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, 2009






Or






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


__________________





Commission
file number 1-15759


CLECO
CORPORATION


(Exact
name of registrant as specified in its charter)


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


__________________





Commission
file number 1-05663


CLECO
POWER LLC


(Exact
name of registrant as specified in its charter)


Louisiana
              (State
      or other jurisdiction of incorporation or organization)
            72-0244480
              (I.R.S.
      Employer Identification No.)2030
      Donahue Ferry Road, Pineville, Louisiana
              (Address
      of principal executive offices)
            71360-5226
              (Zip
      Code)Registrant’s
      telephone number, including area code:  (318)
      484-7400Indicate
      by check mark whether the Registrants: (1) have filed all reports required
      to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      Registrants were required to file such reports) and (2) have been subject
      to such filing requirements for the past 90 days.
              Yes
      x    No
       ̈Indicate
      by check mark whether the Registrants have submitted electronically and
      posted on their corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§232.405
      of this chapter) during the preceding 12 months (or for such shorter
      period that the Registrants were required to submit and post such
      files).  Yes  ̈    No
       ̈Indicate
      by check mark whether Cleco Corporation is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.  See definitions of “large accelerated filer,”
      “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
      Exchange Act.  (Check one):
              Large
      accelerated filer x           Accelerated
      filer  ̈
                       Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting
      company)            Smaller
      reporting company  ̈Indicate
      by check mark whether Cleco Power LLC is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.  See definitions of “large accelerated filer,”
      “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
      Exchange Act.  (Check one):
              Large
      accelerated filer  ̈           Accelerated
      filer  ̈
                       Non-accelerated
      filer x  (Do
      not check if a smaller reporting
      company)            Smaller
      reporting company  ̈Indicate
      by check mark whether the Registrants are shell companies (as defined in
      Rule 12b-2 of the Exchange Act)  Yes ̈    No
      x


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






Registrant
              Description of Class
              Shares Outstanding at October 27,
      2009Cleco
      Corporation
              Common
      Stock, $1.00 Par Value
              60,479,653






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
                      2009 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 Consolidated
Financial Statements are combined.




TABLE
OF CONTENTS


PAGEGLOSSARY
      OF TERMS
            3CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS
            5PART
      I
            Financial
      InformationITEM
      1.
            Cleco
      Corporation — Condensed Consolidated Financial Statements
            7Cleco
      Power — Condensed Consolidated Financial Statements
            15Notes
      to the Unaudited Condensed Consolidated Financial
    Statements
            20ITEM
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            44ITEM
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            62ITEM
      4 and 4T.
            Controls
      and Procedures
            64PART
      II
            Other
      InformationITEM
      1.
            Legal
      Proceedings
            65ITEM
      1A.
            Risk
      Factors
            65ITEM
      5.
            Other
      Information
            65ITEM
      6.
            Exhibits
            67Signatures
            68





2
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




GLOSSARY
OF TERMS







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





ABBREVIATION
      OR ACRONYM
            DEFINITION401(k)
      Plan
            Cleco
      Power 401(k) Savings and Investment PlanAcadia
            Acadia
      Power Partners, LLC and its combined-cycle, natural gas-fired power plant
      near Eunice, Louisiana, 50% owned by APH and 50% owned by
      Cajun.  Prior to September 13, 2007, Acadia was 50% owned by APH
      and 50% owned by Calpine Acadia Holdings, LLC.Acadiana
      Load Pocket
            An
      area in south central Louisiana that has experienced regular transmission
      constraints caused by local load and lack of
      generation.  Transmission within the Acadiana Load Pocket is
      owned by several entities, including Cleco Power.AFUDC
            Allowance
      for Funds Used During ConstructionAmended
      EPC Contract
            Amended
      and Restated EPC Contract between Cleco Power and Shaw, executed on May
      12, 2006, for engineering, procurement, and construction of Rodemacher
      Unit 3, as amended by Amendment No. 1 thereto effective March 9, 2007,
      Amendment No. 2 thereto dated as of July 2, 2008, Amendment No. 3 thereto
      dated as of July 22, 2009, and Amendment No. 4 thereto dated October 19,
      2009.APH
            Acadia
      Power Holdings LLC, a wholly owned subsidiary of
  MidstreamAttala
            Attala
      Transmission LLC, a wholly owned subsidiary of Cleco
      Corporation.  Prior to February 1, 2007, Attala was a wholly
      owned subsidiary of Midstream.Bear
      Energy
            BE
      Louisiana LLC, an indirect wholly owned subsidiary of JPMorgan Chase &
      Co.  In September 2008, BE Louisiana LLC was merged into
      JPMVEC.Bear
      Stearns Companies Inc.
            The
      parent company of Bear, Stearns & Co. Inc.Cajun
            Cajun
      Gas Energy L.L.C.Cleco
      Energy
            Cleco
      Energy LLC, a wholly owned subsidiary of MidstreamCleco
      Innovations LLC
            A
      wholly owned subsidiary of Cleco CorporationCleco
      Katrina/Rita
            Cleco
      Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of
      Cleco PowerCodification
            FASB Accounting Standards
      CodificationTM
      the source of authoritative U.S. GAAP recognized by the FASB to be applied
      by nongovernmental entities.Diversified
      Lands
            Diversified
      Lands LLC, a wholly owned subsidiary of Cleco Innovations LLCEntergy
            Entergy
      CorporationEntergy
      Gulf States
            Entergy
      Gulf States, Inc.Entergy
      Louisiana
            Entergy
      Louisiana, LLCEntergy
      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 OrganizationESPP
            Cleco
      Corporation Employee Stock Purchase PlanEvangeline
            Cleco
      Evangeline LLC, a wholly owned subsidiary of Midstream, and its
      combined-cycle, natural gas-fired power plant located in Evangeline
      Parish, LouisianaEvangeline
      Tolling Agreement
            Capacity
      Sale and Tolling Agreement between Evangeline and BE Louisiana LLC (as
      successor to Williams Power Company, Inc. (formerly known as Williams
      Energy Marketing & Trading Company)) which expires in
      2020.  In September 2008, BE Louisiana LLC was merged into
      JPMVEC.FASB
            Financial
      Accounting Standards BoardFERC
            Federal
      Energy Regulatory CommissionGAAP
            Generally
      Accepted Accounting Principles in the United StatesGDP-IPD
            Gross
      Domestic Product – Implicit Price DeflatorGO
      Zone
            Gulf
      Opportunity Zone Act of 2005 (Public Law 109-135)ICT
            Independent
      Coordinator of TransmissionInterconnection
      Agreement
            One
      of two Interconnection Agreement and Real Estate Agreements, one between
      Attala and Entergy Mississippi, and the other between Perryville and
      Entergy LouisianaIRP
            Integrated
      Resource PlanningIRS
            Internal
      Revenue ServiceJPMVEC
            J.P.
      Morgan Ventures Energy Corporation.  In September 2008, Bear
      Energy was merged into JPMVEC.kWh
            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 PlanMidstream
            Cleco
      Midstream Resources LLC, a wholly owned subsidiary of Cleco
      CorporationMMBtu
            Million
      British thermal unitsMoody’s
            Moody’s
      Investors ServiceMW
            Megawatt(s)
      as applicableNAC
            North
      American Coal CorporationOCI
            Other
      Comprehensive Income




3
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





ABBREVIATION
      OR ACRONYM
            DEFINITIONPCAOB
            Public
      Company Accounting Oversight BoardPCB
            Polychlorinated
      biphenylsPerryville
            Perryville
      Energy Partners, L.L.C., a wholly owned subsidiary of Cleco
      Corporation.  Prior to February 1, 2007, Perryville was a wholly
      owned subsidiary of Perryville Energy Holdings LLC, a wholly owned
      subsidiary of Midstream.Power
      Purchase Agreement
            Power
      Purchase Agreement, dated as of January 28, 2004, between Perryville and
      Entergy ServicesPRP
            Potentially
      responsible partyRegistrant(s)
            Cleco
      Corporation and Cleco PowerRFP
            Request
      for ProposalRodemacher
      Unit 3
            A
      600-MW solid-fuel generating unit under construction by Cleco Power at its
      existing Rodemacher plant site in Boyce, LouisianaRTO
            Regional
      Transmission OrganizationSale
      Agreement
            Purchase
      and Sale Agreement, dated as of January 28, 2004, between Perryville and
      Entergy LouisianaSEC
            Securities
      and Exchange CommissionSERP
            Cleco
      Corporation Supplemental Executive Retirement PlanShaw
            Shaw
      Contractors, Inc., a subsidiary of The Shaw Group Inc.Support
      Group
            Cleco
      Support Group LLC, a wholly owned subsidiary of Cleco
      CorporationSWEPCO
            Southwestern
      Electric Power Company, a wholly owned subsidiary of American Electric
      Power Company, Inc.VaR
            Value-at-riskWilliams
            Williams
      Power Company, Inc.







4
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CAUTIONARY
NOTE 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; JPMVEC’s performance
under the Evangeline Tolling Agreement; future capital expenditures;
projections; business strategies; goals; competitive strengths; market and
industry developments; development and operation of facilities; future
environmental regulations and remediation liabilities; and the anticipated
outcome of various regulatory and legal proceedings.  Although the
Registrants believe that the expectations reflected in such forward-looking
statements are reasonable, such forward-looking statements are based on numerous
assumptions (some of which may prove to be incorrect) and are subject to risks
and uncertainties that could cause the actual results to differ materially from
the Registrants’ expectations.  In addition to any assumptions and
other factors referred to specifically in connection with these forward-looking
statements, the following list identifies some of the factors that could cause
the Registrants’ actual results to differ materially from those contemplated in
any of the Registrants’ forward-looking statements:




§
            Factors
      affecting utility operations, such as unusual weather conditions or other
      natural phenomena; catastrophic weather-related damage (such as hurricanes
      and other storms); 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; decreased customer load; environmental
      incidents; environmental compliance costs; 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;




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




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




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




§
            The
      current global financial crisis and U.S.
  recession;




§
            Credit
      ratings of Cleco Corporation, Cleco Power, and
  Evangeline;




§
            Ability
      to remain in compliance with debt
covenants;




§
            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;




§
            Uncertain
      tax positions;




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




§
            Legal,
      environmental, and regulatory delays and other obstacles associated with
      mergers, acquisitions, reorganizations, investments in joint ventures, or
      other capital projects, including Rodemacher Unit 3, the joint project to
      upgrade the Acadiana Load Pocket transmission system, Cleco Power’s
      acquisition of 50% of Acadia, and Entergy Louisiana’s acquisition of the
      remaining 50% of Acadia;




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




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




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




5
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




For
additional discussion of these factors and other factors that could cause actual
results to differ materially from those contemplated in the Registrants’
forward-looking statements, please read “Risk Factors” in the Registrants’
Combined Annual Report on Form 10-K for the fiscal year ended December 31,
2008.





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.





6
 CLECO
      CORPORATIONCLECO POWER
                      2009 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, 2008.  For more information on the basis of
presentation, see “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 1 — Summary of Significant Accounting Policies — Basis of
Presentation.”





7
 CLECO
      CORPORATIONCLECO POWER
                      2009 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)
            
            2009
            
            
            2008Operating
      revenueElectric
    operations
            
            $
            228,952
            
            
            $
            333,936Other operations
            
            
            9,859
            
            
            
            7,004Affiliate
revenue
            
            
            2,689
            
            
            
            2,735Total operating
      revenue
            
            
            241,500
            
            
            
            343,675Operating
      expensesFuel used for electric
      generation
            
            
            74,585
            
            
            
            93,717Power purchased for utility
      customers
            
            
            61,943
            
            
            
            150,502Other operations
            
            
            26,667
            
            
            
            24,822Maintenance
            
            
            10,452
            
            
            
            10,754Depreciation
            
            
            19,620
            
            
            
            19,283Taxes other than income
      taxes
            
            
            7,479
            
            
            
            9,033Loss on sale of
      assets
            
            
            77
            
            
            
            -Total operating
      expenses
            
            
            200,823
            
            
            
            308,111Operating
      income
            
            
            40,677
            
            
            
            35,564Interest
      income
            
            
            369
            
            
            
            1,669Allowance
      for other funds used during construction
            
            
            17,813
            
            
            
            17,786Equity
      income from investees
            
            
            15,587
            
            
            
            9,662Other
      income
            
            
            2,079
            
            
            
            937Other
      expense
            
            
            (849
            )
            
            
            (2,276
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium, and discount, net of capitalized
      interest
            
            
            17,361
            
            
            
            20,619Allowance for borrowed funds
      used during construction
            
            
            (6,523
            )
            
            
            (4,923
            )Total interest
      charges
            
            
            10,838
            
            
            
            15,696Income
      before income taxes
            
            
            64,838
            
            
            
            47,646Federal
      and state income tax expense
            
            
            4,983
            
            
            
            10,513Net
      income
            
            
            59,855
            
            
            
            37,133Preferred
      dividends requirements, net of tax
            
            
            12
            
            
            
            12Net
      income applicable to common stock
            
            $
            59,843
            
            
            $
            37,121Average
      shares of common stock outstandingBasic
            
            
            60,234,243
            
            
            
            60,031,962Diluted
            
            
            60,556,768
            
            
            
            60,291,616Basic
      earnings per shareFrom continuing
      operations
            
            $
            0.99
            
            
            $
            0.62Net income applicable to common
      stock
            
            $
            0.99
            
            
            $
            0.62Diluted
      earnings per shareFrom continuing
      operations
            
            $
            0.99
            
            
            $
            0.62Net income applicable to common
      stock
            
            $
            0.99
            
            
            $
            0.62Cash
      dividends paid per share of common stock
            
            $
            0.225
            
            
            $
            0.225The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





8
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CLECO
CORPORATION







Condensed
Consolidated Statements of Comprehensive Income (Unaudited)





FOR
      THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Net
      income
            
            $
            59,855
            
            
            $
            37,133Other
      comprehensive loss, net of tax:Net unrealized loss from
      available-for-sale securities (net of tax benefit of $11 in
      2008)
            
            
            -
            
            
            
            (24
            )Amortization of post-retirement
      benefit net loss (net of tax benefit of $91 in 2009 and $130 in
      2008)
            
            
            (123
            )
            
            
            (153
            )Cash flow hedge:Net derivatives loss arising
      during the period (net of tax benefit of $356 in 2009)
            
            
            (569
            )
            
            
            -Reclassification to interest
      expense (net of tax expense of $36 in 2009)
            
            
            58
            
            
            
            -Other
      comprehensive loss
            
            
            (634
            )
            
            
            (177
            )Comprehensive
      income, net of tax
            
            $
            59,221
            
            
            $
            36,956The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.






9
 CLECO
      CORPORATIONCLECO POWER
                      2009 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)
            
            2009
            
            
            2008Operating
      revenueElectric
    operations
            
            $
            627,469
            
            
            $
            803,397Other operations
            
            
            25,680
            
            
            
            29,826Affiliate
revenue
            
            
            8,513
            
            
            
            7,790Total operating
      revenue
            
            
            661,662
            
            
            
            841,013Operating
      expensesFuel used for electric
      generation
            
            
            213,213
            
            
            
            162,140Power purchased for utility
      customers
            
            
            164,209
            
            
            
            392,245Other operations
            
            
            77,557
            
            
            
            69,958Maintenance
            
            
            35,777
            
            
            
            35,456Depreciation
            
            
            58,233
            
            
            
            57,970Taxes other than income
      taxes
            
            
            22,812
            
            
            
            27,320Loss (gain) on sale of
      assets
            
            
            77
            
            
            
            (99
            )Total operating
      expenses
            
            
            571,878
            
            
            
            744,990Operating
      income
            
            
            89,784
            
            
            
            96,023Interest
      income
            
            
            1,051
            
            
            
            4,544Allowance
      for other funds used during construction
            
            
            52,341
            
            
            
            46,462Equity
      income from investees
            
            
            710
            
            
            
            2,723Other
      income
            
            
            4,753
            
            
            
            1,094Other
      expense
            
            
            (2,181
            )
            
            
            (4,322
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium, and discount, net of capitalized
      interest
            
            
            58,827
            
            
            
            49,884Allowance for borrowed funds
      used during construction
            
            
            (19,157
            )
            
            
            (14,526
            )Total interest
      charges
            
            
            39,670
            
            
            
            35,358Income
      before income taxes
            
            
            106,788
            
            
            
            111,166Federal
      and state income tax expense
            
            
            13,258
            
            
            
            22,573Net
      income
            
            
            93,530
            
            
            
            88,593Preferred
      dividends requirements, net of tax
            
            
            35
            
            
            
            35Net
      income applicable to common stock
            
            $
            93,495
            
            
            $
            88,558Average
      shares of common stock outstandingBasic
            
            
            60,167,644
            
            
            
            59,975,190Diluted
            
            
            60,390,454
            
            
            
            60,146,501Basic
      earnings per shareFrom continuing
      operations
            
            $
            1.55
            
            
            $
            1.48Net income applicable to common
      stock
            
            $
            1.55
            
            
            $
            1.48Diluted
      earnings per shareFrom continuing
      operations
            
            $
            1.55
            
            
            $
            1.47Net income applicable to common
      stock
            
            $
            1.55
            
            
            $
            1.47Cash
      dividends paid per share of common stock
            
            $
            0.675
            
            
            $
            0.675The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.






10
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CLECO
CORPORATION







Condensed
Consolidated Statements of Comprehensive Income (Unaudited)





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Net
      income
            
            $
            93,530
            
            
            $
            88,593Other
      comprehensive income (loss), net of tax:Net unrealized loss from
      available-for-sale securities (net of tax benefit of $11 in
      2008)
            
            
            -
            
            
            
            (68
            )Amortization of post-retirement
      benefit net loss (net of tax benefit of $119 in 2009 and $130 in
      2008)
            
            
            (120
            )
            
            
            (161
            )Cash flow hedge:Net derivatives loss arising
      during the period (net of tax benefit of $356 in 2009)
            
            
            (569
            )
            
            
            -Reclassification to interest
      expense (net of tax expense of $36 in 2009)
            
            
            58
            
            
            
            -Other
      comprehensive income (loss)
            
            
            (631
            )
            
            
            (229
            )Comprehensive
      income, net of tax
            
            $
            92,899
            
            
            $
            88,364The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.








11
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




CLECO
CORPORATION







Condensed
Consolidated Balance Sheets (Unaudited)





(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            AT
      DECEMBER 31, 2008AssetsCurrent assetsCash and cash
      equivalents
            
            $
            49,283
            
            
            $
            97,483Restricted cash
            
            
            25,124
            
            
            
            62,311Customer accounts receivable
      (less allowance for doubtful accounts of $1,576 in 2009 and $1,632 in
      2008)
            
            
            44,233
            
            
            
            40,677Accounts receivable –
      affiliate
            
            
            10,939
            
            
            
            3,428Other accounts receivable (less
      allowance for doubtful accounts of $22 in 2009 and $0 in
    2008)
            
            
            23,791
            
            
            
            34,209Taxes
receivable
            
            
            27,268
            
            
            
            13,663Unbilled
revenue
            
            
            23,250
            
            
            
            19,713Fuel inventory, at average
      cost
            
            
            75,191
            
            
            
            57,221Material and supplies
      inventory, at average cost
            
            
            41,136
            
            
            
            37,547Risk management assets,
      net
            
            
            4,679
            
            
            
            368Accumulated deferred
      fuel
            
            
            27,288
            
            
            
            69,154Cash surrender value of
      company-/trust-owned life insurance policies
            
            
            28,347
            
            
            
            22,934Prepayments
            
            
            2,651
            
            
            
            3,751Regulatory assets –
      other
            
            
            9,878
            
            
            
            2,553Other current
      assets
            
            
            1,824
            
            
            
            1,367Total current
      assets
            
            
            394,882
            
            
            
            466,379Property, plant and
      equipmentProperty, plant and
      equipment
            
            
            2,094,766
            
            
            
            2,015,269Accumulated
      depreciation
            
            
            (985,301
            )
            
            
            (948,581
            )Net property, plant and
      equipment
            
            
            1,109,465
            
            
            
            1,066,688Construction work in
      progress
            
            
            1,099,088
            
            
            
            978,598Total property, plant and
      equipment, net
            
            
            2,208,553
            
            
            
            2,045,286Equity investment in
      investees
            
            
            262,472
            
            
            
            249,144Prepayments
            
            
            5,103
            
            
            
            6,067Restricted cash
            
            
            30,916
            
            
            
            40,671Regulatory assets and
      liabilities – deferred taxes, net
            
            
            227,947
            
            
            
            174,804Regulatory assets –
      other
            
            
            206,386
            
            
            
            158,206Intangible asset
            
            
            159,801
            
            
            
            167,826Other deferred
      charges
            
            
            33,158
            
            
            
            32,821Total assets
            
            $
            3,529,218
            
            
            $
            3,341,204The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





(Continued
      on next page)





12
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CLECO
CORPORATION







Condensed
Consolidated Balance Sheets (Unaudited) (Continued)





(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            AT
      DECEMBER 31, 2008Liabilities
      and shareholders’ equityLiabilitiesCurrent
    liabilitiesLong-term debt due within one
      year
            
            $
            11,478
            
            
            $
            63,546Accounts
payable
            
            
            69,657
            
            
            
            117,337Retainage
            
            
            28
            
            
            
            12,734Accounts payable –
      affiliate
            
            
            12,284
            
            
            
            8,229Customer
    deposits
            
            
            33,155
            
            
            
            27,155Interest
accrued
            
            
            16,390
            
            
            
            16,787Accumulated current deferred
      taxes, net
            
            
            52,160
            
            
            
            64,838Risk management liability,
      net
            
            
            17,521
            
            
            
            30,109Regulatory liabilities –
      other
            
            
            27,570
            
            
            
            392Deferred
      compensation
            
            
            6,652
            
            
            
            5,118Other current
      liabilities
            
            
            12,775
            
            
            
            14,588Total current
      liabilities
            
            
            259,670
            
            
            
            360,833Deferred creditsAccumulated deferred federal
      and state income taxes, net
            
            
            414,350
            
            
            
            373,825Accumulated deferred investment
      tax credits
            
            
            10,287
            
            
            
            11,286Postretirement benefit
      obligations
            
            
            142,571
            
            
            
            155,910Regulatory liabilities –
      other
            
            
            155,746
            
            
            
            85,496Restricted storm
      reserve
            
            
            25,090
            
            
            
            27,411Uncertain tax
      positions
            
            
            74,810
            
            
            
            76,124Other deferred
      credits
            
            
            91,360
            
            
            
            82,635Total deferred
      credits
            
            
            914,214
            
            
            
            812,687Long-term debt, net
            
            
            1,238,238
            
            
            
            1,106,819Total
    liabilities
            
            
            2,412,122
            
            
            
            2,280,339Commitments
      and Contingencies (Note 10)Shareholders’
      equityPreferred stockNot subject to mandatory
      redemption, $100 par value, authorized 1,491,000 shares, issued 10,288
      shares atSeptember
      30, 2009 and December 31, 2008, respectively
            
            
            1,029
            
            
            
            1,029Common shareholders’
      equityCommon stock, $1 par value,
      authorized 100,000,000 shares, issued 60,271,221 and 60,066,345 shares and
      outstanding 60,251,985and
      60,042,514 shares at September 30, 2009
                  and
      December 31, 2008, respectively
            
            
            60,271
            
            
            
            60,066Premium on common
      stock
            
            
            398,492
            
            
            
            394,517Retained
    earnings
            
            
            668,103
            
            
            
            615,514Treasury stock, at cost, 19,236
      and 23,831 shares at September 30, 2009 and December 31, 2008,
      respectively
            
            
            (335
            )
            
            
            (428
            )Accumulated other comprehensive
      loss
            
            
            (10,464
            )
            
            
            (9,833
            )Total common shareholders’
      equity
            
            
            1,116,067
            
            
            
            1,059,836Total shareholders’
      equity
            
            
            1,117,096
            
            
            
            1,060,865Total
      liabilities and shareholders’ equity
            
            $
            3,529,218
            
            
            $
            3,341,204The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.






