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Discontinued Operations
 3 Months Ended
Mar. 31, 2024
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Note 3 — Discontinued Operations
In 2022, Cleco Holdings began a strategic review process related to its investment in Cleco Cajun. 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. On November 22, 2023, the Cleco Cajun Divestiture Purchase and Sale Agreement was entered into between the Cleco Cajun Sellers and the Cleco Cajun Purchasers whereby the Cleco Cajun Sellers have agreed to sell the Cleco Cajun Sale Group to the Cleco Cajun Purchasers for the purchase price of $600.0 million, with $500.0 million due at closing and $100.0 million payable 24 months after closing. The purchase price is subject to the closing purchase price adjustment as set forth in the Cleco Cajun Divestiture Purchase and Sale Agreement, including adjustments based on net working capital.
The Cleco Cajun Sellers and the Cleco Cajun Purchasers have each made customary representations, warranties, and covenants in the Cleco Cajun Divestiture Purchase and Sale Agreement. The closing of the Cleco Cajun Divestiture is subject to customary closing conditions and customary conditions regarding the accuracy of the representations and warranties and compliance by the parties with their respective obligations under the Cleco Cajun Divestiture Purchase and Sale Agreement. The Cleco Cajun Divestiture Purchase and Sale Agreement includes customary termination provisions, including if the closing of the Cleco Cajun Divestiture does not occur within nine months of November 22, 2023. The parties expect to receive the last pending regulatory approval and close the Cleco Cajun Divestiture in the second quarter of 2024.
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 the 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. The financial information for the three months ended March 31, 2023, provided in this Quarterly Report on Form 10-Q has been recast as a result of the determination during the third quarter of 2023 that the Cleco Cajun Purchasers are not expected to acquire the natural gas derivative instruments relating to the Cleco Cajun Sale Group. 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 Acquisition, Cleco made commitments to the LPSC that included the repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. If this commitment was not satisfied prior to the closing of the Cleco Cajun Divestiture, proceeds from the Cleco Cajun Divestiture must be used to satisfy the LPSC commitment. At March 31, 2024, $66.7 million of that debt remained outstanding, which was paid on April 26, 2024. This payment satisfied the LPSC commitment. 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. As a result, the Cleco Cajun Sale Group had an impairment of $173.0 million at December 31, 2023. During the three months ended March 31, 2024, an additional impairment charge of $17.0 million was recorded, which resulted in a total impairment charge of $190.0 million. The additional impairment recognized during the three months ended March 31, 2024, was primarily due to changes in assumptions related to the remaining cash flows prior to the closing of the Cleco Cajun Divestiture based on the expected closing date and the expected sale proceeds. The impairment charge reduced the carrying value of the Cleco Cajun Sale Group to its estimated fair value less estimated cost to sell and is recorded in Loss from discontinued operations, net of income taxes on Cleco's Condensed Consolidated Statement of Income. The estimated fair value was determined using the income approach. 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 net working capital adjustment to the sale proceeds from the Cleco Cajun Divestiture Purchase and Sale Agreement, 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 months ended March 31, 2024, and 2023:
FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)
20242023
Operating revenue, net
Electric operations$128,828 $108,761 
Other operations31,534 34,714 
Operating revenue, net160,362 143,475 
Operating expenses
Fuel used for electric generation*
15,196 10,232 
Purchased power61,940 60,625 
Other operations and maintenance23,291 23,370 
Depreciation and amortization356 14,513 
Total operating expenses100,783 108,740 
Operating income
59,579 34,735 
Other income, net
126 134 
Interest, net(80)(1,786)
Loss on classification as held for sale(17,000)(96,000)
Income (loss) from discontinued operations before income taxes
42,625 (62,917)
Federal and state income tax expense (benefit)*
10,663 (81,970)
Income from discontinued operations, net of income taxes
$31,962 $19,053 
* The amounts for the three months ended March 31, 2023, have been recast to exclude net losses, net of income tax benefit associated with Cleco Cajun’s natural gas derivatives of $56.5 million as a result of the determination during the third quarter of 2023 that the Cleco Cajun Purchasers are not expected to acquire the natural gas derivative instruments; therefore, net losses and the related income tax benefit associated with natural gas derivative instruments relating to the Cleco Cajun Sale Group are no longer presented in discontinued operations. As a result of this recast, an additional adjustment of $64.7 million was made to record tax expense at the projected annual effective income tax rate.
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 March 31, 2024, and December 31, 2023:
(THOUSANDS)AT MAR. 31, 2024AT DEC. 31, 2023
Cash, cash equivalents, and restricted cash equivalents$4,273 $4,100 
Accounts receivable47,015 70,001 
Fuel inventory, at average cost59,380 47,243 
Materials and supplies, at average cost36,929 36,283 
Energy risk management assets432 1,066 
Property, plant, and equipment, net651,433 648,676 
Prepayments22,595 18,587 
Intangible assets - other32,569 32,569 
Other assets20,385 20,207 
Accumulated loss recognized on classification as held for sale
(190,000)(173,000)
Total assets held for sale - discontinued operations$685,011 $705,732 
Accounts payable$31,753 $30,442 
Deferred lease revenue19,945 19,945 
Intangible liabilities12,695 12,695 
Asset retirement obligations46,678 46,165 
Other liabilities6,312 5,705 
Total liabilities held for sale - discontinued operations$117,383 $114,952 
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 three months ended March 31, 2024, and 2023:

FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)20242023
Net cash (used in) provided by operating activities - discontinued operations
$(4,780)$1,696 
Net cash provided by (used in) investing activities - discontinued operations
$4,953 $(1,689)