Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Note 18 — Intangible Assets 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 ratably each period consistent with actual collections of the asset's portion of revenue requirement billed to Cleco Power’s customers. Amortization is included in Depreciation and amortization on Cleco’s and Cleco Power’s Consolidated Statements of Income. During the years ended December 31, 2023, and 2022, amortization expense of $14.5 million and $2.8 million, respectively, was recognized. Cleco expects to recognize an estimated $75.4 million of amortization expense over the five years ending December 31, 2028. 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:

			AT DEC. 31,
(THOUSANDS)	2023		2022
Storm Recovery Property intangible asset	$	415,946	$	415,946
Accumulated amortization	(17,288)		(2,823)
Net intangible asset subject to amortization	$	398,658	$	413,123

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 8 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.

The following table presents amortization of other intangible assets in Cleco’s Consolidated Statements of Income:

Cleco
	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2023		2022		2021
Intangible assets
Trade name	$	—	$	—	$	3,897
Power supply agreements	$	9,454	$	9,680	$	9,680
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 2023, 2022, or 2021.

The following table summarizes the balance of other intangible assets subject to amortization included in Cleco’s Consolidated Balance Sheets:

Cleco
	AT DEC. 31,
(THOUSANDS)	2023		2022
Power supply agreements intangible assets	$	85,104	$	85,104
Accumulated amortization	(74,471)		(65,018)
Net intangible assets subject to amortization	$	10,633	$	20,086

The following table summarizes the amortization expense related to other intangible assets expected to be recognized in Cleco’s Consolidated Statements of Income:

(THOUSANDS)	INTANGIBLE ASSETS
For the year ending Dec. 31,
2024	$	2,881
2025	$	744
2026	$	744
2027	$	744
2028	$	744
Thereafter	$	4,775

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 cash flows, long-term growth rates, U.S. Treasury rates, or other factors outside of Cleco’s control may impact Cleco’s projected results, Cleco may be required to reduce all or a portion of the carrying value of goodwill.

Cleco conducted its 2023 annual impairment test using an August 1, 2023, measurement date and determined that the estimated fair value of the reporting unit exceeded its carrying value, and no impairment existed.