13
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q


CLECO
CORPORATION







Condensed
Consolidated Statements of Cash Flows (Unaudited)





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Operating
      activitiesNet income
            
            $
            93,530
            
            
            $
            88,593Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation and
      amortization
            
            
            96,051
            
            
            
            81,335Loss (gain) on sale of
      assets
            
            
            77
            
            
            
            (99
            )Provision for doubtful
      accounts
            
            
            1,444
            
            
            
            2,906Return on equity investment in
      investees
            
            
            750
            
            
            
            8,690Income from equity
      investments
            
            
            (710
            )
            
            
            (2,723
            )Unearned compensation
      expense
            
            
            4,388
            
            
            
            2,994Allowance for other funds used
      during construction
            
            
            (52,341
            )
            
            
            (46,462
            )Amortization of investment tax
      credits
            
            
            (999
            )
            
            
            (1,035
            )Net deferred income taxes
            
            
            (6,061
            )
            
            
            (10,098
            )Deferred fuel costs
            
            
            20,035
            
            
            
            (25
            )Loss on economic
      hedges
            
            
            144
            
            
            
            434Cash surrender value of
      company-/trust-owned life insurance
            
            
            (4,406
            )
            
            
            2,603Changes in assets and
      liabilities:Accounts
    receivable
            
            
            1,351
            
            
            
            (24,414
            )Accounts and notes receivable,
      affiliate
            
            
            (7,511
            )
            
            
            14,373Unbilled
revenue
            
            
            (3,537
            )
            
            
            (1,583
            )Fuel, materials and supplies
      inventory
            
            
            (21,559
            )
            
            
            (4,336
            )Prepayments
            
            
            1,761
            
            
            
            1,725Accounts
payable
            
            
            (40,667
            )
            
            
            6,456Accounts and notes payable,
      affiliate
            
            
            (9,882
            )
            
            
            (38,472
            )Customer
    deposits
            
            
            10,155
            
            
            
            4,396Post retirement benefit
      obligations
            
            
            (13,339
            )
            
            
            -Regulatory assets and
      liabilities, net
            
            
            34,201
            
            
            
            32,119Other deferred
      accounts
            
            
            (33,299
            )
            
            
            (63,971
            )Retainage
    payable
            
            
            (12,706
            )
            
            
            10,551Taxes accrued
            
            
            188
            
            
            
            22,874Interest
accrued
            
            
            (396
            )
            
            
            (2,289
            )Risk management assets and
      liabilities, net
            
            
            (2,337
            )
            
            
            (8,827
            )Other operating
            
            
            (894
            )
            
            
            1,387Net cash provided by operating
      activities
            
            
            53,431
            
            
            
            77,102Investing
      activitiesAdditions to property, plant and
      equipment
            
            
            (190,296
            )
            
            
            (264,303
            )Allowance for other funds used
      during construction
            
            
            52,341
            
            
            
            46,462Proceeds from sale of property,
      plant and equipment
            
            
            570
            
            
            
            99Return of equity investment in
      investees
            
            
            850
            
            
            
            95Contributions to equity
      investees
            
            
            (29,666
            )
            
            
            (14,697
            )Premiums paid on
      company-/trust-owned life insurance
            
            
            (400
            )
            
            
            (629
            )Settlements received from
      insurance policies
            
            
            -
            
            
            
            941Net transfer of cash from (to)
      restricted accounts
            
            
            46,942
            
            
            
            (44,625
            )Other investing
            
            
            -
            
            
            
            599Net cash used in investing
      activities
            
            
            (119,659
            )
            
            
            (276,058
            )Financing
      activitiesRetirement of long-term
      obligations
            
            
            (114,805
            )
            
            
            (350,231
            )Repayment of capital
      leases
            
            
            (1,028
            )
            
            
            (87
            )Issuance of long-term
      debt
            
            
            173,000
            
            
            
            537,541Deferred financing
      costs
            
            
            (517
            )
            
            
            (315
            )Dividends paid on preferred
      stock
            
            
            (35
            )
            
            
            (35
            )Dividends paid on common stock
            
            
            (40,654
            )
            
            
            (40,521
            )Other financing
            
            
            2,067
            
            
            
            983Net cash provided by financing
      activities
            
            
            18,028
            
            
            
            147,335Net
      decrease in cash and cash equivalents
            
            
            (48,200
            )
            
            
            (51,621
            )Cash
      and cash equivalents at beginning of period
            
            
            97,483
            
            
            
            129,013Cash
      and cash equivalents at end of period
            
            $
            49,283
            
            
            $
            77,392Supplementary
      cash flow informationInterest paid (net of amount
      capitalized)
            
            $
            51,327
            
            
            $
            33,950Income taxes paid
            
            $
            8,131
            
            
            $
            40,180Supplementary
      non-cash investing and financing activitiesIssuance of treasury stock –
      LTICP
            
            $
            93
            
            
            $
            79Issuance of common stock –
      LTICP/ESPP
            
            $
            217
            
            
            $
            93Accrued additions to property,
      plant and equipment not reported above
            
            $
            1,179
            
            
            $
            10,868Incurrence of capital lease
      obligation – barges
            
            $
            22,050
            
            
            $
            -The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





14
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





PART
I — FINANCIAL INFORMATION







ITEM
1.CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS








Cleco
Power


These
unaudited condensed consolidated financial statements should be read in
conjunction with Cleco Power’s Consolidated Financial Statements and Notes
included in the Registrants’ Combined Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.  For more information on the basis of
presentation, see “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 1 — Summary of Significant Accounting Policies — Basis of
Presentation.”





15
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




CLECO
POWER







Condensed
Consolidated Statements of Income (Unaudited)





FOR
      THE THREE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Operating
      revenueElectric
    operations
            
            $
            228,952
            
            
            $
            333,936Other operations
            
            
            9,834
            
            
            
            6,981Affiliate
revenue
            
            
            349
            
            
            
            425Total operating
      revenue
            
            
            239,135
            
            
            
            341,342Operating
      expensesFuel used for electric
      generation
            
            
            74,585
            
            
            
            93,717Power purchased for utility
      customers
            
            
            61,943
            
            
            
            150,502Other operations
            
            
            25,165
            
            
            
            23,242Maintenance
            
            
            9,602
            
            
            
            9,719Depreciation
            
            
            19,310
            
            
            
            18,861Taxes other than income
      taxes
            
            
            7,809
            
            
            
            8,732Loss on sale of
      assets
            
            
            70
            
            
            
            -Total operating
      expenses
            
            
            198,484
            
            
            
            304,773Operating
      income
            
            
            40,651
            
            
            
            36,569Interest
      income
            
            
            341
            
            
            
            1,545Allowance
      for other funds used during construction
            
            
            17,813
            
            
            
            17,786Other
      income
            
            
            538
            
            
            
            956Other
      expense
            
            
            (830
            )
            
            
            (779
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium, and discount
            
            
            20,168
            
            
            
            19,896Allowance for borrowed funds
      used during construction
            
            
            (6,523
            )
            
            
            (4,923
            )Total interest
      charges
            
            
            13,645
            
            
            
            14,973Income
      before income taxes
            
            
            44,868
            
            
            
            41,104Federal
      and state income taxes
            
            
            1,316
            
            
            
            10,566Net
      income
            
            $
            43,552
            
            
            $
            30,538The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.





16
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q


CLECO
POWER







Condensed
Consolidated Statements of Income (Unaudited)





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Operating
      revenueElectric
    operations
            
            $
            627,469
            
            
            $
            803,397Other operations
            
            
            25,609
            
            
            
            29,757Affiliate
revenue
            
            
            1,046
            
            
            
            1,527Total operating
      revenue
            
            
            654,124
            
            
            
            834,681Operating
      expensesFuel used for electric
      generation
            
            
            213,213
            
            
            
            162,140Power purchased for utility
      customers
            
            
            164,209
            
            
            
            392,245Other operations
            
            
            72,814
            
            
            
            65,862Maintenance
            
            
            32,705
            
            
            
            32,556Depreciation
            
            
            57,339
            
            
            
            56,886Taxes other than income
      taxes
            
            
            23,172
            
            
            
            24,727Loss on sale of
      assets
            
            
            70
            
            
            
            -Total operating
      expenses
            
            
            563,522
            
            
            
            734,416Operating
      income
            
            
            90,602
            
            
            
            100,265Interest
      income
            
            
            999
            
            
            
            3,121Allowance
      for other funds used during construction
            
            
            52,341
            
            
            
            46,462Other
      income
            
            
            2,138
            
            
            
            1,172Other
      expense
            
            
            (2,985
            )
            
            
            (1,643
            )Interest
      chargesInterest charges, including
      amortization of debt expenses, premium, and discount
            
            
            59,443
            
            
            
            45,961Allowance for borrowed funds
      used during construction
            
            
            (19,157
            )
            
            
            (14,526
            )Total interest
      charges
            
            
            40,286
            
            
            
            31,435Income
      before income taxes
            
            
            102,809
            
            
            
            117,942Federal
      and state income taxes
            
            
            14,033
            
            
            
            27,135Net
      income
            
            $
            88,776
            
            
            $
            90,807The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.








17
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CLECO
POWER







Condensed
Consolidated Balance Sheets (Unaudited)





(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            AT DECEMBER 31,
    2008AssetsUtility plant and
      equipmentProperty, plant and
      equipment
            
            $
            2,078,372
            
            
            $
            1,999,119Accumulated
      depreciation
            
            
            (973,398
            )
            
            
            (937,568
            )Net property, plant and
      equipment
            
            
            1,104,974
            
            
            
            1,061,551Construction work in
      progress
            
            
            1,097,865
            
            
            
            977,377Total utility plant,
      net
            
            
            2,202,839
            
            
            
            2,038,928Current assetsCash and cash
      equivalents
            
            
            35,010
            
            
            
            91,542Restricted cash
            
            
            25,124
            
            
            
            62,311Customer accounts receivable
      (less allowance for doubtful accounts of $1,576 in 2009 and $1,632 in
      2008)
            
            
            44,233
            
            
            
            40,677Other accounts receivable (less
      allowance for doubtful accounts of $22 in 2009 and $0 in
    2008)
            
            
            22,787
            
            
            
            34,130Taxes
receivable
            
            
            -
            
            
            
            5,992Accounts receivable –
      affiliate
            
            
            2,452
            
            
            
            2,059Unbilled
revenue
            
            
            23,250
            
            
            
            19,713Fuel inventory, at average
      cost
            
            
            75,191
            
            
            
            57,221Material and supplies
      inventory, at average cost
            
            
            41,136
            
            
            
            37,547Risk management assets,
      net
            
            
            4,679
            
            
            
            368Prepayments
            
            
            2,273
            
            
            
            3,099Regulatory assets –
      other
            
            
            9,878
            
            
            
            2,553Accumulated deferred
      fuel
            
            
            27,288
            
            
            
            69,154Cash surrender value of life
      insurance policies
            
            
            5,722
            
            
            
            5,563Other current
      assets
            
            
            1,031
            
            
            
            1,144Total current
      assets
            
            
            320,054
            
            
            
            433,073Prepayments
            
            
            5,103
            
            
            
            6,067Restricted cash
            
            
            30,820
            
            
            
            40,574Regulatory assets and
      liabilities – deferred taxes, net
            
            
            227,947
            
            
            
            174,804Regulatory assets –
      other
            
            
            206,386
            
            
            
            158,206Intangible asset
            
            
            159,801
            
            
            
            167,826Other deferred
      charges
            
            
            21,865
            
            
            
            22,119Total
      assets
            
            $
            3,174,815
            
            
            $
            3,041,597Liabilities
      and member’s equityMember’s equity
            
            $
            987,119
            
            
            $
            929,178Long-term debt,
    net
            
            
            1,120,238
            
            
            
            1,076,819Total
      capitalization
            
            
            2,107,357
            
            
            
            2,005,997Current
      liabilitiesLong-term debt due within one
      year
            
            
            11,478
            
            
            
            63,546Accounts payable
            
            
            65,974
            
            
            
            109,450Accounts payable –
      affiliate
            
            
            6,325
            
            
            
            7,536Retainage
            
            
            28
            
            
            
            12,734Customer
deposits
            
            
            33,155
            
            
            
            27,155Taxes accrued
            
            
            36,011
            
            
            
            -Interest accrued
            
            
            16,740
            
            
            
            16,762Accumulated deferred taxes,
      net
            
            
            54,546
            
            
            
            67,233Risk management liability,
      net
            
            
            17,521
            
            
            
            30,109Regulatory liabilities –
      other
            
            
            27,570
            
            
            
            392Other current
      liabilities
            
            
            10,353
            
            
            
            10,200Total current
      liabilities
            
            
            279,701
            
            
            
            345,117Deferred
      creditsAccumulated deferred federal and
      state income taxes, net
            
            
            386,654
            
            
            
            337,148Accumulated deferred investment
      tax credits
            
            
            10,287
            
            
            
            11,286Postretirement benefit
      obligations
            
            
            113,391
            
            
            
            128,373Regulatory liabilities –
      other
            
            
            155,746
            
            
            
            85,496Restricted storm
      reserve
            
            
            25,090
            
            
            
            27,411Uncertain tax
      positions
            
            
            54,509
            
            
            
            54,306Other deferred
      credits
            
            
            42,080
            
            
            
            46,463Total deferred
      credits
            
            
            787,757
            
            
            
            690,483Total
      liabilities and member’s equity
            
            $
            3,174,815
            
            
            $
            3,041,597The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.








18
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





CLECO
POWER







Condensed
Consolidated Statements of Cash Flows (Unaudited)





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Operating
      activitiesNet income
            
            $
            88,776
            
            
            $
            90,807Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation and
      amortization
            
            
            66,496
            
            
            
            63,543Loss on sale of
      assets
            
            
            70
            
            
            
            -Provision for doubtful
      accounts
            
            
            1,444
            
            
            
            2,901Unearned compensation
      expense
            
            
            1,348
            
            
            
            867Allowance for other funds used
      during construction
            
            
            (52,341
            )
            
            
            (46,462
            )Amortization of investment tax
      credits
            
            
            (999
            )
            
            
            (1,035
            )Net deferred income
      taxes
            
            
            4,552
            
            
            
            (4,577
            )Deferred fuel costs
            
            
            20,035
            
            
            
            (25
            )Loss on economic
      hedges
            
            
            144
            
            
            
            434Cash surrender value of
      company-owned life insurance
            
            
            (641
            )
            
            
            (317
            )Changes in assets and
      liabilities:Accounts
    receivable
            
            
            2,273
            
            
            
            (24,760
            )Accounts and notes receivable,
      affiliate
            
            
            (272
            )
            
            
            15,209Unbilled
revenue
            
            
            (3,537
            )
            
            
            (1,583
            )Fuel, materials and supplies
      inventory
            
            
            (21,559
            )
            
            
            (4,336
            )Prepayments
            
            
            2,272
            
            
            
            1,636Accounts
payable
            
            
            (36,375
            )
            
            
            8,947Accounts and notes payable,
      affiliate
            
            
            (1,643
            )
            
            
            (12,990
            )Customer
    deposits
            
            
            10,155
            
            
            
            4,396Post retirement benefit
      obligations
            
            
            (14,982
            )
            
            
            (772
            )Regulatory assets and
      liabilities, net
            
            
            34,201
            
            
            
            32,119Other deferred
      accounts
            
            
            (31,404
            )
            
            
            (68,764
            )Retainage
    payable
            
            
            (12,706
            )
            
            
            10,551Taxes accrued
            
            
            42,003
            
            
            
            17,872Interest
accrued
            
            
            (22
            )
            
            
            2,043Risk management assets and
      liabilities, net
            
            
            (2,337
            )
            
            
            (8,827
            )Other operating
            
            
            60
            
            
            
            2,191Net cash provided by operating
      activities
            
            
            95,011
            
            
            
            79,068Investing
      activitiesAdditions to property, plant and
      equipment
            
            
            (190,047
            )
            
            
            (263,454
            )Allowance for other funds used
      during construction
            
            
            52,341
            
            
            
            46,462Proceeds from sale of property,
      plant and equipment
            
            
            570
            
            
            
            99Premiums paid on company-owned
      life insurance
            
            
            -
            
            
            
            (424
            )Net transfer of cash from (to)
      restricted accounts
            
            
            46,942
            
            
            
            (44,624
            )Other investing
            
            
            1
            
            
            
            -Net cash used in investing
      activities
            
            
            (90,193
            )
            
            
            (261,941
            )Financing
      activitiesRetirement of long-term
      obligations
            
            
            (114,805
            )
            
            
            (250,231
            )Repayment of capital
      leases
            
            
            (1,028
            )
            
            
            (87
            )Issuance of long-term
      debt
            
            
            85,000
            
            
            
            489,541Distribution to
      parent
            
            
            (30,000
            )
            
            
            -Deferred financing
      costs
            
            
            (517
            )
            
            
            (315
            )Net cash (used in) provided by
      financing activities
            
            
            (61,350
            )
            
            
            238,908Net
      (decrease) increase in cash and cash equivalents
            
            
            (56,532
            )
            
            
            56,035Cash
      and cash equivalents at beginning of period
            
            
            91,542
            
            
            
            11,944Cash
      and cash equivalents at end of period
            
            $
            35,010
            
            
            $
            67,979Supplementary
      cash flow informationInterest paid (net of amount
      capitalized)
            
            $
            50,086
            
            
            $
            29,531Income taxes
paid
            
            $
            8,104
            
            
            $
            2,100Supplementary
      non-cash investing and financing activitiesAccrued additions to property,
      plant and equipment not reported above
            
            $
            1,179
            
            
            $
            10,868Incurrence of capital lease
      obligation – barges
            
            $
            22,050
            
            
            $
            -The
      accompanying notes are an integral part of the condensed consolidated
      financial statements.








19
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q













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





Notes
to the Unaudited Condensed Consolidated Financial Statements





Note
1 — Summary of Significant Accounting Policies








Principles
of Consolidation


The
accompanying condensed consolidated financial statements of Cleco include the
accounts of Cleco and its majority-owned subsidiaries after elimination of
intercompany accounts and transactions.


Using
the authoritative guidance for variable interest entities, Cleco has determined
that it is not the primary beneficiary of Evangeline, Perryville, Attala, and
Acadia.  Cleco determined it was not the primary beneficiary by
examining all interests that could absorb expected losses and expected
gains.  This examination used assumptions about the expected rate of
inflation, changes in the market price of natural gas as compared to the market
price of electricity, length of contracts, variability of revenue stream as
compared to variability of expenses, and maximum exposure to
loss.  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 or loss from investees on Cleco
Corporation’s Condensed Consolidated Statements of Income.  For
additional information on the operations of these entities, see Note 9 — “Equity
Investment in Investees.”




Basis
of Presentation


The
condensed consolidated financial statements of Cleco Corporation and Cleco Power
have been prepared pursuant to the rules and regulations of the
SEC.  Accordingly, certain information and note disclosures normally
included in financial statements prepared in accordance with GAAP have been
condensed or omitted; however, 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
GAAP.  The unaudited financial information included in the condensed
consolidated financial statements of Cleco Corporation and Cleco Power reflects
all adjustments of a normal recurring nature which are, in the opinion of the
management of Cleco Corporation and Cleco Power, necessary for a fair statement
of the financial position and the results of operations for the interim
periods.  Information for interim periods is affected by seasonal
variations in sales, rate changes, timing of fuel expense recovery and other
factors, and is not indicative necessarily of the results that may be expected
for the full fiscal year.  For more information on recent accounting
standards and their effect on financial results, see Note 2 — “Recent Accounting
Standards.”




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, 2009, and December 31, 2008,
$56.0 million and $103.0 million of cash, respectively, were
restricted.  The $47.0 million decrease is primarily due to the use of
$17.4 million of funds for GO Zone project costs, the release of $14.7 million
for the construction of Cleco Power’s solid waste disposal facilities at
Rodemacher Unit 3, a $12.7 million net decrease in Cleco Katrina/Rita restricted
cash due to the payment of operating expenses, interest, and principal on storm
recovery bonds, offset by collections, and Cleco Power’s use of $2.2 million for
approved storm damage costs.  At September 30, 2009, restricted cash
consisted of $0.1 million under the Diversified Lands mitigation escrow
agreement, $27.2 million reserved at Cleco Power for GO





20
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Zone
project costs, $25.2 million reserved at Cleco Power for future storm
restoration costs, and $3.5 million at Cleco Katrina/Rita restricted for payment
of operating expenses, interest, and principal on storm recovery
bonds.




Fair
Value Measurements and Disclosures


Various
accounting pronouncements require certain assets and liabilities to be measured
at their fair values.  Some assets and liabilities are required to be
measured at their fair value each reporting period, while others are required to
be measured only one time, generally the date of acquisition or
issuance.  Cleco and Cleco Power are required to disclose the fair
value of certain assets and liabilities by one of three levels when required for
recognition purposes under GAAP.  Other financial assets and liabilities,
such as long-term debt, are reported at their carrying values at their date of
issuance on the condensed consolidated balance sheets with their fair values
disclosed without regard to the three levels.  For more information
about fair value levels, see Note 4 — “Fair Value Accounting.”




Risk
Management


Market
risk inherent in Cleco Power’s market risk-sensitive instruments and positions
includes potential changes arising from changes in interest rates and the
commodity market prices of power and natural gas on different energy
exchanges.  Cleco’s Energy Market Risk Management Policy authorizes
the use of various derivative instruments, including exchange traded 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 uses the authoritative guidance as it relates to
derivatives and hedging 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 because Cleco Power takes physical delivery and the
instruments and positions are used to satisfy customer
requirements.  Cleco Power has entered into certain financial
transactions it considers economic hedges to mitigate the risk associated with
the fixed-price power to be provided to a wholesale customer through December
2010.  The economic hedges cover approximately 98% of the estimated
daily peak-hour power sales to the wholesale customer.  These
transactions meet the definition of derivatives 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.  For the three and nine
months ended September 30, 2009, and 2008, 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)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Realized
      (loss) gain
            
            $
            (524
            )
            
            $
            163
            
            
            $
            (1,405
            )
            
            $
            950Mark-to-marketgain
      (loss)
            
            
            487
            
            
            
            (4,940
            )
            
            
            (144
            )
            
            
            (433
            )Total (loss) gain
            
            $
            (37
            )
            
            $
            (4,777
            )
            
            $
            (1,549
            )
            
            $
            517




Cleco
Power has entered into other positions to mitigate the volatility in customer
fuel costs.  These positions are marked-to-market with the resulting
gain or loss recorded on the balance sheet as a component of the accumulated
deferred fuel asset or liability and a component of risk management assets or
liabilities.  When these positions close, actual gains or losses will
be included in the fuel adjustment clause and reflected on customers’ bills as a
component of the fuel cost adjustment.  Based on market prices at
September 30, 2009, and December 31, 2008, the net mark-to-market impact
relating to these positions were losses of $29.6 million and $57.4 million,
respectively.  The decreased loss is primarily due to the closing of
certain natural gas positions.  Deferred losses relating to closed
natural gas positions totaled $6.4 million at September 30, 2009, and December
31, 2008.


