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Cleco Power 10-Q 2011

Documents found in this filing:

clecocorp10q_093011.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

__________________

Commission file number 1-15759

CLECO CORPORATION

(Exact name of registrant as specified in its charter)>


Louisiana (State or other jurisdiction of incorporation or organization)	72-1445282 (I.R.S. Employer Identification No.)

2030 Donahue Ferry Road, Pineville, Louisiana (Address of principal executive offices)	71360-5226 (Zip Code)

Registrant’s telephone number, including area code: (318) 484-7400

__________________

Commission file number 1-05663

CLECO POWER LLC

(Exact name of registrant as specified in its charter)>


Louisiana (State or other jurisdiction of incorporation or organization)	72-0244480 (I.R.S. Employer Identification No.)

2030 Donahue Ferry Road, Pineville, Louisiana (Address of principal executive offices)	71360-5226 (Zip Code)

Registrant’s telephone number, including area code: (318) 484-7400

Indicate by check mark whether the Registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes x No ¨

Indicate by check mark whether Cleco Corporation is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether Cleco Power LLC is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act) Yes¨ No x

Number of shares outstanding of each of Cleco Corporation’s classes of Common Stock, as of the latest practicable date.
>

Registrant	Description of Class	Shares Outstanding at October 28, 2011

Cleco Corporation	Common Stock, $1.00 Par Value		60,665,607

Cleco Power LLC, a wholly owned subsidiary of Cleco Corporation, meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.>

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

This Combined Quarterly Report on Form 10-Q is separately filed by Cleco Corporation and Cleco Power. Information in this filing relating to Cleco Power is filed by Cleco Corporation and separately by Cleco Power on its own behalf. Cleco Power makes no representation as to information relating to Cleco Corporation (except as it may relate to Cleco Power) or any other affiliate or subsidiary of Cleco Corporation.

This report should be read in its entirety as it pertains to each respective Registrant. The Notes to the Unaudited Condensed Consolidated Financial Statements are combined.

TABLE OF CONTENTS>

			PAGE
GLOSSARY OF TERMS			3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			5

PART I	Financial Information
ITEM 1.	Cleco Corporation — Condensed Consolidated Financial Statements	7
	Cleco Power — Condensed Consolidated Financial Statements	16
	Notes to the Unaudited Condensed Consolidated Financial Statements	23
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	64
ITEM 4.	Controls and Procedures	66

PART II	Other Information
ITEM 1.	Legal Proceedings	67
ITEM 1A.	Risk Factors	67
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
ITEM 5.	Other Information	67
ITEM 6.	Exhibits	68
	Signatures	69

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

GLOSSARY OF TERMS

References in this filing, including all items in Parts I and II, to “Cleco” mean Cleco Corporation and its subsidiaries, including Cleco Power, and references to “Cleco Power” mean Cleco Power LLC and its subsidiaries, unless the context clearly indicates otherwise. Additional abbreviations or acronyms used in this filing, including all items in Parts I and II are defined below:>

