make Cleco’s business stronger,

•committed to the pledge for CEO Action for Diversity & Inclusion to communicate a commitment to diversity and inclusion actions,

•completed implicit bias awareness training with 100% participation to increase awareness of implicit bias and enhance the ability to manage diverse work teams in an inclusive work environment,

•increased diversity and inclusion communications internally and externally, specifically as it relates to ESG. Internally, a live, virtual panel of Cleco executives spoke about managing a multi-generational workforce. Externally, Cleco continues to celebrate diversity in the communities in which it serves,

•ERG continued to engage employees and allies in providing their perspective on thoughts and issues to drive exposure and development, and

•continued to fund the Power of a Promise Scholarship to educate and employ underrepresented minorities and females in the central Louisiana area as well as sponsor the Diversity Scholars Program.

Health, Safety, and Wellness

The success of Cleco’s business is fundamentally connected to the well-being of its employees. Accordingly, Cleco is committed to the health, safety, and wellness of its employees.

Cleco has a strong safety culture and continues to develop programs to ensure its employees are safe at work and away from work. Cleco strives to improve its safety culture in an effort to be a “world class” safety organization with top decile performance compared to peer companies with the goal of reaching a target of zero for injuries and accidents. To accomplish this goal, Cleco continues to implement several safety initiatives throughout the organization aimed at both leading and lagging indicators in an effort to reduce the number and severity of safety incidents. Cleco utilizes employee-led safety teams throughout the company to drive the safety initiatives and provide feedback to senior management. In addition to Occupational Safety and Health Administration mandated safety training, employees receive human performance and energy wheel (hazard identification) training, designed to improve total organization performance.

Cleco continues to provide its employees and their families with access to a variety of health and wellness programs, including programs that provide protection and security so they can have peace of mind concerning events that may require time away from work. Cleco also has programs that support employees’ physical and mental health by providing tools and resources to help them improve or maintain their health and encourage engagement in healthy behaviors. These include paid time off, family leave, flexible work schedules, employee assistance programs, tuition assistance, and on-site services, such as fitness centers, among many others.

Compensation and Benefits

Cleco is committed to offering market-competitive compensation and benefits. Its incentive plan reinforces and rewards individuals for achievement of specific company goals. This may include involvement of outside compensation advisors or use of benchmarking data. Cleco’s benefit offerings are designed to meet the varied and evolving needs of a diverse workforce and offer choice where possible so employees can customize their benefits to meet their needs and the needs of their families. These offerings include a 401(k) Plan, healthcare benefits, health savings and flexible spending accounts, and a variety of insurance options.

Talent Acquisition and Talent Development

Cleco prioritizes investing in the attraction and development of the talent needed to build a sustainable workforce. Cleco has continued to revamp its recruiting and hiring practices, technologies, and resources as well as expand its focus on continuous learning and development. Cleco utilizes industry-leading methodologies to assess performance and potential, provide coaching and feedback, and develop talent. Cleco provides a series of targeted management workshops to address leadership skill and competency gaps. Additionally, its performance management program provides an ongoing opportunity for employees and managers to engage in continuous dialogue and coaching aligned with its annual performance review process. Cleco also has a multitude of resources, such as online learning platforms, that provide quick access to learning resources, tuition reimbursement, and executive talent and succession planning paired with a differentiated development approach. Cleco also encourages employees to engage in external workshops and organizations to address individualized development needs and stay abreast of industry and position-specific best practices.

Employee Engagement

Employee sentiment is important to Cleco. The company measures this throughout the year via an employee engagement survey. One of the key metrics used is the Employee Net Promoter Score (eNPS), which is an indicator of employees’ likelihood to recommend Cleco as a place of employment to friends and/or family. Cleco strives to consistently receive a strong eNPS score year over year. Other important areas measured on the employee engagement survey include future outlook, leadership, safety, diversity and inclusion, communications, vibrancy, and goals.

Pulse, which is Cleco’s mobile, two-way communication platform for employees, allows for tracking of viewership, enables targeted messaging by employee segments, and offers key performance indicators to measure how internal communication supports Cleco’s business objectives. In support of employee engagement efforts, Pulse is the cornerstone of communication for all employees in which 95% of Cleco employees are registered. Pulse has allowed Cleco to successfully reach employees during the COVID-19 pandemic, hurricanes, and winter storms. Pulse also enables forums on topics such as diversity and inclusion and safety.

Communities

Cleco believes that building connections between its employees and its communities creates a more meaningful, fulfilling, and enjoyable workplace. Cleco is committed to being a responsible company in the communities where it does business. Through Cleco’s technology platforms for employee giving, company matching, and volunteering program, employees are able to find and register for volunteer opportunities within their communities and use automated payroll deductions to donate to causes they are passionate about. Cleco continues to match employee donations made to Louisiana qualifying causes dollar for dollar up to $1,000 per year per employee. Employees can also be rewarded with $10 for every hour of volunteer time, up to $500 per year. Organizations are also able to enroll in the platform in order to receive donations faster and connect with corporate giving and volunteering opportunities at Cleco. Cleco also frequently collaborates with organizations on volunteer activities for its employees. Throughout the year, employees make a positive

impact in their local communities and have found a multitude of special ways to volunteer.

Oversight and Governance

Cleco’s Leadership Development and Compensation Committee of the Board of Managers, through its charter, provides oversight of Cleco’s policies, programs, and initiatives focusing on workforce diversity and inclusion. Cleco’s Governance and Public Affairs Committee, through its charter, provides oversight of Cleco’s charitable donations, outreach, and economic development funding programs.

OPERATIONS

Cleco Power

Certain Factors Affecting Cleco Power

As an electric utility, Cleco Power is affected by a number of factors influencing the electric utility industry in general. For more information on these factors, see Part II, Item 7,

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Comparison of the Years Ended December 31, 2022, and 2021 — Cleco Power — Significant Factors Affecting Cleco Power.”

Power Generation

As of December 31, 2022, Cleco Power’s aggregate net electric generating capacity was 2,824 MW. This amount reflects the maximum production capacity these units can sustain over a specified period of time under certain conditions.

On July 13, 2022, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. On January 31, 2023, Cleco Power filed a notice with the LPSC to retire Teche Unit 3.

The following table sets forth certain information with respect to Cleco Power’s generating facilities as of December 31, 2022:

The following table sets forth the amounts of power generated by Cleco Power for the years indicated:


YEAR	THOUSAND MWh	PERCENT OF TOTAL ENERGY REQUIREMENTS
2022	10,842	87.0	%
2021	10,774	90.7	%
2020	11,801	101.5	%

Cleco Power’s generation dispatch and transmission operations are integrated with MISO. The amount of power generated by Cleco Power is dictated by the availability of Cleco Power’s generating fleet and the manner in which MISO dispatches each generating unit. Depending on how generating units are dispatched by MISO, the amount of power generated may be greater than or less than total energy requirements. Generating units are dispatched by referencing each unit’s economic efficiency as it relates to the overall MISO market. For more information on 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.”

Fuel and Purchased Power

Changes in fuel expenses reflect fluctuations in the amount, type, and pricing of fuel used for electric generation; fuel transportation and delivery costs; and deferral of expenses for recovery from customers through Cleco Power’s FAC in subsequent months. Changes in purchased power expenses are a result of the quantity and price of economic power purchased from the MISO market. These quantity changes can be affected by Cleco plant outages and plant performance. For a discussion of certain risks associated with changes in fuel costs and their impact on utility customers, see Item 1A, “Risk Factors — Operational Risks — Transmission Constraints” and “— Regulatory Risks — LPSC Audits.”

The following table sets forth the percentages of power generated from various fuels at Cleco Power’s electric generating plants, the cost of fuel used per MWh attributable to each such fuel, and the weighted average fuel cost per MWh:

Power Purchases

Cleco Power is a participant in the MISO market. MISO makes economic and routine dispatch decisions regarding Cleco Power’s generating units. Power purchases are made at prevailing market prices, also referred to as LMP. LMP 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 Cleco Power’s pricing zones. For information on Cleco Power’s ability to pass on to its customers substantially all of its fuel and purchased power expenses, see “— Regulatory Matters, Industry Developments, and Franchises — Rates.” For information on 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.”

Coal, Petroleum Coke, and Lignite Supply

Cleco Power uses coal for generation at Rodemacher Unit 2. On January 1, 2022, Cleco Power contracted with a supplier to provide Cleco Power’s coal needs at Rodemacher Unit 2, utilizing a two-year, fixed-price, coal agreement expiring on December 31, 2023. For 2023, Cleco Power intends to meet its coal needs through this coal agreement and one other short-term, fixed-price coal agreement. In 2022, Cleco Power had an agreement to transport coal from Wyoming’s Powder River Basin to Rodemacher Unit 2. This agreement was renewed on January 1, 2023, for an additional three years, expiring on December 31, 2025. During 2021, Cleco Power renewed its lease for 113 railcars to transport its coal under one lease, which expires on March 31, 2024.

The continuous supply of coal may be subject to interruption due to adverse weather conditions or other factors that may disrupt transportation to the plant site. At December 31, 2022, Cleco Power’s coal inventory at Rodemacher Unit 2 was approximately 109,000 tons (approximately a 45-day supply).

Cleco Power uses a combination of petroleum coke and Illinois Basin coal for generation at Madison Unit 3. Petroleum coke is a by-product of the oil refinery process and is not considered a fuel specifically produced for a market; however, ample petroleum coke supplies are produced from refineries each year throughout the world, particularly in the Gulf Coast region. The price of petroleum coke is largely driven by the demand for the fuel and the related transportation costs. During 2022, Cleco Power received its petroleum coke supply from multiple refineries located along the upper and lower Mississippi River. Cleco Power purchased approximately 722,000 tons of petroleum coke during 2022, all of which were either an evergreen extension of a previous agreement or a negotiated agreement for one year ending on December 31, 2022. Cleco Power has one-year agreements, expiring on December 31, 2023, to purchase 779,000 tons of petroleum

coke from multiple refineries located along the upper and lower Mississippi River.

During 2022, Cleco Power purchased approximately 202,000 tons of Illinois Basin coal. Cleco Power uses Louisiana waterways, such as the Mississippi River and the Red River, to deliver both petroleum coke and Illinois Basin coal to the Madison Unit 3 plant site. The continuous supply of petroleum coke and Illinois Basin coal may be subject to interruption due to adverse weather conditions or other factors that may disrupt transportation to the plant site. On January 1, 2023, Cleco Power contracted with a supplier to provide Cleco Power’s coal needs at Madison Unit 3 utilizing a two-year, fixed-price, coal agreement expiring on December 31, 2024. For 2023, Cleco Power intends to meet its petroleum coke needs through three one-year, fixed-price petroleum coke agreements. Cleco Power has a logistics agreement with its primary transportation coordinator and provider that is set to expire in March 2033. At December 31, 2022, Cleco Power’s petroleum coke inventory at Madison Unit 3 was approximately 211,000 tons, and Cleco Power’s Illinois Basin coal inventory at Madison Unit 3 was approximately 70,000 tons. The total fuel inventory was 281,000 tons (approximately a 47-day supply).

Natural Gas Supply

During 2022, Cleco Power purchased 58.2 million MMBtu of natural gas for the generation of electricity. The annual and average per-day quantities of gas purchased by Cleco Power from each supplier are shown in the following table:


NATURAL GAS SUPPLIER	2022 PURCHASES (MMBtu)	AVERAGE AMOUNT PURCHASED PER DAY (MMBtu)	PERCENT OF TOTAL NATURAL GAS USED
Tenaska Marketing Ventures	12,889,300	35,313	22.1	%
Mansfield Power and Gas	12,088,311	33,119	20.8	%
Spire Marketing, Inc	4,807,300	13,171	8.3	%
Sabine Pass Liquefaction, LLC	3,842,500	10,527	6.6	%
Total Gas & Power North America, Inc	3,774,700	10,342	6.5	%
Cima Energy LP	3,470,700	9,509	6.0	%
Nextera Energy Resources	2,945,400	8,070	5.1	%
Vitol, Inc	1,784,463	4,889	3.1	%
Others	12,623,629	34,585	21.5	%

Total	58,226,303	159,525	100.0	%

Cleco Power owns natural gas pipelines and interconnections at all of its natural gas generating facilities that allow it to access various natural gas supply markets and maintain a reliable, economical fuel supply for its customers.

Although natural gas prices were elevated and extremely volatile during 2022, natural gas was available without interruption throughout the year. Cleco Power expects to continue to meet its natural gas requirements with purchases on the spot market through daily, monthly, and seasonal contracts with various natural gas suppliers. Natural gas prices may increase rapidly in response to temporary supply interruptions. During 2022 Cleco Power contracted for natural

gas firm transportation with two interstate pipelines. One pipeline contract is for a period of two years ending October 31, 2024, and the other is for six months ending May 31, 2023.

Cleco Power also uses underground salt dome gas storage to help mitigate supply disruptions to its generating facilities and to operationally balance gas supply to its units. The storage volume is contracted by paying a capacity reservation charge at a fixed rate. There are also variable charges incurred to withdraw and inject gas from storage. At December 31, 2022, Cleco Power had 1.2 million MMBtu of gas in storage. Currently, Cleco Power anticipates that its diverse supply options and gas storage, combined with its solid-fuel generation resources, are adequate to meet its generation needs during any temporary interruption of natural gas supplies.

Sales

Cleco Power’s 2022 and 2021 system peak demands, which occurred on December 24, 2022, and February 16, 2021, were 2,695 MW and 2,645 MW, respectively. Sales and system peak demand are affected by weather and are typically highest during the summer air-conditioning season; however, peaks may occur during the winter season as well. For information on the effects of future energy sales on Cleco Power’s results of operations, financial condition, and cash flows, see Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales” and “— Weather Sensitivity.”

Reserve margin is the net capacity resources (either owned or purchased) less native load demand, divided by native load demand. Members of MISO submit their forecasted native load demand to MISO each year. During 2022, Cleco Power’s reserve margin was 9.1%, which was above MISO’s unforced planning reserve margin benchmark of 8.7%. During 2021, Cleco Power’s reserve margin was 22.5%, which was also above MISO’s unforced planning reserve margin benchmark of 9.4%. Cleco Power plans on meeting its planning reserve margin requirements in 2023 as MISO transitions from a traditional annual unforced capacity value to a seasonal accreditation capacity value. For more information on 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.”

Customers and Competition

During 2022 and 2021, Cleco Power had one wholesale customer that accounted for 10.8% and 10.6%, respectively, of its consolidated revenue. In 2021 through a request for proposal process, this significant wholesale customer informed Cleco Power it was not selected as a provider of capacity and

energy after the first quarter of 2024, and on October 19, 2022, the LPSC certified these results. Cleco Power’s failure to recontract this agreement is expected to affect jurisdictional retail rates that will be subject to review by the LPSC in conjunction with Cleco Power’s next rate case, expected to be effective July 1, 2024.

Cleco Power did not have a significant customer that accounted for 10% or more of its consolidated revenue in 2020.

During 2022, 2021, or 2020, Cleco Power did not have a significant customer that accounted for 10% or more of Cleco’s consolidated revenue.

For more information regarding Cleco Power’s sales and revenue, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Within MISO, competitors are typically comprised of investor-owned utilities, independent power producers, power marketers, and power plant developers. These entities typically compete on the basis of price, reliability, and residual risk to the purchasing customer and its end users. Cleco Power could experience some competition for electric sales to industrial customers in the form of cogeneration and from alternative and distributed energy power sources.

The LPSC’s consideration of adopting minimum physical capacity threshold requirements for load serving entities could materially impact Cleco Power’s results of operations, financial condition, and cash flows. Management is unable to determine the timing and outcome of a final LPSC ruling.

Capital Investment Projects

For a discussion of certain Cleco Power major capital investment projects, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Cleco Power.”

Capital Expenditures and Financing

For information on Cleco Power’s capital expenditures, financing, and related matters, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements — Capital Expenditures.”

Cleco Cajun

Power Generation

The following table sets forth certain information with respect to Cleco Cajun’s generating facilities:

Fuel and Purchased Power

Cleco Cajun uses coal and natural gas for its power generation resources. Cleco Cajun procures these fuels under contracts from a variety of suppliers and transporters. Cleco Cajun maintains an inventory of coal supply on-site at its coal generating facilities.

Sales

Cleco Cajun sells wholesale electric supply in Louisiana, Texas, and Arkansas. It furnishes supply to its wholesale customers primarily through all-requirements power supply and service agreements, which require Cleco Cajun to provide the electric capacity, energy, and other services necessary to serve most of its customers’ load requirements. Cleco Cajun procures the entirety of the power required to fulfill these obligations through its participation in the MISO market, and sells the entirety of power produced from its generating plants to the MISO market.

Cleco Cajun’s business experiences seasonality, as it bills its customers based on actual electric energy consumed. This usage tends to be greater during periods of high and low temperatures as compared to periods of moderate temperatures.

Customers and Competition

Competition for Cleco Cajun’s electric cooperative customers is limited through the first quarter of 2025, when the majority of the wholesale electric supply contracts expire. Cleco Cajun’s cooperative customers have notified Cleco Cajun that it was not selected as a provider beyond the first quarter of 2025. The regulatory certification process for new supply contracts has been finalized by the LPSC for all but three cooperative customers. This non-selection is believed to be the result of a trend toward cooperatives favoring shorter-term, market-based solutions and intermittent renewables rather than asset-backed, long-term full-service contracts. Cleco Cajun’s failure to recontract these agreements could have a material adverse effect on Cleco's results of operations, financial condition, or cash flows as early as the second quarter of 2025. Cleco is exploring options related to its investment in Cleco Cajun, including the potential sale of part or all of Cleco Cajun’s assets.

Cleco Cajun did not have a significant customer that accounted for 10% or more of Cleco’s consolidated revenue in 2022, 2021, or 2020.

For more information regarding Cleco Cajun’s sales and revenue, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

The LPSC’s consideration of adopting minimum physical capacity threshold requirements for load serving entities could materially impact Cleco’s results of operations, financial condition, and cash flows. Management is unable to determine the timing and outcome of a final LPSC ruling.

Capital Expenditures

For information on Cleco Cajun’s capital expenditures and related matters, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements — Capital Expenditures.”

REGULATORY MATTERS, INDUSTRY DEVELOPMENTS, AND FRANCHISES

Rates

Cleco Power’s electric operations are subject to the jurisdiction of the LPSC with respect to retail rates, standards of service, accounting, and other matters. Cleco Power is subject to the jurisdiction of FERC with respect to transmission tariffs, accounting, interconnections with other utilities, reliability, and the transmission of power. Periodically, Cleco Power has sought and received from both the LPSC and FERC increases in retail rates and transmission tariffs, respectively, to cover increases in operating costs and costs associated with additions to generation, transmission, and distribution facilities.

Cleco Cajun is subject to the jurisdiction of FERC with respect to transmission tariffs, interconnections with other utilities, reliability, and the transmission of power. The rates Cleco, through Cleco Power and Cleco Cajun, charges its wholesale customers are subject to FERC’s triennial market power analysis. Cleco filed its most recent triennial power analysis in December 2020, and it is currently pending FERC approval. The next triennial market power analysis is expected to be filed in December 2023.

Prior to July 1, 2021, Cleco Power’s annual retail earnings were subject to an FRP established by the LPSC in June 2014. The 2014 FRP allowed Cleco Power 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%, were required to be refunded to customers. On June 16, 2021, the LPSC approved Cleco Power’s current FRP. Effective July 1, 2021, under the terms of the current FRP, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5% and all retail earnings over 10.5% 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 next base rate case is required to be filed with the LPSC on or before March 31, 2023. For more information on the current FRP, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — FRP.”

From June 1, 2021, through August 31, 2022, Cleco Power recovered from retail customers certain incurred costs associated with Hurricanes Laura, Delta, and Zeta through an interim storm recovery rate. Effective September 1, 2022, those costs are being recovered through a new storm recovery surcharge resulting from the storm recovery securitization financing. For more information, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 19 — Securitization.”

Cleco Power has an EAC that is used to recover from its customers certain costs of environmental compliance. These costs are subject to periodic review by the LPSC. For more information on the EAC and the most recent environmental audit, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Environmental Audit.”

For information on the regulatory impacts of the TCJA on Cleco Power, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — TCJA.”

For information on Cleco Power’s and Cleco Cajun’s transmission rates, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 4 — Revenue Recognition — Transmission Revenue.”

For information on regulatory risks that could have an impact on Cleco, see Item 1A, “Risk Factors — Regulatory Risks.”

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 that vary in length. Historically, Cleco Power has been substantially successful in the timely renewal of franchises as each neared the end of its term.

Industry Developments and Competition

For information on developments and competition within the electric utility industry, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Structure.”

Legislative and Regulatory Changes and Matters

Various federal and state legislative and regulatory bodies are considering a number of issues that could shape the future of the electric utility industry. Such issues include, among others:

•the ability of electric utilities to recover stranded costs,

•the role of electric utilities, independent power producers, and competitive bidding in the purchase, construction, and operation of new generating capacity,

•the role of electric utilities and independent transmission providers in competitive bidding in the construction of new transmission facilities,

•the pricing of transmission service on an electric utility’s transmission system, or the cost of transmission services provided by an RTO/ISO,

•FERC’s assessment of market power and a utility’s ability to buy generation assets,

•mandatory transmission reliability standards,

•NERC’s imposition of additional reliability and cybersecurity standards,

•the authority of FERC to grant utilities the power of eminent domain,

•increasing requirements for renewable energy sources,

•demand response and energy efficiency standards,

•comprehensive environmental regulation in the areas of air, water, and waste,

•FERC’s ability to impose financial penalties, and

•the LPSC’s consideration of adopting minimum physical capacity threshold requirements for load serving entities.

At this time, management is unable to predict the outcome of such issues or the effects thereof on the results of operations, financial condition, or cash flows of the Registrants.

For information on certain regulatory matters and regulatory accounting 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.”

ENVIRONMENTAL MATTERS

Environmental Quality

Cleco is subject to federal, state, and local laws and regulations governing the protection of the environment. Violations of these laws and regulations may result in substantial fines and penalties. Cleco has obtained the environmental permits necessary for its operations, and management believes Cleco is in compliance in all material

respects with these permits, as well as all applicable environmental laws and regulations. Environmental requirements affecting electric power facilities are complex, change frequently, and have become more stringent over time as a result of new legislation, administrative actions, and judicial interpretations. Therefore, the capital costs and other expenditures necessary to comply with existing and new environmental requirements are difficult to determine. Cleco Power may request recovery of the costs to comply with certain environmental laws and regulations from its retail customers. If recovery were to be approved by the LPSC, then Cleco Power’s retail rates could increase. If the LPSC were to deny Cleco Power’s request to recover all or part of its environmental compliance costs, then Cleco Power would bear those costs directly. Such a decision could negatively impact the results of operations, financial condition, or cash flows of the Registrants. For information on Cleco Power’s expected capital expenditures related to environmental compliance, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements — Capital Expenditures.”

Air Quality

Air emissions from each of Cleco’s generating units are strictly regulated by the EPA and the LDEQ. The LDEQ has authority over and implements certain air quality programs established by the EPA under the federal CAA, as well as its own air quality regulations. The LDEQ establishes standards of performance and requires permits for EGUs in Louisiana. All of Cleco’s generating units are subject to these requirements.

The EPA has proposed and adopted rules under the authority of the CAA relevant to the emissions of SO2 and NOx from Cleco’s generating units.

Regional Haze SIP

The CAA contains a regional haze program with the goal of returning Class I Federal areas of the nation to natural visibility by 2064. States are required to develop a SIP and revise it every ten years. The SIP must include requirements for the installation of Best Available Retrofit Technology (BART) for applicable EGUs in Louisiana. The EPA issued a final approval of the Louisiana SIP for the first planning phase in December 2017. Although the approval was appealed to the U.S. Court of Appeals for the Fifth Circuit by multiple organizations, the court denied all the challenges to the EPA’s approval of the Louisiana Regional Haze SIP. Because the Louisiana SIP mandates use of existing controls and participation in the CSAPR as BART, Cleco does not believe the Louisiana SIP will have a material impact on the results of operations, financial condition, or cash flows of the Registrants. The second planning period for the regional haze program covers the period from 2018 through 2028 and requires states to adopt SIPs that make reasonable further progress toward achieving natural visibility conditions in Class I Federal areas. The LDEQ published a proposed SIP for the second planning period in April 2021 for public comment and it may be subject to revision upon further review by the LDEQ before it is submitted to the EPA. The proposal does not call for new controls on any state sources, but instead, it relies upon existing consent decrees and expected source retirements to achieve reasonable progress in reducing emissions and improving visibility in Class I Federal areas. The SIP for the second planning phase has not been submitted to the EPA. The EPA

published in the Federal Register on August 30, 2022, the finding that Louisiana and fourteen other states failed to submit a regional haze SIP for the second planning period. The EPA must issue a federal implementation plan within two years of the effective date of this finding if a SIP is not provided by LDEQ before then. Until the LDEQ determines what the reasonable progress requirements are for Cleco units and completes its update of the SIP and the EPA approves the SIP, Cleco is unable to predict if the second phase SIP will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

Acid Rain Program

The CAA also established the Acid Rain Program to address the effects of acid rain and imposed restrictions on acid rain-causing SO2 emissions from certain generating units. The CAA requires all of the regulated EGUs to possess a regulatory allowance for each ton of SO2 emitted beginning in 2000. The EPA allocates a set number of allowances to each affected unit based on its historic emissions. Cleco had sufficient allowances for operations in 2022 and expects to have sufficient allowances for 2023 operations under the Acid Rain Program.

The Acid Rain Program also established emission rate limits on NOx emissions for certain generating units. Compliance with the acid rain emission limits for NOx has been achieved at all affected facilities.

CSAPR

In October 2016, the EPA published the finalized CSAPR update for the 2008 ozone NAAQS in the Federal Register (CSAPR Update Rule). As a result, the EPA proposed Federal Implementation Plans (FIP) that update the EGU CSAPR NOX ozone season emission budgets and implemented the budgets through the existing CSAPR NOX ozone season allowance trading program. The FIP required implementation beginning with the 2017 ozone season.

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. On April 30, 2021, the EPA issued in the Federal Register the final revised CSAPR update for the 2008 ozone NAAQS. Cleco does not expect the final regulation to have a material impact on the results of operations, financial condition, or cash flow of the Registrants.

In October 2015, the EPA promulgated a revision to the 2015 ozone NAAQS, lowering the level of both the primary and secondary standards to 70 ppb. Under the CAA, each state is required to submit a SIP that provides for the implementation, maintenance and enforcement of each primary and secondary NAAQS. In particular, each SIP must contain adequate provisions prohibiting emissions activity within the state, which will contribute significantly to non-attainment or interfere with maintenance by any other state with respect to any such primary or secondary ambient air quality standard. On October 15, 2021, the EPA published in the Federal Register a proposed consent decree that would establish a deadline for the EPA to approve or disapprove “good neighbor” SIP submittals by April 30, 2022, for a number of states including Louisiana. On January 12, 2022, the U.S. District Court for the Northern District of California entered the final consent decree and on February 22, 2022, the EPA issued a proposed disapproval of the “good neighbor” SIP submitted by Louisiana

for the 2015 ozone NAAQS. On April 6, 2022, the EPA published in the Federal Register a proposed federal implementation plan (FIP) that if finalized would be applied to address the “good neighbor” requirements for the 2015 ozone NAAQS for those states that do not have an approved SIP. If the EPA finalizes its proposed disapproval of the Louisiana SIP, the EPA would apply a finalized FIP to address the “good neighbor” provision for Louisiana for the 2015 ozone NAAQS, which might result in the allocation of fewer emission allowances to generating units and may cause Cleco to buy additional allowances and/or take other measures to comply. Management is unable to predict or give a reasonable estimate of the outcome of the EPA’s decision regarding the “good neighbor” provision.

MATS

For information about MATS, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Environmental Audit.”

CPP/ACE and NSPS

In August 2015, the EPA released the final guidelines referred to as the CPP. These guidelines provided each state with standards for CO2 emissions from the existing units of the state’s utility industry. The EPA derived the limits for each state through a strategy involving a combination of unit efficiency improvements, dispatching away from boilers to combined cycle units, and applying renewable energy. The CPP required significant reductions of CO2 emissions and set interim and final CO2 emission goals for each state. The interim emission goals were scheduled to begin in 2022, with final emission goals required by 2030. In February 2016, the U.S. Supreme Court issued a stay of the CPP to remain in place until the D.C. Circuit Court of Appeals ruled on the merits and any ruling from the U.S. Supreme Court.

In August 2015, the EPA released the NSPS rules for CO2 emissions from new, modified, or reconstructed units. The rules set requirements and conditions with respect to CO2 emission standards for new units and those that are modified or reconstructed. Cleco does not anticipate a modification or reconstruction of its existing sources that would trigger the application of the CO2 emission limits.

In March 2017, the executive order of Energy Independence was issued. Among other measures, the order directed the EPA to review the CPP, the proposed Federal Implementation Plan for the CPP, and the GHG NSPS. On July 8, 2019, the EPA published in the Federal Register a final rule repealing the CPP and issuing a replacement to the CPP, informally known as the ACE Rule. The ACE Rule requires state agencies to set standards of performance for each affected generating unit and submit the implementation plan to the EPA for approval by July 8, 2022, with compliance expected within 24 months thereafter. 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 GHG emissions from

existing electric generating units. Therefore, the CPP will not take effect during the EPA’s rulemaking process. In addition, on March 5, 2021, the D.C. Circuit Court of Appeals issued the partial mandate effectuating the court’s vacatur of the ACE Rule that makes effective the court’s decision to vacate the ACE Rule. In April 2021, multiple parties filed petitions for a writ of certiorari asking the U.S. Supreme Court to review the decision by the D.C. Circuit Court of Appeals. On October 29, 2021, the U.S. Supreme Court granted four petitions for certiorari asking the D.C. Circuit Court of Appeals to review its decision to vacate and remand the ACE Rule. On June 30, 2022, the U.S. Supreme Court released its opinion on the D.C. Circuit Court of Appeals vacating and remanding the ACE rule. The U.S. Supreme Court indicated in its opinion that the EPA does not have the authority to apply generation shifting in the regulation of GHG emissions as in the CPP. The case was returned to the D.C. Circuit Court of Appeals. It is expected that the EPA will issue a new GHG rule taking the Court’s opinion into consideration.

On January 20, 2021, the Presidential administration issued an executive order directing 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 administration also released a non-exhaustive list of agency actions to be reviewed, which includes the ACE Rule. Until the D.C. Circuit Court of Appeals opinion has been determined to be final and the EPA has responded to the court’s opinion and the executive order to review the ACE Rule, management cannot determine the future regulatory requirements for GHGs for the utility industry and the potential impact on Cleco’s existing affected units. However, any new rules that require significant reductions in CO2 emissions for existing EGUs could require significant capital expenditures or curtailment of operations of certain EGUs to achieve compliance.

In December 2018, the EPA published proposed rules to replace the August 2015 NSPS rules for CO2 emissions from new, modified, or reconstructed units. As with the current NSPS rules, the proposed rules set requirements and conditions with respect to CO2 emission standards for new, modified, or reconstructed units. Cleco does not anticipate a future modification or future reconstruction of its existing units, as defined in the proposal, which would trigger the application of the proposed CO2 emission limits. Until the EPA finalizes the rule, management cannot state what the final standards will entail or if the new rule will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

NAAQS

A primary NAAQS for NO2 promulgated by the EPA became effective in April 2010. The EPA established a new one-hour standard at a level of 100 ppb to supplement the existing annual standard. In 2012, the EPA determined that no area in the country was violating the standard. In April 2018, the EPA published, following the required review of the NAAQS, a final action that retains the ambient air standards for NO2. The EPA may redesignate areas based on new data it receives from states. Due to the fact that fossil fuel-fired EGUs are a significant source of NO2 emissions in the country, a non-attainment designation could result in utilities such as Cleco being required to substantially reduce their NO2 emissions. However, because the EPA has not yet completed any new

designations, Cleco cannot predict the likelihood or potential impacts of such a rule on its generating units at this time.

The EPA revised the NAAQS for SO2 in June 2010. The new standard is now a one-hour health standard of 75 ppb, designed to reduce short-term exposures to SO2 ranging from five minutes to 24 hours. An important aspect of the new SO2 standard is a revised emission monitoring network combined with a new ambient air modeling approach to determine compliance with the new standard. In January 2018, the EPA published a final rule designating all areas containing Cleco generation facilities as either attainment/unclassifiable or unclassifiable. Therefore, there is no adverse impact to Cleco’s generating units.

On March 18, 2019, the EPA published, following the required review of the NAAQS, a final action that retains the ambient air standards for SO2. The EPA may redesignate areas based on new data it receives from states. Due to the fact that fossil fuel-fired EGUs are a significant source of SO2 emissions in the country, a non-attainment designation could result in utilities such as Cleco being required to substantially reduce their SO2 emissions. However, because the EPA has not yet completed any new designations, Cleco cannot predict the likelihood or potential impacts of such a rule on its generating units at this time.

On December 21, 2020, after a required review, the EPA published a final rule that retains the NAAQS for ozone, which was last revised in 2015. Cleco’s generation facilities are not located in areas designated as nonattainment of the ozone NAAQS.

Other

On May 2, 2019, Louisiana Generating notified the EPA and the LDEQ that it has elected not to Retrofit (as such term is defined in the Consent Decree) Big Cajun II, Unit 1.

On December 15, 2022, Louisiana Generating notified the EPA and the LDEQ that it had elected to Refuel (as such term is defined in the Consent Decree) Big Cajun II, Unit 1, in accordance with certain provisions of the Consent Decree.

Water Quality

Cleco’s facilities are subject to federal and state laws and regulations regarding wastewater discharges. Cleco has received, from the EPA and the LDEQ, permits required under the federal Clean Water Act (CWA) for wastewater discharges from its generating stations. Wastewater discharge permits have fixed dates of expiration, and Cleco applies for renewal of these permits within the applicable time periods.

In March 2011, the EPA proposed regulations that would establish standards for cooling water intake structures at existing power plants and other facilities pursuant to Section 316(b) of the CWA. The EPA published its final rule in August 2014. The standards are intended to protect fish and other aquatic wildlife by minimizing capture, both in screens attached to intake structures (impingement mortality) and in the actual intake structures themselves (entrainment mortality). The final rule (1) sets a performance standard, dealing with fish impingement mortality or reducing the flow velocity at cooling water intakes to less than 0.5 feet per second and (2) requires entrainment standards to be determined on a case-by-case basis by state-delegated permitting authorities. Facilities subject to the standards are required to complete a number of studies within a 45-month period and then comply with the rule as soon as possible after the next discharge permit renewal, by a date determined by the permitting authorities. Portions of

the final rule could apply to a number of Cleco’s fossil fuel steam electric generating stations. Until the required studies are conducted, including technical and economic evaluations of the control options available, and regulatory agency officials have reviewed the studies and made determinations, Cleco remains uncertain as to which technology options or retrofits will be required to be installed on its affected facilities. The costs of required technology options and retrofits may be significant, particularly if closed cycle cooling is required.

The CWA requires the EPA to periodically review and, if appropriate, revise technology-based effluent limitations guidelines for categories of industrial facilities, including power generating facilities. In November 2015, the EPA released the Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category Rule (ELG Rule). The rule is focused on reducing the discharge of metals in wastewater from generating facilities to surface waters.

On October 13, 2020, the EPA published final revisions to the ELG Rule that revised the technology-based effluent limitation guidelines and standards applicable to flue gas desulfurization and bottom ash transport waste waters. The revised ELG Rule, known as the Reconsideration Rule, also allows a unit to come into compliance with the ELG Rule by qualifying as an electric generating unit that will achieve permanent cessation of coal combustion by December 31, 2028. Under this compliance option, Cleco submitted a Notice of Planned Participation by the October 13, 2021, submittal deadline for the Dolet Hills Power Station, Rodemacher Unit 2, and Big Cajun II, Unit 1.

On January 20, 2021, the Presidential administration released a non-exhaustive list of agency actions to be reviewed, which includes the ELG Rule.

Solid Waste Disposal

In the course of operations, Cleco’s facilities generate solid and hazardous waste materials requiring eventual disposal. The Solid Waste Division of the LDEQ has adopted a permitting system for the management and disposal of solid waste generated by power stations. Cleco has received all required permits from the LDEQ for the on-site disposal of solid waste from its generating stations.

In April 2015, the EPA published a final rule in the Federal Register for regulating the disposal and management of CCRs from coal-fired power plants (CCR Rule). The CCR Rule establishes extensive requirements for existing and new CCR landfills and surface impoundments and all lateral expansions consisting of location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. In August 2018, the D.C. Circuit Court of Appeals vacated several requirements in the CCR Rule, which included eliminating the previous acceptability of compacted clay material as a liner for impoundments. As a result, in December 2019, the EPA published a proposed rule that would set deadlines for costly modifications including retrofitting of clay-lined impoundments with compliant liners or closure of the impoundments. The CCR Rule was finalized and published in the Federal Register on August 28, 2020. In November 2020, Cleco submitted demonstrations to the EPA specifying its intended course of action for the ash disposal facilities at Rodemacher Unit 2, Dolet Hills Power Station, and Big Cajun II in order to comply with the final CCR Rule. On January 11, 2022, the EPA communicated that Cleco’s demonstrations have been

deemed complete, subject to the EPA’s approval based on pending technical reviews. During the third quarter of 2022, Cleco ceased placing all CCR and non-CCR waste streams in the bottom ash impoundments at the Dolet Hills Power Station. A Notice of Intent to Close was posted on the Dolet Hills CCR website, updated closure plans were submitted to the LDEQ, and Cleco notified the EPA that it withdrew its Part A demonstration for the Dolet Hill’s impoundments.

On January 20, 2021, the Presidential administration released a nonexhaustive list of agency actions to be reviewed, which includes the CCR rules promulgated in July 2018, August 2020, and November 2020. The EPA has completed its review of the three CCR rules and has determined that the most environmentally protective course is to implement the rules.

As a result of solid waste disposal regulations, Cleco Power and Cleco Cajun have AROs for the retirement of certain ash disposal facilities. All costs of the CCR Rule for Cleco Power are expected to be recovered from its customers in future rates. The actual asset retirement costs related to the CCR Rule requirements may vary substantially from the estimates used to record the increased obligation due to the uncertainty about the compliance strategies that will be used and the preliminary nature of available data used to estimate costs. Cleco will continue to gather additional data in future periods and will make decisions about compliance strategies and the timing of closure activities. As additional information becomes available and management makes decisions about compliance strategies and the timing of closure activities, Cleco will update the ARO balances to reflect these changes in estimates. For more information on Cleco’s compliance strategies and financial impacts of the CCR Rule, see Part II, Item 8, “Financial Statements and Supplementary Data—Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments.” For more information on the regulatory treatment of Cleco Power’s AROs, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Regulatory Assets and Liabilities — AROs.”

In December 2016, the Water Infrastructure Improvements for the Nation Act (WIIN Act), including the WIIN Act’s provisions regarding CCRs, was signed into law. The WIIN Act’s CCR provisions require the EPA to establish a CCR permitting program. It also allows for implementation of the federal CCR Rule through a state-based permit program. On February 20, 2020, the EPA published in the Federal Register a proposed rule establishing the federal permit program. Permits will be required for all CCR units in states that do not have state permit programs. Until the state of Louisiana has evaluated the WIIN Act and made a decision on implementing a state-based option, Cleco cannot determine if there will be a material impact on the results of operations, financial condition, or cash flows of the Registrants.

Cleco produces certain wastes that are classified as hazardous at its electric generating stations and at other locations. Cleco does not treat, store long-term, or dispose of these wastes on-site; therefore, no permits are required. Hazardous wastes produced by Cleco are properly disposed of at permitted hazardous waste disposal sites.

Toxic Substances Control Act (TSCA)

The TSCA directs the EPA to regulate the marketing, disposing, manufacturing, processing, distributing in

commerce, and usage of various toxic substances, including PCBs. Cleco operates and may continue to operate equipment containing PCBs under the TSCA. Once the equipment reaches the end of its useful life, the EPA regulates handling and disposing of the equipment and fluids containing PCBs. Within these regulations, handling and disposing is allowed only through facilities approved and permitted by the EPA. Cleco properly disposes of its PCB waste material at TSCA-permitted disposal facilities.

Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

The CERCLA imposes liability on parties responsible for, in whole or in part, the presence of hazardous substances at a site. In 2007, Cleco received a Special Notice for Remedial Investigation and Feasibility Study (RI/FS) from the EPA for a facility known as the Devil’s Swamp Lake site located just northwest of Baton Rouge, Louisiana. The notice requested that Cleco and Cleco Power, along with many other listed potentially responsible parties (PRP), enter into negotiations with the EPA for the performance of an RI/FS at the Devil’s Swamp Lake site. In 2008, the EPA identified Cleco as one of many companies that sent PCB wastes for disposal to the site. The EPA proposed to add the Devil’s Swamp Lake site to the National Priorities List, based on the release of PCBs to fisheries and wetlands located on the site, but no final listing decision has been made. The EPA issued a Unilateral Administrative Order to two PRPs, Clean Harbors, Inc. and Baton Rouge Disposal, to conduct an RI/FS in 2009. The Tier 1 part of the study was completed in June 2012. The tier 2 remedial investigation report was made public in December 2015. In September 2019, the EPA publicly announced a proposed cleanup strategy for the Superfund Site. In August 2020, the EPA signed a Record of Decision for the Devil’s Swamp Lake site that defines a remediation approach for cleaning up the site and monitoring the natural recovery of certain areas of the lake. With the Record of Decision signed, the EPA has started the enforcement negotiations for the next phase of the project. Management is unable to determine how significant Cleco’s share of the costs associated with a possible response action at the site, if any, may be and whether this will have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

Emergency Planning and Community Right-to-Know Act (EPCRA)

Section 313 of the EPCRA requires certain facilities that manufacture, process, or otherwise use minimum quantities of listed toxic chemicals to file an annual report with the EPA called a Toxic Release Inventory (TRI) report. The TRI report requires industrial facilities to report on approximately 650 substances that the facilities release into the air, water, and land. The TRI report ranks companies based on the amount of a particular substance they release on a state and parish (county) level. Annual reports are due to the EPA on July 1 following the reporting year-end. Cleco has submitted required TRI reports on its activities, and the TRI rankings are available to the public. The rankings do not result in any federal or state penalties.

Electric and Magnetic Fields (EMFs)

The possibility that exposure to EMFs emanating from electric power lines, household appliances, and other electric devices may result in adverse health effects and damage to the environment has been a subject of some public attention.

The following risk factors could have a material adverse effect on results and cause results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Registrants.


STRUCTURAL RISKS

Holding Company

Cleco Holdings is a holding company and its ability to meet its debt obligations is dependent on the cash generated by its subsidiaries.

Cleco Holdings is a holding company and conducts its operations primarily through its subsidiaries. Accordingly, Cleco Holdings’ ability to meet its debt obligations is largely dependent upon the cash generated by these subsidiaries. Cleco Holdings’ subsidiaries are separate and distinct entities and have no obligations to pay any amounts due on Cleco Holdings’ debt or to make any funds available for such payment. In addition, Cleco Holdings’ subsidiaries’ ability to make dividend payments or other distributions to Cleco Holdings may be restricted by their obligations to holders of their outstanding securities and to other general business creditors. Substantially all of Cleco’s consolidated assets are held by either Cleco Power or Cleco Cajun. Cleco Holdings’ right to receive any assets of any subsidiary, and therefore the right of its creditors to participate in those assets, will be structurally subordinated to the claims of that subsidiary’s creditors, including trade creditors. In addition, even if Cleco Holdings were a creditor of any subsidiary, its rights as a creditor would be effectively subordinated to any security interest in the assets of that subsidiary and any indebtedness of the subsidiary ranking senior to that held by Cleco Holdings. Cleco Power is subject to regulation by the LPSC. The 2016 Merger Commitments also provide for limitations on the amount of distributions that may be paid from Cleco Power to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit/issuer ratings. As a result, Cleco Power may be prohibited from making distributions to Cleco Holdings.


OPERATIONAL RISKS

Future Electricity Sales

Cleco Power’s future electricity sales and corresponding base revenue and cash flows and Cleco Cajun’s future wholesale revenue and cash flows could be negatively affected by adverse macroeconomic conditions.

Adverse macroeconomic conditions resulting in low economic growth can negatively impact the businesses of Cleco Power’s residential, commercial, wholesale, and industrial customers, and Cleco Cajun’s wholesale customers resulting in decreased power consumption, which causes a corresponding decrease in base revenue for Cleco Power and revenue for Cleco Cajun. Reduced production or the shutdown of customer facilities

could substantially reduce Cleco Power’s base revenue and Cleco Cajun’s revenue.

Energy conservation, energy efficiency efforts, and other factors that reduce energy demand could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Regulatory and legislative bodies have proposed or introduced requirements and incentives to reduce energy consumption. Conservation and energy efficiency programs are designed to reduce energy demand. Future electricity sales could be impacted by customers switching to alternative sources of energy, such as solar and wind, on-site power generation, and retail customers purchasing less electricity due to increased conservation efforts or expanded energy efficiency measures. Declining usage could result in an under-recovery of fixed costs at Cleco Power’s rate regulated business. An increase in energy conservation, energy efficiency efforts, and other efforts that reduce energy demand could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Weather Sensitivity

Cleco’s operations and power generation could be harmed due to the impact of severe weather events, other natural disasters, or climate change, which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Severe weather, including hurricanes, winter storms, tropical storms, and other natural disasters, such as floods, can affect transportation of fuel to plant sites and can be destructive, causing outages, blackouts or disruptions of interconnected transmission systems, and property damage that can potentially result in additional expenses, lower revenue, and additional capital restoration costs. Extreme drought conditions can impact the availability of cooling water to support the operations of generating plants, which can also result in additional expenses and lower revenue. Extreme weather conditions could also increase commodity prices, including fuel, which could have a material adverse effect on Cleco’s results of operations, financial condition, or cash flows.

Climate change that results in more frequent and more severe weather events in Cleco’s service territory, could result in one or more physical risks, such as an increase in sea level, wind and storm surge damages, wetland and barrier island erosion, risks of flooding, and changes in weather conditions, such as changes in temperature and precipitation patterns, and potential increased impacts of extreme winter weather conditions, including ice storms, any of which could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. The Registrants’ assets are in and serve communities that are at risk from sea level rise, changes in weather conditions, and loss of the protection offered by coastal wetlands. In addition, a significant portion of the nation’s oil and gas infrastructure is

located in these areas and is susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to fuel supply interruptions and price spikes.

For example, during 2020 and 2021, Cleco’s service territory sustained substantial damage from four separate hurricanes and two winter storms that resulted in damage to Cleco Power’s distribution and transmission assets, electricity generation supply shortages, natural gas supply shortages, increases in prices of natural gas in the U.S., and significant outages for Cleco Power’s customers.

Any future severe weather, other natural disaster, or physical changes resulting from climate change could cause damage to, or the loss of, Cleco’s equipment and facilities, which could result in Cleco incurring additional costs, such as the cost to restore service, repair damaged facilities, or obtain replacement power. Any future severe weather, other natural disaster, or physical changes resulting from climate change could also result in changes in demand for and usage of electricity in Cleco’s service territory and the service territory of Cleco’s wholesale customers. The delivery of equipment and supplies necessary to Cleco’s business could also be disrupted. Cleco Power’s recovery of costs associated with these events is subject to LPSC review and approval, and the LPSC could disallow timely and full recovery of the costs incurred. These risks and other possible effects of severe weather, other natural disasters, and climate change could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

The operating results of Cleco are affected by weather conditions and may fluctuate on a seasonal basis.

Weather conditions directly influence the demand for electricity, particularly with respect to residential customers. In Cleco’s service territory, demand for power typically peaks during the hot summer months. As a result, Cleco’s financial results may fluctuate on a seasonal basis. In addition, Cleco has sold less power and, consequently, earned less income when weather conditions were milder. Unusually mild weather in the future could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Workforce

Failure to attract, retain, and develop an appropriately qualified workforce could have a negative impact on business operations and a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Certain events, such as employee resignations and retirements, labor shortages, wage inflation, an aging workforce without appropriate replacements, a lack of equivalent or enhanced skill sets to fulfill future needs, or unavailability of contract resources, may lead to operating challenges and increased costs. The challenges include lack of resources, loss of knowledge, difficulty in finding highly-skilled, qualified candidates, specifically due to the location of Cleco’s corporate office and potential employee relocation challenges even with a hybrid work option, and a lengthy time period associated with skill development. Costs may increase as a result of contractors replacing employees, productivity slowdown, and safety incidents. Failure to hire and adequately develop replacement employees, maintain an inclusive work environment, transfer functional knowledge and expertise to

the next generation of employees, ensure the availability of skilled new hires, or accept hybrid or remote work options may adversely affect the ability to manage and safely operate the Registrants’ business. If the Registrants are unable to successfully attract, retain, and develop an appropriately qualified workforce, the results of operations, financial condition, or cash flows of the Registrants could be materially adversely affected.

Technology and Terrorism Threats

The operational and information technology systems on which Cleco relies to conduct its business and serve customers could fail to function properly due to technological problems, cyberattacks, physical attacks on Cleco’s assets, acts of terrorism, severe weather, solar events, electromagnetic events, natural disasters, the age and condition of information technology assets, human error, or other reasons that could disrupt Cleco’s operations and cause Cleco to incur unanticipated losses and expense.