Cleco
Power maintains margin accounts with commodity brokers used to partially fund
the acquisition of natural gas futures, options, and swap
contracts.  These contracts/positions are used to mitigate the risks
associated with the fixed-price power sales and volatility in customer fuel
costs noted above.  At September 30, 2009, and December 31, 2008,
Cleco Power had deposited net collateral of $12.5 million and $16.5 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, counterparty credit
exposure, and counterparty concentration levels.  Cleco 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.


In
August 2009, Cleco Power entered into a $50.0 million bank loan with variable
interest, paid monthly, calculated at 3.00% plus the one-month
LIBOR.  The loan matures on August 19, 2012, and can be repaid before
maturity without penalty.  In order to mitigate risk of the future
floating interest rates, Cleco Power entered into an interest rate
swap.  Based on the notional amount of the bank loan, the swap
requires a monthly net settlement between Cleco Power’s fixed payment of 1.84%
and the swap counterparty’s floating payment of the one-month
LIBOR.  The swap matures on May 31, 2012.  Under the
authoritative guidance for derivatives and hedging, the swap meets the criteria
of a cash flow hedge.  Changes in the swap’s fair value related to the
effective portion of cash flow hedges are recognized in other comprehensive
income, whereas changes in the fair value related to the ineffective





21
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





portion
are recognized in earnings.  As time passes and settlements are made,
the swap’s other comprehensive income fair values are reclassified into earnings
as a component of interest expense.  For the three and nine months
ended September 30, 2009, there were $0.1 million of reclassification
adjustments from other comprehensive income to interest


expense.  There
was no impact to earnings due to ineffectiveness for the three or nine months
ended September 30, 2009.  For more information on accounting for
derivatives, see Note 4 — “Fair Value Accounting.”




Earnings
per Average Common Share


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





FOR THE THREE MONTHS ENDED
      SEPTEMBER 30,2009
            
            
            
            
            
            
            
            
            2008(THOUSANDS,
      EXCEPT SHARES AND PER SHARE AMOUNTS)
            
            INCOME
            
            
            SHARES
            
            
            PER SHARE
              AMOUNT
            
            
            INCOME
            
            
            SHARES
            
            
            PER SHARE
              AMOUNTNet
      income
            
            $
            59,855
            
            
            
            
            
            
            
            
            $
            37,133Deduct:  non-participating
      stock dividends (4.5% preferred stock)
            
            
            12
            
            
            
            
            
            
            
            
            
            12Basic
      earnings per shareNet
      income applicable to common stock
            
            $
            59,843
            
            
            
            
            
            $
            0.99
            
            
            $
            37,121
            
            
            
            
            
            $
            0.62Total
      basic net income applicable to common stock
            
            $
            59,843
            
            
            
            60,234,243
            
            
            $
            0.99
            
            
            $
            37,121
            
            
            
            60,031,962
            
            
            $
            0.62Effect
      of Dilutive SecuritiesAdd:  stock
      option grants
            
            
            
            
            
            
            28,578
            
            
            
            
            
            
            
            
            
            
            
            62,289Add:  restricted
      stock (LTICP)
            
            
            
            
            
            
            293,947
            
            
            
            
            
            
            
            
            
            
            
            197,365Diluted
      earnings per shareNet
      income applicable to common stock
            
            $
            59,843
            
            
            
            
            
            
            $
            0.99
            
            
            $
            37,121
            
            
            
            
            
            
            $
            0.62Total
      diluted net income applicable to common stock
            
            $
            59,843
            
            
            
            60,556,768
            
            
            $
            0.99
            
            
            $
            37,121
            
            
            
            60,291,616
            
            
            $
            0.62







FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,2009
            
            
            
            
            
            
            
            
            2008(THOUSANDS,
      EXCEPT SHARES AND PER SHARE AMOUNTS)
            
            INCOME
            
            
            SHARES
            
            
            PER SHARE
              AMOUNT
            
            
            INCOME
            
            
            SHARES
            
            
            PER SHARE
              AMOUNTNet
      income
            
            $
            93,530
            
            
            
            
            
            
            
            
            $
            88,593Deduct:  non-participating
      stock dividends (4.5% preferred stock)
            
            
            35
            
            
            
            
            
            
            
            
            
            35Basic
      earnings per shareNet
      income applicable to common stock
            
            $
            93,495
            
            
            
            
            
            $
            1.55
            
            
            $
            88,558
            
            
            
            
            
            $
            1.48Total
      basic net income applicable to common stock
            
            $
            93,495
            
            
            
            60,167,644
            
            
            $
            1.55
            
            
            $
            88,558
            
            
            
            59,975,190
            
            
            $
            1.48Effect
      of Dilutive SecuritiesAdd:  stock
      option grants
            
            
            
            
            
            
            26,269
            
            
            
            
            
            
            
            
            
            
            
            63,833Add:  restricted
      stock (LTICP)
            
            
            
            
            
            
            196,541
            
            
            
            
            
            
            
            
            
            
            
            107,478Diluted
      earnings per shareNet
      income applicable to common stock
            
            $
            93,495
            
            
            
            
            
            
            $
            1.55
            
            
            $
            88,558
            
            
            
            
            
            
            $
            1.47Total
      diluted net income applicable to common stock
            
            $
            93,495
            
            
            
            60,390,454
            
            
            $
            1.55
            
            
            $
            88,558
            
            
            
            60,146,501
            
            
            $
            1.47




During
the first quarter of 2009, Cleco implemented an amendment to the authoritative
guidance for calculating basic earnings per share.  For additional
information on Cleco’s implementation of Codification Topic Earnings Per Share,
see Note 2 — “Recent Accounting Standards.”


Stock
option grants are excluded from the computation of diluted earnings per share if
the exercise price is higher than the average market price.  There
were no stock option grants excluded from the computation of diluted earnings
per share for the three or nine months ended September 30, 2008, due to the
average market price being higher than the exercise prices of the stock
options.  Stock option grants excluded from the computation for the
three and nine months ended September 30, 2009, are presented in the following
tables.





FOR THE THREE MONTHS ENDED
      SEPTEMBER 30, 2009STRIKE PRICE
            
            
            AVERAGE
              MARKET PRICE
            
            
            SHARESStock
      option grants excluded
            
            $
            24.00 -$24.25
            
            
            $
            23.90
            
            
            
            36,433





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30, 2009STRIKE PRICE
            
            
            AVERAGE
              MARKET PRICE
            
            
            SHARESStock
      option grants excluded
            
            $
            22.69 -$24.25
            
            
            $
            22.50
            
            
            
            69,433





Employee
Stock Purchase Plan


In July
2000, Cleco Corporation’s Board of Directors ratified the adoption of a
procedure providing for the automatic reinvestment of dividends (the “DRIP
Feature”) received with respect to the stock held by participants in the
ESPP.  At that time, the Board of Directors reserved 20,000 shares of
common stock (40,000 after giving effect for a 2-for-1 stock split) for issuance
pursuant to the DRIP Feature.  In January 2009, the Board of Directors
approved and authorized an additional 50,000 shares of common stock to be
reserved for issuance under the DRIP Feature of the ESPP.




Stock-Based
Compensation


At
September 30, 2009, Cleco had one share-based compensation plan:  the
LTICP.  Options or restricted shares of Cleco Corporation common
stock, known as non-vested stock


compensation,
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 30, 2009, Cleco granted 97,149 shares of non-vested stock and 74,253
common stock equivalent units to


22
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





certain
officers, key employees, and directors of Cleco Corporation and its subsidiaries
pursuant to the LTICP.


Cleco
and Cleco Power reported pre-tax compensation expense for their share-based
compensation plans as shown in the following table:





CLECO
      CORPORATION
            
            CLECO
      POWER
            
            
            CLECO
      CORPORATION
            
            
            CLECO
      POWERFOR
      THE THREE MONTHS ENDED SEPTEMBER 30,
            
            
            
            
            
            FOR
      THE NINE MONTHS ENDED SEPTEMBER 30,(THOUSANDS)
            2009
            
            
            2008
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Equity
      classificationNon-vested
      stock
            $
            563
            
            
            $
            396
            
            $
            150
            
            
            $
            113
            
            
            $
            1,618
            
            
            $
            1,179
            
            
            $
            432
            
            
            $
            310Stock
      options
            
            13
            
            
            
            14
            
            
            -
            
            
            
            -
            
            
            
            38
            
            
            
            42
            
            
            
            -
            
            
            
            -Total
            $
            576
            
            
            $
            410
            
            $
            150
            
            
            $
            113
            
            
            $
            1,656
            
            
            $
            1,221
            
            
            $
            432
            
            
            $
            310Liability
      classificationCommon
      stock equivalent units
            $
            1,244
            
            
            $
            827
            
            $
            428
            
            
            $
            308
            
            
            $
            2,418
            
            
            $
            1,504
            
            
            $
            916
            
            
            $
            557Total
      pre-tax compensation expense
            $
            1,820
            
            
            $
            1,237
            
            $
            578
            
            
            $
            421
            
            
            $
            4,074
            
            
            $
            2,725
            
            
            $
            1,348
            
            
            $
            867Tax
      benefit (excluding income tax gross-up)
            $
            700
            
            
            $
            476
            
            $
            222
            
            
            $
            162
            
            
            $
            1,568
            
            
            $
            1,049
            
            
            $
            519
            
            
            $
            334





Note
2 — Recent Accounting Standards





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


In April
2008, FASB amended the factors that should be considered in developing renewal
or extension assumptions used to determine the useful life of a recognized
intangible asset.  This amendment allows an entity to use its own
experience in renewing arrangements or to use market assumptions about renewal
in determining the useful life of a recognized intangible asset.  This
amendment also requires additional disclosure about the renewal
costs.  This amendment is effective for financial statements issued
for fiscal years and interim periods beginning after December 15,
2008.  The adoption of this amendment did not have an impact on the
financial condition or results of operations of the Registrants.


In June
2008, FASB amended the authoritative guidance on earnings per share to determine
whether non-vested instruments issued in share-based payment transactions are
participating securities when calculating earnings per share.  This
amendment states that non-vested share-based instruments that contain
nonforfeitable rights to dividends or dividend equivalents are participating
securities and are required to be included in the computation of earnings per
share pursuant to the two-class method.  This amendment is effective
for fiscal years and interim periods beginning after December 15,
2008.  Earnings per share for prior periods presented are required to
be adjusted retrospectively to conform to this amendment.  The
implementation of this amendment did not have an impact on the financial
condition or results of operations of the Registrants.


In
September 2008, FASB amended the authoritative guidance on fair value
measurements and disclosures for accounting and disclosure at fair value for
liabilities that contain inseparable third-party credit
enhancements.  This amendment requires issuers of liabilities to
exclude the third-party credit enhancement when calculating the fair value of
the liability for both recognition and disclosure purposes.  Also,
proceeds received by the issuer for liabilities within the scope of this
amendment represent consideration for both the liability and the credit
enhancement and shall be allocated to both the liability and the premium for the
credit enhancement.  The provisions of this amendment are effective on
a prospective basis in the first reporting period beginning on or after December
15, 2008.  The implementation of this amendment did not have an impact
on the financial condition or results of operations of the
Registrants.


In
December 2008, FASB amended the authoritative guidance for compensation as it
relates to retirement benefits and an employer’s disclosures about plan assets
of a defined benefit pension or other postretirement plan.  This
amendment also includes a technical change that requires a nonpublic entity to
disclose net periodic benefit cost for each annual period for which a statement
of income is presented.  This amendment is effective for the first
fiscal year ending after December 15, 2009.  Since the adoption of
this amendment is a change in disclosure, the adoption will not have any effect
on the financial condition or results of operations of the
Registrants.


In
February 2009, the SEC issued its final rules requiring public companies to
provide the SEC with supplemental financial information in interactive data
format using eXtensible Business Reporting Language or XBRL.  The
information will be provided as an exhibit to the related SEC
filing.  The Registrants are required to include certain financial
information in XBRL format in certain SEC filings beginning with the fiscal
period ending June 30, 2010.


On April
1, 2009, FASB amended the authoritative guidance on business combinations to
address application issues raised by preparers, auditors, and members of the
legal profession on initial recognition and measurement, subsequent measurement
and accounting, and disclosure of assets and liabilities arising from
contingencies in a business combination.  This amendment applies to
all assets acquired and liabilities assumed in a business combination that arise
from contingencies that would be within the scope of the contingencies
accounting standard if the contingency is not acquired or assumed in a business
combination, except for assets and liabilities arising from contingencies that
are subject to specific guidance in the business combinations accounting
standard.  An acquirer shall develop a systematic and rational basis
for subsequently measuring and accounting for assets and liabilities arising
from contingencies depending on their nature.  An acquirer shall
disclose information that enables users of its financial statements to evaluate
the nature and financial effects of a business combination that occurs either
during the current reporting period or after the reporting period but before the
financial statements are issued.  This





23
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





amendment
was effective for assets and liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  The adoption of this amendment had no impact on the financial
condition or results of operations of the Registrants.


On April
9, 2009, FASB amended the other-than-temporary impairment guidance in GAAP for
debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements.  If the fair value of a
debt security is less than its amortized value, these amendments require
companies to assess whether the impairment is recognized depending on a
combination of its intent to sell the security and its ability to hold the
security until recovery of its amortized cost basis.  If an entity
intends to sell the debt security or it is more likely than not the entity will
be required to sell the security, an other-than-temporary impairment is
considered to have occurred and an impairment expense equal to the difference
between fair market value and amortized costs should be
recognized.  If an entity does not intend to sell the security and it
is not more likely than not the entity will be required to sell the security,
then the entity will only recognize the credit loss as an
expense.  The amount of loss relating to other factors will be
recognized as a reduction in other comprehensive income.  These
amendments also include guidance on calculating credit loss and additional
disclosures.  These amendments are effective for interim and annual
reporting periods ending after June 15, 2009.  The implementation of
these amendments did not have an impact on the financial condition or results of
operations of the Registrants.


On April
9, 2009, FASB amended the accounting standard to provide additional guidance for
estimating fair value when the volume and level of activity for the asset or
liability have significantly decreased.  This amendment also includes
guidance on identifying circumstances that indicate a transaction is not
orderly.  This amendment applies to all assets and liabilities within
the scope of the fair value accounting standard.  When weighing
indications of fair value resulting from the use of multiple valuation
techniques, a reporting entity shall consider the reasonableness of the range of
fair value estimates.  The objective is to determine the point within
that range that is most representative of fair value under current market
conditions.  A reporting entity shall evaluate the circumstances to
determine whether the transaction is orderly based on the weight of the
evidence.  In its determinations, a reporting entity need not
undertake all possible efforts, but shall not ignore information that is
available without undue cost and effort.  A reporting entity would be
expected to have sufficient information to conclude whether a transaction is
orderly when it is party to the transaction.  This amendment is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively.  This amendment does not require
disclosures for earlier periods presented for comparative purposes at initial
adoption.  In periods after initial adoption, this amendment requires
comparative disclosures only for periods ending after initial
adoption.  The implementation of this amendment did not have an impact
on the financial condition or results of operations of the
Registrants.


On April
9, 2009, FASB amended the accounting standards which require disclosures about
fair value of financial instruments for interim reporting periods of publicly
traded companies.  These amendments apply to all financial instruments
within the scope of the authoritative guidance for financial instruments,
financial services, and receivables held by publicly traded
companies.  A publicly traded company shall include disclosures about
the fair value of its financial instruments whenever it issues summarized
financial information for interim reporting periods.  These amendments
shall be effective for interim reporting periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15,
2009.  These amendments do not require disclosures for earlier periods
presented for comparative purposes at initial adoption.  In periods
after initial adoption, these amendments require comparative disclosures only
for periods ending after initial adoption.  Since the adoption of
these amendments is only a change in disclosure, adoption did not have any
effect on the financial condition or results of operations of the
Registrants.


On June
4, 2009, FASB amended the authoritative guidance on accounting for events
occurring subsequent to the balance sheet date, but before the issuance of
financial statements.  Certain subsequent events would require an
entity to make adjustments to the financial statements and disclosure, whereas
other events would only require disclosure.  Additionally, all
entities are required to disclose the date through which they have evaluated
subsequent events and whether the date corresponds with the release of their
financial statements.  This amendment is effective for financial
statements issued for fiscal years and interim periods beginning after June 15,
2009.  Implementation of this amendment did not have an impact on the
financial condition or results of operations of the Registrants.


On June
12, 2009, FASB amended the authoritative guidance on transfer and servicing to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets.  This amendment
is effective for fiscal years beginning after November 15,
2009.  Implementation of this amendment is not expected to have an
impact on the financial condition or results of operations of the
Registrants.


On June
12, 2009, FASB amended the authoritative guidance on consolidation which
requires an enterprise to perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity.  In order to be the primary
beneficiary of a variable interest entity, an enterprise must have (a) the power
to direct the activities of a variable interest entity that most significantly
impact the entity’s economic performance,





24
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





and (b)
the obligation to absorb losses of the entity that could potentially be
significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity.  Along with these criteria, an enterprise is now required to
assess whether it has an implicit financial responsibility to ensure that a
variable interest entity operates as designed when determining (a)
above.  Also, the enterprise is required to perform ongoing
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity.  The quantitative approach previously required for
determining the primary beneficiary has been eliminated.  Additional
disclosures are now required in order to provide users of financial statements
with more transparent information about an enterprise’s involvement in a
variable interest entity.  This amendment is effective for the first
fiscal year beginning after November 15, 2009.  Management is
currently evaluating the impact this amendment will have on the financial
condition and results of operations of the Registrants.


On June
29, 2009, FASB amended the authoritative guidance which identified the sources
of accounting principles and the framework for selecting
them.  Codification has become the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental
entities.  This amendment was effective for financial statements
issued for interim and annual periods ending after September 15,
2009.


On
August 28, 2009, FASB amended the authoritative guidance on fair value
measurements and disclosures in order to clarify the fair value of a
liability.  The best measurement of a liability would be a quoted
price in an active market of the liability or an identical
liability.  If the quoted price of the liability is not available,
then an entity could use a quoted price of the liability quoted as an asset,
quoted prices of similar liabilities traded as assets, or a valuation technique
consistent with the principles contained in the Fair Value Measurements and
Disclosures Topic, such as present value.  If an asset quote is used,
the fair market value should be adjusted for factors specific to an asset that
is not applicable to a liability.  Regardless of the method used to
determine fair value, restrictions on transfer of the liability should not be
factored into the valuation of the liability.  This amendment is
effective for the first reporting period beginning after October 1,
2009.  Management believes the adoption of this amendment will not
have a material effect on the financial condition or results of operations of
the Registrants.


In
September 2009, FASB issued various technical corrections to the Codification
that did not have a material effect on the financial condition or results of
operations of the Registrants.


In
September 2009, the FASB amended revenue recognition of arrangements with
multiple deliverables.  If an arrangement
contains multiple deliverables, the selling entity must first determine the best
estimate of the selling price of each deliverable.  Then the selling
entity must allocate the selling price of the entire arrangement based upon the
relative best estimate of the selling price of each deliverable.  This
amendment also contains additional disclosures such as the nature of the
arrangement, significant deliverables and general timing.  This
amendment is effective for arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010.  Management is
currently evaluating the impact this amendment will have on the financial
condition or results of operations of the Registrants.




Note
3 — Regulatory Assets and Liabilities





Cleco
Power follows the authoritative guidance of regulated operations 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, 2009, and December 31, 2008:





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,(THOUSANDS)
            
            2009
            
            
            2008Regulatory
      assets and liabilities – deferred taxes, net
            
            $
            227,947
            
            
            $
            174,804Deferred
      mining costs
            
            $
            24,853
            
            
            $
            26,811Deferred
      interest costs
            
            
            7,495
            
            
            
            7,779Deferred
      asset removal costs
            
            
            698
            
            
            
            658Deferred
      postretirement plan costs
            
            
            110,819
            
            
            
            112,213Deferred
      tree trimming costs
            
            
            12,010
            
            
            
            5,915Deferred
      training costs
            
            
            5,716
            
            
            
            2,520Deferred
      storm surcredit, net
            
            
            5,842
            
            
            
            4,863Deferred
      construction carrying costs
            
            
            48,831
            
            
            
            -Regulatory assets –
      other
            
            $
            216,264
            
            
            $
            160,759Deferred
      fuel transportation revenue
            
            $
            (85
            )
            
            $
            (392
            )Deferred
      construction carrying costs
            
            
            (183,231
            )
            
            
            (85,496
            )Regulatory liabilities –
      other
            
            $
            (183,316
            )
            
            $
            (85,888
            )Deferred
      fuel and purchased power
            
            
            27,288
            
            
            
            69,154Total regulatory assets and
      liabilities, net
            
            $
            288,183
            
            
            $
            318,829




Deferred
Taxes


Cleco
Power has recorded a net regulatory asset related to deferred income taxes in
accordance with the authoritative guidance on income taxes.  The
related regulatory asset or liability recorded represents the effect of tax
benefits or detriments that must be flowed through to customers as they are
received or paid.  Generally, 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.  At September 30, 2009, Cleco
Power had regulatory assets and liabilities – deferred taxes, net of $227.9
million.  The $53.1 million increase from December 31, 2008, was
primarily the result of the collection and deferral of carrying costs for Cleco
Power’s construction of Rodemacher Unit 3.




Deferred
Tree Trimming Costs
 In
January 2008, the LPSC approved Cleco Power’s request to establish a regulatory
asset for costs incurred to trim, cut, or remove trees that were damaged by
Hurricanes Katrina and Rita, but were not addressed as part of the restoration
efforts.  The regulatory asset is capped at $12.0 million in actual
expenditures plus a 12.4% grossed-up rate of return.  Recovery of
these expenditures was requested in Cleco Power’s base




25
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




rate
application filed on July 14, 2008, and was approved by the LPSC on October 14,
2009.  At September 30, 2009, the regulatory asset consisted of $10.9
million of actual expenditures and $1.1 million related to the grossed-up rate
of return.




Deferred
Training Costs


In
February 2008, the LPSC approved Cleco Power’s request to establish a regulatory
asset which is being charged with training costs associated with existing
processes and technology for new employees at Rodemacher Unit
3.  Recovery of these expenditures was requested in Cleco Power’s base
rate application filed on July 14, 2008, and were covered by the retail rate
plan which was approved by the LPSC on October 14, 2009.  At September
30, 2009, Cleco Power had deferred $5.7 million of Rodemacher Unit 3 training
costs.




Deferred
Storm Surcredit, net


Cleco
Power has recorded a storm surcredit as the result of a settlement with the LPSC
that addressed, among other things, the recovery of the storm damages related to
Hurricanes Katrina and Rita.  In the settlement, Cleco Power was
required to implement a surcredit to provide ratepayers with the economic
benefit of the carrying charges of all accumulated deferred income tax
liabilities due to the storm damage costs at a 12.2% rate of return which was
set in LPSC Order No. U-29157A.  The accumulated deferred income tax
liability includes deductions for operation and maintenance expense, casualty
loss, and depreciation against taxable income in the year incurred and all
subsequent periods.  The settlement, through a true-up mechanism,
allows the surcredit to be adjusted to reflect the actual tax deductions allowed
by the IRS.


