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, 2008




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, Pineville, Louisiana
              (Address
      of principal executive offices)
            71360-5226
              (Zip
      Code)Registrant’s
      telephone number, including area code:  (318)
      484-7400Indicate
      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, a non-accelerated filer, or a smaller reporting
      company.  See definitions of “large accelerated filer,”
      “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
      Exchange Act.  (Check one):
              Large
      accelerated filer x           Accelerated
      filer  ̈
                       Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting
      company)            Smaller
      reporting company  ̈Indicate
      by check mark whether Cleco Power LLC is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.  See definitions of “large accelerated filer,”
      “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
      Exchange Act.  (Check one):
              Large
      accelerated filer  ̈           Accelerated
      filer  ̈
                       Non-accelerated
      filer x  (Do
      not check if a smaller reporting
      company)            Smaller
      reporting company  ̈Indicate
      by check mark whether the Registrants are shell companies (as defined in
      Rule 12b-2 of the Exchange Act)  Yes ̈    No
      x




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





Registrant
            Description of
      Class
            Shares
      Outstanding atApril
      30, 2008Cleco
      Corporation
            Common
      Stock, $1.00 Par Value
            60,195,494





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
      CORPORATIONCLECO POWER
                        2008 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 Consolidated
Financial Statements are combined.




TABLE
OF CONTENTS


PAGEGLOSSARY OF
      TERMS
            3DISCLOSURE
      REGARDING FORWARD-LOOKING STATEMENTS
            5PART
      I
            Financial
      InformationITEM
      1.
            Cleco
      Corporation — Condensed Consolidated Financial Statements
            6Cleco
      Power — Condensed Consolidated Financial Statements
            12Notes
      to the Unaudited Condensed Consolidated Financial
    Statements
            16ITEM
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            30ITEM
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            41ITEM
      4.
            Controls
      and Procedures
            43PART
      II
            Other
      InformationITEM
      1.
            Legal
      Proceedings
            44ITEM
      1A.
            Risk
      Factors
            44ITEM
      6.
            Exhibits
            45Signatures
            46




2
 CLECO
      CORPORATIONCLECO POWER
                      2008 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 and its subsidiary, 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 combined-cycle, natural gas-fired power plant
      near Eunice, Louisiana, 50% owned by APH and 50% owned by
      Cajun.  Prior to September 13, 2007, Acadia was 50% owned by APH
      and 50% owned by CAHAFUDC
            Allowance
      for Funds Used During ConstructionAmended
      EPC Contract
            Amended
      and Restated EPC Contract between Cleco Power and Shaw, executed on May
      12, 2006, to engineer, design, and construct Rodemacher Unit
    3APB
            Accounting
      Principles BoardAPB
      Opinion No. 10
            Consolidated
      Financial Statements, Poolings of Interest, Convertible Debt and Debt
      Issued with Stock Warrants Installment Method of
  AccountingAPB
      Opinion No. 18
            The
      Equity Method of Accounting for Investments in Common
  StockAPH
            Acadia
      Power Holdings LLC, a wholly owned subsidiary of
  MidstreamARB
            Accounting
      Research BulletinARB
      No. 51
            Consolidated
      Financial StatementsAttala
            Attala
      Transmission LLC, a wholly owned subsidiary of Cleco
      Corporation.  Prior to February 1, 2007, Attala was a wholly
      owned subsidiary of MidstreamAttala
      Interconnection Agreement
            Interconnection
      Agreement and Real Estate Agreements between Attala and Entergy
      MississippiBear
      Energy LP
            A
      wholly owned subsidiary of Bear Stearns Companies Inc.Bear
      Stearns Companies Inc.
            The
      parent company of Bear, Stearns & Co. Inc.CAH
            Calpine
      Acadia Holdings, LLCCajun
            Cajun
      Gas Energy L.L.C., an affiliate of pooled investment funds managed by King
      Street Capital Management, L.L.C.Calpine
            Calpine
      CorporationCCN
            Certificate
      of Public Convenience and NecessityCES
            Calpine
      Energy Services, L.P.Cleco
      Energy
            Cleco
      Energy LLC, a wholly owned subsidiary of MidstreamCleco
      Innovations LLC
            A
      wholly owned subsidiary of Cleco CorporationCleco
      Katrina/Rita
            Cleco
      Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of
      Cleco PowerDiversified
      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. 06-11
            Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment
      AwardsEITF
      No. 07-1
            Accounting
      for Collaborative Arrangements Related to the Development and
      Commercialization of Intellectual PropertyEITF
      No. 07-3
            Accounting
      for Nonrefundable Advance Payments for Goods or Services to Be Used in
      Future Research and Development ActivitiesEITF
      No. 96-19
            Debtor’s
      Accounting for a Modification or Exchange of Debt
    InstrumentsEntergy
            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
      combined-cycle, natural gas-fired power plant located in Evangeline
      Parish, LouisianaEvangeline
      Tolling Agreement
            Capacity
      Sale and Tolling Agreement between Evangeline and Bear Energy LP which
      expires in 2020.FASB
            Financial
      Accounting Standards BoardFERC
            Federal
      Energy Regulatory CommissionFIN
            FASB
      Interpretation No.FIN
      39
            Offsetting
      of Amounts Related to Certain Contracts – an interpretation of APB Opinion
      No. 10 and FASB Statement No. 105FIN
      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 ARB No. 51 (revised
      December 2003)FIN
      48
            Accounting
      for Uncertainty in Income Taxes – an Interpretation of FASB Statement No.
      109FSP
            FASB
      Staff Position




3
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q


ABBREVIATION
      OR ACRONYM
            DEFINITIONFSP
      No. FAS 157-1
            Application
      of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
      Pronouncements That Address Fair Value Measurements for Purposes of Lease
      Classification or Measurement under Statement 13FSP
      No. FAS 157-2
            Effective
      date of FASB Statement No. 157FSP
      No. FIN 39-1
            Amendment
      of FASB Interpretation No. 39ICT
            Independent
      Coordinator of TransmissionIRP
            Integrated
      Resource PlanningIRS
            Internal
      Revenue ServicekWh
            Kilowatt-hour(s)
      as applicableLDEQ
            Louisiana
      Department of Environmental QualityLIBOR
            London
      Interbank Offered 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 MirantMidstream
            Cleco
      Midstream Resources LLC, a wholly owned subsidiary of Cleco
      CorporationMoody’s
            Moody’s
      Investors ServiceMW
            Megawatt(s)
      as applicablePCB
            Polychlorinated
      biphenylsPerryville
            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 Perryville Energy Holdings LLC, a wholly owned
      subsidiary of Midstream.Perryville
      Interconnection Agreement
            Interconnection
      Agreement and Real Estate Agreements between Perryville and Entergy
      LouisianaPower
      Purchase Agreement
            Power
      Purchase Agreement, dated as of January 28, 2004, between Perryville and
      Entergy ServicesPRP
            Potentially
      responsible partyRegistrant(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, LouisianaRTO
            Regional
      Transmission OrganizationSale
      Agreement
            Purchase
      and Sale Agreement, dated as of January 28, 2004, between Perryville and
      Entergy LouisianaSEC
            Securities
      and Exchange CommissionSERP
            Cleco
      Corporation Supplemental Executive Retirement PlanSFAS
            Statement
      of Financial Accounting StandardsSFAS
      No. 13
            Accounting
      for LeasesSFAS
      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. 141(R)
            Business
      CombinationsSFAS
      No. 149
            Amendment
      of Statement 133 on Derivative Instruments and Hedging
      ActivitiesSFAS
      No. 157
            Fair
      Value MeasurementsSFAS
      No. 159
            The
      Fair Value Option For Financial Assets and Financial Liabilities –
      Including an amendment of FASB Statement No. 115SFAS
      No. 160
            Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No.
      51SFAS
      No. 161
            Disclosures
      about Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133Shaw
            Shaw
      Contractors, 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 Company, a wholly owned subsidiary of American Electric
      Power Company, Inc.VaR
            Value-at-riskWilliams
            Williams
      Power Company, Inc.





4
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS





This
Quarterly Report on Form 10-Q includes “forward-looking statements” about future
events, circumstances, and results.  All statements other than
statements of historical fact included in this Quarterly Report are
forward-looking statements, including, without limitation, statements regarding
the construction, timing and cost of Rodemacher Unit 3; 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; environmental
      compliance costs; power transmission system constraints; or outcome of
      Cleco Power’s rate case expected to be filed with the LPSC by the end of
      the second quarter 2008;




§
            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;




§
            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
      compliance with ERO reliability standards for bulk power systems 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;




§
            The
      amount of uncertain tax positions;




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




§
            Legal,
      environmental, and regulatory delays and other obstacles associated with
      mergers, acquisitions, reorganizations, investments in joint ventures, or
      other capital projects;




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




§
            Changes
      in federal, state, or local laws, and changes in 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 this report and in the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2007.


All
subsequent written and oral forward-looking statements attributable to the
Registrants or persons acting on their behalf are expressly qualified in
their entirety by the factors identified above.


The
Registrants undertake no obligation to update any forward-looking statements,
whether as a result of changes in actual results, changes in assumptions, or
other factors affecting such statements.





5
 CLECO
      CORPORATIONCLECO POWER
                      2008 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, 2007.  For more information on the basis of
presentation, see “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 1 — Summary of Significant Accounting Policies — Basis of
Presentation.”








6
 CLECO
      CORPORATIONCLECO POWER
                      2008 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)
            
            2008
            
            
            2007Operating
      revenueElectric
    operations
            
            $
            209,881
            
            
            $
            213,020Other operations
            
            
            10,064
            
            
            
            9,269Affiliate
revenue
            
            
            2,606
            
            
            
            1,461Operating
    revenue
            
            
            222,551
            
            
            
            223,750Operating
      expensesFuel used for electric
      generation
            
            
            45,536
            
            
            
            55,496Power purchased for utility
      customers
            
            
            89,794
            
            
            
            84,147Other operations
            
            
            22,275
            
            
            
            26,315Maintenance
            
            
            10,113
            
            
            
            10,241Depreciation
            
            
            19,547
            
            
            
            20,098Taxes other than income
      taxes
            
            
            8,831
            
            
            
            9,799Gain on sales of
      assets
            
            
            (99
            )
            
            
            -Total operating
      expenses
            
            
            195,997
            
            
            
            206,096Operating
      income
            
            
            26,554
            
            
            
            17,654Interest
      income
            
            
            1,617
            
            
            
            2,567Allowance
      for other funds used during construction
            
            
            13,683
            
            
            
            5,131Equity
      loss from investees
            
            
            (4,574
            )
            
            
            (1,399
            )Other
      income
            
            
            66
            
            
            
            89Other
      expense
            
            
            (669
            )
            
            
            (1,266
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium and discount, net of capitalized
      interest
            
            
            14,121
            
            
            
            13,657Allowance for borrowed funds
      used during construction
            
            
            (4,577
            )
            
            
            (1,670
            )Total interest
      charges
            
            
            9,544
            
            
            
            11,987Income
      before income taxes
            
            
            27,133
            
            
            
            10,789Federal
      and state income tax expense
            
            
            5,061
            
            
            
            2,143Net
      income
            
            
            22,072
            
            
            
            8,646Preferred
      dividends requirements, net of tax
            
            
            12
            
            
            
            423Net
      income applicable to common stock
            
            $
            22,060
            
            
            $
            8,223Average
      shares of common stock outstandingBasic
            
            
            59,907,896
            
            
            
            57,854,737Diluted
            
            
            60,083,024
            
            
            
            58,198,391Basic
      earnings per shareFrom continuing
      operations
            
            $
            0.37
            
            
            $
            0.14Net income applicable to common
      stock
            
            $
            0.37
            
            
            $
            0.14Diluted
      earnings per shareFrom continuing
      operations
            
            $
            0.37
            
            
            $
            0.14Net income applicable to common
      stock
            
            $
            0.37
            
            
            $
            0.14Cash
      dividends paid per share of common stock
            
            $
            0.225
            
            
            $
            0.225The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





7
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





CLECO
CORPORATION





Condensed
Consolidated Statements of Comprehensive Income (Unaudited)


FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Net
      income
            
            $
            22,072
            
            
            $
            8,646Other
      comprehensive loss, net of tax:Net unrealized loss from
      available-for-sale securities (net of tax benefit of $9 in 2008 and
      $18 in 2007)
            
            
            (14
            )
            
            
            (28
            )Amortization of post-retirement
      benefit net losses (net of tax benefit of $7 in 2008 and $3 in
      2007)
            
            
            (4
            )
            
            
            (2
            )Other
      comprehensive loss
            
            
            (18
            )
            
            
            (30
            )Comprehensive
      income, net of tax
            
            $
            22,054
            
            
            $
            8,616The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





8
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





CLECO
CORPORATION





Condensed
Consolidated Balance Sheets (Unaudited)


(THOUSANDS)
            
            AT
      MARCH 31, 2008
            
            
            AT
      DECEMBER 31, 2007AssetsCurrent assetsCash and cash
      equivalents
            
            $
            108,934
            
            
            $
            129,013Restricted cash
            
            
            10,246
            
            
            
            17,866Customer accounts receivable
      (less allowance for doubtful accounts of $1,236 in 2008 and $1,028 in
      2007)
            
            
            38,870
            
            
            
            39,587Accounts receivable –
      affiliate
            
            
            8,771
            
            
            
            9,367Other accounts
      receivable
            
            
            44,140
            
            
            
            39,029Unbilled
revenue
            
            
            16,566
            
            
            
            17,759Fuel inventory, at average
      cost
            
            
            46,908
            
            
            
            43,291Material and supplies
      inventory, at average cost
            
            
            38,210
            
            
            
            39,195Risk management assets,
      net
            
            
            49,447
            
            
            
            7,201Accumulated deferred
      fuel
            
            
            -
            
            
            
            9,398Cash surrender value of
      company-/trust-owned life insurance policies
            
            
            27,105
            
            
            
            28,857Prepayments
            
            
            2,869
            
            
            
            3,661Regulatory assets -
      other
            
            
            2,554
            
            
            
            20,194Other current
      assets
            
            
            115
            
            
            
            1,098Total current
      assets
            
            
            394,735
            
            
            
            405,516Property, plant and
      equipmentProperty, plant and
      equipment
            
            
            1,933,625
            
            
            
            1,926,848Accumulated
      depreciation
            
            
            (925,857
            )
            
            
            (917,043
            )Net property, plant and
      equipment
            
            
            1,007,768
            
            
            
            1,009,805Construction work in
      progress
            
            
            807,516
            
            
            
            716,075Total property, plant and
      equipment, net
            
            
            1,815,284
            
            
            
            1,725,880Equity investment in
      investees
            
            
            253,056
            
            
            
            258,101Prepayments
            
            
            6,584
            
            
            
            6,783Restricted cash, less current
      portion
            
            
            50,915
            
            
            
            95Regulatory assets and
      liabilities – deferred taxes, net
            
            
            144,207
            
            
            
            126,686Regulatory assets –
      other
            
            
            48,459
            
            
            
            158,268Intangible
assets
            
            
            176,823
            
            
            
            -Other deferred
      charges
            
            
            42,775
            
            
            
            25,294Total assets
            
            $
            2,932,838
            
            
            $
            2,706,623The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





(Continued
      on next page)





9
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





CLECO
CORPORATION


Condensed
Consolidated Balance Sheets (Unaudited) (Continued)


(THOUSANDS)
            
            AT
      MARCH 31, 2008
            
            
            AT
      DECEMBER 31, 2007Liabilities
      and shareholders’ equityLiabilitiesCurrent
    liabilitiesLong-term debt due within one
      year
            
            $
            108,350
            
            
            $
            100,000Accounts
payable
            
            
            101,861
            
            
            
            123,061Retainage
            
            
            5,145
            
            
            
            25Accounts payable –
      affiliate
            
            
            8,417
            
            
            
            6,860Customer
    deposits
            
            
            26,195
            
            
            
            25,989Taxes accrued
            
            
            21,626
            
            
            
            12,411Interest
accrued
            
            
            12,019
            
            
            
            21,933Accumulated deferred
      fuel
            
            
            49,918
            
            
            
            -Accumulated current deferred
      taxes, net
            
            
            45,661
            
            
            
            43,055Risk management liability,
      net
            
            
            -
            
            
            
            3,881Regulatory liabilities -
      other
            
            
            533
            
            
            
            538Deferred
      compensation
            
            
            6,140
            
            
            
            6,366Other current
      liabilities
            
            
            12,233
            
            
            
            13,348Total current
      liabilities
            
            
            398,098
            
            
            
            357,467Deferred creditsAccumulated deferred federal
      and state income taxes, net
            
            
            363,952
            
            
            
            366,305Accumulated deferred investment
      tax credits
            
            
            12,321
            
            
            
            12,665Regulatory liabilities -
      other
            
            
            43,514
            
            
            
            31,855Restricted storm
      reserve
            
            
            50,935
            
            
            
            -Uncertain tax
      positions
            
            
            67,496
            
            
            
            68,369Other deferred
      credits
            
            
            114,961
            
            
            
            89,490Total deferred
      credits
            
            
            653,179
            
            
            
            568,684Long-term debt,
    net
            
            
            861,025
            
            
            
            769,103Total
    liabilities
            
            
            1,912,302
            
            
            
            1,695,254Commitments
      and Contingencies (Note 11)Shareholders’
      equityPreferred stockNot subject to mandatory
      redemption, $100 par value, authorized 1,491,900 shares, issued 10,288
      shares at
              March 31, 2008 and December 31,
      2007
            
            
            1,029
            
            
            
            1,029Common shareholders’
      equityCommon stock, $1 par value,
      authorized 100,000,000 shares, issued 60,010,558 and 59,971,945 shares and
      outstanding 59,982,882
              and 59,943,589 shares
      at March 31, 2008 and December 31, 2007, respectively
            
            
            60,011
            
            
            
            59,972Premium on common
      stock
            
            
            392,196
            
            
            
