**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
        D.C.  20549**


__________________





**FORM
      10-Q**




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




**For
      the quarterly period ended September 30, 2007**




**Or**




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


__________________





**Commission
      file number 1-15759**


**CLECO
      CORPORATION**


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


**Louisiana**
              *(State
                or other jurisdiction of incorporation or organization)*
            **72-1445282**
              *(I.R.S.
                Employer Identification No.)***2030
                Donahue Ferry Road, Pineville, Louisiana**
              *(Address
                of principal executive offices)*
            **71360-5226**
              *(Zip
                Code)***Registrant’s
                telephone number, including area code:  (318)
                484-7400**


__________________





**Commission
      file number 1-05663**


**CLECO
      POWER LLC**


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


**Louisiana**
              *(State
                or other jurisdiction of incorporation or organization)*
            **72-0244480**
              *(I.R.S.
                Employer Identification No.)***2030
                Donahue Ferry Road, Pineville, Louisiana**
              *(Address
                of principal executive offices)*
            **71360-5226**
              *(Zip
                Code)***Registrant’s
                telephone number, including area code:  (318)
                484-7400**Indicate
                by check mark whether the Registrants: (1) have filed all reports
                required
                to be filed by Section 13 or 15(d) of the Securities Exchange Act
                of 1934
                during the preceding 12 months (or for such shorter period that the
                Registrants were required to file such reports) and (2) have been
                subject
                to such filing requirements for the past 90 days.
              Yes
                x    No
                 ̈Indicate
                by check mark whether Cleco Corporation is a large accelerated filer,
                an
                accelerated filer, or a non-accelerated filer.  See definition
                of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
                Exchange Act.  (Check one):
              Large
                accelerated filer x                      Accelerated
                filer  ̈                                 Non-accelerated
                filer  ̈Indicate
                by check mark whether Cleco Power LLC is a large accelerated filer,
                an
                accelerated filer, or a non-accelerated filer.  See definition
                of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
                Exchange Act.  (Check one):
              Large
                accelerated filer  ̈                       Accelerated
                filer  ̈                                 Non-accelerated
                filer xIndicate
                by check mark whether the Registrants are shell companies (as defined
                in
                Rule 12b-2 of the Exchange Act)  Yes  ̈    No
                x





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





Registrant
            Description
                of Class
            Shares
                Outstanding at October 30, 2007Cleco
                Corporation
            Common
                Stock, $1.00 Par Value
            60,007,352





**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
                      2007 3RD
                          QUARTER FORM
                          10-Q


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


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




TABLE
      OF CONTENTS


PAGEGLOSSARY OF
                TERMS
            3DISCLOSURE
                REGARDING FORWARD-LOOKING STATEMENTS
            5**PART
                I**
            **Financial
                Information**ITEM
                1.
            Cleco
                Corporation — Condensed Consolidated Financial Statements
            6Cleco
                Power — Condensed Financial Statements
            15Notes
                to the Unaudited Condensed Financial Statements
            20ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            38ITEM
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            54ITEM
                4.
            Controls
                and Procedures
            55**PART
                II**
            **Other
                Information**ITEM
                1.
            Legal
                Proceedings
            56ITEM
                1A.
            Risk
                Factors
            56ITEM
                6.
            Exhibits
            57Signatures
            58





2
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q
  GLOSSARY
        OF TERMS








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





ABBREVIATION
                OR ACRONYM
            DEFINITION401(k)
                Plan
            Cleco
                Power 401(k) Savings and Investment PlanAcadia
            Acadia
                Power Partners, LLC and its 1,160-MW combined-cycle, natural gas-fired
                power plant near Eunice, Louisiana, 50% owned by APH and 50% owned
                by
                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
                MidstreamAttala
            Attala
                Transmission LLC, a wholly owned subsidiary of Cleco
                Corporation.  Prior to February 1, 2007, Attala was a wholly
                owned subsidiary of MidstreamBear
                Energy LP
            A
                wholly owned subsidiary of Bear Stearns Companies Inc.Bear
                Stearns Companies Inc.
            The
                parent company of Bear, Stearns & Co. Inc.Bidding
                Procedures Order
            Bidding
                Procedures Order, in connection with the sale of CAH’s interest in Acadia,
                approved by the Calpine Debtors Bankruptcy Court by order dated May
                9,
                2007CAH
            Calpine
                Acadia HoldingsCAH
                Assets
            CAH’s
                interest in Acadia and certain related assetsCajun
            Cajun
                Gas Energy L.L.C., an affiliate of pooled investment funds managed
                by King
                Street Capital Management, L.L.C.Calpine
            Calpine
                CorporationCalpine
                Debtors
            Calpine,
                CES, and certain other Calpine subsidiariesCalpine
                Debtors Bankruptcy Court
            U.S.
                Bankruptcy Court for the Southern District of New YorkCalpine
                Tolling Agreements
            Capacity
                Sale and Tolling Agreements between Acadia and CES which were suspended
                in
                March 2006CCN
            Certificate
                of Public Convenience and NecessityCES
            Calpine
                Energy Services, L.P.Claims
                Settlement Agreement
            Claims
                Settlement Agreement, dated April 23, 2007, by and among Calpine,
                CAH,
                CES, Acadia, and APHCleco
                Energy
            Cleco
                Energy LLC, a wholly owned subsidiary of MidstreamCleco
                Innovations LLC
            A
                wholly owned subsidiary of Cleco CorporationDiversified
                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. 07-3
            Accounting
                for Nonrefundable Advance Payments for Goods or Services to Be Used
                in
                Future Research and Development ActivitiesEntergy
            Entergy
                CorporationEntergy
                Gulf States
            Entergy
                Gulf States, Inc.Entergy
                Louisiana
            Entergy
                Louisiana, Inc.Entergy
                Mississippi
            Entergy
                Mississippi, Inc.Entergy
                Services
            Entergy
                Services, Inc., as agent for Entergy Louisiana and Entergy Gulf
                StatesEPA
            United
                States Environmental Protection AgencyEPC
            Engineering,
                Procurement, and ConstructionERO
            Electric
                Reliability OrganizationESOP
            Cleco
                Corporation Employee Stock Ownership PlanESPP
            Cleco
                Corporation Employee Stock Purchase PlanEvangeline
            Cleco
                Evangeline LLC, a wholly owned subsidiary of Midstream, and its 775-MW
                combined-cycle, natural gas-fired power plant located in Evangeline
                Parish, LouisianaEvangeline
                Tolling Agreement
            Capacity
                Sale and Tolling Agreement between Evangeline and Williams which
                expires
                in 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 Accounting Research
                Bulletin No. 51 (revised December
                2003)




3
 CLECO
                    CORPORATIONCLECO
                    POWER
                  2007 3RD
                      QUARTER FORM
                      10-Q




ABBREVIATION
                OR ACRONYM
            DEFINITIONFIN
                48
            Accounting
                for Uncertainty in Income Taxes – an Interpretation of FASB Statement No.
                109FSP
            FASB
                Staff PositionFSP
                FIN 48-1
            Definition
                of *Settlement* in FASB Interpretation No. 48FSP
                No. FIN 39-1
            Amendment
                of FASB Interpretation No. 39ICT
            Independent
                Coordinator of TransmissionInterconnection
                Agreement
            Interconnection
                Agreement and Real Estate Agreement between Attala and Entergy
                MississippiIRS
            Internal
                Revenue ServiceIRP
            Integrated
                Resource PlanningkWh
            Kilowatt-hour(s)
                as applicableLIBOR
            London
                Inter-Bank Offer RateLignite
                Mining Agreement
            Dolet
                Hills Mine Lignite Mining Agreement, dated as of May 31,
                2001LPSC
            Louisiana
                Public Service CommissionLTICP
            Cleco
                Corporation Long-Term Incentive Compensation PlanMAI
            Mirant
                Americas, Inc., a wholly owned subsidiary of Mirant
                CorporationMidstream
            Cleco
                Midstream Resources LLC, a wholly owned subsidiary of Cleco
                CorporationMoody’s
            Moody’s
                Investors ServiceMW
            Megawatt(s)
                as applicableNot
                meaningful
            A
                percentage comparison of these items is not statistically meaningful
                because the percentage difference is greater than
                1,000%NOx
            Nitrogen
                oxidesPerryville
            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.Power
                Purchase Agreement
            Power
                Purchase Agreement, dated as of January 28, 2004, between Perryville
                and
                Entergy ServicesRegistrant(s)
            Cleco
                Corporation and Cleco PowerRFP
            Request
                for ProposalRodemacher
                Unit 3
            A
                600-MW solid fuel generating unit under construction by Cleco Power
                at its
                existing Rodemacher plant site in Boyce, LouisianaRSP
            Rate
                Stabilization PlanRTO
            Regional
                Transmission OrganizationSale
                Agreement
            Purchase
                and Sale Agreement, dated as of January 28, 2004, between Perryville
                and
                Entergy LouisianaSEC
            Securities
                and Exchange CommissionSenior
                Loan Agreement
            Construction
                and Term Loan Agreement, dated as of June 7, 2001, between Perryville
                and
                KBC Bank N.V., as Agent BankSERP
            Cleco
                Corporation Supplemental Executive Retirement PlanSFAS
            Statement
                of Financial Accounting StandardsSFAS
                No. 71
            Accounting
                for the Effects of Certain Types of RegulationSFAS
                No. 109
            Accounting
                for Income TaxesSFAS
                No. 123(R)
            Share-Based
                PaymentSFAS
                No. 131
            Disclosures
                about Segments of an Enterprise and Related InformationSFAS
                No. 133
            Accounting
                for Derivative Instruments and Hedging ActivitiesSFAS
                No. 140
            Accounting
                for Transfers and Servicing of Financial Assets and Extinguishments
                of
                LiabilitiesSFAS
                No. 149
            Amendment
                of Statement 133 on Derivative Instruments and Hedging
                ActivitiesSFAS
                No. 155
            Accounting
                for Certain Hybrid Financial Instruments - an amendment of FASB Statements
                No. 133 and 140SFAS
                No. 156
            Accounting
                for Servicing of Financial Assets - an amendment of FASB Statement
                No.
                140SFAS
                No. 157
            Fair
                Value MeasurementsSFAS
                No. 159
            The
                Fair Value Option For Financial Assets and Financial Liabilities
–
                Including an amendment of FASB Statement No. 115Shaw
            Shaw
                Constructors, Inc., a subsidiary of The Shaw Group Inc.Subordinated
                Loan Agreement
            Subordinated
                Loan Agreement, dated as of August 23, 2002, between Perryville and
                MAISupport
                Group
            Cleco
                Support Group LLC, a wholly owned subsidiary of Cleco
                CorporationSWEPCO
            Southwestern
                Electric Power CompanyTenaska
            Tenaska
                Power Services CompanyVaR
            Value-at-riskWilliams
            Williams
                Power Company, Inc.





4
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        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; or power
                transmission system constraints;


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


§
            Cleco
                Power’s ability to construct, operate, and maintain, within its projected
                costs (including financing) and timeframe, Rodemacher Unit 3, in
                addition
                to any other self-build projects identified in future IRP and RFP
                processes;


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


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


§
            The
                final amount of recoverable lignite costs, as approved by the LPSC,
                that
                are currently deferred by Cleco Power;


§
            Regulatory
                factors such as changes in rate-setting policies, recovery of investments
                made under traditional regulation, the frequency and timing of rate
                increases or decreases, the results of periodic fuel audits, the
                results
                of IRP and RFP processes, the formation of RTOs and ICTs, and the
                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;


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


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


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


§
            Changes
                in federal, state, or local legislative requirements, tax laws or
                rates,
                regulating policies or environmental laws and regulations;
                and


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




For
      additional discussion of these factors and other factors that could cause actual
      results to differ materially from those contemplated in the Registrants’
forward-looking statements, please read “Risk Factors” in this report, as well
      as the Registrants’ Combined Annual Report on Form 10-K for the fiscal year
      ended December 31, 2006.


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
                    2007 3RD
                        QUARTER FORM
                        10-Q




PART
      I — FINANCIAL INFORMATION








**ITEM
      1.**CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


**Cleco
        Corporation**


These
      unaudited condensed consolidated financial statements should be read in
      conjunction with Cleco Corporation’s Consolidated Financial Statements and Notes
      included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal
      year ended December 31, 2006.  For more information on the basis of
      presentation, see “Notes to the Unaudited Condensed Financial Statements — Note
      1 — Summary of Significant Accounting Policies — Basis of
      Presentation.”




6
 CLECO
                    CORPORATIONCLECO
                    POWER
                  2007 3RD
                      QUARTER FORM
                      10-Q






CLECO
      CORPORATION





Condensed Consolidated
        Statements of Income (Unaudited)


FOR
                THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS,
                EXCEPT SHARE AND PER SHARE AMOUNTS)
            
            **2007**
            
            
            2006**Operating
                revenue**Electric
                operations
            
            **$**
            **300,862**
            
            
            $
            284,490Other
                operations
            
            ****
            **9,238**
            
            
            
            7,644Affiliate
                revenue
            
            ****
            **1,591**
            
            
            
            1,969Operating
                revenue
            
            ****
            **311,691**
            
            
            
            294,103**Operating
                expenses**Fuel
                used for electric
                generation
            
            ****
            **97,863**
            
            
            
            80,627Power
                purchased for utility
                customers
            
            ****
            **108,649**
            
            
            
            108,899Other
                operations
            
            ****
            **23,454**
            
            
            
            24,139Maintenance
            
            ****
            **10,205**
            
            
            
            8,850Depreciation
            
            ****
            **19,739**
            
            
            
            23,750Taxes
                other than income
                taxes
            
            ****
            **10,620**
            
            
            
            10,638Total
                operating
                expenses
            
            ****
            **270,530**
            
            
            
            256,903**Operating
                income**
            
            ****
            **41,161**
            
            
            
            37,200Interest
                income
            
            ****
            **2,873**
            
            
            
            2,782Allowance
                for other funds used during construction
            
            ****
            **9,552**
            
            
            
            2,190Equity
                income from investees
            
            ****
            **27,726**
            
            
            
            15,197Other
                income
            
            ****
            **28,402**
            
            
            
            702Other
                expense
            
            ****
            **(1,284**
            **)**
            
            
            (463
            )**Interest
                charges**Interest
                charges, including
                amortization of debt expenses, premium and discount, net of capitalized
                interest
            
            ****
            **13,752**
            
            
            
            11,094Allowance
                for borrowed funds
                used during construction
            
            ****
            **(3,444**
            **)**
            
            
            (816
            )Total
                interest
                charges
            
            ****
            **10,308**
            
            
            
            10,278**Income
                from continuing operations before income taxes**
            
            ****
            **98,122**
            
            
            
            47,330Federal
                and state income tax expense
            
            ****
            **30,077**
            
            
            
            19,350**Income
                from continuing operations**
            
            ****
            **68,045**
            
            
            
            27,980**Discontinued
                operations**Income
                from discontinued
                operations, net of tax
            
            ****
            **-**
            
            
            
            36**Net
                income**
            
            ****
            **68,045**
            
            
            
            28,016Preferred
                dividends requirements, net of tax
            
            ****
            **12**
            
            
            
            424**Net
                income applicable to common stock**
            
            **$**
            **68,033**
            
            
            $
            27,592**Average
                shares of common stock outstanding**Basic
            
            ****
            **59,669,692**
            
            
            
            53,630,494Diluted
            
            ****
            **59,947,916**
            
            
            
            55,938,995**Basic
                earnings per share**From
                continuing
                operations
            
            **$**
            **1.14**
            
            
            $
            0.50Net
                income applicable to common
                stock
            
            **$**
            **1.14**
            
            
            $
            0.50**Diluted
                earnings per share**From
                continuing
                operations
            
            **$**
            **1.13**
            
            
            $
            0.50Net
                income applicable to common
                stock
            
            **$**
            **1.13**
            
            
            $
            0.50**Cash
                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
                    2007 3RD
                        QUARTER FORM
                        10-Q




CLECO
      CORPORATION








Condensed
      Consolidated Statements of Comprehensive Income (Unaudited)


FOR
                THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006Net
                income
            
            **$**
            **68,045**
            
            
            $
            28,016Other
                comprehensive income (loss), net of tax:Net
                unrealized income (loss)
                from available-for-sale securities (net of tax expense (benefit)
                of $11 in
                2007 and $(23) in 2006)
            
            ****
            **18**
            
            
            
            (37
            )Postretirement
                expense component
                (net of tax benefit of $16 in 2007)
            
            ****
            **(9**
            **)**
            
            
            -Other
                comprehensive income (loss)
            
            ****
            **9**
            
            
            
            (37
            )**Comprehensive
                income, net of tax**
            
            **$**
            **68,054**
            
            
            $
            27,979The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.






8
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q


CLECO
      CORPORATION





Condensed Consolidated
      Statements of Income (Unaudited)


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS,
                EXCEPT SHARE AND PER SHARE AMOUNTS)
            
            **2007**
            
            
            2006**Operating
                revenue**Electric
                operations
            
            **$**
            **765,791**
            
            
            $
            736,765Other
                operations
            
            ****
            **26,478**
            
            
            
            22,167Affiliate
                revenue
            
            ****
            **4,673**
            
            
            
            5,157Gross
                operating
                revenue
            
            ****
            **796,942**
            
            
            
            764,089Electric
                customer
                credits
            
            ****
            **-**
            
            
            
            4,382Operating
                revenue,
                net
            
            ****
            **796,942**
            
            
            
            768,471**Operating
                expenses**Fuel
                used for electric
                generation
            
            ****
            **204,671**
            
            
            
            186,980Power
                purchased for utility
                customers
            
            ****
            **308,388**
            
            
            
            306,426Other
                operations
            
            ****
            **74,493**
            
            
            
            67,988Maintenance
            
            ****
            **35,386**
            
            
            
            29,003Depreciation
            
            ****
            **59,827**
            
            
            
            55,108Taxes
                other than income
                taxes
            
            ****
            **30,286**
            
            
            
            30,372Total
                operating
                expenses
            
            ****
            **713,051**
            
            
            
            675,877**Operating
                income**
            
            ****
            **83,891**
            
            
            
            92,594Interest
                income
            
            ****
            **8,030**
            
            
            
            7,217Allowance
                for other funds used during construction
            
            ****
            **21,715**
            
            
            
            4,231Equity
                income from investees
            
            ****
            **97,608**
            
            
            
            30,802Other
                income
            
            ****
            **28,644**
            
            
            
            929Other
                expense
            
            ****
            **(2,536**
            **)**
            
            
            (1,177
            )**Interest
                charges**Interest
                charges, including
                amortization of debt expenses, premium and discount, net of capitalized
                interest
            
            ****
            **41,786**
            
            
            
            33,673Allowance
                for borrowed funds
                used during construction
            
            ****
            **(7,502**
            **)**
            
            
            (1,535
            )Total
                interest
                charges
            
            ****
            **34,284**
            
            
            
            32,138**Income
                from continuing operations before income taxes**
            
            ****
            **203,068**
            
            
            
            102,458Federal
                and state income tax expense
            
            ****
            **63,187**
            
            
            
            38,923**Income
                from continuing operations**
            
            ****
            **139,881**
            
            
            
            63,535**Discontinued
                operations**Loss
                from discontinued
                operations, net of tax
            
            ****
            **-**
            
            
            
            (154
            )**Net
                income**
            
            ****
            **139,881**
            
            
            
            63,381Preferred
                dividends requirements, net of tax
            
            ****
            **446**
            
            
            
            1,310**Net
                income applicable to common stock**
            
            **$**
            **139,435**
            
            
            $
            62,071**Average
                shares of common stock outstanding**Basic
            
            ****
            **58,914,141**
            
            
            
            51,408,708Diluted
            
            ****
            **59,717,636**
            
            
            
            53,621,679**Basic
                earnings per share**From
                continuing
                operations
            
            **$**
            **2.35**
            
            
            $
            1.19Net
                income applicable to common
                stock
            
            **$**
            **2.35**
            
            
            $
            1.19**Diluted
                earnings per share**From
                continuing
                operations
            
            **$**
            **2.34**
            
            
            $
            1.18Net
                income applicable to common
                stock
            
            **$**
            **2.34**
            
            
            $
            1.18**Cash
                dividends paid per share of common stock**
            
            **$**
            **0.675**
            
            
            $
            0.675The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.




9
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q
  CLECO
        CORPORATION





Condensed
      Consolidated Statements of Comprehensive Income (Unaudited)


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006Net
                income
            
            **$**
            **139,881**
            
            
            $
            63,381Other
                comprehensive loss, net of tax:Net
                unrealized loss from
                available-for-sale securities (net of tax benefit of $11 in 2007
                and $35
                in 2006)
            
            ****
            **(17**
            **)**
            
            
            (57
            )Postretirement
                expense component
                (net of tax benefit of $22 in 2007)
            
            ****
            **(13**
            **)**
            
            
            -Other
                comprehensive loss
            
            ****
            **(30**
            **)**
            
            
            (57
            )**Comprehensive
                income, net of tax**
            
            **$**
            **139,851**
            
            
            $
            63,324The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.


10
 CLECO
                        CORPORATIONCLECO
                        POWER
                      2007 3RD
                          QUARTER FORM
                          10-Q
  CLECO
          CORPORATION
 
 Condensed
            Consolidated Balance Sheets (Unaudited)


(THOUSANDS)
            
            **AT
                SEPTEMBER 30, 2007**
            
            
            AT
                DECEMBER 31,
                2006**Assets**Current
                assetsCash
                and cash
                equivalents
            
            **$**
            **195,362**
            
            
            $
            192,471Restricted
                cash
            
            ****
            **-**
            
            
            
            24,361Customer
                accounts receivable
                (less allowance for doubtful accounts of $1,110 in 2007 and $789
                in
                2006)
            
            ****
            **59,915**
            
            
            
            38,889Accounts
                receivable –
                affiliate
            
            ****
            **8,342**
            
            
            
            11,451Other
                accounts
                receivable
            
            ****
            **35,693**
            
            
            
            28,708Unbilled
                revenue
            
            ****
            **20,670**
            
            
            
            18,382Fuel
                inventory, at average
                cost
            
            ****
            **42,139**
            
            
            
            43,236Material
                and supplies
                inventory, at average cost
            
            ****
            **39,138**
            
            
            
            34,755Risk
                management
                assets
            
            ****
            **7,375**
            
            
            
            39Accumulated
                deferred
                fuel
            
            ****
            **33,426**
            
            
            
            77,435Cash
                surrender value of
                company-/trust-owned life insurance policies
            
            ****
            **29,086**
            
            
            
            26,275Margin
                deposits
            
            ****
            **3,824**
            
            
            
            18,638Prepayments
            
            ****
            **3,096**
            
            
            
            4,570Regulatory
                assets -
                other
            
            ****
            **17,547**
            
            
            
            17,453Other
                current
                assets
            
            ****
            **-**
            
            
            
            645Total
                current
                assets
            
            ****
            **495,613**
            
            
            
            537,308Property,
                plant and
                equipmentProperty,
                plant and
                equipment
            
            ****
            **1,911,670**
            
            
            
            1,892,533Accumulated
                depreciation
            
            ****
            **(913,806**
            **)**
            
            
            (876,747
            )Net
                property, plant and
                equipment
            
            ****
            **997,864**
            
            
            
            1,015,786Construction
                work in
                progress
            
            ****
            **647,970**
            
            
            
            289,101Total
                property, plant and
                equipment, net
            
            ****
            **1,645,834**
            
            
            
            1,304,887Equity
                investment in
                investees
            
            ****
            **275,264**
            
            
            
            307,136Prepayments
            
            ****
            **6,830**
            
            
            
            6,515Restricted
                cash
            
            ****
            **94**
            
            
            
            90Regulatory
                assets and
                liabilities – deferred taxes, net
            
            ****
            **115,266**
            
            
            
            94,653Regulatory
                assets –
                other
            
            ****
            **182,250**
            
            
            
            192,061Other
                deferred
                charges
            
            ****
            **19,603**
            
            
            
            18,454**Total
                assets**
            
            **$**
            **2,740,754**
            
            
            $
            2,461,104The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.




(Continued
                on next page)




11
 CLECO
                    CORPORATIONCLECO
                    POWER
                  2007 3RD
                      QUARTER FORM
                      10-Q












Condensed
      Consolidated Balance Sheets (Unaudited) (Continued)


(THOUSANDS)
            
            **AT
                SEPTEMBER 30, 2007**
            
            
            AT
                DECEMBER 31,
                2006**Liabilities
                and shareholders’ equity****Liabilities**Current
                liabilitiesLong-term
                debt due within one
                year
            
            **$**
            **125,000**
            
            
            $
            50,000Accounts
                payable
            
            ****
            **165,742**
            
            
            
            134,172Retainage
            
            ****
            **25**
            
            
            
            12,409Accounts
                payable –
                affiliate
            
            ****
            **13,996**
            
            
            
            5,072Customer
                deposits
            
            ****
            **25,816**
            
            
            
            25,312Provision
                for rate
                refund
            
            ****
            **2**
            
            
            
            3,174Taxes
                accrued
            
            ****
            **56,055**
            
            
            
            49,002Interest
                accrued
            
            ****
            **29,251**
            
            
            
            8,874Accumulated
                current deferred
                taxes, net
            
            ****
            **44,754**
            
            
            
            23,233Risk
                management
                liability
            
            ****
            **16,682**
            
            
            
            55,931Regulatory
                liabilities -
                other
            
            ****
            **543**
            
            
            
            636Deferred
                compensation
            
            ****
            **6,312**
            
            
            
            5,350Other
                current
                liabilities
            
            ****
            **13,425**
            
            
            
            11,535Total
                current
                liabilities
            
            ****
            **497,603**
            
            
            
            384,700Deferred
                creditsAccumulated
                deferred federal
                and state income taxes, net
            
            ****
            **358,870**
            
            
            
            436,775Accumulated
                deferred investment
                tax credits
            
            ****
            **13,024**
            
            
            
            14,100Regulatory
                liabilities -
                other
            
            ****
            **23,708**
            
            
            
            5,827Other
                deferred
                credits
            
            ****
            **183,688**
            
            
            
            104,140Total
                deferred
                credits
            
            ****
            **579,290**
            
            
            
            560,842Long-term
                debt,
                net
            
            ****
            **654,111**
            
            
            
            619,341Total
                liabilities
            
            ****
            **1,731,004**
            
            
            
            1,564,883Commitments
                and Contingencies (Note 8)**Shareholders’
                equity**Preferred
                stockNot
                subject to mandatory
                redemption, $100 par value, authorized 1,491,900 shares, issued 10,288
                and
                200,922 shares at
              September
                30, 2007, and
                December 31, 2006, respectively
            
            ****
            **1,029**
            
            
            
            20,092Common
                shareholders’
                equityCommon
                stock, $1 par value,
                authorized 100,000,000 shares, issued 60,048,276 and 57,605,695 shares
                and
                outstanding 59,905,403
              and
                57,524,498 shares at
                September 30, 2007, and December 31, 2006, respectively
            
            ****
            **59,905**
            
            
            
            57,524Premium
                on common
                stock
            
            ****
            **389,388**
            
            
            
            358,707Retained
                earnings
            
            ****
            **569,317**
            
            
            
            469,824Treasury
                stock, at
                cost, 29,264 and 31,957 shares at September 30, 2007, and
                December 31, 2006, respectively
            
            ****
            **(549**
            **)**
            
            
            (616
            )Accumulated
                other comprehensive
                loss
            
            ****
            **(9,340**
            **)**
            
            
            (9,310
            )Total
                common shareholders’
                equity
            
            ****
            **1,008,721**
            
            
            
            876,129Total
                shareholders’
                equity
            
            ****
            **1,009,750**
            
            
            
            896,221**Total
                liabilities and shareholders’ equity**
            
            **$**
            **2,740,754**
            
            
            $
            2,461,104The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.