Cleco
Power also was allowed to record a corresponding regulatory asset in an amount
representing the flow back of the carrying charges to
ratepayers.  This amount is being amortized over the life of the storm
recovery bonds. The corresponding regulatory asset will be adjusted through the
same surcredit true-up mechanism at the time of a final determination of the tax
benefit for storm damage costs by the IRS.


As a
result of the settlement with the LPSC, Cleco Power was required to implement a
surcredit when funds were withdrawn from the restricted storm
reserve.  In October 2008, Cleco Power withdrew funds from the
restricted storm reserve to pay for damage caused by Hurricanes Gustav and Ike
resulting in the establishment of a surcredit.  However, rather than
refunding this amount, Cleco Power requested and received approval from the LPSC
to replenish the restricted storm reserve.  At September 30, 2009,
Cleco Power had $5.8 million in deferred storm surcredit, net.




Deferred
Construction Carrying Costs


In
February 2006, the LPSC approved Cleco Power’s plans to build Rodemacher Unit
3.  Terms of the approval included authorization for Cleco Power to
collect from customers an amount equal to 75% of the LPSC-jurisdictional portion
of the carrying costs of capital during the construction phase of the unit. In
any calendar year during the construction period, the amount collected from
customers is not to exceed 6.5% of Cleco Power’s projected retail
revenues.  Cleco Power began collection of the carrying costs and
established a regulatory liability in May 2006.  As of September 30,
2009, Cleco Power had collected $134.4 million in construction carrying
costs.


On
October 14, 2009, the LPSC voted unanimously to approve Cleco Power’s retail
rate plan.  The retail rate plan establishes that a minimum of $183.2
million be returned to customers over a five-year period and that Cleco Power
will record a regulatory asset for all amounts above the actual amount collected
from customers.  At September 30, 2009, Cleco Power recognized the
minimum regulatory liability of $183.2 million and the related regulatory asset
of $48.8 million.  Upon commercial operations of Rodemacher Unit 3,
the regulatory asset will be amortized over a five-year period.  At
September 30, 2009, $27.5 million was due to be returned to customers within one
year.




Deferred
Fuel and Purchased Power Costs


The cost
of fuel used for electric generation and the cost of power purchased for utility
customers are recovered through the LPSC-established fuel adjustment clause,
which enables Cleco Power to pass on to its customers substantially all such
charges.  For the three months ended September 30, 2009, approximately
95% of Cleco Power’s total fuel cost was regulated by the LPSC, while the
remainder was regulated by FERC.  Deferred fuel and purchased power
costs recorded at September 30, 2009, and December 31, 2008, were
under-recoveries of $27.3 million and $69.2 million, respectively, and are
scheduled to be collected from customers in future months.  The $41.9
million decrease in the under-recovered funds was primarily the result of a
$27.8 million decreased loss in the mark-to-market of natural gas hedge
positions due to the close of certain natural gas positions, and the collection
of $14.9 million in additional fuel and purchased power costs.  These
decreases were partially offset by the deferral of $0.6 million in additional
fuel and purchased power costs.  For additional information on Cleco
Power’s treatment of natural gas hedges, see Note 1 — “Summary of Significant
Accounting Policies — Risk Management.”




Note
4 — Fair Value Accounting





The
amounts reflected in the Condensed Consolidated Balance Sheets of Cleco and
Cleco Power at September 30, 2009, and December 31, 2008, for cash and cash
equivalents, restricted cash, accounts receivable, accounts payable, and
short-term debt approximate fair value because of their short-term nature. 
Estimates of the fair value of Cleco and Cleco Power’s long-term debt and
Cleco’s nonconvertible preferred stock are based upon the quoted market price
for the same or similar
issues or by a discounted present value analysis of future cash flows using
current rates obtained by Cleco and Cleco Power for debt and by Cleco for
preferred stock with similar maturities. The
estimated fair value of energy market positions is based upon observed market
prices when available.  When such market prices are not available,
management estimates market value at a discrete point in time by assessing
market





26
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





conditions
and observed volatility.  These estimates are subjective in nature and
involve uncertainties.  Therefore, actual results may differ from these
estimates.







Cleco


AT SEPTEMBER 30,
            
            
            AT DECEMBER 31,2009
            
            
            
            
            
            2008(THOUSANDS)
            
            CARRYING
              VALUE
            
            
            ESTIMATED
              FAIR VALUE
            
            
            CARRYING
              VALUE
            
            
            ESTIMATED
              FAIR VALUEFinancial
      instruments not marked-to-marketCash and cash
      equivalents
            
            $
            49,283
            
            
            $
            49,283
            
            
            $
            97,483
            
            
            $
            97,483Restricted cash
            
            $
            56,040
            
            
            $
            56,040
            
            
            $
            102,982
            
            
            $
            102,982Long-term debt, excluding debt
      issuance costs
            
            $
            1,232,545
            
            
            $
            1,242,206
            
            
            $
            1,172,874
            
            
            $
            1,110,171Preferred stock not subject to
      mandatory redemption
            
            $
            1,029
            
            
            $
            792
            
            
            $
            1,029
            
            
            $
            699







AT SEPTEMBER 30,
            
            
            
            
            
            AT DECEMBER 31,2009
            
            
            
            
            
            
            
            
            2008(THOUSANDS)
            
            ORIGINAL
              VALUE
            
            
            OTHER
              UNREALIZED
              LOSSES
              DURING
              THE PERIOD
            
            
            ESTIMATED
              FAIR VALUE
            
            
            ORIGINAL
              VALUE
            
            
            OTHER
              UNREALIZED
              LOSSES
      DURING
              THE
      PERIOD
            
            
            ESTIMATED
              FAIR VALUEFinancial
      instruments marked-to-marketEnergy market
      positionsAssets
            
            $
            104,075
            
            
            $
            (17,064
            )
            
            $
            86,487
            
            
            $
            159,432
            
            
            $
            (47,293
            )
            
            $
            117,851Liabilities
            
            $
            151,943
            
            
            $
            (12,942
            )
            
            $
            139,001
            
            
            $
            221,083
            
            
            $
            (10,315
            )
            
            $
            210,768Interest rate swap
      liability
            
            $
            -
            
            
            $
            (833
            )
            
            $
            833
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -




Cleco
Power


AT SEPTEMBER 30,
              
              
              AT DECEMBER 31,2009
              
              
              
              
              
              2008(THOUSANDS)
              
              CARRYING
                VALUE
              
              
              ESTIMATED
                FAIR VALUE
              
              
              CARRYING
                VALUE
              
              
              ESTIMATED
                FAIR VALUEFinancial
      instruments not marked-to-marketCash and cash
      equivalents
              
              $
              35,010
              
              
              $
              35,010
              
              
              $
              91,542
              
              
              $
              91,542Restricted cash
              
              $
              55,944
              
              
              $
              55,944
              
              
              $
              102,885
              
              
              $
              102,885Long-term debt, excluding debt
      issuance costs
              
              $
              1,114,545
              
              
              $
              1,124,206
              
              
              $
              1,142,874
              
              
              $
              1,080,171






AT SEPTEMBER 30,
            
            
            
            
            
            AT DECEMBER 31,2009
            
            
            
            
            
            
            
            
            2008(THOUSANDS)
            
            ORIGINAL
              VALUE
            
            
            OTHER
              UNREALIZED
              LOSSES
              DURING
              THE
      PERIOD
            
            
            ESTIMATED
              FAIR VALUE
            
            
            ORIGINAL
              VALUE
            
            
            OTHER
              UNREALIZED
              LOSSES
      DURING
              THE
      PERIOD
            
            
            ESTIMATED
              FAIR VALUEFinancial
      instruments marked-to-marketEnergy market
      positionsAssets
            
            $
            104,075
            
            
            $
            (17,064
            )
            
            $
            86,487
            
            
            $
            159,432
            
            
            $
            (47,293
            )
            
            $
            117,851Liabilities
            
            $
            151,943
            
            
            $
            (12,942
            )
            
            $
            139,001
            
            
            $
            221,083
            
            
            $
            (10,315
            )
            
            $
            210,768Interest rate swap
      liability
            
            $
            -
            
            
            $
            (833
            )
            
            $
            833
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





The
financial instruments not marked-to-market are reported on Cleco’s and Cleco
Power’s Consolidated Balance Sheets at carrying value.  The financial
instruments marked-to-market represent market risk recorded in the financial
statements because, to the extent Cleco and Cleco Power have an open position,
they are exposed to the risk that fluctuating market prices may adversely affect
their financial condition or results of operations upon settlement. 
Original value represents the fair value of the positions at the time
originated.


At
September 30, 2009, Cleco and Cleco Power were exposed to concentration of
credit risk through their short-term investments classified as cash
equivalents.  Cleco had $45.2 million in short-term investments in an
institutional money market
fund.  If the money market funds failed to perform under the terms of
the investment, Cleco would be exposed to a loss of the invested
amounts.  Cleco Power had $31.0 million in short-term investments in
several institutional money market funds.  If the money market funds
failed to perform under the terms of the investments, Cleco Power would be
exposed to a loss of the invested amounts.  Collateral on these types
of investments is not required by either Cleco or Cleco Power.  In
order to mitigate potential credit risk, Cleco and Cleco Power have established
guidelines for short-term investments.  Money market funds must have
at least $1.0 billion in assets under management; must have been in existence
for not less than two years; must have portfolios not comprised of more than 50%
of securities issued by foreign entities; and must be rated in the top two
ratings’ categories by at least one nationally recognized rating
agency.  Commercial paper must be issued by a company with
headquarters in the U.S. and rated not less than A1 by Standard & Poor’s or
P1 by Moody’s.  For split-rated issuers, the second rating must not be
lower than


27
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





either
A2 or P2; the issuer’s long-term debt must be rated not lower than A by Standard
& Poor’s or A2 by Moody’s; and the issuer cannot be on negative credit
watch.  Investments in commercial paper rated A2 by Standard &
Poor’s or P2 by Moody’s may be made if approved by the appropriate level of
management.


Cleco
Power was exposed to concentration of credit risk through its energy marketing
assets.  At September 30, 2009, Cleco Power had energy marketing
assets with an estimated fair value of $86.5 million.  These energy
marketing assets represent open natural gas purchase positions, primarily
financial hedge transactions.  Cleco Power entered into these
positions to mitigate the volatility in the cost of fuel purchased for utility
generation and the risk associated with the fixed-price power that is being
provided to a wholesale customer through December 2010.  If the
counterparties to these assets fail to perform under the terms of the
investment, Cleco Power would be exposed to a loss of $86.5
million.  For information about credit risk management and how these
risks are mitigated on energy marketing assets, see Note 1 — “Summary of
Significant Accounting Policies — Risk Management.”




Interest
Rate Swap


In
August 2009, Cleco Power entered into a $50.0 million bank loan with variable
interest, paid monthly, and calculated at 3.00% plus the one-month
LIBOR.  The loan matures on August 19, 2012, and can be repaid before
maturity without penalty.  In order to mitigate risk of the future
floating interest rates, Cleco Power entered into an interest rate swap with
JPMorgan Chase Bank, N.A.  Based on the notional amount of the bank
loan, the swap requires a monthly net settlement between Cleco Power’s fixed
payment of 1.84% and the swap counterparty’s floating payment of the one-month
LIBOR.  The swap matures on May 31, 2012.  Both the bank
loan and the swap were effective the same day and require monthly payments near
the end of the month.  From the inception of the loan to September 30,
2009, Cleco Power recognized net interest expense equal to an annual rate of
4.84% on the bank loan.  Since both the bank loan and the swap require
payments near the end of the month, the cash payments are materially close to
the interest expense recognized.


The swap
is considered a derivative and is carried on the balance sheet at its fair
value.  Its fair value is calculated by the present value of the fixed
payments as compared to expected future LIBOR rates.  Since future
LIBOR rates are not available for each month until termination, quoted LIBOR
rates from an active exchange for observable time periods were used to create a
forward “LIBOR curve” for all months until termination.  Because of
the inputs and common techniques used to calculate fair value, the swap
valuation is considered Level 2.  The notional amount of $50.0 million
is only used to calculate the net interest payment and is not a part of the net
settlement itself.  As such, the repayment of the $50.0 million is
excluded from the fair value calculation.  The bank loan is carried on
the balance sheet at the original issuance amount, less principal
payments.


The swap
meets the criteria of a cash flow hedge under the authoritative guidance as it
relates to derivatives and hedging.  Changes in the swap’s fair value
related to the effective portion are recognized in other comprehensive income,
whereas changes in the fair value related to the ineffective portion are
recognized in earnings.  As time passes and settlements are made, the
swap’s other comprehensive income fair values are reclassified into earnings as
a component of interest expense.  For the three and nine months ended
September 30, 2009, there were $0.1 million of reclassification adjustments from
other comprehensive income to interest expense.  There was no impact
to earnings due to ineffectiveness for the three or nine months ended September
30, 2009.




Fair
Value Measurements and Disclosures


Entities
are required to classify assets and liabilities measured at their fair value
according to three different levels depending on the inputs used in determining
fair value.




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


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


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




The
tables below disclose for Cleco and Cleco Power the fair value of financial
assets and liabilities measured on a recurring basis and within the scope of the
authoritative guidance for fair value measurements and disclosures.







28
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Cleco


CLECO CONSOLIDATED FAIR VALUE
      MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              ASSETS
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)
            
            
            AT
      DECEMBER 31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              ASSETS
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)Asset
      DescriptionEnergy market
      derivatives
            
            $
            262
            
            
            $
            -
            
            
            $
            262
            
            
            $
            -
            
            
            $
            3,687
            
            
            $
            -
            
            
            $
            3,687
            
            
            $
            -Institutional money market 
      funds
            
            
            101,051
            
            
            
            -
            
            
            
            101,051
            
            
            
            -
            
            
            
            204,789
            
            
            
            -
            
            
            
            204,789
            
            
            
            -Total
            
            $
            101,313
            
            
            $
            -
            
            
            $
            101,313
            
            
            $
            -
            
            
            $
            208,476
            
            
            $
            -
            
            
            $
            208,476
            
            
            $
            -






CLECO CONSOLIDATED FAIR VALUE
      MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
              
              AT
      SEPTEMBER 30, 2009
              
              
              QUOTED
      PRICES IN
                ACTIVE MARKETS
                FOR IDENTICAL
                LIABILITIES
                (LEVEL 1)
              
              
              SIGNIFICANT
                OTHER
                OBSERVABLE
                INPUTS
                (LEVEL 2)
              
              
              SIGNIFICANT
                UNOBSERVABLE
                INPUTS
                (LEVEL 3)
              
              
              AT
      DECEMBER 31, 2008
              
              
              QUOTED
      PRICES IN
                ACTIVE MARKETS
                FOR IDENTICAL
                LIABILITIES
                (LEVEL 1)
              
              
              SIGNIFICANT
                OTHER
                OBSERVABLE
                INPUTS
                (LEVEL 2)
              
              
              SIGNIFICANT
                UNOBSERVABLE
                INPUTS
                (LEVEL 3)Liability
      DescriptionEnergy market
      derivatives
              
              $
              30,268
              
              
              $
              9,672
              
              
              $
              20,596
              
              
              $
              -
              
              
              $
              61,295
              
              
              $
              13,757
              
              
              $
              47,538
              
              
              $
              -Interest rate
    swap
              
              
              833
              
              
              
              -
              
              
              
              833
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
              
              $
              31,101
              
              
              $
              9,672
              
              
              $
              21,429
              
              
              $
              -
              
              
              $
              61,295
              
              
              $
              13,757
              
              
              $
              47,538
              
              
              $
              -






Cleco
Power


CLECO POWER FAIR VALUE
      MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              ASSETS
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)
            
            
            AT
      DECEMBER 31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              ASSETS
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)Asset
      DescriptionEnergy market
      derivatives
            
            $
            262
            
            
            $
            -
            
            
            $
            262
            
            
            $
            -
            
            
            $
            3,687
            
            
            $
            -
            
            
            $
            3,687
            
            
            $
            -Institutional money market funds
            
            
            86,851
            
            
            
            -
            
            
            
            86,851
            
            
            
            -
            
            
            
            198,989
            
            
            
            -
            
            
            
            198,989
            
            
            
            -Total
            
            $
            87,113
            
            
            $
            -
            
            
            $
            87,113
            
            
            $
            -
            
            
            $
            202,676
            
            
            $
            -
            
            
            $
            202,676
            
            
            $
            -





CLECO POWER FAIR VALUE
      MEASUREMENTS AT REPORTING DATE USING:(THOUSANDS)
            
            AT
      SEPTEMBER 30, 2009
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              LIABILITIES
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)
            
            
            AT
      DECEMBER 31, 2008
            
            
            QUOTED
      PRICES IN
              ACTIVE MARKETS
              FOR IDENTICAL
              LIABILITIES
              (LEVEL 1)
            
            
            SIGNIFICANT
              OTHER
              OBSERVABLE
              INPUTS
              (LEVEL 2)
            
            
            SIGNIFICANT
              UNOBSERVABLE
              INPUTS
              (LEVEL 3)Liability
      DescriptionEnergy market
      derivatives
            
            $
            30,268
            
            
            $
            9,672
            
            
            $
            20,596
            
            
            $
            -
            
            
            $
            61,295
            
            
            $
            13,757
            
            
            $
            47,538
            
            
            $
            -Interest rate
    swap
            
            
            833
            
            
            
            -
            
            
            
            833
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            $
            31,101
            
            
            $
            9,672
            
            
            $
            21,429
            
            
            $
            -
            
            
            $
            61,295
            
            
            $
            13,757
            
            
            $
            47,538
            
            
            $
            -





The
derivative assets and liabilities are classified as either current or
non-current depending on when the positions close.  All energy market
derivative current assets and current liabilities are reported as a net current
risk management asset or liability.  All energy market derivative
non-current assets and non-current liabilities are reported net in other
deferred charges or other deferred credits.  Net presentation is
appropriate due to the right of offset included in the master netting
agreements.  On the balance sheet, the net current and net non-current
energy market derivative positions are netted with the applicable margin
deposits.  At September 30, 2009, a net current risk management asset
of $4.7 million represented current deferred options.  At September
30, 2009, a net current risk management liability of $17.5 million represented
the current energy market derivative positions of $30.1 million reduced by
current margin deposits of $12.6 million.  The non-current asset
energy market derivative positions of $0.1 million reduced by non-current margin
collections of less than $0.1 million were recorded in other deferred
credits.  The $101.1 million in institutional money market funds was
reported on the Cleco Consolidated balance sheet in cash and cash equivalents,
current restricted cash, and non-current restricted cash in the amounts of $45.2
million, $25.1 million, and $30.8 million, respectively.  At Cleco
Power, cash and cash equivalents, current restricted cash, and restricted
non-current cash were $31.0 million, $25.1 million, and $30.8 million,
respectively, as of September 30, 2009.


Cleco
utilizes different valuation techniques for fair value
calculations.  In order to measure the fair value for Level 1 assets
and liabilities, Cleco obtains the closing price from published indices in
active markets for the various instruments and multiplies this price by the
appropriate number of instruments held.  Level 2 fair values for
assets and liabilities are determined by obtaining the closing price from
published indices in active markets for instruments that are similar to Cleco’s
assets and liabilities.  The fair value obtained is then discounted to
the current period using a U.S. Treasury published interest rate as a proxy for
a risk-free rate of return.  For





29
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





some
options, Cleco uses the Black-Scholes model using observable and available
inputs to calculate the fair value, consistent with the income
approach.  These techniques have been applied consistently from fiscal
period to fiscal period.  Level 3 fair values allow for situations in
which there is little, if any, market activity for the asset or liability at the
measurement date.  Cleco had no Level 3 assets or liabilities at
September 30, 2009, or December 31, 2008.




Derivatives
and Hedging


A
disclosure amendment to the authoritative guidance on derivatives and hedging
which requires entities to provide greater transparency in interim and annual
financial statements became effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008.  This
amendment requires enhanced disclosures about a company’s derivative activities
and how the related hedged items affect a company’s financial position,
financial performance and cash flows.  Cleco is required to provide
qualitative disclosures about derivative fair value, gains and losses, and
credit-risk-related contingent features in derivative agreements.


The
following table presents the fair values of derivative instruments and their
respective line item as recorded on the Condensed Consolidated Balance Sheets of
Cleco and Cleco Power at September 30, 2009:





DERIVATIVES
      NOT DESIGNATED AS HEDGING INSTRUMENTSLIABILITY
      DERIVATIVES(THOUSANDS)
              AT
      SEPTEMBER 30, 2009
            BALANCE
      SHEET LINE ITEM
            
            FAIR
      VALUECommodity
      contractsEconomic
      hedges:Current
            Risk
      management liability, net
            
            $
            (397
            )Long-term
            Other
      deferred charges
            
            
            16Fuel
      cost hedges:Current
            Risk
      management liability, net
            
            
            (29,752
            )Long-term
            Other
      deferred charges
            
            
            127Total
            
            
            $
            (30,006
            )




The
following table presents the effect of derivatives not designated as hedging
instruments on Cleco and Cleco Power’s Condensed Consolidated Statements of
Income for the three and nine months ended September 30, 2009:







(THOUSANDS)
            LOSS IN INCOME OF
              DERIVATIVES LINE
    ITEM
            
            AMOUNT OF LOSS RECOGNIZED IN
      INCOME
              ON
      DERIVATIVES
              THREE MONTHS ENDED
              SEPTEMBER
      30, 2009
            
            
            AMOUNT OF LOSS RECOGNIZED IN
      INCOME ON DERIVATIVES
              NINE
      MONTHS ENDED
              SEPTEMBER 30,
      2009Commodity
      contractsEconomic hedges
            Other
      operations revenue
            
            $
            37
            (1)
            
            $
            1,549
            (2)Fuel cost hedges(3)
            Fuel
      used for electric generation
            
            
            28,271
            
            
            
            74,632Total
            
            
            $
            28,308
            
            
            $
            76,181(1)For the three months ended
      September 30, 2009,
      Cleco recognized $0.5 million of mark-to-market gains related to economic
      hedges.(2)For the nine months ended
      September 30, 2009, Cleco recognized $0.1 million of mark-to-market losses
      related to economic hedges.(3)In accordance with the
      authoritative guidance for regulated operations, an additional $29.6
      million of unrealized losses and $6.4 million of deferred losses
      associated with fuel cost hedges are reported in Accumulated Deferred Fuel
      on the balance sheet. As gains and losses are realized in
              
              future periods, they will be
      recorded as Fuel Used for Electric Generation on the Income
      Statement. For more information, see Note 3 — “Regulatory Assets and
      Liabilities — Deferred Fuel and Purchased Power
    Costs.”




At
September 30, 2009, Cleco had 17.01 million MMBtus of natural gas fuel cost
hedge contracts, which is approximately 29% of the estimated natural gas
requirements for a two-year period.  Cleco had an additional 56,000
MMBtus hedged through 2010, resulting from economic hedges, which is
approximately 90% of the estimated daily peak-hour sales to a wholesale
customer.