The operation of Cleco’s extensive electrical systems relies on evolving operational and information technology systems and network infrastructures that are becoming extremely complex as new technologies and systems are implemented to more safely and reliably deliver electric services. Cleco’s business is highly dependent on its ability to process and monitor, on a real-time daily basis, a large number of tasks and transactions, many of which are highly complex. Cleco’s hybrid remote working environment makes protecting distributed assets more challenging, and there is a greater opportunity for successful cyberattacks. The failure of Cleco’s operational and information technology systems and networks due to a physical attack, cyberattack, or other event would 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; 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’s systems, including its financial information, operational, advanced metering, and billing systems, require constant maintenance, monitoring, security patches, modification or configuration of systems, and update and upgrade of systems, which can be costly and increase the risk of errors and malfunction. Any disruptions or deficiencies in existing systems, or disruptions, delays, or deficiencies in the modification, transition to, or implementation of new systems, could result in increased costs, the inability to track or collect revenues and the diversion of management’s and employees’ attention and resources, and could adversely affect the effectiveness of Cleco’s control environment, and/or its ability to accurately or timely file required regulatory reports.

Despite implementation of security and mitigation measures, Cleco’s technology systems and those of Cleco’s vendors are vulnerable to inoperability, impaired operations, or failures due to physical attacks or cyberattacks on the facilities and equipment needed to operate the technology systems, viruses, human errors, acts of war or terrorism, and other events. If Cleco’s or its vendor’s information technology systems or network infrastructure were to fail, Cleco might be unable to fulfill critical business functions and serve its customers, which could have a material adverse effect on the financial conditions, results of operations, or cash flows of the Registrants.

In addition, in the ordinary course of its business, Cleco collects and retains sensitive information including personal identification information about customers and employees, customer energy usage, and other confidential information. The theft, damage, or improper disclosure of sensitive electronic data could subject Cleco to both penalties for violation of applicable privacy laws and claims from third parties, or harm Cleco’s reputation. In addition, new laws and regulations governing data privacy and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

Pandemics, Epidemics, and Other Outbreaks

Cleco faces risks related to pandemics, epidemics, and outbreaks, including economic, regulatory, legal, workforce, and cybersecurity risks, that could have a material adverse impact on the results of operations, financial condition, cash flows, or liquidity of the Registrants.

The COVID-19 pandemic (and other pandemics, epidemics, and outbreaks) has adversely affected global economic activities and conditions. There is considerable uncertainty associated with pandemics, epidemics, and outbreaks regarding the extent and duration of governmental and other measures implemented to try to slow the spread of any of these occurrences, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders, and business and government shutdowns that could reduce the availability and productivity of Cleco employees, key contractors, and vendors. Cleco’s ability to timely satisfy regulatory requirements, such as recordkeeping and/or timely reporting requirements, could be affected.

On December 4, 2020, Cleco Power made a filing with the LPSC requesting recovery of the expenses incurred as a result of an LPSC executive order issued in response to the COVID-19 pandemic, prohibiting the disconnection of utilities for nonpayment, as well as the lost revenue associated with the disconnection fees and incremental costs. At December 31, 2022, Cleco Power had a regulatory asset of $3.0 million for expenses incurred related to the executive order. Approval of the recovery of these expenses by the LPSC is expected in the second quarter of 2023. For more information regarding the regulatory asset associated with the LPSC’s executive order, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Regulatory Assets and Liabilities — COVID-19 Executive Order.”

Cleco cannot predict the duration, extent, effect, or ultimate impact of any pandemic, epidemic, outbreak, or governmental responsive measure may have on the global, national, or local economy, the capital markets, or Cleco’s suppliers or customers. Any of the foregoing events or other unforeseen consequences could have a material adverse effect on the results of operations, financial condition, cash flows, or liquidity of the Registrants.

Transmission Constraints

Transmission constraints could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

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 a higher LMP. Physical transmission constraints present in the MISO market could increase energy costs within Cleco Power and Cleco Cajun’s pricing zones or result in transmission curtailments. Cleco Power and Cleco Cajun are awarded and/or purchase FTRs in auctions facilitated by MISO. However, insufficient FTR allocations or increased FTR costs, due to negative congestion flows, may result in an unexpected increase in energy costs to Cleco’s customers. For Cleco Power, if a disallowance of additional fuel costs associated with congestion is ordered by the LPSC 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’s Generation, Transmission, and Distribution Facilities

Cleco’s generation facilities are susceptible to unplanned outages, significant maintenance requirements, and interruption of fuel deliveries.

The operation of power generation facilities involves many risks, including breakdown or failure of equipment, fuel supply interruption, and performance below expected levels of output or efficiency. Aging equipment, even if maintained in accordance with good engineering practices, may require significant expenditures to operate at peak efficiency, or to comply with environmental permits. Newer equipment can also be subject to unexpected failures. Accordingly, Cleco may incur more frequent unplanned outages, higher than anticipated operating and maintenance expenditures, higher replacement costs of purchased power, increased fuel costs, MISO related costs, and the loss of potential revenue related to competitive opportunities. The costs of such repairs, maintenance, and purchased power may not be fully recoverable in rates and could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco’s generating facilities are currently fueled primarily by coal, natural gas, and petroleum coke. The deliverability of these fuel sources may be constrained due to such factors as higher demand, decreased regional supply, production shortages, weather-related disturbances, railroad constraints or disruptions, waterway levels, labor strikes, or lack of transportation capacity. If suppliers are unable to deliver the contracted volume of fuel and associated inventories are depleted, Cleco may be unable to operate its generating units which may cause Cleco Power to incur higher costs, which in turn could increase the cost to customers. Cleco Power’s fuel and MISO-procured/settled energy expenses, which are recovered from its customers through the FAC, are subject to refund until either a prudency review or a periodic fuel audit is conducted by the LPSC.

Cleco Power could be indirectly liable for the impacts of other companies’ activities on lands that have been mined and reclaimed by Cleco Power. The liability for impacts on reclaimed lands may not be recoverable in rates and could

have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

The construction of and capital improvements to power generation, transmission, and distribution facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful or significantly more expensive than planned, the financial condition, results of operations, or liquidity of the Registrants could be materially affected.

Cleco’s ability to complete construction of or capital improvements to power generation, transmission, and distribution facilities in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include engineering and project execution risk and escalating costs for materials, labor, and environmental compliance. Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing as set forth under their contracts, changes in the scope and timing of projects, inaccurate cost estimates, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel or material costs, changes in the economy, changes in laws or regulations, including environmental compliance requirements, and other events beyond the control of Cleco may materially affect the schedule and cost of these projects. If these projects are significantly delayed or become subject to cost overruns or cancellation, Cleco could incur additional costs including termination payments, face increased risk of potential write-off of the investment in the project, or be unable to recover such costs in rates. Furthermore, failure to maintain various levels of generating unit availability or transmission and distribution reliability may result in various disallowances of Cleco Power’s investments.

Alternative Generation Technology

Changes in technology may have a material adverse effect on the value of Cleco Power’s and Cleco Cajun’s generating facilities.

A basic premise of Cleco’s business is that generating electricity at central power plants achieves economies of scale and produces electricity at a relatively low price. There are alternative technologies to produce electricity, most notably wind turbines, photovoltaic cells, and other solar generated power. Many companies and organizations conduct research and development activities to seek improvements in alternative technologies. As new technologies are developed and become available, the quantity and pattern of electricity purchased by customers could decline, with a corresponding decline in revenues derived by generating assets. In addition, to the extent Cleco is slow to adopt viable alternative generation technologies, employs technology that is problematic to operate, and/or under or over relies on these alternative technologies, the value of Cleco Power’s and Cleco Cajun’s generating facilities could be reduced.

Litigation

Cleco is subject to litigation related to the 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. See Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and

Contingencies, and Disclosures about Guarantees — Litigation — 2016 Merger” for a discussion of these actions.

It is possible that additional claims beyond those that have already been filed will be brought by the current plaintiffs or by others in an effort to seek monetary relief from Cleco’s former directors and officers. Cleco is not able to predict the outcome of these actions, or others, nor can Cleco predict the amount of time and expense that will be required to resolve the actions. In addition, the cost to Cleco of defending the actions, even if resolved in the defendants’ favor, could be substantial. Such actions could also divert the attention of Cleco’s management and resources from day-to-day operations.

The Registrants are parties to various litigation matters arising out of the ordinary operations of their business. The ultimate outcome of these matters cannot presently be determined, nor, in many cases, can the liability that could potentially result from a negative outcome in each case presently be reasonably estimated. The liability that the Registrants may ultimately incur with respect to any of these cases in the event of a negative outcome may be in excess of amounts currently reserved and insured against with respect to such matters and, as a result, these matters may have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco Cajun

The success of Cleco Cajun depends, in part, on Cleco’s ability to manage the acquired business and realize anticipated benefits.

On February 4, 2019, Cleco acquired all of the membership interests of South Central Generating upon the closing of the Cleco Cajun Transaction. The success of Cleco Cajun will depend, in part, on Cleco’s ability to manage and operate the unregulated business through service to electric cooperative customers and other wholesale customers. The majority of Cleco Cajun’s capacity is contracted through the first quarter of 2025.

Cleco Cajun’s cooperative customers have finalized their recontracting decisions beyond the first quarter of 2025 and all have notified Cleco Cajun that it was not selected as a provider. The regulatory certification process for the new supply contracts has been finalized by the LPSC for all but three cooperative customers. This non-selection is believed to be the result of a trend toward cooperatives favoring shorter-term, market-based solutions and intermittent renewables rather than asset-backed, long-term full-service contracts. Cleco is exploring options related to its investment in Cleco Cajun, including the potential sale of part or all of Cleco Cajun’s assets. Cleco Cajun’s failure to recontract these agreements, the failure to enter into new contracts with other counterparties, or failure to take other mitigating measures for the loss of existing contracts could have a material adverse effect on Cleco’s results of operations, financial condition, cash flows, and liquidity as early as the second quarter of 2025.


REGULATORY RISKS

Regulatory Compliance

Cleco operates in a highly regulated environment and adverse regulatory decisions or changes in applicable regulations could have a material adverse effect on the Registrants’ business or result in significant additional costs.

Cleco’s business is subject to extensive federal, state, and local energy, environmental, and other laws and regulations. Should Cleco be unsuccessful in obtaining necessary licenses or permits or should these regulatory authorities initiate any investigations or enforcement actions or impose penalties or disallowances on Cleco, Cleco’s business could be adversely affected. Existing regulations may be revised or reinterpreted and new laws and regulations may be adopted or become applicable to Cleco or Cleco’s facilities in a manner that may have a material adverse effect on the Registrants’ business or result in significant additional costs.

As a result of the 2016 Merger, Cleco Holdings and Cleco Power made the 2016 Merger Commitments to the LPSC including, but not limited to, the extension of Cleco Power’s FRP for an additional two years, maintaining employee headcount, salaries, and benefits for ten years, and a limitation from incurring additional long-term debt, excluding non-recourse debt, unless certain financial ratios are achieved. Additionally, upon approval of the Cleco Cajun Transaction, Cleco made commitments to the LPSC including, but not limited to, holding Cleco Power retail customers harmless for any adverse impacts, increased costs of debt or equity, and credit rating downgrades attributable to the Cleco Cajun Transaction and the repayment of $400.0 million of Cleco Holdings’ debt by 2024. For information about Cleco Holdings’ repayment schedule, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt — Cleco.”

Cleco Power’s Rates

The LPSC and FERC regulate the retail rates and wholesale transmission tariffs, respectively, that Cleco Power can charge its customers.

Cleco Power’s ongoing financial viability depends on its ability to recover its costs in a timely manner from its LPSC-jurisdictional customers through LPSC-approved rates and its ability to recover its FERC-authorized revenue requirements from its FERC-jurisdictional wholesale transmission customers. Cleco Power’s financial viability also depends on its ability to recover in rates an adequate return on capital, including long-term debt and equity. Generally, historical costs are used by the LPSC in determining Cleco Power’s rates. If Cleco Power is unable to recover any material amount of its costs in rates in a timely manner or recover an adequate return on capital, the results of operations, financial condition, or cash flows of the Registrants could be materially adversely affected. Recovery of these costs could result in rising utility bills threatening the affordability of such costs by Cleco Power’s customers in certain demographic areas, which in turn could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco Power’s revenues and earnings are substantially affected by regulatory proceedings known as rate cases or, in some cases, a request for extension of an FRP. During those

cases, the LPSC determines Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its retail customers through its rates. These proceedings may examine, among other things, the prudency of Cleco Power’s operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC has the authority to disallow recovery of costs found not to have been prudently incurred. Rate cases generally have timelines of approximately one year, and decisions are typically subject to appeal, potentially leading to additional uncertainty. The transmission tariffs of Cleco Power are regulated by FERC with its own regulatory proceedings. Both the LPSC and FERC regulatory proceedings can involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, all of whom have differing concerns but who have the common objective of just and reasonable rates.

Transmission rates that MISO transmission owners may collect are regulated by FERC. In November 2019, FERC voted to adopt new methodology for evaluating base ROE for public utilities under the Federal Power Act. Cleco Power is unable to determine when a binding FERC order will be issued. Any reduction to the ROE component of the transmission rates could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Retail Electric Service

Cleco Power’s retail electric rates and business practices are regulated by the LPSC and reviews may result in refunds to customers.

Cleco Power’s retail rates for residential, commercial, and industrial customers and other retail sales are regulated by the LPSC. Cleco Power’s current retail rate plan became effective on July 1, 2021. If a refund of previously recorded revenue is required as a result of the LPSC’s review, the refund could result in a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. For more information about the current retail rate plan, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — FRP.”

Cleco Power’s next base rate case is required to be filed with the LPSC on or before March 31, 2023. The outcome of any future base rate case could have a material adverse effect on the results of operations, financial condition, and cash flows of the Registrants.

LPSC Audits

The LPSC conducts fuel audits that could result in Cleco Power making substantial refunds of previously recorded revenue.

Generally, Cleco Power’s cost of fuel used for electric generation and cost of purchased power are recovered through the LPSC-established FAC, which 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, which are performed at least every other year. For more information about Cleco Power’s current fuel audit, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies,

and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.”

Management is unable to predict or give a reasonable estimate of the possible range of the disallowance by the LPSC, if any, related to FAC filings. If a disallowance of fuel costs 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.

The LPSC conducts audits of environmental costs that could result in Cleco Power making substantial refunds of previously recorded revenue.

Cleco Power has an EAC that is used to recover from customers certain costs of environmental compliance. The costs eligible for recovery are 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. These costs are subject to periodic review by 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. If a disallowance of environmental costs 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.

FERC Audit

FERC conducts audits that could result in Cleco Power making refunds of previously recorded revenue.

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. Management is unable to predict the timing of future audits and whether or not the outcome of such future audits will have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

MISO

MISO market operations could have a material adverse effect on the results of operations, generation revenues, energy supply costs, financial condition, or cash flows of the Registrants.

Cleco is a member of the MISO market region referred to as “MISO South,” which encompasses parts of Arkansas, Louisiana, Mississippi, and Texas. Dispatch of generation resources and generation volumes to the market is determined by MISO. Costs in the MISO South region are heavily influenced by commodity fuel prices, transmission congestion, dispatch of the generating assets owned not only by Cleco, but by all market participants in the MISO South region, and the overall demand and generation availability in the region.

MISO evaluates forced outage rates to assess generating unit capacity for Cleco’s planning reserve margin. If Cleco is subject to a significant amount of forced outages, Cleco may

not possess sufficient planning reserves to serve its needs and could be forced to purchase capacity from the MISO resource adequacy auction. For Cleco Power, the costs of such capacity may not be recoverable in its rates and could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants. Using MISO’s unforced capacity method for determining generating unit capacity, Cleco Power’s fleet provided for 9 MW of capacity in excess of its peak, coincident to MISO’s peak, in 2022. Due to generation resource retirements, increased reliance on intermittent resources, significant weather events with correlated generator outages, and declining excess reserve margins that will profoundly impact future grid reliability, MISO is currently transitioning from a traditional annual unforced capacity value to a seasonal accreditation capacity value. Because of the recentness of the transition, management is unable to predict the potential impact the transition will have on Cleco’s results of operations, financial condition, or cash flows of the Registrants.

Reliability and CIP Standards Compliance

Cleco is subject to mandatory reliability and CIP standards. Fines and civil penalties are imposed on those who fail to comply with these standards.

NERC serves as the ERO with authority to establish and enforce mandatory reliability and CIP standards, subject to FERC approval, for users of the nation’s transmission system. FERC enforces compliance with these standards. New standards are being developed and existing standards are continuously being modified.

As these standards continue to be adopted and modified, they may impose additional compliance requirements on Cleco Power and Cleco Cajun separately, which may result in increased capital expenditures and operating expenses. Failure to comply with these standards can result in the imposition of material fines and civil penalties.

A NERC Reliability Standards audit and NERC CIP Audit are conducted every three years for Cleco Power and Cleco Cajun. For more information on Cleco’s current and future audits, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition — Financial Condition — Regulatory and Other Matters — Market Structure — Wholesale Electric Markets — ERO.”

Management is unable to predict the financial outcome of 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.

Environmental Compliance

Cleco’s costs of compliance with environmental laws and regulations are significant. The costs of compliance with new environmental laws and regulations, as well as the incurrence of incremental environmental liabilities, could be significant to the Registrants.

Cleco is subject to extensive environmental oversight by federal, state, and local authorities and is required to comply with numerous environmental laws and regulations related to air quality, water quality, waste management, natural resources, and health and safety. Cleco also is required to obtain and comply with numerous governmental permits in operating its facilities. Existing environmental laws, regulations, and permits could be revised or reinterpreted, and new laws

and regulations could be adopted or become applicable to Cleco. As a result, some of Cleco’s EGUs could be rendered uneconomical to maintain or operate and could prompt early retirement of certain generation units. Any legal obligation that would require Cleco to substantially reduce its emissions beyond present levels could require extensive mitigation efforts and could raise uncertainty about the future viability of some fossil fuels as fuel for new and existing EGUs. Cleco will evaluate potential solutions to comply with such regulations and monitor rulemaking and any legal matters impacting the proposed regulations. Cleco may incur significant capital expenditures or additional operating costs to comply with such revisions, reinterpretations, and new requirements. If Cleco were to fail to comply, it could be subject to civil or criminal liabilities and fines or may be forced to shut down or reduce production from its facilities. Cleco cannot predict the timing or the outcome of pending or future legislative and rulemaking proposals.

Cleco Power may request from its customers recovery of its costs to comply with new environmental laws and regulations. If the LPSC were to deny Cleco Power’s request to recover all or part of its environmental compliance costs, there could be a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Wholesale Electric Service

Cleco’s business practices are regulated by FERC, and the wholesale rates of both Cleco Power and Cleco Cajun are subject to FERC’s triennial market power analysis. Cleco Power and/or Cleco Cajun could lose the right to sell wholesale generation at market-based rates.

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 in December 2020, and it is currently pending FERC approval. The next triennial market power analysis is expected to be filed in December 2023. In the future, if FERC determines Cleco Power and/or Cleco Cajun possesses generation market power in excess of certain thresholds, Cleco Power and/or Cleco Cajun could lose the right to sell wholesale generation at market-based rates, which could result in a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.


FINANCIAL RISKS

Commodity and Commercial Transactions

Cleco may enter into fuel supply contracts, energy hedge transactions, and/or commercial transactions, including sales to wholesale customers. If risks related to these transactions are not managed effectively, they may have a material adverse effect on the liquidity, results of operations, or financial condition of the Registrants.

During its normal course of business, Cleco is exposed to uncertain market prices of electricity, natural gas, coal, and other commodities. Market price volatility can impact costs of fuel supply for generation, generation revenue, cost to serve Cleco’s contracted wholesale electricity customers, customer

utility bills, and revenue from customers. To manage market price volatility, Cleco Power and Cleco Cajun may each enter into purchases or sales of certain physical and financial commodity contracts within established risk management guidelines.

For Cleco Power, the changes in fair value of transactions accounted for as derivatives under authoritative accounting guidance are deferred as a component of deferred fuel assets or liabilities in accordance with regulatory policy. At settlement, realized gains or losses are included in Cleco Power’s FAC and reflected on customer’s bills as a component of the fuel charge. Recovery of these costs included in Cleco Power’s FAC is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC. For Cleco Cajun, the changes in fair value of transactions accounted for as derivatives under authoritative accounting guidance as well as the realized gains and losses at settlement are recorded on the income statement as either a component of fuel expense, for gas-related derivatives, or purchased power expense, for FTRs.

Because Cleco is subject to significant fluctuations caused by changes in market prices, Cleco is unable to accurately predict the effect that these transactions could have on its results of operations, financial condition, or cash flows. All risks associated with these transactions cannot be fully eliminated. Therefore, the judgements and assumptions made in the underlying decisions related to these transactions could have a material adverse effect on the liquidity, results of operations, financial condition, or cash flows of the Registrants.

Counterparty Risk and Guarantees

Cleco may be required to provide credit support to its counterparties, which could have a material adverse effect on the Registrants’ liquidity.

Cleco may guarantee the performance of all or some of its commercial transaction obligations and may also be required to provide counterparty credit support in the form of cash or cash equivalent collateral to secure all or part of those obligations. Downgrades in Cleco’s credit quality or changes in the market prices of transaction-related energy commodities could increase the collateral or margin required to be on deposit with the counterparty or clearing house. The required credit support or increase in credit support could have a material adverse effect on the Registrants’ liquidity.

Cleco is exposed to the risk that counterparties may not meet their performance obligations, which could have a material adverse effect on the operating and financial performance of the Registrants.

Counterparties may fail to perform on their physical or financial obligations. Currently, Cleco has industry accepted master agreements in place with counterparties that provide credit default language. Some master agreements with counterparties contain provisions that require the counterparties to provide credit support to secure all or part of their obligations to Cleco. If the counterparties to these arrangements fail to perform, Cleco may enforce and recover the proceeds from the credit support provided; however, in the event of a default, credit support may not always be adequate to cover the related obligations. In such event, Cleco may incur losses in excess of amounts already paid, if any, to the counterparties or due to an adverse replacement cost of the transaction and may be unable to collect liquated damages.

The credit commitments of Cleco’s lenders under its bank facilities may not be honored for a variety of reasons, including unexpected periods of financial distress affecting such lenders, which could materially affect the adequacy of its liquidity sources. In no case would Cleco Power bear any commodity or credit risk of Cleco Cajun.

Global Economic Environment and Uncertainty

Adverse capital market performance could result in reductions in the fair value of benefit plan assets and increase the Registrants’ liabilities related to such plans. Sustained declines in the fair value of the plan’s assets or sustained increases in plan liabilities could result in significant increases in funding requirements, which could adversely affect the Registrants’ liquidity and results of operations.

Performance of the capital markets affects the value of assets that are held in trust to satisfy future obligations under Cleco’s defined benefit pension plan. Sustained adverse market performance could result in lower rates of return for these assets than projected by Cleco and could increase Cleco’s funding requirements related to the pension plan. Additionally, changes in interest rates affect the present value of Cleco’s liabilities under the pension plan. Adverse changes in assumptions or adverse actual events could cause additional minimum contributions.

Cleco Credit Ratings

A downgrade in Cleco Holdings’ or Cleco Power’s credit ratings could result in an increase in their respective borrowing costs, a reduced pool of potential investors and funding sources, and a restriction on Cleco Power making distributions to Cleco Holdings.

Neither Cleco Holdings nor Cleco Power can assure that its current debt ratings will remain in effect for any given period of time or that one or more of its debt ratings will not be lowered or withdrawn entirely by a rating agency. If S&P, Moody’s, or Fitch were to downgrade Cleco Holdings’ or Cleco Power’s long-term ratings, particularly below investment grade, the value of their debt securities could be adversely affected. Downgrades of either Cleco Holdings’ or Cleco Power’s credit ratings could result in additional fees and higher interest rates for borrowings under their respective credit facilities and term loans. In addition, Cleco Holdings or Cleco Power, as the case may be, would likely be required to pay higher interest rates in future debt financings, may be subject to more onerous debt covenants, and their pool of potential investors and funding sources could decrease. In addition, the 2016 Merger Commitments provide for limitations on the amount of distributions that may be paid from Cleco Power to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit/issuer ratings. As a result, Cleco Power may be prohibited from making distributions to Cleco Holdings in the event of a ratings downgrade below investment grade.

Cleco Power LLC’s Unsecured and Unsubordinated Obligations

Cleco Power LLC’s unsecured and unsubordinated obligations, including, without limitation, its senior notes, will be effectively subordinated to any secured debt of Cleco Power LLC and structurally subordinated to indebtedness and other liabilities and preferred equity of any of Cleco Power LLC’s subsidiaries.

Cleco Power LLC’s senior notes and its obligations under various loan agreements and refunding agreements with the Rapides Finance Authority, the Louisiana Public Facilities

Authority, and other issuers of tax-exempt bonds for the benefit of Cleco Power LLC are unsecured and rank equally with all of Cleco Power LLC’s existing and future unsecured and unsubordinated indebtedness. As of December 31, 2022, Cleco Power LLC had an aggregate of $1.46 billion of unsecured and unsubordinated indebtedness net of debt discount and debt expense. The unsecured and unsubordinated indebtedness of Cleco Power LLC will be effectively subordinated to, and thus have a junior position to, any secured debt that Cleco Power LLC may have outstanding from time to time (including any mortgage bonds) with respect to the assets securing such debt. Certain agreements entered into by Cleco Power LLC with other lenders that are unsecured provide that if Cleco Power LLC issues secured debt, Cleco Power LLC is obligated to grant these lenders the same security interest in certain assets of Cleco Power LLC. If such a security interest were to arise, it would further subordinate Cleco Power LLC’s unsecured and unsubordinated obligations.

As of December 31, 2022, Cleco Power LLC had no secured indebtedness outstanding. Cleco Power LLC may issue mortgage bonds in the future under any future Indenture of Mortgage, and holders of mortgage bonds would have a prior claim on certain Cleco Power LLC material assets upon dissolution, winding up, liquidation, or reorganization. Additionally, neither Cleco Power LLC nor its creditors, including holders of its senior notes, can use the assets of Cleco Securitization I to settle debts of Cleco Power LLC.


GENERAL RISK FACTORS

Presidential Administration

The Presidential administration has made and may continue to make substantial changes to environmental, fiscal, and tax policies that could have a material adverse effect on the Registrants’ business.

The Presidential administration may propose substantial changes to environmental, fiscal, and tax policies, which may include comprehensive tax reform, more stringent and onerous requirements for reducing GHG emissions and other pollutants from existing fossil fuel-fired power plants, and other objectives that may impact the results of operations, financial condition, or cash flows of the Registrants. Since taking office in January 2021, the current President has issued several executive orders designed to address climate change and GHG emissions, as well as an executive order requiring agencies to review past environmental actions. Furthermore, the current President has recommitted the U.S. to the Paris Agreement and announced the U.S.’s nationally determined contribution under the Paris Agreement at the summit on climate change on April 22, 2021. The target aims to reduce U.S. emissions by 50-52% compared to a 2005 baseline by 2030. The current Presidential administration has also issued a memorandum to departments and agencies to refrain from proposing or issuing rules until a departmental or agency head appointed or designated by the administration has reviewed and approved the rule. The executive orders may result in the development of additional regulations or changes to existing regulations, and it is possible that these changes could adversely affect Cleco’s business. Until any such changes are enacted, management is unable to determine the impact of any such changes on the Registrants’ business, results of operations, financial condition, or cash flows.

Taxes

Changes in taxation due to uncertain effects of various tax reform legislation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

The Registrants make judgments regarding the utilization of existing income tax credits and the potential tax effects of various financial transactions and results of operations to estimate their obligations to taxing authorities. Tax obligations include income, franchise, property, sales and use, and employment-related taxes. These judgments may include reserves for potential adverse outcomes regarding tax positions that have been taken. Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken by the Registrants could have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

The IRA of 2022 was signed into law on August 16, 2022. Management is still monitoring any potential impact the recently enacted IRA could have on the Registrants. For more information related to the IRA’s tax and renewable provisions, see Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Significant Events — Tax Reform.”

Insurance

Cleco’s insurance coverage may not be sufficient and may become more costly to maintain.

Cleco currently has property, casualty, cybersecurity, and liability insurance policies in place to protect its employees, board of managers, and assets in amounts that it considers appropriate. Such policies are subject to certain limits and deductibles. Insurance coverage may not be available in the future at current costs, on commercially reasonable terms, or at all, and the insurance proceeds received for any loss of, or any damage to, any of Cleco’s facilities may not be sufficient to restore the loss or damage without a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Like other utilities that serve coastal regions, Cleco Power does not have insurance covering its transmission and distribution system, other than substations, because it believes such insurance to be cost prohibitive. In the future, Cleco Power may not be able to recover the costs incurred in restoring transmission and distribution properties following hurricanes or other natural disasters through issuance of storm recovery bonds or a change in Cleco Power’s regulated rates or otherwise, or any such recovery may not be timely granted. Therefore, Cleco Power may not be able to restore any loss of, or damage to, any of its transmission and distribution properties without a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Global Economic Uncertainty and Access to Capital

Disruptions in the capital and credit markets may adversely affect the Registrants’ cost of capital and ability to meet liquidity needs or access capital to operate and grow the business.

The Registrants’ business is capital intensive and dependent upon the Registrants’ respective abilities to access capital at reasonable rates and other terms. The Registrants’ liquidity needs could significantly increase in the event of a hurricane

or other weather-related or unforeseen disaster or when there are spikes in the price of natural gas and other commodities. The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel, purchased power, or storm restoration costs; higher than expected required pension contributions; an acceleration of payments or decreased credit lines; less cash flow from operations than expected; or other unexpected events, could cause the financing needs of the Registrants to increase materially.

Events beyond the Registrants’ control, such as political uncertainty in the U.S. (including the ongoing debates related to the U.S. federal government budget), volatility and disruption in global capital and credit markets, and rising interest rates as a result of increases in the targeted federal funds rate range by the Federal Reserve may create uncertainty that could increase their cost of capital or impair their ability to access the capital markets, including the ability to draw on their respective bank credit facilities. Additionally, upon approval of the Cleco Cajun Transaction, Cleco made commitments to the LPSC including, but not limited to, holding Cleco Power retail customers harmless for any adverse impacts, increased costs of debt or equity, and credit rating downgrades attributable to the Cleco Cajun Transaction; and the repayment of $400.0 million of Cleco Holdings’ debt by 2024. At December 31, 2022, the remaining balance of Cleco Holdings’ debt to be repaid by 2024 was $132.3 million. The Registrants may be unable to predict the degree of success they will have in renewing or replacing their respective credit facilities as they come up for renewal. Moreover, the size, terms, and covenants of any new credit facilities may not be comparable to, and may be more restrictive than, existing facilities. If the Registrants are unable to access the credit and capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities, and/or bear an unfavorable cost of capital, which, in turn, could have a material adverse effect on the Registrants’ ability to fund capital expenditures or to service debt, or on the Registrants’ flexibility to react to changing economic and business conditions.

Inflation may negatively impact the results of operations, financial condition, or cash flows of the Registrants.

Cleco has observed that prices for equipment, materials, supplies, employee labor, and contractor services have increased. Long-term inflationary pressures may result in such prices continuing to increase more quickly than expected. Increases in inflation raises costs for labor, materials, and services, and Cleco may be unable to secure these resources on economically acceptable terms or offset such costs with increased revenues, operating efficiencies, or cost savings, which may adversely impact the results of operations, financial condition, or cash flows of the Registrants.

ESG

Increased focus on and changing expectations regarding ESG programs may result in constraints on the Registrants’ access to capital and increased costs and expenses.

Stakeholder scrutiny of companies’ ESG practices has been increasing across numerous industries. In recent years, certain stakeholders, including an increasing number of investors and lenders, have started placing more importance on ESG criteria when making lending and investment decisions. Although the Registrants are not currently aware of any instances where

CLECO POWER

All of Cleco Power’s electric generating stations and electric operating properties are located in Louisiana. Cleco Power considers all of its properties to be well maintained, in good operating condition, and suitable for their intended purposes. For more information on Cleco Power’s generating facilities, see Item 1, “Business — Operations — Cleco Power.”

Electric Generating Stations

As of December 31, 2022, Cleco Power either owned or had an ownership interest in five steam electric generating stations, three combined cycle units, and one gas turbine with a combined rated capacity of 3,035 MW, and a combined electric net generating capacity of 2,824 MW. The net generating capacity is the result of capacity tests and operational tests performed during 2022, as required by MISO. This amount reflects the maximum production capacity these units can sustain over a specified period of time. For more information on Cleco Power’s generating facilities, see Item 1, “Business — Operations — Cleco Power.”

Electric Substations

As of December 31, 2022, Cleco Power owned 89 active transmission substations and 251 active distribution substations.

Electric Lines

As of December 31, 2022, Cleco Power’s transmission system consisted of 67 circuit miles of 500-kiloVolt (kV) lines; 610 circuit miles of 230-kV lines; 678 circuit miles of 138-kV lines; and 29 circuit miles of 69-kV lines. Cleco Power’s distribution system consisted of 3,417 circuit miles of 34.5-kV lines and 8,819 circuit miles of other lines.

General Properties

Cleco Power owns various properties throughout Louisiana, which include a headquarters office building, regional offices, service centers, telecommunications equipment, and other general-purpose facilities.

Title

Cleco Power’s electric generating plants and certain other principal properties are owned in fee simple. Electric transmission and distribution lines are located either on private rights-of-way or along streets or highways by public consent.

Substantially all of Cleco Power’s property, plant, and equipment are subject to a lien under Cleco Power’s Indenture of Mortgage, which does not impair the use of such properties

in the operation of its business. As of December 31, 2022, no mortgage bonds were outstanding under the Indenture of Mortgage. Some of the unsecured and unsubordinated indebtedness of Cleco Power will be effectively subordinated to, and thus have a junior position to, any mortgage bonds that Cleco Power may have outstanding from time to time with respect to the assets subject to the lien of the Indenture of Mortgage. Cleco Power may issue mortgage bonds in the future under its Indenture of Mortgage, and holders of mortgage bonds would have a prior claim on certain Cleco Power material assets upon dissolution, winding up, liquidation, or reorganization.

CLECO CAJUN

Cleco Cajun has electric generating stations and electric operating properties located in Louisiana and Texas. Cleco Cajun considers all of its properties to be well maintained, in good operating condition, and suitable for their intended purposes. For more information on Cleco Cajun’s generating facilities, see Item 1, “Business — Operations — Cleco Cajun.”

Electric Generating Stations

As of December 31, 2022, Cleco Cajun has ownership interest in four electric generating stations which, combined, consist of five gas turbine units and five steam electric generating units located in Louisiana as well as four combined cycle units located in Texas. These generating facilities have a combined rated capacity of 3,379 MW. For more information on Cleco Cajun’s generating facilities, see Item 1, “Business — Operations — Cleco Cajun.”

General Properties

Cleco Cajun owns various properties throughout Louisiana, which include a regional office, telecommunications equipment, and other general-purpose assets.

Title

Cleco Cajun’s assets are owned in fee simple and are not subject to non-ordinary course of business liens or encumbrances.

CLECO HOLDINGS

There is no established public trading market for Cleco Holdings’ membership interests. All of Cleco Holdings’ outstanding membership interests are owned by Cleco Group.

Cleco Holdings’ credit facility requires a total indebtedness of less than or equal to 65.0% of total capitalization in order to declare dividend payments. Additionally, in accordance with the 2016 Merger Commitments, Cleco Holdings is subject to certain provisions limiting the amount of distributions that may be paid from Cleco Holdings to Cleco Group or Cleco Partners, depending on Cleco Holdings’ debt to EBITDA ratio and its corporate credit ratings.

Cleco Holdings made $219.6 million of distributions to Cleco Group during 2022. Cleco Holdings made no distributions to Cleco Group during 2021 and 2020. Cleco Holdings received no equity contributions from Cleco Group during 2022, 2021, and 2020.

CLECO POWER

There is no market for Cleco Power’s membership interests. All of Cleco Power’s outstanding membership interests are owned

by Cleco Holdings. Distributions on Cleco Power’s membership interests are paid when and if declared by Cleco Power’s Board of Managers. Any future distributions also may be restricted by any credit or loan agreements into which Cleco Power may enter.

Some provisions in Cleco Power’s debt instruments restrict the amount of equity available for distribution to Cleco Holdings by Cleco Power by requiring Cleco Power’s total indebtedness to be less than or equal to 65.0% of total capitalization. In addition, the 2016 Merger Commitments provide for limitations on the amount of distributions that may be paid from Cleco Power to Cleco Holdings, depending on Cleco Power’s common equity ratio and its corporate credit ratings.

Cleco Power made $105.5 million of distributions to Cleco Holdings in 2022. Cleco Power made no distributions to Cleco Holdings in 2021 and 2020. Cleco Power received no equity contributions from Cleco Holdings in 2022, 2021, and 2020.

The following discussion is intended to assist in understanding Cleco’s results of operations and Cleco’s present financial condition. Cleco’s historical consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K contain additional information that should be referred to when reviewing this material.

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 Annual Report on Form 10-K.

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 nine generating units with a total rated capacity of 3,035 MW and serves approximately 293,000 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 a mixture of electric cooperatives, a municipal body, a utility, and a non-profit corporation.

Significant Events

Securitization

Storm Securitization

During 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. The damage to equipment from the storms required replacement, as well as repair of existing assets.

On March 30, 2022, the LPSC approved an uncontested stipulated settlement agreement filed by the LPSC Staff and Cleco Power relating to securitization of these storm 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 deferred storm costs through Cleco Securitization I. For more information on the securitization, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 19 — Securitization.”

Dolet Hills Securitization

On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. At December 31, 2021, the Dolet Hills Power Station was retired, and all of Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. On January 31, 2022, Cleco Power filed an application with the LPSC requesting recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station as well as deferred fuel and other costs associated with the closure of the Oxbow mine. These costs are currently under a prudency review by the LPSC. Pending the outcome of the prudency review, Cleco Power intends to seek a financing order to securitize the unrecovered Dolet Hills Power Station closure costs and Oxbow mine closure costs. The prudency review is expected to be complete in the third quarter of 2023. For more information on the prudency review of the deferred fuel and other mine-related closure costs, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — Deferred Lignite and Mine Closure Costs” and — “Risks and Uncertainties.”

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.

On December 4, 2020, Cleco Power made a filing with the LPSC requesting the recovery of expenses incurred as a result of an LPSC executive order, issued in response to the COVID-19 pandemic, prohibiting the disconnection of utilities for non-payment, as well as the lost revenue associated with the disconnection fees and incremental costs. Cleco Power anticipates approval of the recovery of these expenses in the second quarter of 2023. At December 31, 2022, Cleco Power had a regulatory asset of $3.0 million for expenses incurred. For more information on the regulatory treatment of the regulatory asset, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Regulatory Assets and Liabilities — COVID-19 Executive Order.”

Cleco has implemented certain measures that it believes will provide financial flexibility and help maintain its liquidity. Cleco is working with its suppliers to mitigate the pandemic stimulated impacts to its supply chain. Cleco will continue to monitor developments affecting its workforce, customers, and suppliers and take additional precautions as warranted. Cleco continues to assess the COVID-19 situation and cannot predict the full impact that COVID-19, or any significant related disruptions, 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 — Pandemics, Epidemics, and Other Outbreaks.”

Tax Reform

On August 16, 2022, the IRA of 2022 became law. The IRA of 2022 seeks to lower gasoline and electricity prices, increase energy security, and help consumers afford emissions-cutting technologies. In addition, the IRA of 2022 provides tax credits for clean electricity sources and energy storage, as well as creates programs to enable states and electric utilities to transition to clean power. There are several tax and renewables provisions in this legislation that could have a material effect on the results of operations, financial condition, or cash flows of the Registrants. These include provisions related to direct pay and credit transferability, enhanced carbon capture and sequestration credits, new technology-neutral clean energy investment credits, and new technology-neutral clean energy production credits. These credits are expected to help fund Cleco Power’s Project Diamond Vault as well as future renewable and electrification projects. Management continues to monitor any potential impact the IRA of 2022 could have on the Registrants.

ESG Goals

Cleco is accelerating efforts to protect the environment, manage social relationships, govern responsibly, and ensure accountability. To protect the environment, Cleco is increasing its renewable and electrification initiatives and is aiming to reduce GHG emissions in ways such as incorporating renewable energy resources into its generating fleet, as it replaces coal-fired generation units retired after serving their useful lives. Cleco aims to sustainably reduce its GHG emissions 60.0% by 2030 with aspirations of net zero emissions by 2050. To manage social relationships, Cleco plans to ensure that the electricity that it generates is affordable, reliable, and sustainable. Cleco also plans to continue to support community investment opportunities across its service territory and create a workforce culture that rewards inclusion, safety, and innovation. To govern responsibly, Cleco plans to continue operating according to policies and practices that support the governance framework. To ensure accountability, Cleco created an ESG Steering Committee and appointed a Chief Sustainability Officer to oversee the continued implementation of the ESG goals. Currently, management is unable to predict the impact of implementing these ESG goals on the Registrants. For more information on these ESG goals, see Part I, Item 1, “Business — Human Capital — Diversity and Inclusion,” “— Communities,” and “— Oversight and Governance.”

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 impact the ROE, 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 related operating challenges and uncertainties, including increased wholesale competition. In addition to the ESG goals previously discussed, Cleco Power’s current key initiatives include beginning Project Diamond Vault, continuing the DSMART project, and maintaining and growing its retail business. Cleco

Power is also pursuing various renewable and electrification initiatives. These and other initiatives are discussed below.

Effective July 1, 2021, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, 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. For more information on Cleco Power’s retail rate plan for Cleco Power, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — FRP.”

Renewable and Electrification Initiatives

Project Diamond Vault

On April 11, 2022, Cleco Power announced Project Diamond Vault, a carbon capture and sequestration facility that is anticipated to be constructed at the Brame Energy Center. This facility is expected to capture and compress carbon dioxide produced by the combustion of fuel at Madison Unit 3 and store the compressed gas permanently in deep geological formations located beneath the Brame Energy Center. Cleco Power expects to reduce the carbon output of Madison Unit 3 by approximately 95% with the implementation of this technology. Through this project, Cleco Power plans to leverage technology advancements and Louisiana’s natural resources to create a clean power solution.

The Front End Engineering Design (FEED) study for Project Diamond Vault has begun and is projected to cost approximately $12.0 million. A $9.0 million congressional appropriation has been secured, subject to the U.S. Department of Energy’s grant process, to help offset costs of this study. The FEED study is expected to be completed in mid-2024 and major permitting is expected to be completed in the second half of 2025. Construction of the project is expected to begin by the end of 2025. Management expects the total project will be completed by the end of 2028. After the cost of the FEED study, the remaining project cost is currently estimated to be between $1.10 billion and $1.40 billion. This estimate will be refined throughout the FEED study process as additional information and cost estimates become available. Cleco anticipates funding this project through one or more sources including tax credits provided by the IRA of 2022, Department of Energy grants, private equity investment, and partnership interests.

Other

On July 22, 2022, Cleco Power entered into a long-term agreement to purchase, among other things, the output, capacity, and current and future environmental resource credits of a 240-MW solar electric generation facility to be constructed in DeSoto Parish and owned by a third party. The agreement is subject to LPSC approval and other conditions precedent. If approved, Cleco Power expects to begin receiving output from this facility in 2025.

Cleco Power is also pursuing electrification initiatives such as gas compression, e-trucking, green tariffs, residential heating programs, and increasing the supply of light duty electric vehicles and forklifts, among others.

Cleco Power is seeking available funds from the U.S. government for funding of these electrification initiatives. Cleco

Power cannot predict the likelihood that any funding from the U.S. government ultimately will be approved.

DSMART Project

The DSMART project includes modernization of Cleco Power’s distribution system by replacing or upgrading distribution line equipment to utilize 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 and improve operational efficiencies and time to locate faults. 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 2027. Cleco Power is currently in the second phase of the project. As of December 31, 2022, Cleco Power had spent $43.1 million on the project.

Other

Cleco Power is working to secure load growth opportunities that include renewing existing franchises, pursuing new 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.

In 2021 through a request for proposal process, a significant wholesale customer currently under contract with Cleco Power informed Cleco Power that it was not selected as a provider of capacity and energy after the first quarter of 2024, and on October 19, 2022, the LPSC certified these results. Cleco Power’s failure to recontract this agreement is expected to affect jurisdictional retail rates that will be subject to review by the LPSC in conjunction with Cleco Power’s next rate case, which is expected to be effective on July 1, 2024.

Cleco Cajun

Cleco Cajun currently has power purchase agreements totaling approximately 2,069 MW with 12 wholesale customers, which consist of a mixture of electric cooperatives, a municipal body, a utility, and a non-profit corporation. These contracts provide Cleco Cajun with predictable cash flow and market risk mitigation through at least the first quarter of 2025 but may prevent Cleco Cajun from taking advantage of rising market rates for power.

Cleco is exploring options related to its investment in Cleco Cajun, including the potential sale of part or all of Cleco Cajun’s assets. Cleco Cajun’s failure to recontract its current

cooperative agreements, failure to enter into new contracts with other counterparties, or failure to take other mitigating measures for the loss of existing contracts could have a material adverse effect on Cleco’s results of operations, financial condition, cash flows and liquidity as early as the second quarter of 2025.

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, availability of fuel for generation, and compliance with the commitments made to the LPSC as a result of the Cleco Cajun Transaction.

RESULTS OF OPERATIONS

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Comparison of the Years Ended December 31, 2022, and 2021


Cleco
	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue, net	$	2,239,132	$	1,745,929	$	493,203	28.2	%
Operating expenses	1,897,245		1,401,052		(496,193)		(35.4)	%
Operating income	341,887		344,877		(2,990)		(0.9)	%
Interest income	6,372		3,312		3,060		92.4	%
Allowance for equity funds used during construction	3,740		9,905		(6,165)		(62.2)	%
Other expense, net	(11,113)		(15,681)		4,568		29.1	%
Interest charges	151,158		134,336		(16,822)		(12.5)	%
Federal and state income tax expense	917		13,111		12,194		93.0	%
Net income	$	188,811	$	194,966	$	(6,155)	(3.2)	%

Cleco’s results of operations are primarily attributable to the activity of its reportable segments, Cleco Power and Cleco Cajun. For detailed discussions of those impacts, see “— Cleco Power” and “— Cleco Cajun.” Additional impacts to Cleco’s results of operations include the following activity at Cleco Holdings:

•a decrease in other expense, net of $9.5 million for the change in cash surrender value of certain trust-owned life insurance policies as a result of unfavorable market conditions,

•an increase in interest charges of $1.9 million due to higher rates on variable rate debt, and

•a decrease in income tax expense of $6.4 million primarily for $4.6 million of permanent tax deductions and $1.4 million for the change in pretax income, excluding AFUDC equity.

For information on Cleco’s effective income tax rates, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Income Taxes — Cleco.”

Cleco Power

Significant Factors Affecting Cleco Power

Revenue is primarily affected by the following factors:

As an electric utility, Cleco Power is affected, to varying degrees, by a number of factors influencing the electric utility industry. These factors include, among others, an increasingly competitive business environment; the ability to recover costs through rate-setting proceedings; the ability to successfully perform in MISO and the related operating challenges; the cost of compliance with environmental and reliability regulations; conditions in the credit markets and global economy; changes in the federal and state regulation of generation, transmission, and the sale of electricity; and the increasing uncertainty of future federal and state regulatory and environmental policies. For a discussion of various regulatory changes and competitive forces affecting Cleco Power and other electric utilities, see “Cautionary Note Regarding Forward-Looking Statements,” Part I, Item 1, “Business — Regulatory Matters, Industry Developments, and Franchises,” and “— Financial Condition — Regulatory and Other Matters — Market Structure.” For a discussion of risk factors affecting Cleco Power’s business, see Part I, Item 1A, “Risk Factors.”

Cleco Power’s residential customers’ demand for electricity is affected largely by weather. Weather is generally measured in cooling degree-days and heating degree-days. A high number of cooling degree-days may indicate consumers will use more air conditioning, while a high number of heating degree-days may indicate consumers will use more 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.

Over the last five years, Cleco Power’s non-industrial retail sales have been relatively steady. Cleco Power anticipates moderate growth in retail sales over the next five years. Cleco Power expects to begin providing service to expansions of current customers’ operations, as well as service to new retail customers. Cleco Power’s expectations and projections regarding retail sales are dependent upon factors such as weather conditions, natural gas prices, customer conservation efforts, retail marketing and business development programs, and the economy of Cleco Power’s service area. Cleco Power is pursuing load growth opportunities that include renewal of existing franchises as well as adding new franchises. For more information on other expectations of future energy sales on Cleco Power, see “Cautionary Note Regarding Forward-Looking Statements,” and Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales.”

Other issues facing the electric utility industry that could affect sales include:

•imposition of federal and/or state renewable portfolio standards,

•imposition of energy efficiency mandates,

•legislative and regulatory changes,

•increases in environmental regulations and compliance costs,

•cost of power impacted by the price movement of fuels and the addition of new generation capacity,

•transmission congestion costs,

•increases in capital and operations and maintenance costs due to higher construction and labor costs,

•changes in electric rates compared to customers’ ability to pay,

•changes in the credit markets and local and global economies, and

•the LPSC’s consideration of adopting minimum physical capacity threshold requirements for load serving entities.

For more information on energy legislation in regulatory matters that could affect Cleco, see Part I, Item 1, “Business — Regulatory Matters, Industry Developments, and Franchises — Legislative and Regulatory Changes and Matters.”

Cleco Power’s revenues and earnings are substantially affected by regulatory proceedings known as rate cases, or in some cases, a request for extension of an FRP. During those cases, the LPSC determines Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its retail customers through its rates. Generally, historical costs are used by the LPSC in determining Cleco Power’s rates. These proceedings may examine, among other things, the prudency of Cleco Power’s operation and maintenance practices, level of expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC has the authority to disallow costs found not to have been prudently incurred. Rate cases generally have timelines of approximately one year, and decisions are typically subject to appeal, potentially leading to additional uncertainty. Effective July 1, 2021, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5%, and all retail earnings over 10.5%, are required to be refunded to customers. Cleco Power’s next rate case is expected to be effective on July 1, 2024. The transmission tariffs of Cleco Power are regulated by FERC with its own regulatory proceedings. Both the LPSC and FERC regulatory proceedings can involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, all of whom have differing concerns but who have the common objective of limiting rate increases or reducing rates.

