**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** **March
        31, 2007**
  **Or**
  [
        ]
        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, Pin****eville,
                  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 Cleco Corporation is a large accelerated
                  filer, an
                  accelerated filer, or a non-accelerated filer. See definition of
                  “accelerated filer and largeaccelerated
                  filer” in Rule 12b-2 of the Exchange Act. (Check one):
                Large
                  accelerated filer
                  x                       Accelerated
                  filer                         Non-accelerated
                  filerIndicate
                  by check mark whether Cleco Power LLC is a large accelerated filer,
                  an
                  accelerated filer, or a non-accelerated filer. See definition of
                  “accelerated filer and largeaccelerated
                  filer” in Rule 12b-2 of the Exchange Act. (Check one):
                Large
                  accelerated filer
                                        Accelerated
                  filer                          Non-accelerated
                  filer  xIndicate
                  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 April 30, 2007Cleco
                  Corporation
              Common
                  Stock, $1.00 Par Value
              59,684,966
 
 **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
                          2007 1ST
                              QUARTER FORM
                              10-Q
  This
        combined 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 Financial Statements are
        combined.
  TABLE
                OF CONTENTSPAGEGLOSSARYOFTERMS
              3DISCLOSURE
                  REGARDING
                  FORWARD-LOOKINGSTATEMENTS
              5**PART****I**
              **Financial
                  Information**ITEM
                  1.
              Cleco
                  Corporation — Condensed Consolidated Financial Statements
              7Cleco
                  Power — Condensed Financial Statements
              13Notes
                  to the Unaudited Condensed Financial Statements
              17ITEM
                  2.
              Management’s
                  Discussion and Analysis of Financial
                  Condition and Results of Operations
              33ITEM
                  3.
              Quantitative
                  and Qualitative Disclosuresabout
                  Market Risk
              44ITEM
                  4.
              Controls
                  and Procedures
              46**PART
                  II**
              **Other
                  Information**ITEM1.
              Legal
                  Proceedings
              47ITEM
                  1A.
              Risk
                  Factors
              47ITEM6.
              Exhibits
              48Signatures
              49
 
  CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        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, 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
                DEFINITION401(k)
                    Plan
                Cleco
                    Power 401(k) Savings and Investment PlanAcadia
                Acadia
                    Power Partners, LLC and its 1,160-MW combined-cycle, natural
                    gas-fired
                    power plant near Eunice, Louisiana, 50% owned by APH and 50%
                    owned by a
                    subsidiary of CalpineAFUDC
                Allowance
                    for Funds Used During ConstructionAmended
                    EPC Contract
                Amended
                    and Restated EPC Contract between Cleco Power and Shaw Constructors,
                    Inc.,
                    executed on May 12, 2006, to engineer, design, and construct
                    Rodemacher
                    Unit 3.APH
                Acadia
                    Power Holdings LLC, a wholly owned subsidiary of
                    MidstreamAttala
                Attala
                    Transmission LLC, a wholly owned subsidiary of Cleco Corporation.
                    Prior to
                    February 1, 2007, Attala was a wholly owned subsidiary of
                    Midstream.Calpine
                Calpine
                    CorporationCalpine
                    Debtors
                Calpine,
                    CES, and certain other Calpine subsidiariesCalpine
                    Debtors Bankruptcy
                    Court
                U.S.
                    Bankruptcy Court for the Southern District of New YorkCalpine
                    Tolling Agreements
                Capacity
                    Sale and Tolling Agreements between Acadia and CES which were
                    suspended in
                    March 2006CCN
                Certificate
                    of Public Convenience and NecessityCES
                Calpine
                    Energy Services, L.P.Cleco
                    Energy
                Cleco
                    Energy LLC, a wholly owned subsidiary of MidstreamCompliance
                    Plan
                The
                    three-year plan included in the Consent Agreement in FERC Docket
                    IN03-1-000Consent
                    Agreement
                Stipulation
                    and Consent Agreement, dated as of July 25, 2003, between Cleco
                    and the
                    FERC StaffDiversified
                    Lands
                Diversified
                    Lands LLC, a wholly owned subsidiary of Cleco Innovations LLC,
                    a wholly
                    owned subsidiary of Cleco CorporationEITF
                Emerging
                    Issues Task Force of the FASBEITF
                    No. 03-6
                Participating
                    Securities and the Two-Class Method under FASB Statement No.
                    128, Earnings
                    per ShareEntergy
                Entergy
                    CorporationEntergy
                    Gulf States
                Entergy
                    Gulf States, Inc.Entergy
                    Louisiana
                Entergy
                    Louisiana, Inc.Entergy
                    Mississippi
                Entergy
                    Mississippi, Inc.Entergy
                    Services
                Entergy
                    Services, Inc., as agent for Entergy Louisiana and Entergy Gulf
                    StatesEPA
                United
                    States Environmental Protection AgencyEPC
                Engineering,
                    Procurement, and ConstructionERO
                Electric
                    Reliability OrganizationESOP
                Cleco
                    Corporation Employee Stock Ownership PlanESPP
                Cleco
                    Corporation Employee Stock Purchase PlanEvangeline
                Cleco
                    Evangeline LLC, a wholly owned subsidiary of Midstream, and its
                    775-MW
                    combined-cycle, natural gas-fired power plant located in Evangeline
                    Parish, LouisianaEvangeline
                    Tolling Agreement
                Capacity
                    Sale and Tolling Agreement between Evangeline and Williams which
                    expires
                    in 2020FASB
                Financial
                    Accounting Standards BoardFERC
                Federal
                    Energy Regulatory CommissionFIN
                FASB
                    Interpretation No.FIN
                    45
                Guarantor’s
                    Accounting and Disclosure Requirements for Guarantees, Including
                    Indirect
                    Guarantees
                    of Indebtedness to OthersFIN
                    46R
                Consolidation
                    of Variable Interest Entities - an Interpretation of Accounting
                    Research
                    Bulletin No. 51 (revised December 2003)FIN
                    48
                Accounting
                    for Uncertainty in Income Taxes - an Interpretation of FASB Statement
                    No.
                    109ICT
                Independent
                    Coordinator of TransmissionInterconnection
                    Agreement
                Interconnection
                    Agreement and Real Estate Agreement between Attala and Entergy
                    MississippiIRP
                Integrated
                    Resource PlanningkWh
                Kilowatt-hour(s)
                    as applicableLIBOR
                London
                    Inter-Bank Offer RateLignite
                    Mining Agreement
                Dolet
                    Hills Mine Lignite Mining Agreement, dated as of May 31,
                    2001LPSC
                Louisiana
                    Public Service CommissionLTICP
                Cleco
                    Corporation Long-Term Incentive Compensation PlanMAI
                Mirant
                    Americas, Inc., a wholly owned subsidiary of Mirant
                    CorporationMidstream
                Cleco
                    Midstream Resources LLC, a wholly owned subsidiary of Cleco
                    CorporationMoody’s
                Moody’s
                    Investors ServiceMW
                Megawatt(s)
                    as applicable
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
 ABBREVIATION
                  OR ACRONYM
              DEFINITIONNot
                  meaningful
              A
                  percentage comparison of these items is not statistically meaningful
                  because the percentage difference is greater than
                  1,000%PEH
              Perryville
                  Energy Holdings LLC, a wholly owned subsidiary of
                  MidstreamPerryville
              Perryville
                  Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Corporation.
                  Prior to February 1, 2007, Perryville was a wholly owned subsidiary
                  of
                  PEH.Power
                  Purchase Agreement
              Power
                  Purchase Agreement, dated as of January 28, 2004, between Perryville
                  and
                  Entergy ServicesRegistrant(s)
              Cleco
                  Corporation and Cleco PowerRFP
              Request
                  for ProposalRodemacher
                  Unit 3
              A
                  600-MW solid fuel generating unit under construction by Cleco Power
                  at its
                  existing Rodemacher plant site in Boyce, LouisianaRSP
              Rate
                  Stabilization PlanRTO
              Regional
                  Transmission OrganizationSale
                  Agreement
              Purchase
                  and Sale Agreement, dated as of January 28, 2004, between Perryville
                  and
                  Entergy LouisianaSEC
              Securities
                  and Exchange CommissionSenior
                  Loan Agreement
              Construction
                  and Term Loan Agreement, dated as of June 7, 2001, between Perryville
                  and
                  KBC Bank N.V., as Agent BankSERP
              Cleco
                  Corporation Supplemental Executive Retirement PlanSFAS
              Statement
                  of Financial Accounting StandardsSFAS
                  No. 71
              Accounting
                  for the Effects of Certain Types of RegulationSFAS
                  No. 109
              Accounting
                  for Income TaxesSFAS
                  No. 123(R)
              Share-Based
                  PaymentSFAS
                  No. 131
              Disclosures
                  about Segments of an Enterprise and Related InformationSFAS
                  No. 133
              Accounting
                  for Derivative Instruments and Hedging ActivitiesSFAS
                  No. 140
              Accounting
                  for Transfers and Servicing of Financial Assets and Extinguishments
                  of
                  LiabilitiesSFAS
                  No. 149
              Amendment
                  of Statement 133 on Derivative Instruments and Hedging
                  ActivitiesSFAS
                  No. 155
              Accounting
                  for Certain Hybrid Financial Instruments - an amendment of FASB
                  Statements
                  No. 133 and 140SFAS
                  No. 156
              Accounting
                  for Servicing of Financial Assets - an amendment of FASB Statement
                  No.
                  140SFAS
                  No. 157
              Fair
                  Value MeasurementsSFAS
                  No. 159
              The
                  Fair Value Option For Financial Assets and Financial Liabilities
                  -
                  including an amendment to FAS 115Shaw
              Shaw
                  Constructors, Inc., a subsidiary of The Shaw Group Inc.Subordinated
                  Loan Agreement
              Subordinated
                  Loan Agreement, dated as of August 23, 2002, between Perryville
                  and
                  MAISupport
                  Group
              Cleco
                  Support Group LLC, a wholly owned subsidiary of Cleco
                  CorporationSWEPCO
              Southwestern
                  Electric Power CompanyVaR
              Value-at-riskWilliams
              Williams
                  Power Company, Inc.
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  DISCLOSURE
        REGARDING FORWARD-LOOKING STATEMENTS
 
  This
        Quarterly Report on Form 10-Q includes “forward-looking stat ements”
        about future events, circumstances, and results. All statements other than
        statements of historical fact included in this Quarterly Report are
        forward-looking statements, including, without limitation, statements regarding
        the construction, timing and cost of Rodemacher Unit 3; Acadia settlement
        agreement between Cleco and Calpine; future capital expenditures; and future
        environmental regulations. 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); unscheduled
                generation outages; unanticipated maintenance or repairs; unanticipated
                changes to fuel costs, cost of and reliance on natural gas as a component
                of Cleco’s generation fuel mix and their impact on competition and
                franchises, fuel supply costs or availability constraints due to
                higher
                demand, shortages, transportation problems or other developments;
                environmental incidents; or 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 construct, operate, and maintain, within its projected
                costs (including financing) and timeframe, Rodemacher Unit 3, in
                addition
                to any other self-build projects identified in future IRP and RFP
                processes;  §
            Dependence
                of Cleco Power for energy from sources other than its facilities
                and the
                uncertainty of future long-term sources of such additional
                energy;  §
            Nonperformance
                by and creditworthiness of counterparties under tolling, power purchase,
                and energy service agreements, or the restructuring of those agreements,
                including possible termination;  §
            Outcome
                of the proposed settlement agreement, between Cleco and Calpine,
                associated with Calpine’s bankruptcy filing and its effect on
                Acadia;  §
            The
                final amount of storm restoration costs and storm reserve, if any,
                approved by the LPSC and the method through which such amounts can
                be
                recovered from Cleco Power’s customers;  §
            The
                final amount of recoverable lignite costs, as approved by the LPSC,
                that
                are currently deferred by Cleco Power;  §
            Regulatory
                factors such as changes in rate-setting policies, recovery of investments
                made under traditional regulation, the frequency and timing of rate
                increases or decreases, the results of periodic fuel audits, the
                results
                of IRP and RFP processes, the formation of RTOs and ICTs, and the
                establishment by an ERO of reliability standards for bulk power systems
                and compliance with these standards by Cleco Power, Acadia, Attala,
                Evangeline, and Perryville;  §
            Financial
                or regulatory accounting principles or policies imposed by the FASB,
                the
                SEC, the Public Company Accounting Oversight Board, the FERC, the
                LPSC or
                similar entities with regulatory or accounting
                oversight;  §
            Economic
                conditions, including the ability of customers to continue paying
                for high
                energy costs, related growth and/or down-sizing of businesses in
                Cleco’s
                service area, monetary fluctuations, changes in commodity prices,
                and
                inflation rates;  §
            Credit
                ratings of Cleco Corporation, Cleco Power, and
                Evangeline;  §
            Changing
                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;  §
            Acts
                of terrorism;  §
            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;  §
            Employee
                work force factors, including work stoppages and changes in key
                executives;  §
            Legal,
                environmental, and regulatory delays and other obstacles associated
                with
                mergers, acquisitions, capital projects, reorganizations, or investments
                in joint ventures;  §
            Costs
                and other effects of legal and administrative proceedings, settlements,
                investigations, claims and other matters;  §
            Changes
                in federal, state, or local legislative requirements, tax laws or
                rates,
                regulating policies or environmental laws and regulations;
                and  §
            Ability
                of Cleco Power to recover, from its retail customers, the costs of
                compliance with environmental laws and
                regulations.  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 Annual Report on Form 10-K for the fiscal year ended December 31,
        2006.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  All
        subsequent written and oral forward-looking statements attributable to the
        Registrants or persons acting on their b ehalf
        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
                    2007 1ST
                        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, 2006. For more information on the basis of presentation, see
“Notes
        to the Unaudited Condensed Financial Statements — Note 1 — Summary of
        Significant Accounting Policies — Basis of Presentation.”
 
 CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  CLECO
        CORPORATION
  Condensed
        Consolidated Statements of Income (Unaudited)
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS,
                  EXCEPT SHARE AND PER SHARE AMOUNTS)
              
              **2007**
              
              2006**Operating
                  revenue**Electric
                  operations
              
              **$**
              **213,020**
              
              $
              210,989Other
                  operations
              
              
              **9,269**
              
              
              6,596Affiliate
                  revenue
              
              
              **1,461**
              
              
              1,451Gross
                  operating revenue
              
              
              **223,750**
              
              
              219,036Electric
                  customer credits
              
              
              **-**
              
              
              4,382Operating
                  revenue, net
              
              
              **223,750**
              
              
              223,418**Operating
                  expenses**Fuel
                  used for electric generation
              
              
              **55,496**
              
              
              48,363Power
                  purchased for utility customers
              
              
              **84,147**
              
              
              99,832Other
                  operations
              
              
              **26,315**
              
              
              18,088Maintenance
              
              
              **10,241**
              
              
              5,933Depreciation
              
              
              **20,098**
              
              
              15,645Taxes
                  other than income taxes
              
              
              **9,799**
              
              
              9,584Total
                  operating expenses
              
              
              **206,096**
              
              
              197,445**Operating
                  income**
              
              
              **17,654**
              
              
              25,973Interest
                  income
              
              
              **2,567**
              
              
              2,492Allowance
                  for other funds used during construction
              
              
              **5,131**
              
              
              669Equity(loss)
                  income from investees
              
              
              **(1,399**
              **)**
              
              373Other
                  income
              
              
              **89**
              
              
              108Other
                  expense
              
              
              **(1,266**
              **)**
              
              (328
              )**Interest
                  charges**Interest
                  charges, including amortization of debt expenses, premium and discount,
                  net of capitalized interest
              
              
              **13,657**
              
              
              11,176Allowance
                  for borrowed funds used during construction
              
              
              **(1,670**
              **)**
              
              (227
              )Total
                  interest charges
              
              
              **11,987**
              
              
              10,949**Income
                  from continuing operations before income taxes**
              
              
              **10,789**
              
              
              18,338Federal
                  and state income tax expense
              
              
              **2,143**
              
              
              6,113**Income
                  from continuing operations**
              
              
              **8,646**
              
              
              12,225**Discontinued
                  operations**Loss
                  from discontinued operations, net of tax
              
              
              **-**
              
              
              (87
              )**Net
                  income**
              
              
              **8,646**
              
              
              12,138Preferred
                  dividends requirements, netof
                  tax
              
              
              **423**
              
              
              459**Net
                  income applicable to common stock**
              
              **$**
              **8,223**
              
              $
              11,679**Average
                  shares of common stock outstanding**Basic
              
              
              **57,854,737**
              
              
              49,851,812Diluted
              
              
              **58,198,391**
              
              
              52,120,948**Basic
                  earnings per share**From
                  continuing operations
              
              **$**
              **0.14**
              
              $
              0.23Net
                  income applicable to common stock
              
              **$**
              **0.14**
              
              $
              0.23**Diluted
                  earnings per share**From
                  continuing operations
              
              **$**
              **0.14**
              
              $
              0.23Net
                  income applicable to common stock
              
              **$**
              **0.14**
              
              $
              0.23**Cash
                  dividends paid per share of common stock**
              
              **$**
              **0.225**
              
              $
              0.225The
                  accompanying notes are an integral part of the condensed consolidated
                  financial statements.
 
 CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  CLECO
        CORPORATION
  Condensed
        Consolidated Statements of Comprehensive Income (Unaudited)
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **200****7**
              
              2006Net
                  income
              
              **$**
              **8,646**
              
              $
              12,138Other
                  comprehensive income, net of tax:Net
                  unrealized(loss)
                  gain from available-for-sale securities (net of tax (benefit) expense
                  of
                  $(18) in 2007 and $30 in 2006)
              
              
              **(28**
              **)**
              
              48Postretirement
                  expense component (net of tax benefit of $3 in 2007)
              
              
              **(2**
              **)**
              
              -Other
                  comprehensive
                  (loss) income
              
              
              **(30**
              **)**
              
              48**Comprehensive
                  income, net of tax**
              
              **$**
              **8,616**
              
              $
              12,186The
                  accompanying notes are an integral part of the condensed consolidated
                  financial statements.
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  CLECO
        CORPORATION
  Condensed
        Consolidated Balance Sheets (Unaudited)
 (THOUSANDS)
              
              **At
                  MARCH 31,
                  2007**
              
              AT
                  DECEMBER 31, 2006**Assets**Current
                  assetsCash
                  and cash equivalents
              
              **$**
              **98,608**
              
              $
              192,471Restricted
                  cash
              
              
              **11,247**
              
              
              24,361Customer
                  accounts receivable (less allowance for doubtful accounts of $855
                  in 2007 and $789 in 2006)
              
              
              **34,882**
              
              
              38,889Accounts
                  receivable - affiliate
              
              
              **14,044**
              
              
              11,451Other
                  accounts receivable
              
              
              **33,477**
              
              
              28,708Unbilled
                  revenue
              
              
              **16,006**
              
              
              18,382Fuel
                  inventory, at average cost
              
              
              **44,191**
              
              
              43,236Material
                  and supplies inventory, at average cost
              
              
              **40,178**
              
              
              34,755Risk
                  management assets
              
              
              **6,574**
              
              
              39Accumulated
                  deferred fuel
              
              
              **34,928**
              
              
              77,435Cash
                  surrender value of company-/trust-owned life insurance
                  policies
              
              
              **26,618**
              
              
              26,275Margin
                  deposits
              
              
              **3,544**
              
              
              18,638Prepayments
              
              
              **3,442**
              
              
              4,570Regulatory
                  assets - other
              
              
              **20,100**
              
              
              17,453Other
                  current assets
              
              
              **491**
              
              
              645Total
                  current assets
              
              
              **388,330**
              
              
              537,308Property,
                  plant and equipmentProperty,
                  plant and equipment
              
              
              **1,898,786**
              
              
              1,892,533Accumulated
                  depreciation
              
              
              **(892,197**
              **)**
              
              (876,747
              )Net
                  property, plant and equipment
              
              
              **1,006,589**
              
              
              1,015,786Construction
                  work in progress
              
              
              **381,482**
              
              
              289,101Total
                  property, plant and equipment, net
              
              
              **1,388,071**
              
              
              1,304,887Equity
                  investment in investees
              
              
              **315,033**
              
              
              307,136Prepayments
              
              
              **6,540**
              
              
              6,515Restricted
                  cash
              
              
              **91**
              
              
              90Regulatory
                  assets and liabilities - deferred taxes, net
              
              
              **101,069**
              
              
              94,653Regulatory
                  assets - other
              
              
              **185,259**
              
              
              192,061Other
                  deferred charges
              
              
              **21,796**
              
              
              18,454**Total
                  assets**
              
              **$**
              **2,406,189**
              
              $
              2,461,104The
                  accompanying notes are an integral part of the condensed consolidated
                  financial statements.
 
 (Continued
        on next page)
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  CLECO
        CORPORATION
  Condensed
        Consolidated Balance Sheets (Unaudited) (Continued)
 (THOUSANDS)
              
              **At
                  MARCH 31,
                  2007**
              
              AT
                  DECEMBER 31, 2006**Liabilities
                  and shareholders’ equity****Liabilities**Current
                  liabilitiesLong-term
                  debt due within one year
              
              **$**
              **40,000**
              
              $
              50,000Accounts
                  payable
              
              
              **111,632**
              
              
              134,172Retainage
              
              
              **18,066**
              
              
              12,409Accounts
                  payable - affiliate
              
              
              **19,364**
              
              
              5,072Customer
                  deposits
              
              
              **25,532**
              
              
              25,312Provision
                  for rate refund
              
              
              **6**
              
              
              3,174Taxes
                  accrued
              
              
              **23,354**
              
              
              49,002Interest
                  accrued
              
              
              **27,057**
              
              
              8,874Accumulated
                  current deferred taxes, net
              
              
              **20,036**
              
              
              23,233Risk
                  management liability
              
              
              **17,290**
              
              
              55,931Regulatory
                  liabilities - other
              
              
              **605**
              
              
              636Deferred
                  compensation
              
              
              **5,763**
              
              
              5,350Other
                  current liabilities
              
              
              **13,802**
              
              
              11,535Total
                  current liabilities
              
              
              **322,507**
              
              
              384,700Deferred
                  creditsAccumulated
                  deferred federal and state income taxes, net
              
              
              **352,047**
              
              
              436,775Accumulated
                  deferred investment tax credits
              
              
              **13,742**
              
              
              14,100Regulatory
                  liabilities - other
              
              
              **10,221**
              
              
              5,827Other
                  deferred credits
              
              
              **194,562**
              
              
              104,140Total
                  deferred credits
              
              
              **570,572**
              
              
              560,842Long-term
                  debt, net
              
              
              **619,270**
              
              
              619,341Total
                  liabilities
              
              
              **1,512,349**
              
              
              1,564,883Commitments
                  and Contingencies (Note8)**Shareholders’
                  equity**Preferred
                  stockNot
                  subject to mandatory redemption, $100 par value, authorized 1,491,900
                  shares, issued 10,288 and 200,922 shares at
                March
                  31, 2007 and December 31, 2006, respectively
              
              
              **1,029**
              
              
              20,092Common
                  shareholders’ equityCommon
                  stock, $1
                  par value, authorized 100,000,000 shares, issued 59,598,835 and
                  57,605,695
                  shares and outstanding 59,453,159and
                  57,524,498 shares at March 31, 2007 and December 31, 2006,
                  respectively
              
              
              **59,453**
              
              
              57,524Premium
                  on common stock
              
              
              **378,235**
              
              
              358,707Retained
                  earnings
              
              
              **465,053**
              
              
              469,824Treasury
                  stock, at cost,
                  30,747 and 31,957 shares at March 31, 2007 and December 31, 2006,
                  respectively
              
              
              **(590**
              **)**
              
              (616
              )Accumulated
                  other comprehensive loss
              
              
              **(9,340**
              **)**
              
              (9,310
              )Total
                  common shareholders’ equity
              
              
              **892,811**
              
              
              876,129Total
                  shareholders’ equity
              
              
              **893,840**
              
              
              896,221**Total
                  liabilities and shareholders’ equity**
              
              **$**
              **2,406,189**
              
              $
              2,461,104The
                  accompanying notes are an integral part of the condensed consolidated
                  financial statements.
 