12
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q


CLECO
      CORPORATION





Condensed
      Consolidated Statements of Cash Flows (Unaudited)


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006**Operating
                activities**Net
                income
            
            **$**
            **139,881**
            
            
            $
            63,381Adjustments
                to reconcile net
                income to net cash provided by operating activities:Depreciation
                and
                amortization
            
            ****
            **61,492**
            
            
            
            57,722Gain
                on sale of property, plant
                and equipment
            
            ****
            **-**
            
            
            
            (71
            )Provision
                for doubtful
                accounts
            
            ****
            **1,799**
            
            
            
            2,049Proceeds
                from sale of
                bankruptcy settlement claims
            
            ****
            **78,200**
            
            
            
            -Return
                on equity investment in
                investee
            
            ****
            **60,023**
            
            
            
            15,997Income from
                equity
                investments
            
            ****
            **(97,608**
            **)**
            
            
            (30,802
            )Unearned/deferred
                compensation
                expense
            
            ****
            **6,507**
            
            
            
            3,189ESOP
                expense
            
            ****
            **2,140**
            
            
            
            1,309Allowance
                for other funds used
                during construction
            
            ****
            **(21,715**
            **)**
            
            
            (4,231
            )Amortization
                of investment tax
                credits
            
            ****
            **(1,076**
            **)**
            
            
            (1,148
            )Net
                deferred income
                taxes
            
            ****
            **10,295**
            
            
            
            5,880Deferred
                fuel
                costs
            
            ****
            **400**
            
            
            
            13,229(Gain)
                loss on economic
                hedges
            
            ****
            **(706**
            **)**
            
            
            4,256Cash
                surrender value of
                company-/trust-owned life insurance
            
            ****
            **(1,486**
            **)**
            
            
            (1,074
            )Changes
                in assets and
                liabilities:Accounts
                receivable
            
            ****
            **(36,644**
            **)**
            
            
            (9,591
            )Accounts
                and notes receivable,
                affiliate
            
            ****
            **8,943**
            
            
            
            (5,941
            )Unbilled
                revenue
            
            ****
            **(2,288**
            **)**
            
            
            (2,067
            )Fuel,
                materials and supplies
                inventory
            
            ****
            **(2,153**
            **)**
            
            
            (30,058
            )Accounts
                payable
            
            ****
            **(12,281**
            **)**
            
            
            (53,714
            )Prepayments
            
            ****
            **1,629**
            
            
            
            (852
            )Accounts
                and notes payable,
                affiliate
            
            ****
            **(7,415**
            **)**
            
            
            3,766Retainage
                payable
            
            ****
            **(12,384**
            **)**
            
            
            7,048Customer
                deposits
            
            ****
            **4,166**
            
            
            
            5,283Regulatory
                assets and
                liabilities, net
            
            ****
            **17,156**
            
            
            
            (46,547
            )Other
                deferred
                accounts
            
            ****
            **(13,618**
            **)**
            
            
            4,298Taxes
                accrued
            
            ****
            **15,738**
            
            
            
            37,835Interest
                accrued
            
            ****
            **8,272**
            
            
            
            1,471Margin
                deposits
            
            ****
            **14,814**
            
            
            
            (23,182
            )Other,
                net
            
            ****
            **3,459**
            
            
            
            4,928Net
                cash provided by
                operating activities
            
            ****
            **225,540**
            
            
            
            22,363**Investing
                activities**Additions
                to property, plant and
                equipment
            
            ****
            **(343,458**
            **)**
            
            
            (155,532
            )Allowance
                for other funds used
                during construction
            
            ****
            **21,715**
            
            
            
            4,231Proceeds
                from sale of property,
                plant and equipment
            
            ****
            **422**
            
            
            
            869Return
                of equity investment in
                investee
            
            ****
            **96**
            
            
            
            7,154Equity
                investment in
                investee
            
            ****
            **(2,220**
            **)**
            
            
            (7,026
            )Premiums
                paid on
                company-/trust-owned life insurance
            
            ****
            **(2,017**
            **)**
            
            
            (1,892
            )Transfer
                of cash from restricted
                accounts
            
            ****
            **24,358**
            
            
            
            (2
            )Net
                cash used in investing
                activities
            
            **$**
            **(301,104**
            **)**
            
            $
            (152,198
            )





(Continued
                on next page)





13
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q





CLECO
      CORPORATION





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


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006**Financing
                activities**Sale
                of common
                stock
            
            **$**
            **-**
            
            
            $
            157,530Stock
                issuance
                costs
            
            ****
            **(93**
            **)**
            
            
            -Conversion
                of options to common
                stock
            
            ****
            **8,549**
            
            
            
            2,855Issuance
                of common stock under
                the ESOP
            
            ****
            **424**
            
            
            
            1,206Stock
                based compensation tax
                benefit
            
            ****
            **992**
            
            
            
            252Change
                in short-term debt,
                net
            
            ****
            **-**
            
            
            
            20,000Retirement
                of long-term
                obligations
            
            ****
            **(25,290**
            **)**
            
            
            (40,275
            )Issuance
                of long-term
                debt
            
            ****
            **135,000**
            
            
            
            -Deferred
                financing
                costs
            
            ****
            **(876**
            **)**
            
            
            (822
            )Change
                in ESOP
                trust
            
            ****
            **-**
            
            
            
            1,668Dividends
                paid on preferred
                stock
            
            ****
            **(446**
            **)**
            
            
            (1,760
            )Dividends
                paid on common
                stock
            
            ****
            **(39,805**
            **)**
            
            
            (33,950
            )Net
                cash provided by financing
                activities
            
            ****
            **78,455**
            
            
            
            106,704**Net
                increase (decrease) in cash and cash equivalents**
            
            ****
            **2,891**
            
            
            
            (23,131
            )**Cash
                and cash equivalents at beginning of period**
            
            ****
            **192,471**
            
            
            
            219,153**Cash
                and cash equivalents at end of period**
            
            **$**
            **195,362**
            
            
            $
            196,022**Supplementary
                cash flow information**Interest
                paid
            
            **$**
            **33,504**
            
            
            $
            31,161Income
                taxes
                paid
            
            **$**
            **48,000**
            
            
            $
            12,712**Supplementary
                non-cash investing and financing activities**Issuance
                of treasury stock –
                LTICP and ESOP plans
            
            **$**
            **67**
            
            
            $
            73Issuance
                of common stock –
                LTICP/ESOP/ESPP(1)
            
            **$**
            **21,501**
            
            
            $
            3,642Return
                on equity investment in
                investee
            
            **$**
            **78,200**
            
            
            $
            -Accrued
                additions to property,
                plant and equipment not reported above
            
            **$**
            **92,789**
            
            
            $
            42,088(1)Includes
                conversion ofpreferred stock
                to common stock
                ($19,063/2007,
                $1,678/2006)The
                accompanying notes are an integral part of the condensed consolidated
                financial statements.




14
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q




PART
      I — FINANCIAL INFORMATION





**ITEM
      1.**CONDENSED FINANCIAL STATEMENTS





**Cleco
      Power**


These
      unaudited condensed financial statements should be read in conjunction with
      Cleco Power’s Financial Statements and Notes included in the Registrants’
Combined Annual Report on Form 10-K for the fiscal year ended December 31,
      2006.  For more information on the basis of presentation, see “Notes
      to the Unaudited Condensed Financial Statements — Note 1 — Summary of
      Significant Accounting Policies — Basis of Presentation.”








15
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q


CLECO
      POWER





Condensed
      Statements of Income (Unaudited)


FOR
                THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006**Operating
                revenue**Electric
                operations
            
            **$**
            **300,862**
            
            
            $
            284,490Other
                operations
            
            ****
            **9,231**
            
            
            
            7,621Affiliate
                revenue
            
            ****
            **511**
            
            
            
            514Operating
                revenue
            
            ****
            **310,604**
            
            
            
            292,625**Operating
                expenses**Fuel
                used for electric
                generation
            
            ****
            **97,863**
            
            
            
            80,627Power
                purchased for utility
                customers
            
            ****
            **108,649**
            
            
            
            108,899Other
                operations
            
            ****
            **22,739**
            
            
            
            23,791Maintenance
            
            ****
            **9,590**
            
            
            
            7,981Depreciation
            
            ****
            **19,401**
            
            
            
            23,353Taxes
                other than income
                taxes
            
            ****
            **10,053**
            
            
            
            10,149Total
                operating
                expenses
            
            ****
            **268,295**
            
            
            
            254,800**Operating
                income**
            
            ****
            **42,309**
            
            
            
            37,825Interest
                income
            
            ****
            **1,082**
            
            
            
            1,559Allowance
                for other funds used during construction
            
            ****
            **9,552**
            
            
            
            2,190Other
                income
            
            ****
            **528**
            
            
            
            497Other
                expense
            
            ****
            **(189**
            **)**
            
            
            (759
            )**Interest
                charges**Interest
                charges, including
                amortization of debt expenses, premium and discount
            
            ****
            **11,657**
            
            
            
            9,144Allowance
                for borrowed funds
                used during construction
            
            ****
            **(3,444**
            **)**
            
            
            (816
            )Total
                interest
                charges
            
            ****
            **8,213**
            
            
            
            8,328**Income
                before income taxes**
            
            ****
            **45,069**
            
            
            
            32,984Federal
                and state income taxes
            
            ****
            **10,871**
            
            
            
            11,428**Net
                income**
            
            **$**
            **34,198**
            
            
            $
            21,556The
                accompanying notes are an integral part of the condensed financial
                statements.





16
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q


CLECO
      POWER


Condensed
        Statements of Income (Unaudited)


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006**Operating
                revenue**Electric
                operations
            
            **$**
            **765,791**
            
            
            $
            736,765Other
                operations
            
            ****
            **26,413**
            
            
            
            22,052Affiliate
                revenue
            
            ****
            **1,540**
            
            
            
            1,538Gross
                operating
                revenue
            
            ****
            **793,744**
            
            
            
            760,355Electric
                customer
                credits
            
            ****
            **-**
            
            
            
            4,382Operating
                revenue,
                net
            
            ****
            **793,744**
            
            
            
            764,737**Operating
                expenses**Fuel
                used for electric
                generation
            
            ****
            **204,671**
            
            
            
            186,980Power
                purchased for utility
                customers
            
            ****
            **308,388**
            
            
            
            306,426Other
                operations
            
            ****
            **71,318**
            
            
            
            65,844Maintenance
            
            ****
            **33,587**
            
            
            
            26,919Depreciation
            
            ****
            **58,784**
            
            
            
            53,879Taxes
                other than income
                taxes
            
            ****
            **28,540**
            
            
            
            28,917Total
                operating
                expenses
            
            ****
            **705,288**
            
            
            
            668,965**Operating
                income**
            
            ****
            **88,456**
            
            
            
            95,772Interest
                income
            
            ****
            **3,548**
            
            
            
            5,688Allowance
                for other funds used during construction
            
            ****
            **21,715**
            
            
            
            4,231Other
                income
            
            ****
            **812**
            
            
            
            688Other
                expense
            
            ****
            **(985**
            **)**
            
            
            (1,384
            )**Interest
                charges**Interest
                charges, including
                amortization of debt expenses, premium and discount
            
            ****
            **35,385**
            
            
            
            27,767Allowance
                for borrowed funds
                used during construction
            
            ****
            **(7,502**
            **)**
            
            
            (1,535
            )Total
                interest
                charges
            
            ****
            **27,883**
            
            
            
            26,232**Income
                before income taxes**
            
            ****
            **85,663**
            
            
            
            78,763Federal
                and state income taxes
            
            ****
            **20,517**
            
            
            
            26,287**Net
                income**
            
            **$**
            **65,146**
            
            
            $
            52,476The
                accompanying notes are an integral part of the condensed financial
                statements.





17
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q


CLECO
      POWER





Condensed
      Balance Sheets (Unaudited)


(THOUSANDS)
            
            **AT
                SEPTEMBER 30, 2007**
            
            
            AT
                DECEMBER 31,
                2006**Assets**Utility
                plant and
                equipmentProperty,
                plant and
                equipment
            
            **$**
            **1,896,473**
            
            
            $
            1,877,850Accumulated
                depreciation
            
            ****
            **(904,553**
            **)**
            
            
            (868,516
            )Net
                property, plant and
                equipment
            
            ****
            **991,920**
            
            
            
            1,009,334Construction
                work in
                progress
            
            ****
            **647,090**
            
            
            
            288,455Total
                utility plant,
                net
            
            ****
            **1,639,010**
            
            
            
            1,297,789Current
                assetsCash
                and cash
                equivalents
            
            ****
            **15,241**
            
            
            
            101,878Restricted
                cash
            
            ****
            **-**
            
            
            
            24,361Customer
                accounts receivable
                (less allowance for doubtful accounts of $1,110 in 2007 and $789
                in
                2006)
            
            ****
            **59,915**
            
            
            
            38,889Other
                accounts
                receivable
            
            ****
            **35,164**
            
            
            
            28,399Accounts
                receivable –
                affiliate
            
            ****
            **13,633**
            
            
            
            2,860Unbilled
                revenue
            
            ****
            **20,670**
            
            
            
            18,382Fuel
                inventory, at average
                cost
            
            ****
            **42,139**
            
            
            
            43,236Material
                and supplies
                inventory, at average cost
            
            ****
            **39,138**
            
            
            
            34,755Margin
                deposits
            
            ****
            **3,824**
            
            
            
            18,638Risk
                management
                assets
            
            ****
            **7,375**
            
            
            
            39Prepayments
            
            ****
            **2,428**
            
            
            
            3,713Regulatory
                assets -
                other
            
            ****
            **17,547**
            
            
            
            17,453Accumulated
                deferred
                fuel
            
            ****
            **33,426**
            
            
            
            77,435Cash
                surrender value of life
                insurance policies
            
            ****
            **5,263**
            
            
            
            5,265Other
                current
                assets
            
            ****
            **-**
            
            
            
            439Total
                current
                assets
            
            ****
            **295,763**
            
            
            
            415,742Prepayments
            
            ****
            **6,830**
            
            
            
            6,515Regulatory
                assets and
                liabilities – deferred taxes, net
            
            ****
            **115,266**
            
            
            
            94,653Regulatory
                assets –
                other
            
            ****
            **182,250**
            
            
            
            192,061Other
                deferred
                charges
            
            ****
            **18,691**
            
            
            
            17,092**Total
                assets**
            
            **$**
            **2,257,810**
            
            
            $
            2,023,852**Liabilities
                and member’s equity**Member’s
                equity
            
            **$**
            **771,257**
            
            
            $
            646,404Long-term
                debt,
                net
            
            ****
            **654,111**
            
            
            
            519,341Total
                capitalization
            
            ****
            **1,425,368**
            
            
            
            1,165,745Current
                liabilitiesLong-term
                debt due within one
                year
            
            ****
            **25,000**
            
            
            
            50,000Accounts
                payable
            
            ****
            **161,795**
            
            
            
            128,411Accounts
                payable –
                affiliate
            
            ****
            **10,811**
            
            
            
            35,469Retainage
            
            ****
            **25**
            
            
            
            12,409Customer
                deposits
            
            ****
            **25,816**
            
            
            
            25,312Provision
                for rate
                refund
            
            ****
            **2**
            
            
            
            3,174Taxes
                accrued
            
            ****
            **27,201**
            
            
            
            19,889Interest
                accrued
            
            ****
            **23,160**
            
            
            
            7,707Accumulated
                deferred taxes,
                net
            
            ****
            **46,873**
            
            
            
            22,582Risk
                management
                liability
            
            ****
            **16,682**
            
            
            
            55,931Regulatory
                liabilities -
                other
            
            ****
            **543**
            
            
            
            636Other
                current
                liabilities
            
            ****
            **10,631**
            
            
            
            7,965Total
                current
                liabilities
            
            ****
            **348,539**
            
            
            
            369,485Deferred
                creditsAccumulated
                deferred federal and
                state income taxes, net
            
            ****
            **313,623**
            
            
            
            388,570Accumulated
                deferred investment
                tax credits
            
            ****
            **13,024**
            
            
            
            14,100Regulatory
                liabilities -
                other
            
            ****
            **23,708**
            
            
            
            5,827Other
                deferred
                credits
            
            ****
            **133,548**
            
            
            
            80,125Total
                deferred
                credits
            
            ****
            **483,903**
            
            
            
            488,622**Total
                liabilities and member’s equity**
            
            **$**
            **2,257,810**
            
            
            $
            2,023,852The
                accompanying notes are an integral part of the condensed financial
                statements.





18
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q




CLECO
      POWER








Statements
      of Cash Flows (Unaudited)


FOR
                THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            **2007**
            
            
            2006**Operating
                activities**Net
                income
            
            **$**
            **65,146**
            
            
            $
            52,476Adjustments
                to reconcile net
                income to net cash provided by operating activities:Depreciation
                and
                amortization
            
            ****
            **60,019**
            
            
            
            56,069Gain
                on sale of property, plant
                and equipment
            
            ****
            **-**
            
            
            
            (71
            )Provision
                for doubtful
                accounts
            
            ****
            **1,799**
            
            
            
            2,049Unearned/deferred
                compensation
                expense
            
            ****
            **3,044**
            
            
            
            1,502Allowance
                for other funds used
                during construction
            
            ****
            **(21,715**
            **)**
            
            
            (4,231
            )Amortization
                of investment tax
                credits
            
            ****
            **(1,076**
            **)**
            
            
            (1,148
            )Net
                deferred income
                taxes
            
            ****
            **(11,952**
            **)**
            
            
            839Deferred
                fuel
                costs
            
            ****
            **400**
            
            
            
            13,229(Gain)
                loss on economic
                hedges
            
            ****
            **(706**
            **)**
            
            
            4,256Cash
                surrender value of
                company-owned life insurance
            
            ****
            **(221**
            **)**
            
            
            (287
            )Changes
                in assets and
                liabilities:Accounts
                receivable
            
            ****
            **(36,424**
            **)**
            
            
            (11,007
            )Accounts
                and notes receivable,
                affiliate
            
            ****
            **(10,693**
            **)**
            
            
            (10,947
            )Unbilled
                revenue
            
            ****
            **(2,288**
            **)**
            
            
            (2,068
            )Fuel,
                materials and supplies
                inventory
            
            ****
            **(2,153**
            **)**
            
            
            (30,057
            )Prepayments
            
            ****
            **1,440**
            
            
            
            (953
            )Accounts
                payable
            
            ****
            **(10,753**
            **)**
            
            
            (50,181
            )Accounts
                and notes payable,
                affiliate
            
            ****
            **(24,726**
            **)**
            
            
            (1,179
            )Retainage
                payable
            
            ****
            **(12,384**
            **)**
            
            
            7,048Customer
                deposits
            
            ****
            **4,166**
            
            
            
            5,283Regulatory
                assets and
                liabilities, net
            
            ****
            **17,156**
            
            
            
            (46,547
            )Other
                deferred
                accounts
            
            ****
            **(14,468**
            **)**
            
            
            3,254Taxes
                accrued
            
            ****
            **13,592**
            
            
            
            39,460Interest
                accrued
            
            ****
            **5,981**
            
            
            
            (279
            )Margin
                deposits
            
            ****
            **14,814**
            
            
            
            (23,182
            )Other,
                net
            
            ****
            **3,188**
            
            
            
            1,703Net
                cash provided by operating
                activities
            
            ****
            **41,186**
            
            
            
            5,031**Investing
                activities**Additions
                to property, plant and
                equipment
            
            ****
            **(342,688**
            **)**
            
            
            (155,248
            )Allowance
                for other funds used
                during construction
            
            ****
            **21,715**
            
            
            
            4,231Proceeds
                from sale of property,
                plant and equipment
            
            ****
            **422**
            
            
            
            869Premiums
                paid on company-owned
                life insurance
            
            ****
            **(470**
            **)**
            
            
            (470
            )Transfer
                of cash from restricted
                accounts
            
            ****
            **24,361**
            
            
            
            -Net
                cash used in investing
                activities
            
            ****
            **(296,660**
            **)**
            
            
            (150,618
            )**Financing
                activities**Change
                in short-term debt,
                net
            
            ****
            **-**
            
            
            
            20,000Retirement
                of long-term
                obligations
            
            ****
            **(25,290**
            **)**
            
            
            (40,275
            )Issuance
                of long-term
                debt
            
            ****
            **135,000**
            
            
            
            -Deferred
                financing
                costs
            
            ****
            **(873**
            **)**
            
            
            (630
            )Contribution
                from
                parent
            
            ****
            **60,000**
            
            
            
            -Net
                cash provided by (used in)
                financing activities
            
            ****
            **168,837**
            
            
            
            (20,905
            )**Net
                decrease in cash and cash equivalents**
            
            ****
            **(86,637**
            **)**
            
            
            (166,492
            )**Cash
                and cash equivalents at beginning of period**
            
            ****
            **101,878**
            
            
            
            183,381**Cash
                and cash equivalents at end of period**
            
            **$**
            **15,241**
            
            
            $
            16,889**Supplementary
                cash flow information**Interest
                paid
            
            **$**
            **29,985**
            
            
            $
            27,617Income
                taxes
                received
            
            **$**
            **-**
            
            
            $
            (2,311
            )**Supplementary
                non-cash investing and financing activities**Accrued
                additions to property,
                plant and equipment not reported above
            
            **$**
            **92,789**
            
            
            $
            42,088The
                accompanying notes are an integral part of the condensed financial
                statements.







19
 CLECO
                      CORPORATIONCLECO
                      POWER
                    2007 3RD
                        QUARTER FORM
                        10-Q
 Index
          to Applicable Notes to the Unaudited Condensed Financial Statements of
          Registrants
 
 Note
                    1
                Summary
                    of Significant Accounting Policies
                Cleco
                    Corporation and Cleco PowerNote
                    2
                Regulatory
                    Assets and Liabilities
                Cleco
                    Corporation and Cleco PowerNote
                    3
                Disclosures
                    about Segments
                Cleco
                    CorporationNote
                    4
                Equity
                    Investment in Investees
                Cleco
                    CorporationNote
                    5
                Recent
                    Accounting Standards
                Cleco
                    Corporation and Cleco PowerNote
                    6
                Restricted
                    Cash
                Cleco
                    Corporation and Cleco PowerNote
                    7
                Electric
                    Customer Credits
                Cleco
                    Corporation and Cleco PowerNote
                    8
                Litigation,
                    Other Commitments and Contingencies, and Disclosures about
                    Guarantees
                Cleco
                    Corporation and Cleco PowerNote
                    9
                Preferred
                    Stock
                Cleco
                    CorporationNote
                    10
                Pension
                    Plan and Employee Benefits
                Cleco
                    Corporation and Cleco PowerNote
                    11
                Income
                    Taxes
                Cleco
                    Corporation and Cleco PowerNote
                    12
                Affiliate
                    Transactions
                Cleco
                    Corporation and Cleco PowerNote
                    13
                Debt
                Cleco
                    Corporation and Cleco PowerNote
                    14
                Calpine
                    Bankruptcy Settlement
                Cleco
                    Corporation
  Notes
          to the Unaudited Condensed
          Financial Statements
 **Note
            1 — Summary of Significant Accounting Policies**
 
 ***Principles
          of Consolidation***
 The
          accompanying consolidated condensed financial statements of Cleco include
          the
          accounts of Cleco and its majority-owned subsidiaries after elimination
          of
          intercompany accounts and transactions.
 Cleco
          has adopted the provisions of FIN 46R on its 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 4 — “Equity Investment
          in Investees.”
  ***Basis
          of Presentation***
 The
          condensed consolidated financial statements of Cleco Corporation and the
          condensed financial statements of Cleco Power have been prepared pursuant
          to the
          rules and regulations of the SEC.  Accordingly, certain information
          and note disclosures normally included in financial statements prepared
          in
          accordance with generally accepted accounting principles have been condensed
          or
          omitted, although Cleco believes that the disclosures are adequate to make
          the
          information presented not misleading.
 The
          year-end condensed consolidated balance sheet data was derived from audited
          financial statements but does not include all disclosures required by generally
          accepted accounting principles.  The unaudited financial information
          included in the condensed financial statements of Cleco Corporation and
          Cleco
          Power reflects all adjustments of a normal recurring nature which are,
          in the
          opinion of the management of Cleco Corporation and Cleco Power, necessary
          for a
          fair statement of the financial position and the results of operations
          for the
          interim periods. Information for interim periods is affected by seasonal
          variations in sales, rate changes, timing of fuel expense recovery and
          other
          factors and is not indicative necessarily of the results that may be expected
          for the full fiscal year.  For more information on recent accounting
          standards and their effect on financial results, see Note 5 — “Recent Accounting
          Standards.”
  ***Reclassifications***
 Certain
          reclassifications have been made to prior period financial
          statements to conform them to the presentation used in the current period
          financial statements. These reclassifications had no effect on Cleco
          Corporation’s net income applicable to common stock or total common
          shareholders’ equity or Cleco Power’s net income or total member’s
          equity.
  ***Risk
          Management***
 Market
          risk inherent in Cleco’s market risk-sensitive instruments and positions
          includes the potential change arising from changes in interest rates and
          the
          commodity market prices of power and natural gas on different energy
          exchanges. Cleco’s Risk Management Committee has the authority to approve
          the use of various derivative instruments, including futures and option
          contracts, forward purchase and sales contracts, and swap transactions
          to reduce
          exposure to fluctuations in the price of power and natural gas. Cleco
          Power’s market risk-sensitive instruments and positions qualify for the
          normal-purchase, normal-sale exception to mark-to-market accounting of
          SFAS No.
          133, as modified by SFAS No. 149, since Cleco Power generally takes physical
          delivery and
  20
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  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 97% of the estimated daily peak hour power sales to
          the
          wholesale customer.  These transactions are derivatives as defined by
          SFAS No. 133 but do not meet the accounting criteria to be considered
          hedges.  These transactions are marked-to-market with the resulting
          gain or loss recorded on the income statement as a component of operating
          revenue, net.  For the three and nine months ended September 30, 2007,
          and September 30, 2006, the following gains and losses related to these
          economic
          hedge transactions were recorded in other operations revenue.
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                
                FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006Realized
                    loss
                
                **$**
                **(189**
                **)**
                
                $
                (219
                )
                
                **$**
                **(205**
                **)**
                
                $
                (451
                )Mark-to-market(loss)
                    gain
                
                ****
                **(522**
                **)**
                
                
                (1,866
                )
                
                ****
                **706**
                
                
                
                (4,256
                )Total
                    (loss)
                    gain
                
                **$**
                **(711**
                **)**
                
                $
                (2,085
                )
                
                **$**
                **501**
                
                
                $
                (4,707
                )
  Cleco
          Power has entered into other positions to mitigate some of the volatility
          in
          fuel costs passed on to customers.  These positions are
          marked-to-market with the resulting gain or loss recorded on the balance
          sheet
          as a component of the 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 September 30, 2007, and
          December 31, 2006, the net mark-to-market impacts relating to these positions
          were losses of $18.7 million and $60.3 million,
          respectively.  Deferred losses relating to closed natural gas
          positions at September 30, 2007, and December 31, 2006, totaled $5.7 million
          and
          $8.0 million, respectively.
 Cleco
          Power maintains margin accounts with commodity brokers 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 September 30, 2007, and December 31, 2006, Cleco Power had
          deposited collateral of $3.8 million and $18.6 million, respectively, 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 SEPTEMBER 30,**2007**
                
                
                
                
                
                
                
                
                2006(THOUSANDS,
                    EXCEPT SHARES AND PER SHARE AMOUNTS)
                
                **INCOME**
                
                
                **SHARES**
                
                
                **PER
                    SHARE**
                  **AMOUNT**
                
                
                INCOME
                
                
                SHARES
                
                
                PER
                    SHARE
                  AMOUNTIncome
                    from continuing operations
                
                **$**
                **68,045**
                
                
                
                
                
                
                
                
                $
                27,980Deduct:  non-participating
                    stock dividends (4.5% preferred stock)
                
                ****
                **12**
                
                
                
                
                
                
                
                
                
                11Deduct:  participating
                    preferred stock dividends
                
                ****
                **-**
                
                
                
                
                
                
                
                
                
                413Deduct:  amount
                    allocated to participating preferred
                
                ****
                **-**
                
                
                
                
                
                
                
                
                
                539**Basic
                    earnings per share**Income
                    from continuing operations
                
                **$**
                **68,033**
                
                
                ****
                **59,669,692**
                
                
                **$**
                **1.14**
                
                
                $
                27,017
                
                
                
                53,630,494
                
                
                $
                0.50Income
                    from discontinued operations
                
                ****
                **-**
                
                
                
                
                
                
                ****
                **-**
                
                
                
                36
                
                
                
                
                
                
                
                -Deduct:  amount
                    allocated to participating preferred
                
                ****
                **-**
                
                
                
                
                
                
                ****
                **-**
                
                
                
                1
                
                
                
                
                
                
                
                -Total
                    basic net income applicable to common stock
                
                **$**
                **68,033**
                
                
                ****
                **59,669,692**
                
                
                **$**
                **1.14**
                
                
                $
                27,052
                
                
                
                53,630,494
                
                
                $
                0.50**Effect
                    of Dilutive Securities**Add:  stock
                    option grants
                
                ****
                **-**
                
                
                ****
                **73,517**
                
                
                
                
                
                
                
                -
                
                
                
                157,004Add:  restricted
                    stock (LTICP)
                
                ****
                **6**
                
                
                ****
                **204,707**
                
                
                
                
                
                
                
                10
                
                
                
                315,157Add:  convertible
                    ESOP preferred stock
                
                ****
                **-**
                
                
                ****
                **-**
                
                
                
                
                
                
                
                952
                
                
                
                1,836,340**Diluted
                    earnings per share**Income
                    from continuing operations plus assumed conversions
                
                **$**
                **68,039**
                
                
                ****
                **59,947,916**
                
                
                **$**
                **1.13**
                
                
                $
                27,979
                
                
                
                55,938,995
                
                
                $
                0.50Income
                    from discontinued operations
                
                ****
                **-**
                
                
                
                
                
                
                ****
                **-**
                
                
                
                36
                
                
                
                
                
                
                
                -Total
                    diluted net income applicable to common stock
                
                **$**
                **68,039**
                
                
                ****
                **59,947,916**
                
                
                **$**
                **1.13**
                
                
                $
                28,015
                
                
                
                55,938,995
                
                
                $
                0.50
 
 21
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
 
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,**2007**
                
                
                
                
                
                
                
                
                2006(THOUSANDS,
                    EXCEPT SHARES AND PER SHARE AMOUNTS)
                
                **INCOME**
                
                
                **SHARES**
                
                
                **PER
                    SHARE**
                  **AMOUNT**
                
                
                INCOME
                
                
                SHARES
                
                
                PER
                    SHARE
                  AMOUNTIncome
                    from continuing operations
                
                **$**
                **139,881**
                
                
                
                
                
                
                
                
                $
                63,535Deduct:  non-participating
                    stock dividends (4.5% preferred stock)
                
                ****
                **34**
                
                
                
                
                
                
                
                
                
                35Deduct:  participating
                    preferred stock dividends
                
                ****
                **412**
                
                
                
                
                
                
                
                
                
                1,275Deduct:  amount
                    allocated to participating preferred
                
                ****
                **921**
                
                
                
                
                
                
                
                
                
                1,016**Basic
                    earnings per share**Income
                    from continuing operations
                
                **$**
                **138,514**
                
                
                ****
                **58,914,141**
                
                
                **$**
                **2.35**
                
                
                $
                61,209
                
                
                
                51,408,708
                
                
                $
                1.19Loss
                    from discontinued operations
                
                ****
                **-**
                
                
                
                
                
                
                ****
                **-**
                
                
                
                (154
                )
                
                
                
                
                
                
                -Total
                    basic net income applicable to common stock
                
                **$**
                **138,514**
                
                
                ****
                **58,914,141**
                
                
                **$**
                **2.35**
                
                
                $
                61,055
                
                
                
                51,408,708
                
                
                $
                1.19**Effect
                    of Dilutive Securities**Add:  stock
                    option grants
                
                ****
                **-**
                
                
                ****
                **114,088**
                
                
                
                
                
                
                
                -
                
                
                
                119,003Add:  restricted
                    stock (LTICP)
                
                ****
                **21**
                
                
                ****
                **140,382**
                
                
                
                
                
                
                
                27
                
                
                
                192,837Add:  convertible
                    ESOP preferred stock
                
                ****
                **1,333**
                
                
                ****
                **549,025**
                
                
                
                
                
                
                
                2,291
                
                
                
                1,901,131**Diluted
                    earnings per share**Income
                    from continuing operations plus assumed conversions
                
                **$**
                **139,868**
                
                
                ****
                **59,717,636**
                
                
                **$**
                **2.34**
                
                
                $
                63,527
                
                
                
                53,621,679
                
                
                $
                1.18Loss
                    from discontinued operations
                
                ****
                **-**
                
                
                
                
                
                
                ****
                **-**
                
                
                
                (154
                )
                
                
                
                
                
                
                -Total
                    diluted net income applicable to common stock
                
                **$**
                **139,868**
                
                
                ****
                **59,717,636**
                
                
                **$**
                **2.34**
                
                
                $
                63,373
                
                
                
                53,621,679
                
                
                $
                1.18
 
 There
          were no stock option grants excluded from the computation of diluted earnings
          per share for the nine months ended September 30, 2007, and the three months
          ended September 30, 2006, due to the average market price being higher
          than the
          exercise prices of the stock options.
 Stock
          option grants excluded from the computation of diluted earnings per share
          for
          the three months ended September 30, 2007, and the nine months ended September
          30, 2006, presented in the table below, had exercise prices higher than
          the
          average market price.
 