ABBREVIATION OR ACRONYM	DEFINITION
401(k) Plan	Cleco Power 401(k) Savings and Investment Plan
ABR	Alternate Base Rate
Acadia	Acadia Power Partners, LLC, a wholly owned subsidiary of APH. Acadia no longer owns any materials and supply inventory, property, plant and equipment, or land as a result of the disposition of Acadia Unit 2 to Entergy Louisiana on April 29, 2011. From February 23, 2010 to April 29, 2011, Acadia was owned 100% by Cajun and consisted of Acadia Unit 2. Prior to February 23, 2010, Acadia was 50% owned by APH and 50% owned by Cajun and consisted of Acadia Unit 1 and Acadia Unit 2.
Acadia Unit 1	Cleco Power’s 580-MW unit, combined cycle, natural gas-fired power plant located at the Acadia Power Station near Eunice, Louisiana
Acadia Unit 2	Entergy Louisiana’s 580-MW unit, combined cycle, natural gas-fired power plant located at the Acadia Power Station near Eunice, Louisiana. Prior to April 29, 2011, Acadia Unit 2 was owned by Acadia.
Acadiana Load Pocket	An area in south central Louisiana that has experienced transmission constraints caused by local load and lack of generation. Transmission within the Acadiana Load Pocket is owned by several entities, including Cleco Power.
AFUDC	Allowance for Funds Used During Construction
Amended EPC Contract	Amended and Restated EPC Contract between Cleco Power and Shaw, executed on May 12, 2006, for engineering, procurement, and construction of Madison Unit 3, as amended by Amendment No. 1 thereto effective March 9, 2007, Amendment No. 2 thereto dated as of July 2, 2008, Amendment No. 3 thereto dated as of July 22, 2009, and Amendment No. 4 thereto dated October 19, 2009.
Amended Lignite Mining Agreement	Amended and restated lignite mining agreement effective December 29, 2009
AMI	Advanced Metering Infrastructure
APH	Acadia Power Holdings LLC, a wholly owned subsidiary of Midstream
Attala	Attala Transmission LLC, a wholly owned subsidiary of Cleco Corporation
Cajun	Cajun Gas Energy L.L.C., a wholly owned subsidiary of third parties. In conjunction with the disposition of Acadia Unit 2 on April 29, 2011, APH no longer has any ownership interest in Cajun. From February 23, 2010 to April 29, 2011, Cajun was 50% owned by APH and 50% owned by third parties. Prior to February 23, 2010, Cajun was 100% owned by third parties.
Cleco Innovations LLC	A wholly owned subsidiary of Cleco Corporation
Cleco Katrina/Rita	Cleco Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of Cleco Power
Coughlin	Coughlin Power Station, a combined-cycle, natural gas-fired power plant located in Evangeline Parish, Louisiana. On June 11, 2010, Evangeline Power Station was renamed Coughlin Power Station.
DHLC	Dolet Hills Lignite Company, LLC, a wholly owned subsidiary of SWEPCO
Diversified Lands	Diversified Lands LLC, a wholly owned subsidiary of Cleco Innovations LLC
DOE	United States Department of Energy
Entergy Gulf States	Entergy Gulf States Louisiana, L.L.C., formerly Entergy Gulf States, Inc.
Entergy Louisiana	Entergy Louisiana, LLC
Entergy Mississippi	Entergy Mississippi, Inc.
Entergy Services	Entergy Services, Inc., as agent for Entergy Louisiana and Entergy Gulf States
EPA	United States Environmental Protection Agency
EPC	Engineering, Procurement, and Construction
ESPP	Cleco Corporation Employee Stock Purchase Plan
Evangeline	Cleco Evangeline LLC, a wholly owned subsidiary of Midstream, and its combined cycle, natural gas-fired power plant located in Evangeline Parish, Louisiana. On June 11, 2010, the power plant was renamed Coughlin Power Station.
Evangeline 2010 Tolling Agreement	Capacity Sale and Tolling Agreement between Evangeline and JPMVEC, which was executed in February 2010
Evangeline Restructuring Agreement	Purchase, Sale and Restructuring Agreement entered into on February 22, 2010, by Evangeline and JPMVEC
Evangeline Tolling Agreement	Capacity Sale and Tolling Agreement between Evangeline and BE Louisiana LLC (as successor to Williams Power Company, Inc.) which was set to expire in 2020 and was terminated in February 2010. In September 2008, BE Louisiana LLC was merged into JPMVEC.
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FRP	Formula Rate Plan
GAAP	Generally Accepted Accounting Principles in the United States
GO Zone	Gulf Opportunity Zone Act of 2005 (Public Law 109-135)
ICT	Independent Coordinator of Transmission
Interconnection Agreement	One of two Interconnection Agreement and Real Estate Agreements, one between Attala and Entergy Mississippi, and the other between Perryville and Entergy Louisiana
IRP	Integrated Resource Planning
IRS	Internal Revenue Service
JPMVEC	J.P. Morgan Ventures Energy Corporation. In September 2008, BE Louisiana LLC was merged into JPMVEC.
kWh	Kilowatt-hour(s) as applicable
LIBOR	London Inter-Bank Offer Rate
Lignite Mining Agreement	Dolet Hills Mine Lignite Mining Agreement, dated as of May 31, 2001