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  CLECO
        CORPORATION
  Condensed
        Consolidated Statements of Cash Flows (Unaudited)
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **200****7**
              
              2006**Operating
                  activities**Net
                  income
              
              **$**
              **8,646**
              
              $
              12,138Adjustments
                  to reconcile net income to net cash provided by (used in) operating
                  activities:Depreciation
                  and amortization
              
              
              **21,001**
              
              
              16,506Provision
                  for doubtful accounts
              
              
              **501**
              
              
              646Return
                  on equity investment in investee
              
              
              **-**
              
              
              32Loss
                  (income) from equity investments
              
              
              **1,399**
              
              
              (373
              )Unearned
                  compensation expense
              
              
              **3,028**
              
              
              831ESOP
                  expense
              
              
              **890**
              
              
              92Allowance
                  for other funds used during construction
              
              
              **(5,131**
              **)**
              
              (669
              )Amortization
                  of investment tax credits
              
              
              **(359**
              **)**
              
              (383
              )Net
                  deferred income taxes
              
              
              **1,939**
              
              
              3,931Deferred
                  fuel costs
              
              
              **(9,125**
              **)**
              
              15,698(Gain)
                  loss on economic hedges
              
              
              **(1,459**
              **)**
              
              1,876Cash
                  surrender value of company-/trust-owned life insurance
              
              
              **(343**
              **)**
              
              (348
              )Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              **(5,616**
              **)**
              
              15,314Accounts
                  and notes receivable, affiliate
              
              
              **(2,256**
              **)**
              
              47Unbilled
                  revenue
              
              
              **2,376**
              
              
              2,508Fuel,
                  materials and supplies inventory
              
              
              **(5,246**
              **)**
              
              (24,984
              )Prepayments
              
              
              **1,103**
              
              
              450Accounts
                  payable
              
              
              **(21,045**
              **)**
              
              (41,675
              )Accounts
                  and notes payable, affiliate
              
              
              **697**
              
              
              4,165Accrued
                  payroll
              
              
              **(1,331**
              **)**
              
              (1,366
              )Customer
                  deposits
              
              
              **1,409**
              
              
              1,857Regulatory
                  assets and liabilities, net
              
              
              **3,951**
              
              
              (42,177
              )Other
                  deferred accounts
              
              
              **(613**
              **)**
              
              2,482Retainage
                  payable
              
              
              **5,657**
              
              
              303Taxes
                  accrued
              
              
              **(15,657**
              **)**
              
              (267
              )Interest
                  accrued
              
              
              **5,342**
              
              
              1,643Margin
                  deposits
              
              
              **15,094**
              
              
              (16,918
              )Other,
                  net
              
              
              **2,655**
              
              
              120Net
                  cashprovided by (used in) operating activities
              
              
              **7,507**
              
              
              (48,521
              )**Investing
                  activities**Additions
                  to property, plant and equipment
              
              
              **(96,711**
              **)**
              
              (20,213
              )Allowance
                  for other funds used during construction
              
              
              **5,131**
              
              
              669Return
                  of equity investment in investee
              
              
              **95**
              
              
              2,771Proceeds
                  from sale of property, plant and equipment
              
              
              **-**
              
              
              229Equity
                  investment in investee
              
              
              **(20**
              **)**
              
              (7,026
              )Transfer
                  of cash from restricted accounts
              
              
              **13,113**
              
              
              -Net
                  cash used in investing activities
              
              
              **(78,392**
              **)**
              
              (23,570
              )**Financing
                  activities**Conversion
                  of options to common stock
              
              
              **382**
              
              
              571Issuance
                  of common stock under employee stock purchase plan
              
              
              **424**
              
              
              422Stock
                  based compensation tax benefit
              
              
              **43**
              
              
              68Stock
                  issuance costs
              
              
              **(4**
              **)**
              
              -Retirement
                  of long-term obligations
              
              
              **(10,111**
              **)**
              
              (66
              )Deferred
                  financing costs
              
              
              **(341**
              **)**
              
              (112
              )Change
                  in ESOP trust
              
              
              **-**
              
              
              1,661Dividends
                  paid on preferred stock
              
              
              **(423**
              **)**
              
              (910
              )Dividends
                  paid on common stock
              
              
              **(12,948**
              **)**
              
              (11,267
              )Net
                  cash used in financing activities
              
              
              **(22,978**
              **)**
              
              (9,633
              )**Net****decrease in cash and cash equivalents**
              
              
              **(93,863**
              **)**
              
              (81,724
              )**Cash
                  and cash equivalents at beginning of period**
              
              
              **192,471**
              
              
              219,153**Cash
                  and cash equivalents at end of period**
              
              **$**
              **98,608**
              
              $
              137,429**Supplementary
                  cash flow information**Interest
                  paid(net
                  of amount capitalized)
              
              **$**
              **7,716**
              
              $
              8,996Income
                  taxes paid
              
              **$**
              **15,000**
              
              $
              23**Supplementary
                  non****-cash
                  investing and financing activities**Issuance
                  of treasury stock - LTICP and ESOP plans
              
              **$**
              **25**
              
              $
              27Issuance
                  of common stock - LTICP/ESOP/ESPP1
              
              **$**
              **20,030**
              
              $
              1,538Accrued
                  additions to property, plant and equipment not reported
                  above
              
              **$**
              **50,092**
              
              $
              20,4531 Includes conversion of preferred stock to common stock
                  ($19,063/2007, $799/2006)The
                  accompanying notes are an integral part of the condensed consolidated
                  financial statements.
  CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  PART
        I—
FINANCIAL INFORMATION
  **ITEM
        1.** CONDENSED FINANCIAL STATEMENTS
  **Cleco
        Power**
 These unaudited
        condensed financial statements should be read in conjunction with Cleco Power’s
        Financial Statements and Notes included in the Registrants’ Combined Annual
        Report on Form 10-K for the fiscal year ended December 31, 2006. For more
        information on the basis of presentation, see “Notes to the Unaudited Condensed
        Financial Statements — Note 1 — Summary of Significant Accounting Policies —
Basis of Presentation.”
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
 CLECO
        POWER
  Condensed
        Statements of Income (Unaudited)
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **2007**
              
              2006**Operating
                  revenue**Electric
                  operations
              
              **$**
              **213,020**
              
              $
              210,989Other
                  operations
              
              
              **9,260**
              
              
              6,549Affiliate
                  revenue
              
              
              **513**
              
              
              512Gross
                  operating revenue
              
              
              **222,793**
              
              
              218,050Electric
                  customer credits
              
              
              **-**
              
              
              4,382Operating
                  revenue, net
              
              
              **222,793**
              
              
              222,432**Operating
                  expenses**Fuel
                  used for electric generation
              
              
              **55,496**
              
              
              48,363Power
                  purchased for utility customers
              
              
              **84,147**
              
              
              99,832Other
                  operations
              
              
              **25,613**
              
              
              17,622Maintenance
              
              
              **9,727**
              
              
              5,347Depreciation
              
              
              **19,761**
              
              
              15,225Taxes
                  other than income taxes
              
              
              **8,902**
              
              
              8,881Total
                  operating expenses
              
              
              **203,646**
              
              
              195,270**Operating
                  income**
              
              
              **19,147**
              
              
              27,162Interest
                  income
              
              
              **1,406**
              
              
              2,336Allowance
                  for other funds used during construction
              
              
              **5,131**
              
              
              669Other
                  income
              
              
              **94**
              
              
              67Other
                  expense
              
              
              **(342**
              **)**
              
              (325
              )**Interest
                  charges**Interest
                  charges, including amortization of debt expenses, premium and
                  discount
              
              
              **11,714**
              
              
              9,206Allowance
                  for borrowed funds used during construction
              
              
              **(1,670**
              **)**
              
              (227
              )Total
                  interest charges
              
              
              **10,044**
              
              
              8,979**Income
                  before income taxes**
              
              
              **15,392**
              
              
              20,930Federal
                  and state income taxes
              
              
              **3,116**
              
              
              7,057**Net
                  income**
              
              **$**
              **12,276**
              
              $
              13,873The
                  accompanying notes are an integral part of the condensed financial
                  statements.
 
  CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  CLECO
        POWER
  Condensed
        Balance Sheets (Unaudited)
 (THOUSANDS)
              
              **AT
                  MARCH 31, 2007**
              
              AT
                  DECEMBER 31, 2006**Assets**Utility
                  plant and equipmentProperty,
                  plant and equipment
              
              **$**
              **1,884,125**
              
              $
              1,877,850Accumulated
                  depreciation
              
              
              **(883,649**
              **)**
              
              (868,516
              )Net
                  property, plant and equipment
              
              
              **1,000,476**
              
              
              1,009,334Construction
                  work in progress
              
              
              **380,702**
              
              
              288,455Total
                  utility plant, net
              
              
              **1,381,178**
              
              
              1,297,789Current
                  assetsCash
                  and cash equivalents
              
              
              **4,891**
              
              
              101,878Restricted
                  cash
              
              
              **11,247**
              
              
              24,361Customer
                  accounts receivable (less allowance for doubtful accounts of $855
                  in 2007 and $789 in 2006)
              
              
              **34,882**
              
              
              38,889Other
                  accounts receivable
              
              
              **33,099**
              
              
              28,399Accounts
                  receivable - affiliate
              
              
              **5,006**
              
              
              2,860Unbilled
                  revenue
              
              
              **16,006**
              
              
              18,382Fuel
                  inventory, at average cost
              
              
              **44,191**
              
              
              43,236Material
                  and supplies inventory, at average cost
              
              
              **40,178**
              
              
              34,755Margin
                  deposits
              
              
              **3,544**
              
              
              18,638Risk
                  management assets
              
              
              **6,574**
              
              
              39Prepayments
              
              
              **2,847**
              
              
              3,713Regulatory
                  assets - other
              
              
              **20,100**
              
              
              17,453Accumulated
                  deferred fuel
              
              
              **34,928**
              
              
              77,435Cash
                  surrender value of life insurance policies
              
              
              **5,377**
              
              
              5,265Other
                  current assets
              
              
              **233**
              
              
              439Total
                  current assets
              
              
              **263,103**
              
              
              415,742Prepayments
              
              
              **6,540**
              
              
              6,515Regulatory
                  assets and liabilities - deferred taxes, net
              
              
              **101,069**
              
              
              94,653Regulatory
                  assets - other
              
              
              **185,259**
              
              
              192,061Other
                  deferred charges
              
              
              **20,585**
              
              
              17,092**Total
                  assets**
              
              **$**
              **1,957,734**
              
              $
              2,023,852**Liabilities
                  and member’s equity**Member’s
                  equity
              
              **$**
              **658,589**
              
              $
              646,404Long-term
                  debt,
                  net
              
              
              **519,270**
              
              
              519,341Total
                  capitalization
              
              
              **1,177,859**
              
              
              1,165,745Current
                  liabilitiesLong-term
                  debt due within one year
              
              
              **40,000**
              
              
              50,000Accounts
                  payable
              
              
              **108,861**
              
              
              128,411Accounts
                  payable - affiliate
              
              
              **18,757**
              
              
              35,469Retainage
              
              
              **18,066**
              
              
              12,409Customer
                  deposits
              
              
              **25,532**
              
              
              25,312Provision
                  for rate refund
              
              
              **6**
              
              
              3,174Taxes
                  accrued
              
              
              **12,962**
              
              
              19,889Interest
                  accrued
              
              
              **21,503**
              
              
              7,707Accumulated
                  deferred taxes, net
              
              
              **19,355**
              
              
              22,582Risk
                  management liability
              
              
              **17,290**
              
              
              55,931Regulatory
                  liabilities - other
              
              
              **605**
              
              
              636Other
                  current liabilities
              
              
              **8,995**
              
              
              7,965Total
                  current liabilities
              
              
              **291,932**
              
              
              369,485Deferred
                  creditsAccumulated
                  deferred federal and state income taxes, net
              
              
              **322,576**
              
              
              388,570Accumulated
                  deferred investment tax credits
              
              
              **13,742**
              
              
              14,100Regulatory
                  liabilities - other
              
              
              **10,221**
              
              
              5,827Other
                  deferred credits
              
              
              **141,404**
              
              
              80,125Total
                  deferred credits
              
              
              **487,943**
              
              
              488,622**Total
                  liabilities and member’s equity**
              
              **$**
              **1,957,734**
              
              $
              2,023,852The
                  accompanying notes are an integral part of the condensed financial
                  statements.
 
  CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  CLECO
        POWER
  Statements
        of Cash Flows (Unaudited)
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **200****7**
              
              2006**Operating
                  activities**Net
                  income
              
              **$**
              **12,276**
              
              $
              13,873Adjustments
                  to reconcile net income to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              **20,521**
              
              
              15,949Provision
                  for doubtful accounts
              
              
              **501**
              
              
              646Unearned
                  compensation expense
              
              
              **1,381**
              
              
              473Allowance
                  for other funds used during construction
              
              
              **(5,131**
              **)**
              
              (669
              )Amortization
                  of investment tax credits
              
              
              **(359**
              **)**
              
              (383
              )Net
                  deferred income taxes
              
              
              **(11,819**
              **)**
              
              1,346Deferred
                  fuel costs
              
              
              **(9,125**
              **)**
              
              15,698(Gain)
                  loss on economic hedges
              
              
              **(1,459**
              **)**
              
              1,876Cash
                  surrender value of company-owned life insurance
              
              
              **(112**
              **)**
              
              (108
              )Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              **(5,547**
              **)**
              
              13,654Accounts
                  and notes receivable, affiliate
              
              
              **(2,079**
              **)**
              
              1,074Unbilled
                  revenue
              
              
              **2,376**
              
              
              2,508Fuel,
                  materials and supplies inventory
              
              
              **(5,246**
              **)**
              
              (24,984
              )Prepayments
              
              
              **841**
              
              
              149Accounts
                  payable
              
              
              **(18,128**
              **)**
              
              (36,695
              )Accounts
                  and notes payable, affiliate
              
              
              **(16,941**
              **)**
              
              6,286Accrued
                  payroll
              
              
              **(956**
              **)**
              
              (973
              )Customer
                  deposits
              
              
              **1,409**
              
              
              1,857Regulatory
                  assets and liabilities, net
              
              
              **3,951**
              
              
              (42,177
              )Other
                  deferred accounts
              
              
              **(313**
              **)**
              
              2,075Retainage
                  payable
              
              
              **5,657**
              
              
              303Taxes
                  accrued
              
              
              **658**
              
              
              (1,842
              )Interest
                  accrued
              
              
              **3,588**
              
              
              (107
              )Margin
                  deposits
              
              
              **15,094**
              
              
              (16,918
              )Other,
                  net
              
              
              **760**
              
              
              (898
              )Net
                  cashused
                  in operating activities
              
              
              **(8,202**
              **)**
              
              (47,987
              )**Investing
                  activities**Additions
                  to property, plant and equipment
              
              
              **(96,578**
              **)**
              
              (20,089
              )Allowance
                  for other funds used during construction
              
              
              **5,131**
              
              
              669Proceeds
                  from sale of property, plant and equipment
              
              
              **-**
              
              
              229Transfer
                  of cash from restricted accounts
              
              
              **13,114**
              
              
              -Net
                  cash used in investing activities
              
              
              **(78,333**
              **)**
              
              (19,191
              )**Financing
                  activities**Retirement
                  of long-term obligations
              
              
              **(10,111**
              **)**
              
              (66
              )Deferred
                  financing costs
              
              
              **(341**
              **)**
              
              (112
              )Net
                  cash used in financing activities
              
              
              **(10,452**
              **)**
              
              (178
              )**Net
                  decrease in cash and cash equivalents**
              
              
              **(96,987**
              **)**
              
              (67,356
              )**Cash
                  and cash equivalents at beginning of period**
              
              
              **101,878**
              
              
              183,381**Cash
                  and cash equivalents at end of period**
              
              **$**
              **4,891**
              
              $
              116,025**Supplementary
                  cash flow information**Interest
                  paid(net
                  of amount capitalized)
              
              **$**
              **7,716**
              
              $
              8,961**Supplementary****non-cash
                  investing and financing activities**Accrued
                  additions to property, plant and equipment not reported
                  above
              
              **$**
              **50,092**
              
              $
              20,453The
                  accompanying notes are an integral part of the condensed financial
                  statements.
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  Index
        to
        Applicable Notes to the Unaudited Condensed Financial Statements of Registrants
 
  Note
                  1
              Summary
                  of Significant Accounting Policies
              Cleco
                  Corporation and Cleco PowerNote
                  2
              Regulatory
                  Assets and Liabilities
              Cleco
                  Corporation and Cleco PowerNote3
              Disclosures
                  about Segments
              Cleco
                  CorporationNote4
              EquityInvestment
                  in Investees
              Cleco
                  CorporationNote
                  5
              Recent
                  AccountingStandards
              Cleco
                  Corporation and Cleco PowerNote
                  6
              Restricted
                  Cash
              Cleco
                  Corporation and Cleco PowerNote7
              Electric
                  Customer Credits
              Cleco
                  Corporation and Cleco PowerNote8
              Litigation
                  and Other Commitments and Contingencies
              Cleco
                  Corporation and Cleco PowerNote9
              Disclosures
                  about Guarantees
              Cleco
                  Corporation and Cleco PowerNote
                  10
              Preferred
                  Stock
              Cleco
                  CorporationNote11
              Pension
                  Plan and Employee Benefits
              Cleco
                  Corporation and Cleco PowerNote
                  12
              Income
                  Taxes
              Cleco
                  Corporation and Cleco PowerNote
                  13
              Deferred
                  Fuel and Purchased Power Costs
              Cleco
                  Corporation and Cleco PowerNote
                  14
              Affiliate
                  Transactions
              Cleco
                  Corporation and Cleco PowerNote
                  15
              Calpine
                  Bankruptcy
              Cleco
                  CorporationNote
                  16
              Subsequent
                  Event
              Cleco
                  Corporation
 
  CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  Notes
        to
        the Unaudited Condensed Financial Statements
  **Note** **1
        — Summary of Significant Accounting Policies**
  ***Principles
        of Consolidation***
 The
        accompanying consolidated condensed
        financial statements of Cleco include the accounts of Cleco and its
        majority-owned subsidiaries after elimination of intercompany accounts and
        transactions.
 Cleco
        has
        adopted the provisions of FIN 46R on its sche duled
        effective dates. Through a review of equity interests and other contractual
        relationships, Cleco has determined that it is not the primary beneficiary
        of
        one of its indirect, wholly owned subsidiaries and two of its wholly owned
        subsidiaries. Evangeline, Perryville, and Attala are considered variable
        interest entities. In accordance with FIN 46R, Cleco reports its investment
        in
        these entities on the equity method of accounting. As a result, the assets
        and
        liabilities of these entities are represented by one line item corresponding
        to
        Cleco’s equity investment in these entities. The pre-tax results of operations
        are reported as equity income from investees on Cleco Corporation’s Condensed
        Consolidated Statements of Income. For additional information on the operations
        of these entities, see Note 4 — “Equity Investment in Investees.”
  ***Basis
        of Presentation***
 The
        condensed consolidated financial statements of Cleco Corporation and the
        condensed financial statements of Cleco Power have been prepared pursuant
        to the
        rules and regulations of the SEC. Accordingly, certain information and note
        disclosures normally included in financial statements prepared in accordance
        with generally accepted accounting principles have been condensed or omitted,
        although Cleco believes that the disclosures are adequate to make the
        information presented not misleading.
 The
        year- end
        condensed consolidated balance sheet data was derived from audited financial
        statements, but does not include all disclosures required by generally accepted
        accounting principles. The unaudited financial information included in the
        condensed financial statements of Cleco Corporation and Cleco Power reflects
        all
        adjustments of a normal recurring nature which are, in the opinion of the
        management of Cleco Corporation and Cleco Power, necessary for a fair statement
        of the financial position and the results of operations for the interim periods.
        Information for interim periods is affected by seasonal variations in sales,
        rate changes, timing of fuel expense recovery and other factors, and is not
        indicative necessarily of the results that may be expected for the full fiscal
        year. For more information on recent accounting standards and their effect
        on
        financial results, see Note 5 — “Recent Accounting Standards.”
  ***Reclassifications***
 Certain
        reclassifications have been made
        to
        prior period financial statements to conform them to the presentation used
        in
        the current year’s financial statements. These reclassifications had no effect
        on Cleco Corporation’s net income applicable to common stock or total common
        shareholders’ equity or Cleco Power’s net income or total member’s
        equity.
  ***Risk
        Management*** ****
 Market
        risk inherent in Cleco’s market risk-sensitive instr uments
        and positions includes the potential change arising from changes in interest
        rates and the commodity market prices of power and natural gas on different
        energy exchanges. Cleco’s Trading Risk Management Policy authorizes the use of
        various derivative instruments, including futures and option contracts, forward
        purchase and sales contracts, and swap transactions to reduce exposure to
        fluctuations in the price of power and natural gas. Cleco Power’s market
        risk-sensitive instruments and positions qualify for the normal-purchase,
        normal-sale exception to mark-to-market accounting of SFAS No. 133, as modified
        by SFAS No. 149, since Cleco Power generally takes physical delivery and
        the
        instruments and positions are used to satisfy customer requirements.
 Cleco
        Power has entered into certain financial transactions it considers
        ec onomic
        hedges to mitigate the risk associated with the fixed-price power to be provided
        to a wholesale customer through December 2010. The economic hedges cover
        approximately 97% of the estimated daily peak hour power sales to the wholesale
        customer. These transactions are derivatives as defined by SFAS No. 133 but
        do
        not meet the accounting criteria to be considered hedges. These transactions
        are
        marked-to-market with the resulting gain or loss recorded on the income
        statement as a component of operating revenue, net. For the three months
        ended
        March 31, 2007, there was a net mark-to-market gain of $1.5 million and a
        realized loss of less than $0.1 million recorded in other operations revenue
        related to these economic hedge transactions.
 Cleco
        Power has entered into other positions to mitigate some of the volatility
        in
        fuel costs passed on to customers. These positions are marked-to-market with
        the
        resulting gain or loss recorded on the balance sheet as a component of the
        acc umulated
        deferred fuel asset or liability and a component of risk management assets
        or
        liabilities. When these positions close, actual gains or losses will be included
        in the fuel adjustment clause and reflected on customers’ bills as a component
        of the fuel cost adjustment. Based on market prices at March 31, 2007, the
        net
        mark-to-market impact relating to these positions was a loss of $13.2 million.
        Deferred losses relating to closed natural gas positions at March 31, 2007,
        totaled $3.5 million.
 Cleco
        Power maintains margin accounts with commodity brokers used to partially
        fund
        the acquisition of natural gas futures, options and swap contracts. These
        contracts/positions are used to mitigate the risks associated with the
        fixed-price power sales and volatility in customer fuel costs noted above.
        At
        March 31, 2007, Cleco Power had deposited collateral of
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  $3.5
        million to cover margin requirements relating to open natural gas futures,
        options and swap positions.
 Cleco
        and
        Cleco Power maintain a master netting agre ement
        policy and monitor credit risk exposure through review of counterparty credit
        quality, corporate-wide aggregate counterparty credit exposure and
        corporate-wide aggregate counterparty concentration levels. Cleco actively
        manages these risks by establishing appropriate credit and concentration
        limits
        on transactions with counterparties and by requiring contractual guarantees,
        cash deposits or letters of credit from counterparties or their affiliates,
        as
        deemed necessary. Cleco Power has agreements in place with various
        counterparties that authorize the netting of financial buys and sells and
        contract payments to mitigate credit risk for transactions entered into for
        risk
        management purposes.
  ***Earnings
        per Average Common Share***
 Earnings
        per share is calculated in accordance with EITF No. 03-6 utilizing the
“two-class” method by dividing earnings a llocated
        to holders of common stock by the weighted average number of shares of common
        stock outstanding during the period. The following table shows the calculation
        of basic and diluted earnings per share.
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,**2007**
              
              
              
              
              
              2006(THOUSANDS,
                  EXCEPT SHARES AND PER SHARE AMOUNTS)
              **INCOME**
              
              **SHARES**
              
              **PER
                  SHARE**
                **AMOUNT**
              
              INCOME
              
              SHARES
              
              PER
                  SHARE
                AMOUNTIncome
                  from continuing operations
              
              **$**
              **8,646**
              
              
              
              
              
              
              
              $
              12,225Deduct:
                  non-participating stock dividends (4.5% preferred stock)
              
              
              **12**
              
              
              
              
              
              
              
              
              12Deduct:
                  participating preferred stock dividends
              
              
              **411**
              
              
              
              
              
              
              
              
              449Deduct:
                  amount allocated to participating preferred
              
              
              **-**
              
              
              
              
              
              
              
              
              22**Basic
                  earnings per share**Income
                  from continuing operations
              
              **$**
              **8,223**
              
              
              
              
              **$**
              **0.14**
              
              $
              11,742
              
              
              
              
              $
              0.23Loss
                  from discontinued operations
              
              
              **-**
              
              
              
              
              
              **-**
              
              
              (87
              )
              
              
              
              
              -Total
                  basic net income applicable to common stock
              
              **$**
              **8,223**
              
              
              **57,854,737**
              
              **$**
              **0.14**
              
              $
              11,655
              
              
              49,851,812
              
              $
              0.23**Effect
                  of Dilutive Securities**Add:
                  stock
                  option grants
              
              
              **-**
              
              
              **170,251**
              
              
              
              
              
              -
              
              
              94,382Add:
                  restricted
                  stock (LTICP)
              
              
              **6**
              
              
              **173,403**
              
              
              
              
              
              8
              
              
              197,800Add:
                  convertible ESOP preferred stock
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              471
              
              
              1,976,954**Diluted
                  earnings per share**Income
                  from continuing operations plus assumed conversions
              
              **$**
              **8,229**
              
              
              
              
              **$**
              **0.14**
              
              $
              12,221
              
              
              
              
              $
              0.23Loss
                  from discontinued operations
              
              
              **-**
              
              
              
              
              
              **-**
              
              
              (87
              )
              
              
              
              
              -Total
                  diluted net income applicable to common stock
              
              **$**
              **8,229**
              
              
              **58,198,391**
              
              **$**
              **0.14**
              
              $
              12,134
              
              
              52,120,948
              
              $
              0.23
  There
        were no stock option grants excluded from the computation of diluted earnings
        per share for the three months ended March 31, 2007, due to the average market
        price being higher than the exercise prices of the stock option grants. The
        stock o ption
        grants excluded from the computation of diluted earnings per share for the
        three
        months ended March 31, 2006, are presented in the table below. The stock
        option
        grants excluded from the computation of diluted earnings per share had exercise
        prices higher than the average market price.
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31, 2006STRIKE
                  PRICE
              