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,2007STRIKE
                    PRICE
                
                
                AVERAGE
                  MARKET
                    PRICE
                
                
                SHARESStock
                    option grants excluded
                
                $
                24.25
                
                
                $
                24.14
                
                
                
                37,433
 
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,2006STRIKE
                    PRICE
                
                
                AVERAGE
                  MARKET
                    PRICE
                
                
                SHARESStock
                    option grants excluded
                
                $
                23.25   
                     –      $ 24.25
                
                
                $
                23.05
                
                
                
                125,934
  ***Stock-Based
          Compensation***
 At
          September 30, 2007, Cleco had one share-based compensation plan, the
          LTICP.  Options or restricted shares of stock, known as non-vested
          stock as defined by SFAS No. 123(R), common stock equivalents, and stock
          appreciation rights may be granted to certain officers, key employees,
          or
          directors of Cleco Corporation and its subsidiaries pursuant to the
          LTICP.
 On
          January 26, 2007, Cleco granted 71,863 shares of non-vested stock and 55,249
          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 plan as shown in the following table:
  CLECO
                    CORPORATION
                
                
                CLECO
                    POWER
                
                
                CLECO
                    CORPORATION
                
                
                CLECO
                    POWERFOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,
                
                
                
                
                
                FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006**Equity
                    classification**Non-vested
                    stock
                **$**
                **594**
                
                
                $
                633
                
                
                **$**
                **219**
                
                
                $
                279
                
                
                **$**
                **1,666**
                
                
                $
                1,602
                
                
                **$**
                **656**
                
                
                $
                768Stock
                    options
                ****
                **14**
                
                
                
                26
                
                
                ****
                **1**
                
                
                
                6
                
                
                ****
                **23**
                
                
                
                76
                
                
                ****
                **(4**
                **)**
                
                
                20Non-forfeitable
                    dividends
                ****
                **6**
                
                
                
                9
                
                
                ****
                **4**
                
                
                
                5
                
                
                ****
                **21**
                
                
                
                26
                
                
                ****
                **12**
                
                
                
                14**Total**
                **$**
                **614**
                
                
                $
                668
                
                
                **$**
                **224**
                
                
                $
                290
                
                
                **$**
                **1,710**
                
                
                $
                1,704
                
                
                **$**
                **664**
                
                
                $
                802**Liability
                    classification**Common
                    stock equivalent units
                **$**
                **516**
                
                
                $
                195
                
                
                **$**
                **208**
                
                
                $
                78
                
                
                **$**
                **949**
                
                
                $
                406
                
                
                **$**
                **381**
                
                
                $
                163Company
                    funded participants income tax obligations
                ****
                **274**
                
                
                
                299
                
                
                ****
                **202**
                
                
                
                155
                
                
                ****
                **3,629**
                
                
                
                921
                
                
                ****
                **2,001**
                
                
                
                537**Total**
                **$**
                **790**
                
                
                $
                494
                
                
                **$**
                **410**
                
                
                $
                233
                
                
                **$**
                **4,578**
                
                
                $
                1,327
                
                
                **$**
                **2,382**
                
                
                $
                700**Total
                    pre-tax compensation expense**
                **$**
                **1,404**
                
                
                $
                1,162
                
                
                **$**
                **634**
                
                
                $
                523
                
                
                **$**
                **6,288**
                
                
                $
                3,031
                
                
                **$**
                **3,046**
                
                
                $
                1,502**Tax
                    benefit (excluding income tax gross-up)**
                **$**
                **435**
                
                
                $
                332
                
                
                **$**
                **166**
                
                
                $
                142
                
                
                **$**
                **1,023**
                
                
                $
                812
                
                
                **$**
                **402**
                
                
                $
                371
 
 22
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  **Note
          2 — Regulatory Assets and Liabilities**
 
 Cleco
            Power follows SFAS No. 71, which allows utilities to capitalize or defer
            certain
            costs based on regulatory approval and management’s ongoing assessment that it
            is probable these items will be recovered through the ratemaking
            process.
 The
          following chart summarizes Cleco Power’s regulatory assets and liabilities at
          September 30, 2007, and December 31, 2006:
 
 **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,(THOUSANDS)
                
                **2007**
                
                
                2006Regulatory
                    assets and liabilities – deferred taxes, net
                
                **$**
                **115,266**
                
                
                $
                94,653Deferred
                    mining costs
                
                **$**
                **23,417**
                
                
                $
                20,096Deferred
                    storm restoration costs – Lili/Isidore
                
                ****
                **-**
                
                
                
                2,772Deferred
                    storm restoration costs – Katrina/Rita
                
                ****
                **131,560**
                
                
                
                138,935Deferred
                    interest costs
                
                ****
                **7,609**
                
                
                
                8,430Deferred
                    asset removal costs
                
                ****
                **597**
                
                
                
                562Deferred
                    postretirement plan costs
                
                ****
                **36,614**
                
                
                
                38,719Regulatory
                    assets –
                    other
                
                **$**
                **199,797**
                
                
                $
                209,514Deferred
                    fuel transportation revenue
                
                **$**
                **(1,066**
                **)**
                
                $
                (1,566
                )Deferred
                    construction carrying costs
                
                ****
                **(23,185**
                **)**
                
                
                (4,897
                )Regulatory
                    liabilities -
                    other
                
                **$**
                **(24,251**
                **)**
                
                $
                (6,463
                )Deferred
                    fuel and purchased power
                
                ****
                **33,426**
                
                
                
                77,435Total
                    regulatory assets and
                    liabilities, net
                
                **$**
                **324,238**
                
                
                $
                375,139
  ***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 and nine months ended September 30, 2007,
          approximately 96% of Cleco Power’s total fuel cost was regulated by the LPSC,
          while the remainder was regulated by the FERC.  The regulatory asset
          represents costs to be collected from customers in future months.  The
          $44.0 million decrease in the regulatory asset for deferred fuel and purchased
          power costs is the result of a $41.5 million decrease in deferred losses
          associated with open natural gas hedge positions, and $2.3 million of lower
          deferred losses on closed natural gas hedge positions, both due to increases
          in
          natural gas prices since December 31, 2006, and the deferral of $0.2
          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 acceptance of an LPSC Staff
          recommendation that Cleco Power 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 and nine
          months ended September 30, 2007, Cleco Power has collected $7.5 million
          and
          $18.3 million, respectively.  Cleco Power has determined that carrying
          costs collected from customers through September 30, 2007, will not exceed
          6.5%
          of the projected retail revenue for 2007.  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 next base rate application to recover
          Rodemacher Unit 3 ownership costs, to submit a plan to return to customers
          the
          carrying costs collected during the construction period.
  ***Deferred
          Taxes***
 Cleco
          Power has recorded SFAS No. 109 net regulatory assets related to probable
          future
          taxes payable that will be recovered from customers through future
          rates.  Amounts recorded as regulatory assets are partially offset by
          deferred tax liabilities resulting from the regulatory requirement to flow
          through the current tax benefits to customers of certain accelerated deductions
          that are recovered from customers as they are paid.  The recovery
          periods for regulatory assets and liabilities are based on assets’ lives, which
          are typically 30 years or greater.  The amounts deferred are
          attributable to differences between book and tax recovery periods. The
          increase in regulatory assets relating to deferred taxes 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
          September 30, 2007, Cleco Power had approximately $131.6 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 are being amortized to depreciation expense
          based on
          the 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.  The decrease of $7.4 million of deferred storm restoration
          costs is primarily the result of the amortization mentioned
          above.  Amortization of the storm restoration costs for the seven
          months ended July 31, 2006, initially recorded as maintenance expense,
          was
          transferred to depreciation expense in August 2006, resulting in higher
          depreciation expense reported for the three months ended September 30,
          2006,
          compared to the three months ended September 30, 2007.
 In
          March
          2007, after completing a review of Hurricanes Katrina and Rita restoration
          costs, Cleco Power and the LPSC Staff filed a settlement agreement allowing
          the
          recovery of $159.0 million, essentially all of Cleco Power’s Hurricanes Katrina
          and Rita storm costs.  The agreement also allows Cleco Power to
          securitize the storm costs.  Through securitization, debt securities
          may be issued, the debt service of which will be paid from dedicated amounts
          collected from customers.  In September 2007, the LPSC approved the
          settlement agreement and issued a securitization financing
          order.  Management plans to complete the securitization financing as
          soon as market conditions allow.  Until the time that the bonds are
          sold, Cleco Power will continue to collect storm restoration costs from
          customers through the interim surcharge and
  23
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  amortize
          the deferred storm costs based on the amount of these collections.
  ***Deferred
          Storm Restoration Costs – Lili/Isidore***
 Cleco
          Power incurred approximately $8.2 million of restoration costs related
          to
          Tropical Storm Isidore and Hurricane Lili that were recorded as a regulatory
          asset according to an agreement with the LPSC.  The regulatory asset was
          being amortized to maintenance expense over the six-year period which began
          in
          January 2003.  In September 2007, as a result of discussions between Cleco
          Power and the LPSC, Cleco Power transferred the remaining unamortized regulatory
          asset balance of $1.7 million and the $1.1 million regulatory asset amortization
          expense related to Isidore and Lili recorded for the nine months ended
          September
          30, 2007, to the reserve for storm restoration costs.
  **Note
          3 — Disclosures about Segments**
 Cleco’s
            reportable segments are based on its method of internal reporting, which
            disaggregates business units by first-tier subsidiary. Reportable segments
            were determined by applying SFAS No. 131. Cleco’s reportable segments are
            Cleco Power and Midstream. The reconciling items in the following tables
            consist of the holding company, a shared services subsidiary, two transmission
            interconnection facilities, and an investment subsidiary.  Effective
            February 1, 2007, the ownership interests of Midstream’s transmission
            interconnection facilities were transferred to Cleco Corporation.  In
            accordance with SFAS No. 131, the prior period has been adjusted to reflect
            this
            change in organizational structure.
 Each
          reportable segment engages in business activities from which it earns revenue
          and incurs expenses. Segment managers report periodically to Cleco’s Chief
          Executive Officer (the chief operating decision-maker) with discrete financial
          information and, at least quarterly, present discrete financial information
          to
          Cleco Corporation’s Board of Directors. Each reportable segment prepared
          budgets for 2007 that were presented to and approved by Cleco Corporation’s
          Board of Directors.
 The
          financial results of Cleco’s segments are presented on an accrual
          basis. Management evaluates the performance of its segments and allocates
          resources to them based on segment profit and the requirements to implement
          new
          strategic initiatives and projects to meet current business
          objectives.  Material intercompany transactions occur on a regular
          basis.  These intercompany transactions relate primarily to joint and
          common administrative support services provided by Support Group.
  24
 CLECO
                        CORPORATIONCLECO
                        POWER
                      2007 3RD
                          QUARTER FORM
                          10-Q
  **SEGMENT
          INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30,**
 **CLECO**
                
                
                
                
                
                **RECONCILING**2007(THOUSANDS)
                
                **POWER**
                
                
                **MIDSTREAM**
                
                
                **ITEMS**
                
                
                **ELIMINATIONS**
                
                
                **CONSOLIDATED**RevenueElectric
                    operations
                
                **$**
                **300,862**
                
                
                **$**
                **-**
                
                
                **$**
                **-**
                
                
                **$**
                **-**
                
                
                **$**
                **300,862**Other
                    operations
                
                ****
                **9,231**
                
                
                ****
                **4**
                
                
                ****
                **1**
                
                
                ****
                **2**
                
                
                ****
                **9,238**Affiliate
                    revenue
                
                ****
                **10**
                
                
                ****
                **1,105**
                
                
                ****
                **476**
                
                
                ****
                **-**
                
                
                ****
                **1,591**Intercompany
                    revenue
                
                ****
                **501**
                
                
                ****
                **-**
                
                
                ****
                **8,214**
                
                
                ****
                **(8,715**
                **)**
                
                ****
                **-**Operating
                    revenue
                
                **$**
                **310,604**
                
                
                **$**
                **1,109**
                
                
                **$**
                **8,691**
                
                
                **$**
                **(8,713**
                **)**
                
                **$**
                **311,691**Depreciation
                    expense
                
                **$**
                **19,401**
                
                
                **$**
                **76**
                
                
                **$**
                **262**
                
                
                **$**
                **-**
                
                
                **$**
                **19,739**Interest
                    charges
                
                **$**
                **8,213**
                
                
                **$**
                **5,894**
                
                
                **$**
                **2,060**
                
                
                **$**
                **(5,859**
                **)**
                
                **$**
                **10,308**Interest
                    income
                
                **$**
                **1,082**
                
                
                **$**
                **621**
                
                
                **$**
                **7,024**
                
                
                **$**
                **(5,854**
                **)**
                
                **$**
                **2,873**Equity
                    income from investees
                
                **$**
                **-**
                
                
                **$**
                **27,532**
                
                
                **$**
                **194**
                
                
                **$**
                **-**
                
                
                **$**
                **27,726**Federal
                    and state income tax expense
                
                **$**
                **10,871**
                
                
                **$**
                **17,947**
                
                
                **$**
                **1,106**
                
                
                **$**
                **153**
                
                
                **$**
                **30,077**Segment
                    profit (1)
                
                **$**
                **34,198**
                
                
                **$**
                **30,415**
                
                
                **$**
                **3,432**
                
                
                **$**
                **-**
                
                
                **$**
                **68,045**Additions
                    (adjustments) to long-lived assets
                
                **$**
                **167,737**
                
                
                **$**
                **(4,992**
                **)**
                
                **$**
                **342**
                
                
                **$**
                **-**
                
                
                **$**
                **163,087**Equity
                    investment in investees
                
                **$**
                **-**
                
                
                **$**
                **256,272**
                
                
                **$**
                **152,886**
                
                
                **$**
                **(133,894**
                **)**
                
                **$**
                **275,264**Total
                    segment assets
                
                **$**
                **2,257,810**
                
                
                **$**
                **361,725**
                
                
                **$**
                **573,967**
                
                
                **$**
                **(452,748**
                **)**
                
                **$**
                **2,740,754****(1)Reconciliation
                    of segment profit to consolidated profit:**
                
                **Segment
                    profit**
                
                
                
                
                
                
                
                
                
                
                **$**
                **68,045****Unallocated
                    items:****Preferred
                    dividends
                    requirements**
                
                
                
                
                
                
                ****
                **12****Net
                    income applicable to common stock**
                
                
                **$**
                **68,033**
  
 CLECO
                
                
                
                
                
                RECONCILING2006(THOUSANDS)
                
                POWER
                
                
                MIDSTREAM
                
                
                ITEMS
                
                
                ELIMINATIONS
                
                
                CONSOLIDATEDRevenueElectric
                    operations
                
                $
                284,490
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                284,490Other
                    operations
                
                
                7,621
                
                
                
                21
                
                
                
                4
                
                
                
                (2
                )
                
                
                7,644Affiliate
                    revenue
                
                
                13
                
                
                
                1,443
                
                
                
                513
                
                
                
                -
                
                
                
                1,969Intercompany
                    revenue
                
                
                501
                
                
                
                -
                
                
                
                12,079
                
                
                
                (12,580
                )
                
                
                -Operating
                    revenue, net
                
                $
                292,625
                
                
                $
                1,464
                
                
                $
                12,596
                
                
                $
                (12,582
                )
                
                $
                294,103Depreciation
                    expense
                
                $
                23,353
                
                
                $
                76
                
                
                $
                321
                
                
                $
                -
                
                
                $
                23,750Interest
                    charges
                
                $
                8,328
                
                
                $
                4,989
                
                
                $
                1,946
                
                
                $
                (4,985
                )
                
                $
                10,278Interest
                    income
                
                $
                1,559
                
                
                $
                -
                
                
                $
                6,208
                
                
                $
                (4,985
                )
                
                $
                2,782Equity
                    income from investees
                
                $
                -
                
                
                $
                14,741
                
                
                $
                456
                
                
                $
                -
                
                
                $
                15,197Federal
                    and state income tax expense
                
                $
                11,428
                
                
                $
                5,882
                
                
                $
                2,368
                
                
                $
                (328
                )
                
                $
                19,350Segment
                    profit from continuing operations, net
                
                $
                21,556
                
                
                $
                3,693
                
                
                $
                2,731
                
                
                $
                -
                
                
                $
                27,980Income
                    from discontinued operations, net of tax
                
                
                -
                
                
                
                36
                
                
                
                -
                
                
                
                -
                
                
                
                36Segment
                    profit (1)
                
                $
                21,556
                
                
                $
                3,729
                
                
                $
                2,731
                
                
                $
                -
                
                
                $
                28,016Additions
                    to long-lived assets
                
                $
                85,182
                
                
                $
                -
                
                
                $
                115
                
                
                $
                -
                
                
                $
                85,297Equity
                    investment in investees (2)
                
                $
                -
                
                
                $
                302,167
                
                
                $
                4,969
                
                
                $
                -
                
                
                $
                307,136Total
                    segment assets (2)
                
                $
                2,023,852
                
                
                $
                325,157
                
                
                $
                751,376
                
                
                $
                (639,281
                )
                
                $
                2,461,104(1)Reconciliation
                    of segment profit to consolidated profit:
                
                Segment
                    profit
                
                
                
                
                
                
                
                
                
                
                $
                28,016(2)Balances
                    as of
                    December 31, 2006
                
                Unallocated
                    items:Preferred
                    dividends
                    requirements
                
                
                
                
                
                
                
                424Net
                    income applicable to common stock
                
                
                $
                27,592
 
 25
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  **SEGMENT
            INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30,**
 **CLECO**
                
                
                
                
                
                **RECONCILING**2007(THOUSANDS)
                
                **POWER**
                
                
                **MIDSTREAM**
                
                
                **ITEMS**
                
                
                **ELIMINATIONS**
                
                
                **CONSOLIDATED**RevenueElectric
                    operations
                
                **$**
                **765,791**
                
                
                **$**
                **-**
                
                
                **$**
                **-**
                
                
                **$**
                **-**
                
                
                **$**
                **765,791**Other
                    operations
                
                ****
                **26,413**
                
                
                ****
                **15**
                
                
                ****
                **60**
                
                
                ****
                **(10**
                **)**
                
                ****
                **26,478**Affiliate
                    revenue
                
                ****
                **35**
                
                
                ****
                **3,251**
                
                
                ****
                **1,387**
                
                
                ****
                **-**
                
                
                ****
                **4,673**Intercompany
                    revenue
                
                ****
                **1,505**
                
                
                ****
                **-**
                
                
                ****
                **32,025**
                
                
                ****
                **(33,530**
                **)**
                
                ****
                **-**Operating
                    revenue
                
                **$**
                **793,744**
                
                
                **$**
                **3,266**
                
                
                **$**
                **33,472**
                
                
                **$**
                **(33,540**
                **)**
                
                **$**
                **796,942**Depreciation
                    expense
                
                **$**
                **58,784**
                
                
                **$**
                **230**
                
                
                **$**
                **813**
                
                
                **$**
                **-**
                
                
                **$**
                **59,827**Interest
                    charges
                
                **$**
                **27,883**
                
                
                **$**
                **16,457**
                
                
                **$**
                **6,309**
                
                
                **$**
                **(16,365**
                **)**
                
                **$**
                **34,284**Interest
                    income
                
                **$**
                **3,548**
                
                
                **$**
                **1,044**
                
                
                **$**
                **19,797**
                
                
                **$**
                **(16,359**
                **)**
                
                **$**
                **8,030**Equity
                    income from investees
                
                **$**
                **-**
                
                
                **$**
                **96,460**
                
                
                **$**
                **1,148**
                
                
                **$**
                **-**
                
                
                **$**
                **97,608**Federal
                    and state income tax expense
                
                **$**
                **20,517**
                
                
                **$**
                **40,008**
                
                
                **$**
                **2,509**
                
                
                **$**
                **153**
                
                
                **$**
                **63,187**Segment
                    profit (1)
                
                **$**
                **65,146**
                
                
                **$**
                **64,742**
                
                
                **$**
                **9,993**
                
                
                **$**
                **-**
                
                
                **$**
                **139,881**Additions
                    to long-lived assets
                
                **$**
                **388,545**
                
                
                **$**
                **8**
                
                
                **$**
                **762**
                
                
                **$**
                **-**
                
                
                **$**
                **389,315**Equity
                    investment in investees
                
                **$**
                **-**
                
                
                **$**
                **256,272**
                
                
                **$**
                **152,886**
                
                
                **$**
                **(133,894**
                **)**
                
                **$**
                **275,264**Total
                    segment assets
                
                **$**
                **2,257,810**
                
                
                **$**
                **361,725**
                
                
                **$**
                **573,967**
                
                
                **$**
                **(452,748**
                **)**
                
                **$**
                **2,740,754****(1)Reconciliation
                    of segment profit to consolidated profit:**
                
                **Segment
                    profit**
                
                
                
                
                
                
                
                
                
                
                **$**
                **139,881****Unallocated
                    items:****Preferred
                    dividends
                    requirements**
                
                
                
                
                
                
                ****
                **446****Net
                    income applicable to common stock**
                
                
                **$**
                **139,435**
  
 CLECO
                
                
                
                
                
                RECONCILING2006(THOUSANDS)
                
                POWER
                
                
                MIDSTREAM
                
                
                ITEMS
                
                
                ELIMINATIONS
                
                
                CONSOLIDATEDRevenueElectric
                    operations
                
                $
                736,765
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                736,765Other
                    operations
                
                
                22,052
                
                
                
                26
                
                
                
                106
                
                
                
                (17
                )
                
                
                22,167Electric
                    customer
                    credits
                
                
                4,382
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                4,382Affiliate
                    revenue
                
                
                37
                
                
                
                3,630
                
                
                
                1,490
                
                
                
                -
                
                
                
                5,157Intercompany
                    revenue
                
                
                1,501
                
                
                
                -
                
                
                
                31,737
                
                
                
                (33,238
                )
                
                
                -Operating
                    revenue, net
                
                $
                764,737
                
                
                $
                3,656
                
                
                $
                33,333
                
                
                $
                (33,255
                )
                
                $
                768,471Depreciation
                    expense
                
                $
                53,879
                
                
                $
                232
                
                
                $
                997
                
                
                $
                -
                
                
                $
                55,108Interest
                    charges
                
                $
                26,232
                
                
                $
                13,865
                
                
                $
                5,862
                
                
                $
                (13,821
                )
                
                $
                32,138Interest
                    income
                
                $
                5,688
                
                
                $
                -
                
                
                $
                15,350
                
                
                $
                (13,821
                )
                
                $
                7,217Equity
                    income from investees
                
                $
                -
                
                
                $
                28,189
                
                
                $
                2,613
                
                
                $
                -
                
                
                $
                30,802Federal
                    and state income tax expense
                
                $
                26,287
                
                
                $
                8,204
                
                
                $
                4,884
                
                
                $
                (452
                )
                
                $
                38,923Segment
                    profit from continuing operations, net
                
                $
                52,476
                
                
                $
                4,292
                
                
                $
                6,767
                
                
                $
                -
                
                
                $
                63,535Loss
                    from discontinued operations, net of tax
                
                
                -
                
                
                
                (154
                )
                
                
                -
                
                
                
                -
                
                
                
                (154
                )Segment
                    profit (1)
                
                $
                52,476
                
                
                $
                4,138
                
                
                $
                6,767
                
                
                $
                -
                
                
                $
                63,381Additions
                    to long-lived assets
                
                $
                207,499
                
                
                $
                13
                
                
                $
                270
                
                
                $
                -
                
                
                $
                207,782Equity
                    investment in investees (2)
                
                $
                -
                
                
                $
                302,167
                
                
                $
                4,969
                
                
                $
                -
                
                
                $
                307,136Total
                    segment assets (2)
                
                $
                2,023,852
                
                
                $
                325,157
                
                
                $
                751,376
                
                
                $
                (639,281
                )
                
                $
                2,461,104(1)Reconciliation
                    of segment profit to consolidated profit:
                
                Segment
                    profit
                
                
                
                
                
                
                
                
                
                
                $
                63,381(2)Balances
                    as of
                    December 31, 2006
                
                Unallocated
                    items:Preferred
                    dividends
                    requirements
                
                
                
                
                
                
                
                1,310Net
                    income applicable to common stock
                
                
                $
                62,071
 
 **Note
          4 — Equity Investment in Investees**
 Equity
            investment in investees represents primarily Midstream’s $188.8 million
            investment in Acadia, owned 50% by APH and 50% by Cajun.  Equity investment
            in investees also represents an $86.4 million investment in certain other
            subsidiaries owned 100% by Cleco Corporation.  Equity investments
            which are less than 100% owned by Cleco Innovations LLC represent less
            than $0.1
            million of the total balance.
 Cleco
              reports its investment in Acadia 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.
 
 26
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
 
 The
          table below presents the equity income (loss) from each investment
          accounted for using the equity method.
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER 30,(THOUSANDS)
                
                **2007**
                
                
                2006Acadia
                
                **$**
                **14,146**
                
                
                $
                1,458Subsidiaries
                    100% owned by Cleco Corporation
                
                ****
                **13,549**
                
                
                
                13,795Other
                
                ****
                **31**
                
                
                
                (56
                )Total
                    equity
                    income
                
                **$**
                **27,726**
                
                
                $
                15,197
 
 FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER 30,(THOUSANDS)
                
                **2007**
                
                
                2006Acadia
                
                **$**
                **85,499**
                
                
                $
                13,295Subsidiaries
                    100% owned by Cleco Corporation
                
                ****
                **12,088**
                
                
                
                17,638Other
                
                ****
                **21**
                
                
                
                (131
                )Total
                    equity
                    income
                
                **$**
                **97,608**
                
                
                $
                30,802
  For
          the nine months ended September 30, 2006, APH’s equity income includes the
          drawing in full of a $15.0 million letter of credit.  The letter of
          credit, of which APH was the beneficiary, was posted by Calpine to support
          its
          obligations under the Calpine Tolling Agreements.
 For
          the
          nine months ended September 30, 2007, APH’s equity income includes net proceeds
          of $78.2 million from the settlement of the Calpine bankruptcy
          claims.  It also includes $60.0 million of priority distributions
          received at the closing of the sale of CAH’s 50% equity ownership interest in
          Acadia, partially offset by a $45.8 million other-than-temporary impairment
          of
          the carrying value of the investment in Acadia at the APH level.  For
          more information on these claims, see Note 14 — “Calpine Bankruptcy
          Settlement.”
  ***Acadia***
 Cleco’s
          current assessment of its maximum exposure to loss related to Acadia at
          September 30, 2007, consists of its equity investment of $188.8
          million.
 The
          table below presents the components of Midstream's equity investment in
          Acadia.
 