            391,565Retained
    earnings
            
            
            576,215
            
            
            
            567,724Treasury stock, at
      cost, 27,676 and 28,356 shares at March 31, 2008 and
      December 31, 2007, respectively
            
            
            (506
            )
            
            
            (530
            )Accumulated other comprehensive
      loss
            
            
            (8,409
            )
            
            
            (8,391
            )Total common shareholders’
      equity
            
            
            1,019,507
            
            
            
            1,010,340Total shareholders’
      equity
            
            
            1,020,536
            
            
            
            1,011,369Total
      liabilities and shareholders’ equity
            
            $
            2,932,838
            
            
            $
            2,706,623The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





10
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





CLECO
CORPORATION





Condensed
Consolidated Statements of Cash Flows (Unaudited)


FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Operating
      activitiesNet income
            
            $
            22,072
            
            
            $
            8,646Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation and
      amortization
            
            
            20,160
            
            
            
            21,001Gain on sale of
      assets
            
            
            (99
            )
            
            
            -Provision for doubtful
      accounts
            
            
            680
            
            
            
            501Loss from equity
      investments
            
            
            4,574
            
            
            
            1,399Unearned compensation
      expense
            
            
            448
            
            
            
            3,028ESOP expense
            
            
            -
            
            
            
            890Allowance for other funds used
      during construction
            
            
            (13,683
            )
            
            
            (5,131
            )Amortization of investment tax
      credits
            
            
            (345
            )
            
            
            (359
            )Net deferred income
      taxes
            
            
            (10,563
            )
            
            
            1,939Deferred fuel
    costs
            
            
            (9,471
            )
            
            
            (9,125
            )Gain on economic
      hedges
            
            
            (1,770
            )
            
            
            (1,459
            )Cash surrender value of
      company-/trust-owned life insurance
            
            
            227
            
            
            
            (343
            )Changes in assets and
      liabilities:Accounts
    receivable
            
            
            (4,654
            )
            
            
            (5,616
            )Accounts and notes receivable,
      affiliate
            
            
            1,781
            
            
            
            (2,256
            )Unbilled
revenue
            
            
            1,193
            
            
            
            2,376Fuel, materials and supplies
      inventory
            
            
            (2,632
            )
            
            
            (5,246
            )Prepayments
            
            
            1,301
            
            
            
            1,103Accounts
payable
            
            
            (15,804
            )
            
            
            (21,045
            )Accounts and notes payable,
      affiliate
            
            
            809
            
            
            
            697Customer
    deposits
            
            
            1,262
            
            
            
            1,409Regulatory assets and
      liabilities, net
            
            
            11,368
            
            
            
            3,951Other deferred
      accounts
            
            
            12,278
            
            
            
            (613
            )Retainage
    payable
            
            
            5,120
            
            
            
            5,657Taxes accrued
            
            
            9,215
            
            
            
            (15,657
            )Interest
accrued
            
            
            (9,378
            )
            
            
            5,342Risk management assets and
      liabilities, net
            
            
            5,506
            
            
            
            15,094Other, net
            
            
            (278
            )
            
            
            1,324Net cash provided by
      operating activities
            
            
            29,317
            
            
            
            7,507Investing
      activitiesAdditions to property, plant and
      equipment
            
            
            (107,187
            )
            
            
            (96,711
            )Allowance for other funds used
      during construction
            
            
            13,683
            
            
            
            5,131Proceeds from sale of property,
      plant and equipment
            
            
            140
            
            
            
            -Premiums paid on
      company-/trust-owned life insurance
            
            
            (514
            )
            
            
            -Settlements received from
      insurance policies
            
            
            941
            
            
            
            -Transfer of cash (to) from
      restricted accounts
            
            
            (43,200
            )
            
            
            13,113Other investing
            
            
            632
            
            
            
            75Net cash used in investing
      activities
            
            
            (135,505
            )
            
            
            (78,392
            )Financing
      activitiesRetirement of long-term
      obligations
            
            
            (140,178
            )
            
            
            (10,111
            )Issuance of long-term
      debt
            
            
            240,434
            
            
            
            -Deferred financing
      costs
            
            
            (745
            )
            
            
            (341
            )Dividends paid on preferred
      stock
            
            
            (12
            )
            
            
            (423
            )Dividends paid on common
      stock
            
            
            (13,501
            )
            
            
            (12,948
            )Other financing
            
            
            111
            
            
            
            845Net cash provided by (used in)
      financing activities
            
            
            86,109
            
            
            
            (22,978
            )Net
      decrease in cash and cash equivalents
            
            
            (20,079
            )
            
            
            (93,863
            )Cash
      and cash equivalents at beginning of period
            
            
            129,013
            
            
            
            192,471Cash
      and cash equivalents at end of period
            
            $
            108,934
            
            
            $
            98,608Supplementary
      cash flow informationInterest paid (net of amount
      capitalized)
            
            $
            10,362
            
            
            $
            7,716Income taxes
      paid
            
            $
            12,059
            
            
            $
            15,000Supplementary
      non-cash investing and financing activitiesIssuance of treasury stock –
      LTICP and ESOP plans
            
            $
            25
            
            
            $
            25Issuance of common stock –
      LTICP/ESOP/ESPP1
            
            $
            53
            
            
            $
            20,030Accrued additions to property,
      plant and equipment not reported above
            
            $
            28,186
            
            
            $
            50,0921 Includes conversion of preferred
      stock to common stock($19,063/2007)The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.




11
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





PART
I — FINANCIAL INFORMATION





ITEM
1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Cleco
Power


These
unaudited condensed consolidated financial statements should be read in
conjunction with Cleco Power’s Consolidated Financial Statements and Notes
included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal
year ended December 31, 2007.  For more information on the basis of
presentation, see “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 1 — Summary of Significant Accounting Policies — Basis of
Presentation.”







12
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q


CLECO
POWER





Condensed
Consolidated Statements of Income (Unaudited)


FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Operating
      revenueElectric
    operations
            
            $
            209,881
            
            
            $
            213,020Other operations
            
            
            10,061
            
            
            
            9,260Affiliate
revenue
            
            
            508
            
            
            
            513Operating
    revenue
            
            
            220,450
            
            
            
            222,793Operating
      expensesFuel used for electric
      generation
            
            
            45,536
            
            
            
            55,496Power purchased for utility
      customers
            
            
            89,794
            
            
            
            84,147Other operations
            
            
            20,915
            
            
            
            25,613Maintenance
            
            
            9,193
            
            
            
            9,727Depreciation
            
            
            19,214
            
            
            
            19,761Taxes other than income
      taxes
            
            
            7,813
            
            
            
            8,902Total operating
      expenses
            
            
            192,465
            
            
            
            203,646Operating
      income
            
            
            27,985
            
            
            
            19,147Interest
      income
            
            
            577
            
            
            
            1,406Allowance
      for other funds used during construction
            
            
            13,683
            
            
            
            5,131Other
      income
            
            
            101
            
            
            
            94Other
      expense
            
            
            (345
            )
            
            
            (342
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium and discount
            
            
            12,012
            
            
            
            11,714Allowance for borrowed funds
      used during construction
            
            
            (4,577
            )
            
            
            (1,670
            )Total interest
      charges
            
            
            7,435
            
            
            
            10,044Income
      before income taxes
            
            
            34,566
            
            
            
            15,392Federal
      and state income taxes
            
            
            6,958
            
            
            
            3,116Net
      income
            
            $
            27,608
            
            
            $
            12,276The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





13
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q
  CLECO
POWER


Condensed
Consolidated Balance Sheets (Unaudited)


(THOUSANDS)
            
            AT
      MARCH 31, 2008
            
            
            AT DECEMBER 31,
    2007AssetsUtility plant and
      equipmentProperty, plant and
      equipment
            
            $
            1,918,462
            
            
            $
            1,911,626Accumulated
      depreciation
            
            
            (915,973
            )
            
            
            (907,434
            )Net property, plant and
      equipment
            
            
            1,002,489
            
            
            
            1,004,192Construction work in
      progress
            
            
            806,292
            
            
            
            714,978Total utility plant,
      net
            
            
            1,808,781
            
            
            
            1,719,170Current assetsCash and cash
      equivalents
            
            
            7,400
            
            
            
            11,944Restricted cash
            
            
            10,246
            
            
            
            17,866Customer accounts receivable
      (less allowance for doubtful accounts of $1,236 in 2008 and $1,028 in
      2007)
            
            
            38,870
            
            
            
            39,587Other accounts
      receivable
            
            
            43,760
            
            
            
            38,527Accounts receivable –
      affiliate
            
            
            2,648
            
            
            
            17,425Unbilled
revenue
            
            
            16,566
            
            
            
            17,759Fuel inventory, at average
      cost
            
            
            46,908
            
            
            
            43,291Material and supplies
      inventory, at average cost
            
            
            38,210
            
            
            
            39,195Risk management assets,
      net
            
            
            49,447
            
            
            
            7,201Prepayments
            
            
            2,355
            
            
            
            2,900Regulatory assets –
      other
            
            
            2,554
            
            
            
            20,194Accumulated deferred
      fuel
            
            
            -
            
            
            
            9,398Cash surrender value of life
      insurance policies
            
            
            5,263
            
            
            
            5,333Other current
      assets
            
            
            408
            
            
            
            439Total current
      assets
            
            
            264,635
            
            
            
            271,059Prepayments
            
            
            6,584
            
            
            
            6,783Restricted cash, less current
      portion
            
            
            50,819
            
            
            
            -Regulatory assets and
      liabilities – deferred taxes, net
            
            
            144,207
            
            
            
            126,686Regulatory assets –
      other
            
            
            48,459
            
            
            
            158,268Intangible
assets
            
            
            176,823
            
            
            
            -Other deferred
      charges
            
            
            33,407
            
            
            
            24,516Total
      assets
            
            $
            2,533,715
            
            
            $
            2,306,482Liabilities
      and member’s equityMember’s equity
            
            $
            843,619
            
            
            $
            816,110Long-term debt,
    net
            
            
            861,025
            
            
            
            769,103Total
      capitalization
            
            
            1,704,644
            
            
            
            1,585,213Current
      liabilitiesLong-term debt due within one
      year
            
            
            8,350
            
            
            
            -Accounts payable
            
            
            99,763
            
            
            
            117,640Accounts payable –
      affiliate
            
            
            10,607
            
            
            
            18,881Retainage
            
            
            5,145
            
            
            
            25Customer
deposits
            
            
            26,195
            
            
            
            25,989Taxes accrued
            
            
            15,575
            
            
            
            6,958Interest accrued
            
            
            9,103
            
            
            
            17,536Accumulated deferred
      fuel
            
            
            49,918
            
            
            
            -Accumulated deferred taxes,
      net
            
            
            46,951
            
            
            
            45,205Risk management liability,
      net
            
            
            -
            
            
            
            3,881Regulatory liabilities -
      other
            
            
            533
            
            
            
            538Other current
      liabilities
            
            
            9,051
            
            
            
            9,690Total current
      liabilities
            
            
            281,191
            
            
            
            246,343Deferred
      creditsAccumulated deferred federal and
      state income taxes, net
            
            
            320,111
            
            
            
            321,747Accumulated deferred investment
      tax credits
            
            
            12,321
            
            
            
            12,665Regulatory liabilities -
      other
            
            
            43,514
            
            
            
            31,855Restricted storm
      reserve
            
            
            50,935
            
            
            
            -Uncertain tax
      positions
            
            
            44,381
            
            
            
            44,960Other deferred
      credits
            
            
            76,618
            
            
            
            63,699Total deferred
      credits
            
            
            547,880
            
            
            
            474,926Total
      liabilities and member’s equity
            
            $
            2,533,715
            
            
            $
            2,306,482The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





14
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





CLECO
POWER





Condensed
Consolidated Statements of Cash Flows (Unaudited)


FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Operating
      activitiesNet income
            
            $
            27,608
            
            
            $
            12,276Adjustments to reconcile net
      income to net cash provided by (used in) operating
    activities:Depreciation and
      amortization
            
            
            19,684
            
            
            
            20,521Provision for doubtful
      accounts
            
            
            675
            
            
            
            501Unearned compensation
      expense
            
            
            70
            
            
            
            1,381Allowance for other funds used
      during construction
            
            
            (13,683
            )
            
            
            (5,131
            )Amortization of investment tax
      credits
            
            
            (345
            )
            
            
            (359
            )Net deferred income
      taxes
            
            
            (10,365
            )
            
            
            (11,819
            )Deferred fuel
    costs
            
            
            (9,471
            )
            
            
            (9,125
            )Gain on economic
      hedges
            
            
            (1,770
            )
            
            
            (1,459
            )Cash surrender value of
      company-owned life insurance
            
            
            (107
            )
            
            
            (112
            )Changes in assets and
      liabilities:Accounts
    receivable
            
            
            (4,770
            )
            
            
            (5,547
            )Accounts and notes receivable,
      affiliate
            
            
            14,782
            
            
            
            (2,079
            )Unbilled
revenue
            
            
            1,193
            
            
            
            2,376Fuel, materials and supplies
      inventory
            
            
            (2,632
            )
            
            
            (5,246
            )Prepayments
            
            
            1,053
            
            
            
            841Accounts
payable
            
            
            (12,547
            )
            
            
            (18,128
            )Accounts and notes payable,
      affiliate
            
            
            (8,397
            )
            
            
            (16,941
            )Customer
    deposits
            
            
            1,262
            
            
            
            1,409Regulatory assets and
      liabilities, net
            
            
            11,368
            
            
            
            3,951Other deferred
      accounts
            
            
            8,321
            
            
            
            (313
            )Retainage
    payable
            
            
            5,120
            
            
            
            5,657Taxes accrued
            
            
            8,617
            
            
            
            658Interest
accrued
            
            
            (7,899
            )
            
            
            3,588Risk management assets and
      liabilities, net
            
            
            5,506
            
            
            
            15,094Other, net
            
            
            (582
            )
            
            
            (196
            )Net cash provided by (used in)
      operating activities
            
            
            32,691
            
            
            
            (8,202
            )Investing
      activitiesAdditions to property, plant and
      equipment
            
            
            (107,061
            )
            
            
            (96,578
            )Allowance for other funds used
      during construction
            
            
            13,683
            
            
            
            5,131Proceeds from sale of property,
      plant and equipment
            
            
            140
            
            
            
            -Premiums paid on company-owned
      life insurance
            
            
            (309
            )
            
            
            -Transfer of cash (to) from
      restricted accounts
            
            
            (43,199
            )
            
            
            13,114Net cash used in investing
      activities
            
            
            (136,746
            )
            
            
            (78,333
            )Financing
      activitiesRetirement of long-term
      obligations
            
            
            (140,178
            )
            
            
            (10,111
            )Issuance of long-term
      debt
            
            
            240,434
            
            
            
            -Deferred financing
      costs
            
            
            (745
            )
            
            
            (341
            )Net cash provided by (used in)
      financing activities
            
            
            99,511
            
            
            
            (10,452
            )Net
      decrease in cash and cash equivalents
            
            
            (4,544
            )
            
            
            (96,987
            )Cash
      and cash equivalents at beginning of period
            
            
            11,944
            
            
            
            101,878Cash
      and cash equivalents at end of period
            
            $
            7,400
            
            
            $
            4,891Supplementary
      cash flow informationInterest paid (net of amount
      capitalized)
            
            $
            10,361
            
            
            $
            7,716Supplementary
      non-cash investing and financing activitiesAccrued additions to property,
      plant and equipment not reported above
            
            $
            28,186
            
            
            $
            50,092The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





15
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Index
to Applicable Notes to the Unaudited Condensed Consolidated Financial Statements
of Registrants





Note
      1
            Summary
      of Significant Accounting Policies
            Cleco
      Corporation and Cleco PowerNote
      2
            Recent
      Accounting Standards
            Cleco
      Corporation and Cleco PowerNote
      3
            Fair
      Value Measurement Disclosures
            Cleco
      Corporation and Cleco PowerNote
      4
            Regulatory
      Assets and Liabilities
            Cleco
      Corporation and Cleco PowerNote
      5
            Restricted
      Cash
            Cleco
      Corporation and Cleco PowerNote
      6
            Debt
            Cleco
      Corporation and Cleco PowerNote
      7
            Pension
      Plan and Employee Benefits
            Cleco
      Corporation and Cleco PowerNote
      8
            Income
      Taxes
            Cleco
      Corporation and Cleco PowerNote
      9
            Disclosures
      about Segments
            Cleco
      CorporationNote
      10
            Equity
      Investment in Investees
            Cleco
      CorporationNote
      11
            Litigation,
      Other Commitments and Contingencies, and Disclosures about
      Guarantees
            Cleco
      Corporation and Cleco PowerNote
      12
            Affiliate
      Transactions
            Cleco
      Corporation and Cleco PowerNote
      13
            Intangible
      Asset
            Cleco
      Corporation and Cleco Power





Notes
to the Unaudited Condensed Consolidated Financial Statements





Note
1 — Summary of Significant Accounting Policies





Principles
of Consolidation


The
accompanying condensed consolidated 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 scheduled effective
dates.  Through a review of equity interests and other contractual
relationships, Cleco has determined that it is not the primary beneficiary of
Evangeline, Perryville, Attala, and Acadia.  These 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 of these entities
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 10 — “Equity Investment in
Investees.”


In
March 2008, in connection with the closing of the securitization transaction,
Cleco Power sold the right to bill and collect from customers unamortized storm
damage costs to Cleco Katrina/Rita, a special purpose, wholly owned subsidiary
of Cleco Power.  Cleco Power, through a review of its relationships
with Cleco Katrina/Rita, has determined the entity should be consolidated with
Cleco Power.  For additional information about Cleco Katrina/Rita, see
Note 4 — “Regulatory Assets and Liabilities — Deferred Storm Restoration Costs -
Katrina/Rita.”