Other expenses are primarily affected by the following factors:

The majority of Cleco Power’s non-fuel cost recovery expenses consist of other operations, maintenance, depreciation and amortization, and taxes other than income taxes. Other operations expenses are affected by, among other things, the cost of employee benefits, insurance expense, and the costs associated with energy delivery and customer service. Annual maintenance expenses associated with Cleco Power’s plants generally depend upon their physical characteristics,

maintenance practices, and the effectiveness of their preventive maintenance programs. Transmission and distribution maintenance expenses are generally affected by the level of repair and rehabilitation of lines to maintain reliability. Depreciation and amortization expense is primarily affected by the cost of the facilities in service, the time the facilities were placed in service, and the estimated useful life of the facilities. Taxes other than income taxes generally include payroll taxes, franchise taxes, and property taxes.


	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021		VARIANCE		CHANGE
Operating revenue
Base	$	685,419	$	652,573	$	32,846	5.0	%
Fuel cost recovery	837,647		549,676		287,971		52.4	%
Electric customer credits	(7,674)		(40,878)		33,204		81.2	%
Other operations	98,759		74,625		24,134		32.3	%
Affiliate revenue	6,377		5,641		736		13.0	%
Operating revenue, net	1,620,528		1,241,637		378,891		30.5	%
Operating expenses
Recoverable fuel and purchased power	837,647		549,677		(287,970)		(52.4)	%
Non-recoverable fuel and purchased power	59,846		41,420		(18,426)		(44.5)	%
Other operations and maintenance	216,851		223,257		6,406		2.9	%
Depreciation and amortization	178,231		173,498		(4,733)		(2.7)	%
Taxes other than income taxes	55,075		49,598		(5,477)		(11.0)	%

Regulatory disallowance	13,841		—		(13,841)		(100.0)	%

Total operating expenses	1,361,491		1,037,450		(324,041)		(31.2)	%
Operating income	259,037		204,187		54,850		26.9	%
Interest income	5,082		3,294		1,788		54.3	%
Allowance for equity funds used during construction	3,740		9,905		(6,165)		(62.2)	%
Other expense, net	(7,081)		(19,561)		12,480		63.8	%
Interest charges	88,218		73,090		(15,128)		(20.7)	%
Federal and state income tax expense (benefit)	2,503		(9,353)		(11,856)		(126.8)	%
Net income	$	170,057	$	134,088	$	35,969	26.8	%

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


	FOR THE YEAR ENDED DEC. 31,
			FAVORABLE/
(MILLION kWh)	2022	2021	(UNFAVORABLE)
Electric sales
Residential	3,787	3,653	3.7	%
Commercial	2,674	2,564	4.3	%
Industrial	2,282	2,170	5.2	%
Other retail	121	125	(3.2)	%
Total retail	8,864	8,512	4.1	%
Sales for resale	3,061	2,880	6.3	%
Total retail and wholesale customer sales	11,925	11,392	4.7	%

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


	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/
(THOUSANDS)	2022		2021		(UNFAVORABLE)
Electric sales
Residential	$	322,545	$	304,761	5.8	%
Commercial	200,031		189,802		5.4	%
Industrial	90,243		88,661		1.8	%
Other retail	11,032		10,984		0.4	%

Total retail	623,851		594,208		5.0	%
Sales for resale	61,568		58,365		5.5	%
Total base revenue	$	685,419	$	652,573	5.0	%

The following chart shows how cooling and heating 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 cooling and heating degree-days.


	FOR THE YEAR ENDED DEC. 31,
				2022 CHANGE
	2022	2021	NORMAL	PRIOR YEAR		NORMAL
Cooling degree-days	3,095	3,141	2,779	(1.5)	%	11.4	%
Heating degree-days	1,650	1,314	1,547	25.6	%	6.7	%

Base

Base revenue increased $32.8 million primarily due to $19.3 million of higher usage as a result of weather and $18.0 million of higher rates as a result of the implementation of Cleco Power’s current retail rate plan.

For more information on the effects of future energy sales on the results of operations, financial condition, or cash flows of Cleco Power, see “— Significant Factors Affecting Cleco Power,” “Cautionary Note Regarding Forward-Looking Statements,” and Part I, Item 1A, “Risk Factors — Operational Risks — Future Electricity Sales.”

Fuel Cost Recovery/Recoverable Fuel and Purchased Power

of Cleco Power’s total fuel cost during 2022 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. In February 2021, 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 the incremental fuel and purchased power costs resulting from Winter Storms Uri and Viola through Cleco Power’s FAC over a period of 12 months beginning with the May 2021 bills. Cleco Power’s incremental fuel and purchased power costs during 2021 were also impacted by higher costs of lignite at the Dolet Hills Power Station, which are being recovered through Cleco Power’s FAC. For more information on the accounting for MISO transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Accounting for MISO Transactions.” For more information on Cleco Power’s most current fuel audits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.” For more information on lignite costs at the Dolet Hills Power Station, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits decreased $33.2 million primarily due to $39.9 million of lower credits to retail customers for the federal tax-related benefits of the TCJA now being a component of rates as a result of Cleco Power’s current retail rate plan. After the implementation of Cleco Power’s current retail rate plan, these credits offset base revenue on Cleco Power’s Consolidated Statement of Income. Partially offsetting this decrease was $7.1 million for refunds to Cleco Power’s retail customers as a result of the LPSC approved settlement disallowing the recovery of planning and construction costs incurred for the St. Mary Clean Energy Center. For more information on the TCJA, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — TCJA.” For more information about the LPSC settlement and disallowance, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Other Operations Revenue

Other operations revenue increased $24.1 million primarily due to $13.2 million for storm recovery securitization revenue, $11.6 million of higher transmission revenue from increased usage at higher rates, $1.9 million of higher forfeited discounts, and $1.0 million of higher pole attachment rental income. Partially offsetting these increases was $3.8 million of lower revenue as a result of the expiration of a utility contract in September 2021.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power increased $18.4 million primarily due to $10.9 million for higher volumes of power purchased from MISO at higher prices, $4.6 million for lower amounts deferred to a regulatory asset associated with the Northlake Transmission Agreement, and $1.8 million of higher amortization to the Northlake Transmission Agreement regulatory asset. For more information on the Northlake Transmission Agreement regulatory asset, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Regulatory Assets and Liabilities — Other.”

Other Operations and Maintenance Expense

Other operations and maintenance expense decreased $6.4 million primarily due to $6.9 million of lower generating routine maintenance expenses largely due to the absence of expenses related to the Dolet Hills Power Station as a result of its retirement in December 2021, $6.3 million of lower generating outage maintenance expenses, and $5.7 million of lower distribution maintenance expenses which was largely the result of fewer storms in 2022. These decreases were partially offset by $6.8 million of higher administrative and general employee related expenses and $3.1 million of higher routine distribution operations expense.

Depreciation and Amortization

Depreciation and amortization increased $4.7 million primarily due to $4.3 million for the amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta, $2.8 million for the amortization of the securitized intangible asset that began in November 2022, and $1.3 million for the absence of a 2021 adjustment to the corporate franchise tax regulatory asset. These increases were partially offset by $5.3 million of lower normal recurring additions to fixed assets. For more information on the securitized intangible asset, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Intangible Assets, Intangible Liabilities, and Goodwill — Securitized Intangible — Cleco Securitization.”

Taxes Other Than Income Taxes

Taxes other than income taxes increased $5.5 million primarily due to the amortization of the Madison Unit 3 property tax regulatory asset that began in July 2022. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Regulatory Assets and Liabilities — Madison Unit 3 Property Taxes.”

Regulatory Disallowance

In September 2022, Cleco Power recognized a regulatory disallowance of $13.8 million for the impairment charge resulting from a portion of planning and construction costs incurred for the St. Mary Clean Energy Center that were deemed imprudent and not recoverable by the LPSC. For more information about the LPSC settlement and disallowance, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Allowance for Equity Funds Used During Construction

Allowance for equity funds used during construction decreased $6.2 million primarily due to the absence of a December 2021 adjustment driven by the timing of the election and LPSC approval of the FERC modified formula.

Other Expense, Net

Other expense, net decreased $12.5 million primarily due to $8.4 million of lower pension non-service costs largely due to lower amortization of net losses, $2.4 million for the absence of a special termination benefit, and $1.0 million of disallowed costs as a result of the settlement of Cleco Power’s current retail rate plan.

Interest Charges

Interest charges increased $15.1 million primarily due to $10.0 million for interest on storm recovery bonds issued in June 2022 by Cleco Securitization I, $2.0 million for higher rates on variable rate debt, and $1.3 million for higher interest on floating rate senior notes issued in September 2021.

Income Taxes

Federal and state income taxes increased $11.9 million primarily due to $11.6 million for the change in pretax income, excluding AFUDC equity, $5.8 million for state tax expenses, $4.6 million for the amortization of excess ADIT, and $3.8 million for adjustments to tax returns as filed. These increases were partially offset by $13.5 million for the flowthrough of tax benefits.

For information on Cleco Power’s effective income tax rates, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Income Taxes — Cleco Power.”


Cleco Cajun
			FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2022		2021			VARIANCE		CHANGE
Operating revenue
Electric operations	$	496,042	$	398,226		$	97,816	24.6	%
Electric customer credits	—		244			(244)		(100.0)	%
Other operations	148,823		128,749			20,074		15.6	%

Operating revenue, net	644,865		527,219			117,646		22.3	%
Operating expenses
Fuel used for electric generation	(11,327)		(47,052)			(35,725)		(75.9)	%
Purchased power	380,233		257,703			(122,530)		(47.5)	%
Other operations and maintenance	95,958		93,460			(2,498)		(2.7)	%
Depreciation and amortization	69,999		52,102			(17,897)		(34.3)	%
Taxes other than income taxes	12,318		11,675			(643)		(5.5)	%

Total operating expenses	547,181		367,888			(179,293)		(48.7)	%
Operating income	97,684		159,331			(61,647)		(38.7)	%
Interest income	1,122		15			1,107		*
Other income (expense), net	112		(628)			740		117.8	%
Interest charges	523		803			280		34.9	%
Federal and state income tax expense	24,565		42,283			17,718		41.9	%
Net income	$	73,830	$	115,632		$	(41,802)	(36.2)	%
*Not meaningful

Electric Operations

Electric operations increased $97.8 million primarily due to $86.4 million of higher fuel rates, $10.1 million of higher load volumes, $4.2 million of higher MISO pass-through revenue, and $3.4 million of higher capacity revenue due to higher demand peaks in 2022. These increases were partially offset by $6.7 million for the absence of two power supply agreements.

Other Operations Revenue

Other operations revenue increased $20.1 million primarily due to $15.9 million of higher transmission revenue as a result of an increase in usage at higher rates and $4.1 million of higher variable lease revenue from the Cottonwood Sale Leaseback.

Fuel Used for Electric Generation

Fuel used for electric generation increased $35.7 million primarily due to $58.2 million of lower mark-to-market gains on gas-related derivative contracts, $52.9 million of higher natural gas consumption as a result of higher generating unit dispatch due to weather, and $25.6 million of higher coal consumption as a result of higher generating unit dispatch due to weather and higher prices per ton. These increases were partially offset by $104.6 million of realized gains on natural gas derivatives.

Purchased Power

Purchased power increased $122.5 million primarily due to $105.8 million of higher volumes of power purchased from MISO at higher LMP prices and $16.4 million of higher transmission costs due to higher usage.

Other Operations and Maintenance

Other operations and maintenance expense increased $2.5 million primarily due to $3.5 million of higher generating routine maintenance expenses and $1.6 million of higher generation operations expense. These amounts were partially offset by $2.1 million for expenses related to employee benefits.

Depreciation and Amortization

Depreciation and amortization increased $17.9 million primarily due to $14.6 million relating to adjustments to ARO assets to comply with the final CCR Rule as well as a reduction to the remaining lives of those assets. Also contributing to the increase was $2.4 million of higher normal recurring additions to fixed assets.

Income Taxes

Federal and state income taxes decreased $17.7 million during 2022 as compared to 2021 primarily due to $12.5 million for the change in pretax income, $2.5 million for the absence of an adjustment for state tax rate changes, $1.8 million for state tax expenses, and $1.4 million for permanent tax deductions. The effective income tax rate for the year ended December 31, 2022, was 25.0%.

Comparison of the Years Ended December 31, 2021, and 2020


Cleco
	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020		VARIANCE		CHANGE
Operating revenue, net	$	1,745,929	$	1,498,146	$	247,783	16.5	%
Operating expenses	1,401,052		1,193,054		(207,998)		(17.4)	%
Operating income	344,877		305,092		39,785		13.0	%
Interest income	3,312		3,948		(636)		(16.1)	%
Allowance for equity funds used during construction	9,905		998		8,907		892.5	%

Other expense, net	(15,681)		(14,156)		(1,525)		(10.8)	%
Interest charges	134,336		137,864		3,528		2.6	%
Federal and state income tax expense	13,111		35,718		22,607		63.3	%
Net income	$	194,966	$	122,300	$	72,666	59.4	%

•a decrease in other expense, net of $5.7 million for the change in cash surrender value of certain trust-owned life insurance policies as a result of more favorable market conditions,

•a decrease in interest charges of $4.3 million due to lower rates on variable rate debt incurred in connection with the 2016 Merger and the Cleco Cajun Transaction, and

•an increase in income tax expense of $0.4 million primarily for $2.0 million for the change in pretax income, excluding AFUDC equity and $0.6 million for state tax expense, partially offset by $1.4 million for an adjustment for state tax rate changes and $0.8 million for permanent tax deductions.

For information on Cleco’s effective income tax rates, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Income Taxes — Cleco.”


Cleco Power
	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020		VARIANCE		CHANGE
Operating revenue
Base	$	652,573	$	654,346	$	(1,773)	(0.3)	%
Fuel cost recovery	549,676		360,672		189,004		52.4	%
Electric customer credits	(40,878)		(53,119)		12,241		23.0	%
Other operations	74,625		65,237		9,388		14.4	%
Affiliate revenue	5,641		5,156		485		9.4	%
Operating revenue, net	1,241,637		1,032,292		209,345		20.3	%
Operating expenses
Recoverable fuel and purchased power	549,677		360,664		(189,013)		(52.4)	%
Non-recoverable fuel and purchased power	41,420		33,526		(7,894)		(23.5)	%
Other operations and maintenance	223,257		221,146		(2,111)		(1.0)	%
Depreciation and amortization	173,498		166,987		(6,511)		(3.9)	%
Taxes other than income taxes	49,598		44,631		(4,967)		(11.1)	%


Total operating expenses	1,037,450		826,954		(210,496)		(25.5)	%
Operating income	204,187		205,338		(1,151)		(0.6)	%
Interest income	3,294		3,362		(68)		(2.0)	%
Allowance for equity funds used during construction	9,905		998		8,907		892.5	%
Other expense, net	(19,561)		(12,259)		(7,302)		(59.6)	%
Interest charges	73,090		73,985		895		1.2	%
Federal and state income tax (benefit) expense	(9,353)		26,799		36,152		134.9	%
Net income	$	134,088	$	96,655	$	37,433	38.7	%

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


	FOR THE YEAR ENDED DEC. 31,
			FAVORABLE/
(MILLION kWh)	2021	2020	(UNFAVORABLE)
Electric sales
Residential	3,653	3,642	0.3	%
Commercial	2,564	2,521	1.7	%
Industrial	2,170	1,971	10.1	%
Other retail	125	125	—	%
Total retail	8,512	8,259	3.1	%
Sales for resale	2,880	2,957	(2.6)	%
Total retail and wholesale customer sales	11,392	11,216	1.6	%

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


	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/
(THOUSANDS)	2021		2020		(UNFAVORABLE)
Electric sales
Residential	$	304,761	$	305,430	(0.2)	%
Commercial	189,802		189,066		0.4	%
Industrial	88,661		87,313		1.5	%
Other retail	10,984		10,895		0.8	%
Surcharge	—		2,440		(100.0)	%
Total retail	594,208		595,144		(0.2)	%
Sales for resale	58,365		59,202		(1.4)	%
Total base revenue	$	652,573	$	654,346	(0.3)	%


	FOR THE YEAR ENDED DEC. 31,
				2021 CHANGE
	2021	2020	NORMAL	PRIOR YEAR		NORMAL
Cooling degree-days	3,141	3,179	2,779	(1.2)	%	13.0	%
Heating degree-days	1,314	1,105	1,546	18.9	%	(15.0)	%

Base

Base revenue decreased $1.8 million primarily due to $15.6 million of lower rates as a result of the implementation of Cleco Power’s current retail rate plan. The lower rates are largely due to TCJA bill credits for the retail portion of the unprotected excess ADIT. Prior to the implementation of Cleco Power’s current retail rate plan, these credits were recorded in Electric customer credits on Cleco Power’s Consolidated Statement of Income. Also contributing to the decrease is 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 bonds in March 2020. These decreases were partially offset by $9.5 million of interim rate recovery for certain storm costs relating to Hurricanes Laura, Delta, and Zeta, $3.6 million of higher revenue due to the absence of impacts from lower usage as a result of Hurricanes Laura, Delta, and Zeta in 2020, and $3.2 million of higher usage from colder winter weather.

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 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 on the May 2021 bills. Cleco Power’s incremental fuel and purchased power costs were also impacted by higher costs of lignite at the Dolet Hills Power Station. For more information on the accounting for MISO transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Accounting for MISO Transactions.” For more information on Cleco Power’s most current fuel audits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Fuel Audits.” For more information on lignite costs at the Dolet Hills Power Station, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.”

Electric Customer Credits

Electric customer credits decreased $12.2 million primarily due to lower credits to retail customers for the federal tax-related benefits of the TCJA as a result of the settlement of Cleco Power’s current retail rate plan. After the implementation of Cleco Power’s current retail rate plan, these credits offset base revenue on Cleco Power’s Consolidated Statement of Income. For more information on the TCJA, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — TCJA.”

Other Operations Revenue

Other operations revenue increased $9.4 million primarily due to $5.1 million of higher transmission revenue, $2.5 million of net higher forfeited discounts primarily as a result of Cleco Power resuming disconnection and late fees in October 2020, following the termination of the LPSC moratorium in July 2020, and $1.9 million of higher reconnection fees.

Non-Recoverable Fuel and Purchased Power

Non-recoverable fuel and purchased power increased $7.9 million primarily due to $5.6 million of higher MISO transmission costs and $2.3 million of higher fuel expenses largely due to the winter storms in 2021.

Other Operations and Maintenance Expense

Other operations and maintenance expense increased $2.1 million primarily due to $9.5 million of higher distribution maintenance expenses, $7.3 million of higher generating outage maintenance expenses, $4.9 million of higher customer service expenses relating to increased temporary staffing and increased collection efforts, and $1.6 million of higher reserves for injuries and damages. These increases were partially offset by $8.3 million of lower fees for outside services mostly relating to START project expenses and contract workers, $6.7 million of lower expenses related to employee benefits, and $6.7 million of lower generation operations expenses.

Depreciation and Amortization

Depreciation and amortization increased $6.5 million primarily due to $5.3 million of higher normal recurring additions to fixed assets and $3.1 million for the amortization of regulatory assets relating to Hurricanes Laura, Delta, and Zeta. These amounts were partially offset by $2.1 million for the absence of amortization of storm damages as a result of the final principal and interest payments on the Cleco Katrina/Rita bonds in 2020.

Taxes Other Than Income Taxes

Taxes other than income taxes increased $5.0 million primarily due to $3.2 million of higher property taxes, $0.9 million of higher franchise taxes, and $0.6 million of higher payroll taxes.

Allowance for Equity Funds Used During Construction

Allowance for equity funds used during construction increased $8.9 million primarily due to higher AFUDC rates driven by the timing of the election and LPSC approval of the FERC modified formula authorized in March 2020.

Other Expense, Net

Other expense, net increased $7.3 million primarily due to $6.3 million of higher pension non-service costs and $1.0 million of disallowed costs as a result of the settlement of Cleco Power’s current retail rate plan.

Income Taxes

Federal and state income taxes decreased $36.2 million primarily due to $20.6 million for the amortization of excess ADIT, $10.9 million for adjustments to tax returns as filed, $3.1 million for the flowthrough of tax benefits, and $2.1 for the change in pretax income, excluding AFUDC equity.


Cleco Cajun
			FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2021		2020			VARIANCE		CHANGE
Operating revenue
Electric operations	$	398,226	$	365,555		$	32,671	8.9	%
Electric customer credits	244		(153)			397		259.5	%
Other operations	128,749		121,747			7,002		5.8	%
Affiliate revenue	—		204			(204)		(100.0)	%
Operating revenue, net	527,219		487,353			39,866		8.2	%
Operating expenses
Fuel used for electric generation	(47,052)		33,377			80,429		241.0	%
Purchased power	257,703		188,020			(69,683)		(37.1)	%
Other operations and maintenance	93,460		91,250			(2,210)		(2.4)	%
Depreciation and amortization	52,102		43,997			(8,105)		(18.4)	%
Taxes other than income taxes	11,675		13,415			1,740		13.0	%

Total operating expenses	367,888		370,059			2,171		0.6	%
Operating income	159,331		117,294			42,037		35.8	%
Interest income	15		273			(258)		(94.5)	%
Other (expense) income, net	(628)		255			(883)		(346.3)	%
Interest charges	803		(750)			(1,553)		(207.1)	%
Federal and state income tax expense	42,283		29,080			(13,203)		(45.4)	%
Net income	$	115,632	$	89,492		$	26,140	29.2	%

Electric Operations

Electric operations increased $32.7 million primarily due to $23.6 million of higher fuel rates, $5.6 million of higher load volumes primarily due to winter storms, $4.4 million of higher MISO make-whole payments, $3.9 million of higher capacity contract rates, and $1.3 million for the absence of a 2020 customer demand adjustment. These increases were partially offset by $4.1 million for the expiration of a power supply agreement in May 2021 and $1.5 million of lower MISO capacity revenue.

Other Operations Revenue

Other operations revenue increased $7.0 million primarily due to $9.7 million of higher transmission revenue, partially offset by $2.7 million of lower lease revenue, including variable lease revenue, as a result of the Cottonwood Sale Leaseback.

Fuel Used for Electric Generation

Fuel used for electric generation decreased $80.4 million primarily due to $68.3 million of higher mark-to-market gains on

gas-related derivative contracts and $54.7 million of settlements related to gas swaps activity. These decreases were partially offset by $41.7 million of higher coal consumption which was largely the result of higher generating unit dispatch.

Purchased Power

Purchased power increased $69.7 million primarily due to higher costs of purchased power from MISO, largely the result of higher usage and Winter Storms Uri and Viola.

Other Operations and Maintenance

Other operations and maintenance expense increased $2.2 million primarily due to $5.5 million of higher generating outage maintenance expenses, partially offset by $1.6 million of lower generation operations expense and $1.1 million of lower materials and supplies expense.

Depreciation and Amortization

Depreciation and amortization increased $8.1 million primarily due to $6.2 million relating to adjustments to ARO assets to comply with the final CCR Rule as well as a reduction to the remaining lives of those assets. Also contributing to the increase was $1.9 million of higher normal recurring additions to fixed assets.

Income Taxes

Federal and state income taxes increased $13.2 million primarily due to $8.3 million for the change in pretax income, $2.5 million for an adjustment for state tax rate changes, $1.8 million for state tax expenses, and $0.5 million for permanent tax deductions. The effective income tax rate for the year ended December 31, 2021, was 27.2% which was different than the federal statutory rate.

Non-GAAP Measure

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; however, it is not indicative of future performance. 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.

The following tables set forth a reconciliation of net income, the nearest comparable GAAP financial performance measure, to EBITDA for the years ended December 31, 2022, 2021, and 2020:

CLECO POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

For a narrative analysis of the results of operations explaining the revenue and expense items of Cleco Power for the years ended December 31, 2022, and 2021, see “— Results of Operations — Comparison of the Years Ended December 31, 2022, and 2021 — Cleco Power.”

For a narrative analysis of the results of operations explaining the revenue and expense items of Cleco Power for the years ended December 31, 2021, and 2020, see “— Results of Operations — Comparison of the Years Ended December 31, 2021, and 2020 — Cleco Power.”

The narrative analysis referenced above should be read in combination with Cleco Power’s Financial Statements and the Notes contained in this Annual Report on Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

The preparation of Cleco’s and Cleco Power’s Consolidated Financial Statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that could have a material impact on the results of operations, financial condition, or cash flows of the Registrants.

For more information on Cleco’s accounting policies, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies.”

Cleco believes that the following accounting estimates are the most significant in understanding reported financial results:

•Regulatory Accounting: A significant portion of Cleco’s businesses are subject to regulation. This results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. Cleco Power is required to record regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Future regulatory changes or changes in the competitive environment could result in the discontinuance of this accounting treatment for regulatory assets and liabilities for some or all of Cleco’s businesses. Cleco’s management believes that currently available facts support the continued use of regulatory assets and liabilities and that all regulatory assets and liabilities are recoverable or refundable in the current rate environment. For more information on regulatory assets and liabilities, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of

Significant Accounting Policies — Regulation,” and “Note 5 — Regulatory Assets and Liabilities.”

•Goodwill: On April 13, 2016, in connection with the completion of the 2016 Merger, Cleco recognized goodwill of $1.49 billion, all of which was assigned to the Cleco Power reporting unit. Goodwill is required to be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Application of the goodwill impairment test requires management to make significant assumptions and estimates, including the identification of reporting units, assignments of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of the reporting units, in which independent valuation experts are often used. Changes in management’s assumptions and estimates could materially affect the determination of fair value and goodwill impairment. For more information on goodwill recorded in connection with the 2016 Merger, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Intangible Assets, Intangible Liabilities, and Goodwill — Goodwill.”

•Pension and Other Postretirement Benefits: To determine assets, liabilities, and expenses relating to pension and other postretirement benefits, management must make assumptions about future trends. Assumptions and estimates include, but are not limited to, discount rates, expected return on plan assets, mortality rates, future rate of compensation increases, and medical inflation trend rates. These assumptions are reviewed and updated on an annual basis. Changes in the rates from year-to-year and newly-enacted laws could have a material effect on Cleco’s financial condition and results of operations by changing the recorded assets, liabilities, expense, or required funding of the pension plan obligation. One component of pension expense is the expected return on plan assets. It is an assumed percentage return on the market-related value of plan assets. The market-related value of plan assets differs from the fair value of plan assets by the amount of deferred asset gains or losses. Actual asset returns that differ from the expected return on plan assets are deferred and recognized in the market-related value of assets on a straight-line basis over a five-year period. The 2022 return on plan assets was (19.94)% compared to an expected long-term return of 5.25%. For 2021, the plan assets had a return of 7.14% compared to an expected long-term return of 5.00%. For the calculation of the 2023 periodic expense, Cleco increased the expected long-term return on plan assets to 6.60%.

Management uses a theoretical bond portfolio in order to calculate the discount rate for the measurement of liabilities. As a result of the annual review of assumptions, the pension plan discount rate increased from 2.98% to 5.44% for the December 31, 2022, measurement of liabilities.

A change in the assumed discount rate creates a deferred actuarial gain or loss. Generally, when the assumed discount rate decreases compared to the prior measurement date, a deferred actuarial loss is created. When the assumed discount rate increases compared to the prior measurement date, a deferred actuarial gain is created.

Actuarial gains and losses also are created when actual results, such as compensation increases, differ from assumptions. On December 31, 2022, Cleco Power recognized a $58.1 million net actuarial gain primarily due to an increase in the discount rate and lower than expected return on assets. Historically, Cleco Power has been allowed to recover pension plan expenses; therefore, deferred actuarial gains and losses are recorded as a regulatory asset or liability. The net of the deferred gains and losses is amortized to pension expense over the average service life of the remaining plan participants (approximately five years as of December 31, 2022, for Cleco’s plan) when it exceeds certain thresholds. This approach of amortizing gains and losses has the effect of reducing the volatility of pension expense. Over time, it is not expected to reduce or increase the pension expense relative to an approach that immediately recognizes losses and gains.

The following table shows the impact of a 0.5% change in Cleco’s pension plan discount rate, salary scale, and rate of return on plan assets:


ACTUARIAL ASSUMPTION (THOUSANDS)	CHANGE IN ASSUMPTION	CHANGE IN PROJECTED BENEFIT OBLIGATION		CHANGE IN ESTIMATED BENEFIT COST
Discount rate	0.5% increase	$	(27,009)	$	426
	0.5% decrease	$	29,758	$	(509)
Salary scale	0.5% increase	$	4,053	$	401
	0.5% decrease	$	(3,744)	$	(369)
Expected return on assets	0.5% increase	$	—	$	(2,245)
	0.5% decrease	$	—	$	2,245

Cleco Power did not make any required or discretionary contributions to the pension plan in 2022 or 2021 and made a $15.8 million required contribution to the pension plan in December 2020. Based on funding assumptions at December 31, 2022, management estimates that $74.5 million of pension contributions will be required through 2027. Cleco has not made, and does not expect to make, any contributions to the pension plan in 2023. Future discretionary contributions may be made depending on changes in assumptions, the ability to utilize the contribution as a tax deduction, and requirements concerning recognizing a minimum pension liability. Future required contributions are driven by liability funding target percentages set by law which could cause the required contributions to change from year-to-year. The ultimate amount and timing of the contributions will be affected by changes in the discount rate, changes in the funding regulations, and actual returns on fund assets. Adverse changes in assumptions or adverse actual events could cause additional minimum contributions.

For more information on pension and other postretirement benefits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 10 — Pension Plan and Employee Benefits.”

•Income Taxes: For more information on income taxes, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Income Taxes” and Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Income Taxes.”

•Loss Contingencies: Cleco is currently involved in certain legal proceedings and management has estimated the probable costs for the resolution of these claims. These estimates are based on an analysis of potential results, assuming a combination of litigation and settlement assumptions. For more information on legal proceedings affecting Cleco, see Part I, Item 1, “Business — Environmental Matters — Air Quality,” Item 1A, “Risk Factors — Operational Risks — Litigation,” and Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”

Cleco Power

Cleco Power’s retail rates are regulated by the LPSC and its tariffs for transmission services are regulated by FERC, while rates for wholesale power sales are based on market-based rates and ultimately reviewed by FERC. Cleco Power must evaluate its various transactions related to regulatory orders and accounting guidance to ensure the appropriate timing of revenue recognition, the evaluation of cost deferral and the recoverability and refund of certain assets. Future rate changes could have a material impact on the results of operations, financial condition, or cash flows of Cleco Power. Areas that could be materially impacted by future actions of regulators are described below:

•The LPSC allows Cleco Power to recover prudent costs incurred in developing long-lived assets. If the LPSC were to rule that the cost of current or future long-lived assets was imprudent and not recoverable, Cleco Power could be required to write down the imprudent cost and incur a corresponding impairment loss. On September 21, 2022, the LPSC approved a settlement regarding the St. Mary Clean Energy Center disallowing recovery of $15.0 million, which resulted in a net $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. For more information on the impairment loss and disallowance see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

•The LPSC determines the amount and type of fuel and purchased power expenses that Cleco Power can charge customers through the FAC. Changes in the determination of allowable costs already incurred by Cleco Power could cause material changes in fuel revenue. Recovery of FAC costs is subject to periodic fuel audits by the LPSC, which are performed at least every other year. Management is unable to predict or give a reasonable estimate of the possible range of the disallowance, if any, by the LPSC related to these filings. For more information on current LPSC fuel audits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees —Litigation — LPSC Audits and Reviews — Fuel Audits.” For information on fuel revenue, see “— Results of Operations — Comparison of the Years Ended December 31, 2022, and 2021 — Cleco Power — Significant Factors Affecting Cleco

Power — Fuel Cost Recovery/Recoverable Fuel and Power Purchased.”

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, 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 December 31, 2022:

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.

On April 1, 2022, and following the LPSC’s authorization of the securitization financing of Cleco Power’s storm restoration costs, S&P revised its outlook on Cleco Holdings and Cleco Power to stable from negative. S&P revised its outlook due to its expectation that Cleco’s financial metrics and balance sheet would improve given the upcoming securitization of storm restoration costs. On June 22, 2022, the storm recovery securitization financing was completed.

Cleco Holdings and Cleco Power pay fees and interest under their bank credit agreements based on the highest rating held. 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 are in 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. For more information about MISO, see “— Regulatory and Other Matters — Transmission Rates.” For more information about credit support, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments and Guarantees.”

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 rising interest rates the Registrants have recently been exposed to have negatively affected interest expense on variable rate debt and positively affected interest income for the Registrants’ short-term investments.

Recently, inflationary pressures have increased substantially. Under established regulatory practice, historical costs have traditionally formed the basis for recovery from customers. As a result, Cleco Power’s future cash flows designed to provide recovery of historical plant costs may not be adequate to replace property, plant, and equipment in future years. For information on the impacts of inflation and market price volatility of natural gas on credit loss reserves related to customer accounts receivable, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Reserves for Credit Losses” and Part I, Item 1A, “Risk Factors — General Risk Factors — Global Economic Uncertainty and Access to Capital.”

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan, which included the settlement of the TCJA protected and unprotected excess ADIT. As a result of this settlement, all retail customers will continue receiving bill credits resulting from the TCJA. For more information on the regulatory impact of the TCJA, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 13 — Regulation and Rates — Regulatory Refunds — TCJA.”

Fair Value Measurements

Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Cleco may be required to provide credit support 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 the amount of the initial contract, changes in the market price, changes in open contracts, changes in the amounts counterparties owe to Cleco, and any prenegotiated unsecured thresholds agreed to in the master contract. For more information about fair value instruments, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 7 — Fair Value Accounting Instruments.”

Cash Generation and Cash Requirements

Restricted Cash and Cash Equivalents

For information on Cleco’s and Cleco Power’s restricted cash and cash equivalents, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

Debt

Cleco

At December 31, 2022, Cleco had $109.0 million of short-term debt for outstanding borrowings under its aggregate $475.0 million revolving credit facilities. At December 31, 2021, Cleco had no short-term debt outstanding. For more information on Cleco’s credit facilities, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt — Credit Facilities.”

At December 31, 2022, Cleco’s long-term debt and finance leases outstanding was $3.48 billion. Long-term debt decreased by $3.5 million from December 31, 2021, primarily due to the redemption of Cleco Power’s $325.0 million floating rate senior notes in June 2022, $67.7 million of principal payments made on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC in December 2022, the repayment of Cleco Power’s $25.0 million senior notes in December 2022, and $6.6 million of deferred debt financing costs related to Cleco Securitization I’s storm recovery bonds. These decreases were partially offset by the issuance of Cleco Securitization I’s $425.0 million initial principal amount of storm recovery bonds in June 2022. For more information on Cleco’s debt, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt.”

Cash and cash equivalents available at December 31, 2022, were $57.9 million combined with $366.0 million available revolving credit facility capacity ($111.0 million from Cleco Holdings and $255.0 million from Cleco Power) for total liquidity of $423.9 million.

At December 31, 2022, 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 8, “Financial Statements and Supplementary Data — Notes to the

Financial Statements — Note 7 — Fair Value Accounting Instruments.”

At December 31, 2022, Cleco had a working capital deficit of $88.8 million. At December 31, 2021, Cleco had a working capital surplus of $254.8 million. The $343.6 million decrease in working capital is primarily due to:

•a $247.4 million increase in long-term debt due within one year, primarily due to the reclassification of Cleco Holdings' $165.0 million senior notes due in May 2023, Cleco Power's $100.0 million senior notes due in December 2023, and $9.6 million of Cleco Securitization I's storm recovery bond principal payments scheduled to be paid in March and September 2023, partially offset by the repayment of Cleco Power's $25.0 million senior notes in December 2022,

•a $109.0 million increase in short-term debt due to outstanding draws on revolving credit facilities,

•a $90.7 million decrease in cash and cash equivalents,

•a $45.7 million decrease in the cash surrender value of life insurance policies primarily due to recognition of death benefits, the receipt of a portion of the cash surrender value of life insurance policies, and unfavorable market conditions,

•a $23.6 million increase in accounts payable primarily due to higher MISO power purchases and higher coal transportation costs due to higher gas prices,

•an $11.1 million increase in taxes payable primarily due to higher accruals for federal and state income taxes and payroll taxes, and

•a $10.3 million increase in interest accrued primarily due to Cleco Securitization I's storm recovery bonds issued in June 2022.

These decreases in working capital were partially offset by:

•a $49.8 million increase in affiliate balances primarily due to the settlement of intercompany taxes payable and income tax payments made on behalf of Cleco Group,

•a $34.0 million increase in customer accounts receivable primarily due to an increase in revenue due to higher usage as a result of weather and timing of collections from customers,

•a $21.9 million increase in restricted cash and cash equivalents primarily due to amounts restricted for storm restoration costs,

•a $21.4 million increase in fuel inventory primarily due to higher petroleum coke volume at a higher price per ton at Cleco Power and higher coal volume with higher transportation costs at Cleco Cajun,

•a $17.5 million increase in materials and supplies inventory primarily due to higher purchases at higher costs per unit,

•a $17.9 million increase in regulatory assets primarily due to the reclassification of the short-term portion of the regulatory assets related to Hurricane Ida deferred storm restoration costs under prudency review, Madison Unit 3 property taxes, and Bayou Vista to Segura,

•a $15.1 million increase in other accounts receivable primarily due to an increase in the timing of collections of joint owner receivables at Cleco Power and Cleco Cajun and an increase in receivables related to higher mine costs, and

•a $9.3 million increase in energy risk management assets, excluding Cleco Power’s FTRs, primarily due to market value changes on gas-related derivative contracts at Cleco Cajun.

At December 31, 2022, Cleco’s Consolidated Balance Sheets reflected $5.31 billion of total liabilities compared to $5.17 billion at December 31, 2021. The $135.8 million increase in total liabilities during 2022 was primarily due to:

•an increase in restricted storm reserve of $109.4 million due to the securitization financing of Cleco Power’s storm restoration costs through Cleco Securitization I in June 2022,

•an increase in short-term debt of $109.0 million, as previously discussed,

•an increase in accumulated deferred federal and state income taxes, net of $64.5 million, primarily due to the utilization of the net operating loss carryforward,

•an increase in accounts payable of $23.6 million, as previously discussed,

•an increase in taxes payable of $11.1 million, as previously discussed, and

•an increase in interest accrued of $10.3 million, as previously discussed.

These increases in total liabilities were partially offset by:

•a decrease in regulatory liabilities of $52.7 million, primarily due to amortization of excess ADIT related to the TCJA, and

•a decrease in affiliate accounts payable of $38.2 million primarily due to the settlement of intercompany taxes payable.

Cleco Holdings

Cleco Holdings had $64.0 million short-term debt outstanding at December 31, 2022, which represented borrowings under its $175.0 million revolving credit facility. Cleco Holdings had no short-term debt outstanding at December 31, 2021. For more information on Cleco Holdings’ credit facility, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt — Credit Facilities.”

At December 31, 2022, Cleco Holding’s long-term debt outstanding was $1.47 billion, $230.5 million of which was due within one year. The long-term debt due within one year at December 31, 2022, represents $165.0 million of Cleco Holdings’ senior notes due in May 2023 and $65.6 million principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC. For Cleco Holdings, long-term debt decreased $66.0 million primarily due to the $67.7 million principal payment on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC in December 2022.

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 December 31, 2022.

Cash and cash equivalents available at Cleco Holdings at December 31, 2022, were $2.6 million, combined with $111.0 million available revolving credit facility capacity for a total liquidity of $113.6 million.

Cleco Power

At December 31, 2022, Cleco Power had $45.0 million of short-term debt for outstanding borrowings under its $300.0 million revolving credit facility. Cleco Power had no short-term debt outstanding at December 31, 2021. For more information on Cleco Power’s credit facility, see Item 8, “Financial Statements

and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt — Credit Facilities.”

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 December 31, 2022.

At December 31, 2022, Cleco Power’s long-term debt and finance leases outstanding was $1.90 billion. Long-term debt increased $70.2 million from December 31, 2021, primarily due to the issuance of Cleco Securitization I’s $425.0 million storm recovery bonds in June 2022. This increase was partially offset by the redemption of $325.0 million floating rate senior notes in June 2022, the repayment of $25.0 million senior notes in December 2022, and $6.6 million of deferred debt financing costs related to Cleco Securitization I’s senior secured storm recovery bonds. For more information on Cleco Power’s debt, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt.”

Cash and cash equivalents available at December 31, 2022, were $14.7 million combined with $255.0 million available revolving credit facility capacity for total liquidity of $269.7 million.

At December 31, 2022, and 2021, Cleco Power had a working capital surplus of $35.9 million and $110.2 million, respectively. The $74.3 million decrease in working capital is primarily due to:

•an $84.6 million increase in long-term debt due within one year primarily due to the reclassification of $100.0 million of senior notes due in December 2023 and $9.6 million payments of Cleco Securitization I's storm recovery bond principal payments scheduled to be paid in March and September 2023, partially offset by a $25.0 million repayment of senior notes in December 2022,

•a $71.0 million decrease in cash and cash equivalents,

•a $45.0 million increase in short-term debt due to outstanding draws on the revolving credit facility,

•a $10.2 million increase in interest accrued primarily due to Cleco Securitization I's storm recovery bonds issued in June 2022, and

•a $9.8 million increase in taxes payable primarily due to higher accruals for federal and state income taxes and payroll taxes.

These decreases in working capital were partially offset by:

•a $57.3 million decrease in affiliate accounts payable primarily due to the settlement of intercompany taxes payable,

•a $24.1 million increase in customer accounts receivable primarily due to an increase in revenue due to higher usage as a result of weather and timing of collections from customers,

•a $21.9 million increase in restricted cash and cash equivalents primarily due to amounts restricted for storm restoration costs,

•a $15.4 million increase in material and supplies inventory primarily due to higher purchases at higher costs per unit, and

•an $11.0 million increase in fuel inventory primarily due to higher petroleum coke volume at a higher price per ton.

At December 31, 2022, Cleco Power’s Consolidated Balance Sheets reflected $3.32 billion of total liabilities compared to $3.18 billion at December 31, 2021. The $140.3 million increase in total liabilities during 2022 was primarily due to:

•an increase in restricted storm reserve of $109.4 million due to the securitization financing of storm restoration costs through Cleco Securitization I in June 2022,

•an increase in accumulated deferred federal and state income taxes, net of $62.6 million, primarily due to the utilization of the net operating loss carryforward,

•an increase in short-term debt of $45.0 million, as previously discussed,

•an increase in interest accrued of $10.2 million, as previously discussed, and

•an increase in taxes payable of $9.8 million, as previously discussed.

These increases in total liabilities were partially offset by:

•a decrease in total long-term debt of $70.2 million, as previously discussed,

•a decrease in affiliate accounts payable of $57.3 million, as previously discussed, and

•a decrease in regulatory liabilities of $52.7 million, primarily due to amortization of excess ADIT related to the TCJA.

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 December 31, 2022, 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 48.0% and Cleco Power’s corporate credit rating is investment grade with two of the three credit rating agencies. At December 31, 2022, 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.”

Cleco

Net Operating Cash Flow

Cash generated from operating activities consists of net income, adjusted for non-cash expenses, non-cash income, and changes in operating assets and liabilities. Non-cash adjustments include items such as depreciation and amortization, gain or loss on risk management assets and liabilities, regulatory disallowance, deferred income taxes, and allowance for equity funds used during construction.

Net cash provided by operating activities during 2022 increased $162.3 million from 2021 primarily due to:

•the absence of $107.6 million of lignite costs related to accelerated mine-closure costs at Cleco Power,

•higher recoveries of net fuel and purchased power costs at Cleco Power of $46.6 million primarily due to timing of collections, and

•lower payments for non-capital storm restoration costs of $41.2 million at Cleco Power.

These increases were partially offset by:

•higher payments for affiliate settlements of $58.1 million and

•higher payments for fuel inventory of $29.8 million primarily due to purchases of coal at a higher price per ton at Cleco Cajun.

Net Investing Cash Flow

Net cash used in investing activities decreased $107.6 million primarily due to:

•lower additions to property, plant, and equipment, excluding AFUDC, of $74.4 million and

•higher life insurance proceeds of $40.9 million.

These increases were partially offset by a lower return of equity investment in investee of $7.0 million.

Net Financing Cash Flow

Net cash used in financing activities increased $290.0 million during 2022 primarily due to:

•the absence of the issuance of Cleco Power’s $325.0 million floating rate senior notes in 2021, and the subsequent redemption of those $325.0 million senior notes in June 2022,

•distributions to Cleco Group of $219.6 million, and

•the repayment of Cleco Power’s $25.0 million senior notes in December 2022.

These increases were partially offset by:

•proceeds of $424.9 million, net of discount, from the issuance of Cleco Securitization I’s storm recovery bonds in June 2022,

•lower payments on credit facilities of $143.0 million, and

•higher draws on credit facilities of $41.0 million.

Cleco Power

Net Operating Cash Flow

Cash generated from operating activities consists of net income, adjusted for non-cash expenses, non-cash income, and changes in operating assets and liabilities. Non-cash adjustments include items such as depreciation and amortization, regulatory disallowance, deferred income taxes, and allowance for equity funds used during construction.

Net cash provided by operating activities during 2022 increased $171.7 million from 2021 primarily due to:

•the absence of $107.6 million of lignite costs related to accelerated mine-closure costs,

•higher recoveries of net fuel and purchased power costs of $46.6 million primarily due to timing of collections, and

•lower payments for non-capital storm restoration costs of $41.2 million.

These increases were partially offset by higher payments for affiliate settlements of $46.9 million.

Net Investing Cash Flow

Net cash used in investing activities during 2022 decreased $70.1 million from 2021 primarily due to:

•lower additions to property, plant, and equipment, excluding AFUDC, of $72.0 million and

•higher life insurance proceeds of $5.7 million.

These increases were partially offset by a lower return of equity investment in investee of $7.0 million.

Net Financing Cash Flow

Net cash provided by financing activities during 2022 decreased $239.4 million from 2021 primarily due to:

•the absence of issuance of $325.0 million floating rate senior notes in 2021, and the subsequent redemption of those $325.0 million senior notes in June 2022,

•distributions to Cleco Holdings of $105.5 million,

Cleco

Net Operating Cash Flow

Net cash provided by operating activities during 2021 decreased $23.2 million from 2020 primarily due to:

•higher fuel costs of $113.4 million at Cleco Power primarily related to accelerated mine closure costs,

•higher recoverable fuel and purchased power costs of $25.3 million primarily associated with Winter Storms Uri and Viola not yet collected from Cleco Power’s customers,

•lower collections from Cleco Cajun’s customers of $10.4 million due to timing of receipts,

•lower collections from Cleco Cajun’s joint owners of $6.0 million primarily due to timing of receipts for their portions of generating station expenses,

•lower collections from Cleco Power’s joint owners of $5.1 million primarily due to timing of receipts for their portions of generating station expenses, and

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

These decreases were partially offset by:

•lower payments for fuel inventory at Cleco Cajun of $47.3 million due to lower coal purchases,

•lower payments for non-capital storm restoration costs of $33.3 million at Cleco Power,

•the absence of pension plan contributions of $15.8 million at Cleco Power,

•higher collections from Cleco Power’s customers of $9.3 million due to timing, and

•lower payments to vendors of $4.8 million at Cleco Power primarily due to timing of payments related to other operating and maintenance activities.

Net Investing Cash Flow

Net cash used in investing activities during 2021 decreased $77.1 million from 2020 primarily due to lower additions to property, plant, and equipment, excluding AFUDC, of $77.9 million.

Net Financing Cash Flow

Net cash provided by financing activities during 2021 increased $59.1 million from 2020 primarily due to the issuance of $325.0 million floating rate senior notes at Cleco Power in September 2021.

This increase was partially offset by:

•the absence of borrowing a $125.0 million term loan at Cleco Power in August 2020,

•higher payments on revolving credit facilities of $97.0 million, and

•lower draws on revolving credit facilities of $53.0 million.

Cleco Power

Net Operating Cash Flow

Cash generated from operating activities consists of net income, adjusted for non-cash expenses, non-cash income, and changes in operating assets and liabilities. Non-cash adjustments include items such as depreciation and amortization, regulatory disallowance, deferred income taxes, and allowance for equity funds used during construction.

Net cash provided by operating activities during 2021 decreased $25.3 million from 2020 primarily due to:

•higher fuel costs of $113.4 million primarily due to accelerated mine closure costs,

•higher recoverable fuel and purchased power costs of $25.3 million primarily associated with Winter Storms Uri and Viola not yet collected from customers,

•lower collections from joint owners of $5.1 million primarily due to timing of receipts for their portions of generating station expenses, 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 payment on the Cleco Katrina/Rita bonds in March 2020.

These decreases were partially offset by:

•lower payments for affiliate settlements of $55.5 million,

•lower payments for non-capital storm restoration costs of $33.3 million,

•the absence of pension plan contributions of $15.8 million at Cleco Power

•higher collections from customers of $9.3 million due to timing, and

•lower payments to vendors of $4.8 million primarily due to timing of payments related to other operating and maintenance activities.

Net Investing Cash Flow

Net cash used in investing activities during 2021 decreased $75.2 million from 2020 primarily due to higher additions to property, plant, and equipment, excluding AFUDC, of $76.1 million.

Net Financing Cash Flow

Net cash provided by financing activities during 2021 increased $59.6 million from 2020 primarily due to:

•the issuance of $325.0 million floating rate senior notes in September 2021,

•higher draws on credit facilities of $35.0 million, and

•the absence of the final repayment of Cleco Katrina/Rita storm recovery bonds of $11.1 million.