 **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,INCEPTION
                    TO DATE (THOUSANDS)
                
                **2007**
                
                
                2006Contributed
                    assets (cash and land)
                
                **$**
                **252,812**
                
                
                $
                250,612Income
                    before taxes
                
                ****
                **177,069**
                
                
                
                105,698Impairment
                    of investment
                
                ****
                **(45,847**
                **)**
                
                
                -Capitalized
                    interest and other
                
                ****
                **19,469**
                
                
                
                19,469Less:  Non-cash
                    distribution
                
                ****
                **78,200**
                
                
                
                -Less:
                    Cash
                    distributions
                
                ****
                **136,464**
                
                
                
                136,464Total
                    equity investment in
                    investee
                
                **$**
                **188,839**
                
                
                $
                239,315
  The
          $78.2 million non-cash distribution is the distribution of the CES claim
          from
          Acadia to APH.  The cash distributions of $136.5 million were used to
          pay interest and repay principal on debt at Cleco Corporation relating
          to this
          investment.  Midstream’s equity, as reported on the balance sheet of Acadia
          at September 30, 2007, was $215.2 million.  The difference between the
          $215.2 million and the equity investment in investee of $188.8 million
          shown in
          the table above is $26.4 million.  The difference consists of the
          $45.8 million other-than-temporary impairment of APH’s investment in Acadia,
          partially offset by $19.4 million of interest capitalized on funds contributed
          by Acadia and other miscellaneous charges related to
          construction.
 In
          December 2005, the Calpine Debtors, including CES and the subsidiary which
          owned
          the other 50% of Acadia, filed voluntary petitions in the Calpine Debtors
          Bankruptcy Court for protection under Chapter 11 of the U.S. Bankruptcy
          Code.  In February 2006, APH drew $2.8 million against the $15.0
          million Calpine letter of credit due to the default of CES under the tolling
          agreements.  In August 2006, APH drew the remaining $12.2 million
          available under Calpine’s $15.0 million letter of credit.  These
          amounts were reported as equity income from investees on Cleco Corporation’s
          Condensed Consolidated Statements of Income in the respective
          periods.
 In
          May
          2007, the Calpine Debtors Bankruptcy Court approved the terms of the April
          2007
          settlement agreement with Calpine that resolved issues surrounding the
          Calpine bankruptcy filing and its effect on the Acadia facility.  In
          August 2007, a hearing was held for the Calpine Debtors Bankruptcy Court
          to
          consider and approve the sale of CAH Assets to Cajun.  In September
          2007, after all regulatory approvals were received, the sale of CAH's Assets
          to
          Cajun was completed. For additional information, see Note 14 — “Calpine
          Bankruptcy Settlement.”
 The
          table below contains summarized financial information for Acadia.
 
 **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,(THOUSANDS)
                
                **2007**
                
                
                2006Current
                    assets
                
                **$**
                **9,901**
                
                
                $
                5,233Property,
                    plant and equipment, net
                
                ****
                **429,968**
                
                
                
                437,281Total
                    assets
                
                **$**
                **439,869**
                
                
                $
                442,514Current
                    liabilities
                
                **$**
                **9,397**
                
                
                $
                3,327Partners’
                    capital
                
                ****
                **430,472**
                
                
                
                439,187Total
                    liabilities and partners’
                    capital
                
                **$**
                **439,869**
                
                
                $
                442,514
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                
                FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006Total
                    revenue
                
                **$**
                **32,016**
                
                
                $
                65,918
                
                
                **$**
                **57,507**
                
                
                $
                125,414Gain
                    on settlement
                
                ****
                **-**
                
                
                
                -
                
                
                ****
                **170,200**
                
                
                
                -Total
                    operating expenses
                
                ****
                **32,244**
                
                
                
                50,698
                
                
                ****
                **71,194**
                
                
                
                115,349Other
                    income (loss)
                
                ****
                **21**
                
                
                
                (119
                )
                
                ****
                **28**
                
                
                
                1,501Income
                    before
                    taxes
                
                **$**
                **(207**
                **)**
                
                $
                15,101
                *
                
                **$**
                **156,541**
                
                
                $
                11,566
                ***  The
                    $15.1 million income before taxes for the three months ended
                    September 30,
                    2006, includes the $12.2 million draw against the letter of credit
                    which
                    was allocated 100% to APH earnings.
                  **The
                    $11.6 million income before taxes for the nine months ended September
                    30,
                    2006, includes the $15.0 million in draws against the letter
                    of credit
                    which was allocated 100% to APH earnings.
  Income
          tax expense recorded on APH’s financial statements for the three and nine months
          ended September 30, 2007, was $13.8 million and $37.3
          million, respectively, compared to an income tax benefit of $1.5 million
          and $0.5 million for the three and nine months ended September 30, 2006,
          respectively.  The increase in income tax expense at APH is due to the
          settlement of the Calpine bankruptcy claims included in income for the
          three and
          nine months ended September 30, 2007.
  27
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  ***Subsidiaries
          100% owned by Cleco Corporation***
 Cleco’s
          current assessment of its maximum exposure to loss at September 30, 2007,
          related to its 100% investment in Evangeline, Attala, and Perryville consists
          of
          its equity investment of $86.4 million.
 The
          table below presents the components of Cleco Corporation’s equity investment in
          such entities on a combined basis.
 
 **AT SEPTEMBER
                    30,**
                
                
                AT
                    DECEMBER 31,INCEPTION
                    TO DATE (THOUSANDS)
                
                **2007**
                
                
                2006Contributed
                    assets
                
                **$**
                **175,274**
                
                
                $
                159,135Income
                    before taxes
                
                ****
                **199,458**
                
                
                
                187,370Less:  distributions
                
                ****
                **288,310**
                
                
                
                278,789Total
                    equity investment in
                    investee
                
                **$**
                **86,422**
                
                
                $
                67,716
  The
          table below contains summarized combined financial information for Evangeline,
          Attala and Perryville.
 
 **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,(THOUSANDS)
                
                **2007**
                
                
                2006Current
                    assets
                
                **$**
                **21,003**
                
                
                $
                17,453Accounts
                    receivable - affiliate
                
                ****
                **13,996**
                
                
                
                5,159Property,
                    plant and equipment, net
                
                ****
                **182,424**
                
                
                
                185,958Other
                    assets
                
                ****
                **59,961**
                
                
                
                64,744Total
                    assets
                
                **$**
                **277,384**
                
                
                $
                273,314Current
                    liabilities
                
                **$**
                **21,022**
                
                
                $
                17,532Accounts
                    payable - affiliate
                
                ****
                **1,936**
                
                
                
                4,802Long-term
                    debt
                
                ****
                **168,866**
                
                
                
                177,064Other
                    liabilities
                
                ****
                **65,567**
                
                
                
                61,562Member’s
                    equity
                
                ****
                **19,993**
                
                
                
                12,354Total
                    liabilities and member’s
                    equity
                
                **$**
                **277,384**
                
                
                $
                273,314
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                
                FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006Operating
                    revenue
                
                **$**
                **25,250**
                
                
                $
                25,338
                
                
                **$**
                **50,615**
                
                
                $
                49,356Operating
                    expenses
                
                ****
                **6,006**
                
                
                
                5,752
                
                
                ****
                **19,049**
                
                
                
                15,486Depreciation
                
                ****
                **1,317**
                
                
                
                1,305
                
                
                ****
                **3,902**
                
                
                
                3,912Interest
                    charges
                
                ****
                **4,720**
                
                
                
                4,208
                
                
                ****
                **15,497**
                
                
                
                12,569Interest
                    income
                
                ****
                **343**
                
                
                
                379
                
                
                ****
                **1,020**
                
                
                
                1,048Other
                    expense
                
                ****
                **1**
                
                
                
                657
                
                
                ****
                **1,099**
                
                
                
                798Income
                    before taxes
                
                **$**
                **13,549**
                
                
                $
                13,795
                
                
                **$**
                **12,088**
                
                
                $
                17,639
  Since
          its inception, Cleco has had 100% ownership and voting interest of
          Evangeline.  All of the capacity and output of the power plant has
          been tolled to Williams, which pays Evangeline certain fixed and variable
          amounts.  In May 2007, The Williams Companies, Inc. agreed to sell
          substantially all of its power assets, including its tolling agreement
          with
          Evangeline, to Bear Energy LP.  The sale, which is subject to
          regulatory and other approvals, is expected to close no later than the
          fourth
          quarter of 2007 and is not expected to have an impact on Evangeline’s
          operations.
  **Note
          5 — Recent Accounting Standards**
 The
            Registrants adopted, or will adopt, the recent accounting standards listed
            below
            on their respective effective dates.
 In
          February 2006, the FASB issued SFAS No. 155 which amends SFAS No. 133 and
          SFAS
          No. 140.  The provisions of this statement:
  §
                permit
                    fair value accounting for hybrid financial instruments that contain
                    an
                    embedded derivative that otherwise would require
                    bifurcation;
 §
                clarify
                    the exemption from SFAS No. 133 for certain interest-only and
                    principal-only strips;
 §
                establish
                    a requirement to evaluate interests in securitized financial
                    assets that
                    contain an embedded derivative requiring
                    bifurcation;
 §
                clarify
                    that concentrations of credit risk in the form of subordination
                    are not
                    embedded derivatives; and
 §
                amend
                    SFAS No. 140 as it relates to qualifying special-purpose entities
                    and
                    derivative financial instruments.
  This
          statement is effective for all financial instruments acquired, issued or
          subject
          to a remeasurement event occurring after the beginning of an entity’s first
          fiscal year that begins after September 15, 2006.  The adoption of
          SFAS No. 155 did not have an impact on the financial condition or results
          of
          operations of the Registrants.
 In
          March
          2006, the FASB issued SFAS No. 156 which amends SFAS No. 140 with respect
          to the
          accounting for separately recognized servicing assets and
          liabilities.  This statement requires all separately recognized
          servicing assets and liabilities to be initially measured at fair value,
          requires fair value accounting for derivative instruments used to mitigate
          risks
          of the servicing assets and liabilities, and allows for the election to
          use fair
          value accounting for the servicing assets and liabilities in subsequent
          periods.  SFAS No. 156 is effective for the first fiscal year
          beginning after September 15, 2006.  The adoption of SFAS No. 156 did
          not have an impact on the financial condition or results of operations
          of the
          Registrants.
 In
          July
          2006, the FASB issued FIN 48, which provides guidance on accounting for
          uncertain tax positions.  FIN 48 allows recognition of those tax
          benefits that satisfy a greater than 50% probability threshold.  This
          interpretation requires each tax position to be evaluated using a two-step
          process.  The first step is a determination of the likelihood the
          position will be sustained upon examination based upon the technical merits
          of
          the position.  For tax positions that result from permanent
          differences between book and tax income, the company must evaluate the
          likelihood that the position will be sustained to determine whether a tax
          benefit can be recognized.  Once it is determined that a tax benefit
          can be recognized, the second step is to measure and record the tax benefit
          to
          be realized.  For tax positions that do not meet the requirements of
          the first step, no tax benefit should be recognized.  This
          interpretation also provides for the recognition and measurement of expected
          penalties and interest, as well as disclosure requirements about tax
          positions.  This interpretation is effective for fiscal years
          beginning after December 15, 2006.  For additional information
          regarding the impact the adoption of FIN 48 had on the financial condition
          and
          results of operations of the Registrants, see Note 11 — “Income
          Taxes.”
 In
          September 2006, the FASB issued SFAS No. 157, which provides guidance on
          how
          companies should measure fair
  28
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  value
          when required for recognition or disclosure purposes under generally accepted
          accounting principles.  Specifically, SFAS No. 157 creates a common
          definition of fair value throughout generally accepted accounting principles,
          establishes a fair value hierarchy, and requires companies to make expanded
          disclosures about fair value measurements.  This statement is
          effective for fiscal years beginning after November 15,
          2007.  Management is currently evaluating the impact this statement
          will have on the financial condition and results of operations of the
          Registrants.
 In
          February 2007, the FASB issued SFAS No. 159, which allows entities to choose,
          at
          specified election dates, to measure eligible financial assets and liabilities
          at fair value that are not otherwise required to be measured at fair
          value.  SFAS No. 159 is effective for fiscal years beginning after
          November 15, 2007.  Management is currently evaluating the impact this
          statement will have on the financial condition and results of operations
          of the
          Registrants.
 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.  Management is currently evaluating the
          impact this statement will have on the financial condition and results
          of
          operations of the Registrants.
 In
          May
          2007, the FASB issued FSP FIN 48-1, which provides three conditions that
          should
          be met for a tax position to be considered effectively settled with the
          applicable taxing authority.  The guidance in this FSP is effective
          upon the initial adoption of FIN 48.  Companies that have already
          adopted FIN 48, but have not yet applied FIN 48 in a manner that is consistent
          with this FSP, will be required to retrospectively apply the provisions
          of the
          FSP to the date of their initial adoption of FIN 48.  The adoption of
          this statement had no effect on the financial condition and results of
          operations of the Registrants.
 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.  Management is currently evaluating the impact this
          consensus will have on the financial condition and 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 is not expected to have a
          material impact on the financial condition and results of operations of
          the
          Registrants.
  **Note
          6 — 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 September 30, 2007, and December 31, 2006,
            $0.1 million and $24.5 million of cash, respectively, was restricted.
 At
            September 30, 2007, restricted cash consisted of $0.1 million under the
            Diversified Lands mitigation escrow agreement.  Restricted cash at
            Cleco Power at September 30, 2007, decreased $24.4 million compared to
            December
            31, 2006, due to the release of funds for construction of the solid waste
            disposal facility at Rodemacher Unit 3.
  **Note
          7 — Electric Customer Credits**
 Earnings
            for the nine months ended September 30, 2006, for Cleco and Cleco Power
            reflect
            reversals of previously accrued credits of $4.4 million under terms of
            a RSP
            established in an earnings review settlement with the LPSC in
            1996.
 The
          original terms of the 1996 LPSC earnings review settlement were extended
          without
          modification to September 30, 2006, through subsequent amendments and two
          approved one-year extensions.  As part of the settlement, Cleco Power
          was allowed to retain all regulated earnings up to a 12.25% return on equity,
          and to share equally with customers, as credits on their bills, all regulated
          earnings between 12.25% and 13% return on equity.  All regulated
          earnings above a 13% return on equity were credited to
          customers.  This effectively allowed Cleco Power the opportunity to
          realize a regulatory rate of return up to 12.625%.  The amount of
          credits due to customers, if any, is determined by Cleco Power and the
          LPSC
          annually, based on results for each 12-month period ended September
          30.  The 1996 LPSC settlement provided for such credits to be made on
          customers’ bills the following summer.
 The
          $4.4
          million reversal of previously accrued credits mentioned above was the
          result of
          two events.  The first event was the April 2006 settlement of issues raised
          in the LPSC’s review of Cleco Power’s RSP filings for the 12-months ended
          September 30, 2002, 2003, and 2004.  Under the terms of the settlement,
          Cleco Power refunded $1.3 million as credits on customers’ September 2006
          utility bills and reversed, in the first quarter of 2006, previously accrued
          customer credits of $3.2 million.  The second event was the April 2006
          filing by Cleco Power of its required monitoring report for the 12-month
          period
          ended September 30, 2005.  Based on the reassessment of amounts filed
          in this monitoring report, the results of the Staff’s review as discussed above,
          and projections for the year 2006, Cleco Power reversed in the first quarter
          of
          2006 an additional $1.2 million of customer credits previously
  29
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  accrued
          for the 12-months ended September 30, 2005, and 2006.
 In
          the
          first proceeding, the LPSC also reserved the right to further review Cleco
          Power’s calculation of working capital included in the filings for the 12-months
          ended September 30, 2002, 2003, and 2004.  Cleco Power reached an
          agreement of the working capital issue with the LPSC and refunded an additional
          $3.2 million of previously accrued customer credits to customers in March
          2007.
 The
          LPSC
          consultants completed the review of the 2005 monitoring report in March
          2007.  Cleco Power received the LPSC Staff’s report in April 2007,
          indicating that no refund was due based on the 2005 RSP filing.  In
          August 2007, the LPSC consultants completed their review of Cleco Power’s 2006
          monitoring report, and Cleco Power received the LPSC Staff’s report indicating
          that no refund was due for the reporting period ended September 30,
          2006.  The Staff’s report becomes final after October 31, 2007,
          provided there is no protest by any individual or group of customers prior
          to
          that time.
 Cleco
          Power’s Balance Sheets at September 30, 2007, and December 31, 2006,
          reflect the following accruals for estimated electric customer credits
          relating
          to the 12-months ended September 30, 2002, through September 30,
          2007.
 
 **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,(THOUSANDS)
                
                **2007**
                
                
                2006Provision
                    for rate refund
                
                **$**
                **2**
                
                
                $
                3,174Other
                    deferred credits
                
                ****
                **1,933**
                
                
                
                1,933Total
                    customer
                    credits
                
                **$**
                **1,935**
                
                
                $
                5,107
  Amounts
          reported under the line item provision for rate refund at December 31,
          2006,
          relate to the working capital issue mentioned above for the 12-months ended
          September 30, 2002, 2003, and 2004, that were refunded in March 2007.  The
          amounts reported under the line item other deferred credits relate to potential
          fuel audit issues and currently are not due.  All customer credits
          relating to Cleco Power’s RSP were recorded as a reduction in revenue due to the
          nature of the credits.  The accruals are based upon the original 1996
          settlement, the modified terms of the RSP extension, the resolution of
          the
          2001-2002 fuel audit which was settled in 2004, annual issues as agreed
          to
          between Cleco and the LPSC, and Cleco’s assessment of issues that remain
          outstanding.
 In
          July
          2006, Cleco Power’s request for an extension of the RSP to the in-service date
          of Rodemacher Unit 3, targeted for the fourth quarter of 2009, was approved
          by
          the LPSC with several modifications to the terms of the original
          RSP.  Effective October 1, 2006, Cleco Power began operating under the
          new RSP, which allows Cleco Power to earn a maximum regulated return on
          equity
          of 11.65%.  This maximum return is based on a return on equity of
          11.25%, with any regulated earnings between 11.25% and 12.25% shared between
          shareholders and customers in a 40/60 ratio.  All regulated earnings
          over 12.25% will be returned to customers.  The terms relating to the
          sharing of regulated earnings were modified by the LPSC in its order approving
          the recovery of storm restoration costs discussed below.
 In
          February 2006, the LPSC approved Cleco Power’s request to recover storm
          restoration costs incurred for Hurricanes Katrina and Rita.  As part
          of this approval, the LPSC required that effective during the interim recovery
          period (Phase I), which began with the May 2006 billing cycle, Cleco Power’s
          portion of the shared regulated earnings between the 12.25% and 13% allowed
          return on equity (between 11.25% and 12.25% effective October 1, 2006)
          be
          credited against outstanding Hurricanes Katrina and Rita storm restoration
          costs, rather than being shared between shareholders and
          customers.  In September 2007, as a result of Phase II of the LPSC
          Staff’s review of storm restoration costs, the LPSC approved a settlement
          agreement between Cleco Power and the LPSC Staff allowing the recovery of
          essentially all of Cleco Power’s Hurricanes Katrina and Rita storm
          costs.  As part of the agreement, Cleco Power will continue to forgo
          its share of any excess earnings calculated according to the terms of the
          current RSP (unless modified in a subsequent base rate
          proceeding).  For information concerning this agreement, see Note 2 —
“Regulatory Assets and Liabilities.”  As of September 30, 2007,
          Cleco Power had not credited any earnings against storm restoration
          costs.
  **Note 8
          — 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.  On February 21, 2006, the court designated KPMG LLP (KPMG)
          to examine the claims made by both parties.  On February 23, 2007,
          KPMG delivered a preliminary audit report to outside counsel for each
          party.  Pursuant to a court order, the report’s distribution is
          limited and its contents are confidential.  In March 2007, the parties
          met to mediate the dispute and have agreed to continue to negotiate a framework
          for resolution of the dispute under the supervision of the mediator and
          the U.S.
          District Judge.  On September 11, 2007, the parties met with the U.S.
          District Judge, who extended the mediation process.  Under the current
          court order, this mediation will continue through the end of 2007, unless
          a
          settlement is reached earlier.  Management believes the dispute will
          not
  30
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  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 Cleco
          Corporation and Cleco Power, along with many other listed potentially
          responsible parties to 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.  Cleco
          has been identified as being associated with the site operations and as
          such is
          being requested to respond to this notice.  The Devil's Swamp Lake
          site has been proposed to be added to the National Priorities List (NPL)
          based
          on the release of polychlorinated biphenyls to fisheries and wetlands located
          on
          the site.  The EPA will make a final decision on the listing of the
          site to the NPL after considering the relevant comments. A written response
          to
          the EPA is required by December 7, 2007.  Cleco has contacted the EPA
          in response to the special notice and is reviewing the available
          information.  Since this investigation is in the preliminary stages,
          management is unable to determine what amount, if any, should be accrued
          for
          possible remediation of the facility site.
 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 have also 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 ending 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 September 30, 2007, are summarized in
          the following table, and a discussion of the off-balance sheet commitments
          follows the table.  The discussion should be read in conjunction with
          the table to understand the impact of the off-balance sheet commitments
          on
          Cleco’s financial condition.
 
 AT
                    SEPTEMBER 30, 2007REDUCTIONS
                    TO THEAMOUNT
                    AVAILABLETO
                    BE DRAWN ONFACE
                
                
                
                
                
                NET
                
                
                CLECO
                    CORPORATION’S(THOUSANDS)
                
                AMOUNT
                
                
                REDUCTIONS
                
                
                AMOUNT
                
                
                CREDIT
                    FACILITY**Cleco
                    Corporation**Guarantee
                    issued to Entergy
                    companies for performance obligations of Perryville
                
                **$**
                **277,400**
                
                
                **$**
                **135,000**
                
                
                **$**
                **142,400**
                
                
                **$**
                **328**Guarantees
                    issued to purchasers
                    of the assets of Cleco Energy
                
                ****
                **1,400**
                
                
                ****
                **-**
                
                
                ****
                **1,400**
                
                
                ****
                **1,400**Obligations
                    under standby letter
                    of credit issued to the Evangeline Tolling Agreement
                    counterparty
                
                ****
                **15,000**
                
                
                ****
                **-**
                
                
                ****
                **15,000**
                
                
                ****
                **15,000**Guarantee
                    issued to Entergy
                    Mississippi on behalf of Attala
                
                ****
                **500**
                
                
                ****
                **-**
                
                
                ****
                **500**
                
                
                ****
                **500**Guarantee
                    issued to Tenaska on
                    behalf of Cleco Evangeline
                
                ****
                **5,000**
                
                
                ****
                **-**
                
                
                ****
                **5,000**
                
                
                ****
                **5,000****Cleco
                    Power**Obligations
                    under standby letter
                    of credit issued to the Louisiana Department of Labor
                
                ****
                **525**
                
                
                ****
                **-**
                
                
                ****
                **525**
                
                
                ****
                **-**Obligations
                    under the Lignite
                    Mining Agreement
                
                ****
                **15,772**
                
                
                ****
                **-**
                
                
                ****
                **15,772**
                
                
                ****
                **-**Total
                
                **$**
                **315,597**
                
                
                **$**
                **135,000**
                
                
                **$**
                **180,597**
                
                
                **$**
                **22,228**
 
 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 September 30, 2007, the aggregate guarantee of
          $277.4 million is limited to $142.4 million (other than with respect to
          the
          indemnification of environmental matters to which there is no limit) due
          to the
          performance of some of the underlying obligations that were guaranteed.
          In June
          2005, Perryville paid all interest and
  31
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  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 September 30, 2007, was $0.3 million, resulting
          in a
          corresponding reduction in the available credit under Cleco’s credit facility,
          which was determined in accordance with the facility’s definition of a
          contingent obligation.  The contingent obligation reduces the amount
          available under the credit agreements by an amount equal to the 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.  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 September 30, 2007, 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.  Ratings
          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 Interconnection
          Agreement.  This guarantee will be effective through the life of the
          agreement.
 On
          June
          13, 2007, Cleco Corporation issued a guarantee to Tenaska pursuant to a
          power
          replacement agreement between Evangeline and Tenaska.  The amount of
          the guarantee is $5.0 million, and the guarantee expires on December 31,
          2007.
 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 September 30, 2007, Cleco Power’s 50%
          exposure for this obligation was approximately $15.8 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
                    SEPTEMBER 30, 2007AMOUNT
                    OF COMMITMENT EXPIRATION PER PERIODNET
                
                
                
                
                
                
                
                
                
                
                
                MOREAMOUNT
                
                
                LESS
                    THAN
                
                
                
                
                
                
                
                
                THAN(THOUSANDS)
                