Basis
of Presentation


The
condensed consolidated financial statements of Cleco Corporation and 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 consolidated 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 2 — “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.




Fair
Value Measurements


Various
accounting pronouncements require certain assets and liabilities to be measured
at their fair values.  Certain assets and liabilities are required to
be measured at their fair value each reporting period, while others are required
to be measured only one time, generally the date of acquisition or
issuance.  Beginning with reporting periods ending after January 1,
2008, Cleco and Cleco Power are required to
  16
 CLECO
      CORPORATIONCLECO POWER
                        2008 1ST QUARTER FORM
      10-Q
  disclose
the fair value of financial assets and liabilities by one of three
levels.  For more information about fair value levels, see Note 3 —
“Fair Value Measurement Disclosures.”


Risk
Management


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 on different energy
exchanges. Cleco’s Energy Risk Management Policy authorizes the use of
various derivative instruments, including exchange traded futures and option
contracts, forward purchase and sales contract,
and swap transactions to reduce exposure to fluctuations in the price of power
and natural gas.  Cleco uses 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
Power has entered into certain financial transactions it considers economic
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 96% 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, 2008, and 2007,
there was a net mark-to-market gain of $1.8 million and $1.5 million,
respectively, and a realized gain of $0.1 million and a realized loss of less
than $0.1 million, respectively, recorded in other operations revenue related to
these economic hedge transactions.


Cleco
Power has entered into other positions to mitigate the volatility in customer
fuel costs.  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 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, 2008, and December 31, 2007, the net mark-to-market impact relating to
these positions was a gain of $59.5 million and a loss of $7.0 million,
respectively.  The increase is due to higher gas prices at March 31,
2008, compared to December 31, 2007.  Deferred gains relating to
closed natural gas positions at March 31, 2008, totaled $2.3 million, and
deferred losses at December 31, 2007, totaled $3.1 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, 2008, Cleco Power had received
collateral of $8.1 million, compared to paying collateral of $3.0 million at
December 31, 2007, to cover margin requirements relating to open natural gas
futures, options and swap positions.


Cleco
and Cleco Power maintain a master netting agreement 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


The
following table shows the calculation of basic and diluted earnings per
share.




FOR
      THE THREE MONTHS ENDED MARCH 31,2008
            
            
            
            
            
            
            
            
            2007(THOUSANDS,
      EXCEPT SHARES AND PER SHARE AMOUNTS)
            
            INCOME
            
            
            SHARES
            
            
            PER
      SHARE
              AMOUNT
            
            
            INCOME
            
            
            SHARES
            
            
            PER
      SHARE
              AMOUNTIncome
      from continuing operations
            
            $
            22,072
            
            
            
            
            
            
            
            
            $
            8,646Deduct:  non-participating
      stock dividends (4.5% preferred stock)
            
            
            12
            
            
            
            
            
            
            
            
            
            12Deduct:  participating
      preferred stock dividends
            
            
            -
            
            
            
            
            
            
            
            
            
            411Basic
      earnings per shareIncome
      from continuing operations
            
            $
            22,060
            
            
            
            
            
            $
            0.37
            
            
            $
            8,223
            
            
            
            
            
            $
            0.14Total
      basic net income applicable to common stock
            
            $
            22,060
            
            
            
            59,907,896
            
            
            $
            0.37
            
            
            $
            8,223
            
            
            
            57,854,737
            
            
            $
            0.14Effect
      of Dilutive SecuritiesAdd:  stock
      option grants
            
            
            
            
            
            
            61,527
            
            
            
            
            
            
            
            -
            
            
            
            170,251Add:  restricted
      stock (LTICP)
            
            
            
            
            
            
            113,601
            
            
            
            
            
            
            
            6
            
            
            
            173,403Diluted
      earnings per shareIncome
      from continuing operations plus assumed conversions
            
            $
            22,060
            
            
            
            
            
            
            $
            0.37
            
            
            $
            8,229
            
            
            
            
            
            
            $
            0.14Total
      diluted net income applicable to common stock
            
            $
            22,060
            
            
            
            60,083,024
            
            
            $
            0.37
            
            
            $
            8,229
            
            
            
            58,198,391
            
            
            $
            0.14





17
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




There
were no stock option grants excluded from the computation of diluted earnings
per share for the three months ended March 31, 2008 or 2007, due to the average
market price being higher than the exercise prices of the stock
options.




Stock-Based
Compensation


At
March 31, 2008, 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 25, 2008, Cleco granted 82,993 shares of non-vested stock and 63,733 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)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Equity
      classificationNon-vested
      stock
            
            $
            359
            
            
            $
            625
            
            
            $
            64
            
            
            $
            250Stock
      options
            
            
            14
            
            
            
            23
            
            
            
            -
            
            
            
            4Non-forfeitable
      dividends
            
            
            -
            
            
            
            6
            
            
            
            -
            
            
            
            4Total
            
            $
            373
            
            
            $
            654
            
            
            $
            64
            
            
            $
            258Liability
      classificationCommon
      stock equivalent units
            
            $
            (10
            )
            
            $
            209
            
            
            $
            6
            
            
            $
            80Company
      funded participants income tax obligations
            
            
            -
            
            
            
            2,085
            
            
            
            -
            
            
            
            1,043Total
            
            $
            (10
            )
            
            $
            2,294
            
            
            $
            6
            
            
            $
            1,123Total
      pre-tax compensation expense
            
            $
            363
            
            
            $
            2,948
            
            
            $
            70
            
            
            $
            1,381Tax
      benefit (excluding income tax gross-up)
            
            $
            223
            
            
            $
            332
            
            
            $
            43
            
            
            $
            130





Note
2 — Recent Accounting Standards


The
Registrants adopted, or will adopt, the recent accounting standards listed below
on their respective effective dates.


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.  In February 2008, FASB amended
SFAS No. 157.  FSP No. FAS 157-1 excludes fair value lease
calculations pursuant to SFAS No. 13, as amended, from SFAS No. 157, but does
not exclude assets and liabilities acquired pursuant to SFAS No.
141(R).  FSP No. FAS 157-2 defers the effective date of SFAS No. 157
for non-financial assets and liabilities that are not recognized or disclosed at
fair value on a recurring basis by one year.  The adoption of SFAS No.
157 and the related FSPs did not have a material impact on the financial
condition or results of operations of the Registrants.  For more
information regarding SFAS No. 157 related disclosures, see Note 1 — “Summary of
Significant Accounting Policies — Risk Management.”


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.  The Registrants did not elect the fair value
option for eligible items existing at the effective date.  The
adoption of SFAS No. 159 did not have an impact on the financial condition or
results of operations of the Registrants.


In
April 2007, the FASB issued FSP No. FIN 39-1, which amends FIN
39.  The new guidance permits companies to offset fair value amounts
recognized for derivative instruments executed with the same counterparty under
a master netting arrangement and fair value amounts recognized for the right to
reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable) arising from the same master netting arrangement as the
derivative instruments.  FSP No. FIN 39-1 is effective for fiscal
years beginning after November 15, 2007.  Upon the adoption of FSP No.
FIN 39-1, Cleco Corporation and Cleco Power adopted the policy to net the fair
value of derivative instruments along with the right to reclaim cash collateral
or obligation to return cash collateral.  In accordance with the
provisions of this FSP, the netting was applied retrospectively to the prior
balance sheet presented as a change to an accounting principle.  The
following table represents the right to reclaim cash collateral or obligation to
return cash collateral netted against the fair value of derivative instruments
for both Cleco Corporation and Cleco Power.





(THOUSANDS)
            
            AT
      MARCH 31, 2008
            
            
            AT
      DECEMBER 31, 2007Cash
      collateralRight to receive
            
            $
            -
            
            
            $
            2,966Obligation to
    return
            
            $
            8,072
            
            
            $
            -




Cleco
Corporation and Cleco Power’s Condensed Consolidated Balance Sheets at December
31, 2007 have been retrospectively adjusted due to the adoption of FSP No. FIN
39-1.  The retrospective adjustments to the December 31, 2007, balance
sheets are described in the following tables.




18
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




(THOUSANDS)
            
            AS
      REPORTED
            
            
            AS
      ADJUSTEDCleco
      CorporationCurrent assets – margin
      deposits
            
            $
            2,966
            
            
            $
            -Current assets – risk management
      asset
            
            $
            7,396
            
            
            $
            7,201Assets – other deferred
      charges
            
            $
            26,245
            
            
            $
            25,294Current liabilities – risk
      management liability
            
            $
            7,993
            
            
            $
            3,881





(THOUSANDS)
            
            AS
      REPORTED
            
            
            AS
      ADJUSTEDCleco
      PowerCurrent assets – margin
      deposits
            
            $
            2,966
            
            
            $
            -Current assets – risk management
      asset
            
            $
            7,396
            
            
            $
            7,201Assets – other deferred
      charges
            
            $
            25,467
            
            
            $
            24,516Current liabilities – risk
      management liability
            
            $
            7,993
            
            
            $
            3,881




The
retrospective adoption of FSP No. FIN 39-1 had no effect on net income, earnings
per share, shareholders’ equity or member’s equity.


In
June 2007, the FASB ratified EITF No. 06-11.  This consensus requires
companies to record the realized income tax benefits from dividends or dividend
equivalents that are charged to retained earnings and are paid to employees to
the additional paid-in capital pool.  This consensus is effective
prospectively for dividends declared in fiscal years beginning after September
15, 2007.  This consensus may be adopted early in financial periods
for which financial statements have not been issued.  Entities shall
disclose the nature of any change in their accounting policy for income tax
benefits of dividends on share-based payment awards resulting from the adoption
of this guidance.  The adoption of this EITF did not have an impact on
the financial condition or results of operations of the
Registrants.


In
June 2007, the FASB ratified EITF No. 07-3.  This consensus requires
companies that make non-refundable advance payments for future research and
development activities to capitalize the payments until the goods have been
delivered or the related services performed.  This consensus is
effective for financial statements issued for fiscal years beginning after
December 15, 2007.  Earlier application is not
permitted.  The adoption of this EITF did not have an impact on the
financial condition and results of operations of the Registrants.


In
December 2007, the FASB released SFAS No. 141(R).  This revision
requires the acquirer of a business to recognize assets acquired, liabilities
assumed, and any non-controlling interests at their fair market
values.  The statement gives guidance on the calculation of goodwill
or gain from a bargain purchase and expands the required
disclosures.  The provisions of this statement are applicable to
acquisitions either through one transaction or through a step
acquisition.  This SFAS is applied prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  This statement may not be adopted early.  The
adoption of this statement will only impact the financial condition and results
of operations of the Registrants if they are involved in transactions within the
scope of this statement after its effective date.


In
December 2007, the FASB released SFAS No. 160.  This statement gives
guidance on the presentation and disclosure of noncontrolling interests
(currently known as minority interest) of consolidated
subsidiaries.  This statement requires the noncontrolling interest to
be included in the equity section of the balance sheet, requires disclosure on
the face of the consolidated income statement of the amounts of consolidated net
income attributable to the consolidated parent and the noncontrolling interest,
and expands disclosures.  The provisions of this statement are to be
applied prospectively to fiscal years beginning on or after December 15,
2008.  Early adoption is prohibited.  The adoption of SFAS
No. 160 is not expected to have an impact on the financial condition or results
of operations of the Registrants.


In
December 2007, the FASB ratified EITF No. 07-1.  This EITF prescribes
the income statement presentation and disclosures for participants in
collaborative arrangements.  A collaborative arrangement is defined as
a contractual arrangement that involves a joint operating activity, usually
outside of a legal entity.  The provisions of this EITF are effective
for fiscal years beginning after December 15, 2008 and shall be applied
retrospectively for all collaborative arrangements existing as of the effective
date.  Management is currently evaluating the impact this EITF will
have on the financial condition and results of operations of the
Registrants.


In
March 2008, FASB issued SFAS No. 161 which enhances the disclosures about an
entity’s derivative and hedging activities.  The disclosures include
how and why a derivative instrument is used, how the derivative instrument and
the hedged item are related, and the impact of the derivative instrument and the
hedged item on the entity’s financial statements.  SFAS No. 161 is
effective for fiscal years and interim periods beginning after November 15,
2008.  Since this SFAS is only a change in disclosure, the adoption of
SFAS No. 161 will not have an impact on the financial condition or results of
operations of the Registrants.




Note
3 — Fair Value Measurement Disclosures


SFAS
No. 157 requires entities to classify assets and liabilities measured at their
fair value according to three different levels depending on the inputs used in
determining fair value.




§
            Level
      1 – unadjusted quoted prices in active, liquid markets for the identical
      asset or liability;


§
            Level
      2 – quoted prices for similar assets and liabilities in active markets or
      other inputs that are observable for the asset or liability, including
      inputs that can be corroborated by observable market data, observable
      interest rate yield curves and
volatilities;


§
            Level
      3 – unobservable inputs based upon the entities own
      assumptions.






19
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




The
tables below disclose for Cleco Consolidated and Cleco Power the fair value of
financial assets and liabilities measured on a recurring basis and within the
scope of SFAS No. 157.





CLECO
      CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE
    USING:(THOUSANDS)
            
            AT MARCH
      31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR
      IDENTICAL
              ASSETS
              (LEVEL
      1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL
      2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL
      3)Asset
      DescriptionDerivatives
            
            $
            289,136
            
            
            $
            14,934
            
            
            $
            274,202
            
            
            $
            -Institutionalmoney
      marketfunds
            
            
            137,622
            
            
            
            -
            
            
            
            137,622
            
            
            
            -Security availablefor
      sale
            
            
            127
            
            
            
            127
            
            
            
            -
            
            
            
            -Total
            
            $
            426,885
            
            
            $
            15,061
            
            
            $
            411,824
            
            
            $
            -





CLECO
      CONSOLIDATED FAIR VALUE MEASUREMENTS AT REPORTING DATE
    USING:(THOUSANDS)
            
            AT MARCH
      31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR
      IDENTICAL
              LIABILITIES
              (LEVEL
      1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL
      2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL
      3)Liability
      DescriptionDerivatives
            
            $
            225,970
            
            
            $
            -
            
            
            $
            225,970
            
            
            $
            -





CLECO
      POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
            
            AT MARCH
      31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR
      IDENTICAL
              ASSETS
              (LEVEL
      1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL
      2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL
      3)Asset
      DescriptionDerivatives
            
            $
            289,136
            
            
            $
            14,934
            
            
            $
            274,202
            
            
            $
            -Institutionalmoney
      marketfunds
            
            
            56,222
            
            
            
            -
            
            
            
            56,222
            
            
            
            -Total
            
            $
            345,358
            
            
            $
            14,934
            
            
            $
            330,424
            
            
            $
            -





CLECO
      POWER FAIR VALUE MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
            
            AT MARCH
      31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR
      IDENTICAL
              LIABILITIES
              (LEVEL
      1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL
      2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL
      3)Liability
      DescriptionDerivatives
            
            $
            225,970
            
            
            $
            -
            
            
            $
            225,970
            
            
            $
            -




Cleco
chose to defer for one year the provisions of SFAS No. 157 for non-financial
assets and liabilities in accordance with FSP No. FAS 157-2.


The
derivative assets and liabilities are classified as either current or
non-current depending on when the positions close.  All derivative
current assets and current liabilities are reported as a net current risk
management asset or liability.  All derivative non-current assets and
non-current liabilities are reported net in other deferred charges or other
deferred credits.  Net presentation is appropriate due to the right of
offset included in the master netting agreements.  In accordance with
EITF FIN 39-1, the net current and net non-current derivative positions are
netted with the applicable margin deposits.  At March 31, 2008, a net
current risk management asset of $49.4 million represented net current
derivative positions of $54.9 million reduced by current margin deposits of $5.5
million.  Net non-current derivative positions were $14.5 million,
reduced by non-current margin deposits of $2.6 million which was recorded in
other deferred charges on the balance sheet.  The $137.6 million in
institutional money market funds was reported on the Cleco Consolidated balance
sheet in cash and cash equivalents, current restricted cash, and restricted
non-current cash in the amounts of $84.9 million, $1.9 million, and $50.8
million, respectively.  At Cleco Power, cash and cash
equivalents, current restricted cash, and restricted non-current cash
contained $3.5 million, $1.9 million, and $50.8 million,
respectively.  The security available for sale is reported as a
component of other current assets.
 Cleco
utilizes different valuation techniques for fair value
calculations.  In order to measure the fair value for Level 1 assets
and liabilities, Cleco obtains the closing price from published indices in
active markets for the various instruments and multiplies by the appropriate
number of instruments held.  Level 2 fair values for assets and
liabilities are determined by obtaining the closing price from published indices
in active markets for instruments that are similar to Cleco’s assets and
liabilities.  The fair value obtained is then discounted to the
current period using a U.S. Treasury published interest rate as a proxy for a
risk-free rate of return.  For some options, Cleco uses the
Black-Scholes model using observable and available inputs to calculate the fair
value, consistent with the income approach.  These techniques have
been applied consistently from fiscal period to fiscal period.  Level
3 fair values allow for situations in which there is little, if any, market
activity for the asset or liability at the measurement date.  Cleco
had no level three assets or liabilities at March 31, 2008.