These increases were partially offset by:

•higher payments on revolving credit facilities of $185.0 million and

•the absence of borrowing a $125.0 million term loan in August 2020.

Capital Expenditures

Cleco’s capital expenditures are primarily incurred at Cleco Power and Cleco Cajun. Cleco Power’s capital expenditures relate primarily to assets that may be included in Cleco Power’s rate base and, if considered prudent by the LPSC, can be recovered from its customers. Those assets also earn a rate of return authorized by the LPSC and are subject to the FRP. Such assets primarily consist of improvements to Cleco Power’s distribution system, transmission system, and generating stations as well as hardware and software upgrades. Cleco Cajun’s capital expenditures primarily consist of improvements to Cleco Cajun’s transmission system and generating stations as well as hardware and software upgrades.

During the years ended December 31, 2022, 2021, and 2020, Cleco Power had capital expenditures, excluding AFUDC, of $228.9 million, $301.0 million, and $377.0 million, respectively. Cleco Power funded its capital expenditures for 2022, 2021, and 2020 from internally generated funds and funds obtained through debt issuances.

During the years ended December 31, 2022, 2021, and 2020, other subsidiaries had capital expenditures of $7.8 million, $10.2 million, and $12.0 million, respectively.

In 2023 and for the five-year period ending 2027, Cleco and Cleco Power expect to materially fund their capital expenditure requirements with internally generated funds. However, Cleco Power may choose to issue debt in order to supplement its funding sources and achieve its stipulated

regulatory capital structure. All computations of internally funded capital expenditures exclude AFUDC and capitalized interest.

Cleco’s and Cleco Power’s estimated capital expenditures and debt maturities for 2023 and for the five-year period ending December 31, 2027, are presented in the following tables. All amounts exclude AFUDC and capitalized interest.


Cleco
PROJECT (THOUSANDS)	2023			%		2023-2027		%
Environmental	$	4,000		1	%	$	57,000	3	%
New business	27,000			10	%	135,000		8	%
Renewables and electrification	25,000			9	%	245,000		15	%
Transmission reliability	11,000			4	%	15,000		1	%
General (1)	201,000			76	%	1,192,000		73	%
Total capital expenditures (2)	$	268,000		100	%	$	1,644,000	100	%
Debt payments	340,000		(3)			1,410,000
Total capital expenditures and debt payments	$	608,000				$	3,054,000
(1) Primarily consists of rehabilitation projects of older transmission, distribution, and generation assets and hardware and software upgrades at Cleco Power. (2) Does not include costs related to Project Diamond Vault. (3) Consists of the principal amount committed to be repaid as a result of the Cleco Cajun Transaction as well as other long-term debt obligations with maturity dates in 2023. For more information on the future debt payments, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt.”


Cleco Power
PROJECT (THOUSANDS)	2023			%		2023-2027		%
Environmental	$	4,000		2	%	$	57,000	4	%
New business	27,000			11	%	135,000		9	%
Renewables and electrification	25,000			10	%	245,000		16	%
Transmission reliability	11,000			4	%	15,000		1	%
General (1)	188,000			73	%	1,125,000		70	%
Total capital expenditures (2)	$	255,000		100	%	$	1,577,000	100	%
Debt payments	110,000		(3)			580,000
Total capital expenditures and debt payments	$	365,000				$	2,157,000
(1) Primarily consists of rehabilitation projects of older transmission, distribution, and generation assets and hardware and software upgrades. (2) Does not include costs related to Project Diamond Vault. (3) For more information on the future debt payments, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Debt.”

Capital expenditures for other subsidiaries in 2023 are estimated to total $13.0 million. For the five-year period ending December 31, 2027, capital expenditures for other subsidiaries are estimated to total $67.0 million. Cleco expects cash and cash equivalents on hand, in addition to cash generated from operations, borrowings from credit facilities, and the net proceeds of any issuances of debt securities, to be adequate to fund normal ongoing capital expenditures, working capital, and debt service requirements for the foreseeable future.

Other Cash Requirements

Cleco Power’s regulated operations and Cleco Cajun’s unregulated operations are Cleco’s primary sources of internally generated funds. These funds, along with issuances of additional debt received in future years, will be used for general company purposes, capital expenditures, debt service, human capital expenditures, contractual obligations, and off-balance sheet arrangements, if required.

Cleco also anticipates receipt of grant funds in the future

for renewable and electrification projects, including Project

Off-Balance Sheet Commitments and Guarantees

Cleco has entered into various off-balance sheet commitments in the form of guarantees and standby letters of credit in order to facilitate its activities and the activities of its equity investees (affiliates). Cleco has also agreed to contractual terms that require it 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 guarantees, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 15 — 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, cyberattack, 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 key performance indicator updates to Cleco’s Asset Management Committee and periodically provides general cybersecurity updates to

Cleco’s Audit Committee. Cleco’s third party providers are susceptible to data breaches, which could potentially allow an attacker to compromise the third party servers on which the products run. Cleco could have potential impacts to the confidentiality, integrity, or availability of its data or systems. The third party providers and Cleco investigate data breach incidents. Past instances have resulted in no negative impacts to Cleco’s confidentiality, integrity, or availability of its data or systems. For more information on risks related to Cleco’s cybersecurity, see Part I, Item 1A, “Risk Factors — Operational Risks — Technology and Terrorism Threats.”

Regulatory and Other Matters

Environmental Matters

For information on environmental matters, see Part I, Item 1, “Business — Environmental Matters.”

Retail and Wholesale Rates

For 2022 and 2021, retail rates, which includes the retail portion of FAC and EAC revenue, regulated by the LPSC accounted for approximately 84% and 85%, respectively, of Cleco Power’s total base, FAC, and EAC revenue.

For information on Cleco Power’s base rates, fuel rates, and environmental rates, see Part I, item 1, “Regulatory Matters, Industry Developments, and Franchises — Rates.”

For information on Cleco Power’s and Cleco Cajun’s wholesale rates, see Part I, item 1, “Regulatory Matters, Industry Developments, and Franchises — Rates.”

Transmission Rates

In July 2011, FERC issued Order No. 1000 that reformed the electric transmission planning and cost allocation requirements for public utility transmission providers. The rule builds on the reforms of Order No. 890 and corrects remaining deficiencies

with respect to transmission planning processes and cost allocation methods. In 2015, MISO and the Southwest Power Pool made separate filings containing different metrics to meet specific requirements. A compliance determination for both filings has not been made and no timetable is available for when a determination will be made. Until a determination is made, Cleco is unable to determine if this order will have a material adverse effect on the results of operations, financial condition, or cash flows of the Registrants.

Cleco Power and Cleco Cajun’s generation dispatch and transmission operations are integrated with MISO. MISO operates a fully functioning RTO market with two major market processes: the Day-Ahead Energy and Operating Reserves Market and the Real-Time Energy and Operating Reserves Market. Both use market-based mechanisms to manage transmission congestion across the MISO market area. For more information about the risks associated with Cleco’s participation in MISO, see Part I, Item 1A, “Risk Factors — Regulatory Risks — MISO.”

Market Structure

Wholesale Electric Markets

RTO

In 1999, FERC issued Order No. 2000, which established a general framework for all transmission-owning entities in the nation to voluntarily place their transmission facilities under the control of an appropriate RTO. Cleco Power and Cleco Cajun’s generation dispatch and transmission operations are integrated with MISO. For more information about Cleco Power’s and Cleco Cajun’s integration into MISO, see “—Transmission Rates.”

ERO

NERC, subject to oversight by FERC, is the ERO responsible for developing and enforcing mandatory reliability standards for users, owners, and operators of the bulk power system. NERC, as the ERO, delegates authority to SERC Reliability Corporation.

Cleco anticipates that a new standard relating to the winterization of generation assets will be approved by FERC in 2023. This standard is expected to have more stringent requirements; however, Cleco cannot predict the full impact that this potential new standard will have on its businesses, cash flows, liquidity, financial condition, and results of operations.

A NERC Operations and Planning Reliability Standards audit is conducted every three years for Cleco Power and Cleco Cajun. The most recent NERC Operations and Planning Reliability Standards audits for Cleco Power and Cleco Cajun concluded on September 15, 2022. Final reports were issued on October 25, 2022, for Cleco Cajun and November 16, 2022, for Cleco Power. There were no material findings from the audits.

A NERC CIP audit is also conducted every three years for Cleco Power and Cleco Cajun. NERC CIP audits for Cleco Power and Cleco Cajun began in the fourth quarter of 2022 and are expected to conclude in the first quarter 2023.

Management is 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”.

Retail Electric Markets

Currently, the LPSC does not provide exclusive service territories for electric utilities under its jurisdiction. Instead, retail service is obtained through a long-term nonexclusive franchise. The LPSC uses a “300-foot rule” for determining the supplier for new customers. The “300-foot rule” requires a customer to take service from the electric utility that is within 300 feet of the respective customer. If the customer is beyond 300 feet from any existing utility service, they may choose their electric supplier. The LPSC’s review of the “300-foot rule” in Docket No. R-32763 has been ongoing since April 2013. On February 5, 2020, the docket was closed due to no substantive actions in proceedings since October 2014. Management is unable to predict if this docket will be reopened for reconsideration in the future and cannot determine the impact any potential rulemaking may have on the results of operations, financial condition, or cash flows of Cleco Power. The application of the current rule has led to competition with neighboring utilities for retail customers at the borders of Cleco Power’s service areas. Cleco Power also competes in its service area with suppliers of alternative forms of energy, some of which may be less costly than electricity for certain applications. Cleco Power could experience some competition for electric sales to industrial customers in the form of cogeneration.

Integrated Resource Plan (IRP)

On October 20, 2021, Cleco Power filed its request with the LPSC to initiate its next IRP process. Cleco Power filed its initial data assumptions to be used in its IRP analysis on February 21, 2022. The IRP process includes conducting stakeholder meetings and receiving feedback from stakeholders. The first stakeholders meeting was conducted on March 24, 2022. The first draft of the IRP was filed on October 26, 2022. The next stakeholders meeting was held on November 29, 2022. A final IRP is due in May 2023.

The IRP report describes how Cleco Power plans to meet its forecasted load requirements on a reliable and economic basis, while reducing Cleco Power’s carbon footprint. The IRP is used as a guide in future decision-making and does not represent firm operational commitments.

Service Quality Plan (SQP)

In October 2015, the LPSC proposed an SQP containing 21 requirements for Cleco Power. The SQP has provisions relating to employee headcount, customer service, reliability, vegetation management, and reporting. In April 2016, the SQP was approved by the LPSC. The SQP expired on December 31, 2020. Cleco Power is currently working to complete a new five-year program to submit to the LPSC for approval. On April 29, 2022, Cleco Power filed its annual SQP monitoring report for 2021 based on the expired reporting requirements.

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 help 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 enters into master agreements with counterparties that govern the risk of credit default and allow for collateralization above prenegotiated thresholds to help mitigate potential losses. Alternatively, 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 the amount of the initial contract, changes in the market price, changes in open contracts, changes in the amounts counterparties owe to Cleco, and any prenegotiated unsecured thresholds agreed to in the master contract. 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 7, “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. Disruption in the capital and credit markets may potentially increase the costs of capital and limit the ability to access the capital markets. The inability to raise capital on favorable terms could negatively affect Cleco’s

ability to maintain and expand its business. 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. For more information, see Item 7, “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 bank facilities with fixed-rate debt or vice versa. 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 December 31, 2022, Cleco Holdings had $64.0 million of short-term debt outstanding under its $175.0 million revolving credit facility at a weighted average all-in interest rate of 5.977%. At December 31, 2022, the borrowing costs for amounts drawn under Cleco Holdings’ revolving credit facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275% paid on the unused portion of the facility. Each 1% increase in the interest rate applicable to Cleco Holdings’ short-term variable rate debt would result in a decrease in Cleco Holdings’ pretax earnings of $0.6 million on an annualized basis.

At December 31, 2022, Cleco Holdings had a $132.3 million long-term variable rate bank term loan outstanding at an interest rate of LIBOR plus 1.625%, for an all-in interest rate of 6.015%. 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 $1.3 million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Holdings for the year ended December 31, 2022, was 3.321%.

At December 31, 2022, Cleco Power had $45.0 million of short-term debt outstanding under its $300.0 million revolving credit facility at an all-in interest rate of 5.57%. At December 31, 2022, Cleco Power’s borrowing costs for amounts drawn 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% paid on the unused portion of the facility. Each 1% increase in the interest rate applicable to Cleco Power’s short-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of $0.5 million on an annualized basis.

At December 31, 2022, 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

5.64%. Each 1% increase in the interest rate applicable to Cleco Power’s long-term variable rate debt would result in a decrease in Cleco Power’s pretax earnings of $1.3 million on an annualized basis. The weighted average rate for the outstanding term loan debt at Cleco Power for the year ended December 31, 2022, was 2.967%.

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 consolidated pretax earnings of $3.7 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’s financial performance can be impacted by changes in commodity prices that can impact fuel costs, generation revenue, costs to serve its contracted wholesale electricity customers, and revenue from those customers. Cleco’s risk management policies and procedures authorize 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, each separately and 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 2022, Cleco Cajun had natural gas derivative contracts consisting of fixed price physical forwards and financially settled swap transactions. During 2022, Cleco Power had natural gas derivative contracts consisting of financially settled swap transactions.

Cleco monitors the Value at Risk (VaR) of its natural gas 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 natural gas derivative contracts based on these assumptions:


			FOR THE YEAR ENDED DEC. 31, 2022
(THOUSANDS)	AT DEC. 31, 2022		HIGH		LOW		AVERAGE
Cleco	$	26,128	$	79,618	$	22,142	$	42,657
Cleco Power	$	3,464	$	5,370	$	1,117	$	1,982

For more information on the accounting treatment and fair value of FTRs and natural gas derivative contracts, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Derivatives and Other Risk Management Activity,” “Note 7 — Fair Value Accounting Instruments,” and “Note 8 — Derivative Instruments.”

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cleco Corporate Holdings LLC and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of changes in member’s equity, and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessment – Cleco Power Reporting Unit

As described in Notes 2 and 17 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1.49 billion at December 31, 2022, all of which was assigned to the Cleco Power reporting unit. Management conducts an impairment test as of August 1 of each year, or more often if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Fair value is estimated by management using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. Significant assumptions used in these fair value estimates include estimation of future cash flows related to capital expenditures, long-term rate of growth, and discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Cleco Power reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to capital expenditures, long-term rate of growth, and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for developing the fair value estimate; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness, accuracy, and relevance of underlying data used in the model; and (iv) evaluating the significant assumptions used by management relating to capital expenditures, long-term rate of growth, and discount rate. Evaluating management’s assumptions related to the capital expenditures and projected long-term rate of growth involved evaluating whether the assumptions used by

management were reasonable considering, as applicable, (i) the current and past performance of the reporting unit, (ii) the consistency with external market and modeled rate base changes, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and the long-term rate of growth and discount rate assumptions.

Accounting for the Effects of Regulatory Matters

As described in Notes 2 and 5 to the consolidated financial statements, Cleco Power LLC (“Cleco Power”), a wholly-owned subsidiary of the Company, complies with the accounting policies and practices prescribed by its regulatory commissions, Federal Energy Regulatory Commission (FERC) and the Louisiana Public Service Commission (LPSC). Cleco Power’s retail rates are regulated by the LPSC and its tariffs for transmission services are regulated by FERC, while rates for wholesale power sales are based on market-based rates and are ultimately reviewed by FERC. Cleco Power must evaluate its various transactions related to regulatory orders and accounting guidance to ensure the appropriate timing of revenue recognition, the evaluation of cost deferral, and the recoverability and refund of certain assets. 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. As of December 31, 2022, there were $717.0 million of deferred costs included in regulatory assets and $152.8 million of regulatory liabilities awaiting cash outflow or potential refund. 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. Further, 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 of regulated operations.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of regulatory matters is a critical audit matter are (i) the significant judgment by management in evaluating the impact of regulatory orders and accounting guidance on relevant transactions and (ii) a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence related to the timing of revenue recognition, the evaluation of cost deferral, and the recoverability and refund of certain assets.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, evaluating (i) management’s process for identifying relevant transactions which require regulatory treatment; (ii) management’s assessment regarding the accounting impacts arising from regulatory orders and accounting guidance; (iii) the reasonableness of management’s assessment regarding the timing of revenue recognition, probability of recovery of regulatory assets, and the establishment of regulatory liabilities; and (iv) the regulatory assets and liabilities calculated by management based on provisions and formulas outlined in rate orders and other correspondence.

/s/ PricewaterhouseCoopers LLP

New Orleans, Louisiana

March 8, 2023

We have served as the Company’s auditor since 2016.


CLECO

Consolidated Balance Sheets
	AT DEC. 31,
(THOUSANDS)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	57,875	$	148,563
Restricted cash and cash equivalents	23,549		1,674
Customer accounts receivable (less allowance for credit losses of $1,147 in 2022 and $1,302 in 2021)	125,863		91,869
Accounts receivable - affiliate	14,613		3,041
Other accounts receivable	42,935		27,818
Taxes receivable	—		564
Unbilled revenue	46,040		37,663
Fuel inventory, at average cost	90,231		68,838
Materials and supplies, at average cost	151,138		133,666
Energy risk management assets	49,839		43,479
Accumulated deferred fuel	57,881		56,826
Cash surrender value of company-/trust-owned life insurance policies	52,859		98,576
Prepayments	16,809		13,283
Regulatory assets	47,173		29,261
Other current assets	7,062		12,839
Total current assets	783,867		767,960
Property, plant, and equipment
Property, plant, and equipment	5,445,066		5,416,722
Accumulated depreciation	(946,576)		(700,991)
Net property, plant, and equipment	4,498,490		4,715,731
Construction work in progress	116,550		100,163
Total property, plant, and equipment, net	4,615,040		4,815,894
Equity investment in investee	2,072		2,072
Goodwill	1,490,797		1,490,797
Prepayments	24,926		21,598
Operating lease right of use assets	22,673		24,014
Restricted cash and cash equivalents	110,148		745

Note receivable	12,908		13,744
Regulatory assets - deferred taxes, net	8,803		—
Regulatory assets	611,917		810,820

Intangible asset - securitization	413,123		—
Intangible assets - other	56,635		82,235
Energy risk management assets	58,895		50,962

Other deferred charges	41,945		44,177
Total assets	$	8,253,749	$	8,125,018
The accompanying notes are an integral part of the consolidated financial statements.
(Continued on next page)


CLECO

Consolidated Balance Sheets
	AT DEC. 31,
(THOUSANDS)	2022		2021
Liabilities and member’s equity
Liabilities
Current liabilities
Short-term debt	$	109,000	$	—
Long-term debt and finance leases due within one year	340,867		93,455
Accounts payable	192,213		167,886

Accounts payable - affiliate	13,092		51,297
Customer deposits	57,851		60,852
Provision for rate refund	3,074		5,682

Taxes payable	17,448		6,311
Interest accrued	25,540		15,203

Energy risk management liabilities	8,841		834

Regulatory liabilities - deferred taxes, net	42,890		44,072
Deferred compensation	12,162		14,420

Storm reserves	9,409		—
Other current liabilities	40,310		53,150
Total current liabilities	872,697		513,162
Long-term liabilities and deferred credits
Accumulated deferred federal and state income taxes, net	820,300		755,764

Postretirement benefit obligations	200,580		291,606

Regulatory liabilities - deferred taxes, net	—		51,472
Storm reserves	109,353		—

Deferred lease revenue	22,246		31,451
Intangible liabilities	13,956		18,997

Asset retirement obligations	73,653		69,667
Operating lease liabilities	19,819		21,128
Other deferred credits	34,984		27,582
Total long-term liabilities and deferred credits	1,294,891		1,267,667
Long-term debt and finance leases, net	3,139,094		3,390,033
Total liabilities	5,306,682		5,170,862
Commitments and contingencies (Note 15)
Member’s equity	2,947,067		2,954,156
Total liabilities and member’s equity	$	8,253,749	$	8,125,018
The accompanying notes are an integral part of the consolidated financial statements.


CLECO

Consolidated Statements of Cash Flows
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Operating activities
Net income	$	188,811	$	194,966	$	122,300
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation and amortization	289,486		273,392		249,494

Provision for credit losses	3,357		5,471		5,488


Regulatory disallowance	13,841		—		—

Unearned compensation expense	5,502		6,678		5,715
Allowance for equity funds used during construction	(3,740)		(9,905)		(998)

Gain on risk management assets and liabilities, net	(21,805)		(80,314)		(13,261)
Deferred lease revenue	(9,205)		(9,205)		(9,205)
Deferred income taxes	(7,911)		13,954		35,876
Cash surrender value of company-/trust-owned life insurance	1,266		(9,438)		(3,042)
Changes in assets and liabilities
Accounts receivable	(61,848)		(25,865)		(8,772)
Accounts receivable - affiliate	(11,309)		(1,379)		(621)
Unbilled revenue	(8,377)		2,464		(6,920)
Fuel inventory and materials and supplies	(43,703)		30,254		(39,602)
Prepayments	(15,846)		(12,097)		(20,117)
Accounts payable	20,711		(2,379)		(19,612)
Accounts payable - affiliate	(38,206)		10,014		1,470
Customer deposits	6,778		11,241		6,663
Provision for merger commitments	—		(2,620)		560
Postretirement benefit obligations	(847)		7,106		(9,588)
Regulatory assets and liabilities, net	21,537		(163,788)		(76,428)
Deferred fuel recoveries	8,742		(29,405)		(4,142)
Asset retirement obligations	(4,958)		(959)		461
Other deferred accounts	(7,333)		(13,032)		(17,392)
Taxes accrued	11,337		(10,145)		4,633
Interest accrued	10,337		(380)		(3,417)
Energy risk management collateral received	6,500		—		—

Other operating	(8,205)		(1,989)		6,276
Net cash provided by operating activities	344,912		182,640		205,819
Investing activities
Additions to property, plant, and equipment	(236,767)		(311,141)		(389,015)




Return of equity investment in investee	—		7,000		8,000

Return of investment in company-/trust-owned life insurance	41,671		820		1,912




Other investing	1,839		2,488		1,196
Net cash used in investing activities	(193,257)		(300,833)		(377,907)
The accompanying notes are an integral part of the consolidated financial statements.

(Continued on next page)


CLECO

Consolidated Statements of Cash Flows
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022			2021			2020
Financing activities

Draws on revolving credit facilities	226,000			185,000			238,000
Payments on revolving credit facilities	(117,000)			(260,000)			(163,000)
Issuances of long-term debt	424,946			325,000			125,000
Repayments of long-term debt	(417,700)			(66,000)			(75,055)

Payment of financing costs	(6,968)			(4,408)			(4,570)

Distributions to member	(219,588)			—			—
Other financing	(755)			(682)			(617)
Net cash (used in) provided by financing activities	(111,065)			178,910			119,758
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	40,590			60,717			(52,330)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	150,982		(1)	90,265			142,595
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	191,572	(2)	$	150,982	(1)	$	90,265

Supplementary cash flow information
Interest paid, net of amount capitalized	$	131,760		$	126,061		$	130,544
Income taxes refunded, net	$	—		$	72		$	(2,777)
Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	10,247		$	10,369		$	7,943

Reduction in property, plant, and equipment due to regulatory disallowance	$	13,841		$	—		$	—
Reduction in property, plant, and equipment due to securitization of capitalized storm costs	$	197,689		$	—		$	—
(1) Includes cash and cash equivalents of $148,563, current restricted cash and cash equivalents of $1,674, and non-current restricted cash and cash equivalents of $745. (2) Includes cash and cash equivalents of $57,875, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $110,148.

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cleco Power LLC and its subsidiaries (the “Company” or “Cleco Power”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of changes in member’s equity, and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated

financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Effects of Regulatory Matters

As described in Notes 2 and 5 to the consolidated financial statements, the Company complies with the accounting policies and practices prescribed by its regulatory commissions, Federal Energy Regulatory Commission (FERC) and the Louisiana Public Service Commission (LPSC). The Company’s retail rates are regulated by the LPSC and its tariffs for transmission services are regulated by FERC, while rates for wholesale power sales are based on market-based rates and are ultimately reviewed by FERC. The Company must evaluate its various transactions related to regulatory orders and accounting guidance to ensure the appropriate timing of revenue recognition, the evaluation of cost deferral, and the recoverability and refund of certain assets. The Company 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. As of December 31, 2022, there were $589.3 million of deferred costs included in regulatory assets and $152.8 million of regulatory liabilities awaiting cash outflow or potential refund. Under the current regulatory environment, the Company believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, the Company’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, the Company would be required to write-down such assets. Further, potential deregulation of the industry or possible future changes in the method of rate regulation of the Company could require discontinuance of the application of the authoritative guidance of regulated operations.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These


CLECO POWER

Consolidated Balance Sheets
	AT DEC. 31,
(THOUSANDS)	2022		2021
Assets
Utility plant and equipment
Property, plant, and equipment	$	5,736,526	$	5,745,489
Accumulated depreciation	(2,082,153)		(1,919,766)
Net property, plant, and equipment	3,654,373		3,825,723
Construction work in progress	113,470		94,573
Total utility plant and equipment, net	3,767,843		3,920,296
Current assets
Cash and cash equivalents	14,703		85,667
Restricted cash and cash equivalents	23,549		1,674
Customer accounts receivable (less allowance for credit losses of $1,147 in 2022 and $1,302 in 2021)	72,646		48,551
Accounts receivable - affiliate	3,771		13,612
Other accounts receivable	33,444		21,931

Unbilled revenue	46,040		37,663
Fuel inventory, at average cost	57,078		46,121
Materials and supplies, at average cost	116,943		101,502
Energy risk management assets	2,570		5,515
Accumulated deferred fuel	57,881		56,826
Cash surrender value of company-owned life insurance policies	9,471		16,260
Prepayments	11,765		7,784
Regulatory assets	39,438		21,526
Other current assets	838		782
Total current assets	490,137		465,414
Equity investment in investee	2,072		2,072
Prepayments	1,493		1,243
Operating lease right of use assets	22,628		23,970
Restricted cash and cash equivalents	109,392		—

Note receivable	12,908		13,744
Regulatory assets - deferred taxes, net	8,803		—
Regulatory assets	491,978		680,813
Intangible asset - securitization	413,123		—


Other deferred charges	23,796		21,949
Total assets	$	5,344,173	$	5,129,501
The accompanying notes are an integral part of the consolidated financial statements.
(Continued on next page)


CLECO POWER

Consolidated Statements of Cash Flows
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022			2021			2020
Operating activities
Net income	$	170,057		$	134,088		$	96,655
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation and amortization	185,029			182,373			172,452

Provision for credit losses	3,357			5,471			5,100
Regulatory disallowance	13,841			—			—


Allowance for equity funds used during construction	(3,740)			(9,905)			(998)
Deferred income taxes	(4,690)			(9,211)			6,165

Changes in assets and liabilities
Accounts receivable	(48,353)			(19,707)			(21,289)
Accounts receivable - affiliate	13,253			5,531			3,403
Unbilled revenue	(8,377)			2,464			(6,920)
Fuel inventory and materials and supplies	(27,764)			11,767			(16,609)
Prepayments	(3,808)			(2,370)			(1,414)
Accounts payable	(854)			1,135			(27,401)
Accounts payable - affiliate	(56,714)			(2,071)			(276)
Customer deposits	6,778			11,241			6,663
Provision for merger commitments	—			(2,120)			(1,752)
Postretirement benefit obligations	215			5,586			(12,321)
Regulatory assets and liabilities, net	19,550			(165,775)			(78,416)
Deferred fuel recoveries	8,742			(29,405)			(4,142)
Asset retirement obligations	(4,728)			—			—
Other deferred accounts	(2,281)			(6,199)			(17,710)
Taxes accrued	9,704			(7,647)			23,442
Interest accrued	10,196			(277)			(2,614)
Other operating	(5,148)			(2,451)			5,761
Net cash provided by operating activities	274,265			102,518			127,779
Investing activities
Additions to property, plant, and equipment	(228,940)			(300,957)			(377,044)





Return of equity investment in investee	—			7,000			8,000
Return of investment in company-owned life insurance	6,496			820			1,912
Other investing	1,751			2,392			1,196
Net cash used in investing activities	(220,693)			(290,745)			(365,936)



Financing activities
Draws on revolving credit facility	162,000			185,000			150,000
Payments on revolving credit facility	(117,000)			(260,000)			(75,000)
Issuances of long-term debt	424,946			325,000			125,000
Repayments of long-term debt	(350,000)			—			(11,055)

Payment of financing costs	(6,960)			(3,141)			(1,732)

Distributions to member	(105,500)			—			—
Other financing	(755)			(682)			(617)
Net cash provided by financing activities	6,731			246,177			186,596
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	60,303			57,950			(51,561)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	87,341		(1)	29,391			80,952
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	147,644	(2)	$	87,341	(1)	$	29,391




Supplementary cash flow information
Interest paid, net of amount capitalized	$	71,912		$	68,373		$	67,799

Supplementary non-cash investing and financing activities
Accrued additions to property, plant, and equipment	$	9,954		$	9,696		$	6,824

Reduction in property, plant, and equipment due to regulatory disallowance	$	13,841		$	—		$	—
Reduction in property, plant, and equipment due to securitization of capitalized storm costs	$	197,689		$	—		$	—
(1) Includes cash and cash equivalents of $85,667 and current restricted cash and cash equivalents of $1,674. (2) Includes cash and cash equivalents of $14,703, current restricted cash and cash equivalents of $23,549, and non-current restricted cash and cash equivalents of $109,392.
The accompanying notes are an integral part of the consolidated financial statements.

Note 1 — The Company

Cleco is composed of the following:

•Cleco Power, a regulated electric utility subsidiary, which owns nine generating units with a total rated capacity of 3,035 MW and serves approximately 293,000 customers in Louisiana through its retail business and supplies wholesale power in Louisiana and Mississippi. Cleco Power also owns a 50% interest in Oxbow. Cleco Power owns all of the outstanding membership interests in Cleco Securitization I, a special purpose limited liability company that is consolidated with Cleco Power in its financial statements. For more information on Oxbow and Cleco Securitization I, see Note 14 — “Variable Interest Entities.”

•Cleco Cajun, an unregulated electric utility subsidiary, which owns 14 generating units with a total rated capacity of 3,379 MW and supplies wholesale power and capacity in Arkansas, Louisiana, and Texas.

•Cleco’s other operations consist of the following:

◦Cleco Holdings, a holding company,

◦Support Group, a shared services subsidiary, and

◦Diversified Lands, an investment subsidiary.

Note 2 — Summary of Significant Accounting Policies

Use of Estimates

Principles of Consolidation

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

Following the formation of Cleco Securitization I and the closing of the storm recovery securitization financing on June 22, 2022, Cleco Power became the primary beneficiary of Cleco Securitization I, and as a result, the financial statements of Cleco Securitization I are consolidated with the financial statements of Cleco Power. For additional information about Cleco Securitization I, see Note 14 — “Variable Interest Entities.” For additional information about the storm recovery securitization financing and its regulatory impacts, see Note 5 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs” and Note 19 — “Securitization.”

Goodwill

Goodwill is the excess of the purchase price (consideration transferred and liabilities assumed) over the estimated fair value of net assets of the acquired business and is not subject to amortization. Goodwill is assessed as of August 1 of each year or more often if an event occurs or circumstances change that would indicate the carrying amount may be impaired. For more information on goodwill, see Note 17 — “Intangible Assets, Intangible Liabilities, and Goodwill — Goodwill.”

Intangible Assets and Liabilities

At December 31, 2022, intangible assets included Cleco Securitization I’s right to bill and collect storm recovery charges and fair value adjustments for acquired long-term wholesale power supply agreements. Intangible liabilities included fair value adjustments for acquired long-term wholesale power supply agreements as well as a fair value adjustment for the LTSA assumed for maintenance services related to the Cottonwood Plant. These intangible assets and liabilities are being amortized in a manner that best reflects the economic impact derived from such assets and liabilities.

Prior to being fully impaired during the third quarter of 2021, intangible assets also included an adjustment related to the Cleco Power tradename as a result of the 2016 Merger. Impairment is tested if there are events or circumstances that indicate that an impairment analysis should be performed. If such an event or circumstance occurs, intangible impairment testing is performed prior to goodwill impairment testing. Impairment is calculated as the excess of the asset and liabilities’ respective carrying amounts over their respective fair values. For more information on intangible assets and liabilities, see Note 17 — “Intangible Assets, Intangible Liabilities, and Goodwill.”

Statements of Cash Flows

Cleco’s and Cleco Power’s Consolidated Statements of Cash Flows are prepared using the indirect method. This method requires adjusting net income to remove the effects of all deferrals and accruals of operating cash receipts and payments and to remove items whose cash effects are related to investing and financing cash flows. Derivatives meeting the definition of an accounting hedge are classified in the same category as the item being hedged.

Regulation

Cleco Power is subject to regulation by FERC and the LPSC. Cleco Cajun is subject to regulation by FERC. Cleco complies with the accounting policies and practices prescribed by its regulatory commissions. Cleco Power’s retail rates are regulated by the LPSC. Cleco Power’s and Cleco Cajun’s rates for transmission services are regulated by FERC. Rates for wholesale power sales are based on market-based rates. Cleco Power must evaluate its various transactions related to regulatory orders and accounting guidance to ensure the appropriate timing of revenue recognition, the evaluation of cost deferral, and the recoverability of certain assets and refund of certain liabilities. Cleco Power capitalizes or defers certain costs for recovery from its customers and recognizes a liability for amounts expected to be returned to its 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. Regulatory assets and liabilities are amortized consistent with the treatment in the ratemaking process. Pursuant to this regulatory process, Cleco has recorded regulatory assets and liabilities.

Any future plan adopted by the LPSC for purposes of transitioning utilities from LPSC regulation to retail competition may affect the regulatory assets and liabilities recorded by Cleco if the criteria for the application of the authoritative guidelines for industry regulated operations cannot continue to be met. At this time, Cleco cannot predict whether any legislation or regulation affecting Cleco will be enacted or adopted and, if enacted, what form such legislation or regulation may take.

For more information regarding the regulatory assets and liabilities recorded by Cleco Power, see Note 5 — “Regulatory Assets and Liabilities.”

AROs

Cleco and Cleco Power recognize an ARO when there is a legal obligation under existing or enacted law, statute, written or oral contract, or by legal construction under the doctrine of promissory estoppel to incur costs to remove an asset when the asset is retired. These guidelines also require an ARO,

which is conditional on a future event, to be recorded even if the event has not yet occurred.

Cleco and Cleco Power recognize AROs at the present value of the projected liability in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted to its present value each accounting period. Cleco Power defers this accretion as a regulatory asset based on its determination that these costs can be collected from customers. Concurrent with the recognition of the liability, Cleco and Cleco Power capitalize these costs to the related property, plant, and equipment asset. These capitalized costs are depreciated over the same period as the related property asset. Cleco Power also defers the current depreciation of the asset retirement cost as a regulatory asset.

For more information on the regulatory treatment of Cleco Power’s AROs, see Note 5 — “Regulatory Assets and Liabilities — AROs.” For more information on Cleco’s ARO activity, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures and Guarantees — Other Commitments.”

Property, Plant, and Equipment

Property, plant, and equipment consists primarily of utility generation and energy transmission and distribution assets. Property, plant, and equipment are stated at the cost to acquire or construct the assets, which includes certain materials, labor, payroll taxes and benefits, administrative and general costs, and the estimated cost of funds used during construction. Jointly owned assets are reflected in property, plant, and equipment at Cleco Power’s and Cleco Cajun’s share of the cost to construct or purchase the respective assets. For information on jointly owned assets, see Note 6 — “Jointly Owned Generation Facilities.”

At the date of the 2016 Merger, Cleco’s gross balance of fixed depreciable assets was adjusted to be net of accumulated depreciation, as no accumulated depreciation existed on such date. Since pushdown accounting was not elected at the Cleco Power level, Cleco Power retained its accumulated depreciation.

Cleco’s cost of improvements to property, plant, and equipment is capitalized. Costs associated with repairs and major maintenance projects are expensed as incurred. Cleco capitalizes the cost to purchase or develop software for internal use. Upon retirement or disposition, the cost of Cleco Power’s depreciable plant and the cost of removal, net of salvage value, are charged to accumulated depreciation. For Cleco’s other subsidiaries, upon disposition or retirement of depreciable assets, the difference between the net book value of the property and any proceeds received for the property is recorded as a gain or loss on asset disposition on Cleco’s Consolidated Statements of Income. Any cost incurred to remove the asset is charged to expense.

The amounts of unamortized computer software costs on Cleco’s Consolidated Balance Sheets at December 31, 2022, and 2021 were $168.6 million and $172.7 million, respectively. The amounts of unamortized computer software costs on Cleco Power’s Consolidated Balance Sheets at December 31, 2022, and 2021 were $162.3 million and $167.4 million, respectively. Amortization of capitalized computer software costs charged to expense in Cleco’s and Cleco Power’s Consolidated Statements of Income for the years ending December 31, 2022, 2021, and 2020 is shown in the following tables:


Cleco
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Amortization	$	12,228	$	11,878	$	11,015


Cleco Power
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Amortization	$	11,614	$	11,268	$	10,379

Depreciation on property, plant, and equipment is calculated primarily on a straight-line basis over the useful lives of the assets. The following table presents the useful lives of depreciable assets for Cleco and Cleco Power:


CATEGORY (YEARS)	CLECO			CLECO POWER
Utility Plants
Generation	10	–	55	10	–	55
Distribution	15	–	50	15	–	50
Transmission	5	–	55	5	–	55
Other utility plant	5	–	45	5	–	45
Other property, plant, and equipment	5	–	45	5	–	45

At December 31, 2022, and 2021, Cleco’s and Cleco Power’s property, plant, and equipment consisted of the following:


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Utility plants
Generation	$	2,737,597	$	2,704,536
Distribution	1,429,374		1,494,411
Transmission	811,199		797,694
Other utility plant	457,339		412,577
Other property, plant, and equipment	9,557		7,504
Total property, plant, and equipment	5,445,066		5,416,722
Accumulated depreciation	(946,576)		(700,991)
Net property, plant, and equipment	$	4,498,490	$	4,715,731


Cleco Power
	AT DEC. 31,
(THOUSANDS)	2022		2021
Regulated utility plants
Generation	$	2,321,640	$	2,314,285
Distribution	1,866,662		1,933,389
Transmission	1,000,783		988,122
Other utility plant	547,441		509,693
Total property, plant, and equipment	5,736,526		5,745,489
Accumulated depreciation	(2,082,153)		(1,919,766)
Net property, plant, and equipment	$	3,654,373	$	3,825,723

During 2022, Cleco Power’s regulated utility property, plant, and equipment decreased primarily due to the securitization of storm restoration costs in June 2022. This decrease was partially offset by increased costs related to transmission projects and other capital projects. For more

information on the securitization of storm restoration costs, see Note 19 — “Securitization.”

Cleco Power’s property, plant, and equipment includes plant acquisition costs related primarily to the acquisition of Acadia Unit 1 in 2010. The plant acquisition adjustment and accumulated amortization are reported in Property, plant, and equipment and Accumulated depreciation, respectively, on Cleco’s and Cleco Power’s Consolidated Balance Sheets at December 31, 2022, and 2021, and are shown in the following tables:


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Acadia Unit 1
Plant acquisition adjustment	$	76,116	$	76,116
Accumulated amortization	(21,383)		(18,201)
Net plant acquisition adjustment	$	54,733	$	57,915


Cleco Power
	AT DEC. 31,
(THOUSANDS)	2022		2021
Acadia Unit 1
Plant acquisition adjustment	$	95,578	$	95,578
Accumulated amortization	(40,846)		(37,663)
Net plant acquisition adjustment	$	54,732	$	57,915

Deferred Project Costs

Cleco Power defers costs related to the initial stage of a construction project during which time the feasibility of the construction of property, plant, and equipment is being investigated. At December 31, 2022, and 2021, Cleco Power had deferred $5.8 million and $4.5 million, respectively, for projects that are in the initial stages of development. These amounts are classified as Other deferred charges on Cleco Power’s Consolidated Balance Sheets.

Fuel Inventory and Materials and Supplies

At December 31, 2022, fuel inventory consisted primarily of petroleum coke, coal, limestone, and natural gas used to generate electricity. Prior to the retirement of the Dolet Hills Power Station on December 31, 2021, fuel inventory also consisted of lignite.

Materials and supplies consists of transmission and distribution line construction and repair materials. It also consists of generating station and transmission and distribution substation repair materials.

Both fuel inventory and materials and supplies are recorded at the lower of cost or net realizable value using the average cost method and are issued from stock using the average cost of existing stock. Materials and supplies are recorded when purchased and subsequently charged to expense or capitalized to property, plant, and equipment when installed.

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.

As a result of the market price volatility of natural gas experienced throughout 2022, Cleco has experienced significant increases to the pass-through fuel component of retail customer energy bills. Due to these increased customer fuel costs, along with the impacts of a 40-year high inflation rate, Cleco has experienced increases in credit loss reserves. These factors have not been and are not expected to be material to Cleco’s results of operations, financial condition, or cash flows.

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	4,003		—		4,003
Charge-offs	(6,919)		—		(6,919)
Recovery	1,460		—		1,460
Balances, Dec. 31, 2021	1,302		1,638		2,940

Current period provision	3,362		—		3,362
Charge-offs	(4,800)		—		(4,800)
Recovery	1,283		—		1,283
Balances, Dec. 31, 2022	$	1,147	$	1,638	$	2,785
* Loan held at Diversified Lands that was fully reserved for at December 31, 2020.


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

Current period provision	4,003
Charge-offs	(6,919)
Recovery	1,460
Balance, Dec. 31, 2021	1,302

Current period provision	3,362
Charge-offs	(4,800)
Recovery	1,283
Balance, Dec. 31, 2022	$	1,147

Other Reserves

Cleco maintains property insurance on generating stations, buildings and contents, and substations. Cleco is self-insured for any damage to its power lines. To mitigate the exposure to potential financial loss for storm-related damage to lines and property, the LPSC approved Cleco Power to establish a newly funded storm reserve. For more information on the storm reserve, see Note 5 — “Regulatory Assets and Liabilities — Storm Reserves.”

Cleco also maintains liability and workers’ compensation insurance to mitigate financial losses due to injuries and damages to the property of others. Cleco’s insurance covers claims that exceed certain self-insured limits. For claims within certain self-insured limits, Cleco maintains reserves. At December 31, 2022, and 2021, the general liability and

workers compensation reserves together were $6.9 million and $6.0 million, respectively.

Additionally, Cleco maintains directors and officers insurance to protect managers from claims which may arise from their decisions and actions taken within the scope of their regular duties.

Cash Equivalents

Cleco considers highly liquid, marketable securities, and other similar instruments with original maturity dates of three months or less to be cash equivalents.

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 company purposes.

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


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Current
Cleco Katrina/Rita’s storm recovery surcharge	$	—	$	1,674
Cleco Power’s storm restoration costs - Hurricane Ida	9,409		—
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service	14,140		—
Total current	23,549		1,674
Non-current
Diversified Lands’ mitigation escrow	23		22
Cleco Cajun’s defense fund	733		723
Cleco Power’s future storm restoration costs	103,306		—
Cleco Power’s storm restoration costs - Hurricane Ida	6,086		—

Total non-current	110,148		745
Total restricted cash and cash equivalents	$	133,697	$	2,419


Cleco Power
	AT DEC. 31,
(THOUSANDS)	2022		2021
Current
Cleco Katrina/Rita’s storm recovery surcharges	$	—	$	1,674
Storm restoration costs - Hurricane Ida	9,409		—
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service	14,140		—
Total current	23,549		1,674
Non-current
Future storm restoration costs	103,306		—
Storm restoration costs - Hurricane Ida	6,086		—

Total non-current	109,392		—
Total restricted cash and cash equivalents	$	132,941	$	1,674

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 to be approved by the LPSC. In September 2022, the remaining $1.6 million was refunded to Cleco Power’s retail customers.

On June 22, 2022, the storm recovery securitization financing was completed. In connection with this financing, and as approved by the LPSC, newly funded storm reserves for future storm restoration costs and Hurricane Ida storm restoration costs were established at Cleco Power. The establishment of these reserves resulted in the establishment of corresponding restricted cash and cash equivalents accounts. Additionally, restricted cash and cash equivalents accounts were established for payment of Cleco Securitization I’s estimated operating expenses, storm recovery bond issuance costs, and payment of debt service on those storm recovery bonds. For more information on the storm recovery securitization financing, see Note 19 — “Securitization.”

Equity Investments

Cleco and Cleco Power account for investments in unconsolidated affiliated companies using the equity method of accounting. The amounts reported on Cleco’s and Cleco Power’s Consolidated Balance Sheets represent assets contributed by Cleco or Cleco Power, plus their share of the net income of the affiliate, less any distributions of earnings (dividends) received from the affiliate. The revenues and expenses (excluding income taxes) of these affiliates are netted and reported on one line item as equity income from investees on Cleco’s and Cleco Power’s Consolidated Statements of Income.

Cleco evaluates for impairments of equity method investments at each balance sheet date to determine if events and circumstances have occurred that indicate a possible other-than-temporary decline in the fair value of the investment and the possible inability to recover the carrying value through operations. Cleco uses estimates of the future cash flows from the investee and observable market transactions in order to calculate fair value and recoverability. An impairment is recognized when an other-than-temporary decline in market value occurs and recovery of the carrying value is not probable. There were no impairments recorded for 2022, 2021, or 2020. For more information on Cleco’s equity investments, see Note 14 — “Variable Interest Entities.”

Income Taxes

Cleco accounts for income taxes under the asset and liability method. Income taxes recorded on the income statement and related balance sheet amounts are comprised of a current portion and a deferred portion. The current portion represents Cleco’s estimate of the income taxes payable or receivable for the current year. The deferred portion represents Cleco’s estimate of the future income tax effects of events that have been recognized in the financial statements or income tax returns in the current or prior years. Cleco makes assumptions and estimates when it records income taxes, such as its ability to deduct items on its tax returns, the timing of the deduction, and the effect of regulation on income taxes. Cleco’s income tax expense and benefit and related assets and liabilities could be affected by changes in its assumptions and estimates and by ultimate resolution of assumptions and estimates with taxing authorities and changes in tax regulations, the actual results may differ from the estimated results based on these assumptions and may have a material effect on Cleco’s results of operations. Cleco Group files a federal income tax return for all wholly owned subsidiaries. Cleco Power computes its federal and state income taxes as if it were a stand-alone taxpayer. The LPSC generally requires Cleco Power to flow the

effects of state income taxes to customers. For more information on income taxes, see Note 11 — “Income Taxes.”

Investment Tax Credits

Investment tax credits, which were deferred for financial statement purposes, are amortized as a reduction to income tax expense over the estimated service lives of the properties that gave rise to the credits.

Debt Issuance Costs, Premiums, and Discounts

Issuance costs, premiums, and discounts applicable to debt securities are amortized to interest expense ratably over the lives of the related issuances. Expenses and call premiums related to refinanced Cleco Power debt are deferred and amortized over the life of the new issuance. Debt issuance costs, premiums, and discounts are presented as a direct deduction from the carrying value of the related debt liability.

Revenue and Fuel Costs

Utility Revenue

Revenue from retail sales and transmission of electricity is recognized when the service is provided. The costs of fuel and purchased power used for Cleco Power’s retail customers currently are recovered from its customers through Cleco Power’s FAC. These costs are subject to audit and final determination by the LPSC. Sales taxes and pass-through fees collected on the sale of electricity are not recorded in utility revenue.

Cleco recognizes wholesale revenue, inclusive of both energy and capacity performance obligations, under the invoice practical expedient for the amount Cleco has the right to invoice.

Unbilled Revenue

Cleco Power accrues estimated revenue monthly for energy used by customers but not yet billed. The monthly estimated unbilled revenue amounts are recorded as unbilled revenue and a receivable. Cleco Power uses actual customer energy consumption data available from AMI to calculate unbilled revenues.

Other Operations Revenue

Other operations revenue is recognized at the time products or services are provided to and accepted by customers, and collectability is reasonably assured.

Sales and Use Taxes

Cleco collects a sales and use tax on the sale of electricity that subsequently is remitted to the state in accordance with state law. These amounts are not recorded as income or expense on Cleco’s or Cleco Power’s Consolidated Statements of Income but are reflected at gross amounts on Cleco’s and Cleco Power’s Consolidated Balance Sheets as a receivable until the tax is collected and as a payable until the liability is paid.

Franchise and Consumer Fees

Cleco Power operates under nonexclusive franchise rights granted by municipalities through franchise agreements in which franchise fees are collected and paid. A portion of the franchise fees associated with these franchise agreements is collected by Cleco Power from its retail customers and submitted to the municipality. These fees are recorded as a

receivable until it is collected and as a payable until the liability is paid.

Cleco Power also pays periodic franchise fees to the government units, which may include upfront payments upon the renewal of the franchise agreement. The upfront payments are amortized over the life of the franchise agreement and the periodic fees are expensed in the period in which they are incurred. These amounts are recovered from retail customers through base rates.

Cleco Power collects a consumer fee for one of its franchise agreements. This fee is not recorded on Cleco’s and Cleco Power’s Consolidated Statements of Income as revenue and expense, but is reflected at gross amounts on Cleco’s and Cleco Power’s Consolidated Balance Sheets as a receivable until it is collected and as a payable until the liability is paid.