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

ABBREVIATION OR ACRONYM	DEFINITION
LPSC	Louisiana Public Service Commission
LTICP	Cleco Corporation Long-Term Incentive Compensation Plan
Madison Unit 3	A 600-MW solid-fuel generating unit at Cleco Power’s plant site in Boyce, Louisiana that commenced commercial operation on February 12, 2010. Prior to June 11, 2010, Madison Unit 3 was known as Rodemacher Unit 3.
Midstream	Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Corporation
MMBtu	Million British thermal units
Moody’s	Moody’s Investors Service
MW	Megawatt(s) as applicable
NERC	North American Electric Reliability Corporation
OCI	Other Comprehensive Income
NOx	Nitrogen oxides
Oxbow	Oxbow Lignite Company, LLC, 50% owned by Cleco Power and 50% owned by SWEPCO
PCAOB	Public Company Accounting Oversight Board
PCB	Polychlorinated biphenyl
Perryville	Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Corporation
Power Purchase Agreement	Power Purchase Agreement, dated as of January 28, 2004, between Perryville and Entergy Services
PPACA	Patient Protection and Affordable Care Act (HR 3590)
PRP	Potentially responsible party
Registrant(s)	Cleco Corporation and Cleco Power
RFP	Request for Proposal
Sale Agreement	Purchase and Sale Agreement, dated as of January 28, 2004, between Perryville and Entergy Louisiana
SEC	Securities and Exchange Commission
SERP	Cleco Corporation Supplemental Executive Retirement Plan
Shaw	Shaw Contractors, Inc., a subsidiary of The Shaw Group Inc.
SO2	Sulfur dioxide
SPP	Southwest Power Pool
Support Group	Cleco Support Group LLC, a wholly owned subsidiary of Cleco Corporation
SWEPCO	Southwestern Electric Power Company, a wholly owned subsidiary of American Electric Power Company, Inc.
Teche	Teche Electric Cooperative, Inc.
VaR	Value-at-risk
VIE	Variable Interest Entity

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Combined Quarterly Report on Form 10-Q includes “forward-looking statements” about future events, circumstances, and results. All statements other than statements of historical fact included in this Combined Quarterly Report are forward-looking statements, including, without limitation, statements regarding Madison Unit 3; JPMVEC’s performance under the Evangeline 2010 Tolling Agreement; future capital expenditures; projections, including with respect to base revenue; business strategies; goals, beliefs, plans, and objectives; competitive strengths; market developments; development and operation of facilities; growth in sales volume; meeting capacity requirements, including through RFPs; expansion of service to certain 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, 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:>

Factors affecting utility operations, such as unusual weather conditions or other natural phenomena; catastrophic weather-related damage (such as hurricanes and other storms or severe drought conditions); unscheduled generation outages; unanticipated maintenance or repairs; unanticipated changes to fuel costs; fuel supply costs or availability constraints due to higher demand, shortages, transportation problems, or other developments; fuel mix of Cleco’s generation facilities; decreased customer load; environmental incidents; environmental compliance costs; and power transmission system constraints;

§	Cleco Corporation’s holding company structure and its dependence on the earnings, dividends, or distributions from its subsidiaries to meet its debt obligations and pay dividends on its common stock;

§	Cleco Power’s ability to operate and maintain, within its projected costs, any self-build projects identified in future IRP and RFP processes and its participation in any government grants;

§	Dependence of Cleco Power for energy from sources other than its facilities and the uncertainty of future sources of such additional energy;

§	Nonperformance by and creditworthiness of counterparties under tolling and power purchase agreements, or the restructuring of those agreements, including possible termination;

§	Nonperformance by and creditworthiness of the guarantor counterparty of the U.S. Bank New Markets Tax Credit Fund 2008-1 LLC;