              AVERAGE
                MARKET
                  PRICE
              
              SHARESStock
                  option grants excluded
              
              
              $22.00
                      - $24.25
              
              
              $21.90
              
              
              350,336
  ***Stock-Based
        Compensation***
 At
        March
        31, 200 7,
        Cleco
        had one share-based compensation plan: the LTICP. Options or restricted shares
        of stock, known as non-vested stock as defined by SFAS No. 123(R), common
        stock
        equivalents, and stock appreciation rights may be granted to certain officers,
        key employees, or directors of Cleco Corporation and its subsidiaries pursuant
        to the LTICP.
 On
        January 26,
        2007,
        Cleco granted 71,863 shares of non-vested stock and 55,249 of common stock
        equivalent units to certain officers, key employees and directors of Cleco
        Corporation and its subsidiaries pursuant to the LTICP.
 Cleco
        and
        Cleco Power reported pre-tax compensation expense for their share-based
        compensation plans as shown in the following table:
 CLECO
                  CORPORATION
              
              CLECO
                  POWERFOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **2007**
              
              2006
              
              **2007**
              
              2006**Equity
                  classification**Non-vested
                  stock
              
              **$**
              **625**
              
              $
              300
              
              **$**
              **250**
              
              $
              190Stock
                  options
              
              
              **23**
              
              
              22
              
              
              **4**
              
              
              6Non-forfeitable
                  dividends
              
              
              **6**
              
              
              8
              
              
              **4**
              
              
              5**Total**
              
              **$**
              **654**
              
              $
              330
              
              **$**
              **258**
              
              $
              201**Liability
                  classification**Common
                  stock equivalent units
              
              **$**
              **209**
              
              $
              113
              
              **$**
              **80**
              
              $
              45Company
                  funded participants income tax obligations
              
              
              **2,085**
              
              
              331
              
              
              **1,043**
              
              
              227**Total**
              
              **$**
              **2,294**
              
              $
              444
              
              **$**
              **1,123**
              
              $
              272**Total
                  pre-tax compensation expense**
              
              **$**
              **2,948**
              
              $
              774
              
              **$**
              **1,381**
              
              $
              473**Tax
                  benefit (excluding income tax gross-up)**
              
              **$**
              **332**
              
              $
              171
              
              **$**
              **130**
              
              $
              95
 
 CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  **Note** **2
        — Regulatory Assets and Liabilities**
 Cleco
        Power follows SFAS
        No.
        71, which allows utilities to capitalize or defer certain costs based on
        regulatory approval and management’s ongoing assessment that it is probable
        these items will be recovered through the ratemaking process.
 The
        following chart summarizes Cleco Power’s regulatory assets and liabilities at
        March 31, 2007, and December 31, 2006:
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Regulatory
                  assets and liabilities - deferred taxes, net
              
              **$**
              **101,069**
              
              $
              94,653Deferred
                  mining costs
              
              **$**
              **21,222**
              
              $
              20,096Deferred
                  storm restoration costs - Lili/Isidore
              
              
              **2,425**
              
              
              2,772Deferred
                  storm restoration costs - Katrina/Rita
              
              
              **134,940**
              
              
              138,935Deferred
                  interest costs
              
              
              **8,159**
              
              
              8,430Deferred
                  asset removal costs
              
              
              **574**
              
              
              562Deferred
                  postretirement plan costs
              
              
              **38,039**
              
              
              38,719Regulatory
                  assets - other
              
              **$**
              **205,359**
              
              $
              209,514Deferred
                  fuel transportation revenue
              
              **$**
              (1,399
              )
              $
              (1,566
              )Deferred
                  construction carrying costs
              
              
              (9,427
              )
              
              (4,897
              )Regulatory
                  liabilities - other
              
              **$**
              (10,826
              )
              $
              (6,463
              )Deferred
                  fuel and purchased power
              
              
              **34,928**
              
              
              77,435Total
                  regulatory assets and liabilities, net
              
              **$**
              **330,530**
              
              $
              375,139
 
 The
        decrease of $44.6 million in total regulatory assets and liabilities, net
        from
        December 31, 2006, to March 31, 2007, was primarily due to a reduction in
        the
        amount of Cleco Power’s deferred fuel and purchased power costs. This reduction
        is the result of a $47.1 million increase in the market value of open natural
        gas hedge positions and $4.5 million of lower deferred losses on closed natural
        gas hedge positions, both due to increases in natural gas prices. The increase
        in the mark-to-market and the lower deferred losses were partially offset
        by the
        deferral of $9.1 million in additional fuel and purchased power costs. For
        additional information on deferred fuel and purchased power costs, see Note
        13 —
“Deferred Fuel and Purchased Power Costs.” For additional information on natural
        gas hedges, see Note 1 — “Summary of Significant Accounting Policies — Risk
        Management.”
  ***Deferred
        Taxes***
 Cleco
        Power has recorded SFAS No. 109 net regulatory a ssets
        related to probable future taxes payable that will be recovered from customers
        through future rates. Amounts recorded as regulatory assets are partially
        offset
        by deferred tax liabilities resulting from the regulatory requirement to
        flow
        through the current tax benefits to customers of certain accelerated deductions
        that are recovered from customers as they are paid. The recovery periods
        for
        regulatory assets and liabilities are based on assets’ lives, which are
        typically 30 years or greater. The amounts deferred are attributable to
        differences between book and tax recovery periods.
  ***Deferred
        Storm Restoration Costs***
 At
        March
        31, 2007, Cleco Power had approximately $2.4 mi llion
        and
        $134.9 million of unamortized storm restoration costs relating to damage
        caused
        by Tropical Storm Isidore and Hurricane Lili and damage caused by Hurricanes
        Katrina and Rita, respectively. According to an agreement with the LPSC,
        approximately $8.2 million of restoration costs related to Isidore and Lili
        were
        recorded as a regulatory asset ($7.0 million in 2002 and $1.2 million in
        2003)
        and are being amortized to maintenance expense over the six-year period which
        began in January 2003. The restoration costs relating to Hurricanes Katrina
        and
        Rita were being amortized to depreciation expense based on the amounts collected
        monthly from customers through a surcharge, according to the terms of an
        interim
        rate increase approved by the LPSC, until a review of the restoration costs
        could be completed by the LPSC. In March 2007, after completing this review,
        Cleco Power and the LPSC Staff filed a settlement agreement allowing the
        recovery of essentially all of Cleco Power’s Hurricanes Katrina and Rita storm
        costs. The agreement also allows Cleco Power to securitize the storm costs
        and
        to recover the costs through a customer billing surcharge. Management expects
        the settlement agreement to be approved by the LPSC in the third quarter
        of
        2007.
  **Note** **3
        — Disclosures about Segments**
 Cleco ’s
        reportable segments are based on its method of internal reporting, which
        disaggregates business units by first-tier subsidiary. Reportable segments
        were
        determined by applying SFAS No. 131. Cleco’s reportable segments are Cleco Power
        and Midstream. The reconciling items in the following tables consist of the
        holding company, a shared services subsidiary, two transmission substations,
        and
        an investment subsidiary. Effective February 1, 2007, the ownership interests
        of
        Midstream’s transmission interconnection facilities were transferred to Cleco
        Corporation. In accordance with SFAS No. 131, the prior period has been adjusted
        to reflect this change in organizational structure.
 Each
        reportable segment engages in business activities from which it earns revenue
        and incurs expenses. Segment
        managers report periodically to Cleco’s Chief Executive Officer (the chief
        operating decision-maker) with discrete financial information and, at least
        quarterly, present discrete financial information to Cleco Corporation’s Board
        of Directors. Each reportable segment prepared budgets for 2007 that were
        presented to and approved by Cleco Corporation’s Board of Directors.
 The
        financial results of Cleco’s segments are presented on an accrual basis.
        Management evaluates the performance of its segments and allocates resources
        to
        them based on segment profit and the requirements to implement new strategic
        initiatives and projects to meet current business objectives. Material
        intercompany transactions occur on a regular basis. These intercompany
        transactions relate primarily to joint and common administrative support
        services provided by Support Group.
 
 CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM 10-Q
 
 **SEGMENT
        INFORMATION FOR THE** **THREE
        MONTHS ENDED MARCH 31,**
 **CLECO**
              
              
              
              **RECONCILING**2007
                  (THOUSANDS)
              
              **POWER**
              
              **MIDSTREAM**
              
              **ITEMS**
              
              **ELIMINATIONS**
              
              **CONSOLIDATED**RevenueElectric
                  operations
              
              **$**
              **213,020**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **213,020**Other
                  operations
              
              
              **9,260**
              
              
              **7**
              
              
              **7**
              
              
              **(5**
              **)**
              
              **9,269**Affiliate
                  revenue
              
              
              **12**
              
              
              **986**
              
              
              **463**
              
              
              **-**
              
              
              **1,461**Intercompany
                  revenue
              
              
              **501**
              
              
              **-**
              
              
              **12,396**
              
              
              **(12,897**
              **)**
              
              **-**Operating
                  revenue
              
              **$**
              **222,793**
              
              **$**
              **993**
              
              **$**
              **12,866**
              
              **$**
              **(12,902**
              **)**
              **$**
              **223,750**Depreciation
                  expense
              
              **$**
              **19,761**
              
              **$**
              **75**
              
              **$**
              **262**
              
              **$**
              **-**
              
              **$**
              **20,098**Interest
                  charges
              
              **$**
              **10,044**
              
              **$**
              **5,042**
              
              **$**
              **1,913**
              
              **$**
              **(5,012**
              **)**
              **$**
              **11,987**Interest
                  income
              
              **$**
              **1,406**
              
              **$**
              **-**
              
              **$**
              **6,173**
              
              **$**
              **(5,012**
              **)**
              **$**
              **2,567**Equity
                  (loss) incomefrom
                  investees
              
              **$**
              **-**
              
              **$**
              **(1,827**
              **)**
              **$**
              **428**
              
              **$**
              **-**
              
              **$**
              **(1,399**
              **)**Federal
                  and state income tax expense(benefit)
              
              **$**
              **3,116**
              
              **$**
              **(2,953**
              **)**
              **$**
              **1,980**
              
              **$**
              **-**
              
              **$**
              **2,143**Segment
                  profit(loss)(1)
              
              **$**
              **12,276**
              
              **$**
              **(4,714**
              **)**
              **$**
              **1,084**
              
              **$**
              **-**
              
              **$**
              **8,646**Additions
                  to long-lived assets
              
              **$**
              **99,738**
              
              **$**
              **-**
              
              **$**
              **134**
              
              **$**
              **-**
              
              **$**
              **99,872**Equity
                  investment in investees
              
              **$**
              **-**
              
              **$**
              **296,355**
              
              **$**
              **18,678**
              
              **$**
              **-**
              
              **$**
              **315,033**Total
                  segment
                  assets
              
              **$**
              **1,957,734**
              
              **$**
              **316,919**
              
              **$**
              **478,867**
              
              **$**
              **(347,331**
              **)**
              **$**
              **2,406,189****(1)****Reconciliation
                  of segment profit to consolidated profit:**
              
              
              **Segment
                  profit**
              
              
              
              
              
              
              
              **$**
              **8,646****Unallocated
                  items:****Preferred d****ividends**
                **requirements**
              
              
              
              
              **(423**
              **)****Net
                  income applicable to co****mmon
                  stock**
              **$**
              **8,223**
 
 CLECO
              
              
              
              RECONCILING2006
                  (THOUSANDS)
              
              POWER
              
              MIDSTREAM
              
              ITEMS
              
              ELIMINATIONS
              
              CONSOLIDATEDRevenueElectric
                  operations
              
              $
              210,989
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              210,989Other
                  operations
              
              
              6,549
              
              
              4
              
              
              43
              
              
              -
              
              
              6,596Electric
                  customer credits
              
              
              4,382
              
              
              -
              
              
              -
              
              
              -
              
              
              4,382Affiliate
                  revenue
              
              
              12
              
              
              1,050
              
              
              389
              
              
              -
              
              
              1,451Intercompany
                  revenue
              
              
              500
              
              
              -
              
              
              9,137
              
              
              (9,637
              )
              
              -Operating
                  revenue, net
              
              $
              222,432
              
              $
              1,054
              
              $
              9,569
              
              $
              (9,637
              )
              $
              223,418Depreciation
                  expense
              
              $
              15,225
              
              $
              78
              
              $
              342
              
              $
              -
              
              $
              15,645Interest
                  charges
              
              $
              8,979
              
              $
              4,231
              
              $
              1,948
              
              $
              (4,209
              )
              $
              10,949Interest
                  income
              
              $
              2,336
              
              $
              -
              
              $
              4,365
              
              $
              (4,209
              )
              $
              2,492Equity(loss)
                  income from investees
              
              $
              -
              
              $
              (28
              )
              $
              401
              
              $
              -
              
              $
              373Federal
                  and state income tax expense(benefit)
              
              $
              7,057
              
              $
              (1,695
              )
              $
              806
              
              $
              (55
              )
              $
              6,113Segment
                  profit(loss)
                  from continuing operations, net
              
              $
              13,873
              
              $
              (3,271
              )
              $
              1,623
              
              $
              -
              
              $
              12,225Lossfrom discontinued operations, net of tax
              
              
              -
              
              
              (87
              )
              
              -
              
              
              -
              
              
              (87
              )Segment
                  profit(loss)(1)
              
              $
              13,873
              
              $
              (3,358
              )
              $
              1,623
              
              $
              -
              
              $
              12,138Additions
                  to long-lived assets
              
              $
              50,690
              
              $
              8
              
              $
              116
              
              $
              -
              
              $
              50,814Equity
                  investment in investees(2)
              
              $
              -
              
              $
              302,167
              
              $
              4,969
              
              $
              -
              
              $
              307,136Total
                  segment
                  assets(2)
              
              $
              2,023,852
              
              $
              325,157
              
              $
              751,376
              
              $
              (639,281
              )
              $
              2,461,104(1)Reconciliation
                  of segment profit to consolidated profit:
              
              
              Segment
                  profit
              
              
              
              
              
              
              
              $
              12,138(2)Balances
                  as of December 31, 2006
              
              Unallocated items:Preferred dividends
                requirements, net of tax
              
              
              
              
              (459
              )Net
                  income applicable to common stock
              $
              11,679
   **Note** **4
        —** **Equity
        Investment in Investees**
 Equity
        investment in investees represents primarily Mi dstream’s
        $236.9 million investment in Acadia, owned 50% by APH and 50% by Calpine,
        and
        its $59.4 million investment in Evangeline, owned 100% by Midstream. Equity
        investment in investees also represents a $7.1 million investment in Attala
        and
        a $11.5 million equity investment in Perryville, both owned 100% by Cleco
        Corporation. The remaining $0.1 million relates to equity investments held
        by
        Cleco Innovations LLC, a wholly owned subsidiary of Cleco Corporation.
 Effective
        February 1, 2007, the ownership interests of A ttala
        and
        Perryville were transferred from Midstream to Cleco Corporation. Cleco reports
        its investment in Acadia, Attala, Evangeline, Perryville and the investments
        held by Cleco Innovations LLC using the equity method of accounting. Under
        the
        equity method, the assets and liabilities of these entities are reported
        as
        equity investment in investees on Cleco Corporation’s Condensed Consolidated
        Balance Sheets. The revenue and expenses (excluding income taxes) of these
        entities are netted and reported as equity income from investees on Cleco
        Corporation’s Condensed Consolidated Statements of Income.
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
 
 The
        table
        below presents the equity (loss) income from each investment accounted for
        using
        the equity method.
 FOR
                  THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006APH
              
              **$**
              **(2,395**
              **)**
              $
              (65
              )Attala
              
              
              **219**
              
              
              185Evangeline
              
              
              **568**
              
              
              38Perryville
              
              
              **219**
              
              
              240Other
              
              
              **(10**
              **)**
              
              (25
              )Total
                  equity (loss) income
              
              **$**
              **(1,399**
              **)**
              $
              373
  APH’s
        equity i ncome
        for
        the three-month period ended March 31, 2006, includes a $2.8 million draw
        against the $15.0 million letter of credit issued by Calpine. The remaining
        $12.2 million was drawn in August 2006. The letter of credit, of which APH
        is
        the beneficiary, was posted by Calpine to support its obligations under the
        Calpine Tolling Agreements.
  ***Acadia***
 Cleco’s
        current assessment of its maximum exposure to loss at March
        31,
        2007, consists of its equity investment of $236.9 million.
 The
        table
        below presents the components of Midstream's e quity
        investment in Acadia.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,INCEPTION
                  TO DATE (THOUSANDS)
              
              **2007**
              
              2006Contributed
                  assets (cash and land)
              
              **$**
              **250,612**
              
              $
              250,612Net
                  income
              
              
              **103,303**
              
              
              105,698Capitalized
                  interest and other
              
              
              **19,469**
              
              
              19,469Less:
                  Cash distributions
              
              
              **136,464**
              
              
              136,464Total
                  equity investment in investee
              
              **$**
              **236,920**
              
              $
              239,315
  Midstream’s
        equity, as reported on the balance sheet of Acadia at March 31, 2007, was
        $267.3
        million.  The diffe rence
        of
        $30.4 million between the equity investment in investee of $236.9 million
        as
        shown in the table above and Midstream’s equity includes $19.5 million of
        interest capitalized on funds contributed to Acadia.  It also includes
        other miscellaneous charges related to the construction of the Acadia facility
        offset by $57.4 million which represents the difference between the accounting
        treatments used by the partnership entities to record the allocation of
        termination agreement income.  The remaining $7.5 million is due to the
        difference in accounting treatment of the letter of credit draws between
        Acadia
        and APH. The cash distributions of $136.5 million were used to pay interest
        and
        repay principal on debt at Cleco Corporation relating to this investment.
 I n
        December 2005, the Calpine Debtors, including CES and the subsidiary which
        owns
        the other 50% of Acadia, filed voluntary petitions in the Calpine Debtors
        Bankruptcy Court for protection under Chapter 11 of the U.S. Bankruptcy Code.
        In
        February 2006, APH drew $2.8 million against the $15.0 million Calpine letter
        of
        credit due to the default of CES under the tolling agreements. In August
        2006,
        APH drew the remaining $12.2 million available under Calpine’s $15.0 million
        letter of credit. These amounts were reported as equity income from investees
        on
        Cleco Corporation’s Condensed Consolidated Statements of Income in the
        respective periods.
 On
        April
        23, 2007, Cleco announced that a settlement had been reached with Calpine
        that
        resolves issues surrounding the Calpine bankruptcy filing and its effect
        on the
        Acadia facility. For additional information, see Note 16 — “Subsequent
        Event.”
 The
        table
        below contains summarized financial information for Acadia.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Current
                  assets
              
              **$**
              **5,356**
              
              $
              5,233Property,
                  plant and equipment, net
              
              
              **433,512**
              
              
              437,281Total
                  assets
              
              **$**
              **438,868**
              
              $
              442,514Current
                  liabilities
              
              **$**
              **3,928**
              
              $
              3,327Partners’
                  capital
              
              
              **434,940**
              
              
              439,187Total
                  liabilities and partners’ capital
              
              **$**
              **438,868**
              
              $
              442,514
 
 FOR
                  THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006Total
                  revenue
              
              **$**
              **23,242**
              
              $
              17,292Total
                  operating expenses
              
              
              **28,038**
              
              
              23,020Otherincome
              
              
              **6**
              
              
              3Loss
                  before taxes
              
              **$**
              **(4,790**
              **)**
              $
              (5,725
              )
  Income
        tax benefit
        recorded on APH’s financial statements related to Midstream’s 50% ownership
        interest in Acadia was $2.9 million and $1.7 million for the three months
        ended
        March 31, 2007, and 2006, respectively.
  ***Attala***
 Cleco’s
        current assessment of its maximum exposure to loss at March
        31,
        2007, consists of its equity investment of $7.1 million. The table below
        presents the components of Cleco Corporation’s equity investment in Attala.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,INCEPTION
                  TO DATE (THOUSANDS)
              
              **2007**
              
              2006Contributed
                  assets (cash)
              
              **$**
              **7,006**
              
              $
              7,006Income
                  before taxes
              
              
              **1,121**
              
              
              902Less:
                  distributions
              
              
              **1,011**
              
              
              972Total
                  equity investment in investee
              
              **$**
              **7,116**
              
              $
              6,936
  The
        table
        below contains summarized financial information for Attala.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Current
                  assets
              
              **$**
              **240**
              
              $
              249Other
                  assets
              
              
              **6,933**
              
              
              6,930Total
                  assets
              
              **$**
              **7,173**
              
              $
              7,179Current
                  liabilities
              
              **$**
              **45**
              
              $
              63Accounts
                  payable - affiliate
              
              
              **12**
              
              
              180Other
                  liabilities
              
              
              **45**
              
              
              -Member’s
                  equity
              
              
              **7,071**
              
              
              6,936Total
                  liabilities andmember’s
                  equity
              
              **$**
              **7,173**
              
              $
              7,179
 
 FOR
                  THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006Operatingrevenue
              
              **$**
              **260**
              
              $
              207Operating
                  expenses
              
              
              **41**
              
              
              22Income
                  before taxes
              
              **$**
              **219**
              
              $
              185
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  The
        $6.9
        million in Other assets in the summarized fina ncial
        information for Attala listed above primarily consists of the transmission
        assets utilized by Attala in the Interconnection Agreement. These transmission
        assets are accounted for as a direct financing lease on Attala’s Balance Sheet
        at March 31, 2007.
 Income
        tax expense recorded on Cleco’s
        financial statements related to Cleco Corporation’s 100% interest in Attala was
        $0.1 million for the three months ended March 31, 2007, and 2006.
  ***Evangeline***
 Cleco’s
        current assessment of its maximum exposure to loss at March 31, 2007, consists
        of its equity investment of $59.4 million.
 The
        table
        below presents the components of Midstream's e quity
        investment in Evangeline.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,INCEPTION
                  TO DATE (THOUSANDS)
              
              **2007**
              
              2006Contributed
                  assets (cash)
              
              **$**
              **43,580**
              
              $
              43,580Net
                  income
              
              
              **136,750**
              
              
              136,182Less:
                  distributions
              
              
              **120,895**
              
              
              116,910Total
                  equity investment in investee
              
              **$**
              **59,435**
              
              $
              62,852
  The
        table
        below contains summarized financial information for Evangeline.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Current
                  assets
              
              **$**
              **9,639**
              
              $
              17,162Accounts
                  receivable - affiliate
              
              
              **5,948**
              
              
              5,052Property,
                  plant and equipment, net
              
              
              **184,933**
              
              
              185,958Other
                  assets
              
              
              **48,367**
              
              
              48,429Total
                  assets
              
              **$**
              **248,887**
              
              $
              256,601Current
                  liabilities
              
              **$**
              **15,695**
              
              $
              17,453Accounts
                  payable - affiliate
              
              
              **812**
              
              
              4,611Long-term
                  debt
              
              
              **172,965**
              
              
              177,064Other
                  liabilities
              
              
              **62,823**
              
              
              61,233Member’s
                  deficit
              
              
              **(3,408**
              **)**
              
              (3,760
              )Total
                  liabilities and member’sdeficit
              
              **$**
              **248,887**
              
              $
              256,601
 
 FOR
                  THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006Operating
                  revenue
              
              **$**
              **10,545**
              
              $
              10,343Operating
                  expenses
              
              
              **4,524**
              
              
              4,894Depreciation
              
              
              **1,286**
              
              
              1,308Interest
                  charges
              
              
              **4,522**
              
              
              4,265Interestincome
              
              
              **358**
              
              
              294Other
                  expense
              
              
              **3**
              
              
              132Income
                  before taxes
              
              **$**
              **568**
              
              $
              38
  Since
        its
        inception, Cleco has had 100% ownership and voting interest of Evangeline.
        All
        of the capacity and output of the power plant has been tolled to Williams,
        which pays Evangeline certain fixed and variable amounts.
 At
        March
        31, 2007, Evangeline had a member’s deficit of $3.4 million. This deficit was
        caused by Evangeline’s ability to generate cash, either through operations or
        through income tax savings, that was distributed to its member in excess
        of its
        net income. The deficit did not cause a default under Evang eline’s
        8.82% Senior Secured Bonds due 2019 and is not expected to impact Evangeline’s
        ability to fund its operations.
 I ncome
        tax
        expense recorded on Midstream’s financial statements related to Midstream’s 100%
        ownership interest in Evangeline was $0.2 million for the three months ended
        March 31, 2007, and 2006.
  ***Perryville***
 Cleco’s
        current assessment of its maximum exposure to loss at March
        31,
        2007, consists of its equity investment of $11.5 million.
 The
        table
        below presents the components of Cleco
        Corporation’s equity investment in Perryville.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,INCEPTION
                  TO DATE (THOUSANDS)
              
              **2007**
              
              2006Contributed
                  assets (cash)
              
              **$**
              **102,174**
              
              $
              102,174Net
                  income
              
              
              **50,505**
              
              
              50,285Less:
                  distributions
              
              
              **141,137**
              
              
              154,532Total
                  equity (return of) investment in investee
              
              **$**
              **11,542**
              
              $
              (2,073
              )
  The
        table
        below contains summarized financial information for Perryville.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Current
                  assets
              