AFUDC and Capitalized Interest

The capitalization of AFUDC by Cleco Power is a utility accounting practice prescribed by FERC and the LPSC. AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance construction of new and existing facilities. While cash is not realized currently from

such allowance, AFUDC increases the revenue requirement over the same life of the plant through a higher rate base and higher depreciation. Under regulatory practices, a return on and recovery of AFUDC is permitted in setting rates charged for utility services. For 2020, Cleco Power’s average short-term debt balance exceeded its average construction work-in-progress balance; however, Cleco Power elected the FERC capital structure waiver contained in FERC Docket Number AC20-127-000. The FERC waiver allowed Cleco Power to substitute the average short-term debt of the prior year for the short-term debt balance in the AFUDC rate calculation to compensate for effects of carrying larger short-term debt balances to accommodate unexpected COVID-19 expenses.

The capitalization of interest by Cleco Cajun represents the cost of capital funds used to finance plant additions during the construction period. Interest is capitalized as part of the cost of the utility plant and amortized over the related assets’ useful lives.

The following tables show the composite AFUDC rates, including borrowed and other funds, and the capitalized interest rate for the years ended December 31, 2022, 2021, and 2020:

Fair Value Measurements and Disclosures

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 disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes. For more information about fair value levels, see Note 7 — “Fair Value Accounting Instruments.”

Derivatives and Other Risk Management Activity

Accounting guidance requires derivative instruments and hedging activities to be recognized at fair value on the balance sheet. Cleco may elect the normal purchase and normal sale scope exception to the application of fair value accounting for these instruments and activities if they meet certain accounting criteria. Cleco’s Energy Market Risk Management Policy authorizes hedging against commodity price risk with physical or financially settled derivative instruments. For Cleco Power, due to regulatory treatment, associated mark-to-market adjustments for changes in fair value of recognized derivatives are generally recognized in Accumulated deferred fuel on the balance sheet. For Cleco Cajun, the changes in the fair value of recognized derivatives are recorded in current earnings. For

more information on derivative instruments, see Note 8 — “Derivative Instruments.”

Accounting for MISO Transactions

Cleco Power and Cleco Cajun participate in MISO’s Energy and Operating Reserve market and have the opportunity to participate in the MISO capacity market. If the hourly activity nets to sales, the results are reported in Electric operations on Cleco’s and Cleco Power’s Consolidated Statements of Income. If the hourly activity nets to purchases, the results are reported in Purchased power on Cleco’s and Cleco Power’s Consolidated Statements of Income. Power sales and purchases in the MISO market are made at prevailing market prices, also known as LMP, which represents the cost of providing the next MW of electrical energy at a specific location on the grid. LMP includes a component directly related to congestion on the transmission system and, as a result, can be different based on the location and time of the day the energy is dispatched causing energy costs to increase.

Leases

Cleco determines if a contract is a lease at its inception. A lease is deemed to exist when the right to control the use of identified property, plant, or equipment is conveyed through a contract for a certain period of time and consideration is paid.

If a contract is determined to be a lease, Cleco recognizes a ROU asset and lease liability at the commencement date based on the present value of lease payments over the lease term. The present value of the lease payments is determined by using the implicit interest rate if readily determinable. Cleco’s incremental borrowing rate for a term similar to the duration of the lease based on information available at the commencement date is used if the implicit interest rate is not readily determinable.

Cleco recognizes ROU assets and lease liabilities for leasing arrangements with terms greater than one year. Except for the marine transportation asset class, Cleco accounts for lease and non-lease components in a contract as a single lease component for all classes of underlying assets. Cleco’s marine transportation contracts, which include barges and towboats, contain non-lease components, such as maintenance and labor. Cleco allocates the consideration in these contracts between lease and non-lease components based on estimates of fair value from third parties that typically execute leases for this class of assets.

Expense for a lessee operating lease is recognized as a single lease cost on a straight-line basis over the lease term and reflected in the appropriate income statement line item based on the leased asset’s function. Income for a lessor operating lease is recognized as a single lease income item on a straight-line basis over the lease term and reflected in the appropriate income statement line item based on the lease asset’s function. For more information on leases, see Note 3 — “Leases.”

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 could be applied from March 12, 2020, through December 31, 2022. Management has identified contracts with reference rates that will be discontinued, primarily related to long-term debt obligations. Certain debt contracts have been amended to include fallback provisions that provide substitute reference rates in the event LIBOR is discontinued or deemed to no longer be representative or prior to such events, at the option of Cleco and the administrative agent. Management will continue to modify contracts to include similar fallback language and expects to apply this guidance on an ongoing basis. Management does not expect this guidance to have a significant impact on the Registrants’ results of operations, financial condition, or cash flows.

In November 2021, FASB issued guidance requiring annual disclosures about government assistance with the objective of increasing transparency and reducing existing diversity in practice. This guidance requires disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on the entity’s financial statements. This guidance is effective for annual periods beginning after December 15, 2021. Funding is being sought for relief of incurred storm costs. In addition, a congressional appropriation has been secured, subject to the U.S.

Department of Energy’s grant process, to help offset future costs associated with Cleco Power’s Project Diamond Vault. Management will continue to monitor this activity to determine what, if any, disclosures are required. Management does not expect this guidance to have a significant impact on the results of operations financial condition, or cash flows of the Registrants.

Note 3 — Leases

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

Operating Leases

Cleco Power leases utility systems from two municipalities and one non-municipal public body. One municipal lease has a term of 10 years and expires on August 11, 2031. The second municipal lease has a term of 10 years and expires on May 13, 2028. The non-municipal lease has a term of 27 years and expires on July 31, 2039. Each utility system lease contains fixed and variable components, as well as provisions for extensions.

During 2021, Cleco Power renewed its lease for 113 railcars for coal transportation, which expires on March 31, 2024. Cleco Power reassesses its need for the railcars upon the expiration of each term. Cleco Power pays a monthly rental fee per car. The railcar lease does not contain contingent rent payments.

Cleco Power has leases for three towboats in order to transport petroleum coke to Madison Unit 3. Each of the towboat leases has a term of 10 years and expires on March 31, 2028. Under these agreements, the rates are adjusted annually per the Producer Price Index. Each lease contains provisions for a five-year extension.

Cleco’s and Cleco Power’s remaining operating leases provide for office and operating facilities, office equipment, and tower rentals.

The following is a schedule by year of future minimum lease payments due under Cleco’s and Cleco Power’s long-term operating leases together with the present value of the net minimum lease payments as of December 31, 2022:


(THOUSANDS)	CLECO POWER		CLECO
Years ending Dec. 31,
2023	$	3,534	$	3,565
2024	3,398		3,422
2025	3,275		3,278
2026	3,241		3,244
2027	3,221		3,221
Thereafter	10,026		10,026
Total minimum lease payments	26,695		26,756
Less: amount representing interest	4,002		4,011
Present value of net minimum operating lease payments	$	22,693	$	22,745
Current liabilities	$	2,903	$	2,926
Non-current liabilities	$	19,790	$	19,819

Finance Lease

In April 2018, Cleco Power entered into an agreement with Savage Inland Marine for continued use of 42 barges used to transport petroleum coke to Madison Unit 3 through March 2033. The agreement meets the accounting definition of a finance lease.

The barge lease rate contains both a fixed and variable component, of which the latter is adjusted every third anniversary of the agreement for estimated executory costs. If the barges are idle, the lessor is required to attempt to sublease the barges to third parties with the revenue reducing Cleco Power’s lease payment. This agreement contains a provision for early termination upon the occurrence of any one of four cancellation events.

For each of the years ended December 31, 2022, 2021, and 2020, Cleco Power paid $2.2 million in lease payments. For the years ended December 31, 2022, 2021, and 2020, Cleco Power received $0.6 million, $0.2 million, and $0.8 million, respectively, of revenue from subleases.

The following is an analysis of the leased property under the finance lease:


(THOUSANDS)	AT DEC. 31, 2022		AT DEC. 31, 2021
Barges	$	16,800	$	16,800
Accumulated amortization	(5,320)		(4,200)
Net finance lease asset	$	11,480	$	12,600

The following is a schedule by year of future minimum lease payments due under the finance lease together with the present value of the net minimum lease payments as of December 31, 2022:


(THOUSANDS)
Years ending Dec. 31,
2023	$	2,203
2024	2,203
2025	2,203
2026	2,203
2027	2,203
Thereafter	11,066
Total minimum lease payments	22,081
Less: amount representing interest	8,274
Present value of net minimum finance lease payments	$	13,807
Current liabilities	$	836
Non-current liabilities	$	12,971

Additional Lessee Disclosures

Cleco’s and Cleco Power’s total lease cost includes amounts on the income statement, as well as amounts capitalized as part of property, plant, or equipment or inventory. The following tables reflect total lease costs for Cleco and Cleco Power for the years ended December 31, 2022, and 2021:


Cleco
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Finance lease cost
Amortization of ROU assets	$	1,120	$	1,120
Interest on lease liabilities	1,448		1,521
Operating lease cost	3,710		3,985

Variable lease cost	508		385

Total lease cost	$	6,786	$	7,011


Cleco Power
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Finance lease cost
Amortization of ROU assets	$	1,120	$	1,120
Interest on lease liabilities	1,448		1,521
Operating lease cost	3,675		3,845

Variable lease cost	508		385

Total lease cost	$	6,751	$	6,871

The following tables present additional information related to Cleco’s and Cleco Power’s operating and finance leases as of and for the years ended December 31, 2022, and 2021:


Cleco
		AT DEC. 31,
(THOUSANDS)	BALANCE SHEET LINE ITEM	2022		2021
Supplemental balance sheet information
ROU assets
Operating	Operating lease right of use assets	$	22,673	$	24,014
Finance	Property, plant, and equipment	11,480		12,600
Total ROU assets		$	34,153	$	36,614
Current lease liabilities
Operating	Other current liabilities	$	2,926	$	2,854
Finance	Long-term debt and finance leases due within one year	836		755
Non-current lease liabilities
Operating	Operating lease liabilities	19,819		21,128
Finance	Long-term debt and finance leases, net	12,971		13,807
Total lease liabilities		$	36,552	$	38,544


Cleco Power
		AT DEC. 31,
(THOUSANDS)	BALANCE SHEET LINE ITEM	2022		2021
Supplemental balance sheet information
ROU assets
Operating	Operating lease right of use assets	$	22,628	$	23,970
Finance	Property, plant, and equipment	11,480		12,600
Total ROU assets		$	34,108	$	36,570
Current lease liabilities
Operating	Other current liabilities	$	2,903	$	2,832
Finance	Long-term debt and finance leases due within one year	836		755
Non-current lease liabilities
Operating	Operating lease liabilities	19,790		21,100
Finance	Long-term debt and finance leases, net	12,971		13,807
Total lease liabilities		$	36,500	$	38,494


Cleco
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,720	$	3,938
Operating cash flows from finance leases	$	1,448	$	1,521
Financing cash flows from finance leases	$	755	$	682


Cleco Power
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,685	$	3,800
Operating cash flows from finance leases	$	1,448	$	1,521
Financing cash flows from finance leases	$	755	$	682


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Other supplemental information
Operating leases
Weighted-average remaining lease term	12.5 years		9.0 years
Weighted-average discount rate	4.36	%	4.30	%
Finance leases
Weighted-average remaining lease term	10.3 years		11.3 years
Weighted-average discount rate	10.18	%	10.18	%


Cleco Power
	AT DEC. 31, 2022
(THOUSANDS)	2022		2021
Other supplemental information
Operating leases
Weighted-average remaining lease term	11.4 years		9.0 years
Weighted-average discount rate	4.35	%	4.30	%
Finance leases
Weighted-average remaining lease term	10.3 years		11.3 years
Weighted-average discount rate	10.18	%	10.18	%

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 subsidiary with lessor arrangements. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback is included in Other operations within Cleco’s Consolidated Statement of Income. Cleco Cajun’s lease income under the Cottonwood Sale Leaseback for the years ended December 31, 2022, and 2021 was as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Fixed payments	$	40,000	$	40,000
Variable payments	22,359		18,226
Amortization of deferred lease liability (1)	9,205		9,205
Total lease income	$	71,564	$	67,431

(1) 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.

The remaining minimum lease payments to be received under the Cottonwood Sale Leaseback are as follows:


(THOUSANDS)
Years ending Dec. 31,
2023	$	40,000
2024	40,000
2025	16,667
Total payments	$	96,667

Depreciation expense associated with Cleco’s property under the Cottonwood Sale Leaseback for the years ended December 31, 2022, 2021, and 2020, was $33.9 million, $32.0 million, and $29.3 million, respectively. Cleco calculated depreciation on a straight-line basis over the useful life of the asset. Property associated with the Cottonwood Sale Leaseback was as follows:


			AT DEC. 31,
(THOUSANDS)	2022		2021
Property, plant, and equipment	$	572,044	$	552,659
Accumulated depreciation	(117,981)		(84,065)
Net property, plant, and equipment	$	454,063	$	468,594

Note 4 — Revenue Recognition

Revenue from Contracts with Customers

Retail Revenue

Retail revenue from contracts with customers is generated primarily from Cleco’s regulated electric sales from residential, commercial, and industrial customers. Cleco Power recognizes retail revenue from these contracts as a series, and progress towards satisfaction of the performance obligation is measured using an output method based on kWh delivered. Accordingly, revenue from electricity sales is recognized as energy is delivered to the customer. Cleco Power bills retail customers, based on rates regulated by the LPSC, on a monthly basis with payments generally due within 20 days of the invoice date.

Included in retail revenue is unbilled electric revenue, which represents the amount customers will be billed for services rendered from the meter reading from the most recent bill to the end of the respective accounting period. Actual customer energy consumption data available from AMI is used to calculate unbilled revenue. Also included in retail revenue is electric customer credits, which primarily represents the credits to retail customers for the federal tax-related benefits of the TCJA prior to the settlement of the current retail rate plan. Subsequent to the settlement of the current retail rate plan, these credits offset base revenue.

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


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Total Cleco Power regulatory assets, net	$	436,448	$	663,621
2016 Merger adjustments (1)
Fair value of long-term debt	104,748		112,150
Postretirement costs	11,436		13,424
Financing costs	6,904		7,248
Debt issuance costs	4,587		4,920
Total Cleco regulatory assets, net	$	564,123	$	801,363

(1) Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

Acadia Unit 1 Acquisition Costs

In 2009, the LPSC approved Cleco Power’s request to establish a regulatory asset for costs incurred as a result of the acquisition by Cleco Power of Acadia Unit 1 and half of Acadia Power Station’s related common facilities. The Acadia Unit 1 acquisition costs are being recovered over a 30-year period beginning February 2010.

Accumulated Deferred Fuel

Cleco Power is allowed to recover the cost of fuel used for electric generation and power purchased for utility customers through the LPSC-established FAC or related wholesale contract provisions, which enable Cleco Power to pass on to its customers substantially all such charges. The difference between fuel and purchased power revenues collected from retail and wholesale customers and the current fuel and purchased power costs is generally recorded as Accumulated deferred fuel on Cleco Power’s Consolidated Balance Sheet. For 2022, approximately 78% of Cleco Power’s total fuel cost was regulated by the LPSC.

Affordability Study

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan. As a result, Cleco Power was allowed to establish a regulatory asset related to outside consulting fees for the assessment of Cleco Power’s practices and assistance in the identification of potential cost savings opportunities, while maintaining superior levels of employee safety, reliability, customer service, environmental stewardship, community involvement, and regulatory transparency. In July 2021, the regulatory asset began being amortized over 10 years.

AFUDC Equity Gross-Up

Cleco Power capitalizes equity AFUDC as a cost component of construction projects. Cleco Power has recorded a regulatory asset to recover the tax gross-up related to the equity component of AFUDC. These costs are being amortized over the estimated lives of the respective assets constructed.

AMI Deferred Revenue Requirement

In February 2011, the LPSC approved Cleco Power’s stipulated settlement in Docket No. U-31393 allowing Cleco Power to defer the estimated revenue requirements for the AMI project as a regulatory asset. In June 2014, the LPSC approved Cleco Power’s recovery of the AMI regulatory asset over the average life of the AMI meters, or 11 years. In July 2014, Cleco Power began recovering the AMI deferred revenue requirement.

AROs

Cleco Power recorded an ARO liability for the retirement of certain ash disposal facilities. The ARO regulatory asset represents the accretion of the ARO liability and the depreciation of the related assets. For more information on the accounting treatment and net changes of Cleco Power’s AROs, see Note 2 — “Summary of Significant Accounting Policies — AROs,” and Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments.”

Bayou Vista To Segura Transmission Project Deferred Revenue Requirement

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan. As a result, Cleco Power was allowed to establish a regulatory asset and recover the revenue requirements, including interest at Cleco Power’s weighted average cost of capital, starting in the month after completion of each phase of the Bayou Vista to Segura Transmission project. The northern phase of the project was completed in August 2021, and the southern phase was completed in December 2021. At December 31, 2022, Cleco Power had a regulatory asset for the deferred revenue associated with the Bayou Vista to Segura Transmission project. The regulatory asset is being amortized over 12 months beginning July 1, 2022.

Coughlin Transaction Costs

In January 2014, the LPSC authorized Cleco Power to create a regulatory asset for the transaction costs related to the transfer of Coughlin from Evangeline to Cleco Power. The Coughlin transaction costs are being recovered over a 35-year period beginning July 2014.

COVID-19 Executive Order

On March 13, 2020, the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. This order resulted in an increase of expenses and a loss of revenue for Cleco Power. On April 29, 2020, the LPSC issued an order allowing utilities to establish a regulatory asset for expenses incurred from the suspension of disconnections and collection of late fees imposed by the LPSC executive order. On July 1, 2020, the LPSC issued an order terminating the moratorium on disconnections effective July 16, 2020. Cleco began resuming disconnections and late fees and utilizing collection agencies on October 1, 2020. 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 disconnection fees and incremental costs over a four-year period. Cleco Power has a regulatory asset for expenses incurred related to the executive order and anticipates approval by the LPSC for recovery of these expenses in the second quarter of 2023.

Deferred Lignite and Mine Closure Costs

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. On March 17, 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine. Cleco Power has a regulatory asset for deferred

fuel and mine-related incurred costs, which were included in the application filed with the LPSC on January 31, 2022. Recovery of these costs is subject to a prudency review by the LPSC, which is currently in progress. For more information on the Oxbow mine, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.” For more information on the prudency review related to the deferred fuel and other mine-related closure costs, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — Deferred Lignite and Mine Closure Costs.”

Deferred Storm Restoration Costs

In 2020 and 2021, Cleco Power’s distribution and transmission systems sustained substantial damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola. Cleco Power established a separate regulatory asset to track and defer non-capital expenses associated with each corresponding storm, as approved by the LPSC.

On June 22, 2022, through Cleco Securitization I, Cleco Power completed a securitized financing of Storm Recovery Property, which included the previously mentioned storm restoration costs that were deferred as regulatory assets. In connection with that securitization financing, Cleco Securitization I used the net proceeds from its issuance of storm recovery bonds to purchase the Storm Recovery Property from Cleco Power. Prior to September 1, 2022, certain costs for Hurricanes Laura, Delta, and Zeta were recovered through the interim storm recovery rate. The balances remaining at December 30, 2022, for Hurricanes Laura, Delta, and Zeta are due to the timing of collections of the interim storm rate and are expected to be funded by the storm reserve, pending approval by the LPSC. The costs remaining at December 31, 2022, for Hurricane Ida are currently under a prudency review by the LPSC. Cleco Power is unable to determine the outcome or timing of such review. For more information on the storm recovery securitization financing, see Note 19 — “Securitization.”

Dolet Hills Power Station Closure Costs

In June 2020, Cleco Power revised depreciation rates for the Dolet Hills Power Station to utilize the December 31, 2021, expected end-of-life and early retirement of the Dolet Hills Power Station and defer depreciation expense to a regulatory asset for the amount in excess of the previously LPSC-approved depreciation rates.

The Dolet Hills Power Station was retired on December 31, 2021. On January 31, 2022, Cleco Power filed an application with the LPSC requesting approval of the regulatory treatment and recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station over 20 years. Cleco Power has a regulatory asset for stranded costs. These costs are currently under a prudency review by the LPSC. For more information on the Dolet Hills Power Station, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Risks and Uncertainties.” For more information on the prudency review for these costs see, “— Risks and Uncertainties.”

Energy Efficiency

In December 2018, Cleco Power filed a letter of intent with the LPSC to recover the under recovery of the accumulated decrease in revenues, also known as the LCFC, associated with the energy efficiency program for years 2014 through 2018 to be recovered over a four-year period. Cleco Power began collecting the accumulated LCFC revenues in Cleco Power’s energy efficiency rates effective March 1, 2019. On October 21, 2019, Cleco Power received notice of approval from the LPSC allowing recovery of the accumulated LCFC revenues.

Financing Costs

In 2011, Cleco Power entered into and settled two treasury rate locks. Of the $26.8 million in settlements, $7.4 million was deferred as a regulatory asset relating to ineffectiveness of the hedge relationships. Also in 2011, Cleco Power entered into a forward starting swap contract. These derivatives were entered into in order to mitigate the interest rate exposure on coupon payments related to forecasted debt issuances. In May 2013, the forward starting interest rate swap was settled at a loss of $3.3 million. Cleco Power deferred $2.9 million of the losses as a regulatory asset, which is being amortized over the terms of the related debt issuances.

Interest Costs

Cleco Power’s deferred interest costs include additional deferred capital construction financing costs authorized by the LPSC. These costs are being amortized over the estimated lives of the respective assets.

Madison Unit 3 Property Taxes

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan. As a result, beginning July 1, 2022, Cleco Power is allowed to recover property taxes paid for Madison Unit 3, including a carrying charge at Cleco Power’s weighted average cost of capital, grossed up for income taxes. The amount included in the cost recovery mechanism each year will amortize over 12 months.

Non-Service Cost of Postretirement Benefits

On January 1, 2018, FASB’s amended guidance related to defined benefit pension and other postretirement plans became effective. The amendment allows only the service cost component of net benefit cost to be eligible for capitalization within property, plant, and equipment. Beginning January 1, 2018, Cleco Power’s non-service cost previously eligible for capitalization into property, plant, and equipment are being deferred to a regulatory asset and will be amortized over the estimated lives of the respective assets.

Other

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan resulting in Cleco Power establishing several regulatory assets. Annually, Cleco Power is allowed to defer, as a regulatory asset, the undercollection of revenues related to the Northlake Transmission Agreement. The amount recorded in the regulatory asset will be amortized over the following regulatory period, beginning on July 1. At December 31, 2022, Cleco Power had a regulatory asset of $2.9 million relating to the Northlake Transmission Agreement.

In addition, the LPSC approved recovery of other previously deferred costs associated with Cleco Power’s current retail rate plan, which began being amortized over four

years on July 1, 2021. At December 31, 2022, Cleco Power had a regulatory asset of $7.3 million for these deferred costs.

In June 2017, the LPSC approved the establishment of a regulatory asset upon the completion of the Coughlin Pipeline project for the revenue requirement associated with the project, until Cleco Power’s current retail rate plan was approved. As approved by the LPSC in Cleco Power’s current retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021. At December 31, 2022, Cleco Power had a regulatory asset of $3.4 million related to the deferred revenue associated with the Coughlin Pipeline project.

Effective for income tax periods beginning on or after January 1, 2022, the Louisiana state corporate income tax rate was decreased from 8% to 7.5% and the state deduction for federal income taxes paid was eliminated. These changes resulted in an increase in income tax expense. Therefore, Cleco Power established a regulatory asset of $2.3 million for the increased revenue requirements associated with the income tax expense in excess of the amount previously approved by the LPSC. Cleco Power plans to seek recovery of this regulatory asset in its next rate case, which is required to be filed by March 31, 2023.

Postretirement Costs

Cleco Power recognizes the funded status of its postretirement benefit plans as a net liability or asset. The net liability or asset is defined as the difference between the benefit obligation and the fair market value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. Historically, the LPSC has allowed Cleco Power to recover pension plan expense. Cleco Power, therefore, recognizes a regulatory asset based on its determination that these costs can be collected from customers. These costs are amortized to pension expense over the average service life of the remaining plan participants (approximately five years as of December 31, 2022, for Cleco’s plan) when it exceeds certain thresholds. The amount and timing of the recovery will be based on the changing funded status of the pension plan in future periods. For more information on Cleco’s pension plan and adoption of these authoritative guidelines, see Note 10 — “Pension Plan and Employee Benefits.”

Production Operations and Maintenance Expenses

Annually, Cleco Power is allowed to defer, as a regulatory asset, production operations and maintenance expenses, net of fuel and payroll, above the retail jurisdictional portion of $34.9 million, adjusted annually for a growth factor (deferral threshold). The amount of the regulatory asset is capped at $25.0 million. The LPSC allows Cleco Power to recover the amount deferred in any calendar year over the following three-year regulatory period, beginning on July 1, when the annual rates are set. Cleco Power had a deferral of $2.4 million in 2022 and a deferral of $9.7 million in 2021.

Rodemacher Unit 2 Deferred Costs

As a result of environmental regulations enacted during 2020, Cleco Power revised Rodemacher Unit 2’s expected end-of-life to coincide with its application to the EPA for an alternative closure date of October 17, 2028. Rodemacher Unit 2’s depreciation expense in excess of the previously LPSC-approved depreciation rates are deferred to a regulatory asset.

St. Mary Clean Energy Center

Cleco Power has a regulatory asset for the revenue requirements related to the planning and construction costs incurred for the St. Mary Clean Energy Center. As approved by the LPSC in Cleco Power’s current retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021.

On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The approved settlement also included refunding $10.4 million to Cleco Power’s retail customers. As a result, a regulatory asset of $3.8 million was recognized for the incurred refund liability for retail revenues that will continue to be collected until Cleco Power’s current base rates are reset in its next rate case, which is expected on July 1, 2024. On October 1, 2022, Cleco Power began amortizing the $3.8 million regulatory asset to Electric customer credits on its Consolidated Statement of Income as amounts are collected from customers. For more information on the settlement and disallowance, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

Training Costs

In 2008, the LPSC approved Cleco Power’s request to establish a regulatory asset for training costs associated with existing processes and technology for new employees at Madison Unit 3. Recovery of these expenditures was approved by the LPSC in 2009. In 2010, Cleco Power began amortizing the regulatory asset over a 50-year period.

Tree Trimming Costs

In October 2016, the LPSC approved Cleco Power to defer and recover through its base rates tree trimming costs. The LPSC authorized a deferral up to $10.9 million, excluding debt carrying costs. Cleco Power is currently collecting deferred tree trimming costs through its base rates and expects them to be fully amortized by 2026.

Cleco Holdings’ 2016 Merger Adjustments

As a result of the 2016 Merger, Cleco implemented acquisition accounting, which eliminated AOCI at the Cleco consolidated level on the date of the 2016 Merger. Cleco will continue to recover expenses related to certain postretirement costs; therefore, Cleco recognized a regulatory asset based on its determination that these costs that are probable of recovery continue to be collected from customers. These costs will be amortized to Other operations expense over the average remaining service period of participating employees. Cleco will also continue to recover financing costs associated with the settlement of two treasury rate locks and a forward starting swap contract that were previously recognized in AOCI. Additionally, as a result of the 2016 Merger, a regulatory asset was recorded for debt issuance costs that were eliminated at Cleco and a regulatory asset was recorded for the difference between the carrying value and the fair value of long-term debt. These regulatory assets are being amortized over the terms of the related debt issuances, unless the debt is redeemed prior to maturity, at which time any unamortized related regulatory asset will be derecognized.

Deferred Taxes, Net

The regulatory assets and liabilities recorded for deferred income taxes represent the effect of tax benefits or detriments that must be flowed through to customers as they are received or paid. The amounts deferred are attributable to differences between book and tax recovery periods. In 2017, the TCJA was enacted. Changes in the IRC from the TCJA had a material impact on the Registrants’ financial statements in 2017. Tax effects of changes in tax laws must be recognized in the period in which the law is enacted. Also, deferred tax assets and liabilities must be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. At December 31, 2022, and 2021, Cleco and Cleco Power had $257.4 million and $302.0 million, respectively, accrued for the excess ADIT as a result of the TCJA. For more information on the status of the TCJA regulatory liability, see Note 13 — “Regulation and Rates — Regulatory Refunds — TCJA.”

Storm Reserves

On June 22, 2022, in conjunction with the storm recovery securitization financing and pursuant to the financing order issued by the LPSC on April 1, 2022, newly funded storm reserves for future storm restoration costs and Hurricane Ida storm restoration costs were established. Upon the closing of the securitization financing, Cleco Power withdrew $79.6 million from the LPSC approved Hurricane Ida storm reserve. At December 31, 2022, Cleco Power had total storm

reserves of $118.8 million, comprised of $103.3 million for future storm restoration costs and $15.5 million related to the Hurricane Ida storm reserve. The current portion of $9.4 million for the Hurricane Ida storm reserve is recorded in Other current liabilities on Cleco’s and Cleco Power’s Consolidated Balance Sheets. The current portion represents those deferred storm costs recorded in the related Hurricane Ida regulatory asset that are currently under a prudency review by the LPSC.

Note 6 — Jointly Owned Generation Facilities

Cleco Power and Cleco Cajun operate electric generation units that are jointly owned with other utilities. The joint-owners are responsible for their own share of the capital and the operating and maintenance costs of the respective units. Cleco Power and Cleco Cajun are responsible for their own share of the direct expenses of their respective jointly owned generation units. Cleco Power’s share of expenses is included in the operating expenses on Cleco’s and Cleco Power’s Consolidated Statements of Income. Cleco Cajun’s share of expenses is included in the operating expenses on Cleco’s Consolidated Statement of Income.

At December 31, 2022, the investment in and accumulated depreciation for each generating facility on Cleco’s and Cleco Power’s Consolidated Balance Sheets were as follows:

Natural Gas Derivatives

Cleco Power and Cleco Cajun enter into physical and financial natural gas commodity contracts from time to time. Management has not elected to apply hedge accounting to these contracts as allowed under applicable accounting standards. Physical instruments include long-term purchase contracts. Financial instruments include swaps contracts. Cleco Power’s natural gas derivative contracts are marked-to-market with the resulting unrealized gain or loss recorded as a component of Accumulated deferred fuel on the balance sheet. At settlement, realized gains or losses are included in Cleco Power’s FAC and reflected on customer’s bills as a component of the fuel charge. Cleco Cajun’s unrealized gains or losses as well as realized gains or losses at settlement are recorded on the income statement as a component of fuel expense.

Fair Value Measurements on a Nonrecurring Basis

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


Cleco
	AT DEC. 31,
	2022				2021
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	3,482,556	$	3,180,208	$	3,482,405	$	3,752,220

* The carrying value of long-term debt does not include deferred issuance costs of $16.2 million at December 31, 2022, and $13.2 million at December 31, 2021.


Cleco Power
	AT DEC. 31,
	2022				2021
(THOUSANDS)	CARRYING VALUE*		FAIR VALUE		CARRYING VALUE*		FAIR VALUE
Long-term debt	$	1,895,508	$	1,825,192	$	1,820,254	$	2,085,944

* The carrying value of long-term debt does not include deferred issuance costs of $12.3 million at December 31, 2022, and $7.9 million at December 31, 2021.

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 fixed and variable rate debt with similar tenors and credit ratings change. The fair value of the debt could also change from period to period due to changes in the credit rating of the Cleco entity by which the debt was issued. The fair value of long-term debt is classified as Level 2 in the fair value hierarchy.

Concentrations of Credit Risk

At December 31, 2022, Cleco and Cleco Power were exposed to concentrations of credit risk through their short-term investments classified as cash equivalents and restricted cash equivalents. If the money market funds failed to perform under the terms of the investments, Cleco and Cleco Power would be exposed to a loss of the invested amounts. Collateral on these

types of investments is not required. The Level 1 money market funds asset consists of a single class. In order to capture interest income and minimize risk, cash is invested in money market funds that invest primarily in short-term securities issued by the U.S. government to maintain liquidity and achieve the goal of a net asset value of a dollar. The risks associated with this class are counterparty risk of the fund manager and risk of price volatility associated with the underlying securities of the fund.

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 potentially incur replacement cost losses. Cleco enters into master agreements with counterparties that govern the risk of credit default and allow for collateralization above prenegotiated thresholds to help mitigate potential losses. Alternatively, Cleco may be required to provide credit support 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 the amount of the initial contract, changes in the market price, changes in open contracts, changes in the amounts counterparties owe to Cleco, and any prenegotiated unsecured thresholds agreed to in the master contract. Changes in any of these factors could cause the amount of requested credit support to increase or decrease.

Note 8 — Derivative Instruments

In the normal course of business, Cleco is exposed to a number of market risks. Cleco uses derivatives primarily to mitigate commodity price risk, particularly fuel price risk. Cleco Power has limited exposure to effects of market price risk because it operates primarily under cost-based rate regulation. Cleco Power utilizes derivative instruments to hedge against the exposure of transmission congestion costs and price volatility inherent in fuel purchased for electric generation that are recovered from customers.

On Cleco’s Consolidated Balance Sheets, the fair value of amounts associated with Cleco Cajun’s derivative instruments are offset with related cash collateral balances with the same counterparty. Cleco has not elected to designate any of its current instruments as an accounting hedge. At December 31, 2022, cash collateral received from counterparties by Cleco Cajun was $6.5 million, all of which was netted against the current portion of Energy risk management assets on Cleco’s Consolidated Balance Sheet. At December 31, 2021, there was no cash collateral posted with or received from counterparties that was netted on Cleco’s Consolidated Balance Sheet. The following tables present the fair values of derivative instruments and their respective line items as recorded on Cleco’s and Cleco Power’s Consolidated Balance Sheets at December 31, 2022, and 2021:

Note 9 — Debt

Cleco Power’s total long-term indebtedness as of December 31, 2022, and 2021 was as follows:


Cleco Power
	AT DEC. 31,
(THOUSANDS)	2022		2021
Bonds
Senior notes, 2.94%, due 2022	$	—	$	25,000
Senior notes, 3.08%, due 2023	100,000		100,000
Senior notes, 3.17%, due 2024	50,000		50,000
Senior notes, 3.68%, due 2025	75,000		75,000
Senior notes, 3.47%, due 2026	130,000		130,000
Senior notes, 4.33%, due 2027	50,000		50,000
Senior notes, 3.57%, due 2028	200,000		200,000
Senior notes, 6.50%, due 2035	295,000		295,000
Senior notes, 6.00%, due 2040	250,000		250,000
Senior notes, 5.12%, due 2041	100,000		100,000
Senior notes, floating rate, due 2023	—		325,000
Series A GO Zone bonds, 2.50%, due 2038, mandatory tender in 2025	50,000		50,000
Series B GO Zone bonds, 4.25%, due 2038	50,000		50,000

Cleco Securitization I’s storm recovery bonds, 4.016%, due 2033	125,000		—
Cleco Securitization I’s storm recovery bonds, 4.646%, due 2044	300,000		—
Total bonds	1,775,000		1,700,000
Bank term loan, variable rate, due 2024	125,000		125,000
Finance leases


Barge lease obligations	13,807		14,562
Gross amount of long-term debt and finance leases	1,913,807		1,839,562
Long-term debt due within one year	(109,508)		(25,000)
Finance leases classified as long-term debt due within one year	(836)		(755)
Unamortized debt discount	(4,492)		(4,746)
Unamortized debt issuance costs	(12,524)		(8,207)
Total long-term debt and finance leases, net	$	1,786,447	$	1,800,854

Cleco’s total long-term indebtedness as of December 31, 2022, and 2021 was as follows:


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Total Cleco Power long-term debt and finance leases, net	$	1,786,447	$	1,800,854
Cleco Holdings’ long-term debt, net
Senior notes, 3.250%, due 2023	165,000		165,000
Senior notes, 3.743%, due 2026	535,000		535,000
Senior notes, 3.375%, due 2029	300,000		300,000
Senior notes, 4.973%, due 2046	350,000		350,000
Bank term loan, variable rate, due 2024	132,300		200,000

Long-term debt due within one year	(230,524)		(67,700)
Unamortized debt issuance costs(1)	(3,877)		(5,271)
Fair value adjustment	104,748		112,150
Total Cleco long-term debt and finance leases, net	$	3,139,094	$	3,390,033

(1) For December 31, 2022, and 2021, this amount includes unamortized debt issuance costs for Cleco Holdings of $8.5 million and $10.2 million, respectively, partially offset by deferred debt issuance costs eliminated as a result of the 2016 Merger of $4.6 million and $4.9 million, respectively. For more information, see Note 5 — “Regulatory Assets and Liabilities — Cleco Holdings’ 2016 Merger Adjustments.”

The principal amounts payable under long-term debt agreements for each year through 2027 and thereafter are as follows:


(THOUSANDS)	CLECO POWER		CLECO
For the year ending Dec. 31,
2023	$	109,574	$	274,574
2024	$	189,499	$	321,799
2025(1)	$	90,087	$	90,087
2026	$	145,699	$	680,699
2027	$	66,336	$	66,336
Thereafter	$	1,298,805	$	1,948,805

(1) Does not include Series A GO Zone bonds that have a maturity date of December 2038 but a mandatory tender in May 2025.

The principal amounts payable under the finance lease agreement for each year through 2027 and thereafter are as follows:


(THOUSANDS)	CLECO POWER		CLECO
For the year ending Dec. 31,
2023	$	836	$	836
2024	$	925	$	925
2025	$	1,023	$	1,023
2026	$	1,133	$	1,133
2027	$	1,253	$	1,253
Thereafter	$	8,637	$	8,637

For more information on the finance agreement, see Note 3 — “Leases — Finance Lease.”

Cleco Power

At December 31, 2022, Cleco Power had $110.3 million of long-term debt and finance leases due within one year. The amount due within one year primarily represents $100.0 million of Cleco Power’s senior notes due in December 2023 and $9.6 million of Cleco Securitization I storm recovery bond principal payments scheduled to be paid in March and September 2023.

On June 22, 2022, Cleco Securitization I issued $425.0 million aggregate principal amount of its senior secured storm recovery bonds. The storm recovery bonds were issued in two tranches. One tranche of $125.0 million aggregate principal amount was issued with an interest rate of 4.016% and an expected weighted average life of 4.79 years. A second tranche of $300.0 million aggregate principal amount was issued with an interest rate of 4.646% and an expected weighted average life of 15 years. The storm recovery bonds are governed by an indenture between Cleco Securitization I and the indenture trustee. The indenture contains certain covenants that restrict Cleco Securitization I’s ability to sell, transfer, convey, exchange, or otherwise dispose of its assets. For more information on the storm recovery securitization financing, see Note 19 — “Securitization.”

On June 23, 2022, following the closing of the storm recovery bonds offering, Cleco Power redeemed its $325.0 million floating rate senior notes issued in September 2021 at par.

On December 16, 2022, Cleco Power repaid its $25.0 million 2.94% fixed rate senior notes issued in December 2017 at par.

Other than Cleco Securitization I’s storm recovery bonds, all of Cleco Power’s debt outstanding at December 31, 2022, and 2021 is unsecured and unsubordinated.

Cleco

At December 31, 2022, Cleco had $340.9 million of long-term debt and finance leases due within one year. The long-term debt due within one year at December 31, 2022, primarily represents $165.0 million of Cleco Holdings’ senior notes due in May 2023, $100.0 million of Cleco Power’s senior notes due in December 2023, $65.6 million of principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC, and $9.6 million of Cleco Securitization I storm recovery bond principal payments scheduled to be paid in March and September 2023.

Other than Cleco Securitization I’s storm recovery bonds, all of Cleco’s debt outstanding at December 31, 2022, and 2021 is unsecured and unsubordinated.

Upon approval of the Cleco Cajun Transaction, commitments were made to the LPSC by Cleco, including repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. As of December 31, 2022, Cleco Holdings was in compliance with these commitments. The cumulative minimum principal amounts committed to be repaid for each year through 2024 are as follows:


(THOUSANDS)
For the year ending Dec. 31,
2019	$	66,700
2020	$	133,300
2021	$	200,000
2022	$	267,700
2023	$	333,300
2024	$	400,000

Credit Facilities

At December 31, 2022, Cleco had $109.0 million short-term debt outstanding under its two separate revolving credit facilities. Cleco Holdings’ credit facility, in the amount of $175.0 million, had $64.0 million of outstanding borrowings at December 31, 2022. Cleco Power’s credit facility, in the amount of $300.0 million, had $45.0 million of outstanding borrowings at December 31, 2022. The total of all revolving credit facilities creates a maximum aggregate capacity of $475.0 million. Cleco and Cleco Power had no short-term debt outstanding at December 31, 2021. Cleco Holdings and Cleco Power had no amounts outstanding under their uncommitted lines of credit at December 31, 2022, and 2021.

Cleco Holdings’ revolving credit facility provides funding for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in May 2026. Under covenants contained in Cleco Holdings’ revolving credit facility, Cleco is required to maintain total indebtedness less than or equal to 65.0% of total capitalization. At December 31, 2022, Cleco Holdings was in compliance with the covenants of its revolving credit facility. At December 31, 2022, the borrowing costs for amounts drawn under the facility were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275% paid on the unused portion of the facility. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and commitment fees of 0.125% and 0.05%,

respectively, under the pricing levels of its revolving credit facility.

Cleco Power’s revolving credit facility provides funding for working capital and other financing needs. The revolving credit facility includes restrictive financial covenants and expires in May 2026. Under covenants contained in Cleco Power’s revolving credit facility, Cleco Power is required to maintain total indebtedness less than or equal to 65.0% of total capitalization. At December 31, 2022, Cleco Power was in compliance with the covenants of its credit facility. At December 31, 2022, the borrowing costs for amounts drawn under the facility were equal to LIBOR plus 1.25% or ABR plus 0.25%, plus commitment fees of 0.15% paid on the unused portion of the facility. If Cleco Power’s credit ratings were to be downgraded one level by the credit rating agencies, Cleco Power may be required to pay incremental interest and commitment fees of 0.125% and 0.025%, respectively, under the pricing levels of its revolving credit facility. In February 2023, Cleco Holdings and Cleco Power amended their respective revolving credit facilities and bank term loans to transition the benchmark interest rate from LIBOR to SOFR.

If Cleco Holdings or Cleco Power were not to comply with certain 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 under the respective credit facility or debt agreement 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.

Note 10 — 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. Benefits under the plan reflect an employee’s years of service, age at retirement, and highest total average compensation for any consecutive five calendar years during the last ten years of employment with Cleco. Cleco’s policy is to base its contributions to the employee pension plan upon actuarial computations utilizing the projected unit credit method, subject to the IRS’s full funding limitation. Cleco did not make any required or discretionary contributions to the pension plan in 2022 or 2021. In December 2020, Cleco made a $15.8 million required contribution to the pension plan. Cleco has not made and does not expect to make any contributions in 2023. The required contributions are driven by liability funding target percentages set by law which could cause the required contributions to be uneven among the years. Based on the funding assumptions at December 31, 2022, management estimates that $74.5 million in pension contributions will be required through 2027. Future discretionary contributions may be made depending on changes in assumptions, the ability to utilize the contribution as a tax deduction, and requirements concerning recognizing a minimum pension liability. Adverse changes in assumptions or adverse actual events could cause additional minimum contributions. The ultimate amount and timing of the contributions may be affected by changes in the discount rate, changes in the funding regulations, and actual returns on fund assets. Cleco Power is the plan sponsor and Support Group is the plan administrator.

The following is a reconciliation of the beginning and ending balances of the pension plan’s real estate funds measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2022, and 2021:


(THOUSANDS)
Balance, Dec. 31, 2020	$	35,962
Realized gains	503
Unrealized gains	3,524
Purchases	1,865
Sales	(2,763)
Balance, Dec. 31, 2021	$	39,091
Realized losses	(2,451)
Unrealized gains	4,112
Purchases	2,027
Sales	(3,409)
Balance, Dec. 31, 2022	$	39,370

The market-related value of plan assets differs from the fair value of plan assets by the amount of deferred asset gains or losses. Actual asset returns that differ from the expected return on plan assets are deferred and recognized in the market-related value of assets on a straight-line basis over a five-year period. For 2022, the return on plan assets was (19.94)% compared to an expected long-term return of 5.25%. The 2021 return on pension plan assets was 7.14% compared to an expected long-term return of 5.00%. As of December 31, 2022, none of the pension plan participants’ future annual benefits are covered by insurance contracts.

Pension Plan Investment Objectives

Cleco’s Retirement Committee has established investment performance objectives of the pension plan assets. Over a rolling three- to five-year annualized period, the objectives are for the pension plan’s annualized total return to:

•Exceed the (FAS) actuarial assumed rate of return on plan assets, and

•Exceed the annualized total return of the following customized index (based on the target allocation in the glide path) consisting of a mixture of S&P 500 Index, Russell 2500 Index, Morgan Stanley Capital International All Country World ex U.S. Index, Morgan Stanley Capital International Emerging Markets Index, Custom Index related to Multi-Asset Credit asset class, Bloomberg Barclays Capital Long Credit Index, Bloomberg Barclays 15+ Year Treasury STRIPS, Bloomberg Barclays Intermediate/Government Credit Index, and National Council of Real Estate Investment Fiduciaries Index.

Risk characteristics of the portfolio (annualized standard deviation of returns) should be similar to or less than the custom index.

In order to meet the objectives and to control risk, the Retirement Committee has established the following guidelines that the investment managers must follow:

U.S. Equity Portfolios

•Equity holdings in any single company (including common stock and convertible securities) must not exceed 10% of the manager’s portfolio measured at market value.

•A minimum of 25 stocks should be owned in the portfolio.

•Equity holdings should represent 90% of the portfolio at all times.

•Equity holdings in any one economic sector (as defined by the Global Industry Classification Standard) should not exceed the lesser of three times the sector’s weighting in the S&P 500 Index or 35% of the portfolio.

•Marketable common stocks, preferred stocks convertible into common stocks, and fixed income securities convertible into common stocks are the only permissible equity investments.

•Securities in foreign (non-U.S.) entities denominated in U.S. dollars are limited to 10% of the manager’s portfolio measured at market value. Securities denominated in currencies other than U.S. dollars are not permissible investments.

•The purchase of securities on margin and short sales is prohibited.

International Equity - Developed Markets Portfolios

•Equity holdings in a single company (including common stock and convertible securities) should not exceed 5% of the manager’s portfolio measured at market value.

•A minimum of 30 individual stocks should be owned in the portfolio.

•Equity holdings in any industry sector (as defined by the Global Industry Classification Standard) should not exceed 35% of the portfolio measured at market value.

•A minimum of 50% of the countries within the Morgan Stanley Capital International All Country World ex U.S. Index should be represented within the portfolio. The allocation to an individual country should not exceed the lesser of 30% or 5 times the country’s weighting within the Morgan Stanley Capital International All Country World ex U.S. Index.

•Currency hedging decisions are at the discretion of the investment manager.

Emerging Markets Portfolios

•Equity holdings in any single company (including common stock and convertible securities) should not exceed 10% of the manager’s portfolio measured at market value.

•A minimum of 30 individual stocks should be held within the portfolio.

•Equity holdings in any one industry (as defined by Global Industry Classification Standard) should not exceed 25% of the manager’s portfolio at market value.

•Equity investments must represent at least 75% of the portfolio under normal circumstances.

•A minimum of three countries should be represented within the portfolio.

•Illiquid securities which are not readily marketable may represent no more than 10% of portfolio assets.

•Currency hedging decisions are at the discretion of the investment manager.

Multi-Asset Credits

•Assets can include, but would not be limited to, high yield debt, emerging market debt, global investment grade credit and bank loans, as well as fixed income strategies.

•Currency hedging decisions are the discretion of the investment manager.

Treasury STRIPS

•The STRIPS are synthetic zero-coupon bonds that are created by separating each coupon and principal payment

of a treasury bond into a separate security. STRIPS take the form of a zero-coupon bond which is sold at a discount to face value and mature at par. They are backed by U.S. Treasury securities.

•Implementation of the portfolio is either through Treasury Futures or purchase of Treasury STRIPS through an investment manager.

•The benchmark would be Bloomberg Barclays 15+ Year Treasury STRIPS.

Fixed Income Portfolios - Long Credit and Intermediate Government Credit

•Permitted securities include all U.S. dollar denominated investment grade corporate debt, including sovereign, super-nationals, and Yankee bonds, U.S. government obligations and agency debt, all U.S. dollar denominated investment grade mortgage-backed securities, all U.S. dollar investment grade private placements or securities issued as 144A with or without registration rights.

•The portfolio can invest in surplus notes, trust preferred, E-Caps, and Hybrids. These types of securities do have risk of coupon deferral.

•The portfolio can invest in both senior and subordinated debt and money market securities: Treasury Bills, Commercial or Asset-backed paper rated A1/P1 or higher.

•The duration of the portfolio must be within +/- 1 year of benchmark.

•Sub-asset classes included but not limited to: cash, government, government related securities investment, grade credit, mortgage-backed securities asset-backed, securities, private placements, commercial mortgage-backed securities taxable municipal bonds

•High yield up to 5% from downgrades with no securities to be held below B- (rated by major rating agencies). Not allowed to purchase high yield securities. (120 day cure period for downgrades below B- - -)

•Securities must have a maximum position size of 5% for A rated securities and 3% for BBB rated securities.

•Treasury STRIPS managers will have the discretion to utilize U.S. treasury futures and STRIPS as needed to adjust the portfolio duration.

Real Estate Portfolios

•Real estate funds should be invested primarily in direct equity positions, with debt and other investments representing less than 25% of the fund.

•Leverage should be no more than 70% of the gross market value of the fund.

•Investments should be focused on existing income-producing properties, with land and development properties representing less than 40% of the fund.

The use of futures and options positions which leverage portfolio positions through borrowing, short sales, or other encumbrances of the Plan’s assets is prohibited. The Long Duration fixed income managers, Intermediate Government Credit and Treasury STRIPS manger(s) are exempt from the prohibition on derivatives use, due to the nature of long duration fixed income management.

The investment manager shall not purchase any securities of its organization or affiliated entities.