                COMMITTED
                
                
                ONE
                    YEAR
                
                
                1-3
                    YEARS
                
                
                3-5
                    YEARS
                
                
                5
                    YEARSGuarantees
                
                **$**
                **165,072**
                
                
                **$**
                **5,000**
                
                
                **$**
                **101,400**
                
                
                **$**
                **15,772**
                
                
                **$**
                **42,900**Standby
                    letters of credit
                
                ****
                **15,525**
                
                
                ****
                **525**
                
                
                ****
                **-**
                
                
                ****
                **-**
                
                
                ****
                **15,000**Total
                    commercial
                    commitments
                
                **$**
                **180,597**
                
                
                **$**
                **5,525**
                
                
                **$**
                **101,400**
                
                
                **$**
                **15,772**
                
                
                **$**
                **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.
 
 32
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  ***Acadia***
 In
          May 2005, a detailed review of the gas and electric metering at the Acadia
          plant
          resulted in the discovery of a potential electric metering error whereby
          Acadia
          unknowingly generated excess power to its electric interconnections for
          the
          period beginning June 1, 2002, and ending May 31, 2005.  Acadia made a
          claim against Cleco Power for the delivery of the excess generation for
          which it
          did not receive compensation.  In April 2007, Cleco reached a
          settlement agreement with Calpine, subject to bankruptcy court approval,
          which
          resolved issues related to the Acadia power plant, including the potential
          electric metering error at the plant.  As part of that settlement,
          Calpine agreed to sell APH the right to settle Acadia’s outstanding dispute with
          Cleco Power for $1.25 million.  In May 2007, the Calpine Debtors
          Bankruptcy Court approved the terms of the April 2007 settlement
          agreement.  In September 2007, Calpine completed the transfer to APH
          of its rights in the Acadia dispute.  For more information on the
          Acadia settlement, see Note 14 — “Calpine Bankruptcy Settlement.”
  ***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
          deliveries to its Rodemacher Power Station.  The lease contains a
          provision for early termination, along with an associated termination
          fee.  The termination provision can only be exercised in December
          2010.  If exercised by Cleco Power, the termination fee would be
          approximately $1.4 million.  At this time, Cleco Power has no plans to
          early terminate this lease.
  ***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.  At any time
          during the lease, Cleco Power may terminate the agreement.  The
          termination fee is based upon the unamortized residual value of the equipment
          under lease at the end of the month of termination.  The fee is
          decreased by any sale proceeds obtained by CBL Capital
          Corporation.  Cleco Power would be liable for 87% of the termination
          fee net of any sale proceeds.  Cleco Power’s maximum obligation at
          September 30, 2007, is approximately $4.7 million.  At this time,
          Cleco Power has no plans to terminate this lease prior to expiration of
          the
          lease term.
  **Fuel
          Audit**
 On
          July 14, 2006, the LPSC informed Cleco Power that it was planning to conduct
          a
          periodic fuel audit.  The audit commenced on July 26, 2006, and
          included fuel adjustment clause filings for January 2003 through December
          2004.  Cleco Power has provided to the LPSC Staff all of the requested
          information.  The audit is pursuant to the Fuel Adjustment Clause
          General Order issued November 6, 1997, in Docket No. U-21497 which anticipates
          that an audit will be performed not less than every other year.  The
          LPSC Staff is performing this review, and Cleco Power expects a preliminary
          report to be issued when the review is complete.  Management is unable
          to predict the results of the LPSC audit, which could require Cleco Power
          to
          refund previously recovered revenue and could result in a significant material
          adverse effect on the Registrants’ results of operations, financial condition,
          and cash flows.
  **Other**
 Cleco
          has accrued for liabilities to third parties, employee medical benefits,
          storm
          damages, and deductibles under insurance policies that it maintains on
          major properties, primarily generation stations and transmission
          substations.
 Consistent
          with regulatory treatment, annual charges to operating expenses to provide
          a
          reserve for future storm damages are based upon the average amount of
          noncapital, uninsured storm damages experienced by Cleco Power during the
          previous six years, excluding costs for Hurricanes Katrina and
          Rita.
  ***Risks
          and Uncertainties***
  **Cleco**
 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.
  Williams
 The
          credit ratings of the senior unsecured debt of The Williams Companies,
          Inc.
          (Moody’s – Ba2; Standard & Poor’s – BB), the parent company of Williams
          under the Evangeline Tolling Agreement, remain below “investment
          grade.”  The following list discusses some possible adverse
          consequences if Williams should fail to perform its obligations under the
          Evangeline Tolling Agreement:
  §
                If
                    Williams’ failure to perform constituted a default under the tolling
                    agreement, the holders of the Evangeline bonds would have the
                    right to
                    declare the entire outstanding principal amount ($177.1 million
                    at
                    September 30, 2007) and interest to be immediately due and payable,
                    which could result in:
 §
                Cleco
                    seeking to refinance the bonds, the terms of which may be less
                    favorable
                    than existing terms;
 §
                Cleco
                    causing Evangeline to seek protection under federal bankruptcy
                    laws;
                    or
 §
                the
                    trustee of the bonds foreclosing on the mortgage and assuming
                    ownership of
                    the Evangeline plant;
 §
                Cleco
                    may not be able to enter into agreements in replacement of the
                    Evangeline
                    Tolling Agreement on terms as favorable as that agreement or
                    at
                    all;
 §
                Cleco’s
                    equity investment in Evangeline may be impaired, requiring a
                    write-down to
                    its fair market value, which could be substantial;
                    and
   33
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  §
                Cleco’s
                    credit ratings could be downgraded, which would increase borrowing
                    costs
                    and limit sources of financing.
  In
          May 2007, The Williams Companies, Inc. agreed to sell substantially all
          of its
          power assets, including its tolling agreement with Evangeline, to Bear
          Energy
          LP.  The sale, which is subject to regulatory and other approvals, is
          expected to close no later than the fourth quarter of
          2007.  Management anticipates an improvement in Evangeline’s credit
          quality due to the more favorable credit rating of Bear Stearns Companies
          Inc.
  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. Because of its location on the transmission grid, Cleco Power
          relies on two main suppliers of electric transmission when accessing external
          power markets.  At times, constraints limit the amount of purchased
          power these transmission providers can deliver into Cleco Power‘s service
          territory.
 Financing
          for operational needs and construction 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.
 Under
          the terms of the Amended EPC Contract, in the event Cleco Power does not
          maintain a senior unsecured credit rating of either: (i) Baa3 or better
          from
          Moody’s or (ii) BBB- or better from Standard  & Poor’s, Cleco
          Power will be required to provide a letter of credit to Shaw in the amount
          of
          $20.0 million.  In the event of further downgrade to both of its
          credit ratings to:  (i) Ba2 or below from Moody’s, and (ii) BB or
          below from Standard & Poor’s, Cleco Power will be required to provide an
          additional $15.0 million letter of credit to Shaw.
  **Note
          9 — Preferred Stock**
 Within
            the ESOP, each share of Cleco Corporation 8.125% Convertible Preferred
            Stock
            Series 1991 (ESOP preferred stock) was convertible into 9.6 shares of
            Cleco
            Corporation common stock (Cleco common stock).  The annual dividend rate on
            a share of ESOP preferred stock was generally the higher of $8.125 per
            share or
            9.6 times the annual dividend rate for a share of Cleco common stock.
 At
          December 31, 2006, the ESOP had allocated 190,635 shares of ESOP preferred
          stock
          to 401(k) Plan participants.  In March 2007, in order to comply with
          provisions of the Pension Protection Act of 2006, 190,372 shares of ESOP
          preferred stock were converted into 1.8 million shares of Cleco common
          stock. The ESOP trustee holds the newly converted shares of Cleco common
          stock on behalf of the 401(k) Plan participants.
 As
          a
          result of this conversion, total shareholders’ equity reported on Cleco
          Corporation’s Condensed Consolidated Balance Sheet at September 30, 2007,
          did not change. Cleco Corporation recorded a $19.1 million reduction in
          preferred stock with a corresponding increase in common shareholders’
equity.
  **Note
          10 — Pension Plan and Employee Benefits**
 ***Pension
            Plan and Other Benefits Plan***
 Most
          employees hired or rehired before August 1, 2007, 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
          IRS’s
          full funding limitation.  No contributions to the pension plan were
          made during the nine months ended September 30, 2007.  During 2007, a
          contribution is not expected to be required by funding regulations.  A
          discretionary contribution may be made during 2007; however, the decision
          by
          management to make a contribution and the amount, if any, has not been
          determined.  Cleco Power is considered the plan sponsor, and Support
          Group is considered the plan administrator.  In July 2007, Cleco
          Corporation’s Board of Directors approved an amendment to the pension plan to
          provide that employees hired or rehired on or after August 1, 2007, will
          not be
          eligible for benefits under the pension plan.
  34
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  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 benefits during the
            periods in
            which the benefits are earned.
 The
          components of net periodic pension and other benefit cost for the three
          and nine
          months ended September 30, 2007, and 2006, are as follows:
 PENSION
                      BENEFITS
                  
                  
                  OTHER
                      BENEFITSFOR
                      THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
                  
                  **2007**
                  
                  
                  2006
                  
                  
                  **2007**
                  
                  
                  2006Components
                      of periodic benefit costsService
                      cost
                  
                  **$**
                  **1,990**
                  
                  
                  $
                  1,960
                  
                  
                  **$**
                  **339**
                  
                  
                  $
                  384Interest
                      cost
                  
                  ****
                  **3,919**
                  
                  
                  
                  3,606
                  
                  
                  ****
                  **454**
                  
                  
                  
                  424Expected
                      return on plan
                      assets
                  
                  ****
                  **(4,740**
                  **)**
                  
                  
                  (4,571
                  )
                  
                  ****
                  **-**
                  
                  
                  
                  -Transition
                      obligation
                  
                  ****
                  **-**
                  
                  
                  
                  -
                  
                  
                  ****
                  **5**
                  
                  
                  
                  5Prior
                      period service cost
                      (benefit)
                  
                  ****
                  **209**
                  
                  
                  
                  243
                  
                  
                  ****
                  **(518**
                  **)**
                  
                  
                  (516
                  )Net
                      loss
                  
                  ****
                  **536**
                  
                  
                  
                  636
                  
                  
                  ****
                  **196**
                  
                  
                  
                  217Net
                      periodic benefit
                      cost
                  
                  **$**
                  **1,914**
                  
                  
                  $
                  1,874
                  
                  
                  **$**
                  **476**
                  
                  
                  $
                  514
 
 PENSION
                    BENEFITS
                
                
                OTHER
                    BENEFITSFOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006Components
                    of periodic benefit costsService
                    cost
                
                **$**
                **5,810**
                
                
                $
                5,881
                
                
                **$**
                **1,049**
                
                
                $
                1,153Interest
                    cost
                
                ****
                **11,644**
                
                
                
                10,817
                
                
                ****
                **1,374**
                
                
                
                1,271Expected
                    return on plan
                    assets
                
                ****
                **(14,235**
                **)**
                
                
                (13,714
                )
                
                ****
                **-**
                
                
                
                -Transition
                    obligation
                
                ****
                **-**
                
                
                
                -
                
                
                ****
                **15**
                
                
                
                15Prior
                    period service cost
                    (benefit)
                
                ****
                **634**
                
                
                
                729
                
                
                ****
                **(1,548**
                **)**
                
                
                (1,549
                )Net
                    loss
                
                ****
                **1,471**
                
                
                
                1,908
                
                
                ****
                **696**
                
                
                
                650Net
                    periodic benefit
                    cost
                
                **$**
                **5,324**
                
                
                $
                5,621
                
                
                **$**
                **1,586**
                
                
                $
                1,540
  Since
          Cleco Power is the pension plan sponsor and the related trust holds the
          assets,
          the accrued liability 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 Power’s
          Condensed Statement of Income for the three and nine months ended September
          30,
          2007, was $1.5 million and $3.8 million, respectively.  The expense of
          the pension plan related to Cleco Power’s Condensed Statement of Income for the
          three and nine months ended September 30, 2006, was $1.3 million and $3.9
          million, respectively.
 Cleco
          Corporation is the plan sponsor for the other benefits.  There are no
          assets set aside in a trust, and the liabilities are reported on the individual
          subsidiaries’ financial statements.  The expense related to other
          benefits reflected on Cleco Power’s Condensed Statements of Income for the three
          and nine months ended September 30, 2007, was $0.4 million and $1.4
          million, respectively.  The expense related to other benefits
          reflected on Cleco Power’s Condensed Statements of Income for the three and nine
          months ended September 30, 2006, was $0.4 million and $1.3 million,
          respectively.
  ***SERP***
 Certain
          key executives and key managers are covered by the SERP. The SERP is a
          non-qualified, non-contributory, defined benefit pension plan. Benefits
          under the plan reflect an employee’s years of service, age at retirement, and
          the sum of the highest base salary paid out of the last five calendar years
          and
          the average of the three highest bonuses paid during the last 60 months
          prior to
          retirement, reduced by benefits received from any other defined benefit
          pension
          plan. Cleco Corporation does not fund the SERP liability, but instead pays
          for current benefits out of the general funds available. Cleco Power has
          formed a “rabbi trust” designated as the beneficiary for life insurance policies
          issued on the SERP participants. Proceeds from the life insurance policies
          are expected to be used to pay SERP participants’ life insurance benefits, as
          well as future SERP payments. However, since this is a non-qualified plan,
          the assets of the trust could be used to satisfy general creditors of Cleco
          Power in the event of insolvency. No contributions to the SERP were made
          during the nine months ended September 30, 2007, and 2006.  Cleco
          Power is considered the plan sponsor, and Support Group is considered the
          plan
          administrator.
 The
          components of the net SERP cost are as follows:
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                
                FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                **2007**
                
                
                2006Components
                    of periodic benefit costsService
                    cost
                
                **$**
                **496**
                
                
                $
                345
                
                
                **$**
                **1,076**
                
                
                $
                1,035Interest
                    cost
                
                ****
                **459**
                
                
                
                397
                
                
                ****
                **1,334**
                
                
                
                1,190Prior
                    period service cost
                
                ****
                **15**
                
                
                
                13
                
                
                ****
                **40**
                
                
                
                40Net
                    loss
                
                ****
                **277**
                
                
                
                209
                
                
                ****
                **762**
                
                
                
                627Net
                    periodic benefit cost
                
                **$**
                **1,247**
                
                
                $
                964
                
                
                **$**
                **3,212**
                
                
                $
                2,892
  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 Statements of Income for the three and nine months ended
          September 30, 2007, was $0.3 million and $0.8 million,
          respectively.  The expense related to the SERP reflected on Cleco
          Power’s Condensed Statements of Income for the three and nine months ended
          September 30, 2006, was $0.3 million and $0.8 million,
          respectively.
  ***401(k) Plan/ESOP***
 Most
          employees are eligible to participate in the 401(k) Plan, which was amended
          in
          April 1991 to include a leveraged ESOP.  The ESOP was established with
          300,000 shares of ESOP preferred stock which served as Cleco Corporation’s match
          to employees’ 401(k) Plan contributions and funded dividend payments on
          allocated shares.  Compensation expense related to the 401(k) Plan was
          based upon the value of the shares of ESOP preferred stock allocated to
          401(k)
          Plan participants and the amount of interest incurred by the ESOP, less
          dividends on unallocated shares held by the ESOP.
 At
          March
          31, 2006, substantially all of the shares of ESOP preferred stock were
          fully
          allocated to current and former 401(k) Plan participants. Beginning April
          1, 2006, Cleco Corporation made matching contributions to, and funded dividend
          reinvestments by, 401(k) Plan participants with Cleco
  35
 CLECO
                            CORPORATIONCLECO
                            POWER
                          2007 3RD
                              QUARTER FORM
                              10-Q
  common
          stock.  Compensation expense related to the newly issued common shares is
          based upon the fair market value of the common stock issued to 401(k) Plan
          participants.  At September 30, 2007, and December 31, 2006, Cleco
          Corporation had issued 268,431 and 140,189 shares of Cleco common stock,
          respectively, to 401(k) Plan participants, including dividend
          reinvestments.
 On
          March
          26, 2007, the ESOP trustee converted all outstanding 190,372 shares of
          ESOP
          preferred stock into 1.8 million shares of Cleco common stock.  For
          more information on the conversion, see Note 9 — “Preferred Stock.”
 The
          table below contains information about the 401(k) Plan and the
          ESOP:
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006401(k)
                    Plan expense
                
                **$**
                **667**
                
                
                $
                662Dividend
                    requirements to ESOP on convertible preferred stock
                
                **$**
                **-**
                
                
                $
                413Interest
                    incurred by ESOP on its indebtedness
                
                **$**
                **-**
                
                
                $
                -
 
 FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,(THOUSANDS)
                
                **2007**
                
                
                2006401(k)
                    Plan expense
                
                **$**
                **2,166**
                
                
                $
                1,338Dividend
                    requirements to ESOP on convertible preferred stock
                
                **$**
                **412**
                
                
                $
                1,276Interest
                    incurred by ESOP on its indebtedness
                
                **$**
                **-**
                
                
                $
                8
  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 and
          nine months ended September 30, 2007, was $0.2 million and $0.6 million,
          respectively.  The expense of the 401(k) Plan related to Cleco
          Corporation’s other subsidiaries for the three and nine months ended September
          30, 2006, was $0.2 million and $0.4 million, respectively.  The
          expense related to the dividend requirements on the shares of ESOP preferred
          stock is reflected on Cleco Corporation’s Condensed Consolidated Statements of
          Income for the three and nine months ended September 30, 2007, and
          2006.
 In
          October 2007, Cleco Corporation’s Board of Directors approved an amendment to
          the 401(k) Plan to provide enhanced benefits to participants who were hired
          or
          rehired on or after August 1, 2007, and who are not eligible for the benefits
          under the pension plan.
  **Note
          11 — Income Taxes**
 The
            following tables summarize the effective income tax rates for Cleco Corporation
            and Cleco Power for the three and nine months ended September 30, 2007,
            and
            September 30, 2006.
 
 FOR
                    THE THREE MONTHS ENDED
                  SEPTEMBER
                    30,**2007**
                
                
                2006Cleco
                    Corporation
                
                ****
                **30.7**
                **%**
                
                
                40.9
                %Cleco
                    Power
                
                ****
                **24.1**
                **%**
                
                
                34.6
                %
 
 FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,**2007**
                
                
                2006Cleco
                    Corporation
                
                ****
                **31.1**
                **%**
                
                
                38.0
                %Cleco
                    Power
                
                ****
                **24.0**
                **%**
                
                
                33.4
                %
 
  Cleco
          Corporation’s and Cleco Power’s effective income tax rates for the three and
          nine months ended September 30, 2007, decreased compared to the three and
          nine
          months ended September 30, 2006, as shown in the tables above.  A
          common contributing factor includes the flow-through of tax benefits associated
          with AFUDC equity recorded as a result of the construction of Rodemacher
          Unit
          3.  Tax rates also were affected by the relative size of pre-tax
          income compared to this item.
 Effective
          January 1, 2007, Cleco adopted the provisions of FIN 48 which provide guidance
          on accounting for uncertain tax positions.  During 2006, Cleco
          included all interest related to uncertain tax positions as a component
          of tax
          expense and taxes payable.  Subsequent to the adoption of FIN 48,
          Cleco classified all interest related to uncertain tax positions as a component
          of interest expense and interest payable.  As of the third quarter of
          2006, $0.5 million of interest expense, net of the tax benefit, was included
          in
          tax expense and was not reclassified in the financial statements.  The
          total amount of interest associated with tax positions recognized on the
          balance
          sheets of Cleco Corporation and Cleco Power as of the date of adoption
          was $14.2
          million and $10.2 million, respectively, and $22.0 million and $14.6 million
          as
          of September 30, 2007, respectively.  There was no additional interest
          expense recognized at the date of adoption.  The total amount of
          unrecognized tax benefits for Cleco Corporation and Cleco Power as of the
          date
          of adoption was $62.3 million and $30.9 million, respectively, and $78.5
          million
          and $52.4 million as of September 30, 2007,
          respectively.  Approximately $32.3 million of the increase was mainly
          due to adjustments taken on the 2005 federal income tax return for an indirect
          cost study and a casualty loss deduction.  Approximately $1.3 million
          of the increase was due to a request for refund filed with the IRS due
          to the
          deduction for the tax life of street lights and meters from a 1997 cost
          segregation study.  Partially offsetting these increases was
          approximately $0.6 million due to current year activity for uncertain tax
          positions, $9.9 million attributable to a change in the estimate for the
          FIN 48
          liability related to an indirect cost study, $5.6 million attributable
          to a
          change in the estimate for the FIN 48 liability related to Evangeline tax
          depreciation, and $1.3 million attributable to adjustments taken on the
          2006
          federal income tax return for an indirect cost study.  Due to
          settlement discussions with the IRS, management believes that some of these
          unrecognized benefits may be recognized, resulting in an approximate $1.0
          million benefit to tax expense.
 The
          federal income tax years that remain subject to examination by the IRS
          are
          2001-2006.  The Louisiana state income tax years that remain subject
          to examination by the Louisiana Department of Revenue are
          1998-2006.
 During
          the nine months ended September 30, 2007, there were no decreases in
          unrecognized tax benefits relating to
  36
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  settlements
          or a lapse of the applicable statute of limitation, and there were no material
          changes to tax years that remain subject to examination by major tax
          jurisdictions.
  **Note
          12 — Affiliate Transactions**
 
 Cleco
            has affiliate balances that were not eliminated as of September 30,
            2007.  The balances were not eliminated due to the use of the equity
            method of accounting for Evangeline, Perryville, Attala, and
            Acadia.  At September 30, 2007, the payable to Evangeline was
            $9.5 million, and the payable to Perryville was $4.5 million.  Also,
            at September 30, 2007, the receivable from Evangeline was $1.1 million, the
            receivable from Perryville was $0.8 million, and the receivable from
            Acadia was
            $6.4 million.
 Cleco
          Power has affiliate balances that are payable to or due from its
          affiliates.  At September 30, 2007, the payable to Cleco
          Corporation was $5.9 million, the payable to Support Group was $4.5 million,
          and
          the payable to other affiliates was $0.4 million.  Also, at September
          30, 2007, the receivable from Cleco Corporation was $11.6 million, the
          receivable from Support Group was $1.3 million, and the receivable from
          other
          affiliates was $0.7 million.
  **Note
          13 — Debt**
 
 ***Long-term
          Debt***
 At
          September 30, 2007, and December 31, 2006, Cleco’s long-term debt
          outstanding was $654.1 million and $619.3 million, respectively.  The
          $34.8 million increase primarily was due to $135.0 million in draws against
          Cleco Power’s credit facility, classified as long-term debt.  This was
          partially offset by the reclassification of $100.0 million of 7.00% Senior
          Notes
          at Cleco Corporation to long-term debt due within one year.
 During
          the first nine months of 2007, Cleco Power repaid $10.0 million of 6.53%
          medium-term notes and $15.0 million of 7.50% medium-term notes, both at
          maturity.  These issues were classified as long-term debt due within
          one year; therefore, these repayments did not affect the total amount of
          long-term debt recorded.
  **Note
          14 — Calpine Bankruptcy Settlement**
 
 ***Bankruptcy
          Proceedings***
 In
          December 2005, the Calpine Debtors filed for protection under Chapter 11
          of the
          U.S. Bankruptcy Code in the Calpine Debtors Bankruptcy Court.  CAH, a
          wholly owned subsidiary of Calpine, is one of the Calpine
          Debtors.  Prior to Cajun’s purchase, CAH owned a 50% interest in
          Acadia, and APH owned the other 50% interest in Acadia.  Acadia owns a
          1,160-MW natural gas-fired power plant.
 In
          December 2005, the Calpine Debtors filed a motion with the Calpine Debtors
          Bankruptcy Court seeking to reject the Calpine Tolling Agreements in addition
          to
          six other power supply contracts with other entities.  The rejection
          motion was referred to the U.S. District Court for the Southern District
          of New
          York, and in January 2006, a federal judge dismissed the motion.  The
          Calpine Debtors appealed the decision to the U.S. Court of Appeals for
          the
          Second Circuit and in March 2006, the Calpine Debtors Bankruptcy Court
          entered
          an order permitting Acadia to suspend its obligations to CES under the
          Calpine
          Tolling Agreements in view of CES’s non-performance of the
          agreements.
  ***Settlement
          Agreement***
 In
          April 2007, Cleco announced that a settlement agreement had been reached
          with
          Calpine, subject to the approval of the Calpine Debtors Bankruptcy Court,
          which
          resolved issues related to the Acadia power plant.  The settlement
          included the fixing of Acadia’s claims against the Calpine Debtors and an
          agreement by the parties to certain bidding procedures (Bidding Procedures)
          which governed the sale of CAH’s interest in Acadia and certain related assets
          (collectively, the CAH Assets).  In May 2007, the Calpine Debtors
          Bankruptcy Court approved the terms of the settlement and entered orders
          approving the Claims Settlement Agreement and the Bidding
          Procedures.
 The
          Claims Settlement Agreement addressed Acadia’s outstanding claims against the
          Calpine Debtors.  Under the Claims Settlement Agreement, Acadia
          received a pre-petition general unsecured claim against each of CES and
          Calpine
          (as guarantor of CES’s obligations under the Calpine Tolling Agreements) for
          $185.0 million, which takes into account prior draws made by APH under
          a letter
          of credit in the aggregate amount of $15.0 million.  Acadia made a
          dividend by assignment to APH for its portion of the claims.
 In
          May
          2007, APH sold its claims of $85.0 million against CES and Calpine to JPMorgan
          Chase Bank, N.A. at 92% of face value.  The pre-tax proceeds from this
          sale were $78.2 million.
 The
          Bidding Procedures Order set forth the procedures governing the sale of
          the CAH
          Assets.  Under the Bidding Procedures Order, APH agreed to serve as
          the “stalking horse bidder” for the CAH Assets.  APH’s agreement was
          subject to certain terms and conditions, including payment to APH of a
          $2.9
          million break-up fee in the event APH was not the successful
          purchaser.  APH and CAH entered into a purchase agreement whereby APH
          agreed to purchase the CAH Assets for $60.0 million plus assumed liabilities,
          subject to any higher or better offers.
 The
          Calpine Debtors Bankruptcy Court approved the transfer of the operations,
          maintenance and project management functions of the Acadia power plant
          to
          subsidiaries of Midstream upon the closing of the CAH asset sale.  A
          subsidiary of Calpine has been performing these functions since the Acadia
          power
          plant became operational.
  ***Acadia
          Auction Results***
 In
          July 2007, CAH conducted an auction for the CAH Assets.  APH
          participated in the auction.  At the conclusion of the auction, Cajun
          emerged as the successful bidder, with a price of $189.0
          million.
 In
          August 2007, a hearing was held for the Calpine Debtors Bankruptcy Court
          to
          consider and approve the sale of
  37
 CLECO
                            CORPORATIONCLECO
                            POWER
                          2007 3RD
                              QUARTER FORM
                              10-Q
  CAH
          Assets to Cajun.  In September 2007, after all regulatory approvals
          were received, the sale of CAH's Assets to Cajun was completed.  At the
          closing of the sale, APH received payment from Cajun in the amount of $85.0
          million for the agreed upon value of the priority and guaranteed distributions,
          plus a $2.9 million break-up fee and other expense reimbursements. This
          $85.0 million payment is separate from APH’s $85.0 million pre-petition
          unsecured claim that it sold in May 2007.  APH also acquired, for
          $1.25 million (subject, in certain circumstances, to reduction), Calpine’s
          interest in Acadia’s claim against Cleco Power regarding a potential electric
          metering error at the Acadia power plant.  APH recognized this as
          other expense on Cleco’s Condensed Consolidated Statements of
          Income.
 At
          the
          completion of the sale, management reviewed the carrying value of APH’s 50%
          ownership in Acadia.  Using Calpine’s sale as a market indicator of
          value, APH recognized an impairment charge of $45.8 million, which is the
          difference between the $234.8 million carrying value and the $189.0 million
          market value.  The impairment charge is reflected in equity income
          from investees on Cleco’s condensed consolidated statements of
          income.
 As
          a
          result of the closing and the subsequent settlement of future priority
          distribution payments owed to APH, the Acadia LLC Agreement was amended
          to
          remove APH's priority distribution rights and give each member (APH and
          Cajun) a
          50% ownership and economic interest in Acadia.
  **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, 2006, and Cleco Corporation’s and Cleco Power’s Condensed Financial
          Statements contained in this Form 10-Q. The information included therein is
          essential to understanding the following discussion and
          analysis.  Below is information concerning the consolidated results of
          operations of Cleco for the three and nine months ended September 30, 2007,
          and September 30, 2006.
  **OVERVIEW**
 Cleco
            is a regional energy services holding company that conducts substantially
            all of
            its business operations through its two principal operating business
            segments:
  §
                Cleco
                    Power, an integrated electric utility services subsidiary regulated
                    by the
                    LPSC and the FERC, among other regulators, which also engages
                    in energy
                    management activities, and
 §
                Midstream,
                    a merchant energy subsidiary regulated by the FERC, that owns
                    and operates
                    a merchant generation station and invests in a joint venture
                    that owns and
                    operates a merchant generation
                    station.
  While
          management believes that Cleco remains a strong company, Cleco continues
          to
          focus on several significant factors affecting Cleco Power and Midstream
          as
          described below.
  ***Cleco
          Power***
 Many
          factors affect the opportunities, challenges, and risks of Cleco Power's
          primary
          business of selling electricity.  These factors include the presence
          of a stable regulatory environment, which includes recovery of costs and
          maintenance of a competitive return on equity; the ability to achieve energy
          sales growth while containing costs; and the ability to recover costs related
          to
          growing demand and rising fuel prices and increasingly stringent regulatory
          and
          environmental standards.
 As
          part
          of its plan to resolve long-term capacity needs, Cleco Power began construction
          of Rodemacher Unit 3 in May 2006, which, upon completion, will provide
          a portion
          of the 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 in the fourth quarter of 2009.  For
          additional information, see “— Financial Condition — Liquidity and Capital
          Resources — Regulatory Matters — Rodemacher Unit 3.”
 In
          2005,
          Hurricanes Katrina and Rita caused catastrophic damage to the Gulf Coast
          region,
          including Cleco Power's service territory.  Storm restoration costs
          from Hurricanes Katrina and Rita are currently estimated to total $158.0
          million, a decrease from the original estimate of $161.8 million filed
          with the
          LPSC.  In March 2007, Cleco Power and the LPSC Staff filed a
          settlement agreement allowing the recovery of storm restoration
          costs.  In September 2007, the LPSC approved the settlement agreement
          and issued a financing order authorizing Cleco Power to securitize and
          to cause
          the issuance of storm recovery bonds with an aggregate principal amount
          of
          approximately $187.0 million, equal to the sum of (i) Cleco Power’s costs
          incurred in connection with restoring service to its customers who experienced
          electric power outages as a result of Hurricanes Katrina and Rita (approximately
          $132.0 million, after crediting revenues from an interim storm surcharge,
          and
          excluding income tax benefits associated with such costs), plus (ii) a
          storm
          recovery reserve in the amount of approximately $50.0 million, and (iii)
          the
          upfront and ongoing costs of issuing, supporting and servicing the storm
          recovery bonds.  Management plans to complete the securitization
          financing as soon as market conditions allow.  For additional
          information, see Item 1, “Financial Statements and Supplementary Data — Notes to
          the Unaudited Condensed Financial Statements — Note 2 — Regulatory Assets and
          Liabilities.”
  ***Midstream***
 In
          December 2005, the Calpine Debtors filed for protection under Chapter 11
          of the
          Bankruptcy Code and subsequently
  38
 CLECO
                        CORPORATIONCLECO
                        POWER
                      2007 3RD
                          QUARTER FORM
                          10-Q
   filed
            a motion with the Calpine Debtors Bankruptcy Court to reject the Calpine
            Tolling
            Agreements.  In March 2006, Acadia and CES executed amendments to the
            Calpine Tolling Agreements, which were approved by the Calpine Debtors
            Bankruptcy Court, permitting Acadia to suspend its obligations under
            the
            agreements.
 Under
        an April 2007 settlement between Cleco and Calpine, Acadia received a
        pre-petition general unsecured claim against Calpine of $185.0 million in
        connection with the Calpine Tolling Agreements and Calpine’s guaranty of those
        agreements.  Acadia made a dividend by assignment to APH for its
        portion of the claims.  In May 2007, APH sold the claim of $85.0
        million at 92% of face value.  In September 2007, after all regulatory
        approvals were received, the sale of CAH's Assets to Cajun was completed.
         At the closing of the sale, APH received payment from Cajun in the amount
        of $85.0 million for the agreed upon value of the priority and guaranteed
        distributions, plus a $2.9 million break-up fee and other expense
        reimbursements. For additional information on Acadia and the Calpine
        bankruptcy, see Item 1, “Notes to the Unaudited Condensed Financial Statements —
Note 14 — Calpine Bankruptcy Settlement.”
 Effective
          February 1, 2007, the ownership interests of Midstream’s transmission
          interconnection facilities were transferred to Cleco Corporation.  In
          accordance with SFAS No. 131, the net operating results for Midstream for
          the
          three and nine months ended September 30, 2006, have been adjusted to reflect
          this organizational change.
  ***Comparison
          of the Three Months Ended September 30, 2007, and
          2006***
  **Cleco
          Consolidated**
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenue, net
                