              **$**
              **289**
              
              $
              42Accounts
                  receivable - affiliate
              
              
              **13,416**
              
              
              107Other
                  assets
              
              
              **10,221**
              
              
              9,385Total
                  assets
              
              **$**
              **23,926**
              
              $
              9,534Current
                  liabilities
              
              **$**
              **4,640**
              
              $
              16Accounts
                  payable - affiliate
              
              
              **9,645**
              
              
              11Other
                  liabilities
              
              
              **328**
              
              
              329Member’s
                  equity
              
              
              **9,313**
              
              
              9,178Total
                  liabilities and member’sequity
              
              **$**
              **23,926**
              
              $
              9,534
  The
        transmission assets utilized by Perryville in an inte rconnection
        agreement with Entergy Louisiana are accounted for as a direct financing
        lease
        by Perryville, and are included in Other assets in the summarized financial
        information above.
 FOR
                  THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006Operating
                  revenue
              
              **$**
              **263**
              
              $
              264Operating
                  expenses
              
              
              **44**
              
              
              163Interestincome
              
              
              **-**
              
              
              139Income
                  before taxes
              
              **$**
              **219**
              
              $
              240
  Income
        tax expense recorded on Cleco’s financial stat ements
        related to Cleco Corporation’s 100% interest in Perryville was $0.1 million for
        the three months ended March 31, 2007, and 2006.
  **Note** **5
        — Recent Accounting Standards**
 The Registrants
        adopted, or will adopt, the recent accounting standards listed below on their
        respective effective dates.
 In
        February 2006, the
        FASB
        issued SFAS No. 155 which amends SFAS No. 133 and SFAS No. 140. The provisions
        of this statement:
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  §
            permit
                fair value accounting for hybrid financial instruments
                that contain an embedded derivative that otherwise would require
                bifurcation; §
            clarify
                the exemption from SFAS No. 133 for certain interest-only and
                principal-only strips; §
            establish
                a requirement to evaluate interests in securitized financial assets
                that
                contain an embedded derivative requiring
                bifurcation; §
            clarify
                that concentrations of credit risk in the form of subordination are
                not
                embedded derivatives; and §
            amend
                SFAS No. 140 as it relates to qualifying special-purpose entities
                and
                derivative financial instruments.  This
        statement is effective for all financial instruments a cquired,
        issued or subject to a remeasurement event occurring after the beginning
        of an
        entity’s first fiscal year that begins after September 15, 2006. The adoption of
        SFAS No. 155 did not have an impact on the financial condition or results
        of
        operations of the Registrants.
 In
        March
        2006, the
        FASB
        issued SFAS No. 156 which amends SFAS No. 140 with respect to the accounting
        for
        separately recognized servicing assets and liabilities. This statement requires
        all separately recognized servicing assets and liabilities to be initially
        measured at fair value, requires fair value accounting for derivative
        instruments used to mitigate risks of the servicing assets and liabilities,
        and
        allows for the election to use fair value accounting for the servicing assets
        and liabilities in subsequent periods. SFAS No. 156 is effective for the
        first
        fiscal year beginning after September 15, 2006. The adoption of SFAS No.
        156 did
        not have an impact on the financial condition or results of operations of
        the
        Registrants.
 In
        July
        2006, the FASB issued FIN 48, which provides guidance on accounting for
        uncertain tax positions. FIN 48 allows recognition of those tax benefits
        that
        satisfy a greater than 50% probability threshold. This interpretation requires
        each tax position to be evaluated using a two-step process. The first step
        is a
        determination of the likelihood the position will be sustained upon examination
        based upon the technical merits of the position. For tax positions that result
        from permanent differences between book and tax income, the company must
        evaluate the likelihood that the position will be sustained to determine
        whether
        a tax benefit can be recognized. Once it is determined that a tax benefit
        can be
        recognized, the second step is to measure and record the tax benefit to be
        realized. For tax positions that do not meet the requirements of the first
        step,
        no tax benefit should be recognized. This interpretation also provides for
        the
        recognition and measurement of expected penalties and interest, as well as
        disclosure requirements about tax positions. This interpretation is effective
        for fiscal years beginning after December 15, 2006. For additional information
        regarding the impact the adoption of FIN 48 had on the financial condition
        and
        results of operations of the Registrants, see Note 12 — “Income
        Taxes.”
 In
        September 2006, the FASB issued SFAS No. 157, which provides guidance on
        how
        companies should measure fair value when required for recognition or disclosure
        purposes under generally accepted accounting principles. Specifically, SFAS
        No.
        157 creates a common definition of fair value throughout generally accepted
        accounting principles, establishes a fair value hierarchy, and requires
        companies to make expanded disclosures about fair value measurements. This
        statement is effective for fiscal years beginning after November 15, 2007.
        Management is currently evaluating the impact this statement will have on
        the
        financial condition and results of operations of the Registrants.
 In
        February 2007, the FASB issued SFAS No. 159, which allows entities to choose,
        at
        specified election dates, to measure eligible financial assets and liabilities
        at fair value that are not otherwise required to be measured at fair value.
        SFAS
        No. 159 is effective for fiscal years beginning after November 15, 2007.
        Management is currently evaluating the impact this statement will have on
        the
        financial condition and results of operations of the Registrants.
  **Note** **6
        — Restricted Cash**
 Various
        agreements to which Cleco is subject contain cov enants
        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 general corporate purposes. At March 31, 2007, and December 31, 2006,
        $0.1
        million of cash was restricted under the Diversified Lands mitigation escrow
        agreement. Also, at March 31, 2007, and December 31, 2006, $11.2 million
        and
        $24.4 million of cash, respectively, was restricted under the Cleco Power
        solid
        waste disposal bonds indenture. Restricted cash at Cleco Power decreased
        $13.2
        million compared to December 31, 2006, due to the release of funds for
        construction of the solid waste disposal facility at Rodemacher Unit 3.
  **Note** **7
        —** **Electric Customer Credits**
 Cleco’s
        and Cleco Power’s reported earnings for the three months ended March 31, 2006,
        reflect reversals of previously accrued credits of $4.4 million under terms
        of a
        RSP esta blished
        in an earnings review settlement with the LPSC in 1996. Neither Cleco nor
        Cleco
        Power accrued or reversed any previously accrued credits for the three months
        ended March 31, 2007.
 The
        original terms of the 1996 LPSC earnings review se ttlement
        were extended without modification to September 30, 2006, through subsequent
        amendments and two approved one-year extensions. As part of the settlement,
        Cleco Power was allowed to retain all regulated earnings up to a 12.25% return
        on equity, and to share equally with customers, as credits on their bills,
        all
        regulated earnings between 12.25% and 13% return on equity. All regulated
        earnings above a 13% return on equity were credited to customers. This
        effectively allowed Cleco Power the opportunity to realize a regulatory rate
        of
        return up to 12.625%. The amount of credits due customers, if any, is determined
        by Cleco Power and the LPSC annually, based on results for each 12-month
        period
        ended September 30. The 1996 LPSC settlement provided for such credits to
        be
        made on customers’ bills the following summer.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  In
        July
        2006, Cleco Power’s request for an extension of the RSP to the in-service date
        of Rodemacher Unit 3, targeted for the fourth quarter of 2009, was approved
        by
        the LPSC with several modifications to the terms of the original RSP. Effective
        October 1, 2006, Cleco Power began operating under the new RSP, which allows
        Cleco Power to earn a maximum regulated return on equity of 11.65%. This
        maximum
        return is based on a return on equity of 11.25%, with any regulated earnings
        between 11.25% and 12.25% shared between shareholders and customers in a
        40/60
        ratio. All regulated earnings over 12.25% will be returned to customers.
        The
        terms relating to the sharing of regulated earnings were modified by the
        LPSC in
        its order approving the recovery of storm restoration costs discussed
        below.
 In
        April
        2006, the LPSC approved a recommendation of the LPSC Staff requiring Cleco
        Power
        to refund $1.3 million to customers relating to Cleco Power’s RSP filings for
        the 12-month periods ended September 30, 2002, 2003, and 2004. Cleco Power
        refunded the amount as credits on customers’ September 2006 utility bills.
        Coincident with the $1.3 million refund, in the first quarter of 2006 Cleco
        Power reversed previously accrued customer credits of $3.2 million for the
        periods ended September 30, 2002, 2003, and 2004. In this same proceeding,
        the
        LPSC also reserved the right to further review Cleco Power’s calculation of
        working capital included in the filings for the 12-month periods ended September
        30, 2002, 2003, and 2004. Cleco Power reached an agreement of the working
        capital issue with the LPSC and refunded an additional $3.2 million of
        previously accrued customer credits to customers in March 2007.
 In
        April
        2006, Cleco Power filed its required monitoring report for the 12-month period
        ended September 30, 2005. Based on the reassessment of amounts filed in this
        monitoring report, the results of the Staff’s review as discussed above, and
        projections for the year 2006, in the first quarter of 2006 Cleco Power reversed
        $1.2 million of customer credits previously accrued for the 12-month periods
        ended September 30, 2005, and 2006. The LPSC consultants completed the review
        of
        the 2005 monitoring report in March 2007. Cleco Power received the LPSC Staff’s
        report in April 2007, indicating that no refund is due based on the 2005
        RSP
        filing.
 Cleco
        Power filed its RSP monitoring report with the LPSC for the 12-month period
        ended September 30, 2006, on March 30, 2007. The LPSC consultants have begun
        their review of the 2006 filing. Cleco Power anticipates the review will
        be
        completed by the end of 2007.
 Cleco
        Power’s Balance Sheets at March 31, 2007, and December 31, 2006, reflect the
        following accruals for estimated electric customer credits relating to the
        12-month periods ended September 30, 2002, through September 30,
        2007.
 **AT
                  MARCH
                  31,**
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **2007**
              
              2006Provision
                  for rate refund
              
              **$**
              **6**
              
              $
              3,174Otherdeferred
                  credits
              
              
              **1,933**
              
              
              1,933Totalcustomer
                  credits
              
              **$**
              **1,939**
              
              $
              5,107
  Amounts
        reported under the line item provision for rate r efund
        relate to the 12-month period ended September 30, 2002, and reflect estimated
        amounts due currently. The amounts reported under the line item other deferred
        credits currently are not due. All customer credits relating to Cleco Power’s
        RSP were recorded as a reduction in revenue due to the nature of the credits.
        The accruals are based upon the original 1996 settlement, the modified terms
        of
        the RSP extension, the resolution of the 2001-2002 fuel audit which was settled
        in 2004, annual issues as agreed to between Cleco and the LPSC, and Cleco’s
        assessment of issues that remain outstanding.
 In
        February 2006, the LPSC approved Cleco Power’s r equest
        to
        recover storm restoration costs incurred for Hurricanes Katrina and Rita.
        As
        part of this approval, the LPSC required that effective during the interim
        recovery period (Phase I), which began with the May 2006 billing cycle, Cleco
        Power’s portion of the shared regulated earnings between the 12.25% and 13.00%
        allowed return on equity (between 11.25% and 12.25% effective October 1,
        2006)
        be credited against outstanding Hurricanes Katrina and Rita storm restoration
        costs, rather than being shared between shareholders and customers. In March
        2007, as a result of Phase II of the LPSC Staff’s review of storm restoration
        costs, Cleco Power and the LPSC Staff filed a settlement agreement with the
        LPSC
        allowing the recovery of essentially all of Cleco Power’s Hurricanes Katrina and
        Rita storm costs. As part of the agreement, Cleco Power will continue to
        forgo
        its share of any excess earnings calculated according to the terms of the
        current RSP (unless modified in a subsequent base rate proceeding). For
        information concerning this agreement, see Note 2 — “Regulatory Assets and
        Liabilities.” As of March 31, 2007, Cleco Power had not credited any earnings
        against storm restoration costs.
  **Note** **8 — Litigation and Other Commitments and Contingencies**
  **Other****Litigation**
 On
        June
        22, 2005, the City of Alexandria, Louisiana (the City), a current wholesale
        municipal customer of Cleco Power, filed a lawsuit in Ninth Judicial District
        Court against Cleco Corp oration,
        Cleco Power, and certain other subsidiaries. The lawsuit alleges unspecified
        damages as a result of certain sales made to the City, revenue derived by
        Cleco
        using the City’s power generating facilities under contracts with the City, and
        other alleged improper conduct, including, without limitation, allegations
        that
        Cleco fraudulently mishandled the management of the City’s power requirements
        under the contracts. The lawsuit was removed to and currently is pending
        in the
        U.S. District Court for the Western District of Louisiana. Cleco filed responses
        which include claims for unspecified amounts owed by the City to Cleco. On
        January 13, 2006, Cleco and the City agreed upon guidelines whereby an audit
        and
        subsequent mediation of the disputed transactions would be performed. On
        February 21, 2006, the court designated KPMG LLP (KPMG) to examine the claims
        made by both parties and subsequently serve as the mediator. On February
        23,
        2007,
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  KPMG
        delivered a preliminary audit report to outside counsel for each party. Pursuant
        to a court order, the report’s distribution is limited and its contents are
        confidential. In March 2007, the parties met to mediate the dispute and have
        agreed to continue to negotiate a framework for resolution of the dispute
        under
        the supervision of the mediator and U.S. District Judge. Management believes
        the
        dispute will not have a material adverse effect on the Registrants’ financial
        condition, results of operations, or cash flows.
 Cleco
        is
        involved in regulatory, environmental, and legal proceedings before various
        courts, regulatory commissions, and governmental agencies regarding matters
        arising in the ordinary course of business .
        Some of
        these proceedings, such as fuel review and environmental issues, could involve
        substantial amounts. Management regularly analyzes current information and,
        as
        necessary, provides accruals for probable liabilities on the eventual
        disposition of these matters. Management believes the disposition of these
        matters will not have a material adverse effect on the Registrants’ financial
        condition, results of operations, or cash flows. In several lawsuits, Cleco
        has
        been named as a defendant by individuals who claim injury due to exposure
        to
        asbestos while working at sites in central Louisiana. Most of the claimants
        were
        workers who participated in the construction of various generation facilities,
        and some of the claimants had worked at locations owned by Cleco. With two
        exceptions, all filed, asbestos-related lawsuits have been settled. The result
        of the settlements had no material impact on Cleco’s financial condition,
        results of operations, or cash flows. The two remaining lawsuits were dismissed
        by the trial court; however, the claimants appealed the trial court’s dismissal.
        On March 21, 2007, the appeals court affirmed the trial court’s dismissal. On
        April 19, 2007, the claimants filed a request for review of the appeals court
        decision with the Louisiana Supreme Court. Management believes that the eventual
        disposition of these lawsuits will have no material impact on the Registrants’
financial condition, results of operations, or cash flows. There is no assurance
        that new asbestos-related lawsuits will not be filed against the Registrants
        in
        the future.
  ***Off-Balance
        Sheet Commitments***
 Cleco
        Corporation and Cleco Power have entered into various off-balance sheet
        commitments, in the form of guarantees and standby letter s
        of
        credit, in order to facilitate their activities and the activities of Cleco
        Corporation’s subsidiaries and equity investees (affiliates). Cleco Corporation
        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 Corporation 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 Condensed
        Consolidated Balance Sheets, because it has been determined that Cleco’s
        affiliates are able to perform these obligations under their contracts and
        that
        it is not probable that payments by Cleco will be required. Some of these
        commitments reduce borrowings available to Cleco Corporation under its credit
        facility pursuant to the terms of the credit facility. Cleco’s off-balance sheet
        commitments as of March 31, 2007, are summarized in the following table,
        and a
        discussion of the off-balance sheet commitments follows the table. The
        discussion should be read in conjunction with the table to understand the
        impact
        of the off-balance sheet commitments on Cleco’s financial
        condition.
 AT
                  MARCH 31, 2007REDUCTIONS
                  TO THEAMOUNT
                  AVAILABLETO
                  BE DRAWN ONFACE
              
              
              
              NET
              CLECO
                  CORPORATION’S(THOUSANDS)
              AMOUNT
              
              REDUCTIONS
              
              AMOUNT
              
              CREDIT
                  FACILITY**Cleco
                  Corporation**Guarantee
                  issued to Entergy companies for performance obligations of
                  Perryville
              **$**
              **277,400**
              
              **$**
              **135,000**
              
              **$**
              **142,400**
              
              **$**
              **328**Guarantees
                  issued to purchasers of the assets of Cleco Energy
              
              **1,400**
              
              
              **-**
              
              
              **1,400**
              
              
              **1,400**Obligations
                  under standby letter of credit issued to the Evangeline Tolling
                  Agreement
                counterparty
              
              **15,000**
              
              
              **-**
              
              
              **15,000**
              
              
              **15,000**Guarantee
                  issued to Entergy Mississippi on behalf of Attala
              
              **500**
              
              
              **-**
              
              
              **500**
              
              
              **500****Cleco
                  Power**Obligations
                  under standby letter of credit issued to the Louisiana Department
                  of
                  Labor
              
              **525**
              
              
              **-**
              
              
              **525**
              
              
              **-**Obligations
                  under the Lignite Mining Agreement
              
              **10,920**
              
              
              **-**
              
              
              **10,920**
              
              
              **-**Obligations
                  under standby letter of credit issued to the Louisiana Department
                  of
                  Wildlife and
                Fisheries
              
              **85**
              
              
              **-**
              
              
              **85**
              
              
              **-**Total
              **$**
              **305,830**
              
              **$**
              **135,000**
              
              **$**
              **170,830**
              
              **$**
              **17,228**
  Cleco
        Corporation provided a limited guarantee to Entergy Louisiana and Entergy
        Gulf
        States for Perryville’s performance ,
        indemnity, representation, and warranty obligations under the Sale Agreement,
        the Power Purchase Agreement, and other ancillary agreements related to the
        sale
        of the Perryville facility. As of March 31, 2007, the aggregate guarantee
        of
        $277.4 million is limited to $142.4 million (other than with respect to the
        indemnification of environmental matters to which there is no limit) due
        to the
        performance of some of the underlying obligations that were guaranteed. The
        discounted probability-weighted liability under the guarantees and
        indemnifications as of March 31, 2007, was $0.3 million, resulting in a
        corresponding reduction in the available credit under Cleco’s credit facility,
        which was determined in accordance with the facility’s definition of a
        contingent obligation. The contingent obligation reduces the amount available
        under the credit agreement by an amount equal to the reasonably anticipated
        liability in respect of the contingent obligation as determined in good faith.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  For
        additional information on this guarantee, see Note 9 — “Disclosures about
        Guarantees.”
 In
        November 2004, Cleco completed the sale of substantially all of the assets
        of
        Cleco Energy. Cleco Corporation provided guarantees to the buyers of Cleco
        Energy’s assets for the payment and performance of the indemnity obligations of
        Cleco Energy. The aggregate amount of the guarantees is $1.4 million, and
        the
        guarantees expire in 2009.
 If
        Evangeline fails to perform certain obligations under its tolling agreement,
        Cleco Corporation will be required to make payments to the Evangeline Tolling
        Agreement counterparty. Cleco Corporation’s obligation under the Evangeline
        commitment is in the form of a standby letter of credit from investment grade
        banks and is limited to $15.0 million. Rating triggers do not exist in the
        Evangeline Tolling Agreement. Cleco expects Evangeline to be able to meet
        its
        obligations under the tolling agreement and does not expect Cleco Corporation
        to
        be required to make payments to the counterparty. However, under the covenants
        associated with Cleco Corporation’s credit facility, the entire net amount of
        the Evangeline commitment reduces the amount that can be borrowed under the
        credit facility. The letter of credit for Evangeline is expected to be renewed
        annually until 2020.
 In
        March
        2005, Cleco Corporation issued a guarantee to Central Mississippi Generating
        Company, LLC for Attala’s obligations and liabilities under the purchase and
        sale agreement between Central Mississippi Generating Company, LLC and Attala.
        On January 20, 2007, the guarantee expired. In addition, in January 2006,
        Cleco
        Corporation provided a $0.5 million guarantee to Entergy Mississippi for
        Attala’s obligations under the Interconnection Agreement. This guarantee has no
        time limit.
 The
        State
        of Louisiana allows employers of certain financial net worth to self-insure
        their workers’ compensation benefits. Cleco Power has a certificate of
        self-insurance from the Louisiana Office of Workers’ Compensation and is
        required to post a $0.5 million letter of credit, an amount equal to 110%
        of the
        average losses over the previous three years, as surety.
 As
        part
        of the Lignite Mining Agreement entered into in 2001, Cleco Power and SWEPCO,
        joint owners of Dolet Hills, have agreed to pay the lignite miner’s loan and
        lease principal obligations when due, if the lignite miner does not have
        sufficient funds or credit to pay. Any amounts paid on behalf of the miner
        would
        be credited by the lignite miner against the next invoice for lignite delivered.
        At March 31, 2007, Cleco Power’s 50% exposure for this obligation was
        approximately $10.9 million. The lignite mining contract is in place until
        2011
        and does not affect the amount Cleco Corporation can borrow under its credit
        facility.
 In
        December 2006, Cleco Power issued a standby letter of credit to the Louisiana
        Department of Wildlife and Fisheries in order to obtain a permit to allow
        for
        dredging operations at the Rodemacher Unit 3 site. The letter of credit was
        for
        approximately $0.1 million and expired on April 1, 2007.
 The
        following table summarizes the expected termination date of the guarantees
        and
        standby letters of credit discussed above:
 AT
                  MARCH 31, 2007AMOUNT
                  OF COMMITMENT EXPIRATION
                  PER PERIODNET
              
              
              
              
              
              
              
              MOREAMOUNT
              
              LESS
                  THAN
              
              
              
              
              
              THAN(THOUSANDS)
              
              COMMITTED
              
              ONE
                  YEAR
              
              1-3
                  YEARS
              
              3-5
                  YEARS
              
              5
                  YEARSGuarantees
              
              **$**
              **155,220**
              
              **$**
              **-**
              
              **$**
              **1,400**
              
              **$**
              **110,920**
              
              **$**
              **42,900**Standby
                  letters of credit
              
              
              **15,610**
              
              
              **610**
              
              
              **-**
              
              
              **-**
              
              
              **15,000**Total
                  commercial commitments
              
              **$**
              **170,830**
              
              **$**
              **610**
              
              **$**
              **1,400**
              
              **$**
              **110,920**
              
              **$**
              **57,900**
  ***Acadia***
 In
        May
        2005, a
        detailed review of the gas and electric metering at the Acadia plant resulted
        in
        the discovery of a potential electric metering error whereby Acadia unknowingly
        generated excess power to its electric interconnections for the period beginning
        June 1, 2002, and ending May 31, 2005. Acadia has made a claim against Cleco
        Power for the delivery of the excess generation for which it has not received
        compensation. Cleco Power has evaluated the claim and communicated to Acadia
        that to the extent any unmetered power was generated, Entergy received the
        predominant benefit of that power and therefore Acadia’s claim, if any, is
        primarily against Entergy rather than Cleco Power. Acadia has responded,
        insisting that its claim against Cleco Power is valid. As such, in a letter
        dated July 19, 2006, Acadia demanded compensation from Cleco Power totaling
        approximately $4.5 million, allegedly representing the value of the energy
        delivered. Cleco Power continues to assert that Acadia’s claim is against
        Entergy, not Cleco Power. The three parties are attempting to resolve the
        dispute.
 In
        December 2005, the Calpine Debtors filed for prote ction
        under Chapter 11 of the U.S. Bankruptcy Code in the Calpine Debtors Bankruptcy
        Court. For additional information about the Calpine Bankruptcy, see Note
        15 —
“Calpine Bankruptcy” and for more information on the proposed Acadia settlement
        agreement, see Note 16 — “Subsequent Event.”
 