Regulatory factors such as changes in rate-setting policies, recovery of investments made under traditional regulation, recovery of storm restoration costs, the frequency and timing of rate increases or decreases, the results of periodic NERC audits and fuel audits, the formation of ICTs, and the compliance with the Electric Reliability Organization reliability standards for bulk power systems by Cleco Power and Evangeline;

§	Financial or regulatory accounting principles or policies imposed by FASB, the SEC, the PCAOB, FERC, the LPSC, or similar entities with regulatory or accounting oversight;

§	Economic conditions, including the ability of customers to continue paying for utility bills, related growth and/or down-sizing of businesses in Cleco’s service area, monetary fluctuations, changes in commodity prices, and inflation rates;

§	The current global and U.S. economic environment;

§	Credit ratings of Cleco Corporation and Cleco Power;

§	Ability to remain in compliance with debt covenants;

§	Changes in market conditions and a variety of other factors associated with physical energy, financial transactions, and energy service activities, including, but not limited to, price, basis, credit, liquidity, volatility, capacity, transmission, interest rates, and warranty risks;

§	The availability and use of alternative sources of energy and technologies;

§	The imposition of energy efficiency requirements or of increased conservation efforts of customers;

§	Reliability of all Cleco Power and Midstream generating facilities, particularly Madison Unit 3;

§	Acts of terrorism or other man-made disasters;

§	Availability or cost of capital resulting from changes in Cleco’s business or financial condition, interest rates, or market perceptions of the electric utility industry and energy-related industries;

§	Uncertain tax positions;

§	Employee work force factors, including work stoppages and changes in key executives;

§	Legal, environmental, and regulatory delays and other obstacles associated with mergers, acquisitions, reorganizations, investments in joint ventures, or other capital projects, including the joint project to upgrade the Acadiana Load Pocket transmission system, and the AMI project;

§	Costs and other effects of legal and administrative proceedings, settlements, investigations, claims, and other matters;

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

§	Changes in federal, state, or local laws, and changes in tax laws or rates, or regulating policies;

The impact of current or future environmental laws and regulations, including those related to greenhouse gases and energy efficiency, which could limit, or terminate, the operation of certain generating units, increase costs, reduce customer demand for electricity or otherwise materially adversely impact the Registrants’ financial condition or results of operations;

§	Ability of Cleco Power to recover from its customers the costs of compliance with environmental laws and regulations; and

§	Ability of the Dolet Hills lignite reserve to provide sufficient fuel to the Dolet Hills Power Station until at least 2026.

For additional discussion of these factors and other factors that could cause actual results to differ materially from those contemplated in the Registrants’ forward-looking statements, please read “Risk Factors” in the Registrants’ Combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, and the Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2010. 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.

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.>

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS >

Cleco Corporation

These unaudited condensed consolidated financial statements should be read in conjunction with Cleco Corporation’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2010. For additional information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”>

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)>

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2011			2010
Operating revenue
Electric operations	$	324,532		$	325,629
Tolling operations		9,133			11,153
Other operations		16,064			13,305
Affiliate revenue		-			119
Gross operating revenue		349,729			350,206
Electric customer credits		1,852			(6,314	)
Operating revenue, net		351,581			343,892
Operating expenses
Fuel used for electric generation		122,774			100,587
Power purchased for utility customers		24,739			51,678
Other operations		32,872			30,288
Maintenance		14,587			23,362
Depreciation		30,557			28,847
Taxes other than income taxes		9,845			9,123
Loss on sale of assets		27			20
Total operating expenses		235,401			243,905
Operating income		116,180			99,987
Interest income		509			128
Allowance for other funds used during construction		902			887
Equity (loss) income from investees, before tax		(1	)		2,494
Other income		2,128			2,755
Other expense		(3,360	)		(1,416	)
Interest charges
Interest charges, including amortization of debt expense, premium, and discount, net		26,105			25,404
Allowance for borrowed funds used during construction		(326	)		(336	)
Total interest charges		25,779			25,068
Income before income taxes		90,579			79,767
Federal and state income tax expense		24,737			30,155
Net income		65,842			49,612
Preferred dividends requirements, net of tax		-			12
Net income applicable to common stock	$	65,842		$	49,600