                **$**
                **311,691**
                
                
                $
                294,103
                
                
                $
                17,588
                
                
                
                5.98
                %Operating
                    expenses
                
                ****
                **270,530**
                
                
                
                256,903
                
                
                
                (13,627
                )
                
                
                (5.30
                )%Operating
                    income
                
                **$**
                **41,161**
                
                
                $
                37,200
                
                
                $
                3,961
                
                
                
                10.65
                %Allowance
                    for other funds used during construction
                
                **$**
                **9,552**
                
                
                $
                2,190
                
                
                $
                7,362
                
                
                
                336.16
                %Equity
                    income from investees
                
                **$**
                **27,726**
                
                
                $
                15,197
                
                
                $
                12,529
                
                
                
                82.44
                %Other
                    income
                
                **$**
                **28,402**
                
                
                $
                702
                
                
                $
                27,700
                
                
                
                *Federal
                    and state income taxes
                
                **$**
                **30,077**
                
                
                $
                19,350
                
                
                $
                (10,727
                )
                
                
                (55.44
                )%Net
                    income applicable to common stock
                
                **$**
                **68,033**
                
                
                $
                27,592
                
                
                $
                40,441
                
                
                
                146.57
                %*Not
                    meaningful
  Consolidated
          net income applicable to common stock increased $40.4 million, or 146.6%,
          in the
          third quarter of 2007 compared to the third quarter of 2006 primarily due
          to
          increased Midstream and Cleco Power earnings.
 Operating
          revenue, net increased $17.6 million, or 6.0%, in the third quarter of
          2007
          compared to the same period of 2006 largely as a result of higher fuel
          cost
          recovery revenue at Cleco Power.
 Operating
          expenses increased $13.6 million, or 5.3%, in the third quarter of 2007
          compared
          to the third quarter of 2006 primarily due to increased fuel costs and
          higher
          capacity payments and maintenance expenses at Cleco Power.  The
          resulting change in operating income was primarily due to lower other operations
          expense and lower depreciation expense at Cleco Power.
 Allowance
          for other funds used during construction increased $7.4 million, or 336.2%,
          in
          the third quarter of 2007 compared to the same period of 2006 primarily
          due to
          increased construction activity at Rodemacher Unit 3.
 Equity
          income from investees increased $12.5 million, or 82.4%, in the third quarter
          of
          2007 compared to the third quarter of 2006.  Other income increased
          $27.7 million in the third quarter of 2007 compared to the same period
          of
          2006.  These increases were a result of amounts received by APH
          relating to Cajun's purchase of CAH's 50% equity ownership interest in
          Acadia as
          described above, offset by a pre-tax impairment loss.  For additional
          information, see “— Midstream — Equity Income from Investees and Other
          Income.”
 Federal
          and state income taxes increased $10.7 million, or 55.4%, during the third
          quarter of 2007 compared to the same period of 2006 primarily due to the
          $50.8
          million increase in pre-tax income for the third quarter of 2007 compared
          to the
          same period of 2006.  The effective income tax rate decreased from
          40.9% to 30.7% during the third quarter of 2007 compared to the same period
          of
          2006, mainly due to the flow-through of tax benefits associated with AFUDC
          equity recorded as a result of the construction of Rodemacher Unit
          3.
 Results
          of operations for Cleco Power and Midstream are more fully described
          below.
  **Cleco
          Power**
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenueBase
                
                **$**
                **104,476**
                
                
                $
                103,149
                
                
                $
                1,327
                
                
                
                1.29
                %Fuel
                    cost
                    recovery
                
                ****
                **196,386**
                
                
                
                181,341
                
                
                
                15,045
                
                
                
                8.30
                %Other
                    operations
                
                ****
                **9,231**
                
                
                
                7,621
                
                
                
                1,610
                
                
                
                21.13
                %Affiliate
                    revenue
                
                ****
                **10**
                
                
                
                13
                
                
                
                (3
                )
                
                
                (23.08
                )%Intercompany
                    revenue
                
                ****
                **501**
                
                
                
                501
                
                
                
                -
                
                
                
                -Operating
                    revenue,
                    net
                
                ****
                **310,604**
                
                
                
                292,625
                
                
                
                17,979
                
                
                
                6.14
                %Operating
                    expensesFuel
                    used for electricgeneration
                    – recoverable
                
                ****
                **94,838**
                
                
                
                77,730
                
                
                
                (17,108
                )
                
                
                (22.01
                )%Power
                    purchased for
                    utilitycustomers – recoverable
                
                ****
                **101,508**
                
                
                
                103,732
                
                
                
                2,224
                
                
                
                2.14
                %Non-recoverable
                    fuel andpower
                    purchased
                
                ****
                **10,166**
                
                
                
                8,064
                
                
                
                (2,102
                )
                
                
                (26.07
                )%Other
                    operations
                
                ****
                **22,739**
                
                
                
                23,791
                
                
                
                1,052
                
                
                
                4.42
                %Maintenance
                
                ****
                **9,590**
                
                
                
                7,981
                
                
                
                (1,609
                )
                
                
                (20.16
                )%Depreciation
                
                ****
                **19,401**
                
                
                
                23,353
                
                
                
                3,952
                
                
                
                16.92
                %Taxes
                    other than
                    incometaxes
                
                ****
                **10,053**
                
                
                
                10,149
                
                
                
                96
                
                
                
                0.95
                %Total
                    operating
                    expenses
                
                ****
                **268,295**
                
                
                
                254,800
                
                
                
                (13,495
                )
                
                
                (5.30
                )%Operating
                    income
                
                **$**
                **42,309**
                
                
                $
                37,825
                
                
                $
                4,484
                
                
                
                11.85
                %Allowance
                    for other funds used during construction
                
                **$**
                **9,552**
                
                
                $
                2,190
                
                
                $
                7,362
                
                
                
                336.16
                %Interest
                    charges
                
                **$**
                **8,213**
                
                
                $
                8,328
                
                
                $
                115
                
                
                
                1.38
                %Federal
                    and state income taxes
                
                **$**
                **10,871**
                
                
                $
                11,428
                
                
                $
                557
                
                
                
                4.87
                %Net
                    income
                
                **$**
                **34,198**
                
                
                $
                21,556
                
                
                $
                12,642
                
                
                
                58.65
                %
  39
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  Cleco
          Power’s net income applicable to member’s equity in the third quarter of 2007
          increased $12.6 million, or 58.7%, compared to the third quarter of
          2006.  Contributing factors include:
  §
                higher
                    base revenue,
 §
                higher
                    other operations revenue,
 §
                higher
                    allowance for other funds used during
                    construction,
 §
                lower
                    depreciation expense,
 §
                lower
                    other operations expense, and
 §
                lower
                    effective income tax rate.
  These
          were partially offset by:
  §
                higher
                    non-recoverable fuel and power purchased
                    and
 §
                higher
                    maintenance expense.
 
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,(MILLION
                    kWh)
                
                **2007**
                
                
                2006
                
                
                FAVORABLE/
                  (UNFAVORABLE)Electric
                    salesResidential
                
                ****
                **1,170**
                
                
                
                1,190
                
                
                
                (1.68
                )%Commercial
                
                ****
                **733**
                
                
                
                651
                
                
                
                12.6
                %Industrial
                
                ****
                **786**
                
                
                
                784
                
                
                
                0.26
                %Other
                    retail
                
                ****
                **35**
                
                
                
                101
                
                
                
                (65.35
                )%Total
                    retail
                
                ****
                **2,724**
                
                
                
                2,726
                
                
                
                (0.07
                )%Sales
                    for resale
                
                ****
                **165**
                
                
                
                159
                
                
                
                3.77
                %Unbilled
                
                ****
                **(44**
                **)**
                
                
                (89
                )
                
                
                50.56
                %Total
                    retail and wholesale customer sales
                
                ****
                **2,845**
                
                
                
                2,796
                
                
                
                1.75
                %
 
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                FAVORABLE/
                  (UNFAVORABLE)Electric
                    salesResidential
                
                **$**
                **53,190**
                
                
                $
                53,855
                
                
                
                (1.23
                )%Commercial
                
                ****
                **25,270**
                
                
                
                22,442
                
                
                
                12.6
                %Industrial
                
                ****
                **14,686**
                
                
                
                14,399
                
                
                
                1.99
                %Other
                    retail
                
                ****
                **1,456**
                
                
                
                3,671
                
                
                
                (60.34
                )%Storm
                    surcharge
                
                ****
                **6,644**
                
                
                
                6,582
                
                
                
                0.94
                %Total
                    retail
                
                ****
                **101,246**
                
                
                
                100,949
                
                
                
                0.29
                %Sales
                    for resale
                
                ****
                **4,744**
                
                
                
                5,222
                
                
                
                (9.15
                )%Unbilled
                
                ****
                **(1,514**
                **)**
                
                
                (3,022
                )
                
                
                49.90
                %Total
                    retail and wholesale customer sales
                
                **$**
                **104,476**
                
                
                $
                103,149
                
                
                
                1.29
                %
  A
          review of customer rate schedules was completed by Cleco Power in late
          August
          2006 that resulted in certain other retail customers being reclassified
          to the
          commercial class of customers.  As a result of this reclassification,
          commercial electric sales increased with a corresponding decrease in other
          retail as reflected in the charts above.
 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 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 SEPTEMBER 30,2007
                    CHANGE**2007**
                
                
                2006
                
                
                NORMAL
                
                
                PRIOR
                    YEAR
                
                
                NORMALCooling
                    degree-days
                
                ****
                **1,601**
                
                
                
                1,524
                
                
                
                1,468
                
                
                
                5.05
                %
                
                
                9.06
                %
  ***Base***
 Base
          revenue during the third quarter of 2007 increased $1.3 million, or 1.3%,
          compared to the same period in 2006. The increase primarily was due to
          slightly higher retail and wholesale kWh sales, primarily from warmer weather
          as
          compared to the same period in 2006.
 During
          the second quarter of 2008, Cleco Power is expected to begin providing
          service
          to a new industrial customer.  As a result of this new customer, the
          addition of 8 MWs, which approximates $1.0 million of base revenue annually,
          is
          expected during 2008.
 Cleco
          Power began selling fixed-priced power to a 30-MW wholesale customer on
          January
          1, 2006.  As a result of the fixed-price contract, the customer is
          expected to increase base revenue while diluting earnings in years 2007
          and
          2008.  In years 2009 through 2012, Cleco Power anticipates earnings
          accretion related to this contract.  For additional information on
          Cleco’s energy commodity activities, see Item 3, “Quantitative and Qualitative
          Disclosures about Market Risk — Risk Overview — Commodity Price
          Risks.”  For information on the effects of future energy sales on
          Cleco Power’s financial condition, results of operations, and cash flows, see
“Risk Factors — Future Electricity Sales” in the Registrants’ Combined Annual
          Report on Form 10-K for the fiscal year ended December 31, 2006.
  ***Fuel
          Cost Recovery***
 Fuel
          cost recovery revenue billed to customers during the third quarter of 2007
          compared to the same period in 2006 increased $15.0 million, or 8.3%, primarily
          due to increases in the per-unit cost of fuel used for electric generation
          and
          higher volumes 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 96% of Cleco Power’s total fuel cost is
          regulated by the LPSC, while the remainder is regulated by the
          FERC.  Recovery of fuel adjustment clause costs is subject to refund
          until approval is received from the LPSC.  For information on Cleco
          Power’s ongoing 2003-2004 fuel audit, see Item 1, “Notes to the Unaudited
          Condensed Financial Statements — Note 8 — Litigation, Other Commitments and
          Contingencies, and Disclosures about Guarantees — Fuel Audit.”
  40
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  ***Other
          Operations***
 Other
          operations revenue increased $1.6 million, or 21.1%, in the third quarter
          of
          2007 compared to the third quarter of 2006 primarily due to a $0.5 million
          mark-to-market loss in the third quarter of 2007 compared to a $1.9 million
          mark-to-market loss in the third quarter of 2006 relating to economic hedge
          transactions associated with fixed-price power being provided to a wholesale
          customer.  Also contributing to the increase was $0.2 million of 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 increased $13.5 million, or 5.3%, in the third quarter of 2007
          compared
          to the same period of 2006. Fuel used for electric generation (recoverable)
          increased $17.1 million, or 22.0%, primarily due to higher per-unit costs
          of
          fuel used as compared to the same period of 2006.  Partially
          offsetting this increase was lower volumes of fuel used for electric
          generation.  Power purchased for utility customers (recoverable)
          decreased $2.2 million, or 2.1%, largely due to lower per-unit costs of
          power
          purchased.  Partially offsetting this decrease were higher volumes of
          power purchased.  Higher volumes of purchased power were largely the
          result of unscheduled plant outages during the third quarter of
          2007.  Fuel used for electric generation and power purchased for
          utility customers generally are influenced by natural gas
          prices.  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.  Non-recoverable fuel and purchased power increased $2.1
          million, or 26.1%, primarily due to higher capacity payments made during
          the
          third quarter of 2007.  Other operations expense decreased $1.1
          million, or 4.4%, primarily due to lower employee benefit costs, lower
          payroll
          and administrative expenses, and lower professional fees.  Maintenance
          expenses during the third quarter of 2007 increased $1.6 million, or 20.2%,
          compared to the same period of 2006 primarily due to the reclassification
          of
          certain storm amortization costs to depreciation expense during the third
          quarter of 2006.  Partially offsetting this increase was the
          recognition of previously recorded storm restoration expenses as a regulatory
          asset during the third quarter of 2007.  Depreciation expense
          decreased $4.0 million, or 16.9%, primarily as a result of the absence
          in 2007
          of the reclassification of storm amortization costs to depreciation expense
          during the third quarter of 2006.  Partially offsetting this decrease
          was higher storm amortization costs and normal recurring additions to fixed
          assets.
  ***Allowance
          for Other Funds Used During Construction***
 Allowance
          for other funds used during construction increased $7.4 million, or 336.2%,
          during the third quarter of 2007 compared to the same period of 2006 primarily
          due to increased construction activity at Rodemacher Unit
          3.  Allowance for other funds used during construction comprised 27.9%
          of Cleco Power’s net income for the third quarter of 2007, compared to 10.2% for
          the third quarter of 2006.
  ***Interest
          Charges***
 Interest
          charges decreased $0.1 million, or 1.4%, during the third quarter of 2007
          compared to the same period of 2006 primarily due to the allowance for
          borrowed
          funds used during construction associated with construction activity at
          Rodemacher Unit 3.  Partially offsetting this decrease was interest
          related to draws against Cleco Power’s credit facility during 2007 and the
          accrual of interest related to uncertain tax positions, which was previously
          reported in tax expense.
  ***Income
          Taxes***
 Income
          tax expense decreased $0.6 million, or 4.9%, during the third quarter of
          2007
          compared to the same period of 2006.  Cleco Power’s effective income
          tax rate decreased from 34.6% to 24.1% during the third quarter of 2007
          compared
          to the same period of 2006. The decrease in the rate was primarily due to
          the flow-through of tax benefits associated with AFUDC equity recorded
          as a
          result of the construction of Rodemacher Unit 3.
  **Midstream**
 FOR
                    THE THREE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenueOther
                    operations
                
                **$**
                **4**
                
                
                $
                21
                
                
                $
                (17
                )
                
                
                (80.95
                )%Affiliate
                    revenue
                
                ****
                **1,105**
                
                
                
                1,443
                
                
                
                (338
                )
                
                
                (23.42
                )%Operating
                    revenue
                
                ****
                **1,109**
                
                
                
                1,464
                
                
                
                (355
                )
                
                
                (24.25
                )%Operating
                    expensesOther
                    operations
                
                ****
                **1,024**
                
                
                
                762
                
                
                
                (262
                )
                
                
                (34.38
                )%Maintenance
                
                ****
                **506**
                
                
                
                740
                
                
                
                234
                
                
                
                31.62
                %Depreciation
                
                ****
                **76**
                
                
                
                76
                
                
                
                -
                
                
                
                -Taxes
                    other than
                    incometaxes
                
                ****
                **74**
                
                
                
                52
                
                
                
                (22
                )
                
                
                (42.31
                )%Total
                    operatingexpenses
                
                ****
                **1,680**
                
                
                
                1,630
                
                
                
                (50
                )
                
                
                (3.07
                )%Operating
                    loss
                
                **$**
                **(571**
                **)**
                
                $
                (166
                )
                
                $
                (405
                )
                
                
                (243.98
                )%Equity
                    income from investees
                
                **$**
                **27,532**
                
                
                $
                14,741
                
                
                $
                12,791
                
                
                
                86.77
                %Other
                    income
                
                **$**
                **27,924**
                
                
                $
                -
                
                
                $
                27,924
                
                
                
                *Other
                    expense
                
                **$**
                **1,250**
                
                
                $
                11
                
                
                $
                (1,239
                )
                
                
                *Interest
                    charges
                
                **$**
                **5,894**
                
                
                $
                4,989
                
                
                $
                (905
                )
                
                
                (18.14
                )%Federal
                    and state income tax expense
                
                **$**
                **17,947**
                
                
                $
                5,882
                
                
                $
                (12,065
                )
                
                
                (205.12
                )%Income
                    from discontinued operations
                
                **$**
                **-**
                
                
                $
                36
                
                
                $
                (36
                )
                
                
                (100.00
                )%Net
                    income
                
                **$**
                **30,415**
                
                
                $
                3,729
                
                
                $
                26,686
                
                
                
                715.63
                %*Not
                    meaningful
  Midstream’s
          net income applicable to member’s equity for the third quarter of 2007 increased
          $26.7 million, or 715.6%, compared to the third quarter of
          2006.  Factors affecting Midstream during the third quarter of 2007
          are described below.
  ***Equity
          Income from Investees***
 Equity
          income from investees increased $12.8 million, or 86.8%, in the third quarter
          of
          2007 compared to the third quarter of 2006.  The increase was due to a
          $12.7 million increase in equity earnings at APH and a $0.1 million increase
          at
  41
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  Evangeline.  The
          increase in earnings at APH primarily was a result of amounts received
          by APH
          during the third quarter of 2007 relating to Cajun's purchase of CAH's
          50%
          equity ownership interest in Acadia.  At the closing of the sale, APH
          received payment from Cajun in the amount of $85.0 million for the agreed
          upon
          value of the priority and guaranteed distributions, plus a $2.9 million
          break-up
          fee.  Of these amounts, $60.0 million, which represents consideration
          of APH's priority distributions from Acadia, is included in equity income
          from
          investees.  The remaining $27.9 million is included in other income as
          discussed below.  Partially offsetting the $60.0 million payment
          reflected in equity income from investees was a $45.8 pre-tax impairment
          loss
          recorded in the third quarter of 2007, which represents the excess of the
          carrying value over the calculated fair value of APH's investment in
          Acadia.  The increase at Evangeline was primarily due to the absence
          of asbestos removal expense during the third quarter of 2007. As previously
          discussed, Midstream’s ownership interests in Perryville and Attala were
          transferred to Cleco Corporation effective February 1, 2007, and are no
          longer
          reported as equity income from investees on Midstream’s financial
          statements.  In accordance with SFAS No. 131, operating results for
          the third quarter of 2006 have been adjusted to reflect this new
          structure.  For additional information, see Item 1, “Notes to the
          Unaudited Condensed Financial Statements — Note 3 — Disclosures about
          Segments.”
  ***Other
          Income***
 Other
          income increased $27.9 million in the third quarter of 2007 compared to
          the
          third quarter of 2006 as a result of amounts received by APH during the
          third quarter of 2007 relating to Cajun's purchase of CAH's 50% equity
          ownership
          interest in Acadia.  Of this amount, $25.0 million represents
          consideration of APH's guaranteed payments from Acadia and $2.9 million
          represents break-up fees.
  ***Other
          Expense***
 Other
          expense increased $1.2 million during the third quarter of 2007 compared
          to the
          same period of 2006 primarily due to APH’s payment to acquire Calpine’s interest
          in Acadia’s claim against Cleco Power regarding a potential electric metering
          error at the Acadia facility.
  ***Interest
          Charges***
 Interest
          charges increased $0.9 million, or 18.1%, during the third quarter of 2007
          compared to the same period of 2006 primarily due to a higher interest
          rate and
          a higher balance on affiliate debt relating to APH’s investment in
          Acadia.
  ***Income
          Taxes***
 Income
          tax expense increased $12.1 million, or 205.1%, during the third quarter
          of 2007
          compared to the same period of 2006 due to the $38.8 million increase in
          pre-tax income for the third quarter of 2007 compared to the same period
          of
          2006.  Midstream’s effective income tax rate decreased from 61.4% to
          37.1% during the third quarter of 2007 compared to the same period of 2006,
          mainly due to tax adjustments booked in 2006 and interest related to tax
          positions being accounted for as interest expense in 2007, compared to
          tax
          expense in 2006, as a result of the adoption of FIN 48.
  ***Comparison
          of the Nine Months Ended September 30, 2007, and 2006***
  **Cleco
          Consolidated**
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenue, net
                
                **$**
                **796,942**
                
                
                $
                768,471
                
                
                $
                28,471
                
                
                
                3.70
                %Operating
                    expenses
                
                ****
                **713,051**
                
                
                
                675,877
                
                
                
                (37,174
                )
                
                
                (5.50
                )%Operating
                    income
                
                **$**
                **83,891**
                
                
                $
                92,594
                
                
                $
                (8,703
                )
                
                
                (9.40
                )%Allowance
                    for other funds used during construction
                
                **$**
                **21,715**
                
                
                $
                4,231
                
                
                $
                17,484
                
                
                
                413.24
                %Equity
                    income from investees
                
                **$**
                **97,608**
                
                
                $
                30,802
                
                
                $
                66,806
                
                
                
                216.89
                %Other
                    income
                
                **$**
                **28,644**
                
                
                $
                929
                
                
                $
                27,715
                
                
                
                *Other
                    expense
                
                **$**
                **2,536**
                
                
                $
                1,177
                
                
                $
                (1,359
                )
                
                
                (115.46
                )%Interest
                    charges
                
                **$**
                **34,284**
                
                
                $
                32,138
                
                
                $
                (2,146
                )
                
                
                (6.68
                )%Federal
                    and state income taxes
                
                **$**
                **63,187**
                
                
                $
                38,923
                
                
                $
                (24,264
                )
                
                
                (62.34
                )%Net
                    income applicable to common stock
                
                **$**
                **139,435**
                
                
                $
                62,071
                
                
                $
                77,364
                
                
                
                124.64
                %*Not
                    meaningful
  Consolidated
          net income applicable to common stock increased $77.4 million, or 124.6%,
          in the
          first nine months of 2007 compared to the first nine months of 2006 primarily
          due to increased Midstream and Cleco Power earnings.
 Operating
          revenue, net increased $28.5 million, or 3.7%, in the first nine months
          of 2007
          compared to the same period of 2006 largely as a result of higher base
          and fuel
          cost recovery revenue at Cleco Power.
 Operating
          expenses increased $37.2 million, or 5.5%, in the first nine months of
          2007
          compared to the first nine months of 2006 primarily due to increased fuel
          costs,
          capacity payments, depreciation expense and other operations and maintenance
          expenses at Cleco Power.
 Allowance
          for other funds used during construction increased $17.5 million, or 413.2%,
          in
          the first nine months of 2007 compared to the same period of 2006 primarily
          due
          to increased construction activity at Rodemacher Unit 3.
 Equity
          income from investees increased $66.8 million, or 216.9%, in the first
          nine
          months of 2007 compared to the same period of 2006.  The increase
          primarily was due to increased equity earnings at APH, resulting from the
          settlement of Acadia’s pre-petition unsecured claims against CES and Calpine and
          amounts received by APH relating to Cajun’s purchase of CAH’s 50% equity
          ownership interest in Acadia, offset by a pre-tax impairment loss.
 Other
          income increased $27.7 million in the first nine months of 2007 compared
          to the
          same period of 2006 primarily due to amounts received by APH relating to
          Cajun’s
          purchase of CAH’s 50% equity ownership interest in Acadia.  For
          additional information, see “— Midstream — Equity Income from Investees and
          Other Income.”
 Other
          expense increased $1.4 million, or 115.5%, in the first nine months of
          2007
          compared to the same period of 2006 primarily due to APH’s payment to acquire
          Calpine’s
  42
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  interest
          in Acadia’s claim against Cleco Power regarding a potential electric metering
          error at the Acadia facility.
 Interest
          charges increased $2.1 million, or 6.7%, in the first nine months of 2007
          compared to the same period of 2006 primarily due to interest related to
          draws
          against Cleco Power’s credit facility during 2007 and the accrual of interest
          related to uncertain tax positions at Cleco Power, which was previously
          reported
          in tax expense.  Partially offsetting these increases was the
          allowance for borrowed funds used during construction associated with
          construction activity at Rodemacher Unit 3.
 Federal
          and state income taxes increased $24.3 million, or 62.3%, during the first
          nine
          months of 2007 compared to the same period of 2006 primarily due to the
          $100.6
          million increase in pre-tax income for 2007 compared to the same period
          of
          2006.  The effective income tax rate decreased from 38.0% to 31.1%
          during the first nine months of 2007 compared to the same period of 2006,
          mainly
          due to the flow-through of tax benefits associated with AFUDC equity recorded
          as
          a result of the construction of Rodemacher Unit 3.
 Results
          of operations for Cleco Power and Midstream are fully described
          below.
  **Cleco
          Power**
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenueBase
                
                **$**
                **272,765**
                
                
                $
                261,724
                
                
                $
                11,041
                
                
                
                4.22
                %Fuel
                    cost
                    recovery
                
                ****
                **493,026**
                
                
                
                475,041
                
                
                
                17,985
                
                
                
                3.79
                %Electric
                    customer
                    credits
                
                ****
                **-**
                
                
                
                4,382
                
                
                
                (4,382
                )
                
                
                (100.00
                )%Other
                    operations
                
                ****
                **26,413**
                
                
                
                22,052
                
                
                
                4,361
                
                
                
                19.78
                %Affiliate
                    revenue
                
                ****
                **35**
                
                
                
                37
                
                
                
                (2
                )
                
                
                (5.41
                )%Intercompany
                    revenue
                
                ****
                **1,505**
                
                
                
                1,501
                
                
                
                4
                
                
                
                0.27
                %Operating
                    revenue,
                    net
                
                ****
                **793,744**
                
                
                
                764,737
                
                
                
                29,007
                
                
                
                3.79
                %Operating
                    expensesFuel
                    used for electricgeneration
                    – recoverable
                
                ****
                **196,872**
                
                
                
                179,305
                
                
                
                (17,567
                )
                
                
                (9.80
                )%Power
                    purchased for
                    utilitycustomers – recoverable
                
                ****
                **296,071**
                
                
                
                295,974
                
                
                
                (97
                )
                
                
                (0.03
                )%Non-recoverable
                    fuel andpower
                    purchased
                
                ****
                **20,116**
                
                
                
                18,127
                
                
                
                (1,989
                )
                
                
                (10.97
                )%Other
                    operations
                
                ****
                **71,318**
                
                
                
                65,844
                
                
                
                (5,474
                )
                
                
                (8.31
                )%Maintenance
                
                ****
                **33,587**
                
                
                
                26,919
                
                
                
                (6,668
                )
                
                
                (24.77
                )%Depreciation
                
                ****
                **58,784**
                
                
                
                53,879
                
                
                
                (4,905
                )
                
                
                (9.10
                )%Taxes
                    other than
                    incometaxes
                
                ****
                **28,540**
                
                
                
                28,917
                
                
                
                377
                
                
                
                1.30
                %Total
                    operatingexpenses
                
                ****
                **705,288**
                
                
                
                668,965
                
                
                
                (36,323
                )
                
                
                (5.43
                )%Operating
                    income
                
                **$**
                **88,456**
                
                
                $
                95,772
                
                
                $
                (7,316
                )
                
                
                (7.64
                )%Interest
                    income
                
                **$**
                **3,548**
                
                
                $
                5,688
                
                
                $
                (2,140
                )
                
                
                (37.62
                )%Allowance
                    for other funds used during construction
                
                **$**
                **21,715**
                
                
                $
                4,231
                
                
                $
                17,484
                
                
                
                413.24
                %Interest
                    charges
                
                **$**
                **27,883**
                
                
                $
                26,232
                
                
                $
                (1,651
                )
                
                
                (6.29
                )%Federal
                    and state income taxes
                
                **$**
                **20,517**
                
                
                $
                26,287
                
                
                $
                5,770
                
                
                
                21.95
                %Net
                    income
                
                **$**
                **65,146**
                
                
                $
                52,476
                
                
                $
                12,670
                
                
                
                24.14
                %
  Cleco
          Power’s net income applicable to member’s equity in the first nine months of
          2007 increased $12.7 million, or 24.1%, compared to the first nine months
          of
          2006.  Contributing factors include:
  §
                higher
                    base revenue,
 §
                higher
                    other operations revenue,
 §
                higher
                    allowance for other funds used during construction,
                    and
 §
                lower
                    effective income tax rate.
 