Note
4 — 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, 2008, and December 31, 2007:





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,(THOUSANDS)
            
            2008
            
            
            2007Regulatory
      assets and liabilities – deferred taxes, net
            
            $
            144,207
            
            
            $
            126,686Deferred
      mining costs
            
            $
            28,726
            
            
            $
            29,364Deferred
      storm restoration costs - Katrina/Rita
            
            
            -
            
            
            
            127,578Deferred
      interest costs
            
            
            9,041
            
            
            
            9,389Deferred
      asset removal costs
            
            
            621
            
            
            
            608Deferred
      postretirement plan costs
            
            
            11,523
            
            
            
            11,523Deferred
      tree trimming costs
            
            
            571
            
            
            
            -Deferred
      training costs
            
            
            531
            
            
            
            -Regulatory assets –
      other
            
            $
            51,013
            
            
            $
            178,462Deferred
      fuel transportation revenue
            
            $
            (794
            )
            
            $
            (930
            )Deferred
      construction carrying costs
            
            
            (43,253
            )
            
            
            (31,463
            )Regulatory liabilities -
      other
            
            $
            (44,047
            )
            
            $
            (32,393
            )Deferred
      fuel and purchased power
            
            
            (49,918
            )
            
            
            9,398Total regulatory assets and
      liabilities, net
            
            $
            101,255
            
            
            $
            282,153




20
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Deferred
Taxes


Cleco
Power has recorded a net regulatory asset related to deferred income taxes in
accordance with SFAS No. 109.  The regulatory asset or liability is
recorded under SFAS No. 71 and represents the effect of tax benefits or
detriments that must be flowed through to customers as they are received or
paid.  For the most part, 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.  The $17.5 million increase in
regulatory assets and liabilities – deferred taxes, net is primarily the result
of the collection and deferral of carrying costs for Cleco Power’s construction
of Rodemacher Unit 3.




Deferred
Storm Restoration Costs - Katrina/Rita


At
December 31, 2007, Cleco Power had approximately $127.6 million of unamortized
storm restoration costs deferred as regulatory assets relating to damage caused
by Hurricanes Katrina and Rita.  The restoration costs relating to
Hurricanes Katrina and Rita were amortized to depreciation expense based on
amounts collected monthly from customers through a surcharge, according to the
terms of an interim storm recovery plan approved by the LPSC in February
2006.  In March 2007, after completing a review of the restoration
costs, Cleco Power and the LPSC Staff filed a settlement agreement allowing
recovery of essentially all of Cleco Power's Hurricanes Katrina and Rita storm
costs.  The agreement authorized the issuance of securitized storm
recovery bonds to finance the restoration costs from Hurricanes Katrina and Rita
and the collection of a special storm recovery charge from Cleco Power's
customers to pay principal, interest and other amounts related to the
bonds.  The LPSC approved the settlement agreement and issued a
securitization financing order in September 2007.  In March 2008, the
securitization financing was completed, collection of the interim surcharge
ceased and the right to bill and collect from customers unamortized storm damage
costs was sold to Cleco Katrina/Rita, a special purpose, wholly owned subsidiary
of Cleco Power.


Cleco
Katrina/Rita issued $180.6 million aggregate principal amount of senior secured
storm recovery bonds.  A portion of the net proceeds of $176.0 million
from the issuance of the bonds was used to pay Cleco Power the purchase price of
its rights to bill and collect from customers unamortized storm damage costs by
Hurricanes Katrina and Rita reducing Cleco Power’s regulatory asset established
for this purpose.  Cleco Power used $50.8 million of such proceeds to
establish a storm reserve fund for future storm damage, with the remaining
portion of the proceeds, which is reimbursement of previously unrecovered storm
costs from Hurricanes Katrina and Rita, to be used for working capital and other
general corporate purposes.  As of March 31, 2008, Cleco Power had
$50.9 million of storm reserve reflected on the balance sheet, $0.1 million of
which is interest earned on the $50.8 million reserve.  For additional
information on the securitization of storm costs, see Note 6 —
“Debt.”




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, 2008,
approximately 98% 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, 2008, and December 31, 2007, were a
$49.9 million over-recovery and $9.4 million under-recovery,
respectively.  The $59.3 million increase in the recovered costs was
primarily the result of a $66.4 million increase in the market value of open
natural gas hedge positions and a $5.4 million gain on closed natural
gas hedge positions, both due to increases in natural gas prices since December
31, 2007.  The increase in market value and gains was partially offset by
the deferral of $12.5 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.”




Deferred
Construction Carrying Costs


In
February 2006, the LPSC approved Cleco Power’s plans to build Rodemacher Unit
3.  Terms of the approval included authorization for Cleco Power to
collect from customers an amount equal to 75% of the LPSC-jurisdictional portion
of the carrying costs of capital during the construction phase of the
unit.  In any calendar year during the construction period, the amount
collected from customers is not to exceed 6.5% of Cleco Power’s projected retail
revenues.  Cleco Power began collection of the carrying costs in May
2006.  For the three-month periods ended March 31, 2008, and 2007,
Cleco Power collected $11.8 million and $4.5 million, respectively.  A
regulatory liability was established for the carrying costs due to the terms of
the LPSC order which requires Cleco Power, as part of its base rate application
to recover Rodemacher Unit 3 ownership
costs, to submit a plan to return to customers the carrying costs over a shorter
period than the life of the Rodemacher Unit 3 asset.




Deferred
Tree Trimming Costs


In
January 2008, the LPSC approved Cleco Power’s request to establish a regulatory
asset which will be charged with actual expenditures at Cleco Power’s grossed-up
rate of return for costs incurred to trim, cut or remove trees that were damaged
by Hurricanes Katrina and Rita, but were not addressed as part of the
restoration efforts. The amount of expenditures subject to deferral as a
regulatory asset was limited to $12.0 million by the LPSC.  Recovery of
these expenditures will be requested as part of Cleco Power’s base rate
application expected to be filed by the end of the second quarter of 2008.
 At March 31, 2008, Cleco Power had deferred $0.6 million in tree trimming
expenditures.




21
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Deferred
Training Costs


In
February 2008, the LPSC approved Cleco Power’s request to establish a regulatory
asset which will be charged with training costs associated with existing
processes and technology for new employees at Rodemacher Unit 3.  Normally
these types of training costs would be expensed as incurred; however, this order
by the LPSC allows Cleco Power to defer the training costs and seek recovery in
rates when Rodemacher Unit 3 goes into service.  At March 31, 2008,
Cleco Power had deferred $0.5 million of Rodemacher Unit 3 training
costs.




Note
5 — Restricted Cash


Various
agreements to which Cleco is subject contain covenants 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, 2008, and December 31, 2007, $61.2
million and $18.0 million of cash, respectively, were restricted.  At March
31, 2008, restricted cash consisted of $0.1 million under the Diversified Lands
mitigation escrow agreement, $8.3 million held in escrow for the construction of
Cleco Power’s solid waste disposal facilities at Rodemacher Unit 3, $50.9
million reserved at Cleco Power for future storm restoration costs, and $1.9
million at Cleco Katrina/Rita restricted for payment of operating expenses,
interest and principal on storm securitization
bonds.




Note
6 — Debt





Long-term
Debt


At
March 31, 2008, Cleco’s long-term debt outstanding was $969.4 million, of
which $108.4 million was long-term debt due within one year, compared to $869.1
million at December 31, 2007, which included $100.0 million of long-term debt
due within one year.  At March 31, 2008, Cleco Power’s long-term
debt outstanding was $869.4 million, of which $8.4 million was long-term debt
due within one year, compared to $769.1 million at December 31, 2007, none of
which was due within one year.  The long-term debt due within one year
is primarily 7% senior notes, which was redeemed at maturity on May 1,
2008.


For
both Cleco and Cleco Power, the $100.3 million increase was primarily due to
$180.6 million of storm recovery bonds issued by Cleco Katrina/Rita in March
2008, partially offset by a reduction of $80.0 million in draws against Cleco
Power’s credit facility, which is classified as long-term debt.  The
storm recovery bonds were issued in two tranches.  One tranche of
$113.0 million initial principal amount of bonds with an expected average life
of five years was issued with an interest rate of 4.41%, and one tranche of
$67.6 million initial principal amount of bonds with an expected average life of
10.58 years was issued with an interest rate of 5.61%.  The resulting
weighted average interest rate of both tranches is 4.86%, and the effective
weighted average life is seven years.


The
solid waste disposal bonds that were issued in 2007 initially had a variable
interest rate which was reset weekly via an auction agent.  On March
12, 2008, Cleco Power exercised a provision in the bond indenture to change the
method of interest through a reoffering of the bonds.  As a part of
the reoffering, the holders of the original auction rate bonds were required to
tender them.  The reoffered bonds have a five-year term with a fixed
rate of 5.25% per annum, with the option to redeem the bonds or require that
they be mandatorily tendered at the end of the five years.  If Cleco
Power does not cause the bonds to be optionally redeemed or mandatorily tendered
at the end of the five years, the bonds will become variable
rate.  Cleco Power plans to remarket the bonds at the end of the
five-year period.  The maturity date of the 2007 bonds is November 1,
2037.




Note
7 — 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 discretionary contributions were made during the three
months ended March 31, 2008.  Currently, a contribution required by
funding regulations is not expected during 2008.  A discretionary
contribution may be made during 2008; however, the decision by management to
make a contribution in 2008 and the amount, if any, has not been
determined.  Cleco Power is considered the plan sponsor, and Support
Group is considered the plan administrator.  In July 2007, Cleco
Corporation’s Board of Directors approved an amendment to the pension plan to
provide that all employees hired on or after August 1, 2007, are not eligible
for benefits under the pension plan.


Cleco
Corporation’s retirees and their dependents are eligible 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, 2008, and 2007, are as follows:





PENSION
      BENEFITS
            
            
            OTHER
      BENEFITSFOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Components
      of periodic benefit costsService cost
            
            $
            1,409
            
            
            $
            1,910
            
            
            $
            344
            
            
            $
            355Interest cost
            
            
            3,935
            
            
            
            3,863
            
            
            
            479
            
            
            
            460Expected return on plan
      assets
            
            
            (5,043
            )
            
            
            (4,748
            )
            
            
            -
            
            
            
            -Transition obligation
            
            
            -
            
            
            
            -
            
            
            
            5
            
            
            
            5Prior period service
      cost
            
            
            (18
            )
            
            
            212
            
            
            
            (516
            )
            
            
            (515
            )Net loss
            
            
            -
            
            
            
            468
            
            
            
            210
            
            
            
            250Net periodic benefit
      cost
            
            $
            283
            
            
            $
            1,705
            
            
            $
            522
            
            
            $
            555




22
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Since
Cleco Power is the pension plan sponsor and the related trust holds the assets,
the prepaid benefit cost of the pension 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, 2008, and
2007, was $0.4 million and $0.5 million, respectively.


Cleco
Corporation is the plan sponsor for the other benefit plans.  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 Consolidated Statements of
Income was $0.5 million for the three months ended March 31, 2008, and
2007.




SERP


Certain
key executives and key managers of Cleco 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, 2008, and 2007. 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)
            
            2008
            
            
            2007Components
      of periodic benefit costsService
      cost
            
            $
            340
            
            
            $
            290Interest
      cost
            
            
            474
            
            
            
            438Prior
      period service cost
            
            
            13
            
            
            
            12Net
      loss
            
            
            164
            
            
            
            243Net
      periodic benefit cost
            
            $
            991
            
            
            $
            983




The
SERP has no assets, and liabilities are reported on the individual subsidiaries’
financial statements.  The expense related to the SERP reflected on
Cleco Power’s Condensed Consolidated Statements of Income was $0.3 million for
the three months ended March 31, 2008, and 2007.




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.  In August 2007, Cleco
Corporation’s Board of Directors approved an amendment to the 401(k) plan to
provide an enhanced 401(k) benefit for employees not otherwise eligible to
participate in Cleco’s pension plan.  The ESOP was established with
300,000 shares of convertible preferred stock which served as Cleco
Corporation’s match to employees’ 401(k) Plan contributions and funded dividend
payments on allocated shares.  By late March 2006, substantially all
of the shares of ESOP preferred stock were fully allocated to current and former
401(k) Plan participants. Beginning April 2007, Cleco Corporation no longer
made matching contributions to, or funded dividend reinvestments by, 401(k) Plan
participants with Cleco common stock.


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.


The
table below contains information about the 401(k) Plan and the
ESOP:





FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007401(k)
      Plan expense
            
            $
            1,011
            
            
            $
            899Dividend
      requirements to ESOP on convertible preferred stock
            
            $
            -
            
            
            $
            411




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, 2008, and 2007, was $0.3 million and $0.2 million,
respectively.  The expense related to the payment of dividends on
the shares of convertible preferred stock held in the ESOP is reflected on
Cleco Corporation’s Condensed Consolidated Statements of Income for the three
months ended March 31, 2007.




Note
8 — Income Taxes


The
following table summarizes the effective income tax rates for Cleco Corporation
and Cleco Power for the three-month periods ended March 31, 2008, and March 31,
2007.





FOR
      THE THREE MONTHS ENDED MARCH 31,2008
            
            
            2007Cleco
      Corporation
            
            
            18.7
            %
            
            
            19.9
            %Cleco
      Power
            
            
            20.1
            %
            
            
            20.2
            %




For
the three months ended March 31, 2008 and 2007, the effective income tax rate
for Cleco Corporation and Cleco Power was less than the federal statutory rate
primarily due to the flow-through of tax benefits associated with AFUDC equity
recorded as a result of the construction of Rodemacher Unit 3. Cleco
Corporation accounts for income taxes under SFAS No. 109 and records uncertain
tax positions under FIN 48.  In the first quarter of 2008, Cleco and
the IRS agreed to apply industry-wide guidelines as the basis for settling a
potential dispute regarding the amount of indirect overhead costs required to be
capitalized for tax purposes.  Based on acceptance of the settlement
guidelines, Cleco recorded, in the first quarter of 2008, an interest benefit of
approximately $2.1 million.




23
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Note
9 — 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
interconnection facilities, and an investment
subsidiary.


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 2008 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.





SEGMENT
INFORMATION FOR THE THREE MONTHS ENDED MARCH 31,


CLECO
            
            
            
            
            
            RECONCILING2008(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            209,881
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            209,881Other operations
            
            
            10,061
            
            
            
            -
            
            
            
            6
            
            
            
            (3
            )
            
            
            10,064Affiliate
      revenue
            
            
            7
            
            
            
            1,918
            
            
            
            681
            
            
            
            -
            
            
            
            2,606Intercompany
      revenue
            
            
            501
            
            
            
            -
            
            
            
            9,482
            
            
            
            (9,983
            )
            
            
            -Operating
      revenue
            
            $
            220,450
            
            
            $
            1,918
            
            
            $
            10,169
            
            
            $
            (9,986
            )
            
            $
            222,551Depreciation
      expense
            
            $
            19,214
            
            
            $
            76
            
            
            $
            257
            
            
            $
            -
            
            
            $
            19,547Interest
      charges
            
            $
            7,435
            
            
            $
            1,969
            
            
            $
            2,120
            
            
            $
            (1,980
            )
            
            $
            9,544Interest
      income
            
            $
            577
            
            
            $
            -
            
            
            $
            3,020
            
            
            $
            (1,980
            )
            
            $
            1,617Equity
      (loss) income from investees
            
            $
            -
            
            
            $
            (5,013
            )
            
            $
            439
            
            
            $
            -
            
            
            $
            (4,574
            )Federal
      and state income tax expense (benefit)
            
            $
            6,958
            
            
            $
            (2,803
            )
            
            $
            906
            
            
            $
            -
            
            
            $
            5,061Segment
      profit (loss) (1)
            
            $
            27,608
            
            
            $
            (4,616
            )
            
            $
            (920
            )
            
            $
            -
            
            
            $
            22,072Additions
      to long-lived assets
            
            $
            105,068
            
            
            $
            2
            
            
            $
            123
            
            
            $
            -
            
            
            $
            105,193Equity
      investment in investees
            
            $
            -
            
            
            $
            244,466
            
            
            $
            8,591
            
            
            $
            (1
            )
            
            $
            253,056Total
      segment assets
            
            $
            2,533,715
            
            
            $
            262,172
            
            
            $
            417,126
            
            
            $
            (280,175
            )
            
            $
            2,932,838(1)Reconciliation
      of segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            22,072Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            
            12Net
      income applicable to common stock
            
            
            $
            22,060







CLECO
            
            
            
            
            
            RECONCILING2007(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            213,020
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            213,020Other operations
            
            
            9,260
            
            
            
            7
            
            
            
            7
            
            
            
            (5
            )
            
            
            9,269Affiliate
      revenue
            
            
            12
            
            
            
            986
            
            
            
            463
            
            
            
            -
            
            
            
            1,461Intercompany
      revenue
            
            
            501
            
            
            
            -
            
            
            
            12,396
            
            
            
            (12,897
            )
            
            
            -Operating
      revenue, net
            
            $
            222,793
            
            
            $
            993
            
            
            $
            12,866
            
            
            $
            (12,902
            )
            
            $
            223,750Depreciation
      expense
            
            $
            19,761
            
            
            $
            75
            
            
            $
            262
            
            
            $
            -
            
            
            $
            20,098Interest
      charges
            
            $
            10,044
            
            
            $
            5,042
            
            
            $
            1,913
            
            
            $
            (5,012
            )
            
            $
            11,987Interest
      income
            
            $
            1,406
            
            
            $
            -
            
            
            $
            6,173
            
            
            $
            (5,012
            )
            
            $
            2,567Equity
      (loss) income from investees
            
            $
            -
            
            
            $
            (1,827
            )
            
            $
            428
            
            
            $
            -
            
            
            $
            (1,399
            )Federal
      and state income tax expense (benefit)
            
            $
            3,116
            
            
            $
            (2,953
            )
            
            $
            1,980
            
            
            $
            -
            
            
            $
            2,143Segment
      profit (loss) (1)
            
            $
            12,276
            
            
            $
            (4,714
            )
            
            $
            1,084
            
            
            $
            -
            
            
            $
            8,646Additions
      to long-lived assets
            
            $
            99,738
            
            
            $
            -
            
            
            $
            134
            
            
            $
            -
            
            
            $
            99,872Equity
      investment in investees (2)
            
            $
            -
            
            
            $
            249,758
            
            
            $
            8,342
            
            
            $
            1
            
            
            $
            258,101Total
      segment assets (2)
            
            $
            2,306,482
            
            
            $
            265,918
            
            
            $
            459,139
            
            
            $
            (324,916
            )
            
            $
            2,706,623(1)Reconciliation
      of segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            8,646(2)Balances
      as of December 31, 2007
            
            Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            
            423Net
      income applicable to common stock
            
            
            $
            8,223




24
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Note
10 — Equity Investment in Investees


Cleco
reports its investment in Acadia, Evangeline and certain other
subsidiaries on the equity method of accounting in accordance with APB Opinion
No. 18, after consideration of FIN 46R.  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.