Average number of basic common shares outstanding		60,467,595			60,471,183
Average number of diluted common shares outstanding		60,873,311			60,825,298
Basic earnings per share
Net income applicable to common stock	$	1.09		$	0.82
Diluted earnings per share
Net income applicable to common stock	$	1.08		$	0.82
Cash dividends paid per share of common stock	$	0.28		$	0.25
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)>

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Net income	$	65,842		$	49,612
Other comprehensive loss, net of tax:
Amortization of post-retirement benefit net income (net of tax expense of $178 in 2011 and $6 in 2010)		269			9
Cash flow hedges:
Net derivatives loss on interest rate swap arising during the period (net of tax benefit of $145 in 2010)		-			(231	)
Reclassification of interest expense on interest rate swap (net of tax expense of $75 in 2010)		-			119
Reclassification of interest expense on treasury rate lock (net of tax benefit of $34 in 2011 and $16 in 2010)		(55	)		(25	)
Net unrealized loss on treasury rate lock (net of tax benefit of $11,529 in 2011)		(18,433	)		-
Total other comprehensive loss, net of tax		(18,219	)		(128	)
Comprehensive income, net of tax	$	47,623		$	49,484
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Income (Unaudited)>

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2011			2010
Operating revenue
Electric operations	$	823,484		$	839,528
Tolling operations		16,137			23,016
Other operations		41,775			34,425
Affiliate revenue		202			1,426
Gross operating revenue		881,598			898,395
Electric customer credits		(3,405	)		(6,314	)
Operating revenue, net		878,193			892,081
Operating expenses
Fuel used for electric generation		298,009			276,727
Power purchased for utility customers		58,665			124,404
Other operations		92,206			86,786
Maintenance		59,666			58,832
Depreciation		89,641			82,899
Taxes other than income taxes		28,770			26,490
Gain on sale of assets		(468	)		(37	)
Total operating expenses		626,489			656,101
Operating income		251,704			235,980
Interest income		794			369
Allowance for other funds used during construction		3,757			11,052
Income from equity investees, before tax		62,051			39,212
Gain on toll settlement		-			148,402
Other income		3,330			3,563
Other expense		(4,969	)		(4,379	)
Interest charges
Interest charges, including amortization of debt expense, premium, and discount, net		79,368			76,074
Allowance for borrowed funds used during construction		(1,357	)		(4,054	)
Total interest charges		78,011			72,020
Income before income taxes		238,656			362,179
Federal and state income tax expense		73,451			127,411
Net income		165,205			234,768
Preferred dividends requirements, net of tax		26			35
Preferred stock redemption costs, net of tax		112			-
Net income applicable to common stock	$	165,067		$	234,733

Average number of basic common shares outstanding		60,549,860			60,405,388
Average number of diluted common shares outstanding		60,830,251			60,632,138
Basic earnings per share
Net income applicable to common stock	$	2.73		$	3.89
Diluted earnings per share
Net income applicable to common stock	$	2.71		$	3.87
Cash dividends paid per share of common stock	$	0.81		$	0.725
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Unaudited)>

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Net income	$	165,205		$	234,768
Other comprehensive loss, net of tax:
Amortization of post-retirement benefit net income (loss) (net of tax (expense) benefit of $(454) in 2011 and $6 in 2010)		910			(9	)
Cash flow hedges:
Net derivatives loss on interest rate swap arising during the period (net of tax benefit of $276 in 2010)		-			(441	)
Reclassification of interest expense on interest rate swap (net of tax expense of $228 in 2010)		-			364
Reclassification of interest expense on treasury rate lock (net of tax benefit of $103 in 2011 and $48 in 2010)		(164	)		(77	)
Net unrealized loss on treasury rate lock (net of tax benefit of $11,529 in 2011)		(18,433	)		-
Total other comprehensive loss, net of tax		(17,687	)		(163	)
Comprehensive income, net of tax	$	147,518		$	234,605
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)>