 These
          were partially offset by:
  §
                absence
                    of favorable customer credit
                    adjustments,
 §
                higher
                    other operations and maintenance
                    expenses,
 §
                higher
                    depreciation expense,
 §
                higher
                    non-recoverable fuel and power
                    purchased,
 §
                lower
                    interest income, and
 §
                higher
                    interest charges.
 
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,(MILLION
                    kWh)
                
                **2007**
                
                
                2006
                
                
                FAVORABLE/
                  (UNFAVORABLE)Electric
                    salesResidential
                
                ****
                **2,789**
                
                
                
                2,760
                
                
                
                1.05
                %Commercial
                
                ****
                **1,869**
                
                
                
                1,529
                
                
                
                22.24
                %Industrial
                
                ****
                **2,255**
                
                
                
                2,201
                
                
                
                2.45
                %Other
                    retail
                
                ****
                **102**
                
                
                
                380
                
                
                
                (73.16
                )%Total
                    retail
                
                ****
                **7,015**
                
                
                
                6,870
                
                
                
                2.11
                %Sales
                    for resale
                
                ****
                **384**
                
                
                
                391
                
                
                
                (1.79
                )%Unbilled
                
                ****
                **67**
                
                
                
                53
                
                
                
                26.42
                %Total
                    retail and wholesale customer sales
                
                ****
                **7,466**
                
                
                
                7,314
                
                
                
                2.08
                %
 
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                FAVORABLE/
                  (UNFAVORABLE)Electric
                    salesResidential
                
                **$**
                **122,567**
                
                
                $
                121,724
                
                
                
                0.69
                %Commercial
                
                ****
                **70,219**
                
                
                
                57,232
                
                
                
                22.69
                %Industrial
                
                ****
                **42,398**
                
                
                
                41,554
                
                
                
                2.03
                %Other
                    retail
                
                ****
                **4,323**
                
                
                
                14,894
                
                
                
                (70.97
                )%Storm
                    surcharge
                
                ****
                **18,295**
                
                
                
                10,508
                
                
                
                74.11
                %Total
                    retail
                
                ****
                **257,802**
                
                
                
                245,912
                
                
                
                4.84
                %Sales
                    for resale
                
                ****
                **12,675**
                
                
                
                13,745
                
                
                
                (7.78
                )%Unbilled
                
                ****
                **2,288**
                
                
                
                2,067
                
                
                
                10.69
                %Total
                    retail and wholesale customer sales
                
                **$**
                **272,765**
                
                
                $
                261,724
                
                
                
                4.22
                %
  A
          review of customer rate schedules was completed by Cleco Power in late
          August
          2006 that resulted in certain other retail customers being reclassified
          to the
          commercial class of customers.  As a result of this reclassification,
          commercial electric sales increased with a corresponding decrease in other
          retail as reflected in the charts above.
 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 NINE MONTHS ENDED SEPTEMBER 30,2007
                    CHANGE**2007**
                
                
                2006
                
                
                NORMAL
                
                
                PRIOR
                    YEAR
                
                
                NORMALCooling
                    degree-days
                
                ****
                **2,635**
                
                
                
                2,708
                
                
                
                2,436
                
                
                
                (2.70
                )%
                
                
                8.17
                %Heating
                    degree-days
                
                ****
                **950**
                
                
                
                693
                
                
                
                1,026
                
                
                
                37.09
                %
                
                
                (7.41
                )%
  43
 CLECO
                        CORPORATIONCLECO
                        POWER
                      2007 3RD
                          QUARTER FORM
                          10-Q
  ***Base***
 Base
          revenue during the first nine months of 2007 increased $11.0 million, or
          4.2%, compared to the same period in 2006. The increase primarily was due
          to the recovery of storm restoration costs through a monthly customer surcharge
          that began in May 2006.  These storm-related costs are being amortized
          to depreciation expense based on the amounts collected monthly from
          customers through this surcharge.  Also contributing to the
          increase in base revenue were higher retail and wholesale kWh sales,
          primarily from colder winter weather as compared to the same period in
          2006.
 For
          information on the anticipated effects of changes in revenue from industrial
          and
          wholesale customers, see “— Comparison of the Three Months Ended September 30,
          2007, and 2006 — Cleco Power — Base.”  For additional information on
          Cleco’s energy commodity activities, see Item 3, “Quantitative and Qualitative
          Disclosures about Market Risk — Risk Overview — Commodity Price
          Risks.”
 For
          information on the effects of future energy sales on Cleco Power’s financial
          condition, results of operations, and cash flows, see “Risk Factors — Future
          Electricity Sales” in the Registrants’ Combined Annual Report on Form 10-K for
          the fiscal year ended December 31, 2006.
  ***Fuel
          Cost Recovery***
 Fuel
          cost recovery revenue billed to customers during the first nine months
          of 2007
          compared to the same period in 2006 increased $18.0 million, or 3.8%, primarily
          due to increases in the per-unit cost of fuel used for electric generation
          and
          higher volumes of power purchased for utility customers.  For
          information on Cleco Power’s ability to recover fuel and purchase power costs,
          see “— Comparison of the Three Months Ended September 30, 2007, and 2006 — Cleco
          Power — Fuel Cost Recovery.”
  ***Electric
          Customer Credits***
 The
          $4.4 million change in electric customer credits is the result of the absence
          in
          the first nine months of 2007 of favorable adjustments made during the
          first
          nine months of 2006 related to prior RSP filing periods.  The
          potential refunds associated with the RSP are based on results for each
          12-month
          period ended September 30.  For additional information on the accrual
          of electric customer credits, see Item 1, “Notes to the Unaudited Condensed
          Financial Statements — Note 7 — Electric Customer Credits.”
  ***Other
          Operations***
 Other
          operations revenue increased $4.4 million, or 19.8%, in the first nine
          months of
          2007 compared to the first nine months of 2006 primarily due to a $0.7
          million
          mark-to-market gain in the first nine months of 2007 as compared to a $4.3
          million mark-to-market loss in the first nine months of 2006 relating to
          economic hedge transactions associated with fixed-price power being
          provided to a wholesale customer.  These increases were partially
          offset by lower transmission services revenue. For information on Cleco’s energy
          commodity activities, see Item 3, “Quantitative and Qualitative Disclosures
          about Market Risk — Risk Overview — Commodity Price Risks.”
  ***Operating
          Expenses***
 Operating
          expenses increased $36.3 million, or 5.4%, in the first nine months of
          2007
          compared to the same period of 2006. Fuel used for electric generation
          (recoverable) increased $17.6 million, or 9.8%, primarily due to higher
          per-unit
          costs of fuel used as compared to the same period of 2006.  Partially
          offsetting this increase were lower volumes of fuel used for electric
          generation.  Fuel used for electric generation and power purchased for
          utility customers generally are influenced by natural gas
          prices.  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.  Non-recoverable fuel and power purchased increased $2.0
          million, or 11.0%, primarily due to higher capacity payments made during
          the
          first nine months of 2007.  Other operations expense increased $5.5
          million, or 8.3%, primarily due to the absence in 2007 of the $3.5 million
          recognition of previously recorded storm restoration expenses as a regulatory
          asset as a result of the LPSC's February 22, 2006, approval of Cleco Power's
          request to recover these storm restoration costs.  Also contributing
          to the increase were higher transmission and distribution operation
          expenses. Maintenance expenses during the first nine months of
          2007 increased $6.7 million, or 24.8%, compared to the same period of 2006
          primarily due to the absence of the $3.0 million recognition of previously
          recorded storm restoration expenses as a regulatory asset as a result of
          the
          LPSC’s February 22, 2006 order.  Also contributing to the increase was more
          generating station maintenance work performed during the first nine months
          of
          2007.  Partially offsetting these increases was the recognition of other
          previously recorded storm restoration expenses as a regulatory asset during
          the
          third quarter of 2007.  Depreciation expense increased $4.9 million,
          or 9.1%, primarily as a result of $4.0 million of storm amortization costs
          and
          $0.9 million of normal recurring additions to fixed assets.
  ***Interest
          Income***
 Interest
          income decreased $2.1 million, or 37.6%, during the first nine months of
          2007
          compared to the same period of 2006 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 $17.5 million, or 413.2%,
          during the first nine months of 2007 compared to the same period of 2006
          primarily due to increased construction activity at Rodemacher Unit
          3.  Allowance for other funds used during construction comprised 33.3%
          of Cleco Power’s net income for the first nine months of 2007, compared to 8.1%
          for the first nine months of 2006.
  44
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  ***Interest
          Charges***
 Interest
          charges increased $1.7 million, or 6.3%, during the first nine months of
          2007
          compared to the same period of 2006 primarily due to interest related to
          draws
          against Cleco Power’s credit facility during 2007 and the accrual of interest
          related to uncertain tax positions, which was previously reported in tax
          expense.  Partially offsetting these increases was the allowance for
          borrowed funds used during construction associated with construction activity
          at
          Rodemacher Unit 3.
  ***Income
          Taxes***
 Income
          tax expense decreased $5.8 million, or 22.0%, during the first nine months
          of
          2007 compared to the same period of 2006.  The decrease in income tax
          expense was partially offset by a $6.9 million increase in pre-tax income
          for
          2007 compared to the same period of 2006.  Cleco Power’s effective
          income tax rate decreased from 33.4% to 24.0% during the first nine months
          of
          2007 compared to the same period of 2006, mainly due to the flow-through
          of tax
          benefits associated with AFUDC equity recorded as a result of the construction
          of Rodemacher Unit 3.  The tax rate is also affected by the relative
          size of this item to pre-tax income.
  **Midstream**
 FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
                
                **2007**
                
                
                2006
                
                
                VARIANCE
                
                
                CHANGEOperating
                    revenueOther
                    operations
                
                **$**
                **15**
                
                
                $
                26
                
                
                $
                (11
                )
                
                
                (42.31
                )%Affiliate
                    revenue
                
                ****
                **3,251**
                
                
                
                3,630
                
                
                
                (379
                )
                
                
                (10.44
                )%Operating
                    revenue
                
                ****
                **3,266**
                
                
                
                3,656
                
                
                
                (390
                )
                
                
                (10.67
                )%Operating
                    expensesOther
                    operations
                
                ****
                **4,231**
                
                
                
                3,285
                
                
                
                (946
                )
                
                
                (28.80
                )%Maintenance
                
                ****
                **1,568**
                
                
                
                1,780
                
                
                
                212
                
                
                
                11.91
                %Depreciation
                
                ****
                **230**
                
                
                
                232
                
                
                
                2
                
                
                
                0.86
                %Taxes
                    other than
                    incometaxes
                
                ****
                **206**
                
                
                
                174
                
                
                
                (32
                )
                
                
                (18.39
                )%Total
                    operatingexpenses
                
                ****
                **6,235**
                
                
                
                5,471
                
                
                
                (764
                )
                
                
                (13.96
                )%Operating
                    loss
                
                **$**
                **(2,969**
                **)**
                
                $
                (1,815
                )
                
                $
                (1,154
                )
                
                
                (63.58
                )%Interest
                    income
                
                **$**
                **1,044**
                
                
                $
                -
                
                
                $
                1,044
                
                
                
                *Equity
                    income from investees
                
                **$**
                **96,460**
                
                
                $
                28,189
                
                
                $
                68,271
                
                
                
                242.19
                %Other
                    income
                
                **$**
                **27,924**
                
                
                $
                -
                
                
                $
                27,924
                
                
                
                *Other
                    expense
                
                **$**
                **1,252**
                
                
                $
                13
                
                
                $
                (1,239
                )
                
                
                *Interest
                    charges
                
                **$**
                **16,457**
                
                
                $
                13,865
                
                
                $
                (2,592
                )
                
                
                (18.69
                )%Federal
                    and state income tax expense
                
                **$**
                **40,008**
                
                
                $
                8,204
                
                
                $
                (31,804
                )
                
                
                (387.66
                )%Loss
                    from discontinued operations
                
                **$**
                **-**
                
                
                $
                (154
                )
                
                $
                154
                
                
                
                100.00
                %Net
                    income
                
                **$**
                **64,742**
                
                
                $
                4,138
                
                
                $
                60,604
                
                
                
                **Not
                    meaningful
  Midstream’s
          net income applicable to member’s equity for the first nine months of 2007
          increased $60.6 million compared to the first nine months of
          2006.  Factors affecting Midstream during the first nine months of
          2007 are described below.
  ***Operating
          Expenses***
 Operating
          expenses increased $0.8 million, or 14.0%, in the first nine months of
          2007
          compared to the first nine months of 2006.  The increase largely was
          due to higher employee benefit costs and higher administrative
          expenses.
  ***Interest
          Income***
 Interest
          income increased $1.0 million in the first nine months of 2007 compared
          to the
          first nine months of 2006 primarily due to higher investment balances at
          APH.  Higher investment balances were the result of amounts received
          by APH relating to the settlement of Acadia's pre-petition unsecured claims
          against CES and Calpine.
  ***Equity
          Income from Investees***
 Equity
          income from investees increased $68.3 million, or 242.2%, in the first
          nine
          months of 2007 compared to the first nine months of 2006.  The increase was
          due to a $72.2 million increase in equity earnings at APH, partially offset
          by a
          $3.9 million decrease at Evangeline.  The increase in earnings at APH
          primarily was due to the settlement of Acadia’s pre-petition unsecured claims
          against CES and Calpine and amounts received by APH relating to CAH’s 50% equity
          ownership interest in Acadia.  Partially offsetting these increases
          was an impairment loss recorded in the third quarter of 2007 and the absence
          in
          2007 of APH's draw against the $15.0 million letter of credit issued by
          Calpine.  The decrease at Evangeline primarily was due to purchases of
          replacement power related to an outage at the facility, as well as higher
          interest charges.  These decreases were partially offset by higher
          revenue from replacement energy.  As previously discussed, Midstream’s
          ownership interests in Perryville and Attala were transferred to Cleco
          Corporation effective February 1, 2007, and are no longer reported as equity
          income from investees on Midstream’s financial statements.  In accordance
          with SFAS No. 131, operating results for the first nine months of 2006
          have been
          adjusted to reflect this new structure.  For additional information,
          see Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 3 —
Disclosures about Segments.”
  ***Other
          Income***
 Other
          income increased $27.9 million during the first nine months of 2007 compared
          to
          the first nine months of 2006 as a result of amounts received by APH relating
          to
          Cajun's purchase of CAH's 50% equity ownership interest in Acadia.  At
          the closing of the sale, APH received payment from Cajun in the amount
          of $85.0
          million for the agreed upon value of the priority and guaranteed distributions,
          plus a $2.9 million break-up fee.  Of these amounts, $27.9 million is
          included in other income of which $25.0 million represents consideration
          of
          APH's guaranteed payments from Acadia and $2.9 million represents break-up
          fees.  The remaining $60.0 million is included in equity income from
          investees.
  ***Other
          Expense***
 Other
          expense increased $1.2 million during the first nine months of 2007 compared
          to
          the same period of 2006 primarily due to APH’s payment to acquire Calpine’s
          interest in
  45
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  Acadia’s
          claim against Cleco Power regarding a potential electric metering error
          at the
          Acadia facility.
  ***Interest
          Charges***
 Interest
          charges increased $2.6 million, or 18.7%, during the first nine months
          of 2007
          compared to the same period of 2006 primarily due to a higher interest
          rate and
          a higher balance on affiliate debt relating to APH’s investment in
          Acadia.
  ***Income
          Taxes***
 Income
          tax expense increased $31.8 million, or 387.7%, during the first nine months
          of
          2007 compared to the same period of 2006 due to a $92.3 million increase in
          pre-tax income for 2007 compared to the same period of
          2006.  Midstream’s effective income tax rate decreased from 65.7% to
          38.2% during the first nine months of 2007 compared to the same period
          of 2006,
          mainly due to tax adjustments booked in 2006 and interest related to tax
          positions being accounted for as interest expense in 2007, compared to
          tax
          expense in 2006, as a result of the adoption of FIN 48.
  **FINANCIAL
          CONDITION**
 **Liquidity
            and Capital Resources**
  **General
          Considerations and Credit-Related Risks**
  ***Credit
          Ratings and Counterparties***
 At
          September 30, 2007, Moody’s outlook for both Cleco Corporation and Cleco Power
          was stable.  Standard & Poor’s ratings outlook for both companies
          was negative due to continued uncertainties surrounding Cleco’s merchant energy
          activities and risks associated with the construction of Rodemacher Unit
          3.  If Cleco Corporation or Cleco Power’s credit ratings 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.
 On
          May
          22, 2007, Moody’s placed Evangeline’s Senior Secured Debt Rating of Ba2 under
          review for possible upgrade.  The rating action reflects the announced
          sale of Williams’ power business segment, including its tolling agreement with
          Evangeline, to Bear Energy LP.  Williams has announced that the sale,
          which is subject to regulatory and other approvals, is expected to close
          no
          later than the fourth quarter of 2007.  Management anticipates an
          improvement in the Evangeline’s credit quality due to the more
          favorable credit rating of Bear Stearns Companies Inc.
 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 gas positions that Cleco may initiate in the
          future, Cleco Corporation may be required to provide credit support or
          pay
          liquidated damages.  The amount of credit support that Cleco may be
          required to provide at any point in the future is dependent on the amount
          of the
          initial transaction, changes in the market price of power and gas, the
          changes
          in open power and natural gas positions, and changes in the amount
          counterparties owe Cleco.  Changes in any of these factors could cause
          the amount of requested credit support to increase or decrease.  For
          additional information, as well as a discussion of other factors affecting
          Cleco’s financial condition relating to its credit ratings, the credit ratings
          of its counterparties, and other credit-related risks, please read “Management’s
          Discussion and Analysis of Financial Condition and Results of Operations
—
Financial Condition — Liquidity and Capital Resources — General Considerations
          and Credit-Related Risks — Credit Ratings and Counterparties” in the
          Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
          December 31, 2006.
  ***Debt***
 At
          September 30, 2007, 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 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.  A similar downgrade to the credit
          ratings of 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 September 30, 2007, or December 31,
          2006.  At September 30, 2007, Cleco’s long-term debt outstanding was
          $654.1 million compared to $619.3 million at December 31, 2006.  The
          $34.8 million increase was primarily due to $135.0 million in draws against
          Cleco Power’s credit facility, partially offset by the reclassification of
          $100.0 million of 7.00% Senior Notes at Cleco Corporation to long-term
          debt due
          within one year.  During the first nine months of 2007, Cleco repaid
          $10.0 million of 6.53% medium-term notes and $15.0 million of 7.50% medium-term
          notes, both at maturity.  These issues were classified as long-term
          debt due within one year; therefore, these repayments did not affect the
          total
          amount of long-term debt recorded.  For additional information, see “—
Cleco Corporation (Holding Company Level)” and “— Cleco Power”
below.
  46
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  At
          September 30, 2007, Cleco had a working capital deficit of $2.0 million and
          at December 31, 2006, a working capital surplus of $152.6
          million.  The $154.6 million decrease in working capital is primarily
          due to additions to property, plant and equipment, including Rodemacher
          Unit 3,
          the reclassification of long-term debt to long-term debt due within one
          year,
          and the payment of dividends.  Partially offsetting the decrease was
          cash received from draws on Cleco Power’s credit facility, proceeds from the
          sale of the Calpine bankruptcy claims, and the receipt of preferred and
          guaranteed distributions from Acadia.
 Cash
          and
          cash equivalents available at September 30, 2007, were $195.4 million combined
          with $267.8 million facility capacity ($127.8 million from Cleco Corporation
          and
          $140.0 million from Cleco Power) for total liquidity of $463.2
          million.  Cash and cash equivalents increased $2.9 million, when
          compared to December 31, 2006, largely due to draws against Cleco Power’s credit
          facility, proceeds from the sale of the Calpine bankruptcy claims, and
          the
          receipt of preferred and guaranteed distributions from Acadia.  This
          was partially offset by additions to property, plant and equipment, including
          Rodemacher Unit 3, repayment of debt, and payment of dividends.
  ***Cleco
          Corporation (Holding Company Level)***
 Cleco
          Corporation had no short-term debt outstanding at September 30, 2007, or
          December 31, 2006.  At September 30, 2007, Cleco Corporation had
          $100.0 million of long-term debt due within one year 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
          September 30, 2007, off-balance sheet commitments reduced available
          borrowings under the credit facility by an additional $22.2 million, leaving
          available capacity of $127.8 million.  For more information about
          these commitments, see Item 1, “Notes to the Unaudited Condensed Financial
          Statements — Note 8 — Litigation, Other Commitments and Contingencies, and
          Disclosures about Guarantees — Off-Balance Sheet Commitments.”  An
          uncommitted line of credit with a bank in an amount up to $10.0 million
          also is
          available to support Cleco’s working capital needs.
 Cash
          and
          cash equivalents available at September 30, 2007, were $180.1 million,
          combined with $127.8 million facility capacity, for total liquidity of
          $307.9
          million.  Cash and cash equivalents increased $89.5 million, when
          compared to December 31, 2006, largely due to the proceeds received for
          Cajun’s
          purchase of CAH’s 50% equity ownership interest in Acadia and the agreed upon
          value of priority and guaranteed distributions.  This was partially
          offset by the payment of dividends.  For additional information, see
          Item 1, “Notes to the Unaudited Condensed Financial Statements — Note 14 —
Calpine Bankruptcy Settlement.”
  ***Cleco
          Power***
 Cleco
          Power had no short-term debt outstanding at September 30, 2007, or December
          31, 2006.  At September 30, 2007, Cleco Power’s long-term debt
          outstanding was $654.1 million compared to $519.3 million at December 31,
          2006.  The $134.8 million increase was due to $135.0 million in draws
          against Cleco Power’s credit facility during the second and third quarters of
          2007.  During the first nine months of 2007, Cleco Power repaid $10.0
          million of 6.53% medium-term notes and $15.0 million of 7.50% medium-term
          notes,
          both at maturity.  These issues were classified as long-term debt due
          within one year; therefore, these repayments did not affect the total amount
          of
          long-term debt recorded.
 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
          September 30, 2007, $135.0 million was outstanding under Cleco Power’s $275.0
          million, five-year facility with a weighted average interest rate of
          5.79%.  An uncommitted line of credit (which is also available to
          Cleco Corporation) with a bank in an amount up to $10.0 million also is
          available to support Cleco Power’s working capital needs.
 Cash
          and
          cash equivalents available at September 30, 2007, were $15.2 million, combined
          with $140.0 million facility capacity for total liquidity of $155.2
          million.  Cash and cash equivalents decreased $86.6 million, when
          compared to December 31, 2006 primarily due to additions to property, plant
          and
          equipment, including Rodemacher Unit 3, and repayment of debt.  This
          was partially offset by draws against Cleco Power’s credit
          facility.
 Storm
          restoration costs from Hurricanes Katrina and Rita are currently estimated
          to
          total $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 filed a settlement
          agreement with the LPSC allowing the recovery of essentially all of Cleco
          Power’s Hurricanes Katrina and Rita storm costs.  For the three and
          nine months ended September 30, 2007, Cleco Power recovered $6.6 million
          and
          $18.3 million, respectively.  The agreement also allows Cleco Power to
          securitize the storm costs and to recover debt service costs through a
          customer
          billing surcharge.  The securitization financing order was approved by
          the LPSC in September 2007.
 Cleco
          Power is exploring the possibility of financing the capital investment
          with
          tax-exempt bonds through the Gulf Opportunity Zone (GO Zone)
          Act.  Cleco Power has identified certain projects in the Gulf
          Opportunities Zone areas to be completed by 2010 and has filed an application
          with the Louisiana Public Finance Authority requesting $100.0 million of
          financing capacity, which would provide proceeds to fund capital expenditures
          in
          those identified areas.  It is uncertain whether approval will be
          granted by the Louisiana State Bond
  47
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  Commission
          as a result of the limited availability of GO Zone Act financing.
 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 $23.2 million and $4.9 million at
          September 30, 2007, and December 31, 2006, respectively.  In addition
          to this recovery, Cleco Power plans to fund the construction costs related
          to
          Rodemacher Unit 3 by utilizing cash on hand, drawing available funds from
          its
          credit facility, issuing long-term debt, and receiving equity contributions
          from
          Cleco Corporation.
 The
          Louisiana State Bond Commission has approved the issuance of up to $200.0
          million of tax-exempt bonds to finance the qualifying costs of the solid
          waste
          disposal facilities at Rodemacher Unit 3.  Thus far, a total of $152.9
          million of qualifying costs at Rodemacher Unit 3 has been
          identified.  A total of $60.0 million was allocated by the Governor’s
          office for issuance in 2006.  These bonds were issued in November 2006
          by the Rapides Finance Authority.  Cleco Power applied to the
          Governor’s office for allocation again in 2007 and was allocated another $60.0
          million by the Governor’s office for issuance in 2007.  Cleco expects
          to issue these bonds in the fourth quarter of 2007.  Cleco Power can
          apply again in 2008, up to the total amount of qualifying costs
          identified.
  ***Midstream***
 Midstream
          had no short-term or long-term debt outstanding at September 30, 2007,
          or
          December 31, 2006.
 APH’s
          $85.0 million settlement of pre-petition unsecured claims against CES and
          Calpine was subsequently sold for $78.2 million.  The proceeds from
          this sale, partially offset by payments made by APH relating to the settlement
          of such claims, were used to repay intercompany loans to Cleco
          Corporation.  In September 2007, after all regulatory approvals were
          received, the sale of CAH's Assets to Cajun was completed.  At the closing
          of the sale, APH received payment from Cajun in the amount of $85.0 million
          for
          the agreed upon value of the priority and guaranteed distributions, plus
          a $2.9
          million break-up fee and other expense reimbursements. This $85.0 million
          payment is separate from APH’s $85.0 million pre-petition unsecured claim that
          it sold in May 2007.
 Evangeline,
          which has been deconsolidated and is no longer reported in Cleco Corporation’s
          consolidated results, had no short-term debt outstanding at September 30,
          2007.  Evangeline had $168.9 million and $177.1 million of long-term
          debt outstanding at September 30, 2007, and December 31, 2006, respectively,
          in
          the form of 8.82% Senior Secured Bonds due 2019.  In addition,
          Evangeline had $8.2 million and $7.6 million of long-term debt due within
          one
          year at September 30, 2007, and December 31, 2006, respectively, relating
          to
          these bonds.  The bonds issued by Evangeline are non-recourse to Cleco
          Corporation.
  ***Restricted
          Cash***
 Various
          agreements to which Cleco is subject contain 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 September 30, 2007, and December 31, 2006,
          $0.1 million and $24.5 million of cash, respectively, was restricted on
          Cleco
          Corporation’s Consolidated Balance Sheet.  At September 30, 2007,
          restricted cash consisted of $0.1 million under the Diversified Lands mitigation
          escrow agreement.  Restricted cash at Cleco Power decreased $24.4
          million compared to December 31, 2006, due to the release of funds for
          construction of the solid waste disposal facility at Rodemacher Unit
          3.  Evangeline’s restricted cash is not reflected in Cleco
          Corporation’s Consolidated Balance Sheet due to
          deconsolidation.  Evangeline’s restricted cash at September 30, 2007,
          and December 31, 2006, was $31.3 million and $34.5 million,
          respectively.  This cash is restricted under Evangeline’s senior
          secured bond indenture.
  ***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.  The obligations listed in the following table
          do not include amounts for ongoing needs for which no contractual obligation
          existed as of September 30, 2007, and represent only the projected future
          payments that Cleco was obligated to make relative to uncertain tax positions
          as
          of September 30, 2007.  For more information on Cleco’s uncertain tax
          positions, see Item 1, “Notes to the Unaudited Condensed Financial Statements –
Note 11 — Income Taxes.”  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, 2006.
 
 **AT
                    SEPTEMBER 30,**UNCERTAIN
                    TAX POSITIONS (THOUSANDS)
                
                **2007**Tax
                    liability
                
                **$**
                **78,509**Interest
                
                ****
                **21,991**Total*
                
                **$**
                **100,500**Cleco
                    Corporation (1)
                
                **$**
                **57**Cleco
                    Power (2)
                
                ****
                **67,012**Midstream
                    (3)
                
                ****
                **33,431**Total
                
                **$**
                **100,500***Uncertain
                    federal and state tax positions as of September 30, 2007, that
                    will be
                    settled at some future date with the IRS and Louisiana Department
                    of
                    Revenue.
                  (1)Includes
                    interest of $57
                  (2)Includes
                    interest of $14,638
                  (3)Includes
                    interest of $7,296
  48
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            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 September 30, 2007, are summarized
          in the
          following table, and a discussion of the off-balance sheet commitments
          follows
          the table.  The discussion should be read in conjunction with the
          table to understand the impact of the off-balance sheet commitments on
          Cleco’s
          financial condition.
 