The following chart shows the dynamic asset allocation based on the funded ratio at December 31, 2022:


	PERCENT OF TOTAL PLAN ASSETS
			AT DEC. 31, 2022
	MINIMUM		TARGET		MAXIMUM
Return-seeking
Domestic equity			19	%
International equity			20	%
Multi-asset credit			6	%
Real estate			5	%
Total return-seeking	45	%	50	%	55	%
Liability hedging*	45	%	50	%	55	%
*Liability hedging has no target subcategories.

The assumed health care cost trend rates used to measure the expected cost of Other Benefits is 5.0% for 2023 and remains at 5.0% thereafter. The rate used for 2022 was also 5.0%. Assumed health care cost trend rates have a limited effect on the amount reported for Cleco’s health care plans.

The projected benefit payments for the employee pension plan and Other Benefits plan for each year through 2027 and the next five years thereafter are listed in the following table:


(THOUSANDS)	PENSION BENEFITS		OTHER BENEFITS, GROSS
For the year ending Dec. 31,
2023	$	30,509	$	5,163
2024	$	31,117	$	4,937
2025	$	32,015	$	4,741
2026	$	32,596	$	4,619
2027	$	33,101	$	4,526
Five years thereafter	$	172,598	$	20,325

SERP

Certain Cleco officers are covered by SERP. In 2014, SERP was closed to new participants; however, with regard to current SERP participants, including former employees or their beneficiaries, all terms of SERP will continue, other than as described below. SERP is a non-qualified, non-contributory, defined benefit pension plan. Generally, benefits under the plan reflect an employee’s years of service, age at retirement, and the sum of (a) the highest base salary paid out over the last five calendar years and (b) the average of the five highest cash bonuses paid during the 60 months prior to retirement. SERP benefits are reduced by retirement benefits received from any other defined benefit pension plan, supplemental executive retirement plan, or Cleco contributions under the enhanced 401(k) Plan to the extent such contributions exceed the amount the employee would have received under the terms of the original 401(k) Plan. Management reviews current market trends as it evaluates Cleco’s future compensation strategy.

Cleco does not fund the SERP liability, but instead pays for current benefits out of the cash available of the respective company of the employed officer. Because the SERP is a non-qualified plan, Cleco has purchased life insurance policies on certain SERP participants as a mechanism to provide a source of funding. These polices are held in a rabbi trust formed by Cleco Power. The rabbi trust is the named beneficiary of the life insurance policies and, therefore, receives the proceeds upon death of the insured participants. The life insurance policies may be used to reimburse Cleco for benefits paid from

The expense related to SERP reflected on Cleco Power’s Consolidated Statements of Income for the years ended December 31, 2022, 2021, and 2020 was $0.6 million, $0.6 million, and $1.0 million, respectively.

Liabilities relating to SERP are reported on the individual subsidiaries’ financial statements. The current and non-current portions of the SERP liability for Cleco and Cleco Power at December 31, 2022, and 2021 are as follows:


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Current	$	4,713	$	4,654
Non-current	$	63,714	$	88,523


Cleco Power
	AT DEC. 31,
(THOUSANDS)	2022		2021
Current	$	672	$	679
Non-current	$	9,087	$	12,909

The projected benefit payments for SERP for each year through 2027 and the next five years thereafter are shown in the following table:


(THOUSANDS)	2023		2024		2025		2026		2027		FIVE YEARS THEREAFTER
SERP	$	4,840	$	4,908	$	5,054	$	5,175	$	5,133	$	25,167

401(k)

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 years ended December 31, 2022, 2021, and 2020 was as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
401(k) Plan expense	$	8,704	$	9,366	$	9,685

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 years ended December 31, 2022, 2021, and 2020 was as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
401(k) Plan expense	$	4,079	$	4,350	$	4,424

Effective September 30, 2021, the 401(k) plan was amended to offer an enhanced 401(k) benefit to certain employees participating in the plan that elected to retire during a certain retirement window. Those certain employees who elected by September 30, 2021, to receive the enhanced 401(k) benefits received a one-time contribution up to 30% of the employee’s 2021 base salary in accordance with IRS contribution limits. This resulted in a one-time benefit cost of $0.2 million that was included as an expense of the 401(k) plan.

Note 11 — Income Taxes

Cleco

For the year ended December 31, 2022, and 2021, income tax expense was lower than the amount computed by applying the statutory federal rate. For the year ended December 31, 2020, income tax expense was higher than the amount computed by applying the statutory federal rate. The differences are as follows:


				FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)	2022			2021			2020
Income before tax	$	189,728		$	208,077		$	158,018
Statutory rate	21.0		%	21.0		%	21.0		%
Tax expense at federal statutory rate	$	39,843		$	43,696		$	33,184
Increase (decrease)
Flowthrough of tax benefits	(12,272)			(356)			5,100

State income taxes, net of federal benefit	12,177			9,619			7,190


Return to accrual adjustment	128			(3,862)			7,218
Permanent adjustments	(6,578)			(91)			(33)

Amortization of excess ADIT	(32,639)			(37,254)			(16,667)
Other, net	258			1,359			(274)
Total tax expense	$	917		$	13,111		$	35,718
Effective rate	0.5		%	6.3		%	22.6		%

Information about current and deferred income tax expense is as follows:


			FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Current federal income tax expense (benefit)	$	1,351	$	(2)	$	(2,634)
Deferred federal income tax expense (benefit)	2,546		(9,581)		21,865
Amortization of accumulated deferred investment tax credits	(134)		(142)		(159)
Total federal income tax (benefit) expense	$	3,763	$	(9,725)	$	19,072
Current state income tax expense (benefit)	7,611		(699)		2,636
Deferred state income tax (benefit) expense	(10,457)		23,535		14,010
Total state income tax expense	$	(2,846)	$	22,836	$	16,646
Total federal and state income tax expense	$	917	$	13,111	$	35,718
Items charged or credited directly to member’s equity
Federal deferred	6,297		514		(2,202)
State deferred	2,431		(120)		(720)
Total tax expense (benefit) from items charged directly to member’s equity	$	8,728	$	394	$	(2,922)
Total federal and state income tax expense	$	9,645	$	13,505	$	32,796

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2022, and 2021 was comprised of the following:


	AT DEC. 31,
(THOUSANDS)	2022		2021
Depreciation and property basis differences	$	(869,796)	$	(885,747)
Net operating loss carryforward	135,914		195,488
NMTC	88,245		92,364
Fuel costs	(41,233)		(38,070)
Other comprehensive income	4,022		12,750
Regulated operations regulatory liability, net	(114,711)		(93,990)
Postretirement benefits	38,418		34,683
Merger fair value adjustments	(47,929)		(49,806)
Other	(13,230)		(23,436)
Accumulated deferred federal and state income taxes, net	$	(820,300)	$	(755,764)

Cleco Power

For the year ended December 31, 2022, and 2021, income tax expense was lower than the amount computed by applying the statutory rate. For the year ended 2020, income tax expense was higher than the amount computed by applying the statutory rate. The differences are as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)	2022			2021			2020
Income before tax	$	172,560		$	124,735		$	123,454
Statutory rate	21.0		%	21.0		%	21.0		%
Tax expense at federal statutory rate	$	36,238		$	26,194		$	25,925
Increase (decrease)
Flowthrough of tax benefits	(12,272)			(356)			5,100

State income taxes, net of federal benefit	12,109			6,343			6,303

Return to accrual adjustment	14			(3,831)			7,082

Amortization of excess ADIT	(32,639)			(37,254)			(16,667)
Other, net	(947)			(449)			(944)
Total taxes	$	2,503		$	(9,353)		$	26,799
Effective rate	1.5		%	(7.5)		%	21.7		%

Information about current and deferred income tax expense is as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Current federal income tax expense	$	4,921	$	—	$	15,724
Deferred federal income tax benefit	(1,926)		(23,071)		(5,033)
Amortization of accumulated deferred investment tax credits	(134)		(142)		(159)
Total federal income tax expense (benefit)	$	2,861	$	(23,213)	$	10,532
Current state income tax expense	2,406		—		5,069
Deferred state income tax (benefit) expense	(2,764)		13,860		11,198
Total state income tax expense	$	(358)	$	13,860	$	16,267
Total federal and state income tax expense (benefit)	$	2,503	$	(9,353)	$	26,799
Items charged or credited directly to members’ equity
Federal deferred	2,610		1,714		(576)
State deferred	1,008		338		(189)
Total tax expense (benefit) from items charged directly to member’s equity	$	3,618	$	2,052	$	(765)
Total federal and state income tax expense (benefit)	$	6,121	$	(7,301)	$	26,034

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2022, and 2021 was comprised of the following:


	AT DEC. 31,
(THOUSANDS)	2022		2021
Depreciation and property basis differences	$	(754,200)	$	(744,594)
Net operating loss carryforward	94,555		125,392
Fuel costs	(13,594)		(14,552)
Other comprehensive income	2,604		6,222
Regulated operations regulatory liability, net	(114,711)		(93,990)
Postretirement benefits	24,946		20,649
Other	(9,727)		(6,606)
Accumulated deferred federal and state income taxes, net	$	(770,127)	$	(707,479)

Valuation Allowance

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. At December 31, 2022, and 2021, Cleco had a deferred tax asset resulting from a NMTC carryforward of $88.2 million and $92.4 million, respectively. If the NMTC carryforward is not utilized, it will begin to expire in 2030. Management considers it more likely than not that the deferred tax asset related to the NMTC carryforward will be realized; therefore, no valuation allowance has been recorded for Cleco and Cleco Power.

Net Operating Losses

For the 2021 tax year, Cleco created a federal net operating loss of approximately $718.3 million and a state net operating loss of approximately $423.7 million. For the 2022 tax year, Cleco expects to utilize a federal net operating loss of $192.9 million and a state net operating loss of $82.5 million.

For the 2021 tax year, Cleco Power created a federal net operating loss of approximately $422.1 million and a state operating loss of $423.7 million. For the 2022 tax year, Cleco Power expects to utilize a federal net operating loss and state net operating loss of $93.7 million and $82.5 million, respectively.

Both the federal and state net operating losses may be carried forward indefinitely. Cleco and Cleco Power consider it more likely than not that these income tax losses will be utilized to reduce future income tax payments, and the entire net operating loss carryforward will be utilized within the statutory deadlines.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At December 31, 2022, and 2021, Cleco and Cleco Power had no interest payable related to uncertain tax positions. For the years ended December 31, 2022, 2021, and 2020, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At December 31, 2022, and 2021, Cleco and Cleco Power had no liability for unrecognized tax positions.

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 tax return. While the statute of limitations remains open for tax years 2019, 2020, and 2021, the IRS has completed its review of years 2019 and 2020, 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 the 2021 tax year. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year and the Compliance Assurance Maintenance phase for the 2023 tax year.

The state income tax years 2019, 2020, and 2021 remain subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expenses. For the years ended December 31, 2022, 2021, and 2020, no penalties were recognized.

TCJA

On December 22, 2017, the TCJA was enacted into law. The TCJA includes significant changes to the IRC, as amended, including amendments which significantly change the taxation of business entities and includes specific provisions related to rate regulated activities, including Cleco Power. The most significant change that impacts Cleco is the reduction of the corporate federal income tax rate from 35% to 21%.

At December 31, 2022, and 2021, Cleco and Cleco Power had $257.4 million and $302.0 million, respectively, accrued for the excess ADIT. For more information on the regulatory treatment of the TCJA regulatory liability, see Note 5 — “Regulatory Assets and Liabilities — Deferred Taxes, Net” and Note 13 — “Regulation and Rates — Regulatory Refunds — TCJA.”

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.

During December 2022, Cleco and Cleco Power paid the remaining $3.0 million and $1.8 million, respectively, deferred in employer payroll tax payments for the period of March 27, 2020, through December 31, 2020.

Note 12 — Disclosures about Segments

Cleco

Cleco’s reportable segments are based on its method of internal reporting, which disaggregates business units by its first-tier subsidiaries. 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 Holdings’ 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 Holdings’ 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 are 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

Note 13 — Regulation and Rates

Regulatory Refunds

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


			AT DEC. 31,
(THOUSANDS)	2022		2021
Cleco Katrina/Rita storm recovery charges	$	—	$	1,611
FRP	$	—	$	1,229
Site-specific industrial customer	$	903	$	833

TCJA	$	2,057	$	2,057

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the Cleco Katrina/Rita 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. 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. In September 2022, $1.6 million was refunded to retail customers in the form of bill credits as approved by the LPSC on July 27, 2022.

FRP

Prior to July 1, 2021, Cleco Power’s annual retail earnings were subject to an FRP established by the LPSC in June 2014. The 2014 FRP allowed Cleco Power to earn a target ROE of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60% of retail earnings between 10.9% and 11.75%, and all retail earnings over 11.75% were required to be refunded to customers. On June 16, 2021, the LPSC approved Cleco Power’s new FRP. Effective July 1, 2021, under the terms of the new FRP, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5% and all retail earnings over 10.5%, 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. Cleco Power’s next base rate case is required to be filed with the LPSC on or before March 31, 2023.

On October 31, 2022, a monitoring report was filed for the 12 months ending June 30, 2022, indicating no refund was due. The LPSC staff is currently reviewing the report and Cleco Power has responded to data requests. Cleco Power anticipates the approval of this report in the third quarter of 2023.

Cleco Power continued to accrue the annual cost of service savings resulting from the 2016 Merger Commitments through June 30, 2021. Beginning July 1, 2021, the annual cost of service savings are included in Cleco Power’s current retail rate plan. Cleco Power had $1.2 million accrued for the period of July 1, 2019, through June 30, 2020, which was refunded to customers in September 2022.

St. Mary Clean Energy Center

In August 2019, the St. Mary Clean Energy Center was placed in service. The planning and construction costs for this facility

are currently being recovered through Cleco Power’s base rates and were subject to a prudency review by the LPSC. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million of those costs, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The approved settlement also included refunding $10.4 million to Cleco Power’s retail customers, which was given back to customers as bill credits in October 2022. For more information about the settlement and disallowance, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. 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 2020, the LPSC approved Cleco Power’s extension of 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 June 30, 2021. The $7.0 million monthly refund consisted of approximately $4.4 million, which was 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 December 31, 2022, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan which includes the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1, 2021, all retail customers will continue receiving bill credits resulting from the TCJA. The target retail portion of the unprotected excess ADIT is approximately $2.5 million monthly and will be credited over a period of three years concluding on June 30, 2024. The retail portion of the protected excess ADIT will be credited until the full amount of the protected excess ADIT has been returned to Cleco Power’s customers through bill credits. At December 31, 2022, Cleco Power had $257.4 million accrued for the excess ADIT, of which $42.9 million is reflected in current regulatory liabilities.

Teche Unit 3

On September 7, 2021, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. In December 2021, Cleco Power filed notices with the LPSC and MISO to suspend the retirement of Teche Unit 3. As a result, on March 15, 2022, Cleco Power refunded to MISO $4.3 million for capital expenditures paid by third parties while operating Teche Unit 3 as a system support resource unit.

Note 14 — Variable Interest Entities

Cleco Securitization I

Cleco Securitization I is a special-purpose, wholly owned subsidiary of Cleco Power that was formed for the purpose of issuing storm recovery bonds to finance the securitization of Storm Recovery Property at Cleco Power. On June 22, 2022, the securitized financing was complete. Cleco Securitization I’s assets cannot be used to settle Cleco Power’s obligations and the holders of the storm recovery bonds have no recourse against Cleco Power. For more information about the securitization financing, see Note 19 — “Securitization.”

Because Cleco Securitization I’s equity at risk is less than 1% of its total assets, it is considered to be a variable interest entity. Through its equity ownership interest and role as servicer, Cleco Power has the power to direct the most significant financial and operating activities of Cleco Securitization I, including billing, collections, and remittance of retail customer cash receipts to enable Cleco Securitization I to pay the principal and interest payments on the storm recovery bonds. Cleco Power also has the obligation to absorb losses up to its equity investment and rights to receive returns from Cleco Securitization I. Therefore, management has determined that Cleco Power is the primary beneficiary of Cleco Securitization I, and as a result, Cleco Securitization I is included in the consolidated financial statements of Cleco Power. No gain or loss was recognized upon initial consolidation.

The following table summarizes the impact of Cleco Securitization I on Cleco’s and Cleco Power’s Consolidated Balance Sheets:


(THOUSANDS)	AT DEC. 31, 2022
Restricted cash - current	$	14,139
Accounts receivable - affiliate	3,348

Intangible asset - securitization	413,123
Total assets	$	430,610
Long-term debt due within one year	$	9,574
Accounts payable - affiliate	165
Interest accrued	9,953
Long-term debt, net	408,741
Member’s equity	2,177
Total liabilities and member’s equity	$	430,610

The following table summarizes the impact of Cleco Securitization I on Cleco’s and Cleco Power’s Consolidated Statements of Income:


(THOUSANDS)	FOR THE YEAR ENDED DEC. 31, 2022
Operating revenue	$	13,181
Operating expenses	(2,992)
Interest income	63
Interest charges, net	(10,200)
Income before taxes	$	52

Oxbow

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’s and Cleco Power’s 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’s and Cleco Power’s 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 December 31, 2022, consisted of its equity investment of $2.1 million.

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


	AT DEC. 31,
INCEPTION TO DATE (THOUSANDS)	2022		2021
Purchase price	$	12,873	$	12,873
Cash contributions	6,399		6,399
Distributions	(17,200)		(17,200)
Total equity investment in investee	$	2,072	$	2,072

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:


	AT DEC. 31,
(THOUSANDS)	2022		2021
Oxbow’s net assets/liabilities	$	4,145	$	4,145
Cleco Power’s 50% equity	$	2,072	$	2,072
Cleco Power’s maximum exposure to loss	$	2,072	$	2,072

The following tables contain summarized financial information for Oxbow:


	AT DEC. 31,
(THOUSANDS)	2022		2021
Current assets	$	6,187	$	6,979
Property, plant, and equipment, net	3,798		3,798

Total assets	$	9,985	$	10,777
Current liabilities	$	395	$	393
Other liabilities	5,445		6,239
Partners’ capital	4,145		4,145
Total liabilities and partners’ capital	$	9,985	$	10,777


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Operating revenue	$	332	$	5,155	$	34,827
Operating expenses	(332)		(5,155)		(34,827)
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 billed Cleco Power its proportionate share of incurred lignite extraction and associated mining-related costs. Oxbow billed Cleco Power its proportionate share of incurred costs related to mineral rights and land leases. On October 6, 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine. At December 31, 2021, the Dolet Hills Power Station was

retired, and all Cleco Power’s proportionate share of lignite-related costs had been billed by DHLC and Oxbow. For more information on DHLC and the Oxbow mine, see Note 15 — “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 15 — 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. On October 18, 2021, the District Court issued

an order consistent with a joint motion by the parties to dismiss all claims against the former independent directors leaving two former executives as the only remaining defendants. 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 (the Bunkie project). According to the petition filed by Gulf Coast in the 12th Judicial District Court for Avoyelles Parish, Louisiana, 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 12th Judicial 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 12th Judicial 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 12th Judicial District Court lifted the stay at the request of Gulf Coast. The parties are currently participating in discovery.

Diversified Lands loaned $2.0 million to Gulf Coast for the Bunkie project. The loan was secured by a mortgage on the Bunkie project site. Diversified Lands foreclosed on the Bunkie property in February 2020 and has also asserted claims personally against the former owner of Gulf Coast. These claims are based on contracts and credit documents executed by Gulf Coast, the obligations and performance of which were personally guaranteed by the former owner of Gulf Coast. Diversified Lands is seeking recovery of the indebtedness still owed by Gulf Coast to Diversified Lands following the February 2020 foreclosure, which action has been consolidated with the litigation filed by Gulf Coast in the 12th Judicial District Court for Avoyelles Parish, Louisiana. Discovery is ongoing and no trial date has been set.

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, 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 Corporation 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. 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. 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 appealed this decision.

On May 17, 2022, the Court of Appeal, First Circuit, ruled in favor of Cleco and affirmed the decision of the 16th Judicial District Court for St. Mary Parish with respect to Cleco. However, the First Circuit Court reversed the 16th Judicial District Court for St. Mary Parish’s decision dismissing Cabot Corporation from the St. Mary Parish case. All parties filed applications for rehearing, which were denied on June 29, 2022.

Cabot Corporation applied for review by the Louisiana Supreme Court of the portion of the First Circuit Court's ruling that denied Cabot Corporation’s exception seeking dismissal from the St. Mary Parish litigation. On November 1, 2022, the Louisiana Supreme Court rendered a decision in favor of Cabot Corporation. The Louisiana Supreme Court’s decision reversed the First Circuit Court’s decision and reinstated the decision of the 16th Judicial District Court granting Cabot Corporation’s declinatory exceptions of lis pendens. The St. Mary Parish case has been dismissed in full.

The stay was lifted in the Rapides Parish case and the Rapides Parish case is proceeding.

LPSC Audits and Reviews

Fuel Audits

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, which are 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 was $565.8 million. On February 16, 2023, the LPSC approved the audit report indicating no material findings. 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.

On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of incremental fuel and purchased power costs incurred as a result of Winter Storms Uri and Viola over a period of 12 months beginning with the May 2021 bills. On May 11, 2021, Cleco Power received notice of an audit from the LPSC for the fuel costs incurred during the time period required to restore services to Cleco Power’s customers during Winter Storms Uri and Viola. Cleco Power has responded to several data requests. Management is unable to determine the outcome or timing of the audit.

Environmental Audit

In 2009, the LPSC approved Cleco Power to recover from its customers certain costs of environmental compliance through an EAC. 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. 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 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 Presidential 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 directed the EPA to consider issuing a proposed rule to suspend, revise, or rescind the rule. The EPA determined the most environmentally protective course is to implement the rules in the executive order. On February 9, 2022, the EPA published in the Federal Register a proposed rule to revoke the agency’s May 2020 finding with respect to whether it is appropriate and necessary to regulate coal and oil-fired generating units under MATS, but the EPA has not yet acted on a review of the risk and technology determination from the May 2020 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.

Energy Efficiency Audit

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. Through an approved rate tariff, Cleco Power recovered $8.5 million and $6.8 million for the 2022 and 2021 program years, respectively.

On June 9, 2021, the LPSC initiated an audit on program years 2019 and 2020 to consider all program costs. On September 14, 2022, the LPSC approved the audit report indicating no material findings. Program years 2021 and thereafter are subject to audit. Management is unable to predict or give a reasonable estimate of the outcome of this or any future audits.

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 LCFC revenues when base rates reset, which took place on July 1, 2021.

Prudency Reviews

Deferred Lignite and Mine Closure Costs

Cleco Power is seeking recovery for deferred fuel and other mine-related closure costs. Recovery of these costs is subject to a prudency review by the LPSC, which is currently in progress. Cleco Power believes these costs are prudent and recoverable. However, initial testimony by the LPSC Staff advisors filed in August 2022 indicates disagreement with the prudency of these incurred costs. Cleco Power filed rebuttal testimony on September 23, 2022, rebutting the LPSC Staff’s accusations of the lignite mining agreement not being approved by the LPSC, the prudency of the costs incurred, and the recoverability of such costs. A hearing date is scheduled in May 2023 and management expects the prudency review to be completed in the third quarter of 2023. Due to the nature and timing of the regulatory process, Cleco Power is currently unable to determine if any portion of the incurred costs will be disallowed for recovery but continues to assert that recovery of those costs is probable.

St. Mary Clean Energy Center

In August 2019, the St. Mary Clean Energy Center was placed in service. The St. Mary Clean Energy Center is a partnership with Cabot Corporation, whereby Cleco Power generates power through waste heat recovered from Cabot Corporation’s carbon black manufacturing process. The planning and construction costs incurred for this facility are currently being recovered through Cleco Power’s base rates and were subject to a prudency review by the LPSC. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The impairment charge is recorded in Regulatory disallowance on Cleco’s and Cleco Power’s Consolidated Statements of Income. The settlement also resulted in a refund to Cleco Power’s retail customers totaling $10.4 million, which was given back to customers as bill credits in October 2022. The $10.4 million refund consisted of $6.6 million for costs recovered in periods prior to September 30, 2022, and $3.8 million for costs to be recovered from October 1, 2022, until Cleco Power’s base rates reset in its next rate case, which is expected to be on July 1, 2024. The refund of costs recovered prior to September 30, 2022, was recorded in Electric customer credits, with the remainder recorded as a regulatory asset on Cleco’s and Cleco Power’s Consolidated Balance Sheets. On October 1, 2022, Cleco Power began amortizing the regulatory asset to Electric customer credits on Cleco’s and Cleco Power’s Consolidated Statements of Income.

South Central Generating

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. As of December 31, 2022, 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 some 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 December 31, 2022, believes the probable and reasonably estimable liabilities based on the eventual disposition of these matters are $6.9 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’s and Cleco Power’s Consolidated Balance Sheets because management has determined that Cleco’s 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 as a result of the transfer of Coughlin to Cleco Power. The maximum amount of the potential payment to Cleco Power and Cleco Holdings 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 projected to be paid would be based on the forecasted loan and lease obligations to be incurred by DHLC, primarily for reclamation obligations. As of December 31, 2022, Cleco Power does not expect any payments to be made under this guarantee. Cleco Power has the right to dispute the incurrence of loan and lease obligations through the review of the mining reclamation plan before the incurrence of such obligations. The Amended Lignite Mining Agreement does not affect the amount the Registrants can borrow under their credit facilities.

In April 2020, Cleco Power and SWEPCO mutually agreed not to 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 June 30, 2020, all lignite reserves intended to be extracted from the mines 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. For more information on the joint filing, see “— Risks and Uncertainties.” For more information on the LPSC prudency review associated with the mine closure costs, see “— LPSC Audits and Reviews — Prudency Reviews — Deferred Lignite and Mine Closure Costs.”

Cleco has 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.

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.

Long-Term Purchase Obligations

Cleco Holdings had no unconditional long-term purchase obligations at December 31, 2022. Cleco Power and Cleco Cajun have several unconditional long-term purchase obligations primarily related to the purchase of fuel, energy delivery facilities, information technology outsourcing, natural gas storage, network monitoring, and software maintenance. The aggregate amount of payments required under such obligations at December 31, 2022, is as follows:


(THOUSANDS)	CLECO POWER		CLECO
For the year ending Dec. 31,
2023	$	75,692	$	83,067
2024	56,627		61,960
2025	23,317		25,074
2026	5,430		6,095
2027	5,365		5,816
Thereafter	1,200		1,872
Total long-term purchase obligations	$	167,631	$	183,884

Cleco’s payments under these agreements for the years ended December 31, 2022, 2021, and 2020 were $83.8 million, $59.9 million, and $92.5 million, respectively. Cleco Power’s payments under these agreements for the years ended December 31, 2022, 2021, and 2020 were $49.0 million, $43.3 million, and $24.8 million, respectively.

Other Commitments

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

notification, and internet posting requirements. In August 2018, the D.C. Court of Appeals vacated several requirements in the CCR regulation, which included eliminating the previous acceptability of compacted clay material as a liner for impoundments. As a result, in August 2020, the EPA published a final rule in the Federal Register that would set deadlines for costly modifications including retrofitting of clay-lined impoundments with compliant liners or closure of the impoundments. In November 2020, Cleco submitted demonstrations to the EPA specifying its intended course of action for the ash disposal facilities at Rodemacher Unit 2, Dolet Hills Power Station, and Big Cajun II in order to comply with the final CCR Rule. During 2021, additional information was submitted to the LDEQ to revise and update Cleco Power’s compliance strategy. During the third quarter of 2021, management received additional information in connection with Cleco Power’s and Cleco Cajun’s compliance strategies resulting in a revision to the estimated cash flows expected to be required to settle the respective AROs. Therefore, Cleco Power and Cleco Cajun recorded an increase of $11.3 million and $35.4 million, respectively, in their ARO balances. On January 11, 2022, Cleco Power and Cleco Cajun received communication from the EPA that the demonstrations had been deemed complete. However, the demonstrations are still subject to EPA approval based on pending technical reviews.

At December 31, 2022, Cleco Power and Cleco Cajun recorded adjustments to their respective AROs due to revised cost estimates. Therefore, Cleco Power recorded an increase of $1.5 million and Cleco Cajun recorded an increase of $10.6 million in their respective ARO balances.

The following table summarizes the net changes in the ARO for Cleco and Cleco Power:


(THOUSANDS)	CLECO CAJUN		CLECO POWER		CLECO
Balance, Dec. 31, 2020	$	16,658	$	11,364	$	28,022
Liabilities settled	(1,433)		—		(1,433)
Accretion	723		354		1,077
Revisions and adjustments	35,402		11,271		46,673
Balance, Dec. 31, 2021	$	51,350	$	22,989	$	74,339
Liabilities settled	(135)		(4,728)		(4,863)
Accretion	1,992		613		2,605
Revisions and adjustments	10,646		1,526		12,172
Balance, Dec. 31, 2022	$	63,853	$	20,400	$	84,253

As part of the Cleco Cajun Transaction, NRG Energy agreed to indemnify Cleco for certain environmental costs up to $25.0 million associated with the CCR Rule. At December 31, 2022, Cleco Cajun had an indemnification asset totaling $22.8 million. The current portion of the indemnification asset of $5.5 million is reflected in Other current assets and the non-current portion of $17.3 million is reflected in Other deferred charges on Cleco’s Consolidated Balance Sheet. The indemnification asset is expected to be collected as closure costs are incurred.

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.

At December 31, 2022, Cleco Power had $147.1 million deferred as a regulatory asset for stranded costs related to the Dolet Hills Power Station retirement and $133.6 million deferred as a regulatory asset for accelerated fuel and mine-related closure costs. On January 31, 2022, Cleco Power filed an application with the LPSC requesting recovery of these costs as well as decommissioning costs associated with the Dolet Hills Power Station retirement. These costs are under a prudency review by the LPSC, which is expected to be complete in the third quarter of 2023. Pending the outcome of the prudency review, Cleco Power intends to include the final costs in its filing for securitization. For more information on this prudency review, see “— Litigation — LPSC Audits and Reviews — Prudency Reviews — Deferred Lignite and Mine Closure Costs.”

Note 16 — Affiliate Transactions

Cleco

Cleco has entered into service agreements with affiliates to receive and to provide goods and professional services. Goods and services received by Cleco primarily involve services provided by Support Group. Support Group provides joint and common administrative support services in the areas of information technology; finance, cash management, accounting, tax, and auditing; human resources; public relations; project consulting; risk management; strategic and corporate development; legal, ethics, and regulatory compliance; facilities management; supply chain and inventory management; and other administrative services.

Cleco Power’s affiliates are charged the higher of management’s estimated fair market value or fully loaded costs for goods and services provided by Cleco Power. Cleco, with the exception of Support Group, charges Cleco Power the lower of management’s estimated fair market value or fully loaded costs for goods and services provided in accordance with service agreements. Support Group bills fully loaded costs to affiliates, which includes payroll and non-payroll costs.

All charges and revenues from consolidated affiliates were eliminated in Cleco’s Consolidated Statements of Income for the years ending December 31, 2022, 2021, and 2020.

At December 31, 2022, Cleco Holdings had an affiliate receivable of $14.6 million, primarily for estimated income taxes paid on behalf of Cleco Group. At December 31, 2021, Cleco Holdings had an affiliate receivable of $3.0 million from Cleco Group primarily for franchise taxes paid on behalf of Cleco Group. At December 31, 2022, and 2021, Cleco Holdings had an affiliate payable of $13.1 million and $51.3 million, respectively to Cleco Group primarily for settlement of taxes payable.

For the year ended December 31, 2022, Cleco Holdings made $219.6 million of distribution payments to Cleco Group. During 2021 and 2020, Cleco Holdings made no distribution payments to Cleco Group.

Cleco Power

Cleco Power has entered into service agreements with affiliates to receive and to provide goods and professional

services. Charges from affiliates included in Cleco Power’s Consolidated Statements of Income primarily involve services provided by Support Group in accordance with service agreements. Support Group provides joint and common administrative support services in the areas of information technology; finance, cash management, accounting, tax, and auditing; human resources; public relations; project consulting; risk management; strategic and corporate development; legal, ethics, and regulatory compliance; facilities management; supply chain and inventory management; and other administrative services.

With the exception of Support Group, affiliates charge Cleco Power the lower of management’s estimated fair market value or fully loaded costs for goods and services provided in accordance with service agreements. Support Group charges only fully loaded costs. The following table is a summary of charges from each affiliate included in Cleco Power’s Consolidated Statements of Income:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Support Group
Other operations and maintenance	$	87,830	$	91,915	$	94,798
Taxes other than income taxes	$	(41)	$	40	$	—
Other expense	$	60	$	35	$	43

The majority of the services provided by Cleco Power relates to the lease of office space to Support Group and transmission services to Cleco Cajun. Cleco Power charges affiliates the higher of management’s estimated fair market value or fully loaded costs for goods and services provided in accordance with service agreements.

The following table is a summary of revenue received from affiliates included in Cleco Power’s Consolidated Statements of Income:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Other operations revenue
Cleco Cajun	$	10,213	$	7,616	$	6,463
Affiliate revenue
Support Group	5,475		4,783		4,715
Cleco Cajun	902		858		441
Other income

Total	$	16,590	$	13,257	$	11,619

Cleco Power had the following affiliate receivable and payable balances associated with the service agreements:


	AT DEC. 31,
	2022				2021
(THOUSANDS)	ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE		ACCOUNTS RECEIVABLE		ACCOUNTS PAYABLE
Cleco Holdings	$	5	$	1,138	$	10,347	$	59,627
Support Group	2,299		11,305		2,473		10,038
Cleco Cajun	1,467		5		792		64

Total	$	3,771	$	12,448	$	13,612	$	69,729

Oxbow billed 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. For the year ended December 31, 2022, Cleco Power did not have any incurred costs. For the year ended December 31, 2021, Cleco Power recorded $2.7 million, of its proportionate share of incurred costs.

During 2022, Cleco Power made $105.5 million of distribution payments to Cleco Holdings. During 2021 and 2020, Cleco Power made no distribution payments to Cleco Holdings. Cleco Power received no equity contributions from Cleco Holdings in 2022, 2021, and 2020.

Note 17 — Intangible Assets, Intangible Liabilities, and Goodwill

Securitized Intangible

Cleco Securitization

On June 22, 2022, Cleco Securitization I acquired the Storm Recovery Property from Cleco Power for a purchase price of $415.9 million. The Storm Recovery Property is classified as a securitized intangible asset on Cleco’s and Cleco Power’s Consolidated Balance Sheets. This securitized intangible asset is being amortized over the estimated periods needed to collect the required amounts from Cleco Power’s customers to service Cleco Securitization I’s storm recovery bonds, currently estimated through September 2044. Amortization is included in Depreciation and amortization on Cleco’s and Cleco Power’s Consolidated Statements of Income. During the year ended December 31, 2022, amortization expense of $2.8 million was recognized. At the end of its life, this securitized intangible asset will have no residual value.

The following table summarizes the balance of the securitized intangible asset subject to amortization included on Cleco’s and Cleco Power’s Consolidated Balance Sheets:


(THOUSANDS)	AT DEC. 31, 2022
Storm Recovery Property intangible asset	$	415,946
Accumulated amortization	(2,823)
Net intangible asset subject to amortization	$	413,123

For additional information on Cleco Power’s storm costs and the securitization financing, see Note 5 — “Regulatory Assets and Liabilities,” Note 9 — “Debt,” and Note 19 — “Securitization.”

Cleco Katrina/Rita

During 2008, Cleco Katrina/Rita acquired a $177.5 million intangible asset which included $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. In 2020, amortization expense of $0.5 million was recognized in Cleco’s and Cleco Power’s Consolidated Statements of Income.

Other Intangibles

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Consolidated Balance Sheet for the valuation of finite intangible assets relating to long-term wholesale power supply agreements. At the end of their lives, these power supply agreement intangible assets will have no residual value. 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 Consolidated Statements of Income.

As a result of the 2016 Merger, fair value adjustments were recorded on Cleco’s Consolidated Balance Sheet for the valuation of a finite intangible asset relating to the Cleco Power trade name. In August 2021, a wholesale customer that is currently under contract with Cleco Power through March 31, 2024, informed Cleco Power that it was not selected through its request for proposal process as a provider of load after the first quarter of 2024. Cleco considered this to be a triggering event and determined that the carrying value of the trade name intangible asset may not be recoverable. Therefore, a valuation of the Cleco Power trade name was conducted to test for impairment. A discounted cash flow model utilizing an estimated weighted average cost of capital of 8% was used to determine the fair value of the Cleco Power trade name. As a result, Cleco determined that the fair value of the Cleco Power trade name was less than its carrying value and an impairment of $3.8 million was recognized reducing the carrying value to zero at September 30, 2021.

As a result of the Cleco Cajun Transaction, fair value adjustments were recorded on Cleco’s Consolidated Balance Sheet for the difference between the contract and market price of acquired long-term wholesale power agreements. 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 6 and 8 years. The amortization is included in Electric operations on Cleco’s 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, and is expected to be fully amortized in 2025. The amortization is included as a reduction to the LTSA prepayments on Cleco’s Consolidated Balance Sheet.

The following table presents amortization of other intangible assets and liabilities in Cleco’s Consolidated Statements of Income:


Cleco
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Intangible assets

Trade name	$	—	$	3,897	$	255
Power supply agreements	$	25,600	$	25,600	$	25,600
Intangible liabilities
LTSA	$	3,484	$	3,484	$	3,484
Power supply agreements	$	1,557	$	2,378	$	3,528
An impairment on the Trade name intangible asset was recognized in 2021. No other impairments for intangibles listed in the table above were recognized in 2022, 2021, or 2020.

The following table summarizes the balance of other intangible assets and liabilities subject to amortization included in Cleco’s Consolidated Balance Sheets:


Cleco
	AT DEC. 31,
(THOUSANDS)	2022		2021
Intangible assets

Power supply agreements	$	184,004	$	184,004
Total intangible assets carrying amount	$	184,004	$	184,004
Intangible liabilities
LTSA	24,100		24,100
Power supply agreements	14,200		14,200
Total intangible liabilities carrying amount	38,300		38,300
Net intangible assets carrying amount	145,704		145,704
Accumulated amortization	(105,848)		(82,466)
Net intangible assets subject to amortization	$	39,856	$	63,238

The following table summarizes the amortization expense related to other intangible assets and liabilities expected to be recognized in Cleco’s Consolidated Statements of Income:


Cleco
(THOUSANDS)	INTANGIBLE ASSETS		INTANGIBLE LIABILITIES
For the year ending Dec. 31,
2023	$	25,373	$	5,041
2024	$	18,801	$	5,041
2025	$	5,037	$	3,873
2026	$	744	$	—
2027	$	744	$	—
Thereafter	$	3,112	$	—

Goodwill

On April 13, 2016, in connection with the completion of the 2016 Merger, Cleco recognized goodwill of $1.49 billion. Management assigned the recognized goodwill to the Cleco Power reporting unit. Goodwill is required to be tested for impairment at the reporting unit level on an annual basis or whenever events or circumstances indicate that the value of goodwill may be impaired.

In performing the impairment test, Cleco compares the fair value of the reporting unit to its carrying value including goodwill. If the carrying value including goodwill were to exceed the fair value of a reporting unit, an impairment loss

would be recognized. A goodwill impairment loss is measured as the amount by which a reporting unit's carrying value exceeds fair value, not to exceed the carrying amount of goodwill.

Cleco estimates the reporting unit's fair value using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. The income approach cash flow valuations involve a number of estimates that require broad assumptions and significant judgment by management regarding future performance, including estimation of future cash flows related to capital expenditures, the weighted average cost of capital or discount rate and the assumed long-term growth rate approach, which incorporates management's assumptions regarding sustainable long-term growth. The market approach includes significant assumptions around the implied market multiples for certain peer companies. Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of the test date.

Cleco performs an annual impairment test each August. In between annual tests, Cleco monitors its estimates and assumptions regarding estimated future cash flows, including the impact of movements in market indicators in future quarters, and will update the impairment analyses if a triggering event occurs. While Cleco believes the assumptions are reasonable, actual results may differ from projections. To the extent projected results or cash flows are revised downward, Cleco may be required to reduce all or a portion of the carrying value of goodwill, which could adversely impact earnings.

Cleco conducted its 2022 annual impairment test using an August 1, 2022, measurement date and determined that the estimated fair value of the reporting unit exceeded its carrying value, and no impairment existed.

Note 18 — 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.

Note 19 — Securitization

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 storm 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 had regulatory assets totaling $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 Consolidated Income Statements in the period the costs were incurred.

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 for the securitization 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 to fund Hurricane Ida storm restoration costs;

•$100.9 million for a reserve to fund future storm restoration costs; and

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

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 its 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 9 — “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 2 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

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

Cleco Power, in line with other impacted utilities, has sought 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.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of Cleco Holdings and Cleco Power (individually, “Registrant” and collectively, the “Registrants”) management, including the CEO and CFO, the Registrants have evaluated the effectiveness of their disclosure controls and procedures as of December 31, 2022. Based on the evaluations, the CEO and CFO have concluded that the Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and that the Registrants’ disclosure controls and procedures are also effective in ensuring that such information is accumulated and communicated to the Registrants’ management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

Managements’ Reports on Internal Control Over Financial Reporting

The management of the Registrants are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. The Registrants’ internal control over financial reporting is a process designed by, or under the supervision of, the Registrants’ principal executive and financial officers and effected by the Registrants’ board of managers, management,

and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

As a result of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The management of the Registrants, under the supervision of each of the Registrants’ principal executive officer and principal financial officer, conducted an assessment of the effectiveness of the Registrants’ respective internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, the management of the Registrants concluded that, as of December 31, 2022, the Registrants’ internal control over financial reporting was effective.

Changes in Internal Control over Financial Reporting

There have been no changes in the Registrants’ internal control over financial reporting that occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

Boards of Managers of Cleco

As of March 8, 2023, the Board of Managers of Cleco Holdings is comprised of 13 managers, as set forth below. Cleco Power’s Board of Managers is comprised of 14 managers, including the same 13 managers that comprise the Board of Managers of Cleco Holdings, plus one additional manager, Melissa Stark. The Board of Managers of Cleco Holdings and the Board of Managers of Cleco Power are collectively referred to below as “the Boards.” The managers’ ages, dates of appointment, employment history, and committee assignments as of March 8, 2023, are also set forth below. Each of Ms. Scott and Messrs. Gallot, Gilchrist, and Wainer serve pursuant to one-year agreements which are considered for renewal annually by the Boards. Mr. Fontenot serves by virtue of his position as the CEO, and the other managers are designated for membership by BCI, John Hancock, or MAM.

Andrew Chapman joined Macquarie in 2006 and retired on September 30, 2021. Through his consulting company WesWave LLC, Mr. Chapman is a consultant to MAM and serves on the Boards of Cleco and on the board of the entity that holds Lordstown Energy Center, a gas-fired power plant in eastern Ohio. During his 15 years with Macquarie, Mr. Chapman has served as a director of utility companies owned in part by MAM’s funds, including Puget Sound Energy, Duquesne Light Company, Aquarion Water Company, Cleco, and entities related to those holdings. Mr. Chapman is 67 years old and became a member of the Boards in 2016. He is the Chair of the Business Planning and Budget Review Committee, Chair of the Leadership Development and Compensation Committee, and a member of the Asset Management Committee, the Governance and Public Affairs Committee and the Audit Committee.

Mr. Chapman held executive positions with Elizabethtown Water Company, E-town Corporation, American Water Works and the State of New Jersey prior to joining Macquarie in 2006.

Mr. Chapman earned his Master of Business Administration from the Yale School of Management.

William “Bill” Fontenot has served as the President and CEO of Cleco Holdings r since January 2018 and CEO of Cleco Power and Cleco Cajun since February 2019. Mr. Fontenot is 60 years old and was appointed to the Boards in 2018. He is a member of the Asset Management Committee, the Business Planning and Budget Review Committee, and the Governance and Public Affairs Committee. Mr. Fontenot has previously served as Interim CEO of Cleco Power from February 2017 to December 2017, Chief Operating Officer of Cleco Power from April 2016 to February 2017, and Senior Vice President of Utility Operations from March 2012 to April 2016.

Mr. Fontenot serves on the boards of the Council for a Better Louisiana, the Association of Edison Illuminating

Companies, the Southeastern Electric Exchange, and the Louisiana State University at Alexandria Foundation.

Mr. Fontenot holds a Bachelor of Science degree in electrical engineering from Louisiana State University.

Paraskevas “Paris” Fronimos is a Director on the Infrastructure and Renewable Resource Investments team of BCI. He is 48 years old and became a member of the Boards in 2019. Mr. Fronimos is the Chair of the Asset Management Committee and a member of the Business Planning and Budget Review Committee.

Mr. Fronimos joined BCI in 2017 and works with the management teams of portfolio companies primarily in the energy and utility sectors in the Americas. Mr. Fronimos currently serves as a Director of NTS, a Brazilian natural gas pipeline, a Director of Isagen, a Colombian power producer, and Director of Brookfield Brazil Motorways Holdings SRL, a toll road holding company in Barbados. Mr. Fronimos served as a Director of Tribus Services Inc, a U.S. utility services company, from 2018 to 2020. Prior to BCI, Mr. Fronimos was employed by Nova Scotia Power, a Canadian power utility, as a fuels portfolio manager. He has more than 15 years of experience in the energy and utilities space, having worked on environmental and energy policy, developing greenfield energy projects, advising on transactions, and driving fleet and fuel supply optimization activities, including commodity pricing and hedging.

Mr. Fronimos holds a bachelor’s degree in Mineral Resources Engineering from the Technical University of Crete and a Master’s in Business Administration (specializing in Natural Resources and Energy) from the University of Alberta. He is an Energy Risk Professional (ERP®) certified by the Global Association of Risk Professionals.

Richard “Rick” Gallot, Jr. is the President of Grambling State University. He is 56 years old and became a member of the Boards in 2016. Mr. Gallot is a member of the Leadership Development and Compensation Committee and the Governance and Public Affairs Committee.

Mr. Gallot serves on the board of Origin Bancorp, Inc. (Nasdaq: OBNK) and was recently appointed to the Louisiana Cybersecurity Commission by Louisiana Governor John Bel Edwards. He recently served as a Louisiana state senator for District 29, where he held the position of vice chairman of the Commerce Committee and was a member of the Agriculture, Forestry, Aquaculture, and Rural Development Committee and the Revenue and Fiscal Affairs Committee. He previously served as a member of the Louisiana House of Representatives for District 11, where he served as Chair of the House and Governmental Affairs Committee and was a member of the Executive Committee.

Mr. Gallot obtained his Juris Doctorate from Southern University School of Law and has been a licensed Louisiana attorney since 1990.

David Randall “Randy” Gilchrist is the President and CEO of Gilchrist Construction Company (GCC), a central Louisiana-based infrastructure contractor specializing in road and bridge construction. He is 63 years old and became a member of the Boards in 2016. Mr. Gilchrist is a member of the Asset Management Committee and the Audit Committee.

Under Mr. Gilchrist’s leadership, GCC has grown since 1985 from a small site work contractor to one of Louisiana’s leading highway contractors. Mr. Gilchrist has served as President of Associated General Contractors, Chair of Driving Louisiana Forward, Chair of the Central Louisiana Chamber of Commerce, and vice chairman of Central Louisiana Economic Development Alliance. He has also served on the boards of the Rapides Foundation and Rapides Healthcare System.

Gerald “Jerry” Hanrahan is a Senior Industry Advisor to the Power and Infrastructure Team at John Hancock. The Power and Infrastructure Team is responsible for transactions in public utility, independent power project and infrastructure financing areas for John Hancock and manages a portfolio of over $21.00 billion in assets spanning over 300 individual investments. Mr. Hanrahan is 62 years old and became a member of the Boards in 2018. He is a member of the Asset Management Committee.

Mr. Hanrahan joined John Hancock as a director in 2001, served as managing director from 2003 to 2011, and served as Team Leader - Vice President from 2011 until 2016. He has worked in the financing area of the power industry since 1990. Before joining John Hancock, Mr. Hanrahan worked for four years in the Boston and London offices of InterGen, where he coordinated all financing activities on $2.70 billion in power projects in Turkey, Colombia and Egypt. Before that, he spent nine years in the structured finance and financial advisory divisions of Bank of Tokyo Capital Corporation in Boston.

Mr. Hanrahan holds a Master of Business Administration from Babson College and a Bachelor of Science degree from Northeastern University.

Domingo Solís-Hernández is a Managing Director at MAM where he oversees origination of new assets and works with management teams of portfolio companies in the infrastructure sector. He is 44 years old and became a member of the Boards in February 2022. Mr. Solís-Hernández is a member of the Asset Management Committee and the Business Planning and Budget Review Committee.

Mr. Solís-Hernández has over 18 years of experience in the infrastructure sector. Since 2012, he has worked for the Macquarie Group in Europe and the U.S. Prior to Macquarie, he worked as a merger & acquisition investment banker and started his career working as a consultant engineer.

Mr. Solís-Hernández previously served as a director of Italian companies Hydro Dolomiti Energia, a hydro operator, and Societa Gasdotti Italia, a natural gas transmission operator. He also served as a director of Renvico, a renewables operator in France and Italy.

Mr. Solís-Hernández holds a Bachelor’s degree and a Master’s degree in Industrial Engineering from the University of Malaga and a Master of Business Administration from the University of Kentucky.

Christopher Leslie is Executive Chairman of Macquarie Infrastructure Real Assets Americas. Prior to taking that role in July 2016, Mr. Leslie was the CEO of Macquarie Infrastructure Partners I, II, and III, which collectively manages more than $7.00 billion in U.S. and Canadian infrastructure investments. Mr. Leslie is 58 years old and became a member of the Boards in 2016. He is a member of the Leadership Development and Compensation Committee. Mr. Leslie has been or is a director of a number of MAM portfolio companies in the energy, transportation, and communications sectors.