(THOUSANDS)	AT SEPTEMBER 30, 2011			AT DECEMBER 31, 2010
Assets
Current assets
Cash and cash equivalents	$	158,232		$	191,128
Restricted cash		3,554			14,959
Customer accounts receivable (less allowance for doubtful accounts of $1,177 in 2011 and $1,046 in 2010)		52,299			38,820
Accounts receivable - affiliate		-			831
Other accounts receivable (less allowance for doubtful accounts of $1,985 in 2011 and $2,409 in 2010)		49,290			52,546
Taxes receivable		36,705			50,104
Unbilled revenue		33,112			44,649
Fuel inventory, at average cost		38,070			82,737
Material and supplies inventory, at average cost		52,257			48,265
Accumulated deferred federal and state income taxes, net		25,057			4,106
Accumulated deferred fuel		9,162			10,348
Cash surrender value of company-/trust-owned life insurance policies		50,628			49,789
Prepayments		5,004			6,399
Regulatory assets - other		12,869			13,508
Other current assets		4,745			661
Total current assets		530,984			608,850
Property, plant and equipment
Property, plant and equipment		3,859,621			3,810,896
Accumulated depreciation		(1,218,818	)		(1,162,456	)
Net property, plant and equipment		2,640,803			2,648,440
Construction work in progress		223,640			135,785
Total property, plant and equipment, net		2,864,443			2,784,225
Equity investment in investees		13,081			86,732
Prepayments		4,580			5,274
Restricted cash, less current portion		25,349			26,089
Regulatory assets and liabilities - deferred taxes, net		213,847			203,696
Regulatory assets - other		249,410			266,431
Net investment in direct financing lease		13,676			13,817
Intangible asset		136,393			145,374
Other deferred charges		19,778			20,922
Total assets	$	4,071,541		$	4,161,410
The accompanying notes are an integral part of the condensed consolidated financial statements.

(Continued on next page)

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited) (Continued)

(THOUSANDS)	AT SEPTEMBER 30, 2011			AT DECEMBER 31, 2010
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Short-term debt	$	-		$	150,000
Long-term debt due within one year		13,108			12,269
Accounts payable		93,186			123,042
Retainage		3,231			2,726
Accounts payable - affiliate		-			155
Customer deposits		42,181			38,934
Provision for rate refund		3,917			9,598
Interest accrued		62,377			34,462
Energy risk management liability, net		5,159			9,027
Interest rate risk management liability		29,962			-
Regulatory liabilities - other		33,272			43,562
Deferred compensation		7,562			7,751
Uncertain tax positions		42,674			31,853
Other current liabilities		14,784			14,302
Total current liabilities		351,413			477,681
Deferred credits
Accumulated deferred federal and state income taxes, net		624,429			553,211
Accumulated deferred investment tax credits		7,741			8,669
Post-retirement benefit obligations		109,865			166,387
Regulatory liabilities - other		7,026			44,313
Restricted storm reserve		24,656			25,993
Uncertain tax positions		47,715			60,395
Tax credit fund investment, net		48,494			44,514
Contingent sale obligations		29,443			4,714
Other deferred credits		44,070			57,617
Total deferred credits		943,439			965,813
Long-term debt, net		1,370,576			1,399,709
Total liabilities		2,665,428			2,843,203
Commitments and Contingencies (Note 11)
Shareholders’ equity
Preferred stock
Not subject to mandatory redemption, $100 par value, authorized 1,491,900 shares, issued 0 and 10,288 shares at September 30, 2011 and December 31, 2010, respectively		-			1,029
Common shareholders’ equity
Common stock, $1 par value, authorized 100,000,000 shares, issued 60,683,947 and 60,539,624 shares and outstanding 60,273,131 and 60,526,126 shares at September 30, 2011, and December 31, 2010, respectively		60,684			60,540
Premium on common stock		409,040			405,313
Retained earnings		978,942			863,237
Treasury stock, at cost, 410,816 and 13,498 shares at September 30, 2011, and December 31, 2010, respectively		(13,228	)		(274	)
Accumulated other comprehensive loss		(29,325	)		(11,638	)
Total common shareholders’ equity		1,406,113			1,317,178
Total shareholders’ equity		1,406,113			1,318,207
Total liabilities and shareholders’ equity	$	4,071,541		$	4,161,410
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)>