 **Other****Contingencies**
  **General
        Electric Services Corporation**
 Cleco
        Power has entered into an operating lease agreement with General Electric
        Services Corporation for leasing of rai lcars
        in
        order to transport coal deliveries to its Rodemacher Power Station. The lease
        contains a provision for early termination, along with an associated termination
        fee. The termination provision can only be exercised in December 2010. If
        exercised by Cleco Power, the termination fee would be approximately $1.4
        million. At this time, Cleco Power has no plans to early terminate this
        lease.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  **CBL
        Capital Corporation**
 Cleco
        Power has entered into an operating lease agre ement
        with CBL Capital Corporation. This is a master leasing agreement for company
        vehicles and other equipment. The lease contains a provision for early
        termination, along with an associated termination fee. At any time during
        the
        lease, Cleco Power may terminate the agreement. The termination fee is based
        upon the unamortized residual value of the equipment under lease at the end
        of
        the month of termination. The fee is decreased by any sale proceeds obtained
        by
        CBL Capital Corporation. Cleco Power would be liable for 87% of the termination
        fee net of any sale proceeds. Cleco Power’s maximum obligation at March 31,
        2007, is approximately $2.3 million. At this time, Cleco Power has no plans
        to
        terminate this lease prior to expiration of the lease term.
  **FERC
        Staff Investigation**
 In
        November 2005, after a review of Cleco’s October 2005 quarterly compliance
        report, the FERC Staff initiated a prelim inary,
        non-public investigation into certain representations made by Cleco. In response
        to data requests from the FERC Staff, Cleco provided information regarding
        those
        representations as well as compliance with the Code of Conduct and Compliance
        Plan contained in the Consent Agreement. The information primarily concerns
        the
        possible sharing of employees and information among Cleco’s subsidiaries, as
        well as the accuracy of information furnished to the FERC Staff in connection
        with reporting on compliance with the Consent Agreement. Discussions with
        the
        FERC Staff are ongoing. Management is unable to predict the results of the
        outcome of the investigation which could have a material adverse effect on
        the
        Registrants’ results of operations and cash flows.
  **Fuel
        Audit**
 On
        July
        14, 2006, the LPSC informed Cleco Power that it was planning to conduct a
        periodic fuel audit. The audit co mmenced
        on July 26, 2006, and included fuel adjustment clause filings for January
        2003
        through December 2004. Cleco Power has produced to the LPSC Staff all of
        the
        requested information. The audit is pursuant to the Fuel Adjustment Clause
        General Order issued November 6, 1997, in Docket No. U-21497 which anticipates
        that an audit will be performed not less than every other year. The LPSC
        Staff
        is performing this review, and Cleco Power expects a preliminary report to
        be
        issued when the review is complete. Management is unable to predict the results
        of the LPSC audit, which could require Cleco Power to refund previously
        recovered revenue and could result in a significant material adverse effect
        on
        the Registrants’ results of operations, financial condition, and cash flows.
  ***Other***
 Cleco
        has
        accrued for liabilities to third parties, employee medical benefits, storm
        damages, and deductibles under i nsurance
        policies that it maintains on major properties, primarily generation stations
        and transmission substations.
 Consistent
        with regulatory treatment, annual charges to operating expenses to provide
        a
        reserve for future storm damages are based upon the average amount of
        noncapital, uninsured storm damages experienced by Cleco Power du ring
        the
        previous six years, excluding costs for Hurricanes Katrina and Rita for which
        Cleco Power has requested authorization from the LPSC to recover.
  ***Risks
        and Uncertainties***
  **Cleco
        Corporation**
 Cleco
        Corporation could be subject to possible adverse co nsequences
        if Cleco’s counterparties fail to perform their obligations or if Cleco
        Corporation or its affiliates are not in compliance with loan agreements
        or bond
        indentures.
  Williams
 The
        credit ratings of the senior unsecured debt of The Wi lliams
        Companies, Inc. (Moody’s - Ba2; Standard & Poor’s - BB), the parent company
        of Williams under the Evangeline Tolling Agreement, remains below investment
        grade. The following list discusses some possible adverse consequences if
        Williams should fail to perform its obligations under the Evangeline Tolling
        Agreement:
  §
            If
                Williams’ failure to perform constituted a default under the tolling
                agreement, the holders of the Evangeline bonds would have the right
                to
                declare the entire outstanding
                principal amount ($180.9 million at March 31, 2007) and interest
                to be
                immediately due and payable, which could result in: §
            Cleco
                seeking to refinance the bonds, the terms of which may be less favorable
                than existing terms; §
            Cleco
                causing Evangeline to seek protection under federal bankruptcy laws;
                or §
            the
                trustee of the bonds foreclosing on the mortgage and assuming ownership
                of
                the Evangeline plant; §
            Cleco
                may not be able to enter into agreements in replacement
                of the Evangeline Tolling Agreement on terms as favorable as that
                agreement or at all; §
            Cleco’s
                equity investment in Evangeline may be impaired, requiring a write-down
                to
                its fair market value, which could be substantial;
                and §
            Cleco’s
                credit ratings could be downgraded, which would increase borrowing
                costs
                and limit sources of financing.  CES
 I n
        December 2005, the Calpine Debtors filed for protection under Chapter 11
        of the
        U.S. Bankruptcy Code in the Calpine Debtors Bankruptcy Court and filed a
        motion
        with the court seeking to reject the Calpine Tolling Agreements. For additional
        information about the Calpine bankruptcy, see Note 15 — “Calpine Bankruptcy” and
        for more information on the proposed Acadia settlement agreement, see Note
        16 —
“Subsequent Event.”
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
 Although
          neither Acadia nor Cleco were required to record an impairment of their
          assets
          or equity investment at March 31,
          2007,
          future events could cause the valuation of those assets or equity investment
          to
          be higher than market whereby an impairment would be required and Cleco’s
          financial condition would be adversely affected.
  Other
 Financing
        for operational needs and construction requir ements
        is
        dependent upon the cost and availability of external funds from capital markets
        and financial institutions. Access to funds is dependent upon factors such
        as
        general economic conditions, regulatory authorizations and policies, the
        credit
        ratings of Cleco Corporation and Cleco Power, the cash flows from routine
        operations and the credit ratings of project counterparties. If Cleco
        Corporation’s credit rating was to be downgraded by Moody’s or by Standard &
Poor’s, Cleco Corporation would be required to pay additional fees and higher
        interest rates under its bank credit and other debt agreements.
  **Cleco
        Power**
 Cleco
        Power supplies a portion of its customers’ electric power requirements from its
        own
        generation facilities. In addition to power obtained from power purchase
        agreements, Cleco Power purchases power from other utilities and marketers
        to
        supplement its generation at times of relatively high demand or when the
        purchase price of power is less than its own cost of generation. Because
        of its
        location on the transmission grid, Cleco Power relies on two main suppliers
        of
        electric transmission when accessing external power markets. At times,
        constraints limit the amount of purchased power these transmission providers
        can
        deliver into Cleco Power’s service territory.
 Financing
        for operational needs and construction requir ements
        is
        dependent upon the cost and availability of external funds from capital markets
        and financial institutions. Access to funds is dependent upon factors such
        as
        general economic conditions, regulatory authorizations and policies, the
        credit
        ratings of Cleco Corporation and Cleco Power, the cash flows from routine
        operations and the credit ratings of project counterparties. If Cleco Power’s
        credit rating was to be downgraded by Moody’s or by Standard & Poor’s, Cleco
        Power would be required to pay additional fees and higher interest rates
        under
        its bank credit and other debt agreements.
 Under
        the
        terms of the Amended EPC Contract, in the event Cleco Power does not maintain
        a
        senior unsecured credit rating of either: (i) Baa3 or better from Moody’s or
        (ii) BBB- or better from Standard & Poor’s, Cleco Power will be required to
        provide a letter of credit to Shaw in the amount of $20.0 million. In the
        event
        of further downgrade to both of its credit ratings to: (i) Ba2 or below from
        Moody’s, and (ii) BB or below from Standard & Poor’s, Cleco Power will be
        required to provide an additional $15.0 million letter of credit to
        Shaw.
  **Note** **9
        — Disclosures about Guarantees**
 Cleco
        Corporation and Cleco Power have agreed to contra ctual
        terms that require them to pay third parties if certain triggering events
        occur.
        These contractual terms generally are defined as guarantees in FIN 45.
        Guarantees issued or modified after December 31, 2002, that fall within the
        initial recognition scope of FIN 45 are required to be recorded as a liability.
        Outstanding guarantees that fall within the disclosure scope of FIN 45 are
        required to be disclosed for all accounting periods ending after December
        15,
        2002.
 Guarantees
        and indemnifications were issued in conne ction
        with the sale of the generation assets to Entergy Louisiana by Perryville.
        These
        guarantees and indemnifications fall within the recognition scope of FIN
        45
        because they relate to the past performance, indemnity, representation, and
        warranty obligations of the disposed assets and also contain provisions
        requiring payment for potential damages. The potential length of these
        liabilities range from a five-year life to an indefinite life. Each
        indemnification and guarantee was assigned a probability and an estimate
        of
        potential damages. The maximum aggregate potential damages under the guarantees
        and indemnifications are $42.4 million (excluding maximum aggregate potential
        damages of $100.0 million for discharge of project debt discussed in more
        detail
        below and the indemnification of environmental matters to which there is
        no
        limit). On June 30, 2005, Perryville paid all interest and principal owed
        under
        the Senior Loan Agreement, and on July 19, 2005, it exercised offset rights
        against MAI to satisfy its obligations of $98.7 million under the Subordinated
        Loan Agreement. As a result, it is unlikely that Cleco Corporation will have
        any
        other liabilities which would give rise to indemnity claims against Perryville
        and trigger any actual obligation under the $100.0 million portion of the
        guarantee which expires on June 30, 2010. The discounted probability-weighted
        liability under the guarantees and indemnifications as of March 31, 2007,
        calculated in accordance with FIN 45, was $0.3 million.
 Guarantees
        and indemnifications were issued in connection with the asset sales of Cleco
        Energy's oil and gas properties and natural gas pipelines. These guarantees
        and
        indemnifications fall within the recognition scope of FIN 45, because they
        relate to the past performance obligations of the disposed assets and also
        contain provisions requiring payment for potential damages. The potential
        liabilities expire either after a two- or five-year life. Each indemnification
        and guarantee was assigned probabilities and estimates of potential damages.
        On
        September 15, 2006, the portion of the guarantee with a two-year life expired.
        The maximum aggregate potential payment under the guarantees and
        indemnifications is $1.2 million. The discounted probability-weighted liability
        under the guarantees and indemnifications as of March 31, 2007, was less
        than
        $0.1 million. The buyers of the Cleco Energy assets would be entitled to
        amounts
        under the guarantees and indemnifications due to breach or default of
        performance of Cleco Energy under their respective sale agreements. Cleco
        Corporation has guaranteed Cleco Energy’s indemnification obligations under the
        sale agreements. Maximum potential payments under the Cleco Corporation
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  guarantees
        are $1.4 million but are not within the recognition scope of FIN 45.
 In
        its
        bylaws, Cleco Corporation has agreed to indemnify directors, officers, agents
        and employees who are made a party
        to
        a pending or completed suit, arbitration, investigation, or other proceeding
        whether civil, criminal, investigative or administrative, if the basis of
        inclusion arises as the result of acts conducted in the discharge of their
        official capacity. Cleco Corporation has purchased various insurance policies
        to
        reduce the risks associated with the indemnification. In its Operating
        Agreement, Cleco Power provides for the same indemnification obligations
        as
        described above with respect to its managers, officers, agents, and
        employees.
 Cleco
        Corporation has issued guarantees and a letter of credit to support the
        activities of Perryville, Attala, and Evangeline. These commitments are not
        within the scope of FIN 45, since these are guarantees of performance by
        wholly
        owned subsidiaries. For information regarding these commitments, see Note
        8 —
“Litigation and Other Commitments and Contingencies — Off-Balance Sheet
        Commitments.”
 Under
        the
        Lignite Mining Agreement, Cleco Power and SWEPCO have agreed to pay the lignite
        miner’s loan and lease principal obligation. For information on the Lignite
        Mining Agreement, see Note 8 — “Litigation and Other Commitments and
        Contingencies — Off-Balance Sheet Commitments.”
 Generally,
        neither Cleco Corporation nor Cleco Power has recourse that would enable them to recover
        amounts paid under the guarantees. The one exception is the insurance contracts
        associated with the indemnification of directors, managers, officers,
        agents and employees. There are no assets held as collateral for third parties
        that either Cleco Corporation or Cleco Power could obtain and liquidate to
        recover amounts paid pursuant to the guarantees.
  **Note** **10
        — Preferred Stock**
 Within
        the ESOP, each share of Cleco Corporation 8.125% Convertible Preferred Stock
        Series 1991 (ESOP preferred stock) is convertible into 9.6 shares of Cleco
        Corporation common stock (Cleco common stock). The
        annual dividend rate on a share of ESOP preferred stock is generally the
        higher
        of $8.125 per share or 9.6 times the annual dividend rate for a share of
        Cleco
        common stock.
 At
        December 31, 2006, the ESOP had allocated 190,635 shares of
        ESOP
        preferred stock to 401(k) Plan participants. In March 2007, in order to comply
        with provisions of the Pension Protection Act of 2006, 190,372 shares of
        ESOP
        preferred stock were converted into 1.8 million shares of Cleco common stock.
        The ESOP trustee holds the newly converted shares of Cleco common stock on
        behalf of the 401(k) Plan participants.
 As
        a
        result of this conversion, total shareholders’ equity reported on Cleco
        Corporation’s Condensed Consolidated Balance Sheet at March 31, 2007, did not
        change. Cleco Corporation recorded a $19.1 million reduction in preferred
        stock
        with a corresponding increase in common shareholders’ equity.
  **Note** **11
        — Pension Plan and Employee Benefits**
  ***Pension
        Plan and Other Benefits Plan***
 Most
        employees are covered by a noncontributory, 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 10 years of employment with Cleco Corporation. Cleco
        Corporation’s policy is to base its contributions to the employee pension plan
        upon actuarial computations utilizing the projected unit credit method, subject
        to the Internal Revenue Service’s full funding limitation. No contributions to
        the pension plan were made during the three months ended March 31, 2007.
        During
        2007, a contribution is not expected to be required by funding regulations.
        A
        discretionary contribution may be made during 2007; however, the decision
        by
        Management to make a contribution and the amount, if any, has not been
        determined. Cleco Power is considered the plan sponsor, and Support Group
        is
        considered the plan administrator.
 Cleco
        Corporation’s retirees and their dependents are el igible
        to
        receive medical, dental, vision, and life insurance benefits (other benefits).
        Cleco Corporation recognizes the expected cost of these other benefits during
        the periods in which the benefits are earned.
 The
        components of net periodic pension and other benefit cost for the three months
        ended March 31, 2007, and 2006, are as follows:
 PENSION
                  BENEFITS
              
              OTHER
                  BENEFITSFOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **2007**
              
              2006
              
              **2007**
              
              2006Components
                  of periodic benefitcostsService
                  cost
              
              **$**
              **1,910**
              
              $
              1,852
              
              **$**
              **355**
              
              $
              393Interest
                  cost
              
              
              **3,863**
              
              
              3,704
              
              
              **460**
              
              
              432Expected
                  return on plan assets
              
              
              **(4,748**
              **)**
              
              (4,292
              )
              
              **-**
              
              
              -Transition
                  obligation
              
              
              **-**
              
              
              -
              
              
              **5**
              
              
              5Prior
                  period service cost
              
              
              **212**
              
              
              247
              
              
              **(515**
              **)**
              
              (506
              )Net
                  loss
              
              
              **468**
              
              
              129
              
              
              **250**
              
              
              212Net
                  periodic benefit cost
              
              **$**
              **1,705**
              
              $
              1,640
              
              **$**
              **555**
              
              $
              536
  Since
        Cleco Power is the pension plan sponsor and the related trust holds the assets,
        the prepaid benefit cost of the pe nsion
        plan is reflected at Cleco Power. The liability of Cleco Corporation’s other
        subsidiaries is transferred, with a like amount of assets, to Cleco Power
        monthly. The expense of the pension plan related to Cleco Corporation’s other
        subsidiaries for the three months ended March 31, 2007, and 2006, was $0.5
        million and $0.6 million, respectively.
 Cleco
        Corporation is the plan sponsor for the other ben efits.
        There are no assets set aside in a trust, and the liabilities are reported
        on
        the individual subsidiaries’ financial statements. The expense related to other
        benefits reflected on Cleco Power’s Condensed Statements of Income for the three
        months ended March 31, 2007, and 2006, was $0.5 million.
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  ***SERP***
 Certain
        key executives and key managers are covered by the
        SERP.
        The SERP is a non-qualified, non-contributory, defined benefit pension plan.
        Benefits under the plan reflect an employee’s years of service, age at
        retirement, and the sum of the highest base salary paid out of the last five
        calendar years and the average of the three highest bonuses paid during the
        last
        60 months prior to retirement, reduced by benefits received from any other
        defined benefit pension plan. Cleco Corporation does not fund the SERP
        liability, but instead pays for current benefits out of the general funds
        available. Cleco Power has formed a “rabbi trust” designated as the beneficiary
        for life insurance policies issued on the SERP participants. Proceeds from
        the
        life insurance policies are expected to be used to pay SERP participants’ life
        insurance benefits, as well as future SERP payments. However, since this
        is a
        non-qualified plan, the assets of the trust could be used to satisfy general
        creditors of Cleco Power in the event of insolvency. No contributions to
        the
        SERP were made during the three months ended March 31, 2007, and 2006. Cleco
        Power is considered the plan sponsor, and Support Group is considered the
        plan
        administrator.
 The
        components of the net SERP cost are as follows :
 FOR
                  THE THREE MONTHS ENDED  MARCH 31,(THOUSANDS)
              
              **2007**
              
              2006Components
                  of periodic benefit costsService
                  cost
              
              **$**
              **290**
              
              $
              340Interest
                  cost
              
              
              **438**
              
              
              368Prior
                  period service cost
              
              
              **12**
              
              
              14Net
                  loss
              
              
              **243**
              
              
              202Net
                  periodic benefit cost
              
              **$**
              **983**
              
              $
              924
  The
        SERP
        has no assets, and liabilities are reported on the individual subsidiaries’
financial statements. The expense r elated
        to
        the SERP reflected on Cleco Power’s Condensed Statements of Income for the three
        months ended March 31, 2007, and 2006, was $0.3 million.
  ***401(k)
        Plan/ESOP***
 Most
        employees are eligible to participate in the
        401(k) Plan, which was amended in April 1991 to include a leveraged ESOP.
        The
        ESOP was established with 300,000 shares of ESOP preferred stock which served
        as
        Cleco Corporation’s match to employees’ 401(k) Plan contributions and funded
        dividend payments on allocated shares. Compensation expense related to the
        401(k) Plan is based upon the value of the shares of ESOP preferred stock
        allocated to 401(k) Plan participants and the amount of interest incurred
        by the
        ESOP, less dividends on unallocated shares held by the ESOP.
 At
        March
        31, 2006, substantially
        all of the shares of ESOP preferred stock were fully allocated to current
        and
        former 401(k) Plan participants. Beginning April 1, 2006, Cleco Corporation
        made
        matching contributions to, and funded dividend reinvestments by, 401(k) Plan
        participants with Cleco common stock. Compensation expense related to the
        newly
        issued common shares is based upon the fair market value of the common stock
        issued to 401(k) Plan participants. At March 31, 2007, and December 31, 2006,
        Cleco Corporation had issued 186,207 and 140,189 shares of Cleco common stock,
        respectively, to 401(k) Plan participants, including dividend reinvestments.
 On
        March
        26, 2007, the ESOP trustee converted all outstanding 190,372 shares of ESOP
        preferred stock into 1.8 million shares of Cleco common stock. For more
        information on the conversion, see Note 10 — “Preferred Stock.”
 The
        table
        below contains information about the 401(k) Plan and the ESOP:
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **2007**
              
              2006401(k)
                  Plan expense
              
              **$**
              **899**
              
              $
              100Dividend
                  requirements to ESOP on convertiblepreferred stock
              
              **$**
              **411**
              
              $
              449Interest
                  incurred
                  by ESOP on its indebtedness
              
              **$**
              **-**
              
              $
              9
  Cleco
        Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan
        related to Cleco Corporation’s other subsidiaries for the three months ended
        March 31, 2007, and 2006, was $0.2 million and less than $0.1 million,
        respectively. The expense related to the dividend requirements on the shares
        of
        ESOP preferred stock is reflected on Cleco Corporation’s Condensed Consolidated
        Statements of Income for the three months ended March 31, 2007, and 2006.
  **Note
        1** **2
        — Income Taxes**
 The
        following table summarizes the effective income tax rates for Cleco Corporation
        and Cleco Power for the three-month per iods
        ended March 31, 2007, and March 31, 2006.
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,**2007**
              
              2006Cleco
                  Corporation
              **19.9%**
              
              33.3%Cleco
                  Power
              **20.2%**
              
              33.7%
  Cleco Corporation’s
        and Cleco Power’s effective income tax rates for the three months ended March
        31, 2007, decreased compared to the three months ended March 31, 2006, as
        shown
        in the chart above. A common contributing factor includes the flow-through
        of
        tax benefits associated with AFUDC equity recorded as a result of the
        construction of Rodemacher Unit 3. Tax rates also were affected by the relative
        size of pre-tax income related to this item.
 Effective
        January 1, 2007, Cleco adopted the provisions of FIN 48 which provides guidance
        on accounting for uncertain tax positions. During 2006, Cleco included all
        interest related to uncertain tax positions as a component of tax expense
        and
        taxes payable. Subs equent
        to
        the adoption of FIN 48, Cleco classified all interest related to uncertain
        tax
        positions as a component of interest expense and interest payable. During
        the
        first quarter of 2006, $0.7 million of interest expense was included in tax
        expense and was not reclassified in the financial statements. The total amount
        of interest associated with tax positions recognized on the balance sheets
        of
        Cleco Corporation and Cleco Power as of the date of adoption was $16.7 million
        and $10.2 million, respectively, and $19.1 million and $12.2 million as of
        March
        31, 2007, respectively. There was no additional interest expense recognized
        at
        the date of
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  adoption.
        The total amount of unrecognized tax benefits for Cleco Corporation and Cleco
        Power as of the date of adoption was $62.3 million and $30.9 million,
        respectively, and $97.9 million and $66.2 million as of March 31, 2007,
        respectively. Approximately $33.9 million of the change was mainly due to
        adjustments taken on the 2005 federal income tax return for an indirect cost
        study and a casualty loss deduction. Approximately $1.5 million was due to
        a
        request for refund filed with the Internal Revenue Service due to the deduction
        for the tax life of street lights and meters from a 1997 cost segregation
        study.
        Due to settlement discussions with the Internal Revenue Service, management
        believes that some of these unrecognized benefits may be recognized, resulting
        in an approximate $1.0 million benefit to the effective tax rate.
 The
        federal income tax years that remain subject to examination by the Internal
        Revenue Service are 2001-2006. The Louisiana state income tax years that
        remain
        subject to examination by the Louisiana Department of Revenue are
        1998-2006.
 During
        the three months ended March 31, 2007, there were no decreases in unrecognized
        tax benefits relating to settl ements
        or
        a lapse of the applicable statute of limitation, and there were no material
        changes to tax years that remain subject to examination by major tax
        jurisdictions.
  **Note
        1** **3
        — Deferred Fuel and Purchased Power Costs**
 The
        cost
        of fuel used for electric generation and the cost of power purchased for
        utility
        customers are recovered through the LPSC- established
        fuel adjustment clause, which enables Cleco Power to pass on to its customers
        substantially all such charges. For the three months ended March 31, 2007,
        approximately 97% of Cleco Power’s total fuel cost was regulated by the LPSC,
        while the remainder was regulated by the FERC. Deferred fuel and purchased
        power
        costs recorded at March 31, 2007, and December 31, 2006, were under-recoveries
        of $34.9 million and $77.4 million, respectively, and are scheduled to be
        collected from customers in future months. The $42.5 million decrease in
        the
        unrecovered costs was primarily the result of a $47.1 million increase in
        the
        market value of open natural gas hedge positions along with $4.5 million
        of
        lower losses in closed natural gas hedge positions, both due to increases
        in
        natural gas prices since December 31, 2006. The increase in market value
        and
        lower losses were partially offset by the deferral of $9.1 million in additional
        fuel and purchased power costs.
 For
        additional information on Cleco Power’s treatment of natural gas hedges, see
        Note 1 —
        “Summary of Significant Accounting Policies — Risk Management.”
  **Note
        1** **4
        — Affiliate Transactions**
 Cleco
        has
        affiliate balances that were not eliminated as of March 31, 2007. The
        balances were not eliminated due to the use of the equity method of accounting
        for Evangeline, Perryville, Attala, and Acadia. For information on the
        Evangeline, Perryville, Attala, and Acadia equity investments, see Note 4
—
“Equity Investment in Investees.” At March 31, 2007, the payable to Evangeline
        was $6.0 million, and the payable to Perryville was $13.4 million. Also,
        at
        March 31, 2007, the receivable from Evangeline was $0.8 million, the receivable
        from Perryville was $9.6 million, and the receivable from Acadia was $3.6
        million.
 Cleco
        Power has affiliate balances that are payable to or due from its affiliates.
        At
        March 31, 2007, the payable to Su pport
        Group was $8.1 million, the payable to Cleco Corporation was $10.6 million,
        and
        the payable to other affiliates was less than $0.1 million. Also, at March
        31,
        2007, the receivable from Cleco Corporation was $2.7 million, the receivable
        from Support Group was $2.2 million, and the receivable from other affiliates
        was less than $0.1 million.
  **Note
        1** **5
        — Calpine Bankruptcy**
  ***Bankruptcy*** ***Proceedings***
 I n
        December 2005, the Calpine Debtors filed for protection under Chapter 11
        of the
        U.S. Bankruptcy Code in the Calpine Debtors Bankruptcy Court. Subsequently,
        the
        Calpine Debtors filed a motion with the bankruptcy court seeking to reject
        the
        Calpine Tolling Agreements in addition to six other power supply contracts
        with
        other entities. The rejection motion was referred to the U.S. District Court
        for
        the Southern District of New York, and in January 2006, a federal judge
        dismissed the motion. The Calpine Debtors have appealed the decision to the
        U.S.
        Court of Appeals for the Second Circuit, where it remains pending.
 In
        March
        2006, Acadia filed a motion
        with the Calpine Debtors Bankruptcy Court to compel CES to perform under
        the
        Calpine Tolling Agreements, and to pay all amounts due under such agreements
        since the commencement of the Calpine Debtors’ bankruptcy cases. On March 22,
        2006, the Calpine Debtors Bankruptcy Court approved amendments to each of
        the
        Calpine Tolling Agreements which permitted Acadia to suspend its obligations
        under those tolling agreements in view of CES’ non-performance. Acadia has
        postponed indefinitely its request for a hearing on the motion to compel
        pending
        the outcome of the proposed settlement agreement between Cleco Corporation
        and
        Calpine.
  ***Outstanding
        Claims***
 As
        of
        March 31, 2007, Acadia had invoiced CES a total of $86.2 million for obligations
        performed under the Calpine Tolling Agreements.
 (THOUSANDS)Pre-petition
                  claimsDecember
                  2005
              
              $
              3,581Post-petition
                  claimsDecember
                  2005
              