Equity
investment in investees represents primarily Midstream’s $186.5 million
investment in Acadia, owned 50% by APH and 50% by Cajun, and its $57.9 million
investment in Evangeline, owned 100% by Midstream.  Equity investment in
investees also represents a $7.3 million investment in Attala and a $1.3 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.


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)
            
            2008
            
            
            2007Acadia
            
            $
            (3,370
            )
            
            $
            (2,395
            )Evangeline
            
            
            (1,643
            )
            
            
            568Other
      subsidiaries 100% owned by Cleco
              Corporation
            
            
            439
            
            
            
            438Other
            
            
            -
            
            
            
            (10
            )Total equity (loss)
      income
            
            $
            (4,574
            )
            
            $
            (1,399
            )




Acadia


Cleco’s
current assessment of its maximum exposure to loss with respect to
Acadia at March 31, 2008, consists of its equity investment of $186.5
million.


The
following table presents the components of Midstream's equity investment in
Acadia.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2008
            
            
            2007Contributed
      assets (cash and land)
            
            $
            259,019
            
            
            $
            259,019Income
      before taxes
            
            
            168,386
            
            
            
            171,914Impairment
      of investment
            
            
            (45,847
            )
            
            
            (45,847
            )Capitalized
      interest and other
            
            
            19,627
            
            
            
            19,469Less:  non-cash
      distribution
            
            
            78,200
            
            
            
            78,200Less:  cash
      distributions
            
            
            136,464
            
            
            
            136,464Total equity investment in
      investee
            
            $
            186,521
            
            
            $
            189,891




Midstream’s
equity, as reported on the balance sheet of Acadia at March 31, 2008, was $212.6
million.  The difference between the $212.6 million and the equity
investment in investee of $186.5 million as shown in the table above is $26.1
million, and primarily consists of the $45.8 million other-than-temporary
impairment of APH’s investment in Acadia, partially offset by $19.6 million of
interest capitalized on funds contributed by Acadia.


The
table below contains summarized financial information for Acadia.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,(THOUSANDS)
            
            2008
            
            
            2007Current
      assets
            
            $
            10,861
            
            
            $
            13,672Property,
      plant and equipment, net
            
            
            416,510
            
            
            
            419,882Total assets
            
            $
            427,371
            
            
            $
            433,554Current
      liabilities
            
            $
            2,079
            
            
            $
            1,206Partners’
      capital
            
            
            425,292
            
            
            
            432,348Total liabilities and partners’
      capital
            
            $
            427,371
            
            
            $
            433,554





FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Total
      revenue
            
            $
            7,768
            
            
            $
            23,242Total
      operating expenses
            
            
            14,884
            
            
            
            28,038Other
      income
            
            
            60
            
            
            
            6Loss before
taxes
            
            $
            (7,056
            )
            
            $
            (4,790
            )




Income
tax benefit recorded on APH’s financial statements related to Midstream’s 50%
ownership interest in Acadia was $2.2 million and $2.9 million for the three
months ended March 31, 2008, and 2007, respectively.




Evangeline


Cleco’s
current assessment of its maximum exposure to loss with respect to Evangeline at
March 31, 2008, consists of its equity investment of $57.9 million.


The
table below presents the components of Midstream's equity investment in
Evangeline.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2008
            
            
            2007Contributed
      assets (cash)
            
            $
            49,905
            
            
            $
            49,156Net
      income
            
            
            145,776
            
            
            
            147,418Less:  non-cash
      distributions
            
            
            16,713
            
            
            
            15,685Less:  cash
      distributions
            
            
            121,022
            
            
            
            121,022Total equity investment in
      investee
            
            $
            57,946
            
            
            $
            59,867




The
table below contains summarized financial information for
Evangeline.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,(THOUSANDS)
            
            2008
            
            
            2007Current
      assets
            
            $
            10,841
            
            
            $
            17,018Accounts
      receivable - affiliate
            
            
            1,832
            
            
            
            2,280Property,
      plant and equipment, net
            
            
            180,735
            
            
            
            181,604Other
      assets
            
            
            49,017
            
            
            
            48,999Total assets
            
            $
            242,425
            
            
            $
            249,901Current
      liabilities
            
            $
            14,735
            
            
            $
            15,122Accounts
      payable - affiliate
            
            
            279
            
            
            
            2,721Long-term
      debt, net
            
            
            165,314
            
            
            
            168,866Other
      liabilities
            
            
            71,470
            
            
            
            71,501Member’s
      deficit
            
            
            (9,373
            )
            
            
            (8,309
            )Total liabilities and member’s
      deficit
            
            $
            242,425
            
            
            $
            249,901





FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Operating
      revenue
            
            $
            10,430
            
            
            $
            10,545Operating
      expenses
            
            
            6,214
            
            
            
            4,524Depreciation
            
            
            1,355
            
            
            
            1,286Interest
      charges
            
            
            4,664
            
            
            
            4,522Interest
      income
            
            
            163
            
            
            
            358Other
      expense
            
            
            2
            
            
            
            3(Loss)
      income before taxes
            
            $
            (1,642
            )
            
            $
            568




25
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




The
difference between the equity investment in investee and member’s equity shown
in the tables above is due to income tax items being reported in the
corresponding tax accounts on Midstream’s financial statements, rather than the
equity investment account.


Income
taxes recorded on Midstream’s financial statements related to Midstream’s 100%
ownership interest in Evangeline were a $0.6 million benefit for the
three months ended March 31, 2008, and a $0.2 million expense for the three
months ended March 31, 2007.


Since
its inception, Cleco has had 100% ownership and voting interest of
Evangeline.  Prior to November 9, 2007, all of the capacity and output
of the power plant had been tolled to Williams, which paid Evangeline certain
fixed and variable amounts.  In November 2007, The Williams Companies,
Inc. assigned all of its rights and interests in its tolling agreement with
Evangeline to Bear Energy LP.  On March 16, 2008, JPMorgan Chase &
Co. announced it was acquiring Bear Stearns Companies Inc., the parent company
of Bear Energy LP.  For more information regarding Bear Energy LP and
the announced purchase by JPMorgan Chase & Co., see Note 11 — Litigation,
Other Commitments and Contingencies, and Disclosures about Guarantees — Risks
and Uncertainties.”




Other
Subsidiaries 100% owned by Cleco Corporation


Cleco’s
current assessment of its maximum exposure to loss with respect to Perryville
and Attala at March 31, 2008, consists of its equity investment of $8.6
million.


The
table below presents the components of Cleco Corporation’s equity investments in
Perryville and Attala.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2008
            
            
            2007Contributed
      assets (cash)
            
            $
            126,591
            
            
            $
            126,591Net
      income
            
            
            53,141
            
            
            
            52,735Less:  non-cash
      distributions
            
            
            20,712
            
            
            
            20,555Less:  cash
      distributions
            
            
            150,433
            
            
            
            150,433Total equity investment in
      investee
            
            $
            8,587
            
            
            $
            8,338




The
table below contains summarized financial information for Perryville and
Attala.





AT
      MARCH 31,
            
            
            AT
      DECEMBER 31,(THOUSANDS)
            
            2008
            
            
            2007Current
      assets
            
            $
            1,070
            
            
            $
            691Accounts
      receivable - affiliate
            
            
            480
            
            
            
            493Other
      assets
            
            
            14,421
            
            
            
            14,499Total assets
            
            $
            15,971
            
            
            $
            15,683Current
      liabilities
            
            $
            99
            
            
            $
            175Accounts
      payable - affiliate
            
            
            3,062
            
            
            
            2,968Other
      liabilities
            
            
            328
            
            
            
            328Member’s
      equity
            
            
            12,482
            
            
            
            12,212Total liabilities and member’s
      equity
            
            $
            15,971
            
            
            $
            15,683





FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007Operating
      revenue
            
            $
            732
            
            
            $
            523Operating
      expenses
            
            
            85
            
            
            
            71Income
      before taxes
            
            $
            647
            
            
            $
            452




The
difference between the equity investment in investee and member’s equity shown
in the tables above is due to income tax items being reported in the
corresponding tax accounts on Cleco Corporation’s financial statements, rather
than the equity investment account.


The
transmission assets utilized by Perryville under the Perryville Interconnection
Agreement are accounted for as a direct financing lease by Perryville and are
included in other assets in the summarized financial information
above.


Income
tax expense recorded on Cleco’s financial statements related to Cleco
Corporation’s 100% interest in Perryville and Attala was $0.2 million for the
three months ended March 31, 2008 and 2007.




Note
11 — Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees





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 Corporation, 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.  From March 2007 to April 2008, the parties have attempted
to negotiate a settlement under the supervision of the presiding judge and a
court approved mediator.  In the meantime, the matter has been set for
a trial commencing January 5, 2009, in the event the parties are unable to reach
a settlement.  The service agreement between Cleco Power and the City
of Alexandria will end effective March 3, 2009, unless further extended by
mutual agreement of the parties.  Management believes the dispute will
not have a material adverse effect on the Registrants’ financial condition,
results of operations, or cash flows.


On
October 8, 2007, Cleco received a Special Notice for Remedial Investigation and
Feasibility Study from the EPA.  The special notice requested that
Cleco Corporation and Cleco Power, along with many other listed potentially
responsible parties, enter into negotiations with the EPA for the performance of
a Remedial Investigation and Feasibility Study at an area known as the Devil’s
Swamp Lake just northwest of Baton Rouge, Louisiana.  The EPA has
identified Cleco as one of many companies sending PCB wastes for disposal to the
site.  The Devil’s Swamp Lake site has been proposed to be added
to the National Priorities List (NPL) based on the release of PCBs to fisheries
and wetlands located on the site.




26
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




The
EPA will make a final decision on the listing of the site to the NPL after
considering relevant comments.  Cleco has contacted the EPA in
response to the special notice and is reviewing the available
information.  The EPA and a number of PRPs met on January 31, 2008,
for an organizational meeting to discuss the background of the
site.  The PRPs began discussing a potential proposal to the EPA on
February 19, 2008.  As this investigation is in the preliminary
stages, management is unable to determine whether the costs associated with
possible remediation of the facility site will have a material adverse effect on
the Registrants’ results of operations, financial condition, and 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.




Off-Balance
Sheet Commitments and Disclosures about Guarantees


Cleco
Corporation and Cleco Power have entered into various off-balance sheet
commitments, in the form of guarantees and standby letters of credit, in order
to facilitate their activities and the activities of Cleco Corporation’s
subsidiaries and equity investees (affiliates). Cleco Corporation and Cleco
Power also have agreed to contractual 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 ended after December 15, 2002.


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, 2008, 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, 2008REDUCTIONS
      TO THEAMOUNT
      AVAILABLETO
      BE DRAWN ONFACE
            
            
            
            
            
            NET
            
            
            CLECO
      CORPORATION’S(THOUSANDS)
            
            AMOUNT
            
            
            REDUCTIONS
            
            
            AMOUNT
            
            
            CREDIT
      FACILITYCleco
      CorporationGuarantee issued to Entergy
      companies for performance obligations of Perryville
            
            $
            277,400
            
            
            $
            135,000
            
            
            $
            142,400
            
            
            $
            328Guarantees issued to purchasers
      of the assets of Cleco Energy
            
            
            1,400
            
            
            
            
            
            
            
            1,400
            
            
            
            1,400Obligations under standby letter
      of credit issued to the Evangeline Tolling Agreement
      counterparty
            
            
            15,000
            
            
            
            
            
            
            
            15,000
            
            
            
            15,000Guarantee issued to Entergy
      Mississippi on behalf of Attala
            
            
            500
            
            
            
            
            
            
            
            500
            
            
            
            500Cleco
      PowerObligations under standby letter
      of credit issued to the Louisiana Department of Labor
            
            
            525
            
            
            
            
            
            
            
            525Obligations under the Lignite
      Mining Agreement
            
            
            9,531
            
            
            
            
            
            
            
            9,531Total
            
            $
            304,356
            
            
            $
            135,000
            
            
            $
            169,356
            
            
            $
            17,228





Cleco
Corporation provided a limited guarantee and an indemnification, which fall
within the recognition scope of FIN 45, 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, 2008, 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.  In June 2005, Perryville paid all interest and principal
owed under the Senior Loan Agreement, and in July 2005, it exercised offset
rights against MAI to satisfy its obligation 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.  The discounted probability-weighted liability under the
guarantees and indemnifications as of March 31, 2008, 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 facility by an amount equal to the
maximum reasonably anticipated liability in respect of the contingent obligation
as determined in good faith.




27
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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.  These guarantees
do not fall within the scope of FIN 45.  Cleco Energy issued guarantees and
indemnifications that 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
maximum aggregate potential payment under the guarantees and indemnifications is
$1.2 million.  The discounted probability-weighted liability under the
FIN 45 guarantees and indemnifications as of March 31, 2008, was $0.1
million.


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
January 2006, Cleco Corporation provided a $0.5 million guarantee to Entergy
Mississippi for Attala’s obligations under the Attala Interconnection
Agreement.  This guarantee will be effective through the life of the
agreement.


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, 2008, Cleco Power’s 50% exposure for this
obligation was approximately $9.5 million. The lignite mining contract is
in place until 2011 and does not affect the amount Cleco Corporation can borrow
under its credit facility.


The
following table summarizes the expected termination dates of the guarantees and
standby letters of credit discussed above:




AT
      MARCH 31, 2008AMOUNT
      OF COMMITMENT EXPIRATION PER PERIODNET
            
            
            
            
            
            
            
            
            
            
            
            MOREAMOUNT
            
            
            LESS
      THAN
            
            
            
            
            
            
            
            
            THAN(THOUSANDS)
            
            COMMITTED
            
            
            ONE
      YEAR
            
            
            1-3
      YEARS
            
            
            3-5
      YEARS
            
            
            5
      YEARSGuarantees
            
            $
            153,831
            
            
            $
            100,000
            
            
            $
            1,400
            
            
            $
            9,531
            
            
            $
            42,900Standby
      letters of credit
            
            
            15,525
            
            
            
            525
            
            
            
            -
            
            
            
            -
            
            
            
            15,000Total commercial
      commitments
            
            $
            169,356
            
            
            $
            100,525
            
            
            $
            1,400
            
            
            $
            9,531
            
            
            $
            57,900





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 as described above with
respect to its managers, officers, agents, and employees.


Generally,
neither Cleco Corporation nor Cleco Power has recourse that would enable them to
recover amounts paid under their guarantee or indemnification
obligations.  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.





Other
Contingencies




General
Electric Services Corporation


Cleco
Power has entered into an operating lease agreement with General Electric
Services Corporation for leasing of railcars in order to transport coal 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.




CBL
Capital Corporation


Cleco
Power has entered into an operating lease agreement 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.  Cleco Power
may terminate the agreement at any time during the lease.  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




28
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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,
2008, was approximately $4.9 million.  At this time, Cleco
Power has no plans to terminate this lease prior to expiration of the lease
term.





LPSC
Fuel Audit


In
July 2006, the LPSC informed Cleco Power that it was planning to conduct a
periodic fuel audit that included fuel adjustment clause filings for January
2003 through December 2004.  Cleco Power believes that it has provided
the LPSC Staff with all of the information requested by the LPSC
Staff.  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 the Staff to complete
the review in 2008.  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, and
storm damages.


During
the first quarter of 2008, charges to operating expenses to provide a reserve
for future storm damages were based upon the average amount of noncapital,
uninsured storm damages experienced by Cleco Power during the previous six
years, excluding costs for Hurricanes Katrina and Rita.  The
settlement term sheet signed with the LPSC in March 2007 allowed, among other
items, the funding and securitization of $50.8 million for a reserve for future,
extraordinary storm costs.  For more information regarding storm
restoration costs, see Note 4 — “Regulatory Assets and Liabilities — Deferred
Storm Restoration Costs - Katrina/Rita.”




Risks
and Uncertainties




Cleco
Corporation


Cleco
Corporation could be subject to possible adverse consequences 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.




Evangeline
Tolling Agreement


Bear
Stearns Companies Inc. guarantees the payment obligation of Bear Energy LP under
the Evangeline Tolling Agreement.  On March 16, 2008, after Bear
Stearns Companies Inc. suffered significant liquidity deterioration, JPMorgan
Chase & Co. announced it was acquiring the Bear Stearns Companies
Inc.  Pending the completion of the merger, JPMorgan Chase & Co.
is guaranteeing the obligations of Bear Stearns Companies Inc. and its
subsidiaries, including obligations under the Evangeline Tolling Agreement, and
is providing management oversight
for its operations.  In the event the acquisition is not completed,
there is a possibility that neither Bear Energy LP nor Bear Stearns Companies
Inc. will be able to meet the payment obligations under the Evangeline Tolling
Agreement.  The tolling agreement is the principle source of cash flow
for Evangeline.  Failure to receive payment from Bear Energy LP or
Bear Stearns Companies Inc. would result in a material negative impact to
Evangeline’s financial statements, which would then flow through to Cleco
Corporation’s consolidated financial statements through Midstream’s equity
investment in Evangeline.




Other


Financing
for operational needs and construction requirements 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.


Changes
in the regulatory environment or market forces could cause Cleco to determine
its assets have suffered an other than temporary decline in value, whereby an
impairment would be required to be taken and Cleco’s financial condition could
be materially adversely affected.




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.  Due to 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 requirements 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.




29
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Note
12 — Affiliate Transactions





Cleco
has affiliate balances that were not eliminated as of March 31,
2008.  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 10 — “Equity Investment in
Investees.”  At March 31, 2008, the payable to Evangeline was $7.9
million, the payable to Perryville was $0.4 million, and the payable to Attala
was $0.1 million.  Also, at March 31, 2008, the receivable from
Evangeline was $1.7 million, the receivable from Perryville was $6.7 million,
the receivable from Acadia was $0.3 million, and the receivable from Attala was
$0.1 million.