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Operating activities
Net income	$	165,205		$	234,768
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		114,104			124,144
Gain on forgiveness of debt		-			(129,870	)
Return on equity investment in investee		58,665			-
Income from equity investments		(62,051	)		(39,212	)
Unearned compensation expense		6,065			3,947
Allowance for other funds used during construction		(3,757	)		(11,052	)
Net deferred income taxes		45,336			40,013
Deferred fuel costs		(6,422	)		13,994
Cash surrender value of company-/trust-owned life insurance		1,055			(1,481	)
Changes in assets and liabilities:
Accounts receivable		(18,274	)		(30,329	)
Accounts and notes receivable, affiliate		1,074			894
Unbilled revenue		11,538			(23,359	)
Fuel, materials and supplies inventory		40,675			(11,979	)
Prepayments		2,089			1,047
Accounts payable		(34,986	)		(13,277	)
Accounts and notes payable, affiliate		(552	)		(2,364	)
Customer deposits		9,718			9,490
Long-term receivable		-			27,976
Post-retirement benefit obligations		(56,743	)		503
Regulatory assets and liabilities, net		(40,204	)		(77,331	)
Contingent sale obligations		10,900			4,800
Other deferred accounts		(2,184	)		7,363
Retainage payable		(2,481	)		-
Taxes accrued		12,946			51,597
Interest accrued		10,738			9,606
Energy risk management assets and liabilities, net		3,880			6,340
Other operating		(3,692	)		(3,860	)
Net cash provided by operating activities		262,642			192,368
Investing activities
Additions to property, plant and equipment		(145,669	)		(252,711	)
Allowance for other funds used during construction		3,757			11,052
Cash from reconsolidation of VIEs		3,879			812
Return of equity investment in investee		89,654			-
Equity investment in investees		-			(8,700	)
Return of investment in tax credit fund		244			-
Contributions to tax credit fund		(18,479	)		(28,837	)
Transfer of cash from restricted accounts		12,144			45,243
Other investing		373			(1,678	)
Net cash used in investing activities	$	(54,097	)	$	(234,819	)

(Continued on next page)

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Financing activities
Issuance of short-term debt	$	-		$	150,000
Retirement of short-term debt		(150,000	)		-
Draws on credit facility		10,000			255,000
Payments on credit facility		(25,000	)		(350,000	)
Retirement of long-term debt		(12,269	)		(46,696	)
Repurchase of common stock		(13,009	)		-
Redemption of preferred stock		(1,039	)		-
Dividends paid on preferred stock		(26	)		(35	)
Dividends paid on common stock		(49,170	)		(43,848	)
Other financing		(928	)		673
Net cash used in financing activities		(241,441	)		(34,906	)
Net decrease in cash and cash equivalents		(32,896	)		(77,357	)
Cash and cash equivalents at beginning of period		191,128			145,193
Cash and cash equivalents at end of period	$	158,232		$	67,836
Supplementary cash flow information
Interest paid (net of amount capitalized)	$	53,936		$	55,623
Income taxes paid	$	18,241		$	17,047
Supplementary non-cash investing and financing activities
Accrued additions to property, plant and equipment	$	11,491		$	5,314
Issuance of treasury stock - LTICP	$	55		$	74
Issuance of common stock - LTICP/ESPP	$	241		$	222
Non-cash additions to property, plant and equipment	$	4,074		$	152,067
Non-cash return of investment	$	-		$	152,067
Non-cash contribution to subsidiary, net of tax	$	-		$	225,732
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS >

Cleco Power

These unaudited condensed consolidated financial statements should be read in conjunction with Cleco Power’s Consolidated Financial Statements and Notes included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2010. For additional information on the basis of presentation, see “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation.”>