Mr. Leslie joined Macquarie in 1992 in Australia. He has been instrumental in expanding Macquarie’s infrastructure business globally, having launched Macquarie offices in Southeast Asia, India, and North America.

Mr. Leslie holds a Bachelor of Commerce degree from the University of Melbourne.

Jon Perry is a Director within the Infrastructure & Renewable Resources Department at BCI, where he is responsible for sourcing, executing and managing infrastructure investments. He is 46 years old and became a member of the Boards in 2018. Mr. Perry is the Chair of the Audit Committee.

Mr. Perry has over 15 years of experience in the utility and energy sectors. Prior to working with BCI, he held positions as Manager, Mergers and Acquisitions at TransAlta, a leading Canadian independent power producer and Manager, Regulatory and Financial Reporting at FortisAlberta, a regulated distribution utility. Before then, Mr. Perry held financial and investor relations positions in Canadian junior and mid-cap oil and gas companies.

Mr. Perry holds a Bachelor of Medical Laboratory Sciences from the University of British Columbia. He is also a Chartered Accountant in the Province of Alberta and is a Chartered Financial Analyst charter holder.

Aaron Rubin is a Managing Director at MAM, where he is responsible for MAM’s North American power and utilities investment team. He is 45 years old and became a member of the Boards in 2018. Mr. Rubin is a member of the Business Planning and Budget Review Committee.

Since joining Macquarie in 2008, Mr. Rubin has had extensive responsibility for investment origination and execution as well as for management of portfolio investments. He has also served as the CEO of the Moscow-based Macquarie Russia & CIS Infrastructure Fund, and has been or is a director of a number of Macquarie portfolio companies in the energy, transportation, and communications sectors. Mr. Rubin is currently a director of the holding companies of Lordstown Energy Center, a 940-MW gas-fired power plant in Ohio, Puget Energy, an electric and natural gas utility in Washington State, and Cyrq Energy, a leading U.S. geothermal power company. Prior to joining Macquarie, Mr. Rubin was a Vice President on JPMorgan’s North American mergers and acquisitions team.

Mr. Rubin holds a Bachelor of Commerce and a Bachelor of Laws degree from the University of Queensland.

Peggy Scott currently serves as the Chair of the Boards. In addition, she serves on Cleco’s Audit Committee and Governance and Public Affairs Committee. She served as Chairperson and Interim CEO of Cleco Holdings from February 9, 2017, through December 31, 2017. She is 71 years old and became a member of the Boards in 2016.

Ms. Scott serves on the boards of The Eastern Company (Nasdaq: EML), Martin Sustainable Resources LLC, and the Blue Cross Foundation of Louisiana. She previously served on the boards of Benefytt Technologies, Inc. (BFYT) until its 2020 acquisition, and Gresham Smith Partners until June 2022, as well as on the boards of various corporate and community organizations.

Presently, Ms. Scott is an adviser to growing companies in diverse industries. Previously, she served as the Executive Vice President, Chief Operating Officer, and CFO of Blue Cross Blue Shield of Louisiana (BCBS) and as Chief Strategy Officer. Prior to BCBS, Ms. Scott was an office Managing Partner with Deloitte and held senior executive positions in U.S. and International companies in seven countries where she led transformational growth and change.

Ms. Scott was named one of the ten Outstanding Young Women of America, featured in the Wall Street Journal as National Financial Executive of the year, and inducted into the American Institute of CPAs’ Hall of Fame. She is in the Louisiana State University’s Alumni Hall of Distinction, named a Tulane Outstanding Alumnus, and holds a Presidential citation.

Ms. Scott holds a Master of Business Administration from Tulane University and a Bachelor of Science degree in accounting from Louisiana State University. She is a CPA and certified in Valuations and Forensics and as a Professional Corporate Director.

Melissa Stark currently serves as the managing principal and owner of Co Issuer Corporate Staffing, LLC, which she established in 2003 to provide independent directors and officers for special purpose entities. She is 60 years old and was appointed in 2016 as a special independent manager of Cleco Power, whose sole purpose is to vote on any bankruptcy-related matters, as specified in Cleco Power’s Second Amended and Restated Operating Agreement. Ms. Stark serves as a director of a number of companies in the financial sector. From 2001 to 2017, Ms. Stark concurrently served as a principal and co-founder of Water Tower Capital, LLC, a Chicago based investment advisory firm. From 1994 to 1996 she was Vice President - Fixed Income Research at Duff & Phelps (now known as Fitch) where she covered high yield bonds in the retail industry. She served as Vice President - Special Investments at PPM America, Inc. from 1991 to 1994.

Ms. Stark holds a Master of Business Administration in Finance from New York University Stern School of Business.

Steven Turner is a Managing Director within the Infrastructure & Renewable Resources Department at BCI, where he is

responsible for sourcing, executing, and managing infrastructure investments. He is 50 years old and became a member of the Boards in 2016. Mr. Turner is the Chair of the Governance and Public Affairs Committee and a member of the Business Planning and Budget Review Committee and the Leadership Development and Compensation Committee.

Mr. Turner serves on the board of Corix Infrastructure Inc., a privately held waste/wastewater and utility holding company based in Vancouver, British Columbia. He is also a past director of Macquarie Utilities Inc. and Aquarion Water Company (Aquarion), the parent companies to a suite of New England-based water utilities.

Mr. Turner has over 15 years of experience in institutional investing. Prior to joining BCI, he held positions as an Associate with Ventures West Management, a leading Canadian venture capital firm and as an Associate Equity Analyst with Raymond James Ltd., a full-service brokerage firm.

Mr. Turner has a Bachelor of Science degree in Environmental Engineering from Montana Tech of the University of Montana and holds a Master of Business Administration from the University of Victoria. He is also a registered Professional Engineer in the Province of British Columbia, a Chartered Financial Analyst charter holder and holds the ICD.D designation.

Bruce Wainer is the CEO of Wainer Enterprises, a family-owned commercial development company on Louisiana’s Northshore and in New Orleans. He is 63 years old and became a member of the Boards in 2016. Mr. Wainer is a member of the Business Planning and Budget Review Committee and the Governance and Public Affairs Committee. He is the developer of some of the most successful commercial developments in the New Orleans area and a past chairman of the Northshore Business Council. His business affiliations include partner at Wainer Brothers, All State Financial Company and Circle West Trailer Park Company; president of Quality Properties, Inc., Regent Lands, Inc., Flowers, Inc., Upside Down Cajun Brands, Inc., Louisiana Properties, Inc., Tamco, Inc., Riverhill, Inc., Metro Credit Services, Inc. and Pan American Investors, Inc., and manager of Advance Mortgage Company, LLC.

Executive Officers of Cleco

The names of the executive officers of Cleco and certain subsidiaries, their positions held, five-year employment history, and ages as of March 8, 2023, are as follows. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed.

Audit Committee

Cleco has a separately-designated standing Audit Committee. The members of Cleco’s Audit Committee are Andrew Chapman, Randy Gilchrist, Jon Perry (who serves as Chair of the committee) and Peggy Scott. The Boards have determined that Andrew Chapman is the Audit Committee financial expert.

Code of Business Conduct & Ethics and Related Party Transactions

Cleco has adopted a Code of Conduct that applies to its principal executive officer, principal financial officer, principal accounting officer, and treasurer. Cleco also has adopted an Ethics Guide applicable to all employees and the Boards. In addition, the Boards have adopted Conflicts of Interest and Related Policies to prohibit certain conduct and to reflect the expectation of the Boards that their members engage in and promote honest and ethical conduct in carrying out their duties and responsibilities, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships and corporate opportunities. Under the Conflicts of Interest and Related Policies, Cleco considers transactions that are reportable under the SEC’s rules for transactions with related parties to be conflicts of interest and prohibits them. Any request, waiver, interpretation or other administration of the policy shall be referred to the Governance and Public Affairs Committee. Any recommendations by the Governance and Public Affairs Committee to implement a waiver shall be referred to the full Boards for a final determination. The Code of Conduct for Financial Managers, Ethics Guide, and Conflicts of Interest and Related Policies are posted on Cleco’s website at https://cleco.com/about/leadership-governance/codes-of-conduct. Each of these documents is also available free of charge by request sent to: Public Relations, Cleco, P.O. Box 5000, Pineville, LA 71361-5000.

Communications with the Boards

The Corporate Governance Guidelines provide for communications with the Boards by interested persons. In order for employees and other interested persons to make their concerns known to the Boards, Cleco has established a procedure for communications with the Boards through the Boards’ Chair. The procedure is intended to provide a method

for confidential communication, while at the same time protecting the privacy of the members of the Boards. Any interested person wishing to communicate with the Boards, or the non-management members of the Boards, may do so by addressing such communication as follows:

Chair of the Boards of Managers

c/o Corporate Secretary

Cleco Holdings

P.O. Box 5000

Pineville, LA 71361-5000

Upon receipt, Cleco’s Corporate Secretary will forward the communication, unopened, directly to the Chair of the Boards. The Chair will, upon review of the communication, make a determination as to whether it should be brought to the attention of the other non-management members and/or the management member of the Boards and whether any response should be made to the person sending the communication, unless the communication was made anonymously.

Compensation Discussion and Analysis (CD&A)

This section provides information about the compensation program in place for the Company’s named executive officers who are included in the Summary Compensation Table. It includes a discussion and analysis of the overall objectives of its compensation program and each element of compensation the Company provides.

Executive Summary

Compensation Philosophy

The compensation principles and philosophy of the Committee are:

•Executives should be rewarded on performance, and incentives should align interests between management and the Company while considering prudent risk taking;

•Total remuneration (the sum of base salary, annual incentives, long-term incentives, and retirement benefits) is determined so the combination of all pay elements will deliver a total compensation opportunity comparable to that of the Company’s Peer Group.

◦Newly hired and/or promoted executives should be transitioned to median over time as they become more proficient in their roles;

•The mix of fixed compensation (base salary and retirement benefits) and variable/at-risk compensation (annual incentive and long-term incentive) should align with market by emphasizing variable/at-risk compensation; and

•The competitive market for an executive’s compensation will be based on comparable utilities and will not be adjusted for Cleco’s privately held status or location.

Compensation Program Elements

The Committee targets total compensation (made up of the elements described below) to be competitive with the median of the Comparator Group, but individual positioning may vary above or below the median depending on each executive’s experience, performance, and contribution to the Company. For 2022, Cleco believes that it accomplished its philosophy through the following compensation and benefit components:

Roles and Responsibilities

Leadership Development and Compensation Committee

The Committee, which consists of one independent Board Manager and three investor Board Managers, is responsible for developing and overseeing the Company’s executive compensation program. The Committee met seven times during 2022 with primarily virtual attendance. The Chief Human Resources and Diversity Officer attended the Committee meetings on behalf of management but did not participate in all of the Committee’s executive sessions.

The Committee’s responsibilities, which are more fully described in its charter, include:

•establishing and overseeing the Company’s executive compensation philosophy and goals and the programs which align with those;

•engaging and evaluating an independent compensation consultant;

•determining if the Company’s executive compensation and benefit programs are achieving their intended purposes,

being properly administered and creating proper incentives in light of the Company’s risk factors;

•analyzing the executive compensation and benefits practices of peer companies and annually reporting to the Board or recommending for approval by the Board the overall design of the Company’s executive compensation and benefit programs;

•annually evaluating the performance of the CEO and the CFO and recommending to the Board adjustments in the CEO's and CFO’s compensation and benefits;

•overseeing the administrative committees and periodically reviewing the Company’s benefit plans, including retirement plans;

•annually reviewing the Committee’s charter and revising as necessary;

•annually ensuring there is a process for talent and succession management for executives; and

•reviewing and making recommendations on efforts to promote diversity and inclusion.

The Compensation Consultant

The Committee engaged Pay Governance to consult on matters concerning executive officers’ compensation and benefits. All executive compensation adjustments and award calculations for 2022 were reviewed by Pay Governance on behalf of the Committee. Pay Governance acted at the direction of the Committee and was independent of management. Pay Governance was responsible for:

•recommending a group of peer companies to use for its market comparisons;

•reviewing the Company’s executive compensation program, including compensation levels in relation to Company performance, pay opportunities relative to those at comparable companies, short- and long-term incentive targets and metrics, executive retirement benefits, and other executive benefits;

•reviewing the Company’s Board of Manager compensation program;

•reporting on emerging trends and best practices in the area of executive and Board of Manager compensation; and

•attending the Committee meetings.

The Committee reviewed the firm’s qualifications as well as its independence and the potential for conflicts of interest. The Committee concluded that Pay Governance is independent, and its services to the Committee do not create any conflicts of interest. The Committee has the sole authority to approve Pay Governance’s compensation and determine the nature and scope of its services. Pay Governance does not perform any other services for or receive any other fees from the Company.

CEO

The CEO discusses with the Committee base salary adjustments, cash incentives, and long-term incentive awards

for executives other than himself. The CEO participates in meetings of the Committee to discuss executive compensation, including measures and performance targets but is subsequently excused to allow the Committee to meet in executive session without management present.

Evaluation and Design of the Compensation and Benefit Programs

The Committee believes that compensation and benefits for executive officers who successfully enhance investors’ value should be competitive with the compensation and benefits offered by similar companies in the industry to attract and retain the high quality executive talent required by the Company. The Committee examines executive officers’ compensation against comparable positions using publicly available proxy data for a group of 12 industry peers (Peer Group) and utility industry survey data to help design and benchmark executive officer compensation. This evaluation includes base salary, annual and long-term incentive plan targets, other potential awards, retirement benefits, and target total compensation. The Peer Group is used to track comparable performance of the long-term incentive plan. The combination of the Peer Group and the utility industry survey data is referred to as the “Comparator Group.”

The Peer Group did not change in 2022. The Committee will continue to evaluate the Peer Group annually as companies are often acquired, taken private, or grow at a rate that renders them inappropriate for comparison purposes. The Committee evaluates the Peer Group to ensure that peer companies are of similar scope in relation to revenues, assets, and employee count and have a good operational fit.

In setting executive compensation levels in 2022, the Committee also used utility industry survey data from the most recent Willis Towers Watson Energy Services Executive Compensation Database. Survey data provides a broader energy industry perspective. This survey data is used in conjunction with the Peer Group data as a competitive market reference point for the Committee to consider in determining pay levels.

Decisions Made in 2022 with Regard to Each Compensation and Benefit Component

Base Salary

The base salary levels for the executive officers as a group, including the named executive officers are set so that, in combination with other pay elements, it will deliver a total compensation opportunity comparable to that of the Company’s Peer Group. The Committee sets the base salary level for the CEO and CFO.

Base salaries for the named executive officers in 2022 are shown in the table below:


NAME	2022 BASE SALARY		2022 % CHANGE (1)
Mr. Fontenot	$	721,000	0.0	%
Ms. Guillory	$	390,000	2.6	%
Mr. LaBorde	$	350,000	12.9	%
Mr. Hilton (2)	$	295,000	3.5	%
Mr. Conway	$	385,000	5.5	%

(1) Base salary increases were adjusted to a level approximating +/-10% of the Comparator Group market

median for total remuneration.

(2) Cleco Power employee.

Annual Cash Incentive

The Company maintains the STIP, an annual, performance-based cash incentive plan. The STIP applies to all regular, full-time employees, and it includes weighting for corporate and individual performance goals. The STIP award opportunities for executive officers are set so that, in combination with other pay elements, it will deliver a total compensation opportunity comparable to that of the Company’s Peer Group. The

The Committee included Milestone Measures (Measures) in the 2022 STIP corporate metrics for EMT and other corporate officers weighted at 20% and a stretch objective weighted at an additional 5%. These Measures were associated with progress milestones on key strategic corporate projects related to safety performance improvement, ESG, business plan objectives, Cleco Cajun restructuring resolution, Madison 3 carbon capture and sequestration (CCS), business process improvements utilizing technology, and cybersecurity. For the STIP calculation, the Committee put the greatest emphasis on financial performance using an adjusted EBITDA metric at both the business unit and consolidated levels. Adjusted EBITDA represents net income before interest, income taxes, depreciation, and amortization adjusted for certain pension and SERP expenses, gains and losses on certain life insurance policies, certain 2016 Merger and Cleco Cajun Transaction related expenses, variable lease revenue, and unrealized gains and losses on FTRs and gas-related contract derivatives. In addition, to continually focus the entire organization on the importance of safety, system reliability, generation fleet availability, sustainability, and to focus Cleco Power and Cleco Support executives and employees on customer satisfaction, the remainder of the STIP opportunity was attributable to these operational measures.

Management recommends the STIP financial performance and other measures to the Committee. Based on the historical performance relative to target and the relative historical performance versus the Peer Group, the Committee reviews, revises as appropriate, and approves the STIP measures for the upcoming year.

Details Related to Corporate Performance Metrics Established to Determine 2022 STIP Award Levels

Metric # 1: Safety Consolidated — For the 2022 safety measure, the Company included the frequency of incidents represented by the Total Recordable Incident Rate (TRIR), which represents 4% of the overall STIP award, the severity of incidents represented by the Days Away, Restricted or

Transferred (DART) rate, which represents 4% of the overall STIP award, and Contractor Total Recordable Incident Rate (TRIR), which represents 2% of the overall STIP award. These three measures total 10% for the safety metric. The targets for TRIR and DART safety measures were based on the average rates of the companies in the Southeastern Electric Exchange, of which Cleco is a member, over the three-year period of 2019, 2020, and 2021. The target for Contractor TRIR is based on a 10% year-over-year improvement.


SAFETY - TRIR MATRIX (4%)
PERFORMANCE LEVEL			% OF TRIR TARGET AWARD PAID
Above 0.623			0%
0.530 - 0.623			50%
0.436 - 0.529			100%
0.343 - 0.435			150%
At or below 0.342			200%
2022 Result (0.845)			0%


SAFETY - DART MATRIX (4%)
PERFORMANCE LEVEL			% OF DART TARGET AWARD PAID
Above 0.342			0%
0.291 - 0.342			50%
0.239 - 0.290			100%
0.187 - 0.238			150%
At or below 0.186			200%
2022 Results (0.384)			0%


SAFETY - CONTRACTOR TRIR MATRIX (2%)
PERFORMANCE LEVEL			% OF DART TARGET AWARD PAID
Above 1.057			0%
At or below 1.057			100%
2022 Results (0.772)			100%

Metric # 2: Adjusted EBITDA Consolidated — The following adjusted EBITDA matrix was developed to determine performance and payout ranges related to consolidated adjusted EBITDA performance in 2022. For Cleco Power and Cleco Cajun, this measure represents 30% of the overall STIP award for the corporate measures for non-executives and 20% of the overall STIP award for the corporate measures for executives. For Cleco Support, this measure represents 65% of the overall STIP award for the corporate measures for non-executives and 45% of the overall STIP award for the corporate measures for executives. The final percentage of the financial target award is interpolated based on the performance level.


ADJUSTED EBITDA MATRIX - CONSOLIDATED
PERFORMANCE LEVEL			% OF FINANCIAL TARGET AWARD PAID
Below $547.7 million			0%
Below $604.5 and at or above $547.7 million			50%
$604.5 million			100%
Above $604.5 and below $668.0 million			150%
At or above $668.0 million			200%
2022 Result - $585.4 million			83.2%

Metric # 3: EFORd — This metric represents the probability a generator will fail either completely or in part when its operation is required. This metric is 10% of the overall STIP award for the Cleco Power, 5% of the overall STIP award for the Cleco Cajun measures, 7.5% of the overall STIP award for the Cleco Support corporate measures (Cleco Support employees weighting is 50% of the Cleco Power weighting and 50% of the Cleco Cajun weighting). The 2022 target was based on the average performance over the three-year period of 2019, 2020, and 2021.


EFORd MATRIX - CLECO POWER (10%)
PERFORMANCE LEVEL			% OF EFORd TARGET AWARD PAID
Above 8.70%			0%
6.49% - 8.70%			50%
4.28% - 6.48%			100%
2.06% - 4.27%			150%
At or below 2.05%			200%
2022 Result (8.88%)			0%


EFORd MATRIX - CLECO CAJUN (5%)
PERFORMANCE LEVEL			% of EFORd TARGET AWARD PAID
Above 10.92%			0%
8.19% - 10.92%			50%
5.45% - 8.18%			100%
2.72% - 5.44%			150%
At or below 2.71%			200%
2022 Result (4.92%)			150%

Metric # 4: Peak EAF - Cleco Cajun and Cleco Support — This metric represents the amount of time that the power generation plant is able to produce electricity without any outages or deratings over a peak period (defined as May through September, Monday through Friday, hours ending 0700 through 2200), divided by the amount of time in the peak

period. This metric is 15% of the overall STIP award for the Cleco Cajun corporate measures and 7.5% of the overall STIP award for the Cleco Support corporate measures (Cleco Support employees weighting is 50% of the Cleco Cajun weighting). The 2022 target was based on the Cajun fleet’s average performance over the three-year period of 2019, 2020, and 2021.


PEAK EAF MATRIX - CLECO CAJUN (15%)
PERFORMANCE LEVEL			% OF PEAK EAF TARGET AWARD PAID
Below 95.95%			0%
96.95% - 95.95%			50%
97.97% - 96.96%			100%
99.00% - 97.98%			150%
At or above 99.01%			200%
2022 Result (97.02%)			100%

Metric # 5: Customer Satisfaction - Cleco Power and Cleco Support — The Company included Customer Satisfaction in its performance measures in 2022 using the JD Power South Midsize segment (JD Power study) for comparison. For the STIP metric, the Company uses a percentile-based target relative to the peer groups. The Company compared its overall performance against its peers in the JD Power study. This metric represents 15% of the overall STIP award for Cleco Power corporate measures and 7.5% of the overall STIP award for the Cleco Support corporate measures (Cleco Support employees weighting is 50% of the Cleco Power weighting).


CUSTOMER SATISFACTION MATRIX - CLECO POWER (15%)
PERFORMANCE LEVEL			% OF CUSTOMER SATISFACTION TARGET AWARD PAID
Below 25th Percentile			0%
25th - 49th Percentile			50%
50th - 74th Percentile			100%
75th - 89th Percentile			150%
At or above 90th Percentile			200%
2022 Result - Below 25th Percentile			0%

Metric # 6: LPSC SAIDI - Cleco Power and Cleco Support — SAIDI measures the average amount of time a customer’s service is interrupted during the year measured in hours per customer per year, and excludes major events per the LPSC’s criteria. The 2022 LPSC SAIDI goal was based on the long-term goal of consistent performance improvement aligned with the LPSC target. This metric represents 5% of the overall STIP award for the Cleco Power corporate measures and 2.5% of the overall STIP award for the Cleco Support corporate measures (Cleco Support employees weighting is 50% of the Cleco Power weighting).


LPSC SAIDI MATRIX - CLECO POWER (5%)
PERFORMANCE LEVEL			% OF LPSC SAIDI TARGET AWARD PAID
Above 2.87			0%
At or below 2.87			100%
2022 Result (2.76)			100%

Metric # 7: Adjusted EBITDA — The following adjusted EBITDA matrix was developed to determine performance and payout ranges related to respective Business Unit adjusted EBITDA performance in 2022. The overall STIP award for the corporate measures for non-executives is 30% for Cleco Power and 40% for Cleco Cajun. The overall STIP award for the corporate measures for executives is 20% for Cleco Power and 30% for Cleco Cajun. The final percentage of the financial target award is interpolated based on the performance level.


ADJUSTED EBITDA MATRIX - CLECO POWER (20%)
PERFORMANCE LEVEL	% OF FINANCIAL TARGET AWARD PAID
Below $426.6 million	0	%
Below $461.2 and at or above $426.6 million	50	%
$461.2 million	100	%
Above $461.2 and below $495.8 million	150	%
At or above $495.8 million	200	%
2022 Result - $449.4 million	82.9%


ADJUSTED EBITDA MATRIX - CLECO CAJUN (30%)
PERFORMANCE LEVEL	% OF FINANCIAL TARGET AWARD PAID
Below $120.8 million	0	%
Below $143.0 million and at or above $120.8 million	50	%
$143.2 million	100	%
Above $143.2 and below $171.7 million	150	%
At or above $171.7 million	200	%
2022 Result - $136.3 million	84.8%

Metric # 8: Milestone Measures — Cleco officers had an additional STIP metric for 2022. This metric represents 20% of the overall STIP award for the corporate measures for executives and measures progress on certain strategic initiatives. These initiatives included safety performance improvement (5%), business application strategy and cybersecurity (5%), business plan objectives (5%), and Cleco Cajun restructuring resolution (5%). This measure also includes a stretch objective (5%) for ESG and Madison 3 CCS initiatives. For 2022, executives were able to earn up to 5% in addition to the 20% target based on success of milestone measures. The Committee evaluated the performance of each initiative and determined the 2022 result for the Milestone Measures as follows.


MILESTONE MEASURES (20% with up to a 5% stretch)
2022 RESULTS			% OF MILESTONE TARGET AWARD PAID
Cleco Power			22.5%
Support Group			22.5%
Cleco Cajun			22.5%

Total Payout for EMT Cleco Power: The calculated STIP payout for Cleco Power was 62.7% of target. The total STIP corporate payout for 2022 was calculated as follows:


	% OF TARGET		x	AWARD LEVEL		=	% OF PAYOUT
Safety Consolidated	10	%		20.0	%		2.0%
Adjusted EBITDA Consolidated	20	%		41.6	%		8.32%
EFORd	10	%		0.0	%		0%
Customer Satisfaction	15	%		0.0	%		0%
LPSC SAIDI	5	%		100.0	%		5.0%
Adjusted EBITDA	20	%		124.4	%		24.87%
Milestone Measures (stretch included)	20	%		112.5	%		22.50	%
Resulting Total (1)	100	%					62.70	%

(1) The resulting total is rounded to the nearest decimal.

Total Payout for EMT Cleco Support: The calculated STIP payout for Cleco Support was 75.7% of target. The total STIP corporate payout for 2022 was calculated as follows:


	% OF TARGET		x	AWARD LEVEL		=	% OF PAYOUT
Safety Consolidated	10	%		20.0	%		2.00	%
Adjusted EBITDA Consolidated	45	%		83.2	%		37.45	%
EFORd	7.5	%		50.0	%		3.75	%
Peak EAF	7.5	%		100.0	%		7.50	%
Customer Satisfaction	7.5	%		0.0	%		0.00	%
LPSC SAIDI	2.5	%		100.0	%		2.50	%
Milestone Measures (stretch included)	20	%		112.5	%		22.50	%
Resulting Total (1)	100	%					75.70	%

(1) The resulting total is rounded to the nearest decimal.

Total Payout for EMT Cleco Cajun: The calculated STIP payout for Cleco Cajun was 89.3% of target. The total STIP corporate payout for 2022 was calculated as follows:


	% OF TARGET		x	AWARD LEVEL		=	% OF PAYOUT
Safety Consolidated	10	%		20.0	%		2.00	%
Adjusted EBITDA Consolidated	20	%		41.6	%		8.32	%
EFORd	5	%		150.0	%		7.50	%
Peak EAF	15	%		100.0	%		15.00	%
Adjusted EBITDA	30	%		113.1	%		33.94	%
Milestone Measures (stretch included)	20	%		112.5	%		22.50	%
Resulting Total (1)	100	%					89.30	%

(1) The resulting total is rounded to the nearest decimal.

The Committee also has the authority to adjust the amount of any individual STIP award upon recommendation by the CEO. Adjustments for the STIP participants, except for the named executive officers and other members of EMT, may be made by the CEO at his discretion. Adjustments are based on the annual performance review process.

Long-Term Compensation

In 2022, the Committee continued a cash-based LTIP and issued grants for the three-year cycle for the performance period ending December 31, 2022. The metrics for the LTIP cycle issued in 2022 are weighted 50% on the three-year average ROIC and 50% on TSR.

Each executive officer’s target LTIP award level is set, so in combination with other pay elements, it will deliver a total compensation opportunity comparable to that of the

Company’s Peer Group. The chart below details the targeted opportunity for each of the named executives expressed as a percentage of base salary:


NAME	TARGET AS % OF BASE SALARY(1)
Mr. Fontenot	236	%
Ms. Guillory	120	%
Mr. LaBorde	85	%
Mr. Hilton (2)	90	%
Mr. Conway	105	%

(1) Long-term incentives were adjusted to a level approximating +/-10% of the Comparator Group market

median for total remuneration based on salary as of the June 13, 2022 grant date.

(2) Cleco Power employee.

2020-2022 LTIP Award

The Leadership Development & Compensation Committee approved an overall award level of 74% of target for the LTIP three-year performance cycle that ended on December 31, 2022. This award level represents an average ROIC of 74% and TSR of 74% over the three-year performance period. This award will be paid in cash and is included in column G of the Summary Compensation Table for 2022.

Retirement Plans - Nonqualified Deferred Compensation Plan

The Company maintains a Deferred Compensation Plan so that members of the Boards, executive officers, and certain key employees may defer receipt and taxation of certain forms of compensation. Members of the Boards may defer up to 100% of their compensation; executive officers and other key employees may defer up to 50% of their base salary and up to 100% of their annual cash incentive. The use of deferred compensation plans is prevalent within the industry and within the companies in the Peer Group. The Company does not match deferrals or contribute to the plan. Actual participation in the plan is voluntary. The notional investment options made available to participants are selected by the CFO. The allocation of deferrals among investment options is made by individual participants. The notional investment options include money market, fixed income, and equity funds. No changes were made to the plan during 2022.

Retirement Plans - SERP

The Company maintains a SERP for the benefit of the executive officers who are designated as participants by the Committee. SERP was designed to attract and retain executive officers who have contributed and will continue to contribute to the Company’s overall success by ensuring that adequate compensation will be provided or replaced during retirement. In July 2014, the Cleco Corporation Board of Directors voted to close SERP to new participants.

Benefits under SERP vest after ten years of service or upon death or disability while a participant is employed by the Company. The Committee may reduce the vesting period, which typically would occur in association with recruiting efforts. Benefits, whether or not vested, are forfeited in the event a participant is terminated for cause.

Generally, benefits are based upon a participant’s attained age at the time of separation from service. The maximum benefit is payable at age 65 and is 65% of final compensation. Payments from the Company’s defined benefit pension plan (Pension Plan), certain employer contributions to the 401(k) Plan and payments paid or payable from prior and subsequent employers’ defined benefit retirement or similar supplemental plans reduce or offset SERP benefits. If a

participant has not attained age 55 at the time of separation and receives SERP benefits before attaining age 65, SERP benefits are actuarially reduced to reflect early payment. The “Pension Benefits” table lists the present value of accumulated SERP benefits for the named executive officers as of December 31, 2022.

In 2011, the Committee amended SERP to eliminate the business transaction benefit previously included in SERP, as well as the requirement that a SERP participant be a party to an employment agreement to receive change in control benefits.

With regard to current SERP participants, two participants have agreed to fix the base compensation portion of their SERP calculation as of December 31, 2022. Additionally, they have agreed to use target rather than actual awards under the annual incentive plan for years 2016 and 2017 for the average incentive award portion of the SERP calculation. A third participant’s SERP benefit will be set at a specified amount based upon the year of separation.

In the event a SERP participant’s employment is involuntarily terminated by the Company without cause, or the participant terminates his or her employment on account of good reason, occurring within the 36-month period following a change in control event for all participants who commenced participation in SERP prior to October 28, 2011, or the 24-month period following a change in control event for all participants who commenced participation in SERP on or after October 28, 2011, such participant’s benefit shall: (i) become fully vested; (ii) be increased by adding three years to an affected participant’s age, subject to a minimum benefit of 50% of final compensation; and (iii) be subject to a modified reduction determined by increasing the executive’s age by three years.

Change in Employment Status and Change in Control Events

During 2022, the Company had no employment agreements with current named executives other than the agreements with Mr. Fontenot as President & CEO and Mr. Conway as Chief Corporate Development & Compliance Officer & General Counsel. The Company may enter into employment agreements with its executives generally in connection with recruiting efforts. The standard agreement provides for a non-renewing term, generally two years, and does not contain a change in control tax gross-up provision.

The Cleco Corporation Executive Severance Plan

In recognition of the non-renewal of executive employment contracts, the Cleco Corporation Board of Directors adopted the Cleco Corporation Executive Severance Plan (the Executive Severance Plan) on October 28, 2011. The Executive Severance Plan provides the executive officers and other key employees with cash severance benefits in the event of a termination of employment, including involuntary termination in connection with a change in control.

Perquisites and Other Benefits

The Company may make available the following perquisites to its executive officers:

•Executive officer physicals - as a condition of receiving their STIP award, Cleco requires and pays for an annual physical for the executive officers and their spouses;

•Spousal/companion travel - in connection with the various industry, governmental, civic, and entertainment activities of

the executive officers, Cleco pays for spousal/companion travel associated with such events;

•Relocation program - in addition to the standard relocation policy available to all employees, Cleco maintains a policy whereby the executive officers and other key employees may request that the Company pay real estate agent and certain other closing fees should the officer or key employee sell his/her primary residence or that the Company purchase the executive officer’s or key employee’s primary residence at the greater of its documented cost (not to exceed 120% of the original purchase price) or average appraised value. Typically, this occurs when an executive officer or key employee relocates at the Company’s request; and

•Purchase program - under the Executive Severance Plan, a covered executive officer may request the Company to purchase his/her primary residence in the event he or she is involuntarily terminated without cause or separates for good reason, either in connection with a change in control and further provided the executive officer relocates more than 100 miles from the residence to be purchased. Limits on the purchase amount are the same as the relocation program described above.

The Committee approves the perquisites based on what it believes is prevailing market practice, as well as specific Company needs. The Company believes the relocation program is an important element in attracting executive talent. Perquisite expenses related to business and spousal companion travel for the executive officers are reviewed by Internal Audit, and any exceptions are reported to the Audit Committee.

See the section titled “All Other Compensation” for details of these perquisites and their value for the named executive officers.

The executive officers, including the named executive officers, participate in the other benefit plans on the same terms as other employees. These plans include paid time off for vacation, sick leave, and bereavement; group medical, dental, vision, and prescription drug coverage (including the annual wellness program); basic life insurance; supplemental life insurance; dependent life insurance; accidental death and dismemberment insurance; defined benefit pension plan (for those hired prior to August 1, 2007); and the 401(k) Plan with a Company match for those employees hired before August 1, 2007, as well as a 401(k) Plan with an enhanced benefit for those employees hired on or after August 1, 2007.

Board Compensation

The Governance and Public Affairs Committee may engage the Committee’s independent consultant from time to time to conduct market competitive reviews of the Board compensation program. Details of the Boards’ compensation are shown in the “Board of Manager Compensation” table.

Other Tools and Analyses to Support Compensation Decisions

Tally Sheets

At least annually, the Committee reviews tally sheets that set forth the items listed below. This review is conducted as part of the comparison of the compensation and benefit components that are prevalent within the Comparator Group. The comparison facilitates discussion with the Committee’s outside independent consultant as to the use and amount of each

compensation and benefit component versus the applicable Peer Group.

•Annual compensation expense for each named executive officer - this includes the rate of change in total cash compensation from year-to-year; the annual periodic cost of providing retirement benefits; and the annual cost of providing other benefits such as health insurance, as well as the status of any deferred compensation.

•Reportable compensation - to further evaluate total compensation; to evaluate total compensation of the CEO compared to the other executive officers; and to otherwise evaluate internal equity among the named officers.

•Post-employment payments - reviewed pursuant to the potential separation events discussed in “Potential Payments at Termination or Change in Control.”

Trends and Regulatory Updates

As needed, and generally at least annually, the Committee reviews reports related to industry trends, legislative and regulatory developments, and compliance requirements based on management’s analysis and guidance provided by Pay Governance, as applicable. Plan revisions and compensation program design changes are implemented as needed.

Risk Assessment

The Committee also seeks to structure compensation that will provide sufficient incentives for the executive officers to drive results while avoiding unnecessary or excessive risk taking that could harm the long-term value of the Company. The Committee believes that the following actions and/or measures help achieve this goal:

•the Committee reviews the design of the executive compensation program to ensure an appropriate balance between business risk and resulting compensation;

•the Committee allocates pay mix between base salary and performance-based pay to provide a balance of incentives;

•the design of the incentive measures is structured to align management’s actions with the interests of the investors;

•incentive payments are dependent on the Company’s performance measured against pre-established targets and goals and/or compared to the performance of companies in the Peer Group;

•the range and sensitivity of potential payouts relative to target performance are reasonable;

•the Committee imposes checks and balances on the payment of compensation discussed herein;

•detailed processes establish the Company’s financial performance measures under its incentive plans; and

•incentive targets are designed to be challenging, yet achievable, to mitigate the potential for excessive risk-taking behaviors.

IRC Section 409A

IRC Section 409A generally was effective as of January 1, 2005. The section substantially modified the rules governing the taxation of nonqualified deferred compensation. The consequences of a violation of IRC Section 409A, unless corrected, are the immediate taxation of amounts deferred, the imposition of an excise tax and the assessment of interest on the amount of the income inclusion, each of which is imposed upon the recipient of the compensation. The plans, agreements and incentives subject to IRC Section 409A have

General

The Summary Compensation Table sets forth individual compensation information for the CEO, the CFO, and the three other most highly compensated executive officers of Cleco and its affiliates for services rendered in all capacities to Cleco and its affiliates during the fiscal years ended December 31, 2022, 2021, and 2020 (the “named executives” or “named executive officers”). Compensation components represent both payments made to the named executive officers during the year and other forms of compensation as follows:

•Column C, “Salary;” Column D, “Bonus;” Column E, “Non-Equity Incentive Plan Compensation;” and Column G, “All Other Compensation” represent cash compensation earned by the named executive in 2022, 2021, or 2020.

•The amounts shown in Column F, “Change in Pension Value and Nonqualified Deferred Compensation Earnings,” represent changes in the actuarial value of accrued benefits during 2022, 2021, and 2020 under the Pension Plan and SERP, as applicable. Actuarial value computations are based on assumptions discussed in Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 10 — Pension Plan and

Employee Benefits.” The 2022 changes shown in Column F are due in part to the actuarial impact from a decrease in the discount rate used to calculate future benefits under the Pension Plan and SERP. Negative changes, if any, are reported as zero. This compensation will be payable to the named executive in future years, generally as post-employment retirement payments.

Salary

Data in Column C includes pay for time worked, as well as pay for time not worked, such as vacation, sick leave, jury duty, bereavement, and holidays. The salary level of each of the named executives is determined by a review of market data for companies comparable in size and scope to Cleco, as discussed under “— Compensation Discussion and Analysis — Decisions Made in 2022 with Regard to Each Compensation and Benefit Component — Base Salary.” In some instances, merit lump sum payments are used to recognize positive performance when base pay has reached or exceeded the Company’s base pay policy target, and are included in the salary column. Deferral of 2022, 2021, and 2020 base pay made by Mr. Fontenot and Mr. LaBorde, pursuant to the Deferred Compensation Plan also is included in the salary

column and is further detailed in the “Nonqualified Deferred Compensation” table. Adjustments to base pay are recommended to the Committee typically on an annual basis, and if approved, usually are implemented in January. Base salary changes made in 2022 for named executives and the reasons for those changes are discussed in “— Compensation Discussion and Analysis — Decisions Made in 2022 with Regard to Each Compensation and Benefit Component — Base Salary.”

Bonus

Column D, “Bonus” includes non-plan-based, discretionary incentives earned during 2022, 2021, or 2020.

Non-Equity Incentive Plan Compensation

Column E, “Non-Equity Incentive Plan Compensation” contains cash awards earned during 2022 that will be paid in March 2023 under the STIP; earned during 2021 and paid in March 2022 under the STIP; and earned during 2020 and paid in March 2021 under the STIP. Deferral of annual cash incentive payments made by Mr. Fontenot and Mr. LaBorde pursuant to the Deferred Compensation Plan also is included in Column E and is further detailed in the “Nonqualified Deferred Compensation” table. Column E also includes cash awards earned during 2022 that will be paid in March 2023; earned during 2021 that were paid in March 2022, and earned during 2020 that were paid in February 2021 for the LTIP performance periods ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively.

Change in Pension Value and Nonqualified Deferred Compensation Earnings

The values in Column F represent the aggregate increase in the actuarial present value of benefits earned by each named executive officer during 2022, 2021, and 2020 under the Pension Plan and SERP, including SERP’s supplemental death benefit provision. These values do not represent cash received by the named executives in 2022, 2021, and 2020; rather, these amounts represent the present value of future retirement payments Cleco projects will be made to each named executive. Changes in the present value of the Pension Plan and SERP benefits from December 31, 2021, to December 31,

2022; from December 31, 2020 to December 31, 2021; and from December 31, 2019, to December 31, 2020, result from an additional year of earned service, compensation changes and the increase (or decrease) in value caused by the change in the discount rate used to compute present value. (Generally, a decrease in the discount rate will increase the present value of benefits and an increase in the discount rate will decrease the present value.) If the discount rate increases by a large enough amount, it can cause the accrued pension and SERP liability to decline versus the prior year. When this occurs, the values reported for Column F are zero.

The present value of the accumulated benefit obligation for each named executive officer is included in the table, “Pension Benefits.” These values are reviewed by the Committee in conjunction with its annual tally sheet analysis. An explanation of why the Company uses SERP and its relationship to other compensation elements can be found in “Decisions Made in 2022 With Regard to Each Compensation and Benefit Component.”

Column F also would include any above-market or preferential earnings on deferred compensation paid by the Company. There were no such preferential earnings paid by the Company in 2022, 2021, and 2020.

All Other Compensation

Payments made to or on behalf of named executive officers in Column G, “All Other Compensation,” include the following:

•Contributions by Cleco under the 401(k) Plan on behalf of the named executive officers;

•Term life insurance premiums paid for the benefit of the named executive officers;

•Spousal travel;

•Certain corporate memberships; and

•Federal Insurance Contributions Act (FICA) tax due currently and paid by the Company on the annual increase in the named executive officers’ future SERP benefits.

The value of the Column G items for 2022 for each named executive officer is as follows:

General

The Company provides executive officers who meet certain tenure requirements benefits from the Pension Plan and SERP. Vesting in the Pension Plan requires five years of service with the Company. Mr. Fontenot, Ms. Guillory, and Mr. Hilton are fully vested in the Pension Plan. Mr. LaBorde is fully vested in the Pension Plan based on previous service with the Company. Having been rehired after August 1, 2007, he was no longer eligible to participate in the Pension Plan and was included in an enhanced 401(k) Plan for those employees hired (or rehired) on or after August 1, 2007. Mr. Conway, having been hired after August 1, 2007, was not eligible to participate in the Pension Plan and was included in an enhanced 401(k) Plan for those employees hired on or after August 1, 2007.

Vesting in SERP requires ten years of service. Under the terms of SERP, automatic vesting occurs upon a Change in Control if a participating executive is involuntarily terminated from the Company. Messrs. Fontenot and LaBorde are all fully vested in SERP based on years of service. Ms. Guillory and Messrs. Hilton and Conway are not participants in SERP.

The present value of each of the named executive officer’s accumulated benefit values was actuarially calculated and represents the values as of December 31, 2022. These calculations were made using the projected unit credit method for valuation purposes and a discount rate of 5.44%. Other material assumptions relating to the valuation include use of the Pri-2012 Employee and Healthy Retiree gender distinct mortality tables projected generationally using Scale MP-2020 (using White Collar for SERP present values and no collar for Qualified Plan present values), assumed retirement at age 65 and retirement payments in the form of joint and 100% survivor with 10 years certain payment.

The sum of the change in actuarial value of the Pension Plan during 2022 and the change in value of SERP is included in Column F, “Change in Pension Value and Nonqualified Deferred Compensation Earnings,” in the Summary Compensation Table. Negative changes, if any, are reported as zero.

Pension Plan

The Cleco Corporate Holdings LLC Pension Plan, restated effective September 1, 2020, is a defined benefit plan funded entirely by employer contributions. Effective August 1, 2007, the Pension Plan was closed to new participants. Employees hired or rehired on or after August 1, 2007 are eligible to participate in an enhanced 401(k) Plan. Mr. Fontenot, Ms. Guillory, and Mr. Hilton were hired prior to August 1, 2007.

Benefits under the Pension Plan are determined by years of service, age at retirement, and highest total average compensation for any consecutive five calendar years during the last ten years of employment. Earnings include base pay, cash incentives, merit lump sums, imputed income with respect to life insurance premiums paid by the Company, pre-tax contributions to the 401(k) Plan, salary and bonus deferrals to the Deferred Compensation Plan, and any other form of payment taxable under IRC Section 3401(a). Earnings exclude reimbursement of expenses, gifts, severance pay, moving expenses, outplacement assistance, relocation allowances, welfare benefits, benefits accrued (other than salary and bonus deferrals) or paid pursuant to the Deferred Compensation Plan, the value of benefits accrued or paid (including dividends) under the LTIP, income from the exercise of stock options and income from disqualifying stock dispositions. For 2022, the amount of earnings was further limited to $305,000 as prescribed by the IRS.

The formula for calculating the defined benefit under the Pension Plan is as follows:

1. Defined Benefit = Annual Benefit + Supplement Benefit

2. Annual Benefit = Final Average Earnings × Years of Service × Pension Factor

3. Supplement Benefit = (Final Average Earnings - Social Security Covered Compensation) × Years of Service × .0065

The applicable pension factor for 2022 was 1.25%. Based on the benefit formula, the pension factor will remain at 1.25% in future years. Social Security-covered income is prescribed by the IRS based on the year of birth.

Benefits from the Pension Plan are generally paid at normal, late or early retirement dates and are subject to a limit prescribed by the IRS, generally $245,000 in 2022. Normal retirement at age 65 entitles the participant to a full pension. A participant may elect to delay retirement past age 65 as long as he/she is actively employed. Years of service continue to accumulate (up to a maximum of 35) and earnings continue to count toward the final earnings calculation. If a participant chooses to retire after age 55 but before normal retirement age, the amount of the annual pension benefit is reduced by 3% per year between ages 55 and 62. For example, the normal pension benefit at age 55 is reduced by 21%.

SERP

SERP is designed to provide retirement income of 65% of an executive officer’s final compensation at normal retirement, age 65. Final compensation under SERP is based on the sum of the highest annual salary paid during the five years prior to termination of employment and the average of the three highest STIP awards paid to the participant during the preceding 60 months. Final compensation also is determined without regard to the IRS limit on compensation. The SERP benefit rate at normal retirement is reduced by 2% per year for each year a participant retires prior to age 65, with a minimum benefit rate of 45% at age 55. The final benefit rate also may be reduced further if a participant separates from service prior to age 55. This actuarially determined reduction factor is equivalent to that used in the Pension Plan, which is 3% for each year from age 55 to 62. For example, if a SERP participant were to terminate service at age 50 and start receiving his or her SERP benefit at age 55, his or her SERP benefit rate would be 35.6%. This is the product of the minimum SERP benefit of 45% reduced by another 21% for early commencement. The actual SERP benefit payments are

reduced if a participant is to receive benefit payments from the Pension Plan, has received certain employer contributions related to the 401(k) Plan and/or is eligible to receive retirement-type payments from former employers and subsequent employers, if applicable.

SERP provides survivor benefits, which are payable to a participant’s surviving spouse or other beneficiary. SERP also contains a supplemental death benefit that was added in 1999 to reflect market practice. If a SERP participant dies while actively employed, the amount of the supplemental death benefit is equal to the sum of two times the participant’s annual base salary as of the date of death and the participant’s target bonus payable under the annual incentive plan for the year in which death occurs. If a participant dies after termination of employment, the supplemental benefit is equal to the sum of the participant’s final annual base salary and target bonus payable under the annual incentive plan for the year in which the participant retired or otherwise terminated employment. The supplemental death benefit is not dependent on years of service.

In July 2014, Cleco Corporation’s Board of Directors closed SERP to new participants. In August 2016, the Company’s Board of Managers voted to freeze salary and bonus components used in the final compensation calculation as of December 31, 2017, for Mr. LaBorde. In December 2017, the Company entered into an employment agreement with Mr. Fontenot as its CEO, the terms of which amended the calculation of Mr. Fontenot’s SERP benefit to include a fixed benefit depending upon the year Mr. Fontenot separates from the Company. With regard to former employees or their beneficiaries, all terms of SERP will continue.

Estimated Annual Payments

The following table shows the estimated annual payments at age 55 (or actual attained age if greater than 55) to each of the named executives under the Pension Plan and SERP as of December 31, 2022.


	ESTIMATED PAYMENTS AT 55 (OR ACTUAL ATTAINED AGE IF GREATER THAN 55)
	PENSION		SERP		TOTAL
Mr. Fontenot	$	132,303	$	162,697	$	295,000
Ms. Guillory	$	57,075	$	0	$	57,075
Mr. LaBorde	$	40,020	$	58,279	$	98,299
Mr. Hilton	$	108,740	$	0	$	108,740
Mr. Conway (1)	$	0	$	0	$	0
(1) Mr. Conway did not participant in the Pension Plan, as he was hired after August 1, 2007, nor SERP, as he was hired after the plan was closed to new participants in July 2014.

Deferred Compensation

Named executives and other key employees are eligible to participate in the Company’s Deferred Compensation Plan. Participants are allowed to defer up to 50% of their base salary and up to 100% of their annual cash incentive, as reported in Columns C and G in the Summary Compensation Table. Consequently, the executive officer contributions listed in Column B above are made by the participant and not by Cleco. Messrs. Fontenot and LaBorde elected to participate in the Deferred Compensation Plan during 2022. All deferral elections for 2022 were made prior to the beginning of 2022 as required by the regulations under IRC Section 409A. There are no matching contributions made by the Company.