              
              1,962Twelve
                  months ended December 31, 2006
              
              
              64,478Three
                  months ended March 31, 2007
              
              
              16,143Total
              
              $
              86,164
  As
        of March
        31,
        2007, Acadia has recorded a reserve for uncollectible accounts of $71.2 million,
        net of the full amount drawn by APH during 2006 against the $15.0 million
        letter
        of credit issued by Calpine.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  ***Other***
 For
        information regar ding
        a
        dispute over electric metering at Acadia, see Note 8 — “Litigation and Other
        Commitments and Contingencies — Acadia.”
 For
        a
        discussion of a preliminary settlement reached b etween
        Cleco Corporation and Calpine associated with Calpine’s bankruptcy filing and
        its effect on the Acadia facility, see Note 16 — “Subsequent
        Event.”
  **Note
        1** **6
        — Subsequent Event**
 On
        April
        2 3,
        2007,
        Cleco announced that a settlement had been reached with Calpine that resolves
        issues related to the Acadia power plant. The settlement is subject to approval
        by the Calpine Debtors Bankruptcy Court.
 The
        first part
        of
        the settlement involves claims of Acadia against CES, which is the counterparty
        to the suspended Calpine Tolling Agreements for CES’ breaches of such
        agreements, and Calpine’s guarantee of CES’ obligations thereunder. Under the
        proposal, APH will receive a pre-petition general unsecured claim against
        each
        of Calpine and CES for $85.0 million (which is net of draws made by APH under
        a
        letter of credit in the aggregate amount of $15.0 million), which represents
        APH’s share of Acadia’s allowed claims against each of CES and Calpine for
        $185.0 million on account of CES’s breaches of its obligations under the Calpine
        Tolling Agreements.
 Additionally,
        APH has agreed to serve as the “stalking horse” bidder for Calpine’s membership
        interest in Acadia for $60.0 million plus assumed liabilities through a
        bankruptcy-court sponsored auction. APH’s $60.0 million offer, in effect, values
        an unencumbered 50% interest in the Acadia power plant at $145.0 million,
        taking
        into account the agreed value of certain priority distributions and payments
        due
        APH. The terms of the auction, which includes a $2.9 million breakup fee
        in
        favor of APH, are scheduled to be considered for approval at a bankruptcy
        court
        hearing on May 9, 2007. The auction process is expected to be completed in
        late
        July 2007. Until the auction process is complete, a third party marketer
        will
        continue to provide energy management services for the Acadia power
        plant.
 If
        APH is
        not the successful bidder, APH will retain its 50% membership interest in
        Acadia
        and receive payment from the successful bidder in the amount of $85.0 million,
        which represents the agreed upon value of the priority distributions and
        payments due APH under the current Acadia agreement with Calpine. This $85.0
        million payment is in addition to APH’s $85.0 million pre-petition general
        unsecured claims against Calpine and CES for CES’ non-performance under the
        Calpine Tolling Agreements.
 Whether
        APH or another bidder is the successful pu rchaser
        at the auction, upon closing of the sale, a subsidiary of Cleco will assume
        operations and project management functions of the Acadia facility. At the
        closing of the sale APH will acquire, for an agreed value of $1.25 million
        (subject, in certain circumstances, to reduction), Calpine’s interest in the
        claim against Cleco Power regarding a potential electric metering error at
        the
        Acadia facility.
  **ITEM
        2****.** MANAGEMENT’S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  The
        following discussion and analysis should be read in co mbination
        with the Registrants’ Combined Annual Report on Form 10-K for the fiscal year
        ended December 31, 2006, and Cleco Corporation’s and Cleco Power’s Condensed
        Financial Statements contained in this Form 10-Q. The information included
        therein is essential to understanding the following discussion and analysis.
        Below is information concerning the consolidated results of operations of
        Cleco
        for the three months ended March 31, 2007, and March 31, 2006.
  **OVERVIEW**
 Cleco
        is
        a regional energy services holding company that conducts substantially all
        of
        its business
        operations through its two principal operating business segments:
  §
            Cleco
                Power, an integrated electric utility services subsidiary regulated
                by the
                LPSC and the FERC, among other regulators, which also engages in
                energy
                management activities; and §
            Midstream,
                a merchant energy subsidiary regulated by the FERC, that owns and
                operates
                a merchant generation
                station and invests in a joint venture that owns and operates a merchant
                generation station.  While
        management believes that Cleco remains a strong company, Cleco continues
        to
        focus on several significant factors affecting Cleco Power and Midstream
        as
        described below.
  ***Cleco
        Power***
 Many
        factors affect the opportunities, challenges, and risks of Cleco Power's
        primary
        business of selling electricity. These factors include the presence
        of a stable regulatory environment, which includes recovery of costs and
        maintenance of a competitive return on equity; the ability to achieve energy
        sales growth while containing costs; and the ability to recover costs related
        to
        growing demand and rising fuel prices and increasingly stringent regulatory
        and
        environmental standards.
 As
        part
        of its plan to resolve long-term capacity needs, Cleco Power began construction
        of Rodemacher Unit 3 in May 2006, which, upon completion, will provide a
        portion
        of the uti lity’s
        future power supply needs and help stabilize customer fuel costs. The project’s
        capital cost, including carrying costs during construction, is estimated
        at $1.0
        billion. Cleco Power anticipates the plant will be operational no later than
        the
        fourth quarter of 2009. For additional information, see “— Financial Condition —
Liquidity and Capital Resources — Regulatory Matters — Rodemacher Unit
        3.”
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  Cleco
        Power continues to evaluate a range of other power supply options for 2008
        and
        beyond. As such, Cleco Power is continuing to update its IRP to look at future
        sources of supply. Cleco Power has issued a RFP to meet its 2008 capacity
        and
        energy requirements. Cleco Power also plans to release an additional RFP
        in 2007
        to identify long-term resources to fill the needs forecasted by the latest
        IRP.
 In
        2005,
        Hurricanes Katrina and Rita caused catastrophic damage to the Gulf Coast
        region,
        including Cleco Power's service territory. Storm restoration costs from
        Hurricanes Katrina and Rita are currently estimated to total $158.7 million,
        a
        decrease from the original estimate of $161.8 million filed with the LPSC.
        In
        March 2007, Cleco Power and the LPSC Staff filed a settlement agreement allowing
        the recovery of $158.7 million of storm restoration costs. For additional
        information, see Item 1, “Financial Statements and Supplementary Data — Notes to
        the Unaudited Condensed Financial Statements — Note 2 — Regulatory Assets and
        Liabilities.”
 Cleco
        Power is exploring the potential reimbursement of storm restoration costs
        from
        the U.S. Government to reduce the amount to be recovered from customers.
        In
        addition, Cleco Power is exploring the possibility of financing the storm
        restoration costs with tax-exempt bonds through the Gulf Opportunities Zone
        Act
        of 2005 (the Act). The Louisiana State Bond Commission has granted preliminary
        approval to Cleco Power for the issuance of up to $160.0 million of tax-exempt
        bonds under the Act. Cleco Power cannot predict with certainty that any
        reimbursement from the U.S. Government, securitization of costs, or any other
        financing will be given final approval, and if approved, the certainty that
        any
        such financing can be consummated.
  ***Midstream***
 I n
        December 2005, the Calpine Debtors filed for protection under Chapter 11
        of the
        Bankruptcy Code and subsequently filed a motion with the Calpine Debtors
        Bankruptcy Court to reject the Calpine Tolling Agreements. In March 2006,
        Acadia
        and CES executed amendments to the Calpine Tolling Agreements, which were
        approved by the Calpine Debtors Bankruptcy Court, permitting Acadia to suspend
        its obligations under the agreements.
 On
        April
        23, 2007, Cleco announced that a settlement, subject to bankruptcy court
        approval, had been reached with Calpine that resolves issues surrounding
        the
        Calpine bankruptcy filing. Under the proposed settlement, APH will receive
        allowed unsecured claims against Calpine of $85.0 million in connection with
        the
        Calpine Tolling Agreements and Calpine’s guaranty of those agreements.
        Additionally, APH has agreed to purchase Calpine’s ownership interest in Acadia
        for $60.0 million, subject to any higher or better offers Calpine may receive
        in
        a bankruptcy court-sponsored auction. The auction process is anticipated
        to
        begin in May, with the bankruptcy auction expected in July. The terms of
        the
        auction will be considered at a May 9, 2007, bankruptcy court hearing. If
        APH is
        not the successful bidder, APH will retain its 50% ownership in Acadia and
        receive payment from the successful bidder in the amount of $85.0 million
        representing the value of its priority distributions from the partnership.
        In
        either outcome, a Cleco subsidiary will assume operations and project management
        functions of the Acadia facility. Until the auction process is complete,
        a third
        party marketer will continue to provide energy management services for the
        Acadia power plant. For additional information on Acadia and the Calpine
        bankruptcy, see Item 1, “Notes to the Unaudited Condensed Financial Statements —
Note 15 — Calpine Bankruptcy” and Note 16 — “Subsequent Event.”
 Cleco continues
        to assess the ongoing credit condition of the Evangeline Tolling Agreement
        counterparty, as Midstream’s merchant energy business is heavily dependent on
        the performance of this tolling agreement. For additional information on
        the
        risks associated with this tolling agreement counterparty, see Item 1,
“Financial Statements and Supplementary Data — Notes to the Unaudited Condensed
        Financial Statements — Note 8 — Litigation and Other Commitments and
        Contingencies — Risks and Uncertainties.”
 Effective
        February 1, 2007, the ownership interests of Midstream’s transmission
        interconnection facilities were transferred to Cleco Corporation. In accordance
        with SFAS No. 131, the net operating results for Midstream for the first
        quarter
        of 2006 have been adjusted to reflect this organizational change.
  **Comparison
        of the Three Months Ended****March
        31, 2007, and 2006**
  **Cleco
        Consolidated**
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
              
              **2007**
              
              2006
              
              VARIANCE
              
              CHANGEOperating
                  revenue, net
              
              **$**
              **223,750**
              
              $
              223,418
              
              $
              332
              
              
              0.15
              %Operating
                  expenses
              
              
              **206,096**
              
              
              197,445
              
              
              (8,651
              )
              
              (4.38
              )%Operating
                  income
              
              **$**
              **17,654**
              
              $
              25,973
              
              $
              (8,319
              )
              
              (32.03
              )%Allowance
                  for other funds used during construction
              
              **$**
              **5,131**
              
              $
              669
              
              $
              4,462
              
              
              666.97
              %Equity(loss)
                  income from investees
              
              **$**
              **(1,399**
              **)**
              $
              373
              
              $
              (1,772
              )
              
              (475.07
              )%Other
                  expense
              
              **$**
              **1,266**
              
              $
              328
              
              $
              (938
              )
              
              (285.98
              )%Interest
                  charges
              
              **$**
              **11,987**
              
              $
              10,949
              
              $
              (1,038
              )
              
              (9.48
              )%Federal
                  and state income taxes
              
              **$**
              **2,143**
              
              $
              6,113
              
              $
              3,970
              
              
              64.94
              %Net
                  income applicable to common stock
              
              **$**
              **8,223**
              
              $
              11,679
              
              $
              (3,456
              )
              
              (29.59
              )%
  Consolidated net
        income applicable to common stock decreased $3.5 million, or 29.6%, in the
        first
        quarter of 2007 compared to the first quarter of 2006 primarily due to decreased
        Cleco Power, Midstream, and corporate earnings.
 Operating
        expenses increased $8.7 million, or 4.4%, in the first quarter of 2007 compared
        to the first quarter of 2006 primarily due to increased depreciation expense
        and
        other operations and maintenance expenses at Cleco Power.
 Allowance
        for other funds used during construction increased $4.5 million, or 667.0%,
        in
        the first quarter of 2007 compared to the same period of 2006 primarily due
        to
        increased construction activity at Rodemacher Unit 3.
 Equity
        income from investees decreased $1.8 million, or 475.1%, in the first quarter
        of
        2007 compared to the same period of 2006 primarily due to decreased equity
        earnings at
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  APH,
        partially offset by increased equity earnings at Evangeline
 Other
        expense increased $0.9 million, or 286.0%, in the first quarter of 2007 compared
        to the same period of 2006 primarily due to increased corporate
        reserves.
 Interest
        charges increased $1.0 million, or 9.5%, in the first quarter of 2007 compared
        to the same period of 2006 primarily due to the accrual of interest related
        to
        uncertain tax positions at Cleco Power.
 Federal
        and state income taxes decreased $4.0 million, or 64.9%, in the first quarter
        of
        2007 compared to the same period of 2006. The decrease was due to the
        flow-through of tax benefits associated with AFUDC equity recorded as a result
        of the construction of Rodemacher Unit 3.
 Results
        of operations for Cleco Power and Midstream are more fully described
        below.
  **Cleco
        Power**
 Cleco
        Power’s net income in the first
        quarter of 2007 decreased $1.6 million, or 11.5%, compared to the first quarter
        of 2006. Contributing factors include:
  §
            higher
                other operations and maintenance
                expenses, §
            absence
                of favorable customer credit adjustments, §
            higher
                depreciation
                expense, §
            lower
                interest income, and §
            higher
                interest charges.  These were
        partially offset by:
  §
            higher
                base revenue, §
            higher
                allowance for other funds used during construction, §
            higher
                other operations revenue, and §
            lower
                effective income tax rate.  FOR
                  THE THREE MONTHS ENDED MARCH
                  31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
              
              **2007**
              
              2006
              
              VARIANCE
              
              CHANGEOperating
                  revenueBase
              
              **$**
              **78,075**
              
              $
              67,898
              
              $
              10,177
              
              
              14.99
              %Fuel
                  cost recovery
              
              
              **134,945**
              
              
              143,091
              
              
              (8,146
              )
              
              (5.69
              )%Electric
                  customer credits
              
              
              **-**
              
              
              4,382
              
              
              (4,382
              )
              
              *Other
                  operations
              
              
              **9,260**
              
              
              6,549
              
              
              2,711
              
              
              41.40
              %Affiliate
                  revenue
              
              
              **12**
              
              
              12
              
              
              -
              
              
              *Intercompany
                  revenue
              
              
              **501**
              
              
              500
              
              
              1
              
              
              0.20
              %Operating
                  revenue, net
              
              
              **222,793**
              
              
              222,432
              
              
              361
              
              
              0.16
              %Operating
                  expensesFuel
                  used for electricgeneration
                  - recoverable
              
              
              **53,367**
              
              
              46,151
              
              
              (7,216
              )
              
              (15.64
              )%Power
                  purchased for utilitycustomers
                  - recoverable
              
              
              **81,554**
              
              
              96,967
              
              
              15,413
              
              
              15.90
              %Non-recoverable
                  fuel andpower
                  purchased
              
              
              **4,722**
              
              
              5,077
              
              
              355
              
              
              6.99
              %Other
                  operations
              
              
              **25,613**
              
              
              17,622
              
              
              (7,991
              )
              
              (45.35
              )%Maintenance
              
              
              **9,727**
              
              
              5,347
              
              
              (4,380
              )
              
              (81.92
              )%Depreciation
              
              
              **19,761**
              
              
              15,225
              
              
              (4,536
              )
              
              (29.79
              )%Taxes
                  other than incometaxes
              
              
              **8,902**
              
              
              8,881
              
              
              (21
              )
              
              (0.24
              )%Total
                  operatingexpenses
              
              
              **203,646**
              
              
              195,270
              
              
              (8,376
              )
              
              (4.29
              )%Operating
                  income
              
              **$**
              **19,147**
              
              $
              27,162
              
              $
              (8,015
              )
              
              (29.51
              )%Interest
                  income
              
              **$**
              **1,406**
              
              $
              2,336
              
              $
              (930
              )
              
              (39.81
              )%Allowance
                  for other funds used during construction
              
              **$**
              **5,131**
              
              $
              669
              
              $
              4,462
              
              
              666.97
              %Interest
                  charges
              
              **$**
              **10,044**
              
              $
              8,979
              
              $
              (1,065
              )
              
              (11.86
              )%Federal
                  and state income taxes
              
              **$**
              **3,116**
              
              $
              7,057
              
              $
              3,941
              
              
              55.85
              %Net
                  income
              
              **$**
              **12,276**
              
              $
              13,873
              
              $
              (1,597
              )
              
              (11.51
              )%* Not
                  meaningful
 
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(MILLION
                  kWh)
              
              **2007**
              
              2006
              
              FAVORABLE/
                (UNFAVORABLE)Electric
                  salesResidential
              
              
              **842**
              
              
              750
              
              
              12.27
              %Commercial
              
              
              **543**
              
              
              407
              
              
              33.42
              %Industrial
              
              
              **710**
              
              
              692
              
              
              2.60
              %Other
                  retail
              
              
              **33**
              
              
              131
              
              
              (74.81
              )%Total
                  retail
              
              
              **2,128**
              
              
              1,980
              
              
              7.47
              %Sales
                  for resale
              
              
              **102**
              
              
              117
              
              
              (12.82
              )%Unbilled
              
              
              **(70**
              **)**
              
              (82
              )
              
              14.63
              %Total
                  retail and wholesale customer sales
              
              
              **2,160**
              
              
              2,015
              
              
              7.20
              %
 
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,(THOUSANDS)
              
              **2007**
              
              2006
              
              FAVORABLE/
                (UNFAVORABLE)Electric
                  salesResidential
              
              **$**
              **33,265**
              
              $
              30,340
              
              
              9.64
              %Commercial
              
              
              **22,295**
              
              
              16,946
              
              
              31.56
              %Industrial
              
              
              **13,634**
              
              
              13,383
              
              
              1.88
              %Other
                  retail
              
              
              **1,440**
              
              
              5,497
              
              
              (73.80
              )%Storm
                  surcharge
              
              
              **5,931**
              
              
              -
              
              
              *Total
                  retail
              
              
              **76,565**
              
              
              66,166
              
              
              15.72
              %Sales
                  for resale
              
              
              **3,887**
              
              
              4,240
              
              
              (8.33
              )%Unbilled
              
              
              **(2,377**
              **)**
              
              (2,508
              )
              
              5.22
              %Total
                  retail and wholesale customer sales
              
              **$**
              **78,075**
              
              $
              67,898
              
              
              14.99
              %* Not
                  meaningful
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  Cleco
        Power’s residential customers’ demand for electricity largely is affected by
        weather. Weather generally is measured in cooling degree-days and heating
        degree-days. A cooling degree-day is an indication of the likelihood that
        a
        consumer will use air conditioning, while a heating degree-day is an indication
        of the likelihood that a consumer will use 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 available.
        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.
 The
        following chart shows how cooling and heating degree-days varied from normal
        conditions and from the prior period. Cleco Power uses temperature data
        collected by the National Oceanic and Atmospheric Administration to determine
        degree-days.
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,2007
                  CHANGE**2007**
              
              2006
              
              NORMAL
              
              PRIOR
                  YEAR
              
              NORMALHeatingdegree-days
              
              
              **869**
              
              
              688
              
              
              977
              
              
              26.31
              %
              
              (11.05
              )%Coolingdegree-days
              
              
              **112**
              
              
              110
              
              
              70
              
              
              1.82
              %
              
              60.00
              %
  ***Base***
 Base
        revenue during the
        first
        quarter of 2007 increased $10.2 million, or 15.0%, compared to the same period
        in 2006. The increase primarily was due to the recovery of storm restoration
        costs through a monthly customer surcharge that began in May 2006. These
        storm-related costs are being amortized to expense based on the amounts
        collected monthly from customers through this surcharge. Also contributing
        to
        the increase in base revenue were higher retail and wholesale kWh sales,
        primarily from colder weather as compared to last winter. During 2007, Cleco
        Power is expected to begin providing service to expansions of current customers’
operations, as well as services to new commercial and new industrial customers.
        As a result of the expansions and new customers described above, the addition
        of
        13 MWs, which approximates $1.4 million of base revenue annually, is expected
        during 2007. This addition partially offsets the loss of customers described
        below.
 In
        late
        January 2007, one of Cleco Power’s largest indu strial
        customers closed one of its three wood product plants. The closure of the
        plant
        was a result of a downturn in its product market, largely due to decreased
        home
        construction in various regions of the country. The load for this customer
        was 8
        MW, generating base revenue of approximately $1.0 million annually.
 In
        the
        third quarter of 2007, a large industrial customer is expected to begin
        operations of a cogeneration project. The project is a 15-MW unit on site
        fueled
        by waste heat. The project will displace the customer’s load of 12 MW, and the
        remaining 3 MW will be purchased by Cleco Power under a power purchase
        agreement. The annual base revenue loss from this customer is expected to
        be
        approximately $1.3 million. Another industrial customer is also expected
        to
        begin construction of a cogeneration project in 2007. This project is designed
        to displace all of the customer’s 38-MW load. Potential annual base revenue loss
        from this customer is expected to be approximately $5.0 million. The project
        is
        expected to be operational eighteen months after construction begins.
 Cleco
        Power began selling fixed-priced power to a 30-MW wholesale customer on January
        1, 2006. As a result of the fixed-price contract, the new customer is expected
        to increase base revenue while potentially diluting earnings in years 2007
        and
        2008. In years 2009 through 2012, Cleco Power anticipates earnings accretion
        related to this contract. For additional information on Cleco’s energy commodity
        activities, see Item 3, “Quantitative and Qualitative Disclosures about Market
        Risk — Risk Overview — Commodity Price Risks.”
 For
        information on the effects of future energy sales on Cleco Power’s financial
        condition, results of operations, and cash flows, see “Risk Factors — Future
        Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for
        the fiscal year ended December 31, 2006.
  ***Fuel
        Cost Recovery***
 Fuel
        cost
        recovery revenue billed to customers during the first quarter of 2007 compared
        to the same period in 2006 d ecreased
        $8.1 million, or 5.7%, primarily due to decreases in the per-unit cost of
        power
        purchased for utility customers.  Partially offsetting the decrease were
        increased volumes of power purchased for utility customers and increases
        in the
        per-unit cost of fuel used for electric generation.  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 fuel adjustment clause, which enables Cleco Power to pass
        on to
        its customers substantially all such charges. Approximately 97% of Cleco
        Power’s
        total fuel cost is regulated by the LPSC, while the remainder is regulated
        by
        the FERC. Recovery of fuel adjustment clause costs is subject to refund until
        monthly approval is received from the LPSC. For information on Cleco Power’s
        ongoing 2003-2004 fuel audit, see Item 1, “Notes to the Unaudited Condensed
        Financial Statements — Note 8 — Litigation and Other Commitments and
        Contingencies — Fuel Audit.”
  ***Electric
        Customer Credits***
 The
        $4.4
        million change in electric customer credits is the r esult
        of
        the absence in the first quarter of 2007 of favorable adjustments made during
        the first quarter of 2006 related to prior RSP filing periods. The potential
        refunds associated with the RSP are based on results for each 12-month period
        ended September 30. For additional information on the accrual of electric
        customer credits, see Item 1, “Notes to the Unaudited Condensed Financial
        Statements — Note 7 — Electric Customer Credits.”
  ***Other
        Operations***
 Other
        operations revenue increased $2.7 million, or 41.4%, in the first quarter
        of
        2007 compared to the first quarter of 2006
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  primarily
        due to a $1.5 million mark-to-market gain in the first quarter of 2007 as
        compared to a $1.9 million mark-to-market loss in the first quarter of 2006
        relating to ec onomic
        hedge transactions associated with fixed-price power being provided to a
        wholesale customer. This increase was partially offset by lower transmission
        services revenue. For information on Cleco’s energy commodity activities, see
        Item 3, “Quantitative and Qualitative Disclosures about Market Risk — Risk
        Overview — Commodity Price Risks.”
  ***Operating
        Expenses***
 Operating
        expenses increased $ 8.4
        million, or 4.3%, in the first quarter of 2007 compared to the same period
        of
        2006. Fuel used for electric generation (recoverable) increased $7.2 million,
        or
        15.6%, primarily due to higher per-unit costs and volumes of fuel used as
        compared to the same period of 2006. Power purchased for utility customers
        (recoverable) decreased $15.4 million, or 15.9%, largely due to lower per-unit
        costs of purchased power. Fuel used for electric generation and power purchased
        for utility customers generally are influenced by natural gas prices. However,
        other factors such as unscheduled outages, unusual maintenance or repairs,
        or
        other developments may affect fuel used for electric generation and power
        purchased for utility customers. Other operations expense increased $8.0
        million, or 45.4%, primarily due to the absence in the first quarter of 2007
        of
        the $3.5 million recognition of previously recorded storm restoration expenses
        as a regulatory asset as a result of the LPSC’s February 22, 2006, approval of
        Cleco Power’s request to recover these storm restoration costs. Also
        contributing to the increase were higher professional fees, higher employee
        benefit costs, and higher payroll and administrative expenses. Maintenance
        expenses during the first quarter of 2007 increased $4.4 million, or 81.9%,
        compared to the same period of 2006 primarily due to the absence of the $3.0
        million recognition of previously recorded storm restoration expenses as
        a
        regulatory asset as a result of the LPSC’s February 22, 2006 order. Also
        contributing to the increase was more generating station maintenance work
        performed during the first quarter of 2007. Depreciation expense increased
        $4.5
        million, or 29.8%, primarily as a result of $4.1 million of storm amortization
        costs and $0.4 million of normal recurring additions to fixed
        assets.
  **Interest****Income**
 Interest
        income decreased $0.9 million, or 39.8%, during the first quarter of 2007
        compared to the same period of 2006 primarily due to lower average investment
        ba lances.
  ***Allowance
        for Other Funds Used During Construction***
 Allowance
        for other funds used during construction increased $4.5 million, or 667.0%,
        during the first quarter of 2007 co mpared
        to
        the same period of 2006 primarily due to increased construction activity
        at
        Rodemacher Unit 3. Allowance for other funds used during construction equaled
        41.8% of Cleco Power’s net income for the first quarter of 2007, compared to
        4.8% for the first quarter of 2006.
  ***In*** **terest
        *Charges***
 Interest
        charges increased $1.1 million, or 11.9%, during the first quarter of 2007
        compared to the same period of 2006 primarily due to the accrual of interest
        related to u ncertain
        tax positions, which was previously reported in tax expense. For additional
        information, see Item 1, “Notes to the Unaudited Condensed Financial Statements
— Note 12 — Income Taxes.”
  ***Income
        Taxes***
 Income
        tax expense decreased $3.9 million, or 55.9%, during the first quarter of
        2007
        compared to the same period of 2006. Cleco Power’s effective income tax rate
        d ecreased
        from 33.7% to 20.2% during the first quarter of 2007 compared to the same
        period
        of 2006. The decrease in the rate was primarily due to the flow-through of
        tax
        benefits associated with AFUDC equity recorded as a result of the construction
        of Rodemacher Unit 3. Tax rates also were affected by the relative size of
        pre-tax income related to this item. Pre-tax income during the first quarter
        of
        2007 decreased $5.5 million compared to the same period of 2006.
  **Midstream**
 Midstream’s
        net loss for the first quarter of 2007 increased $1.4 million, or 40.4%,
        compared to the first quarter of 2006. Factors affecting Midstream during
        the
        first qua rter
        of
        2007 are described below.
 FOR
                  THE THREE MONTHS ENDED MARCH
                  31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
              