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)>

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)	2011			2010
Operating revenue
Electric operations	$	324,532		$	325,629
Other operations		15,565			12,819
Affiliate revenue		347			343
Gross operating revenue		340,444			338,791
Electric customer credits		1,852			(6,314	)
Operating revenue, net		342,296			332,477
Operating expenses
Fuel used for electric generation		122,774			100,587
Power purchased for utility customers		24,739			51,678
Other operations		31,185			28,650
Maintenance		15,768			20,272
Depreciation		28,859			27,133
Taxes other than income taxes		8,802			9,161
(Gain) loss on sale of assets		(6	)		7
Total operating expenses		232,121			237,488
Operating income		110,175			94,989
Interest income		276			117
Allowance for other funds used during construction		902			887
Other income		1,323			293
Other expense		(1,881	)		(1,339	)
Interest charges
Interest charges, including amortization of debt expense, premium, and discount, net		25,632			16,380
Allowance for borrowed funds used during construction		(326	)		(336	)
Total interest charges		25,306			16,044
Income before income taxes		85,489			78,903
Federal and state income tax expense		31,656			26,568
Net income	$	53,833		$	52,335
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)>

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Net income	$	53,833		$	52,335
Other comprehensive loss, net of tax:
Amortization of post-retirement benefit net income (loss) (net of tax (expense) benefit of $(99) in 2011 and $55 in 2010)		146			(89	)
Cash flow hedges:
Net derivatives loss on interest rate swap arising during the period (net of tax benefit of $145 in 2010)		-			(231	)
Reclassification of interest expense on interest rate swap (net of tax expense of $75 in 2010)		-			119
Reclassification of interest expense on treasury rate lock (net of tax benefit of $34 in 2011 and $16 in 2010)		(55	)		(25	)
Net unrealized loss on treasury rate lock (net of tax benefit of $11,529 in 2011)		(18,433	)		-
Total other comprehensive loss, net of tax		(18,342	)		(226	)
Comprehensive income, net of tax	$	35,491		$	52,109
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Income (Unaudited)>

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Operating revenue
Electric operations	$	823,484		$	839,528
Other operations		40,261			32,959
Affiliate revenue		1,041			1,029
Gross operating revenue		864,786			873,516
Electric customer credits		(3,405	)		(6,314	)
Operating revenue, net		861,381			867,202
Operating expenses
Fuel used for electric generation		298,009			276,727
Power purchased for utility customers		58,665			124,404
Other operations		87,086			81,111
Maintenance		53,962			51,697
Depreciation		84,543			77,941
Taxes other than income taxes		25,585			25,110
(Gain) loss on sale of assets		(7	)		47
Total operating expenses		607,843			637,037
Operating income		253,538			230,165
Interest income		557			351
Allowance for other funds used during construction		3,757			11,052
Other income		2,168			1,038
Other expense		(4,499	)		(3,619	)
Interest charges
Interest charges, including amortization of debt expense, premium, and discount, net		75,386			61,158
Allowance for borrowed funds used during construction		(1,357	)		(4,054	)
Total interest charges		74,029			57,104
Income before income taxes		181,492			181,883
Federal and state income tax expense		61,935			58,299
Net income	$	119,557		$	123,584
The accompanying notes are an integral part of the condensed consolidated financial statements.

CLECO CORPORATION
CLECO POWER	2011 3RD QUARTER FORM 10-Q

CLECO POWER

Condensed Consolidated Statements of Comprehensive Income (Unaudited)>

	FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(THOUSANDS)	2011			2010
Net income	$	119,557		$	123,584
Other comprehensive loss, net of tax:
Amortization of post-retirement benefit net income (loss) (net of tax (expense) benefit of $(227) in 2011 and $172 in 2010)		519			(274	)
Cash flow hedges:
Net derivatives loss on interest rate swap arising during the period (net of tax benefit of $276 in 2010)		-			(441	)
Reclassification of interest expense on interest rate swap (net of tax expense of $228 in 2010)		-			364
Reclassification of interest expense on treasury rate lock (net of tax benefit of $103 in 2011 and $48 in 2010)		(164	)		(77	)
Net unrealized loss on treasury rate lock (net of tax benefit of $11,529 in 2011)		(18,433	)		-
Total other comprehensive loss, net of tax

Cleco Power (CNL)

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