The
following table presents the fair values of derivatives designated as hedging
instruments and their respective line item as recorded on the Condensed
Consolidated Balance Sheets of Cleco and Cleco Power at September 30,
2009:





DERIVATIVES
      NOT DESIGNATED AS HEDGING INSTRUMENTSLIABILITY
      DERIVATIVES(THOUSANDS)
              AT
      SEPTEMBER 30, 2009
            BALANCE
      SHEET LINE ITEM
            
            FAIR
      VALUECash
      flow hedges:Other
      current liabilities
            
            $
            533Other
      deferred credits
            
            
            300Total
            
            
            $
            833




The
following table presents the effect of derivatives designated as hedging
instruments on Cleco and Cleco Power’s Condensed Consolidated Statements of
Income for the three and nine months ended September 30, 2009:





(THOUSANDS)
            
            AMOUNT OF LOSS
              RECOGNIZED IN OCI
              THREE MONTHS ENDED
              SEPTEMBER 30,
2009
            
            LOCATION OF LOSS
              RECLASSIFIED FROM
              ACCUMULATED OCI
              INTO INCOME
              (EFFECTIVE PORTION)
            
            AMOUNT OF LOSS
              RECLASSED FROM
              ACCUMULATED OCI
              INTO INCOME
              (EFFECTIVE PORTION)
              THREE MONTHS ENDED
              SEPTEMBER
      30, 2009Interest
      rate swap
            
            $
            925
            
            Interest charges
            
            $
            94








(THOUSANDS)
            
            AMOUNT OF LOSS RECOGNIZED IN OCI
              NINE MONTHS ENDED
              SEPTEMBER 30,
2009
            
            LOCATION OF LOSS
              RECLASSIFIED FROM
              ACCUMULATED OCI
              INTO INCOME
              (EFFECTIVE PORTION)
            
            AMOUNT OF LOSS
              RECLASSED FROM
              ACCUMULATED OCI
              INTO INCOME
              (EFFECTIVE PORTION)
              NINE MONTHS ENDED
              SEPTEMBER
      30, 2009Interest
      rate swap
            
            $
            925
            
            Interest charges
            
            $
            94




30
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Cleco
and Cleco Power did not record any expense related to the ineffectiveness of
hedges for the three or nine months ended September 30, 2009.  For
additional information, see “— Interest Rate Swap.”




Note
5 — Debt







Long-term
Debt


Cleco
had no short-term debt outstanding at September 30, 2009, or December 31,
2008.  At September 30, 2009, Cleco’s long-term debt outstanding was
$1.2 billion, of which $11.5 million was due within one year, compared to $1.2
billion outstanding at December 31, 2008, which included $63.5 million due
within one year.  The long-term debt due within one year at September
30, 2009, represents $11.5 million of principal payments for the Cleco
Katrina/Rita storm recovery bonds scheduled to be paid in the next twelve
months.  For Cleco, long-term debt increased $79.4 million primarily
due to an $88.0 million increase in Cleco Corporation’s credit facility draws,
the execution of a $50.0 million variable-rate monthly bank loan in August 2009,
a $35.0 million increase in Cleco Power’s credit facility draws, and a $19.5
million increase in long-term capital leases.  These increases were
partially offset by the $50.0 million repayment of a medium-term note at
maturity in May 2009, the $49.5 million repayment of insured quarterly notes in
August 2009, and $13.5 million related to Cleco Katrina/Rita storm recovery bond
principal payments made in March and September 2009.  During January
2009, Cleco Power entered into a lease agreement for barges to be used for fuel
transportation for Rodemacher Unit 3.  For additional information, see
Note 10 — “Litigation, Other Commitments and Contingencies, and Disclosures
about Guarantees — Other Contingencies — Fuel Transportation
Agreement.”


Cleco
Power had no short-term debt outstanding at September 30, 2009, or December 31,
2008.  At September 30, 2009, Cleco Power’s long-term debt outstanding
was $1.1 billion, of which $11.5 million was due within one year, compared to
$1.1 billion outstanding at December 31, 2008, of which $63.5 million was due
within one year. The long-term debt due within one year at September 30, 2009,
represents principal payments for the Cleco Katrina/Rita storm recovery bonds
scheduled to be paid in the next twelve months.  For Cleco Power,
long-term debt decreased $8.6 million primarily due to the $50.0 million
repayment of a medium-term note at maturity in May 2009, the $49.5 million
repayment of insured quarterly notes in August 2009, and $13.5 million related
to Cleco Katrina/Rita storm recovery bond principal payments made in March and
September 2009.  These decreases were partially offset by the issuance
of a $50.0 million variable-rate monthly bank loan in August 2009, an increase
of $35.0 million in Cleco Power’s credit facility draws, and a $19.5 million
increase in long-term capital leases.  During January 2009, Cleco
Power entered into a lease agreement for barges to be used for fuel
transportation for Rodemacher Unit 3.  For additional information, see
Note 10 — “Litigation, Other Commitments and Contingencies, and Disclosures
about Guarantees — Other Contingencies — Fuel Transportation
Agreement.”


In
August 2009, Cleco Power redeemed all $49.5 million principal amount of its
outstanding 6.05% insured quarterly notes due June 2012.  The notes
were replaced with a one-month LIBOR plus 3.00% floating rate bank loan maturing
on August 19, 2012.  In July 2009, Cleco Power locked in a $50.0
million interest rate swap arrangement related to this loan.  This
swap was effective on August 19, 2009 and will mature on May 31,
2012.  For additional information, see Note 4 — “Fair Value Accounting
— Interest Rate Swap.”


In
August 2009, Cleco Corporation and the lenders under its $150.0 million
five-year credit facility amended the credit facility to increase the threshold
in a representation that the present value of all accumulated benefit
obligations under Cleco’s pension plan is allowed to exceed the fair market
value of the assets of the plan.  At December 31, 2008, the present
value of all accumulated benefit obligations under the pension plan exceeded the
fair market value of the plan assets by approximately $61.4
million.  In connection with the amendment, the lenders under the
credit facility waived each event of default relating to the breach of the
representation from December 31, 2008, to the date of the
amendment.  In connection with the waiver and amendment, Cleco
Corporation paid the lenders approximately $0.1 million, which fees are included
in interest expense for the three months ended September 30, 2009.


In
August 2009, Cleco Power and the lenders under its $275.0 million five-year
credit facility amended the credit facility to increase the threshold in a
representation that the present value of all accumulated benefit obligations
under Cleco’s pension plan is allowed to exceed the fair market value of the
assets of the plan.  At December 31, 2008, the present value of all
accumulated benefit obligations under the pension plan exceeded the fair market
value of the plan assets by approximately $61.4 million. In connection with the
amendment, the lenders under the credit facility waived each event of default
relating to the breach of the representation from December 31, 2008, to the date
of the amendment.  In connection with the waiver and amendment, Cleco
Power paid the lenders approximately $0.1 million, which fees are included in
interest expense for the three months ended September 30, 2009.




Note
6 — Pension Plan and Employee Benefits







Pension
Plan and Other Benefits Plan


Most
employees hired before August 1, 2007 are covered by a non-contributory, 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.  During the nine months ended September 30, 2009, $18.8
million of discretionary contributions were made to the pension plan for the
2008 plan year.  Cleco Power expects to be required to make


31
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





an
additional $72.0 million in contributions to the pension plan over the next five
years, including $4.8 million in 2010.  The required contributions are
driven by liability funding target percentages set by law which could cause the
required contributions to be uneven among the years.  The ultimate
amount and timing of the contributions will be affected by changes in the
discount rate, changes in the funding regulations, and actual returns on fund
assets.  Cleco Power is considered the plan sponsor, and Support Group
is considered the plan administrator.


Cleco
Corporation’s retirees and their dependents are eligible to receive medical,
dental, vision, and life insurance benefits (other benefits).  Cleco
Corporation recognizes the expected cost of these other benefits during the
periods in which the benefits are earned.


The
components of net periodic pension and other benefit cost for the three and nine
months ended September 30, 2009, and 2008, are as follows:





PENSION BENEFITS
            
            
            OTHER BENEFITSFOR THE THREE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Components
      of periodic benefit costsService cost
            
            $
            1,798
            
            
            $
            1,470
            
            
            $
            355
            
            
            $
            339Interest cost
            
            
            4,150
            
            
            
            3,964
            
            
            
            614
            
            
            
            454Expected return on plan
      assets
            
            
            (4,450
            )
            
            
            (5,044
            )
            
            
            -
            
            
            
            -Transition obligation
            
            
            -
            
            
            
            -
            
            
            
            5
            
            
            
            5Prior period service credit
      (cost)
            
            
            432
            
            
            
            (18
            )
            
            
            (516
            )
            
            
            (518
            )Net loss
            
            
            -
            
            
            
            -
            
            
            
            209
            
            
            
            196Net periodic benefit
      cost
            
            $
            1,930
            
            
            $
            372
            
            
            $
            667
            
            
            $
            476





PENSION BENEFITS
            
            
            OTHER BENEFITSFOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Components
      of periodic benefit costsService cost
            
            $
            5,257
            
            
            $
            4,409
            
            
            $
            1,060
            
            
            $
            1,059Interest cost
            
            
            12,340
            
            
            
            11,892
            
            
            
            1,605
            
            
            
            1,486Expected return on plan
      assets
            
            
            (14,597
            )
            
            
            (15,133
            )
            
            
            -
            
            
            
            -Transition obligation
            
            
            -
            
            
            
            -
            
            
            
            15
            
            
            
            15Prior period service credit
      (cost)
            
            
            1,394
            
            
            
            (53
            )
            
            
            (1,548
            )
            
            
            (1,549
            )Net loss
            
            
            -
            
            
            
            -
            
            
            
            672
            
            
            
            695Net periodic benefit
      cost
            
            $
            4,394
            
            
            $
            1,115
            
            
            $
            1,804
            
            
            $
            1,706




Since
Cleco Power is the pension plan sponsor and the related trust holds the assets,
the prepaid benefit cost of the pension plan is reflected at Cleco
Power.  The liability of Cleco Corporation’s other subsidiaries is
transferred, with a like amount of assets, to Cleco Power
monthly.  The expense of the pension plan related to Cleco
Corporation’s other subsidiaries for the three and nine months ended September
30, 2009, was $0.5 million and $1.4 million, respectively, compared to $0.4
million and $1.1 million for the same periods in 2008.


Cleco
Corporation is the plan sponsor for the other benefit plans.  There
are no assets set aside in a trust, and the liabilities are reported on the
individual subsidiaries’ financial statements.  The expense related to
other benefits reflected in Cleco Power’s Condensed Consolidated Statements of
Income for the three and nine months ended September 30, 2009, was $0.6 million
and $1.5 million, respectively, net of Medicare Part D subsidy of $0.1 million
and $0.3 million, respectively.  For
the same periods in 2008, Cleco Power recognized $0.5 million and $1.4 million
of expense, respectively, net of Medicare Part D subsidy of $0.1 million and
$0.2 million, respectively.




SERP


Certain
Cleco executive officers 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 annual bonuses paid
during the 60 months prior to retirement, reduced by benefits received from any
other defined benefit pension plan, SERP Plan or Cleco contributions under the
enhanced 401(k) Plan to the extent such contributions exceed the limits of the
401(k) 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 the SERP participants’ life insurance benefits, as well as
future SERP benefit payments.  However, since SERP 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.  All SERP benefits are paid
out of the general cash available of the respective companies from which the
officer retired.  No contributions to the SERP were made during the
nine months ended September 30, 2009, or 2008.  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)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Components
      of periodic benefit  costsService
      cost
            
            $
            456
            
            
            $
            329
            
            
            $
            1,206
            
            
            $
            1,046Interest
      cost
            
            
            111
            
            
            
            534
            
            
            
            1,511
            
            
            
            1,424Prior
      period service cost
            
            
            13
            
            
            
            13
            
            
            
            40
            
            
            
            40Net
      loss (gain)
            
            
            76
            
            
            
            (15
            )
            
            
            583
            
            
            
            492Net
      periodic benefit  cost
            
            $
            656
            
            
            $
            861
            
            
            $
            3,340
            
            
            $
            3,002




The SERP
liabilities are reported on the individual subsidiaries’ financial
statements.  The expense related to the SERP reflected on Cleco
Power’s Consolidated Statements of Income was $0.1 million and $0.8 million for
the three and nine months ended September 30, 2009, respectively, compared to
$0.2 million and $0.7 million for the same periods in 2008.




401(k)
Plan


Most
employees are eligible to participate in the 401(k) Plan.  In August
2007, Cleco Corporation’s Board of Directors approved an amendment to the 401(k)
Plan to provide an enhanced 401(k) benefit for employees not otherwise eligible
to participate in Cleco’s pension plan.  Beginning January 2008,


32
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Cleco
Corporation made matching contributions and funded dividend reinvestments
related to Cleco Corporation common stock with cash.


The
table below contains information about the 401(k) Plan.





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,
            
            
            FOR THE NINE MONTHS
      ENDED
              SEPTEMBER
    30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008401(k)
      Plan expense
            
            $
            903
            
            
            $
            970
            
            
            $
            2,853
            
            
            $
            2,661




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, 2009, was $0.2 million and $0.8 million,
respectively, compared to $0.3 million and $0.7 million for the same periods in
2008.




Note
7 — Income Taxes





The
following tables summarize the effective income tax rates for Cleco Corporation
and Cleco Power for the three- and nine-month periods ended September 30, 2009,
and 2008.





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,
            
            FOR THE NINE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            2009
            
            2008
            
            2009
            
            2008Cleco
      Corporation
            7.7%
            
            22.1%
            
            12.4%
            
            20.3%Cleco
      Power
            2.9%
            
            25.7%
            
            13.6%
            
            23.0%




For the
three- and nine-month periods ended September 30, 2009 and 2008, the effective
income tax rate for Cleco Corporation and Cleco Power was less than the federal
statutory rate primarily due to the flow-through of tax benefits associated with
AFUDC equity recorded as a result of the construction of Rodemacher Unit
3.  During the second quarter of 2009, the IRS issued its report for
the tax years 2001 through 2003.  The unagreed upon issues relate to
the recovery period of the Evangeline facility and bonus depreciation related to
the Perryville facility.  These issues were appealed by Cleco and are
appropriately included in tax reserves in the financial
statements.  Cleco is currently under federal and state audits for
fiscal years 2004 through 2007.  It is reasonably possible that the
unrecognized tax benefits could increase or decrease by $20.4 million over the
next twelve months as the unagreed upon issues are resolved.  A
potential change would not have a material impact on the Registrants’ respective
annual effective tax rate.




Note
8 — Disclosures about Segments





Cleco’s
reportable segments are based on its method of internal reporting, which
disaggregates business units by first-tier subsidiary.  Cleco’s
reportable segments are Cleco Power and Midstream.  The reconciling
items in the following tables consist of the holding company, a shared services
subsidiary, two transmission interconnection facilities, and an investment
subsidiary.


Each
reportable segment engages in business activities from which it earns revenue
and incurs expenses.  Segment managers report periodically to Cleco’s
Chief Executive Officer (the chief operating decision-maker) with discrete
financial information and, at least quarterly, present discrete financial
information to Cleco Corporation’s Board of Directors.  Each
reportable segment prepared budgets for 2009 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.





33
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





SEGMENT
INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30,





CLECO
            
            
            
            
            
            RECONCILING2009(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            228,952
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            228,952Other operations
            
            
            9,834
            
            
            
            -
            
            
            
            27
            
            
            
            (2
            )
            
            
            9,859Affiliate
      revenue
            
            
            6
            
            
            
            2,087
            
            
            
            596
            
            
            
            -
            
            
            
            2,689Intercompany
      revenue
            
            
            343
            
            
            
            -
            
            
            
            11,372
            
            
            
            (11,715
            )
            
            
            -Operating
      revenue
            
            $
            239,135
            
            
            $
            2,087
            
            
            $
            11,995
            
            
            $
            (11,717
            )
            
            $
            241,500Depreciation
      expense
            
            $
            19,310
            
            
            $
            44
            
            
            $
            266
            
            
            $
            -
            
            
            $
            19,620Interest
      charges
            
            $
            13,645
            
            
            $
            1,396
            
            
            $
            (2,895
            )
            
            $
            (1,308
            )
            
            $
            10,838Interest
      income
            
            $
            341
            
            
            $
            -
            
            
            $
            1,336
            
            
            $
            (1,308
            )
            
            $
            369Equity
      income from investees
            
            $
            -
            
            
            $
            15,108
            
            
            $
            479
            
            
            $
            -
            
            
            $
            15,587Federal
      and state income tax expense (benefit)
            
            $
            1,316
            
            
            $
            4,923
            
            
            $
            (1,256
            )
            
            $
            -
            
            
            $
            4,983Segment
      profit (1)
            
            $
            43,552
            
            
            $
            8,412
            
            
            $
            7,891
            
            
            $
            -
            
            
            $
            59,855Additions
      to long-lived assets
            
            $
            61,837
            
            
            $
            3
            
            
            $
            (182
            )
            
            $
            -
            
            
            $
            61,658Equity
      investment in investees
            
            $
            -
            
            
            $
            247,713
            
            
            $
            129,514
            
            
            $
            (114,755
            )
            
            $
            262,472Total
      segment assets
            
            $
            3,174,815
            
            
            $
            265,786
            
            
            $
            403,053
            
            
            $
            (314,436
            )
            
            $
            3,529,218(1)Reconciliation of
      segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            59,855Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            12Net
      income applicable to common stock
            
            
            $
            59,843







CLECO
            
            
            
            
            
            RECONCILING2008(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            333,936
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            333,936Other operations
            
            
            6,981
            
            
            
            -
            
            
            
            25
            
            
            
            (2
            )
            
            
            7,004Affiliate
      revenue
            
            
            7
            
            
            
            2,143
            
            
            
            585
            
            
            
            -
            
            
            
            2,735Intercompany
      revenue
            
            
            418
            
            
            
            (12
            )
            
            
            10,974
            
            
            
            (11,380
            )
            
            
            -Operating
      revenue, net
            
            $
            341,342
            
            
            $
            2,131
            
            
            $
            11,584
            
            
            $
            (11,382
            )
            
            $
            343,675Depreciation
      expense
            
            $
            18,861
            
            
            $
            78
            
            
            $
            344
            
            
            $
            -
            
            
            $
            19,283Interest
      charges
            
            $
            14,973
            
            
            $
            1,566
            
            
            $
            722
            
            
            $
            (1,565
            )
            
            $
            15,696Interest
      income
            
            $
            1,545
            
            
            $
            -
            
            
            $
            1,689
            
            
            $
            (1,565
            )
            
            $
            1,669Equity
      income from investees
            
            $
            -
            
            
            $
            9,223
            
            
            $
            439
            
            
            $
            -
            
            
            $
            9,662Federal
      and state income tax expense (benefit)
            
            $
            10,566
            
            
            $
            2,383
            
            
            $
            (2,436
            )
            
            $
            -
            
            
            $
            10,513Segment
      profit (1)
            
            $
            30,538
            
            
            $
            4,573
            
            
            $
            2,022
            
            
            $
            -
            
            
            $
            37,133Additions
      to long-lived assets
            
            $
            61,327
            
            
            $
            23
            
            
            $
            242
            
            
            $
            -
            
            
            $
            61,592Equity
      investment in investees (2)
            
            $
            -
            
            
            $
            234,273
            
            
            $
            14,871
            
            
            $
            -
            
            
            $
            249,144Total
      segment assets (2)
            
            $
            3,041,597
            
            
            $
            250,882
            
            
            $
            324,232
            
            
            $
            (275,507
            )
            
            $
            3,341,204(1)Reconciliation of
      segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            37,133(2)Balances as
      of December 31, 2008
            
            Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            
            12Net
      income applicable to common stock
            
            
            $
            37,121








34
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




SEGMENT
INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30,





CLECO
            
            
            
            
            
            RECONCILING2009(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            627,469
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            627,469Other operations
            
            
            25,609
            
            
            
            1
            
            
            
            78
            
            
            
            (8
            )
            
            
            25,680Affiliate
      revenue
            
            
            17
            
            
            
            6,627
            
            
            
            1,869
            
            
            
            -
            
            
            
            8,513Intercompany
      revenue
            
            
            1,029
            
            
            
            -
            
            
            
            31,987
            
            
            
            (33,016
            )
            
            
            -Operating
      revenue
            
            $
            654,124
            
            
            $
            6,628
            
            
            $
            33,934
            
            
            $
            (33,024
            )
            
            $
            661,662Depreciation
      expense
            
            $
            57,339
            
            
            $
            132
            
            
            $
            762
            
            
            $
            -
            
            
            $
            58,233Interest
      charges
            
            $
            40,286
            
            
            $
            6,034
            
            
            $
            (2,692
            )
            
            $
            (3,958
            )
            
            $
            39,670Interest
      income
            
            $
            999
            
            
            $
            -
            
            
            $
            4,010
            
            
            $
            (3,958
            )
            
            $
            1,051Equity
      (loss) income from investees
            
            $
            -
            
            
            $
            (782
            )
            
            $
            1,492
            
            
            $
            -
            
            
            $
            710Federal
      and state income tax expense (benefit)
            
            $
            14,033
            
            
            $
            (3,469
            )
            
            $
            2,694
            
            
            $
            -
            
            
            $
            13,258Segment
      profit (loss) (1)
            
            $
            88,776
            
            
            $
            (4,997
            )
            
            $
            9,751
            
            
            $
            -
            
            
            $
            93,530Additions
      to long-lived assets
            
            $
            183,248
            
            
            $
            54
            
            
            $
            194
            
            
            $
            -
            
            
            $
            183,496Equity
      investment in investees
            
            $
            -
            
            
            $
            247,713
            
            
            $
            129,514
            
            
            $
            (114,755
            )
            
            $
            262,472Total
      segment assets
            
            $
            3,174,815
            
            
            $
            265,786
            
            
            $
            403,053
            
            
            $
            (314,436
            )
            
            $
            3,529,218(1)Reconciliation of
      segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            93,530Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            35Net
      income applicable to common stock
            
            
            $
            93,495





CLECO
            
            
            
            
            
            RECONCILING2008(THOUSANDS)
            
            POWER
            
            
            MIDSTREAM
            
            
            ITEMS
            
            
            ELIMINATIONS
            
            
            CONSOLIDATEDRevenueElectric
    operations
            
            $
            803,397
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            803,397Other operations
            
            
            29,757
            
            
            
            1
            
            
            
            76
            
            
            
            (8
            )
            
            
            29,826Affiliate
      revenue
            
            
            21
            
            
            
            5,892
            
            
            
            1,877
            
            
            
            -
            
            
            
            7,790Intercompany
      revenue
            
            
            1,506
            
            
            
            -
            
            
            
            30,859
            
            
            
            (32,365
            )
            
            
            -Operating
      revenue
            
            $
            834,681
            
            
            $
            5,893
            
            
            $
            32,812
            
            
            $
            (32,373
            )
            
            $
            841,013Depreciation
      expense
            
            $
            56,886
            
            
            $
            230
            
            
            $
            854
            
            
            $
            -
            
            
            $
            57,970Interest
      charges
            
            $
            31,435
            
            
            $
            5,057
            
            
            $
            3,943
            
            
            $
            (5,077
            )
            
            $
            35,358Interest
      income
            
            $
            3,121
            
            
            $
            -
            
            
            $
            6,498
            
            
            $
            (5,075
            )
            
            $
            4,544Equity
      income from investees
            
            $
            -
            
            
            $
            1,660
            
            
            $
            1,063
            
            
            $
            -
            
            
            $
            2,723Federal
      and state income tax expense (benefit)
            
            $
            27,135
            
            
            $
            (2,298
            )
            
            $
            (2,264
            )
            
            $
            -
            
            
            $
            22,573Segment
      profit (loss) (1)
            
            $
            90,807
            
            
            $
            (2,955
            )
            
            $
            741
            
            
            $
            -
            
            
            $
            88,593Additions
      to long-lived assets
            
            $
            244,143
            
            
            $
            63
            
            
            $
            786
            
            
            $
            -
            
            
            $
            244,992Equity
      investment in investees (2)
            
            $
            -
            
            
            $
            234,273
            
            
            $
            14,871
            
            
            $
            -
            
            
            $
            249,144Total
      segment assets (2)
            
            $
            3,041,597
            
            
            $
            250,882
            
            
            $
            324,232
            
            
            $
            (275,507
            )
            
            $
            3,341,204(1)Reconciliation of
      segment profit to consolidated profit:
            
            Segment
      profit
            
            
            
            
            
            
            
            
            
            
            $
            88,593(2)Balances as
      of December 31, 2008
            
            Unallocated
      items:Preferred dividends
      requirements, net of tax
            
            
            
            
            
            
            
            35Net
      income applicable to common stock
            
            
            $
            88,558





Note
9 — Equity Investment in Investees





Cleco
reports its investment in Acadia, Evangeline, and certain other subsidiaries on
the equity method of accounting.  Under the equity method, the assets
and liabilities of these entities are reported as equity investment in investees
on Cleco Corporation’s Condensed Consolidated Balance Sheets.  The
revenue and expenses (excluding income taxes) of these entities are netted and
reported as equity income or loss from investees on Cleco Corporation’s
Condensed Consolidated Statements of Income.