              **2007**
              
              2006
              
              VARIANCE
              
              CHANGEOperating
                  revenueOther
                  operations
              
              **$**
              **7**
              
              $
              4
              
              $
              3
              
              
              75.00
              %Affiliate
                  revenue
              
              
              **986**
              
              
              1,050
              
              
              (64
              )
              
              (6.10)
              %Operating
                  revenue
              
              
              **993**
              
              
              1,054
              
              
              (61
              )
              
              (5.79
              )%Operating
                  expensesOther
                  operations
              
              
              **1,200**
              
              
              1,123
              
              
              (77
              )
              
              (6.86
              )%Maintenance
              
              
              **460**
              
              
              502
              
              
              42
              
              
              8.37
              %Depreciation
              
              
              **75**
              
              
              78
              
              
              3
              
              
              3.85
              %Taxes
                  other than incometaxes
              
              
              **55**
              
              
              57
              
              
              2
              
              
              3.51
              %Total
                  operatingexpenses
              
              
              **1,790**
              
              
              1,760
              
              
              (30
              )
              
              (1.70
              )%Operating
                  loss
              
              **$**
              **(797**
              **)**
              $
              (706
              )
              $
              (91
              )
              
              (12.89
              )%Equityloss
                  from investees
              
              **$**
              **(1,827**
              **)**
              $
              (28
              )
              $
              (1,799
              )
              
              *Interest
                  charges
              
              **$**
              **5,042**
              
              $
              4,231
              
              $
              (811
              )
              
              (19.17
              )%Federal
                  and state income taxbenefit
              
              **$**
              **2,953**
              
              $
              1,695
              
              $
              1,258
              
              
              74.22
              %Loss
                  from discontinued operations
              
              **$**
              **-**
              
              $
              (87
              )
              $
              87
              
              
              *Netloss
              
              **$**
              **(4,714**
              **)**
              $
              (3,358
              )
              $
              (1,356
              )
              
              (40.38
              )%* Not
                  meaningful
  ***Equity*** **Loss
        from Investees**
 Equity loss
        from
        investees increased $1.8 million in the first quarter of 2007 compared to
        the
        first quarter of 2006. The increase was due to a $2.3 million decrease in
        equity
        earnings at APH, partially offset by a $0.5 million increase at Evangeline.
        The
        decrease in earnings at APH primarily was due to the absence in the first
        quarter of 2007 of APH’s $2.8 million drawdown against the $15.0 million letter
        of credit issued by
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  Calpine.
        The increase at Evangeline primarily was due to lower gas and turbine
        maintenance expenses, as well as decreased heat rate penalties. For additional
        information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited
        Condensed Financial Statements — Note 4 — Equity Investment in Investees.” As
        previously discussed, Midstream’s ownership interests in Perryville and Attala
        were transferred to Cleco Corporation effective February 1, 2007, and are
        no
        longer reported as equity income from investees on Midstream’s financial
        statements. In accordance with SFAS No. 131, operating results for the first
        quarter of 2006 have been adjusted to reflect this new structure. For additional
        information, see Item 1, “Notes to the Unaudited Condensed Financial Statements
— Note 3 — Disclosures about Segments.”
  ***Interest
        Charges***
 Interest
        charges increased $0.8 million, or 19.2%, during the first quarter of 2007
        compared to the same period of 2006 primarily due to a higher interest rate
        and
        a higher balance on affiliate debt rela ting
        to
        APH’s investment in Acadia.
  ***Income
        Taxes***
 Income
        tax benefit increased $1.3 million, or 74.2%, during the first quarter of
        2007
        compared to the same period of 2006. Mi dstream’s
        effective income tax rate increased from 34.1% to 38.5% during the first
        quarter
        of 2007 compared to the same period of 2006. The difference in the tax rate
        is
        primarily due to interest related to tax positions being accounted for as
        interest expense in 2007, compared to tax expense in 2006. Tax rates also
        were
        affected by the relative size of pre-tax income to this item. Pre-tax loss
        during the first quarter of 2007 increased $2.7 million compared to the same
        period of 2006.
  **FINANCIAL
        CONDITION**
 **Liquidity
        and Capital Resources**
  **General
        Considerations and Credit-Related Risks**
  ***Credit
        Ratings and Counterparties***
 At
        March
        31, 2007, Moody’s outlook for both Cleco Corpor ation
        and
        Cleco Power was stable. Standard & Poor’s ratings outlook for both companies
        was negative due to continued uncertainties surrounding Cleco’s merchant energy
        activities and risks associated with the construction of Rodemacher Unit
        3. If
        Cleco Corporation or Cleco Power’s credit rating were to be downgraded by
        Moody’s or Standard & Poor’s, Cleco Corporation and/or Cleco Power would be
        required to pay additional fees and higher interest rates under their bank
        credit and other debt agreements.
 Under
        the
        terms of the Amended EPC Contract, in the event Cleco Power does
        not
        maintain a senior unsecured credit rating of either: (i) Baa3 or better from
        Moody’s or (ii) BBB- or better from Standard & Poor’s, Cleco Power will be
        required to provide a letter of credit to Shaw in the amount of $20.0 million.
        In the event of further downgrade to both of its credit ratings to: (i) Ba2
        or
        below from Moody’s, and (ii) BB or below from Standard & Poor’s, Cleco Power
        will be required to provide an additional $15.0 million letter of credit
        to
        Shaw.
 With respect to any
        open power or gas positions that Cleco may initiate in the future, Cleco
        may be
        required to provide credit support (or pay liquidated damages). 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 transaction, changes in the market
        price of power and gas, the changes in open power and natural gas positions,
        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.
        For
        additional information, as well as a discussion of other factors affecting
        Cleco’s financial condition relating to its credit ratings, the credit ratings
        of its counterparties, and other credit-related risks, please read “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — General Considerations
        and Credit-Related Risks — Credit Ratings and Counterparties” in the
        Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
        December 31, 2006.
  ***Debt***
 At
        March
        31, 2007, Cleco Co rporation
        and Cleco Power were in compliance with the covenants in their credit
        facilities. If Cleco Corporation were to default under the covenants in its
        various credit facilities, it would be unable to borrow additional funds
        under
        the facilities. Further, if Cleco Power were to default under its credit
        facility, Cleco Corporation would be considered in default under its credit
        facility. The bonds issued by Evangeline are non-recourse to Cleco Corporation,
        and a default on these bonds would not be considered a default under Cleco
        Corporation’s credit facility. If Cleco Corporation’s credit rating were to be
        downgraded one level below investment grade, Cleco Corporation would be required
        to pay fees and interest at a rate of 0.45% higher than the current level
        for
        its $150.0 million credit facility. The same downgrade at Cleco Power would
        require Cleco Power to pay fees and interest at a rate of 0.70% higher than
        the
        current level on its $275.0 million credit facility.
  ***Cleco*** ***Consolidated***
 Cleco
        had
        no short-term debt outstanding at March 31, 2007, or December 31, 2006. At
        March
        31, 2007, and December 31, 2006, Cleco’s long-term debt outstanding was $619.3
        mi llion.
        On
        March 15, 2007, Cleco repaid $10.0 million of 6.53% medium-term notes at
        maturity. These medium-term notes were classified as long-term debt due within
        one year; therefore, the repayment did not affect the total amount of long-term
        debt recorded. For additional information, see “— Cleco Corporation (Holding
        Company Level)” and “— Cleco Power” below.
 At
        March
        31, 2007, and December 31, 2006, Cleco had a working capital surplus of $65.8
        million and $152.6 million, respectively. The $86.8 million decrease in working
        capital is primarily due to the payment of dividends, additions to
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  property,
        plant, and equipment, and construction costs for Rodemacher Unit 3.
 Cash
        and
        cash equivalents available at March 31, 2007, were $98.6 million combined
        with
        $407.8 million facility capacity ($132.8 million from Cleco Corporation and
        $275.0 million from Cleco Power) for total liquidity of $506.4 million. Cash
        and
        cash equivalents decreased $93.9 million, when compared to December 31, 2006.
        This decrease is primarily due to repayment of debt, payment of dividends,
        an
        increase in inventory, and additions to property, plant and equipment, including
        Rodemacher Unit 3. This was partially offset by collection of customer accounts
        receivables and lower margin deposit requirements.
  ***Cleco
        Corporation (Holding Company Level)***
 Cleco
        Corporation had no short-term debt outstanding at March
        31,
        2007, or December 31, 2006. At March 31, 2007, and December 31, 2006, Cleco
        Corporation had $100.0 million of long-term debt outstanding related to its
        7.00% Senior Notes due May 1, 2008.
 Cleco
        Corporation’s $150.0 million five-year credit faci lity
        matures on June 2, 2011. This facility provides for working capital and other
        needs. Cleco Corporation’s borrowing costs under the facility are equal to LIBOR
        plus 0.650%, including facility fees.
 At
        March
        31, 2007, off-balance sheet commitments reduced available borrowings by an
        additional $17.2 million, leaving available capacity of $132.8 million. For
        more
        information about these commitments, see “— Off-Balance Sheet Commitments.” An
        uncommitted line of credit with a bank in an amount up to $10.0 million also
        is
        available to support Cleco’s working capital needs. This line of credit is
        available to either Cleco Corporation or Cleco Power.
 Cash
        and
        cash equivalents available at March 31, 2007, were $93.7 million, combined
        with
        $132.8 million facility capacity for total liquidity of $226.5 million. Cash
        and
        cash equivalents increased $3.1 million, when compared to December 31, 2006,
        primarily due to the settlement of affiliate payables and receivables. This
        was
        partially offset by the payment of dividends.
  ***Cleco
        Power***
 There
        was
        no short-term debt outstanding at Cleco Power at March 31, 2007, or December
        31,
        2006. At
        March
        31, 2007, and December 31, 2006, Cleco Power’s long-term debt outstanding was
        $519.3 million. On March 15, 2007, Cleco Power repaid $10.0 million of 6.53%
        medium-term notes at maturity. These medium-term notes were classified as
        long-term debt due within one year; therefore, the repayment did not affect
        the
        total amount of long-term debt recorded.
 Cleco
        Power’s $275.0 million five-year credit facility m atures
        on
        June 2, 2011. This facility provides for working capital and other needs.
        Cleco
        Power’s borrowing costs under the facility are equal to LIBOR plus 0.400%,
        including facility fees.
 At
        March
        31, 2007, no amounts were outstanding under Cleco Power’s $275.0 million,
        five-year facility. An uncommitted line of credit with a bank in an amount
        up to
        $10.0 million also is available to support Cleco Power’s working capital needs.
        This line of credit is available to either Cleco Power or Cleco
        Corporation.
 Cash
        and
        cash equivalents available at March 31, 2007, were $4.9 million, combined
        with
        $275.0 million facility capacity for total liquidity of $279.9 million. Cash
        and
        cash equivalents decreased $97.0 million, when compared to December 31, 2006.
        This decrease is primarily due to repayment of debt, an increase in inventory,
        and additions to property, plant and equipment, including Rodemacher Unit
        3.
        This was partially offset by collection of customer accounts receivable and
        lower margin deposit requirements.
 Storm
        restoration costs from Hurricanes Katrina and Rita are currently estimated
        to
        total $158.7 million. During 2006, the LPSC agreed to an interim increase
        in
        rates of $23.4 million annually over a ten-year period to recover approximately
        $161.8 million of estimated storm restoration costs, until a review of the
        costs
        by the LPSC was completed. In March 2007, after completing this review, Cleco
        Power and the LPSC Staff filed a settlement agreement with the LPSC allowing
        the
        recovery of essentially all of Cleco Power’s Hurricanes Katrina and Rita storm
        costs. The agreement also allows Cleco Power to securitize the storm costs
        and
        to recover the costs through a customer billing surcharge. Management expects
        the settlement agreement to be approved by the LPSC in the third quarter
        of
        2007. Cleco Power is also exploring the reimbursement of storm restoration
        costs
        from the U.S. Government.
 On
        February 22, 2006, the LPSC approved Cleco Power’s plans to build Rodemacher
        Unit 3. Terms of the approval included acceptance of an LPSC Staff
        recommendation that Cleco Power collect from customers an amount equal to
        75% of
        the carrying costs of capital during the construction phase of the unit.
        In
        addition to this recovery, Cleco Power plans to fund the construction costs
        related to Rodemacher Unit 3 by utilizing cash on hand, available funds from
        its
        credit facility, the issuance of long-term debt and equity contributions
        from
        Cleco Corporation.
 The
        Louisiana State Bond Commission has approved the issuance of up to $200.0
        million of tax-exempt bonds to finance the qualifying costs of the solid
        waste
        disposal facilities at Rodemacher Unit 3. Thus far, a total of $152.9 million
        of
        qualifying costs at Rodemacher Unit 3 has been identified. A total of $60.0
        million was allocated by the Governor’s office for issuance in 2006. Cleco Power
        has applied to the Governor’s office for allocation in 2007 and can apply again
        in 2008, if necessary, up to the total amount of qualifying costs identified.
        The $60.0 million of bonds allocated for 2006 were issued on November 21,
        2006,
        by the Rapides Finance Authority, and Cleco Power agreed to pay the debt
        service
        on the bonds. The fixed interest rate on the bonds is 4.70%, and the maturity
        date is November 1, 2036. The bonds may be called at the option of the issuer
        at
        the direction of Cleco Power after November 1, 2016.
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  ***Midstream***
 Midstream
        had no short-term debt outstanding at March 31, 2007, or December 31,
        2006.
 Evangeline,
        deconsolidated and no longer reported in Cleco Corporation’s consolidated
        results, had no short-term debt ou tstanding
        at March 31, 2007. Evangeline did have $173.0 million and $177.1 million
        of
        long-term debt outstanding at March 31, 2007, and December 31, 2006,
        respectively, in the form of 8.82% Senior Secured Bonds due 2019. In addition,
        Evangeline had $7.9 million and $7.6 million of long-term debt due within
        one
        year at March 31, 2007, and December 31, 2006, respectively, relating to
        these
        bonds. The bonds issued by Evangeline are non-recourse to Cleco Corporation.
  ***Restricted
        Cash***
 Various
        agreements to which Cleco is subject contain cov enants
        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 general corporate purposes. At March 31, 2007, and December 31, 2006,
        $36.3
        million and $59.0 million of cash, respectively, was restricted. At March
        31,
        2007, the $36.3 million of restricted cash consisted of $0.1 million under
        the
        Diversified Lands mitigation escrow agreement, $25.0 million under the
        Evangeline senior secured bond indenture, and $11.2 million under the Cleco
        Power solid waste disposal bonds indenture. Restricted cash at Cleco Power
        decreased $13.2 million compared to December 31, 2006, due to the release
        of
        funds for construction of the solid waste disposal facility at Rodemacher
        Unit
        3. The restricted cash at Evangeline is not included in Cleco Corporation’s
        Condensed Consolidated Balance Sheets at March 31, 2007, due to the
        deconsolidation of Evangeline.
  ***Contractual******Obligations
        and Other Commitments***
 For
        information regarding Cleco’s
        Contractual Obligations and Other Commitments, please read “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash
        Requirements — Contractual Obligations and Other Commitments” in the
        Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
        December 31, 2006.
  ***Off-Balance
        Sheet Commitments***
 Cleco
        Corporation and Cleco Power have entered into various off-balance sheet
        commitments, in the form of guarantees and standby letter s
        of
        credit, in order to facilitate their activities and the activities of Cleco
        Corporation’s subsidiaries and equity investees (affiliates). Cleco Corporation
        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 Corporation 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 Condensed
        Consolidated Balance Sheets, because it has been determined that Cleco’s
        affiliates are able to perform these obligations under their contracts and
        that
        it is not probable that payments by Cleco will be required. Some of these
        commitments reduce borrowings available to Cleco Corporation under its credit
        facility pursuant to the terms of the credit facility. Cleco’s off-balance sheet
        commitments as of March 31, 2007, are summarized in the following table,
        and a
        discussion of the off-balance sheet commitments follows the table. The
        discussion should be read in conjunction with the table to understand the
        impact
        of the off-balance sheet commitments on Cleco’s financial
        condition.
 AT
                    MARCH 31, 2007REDUCTIONS
                    TO THEAMOUNT
                    AVAILABLETO
                    BE DRAWN ONFACE
                
                
                
                NET
                CLECO
                    CORPORATION’S(THOUSANDS)
                AMOUNT
                
                REDUCTIONS
                
                AMOUNT
                
                CREDIT
                    FACILITY**Cleco
                    Corporation**Guarantee
                    issued to Entergy companies for performance obligations of
                    Perryville
                **$**
                **277,400**
                
                **$**
                **135,000**
                
                **$**
                **142,400**
                
                **$**
                **328**Guarantees
                    issued to purchasers of the assets of Cleco Energy
                
                **1,400**
                
                
                **-**
                
                
                **1,400**
                
                
                **1,400**Obligations
                    under standby letter of credit issued to the Evangeline Tolling
                    Agreement
                  counterparty
                
                **15,000**
                
                
                **-**
                
                
                **15,000**
                
                
                **15,000**Guarantee
                    issued to Entergy Mississippi on behalf of Attala
                
                **500**
                
                
                **-**
                
                
                **500**
                
                
                **500****Cleco
                    Power**Obligations
                    under standby letter of credit issued to the Louisiana Department
                    of
                    Labor
                
                **525**
                
                
                **-**
                
                
                **525**
                
                
                **-**Obligations
                    under the Lignite Mining Agreement
                
                **10,920**
                
                
                **-**
                
                
                **10,920**
                
                
                **-**Obligations
                    under standby letter of credit issued to the Louisiana Department
                    of
                    Wildlife and
                  Fisheries
                
                **85**
                
                
                **-**
                
                
                **85**
                
                
                **-**Total
                **$**
                **305,830**
                
                **$**
                **135,000**
                
                **$**
                **170,830**
                
                **$**
                **17,228**
 Cleco
        Corporation provided a limited guarantee to Entergy Louisiana and Entergy
        Gulf
        States for Perryville’s performance ,
        indemnity, representation, and warranty obligations under the Sale Agreement,
        the Power Purchase Agreement, and other ancillary agreements related to the
        sale
        of the Perryville facility in 2005. As of March 31, 2007, the aggregate
        guarantee of $277.4 million is limited to $142.4 million (other than with
        respect to the indemnification of environmental matters to which there is
        no
        limit) due to the performance of some of the underlying obligations that
        were
        guaranteed. The discounted probability-weighted liability under the guarantees
        and indemnifications as of March 31, 2007, was $0.3 million,
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  resulting
        in a corresponding reduction in the available credit under Cleco Corporation’s
        credit facility, which was determined in accordance with the facility’s
        definition of a contingent obligation. The contingent obligation reduces
        the
        amount available under the credit agreement by an amount equal to the reasonably
        anticipated liability in respect of the contingent obligation as determined
        in
        good faith. For additional information on this guarantee, see Note 9 —
“Disclosures about Guarantees.”
 In
        November 2004, Cleco completed the sale of substantially all of the assets
        of
        Cleco Energy. Cleco Corporation provided guarantees to the buyers of Cleco
        Energy’s assets for the payment and performance of the indemnity obligations of
        Cleco Energy. The aggregate amount of the guarantees is $1.4 million, and
        the
        guarantees expire in 2009.
 If
        Evangeline fails to perform certain obligations under its tolling agreement,
        Cleco Corporation will be required to make payments to the Evangeline Tolling
        Agreement counterparty. Cleco Corporation’s obligation under the Evangeline
        commitment is in the form of a standby letter of credit from investment grade
        banks and is limited to $15.0 million. Rating triggers do not exist in the
        Evangeline Tolling Agreement. Cleco expects Evangeline to be able to meet
        its
        obligations under the tolling agreement and does not expect Cleco Corporation
        to
        be required to make payments to the counterparty. However, under the covenants
        associated with Cleco Corporation’s credit facility, the entire net amount of
        the Evangeline commitment reduces the amount that can be borrowed under the
        credit facility. The letter of credit for Evangeline is expected to be renewed
        annually until 2020.
 On
        March
        16, 2005, Cleco Corporation issued a guarantee to Central Mississippi Generating
        Company, LLC for Attala’s obligations and liabilities under the purchase and
        sale agreement between Central Mississippi Generating Company, LLC and Attala.
        On January 20, 2007, the guarantee expired. In addition, on January 20, 2006,
        Cleco Corporation provided a $0.5 million guarantee to Entergy Mississippi
        for
        Attala’s obligations under the Interconnection Agreement. This guarantee has no
        time limit.
 The
        State
        of Louisiana allows employers of certain financial net worth to self-insure
        their workers’ compensation benefits. Cleco Power has a certificate of
        self-insurance from the Louisiana Office of Workers’ Compensation and is
        required to post a $0.5 million letter of credit, an amount equal to 110%
        of the
        average losses over the previous three years, as surety.
 As
        part
        of the Lignite Mining Agreement entered into in 2001, Cleco Power and SWEPCO,
        joint owners of Dolet Hills, have agreed to pay the lignite miner’s loan and
        lease principal obligations when due, if the lignite miner does not have
        sufficient funds or credit to pay. Any amounts paid on behalf of the miner
        would
        be credited by the lignite miner against the next invoice for lignite delivered.
        At March 31, 2007, Cleco Power’s 50% exposure for this obligation was
        approximately $10.9 million. The lignite mining contract is in place until
        2011
        and does not affect the amount Cleco Corporation can borrow under its credit
        facility.
 On
        December 1, 2006, Cleco Power issued a standby letter of credit to the Louisiana
        Department of Wildlife and Fisheries in order to obtain a permit to allow
        for
        dredging operations at the Rodemacher Unit 3 site. The letter of credit was
        for
        approximately $0.1 million and expired on April 1, 2007.
 The
        following table summarizes the expected termination date of the guarantees
        and
        standby letters of credit discussed above:
 AT
                  MARCH 31, 2007AMOUNT
                  OF COMMITMENT EXPIRATION
                  PER PERIODNET
              
              
              
              
              
              
              
              MOREAMOUNT
              
              LESS
                  THAN
              
              
              
              
              
              THAN(THOUSANDS)
              
              COMMITTED
              
              ONE
                  YEAR
              
              1-3
                  YEARS
              
              3-5
                  YEARS
              
              5
                  YEARSGuarantees
              
              **$**
              **155,220**
              
              **$**
              **-**
              
              **$**
              **1,400**
              
              **$**
              **110,920**
              
              **$**
              **42,900**Standby
                  letters of credit
              
              
              **15,610**
              
              
              **610**
              
              
              **-**
              
              
              **-**
              
              
              **15,000**Total
                  commercial commitments
              
              **$**
              **170,830**
              
              **$**
              **610**
              
              **$**
              **1,400**
              
              **$**
              **110,920**
              
              **$**
              **57,900**
  **Regulatory
        Matters**
  ***Wholesale
        Rates of Cleco***
 On
        February 16, 2007, the FERC issued Order
        No.
        890 amending its regulations and the pro forma tariff (a FERC-approved document
        outlining rates, charges, rules and conditions under which a utility provides
        wholesale electric service) adopted in FERC Order Nos. 888 and 889 to address
        apparent deficiencies. The order became effective on March 14, 2007. Cleco
        Power
        is in the process of incorporating these new requirements and business practices
        into its operations.
 For additional
        information on the wholesale rates of Cleco, please read “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — Regulatory Matters —
Wholesale Rates of Cleco” in the Registrants’ Combined Annual Report on Form
        10-K for the fiscal year ended December 31, 2006.
  ***Retail
        Rates of Cleco Power***
 In
        March
        2007, as a result of Phase II of the LPSC Staff’s r eview
        of
        storm restoration costs, Cleco Power and the LPSC Staff filed a settlement
        agreement allowing the recovery of essentially all Cleco Power’s Hurricanes
        Katrina and Rita storm costs, currently estimated to total $158.7 million.
        Cleco
        Power is currently recovering these storm costs under an interim rate increase
        approved by the LPSC. The settlement agreement also allows Cleco Power to
        securitize the amount of the storm costs and to fund and securitize a $50.0
        million reserve for future, extraordinary storm damage costs. Management
        expects
        the settlement agreement to be approved by the LPSC in the third quarter
        of
        2007.
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  In
        April
        2006, the LPSC approved a recommendation of the LPSC Staff requiring Cleco
        Power
        to refund $1.3 million to cu stomers
        relating to Cleco Power’s RSP filings for the 12-month periods ended September
        30, 2002, 2003, and 2004. Cleco Power refunded the amount as credits on
        customers’ September 2006 utility bills. However, the LPSC also reserved the
        right to further review Cleco Power’s calculation of working capital included in
        the filings for the 12-month periods ended September 30, 2002, 2003, and
        2004.
        Cleco Power reached an agreement of the working capital issue with the LPSC
        in
        March 2007 and refunded to customers an additional $3.2 million of previously
        accrued customer credits in the same month.
 In
        March
        2007, the LPSC consultants completed the review of Cleco Power’s RSP monitoring
        report for the 12-month period ended September 30, 2005. Cleco Power received
        the LPSC Staff’s report in April 2007 indicating that no refund is due based on
        the 2005 RSP filing.
 For
        additional information on other regulatory aspects of retail rates concerning
        Cleco Power, please read “Management’s Discussion and Analysis of Financial
        Condition and Results of Operations — Financial Condition — Liquidity and
        Capital Resources — Regulatory Matters — Retail Rates of Cleco Power” in the
        Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
        December 31, 2006.
  ***Wholesale
        Electric Markets***
 On
        March
        16, 2007, to implement the new directives added by Section 215 of the Federal
        Power Act regarding e stablishment
        of reliability standards for all public utilities subject to the FERC’s
        authority, the FERC issued Order No. 693 approving 83 of the 107 standards
        currently filed by the North American Electric Reliability Council in its
        capacity as the authorized ERO. The FERC will begin enforcement of these
        standards on June 1, 2007. Cleco Power is in the process of incorporating
        these
        new reliability standards into its operations.
 For additional
        information on regulatory aspects of wholesale electric markets affecting
        Cleco,
        please read “Management’s Discussion and Analysis of Financial Condition and
        Results of Operations — Financial Condition — Liquidity and Capital Resources —
Regulatory Matters — Market Restructuring — Wholesale Electric Markets” in the
        Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
        December 31, 2006.
  ***Retail
        Electric Markets***
 For
        a
        discussion of the regulatory aspects of retail electric markets affecting
        Cleco
        Power, please read “Management’s Discussion and Analysis of Financial Condition
        and Results of Operations — Financial Condition — Liquidity and Capital
        R esources
        — Regulatory Matters — Retail Electric Markets” in the Registrants’ Combined
        Annual Report on Form 10-K for the fiscal year ended December 31,
        2006.
  ***Generation
        RFP***
  2007
        Short-Term RFP for 2008 Resources
 On
        January 29, 2007, Cleco Power issued a RFP for a min imum
        of
        50 MW up to 350 MW to meet its 2008 capacity and energy requirements. Proposals
        were received on February 19, 2007. Cleco Power has selected the winning
        bids
        and is currently negotiating with those selected bidders.
  2007
        Long-Term RFP
 Cleco
        Power also plans to release an additional RFP in 2007 to identify
        long-term resources to fill the needs forecasted by the latest IRP. This
        RFP
        will include self-build options that will compete with market bids to provide
        the most economic and reliable options for Cleco Power customers.
 