Cleco
Power has affiliate balances that are payable to or due from its
affiliates.  At March 31, 2008, the payable to Support Group was $5.7
million, the payable to Cleco Corporation was $4.9 million, and the payable to
other affiliates was less than $0.1 million.  Also, at March 31, 2008,
the receivable from Support Group was $2.6 million, and the receivable from
other affiliates was less than $0.1 million.




Note
13 — Intangible Asset


Cleco
Katrina/Rita acquired a $177.5 million intangible asset which
includes $176.0 million for the right to bill and collect storm recovery
charges from customers of Cleco Power and $1.5 million of financing
costs.  This intangible asset is expected to have a life of 12 years,
but could have a life of up to 15 years depending on the time period required to
collect the required amount from Cleco Power’s customers.  The
intangible asset is being amortized according to the estimated collections from
Cleco Power’s customers.  At the end of its life, this asset will have
no residual value.  During the three months ended March 31, 2008,
Cleco Katrina/Rita recognized amortization expense of $0.7
million.  For additional information on Cleco Katrina/Rita storm costs
and securitization, see Note 4 — “Regulatory Assets and Liabilities — Deferred
Storm Restoration Costs - Katrina/Rita.  The tables below provide
additional information about this intangible asset.





(THOUSANDS)
            
            AT
      MARCH 31, 2008Gross
      carrying amount
            
            $
            177,507Accumulated
      amortization
            
            
            684Intangible
      asset
            
            $
            176,823





(THOUSANDS)Expected
      amortization expenseFor the year ending March 31,
      2009
            
            $
            10,335For the year ending March 31,
      2010
            
            $
            11,538For the year ending March 31,
      2011
            
            $
            12,330For the year ending March 31,
      2012
            
            $
            13,167





ITEM
2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS







The
following discussion and analysis should be read in combination with the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, and Cleco Corporation and Cleco Power’s Condensed
Consolidated 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,
2008, and March 31, 2007.




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 challenges and factors that could affect its results of
operations and financial condition in the near term.




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 utility’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.  Cleco Power’s current base rates have been extended through the
start of Rodemacher Unit 3.  Currently, Cleco Power plans on filing a
rate case by the end of the second quarter of 2008, at least one year prior to
the estimated completion of Rodemacher Unit 3, to establish rates to be
effective upon commercial operation of the unit.  Cleco Power’s
current base rates allow it the opportunity to earn a maximum regulated return
on equity of 11.65%, which is based on a return on equity of 11.25% and 12.25%
shared between shareholders and customers in a 40/60 ratio.  If the
LPSC does not increase Cleco Power’s base rates or denies Cleco Power’s request
to recover costs incurred in the construction of Rodemacher Unit 3, Cleco
Power’s results of operations, financial




30
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




condition,
and cash flows could be materially adversely affected.  For additional
information, see “— Financial Condition — Liquidity and Capital Resources —
Regulatory Matters — Rodemacher Unit 3.”


Cleco
Power currently is recording AFUDC associated with construction of Rodemacher
Unit 3.  Once the plant begins commercial operations, Cleco Power will
no longer record AFUDC related to Rodemacher Unit 3.  Recovery of the
Rodemacher Unit 3 investment will be handled as part of Cleco Power’s upcoming
general rate case filing.  Cleco Power expects to file the rate case
by the end of the second quarter of 2008.  New rates are anticipated
to be implemented to coincide with commercial operations of Rodemacher Unit
3.


Cleco
Power continues to evaluate a range of other power supply options for 2009 and
beyond.  As such, Cleco Power is continuing to update its IRP to look
at future sources of supply. Cleco Power released an RFP in October 2007
seeking long-term resources to fill the needs identified by the latest IRP and
also released an RFP in March 2008 to meet its 2009 capacity and energy
requirements.




Midstream


Acadia
resides in the Southeastern Electric Reliability Council (SERC)-Entergy
sub-region.   For merchant generators, this sub-region is
challenged both by the general oversupply of gas-fired generation available to
serve the Entergy system needs and the physical transmission constraints that
can limit the amount of power that Acadia can deliver.  The
SERC-Entergy sub-region has reserve margins among the highest in the nation, and
margins are expected to remain that way for some time.   These
high reserve margins can lead to lower capacity factors and lower profitability
for Acadia.  Due to Acadia’s location on the transmission
grid, Acadia relies on two main suppliers of electric transmission when
accessing external power markets.  At times, transmission availability
limits the wholesale markets accessible by Acadia resulting in limited buyers
for Acadia’s output.


To
address these risks, Acadia markets short-, mid- and long-term products
where available.  Through its third party energy marketer, Acadia
pursues opportunities in the hourly, weekly, and annual markets.  In
addition, Acadia actively participates in long-term requests for capacity and
energy.  Acadia’s success in these marketing efforts is a primary
driver of Acadia’s earnings and cash flow.




Comparison
of the Three Months Ended March 31, 2008, and 2007




Cleco
Consolidated


FOR
      THE THREE MONTHS ENDED MARCH 31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2008
            
            
            2007
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenue, net
            
            $
            222,551
            
            
            $
            223,750
            
            
            $
            (1,199
            )
            
            
            (0.54
            )%Operating
      expenses
            
            
            195,997
            
            
            
            206,096
            
            
            
            10,099
            
            
            
            4.90
            %Operating
      income
            
            $
            26,554
            
            
            $
            17,654
            
            
            $
            8,900
            
            
            
            50.41
            %Interest
      income
            
            $
            1,617
            
            
            $
            2,567
            
            
            $
            (950
            )
            
            
            (37.01
            )%Allowance
      for other funds used during construction
            
            $
            13,683
            
            
            $
            5,131
            
            
            $
            8,552
            
            
            
            166.67
            %Equity
      loss from investees
            
            $
            (4,574
            )
            
            $
            (1,399
            )
            
            $
            (3,175
            )
            
            
            (226.95
            )%Interest
      charges
            
            $
            9,544
            
            
            $
            11,987
            
            
            $
            2,443
            
            
            
            20.38
            %Federal
      and state income taxes
            
            $
            5,061
            
            
            $
            2,143
            
            
            $
            (2,918
            )
            
            
            (136.16
            )%Net
      income applicable to common stock
            
            $
            22,060
            
            
            $
            8,223
            
            
            $
            13,837
            
            
            
            168.27
            %




Consolidated
net income applicable to common stock increased $13.8 million, or 168.3%, in the
first quarter of 2008 compared to the first quarter of 2007 primarily due to
increased earnings at Cleco Power.


Operating
revenue, net decreased $1.2 million, or 0.5%, in the first quarter of 2008
compared to the first quarter of 2007 largely as a result of lower fuel cost
recovery revenue at Cleco Power.


Operating
expenses decreased $10.1 million, or 4.9%, in the first quarter of 2008 compared
to the first quarter of 2007 primarily due to lower fuel costs and lower other
operations and maintenance expenses at Cleco Power.


Interest
income decreased $1.0 million, or 37.0%, in the first quarter of 2008 compared
to the first quarter of 2007 largely as a result of lower average investment
balances.


Allowance
for other funds used during construction increased $8.6 million, or 166.7%, in
the first quarter of 2008 compared to the same period of 2007 primarily due to
increased construction activity at Rodemacher Unit 3.


Equity
loss from investees increased $3.2 million, or 227.0%, in the first quarter of
2008 compared to the same period of 2007 primarily due to decreased equity
earnings at APH and Evangeline.


Interest
charges decreased $2.4 million, or 20.4%, in the first quarter of 2008 compared
to the same period of 2007 primarily due to the allowance for borrowed funds
used during construction associated with the construction activity at Rodemacher
Unit 3, the repayment of medium-term notes at Cleco Power, and interest
adjustments related to a favorable settlement on uncertain tax
positions.  Partially offsetting this decrease was increased interest
related to draws against Cleco Power’s credit facility and interest related to
the November 2007 issuance of solid waste disposal facility bonds and the March
2008 issuance of storm recovery bonds.


Federal
and state income taxes increased $2.9 million, or 136.2%, primarily due to an
increase in pre-tax income during the first quarter of 2008 compared to the same
period of 2007.




31
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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 2008 increased $15.3 million, or
124.9%, compared to the first quarter of 2007.  Contributing factors
include:




§
            higher
      other operations revenue,


§
            lower
      other operations and maintenance
expenses,


§
            lower
      depreciation expense,


§
            lower
      taxes other than income taxes,


§
            higher
      allowance for other funds used during construction,
  and


§
            lower
      interest charges.




These
were partially offset by lower interest income.


FOR
      THE THREE MONTHS ENDED MARCH 31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
              
              2008
              
              
              2007
              
              
              VARIANCE
              
              
              CHANGEOperating
      revenueBase
              
              $
              79,189
              
              
              $
              78,075
              
              
              $
              1,114
              
              
              
              1.43
              %Fuel cost
    recovery
              
              
              130,692
              
              
              
              134,945
              
              
              
              (4,253
              )
              
              
              (3.15
              )%Other operations
              
              
              10,061
              
              
              
              9,260
              
              
              
              801
              
              
              
              8.65
              %Affiliate
revenue
              
              
              7
              
              
              
              12
              
              
              
              (5
              )
              
              
              (41.67
              )%Intercompany
    revenue
              
              
              501
              
              
              
              501
              
              
              
              -
              
              
              
              -Operating revenue,
      net
              
              
              220,450
              
              
              
              222,793
              
              
              
              (2,343
              )
              
              
              (1.05
              )%Operating
      expensesFuel used for electricgeneration
      – recoverable
              
              
              43,322
              
              
              
              53,367
              
              
              
              10,045
              
              
              
              18.82
              %Power purchased for
      utilitycustomers – recoverable
              
              
              87,377
              
              
              
              81,554
              
              
              
              (5,823
              )
              
              
              (7.14
              )%Non-recoverable fuel andpower
      purchased
              
              
              4,631
              
              
              
              4,722
              
              
              
              91
              
              
              
              1.93
              %Other operations
              
              
              20,915
              
              
              
              25,613
              
              
              
              4,698
              
              
              
              18.34
              %Maintenance
              
              
              9,193
              
              
              
              9,727
              
              
              
              534
              
              
              
              5.49
              %Depreciation
              
              
              19,214
              
              
              
              19,761
              
              
              
              547
              
              
              
              2.77
              %Taxes other than
      incometaxes
              
              
              7,813
              
              
              
              8,902
              
              
              
              1,089
              
              
              
              12.23
              %Total
      operatingexpenses
              
              
              192,465
              
              
              
              203,646
              
              
              
              11,181
              
              
              
              5.49
              %Operating
      income
              
              $
              27,985
              
              
              $
              19,147
              
              
              $
              8,838
              
              
              
              46.16
              %Interest
      income
              
              $
              577
              
              
              $
              1,406
              
              
              $
              (829
              )
              
              
              (58.96
              )%Allowance
      for other funds used during construction
              
              $
              13,683
              
              
              $
              5,131
              
              
              $
              8,552
              
              
              
              166.67
              %Interest
      charges
              
              $
              7,435
              
              
              $
              10,044
              
              
              $
              2,609
              
              
              
              25.98
              %Federal
      and state income taxes
              
              $
              6,958
              
              
              $
              3,116
              
              
              $
              (3,842
              )
              
              
              (123.30
              )%Net
      income
              
              $
              27,608
              
              
              $
              12,276
              
              
              $
              15,332
              
              
              
              124.89
              %






FOR
      THE THREE MONTHS ENDED MARCH 31,(MILLION
      kWh)
            
            2008
            
            
            2007
            
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            
            
            840
            
            
            
            842
            
            
            
            (0.24
            )%Commercial
            
            
            554
            
            
            
            543
            
            
            
            2.03
            %Industrial
            
            
            686
            
            
            
            710
            
            
            
            (3.38
            )%Other retail
            
            
            32
            
            
            
            33
            
            
            
            (3.03
            )%Total retail
            
            
            2,112
            
            
            
            2,128
            
            
            
            (0.75
            )%Sales for resale
            
            
            71
            
            
            
            102
            
            
            
            (30.39
            )%Unbilled
            
            
            (57
            )
            
            
            (70
            )
            
            
            18.57
            %Total
      retail and wholesale customer sales
            
            
            2,126
            
            
            
            2,160
            
            
            
            (1.57
            )%







FOR
      THE THREE MONTHS ENDED MARCH 31,(THOUSANDS)
            
            2008
            
            
            2007
            
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            
            $
            33,044
            
            
            $
            33,265
            
            
            
            (0.66
            )%Commercial
            
            
            23,035
            
            
            
            22,295
            
            
            
            3.32
            %Industrial
            
            
            13,001
            
            
            
            13,634
            
            
            
            (4.64
            )%Other retail
            
            
            1,365
            
            
            
            1,440
            
            
            
            (5.21
            )%Storm surcharge
            
            
            5,850
            
            
            
            5,931
            
            
            
            (1.37
            )%Total retail
            
            
            76,295
            
            
            
            76,565
            
            
            
            (0.35
            )%Sales for resale
            
            
            4,087
            
            
            
            3,887
            
            
            
            5.15
            %Unbilled
            
            
            (1,193
            )
            
            
            (2,377
            )
            
            
            49.81
            %Total
      retail and wholesale customer sales
            
            $
            79,189
            
            
            $
            78,075
            
            
            
            1.43
            %




The
service agreement between Cleco Power and one of its municipal customers will
end effective March 3, 2009, unless further extended by mutual agreement of the
parties.  The termination of the contract, assuming a termination date
of March 3, 2009, is expected to decrease 2009 base revenue by $4.2 million and
decrease both 2009 fuel cost recovery revenue and fuel expenses by $21.4 million
each.


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 31,2008
      CHANGE2008
            
            
            2007
            
            
            NORMAL
            
            
            PRIOR
      YEAR
            
            
            NORMALHeating-degree days
            
            
            814
            
            
            
            869
            
            
            
            986
            
            
            
            (6.33
            )%
            
            
            (17.44
            )%Cooling-degree days
            
            
            111
            
            
            
            112
            
            
            
            71
            
            
            
            (0.89
            )%
            
            
            56.34
            %




Fuel
Cost Recovery


Fuel
cost recovery revenue billed to customers during the first quarter of 2008
compared to the same period in 2007 decreased $4.3 million, or 3.2%, primarily
due to decreases in the per-unit cost of fuel used for electric generation and
lower volumes of power purchased for utility customers.  Partially
offsetting the decrease were increased volumes of fuel used for electric
generation and increases in the per-unit cost of power purchased for utility
customers.  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 98% of




32
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Cleco
Power’s total fuel cost during the first quarter of 2008 was regulated by the
LPSC, while the remainder was regulated by the FERC.  Recovery of fuel
adjustment clause costs is subject to refund until approval is received from the
LPSC.  For information on Cleco Power’s ongoing 2003 through 2004 fuel
audit, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 11 — Litigation, Other Commitments and Contingencies, and
Disclosures about Guarantees — LPSC Fuel Audit.”




Other
Operations


Other
operations revenue increased $0.8 million, or 8.7%, in the first quarter of 2008
compared to the first quarter of 2007 primarily due to $0.5 million of
mark-to-market gains and realized gains relating to economic hedge transactions
associated with fixed-price power being provided to a wholesale
customer.  Also contributing to the increase was $0.3 million of
higher other miscellaneous 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 decreased $11.2 million, or 5.5%, in the first quarter of 2008 compared
to the same period of 2007. Fuel used for electric generation (recoverable)
decreased $10.0 million, or 18.8%, primarily due to lower per-unit costs of fuel
used as compared to the same period of 2007.  Partially offsetting
this decrease were higher volumes of fuel used for electric
generation.  Power purchased for utility customers (recoverable)
increased $5.8 million, or 7.1%, largely due to higher per-unit costs of
purchased power.  Partially offsetting this increase were lower
volumes of purchased power.  Fuel used for electric generation and
power purchased for utility customers generally are influenced by natural gas
prices, as well as availability of transmission.  However, other
factors such as scheduled and/or 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
decreased $4.7 million, or 18.3%, primarily due to lower employee benefit costs
and administrative expenses.  Maintenance expenses during the first
quarter of 2008 decreased $0.5 million, or 5.5%, compared to the same
period of 2007 primarily due to less generating station maintenance work
performed during the first quarter of 2008.  Depreciation expense
decreased $0.5 million, or 2.8%, primarily as a result of lower storm
amortization costs.  Taxes other than income taxes decreased $1.1
million, or 12.2%, primarily due to a change in the accounting treatment of city
franchise taxes as a result of an LPSC order.




Interest
Income


Interest
income decreased $0.8 million, or 59.0%, during the first quarter of 2008
compared to the same period of 2007 primarily due to lower average investment
balances.  Lower investment balances were the result of construction
payments for
Rodemacher Unit 3 being partially funded by these investments.




Allowance
for Other Funds Used During Construction


Allowance
for other funds used during construction increased $8.6 million, or 166.7%,
during the first quarter of 2008 compared to the same period of 2007 primarily
due to increased construction activity at Rodemacher Unit
3.  Allowance for other funds used during construction comprised 49.6%
of Cleco Power’s net income for the first quarter of 2008, compared to 41.8% for
the first quarter of 2007.




Interest Charges


Interest
charges decreased $2.6 million, or 26.0%, during the first quarter of 2008
compared to the same period of 2007 primarily due to $2.9 million of allowance
for borrowed funds used during construction associated with the construction
activity at Rodemacher Unit 3, $0.9 million related to the repayment of
medium-term notes during 2007, and $2.1 million of interest adjustments related
to a favorable settlement on uncertain tax positions during the first quarter of
2008.  Partially offsetting this decrease was $1.5 million of interest
related to draws against Cleco Power’s credit facility and $1.8 million of
interest related to the November 2007 issuance of solid waste disposal facility
bonds and the March 2008 issuance of storm recovery
bonds.