Equity
investment in investees at September 30, 2009, represents primarily Midstream’s
$181.0 million investment in Acadia, owned 50% by APH and 50% by Cajun, and its
$66.7 million investment in Evangeline, owned 100% by
Midstream.  Equity investment in investees also represents a $7.1
million investment in Attala and a $7.6 million equity investment in Perryville,
both 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.


The
following table presents the equity (loss) income from each investment accounted
for using the equity method.





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Acadia
            
            $
            (700
            )
            
            $
            (1,091
            )Evangeline
            
            
            15,808
            
            
            
            10,314Other
      subsidiaries 100% owned by Cleco Corporation
            
            
            470
            
            
            
            439Subsidiary
      less than 100% owned by Cleco Innovations
            
            
            9
            
            
            
            -Total equity income
            
            $
            15,587
            
            
            $
            9,662





35
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




FOR THE NINE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008Acadia
            
            $
            (11,588
            )
            
            $
            (7,869
            )Evangeline
            
            
            10,806
            
            
            
            9,529Other
      subsidiaries 100% owned by Cleco Corporation
            
            
            1,483
            
            
            
            1,063Subsidiary
      less than 100% owned by Cleco Innovations
            
            
            9
            
            
            
            -Total equity income
            
            $
            710
            
            
            $
            2,723




Acadia


Since
Acadia is owned 50% by APH and 50% by Cajun, neither owner is the primary
beneficiary, and Acadia is accounted for as an equity method
investment.  Cleco’s current assessment of its maximum exposure to
loss related to Acadia at September 30, 2009, consists of its equity investment
of $181.0 million.  The table below presents the components of
Midstream's equity investment in Acadia.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2009
            
            
            2008Contributed
      assets (cash and land)
            
            $
            272,956
            
            
            $
            259,019Income
      before taxes
            
            
            148,855
            
            
            
            160,444Impairment
      of investment
            
            
            (45,847
            )
            
            
            (45,847
            )Capitalized
      interest and other
            
            
            19,722
            
            
            
            19,722Less:  non-cash
      distribution
            
            
            78,200
            
            
            
            78,200Less:  cash
      distributions
            
            
            136,464
            
            
            
            136,464Total equity investment in
      investee
            
            $
            181,022
            
            
            $
            178,674




The
$78.2 million non-cash distribution is the distribution of the Calpine Energy
Services, L.P. claim from Acadia to APH.  The cash distributions of
$136.5 million were used to pay interest and repay principal on a loan from
Cleco Corporation relating to this investment.  Midstream’s equity, as
reported on the balance sheet of Acadia at September 30, 2009, was $207.1
million.  The difference between the $207.1 million and the equity
investment in investee of $181.0 million as shown in the previous table is $26.1
million, and consists of the $45.8 million other-than-temporary impairment of
APH’s investment in Acadia, partially offset by $19.7 million of interest
capitalized on funds contributed to Acadia.


The
following tables contain summarized financial information for
Acadia.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,(THOUSANDS)
            
            2009
            
            
            2008Current
      assets
            
            $
            223,598
            
            
            $
            5,413Property,
      plant and equipment, net
            
            
            196,552
            
            
            
            405,565Total assets
            
            $
            420,150
            
            
            $
            410,978Current
      liabilities
            
            $
            5,854
            
            
            $
            1,380Partners’
      capital
            
            
            414,296
            
            
            
            409,598Total liabilities and partners’
      capital
            
            $
            420,150
            
            
            $
            410,978





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,
            
            
            FOR THE NINE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Operating
      revenue
            
            $
            27,241
            
            
            $
            45,542
            
            
            $
            49,190
            
            
            $
            70,479Operating
      expenses
            
            
            28,677
            
            
            
            47,775
            
            
            
            66,314
            
            
            
            86,443Other
      income (expense )
            
            
            36
            
            
            
            51
            
            
            
            (6,052
            )
            
            
            (88
            )Loss before
taxes
            
            $
            (1,400
            )
            
            $
            (2,182
            )
            
            $
            (23,176
            )
            
            $
            (16,052
            )






Income
tax benefits recorded on APH’s financial statements related to Midstream’s 50%
ownership interest in Acadia were $1.4 million and $7.3 million for the three
and nine months ended September 30, 2009, respectively, compared to $1.2 million
and $5.3 million for the three and nine months ended September 30, 2008,
respectively.


In
2009, Cleco Power announced Acadia was selected as the winning bidder in Cleco
Power’s 2007 long-term request for capacity beginning in 2010.  Cleco
Power will own and operate one of Acadia’s two 580-MW units and will also
operate the other unit on behalf of Acadia or a future owner.  The
carrying value of the unit has been classified as an asset held for sale in
Acadia’s current assets.  No gain or loss has been recorded, as the
fair value less the costs to sell are greater than the carrying value, and the
transaction has not yet closed.


Cleco
Power and the parties have executed the definitive
agreements.  However, prior to closing the transaction, valued at
approximately $300 million, Cleco Power must receive approvals from the LPSC and
FERC.  In a process that remains under the supervision of an
independent monitor appointed by the LPSC, Cleco Power and Acadia plan to
complete the transaction in the first quarter of 2010.  Beginning in
January 2010, the agreements provide that Acadia will continue to operate the
plant and serve Cleco Power under a tolling agreement covering 50% of the Acadia
power station until the transaction is closed, after which Cleco Power will own
and operate one of Acadia’s two 580-MW units and will also operate the other
unit on behalf of Acadia or a future owner.  This tolling agreement
was approved by the LPSC in October 2009.  The tolling agreement must
also be approved by FERC.


On
October 30, 2009, Acadia and Entergy Louisiana announced that definitive
agreements have been executed whereby Entergy Louisiana will purchase 50% of
Acadia or one of its two 580-MW units.  The transaction is anticipated
to be completed in late 2010 or early 2011.  The agreements provide
that, beginning in May 2010, Acadia will serve Entergy Louisiana under a tolling
agreement covering 50% of Acadia until the sale is completed.  Both
the asset sale and interim tolling agreement require regulatory
approval.  Cleco Power will operate both units at Acadia after the
Entergy transaction is completed.


In
connection with these transactions and in exchange for reasonable consideration,
APH has agreed to indemnify, upon the closing of the transactions, Cajun and its
affiliates against 100% of Acadia’s liabilities and other obligations related to
both the Cleco Power and Entergy transactions.




Evangeline


Since
its inception, Cleco has had 100% ownership and voting interest of
Evangeline.  Through an analysis of variable interests, such as
Cleco’s investment, the long-term debt, the tolling counterparty, and the
potential to absorb expected losses and gains, Cleco has determined that it is
not the primary beneficiary.  The determination is driven by several
factors such as:




36
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




§
            The
      tolling counterparty is at risk to absorb market losses and gains, which
      are primarily determined by the relative price of electricity and natural
      gas.


§
            The
      debt is non-recourse to Cleco; therefore, the debt-holders main security
      is the underlying assets of
Evangeline.


§
            Cleco’s
      risk of loss is limited to its investment plus the $15.0 million letter of
      credit issued on behalf of the tolling
  counterparty.


§
            The
      size of Evangeline’s debt compared to the size of Cleco’s investment at
      risk.




Since
Cleco is not the primary beneficiary, Evangeline is accounted for as an equity
method investment.


Cleco’s
current assessment of its maximum exposure to loss related to Evangeline at
September 30, 2009, consists of its equity investment of $66.7 million and $15.0
million of possible draws on the letter of credit Cleco has posted on
Evangeline’s behalf, for a total of $81.7 million.  The following
table presents the components of Midstream's equity investment in
Evangeline.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2009
            
            
            2008Contributed
      assets (cash)
            
            $
            49,961
            
            
            $
            49,961Net
      income
            
            
            162,404
            
            
            
            151,599Less:  non-cash
      distributions
            
            
            16,620
            
            
            
            16,907Less:  cash
      distributions
            
            
            129,054
            
            
            
            129,054Total equity investment in
      investee
            
            $
            66,691
            
            
            $
            55,599




The
following tables contain summarized financial information for
Evangeline.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,(THOUSANDS)
            
            2009
            
            
            2008Current
      assets
            
            $
            32,160
            
            
            $
            25,750Accounts
      receivable - affiliate
            
            
            40
            
            
            
            1Property,
      plant and equipment, net
            
            
            183,678
            
            
            
            180,051Other
      assets
            
            
            38,490
            
            
            
            42,528Total assets
            
            $
            254,368
            
            
            $
            248,330Current
      liabilities
            
            $
            31,685
            
            
            $
            20,244Accounts
      payable - affiliate
            
            
            516
            
            
            
            3,512Long-term
      debt, net
            
            
            153,564
            
            
            
            161,762Other
      liabilities
            
            
            71,228
            
            
            
            71,845Member’s
      deficit
            
            
            (2,625
            )
            
            
            (9,033
            )Total liabilities and member’s
      deficit
            
            $
            254,368
            
            
            $
            248,330





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,
            
            
            FOR THE NINE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Operating
      revenue
            
            $
            25,753
            
            
            $
            26,452
            
            
            $
            48,989
            
            
            $
            49,866Operating
      expenses
            
            
            4,589
            
            
            
            9,844
            
            
            
            20,313
            
            
            
            22,068Depreciation
            
            
            1,396
            
            
            
            1,339
            
            
            
            4,136
            
            
            
            4,032Interest
      charges
            
            
            3,981
            
            
            
            4,526
            
            
            
            12,424
            
            
            
            13,863Interest
      income
            
            
            -
            
            
            
            102
            
            
            
            -
            
            
            
            360Other
      income (expense)
            
            
            21
            
            
            
            (531
            )
            
            
            (1,310
            )
            
            
            (734
            )Income before
    taxes
            
            $
            15,808
            
            
            $
            10,314
            
            
            $
            10,806
            
            
            $
            9,529




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


Cleco
Corporation has posted a $15.0 million letter of credit on behalf of the
Evangeline Tolling Agreement counterparty.  The letter of credit can
be drawn in the event Evangeline defaults on the tolling agreement.


Evangeline’s
restricted cash at September 30, 2009, and December 31, 2008, was $22.3 million
and $25.0 million, respectively.  This cash is restricted under
Evangeline’s senior secured bond indenture.


Income
taxes recorded on Midstream’s financial statements related to Midstream’s 100%
ownership interest in Evangeline were expenses of $6.3 million and $4.4 million
for the three and nine months ended September 30, 2009, respectively, compared
to $3.7 million expense and $3.4 million benefit for the three and nine months
ended September 30, 2008, respectively.


Prior to
November 9, 2007, all of the capacity and output of the power plant had been
tolled to Williams, which paid Evangeline certain fixed and variable
amounts.  In November 2007, The Williams Companies, Inc. assigned all
of its rights and interests in its tolling agreement with Evangeline to Bear
Energy.  In May 2008, JPMorgan Chase & Co. completed the
acquisition of Bear Stearns Companies Inc., the parent company of Bear
Energy.  In September 2008, Bear Energy was merged into
JPMVEC.  For more information regarding the Evangeline Tolling
Agreement, see Note 10 — “Litigation, Other Commitments and Contingencies, and
Disclosures about Guarantees — Risks and Uncertainties.”




Other
Subsidiaries 100% owned by Cleco Corporation


The
information about these entities is aggregated because their method of
operation, size, and risk are materially similar.  Both entities own
transmission assets, provide transmission services to one customer under a
long-term contract at a FERC-approved cost of service rate, and are capitalized
with 100% equity.


Through
an analysis of variable interests, such as Cleco’s investment and the single
counterparty that has a long-term lease of the facilities, Cleco has determined
that it is not the primary beneficiary of either entity.  The
determination is driven by several factors such as:




§
            Each
      entity has only one customer under the long-term agreements accounted for
      as direct financing leases.


§
            Both
      entities can only charge FERC-approved
tariffs.


§
            Both
      entities have the ability to change the tariff if actual expenses are
      materially different than expected
expenses.


§
            The
      lease counterparty is required to make lease payments regardless of the
      use of the assets.


§
            Cleco’s
      risk of loss is limited to its
investment.




Since
Cleco is not the primary beneficiary, the investments in Perryville and Attala
are accounted for as equity method investments.


Cleco’s
current assessment of its maximum exposure to loss with respect to Perryville
and Attala at September 30,





37
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





2009,
consists of its equity investment of $14.7 million.  The following
table presents the components of Cleco Corporation’s equity investment in
Perryville and Attala.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,INCEPTION
      TO DATE (THOUSANDS)
            
            2009
            
            
            2008Contributed
      assets (cash)
            
            $
            132,960
            
            
            $
            132,960Net
      income
            
            
            55,650
            
            
            
            54,166Less:  non-cash
      distributions
            
            
            20,875
            
            
            
            20,869Less:  cash
      distributions
            
            
            152,989
            
            
            
            151,389Total equity investment in
      investee
            
            $
            14,746
            
            
            $
            14,868




The
following tables contain summarized financial information for Perryville and
Attala.





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,(THOUSANDS)
            
            2009
            
            
            2008Current
      assets
            
            $
            3,044
            
            
            $
            4,905Other
      assets
            
            
            16,782
            
            
            
            14,166Total assets
            
            $
            19,826
            
            
            $
            19,071Current
      liabilities
            
            $
            1,196
            
            
            $
            9Accounts
      payable - affiliate
            
            
            2
            
            
            
            2Other
      liabilities
            
            
            745
            
            
            
            484Member’s
      equity
            
            
            17,883
            
            
            
            18,576Total liabilities and member’s
      equity
            
            $
            19,826
            
            
            $
            19,071





FOR THE THREE MONTHS
      ENDED
              SEPTEMBER 30,
            
            
            FOR THE NINE MONTHS
      ENDED
              SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Operating
      revenue
            
            $
            488
            
            
            $
            492
            
            
            $
            1,471
            
            
            $
            1,484Operating
      expense
            
            
            57
            
            
            
            53
            
            
            
            451
            
            
            
            421Interest
      income
            
            
            39
            
            
            
            -
            
            
            
            463
            
            
            
            -Income before
    taxes
            
            $
            470
            
            
            $
            439
            
            
            $
            1,483
            
            
            $
            1,063




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


The
transmission assets utilized by Perryville and Attala are accounted for as
direct financing leases and are included in other assets in the summarized
financial information above.


Income
tax expense recorded on Cleco’s financial statements related to Cleco
Corporation’s 100% interest in Perryville and Attala was $0.2 million and $0.6
million for the three and nine months ended September 30, 2009, respectively,
compared to $0.2 million and $0.4 million for the three and nine months ended
September 30, 2008, respectively.




Note
10 — 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 moved to and currently is pending in the
U.S. District Court for the Western District of Louisiana.  Effective
December 30, 2008, the City Council of Alexandria passed an ordinance
authorizing the mayor to settle the litigation by executing a new 13-year power
supply agreement with Cleco.  Pending execution of this new supply
agreement, the presiding judge agreed to dismiss the claims asserted in the
litigation without prejudice.  The mayor declined to execute the new
supply agreement and upon motion of the city, the judge reinstated the lawsuit
on October 16, 2009.  The litigation will now be resolved by trial,
which has been scheduled to commence on February 22, 2010.  Management
believes the dispute will not have a material adverse effect on the Registrants’
financial condition, results of operations, or cash flows.


On
October 8, 2007, Cleco received a Special Notice for Remedial Investigation and
Feasibility Study from the EPA.  The special notice requested that
Cleco Corporation and Cleco Power, along with many other listed potentially
responsible parties, enter into negotiations with the EPA for the performance of
a Remedial Investigation and Feasibility Study at an area known as the Devil’s
Swamp Lake northwest of Baton Rouge, Louisiana.  The EPA has
identified Cleco as one of many companies sending PCB wastes for disposal to the
site.  The Devil’s Swamp Lake site has been proposed to be added to
the National Priorities List (NPL) based on the release of PCBs to fisheries and
wetlands located on the site.  The EPA has yet to make a final
determination on whether to add Devil’s Swamp Lake to the NPL.  The
EPA and a number of PRPs met on January 31, 2008, for an organizational meeting
to discuss the background of the site.  The PRPs began discussing a
potential proposal to the EPA on February 19, 2008.  Negotiations
among the PRPs and the EPA are ongoing in regard to the remedial investigation
and feasibility study at the Devil’s Swamp site, with little progress having
been made since the January 2008 meeting.  The PRPs alleged to have
disposed PCBs at the site have proposed a tentative cost sharing formula with
the facility owner to fund the remedial investigation.  The response
to the proposal has been pending for months.  Since this investigation
is in the preliminary stages, management is unable to determine whether the
costs associated with possible remediation of the facility site will have a
material adverse effect on the Registrants’ results of operations, financial
condition, and cash flows.


Cleco is
involved in regulatory, environmental, and legal proceedings before various
courts, regulatory commissions, and governmental agencies regarding matters
arising in the ordinary course of business.  Some of these
proceedings, such as fuel review and environmental issues, could involve
substantial amounts.  Management regularly analyzes current
information and, as necessary, provides accruals for probable liabilities on the
eventual disposition of these matters.  Management believes the
disposition of these matters will not have a material adverse effect on the
Registrants’ financial condition, results of operations, or cash
flows.




38
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q






Off-Balance
Sheet Commitments and Disclosures about Guarantees


Cleco
Corporation and Cleco Power have entered into various off-balance sheet
commitments, in the form of guarantees and standby letters of credit, in order
to facilitate their activities and the activities of Cleco Corporation’s
subsidiaries and equity investees (affiliates).  Cleco Corporation and
Cleco Power also have agreed to contractual terms that require them to pay third
parties if certain triggering events occur.  These contractual terms
generally are defined as guarantees in the authoritative guidance.


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, 2009, 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, 2009REDUCTIONS TO THEAMOUNT AVAILABLETO BE DRAWN ONFACE
            
            
            
            
            
            NET
            
            
            CLECO
      CORPORATION’S(THOUSANDS)
            
            AMOUNT
            
            
            REDUCTIONS
            
            
            AMOUNT
            
            
            CREDIT FACILITYCleco
      CorporationGuarantee issued to Entergy
      companies for performance obligations of Perryville
            
            $
            177,400
            
            
            $
            135,000
            
            
            $
            42,400
            
            
            $
            328Guarantees issued to purchasers
      of the assets of Cleco Energy
            
            
            1,000
            
            
            
            -
            
            
            
            1,000
            
            
            
            1,000Obligations under standby letter
      of credit issued to the Evangeline Tolling Agreement
      counterparty
            
            
            15,000
            
            
            
            -
            
            
            
            15,000
            
            
            
            15,000Guarantee issued to Entergy
      Mississippi on behalf of Attala
            
            
            500
            
            
            
            -
            
            
            
            500
            
            
            
            500Guarantee issued to Tenaska Gas
      Storage, LLC on behalf of Acadia
            
            
            10,000
            
            
            
            -
            
            
            
            10,000
            
            
            
            10,000Cleco
      PowerObligations under standby letter
      of credit issued to the Louisiana Department of Labor
            
            
            3,525
            
            
            
            -
            
            
            
            3,525
            
            
            
            -Obligations under the Lignite
      Mining Agreement
            
            
            3,488
            
            
            
            -
            
            
            
            3,488
            
            
            
            -Total
            
            $
            210,913
            
            
            $
            135,000
            
            
            $
            75,913
            
            
            $
            26,828





Cleco
Corporation provided a limited guarantee and an indemnification 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, 2009, the aggregate
guarantee of $177.4 million is limited to $42.4 million due to the performance
of some of the underlying obligations that were
guaranteed.  Management believes 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, 2009, was $0.3 million,
resulting in a corresponding reduction in the available credit under Cleco’s
credit facility, which was determined in accordance with the facility’s
definition of a contingent obligation.  The contingent obligation
reduces the amount available under the credit facility by an amount equal to the
maximum reasonably anticipated liability in respect of the contingent obligation
as determined in good faith.


In
November 2004, Cleco completed the sale of substantially all of the assets of
Cleco Energy.  Cleco Corporation provided guarantees to the buyers of
Cleco Energy’s assets for the payment and performance of the indemnity
obligations of Cleco Energy.  The aggregate amount of the guarantees
was $1.4 million, of which $0.4 million expired on September 27, 2009, and $1.0
million expired on October 20, 2009.  These guarantees do not fall
within the scope of the authoritative guidance for guarantees.  Cleco
Energy issued guarantees and indemnifications that fall within the recognition
scope of the authoritative guidance for guarantees, 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 as of September 30,
2009, was $1.0 million.  The discounted probability-weighted liability
as of September 30, 2009, was $0.1 million.


If
Evangeline fails to perform certain obligations under its tolling agreement,
Cleco Corporation will be required to make payments to the Evangeline Tolling
Agreement counterparty.  Cleco Corporation’s obligation under the
Evangeline commitment is in the form of a standby letter of credit from
investment grade banks and is limited to $15.0 million.  Rating
triggers do not exist in the Evangeline Tolling Agreement.  Cleco
expects Evangeline to be able to meet its obligations under the tolling
agreement and does not expect Cleco Corporation to be required to make payments
to the counterparty.  However, under the covenants associated with
Cleco Corporation’s credit facility, the entire net amount of the Evangeline
commitment reduces the amount that can be borrowed under the credit
facility.  The letter of credit for Evangeline is expected to be
renewed annually until 2020.


In
January 2006, Cleco Corporation provided a $0.5 million guarantee to Entergy
Mississippi for Attala’s obligations under





39
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





the
Interconnection Agreement.  This guarantee will be effective through
the life of the agreement.


In
February 2009, Cleco Corporation provided a $10.0 million guarantee to Tenaska
Gas Storage, LLC for Acadia’s obligation under the Energy Management Services
Agreement.  This guarantee expired on October 31, 2009.


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 $3.5 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, 2009, Cleco Power’s 50% exposure
for this obligation was approximately $3.5 million.  The lignite
mining contract is in place until 2011 and does not affect the amount Cleco
Corporation can borrow under its credit facility.