 For additional
        information on Cleco Power’s generation RFPs, please read “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — Regulatory Matters —
Generation RFP” in the Registrants’ Combined Annual Report on Form 10-K for the
        fiscal year ended December 31, 2006.
  ***Rodemacher
        Unit 3***
 In
        May
        2006, Cleco
        Power began construction of Rodemacher Unit 3 which will provide a portion
        of
        the utility’s future power supply needs. Rodemacher Unit 3 will be capable of
        burning various solid fuels, but primarily is expected to burn petroleum
        coke
        produced by several refineries throughout the Gulf Coast region. All
        environmental permits for the unit have been received. The total capital
        cost of
        the project, including AFUDC, Amended EPC Contract costs, and other development
        expenses, is estimated at $1.0 billion.
 In
        May
        2006, Cleco Power and Shaw entered into the Amended EPC Contract, which provides
        for substantial co mpletion
        of construction by the fourth quarter of 2009. The Amended EPC Contract allows
        for termination at Cleco Power’s sole discretion, which would require payment of
        escalating termination fees, or if certain milestones, approvals, or other
        typical commercial terms and conditions are not met. At March 31, 2007, the
        maximum termination fee would have been $84.7 million. The project remains
        on
        schedule for commercial operation no later than the fourth quarter of
        2009.
 At
        March
        31, 2007, Cleco Power had incurred approximately $309.7 million in project
        costs.
 For
        additional information on the CCN and construction of Rodemacher Unit 3,
        please
        read “Management’s Discussion and Analysis of Financial Condition and Results of
        Operations — Financial Condition — Liquidity and Capital Resources —Regulatory
        Matters — Rodemacher Unit 3” in the Registrants’ Combined Annual Report on Form
        10-K for the fiscal year ended December 31, 2006. For a discussion of risks
        associated with the Rodemacher Unit 3 project, see “Risk Factors — Rodemacher
        Unit 3 Construction Costs,” — “Rodemacher Unit 3 Technical Specifications,” and
— “Termination of the Rodemacher Unit 3 Project or the Amended EPC Contract” in
        the
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  Registrants’
        Combined Annual Report on Form 10-K for the fiscal year ended December 31,
        2006.
  ***Lignite
        Deferral***
 For information
        on Cleco Power’s deferred lignite mining expenditures, please read “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — Regulatory Matters —
Other Matters — Lignite Deferral” in the Registrants’ Combined Annual Report on
        Form 10-K for the fiscal year ended December 31, 2006.
 I n
        November 2006, Cleco Power and SWEPCO submitted a joint application to the
        LPSC
        requesting that Cleco Power recover its existing deferral balance and eliminate
        any future benchmarking of lignite mining costs. The application was docketed
        by
        the LPSC, and Cleco Power and SWEPCO filed testimony in support of the
        application on January 29, 2007. Cleco Power expects a favorable response
        to its
        request, and current and future deferrals are expected to be collected. It
        is
        anticipated the LPSC Staff will finalize its review of this information and
        issue a recommendation during the third quarter of 2007.
 If
        this
        request is not granted, Cleco Power may be required to expense a portion
        of the
        current deferred balance as well as expense future amounts instead of deferring
        them.
 At
        March
        31, 2007, and December 31, 2006, Cleco Power had $21.2 million and $20.1
        million, respectively, in deferred costs remaining. Included in the deferred
        cost balance is interest totaling $3.4 million and $3.0 million as of March
        31,
        2007, and December 31, 2006, respectively.
 For
        a
        discussion of risks associated with Cleco Power’s application to recover
        deferred lignite mining costs, see “Risk Factors — Deferred Lignite Mining
        Costs” in the Registrants’ Co mbined
        Annual Report on Form 10-K for the fiscal year ended December 31,
        2006.
  ***Franchises***
 On
        February 13, 2007, the City Council of Eunice voted to a ccept
        a
        city-wide franchise proposal with a local electric cooperative. The cooperative
        will now have the opportunity to serve customers city-wide. However, both
        utilities are required to follow the LPSC 300-foot rule regulation to determine
        which utility can provide electricity to the customer. In general, if a
        utility's distribution system is within 300 feet of the new customer's meter
        point, that utility automatically serves the customer. Otherwise, the customer
        may choose the electricity provider. This decision does not have a material
        impact on Cleco Power's results of operations or financial condition, but
        could
        reduce future customer and load growth as both utilities compete for new
        customers.
 Historically,
        Cleco Power has been allowed to recover m unicipal
        franchise fees as part of base rates it charges retail customers. Consequently,
        franchise fees are recovered from customers both inside and outside a franchised
        area. In October 2006, the LPSC approved the practice of billing franchise
        fees
        as a separate line item only to the municipal customers affected, rather
        than
        included in base rates to all retail customers. In November 2006, the LPSC
        placed the order on hold requesting comments from the Louisiana Municipal
        Association and Louisiana mayors. The LPSC is expected to vote on the
        implementation of the order in the second quarter of 2007. Cleco Power
        anticipates no material impact to its results of operations or financial
        condition if the order is approved.
 For
        additional information on Cleco Power’s electric service franchises, please read
“Business — Regulatory Matters, Industry Developments, and Franchises —
Franchises” in the Registrants’ Combined Annual Report on Form 10-K for the
        fiscal year ended December 31, 2006.
  ***Environmental
        Matters***
 Cleco
        is
        subject to extensive environmental regulation by fe deral,
        state and local authorities and is required to comply with numerous
        environmental laws and regulations, and to obtain and to comply with numerous
        governmental permits, in operating its facilities. In addition, existing
        environmental laws, regulations and permits could be revised or reinterpreted;
        new laws and regulations could be adopted or become applicable to Cleco or
        its
        facilities; and future changes in environmental laws and regulations could
        occur, including potential regulatory and enforcement developments related
        to
        air emissions. Cleco may incur significant additional costs to comply with
        these
        revisions, reinterpretations and requirements. If Cleco fails to comply with
        these revisions, reinterpretations and requirements, it could be subject
        to
        civil or criminal liabilities and fines.
 Congress
        is considering several bills related to climate change, which may include
        substantial, mandatory cuts in ca rbon
        dioxide and other greenhouse gas emissions. The majority of the bills would
        require reductions in carbon dioxide from electric generating units. On November
        29, 2006, the U.S. Supreme Court heard arguments in a case, Massachusetts
        vs.
        E.P.A, in which the U.S. Circuit Court of Appeals for the District of Columbia
        held that the EPA had discretion to refuse to regulate greenhouse gases from
        mobile sources. On April 2, 2007, the Supreme Court overturned the lower
        court’s
        ruling and found that carbon dioxide and other greenhouse gases are “air
        pollutants” under the Clean Air Act (CAA). As air pollutants, the Supreme
        Court’s decision would require the EPA to regulate greenhouse gas emissions from
        new motor vehicles if, in the EPA’s judgment, such greenhouse gas emissions may
        reasonably be anticipated to endanger public health or welfare. Based on
        the
        Supreme Court’s decision that greenhouse gases are “air pollutants,” the EPA may
        also decide to use its authority under the CAA to regulate greenhouse gases,
        such as carbon dioxide, from stationary sources such as power plants. Thus,
        the
        Supreme Court ruling could result in federal regulation of carbon dioxide
        and
        other greenhouse gas emissions in upcoming years. Cleco will continue to
        monitor
        the development of new legislative and regulatory requirements and their
        potential impacts. While it is unknown at this time what the final outcome
        of
        these regulations will entail or whether federal and/or state carbon dioxide
        laws or regulations will be enacted, any capital and operating costs of
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  additional
        pollution control equipment or carbon dioxide emission reduction measures,
        such
        as the cost of sequestration or purchasing allowances, or offset credits,
        that
        may be required could materially adversely affect future results of operations,
        cash flows, and possibly financial condition, unless such costs could be
        recovered through regulated rates and/or future market prices for
        energy.
 For
        a
        discussion of other Cleco environmental matters, please read “Business —
Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K
        for the fiscal year ended December 31, 2006.
  ***Recent
        Accounting Standards***
 For
        a
        discussion of recent accounting standards,
        see Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 5 —
Recent Accounting Standards” of this form 10-Q, which discussion is incorporated
        herein by reference.
  **CRITICAL
        ACCOUNTING POLICIES**
 Cleco ’s
        critical accounting policies include those accounting policies that are both
        important to Cleco’s financial condition and results of operations and those
        that require Management to make difficult, subjective, or complex judgments
        about future events, which could result in a material impact to the financial
        statements of Cleco Corporation’s segments or to Cleco as a consolidated
        entity.  The financial statements contained in this report are prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America, which require Cleco to make estimates and assumptions.  Estimates
        and assumptions about future events and their effects cannot be made with
        certainty.  Management bases its current estimates and assumptions on
        historical experience and on various other factors that are believed to be
        reasonable under the circumstances.  On an ongoing basis, these estimates
        and assumptions are evaluated and, if necessary, adjustments are made when
        warranted by new or updated information or by a change in circumstances or
        environment.  Actual results may differ significantly from these estimates
        under different assumptions or conditions.  For a discussion of Cleco’s
        critical accounting policies, see “Management’s Discussion and Analysis of
        Financial Condition and Results of Operations — Critical Accounting Policies” in
        the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended
        December 31, 2006.
  **CLECO
        POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS**
 Set
        forth
        below is information concerning the results of oper ations
        of
        Cleco Power for the three months ended March 31, 2007, and March 31, 2006.
        The
        following narrative analysis should be read in combination with Cleco Power’s
        Unaudited Condensed Financial Statements and the Notes contained in this
        Form
        10-Q.
 Cleco
        Power meets the conditions specified in General I nstructions
        H(1)(a) and (b) to Form 10-Q and is therefore permitted to use the reduced
        disclosure format for wholly owned subsidiaries of reporting companies.
        Accordingly, Cleco Power has omitted from this report the information called
        for
        by Item 2 (Management’s Discussion and Analysis of Financial Condition and
        Results of Operations) and Item 3 (Quantitative and Qualitative Disclosures
        about Market Risk) of Part I of Form 10-Q and the following Part II items
        of
        Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds)
        and Item 3 (Defaults upon Senior Securities). Pursuant to the General
        Instructions, Cleco Power has included an explanation of the reasons for
        material changes in the amount of revenue and expense items of Cleco Power
        between the first quarter of 2007 and the first quarter of 2006. Reference
        is
        made to Management’s Discussion and Analysis of Financial Condition and Results
        of Operations in Item 7 of the Registrants’ Combined Annual Report on Form 10-K
        for the fiscal year ended December 31, 2006.
 For
        an
        explanation of material changes in the amount of revenue and expense items
        of
        Cleco Power between the first quarter of 2007 and the first quarter of 2006,
        see
“— Results of Operations — Comparison of the Three Months Ended March 31, 2007,
        and 2006 — Cleco Power” of this Form 10-Q, which discussion is incorporated
        herein by reference.
 
  **ITEM
        3.** QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ***Risk
        Overview***
 Market
        risk inherent in Cleco’s market risk-sensitive instruments and positions
        includes potential changes arising from changes in interest rates and the
        commodity market prices of power and natural gas in the industry on different
        energy exchanges. Cleco is subject to market risk associated with economic
        hedges relating to open natural gas contracts. Cleco
        also is subject to market risk associated with its remaining tolling agreement
        counterparty. For additional information concerning Cleco’s market risk
        associated with its remaining counterparty, see Item 2, “Management’s Discussion
        and Analysis of Financial Condition and Results of Operations — Financial
        Condition — Liquidity and Capital Resources — General Considerations and
        Credit-Related Risks.”
 Cleco
        use s
        SFAS
        No. 133 to determine whether the market risk-sensitive instruments and positions
        are required to be marked-to-market. Generally, Cleco Power’s market
        risk-sensitive instruments and positions qualify for the normal-purchase,
        normal-sale exception to mark-to-market accounting of SFAS No. 133, as modified
        by SFAS No. 149, since Cleco Power generally takes physical delivery and
        the
        instruments and positions are used to satisfy customer requirements.
 Cleco’s
        exposure to market risk, as discussed below, represents an estimate of possible
        changes in the fair value or future earnings that would occur, assuming possible
        future
  CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  movements
        in the interest rates and commodity prices of power and natural gas.
        Management’s views on market risk are not necessarily indicative of actual
        results, nor do they represent the maximum possible gains or losses. The
        views
        do represent, within the parameters disclosed, what management estimates
        may
        happen.
 Cleco
        monitors credit risk exposure through reviews of counterparty credit quality,
        corporate-wide aggregate counterparty credit exposure and corporate-wide
        aggregate counterparty concentration levels. Cleco actively manages these
        risks
        by establishing appropriate credit and concentration limits on transactions
        with
        counterparties and requiring contractual guarantees, cash deposits or letters
        of
        credit from counterparties or their affiliates, as deemed necessary. Cleco
        Power
        has agreements in place with various counterparties that authorize the netting
        of financial transactions and contract payments to mitigate credit risk for
        transactions entered into for risk management purposes.
  **Interest
        Rate Risks**
 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 credit facility with fixed-rate debt.
        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 fixed-rate oblig ations
        is
        computed by calculating the current fair market value using a net present
        value
        model based upon a 1% change in the average interest rate applicable to such
        debt. 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.
 As
        of
        March 31, 2007, Cleco had no long-term or short-term variable-rate debt.
  **Commodity
        Price Risks**
 Management
        believes Cleco has controls in place to minimize the risks
        involved in its financial and energy commodity activities. Independent controls
        over energy commodity functions consist of a middle office (risk management),
        a
        back office (accounting), regulatory compliance staff, as well as oversight
        by a
        risk management committee comprised of officers and managers, who are appointed
        by Cleco’s Board of Directors. VaR limits are established by the Risk Management
        Committee and monitored through a daily risk report that identifies the current
        VaR and market conditions.
 During
        2005, Cleco Power entered into certain financial hedge transactions it considers
        economic hedges to mitigate the risk associated with fixed-price power to
        be
        provided to a wholesale customer through December 2010. These transactions
        are
        derivatives as defined by SFAS No. 133 but do not meet the accounting criteria
        to be considered hedges. These transactions are marked-to-market with the
        resulting gain or loss recorded on the income statement as a component of
        operating revenue, net. At
        March
        31, 2007, the positions had a mark-to-market value of $2.4 million, which
        is an
        increase of $1.5 million from the mark-to-market value of $0.9 million at
        December 31, 2006. In addition, these positions resulted in a realized loss
        of
        less than $0.1 million for the three months ended March 31, 2007. In light
        of
        these economic hedge transactions, volatility in natural gas prices will
        likely
        cause fluctuations in the market value of open natural gas positions and
        ultimately in Cleco Power’s future earnings.
 Cleco
        Power provides fuel for generation and purchases power to meet the power
        demands
        of customers. Cleco Power has entered into positions to mitigate the volatility
        in fuel costs passed on to customers as encouraged by an LPSC order. In December
        2004, Cleco Power implemented a fuel stabilization policy (which was filed
        with
        the LPSC and subsequently amended in June 2006) to target higher levels of
        minimum hedging percentages and mitigate the volatility in customer fuel
        costs.
        The change in positions could result in increased volatility in the
        marked-to-market amounts for the financial positions. These positions are
        marked-to-market with the resulting gain or loss recorded on the balance
        sheet
        as a component of the accumulated deferred fuel asset or liability and a
        component of the risk management assets or liabilities. When
        these positions close, actual gains or losses are deferred and included in
        the
        fuel adjustment clause in the month the physical contract settles. Based
        on
        market prices at March 31, 2007, the net mark-to-market impact related to
        open
        natural gas positions was a loss of $13.2 million. Deferred losses relating
        to
        closed natural gas positions at March 31, 2007, totaled $3.5 million.
 Cleco
        utilizes a VaR model to assess the market risk of its hedging portfolios,
        including derivative financial instruments. VaR represents the potential
        loss in
        fair value for an instrument from adverse changes in market factors over
        a
        defined period of time with a specified confidence level. VaR is calculated
        daily, using the variance/covariance method, assuming a holding period of
        one
        day, with a 95% confidence level for natural gas and power positions. Volatility
        is calculated daily from historical forward prices using the exponentially
        weighted moving average method.
 Based
        on
        these assumptions, the VaR relating to the economic hedge transactions for
        the
        three months ended March 31, 2007, as well as the VaR at December 31, 2006,
        is
        summarized below:
 **FOR
                  THE THREE
                  MONTHS**
                **** **ENDED
                  MARCH 31, 2007**
              
              **AT
                  MARCH
                  31**,
              
              AT
                  DECEMBER 31,(THOUSANDS)
              
              **HIGH**
              
              **LOW**
              
              **AVERAGE**
              
              **2007**
              
              2006Cleco
                  Power
              
              **$**
              **452.6**
              
              **$**
              **248.0**
              
              **$**
              **358.8**
              
              **$**
              **267.1**
              
              $
              459.5
  ***Cleco
        Power***
 Please
        refer to “— Risk Overview” above for a discussion of market risk inherent in
        Cleco Power’s market risk-sensitive i nstruments.
 Cleco
        Power has entered into various fixed- and variable-rate debt obligations. Please
        refer to “— Interest Rate Risks” above for a discussion of how Cleco Power
        monitors its mix of fixed- and variable-rate debt obligations and the manner
        of
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  calculating
        changes in fair market value and interest expense of its debt obligations.
 As
        of
        March 31, 2007, Cleco Power had no long-term or short-term variable-rate debt.
 Please
        refer to “—
Commodity Price Risks” above for a discussion of controls, transactions, VaR,
        and market value maturities associated with Cleco Power’s energy commodity
        activities.
  **ITEM
        4.** CONTROLS AND PROCEDURES
  ***Evaluation
        of Disclosure Controls and Procedures***
 In
        accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act
        of
        1934, the
        Registrants’ management has evaluated, as of the end of the period covered by
        this report, with the supervision and participation of the Registrants’ chief
        executive officer and chief financial officer, the effectiveness of the
        Registrants’ disclosure controls and procedures as defined by Rules 13a-15(e)
        and 15d-15(e) under the Securities Exchange Act of 1934 (Disclosure Controls).
        Based on that evaluation, such officers concluded that the Registrants’
disclosure controls were effective as of the date of that
        evaluation.
 During
        the Registrants’ first
        fiscal quarter of 2007, there have been no changes in the Registrants’ internal
        control over financial reporting (as such term is defined in Rules 13a-15(f)
        and
        15d-15(f) under the Exchange Act) that have materially affected, or are
        reasonably likely to materially affect, the Registrants’ internal control over
        financial reporting.
 
 CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  PART
        II —
OTHER INFORMATION
  **ITEM
        1****.** LEGAL PROCEEDINGS
  **CLECO**
 For
        information on legal proceedings affecting Cleco, see
        Part
        I, Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 8 —
Litigation and Other Commitments and Contingencies — Other Litigation,” and Note
        15 — “Calpine Bankruptcy.”
  **CLECO
        POWER**
 For
        information on legal proceedings affecting Cleco Power, see
        Part
        I, Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 8 —
Litigation and Other Commitments and Contingencies — Other Litigation.”
  **ITEM
        1A.** RISK FACTORS
 For
        risks
        that could affect actual results and cause results to differ materially from
        those expressed in any forward-looking statements made by, or on behalf of,
        the
        Registrants, see the risk factors disclosed under "Risk Factors" in Item
        1A of
        the Registrants' Combined Annual Report of Form 10-K for the fiscal year
        ended
        December 31, 2006.
 
 CLECO
                          CORPORATION
                        CLECO
                          POWER
                      2007 1ST
                          QUARTER FORM
                          10-Q
  **ITEM
        6****.**EXHIBITS
 **CLECO
                  CORPORATION**10(a)
              Executive
                  Employment Agreement between Cleco Corporation and William G. Fontenot
                  effective as of July 28, 200012(a)
              Computation
                  of Ratios of Earnings to Fixed Charges and of Earnings to Combined
                  Fixed
                  Charges and Preferred Stock Dividends for the three- and twelve-month
                  periods endedMarch
                  31, 2007, for Cleco Corporation31(a)
              CEO
                  Certification in accordance with section 302 of the Sarbanes-Oxley
                  Act of
                  2002
                CFO
                  Certification in accordance with section 302 of the Sarbanes-Oxley
                  Act of
                  200232(a)
              CEO
                  and CFO Certification pursuant to section 906 of the Sarbanes-Oxley
                  Act of
                  2002**CLECO
                  POWER**10(b)
              401(k)
                  Savings and Investment Plan, Stock Trust Agreement, Amendment No.
                  3,
                  Effective January 1, 200712(b)
              Computation
                  ofRatios
                  of Earnings to Fixed Charges for the three- and twelve-month periods
                  ended
                  March 31, 2007, for Cleco Power31(b)
              CEO
                  Certification in accordance with section 302 of the Sarbanes-Oxley
                  Act of
                  2002
                CFO
                  Certification in accordance with section 302 of the Sarbanes-Oxley
                  Act of
                  200232(b)
              CEO
                  and CFO Certification pursuant to section 906 of the Sarbanes-Oxley
                  Act of
                  2002
   CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  SIGNATURE
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the
        Registrant has duly caused this report to be signed on its behalf by the
        undersigned thereunto duly authorized.
  
 
 
 
 **CLECO
                  CORPORATION**(Registrant)By:/s/
                  R. Russell
                  DavisR.
                  Russell DavisVice
                  President and Chief Accounting
                  Officer
 
 
 
 
 Date:
        May
        2, 2007
   CLECO
                        CORPORATION
                      CLECO
                        POWER
                    2007 1ST
                        QUARTER FORM
                        10-Q
  SIGNATURE
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the
        Registrant has duly caused this report to be signed on its behalf by the
        undersigned thereunto duly authorized.
 
 
 
 
 
 **CLECO
                  POWER LLC**(Registrant)By:/s/
                  R. Russell
                  DavisR.
                  Russell DavisVice
                  President and Chief Accounting
                  Officer
 
 
 
 
 Date:     May
        2,
        2007