Deferrals become general funds for use by the Company to be repaid to the participant at a pre-specified date. Short-term deferrals may be paid out as early as five years following the end of the plan year (i.e., the year in which compensation was earned). Retirement deferrals are paid at the later of termination of service or the attainment of an age specified by the participant. A bookkeeping account is maintained for each participant that records deferred salary and/or bonus, as well as earnings on deferred amounts. Earnings are determined by the performance of notional investment alternatives, which are similar to the investments available under the 401(k) Plan. Participants select which of these alternatives will be used to determine the earnings on their own accounts. The Deferred Compensation Plan is not intended to provide for the payment of above-market or preferential earnings (as these terms are defined under the SEC regulations) on compensation deferred under the plan. As such, the Deferred Compensation Plan does not provide a guaranteed rate of return.

Potential Payments at Termination or Change in Control

The following tables, “Potential Payments at Termination or Change in Control,” detail the estimated value of payments and benefits provided to each named executive officer assuming the following separation events occurred as of December 31, 2022: termination by the executive; disability; death; retirement; constructive termination; termination by the Company for cause; and termination in connection with a change in control. The Company has selected these events based on long-standing provisions in employee benefit plans, such as the Pension Plan and 401(k) Plan, or because the use is common within the industry and Comparator Group. Some of the potential severance payments are governed by the separate documents establishing the STIP, LTIP, and SERP.

At its October 2011 meeting, Cleco Corporation’s Compensation Committee approved the Executive Severance Plan to provide severance benefits to executive officers. In October and December 2014 and July 2015, the Cleco Corporation’s Compensation Committee approved amendments to the Executive Severance Plan. At December 31, 2022, all of the named executive officers were covered by the Executive Severance Plan.

The following narrative describes the type and form of payments and benefits for each separation event. The tables under “Potential Payments at Termination or Change in Control” provide an estimate of potential payments and benefits to each named executive officer under each separation event. Throughout this section, reference to “executive officers” is inclusive of named executive officers.

Termination by the Executive

If an executive officer resigns voluntarily, no payments are made or benefits provided other than those required by law.

Disability

Annual disability benefits are payable when a total and permanent disability occurs and are paid until the executive officer’s normal retirement age, which is age 65. This benefit is provided under SERP, if applicable, and is paid regardless of whether the executive was vested in SERP at the time of disability. At age 65, a disabled executive is eligible to receive annual retirement benefits under the Pension Plan, for those who are participants, and SERP as outlined under the headings “Pension Plan” and “SERP,” respectively. The executive officer also is eligible to receive a one-time, prorated share of the current year’s STIP award and a prorated award for each LTIP performance cycle in which he/she participates to the extent those performance cycles award at their completion.

Death

A prorated share of the current year’s STIP award and a supplemental death benefit provided from SERP, if applicable, are paid to an executive officer’s designated beneficiary in the event of death in service. Both are one-time payments. The executive officer’s designated beneficiary is also eligible to receive a prorated award for each LTIP performance cycle in which the executive officer participates, to the extent those performance cycles award at their completion.

Annual survivor benefits are payable to an executive officer’s surviving spouse for his/her life, or if there is no surviving spouse, to the executive officer’s designated beneficiary for a period of ten years or, if no designated beneficiary is named, to the executive officer’s estate for a period of ten years. Amounts are calculated under the provisions of the Pension Plan and SERP. For more information, see the discussion under the headings “Pension Plan” and “SERP,” respectively, as well as SERP provisions relating to death while in service. Survivor benefits are paid from SERP regardless of vested status in SERP at the time of death. The SERP supplemental death benefit is paid only to executives who were employed by the Company on or after December 17, 1999. Messrs. Fontenot and LaBorde are eligible for this benefit.

Retirement

In the event of early or normal retirement, the executive officer is eligible to receive a prorated share of the current year’s STIP award and at least a prorated award for each LTIP performance cycle in which he/she participates to the extent those performance cycles award at their completion. Retirement benefits are provided pursuant to the Pension Plan and SERP. Payments are made monthly and are calculated using the assumptions described in the discussion following the “Pension Benefits” table.

Constructive Termination

Payments made and benefits provided upon a constructive termination are ordinarily greater than payments made on account of an executive officer’s retirement, death or disability because separation effectively is initiated by the Company. Certain payments are made contingent upon the execution of a waiver, release and covenants agreement in favor of the Company. Constructive termination also may be initiated by an

executive officer if there has been (i) a material reduction in his/her base compensation, other than a reduction uniformly applicable to all executive officers; and (ii) a contemporaneous, material reduction in his/her authority, job duties, or responsibilities.

Under the terms of the Executive Severance Plan, an executive would receive constructive termination payments including up to 52 weeks of base compensation, up to $50,000 in lieu of outplacement services and reimbursement of premiums paid to maintain coverage under Cleco’s medical plan for up to 18 months. The executive also would be eligible for a prorated portion of the current year’s payout under the STIP and a prorated award for the LTIP performance cycles in which he/she participates, to the extent those performance cycles award at their completion.

If the executive officer has vested retirement benefits and has attained eligible retirement age, he/she would receive retirement benefits as described under “Pension Benefits.”

Termination for Cause

“Cause” is defined as an executive’s (i) intentional act of fraud, embezzlement or theft in the course of employment or other intentional misconduct that is materially injurious to the Company’s financial condition or business reputation; (ii) intentional damage to Company property, including the wrongful disclosure of its confidential information; (iii) willful and intentional refusal to perform the essential duties of his/her position; (iv) failure to fully cooperate with government or independent agency investigations; (v) conviction of a felony or crime involving moral turpitude; (vi) willful, reckless, or negligent violation of the material provisions of Cleco’s Code of Conduct; or (vii) reckless or intentional acts or failures to act in a manner which materially compromises his/her ability to perform the essential duties of his/her position; or (viii) willful, reckless, or negligent violation of rules related to the Sarbanes-Oxley Act or rules adopted by the SEC. No payments, other than those required by law, are made or benefits provided under the Executive Severance Plan if an executive officer is terminated for cause. If an executive officer is vested in SERP, that benefit is forfeited. The value of that forfeiture is shown as a negative number in the separation payments tables.

Change in Control

The term “Change in Control” is defined in the LTIP. One or more of the following triggering events constitute a Change in Control:

•Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or an Affiliate or any “person” who on the effective date of this Plan is a director, officer, or is the “beneficial owner” (as determined in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of outstanding securities of the Company or an employee stock ownership plan (within the meaning of Code Section 4975(e)(7)) sponsored by the Company or an Affiliate, is or becomes the “beneficial owner” (as determined in Rule 13d-3 promulgated under the Exchange Act) of 80% or more of the combined voting power of the outstanding securities of the Company;

•The Company is party to a merger or consolidation with another entity and, as a result of such transaction, 80% or more of the combined voting power of outstanding securities of the Company or its successor in the merger (or a direct or

indirect parent company of the Company or its successor in the merger) is owned in the aggregate by persons who were not “beneficial owners” (as determined in Rule 13d-3 promulgated under the Exchange Act) of securities of the Company immediately before such transaction;

•The Company sells, leases, or otherwise disposes of, in one transaction or in a series of related transactions, all or substantially all of its assets;

•The owners of the Company approve a plan of dissolution or liquidation; or

•All or substantially all of the assets or the issued and outstanding membership interests of Cleco Power LLC is sold, leased or otherwise disposed of in one or a series of related transactions to a person, other than the Company or an Affiliate.

Except as described below, payments are made and benefits provided only if an executive’s employment is terminated during the 60-day period preceding or the 24-month period following the Change in Control.

Termination must be involuntary and by the Company without cause or initiated by the executive on account of “Good Reason.” Good reason means that (i) a Participant’s base compensation in effect immediately before the commencement of a Change in Control Period is materially reduced, or there is a material reduction or termination of such Participant’s rights to any employee benefit in effect immediately prior to such period; (ii) a Participant’s authority, duties or responsibilities are materially reduced from those in effect immediately before the commencement of a Change in Control Period, or such Participant has reasonably determined that, as a result of a change in circumstances that materially affects his or her employment with the Company, he or she is unable to exercise the authority, power, duties and responsibilities assigned to him or her immediately before the commencement of such period; or (iii) a Participant is required to transfer to an office or business location that is more than 60 miles from the primary location to which he or she was assigned prior to the commencement of a Change in Control Period. No event or condition shall constitute Good Reason hereunder unless (a) a Participant provides to the Committee written notice of his or her objection to such event not later than 60 days after such Participant first learns, or should have learned, of such event; (b) such event is not corrected by the Company promptly after receipt of such notice, but in no event more than 30 days after receipt thereof; and (c) such Participant Separates from Service not more than 15 days following the expiration of the 30-day period described in clause (b) hereof. The executive also must satisfy the conditions included in the waiver, release and covenants agreement defined in the Executive Severance Plan.

Under the Executive Severance Plan, an executive would receive an amount up to two times the sum of annualized base salary and the average non-equity incentive plan bonus over the last three fiscal years and reimbursement of COBRA premiums for up to 24 months. Payments may also include the purchase of the executive officer’s primary residence and reimbursement of relocation expenses, but only if the executive relocates his/her primary residence more than 100 miles. No excise tax payments or gross-ups are made; instead, benefits will be reduced in lieu of the imposition of the tax. The numbers shown below do not give effect to this reduction.

Subject to the conditions described above, upon a Change in Control, SERP benefits are: (i) fully vested;

(ii) increased by adding three years to an affected executive’s age, subject to a minimum benefit of 50% of compensation; and (iii) subject to a modified actuarial reduction determined by increasing the executive’s age by three years.

If an executive officer is vested and of eligible retirement age, he or she may become eligible to begin to receive the annual retirement benefit described above upon a Change in Control.

The following tables set forth the value of post-employment payments and benefits that are not generally made available to all employees. Each separation event is assumed to occur on December 31, 2022. Retirement is assumed to occur at age 55 or the named executive officer’s actual attained age if greater than 55. Estimated payments

under the STIP and LTIP for disability, death, retirement and constructive termination are uncertain until the completion of the performance period/cycle. In the case of the STIP, the performance period is the current fiscal year. The estimated payment for the home purchase and relocation is a projection of the expense to the Company to sell the named executive officer’s principal residence including any loss avoided by the named executive officer by having the right to sell the residence to the Company, plus the projected cost to the Company to relocate the named executive officer.

Pursuant to Item 401(j) of Regulation S-K, the separation events disclosed in this Annual Report on Form 10-K are assumed to occur in the past, as of December 31, 2022.

BOARD OF MANAGERS COMPENSATION

2022 Board of Managers Compensation


NAME (1)	FEES EARNED OR PAID IN CASH ($)		TOTAL ($)
A	B		C
Rick Gallot	$	160,000	$	160,000
Randy Gilchrist	$	160,000	$	160,000
Peggy Scott	$	250,000	$	250,000
Melissa Stark	$	3,750	$	3,750
Bruce Wainer	$	160,000	$	160,000

(1)Messrs. Chapman, Fronimos, Hanrahan, Leslie, Perry, Rubin, Turner, and Solís-Hernández were appointed to the Boards by the Owner Group and do not receive additional compensation for their service on the Boards.

General

Column B, “Fees Earned or Paid in Cash” represents cash compensation earned and/or received in 2022.

A non-management Board Manager may elect to participate in the Company’s Deferred Compensation Plan and defer the receipt of all or part of his or her fees. Benefits are equal to the amount credited to each Board Manager’s individual account based on compensation deferred plus applicable investment returns as specified by the director upon election to participate in the plan. Investment options are similar to those provided to participants in the 401(k) Plan. Funds may be reallocated between investments at the discretion of the Board Manager. Accounts, which may be designated separately by deferral year, are payable in the form of a single-sum payment or in the form of substantially equal annual installments, not to exceed 15, when a Board Manager ceases to serve on the Cleco’s Boards or attains a specified age.

Fees Earned or Paid in Cash

During 2022, each Board Manager who is not a Cleco employee or appointed by the Owner Group, except Ms. Stark,

received an annual cash retainer of $160,000. Ms. Stark received an annual cash retainer of $3,750. During this period, the non-management Chair was compensated with an additional retainer of $90,000.

Board Managers are permitted to defer receipt of their fees under the Company’s Deferred Compensation Plan. Messrs. Gallot and Gilchrist elected to defer all or a portion of their fees in 2022.

Cleco reimburses Board Managers for travel and related expenses incurred for attending meetings of Cleco’s Boards and Board committees, including travel costs for spouses/companions. No expenses for spouses/companions were incurred during 2022.

Cleco also provides its Board Managers who are not employed by Cleco or appointed by the Owner Group with $200,000 of life insurance and permanent total disability coverage under a group accidental death and dismemberment plan maintained by Cleco Power. The total 2022 premium for all coverage (exempt employees, officers and Board Managers) under this plan was $6,128.

Interests of the Board of Managers

In 2022, no non-management member of Cleco’s Boards performed services for or received compensation from Cleco or its affiliates except for those services relating to his or her duty as a member of Cleco’s Boards.

REPORT OF THE LEADERSHIP DEVELOPMENT AND COMPENSATION COMMITTEE

The Leadership Development and Compensation Committee of the Boards (see “Boards of Managers of Cleco” above and “Director Independence and Related Party Transactions” below), includes four managers, one of whom meets the additional requirements for independence which were adopted by the Board. The Leadership Development and Compensation Committee operates under a written charter last revised in December 2021, a copy of which is posted on

Cleco’s web site at https://www.cleco.com/about/leadership-governance/board-committees. A copy of this charter also is available free of charge by request sent to: Public Relations, Cleco, P.O. Box 5000, Pineville, LA 71361-5000.

The Leadership Development and Compensation Committee was established in April 2016.

Based on the review and discussions referred to above, the Leadership Development and Compensation Committee recommended to the Company’s Boards that the CD&A and related required compensation disclosure tables be included in this Annual Report on Form 10-K and filed with the SEC.

The Leadership Development and Compensation Committee of the Boards of Managers of Cleco Holdings and Cleco Power

Andrew Chapman, Chair

Christopher Leslie

Richard Gallot, Jr.

Steven Turner

Leadership Development and Compensation Committee Interlocks and Insider Participation

The members of the Leadership Development and Compensation Committee are set forth above. No members of the Leadership Development and Compensation Committee were officers or employees of the Company or any of its subsidiaries during 2022, were former Company officers, or had any relationship otherwise requiring disclosure.

CEO Pay Ratio

The aggregate compensation of the executive who served in the CEO role in 2022 (Mr. Fontenot) was $2,651,721. This

amount differs from the aggregate amount reflected in the Summary Compensation Table included in this Annual Report on Form 10-K because of the inclusion of the value of the Company’s contribution to health and welfare benefits. The median employee’s annual total compensation for 2022 was $113,124, calculated including the same components of total pay as was used for Mr. Fontenot. As a result, Cleco estimates that the CEO’s 2022 annual total compensation was 23.4 times that of the median employee’s annual total compensation. The median employee was determined based on employees of the Company on December 31, 2022, using the consistently applied compensation measure of target total cash compensation (including base salary and target bonus). Target total cash compensation was annualized for those employees that were not employed for the full year of 2022.

The pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K. In addition, because the SEC rules for identifying the median employee allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP (PwC) for the years ended December 31, 2022, and 2021, respectively, were as follows:


	2022		2021
Audit fees	$	2,420,500	$	2,258,964
Audit-related fees	208,500		206,250
Tax fees	593,017		394,920
Other fees	60,251		8,251
Total	$	3,282,268	$	2,868,385

Audit fees include professional fees rendered by PwC for financial statement audit and review services that are customary under generally accepted auditing standards or that are customary for the purpose of rendering an opinion or review report on the financial statements.

Audit-related fees consist of assurance and related services that are traditionally performed by PwC, such as audits of stand-alone financial statements or other assurance services not required by statute or regulation.

Tax fees consist of professional services rendered by PwC for tax compliance, tax planning and tax advice, and consulting services, including assistance and representation in connection with tax audits and appeals, tax advice related to employee benefit plans and requests for rulings or technical advice from taxing authorities.

Other fees primarily reflect costs for training services and accounting research software licenses.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has established a policy requiring its pre-approval of all audit and non-audit services provided by the independent registered public accounting firm. The policy

requires the general pre-approval of annual audit services and specific pre-approval of all other permitted services. In determining whether to pre-approve permitted services, the Audit Committee considers whether such services are consistent with SEC rules and regulations. Furthermore, requests for pre-approval for services that are eligible for general pre-approval must be detailed as to the services to be provided. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval and the fees for the services performed to date. During 2022 and 2021, all audit and non-audit fees were pre-approved by the Audit Committee in accordance with the policy described above and pursuant to applicable rules of the SEC.

For the fiscal years ended December 31, 2022, and 2021, professional services provided for Cleco Power that were directly billed to Cleco Holdings were allocated to Cleco Power though not billed directly to Cleco Power. The following is Cleco Power’s allocation of professional services provided by PwC:


	2022		2021
Audit fees	$	1,961,400	$	1,846,721
Audit-related fees	177,500		176,250
Tax fees	474,414		315,936
Other fees	8,671		6,601
Total	$	2,621,985	$	2,345,508

Note 1 — Summary of Significant Accounting Policies

The condensed financial statements represent the financial information required by SEC Regulation S-X 5-04 for Cleco Holdings, which requires the inclusion of parent company only financial statements if the restricted net assets of consolidated subsidiaries exceed 25% of total consolidated net assets as of the last day of its most recent fiscal year. As of December 31, 2022, Cleco Holdings’ restricted net assets of consolidated subsidiaries were $1.37 billion and exceeded 25% of its total consolidated net assets.

Cleco Holdings’ major, first-tier subsidiaries are Cleco Power and Cleco Cajun. Cleco Power contains the LPSC-jurisdictional generation, transmission, and distribution electric utility operations serving its retail and wholesale customers. Cleco Cajun is an unregulated electric utility company that owns generation and transmission assets and supplies wholesale power and capacity to its customers.

The accompanying financial statements have been prepared to present the results of operations, financial condition, and cash flows of Cleco Holdings on a stand-alone basis as a holding company. Investments in subsidiaries and other investees are presented using the equity method. These financial statements should be read in conjunction with Cleco’s consolidated financial statements.

Note 2 — Debt

At December 31, 2022, Cleco Holdings had $64.0 million of outstanding borrowings under its $175.0 million revolving credit facility at a weighted average all-in interest rate of 5.977%. At December 31, 2021, Cleco Holdings had no short-term debt outstanding.

At December 31, 2022, Cleco Holding’s long-term debt outstanding was $1.47 billion, of which $230.5 million was due within one year. The amount due within one year represents $165.0 million of Cleco Holdings’ senior notes due in May 2023 and $65.6 million principal payments on Cleco Holdings’ debt as required by the Cleco Cajun Transaction commitments to the LPSC.

Cleco Holdings’ $175.0 million revolving credit agreement matures on May 21, 2026. Under this agreement, Cleco Holdings is required to maintain total indebtedness less than or equal to 65.0% of total capitalization. At December 31, 2022, the borrowing costs for amounts drawn under this agreement were equal to LIBOR plus 1.625% or ABR plus 0.625%, plus commitment fees of 0.275% paid on the unused portion of the facility. If Cleco Holdings’ credit ratings were to be downgraded one level by the credit rating agencies, Cleco Holdings may be required to pay incremental interest and commitment fees of 0.125% and 0.05%, respectively.

Upon approval of the Cleco Cajun Transaction, commitments were made to the LPSC by Cleco Holdings, including repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. As of December 31, 2022, Cleco Holdings was in compliance with these commitments. The cumulative minimum principal amounts committed to be repaid for each year through 2024 are as follows:


(THOUSANDS)
For the year ending Dec. 31,
2019	$	66,700
2020	$	133,300
2021	$	200,000
2022	$	267,700
2023	$	333,300
2024	$	400,000

The principal amounts payable under long-term debt agreements for each year through 2027 and thereafter are as follows:


AMOUNTS PAYABLE UNDER LONG-TERM DEBT ARRANGEMENTS	(THOUSANDS)
For the year ending Dec. 31,
2023	$	165,000
2024	$	132,300
2025	$	—
2026	$	535,000
2027	$	—
Thereafter	$	650,000

Note 3 — Cash Distributions and Equity Contributions

The following table summarizes the cash distributions Cleco Holdings received from affiliates during 2022, 2021, and 2020:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Cleco Power	$	105,500	$	—	$	—
Cleco Cajun	137,000		111,000		134,000


Total	$	242,500	$	111,000	$	134,000

During the years ended December 31, 2022, 2021, and 2020, Cleco Holdings made no contributions to affiliates.

During the years ended December 31, 2022, 2021, and 2020, Cleco Holdings received no equity contributions from Cleco Group.

During the year ended December 31, 2022, Cleco Holdings made $219.6 million of distribution payments to Cleco Group. During the years ended December 31, 2021, and 2020, Cleco Holdings made no distribution payments to Cleco Group.

Note 4 — Income Taxes

Cleco Holdings’ (Parent Company Only) Condensed Statements of Income reflect income tax expense (benefit) for the following line items:


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		6

PART I
ITEM 1.	Business
	General	8
	Human Capital	8
	Operations	10
	Regulatory Matters, Industry Developments, and Franchises	13
	Environmental Matters	14
ITEM 1A.	Risk Factors	19
ITEM 1B.	Unresolved Staff Comments	28
ITEM 2.	Properties	28
ITEM 3.	Legal Proceedings	29
ITEM 4.	Mine Safety Disclosures	29

PART II
ITEM 5.	Market for Registrants’ Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	30
ITEM 6.	Reserved	30
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
ITEM 8.	Financial Statements and Supplementary Data	54
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	117
ITEM 9A.	Controls and Procedures	117
ITEM 9B.	Other Information	117
ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	117

PART III
ITEM 10.	Directors, Executive Officers, and Corporate Governance of the Registrants	118
ITEM 11.	Executive Compensation	122
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	137
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	137
ITEM 14.	Principal Accountant Fees and Services	138

PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	139
ITEM 16.	Form 10-K Summary	143
	Signatures	151


			LIGNITE				COAL		NATURAL GAS				PETROLEUM COKE				RENEWABLES		WEIGHTED AVERAGE COST PER MWh
YEAR	COST PER MWh		PERCENT OF GENERATION		COST PER MWh		PERCENT OF GENERATION		COST PER MWh		PERCENT OF GENERATION		COST PER MWh		PERCENT OF GENERATION		PERCENT OF GENERATION
2022	N/A (1)		N/A (1)		$	31.56	14.1	%	$	54.78	66.7	%	$	57.64	17.0	%	2.2	%	$	51.02
2021	$	134.76	4.3	%	$	24.20	14.7	%	$	33.71	55.2	%	$	31.62	23.9	%	1.9	%	$	35.75
2020	$	159.10	2.9	%	$	25.49	9.1	%	$	16.97	66.2	%	$	17.40	20.3	%	1.5	%	$	21.90


			PAYMENTS DUE BY PERIOD
CONTRACTUAL OBLIGATIONS (THOUSANDS)	TOTAL		UP TO 12 MONTHS		BEYOND 12 MONTHS
Cleco
Long-term debt (1)	$	5,076,468	$	164,563	$	4,911,905


Purchase obligations	$	575,527	$	474,124	$	101,403
Other long-term liabilities (2)	$	17,035	$	2,561	$	14,474


Cleco Power
Long-term debt (1)	$	3,038,903	$	106,774	$	2,932,129


Purchase obligations	$	331,633	$	239,109	$	92,524
Other long-term liabilities (2)	$	4,800	$	1,600	$	3,200


GENERATING STATION	YEAR OF INITIAL OPERATION	RATED CAPACITY (MW)		NET CAPACITY (MW)	(1)	PRIMARY FUEL USED FOR GENERATION	GENERATION TYPE
Brame Energy Center
Nesbitt Unit 1	1975	440		424		natural gas	steam
Rodemacher Unit 2	1982	157	(2)	147	(2)	coal	steam
Madison Unit 3	2010	641		627		petroleum coke/coal	steam
Acadia Unit 1	2002	580		538		natural gas	combined cycle
Coughlin Unit 6	2000	264		254		natural gas	combined cycle
Coughlin Unit 7	2000	511		481		natural gas	combined cycle
Teche Unit 3	1971	359		272		natural gas	steam
Teche Unit 4	2011	33		34		natural gas	combustion
St. Mary Clean Energy Center	2019	50		47		waste heat	steam
Total generating capability		3,035		2,824


GENERATING STATION	COMMENCEMENT OF COMMERCIAL OPERATION	RATED CAPACITY (MW)		NET CAPACITY (MW)	(1)	PRIMARY FUEL USED FOR GENERATION	GENERATION TYPE
Bayou Cove (2)	2002	225		221		natural gas	combustion
Big Cajun I
Unit 1 and Unit 2	1972	220		172		natural gas	steam
Unit 3 and Unit 4	2001	210		193		natural gas	combustion
Big Cajun II
Unit 1	1981	580		532		coal	steam
Unit 2	1982	540		552		natural gas	steam
Unit 3	1983	341	(4)	318	(4)	coal	steam
Cottonwood (3)	2003	1,263		1,166		natural gas	combined cycle

Total generating capability		3,379		3,154



	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PER SHARE AND PERCENTAGES)	2022			2021			2020
Operating revenue, net (excluding intercompany revenue)
Cleco Power	$	1,603,938		$	1,228,382		$	1,020,674
Cleco Cajun	644,865			527,219			487,149
Other	(9,671)			(9,672)			(9,677)
Total	$	2,239,132		$	1,745,929		$	1,498,146
Income before income taxes	$	189,728		$	208,077		$	158,018
Net income	$	188,811		$	194,966		$	122,300
Capitalization
Member’s equity	48.42		%	46.56		%	46.55		%
Long-term debt and finance leases (1)	51.58		%	53.44		%	53.45		%
Member’s equity	$	2,947,067		$	2,954,156		$	2,757,023
Long-term debt and finance leases (1)	$	3,139,094		$	3,390,033		$	3,165,387
Total assets	$	8,253,749		$	8,125,018		$	7,725,569


CLECO

Consolidated Statements of Income
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Operating revenue
Electric operations	$	2,009,427	$	1,590,796	$	1,370,893
Other operations	237,379		195,767		180,524

Gross operating revenue	2,246,806		1,786,563		1,551,417
Electric customer credits	(7,674)		(40,634)		(53,271)
Operating revenue, net	2,239,132		1,745,929		1,498,146
Operating expenses
Fuel used for electric generation	599,410		349,227		326,869
Purchased power	656,776		444,905		282,255
Other operations and maintenance	300,785		304,996		303,246
Depreciation and amortization	256,138		237,415		219,363
Taxes other than income taxes	70,295		64,509		61,321

Regulatory disallowance	13,841		—		—

Total operating expenses	1,897,245		1,401,052		1,193,054
Operating income	341,887		344,877		305,092
Interest income	6,372		3,312		3,948
Allowance for equity funds used during construction	3,740		9,905		998

Other expense, net	(11,113)		(15,681)		(14,156)
Interest charges
Interest charges, net	152,975		137,050		139,272
Allowance for borrowed funds used during construction	(1,817)		(2,714)		(1,408)
Total interest charges	151,158		134,336		137,864
Income before income taxes	189,728		208,077		158,018
Federal and state income tax expense	917		13,111		35,718
Net income	$	188,811	$	194,966	$	122,300
The accompanying notes are an integral part of the consolidated financial statements.


CLECO

Consolidated Statements of Comprehensive Income
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Net income	$	188,811	$	194,966	$	122,300
Other comprehensive income, net of tax
Postretirement benefits gain (loss) (net of tax expense of $8,728, tax expense of $394, and tax benefit of $2,922, respectively)	23,688		2,167		(8,283)

Total other comprehensive income (loss), net of tax	23,688		2,167		(8,283)
Comprehensive income, net of tax	$	212,499	$	197,133	$	114,017
The accompanying notes are an integral part of the consolidated financial statements.


CLECO

Consolidated Statements of Changes in Member’s Equity
(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	—		122,300		—		122,300
Other comprehensive loss, net of tax	—		—		(8,283)		(8,283)
Balances, Dec. 31, 2020	$	2,454,276	$	328,543	$	(25,796)	$	2,757,023

Net income	—		194,966		—		194,966
Other comprehensive income, net of tax	—		—		2,167		2,167
Balances, Dec. 31, 2021	$	2,454,276	$	523,509	$	(23,629)	$	2,954,156
Distributions to member	—		(219,588)		—		(219,588)

Net income	—		188,811		—		188,811
Other comprehensive income, net of tax	—		—		23,688		23,688
Balances, Dec. 31, 2022	$	2,454,276	$	492,732	$	59	$	2,947,067
The accompanying notes are an integral part of the consolidated financial statements.


Note 1	The Company	Cleco and Cleco Power
Note 2	Summary of Significant Accounting Policies	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	Jointly Owned Generation Facilities	Cleco and Cleco Power
Note 7	Fair Value Accounting Instruments	Cleco and Cleco Power
Note 8	Derivative Instruments	Cleco and Cleco Power
Note 9	Debt	Cleco and Cleco Power
Note 10	Pension Plan and Employee Benefits	Cleco and Cleco Power
Note 11	Income Taxes	Cleco and Cleco Power
Note 12	Disclosures about Segments	Cleco
Note 13	Regulation and Rates	Cleco and Cleco Power
Note 14	Variable Interest Entities	Cleco and Cleco Power
Note 15	Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees	Cleco and Cleco Power
Note 16	Affiliate Transactions	Cleco and Cleco Power
Note 17	Intangible Assets, Intangible Liabilities, and Goodwill	Cleco and Cleco Power
Note 18	Accumulated Other Comprehensive Loss	Cleco and Cleco Power
Note 19	Securitization	Cleco and Cleco Power


Cleco
							FOR THE YEAR ENDED DECEMBER 31,
	2022				2021				2020
	PRETAX BASIS		NET OF TAX		PRETAX BASIS		NET OF TAX		PRETAX BASIS		NET OF TAX
AFUDC composite rate	9.06	%	7.09	%	10.05	%	7.81	%	10.14	%	7.96	%
Capitalized interest rate	3.68	%	N/A		1.80	%	N/A		1.98	%	N/A


	FOR THE YEAR ENDED DEC. 31, 2021
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	453,873		$	—		$	—		$	—	$	453,873
Commercial (1)	294,553			—			—			—		294,553
Industrial (1)	175,134			—			—			—		175,134
Other retail (1)	16,105			—			—			—		16,105

Electric customer credits	(41,007)			—			—			—		(41,007)
Total retail revenue	898,658			—			—			—		898,658
Wholesale, net	250,987		(1)	398,226		(2)	(9,680)		(3)	1		639,534
Transmission, net	55,963		(4)	61,500		(5)	—			(7,615)		109,848
Other	18,791			—			8			—		18,799
Affiliate (6)	5,641			—			113,623			(119,264)		—
Total revenue from contracts with customers	1,230,040			459,726			103,951			(126,878)		1,666,839
Revenue unrelated to contracts with customers
Other	11,597		(7)	67,493		(8)	—			—		79,090
Total revenue unrelated to contracts with customers	11,597			67,493			—			—		79,090
Operating revenue, net	$	1,241,637		$	527,219		$	103,951		$	(126,878)	$	1,745,929


	FOR THE YEAR ENDED DEC. 31, 2020
(THOUSANDS)	CLECO POWER			CLECO CAJUN			OTHER			ELIMINATIONS		TOTAL
Revenue from contracts with customers
Retail revenue
Residential (1)	$	402,050		$	—		$	—		$	—	$	402,050
Commercial (1)	256,964			—			—			—		256,964
Industrial (1)	137,920			—			—			—		137,920
Other retail (1)	14,235			—			—			—		14,235
Storm recovery surcharge	2,440			—			—			—		2,440
Electric customer credits	(52,208)			—			—			—		(52,208)
Total retail revenue	761,401			—			—			—		761,401
Wholesale, net	192,187		(1)	365,555		(2)	(9,680)		(3)	—		548,062
Transmission	49,164		(4)	51,449		(5)	—			(6,463)		94,150
Other	15,162			—			—			1		15,163
Affiliate (6)	5,156			204			129,126			(134,486)		—
Total revenue from contracts with customers	1,023,070			417,208			119,446			(140,948)		1,418,776
Revenue unrelated to contracts with customers
Other	9,222		(7)	70,145		(8)	3			—		79,370
Total revenue unrelated to contracts with customers	9,222			70,145			3			—		79,370
Operating revenue, net	$	1,032,292		$	487,353		$	119,449		$	(140,948)	$	1,498,146


Cleco Power
	AT DEC. 31,				REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	2022		2021







Regulatory assets
Acadia Unit 1 acquisition costs	$	1,807	$	1,913	17
Accumulated deferred fuel (1)	57,881		56,826		Various	(9)
Affordability study	11,715		13,094		8.5
AFUDC equity gross-up	63,477		66,574		Various	(2)
AMI deferred revenue requirement	1,499		2,045		3.25
AROs (1)(8)	17,218		15,141
Bayou Vista to Segura transmission project deferred revenue requirement	2,510		1,392		0.5
Coughlin transaction costs	815		845		26.5
COVID-19 executive order (8)	2,953		2,953
Deferred lignite and mine closure costs (8)	133,587		136,980
Deferred storm restoration costs - Hurricane Delta (6)	109		17,113
Deferred storm restoration costs - Hurricane Ida (7)	9,409		37,617
Deferred storm restoration costs - Hurricane Laura (6)	457		54,282
Deferred storm restoration costs - Hurricane Zeta (6)	9		3,296
Deferred storm restoration costs - Winter Storms Uri & Viola	—		1,912
Dolet Hills Power Station closure costs (8)	147,082		145,844

Energy efficiency	235		1,645		0.25
Financing costs (1)	6,456		6,826		Various	(3)
Interest costs	3,210		3,459		Various	(2)
Madison Unit 3 property taxes	13,038		8,362		Various	(9)

Non-service cost of postretirement benefits	14,810		12,950		Various	(2)
Other	14,114		11,224		Various	(9)
Postretirement costs	47,317		117,773		Various	(4)
Production operations and maintenance expenses	10,443		11,058		Various	(5)
Rodemacher Unit 2 deferred costs (8)	12,645		6,931
St. Mary Clean Energy Center	4,350		6,089		2.5

Training costs	5,774		5,929		37
Tree trimming costs	6,377		9,092		2.25
Total regulatory assets	589,297		759,165
Regulatory liabilities

Deferred taxes, net	(34,087)		(95,544)		Various	(9)
Storm reserves	(118,762)		—		Various	(9)
Total regulatory liabilities	(152,849)		(95,544)
Total regulatory assets, net	$	436,448	$	663,621
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at December 31, 2022, and 2021, respectively. All other assets are earning a return on investment. (2) Amortized over the estimated lives of the respective assets. (3) Amortized over the terms of the related debt issuances. (4) Amortized over the average service life of the remaining plan participants. (5) Deferral is recovered over the following three-year regulatory period. (6) From June 1, 2021, through August 31, 2022, these were being recovered through the interim storm recovery rate. For more information, see Note 19 — “Securitization.” (7) Currently not in a recovery period. The balance remaining represents amounts under prudency review by the LPSC. (8) Currently not in a recovery period. (9) For more information on the remaining recovery period, refer to the following disclosures for each specific regulatory asset or liability.


Cleco
			AT DEC. 31, 2022
(THOUSANDS, EXCEPT PERCENTAGES AND MW)	UTILITY PLANT IN SERVICE			ACCUMULATED DEPRECIATION		CONSTRUCTION WORK IN PROGRESS		OWNERSHIP INTEREST PERCENTAGE		RATED CAPACITY (MW)	OWNERSHIP INTEREST (MW)
Acadia Power Station common facilities (1)	$	16,959		$	2,846	$	874	50	%
Bayou Cove common facilities (2)	$	13,476		$	2,901	$	—	75	%
Big Cajun II
Unit 3	$	19,418		$	4,548	$	178	58	%	588	341
Common facilities - Units 1, 2, and 3	$	60,319		$	8,230	$	—	86	%
Brame Energy Center
Rodemacher Unit 2	$	82,222		$	29,130	$	1,039	30	%	523	157
Common facilities - Nesbitt Unit 1 and Rodemacher Unit 2	$	3,337		$	556	$	7	62	%
Common facilities - Rodemacher Unit 2 and Madison Unit 3	$	2,894		$	255	$	66	69	%
Common facilities - Nesbitt Unit 1, Rodemacher Unit 2, and Madison Unit 3	$	10,444		$	1,761	$	57	77	%


Cleco
	FAIR VALUE MEASUREMENTS AT REPORTING DATE
(THOUSANDS)	AT DEC. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		AT DEC. 31, 2021		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset Description
Money market funds	$	182,574	$	182,574	$	—	$	—	$	145,033	$	145,033	$	—	$	—
FTRs	3,088		—		—		3,088		6,977		—		—		6,977
Natural gas derivatives	105,646		—		105,646		—		87,464		—		87,464		—
Total assets	$	291,308	$	182,574	$	105,646	$	3,088	$	239,474	$	145,033	$	87,464	$	6,977
Liability Description

FTRs	$	1,862	$	—	$	—	$	1,862	$	834	$	—	$	—	$	834
Natural gas derivatives	6,979		—		6,979		—		—		—		—		—
Total liabilities	$	8,841	$	—	$	6,979	$	1,862	$	834	$	—	$	—	$	834


Cleco
	FAIR VALUE				VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	FORWARD PRICE RANGE
(THOUSANDS, EXCEPT DOLLAR PER MWh)	Assets		Liabilities				Low		High
FTRs at Dec. 31, 2022	$	3,088	$	1,862	RTO auction pricing	FTR price - per MWh	$	(11.21)	$	13.65
FTRs at Dec. 31, 2021	$	6,977	$	834	RTO auction pricing	FTR price - per MWh	$	(3.94)	$	9.25


Cleco
	DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
		AT DEC. 31, 2022
				GROSS AMOUNTS OFFSET ON THE BALANCE SHEET				GROSS AMOUNTS NOT OFFSET ON THE BALANCE SHEET (1)
(THOUSANDS)	BALANCE SHEET LINE ITEM	GROSS ASSET (LIABILITY)		CASH COLLATERAL		NET ASSET (LIABILITY) ON THE BALANCE SHEET		COLLATERAL		NET AMOUNT
Commodity-related contracts
FTRs
Current	Energy risk management assets	$	3,088	$	—	$	3,088	$	—	$	3,088
Current	Energy risk management liabilities	(1,862)		—		(1,862)		—		(1,862)
Natural gas derivatives
Current	Energy risk management assets	53,251		(6,500)		46,751		(32,578)		14,173
Non-current	Energy risk management assets	58,895		—		58,895		(20,422)		38,473
Current	Energy risk management liabilities	(6,979)		—		(6,979)		—		(6,979)

Commodity-related contracts, net		$	106,393	$	(6,500)	$	99,893	$	(53,000)	$	46,893


Cleco
	AMOUNT OF GAIN/(LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
		FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	DERIVATIVES LINE ITEM	2022		2021			2020
Commodity contracts
FTRs (1)	Electric operations	$	14,118	$	12,797		$	9,213
FTRs (1)	Purchased power	(10,829)		(14,813)		(2)	(10,141)		(2)
Natural gas derivatives (3)	Fuel used for electric generation	180,522		134,144			12,159		(2)
Total		$	183,811	$	132,128		$	11,231


(THOUSANDS)		AT DEC. 31, 2022		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Asset Description
Cash equivalents		$	7,345	$	—	$	7,345	$	—

Government securities		33,019		—		33,019		—
Mutual funds
Domestic		78,349		78,349		—		—
International		39,722		39,722		—		—
Real estate funds		39,370		—		—		39,370
Corporate debt		103,940		—		103,940		—
Total		$	301,745	$	118,071	$	144,304	$	39,370

	Investments measured at net asset value*	98,505
	Interest accrual	2,035
	Total net assets	$	402,285
	*Investments measured at net asset value consist of Common/collective trust.


			SERP BENEFITS
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2022		2021
Change in benefit obligation
Benefit obligation at beginning of period	$	93,179	$	97,225
Service cost	227		232
Interest cost	2,679		2,538
Actuarial gain	(22,097)		(1,932)
Benefits paid	(5,561)		(4,884)



Benefit obligation at end of period	$	68,427	$	93,179


	SERP BENEFITS
	AT DEC. 31
(THOUSANDS)	2022		2021
Net actuarial loss	$	8,241	$	31,526
Prior service credit	$	(1,299)	$	(1,514)


SEGMENT INFORMATION
	FOR THE YEAR ENDED DEC. 31, 2022
(THOUSANDS)	CLECO POWER		CLECO CAJUN			TOTAL SEGMENTS
Revenue
Electric operations	$	1,523,066	$	496,042		$	2,019,108
Other operations	98,759		148,823			247,582
Affiliate revenue	6,377		—			6,377
Electric customer credits	(7,674)		—			(7,674)
Operating revenue, net	$	1,620,528	$	644,865		$	2,265,393
Net income	$	170,057	$	73,830		$	243,887
Add: Depreciation and amortization	178,231		75,157		(1)	253,388
Less: Interest income	5,082		1,122			6,204
Add: Interest charges	88,218		523			88,741
Add: Federal and state income tax expense	2,503		24,565			27,068








EBITDA	$	433,927	$	172,953		$	606,880
Additions to property, plant, and equipment	$	228,940	$	6,867		$	235,807
Equity investment in investee	$	2,072	$	—		$	2,072
Goodwill	$	1,490,797	$	—		$	1,490,797
Total segment assets	$	6,834,970	$	1,019,241		$	7,854,211
(1) Includes $14.4 million of amortization of intangible assets and liabilities related to wholesale power supply agreements and $(9.2) million of deferred lease revenue amortization as a result of the Cleco Cajun Transaction.


	FOR THE YEARS ENDED DEC. 31,
(THOUSANDS)	2022		2021		2020
Net income	$	188,811	$	194,966	$	122,300
Add: Depreciation and amortization	270,976		251,431		232,229
Less: Interest income	6,372		3,312		3,948
Add: Interest charges	151,158		134,336		137,864
Add: Federal and state income tax expense	917		13,111		35,718
Add (less): Other corporate costs and noncash items (1)	1,390		(7,362)		1,633







Total segment EBITDA	$	606,880	$	583,170	$	525,796
(1) Adjustments made for Other and Elimination totals not allocated to total segment EBITDA.


Cleco
(THOUSANDS)	POSTRETIREMENT BENEFIT NET GAIN (LOSS)
Balance, Dec. 31, 2019	$	(17,513)
Other comprehensive income before reclassifications
Postretirement benefit adjustments incurred during the year	(10,026)
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss	1,743

Balance, Dec. 31, 2020	$	(25,796)
Other comprehensive income before reclassifications
Postretirement benefit adjustments incurred during the year	1,470
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss	697

Balance, Dec. 31, 2021	$	(23,629)
Other comprehensive income before reclassifications
Postretirement benefit adjustments incurred during the year	23,647
Amounts reclassified from accumulated other comprehensive income
Amortization of postretirement benefit net loss	41


Balance, Dec. 31, 2022	$	59


Cleco Power
(THOUSANDS)	POSTRETIREMENT BENEFIT NET (LOSS) GAIN		NET (LOSS) GAIN ON CASH FLOW HEDGES		TOTAL AOCI
Balances, Dec. 31, 2019	$	(16,717)	$	(5,868)	$	(22,585)
Other comprehensive loss before reclassifications
Postretirement benefit adjustments incurred during the year	(4,050)		—		(4,050)
Amounts reclassified from accumulated other comprehensive loss
Amortization of postretirement benefit net loss	1,628		—		1,628
Reclassification of net loss to interest charges	—		254		254

Balances, Dec. 31, 2020	$	(19,139)	$	(5,614)	$	(24,753)
Other comprehensive loss before reclassifications
Postretirement benefit adjustments incurred during the year	4,606		—		4,606
Amounts reclassified from accumulated other comprehensive loss
Amortization of postretirement benefit net loss	1,648		—		1,648
Reclassification of net loss to interest charges	—		316		316

Balances, Dec. 31, 2021	$	(12,885)	$	(5,298)	$	(18,183)
Other comprehensive loss before reclassifications
Postretirement benefit adjustments incurred during the year	8,339		—		8,339
Amounts reclassified from accumulated other comprehensive loss
Amortization of postretirement benefit net loss	1,228		—		1,228
Reclassification of net loss to interest charges	—		251		251



Balances, Dec. 31, 2022	$	(3,318)	$	(5,047)	$	(8,365)


NAME OF EXECUTIVE			POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
William G. Fontenot Cleco Holdings Cleco Power Cleco Cajun			President and CEO since January 2018. CEO since February 2019; President and CEO from January 2018 to February 2019. CEO since February 2019. (Age 60)
Kristin L. Guillory Cleco Holdings Cleco Power Cleco Cajun			CFO since July 2021; Treasurer from February 2018 to September 2019; General Manager Finance and Assistant Treasurer from May 2016 to February 2018. CFO since July 2021; President from September 2019 to July 2021. (Age 40)


NAME OF EXECUTIVE			POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
Robert R. LaBorde, Jr. Cleco Holdings			Chief Operations & Sustainability Officer since January 2022; Chief Operations Officer from February 2019 to January 2022; Vice President Generation Operations & Environmental Services from April 2016 to February 2019. (Age 55)
Justin S. Hilton Cleco Power Cleco Holdings Cleco Power			President since February 2019. Vice President MISO Operations from April 2016 to February 2019. (Age 53)

William B. Conway, Jr. Cleco Holdings Cleco Power			Chief Development Officer, Chief Compliance Officer and General Counsel since June 2022; Chief Compliance Officer and General Counsel since July 2020; Retired from May 2017 to June 2020. (Age 65)
Mark A. Madsen Cleco Holdings			Chief Information & Supply Chain Officer since August 2020; Chief Digital & Information Officer from May 2019 to August 2020; Chief Information Officer, Vice President of IT - Waste Management Inc. from March 2010 to January 2019. (Age 53)
Normanique G. Preston Cleco Holdings			Chief Human Resources & Diversity Officer since September 2019; Vice President Human Resources from August 2018 to September 2019; Vice President - Human Resources, Dynegy, Inc. from November 2015 to June 2018. (Age 56)


2022 PAY ELEMENT			DESCRIPTION
Base Salary			• Fixed pay element • Delivered in cash
Annual Cash Incentive (STIP)			• Performance-based annual incentive plan that pays out in cash • Adjusted EBITDA is the primary metric for the named executive officers • Additional metrics include safety, system reliability, customer service, generation fleet availability, and milestone measures
Long-Term Incentives			• Performance-based incentive paid in cash currently with a three-year cycle • Payout is contingent on Average ROIC and Total Shareholder Return (TSR), each weighted at 50%
Benefits			• Broad-based benefits such as group medical, dental, vision, and prescription drug coverage; basic life insurance; supplemental life insurance; dependent life insurance; accidental death and dismemberment insurance; a defined benefit pension plan (for those employees hired prior to August 1, 2007); and a 401(k) Plan with a Company match for those employees hired before August 1, 2007, as well as a 401(k) Plan with an enhanced benefit for those employees hired on or after August 1, 2007
Executive Benefits			• SERP (closed to new participants in 2014) • Nonqualified Deferred Compensation Plan
Perquisites			• Limited to executive physicals, spousal/companion travel, and relocation assistance


2022 PEER GROUP COMPANIES
ALLETE, Inc.	Hawaiian Electric Industries, Inc.	Otter Tail Corporation
Alliant Energy Corporation	IDACORP, Inc.	Pinnacle West Capital Corporation
Avista Corporation	NorthWestern Corporation	PNM Resources, Inc.
Black Hills Corporation	OGE Energy Corp.	Portland General Electric Company


NAME			TARGET AS % OF BASE SALARY
Mr. Fontenot (1)			115%
Ms. Guillory			65%
Mr. LaBorde			50%
Mr. Hilton (2)			50%
Mr. Conway			60%


	CONSOLIDATED		BUSINESS UNIT					MILESTONE MEASURES
	SAFETY	ADJUSTED EBITDA	EFORd	PEAK EAF	CUSTOMER SATISFACTION	LPSC SAIDI	ADJUSTED EBITDA
Cleco Power	10%	20%	10%		15%	5%	20%	20%
Cleco Support (1)	10%	45%	7.5%	7.5%	7.5%	2.5%		20%
Cleco Cajun	10%	20%	5%	15%			30%	20%


NAME AND PRINCIPAL POSITION	YEAR	SALARY($)		BONUS($)		NON-EQUITY INCENTIVE PLAN COMPENSATION ($)		CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($)(1)		ALL OTHER COMPENSATION ($)		TOTAL ($)
A	B	C		D		E		F		G		H
William G. Fontenot, (2)	2022	$	721,000	$	0	$	1,888,467	$	0	$	26,709	$	2,636,176
President & CEO	2021	$	719,385	$	0	$	2,200,081	$	42,503	$	20,877	$	2,982,846
	2020	$	721,154	$	0	$	1,806,020	$	1,320,099	$	17,520	$	3,864,793

Kristin L. Guillory, (3)	2022	$	389,231	$	0	$	403,162	$	0	$	14,440	$	806,833
CFO	2021	$	320,000	$	0	$	329,917	$	12,029	$	12,251	$	674,197

Robert R. LaBorde, Jr.,	2022	$	346,923	$	0	$	345,911	$	0	$	26,828	$	719,662
Chief Operations & Sustainability Officer	2021	$	308,462	$	0	$	442,313	$	0	$	26,673	$	777,448
	2020	$	298,269	$	0	$	319,608	$	485,114	$	13,693	$	1,116,684

Justin S. Hilton,	2022	$	294,231	$	0	$	316,116	$	0	$	13,035	$	623,382
President - Cleco Power	2021	$	284,231	$	0	$	416,023	$	50,551	$	12,241	$	763,046
	2020	$	283,846	$	0	$	237,357	$	376,853	$	10,050	$	908,106

William B. Conway, Jr., (3)	2022	$	383,462	$	0	$	433,169	$	0	$	24,138	$	840,769
Chief Corporate Development & Compliance Officer & General Counsel	2021	$	363,846	$	0	$	186,108	$	0	$	13,462	$	563,416