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





AT SEPTEMBER 30,
    2009AMOUNT OF COMMITMENT EXPIRATION
      PER PERIODNET
            
            
            
            
            
            
            
            
            
            
            
            MOREAMOUNT
            
            
            LESS THAN
            
            
            
            
            
            
            
            
            THAN(THOUSANDS)
            
            COMMITTED
            
            
            ONE YEAR
            
            
            1-3 YEARS
            
            
            3-5 YEARS
            
            
            5 YEARSGuarantees
            
            $
            57,388
            
            
            $
            11,000
            
            
            $
            3,488
            
            
            $
            -
            
            
            $
            42,900Standby
      letters of credit
            
            
            18,525
            
            
            
            3,525
            
            
            
            -
            
            
            
            -
            
            
            
            15,000Total commercial
      commitments
            
            $
            75,913
            
            
            $
            14,525
            
            
            $
            3,488
            
            
            $
            -
            
            
            $
            57,900





In its
bylaws, Cleco Corporation has agreed to indemnify directors, officers, agents
and employees who are made a party to a pending or completed suit, arbitration,
investigation, or other proceeding whether civil, criminal, investigative or
administrative, if the basis of inclusion arises as the result of acts conducted
in the discharge of their official capacity.  Cleco Corporation has
purchased various insurance policies to reduce the risks associated with the
indemnification.  In its Operating Agreement, Cleco Power provides for
the same indemnification as described above with respect to its managers,
officers, agents, and employees.


Generally,
neither Cleco Corporation nor Cleco Power has recourse that would enable them to
recover amounts paid under their guarantee or indemnification
obligations.  The one exception is the insurance contracts associated
with the indemnification of directors, managers, officers, agents, and
employees.  There are no assets held as collateral for third parties
that either Cleco Corporation or Cleco Power could obtain and liquidate to
recover amounts paid pursuant to the guarantees.





Other
Contingencies




General
Electric Equipment Services Corporation


Cleco
Power has entered into an operating lease agreement with General Electric
Equipment Services Corporation for leasing railcars in order to transport coal
to its Rodemacher Power Station Unit 2.  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 $1.3 million.  At this time, Cleco Power has no plans to
early terminate this lease, which expires in March 2017.





CBL
Capital Corporation


Cleco
Power has entered into an operating lease agreement with CBL Capital
Corporation, which was acquired by GE Capital Commercial, Inc. (GE
Capital).  This is a master leasing agreement for company vehicles and
other equipment.  On November 14, 2008, Cleco Power was notified by GE
Capital that it was electing to terminate the lease.  Pursuant to the
terms of the lease agreement, the termination date was effective January 13,
2009.  Cleco Power has one year from the termination date to enter
into a new operating lease with a third party and/or negotiate the purchase of
such equipment for the unamortized balance.  The unamortized balance
of equipment under the GE Capital lease was $5.3 million at September 30,
2009.  Cleco Power expects to purchase the vehicles and equipment
under the lease agreement during the fourth quarter of 2009.




LPSC
Fuel Audit


The LPSC
Fuel Adjustment Clause General Order issued November 6, 1997, in Docket No.
U-21497 provides that an audit will be performed not less than every other
year.  Cleco Power currently has fuel adjustment clause filings for
2003 through 2008 subject to audit.  In July 2006, the LPSC informed
Cleco Power that it was planning to conduct a periodic fuel audit that included
fuel adjustment clause filings for January 2003 through December
2004.  In March 2009, the LPSC indicated its intent to proceed with
the audit for the years 2003 through 2008.  However, this review is
still pending.  Cleco Power could be required to make a substantial
refund of previously recorded revenue as a result of these audits, and such
refund could result in a material adverse effect on the Registrants’ results of
operations, financial condition, and cash flows.




40
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Fuel
Transportation Agreement


Cleco
Power has entered into an agreement that meets the accounting definition of a
capital lease for barges in order to transport petroleum coke and limestone to
Rodemacher Unit 3.  The 42 dedicated barges were delivered between
January 6 and February 12, 2009.


The
lease rate contains a fixed portion of $225 per day per barge and a variable
component of $75 adjusted by Producer Price Index (PPI) annually for executory
costs.  If the barges are idle, the lessor is required to attempt to
sublease the barges to third parties with the revenue reducing Cleco Power’s
lease payment.  During the three and nine months ended September 30,
2009, Cleco Power did not receive any revenue from subleases.


The
initial term of this agreement is five years and the agreement will terminate
December 31, 2013.  Cleco will have an option to renew this agreement
for a second five-year term in full or in part and, at its option, purchase any
or all of the dedicated barges.  If Cleco does not renew this
agreement for the renewal term, then the lessor has the option to require Cleco
to purchase any or all of the barges.  If Cleco Power purchases the
barges on December 31, 2013, the purchase price of all 42 barges will be $21.7
million.


This
agreement contains a provision for early termination upon the occurrence of any
one of four cancellation events.


The
following is an analysis of the leased property under capital leases by major
classes:





AT
      SEPTEMBER 30,
            
            
            AT DECEMBER 31,CLASSES
      OF PROPERTY (THOUSANDS)
            
            2009
            
            
            2008Barges
            
            $
            22,050
            
            
            $
            -Other
            
            
            555
            
            
            
            555Total capital
    leases
            
            
            22,605
            
            
            
            555Less:
      accumulated amortization
            
            
            1,958
            
            
            
            342Net capital
    leases
            
            $
            20,647
            
            
            $
            213




The
amount listed as other in the chart above includes a capital lease agreement for
miscellaneous equipment by Cleco Power.  This lease terminates
December 31, 2010.


The
following is a schedule by years of future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as of
September 30, 2009.





(THOUSANDS)Three
      months ending December 31, 2009
            
            $
            1,196Years
      ending December 31,2010
            
            
            4,7482011
            
            
            4,6222012
            
            
            4,6342013
            
            
            4,6222014
            
            
            4,622Thereafter
            
            
            18,499Total
      minimum lease payments
            
            
            42,943Less:  executory
      costs
            
            
            10,854Net
      minimum lease payments
            
            
            32,089Less:  amount
      representing interest
            
            
            10,822Present
      value of net minimum lease payments
            
            $
            21,267Current
    liabilities
            
            $
            1,598Non-current
      liabilities
            
            $
            19,669




During
the three and nine months ended September 30, 2009, Cleco Power incurred
immaterial amounts of contingent rent related to the increase in the
PPI.




Oxbow
Lignite Mine Acquisition


In April
2009, Cleco Power entered into an agreement with SWEPCO to purchase the Oxbow
Lignite Company from NAC.  In September 2009, the LPSC approved the
joint application authorizing the acquisition of Oxbow Lignite
Company.  The purchase price of approximately $42.0 million includes
the lignite reserves, mining equipment, and related assets and
permits.  Cleco Power’s 50% portion of the purchase price for the
lignite reserves is approximately $12.9 million.  The lignite reserves
of approximately 120 million tons acquired under this agreement are expected to
fuel the Dolet Hills Power Station through 2026.  SWEPCO’s subsidiary,
Dolet Hills Lignite Company, LLC, will acquire the mining equipment and related
assets and permits for approximately $15.8 million and will operate the new mine
along with its current operations at the Dolet Hills Lignite Mine on similar
terms.  The existing Red River Lignite Supply and Transportation
Agreement with NAC will terminate upon the closing of this
transaction.  Pending approval by the Arkansas Public Service
Commission, a condition precedent for SWEPCO to close, the closing of this
transaction is expected to occur in December 2009.




Rodemacher
Unit 3


In
August 2005, Cleco Power entered into an EPC contract with Shaw to construct
Rodemacher Unit 3.  Cleco Power began construction of Rodemacher Unit
3 in May 2006.  In May 2006, Cleco Power and Shaw entered into an
Amended EPC Contract, which provided for substantial completion of construction
of Rodemacher Unit 3 by September 30, 2009.  In July 2008, Cleco Power
and Shaw amended this contract to provide for substantial completion as early as
June 30, 2009.  On October 19, 2009, Cleco and Shaw again amended the
EPC Contract to extend the substantial completion date to September 28,
2009.


In
December 2008, Cleco Power received correspondence from Shaw providing damage
estimates of $12.3 million due to alleged force majeure events related to
Hurricanes Gustav and Ike and a schedule extension of 15 days.  In
April 2009, Shaw withdrew such estimates and in July 2009, Shaw submitted a
formal claim for such events in the amount of $23.0 million and a schedule
extension of 48 days.  Additionally, in June 2009, Shaw notified Cleco
of an alleged event of default claiming that the on-site fuel for Rodemacher
Unit 3 did not meet the specifications under the Amended EPC
Contract.  In October 2009, under the terms of the Amended EPC
Contract, Shaw withdrew its request for recovery of any and all claims relating
to fuel quality and agreed to limit the claims for force majeure related costs,
not to exceed $24.0 million less a settlement credit of $6.0 million
..  The force majeure related claims remain in dispute resolution under
the Amended EPC Contract.  The Registrants do not believe the
resolution of these claims will have a material adverse effect on the
Registrants’ results of operations, financial condition, or cash
flows.




41
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Acadia
Transactions


On
February 26, 2009, Cleco Power announced that it had chosen the acquisition of
50% of the Acadia power station, or one of its two 580-MW units, as the lowest
bid in its 2007 long-term RFP.  Cleco Power will own and operate one
unit and operate the other 580-MW unit on behalf of Acadia or a future
owner.  Cleco Power and the parties have executed the definitive
agreements.  However, prior to closing the transaction, valued at
approximately $300 million, Cleco Power must receive approvals from the LPSC and
FERC.  In a process that remains under the supervision of an
independent monitor appointed by the LPSC, Cleco Power and Acadia plan to
complete the transaction in the first quarter of 2010.  Beginning in
January 2010, the agreements provide that Acadia will continue to operate the
plant and serve Cleco Power under a tolling agreement covering 50% of the Acadia
power station until the transaction is closed, after which Cleco Power will own
and operate one unit and operate the other 580-MW unit on behalf of Acadia or a
future owner.  This tolling agreement was approved by the LPSC in
October 2009.  The tolling agreement must also be approved by
FERC.


On
October 30, 2009, Acadia and Entergy Louisiana announced that definitive
agreements have been executed whereby Entergy Louisiana will purchase 50% of the
Acadia power station, or one of its two 580-MW units.  The transaction
is anticipated to be completed in late 2010 or early 2011.  The
agreements provide that, beginning in May 2010, Acadia will serve Entergy
Louisiana under a tolling agreement covering 50% of the Acadia power station
until the sale is completed.  Both the asset sale and interim tolling
agreement require regulatory approval.  Cleco Power will operate both
units at Acadia power station after the Entergy transaction is
completed.


In
connection with these transactions and in exchange for reasonable consideration,
APH has agreed to indemnify, upon the closing of these transactions, Cajun and
its affiliates against 100% of Acadia’s liabilities and other obligations
related to both the Cleco Power and Entergy transactions.




Other


Cleco
has accrued for liabilities to third parties, employee benefits, and storm
damages.




Risks
and Uncertainties




Cleco
Corporation


Cleco
Corporation could be subject to possible adverse consequences if Cleco’s
counterparties fail to perform their obligations or if Cleco Corporation or its
affiliates are not in compliance with loan agreements or bond
indentures.




Evangeline
Tolling Agreement


During
2008, JPMorgan Chase & Co. acquired The Bear Stearns Companies
Inc.  In connection with the acquisition, JPMorgan Chase & Co.
guaranteed certain obligations of The Bear Stearns Companies Inc. and its
subsidiaries, including obligations under the Evangeline Tolling
Agreement.  In September 2008, Bear Energy was merged into
JPMVEC.  If JPMorgan Chase & Co. or any successor or assignee were
to fail to perform its payment obligations, such failure could have a material
adverse effect on Cleco Corporation’s results of operations, financial
condition, and cash flows for the following reasons, among others:




§
            If
      such failure to perform constituted a default under the tolling agreement,
      the holders of the Evangeline bonds would have the right to declare the
      entire outstanding principal amount ($161.8 million at September 30, 2009)
      and interest to be immediately due and payable, which could result in:


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


o
            Cleco
      causing Evangeline to seek protection under federal bankruptcy laws;
      or


o
            the
      trustee of the bonds foreclosing on the mortgage and assuming ownership of
      the Evangeline plant;


§
            Cleco
      may not be able to enter into agreements in replacement of the Evangeline
      Tolling Agreement on terms as favorable as that agreement or at
      all;


§
            Cleco’s
      equity investment in Evangeline may be impaired, requiring a write-down to
      its fair market value, which could be substantial;
  and


§
            Cleco’s
      credit ratings could be downgraded, which would increase borrowing costs
      and limit sources of financing.




Other


Access
to capital markets is a significant source of funding for both short- and
long-term capital requirements not satisfied by operating cash
flows.  Recent market conditions have limited the availability and
have increased the costs of capital for many companies.  The inability
to raise capital on favorable terms could negatively affect Cleco Corporation’s
and Cleco Power’s ability to maintain and expand their
businesses.  After assessing the current operating performance,
liquidity, and credit ratings of Cleco, management believes that Cleco will have
access to the capital markets at prevailing market rates for companies with
comparable credit ratings.  At September 30, 2009, Moody’s and
Standard & Poor’s outlooks for Cleco Corporation were stable.  If
Cleco Corporation’s credit ratings were to be downgraded by Moody’s and 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





42
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





demand
or when the purchase price of power is less than its own cost of
generation.  Due to its location on the transmission grid, Cleco Power
relies on two main suppliers of electric transmission when accessing external
power markets.  At times, constraints limit the amount of purchased
power these transmission providers can deliver into Cleco Power’s service
territory.


Access
to capital markets is a significant source of funding for both short- and
long-term capital requirements not satisfied by operating cash
flows.  Recent market conditions have limited the availability and
have increased the costs of capital for many companies.  The inability
to raise capital on favorable terms could negatively affect Cleco Power’s
ability to maintain and expand its businesses.  After assessing the
current operating performance, liquidity, and credit ratings of Cleco Power,
management believes that Cleco Power will have access to the capital markets at
prevailing market rates for companies with comparable credit
ratings.  At September 30, 2009, Standard & Poor’s outlook for
Cleco Power was stable.  In June 2009, Moody’s placed Cleco Power’s
rating under review for possible downgrade.  Cleco Power is currently
rated one level higher by Moody’s than by Standard &
Poor’s.  Cleco Power pays fees and interest under its bank credit and
other debt agreements based on the higher of the two credit
ratings.  If Cleco Power’s credit ratings were to be downgraded by
Moody’s, Cleco Power would be required to pay additional fees and higher
interest rates.  Cleco Power’s collateral for derivatives is based on
the lower of the two credit ratings.  If Cleco Power’s credit ratings
were to be downgraded by Standard & Poor’s, Cleco Power would be required to
pay additional collateral for derivatives.


In
August 2005, Cleco Power entered into an EPC contract with Shaw to construct
Rodemacher Unit 3.  In May 2006, Cleco Power and Shaw entered into an
Amended EPC Contract.  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
11 — Affiliate Transactions





Cleco
has affiliate balances that were not eliminated as of September 30,
2009.  The balances were not eliminated due to the use of the equity
method of accounting for Evangeline, Perryville, Attala, and
Acadia.  For information on the Evangeline, Perryville, Attala, and
Acadia equity investments, see Note 9 — “Equity Investment in
Investees.”  At September 30, 2009, the payable to Evangeline was
$12.2 million and the payable to Acadia was $0.1 million.  Also, at
September 30, 2009, the receivable from Evangeline was $10.5 million and the
receivable from Acadia was $0.4 million.  The receivable from
Perryville and Attala combined was less than $0.1 million.


Cleco
Power has affiliate balances that are payable to or due from its
affiliates.  At September 30, 2009, the payable to Support Group was
$5.5 million, the payable to Cleco Corporation was $0.8 million, and the payable
to other affiliates was less than $0.1 million.  Also, at September
30, 2009, the receivable from Support Group was $2.4 million, and the receivable
from other affiliates was $0.1 million.




Note
12 — Intangible Asset





During
the first quarter of 2008, Cleco Katrina/Rita acquired a $177.5 million
intangible asset which includes $176.0 million for the right to bill and collect
storm recovery charges from customers of Cleco Power and $1.5 million of
financing costs.  This intangible asset is expected to have a life of
12 years, but could have a life of up to 15 years depending on the time period
required to collect the required amount from Cleco Power’s
customers.  The intangible asset is being amortized according to the
estimated collections from Cleco Power’s customers.  At the end of its
life, this asset will have no residual value.  For the three and nine
months ended September 30, 2009, Cleco Katrina/Rita recognized amortization
expense of $2.7 million and $8.0 million, respectively, compared to $2.7 million
and $6.3 million, respectively, for the same periods in 2008.  The
tables below provide additional information about this intangible
asset.





(THOUSANDS)
            AT SEPTEMBER 30,
    2009Gross
      carrying amount
            
            $
            177,537Accumulated
      amortization
            
            
            17,736Intangible
      asset
            
            $
            159,801





(THOUSANDS)Expected
      amortization expenseFor the twelve months ending
      September 30, 2010
            
            $
            11,346For the twelve months ending
      September 30, 2011
            
            
            12,127For the twelve months ending
      September 30, 2012
            
            
            12,955For the twelve months ending
      September 30, 2013
            
            
            13,803Thereafter
            
            
            109,570Total
      intangible asset
            
            $
            159,801




Note
13 — Subsequent Events





As of
October 30, 2009, management has evaluated the potential recognition or
disclosure of events or transactions that occurred in the period after the
balance sheet date of September 30, 2009.  The date October 30, 2009,
represents the date that Cleco issued the financial statements for the period
ended September 30, 2009.


On
October 2, 2009, Cleco Power entered into a treasury rate lock contract in order
to mitigate the interest rate exposure on possible future debt
issuances.  The notional amount of the treasury rate lock was $75.0
million.  The 4.005% lock rate was based on the 30-year treasury note
yield as of October 2, 2009.


In July
2008, Cleco Power filed a rate plan to establish new rates to be effective upon
commercial operation of Rodemacher Unit 3.  On October 14, 2009, the
LPSC approved Cleco Power’s new rate plan, which includes a target return on
equity of 10.7% with sharing occurring after 11.3%.  The new





43
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





rates
will be effective upon commercial operation of Rodemacher Unit 3.


On
October 30, 2009, Acadia and Entergy Louisiana announced that definitive
agreements have been executed whereby Entergy Louisiana will purchase 50% of the
Acadia power station, or one of its two 580-MW units.  The transaction
is anticipated to be completed in late 2010 or early 2011.  The
agreements provide that, beginning in May 2010, Acadia will serve Entergy
Louisiana under a tolling agreement covering 50% of the Acadia power station
until the sale is completed.  Both the asset sale and interim tolling
agreement require regulatory approval.  Cleco Power will operate both
units at the Acadia power station after the Entergy transaction is
completed.


On
October 30, 2009, Cleco Corporation filed a shelf registration statement with
the SEC registering the offer and sale of up to $300.0 million of Cleco
Corporation debt securities.  In addition, on such date, Cleco Power
filed a shelf registration statement with the SEC registering the offer and the
sale of up to $500.0 million of Cleco Power debt securities.  Both
shelf registration statements became effective upon filing with the
SEC.


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, 2008, and Cleco Corporation and Cleco Power’s Condensed
Consolidated Financial Statements contained in this Form 10-Q.  The
information included therein is essential to understanding the following
discussion and analysis.  Below is information concerning the
consolidated results of operations of Cleco for the three and nine months ended
September 30, 2009, and September 30, 2008.




OVERVIEW





Cleco is
a regional energy services holding company that conducts substantially all of
its business operations through its two primary subsidiaries:




§
            Cleco
      Power, an integrated electric utility services company regulated by the
      LPSC, FERC, and other regulators, which serves approximately 276,000
      customers across Louisiana and also engages in energy management
      activities; and


§
            Midstream,
      a merchant energy company regulated by FERC, which owns and operates a
      merchant power plant (Evangeline).  Midstream also owns a 50%
      interest in a merchant power plant (Acadia) and operates the plant on
      behalf of its partner.




While
management believes that Cleco remains a strong company, Cleco continues to
focus on several challenges and factors that could affect its results of
operations and financial condition in the near term.





Cleco
Power


Many
factors affect Cleco Power’s primary business of selling
electricity.  These factors include the presence of a stable
regulatory environment, which can impact cost recovery and return on equity, as
well as the recovery of costs related to growing energy demand and rising fuel
prices; the ability to increase energy sales while containing costs; and the
ability to meet increasingly stringent regulatory and environmental
standards.


As part
of a plan to diversify its fuel mix, combat rising fuel prices, and resolve its
long-term generation capacity needs, Cleco Power began constructing a 600-MW
solid-fuel generating unit at its Rodemacher power plant in May
2006.  When complete, Rodemacher Unit 3 will meet a portion of the
utility’s 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.  Shaw has informed Cleco
that it anticipates the plant will be substantially complete and operational in
late December 2009.  Cleco Power’s current base rates have been
extended through the commercial operation of Rodemacher Unit 3.


In July
2008, Cleco Power filed a rate plan to establish new rates to be effective upon
commercial operation of Rodemacher Unit 3.  As part of the new rate
plan, Cleco Power requested a return on equity of 12.25%.  Cleco
Power’s current base rates allow it the opportunity to earn a maximum regulated
return on equity of 11.65%, which is based on a return on equity of 11.25%, with
any regulated earnings between 11.25% and 12.25% shared between shareholders and
customers in a 40/60 ratio.  Cleco Power is currently recording AFUDC
associated with construction of Rodemacher Unit 3.  Once the unit
begins commercial operation, Cleco Power will no longer record AFUDC related to
Rodemacher Unit 3.  Recovery of the Rodemacher Unit 3 investment is
the largest component in Cleco Power’s new rate plan.  On October 14,
2009, the LPSC approved Cleco Power’s new retail rate plan which includes a
target return on equity of 10.7% with sharing occurring after
11.3%.  The new rates will be effective upon commercial operation of
Rodemacher Unit 3.  The retail rate plan is expected to increase
retail base revenues in the first twelve months of Rodemacher Unit 3 commercial
operations by approximately $173.0 million with an anticipated net billing
decrease for retail customers of approximately $40.0 million, or 5.0%, including
a reduction of approximately $97.0 million resulting from the cessation of
collection of and the refund of Rodemacher Unit 3 construction financing costs
based on a five-year crediting period.  For additional information,
see “— Financial Condition — Liquidity and Capital Resources — Regulatory
Matters — Retail Rates of Cleco Power” and — “Rodemacher Unit 3.”


Cleco
Power continues to evaluate a range of other power supply options for the
remainder of 2009 and beyond.  As such, Cleco Power is continuing to
update its IRP to look at future sources of supply.  Cleco Power
released a RFP in




44
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




October
2007 seeking long-term resources to fill the needs identified by the latest
IRP.  On February 26, 2009, Cleco Power announced that it had chosen
the acquisition of 50% of the Acadia power station, or one of its two 580-MW
units, as the lowest bid in its 2007 long-term RFP for capacity beginning in
2010.  Cleco Power will own and operate one unit and operate the other
580-MW unit on behalf of Acadia or a future owner as described further below
under “— Midstream.”  Cleco Power and the parties have executed the
definitive agreements.  However, prior to closing the transaction,
valued at approximately $300 million, Cleco Power must receive approvals from
the LPSC and FERC.  In a process that remains under the supervision of
an independent monitor appointed by the LPSC, Cleco Power and Acadia plan to
complete the transaction in the first quarter of 2010.  Beginning in
January 2010, the agreements provide that Acadia will operate the plant and
serve Cleco Power under a tolling agreement covering 50% of the Acadia power
station until the transaction is closed.  This tolling agreement was
approved by the LPSC in October 2009.  The tolling agreement must also
be approved by FERC.


