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Discontinued Operations
 9 Months Ended
Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Note 3 — Discontinued Operations
In March 2023, Cleco Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and a sale will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the results of operations and financial position of the Cleco Cajun Sale Group are presented as discontinued operations, and the financial information for historical periods
provided in this report has been recast to reflect this presentation. Certain expenses incurred by the Cleco Cajun Sale Group as a result of common services provided by Support Group are reflected in Cleco’s results of continuing operations due to the expected ongoing nature of those expenses. In addition, revenue recognized by Cleco Power from transmission services provided to the Cleco Cajun Sale Group is no longer eliminated upon consolidation of Cleco's financial statements and is reflected in Cleco’s results of continuing operations due to the expected ongoing nature of these services.
In February 2019 in connection with the approval of the Cleco Cajun Transaction, Cleco made commitments to the LPSC that included the repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. Proceeds from the divestiture of the Cleco Cajun Sale Group must be used to satisfy the LPSC commitment. At September 30, 2023, $132.3 million of that debt remains outstanding. Interest expense on that debt is included in discontinued operations.
Cleco determined that the estimated fair value less the estimated cost to sell the Cleco Cajun Sale Group was less than the carrying value of the Cleco Cajun Sale Group at March 31, 2023, June 30, 2023, and September 30, 2023. These determinations resulted in an impairment charge of $154.0 million in the nine months ended September 30, 2023, of which $38.0 million was recognized in the three months ended September 30, 2023. The impairment charge recognized in the three months ended September 30, 2023, was primarily due to changes in assumptions related to the expected sale proceeds, probabilities assigned to potential sale scenarios, and the expected closing date. The impairment charge recognized in the nine months ended September 30, 2023, reduced the carrying value of the Cleco Cajun Sale Group to its estimated fair value less estimated cost to sell.
The impairment charge is recognized in Loss from discontinued operations, net of income taxes on Cleco's Condensed Consolidated Statement of Income. The estimated fair value was based on a weighted average of potential sale scenarios that were determined through the income and market approaches. The fair value estimates involved a number of judgments and assumptions including the future performance of the Cleco Cajun Sale Group through the expected divestiture date, the expected sale proceeds and the timing of such proceeds, replacement interconnection value, and the weighted average cost of capital or discount rate. The fair value measurement of the Cleco Cajun Sale Group is classified as Level 3 in the fair value hierarchy.
The following table presents the amounts that have been reclassified from continuing operations and included in discontinued operations within Cleco’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023, and 2022:
FOR THE THREE MONTHS ENDED SEPT. 30,FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)
2023202220232022
Operating revenue, net
Electric operations$153,025 $140,767 $385,249 $370,489 
Other operations34,231 39,573 95,413 111,897 
Operating revenue, net187,256 180,340 480,662 482,386 
Operating expenses
Fuel used for electric generation *
41,339 59,435 70,053 141,189 
Purchased power67,297 111,901 175,884 275,531 
Other operations and maintenance28,611 20,727 75,926 61,726 
Depreciation and amortization433 12,046 15,448 55,866 
Total operating expenses137,680 204,109 337,311 534,312 
Operating income (loss)
49,576 (23,769)143,351 (51,926)
Other (expense) income, net(7)12 125 96 
Interest, net(1,835)(1,712)(5,545)(3,663)
Loss on classification as held for sale(38,000)— (154,000)— 
Income (loss) from discontinued operations before income taxes
9,734 (25,469)(16,069)(55,493)
Federal and state income tax expense (benefit)*
152,463 (3,609)(6,362)(920)
Loss from discontinued operations, net of income taxes
$(142,729)$(21,860)$(9,707)$(54,573)
*For the six months ended June 30, 2023, and 2022, net (losses) gains associated with Cleco Cajun’s natural gas derivatives of $(82.4) million and $165.9 million, respectively, and the related income tax benefit (expense) of $22.2 million and $(44.7) million, respectively, were included in discontinued operations. As a result of the determination that potential buyers are no longer expected to acquire the natural gas derivative instruments in any of the potential sale scenarios, the net (losses) gains and related income tax benefit (expense) associated with the natural gas derivative instruments are no longer presented in discontinued operations.
The following table presents the assets and liabilities of the Cleco Cajun Sale Group that have been reclassified as held for sale within Cleco’s Condensed Consolidated Balance Sheets as of September 30, 2023, and December 31, 2022:
(THOUSANDS)AT SEPT. 30, 2023AT DEC. 31, 2022
Cash, cash equivalents, and restricted cash equivalents$4,091 $4,067 
Accounts receivable58,733 57,822 
Fuel inventory, at average cost93,971 33,153 
Materials and supplies, at average cost35,860 34,195 
Energy risk management assets1,398 518 
Property, plant, and equipment, net636,523 649,067 
Prepayments24,655 23,601 
Intangible assets - other32,569 36,548 
Other assets21,563 23,619 
Loss recognized on classification as held for sale(154,000)— 
Total assets held for sale - discontinued operations$755,363 $862,590 
Accounts payable$46,209 $59,434 
Deferred lease revenue19,945 22,246 
Intangible liabilities12,695 13,956 
Asset retirement obligations45,702 63,725 
Other liabilities12,526 7,647 
Total liabilities held for sale - discontinued operations$137,077 $167,008 
Balances associated with natural gas derivative instruments are no longer presented as held for sale on Cleco’s Condensed Consolidated Balance Sheets as of September 30, 2023, and December 31, 2022, as a result of the determination that potential buyers are no longer expected to acquire the natural gas derivative instruments in any of the potential sale scenarios.
Cleco has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. The following table presents the cash flows from discontinued operations related to the Cleco Cajun Sale Group for the nine months ended September 30, 2023, and 2022:

FOR THE NINE MONTHS ENDED SEPT. 30,
(THOUSANDS)20232022
Net cash provided by operating activities - discontinued operations
$5,425 $4,849 
Net cash used in investing activities - discontinued operations$(5,401)$(4,844)