Income
Taxes


Income
tax expense increased $3.8 million, or 123.3%, primarily due to an increase in
pre-tax income during the first quarter of 2008 compared to the same period of
2007.




Midstream


FOR
      THE THREE MONTHS ENDED MARCH 31,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2008
            
            
            2007
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenueOther operations
            
            $
            -
            
            
            $
            7
            
            
            $
            (7
            )
            
            
            (100.00
            )%Affiliate
revenue
            
            
            1,918
            
            
            
            986
            
            
            
            932
            
            
            
            94.52
            %Operating
    revenue
            
            
            1,918
            
            
            
            993
            
            
            
            925
            
            
            
            93.15
            %Operating
      expensesOther operations
            
            
            1,439
            
            
            
            1,200
            
            
            
            (239
            )
            
            
            (19.92
            )%Maintenance
            
            
            849
            
            
            
            460
            
            
            
            (389
            )
            
            
            (84.57
            )%Depreciation
            
            
            76
            
            
            
            75
            
            
            
            (1
            )
            
            
            (1.33
            )%Taxes other than
      incometaxes
            
            
            88
            
            
            
            55
            
            
            
            (33
            )
            
            
            (60.00
            )%Gain on sales of
      assets
            
            
            (99
            )
            
            
            -
            
            
            
            99
            
            
            
            -Total
      operatingexpenses
            
            
            2,353
            
            
            
            1,790
            
            
            
            (563
            )
            
            
            (31.45
            )%Operating
      loss
            
            $
            (435
            )
            
            $
            (797
            )
            
            $
            362
            
            
            
            45.42
            %Equity
      loss from investees
            
            $
            (5,013
            )
            
            $
            (1,827
            )
            
            $
            (3,186
            )
            
            
            (174.38
            )%Interest
      charges
            
            $
            1,969
            
            
            $
            5,042
            
            
            $
            3,073
            
            
            
            60.95
            %Federal
      and state income tax benefit
            
            $
            2,803
            
            
            $
            2,953
            
            
            $
            (150
            )
            
            
            (5.08
            )%Net
      loss
            
            $
            (4,616
            )
            
            $
            (4,714
            )
            
            $
            98
            
            
            
            2.08
            %




33
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Factors
affecting Midstream during the first quarter of 2008 are described
below.




Operating
Revenue


Operating
revenue increased $0.9 million, or 93.2%, in the first quarter of 2008 compared
to the first quarter of 2007.  The increase was primarily due to the
accounting treatment of Acadia's power plant operations, maintenance, and
engineering services resulting from Cajun's purchase of Calpine's 50% ownership
interest in Acadia in September 2007.  Prior to September 2007,
Calpine employees provided power plant operations, maintenance, and engineering
services to Acadia.  Subsequent to September 2007, these services were
provided by Midstream.  As a result, all revenue associated with plant
operations for Acadia is included in affiliate revenue.




Equity
Loss from Investees


Equity
loss from investees increased $3.2 million, or 174.4%, during the first quarter
of 2008 compared to the same period of 2007.  The increase was due to
a $2.2 million decrease in equity earnings at Evangeline and a $1.0 million
decrease in equity earnings at APH.  The decrease at Evangeline was
primarily due to higher turbine maintenance expenses.  The decrease at
APH was primarily due to higher turbine and general maintenance expenses at the
facility.  In January 2008, Acadia entered into a long-term
maintenance contract that is expected to stabilize future maintenance expenses
at the plant.  For additional information on Evangeline and Acadia,
see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements
— Note 10 — Equity Investment in Investees.”




Interest
Charges


Interest
charges decreased $3.1 million, or 61.0%, during the first quarter of 2008
compared to the same period of 2007 primarily due to a lower interest rate and a
lower balance on affiliate debt relating to APH’s investment in
Acadia.




FINANCIAL
CONDITION


Liquidity
and Capital Resources




General
Considerations and Credit-Related Risks




Credit
Ratings and Counterparties


At
March 31, 2008, Moody’s and Standard & Poor’s outlooks for both Cleco
Corporation and Cleco Power were stable.  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.


The
parent company of Evangeline’s counterparty to the Evangeline Tolling Agreement
is Bear Stearns Companies Inc.  Bear Stearns Companies Inc. has issued
guarantees of the payment obligations under the Evangeline Tolling
Agreement.  On March 16, 2008, after Bear Stearns Companies Inc.
suffered significant liquidity deterioration, JPMorgan Chase &
Co. announced
it was acquiring the Bear Stearns Companies Inc.  JPMorgan Chase &
Co. is guaranteeing the obligations of Bear Stearns Companies Inc. and its
subsidiaries, including obligations under the Evangeline Tolling Agreement,
pending the completion of the merger, and is providing management oversight for
its operations.  At March 31, 2008, Moody’s outlook for Evangeline was
stable.  The tolling agreement is the principal source of cash flow
for Evangeline.  For more information regarding Evangeline’s tolling
agreement, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 11 — Litigation, Other Commitments and Contingencies, and
Disclosures about Guarantees — Risk and Uncertainties — Evangeline Tolling
Agreement.”


In
August 2005, Cleco Power entered into an EPC contract with Shaw to construct
Rodemacher Unit 3.  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 natural gas hedging 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 natural gas, the
changes in open power and 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, 2007.




Debt


At
March 31, 2008, Cleco Corporation 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




34
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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, 2008, or December 31,
2007.  At March 31, 2008, Cleco’s long-term debt outstanding was
$969.4 million, of which $108.4 million was long-term debt due within one year,
compared to $869.1 million at December 31, 2007, which included $100.0 million
of long-term debt due within one year.  For additional information,
see “— Cleco Corporation (Holding Company Level)” and “— Cleco Power”
below.


At
March 31, 2008, Cleco had a working capital deficit of $3.4
million.  At December 31, 2007, Cleco had a working capital surplus of
$48.1 million.  The $51.5 million decrease in working capital is
primarily due to the payment of dividends, additions to property, plant and
equipment, construction costs for Rodemacher Unit 3, and the sale of Cleco
Power’s right to bill and collect from its customers the unamortized storm costs
from Cleco Power to Cleco Katrina/Rita.  An uncommitted bank line of
credit up to $10.0 million also is available to support Cleco’s working capital
needs.


Cash
and cash equivalents available at March 31, 2008, were $108.9 million combined
with $297.8 million facility capacity ($132.8 million from Cleco Corporation and
$165.0 million from Cleco Power) for total liquidity of $406.7
million.  Cash and cash equivalents decreased $20.1 million, when
compared to December 31, 2007.  This decrease is primarily due to
additions to property, plant and equipment, including Rodemacher Unit 3,
partially offset by cash received from the issuance of bonds and collection of
customer accounts receivables.




Cleco
Corporation (Holding Company Level)


Cleco
Corporation had no short-term debt outstanding at March 31, 2008, or December
31, 2007.  At March 31, 2008, and December 31, 2007, 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 facility 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, 2008, 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 bank line of credit up
to $10.0 million also is available to support Cleco’s working capital
needs.


Cash
and cash equivalents available at March 31, 2008, were $101.5 million, combined
with $132.8 million facility capacity
for total liquidity of $234.3 million.  Cash and cash equivalents
decreased $15.5 million, when compared to December 31, 2007, primarily due to
the payment of dividends and the settlement of affiliate payables and
receivables.




Cleco
Power


There
was no short-term debt outstanding at Cleco Power at March 31, 2008, or December
31, 2007.  At March 31, 2008, Cleco Power’s long-term debt outstanding
was $869.4 million, of which $8.4 million was long-term debt due within one
year, compared to $769.1 million at December 31, 2007, of which none was due
within one year.


Cleco
Power’s $275.0 million five-year credit facility matures 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, 2008, $110.0 million was outstanding under Cleco Power’s $275.0
million, five-year facility with a weighted average interest rate of
4.12%.  An uncommitted bank line of credit up to $10.0 million also is
available to support Cleco Power’s working capital needs.


On
March 6, 2008, Cleco Katrina/Rita issued $180.6 million aggregate principal
amount of senior secured storm recovery bonds.  The bonds were issued
in two tranches, with one tranche of $113.0 million initial principal amount
with an expected average life of five years and bearing interest of 4.41% per
annum.  The other tranche was for $67.6 million initial principal
amount with an expected average life of 10.58 years and bearing interest at
5.61% per annum.  The resulting weighted average interest rate of both
tranches is 4.86% per annum, and the effective weighted average life is
seven years.  Proceeds from the bonds were used to repay loans under
Cleco Power’s revolving credit facility and for general corporate
purposes.  Debt service for the bonds will be paid by a special
monthly storm recovery surcharge paid by all Cleco Power's retail customers, as
discussed below.


Cash
and cash equivalents available at March 31, 2008, were $7.4 million, combined
with $165.0 million facility capacity for total liquidity of $172.4
million.  Cash and cash equivalents decreased $4.5 million when
compared to December 31, 2007.  This decrease is primarily due to
additions to property, plant and equipment, including Rodemacher Unit 3,
partially offset by cash received from the issuance of bonds and collection of
customer accounts receivable.


In
February 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.  Cleco Power had collected $43.3 million and $31.5 million at
March 31, 2008, and December 31, 2007, respectively.  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 the receipt of equity
contributions from Cleco Corporation.




35
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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.  The Governor’s office
allocated $60.0 million for issuance in 2006, and another $60.0 million for
issuance in 2007.  These bonds were issued by the Rapides Finance
Authority in November 2006 and November 2007, respectively.  Cleco
Power can apply again in 2008, up to the total amount of qualifying costs
identified.  Thus far, a total of $152.9 million of qualifying costs
has been identified.  The bonds issued in 2006 have a fixed interest
rate of 4.70% per annum, and the maturity date is November 1,
2036.  The 2006 bonds may be called at the option of the issuer at the
direction of Cleco Power after November 1, 2016.  The bonds issued in
2007 initially had a variable interest rate which was reset weekly via an
auction agent.  On March 12, 2008, Cleco Power exercised a provision
in the bond indenture to change the method of interest through a reoffering of
the bonds.  As a part of the reoffering, the holders of the original
auction rate bonds were required to tender them.  The reoffered bonds
have a five-year term with a fixed rate of 5.25% per annum, with the option to
call at the end of the five years.  If Cleco Power does not call the
bonds at the end of the five years, the bonds will become variable
rate.  Cleco Power plans to remarket the bonds at the end of the
five-year period.  The maturity date of the 2007 bonds is November 1,
2037.


Storm
restoration costs from Hurricanes Katrina and Rita totaled $158.0
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 signed a settlement term sheet allowing the
recovery and securitization of essentially all of Cleco Power’s Hurricanes
Katrina and Rita storm costs, along with the funding and securitization of an
approximately $50.0 million reserve for future storm costs.  The
agreement also allowed Cleco Power to recover debt service costs and other storm
related expenses through a customer billing surcharge.  For each of
the periods ended March 31, 2008, and March 31, 2007, Cleco Power collected $5.9
million of storm recovery surcharges.  For more information regarding
storm restoration costs, see Item 1, “Notes to the Unaudited Condensed
Consolidated Financial Statements — Note 4 — Regulatory Assets and Liabilities —
Deferred Storm Restoration Costs - Katrina/Rita.”


Cleco
Power has identified certain generating, transmission, and distribution
construction projects in the Gulf Opportunities Zone (GO Zone)
areas.  Cleco Power has filed an application with the Louisiana Public
Finance Authority requesting $100.0 million in capacity to fund these
projects.  If approved by the Louisiana State Bond Commission, Cleco
Power plans to issue the GO Zone bonds later this year.




Midstream


Midstream
had no debt outstanding at March 31, 2008, or December 31, 2007.


Evangeline,
which is deconsolidated and accounted for under the equity method, had no
short-term debt outstanding at March 31, 2008.  Evangeline had $173.0
million and $177.1 million
of long-term debt outstanding at March 31, 2008, and December 31, 2007,
respectively, in the form of 8.82% Senior Secured Bonds due 2019.  Of
these amounts, $7.7 million and $8.2 million was due within one year at March
31, 2008, and December 31, 2007, respectively.  The bonds issued by
Evangeline are non-recourse to Cleco Corporation.




Restricted
Cash


Various
agreements to which Cleco is subject contain covenants 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, 2008, and December 31, 2007, $61.2
million and $18.0 million of cash, respectively, was restricted.  At
March 31, 2008, the $61.2 million of restricted cash consisted of $0.1 million
under the Diversified Lands mitigation escrow, $8.3 million held in escrow for
the construction of Cleco Power’s solid waste disposal facilities at Rodemacher
Unit 3, $50.9 million reserved at Cleco Power for future storm restoration
costs, and $1.9 million at Cleco Katrina/Rita restricted for payment of
operating expenses, interest and principal on storm securitization bonds under
the storm recovery bonds loan agreement.  Restricted cash at Cleco
Power at March 31, 2008, increased $43.2 million compared to December 31, 2007,
primarily due to the establishment of the reserve for future storm restoration
costs, partially offset by the release of funds for construction at Rodemacher
Unit 3.  Restricted cash at Cleco Katrina/Rita at March 31, 2008,
increased $1.9 million compared to December 31, 2007, due to the issuance of the
storm recovery bonds.


The
restricted cash at Evangeline is not included in restricted cash on Cleco
Corporation’s Condensed Consolidated Balance Sheets due to the equity method of
accounting.  Evangeline’s restricted cash at March 31, 2008, and
December 2007, was $23.3 million and $33.3 million, respectively.




Contractual Obligations and Other
Commitments


Cleco,
in the normal course of business activities, enters into a variety of
contractual obligations.  Some of these result in direct obligations
that are reflected in the Consolidated Balance Sheets while other commitments,
some firm and some based on uncertainties, are not reflected in the consolidated
financial statements.


For
additional 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, 2007.




36
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




Off-Balance
Sheet Commitments


Cleco
Corporation and Cleco Power have entered into various off-balance sheet
commitments, in the form of guarantees and standby letters 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, 2008, 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, 2008REDUCTIONS
      TO THEAMOUNT
      AVAILABLETO
      BE DRAWN ONFACE
            
            
            
            
            
            NET
            
            
            CLECO
      CORPORATION’S(THOUSANDS)
            
            AMOUNT
            
            
            REDUCTIONS
            
            
            AMOUNT
            
            
            CREDIT
      FACILITYCleco
      CorporationGuarantee issued to Entergy
      companies for performance obligations of Perryville
            
            $
            277,400
            
            
            $
            135,000
            
            
            $
            142,400
            
            
            $
            328Guarantees issued to purchasers
      of the assets of Cleco Energy
            
            
            1,400
            
            
            
            -
            
            
            
            1,400
            
            
            
            1,400Obligations under standby letter
      of credit issued to the Evangeline Tolling Agreement
      counterparty
            
            
            15,000
            
            
            
            -
            
            
            
            15,000
            
            
            
            15,000Guarantee issued to Entergy
      Mississippi on behalf of Attala
            
            
            500
            
            
            
            -
            
            
            
            500
            
            
            
            500Cleco
      PowerObligations under standby letter
      of credit issued to the Louisiana Department of Labor
            
            
            525
            
            
            
            -
            
            
            
            525
            
            
            
            -Obligations under the Lignite
      Mining Agreement
            
            
            9,531
            
            
            
            -
            
            
            
            9,531
            
            
            
            -Total
            
            $
            304,356
            
            
            $
            135,000
            
            
            $
            169,356
            
            
            $
            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, 2008, 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.  In June 2005, Perryville paid all interest and principal
owed under the Senior Loan Agreement, and in July 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.  The discounted probability-weighted liability under the
guarantees and indemnifications as of March 31, 2008, 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 facility by an amount equal to the
maximum reasonably anticipated liability in respect of the contingent obligation
as determined in good faith.


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
January 2006, Cleco Corporation provided a $0.5 million guarantee to Entergy
Mississippi for Attala’s obligations under the Attala Interconnection
Agreement.  This guarantee will be in effect through the life of the
agreement.


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,




37
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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, 2008, Cleco
Power’s 50% exposure for this obligation was approximately $9.5
million. The lignite mining contract is in place until 2011 and does not
affect the amount Cleco Corporation can borrow under its credit
facility.


The
following table summarizes the expected termination date of the guarantees and
standby letters of credit discussed above:





AT
      MARCH 31, 2008AMOUNT
      OF COMMITMENT EXPIRATION PER PERIODNET
            
            
            
            
            
            
            
            
            
            
            
            MOREAMOUNT
            
            
            LESS
      THAN
            
            
            
            
            
            
            
            
            THAN(THOUSANDS)
            
            COMMITTED
            
            
            ONE
      YEAR
            
            
            1-3
      YEARS
            
            
            3-5
      YEARS
            
            
            5
      YEARSGuarantees
            
            $
            153,831
            
            
            $
            100,000
            
            
            $
            1,400
            
            
            $
            9,531
            
            
            $
            42,900Standby
      letters of credit
            
            
            15,525
            
            
            
            525
            
            
            
            -
            
            
            
            -
            
            
            
            15,000Total commercial
      commitments
            
            $
            169,356
            
            
            $
            100,525
            
            
            $
            1,400
            
            
            $
            9,531
            
            
            $
            57,900





Regulatory Matters




Wholesale
Rates of Cleco


For
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, 2007.




Retail
Rates of Cleco Power


In
March 2007, after completing a review of restoration costs related to Hurricanes
Katrina and Rita, Cleco Power and the LPSC Staff filed a settlement agreement
allowing recovery of essentially all of Cleco Power's Hurricanes Katrina and
Rita storm costs.  The agreement authorized the issuance of
securitized bonds to finance the restoration costs and collection of a special
storm recovery charge from Cleco Power's customers to pay principal,
interest and other amounts related to the bonds.  The LPSC approved
the settlement agreement and issued a securitization financing order in
September 2007.  In March 2008, securitization financing was
completed.  For additional information about the recovery of storm
restoration costs, see Item 1, "Notes to the Unaudited Condensed Financial
Statements — Note 4 — Regulatory Assets and Liabilities — Deferred Storm
Restoration Costs - Katrina/Rita."