 AT
                    SEPTEMBER 30, 2007REDUCTIONS
                    TO THEAMOUNT
                    AVAILABLETO
                    BE DRAWN ONFACE
                
                
                
                
                
                NET
                
                
                CLECO
                    CORPORATION’S(THOUSANDS)
                
                AMOUNT
                
                
                REDUCTIONS
                
                
                AMOUNT
                
                
                CREDIT
                    FACILITY**Cleco
                    Corporation**Guarantee
                    issued to Entergy
                    companies for performance obligations of Perryville
                
                **$**
                **277,400**
                
                
                **$**
                **135,000**
                
                
                **$**
                **142,400**
                
                
                **$**
                **328**Guarantees
                    issued to purchasers
                    of the assets of Cleco Energy
                
                ****
                **1,400**
                
                
                ****
                **-**
                
                
                ****
                **1,400**
                
                
                ****
                **1,400**Obligations
                    under standby letter
                    of credit issued to the Evangeline Tolling Agreement
                    counterparty
                
                ****
                **15,000**
                
                
                ****
                **-**
                
                
                ****
                **15,000**
                
                
                ****
                **15,000**Guarantee
                    issued to Entergy
                    Mississippi on behalf of Attala
                
                ****
                **500**
                
                
                ****
                **-**
                
                
                ****
                **500**
                
                
                ****
                **500**Guarantee
                    issued to Tenaska on
                    behalf of Cleco Evangeline
                
                ****
                **5,000**
                
                
                ****
                **-**
                
                
                ****
                **5,000**
                
                
                ****
                **5,000****Cleco
                    Power**Obligations
                    under standby letter
                    of credit issued to the Louisiana Department of Labor
                
                ****
                **525**
                
                
                ****
                **-**
                
                
                ****
                **525**
                
                
                ****
                **-**Obligations
                    under the Lignite
                    Mining Agreement
                
                ****
                **15,772**
                
                
                ****
                **-**
                
                
                ****
                **15,772**
                
                
                ****
                **-**Total
                
                **$**
                **315,597**
                
                
                **$**
                **135,000**
                
                
                **$**
                **180,597**
                
                
                **$**
                **22,228**
 
 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 September 30, 2007, the aggregate guarantee of $277.4
          million is limited to $142.4 million (other than with respect to the
          indemnification of environmental matters, to which there is no limit) due
          to the
          performance of some of the underlying obligations that were
          guaranteed.  The discounted probability-weighted liability under the
          guarantees and indemnifications as of September 30, 2007, was $0.3 million,
          resulting in a corresponding reduction in the available credit under Cleco’s
          credit facility, which was determined in accordance with the facility’s
          definition of a contingent obligation.  The contingent obligation
          reduces the amount available under the credit agreements by an amount equal
          to
          the reasonably anticipated liability in respect of the contingent obligation
          as
          determined in good faith.  For additional information on this
          guarantee, see Item 1, “Notes to the Unaudited Condensed Financial Statements —
Note 8 — Litigation, Other Commitments and Contingencies, and Disclosures about
          Guarantees.”
 In
          November 2004, Cleco completed the sale of substantially all of the assets
          of
          Cleco Energy.  Cleco Corporation provided guarantees to the buyers of
          Cleco Energy’s assets for the payment and performance of the indemnity
          obligations of Cleco Energy.  The aggregate amount of the guarantees
          is $1.4 million, and the guarantees expire in 2009.
 If
          Evangeline fails to perform certain obligations under its tolling agreement,
          Cleco Corporation will be required to make payments to the Evangeline Tolling
          Agreement counterparty. Cleco Corporation’s obligation under the Evangeline
          commitment is in the form of a standby letter of credit from investment
          grade
          banks and is limited to $15.0 million. Ratings 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 Interconnection
          Agreement.  This guarantee will be effective through the life of the
          agreement.
 On
          June
          13, 2007, Cleco Corporation issued a guarantee to Tenaska pursuant to a
          power
          replacement agreement between Evangeline and Tenaska.  The amount of
          the guarantee is $5.0 million, and the guarantee expires on December 31,
          2007.
 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
  49
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  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 September 30, 2007, Cleco Power’s 50% exposure for this
          obligation was approximately $15.8 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
                    SEPTEMBER 30, 2007AMOUNT
                    OF COMMITMENT EXPIRATION PER PERIODNET
                
                
                
                
                
                
                
                
                
                
                
                MOREAMOUNT
                
                
                LESS
                    THAN
                
                
                
                
                
                
                
                
                THAN(THOUSANDS)
                
                COMMITTED
                
                
                ONE
                    YEAR
                
                
                1-3
                    YEARS
                
                
                3-5
                    YEARS
                
                
                5
                    YEARSGuarantees
                
                **$**
                **165,072**
                
                
                **$**
                **5,000**
                
                
                **$**
                **101,400**
                
                
                **$**
                **15,772**
                
                
                **$**
                **42,900**Standby
                    letters of credit
                
                ****
                **15,525**
                
                
                ****
                **525**
                
                
                ****
                **-**
                
                
                ****
                **-**
                
                
                ****
                **15,000**Total
                    commercial
                    commitments
                
                **$**
                **180,597**
                
                
                **$**
                **5,525**
                
                
                **$**
                **101,400**
                
                
                **$**
                **15,772**
                
                
                **$**
                **57,900**
 
 **Regulatory
          Matters**
  ***Wholesale
          Rates of Cleco***
 On
          February 16, 2007, the FERC issued Order No. 890 amending its regulations
          and
          the pro forma tariff (a FERC-approved document outlining rates, charges,
          rules
          and conditions under which a utility provides wholesale electric service)
          adopted in FERC Order Nos. 888 and 889 to address apparent deficiencies
          in the
          pro forma tariff and to standardize several industry practices relating
          to the
          provision of wholesale electric service.  The order became effective
          on May 14, 2007, and contained various implementation deadlines ranging
          from 30
          days to one year.  Cleco Power is in the process of incorporating
          these new requirements and business practices into its operations.
 For
          additional information on the wholesale rates of Cleco, please read
“Management’s Discussion and Analysis of Financial Condition and Results of
          Operations — Financial Condition — Liquidity and Capital Resources — Regulatory
          Matters — Wholesale Rates of Cleco” in the Registrants’ Combined Annual Report
          on Form 10-K for the fiscal year ended December 31, 2006.
  ***Retail
          Rates of Cleco Power***
 In
          March 2007, after completing a review of Hurricanes Katrina and Rita restoration
          costs, Cleco Power and the LPSC Staff filed a settlement agreement allowing
          the
          recovery of $159.0 million, essentially all of Cleco Power’s Hurricanes Katrina
          and Rita storm costs.  The agreement also authorizes the issuance of
          securitized bonds to finance the restoration costs from Hurricanes Katrina
          and
          Rita.  The collection of a special storm recovery charge from Cleco Power’s
          customers will securitize the bonds.  The LPSC approved the settlement
          agreement and issued a securitization financing order at its September
          12, 2007
          Business and Executive Session.  Management plans to complete the
          securitization financing as soon as market conditions allow.  Until
          the time that the bonds are sold, Cleco Power will continue to collect
          storm
          restoration costs from customers through the interim surcharge and amortize
          the
          deferred storm costs based on the amount of these collections.
 Cleco
          Power filed its RSP monitoring report with the LPSC for the 12-month period
          ended September 30, 2006, on March 30, 2007.  The LPSC consultants
          completed their review of Cleco Power’s 2006 monitoring report in August
          2007.  Cleco Power received the LPSC Staff’s report on August 29, 2007,
          indicating that no refund was due for the reporting period ended September
          30,
          2006.  The Staff’s report becomes final after October 31, 2007, barring a
          protest by any individual or group of customers.  For additional
          information concerning Cleco Power’s RSP, see Item 1, “Notes to the Unaudited
          Condensed Financial Statements — Note 7 — Electric Customer
          Credits.”
 For
          additional information on other regulatory aspects of retail rates concerning
          Cleco Power, please read “Management’s Discussion and Analysis of Financial
          Condition and Results of Operations — Financial Condition — Liquidity and
          Capital Resources — Regulatory Matters — Retail Rates of Cleco Power” in the
          Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
          December 31, 2006.
  ***Wholesale
          Electric Markets***
 On
          March 16, 2007, to implement the new directives added by Section 215 of
          the
          Federal Power Act regarding establishment of reliability standards for
          all
          public utilities subject to the FERC’s authority, the FERC issued Order No. 693
          approving 83 standards currently filed by the North American Electric
          Reliability Council in its capacity as the authorized ERO.  The rules
          essentially deal with documentation and the standardization of practices
          across
          the industry.  The FERC began enforcement of these standards on June 18,
          2007.  Cleco Power has incorporated these reliability standards into
          its operations and continues to monitor and participate in the development
          of
          new standards.
 For
          additional information on regulatory aspects of wholesale electric markets
          affecting Cleco, please read “Management’s Discussion and Analysis of Financial
          Condition and Results of Operations — Financial Condition — Liquidity and
          Capital Resources — Regulatory Matters — Market Restructuring — Wholesale
          Electric Markets” in the Registrants’ Combined Annual Report on Form 10-K for
          the fiscal year ended December 31, 2006.
  50
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  ***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, 2006.
  ***Generation
          RFP***
  2007
          Short-Term RFP for 2008 Resources
 On
          January 29, 2007, Cleco Power issued a RFP for a minimum of 50 MW up to
          350 MW
          to meet its 2008 capacity and energy requirements.  Proposals were
          received on February 19, 2007.  Cleco Power has selected the winning
          bids and has signed contracts with the selected bidders.  Cleco Power
          has filed for certification with the LPSC for these resources to begin
          in
          2008.
  2007
          Long-Term RFP
 On
          June 27, 2007, Cleco Power filed draft documents with the LPSC for up to
          approximately 600 MW of intermediate and/or peaking resources to meet its
          long-term capacity and energy requirements.  Cleco Power has listed
          four potential self-build projects in the informational filing that will
          be
          tested against the market.  The final version of the RFP was issued in
          October 2007, with bids due in December 2007.
 For
          additional information on Cleco Power’s generation RFPs, please read
“Management’s Discussion and Analysis of Financial Condition and Results of
          Operations — Financial Condition — Liquidity and Capital Resources — Regulatory
          Matters — Generation RFP” in the Registrants’ Combined Annual Report on Form
          10-K for the fiscal year ended December 31, 2006.
  ***Rodemacher
          Unit 3***
 In
          May 2006, Cleco Power began construction of Rodemacher Unit 3 which will
          provide
          a portion of the utility’s future power supply needs. Rodemacher Unit 3 will be
          capable of burning various solid fuels, but primarily is expected to burn
          petroleum coke produced by several refineries throughout the Gulf Coast
          region.
 All environmental permits for the unit have been received.  The
          total capital cost of the project, including AFUDC, Amended EPC Contract
          costs,
          and other development expenses, is estimated at $1.0 billion.
 In
          May 2006, Cleco Power and Shaw entered into the Amended EPC Contract, which
          provides for substantial completion of construction by the fourth quarter
          of
          2009.  The Amended EPC Contract allows for termination at Cleco
          Power’s sole discretion, which would require payment of increasing termination
          fees, or if certain milestones, approvals, or other typical commercial
          terms and
          conditions are not met.  At September 30, 2007, the maximum
          termination costs would have been $529.3 million which is $37.2 million
          more
          than the capital expended to date.  Upon issuance of the notice to
          start construction in May 2006, Shaw provided a $58.9 million letter of
          credit
          to Cleco Power.  The Amended EPC Contract also provides for Cleco Power to
          retain seven and one-half percent (7.5%) of payments.  On June 29,
          2007, Shaw exchanged such retainage in the amount of $24.2 million for
          an
          additional letter of credit.  This letter of credit increases each
          month in the amount of what would have been retained otherwise.  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 construction of the
          project remains on schedule for commercial operation to begin no later
          than the
          fourth quarter of 2009.  As of September 30, 2007, Cleco Power had
          incurred approximately $551.8 million (including AFUDC) in project
          costs.  The contract price, as amended for change orders to date, is
          $785.6 million.
 For
          additional information on the CCN and construction of Rodemacher Unit 3,
          please
          read “Management’s Discussion and Analysis of Financial Condition and Results of
          Operations — Financial Condition — Liquidity and Capital Resources —Regulatory
          Matters — Rodemacher Unit 3” in the Registrants’ Combined Annual Report on Form
          10-K for the fiscal year ended December 31, 2006.  For a discussion of
          risks associated with the Rodemacher Unit 3 project, see “Risk Factors —
Rodemacher Unit 3 Construction Costs,” — “Rodemacher Unit 3 Technical
          Specifications,” and — “Termination of the Rodemacher Unit 3 Project or the
          Amended EPC Contract” in the Registrants’ Combined Annual Report on Form 10-K
          for the fiscal year ended December 31, 2006.
  ***Lignite
          Deferral***
 For
          information on Cleco Power’s deferred lignite mining expenditures, please read
“Management’s Discussion and Analysis of Financial Condition and Results of
          Operations — Financial Condition — Liquidity and Capital Resources — Regulatory
          Matters — Other Matters — Lignite Deferral” in the Registrants’ Combined Annual
          Report on Form 10-K for the fiscal year ended December 31, 2006.
 In
          November 2006, Cleco Power and SWEPCO submitted a joint application to
          the LPSC
          requesting that Cleco Power recover its existing deferral
          balance.  The application was docketed by the LPSC, and Cleco Power
          and SWEPCO filed testimony in support of the application on January 29,
          2007,
          and have since responded to discovery requests of the LPSC’s
          Staff.  At this time, Cleco Power and SWEPCO are engaged in settlement
          discussions which will allow for Cleco Power’s recovery of its lignite
          deferrals, among other things.  It is anticipated that the settlement
          will be completed and will be approved by the LPSC in the fourth quarter
          of
          2007.
 At
          September 30, 2007, and December 31, 2006, Cleco Power had $23.4 million
          and
          $20.1 million, respectively, in deferred costs remaining.  Included in
          the deferred cost balance is interest totaling $4.2 million and $3.0 million
          as
          of September 30, 2007, and December 31, 2006, respectively.
 For
          a
          discussion of risks associated with Cleco Power’s application to recover
          deferred lignite mining costs, see “Risk Factors — Deferred Lignite Mining
          Costs” in the Registrants’
   51
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  Combined
          Annual Report on Form 10-K for the fiscal year ended December 31,
          2006.
  ***Franchises***
 In
          September 2007, Cleco Power renewed a franchise agreement in Louisiana
          with the
          City of Glenmora before its expiration date.  The term of the renewed
          agreement is 30 years, consisting of a new 25-year agreement plus 5 years
          remaining on the existing franchise contract, beginning in September
          2007.  Currently, Cleco Power serves approximately 850 customers in
          Glenmora.
 Historically,
          Cleco Power has been allowed to recover municipal franchise fees as part
          of the
          base rates it charges retail customers.  Consequently, franchise fees
          are recovered from customers both inside and outside a franchised
          area.  In October 2007, the LPSC ordered the billing of franchise fees
          as a separate line item on customer bills.  The decision provided that
          50% of the franchise fee would continue to be included in base rates charged
          to
          all customers and 50% of the franchise fee would be included on customer
          bills
          as a separate line item, billed only to customers within the franchised
          area.  Cleco Power anticipates the implementation of the LPSC order to
          have a favorable impact on its results of operations.
 For
          additional information on Cleco Power’s electric service franchises, please read
“Business — Regulatory Matters, Industry Developments, and Franchises —
Franchises” in the Registrants’ Combined Annual Report on Form 10-K for the
          fiscal year ended December 31, 2006.
  ***Environmental
          Matters***
 Cleco
          is subject to extensive environmental regulation by 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.
 Section
          316(b) of the Clean Water Act regulates potential adverse environmental
          impacts
          to all aquatic species due to water intake structures.  These regulations
          establish requirements applicable to the location, design, construction,
          and
          capacity of cooling water intake structures.  Section 316(b) is
          applicable to Cleco’s Teche Power Station and Evangeline Power Station.  On
          July 2, 2007, the EPA officially suspended the Phase II, 316(b) rule as
          a result
          of a January 2007 decision by the U.S. Court of Appeals for the Second
          Circuit
          which largely overturned the EPA’s final Phase II 316(b) rule.  The
          appeals court decision limits or rejects the use of cost effectiveness
          and cost
          benefit tests historically recognized by other federal courts.  Due to
          the suspension of the rule, mandatory compliance dates for the completion
          of
          studies and assessments will likely be delayed for some time.  Until
          then, the EPA will likely use 316(b) Phase II rules as guidance for future
          permit renewals until a new 316(b) rule is promulgated.  Unless the Second
          Circuit’s decision is overturned by the Supreme Court, the EPA could mandate a
          more expensive, technology based approach (i.e. modifications to existing
          intake
          structures or conversion to cooling tower systems) without regard for actual
          need based on site specific environmental studies.  At this time, it
          is uncertain which technology option will be required to be installed on
          Cleco's
          intake structures and the associated costs of those
          modifications.  Cleco anticipates that any new requirements for its
          affected facilities would be established as the facilities go through the
          water
          discharge permit renewal process.
 On
          June
          20, 2007, the EPA proposed to strengthen the national ambient air quality
          standards (NAAQS) for ground-level ozone, the primary component of
          smog.  The Agency also requested comments on alternative levels of the
          primary ozone standard.  Depending on the final level the EPA chooses,
          a significant number of additional parishes of Louisiana could be designated
          as
“non-attainment,” meaning they do not meet the national ambient air quality
          standards for that area.  Since NOx emissions are a precursor to ozone
          formation, existing fossil fuel fired units located in or near these ozone
          non-attainment areas that do not currently utilize best available control
          technology could be targeted for installation of additional NOx emission
          controls.  While it is unknown at this time what the final rule will
          entail, any capital and operating costs of additional pollution control
          equipment could have a material adverse effect on the Registrants’ results of
          operations, financial condition, and cash flows.
 The
          enactment of federal or state renewable portfolio standards (RPS) mandating
          the
          use of renewable and alternative fuel sources, such as wind, solar, biomass
          and
          geothermal, could result in certain changes in Cleco's business or its
          competitive position.  These changes could include renewable energy
          credit costs and capital expenditures for renewable generation
          resources.  RPS legislation has been enacted in many states and is
          currently being considered by the United States Congress. States that currently
          do not have RPS requirements could adopt such legislation in the
          future.  Cleco is currently evaluating the potential impacts of
          potential RPS legislation on its businesses based on the RPS programs proposed
          in Congress and existing RPS programs in other states.  Cleco will
          continue to monitor developments related to RPS at the federal and state
          levels.
 On
          October 8, 2007, Cleco received a Special Notice for Remedial Investigation
          and
          Feasibility Study from the EPA.  The special notice requested Cleco
          Corporation and Cleco Power, along with many other listed potentially
          responsible parties to 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.  Cleco
          has been identified as being associated with the site operations and as
          such is
          being requested
  52
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  to
          respond to this notice.  The Devil's Swamp site has been proposed to
          be added to the National Priorities List (NPL) based on the release of
          polychlorinated biphenyls to fisheries and wetlands located on the
          site.  The EPA will make a final decision on the listing of the site
          to the NPL after considering the relevant comments.  A written response to
          the EPA is required by December 7, 2007.  Cleco has contacted the EPA
          in response to the special notice and is reviewing the available
          information.  Since this investigation is in the preliminary stages,
          management is unable to determine what amount, if any, should be accrued
          for
          possible remediation of the facility site.
 For
          a
          discussion of other Cleco environmental matters, please read “Business —
Environmental Matters” in the Registrants’ Combined Annual Report on Form 10-K
          for the fiscal year ended December 31, 2006.
  ***Recent
          Accounting Standards***
 For
          a discussion of recent accounting standards, see Item 1, “Notes to the Unaudited
          Condensed Financial Statements — Note 5 — Recent Accounting Standards” of this
          form 10-Q, which discussion is incorporated herein by reference.
  **CRITICAL
          ACCOUNTING POLICIES**
 Cleco’s
            critical accounting policies include those accounting policies that are
            both
            important to Cleco’s financial condition and results of operations and those
            that require management to make difficult, subjective, or complex judgments
            about future events, which could result in a material impact to the financial
            statements of Cleco Corporation’s segments or to Cleco as a consolidated
            entity.  The financial statements contained in this report are prepared in
            accordance with accounting principles generally accepted in the United
            States of
            America, which require Cleco to make estimates and assumptions.  Estimates
            and assumptions about future events and their effects cannot be made
            with
            certainty.  Management bases its current estimates and assumptions on
            historical experience and on various other factors that are believed
            to be
            reasonable under the circumstances.  On an ongoing basis, these estimates
            and assumptions are evaluated and, if necessary, adjustments are made
            when
            warranted by new or updated information or by a change in circumstances
            or
            environment.  Actual results may differ significantly from these estimates
            under different assumptions or conditions.  For a discussion of Cleco’s
            critical accounting policies, see “Management’s Discussion and Analysis of
            Financial Condition and Results of Operations — Critical Accounting Policies” in
            the Registrant’s Combined Annual Report on Form 10-K for the fiscal year ended
            December 31, 2006.
  **CLECO
          POWER — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS**
 Set
            forth below is information concerning the results of operations of Cleco
            Power
            for the three and nine months ended September 30, 2007, and September
            30,
            2006. The following narrative analysis should be read in combination with
            Cleco Power’s Unaudited Condensed Financial Statements and the Notes contained
            in this Form 10-Q.
 Cleco
          Power meets the conditions specified in General 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), Item 3
          (Defaults Upon Senior Securities), and Item 4 (Submission of Matters to a Vote
          of Security Holders).  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 nine
          months
          of 2007 and the first nine months of 2006.  Reference is made to
          Management’s Discussion and Analysis of Financial Condition and Results of
          Operations in Item 7 of the Registrants’ Combined Annual Report on Form 10-K for
          the fiscal year ended December 31, 2006.
 For
          an
          explanation of material changes in the amount of revenue and expense items
          of
          Cleco Power between the third quarter of 2007 and the third quarter of
          2006, see
“— Results of Operations — Comparison of the Three Months Ended September 30,
          2007, and 2006 — Cleco Power” of this Form 10-Q, which discussion is
          incorporated herein by reference.
 For
          an
          explanation of material changes in the amount of revenue and expense items
          of
          Cleco Power between the first nine months of 2007 and the first nine months
          of
          2006, see “— Results of Operations — Comparison of the Nine Months Ended
          September 30, 2007, and 2006 — Cleco Power” of this Form 10-Q, which discussion
          is incorporated herein by reference.
 
 53
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
 **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 generally takes physical
          delivery and the instruments and positions are used to satisfy customer
          requirements.
 Cleco’s
          exposure to market risk, as discussed below, represents an estimate of
          possible
          changes in the fair value or future earnings that would occur, assuming
          possible
          future 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 computed by assuming a 1% change in the current interest
          rate
          applicable to such debt.
 As
          of
          September 30, 2007, Cleco had no long-term or short-term variable-rate
          debt.  However, at September 30, 2007, Cleco Power had borrowings of
          $135.0 million outstanding under its $275.0 million five-year credit facility
          at
          a weighted average cost of 5.79%.  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 $1.4 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.  VaR limits are recommended by the Risk Management
          Committee and monitored through a daily risk report that identifies the
          current
          VaR and market conditions.
 During
          2005, Cleco Power entered into certain financial hedge transactions it
          considers
          economic hedges to mitigate the risk associated with fixed-price power
          to be
          provided to a wholesale customer through December 2010.  These
          transactions are derivatives as defined by SFAS No. 133 but do not meet
          the
          accounting criteria to be considered hedges.  These transactions are
          marked-to-market with the resulting gain or loss recorded on the income
          statement as a component of operating revenue, net.  At September 30,
          2007, the positions had a mark-to-market value of $1.6 million, which is
          an
          increase of $0.7 million from the mark-to-market value of $0.9 million
          at
          December 31, 2006.  In addition, these positions resulted in a
          realized loss of $0.2 million for the nine-month period ended September
          30,
          2007.  In light of these economic hedge transactions, volatility in
          natural gas prices will likely cause fluctuations in the market value of
          open
          natural gas positions and ultimately in Cleco Power’s future
          earnings.
 Cleco
          Power provides fuel for generation and purchases power to meet the power
          demands
          of customers. Cleco Power has entered into positions to mitigate the
          volatility in fuel costs passed on to customers as encouraged by an LPSC
          order.  In December 2004, Cleco Power implemented a fuel stabilization
          policy (which was filed with the LPSC and subsequently amended in June
          2006) to
          target higher levels of minimum hedging percentages and mitigate the volatility
          in
  54
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
 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 September 30, 2007,
            the net mark-to-market impact related to open natural gas positions was
            a loss
            of $18.7 million.  Deferred losses relating to closed natural gas
            positions at September 30, 2007, totaled $5.7 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 and nine months ended September 30, 2007, as well as the VaR at September
          30, 2007, and December 31, 2006, is summarized below:
 
 **FOR
                    THE THREE MONTHS**
                  **ENDED
                    SEPTEMBER 30, 2007**(THOUSANDS)
                
                **HIGH**
                
                
                **LOW**
                
                
                **AVERAGE**Cleco
                    Power
                
                **$**
                **302.5**
                
                
                **$**
                **193.8**
                
                
                **$**
                **247.8**
 
 **FOR
                    THE NINE MONTHS**
                  **ENDED
                    SEPTEMBER 30, 2007**
                
                
                **AT
                    SEPTEMBER 30,**
                
                
                AT
                    DECEMBER 31,(THOUSANDS)
                
                **HIGH**
                
                
                **LOW**
                
                
                **AVERAGE**
                
                
                **2007**
                
                
                2006Cleco
                    Power
                
                **$**
                **452.6**
                
                
                **$**
                **164.5**
                
                
                **$**
                **287.1**
                
                
                **$**
                **236.7**
                
                
                $
                459.5
  ***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- and variable-rate debt
          obligations.  Please refer to “— Interest Rate Risks” above for a
          discussion of how Cleco Power monitors its mix of fixed- and variable-rate
          debt
          obligations and the manner of calculating changes in fair market value
          and
          interest expense of its debt obligations.
 As
          of
          September 30, 2007, Cleco Power had no long-term or short-term variable-rate
          debt.  However, at September 30, 2007, Cleco Power had borrowings of
          $135.0 million outstanding under its $275.0 million five-year credit facility
          at
          a weighted average cost of 5.79%.  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 $1.4 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.
 
 **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’ third fiscal quarter of 2007, there have been no
          changes in the Registrants’ internal control over financial reporting (as
          such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
          Act)
          that have materially affected, or are reasonably likely to materially affect,
          the Registrants’ internal control over financial reporting.
  55
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  PART
          II — OTHER INFORMATION
 
  **ITEM
          1****.**LEGAL
          PROCEEDINGS
 **CLECO**
 For
            information on legal proceedings affecting Cleco, see Part I, Item 1,
“Notes to
            the Unaudited Condensed Financial Statements — Note 8 — Litigation, Other
            Commitments and Contingencies, and Disclosures about Guarantees
— Litigation,” and Note 14 — Calpine Bankruptcy Settlement.”
 
 **CLECO
          POWER**
 For
            information on legal proceedings affecting Cleco Power, see Part I, Item
            1,
“Notes to the Unaudited Condensed Financial Statements — Note 8 — Litigation,
            Other Commitments and Contingencies, and Disclosures about Guarantees
—
Litigation.”
 
 **ITEM
            1A.**RISK FACTORS
 Other
          than the removal of the risk factors regarding the FERC Staff Investigation
          and
          the Calpine Bankruptcy, there have been no material changes to the risk
          factors
          previously disclosed in the Registrants’ Combined Annual Report on Form 10-K for
          the fiscal year ended December 31, 2006 (the “2006 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 2006 Form 10-K.  For additional information on the settlement
          of the Calpine Bankruptcy, see Item 1, “Notes to the Unaudited Condensed
          Financial Statements — Note 14 — Calpine Bankruptcy
          Settlement.”
  56
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            QUARTER FORM
                            10-Q
  **ITEM
          6****.**EXHIBITS
 
 **CLECO
                    CORPORATION**3.1
                Bylaws
                    of Cleco Corporation, Revised effective July 20, 200710.1
                Summary
                    of Director Compensation, Benefits and Policies12(a)
                Computation
                    of Ratios of Earnings to Fixed Charges and of Earnings to Combined
                    Fixed
                    Charges and Preferred Stock Dividends for the three-, nine-, and
                    twelve-month periods ended September 30, 2007, 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
                    2002**CLECO
                    POWER**10.2
                401(k)
                    Savings and Investment Plan, Amendment No. 3, Effective August
                    1,
                    200712(b)
                Computation
                    of Ratios of Earnings to Fixed Charges for the three-, nine-,
                    and
                    twelve-month periods ended September 30, 2007, 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
  57
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            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:  October
          31, 2007
  58
 CLECO
                          CORPORATIONCLECO
                          POWER
                        2007 3RD
                            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:  October
          31, 2007
  59