In
January 2008, Cleco Power filed its monitoring report for the 12-month period
ended September 30, 2007.  Cleco Power anticipates that the LPSC Staff
will complete their review of this report by the end of the third quarter of
2008.


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, 2007.




Wholesale
Electric Markets


For
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, 2007.




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 Resources — Regulatory Matters — Retail Electric Markets” in the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2007.




Generation
RFP




2007
Long-Term RFP


In
June 2007, Cleco Power filed draft documents with the LPSC for up to
approximately 600 MW of intermediate and/or peaking resources to meet projected
load growth over a 10-year period beginning in 2010.  To meet these
needs, Cleco Power is looking for products for a term of 2 to 30
years.  Out of the approximately 600-MW total, up to approximately 350
MW may be sourced from a peaking resource.  Cleco Power has submitted
four potential self-build projects that will be tested against the
market.  The final version of the RFP was issued in October 2007,
and bids were received in December 2007. Cleco has notified bidders if
their bids have been selected for the short list. Final selections are
anticipated before the end of the third quarter of
2008.




2008
Short-Term RFP for 2009 Resources


On
March 5, 2008, Cleco Power issued a RFP for a minimum of 50 MW up to 450 MW to
meet its 2009 capacity and energy requirements.  Bids were received on
March 20, 2008, and currently are being evaluated to develop a final
portfolio.  Bidders will be notified of the results specific to their
proposal and contract negotiations are scheduled to begin in May
2008.




38
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




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, 2007.




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.  Cleco Power has entered into a contract with Exxon
Mobil to supply 300,000 tons of the anticipated 1.5 million tons per year
consumption of petroleum coke for a three-year period beginning in
2009.


In
May 2006, Cleco Power and Shaw entered into an Amended EPC Contract, which
provides for substantial completion of the construction no later than the fourth
quarter of 2009.  The total capital cost of the project, including
AFUDC, Amended EPC Contract costs, and other development expenses, is estimated
at $1.0 billion.  The lump sum price under the scope of the Amended
EPC Contract, including accepted change orders under the contract, is $786.4
million. The Amended EPC Contract allows for termination at Cleco Power’s sole
discretion, which would require payment of termination fees, or if certain
milestones, approvals, or other typical commercial terms and conditions are not
met.  As of March 31, 2008, the maximum termination costs would have
been $660.3 million, or an additional $23.7 million more than the capital
expended to date.  Upon issuance of the notice to start construction in May
2006, and in support of its performance obligations, Shaw provided a $58.9
million letter of credit to Cleco Power.  In addition to the letter of
credit, Shaw also posted a $200.0 million payment and performance bond in favor
of Cleco Power in support of its performance obligations under the Amended EPC
Contract.  The Amended EPC Contract also provides for Shaw
to:  (a) allow retention, or (b) issue an additional letter of credit,
in an amount equal to 7.5% of the payments made by Cleco Power under the
contract.  As of March 31, 2008, Shaw had issued a letter of credit in
the amount of $42.0 million and Cleco has retained amounts of $5.1
million.  The project remains on schedule for commercial operation no
later than the fourth quarter of 2009.  As of March 31, 2008, Cleco
Power had incurred approximately $713.8 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, 2007.  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 Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2007.




Lignite
Deferral


At
March 31, 2008, and December 31, 2007, Cleco Power had $28.7 million and $29.4
million, respectively, in deferred costs remaining
uncollected.


For
additional 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, 2007.




Franchises


On
March 8, 2008, the Town of Elizabeth voted in favor of leasing their electrical
system to Cleco Power.  On May 6, 2008, the Town's Board of Aldermen
will vote on the ordinance that gives the Mayor the authority to enter into the
lease/franchise agreement with Cleco Power.  The agreement is for 10
years with two 10-year renewal terms. Approximately 225 Cleco Power
customers are located in Elizabeth.


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, 2007.




Environmental
Matters


Cleco
is subject to extensive environmental regulation by federal, 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.


On
February 8, 2008, the U.S. Court of Appeals for the D.C. Circuit in New Jersey
v. EPA vacated both the EPA's rule delisting coal-fired electric generating
units (EGUs) from regulation under section 112 of the Clean Air Act (CAA) and
the entire Clean Air Mercury Rule (CAMR).  As a result of the court's
action, EGUs are subject to regulation under section 112, which will require the
EPA to promulgate Maximum Achievable Control Technology (MACT) standards for
hazardous air pollutants for coal- and oil-fired EGUs.




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 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




On
March 24, 2008, the EPA filed a petition asking all of the judges (also known as
en banc) of the D.C. Circuit to re-hear the decision in New Jersey v. EPA.
Industry interveners also filed a petition requesting rehearing en banc, as well
as rehearing by the three-judge panel.  Although the D.C. Circuit is not
required to rule on petitions for rehearing or rehearing en banc in a specified
time, it is expected that the court will grant or deny the EPA and industry
interveners' petitions within the next two to three months. Parties also may
request the case to be heard by the Supreme Court.  The 90-day time period
in which parties may file a petition for certiorari with the Supreme Court will
run from the date the D.C. Circuit denies rehearing or, if rehearing is granted,
the subsequent entry of judgment.


Assuming
there is not a reversal of the decision by the D.C. Circuit itself or the
Supreme Court, the EPA will have to move forward to set MACT standards for coal-
and oil-fired EGUs under section 112 of the CAA which requires that: (1) new
sources must adopt, at minimum, the emission control that is achieved in
practice by the best controlled similar source, as determined by the
Administrator and (2) existing sources must adopt emission controls equal to the
average emission limitation achieved by the best performing 12 percent of the
existing source.  While all coal- and oil-fired EGUs will be subject to
whatever final MACT rules the EPA adopts, in the interim, before those rules are
adopted, case-by-case MACT permitting under section 112 also may
apply.  Cleco believes that a case-by-case MACT requirement does not
and will not apply to its existing units based in part on the conclusion of the
Congressional Budget Office that a case-by-case MACT analysis should not apply
to existing coal-fired units.  However, once the EPA promulgates a
"general" MACT standard for existing sources, Dolet Hills Unit 1 and Rodemacher
Unit 2 will be subject to those MACT standards, whatever they may be.
 Teche Unit 3 and Rodemacher Unit 1, because they have the capacity of
burning oil, could also potentially be impacted.  At this time, Cleco
is not able to quantify the capital investment or operating cost impact of
these general MACT standards to its existing units as those standards have not
yet been determined by the EPA.


In
regards to new units, some groups are taking the position that all coal- and
oil-fired EGUs permitted without a case-by-case MACT during the period when
EPA’s delisting and CAMR rules were in effect must now obtain case-by-case MACT
permits.  These groups are requesting that permitting authorities require a
case-by-case MACT analysis to be conducted on such units.  For units
such as Rodemacher Unit 3 that received final, non-appealable permits while the
delisting and CAMR rules were in effect, further guidance from the EPA is
expected regarding their status under the MACT rules and if in fact a
case-by-case MACT analysis will be required.  To date, Cleco has
received no direct indications from permitting authorities that a case-by-case
MACT analysis is required or that construction should be suspended while a
case-by-case MACT analysis is conducted.  Rodemacher Unit 3 was lawfully
permitted, and at this time, Cleco does not anticipate any construction schedule
delays.  Should permitting authorities determine
that a case-by-case MACT applies to Rodemacher Unit 3, there could be
significant impacts on the final capital cost of the unit and/or delays in the
construction schedule.  At this time, Cleco is not able to quantify the
capital investment or operating cost associated with the application of
case-by-case MACT standards to Rodemacher Unit 3.


On
March 19, 2008, Cleco Power received a consolidated compliance order and notice
of potential penalty (CO/NOPP) from the LDEQ for alleged violations of the air
quality rules at its Dolet Hills and Rodemacher Power Stations.  For
Dolet Hills, the CO/NOPP alleges that upon a file review conducted on or about
February 26, 2008, the LDEQ found that Cleco Power was in violation of
conditions in its Title V permit regarding compliance assurance tests to be
conducted upon its continuous monitoring systems. Upon review of the LDEQ
findings and the Part 75 regulations, Cleco Power contends that the actions
taken by Cleco Power were allowed under the Part 75 regulations, as well as the
Title V permit.  In regard to the Rodemacher Power Station violations,
the CO/NOPP states that a file review of the Rodemacher facility was conducted
on or about September 14, 2007, and that upon the agency’s review of the
Quarterly Stack Emissions Reports required under 40 CFR Part 60 submitted by
Cleco Power, the LDEQ found that Rodemacher Unit 2 exceeded opacity limits at
various times during the second, third and fourth quarters of
2007.  Cleco Power has met with the LDEQ in regard to these alleged
violations and is responding to LDEQ’s requests for additional
information.  On April 16, 2008, Cleco filed a Request for
Administrative Hearing with the LDEQ with regards to the CO/NOPP, because Cleco
contends that there are several factual errors in the CO/NOPP.  The
LDEQ has 30 days to grant or deny the hearing request.  At this time,
Cleco is unable to determine what, if any, action the LDEQ will take with
respect to the CO/NOPP.


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, 2007.




Recent
Accounting Standards


For
a discussion of recent accounting standards, see Item 1, “Notes to the Unaudited
Condensed Consolidated Financial Statements — Note 2 — 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
  40
 CLECO
      CORPORATIONCLECO POWER
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      10-Q
  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, 2007.




CLECO
POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS


Set
forth below is information concerning the results of operations of Cleco Power
for the three months ended March 31, 2008, and March 31, 2007. The
following narrative analysis should be read in combination with Cleco Power’s
Unaudited Condensed Consolidated Financial Statements and the Notes contained in
this Form 10-Q.


Cleco
Power meets the conditions specified in General Instructions 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 2008 and
the first quarter of 2007.  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, 2007.


For
an explanation of material changes in the amount of revenue and expense items of
Cleco Power between the first quarter of 2008 and the first quarter of 2007, see
“— Results of Operations — Comparison of the Three Months Ended March 31, 2008,
and 2007 — 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
uses 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 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 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 obligations 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




41
 CLECO
      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q




computed
by assuming a 1% change in the current interest rate applicable to such
debt.


As
of March 31, 2008, Cleco had no long-term or short-term variable-rate
debt.  However, at March 31, 2008, Cleco Power had borrowings of
$110.0 million outstanding under its $275.0 million five-year credit facility at
a weighted average cost of 4.12%.  The borrowing costs under the
facility are equal to LIBOR plus 0.400%, including facility fees.  The
existing borrowings have 30-day terms and various maturity dates.  If
the amounts of the individual borrowings are renewed at maturity, rather than
repaid, each 1% change in the average interest rates applicable to such debt
would result in a change of approximately $1.1 million in Cleco's annual pre-tax
earnings.




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 the General Manager –
Internal Audit, who are appointed by Cleco Corporation’s Board of
Directors.  Risk limits are recommended by the Risk Management
Committee and monitored through a daily risk report that identifies the current
VaR, market conditions, and concentration of energy market
transactions.


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,
2008, the positions had a mark-to-market value of $3.7 million, which is an
increase of $1.7 million from the mark-to-market value of $2.0 million at
December 31, 2007.  In addition, these positions resulted in a
realized gain of $0.1 million for the three months ended March 31,
2008.  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 customer fuel costs, 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, 2008, the net
mark-to-market impact related to open natural gas positions was a gain of $59.5
million.  Deferred gains relating to closed natural gas positions at
March 31, 2008, totaled $2.3 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 with delta approximation,
assuming a holding period of one day, and 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, 2008, as well as the VaR at December 31,
2007, is summarized below:





FOR
      THE THREE MONTHS
              ENDED
      MARCH 31, 2008
            
            
            AT MARCH 31,
            
            
            AT
      DECEMBER 31,(THOUSANDS)
            
            HIGH
            
            
            LOW
            
            
            AVERAGE
            
            
            2008
            
            
            2007Cleco
      Power
            
            $
            502.3
            
            
            $
            167.3
            
            
            $
            266.2
            
            
            $
            471.8
            
            
            $
            160.1




Cleco
Power


Please
refer to “— Risk Overview” above for a discussion of market risk inherent in
Cleco Power’s market risk-sensitive instruments.


Cleco
Power has entered into various fixed-rate debt obligations.  Please
refer to “— Interest Rate Risks” above for a discussion of Cleco Power’s
borrowing under its credit facility and how it monitors its mix of fixed-rate
debt obligations and the manner of calculating changes in fair market value and
interest expense of its debt obligations.


As
of March 31, 2008, Cleco Power had no long-term or short-term variable-rate
debt.  However, at March 31, 2008, Cleco Power had borrowings of
$110.0 million outstanding under its $275.0 million five-year credit facility at
a weighted average cost of 4.12%.  The borrowing costs under the
facility are equal to LIBOR plus 0.400%, including facility fees.  The
existing borrowings have 30-day terms and various maturity dates.  If
the amounts of the individual borrowings are renewed at maturity, rather than
repaid, each 1% change in the average interest rates applicable to such debt
would result in change of approximately $1.1 million in Cleco Power’s annual
pre-tax earnings.


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.




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      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q






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 2008, 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.





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      CORPORATIONCLECO POWER
                      2008 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 Consolidated Financial Statements — Note 11 —
Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees — Litigation.”




CLECO
POWER


For
information on legal proceedings affecting Cleco Power, see Part I, Item 1,
“Notes to the Unaudited Condensed Consolidated Financial Statements — Note 11 —
Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees — Litigation.”





ITEM
1A.RISK FACTORS


Other
than the change to the risk factor described below, there have been no material
changes from the risk factors disclosed under the heading “Risk Factors” in Item
1A of the Registrants’ Combined Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 (the “2007 Annual Report on Form 10-K”).  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 2007 Annual Report on Form 10-K.  The risk factor below should
be read in conjunction with the risk factors disclosed in the 2007 Annual Report
on Form 10-K.




Evangeline
Tolling Agreement




Failure
by Bear Stearns Companies Inc. or any successors or assignees to fulfill its
guarantee obligations under the Evangeline Tolling Agreement could have a
material adverse effect on Cleco’s results of operations, financial condition,
and cash flows.


Bear
Stearns Companies Inc. guarantees the payment obligations of Bear Energy LP
under the Evangeline Tolling Agreement.  On March 16, 2008, after Bear
Stearns Companies Inc. suffered significant liquidity deterioration, JPMorgan
Chase & Co. announced it was acquiring Bear Stearns Companies
Inc. Pending the completion of the acquisition of Bear Stearns Companies
Inc., JPMorgan Chase & Co. is guaranteeing the obligations of Bear Stearns
Companies Inc. and its subsidiaries, including obligations under the guarantee
and the Evangeline Tolling Agreement, and is providing management oversight for
Bear Stearns Companies Inc. operations.  This guarantee will continue
to be in effect once the acquisition of Bear Stearns Companies Inc. is
completed.  In the event the acquisition is not completed, the
JPMorgan Chase & Co. guarantee also will likely be terminated.  If
Bear Stearns Companies Inc. or any successor or assignee were to fail
to perform its payment obligations, such failure could have a material adverse
effect on Cleco Corporation’s results of operations, financial condition, and
cash flows for the following reasons, among others:




§
            If
      such failure to perform constituted a default under the tolling agreement,
      the holders of the Evangeline bonds would have the right to declare the
      outstanding principal amount ($173.0 million at March 31, 2008) and
      interest to be immediately due and payable, which could result
      in:


§
            Cleco’s
      seeking to refinance the bonds, the terms of which may be less favorable
      than existing terms;


§
            Cleco’s
      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.





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      CORPORATIONCLECO POWER
                      2008 1ST QUARTER FORM
      10-Q





ITEM
6.EXHIBITS





CLECO
      CORPORATION3.1
            Bylaws
      of Cleco Corporation, Revised effective April 25, 200812(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 ended March 31, 2008, for Cleco Corporation31.1
            CEO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200231.2
            CFO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200232.1
            CEO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      200232.2
            CFO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      2002CLECO
      POWER4.1
            Indenture
      dated as of March 6, 2008 (incorporated by reference to Exhibit 4.1 of
      Form 8-K (file no. 1-05663), filed March 6, 2008)4.2
            First
      Supplemental Indenture dated as of March 6, 2008 (incorporated by
      reference to Exhibit 4.2 of Form 8-K (file no. 1-05663), filed March 6,
      2008)10.1
            Storm
      Recovery Property Sale Agreement dated as of March 6, 2008 between Cleco
      Katrina/Rita Hurricane Recovery Funding LLC and Cleco Power LLC
      (incorporated by reference to Exhibit 10.1 of Form 8-K (file no. 1-05663),
      filed March 6, 2008)10.2
            Storm
      Recovery Property Servicing Agreement dated as of March 6, 2008 between
      Cleco Katrina/Rita Hurricane Recovery Funding LLC and Cleco Power LLC
      (incorporated by reference to Exhibit 10.2 of Form 8-K (file no. 1-05663),
      filed March 6, 2008)10.3
            Administration
      Agreement dated as of March 6, 2008 between Cleco Katrina/Rita Hurricane
      Recovery Funding LLC and Cleco Power LLC (incorporated by reference to
      Exhibit 10.3 of Form 8-K (file no. 1-05663), filed March 6,
      2008)12(b)
            Computation
      of Ratios of Earnings to Fixed Charges for the three- and
      twelve-month periods ended March 31, 2008, for Cleco Power31.3
            CEO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200231.4
            CFO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200232.3
            CEO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      200232.4
            CFO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      2002




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      CORPORATIONCLECO POWER
                      2008 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
6, 2008




46
 CLECO
      CORPORATIONCLECO POWER
                      2008 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 6, 2008







47