In
October 2009, one of Cleco Power’s large industrial customers announced that it
would be closing its operations in December 2009.  Cleco Power’s
annual base revenue billings to this customer were expected to be approximately
$2.3 million.




Midstream


Acadia
resides in the Southeastern Electric Reliability Council (SERC)-Entergy
sub-region.  For merchant generators, this sub-region is challenged
both by the general oversupply of gas-fired generation available to serve the
Entergy system needs and the physical transmission constraints that can limit
the amount of power that can be delivered.  The SERC-Entergy
sub-region has reserve margins among the highest in the nation.  These
high reserve margins can lead to lower capacity factors and lower profitability
for Acadia.  In the coming years, the wholesale power market within
the SERC-Entergy sub-region is expected to tighten as load grows.  The
tightening wholesale power market is expected to result in higher wholesale
power prices.  At times, transmission availability limits the
wholesale markets accessible by Acadia resulting in limited buyers for Acadia’s
output.  Because of Acadia’s location on the transmission grid, Acadia
has interconnections with two main suppliers of electric transmission when
accessing external power markets.


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


On
February 26, 2009, Cleco Power announced that it had selected Acadia’s proposal
to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power
2007 long-term RFP.  Under the proposed arrangement, Cleco Power would
acquire and operate one of Acadia’s generating units and operate the other unit,
as described further above under “— Cleco Power.”


On
October 30, 2009, Acadia and Entergy Louisiana announced that definitive
agreements have been executed whereby Entergy Louisiana will purchase 50% of the
Acadia power station, or one of its two 580-MW units.  The transaction
is anticipated to be completed in late 2010 or early 2011.  The
agreements provide that, beginning in May 2010, Acadia will serve Entergy
Louisiana under a tolling agreement covering 50% of the Acadia power station
until the sale is completed.  Both the asset sale and interim tolling
agreement require regulatory approval.  Cleco Power will operate both
units at Acadia after the Entergy transaction is completed.


Midstream’s
other principal source of revenue is the Evangeline Tolling Agreement, under
which the counterparty has the right to dispatch the electric generation
capacity of the facility.  Profitability of Midstream’s investment in
Evangeline depends principally upon continued performance by JPMVEC of its
payment obligations under the tolling agreement and controlling maintenance
expenses associated with the facility.




Comparison
of the Three Months Ended September 30, 2009, and 2008




Cleco
Consolidated


FOR THE THREE MONTHS ENDED
      SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2009
            
            
            2008
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenue, net
            
            $
            241,500
            
            
            $
            343,675
            
            
            $
            (102,175
            )
            
            
            (29.7
            )%Operating
      expenses
            
            
            200,823
            
            
            
            308,111
            
            
            
            107,288
            
            
            
            34.8
            %Operating
      income
            
            $
            40,677
            
            
            $
            35,564
            
            
            $
            5,113
            
            
            
            14.4
            %Interest
      income
            
            $
            369
            
            
            $
            1,669
            
            
            $
            (1,300
            )
            
            
            (77.9
            )%Allowance
      for other funds used during construction
            
            $
            17,813
            
            
            $
            17,786
            
            
            $
            27
            
            
            
            0.2
            %Equity
      income from investees
            
            $
            15,587
            
            
            $
            9,662
            
            
            $
            5,925
            
            
            
            61.3
            %Other
      income
            
            $
            2,079
            
            
            $
            937
            
            
            $
            1,142
            
            
            
            121.9
            %Other
      expense
            
            $
            849
            
            
            $
            2,276
            
            
            $
            1,427
            
            
            
            62.7
            %Interest
      charges
            
            $
            10,838
            
            
            $
            15,696
            
            
            $
            4,858
            
            
            
            31.0
            %Federal
      and state income taxes
            
            $
            4,983
            
            
            $
            10,513
            
            
            $
            5,530
            
            
            
            52.6
            %Net
      income applicable to common stock
            
            $
            59,843
            
            
            $
            37,121
            
            
            $
            22,722
            
            
            
            61.2
            %




Consolidated
net income applicable to common stock increased $22.7 million, or 61.2%, in the
third quarter of 2009 compared to the third quarter of 2008 primarily due to
increased Cleco Power, Midstream, and corporate earnings.


Operating
revenue, net decreased $102.2 million, or 29.7%, in the third quarter of 2009
compared to the third quarter of 2008 largely as a result of lower fuel cost
recovery revenue at Cleco Power.


Operating
expenses decreased $107.3 million, or 34.8%, in the third quarter of 2009
compared to the third quarter of 2008 primarily due to lower per-unit costs and
volumes of purchased power for utility customers.


Interest
income decreased $1.3 million, or 77.9%, in the third quarter of 2009 compared
to the third quarter of 2008 primarily due to a lower recovery of interest costs
relating to Cleco Power’s lower deferred lignite mining costs.




45
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Equity
income from investees increased $5.9 million, or 61.3%, in the third quarter of
2009 compared to the third quarter of 2008 primarily due to increased equity
income at Evangeline.


Other
income increased $1.1 million, or 121.9%, during the third quarter of 2009
compared to the third quarter of 2008 primarily due to the recognition of an
increase in the cash surrender value of life insurance policies at Cleco
Corporation.


Other
expense decreased $1.4 million, or 62.7%, during the third quarter of 2009
compared to the third quarter of 2008 primarily due to the absence in 2009 of
decreases in the cash surrender value of life insurance policies at Cleco
Corporation during the third quarter of 2008.


Interest
charges decreased $4.9 million, or 31.0%, during the third quarter of 2009
compared to the third quarter of 2008 primarily due to the settlement of a
franchise tax lawsuit and lower net interest charges at Cleco Power as discussed
below.


Federal
and state income taxes decreased $5.5 million, or 52.6%, in the third quarter of
2009 compared to the third quarter of 2008 primarily due to a decrease in
forecasted pre-tax income and due to the increased impact that equity AFUDC had
on actual pre-tax income.  The effective income tax rate is less than
the expected statutory rate primarily due to the significant impact of
flow-through treatment on plant-related differences such as equity
AFUDC.


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)
              
              2009
              
              
              2008
              
              
              VARIANCE
              
              
              CHANGEOperating
      revenueBase
              
              $
              103,198
              
              
              $
              99,090
              
              
              $
              4,108
              
              
              
              4.1
              %Fuel cost
    recovery
              
              
              125,754
              
              
              
              234,846
              
              
              
              (109,092
              )
              
              
              (46.5
              )%Other operations
              
              
              9,834
              
              
              
              6,981
              
              
              
              2,853
              
              
              
              40.9
              %Affiliate
revenue
              
              
              6
              
              
              
              7
              
              
              
              (1
              )
              
              
              (14.3
              )%Intercompany
    revenue
              
              
              343
              
              
              
              418
              
              
              
              (75
              )
              
              
              (17.9
              )%Operating revenue,
      net
              
              
              239,135
              
              
              
              341,342
              
              
              
              (102,207
              )
              
              
              (29.9
              )%Operating
      expensesFuel used for electric
      generation – recoverable
              
              
              72,512
              
              
              
              90,846
              
              
              
              18,334
              
              
              
              20.2
              %Power purchased for utility
      customers – recoverable
              
              
              53,242
              
              
              
              144,000
              
              
              
              90,758
              
              
              
              63.0
              %Non-recoverable fuel and power
      purchased
              
              
              10,774
              
              
              
              9,373
              
              
              
              (1,401
              )
              
              
              (14.9
              )%Other operations
              
              
              25,165
              
              
              
              23,242
              
              
              
              (1,923
              )
              
              
              (8.3
              )%Maintenance
              
              
              9,602
              
              
              
              9,719
              
              
              
              117
              
              
              
              1.2
              %Depreciation
              
              
              19,310
              
              
              
              18,861
              
              
              
              (449
              )
              
              
              (2.4
              )%Taxes other than income
      taxes
              
              
              7,809
              
              
              
              8,732
              
              
              
              923
              
              
              
              10.6
              %Loss on sale of
      assets
              
              
              70
              
              
              
              -
              
              
              
              (70
              )
              
              
              -Total operating
      expenses
              
              
              198,484
              
              
              
              304,773
              
              
              
              106,289
              
              
              
              34.9
              %Operating
      income
              
              $
              40,651
              
              
              $
              36,569
              
              
              $
              4,082
              
              
              
              11.2
              %Interest
      income
              
              $
              341
              
              
              $
              1,545
              
              
              $
              (1,204
              )
              
              
              (77.9
              )%Allowance
      for other funds used during construction
              
              $
              17,813
              
              
              $
              17,786
              
              
              $
              27
              
              
              
              0.2
              %Interest
      charges
              
              $
              13,645
              
              
              $
              14,973
              
              
              $
              1,328
              
              
              
              8.9
              %Federal
      and state income taxes
              
              $
              1,316
              
              
              $
              10,566
              
              
              $
              9,250
              
              
              
              87.5
              %Net
      income
              
              $
              43,552
              
              
              $
              30,538
              
              
              $
              13,014
              
              
              
              42.6
              %




Cleco
Power’s net income in the third quarter of 2009 increased $13.0 million, or
42.6%, compared to the third quarter of 2008.  Contributing factors
include:




§
            higher
      base revenue,


§
            higher
      other operations revenue,


§
            lower
      interest charges,


§
            lower
      taxes other than income taxes, and


§
            lower
      effective income tax rate.




These
were partially offset by:




§
            lower
      interest income,


§
            higher
      other operations expense, and


§
            higher
      non-recoverable fuel and purchased power
  expenses.





FOR THE THREE MONTHS ENDED
      SEPTEMBER 30,(MILLION
      kWh)
            2009
            
            2008
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            1,207
            
            1,144
            
            5.5 %Commercial
            743
            
            721
            
            3.1 %Industrial
            577
            
            762
            
            (24.3)%Other retail
            36
            
            36
            
            -Total retail
            2,563
            
            2,663
            
            (3.8)%Sales for resale
            199
            
            153
            
            30.1 %Unbilled
            (95)
            
            (134)
            
            29.1 %Total
      retail and wholesale customer sales
            2,667
            
            2,682
            
            (0.6)%





FOR THE THREE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            
            $
            53,970
            
            
            $
            51,490
            
            
            
            4.8
            %Commercial
            
            
            25,802
            
            
            
            25,195
            
            
            
            2.4
            %Industrial
            
            
            12,912
            
            
            
            14,585
            
            
            
            (11.5
            )%Other retail
            
            
            1,491
            
            
            
            1,469
            
            
            
            1.5
            %Storm surcharge
            
            
            5,054
            
            
            
            5,455
            
            
            
            (7.4
            )%Total retail
            
            
            99,229
            
            
            
            98,194
            
            
            
            1.1
            %Sales for resale
            
            
            7,435
            
            
            
            5,759
            
            
            
            29.1
            %Unbilled
            
            
            (3,466
            )
            
            
            (4,863
            )
            
            
            28.7
            %Total
      retail and wholesale customer sales
            
            $
            103,198
            
            
            $
            99,090
            
            
            
            4.1
            %




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 more
alternative heating sources are available.  Normal heating- 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.




46
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q







FOR
      THE THREE MONTHS ENDED SEPTEMBER 30,2009 CHANGE2009
            
            2008
            
            NORMAL
            
            PRIOR YEAR
            
            NORMALCooling-degree
      days
            1,584
            
            1,541
            
            1,468
            
            2.8%
            
            7.9%




Base


Base
revenue increased $4.1 million, or 4.1%, during the third quarter of 2009
compared to the third quarter of 2008.  The increase was primarily due
to higher residential usage per customer, Cleco Power providing service to a new
wholesale customer that commenced in April 2009, and the absence of
hurricane-related outages.  Partially offsetting these increases were
lower sales to industrial customers as a result of decreased production at one
of Cleco Power’s large industrial customers and the start of a large industrial
customer cogenerating a portion of its electricity requirements.  For
information on the anticipated effects of changes in revenue from an industrial
customer, see “— Overview — Cleco Power.”  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, 2008.




Fuel
Cost Recovery


Fuel
cost recovery revenue billed to customers decreased $109.1 million, or 46.5%,
during the third quarter of 2009 compared to the third quarter in 2008 primarily
due to decreases in the per-unit cost and volume of power purchased for utility
customers.  Partially offsetting this decrease were increases in the
per-unit cost and volume of fuel used for electric
generation.  Changes in fuel costs historically have not significantly
affected Cleco Power’s net income.  Generally, fuel and purchased
power expenses are recovered through the LPSC-established fuel adjustment
clause, which enables Cleco Power to pass on to its customers substantially all
such charges.  Approximately 95% of Cleco Power’s total fuel cost
during the third quarter of 2009 was regulated by the LPSC, while the remainder
was regulated by FERC.  Recovery of fuel adjustment clause costs is
subject to refund until approval is received from the LPSC.  For
information on Cleco Power’s pending fuel audit, see Item 1, “Notes to the
Unaudited Condensed Consolidated Financial Statements — Note 10 — Litigation,
Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC
Fuel Audit.”




Other
Operations


Other
operations revenue increased $2.9 million, or 40.9%, in the third quarter of
2009 compared to the third quarter of 2008 primarily due to a $4.7 million net
gain relating to economic hedge transactions associated with fixed-price power
being provided to a wholesale customer.  Partially offsetting this
increase was $1.8 million of lower other miscellaneous revenue.  For
information on Cleco’s energy commodity activities, see Item 3, “Quantitative
and Qualitative Disclosures about Market Risk — Risk Overview — Commodity Price
Risks.”




Operating
Expenses


Operating
expenses decreased $106.3 million, or 34.9%, in the third quarter of 2009
compared to the third quarter of 2008.  Fuel used for electric
generation (recoverable) decreased $18.3 million, or 20.2%, primarily due to
recovery of higher fuel costs deferred in prior periods.  Partially
offsetting this decrease were higher per-unit costs and volumes of fuel used as
compared to the third quarter of 2008, as a result of realized losses on fuel
hedging due to the price volatility of natural gas.  Power purchased
for utility customers (recoverable) decreased $90.8 million, or 63.0%, largely
due to lower per-unit costs and volumes of purchased power.  Fuel used
for electric generation and power purchased for utility customers generally are
influenced by natural gas prices, as well as availability of
transmission.  However, other factors such as scheduled and/or
unscheduled outages, unusual maintenance or repairs, or other developments may
affect fuel used for electric generation and power purchased for utility
customers.  Non-recoverable fuel and power purchased increased $1.4
million, or 14.9%, primarily due to higher net capacity payments made during the
third quarter of 2009.  Other operations expense increased $1.9
million, or 8.3%, primarily due to higher general liability expense, and higher
employee benefit costs and administrative expenses.  Taxes other than
income taxes decreased $0.9 million, or 10.6%, primarily due to lower property
taxes and franchise fees.




Interest
Income


Interest
income decreased $1.2 million, or 77.9%, during the third quarter of 2009
compared to the third quarter of 2008 primarily due to a lower recovery of
interest costs relating to Cleco Power's lower deferred lignite mining
costs.




Allowance
for Other Funds Used During Construction


Allowance
for other funds used during construction comprised 40.9% of Cleco Power’s net
income for the third quarter of 2009 compared to 58.2% for the third quarter of
2008.  Cleco Power is currently recording AFUDC associated with
construction of Rodemacher Unit 3.  Once the unit begins commercial
operations, Cleco Power will no longer record AFUDC related to Rodemacher Unit
3.




Interest
Charges


Interest
charges decreased $1.3 million, or 8.9%, during the third quarter of 2009
compared to the thirdquarter of
2008 primarily due to the capitalization of an additional $1.6 million of
allowance for borrowed funds used during construction associated with Rodemacher
Unit 3, $1.3 million primarily from interest related to uncertain tax positions,
and $0.2 million of other miscellaneous interest charges.  Partially
offsetting these decreases was $1.8 million related to the December 2008
issuance of GO Zone bonds.




Income
Taxes


Federal
and state income taxes decreased $9.3 million, or 87.5%, in the third quarter of
2009 compared to the third quarter of 2008 primarily due to a decrease in
forecasted pre-tax





47
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





income
and due to the increased impact that equity AFUDC had on actual pre-tax
income.  The effective income tax rate is less than the expected
statutory rate primarily due to the significant impact of flow-through treatment
on plant-related differences such as equity AFUDC.




Midstream


FOR THE THREE MONTHS ENDED
      SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2009
            
            
            2008
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenueAffiliate
revenue
            
            $
            2,087
            
            
            $
            2,131
            
            
            $
            (44
            )
            
            
            (2.1
            )%Operating
    revenue
            
            
            2,087
            
            
            
            2,131
            
            
            
            (44
            )
            
            
            (2.1
            )%Operating
      expensesOther operations
            
            
            1,508
            
            
            
            1,717
            
            
            
            209
            
            
            
            12.2
            %Maintenance
            
            
            808
            
            
            
            938
            
            
            
            130
            
            
            
            13.9
            %Depreciation
            
            
            44
            
            
            
            78
            
            
            
            34
            
            
            
            43.6
            %Taxes other than income
      taxes
            
            
            92
            
            
            
            94
            
            
            
            2
            
            
            
            2.1
            %Loss on sale of
      assets
            
            
            5
            
            
            
            -
            
            
            
            (5
            )
            
            
            -Total operating
      expenses
            
            
            2,457
            
            
            
            2,827
            
            
            
            370
            
            
            
            13.1
            %Operating
      loss
            
            $
            (370
            )
            
            $
            (696
            )
            
            $
            326
            
            
            
            46.8
            %Equity
      income from investees
            
            $
            15,108
            
            
            $
            9,223
            
            
            $
            5,885
            
            
            
            63.8
            %Federal
      and state income tax expense
            
            $
            4,923
            
            
            $
            2,383
            
            
            $
            (2,540
            )
            
            
            (106.6
            )%Net
      income
            
            $
            8,412
            
            
            $
            4,573
            
            
            $
            3,839
            
            
            
            83.9
            %




Factors
affecting Midstream during the third quarter of 2009 are described
below.




Equity
Income from Investees


Equity
income from investees increased $5.9 million, or 63.8%, during the third quarter
of 2009 compared to the third quarter of 2008.  The increase was due
to a $5.5 million increase in equity earnings at Evangeline and a $0.4 million
decrease in equity losses at APH.  The increased earnings at
Evangeline were primarily due to lower maintenance expenses and the absence of
replacement power purchases primarily due to the absence in 2009 of an unplanned
outage at Evangeline that occurred in 2008.  The decrease in losses at
APH was due to higher net revenue from Acadia's short-term tolling agreement
with Cleco Power and lower depreciation expense.  For additional
information on Evangeline and Acadia, see Item 1, “Notes to the Unaudited
Condensed Consolidated Financial Statements — Note 9 — Equity Investment in
Investees.”




Income
Taxes


Federal
and state income taxes increased $2.5 million, or 106.6%, during the third
quarter of 2009 compared to the third quarter of 2008 primarily due to an
increase in pre-tax income.




Comparison
of the Nine Months Ended September 30, 2009, and 2008




Cleco
Consolidated


FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2009
            
            
            2008
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenue, net
            
            $
            661,662
            
            
            $
            841,013
            
            
            $
            (179,351
            )
            
            
            (21.3
            )%Operating
      expenses
            
            
            571,878
            
            
            
            744,990
            
            
            
            173,112
            
            
            
            23.2
            %Operating
      income
            
            $
            89,784
            
            
            $
            96,023
            
            
            $
            (6,239
            )
            
            
            (6.5
            )%Interest
      income
            
            $
            1,051
            
            
            $
            4,544
            
            
            
            (3,493
            )
            
            
            (76.9
            )%Allowance
      for other funds used during construction
            
            $
            52,341
            
            
            $
            46,462
            
            
            $
            5,879
            
            
            
            12.7
            %Equity
      income from investees
            
            $
            710
            
            
            $
            2,723
            
            
            $
            (2,013
            )
            
            
            (73.9
            )%Other
      income
            
            $
            4,753
            
            
            $
            1,094
            
            
            $
            3,659
            
            
            
            334.5
            %Other
      expense
            
            $
            2,181
            
            
            $
            4,322
            
            
            $
            2,141
            
            
            
            49.5
            %Interest
      charges
            
            $
            39,670
            
            
            $
            35,358
            
            
            $
            (4,312
            )
            
            
            (12.2
            )%Federal
      and state income taxes
            
            $
            13,258
            
            
            $
            22,573
            
            
            $
            9,315
            
            
            
            41.3
            %Net
      income applicable to common stock
            
            $
            93,495
            
            
            $
            88,558
            
            
            $
            4,937
            
            
            
            5.6
            %




Consolidated
net income applicable to common stock increased $4.9 million, or 5.6%, in the
first nine months of 2009 compared to the first nine months of 2008 primarily
due to increased corporate earnings.  Partially offsetting this
increase were lower earnings at Cleco Power and higher losses at
Midstream.


Operating
revenue, net decreased $179.4 million, or 21.3%, in the first nine months of
2009 compared to the first nine months of 2008 largely as a result of lower fuel
cost recovery revenue at Cleco Power.


Operating
expenses decreased $173.1 million, or 23.2%, in the first nine months of 2009
compared to the first nine months of 2008 primarily due to lower per-unit costs
and volumes of purchased power for utility customers.


Interest
income decreased $3.5 million, or 76.9%, in the first nine months of 2009
compared to the first nine months of 2008 primarily due to lower interest rates
and lower average investment balances.  Also contributing to the
decrease was a lower recovery of interest costs relating to Cleco Power’s lower
deferred lignite mining costs.


Allowance
for other funds used during construction increased $5.9 million, or 12.7%, in
the first nine months of 2009 compared to the first nine months of 2008
primarily due to increased construction activity at Rodemacher Unit
3.


Equity
income from investees decreased $2.0 million, or 73.9%, in the first nine months
of 2009 compared to the first nine months of 2008 primarily due to increased
equity losses at APH, partially offset by equity earnings at
Evangeline.


Other
income increased $3.7 million, or 334.5%, in the first nine months of 2009
compared to the first nine months of 2008 primarily due to the recognition of an
increase in the cash surrender value of life insurance policies at Cleco
Corporation and higher mutual assistance revenue at Cleco Power.


Other
expense decreased $2.1 million, or 49.5% in the first nine months of 2009
compared to the first nine months of 2008 primarily due to the absence in 2009
of decreases in the cash surrender value of life insurance policies at Cleco
Corporation during 2008.  Partially offsetting this decrease were
higher mutual assistance expenses at Cleco Power.




48
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Interest
charges increased $4.3 million, or 12.2%, during the first nine months of 2009
compared to the first nine months of 2008 primarily due to higher net interest
charges at Cleco Power as discussed below, partially offset by lower interest
charges at Cleco Corporation from the repayment of senior notes and the
settlement of a franchise tax lawsuit.


Federal
and state income taxes decreased $9.3 million, or 41.3%, during the first nine
months of 2009 compared to the first nine months of 2008 primarily due to a
decrease in pre-tax income, increases in forecasted equity AFUDC and forecasted
permanent tax deductions, and a decrease in deferred state income taxes related
to changes in state flow-through items.  The effective income tax rate
is less than the expected statutory rate primarily due to the significant impact
of flow-through treatment on plant-related differences such as equity
AFUDC.


Results
of operations for Cleco Power and Midstream are more fully described
below.




Cleco
Power


FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2009
            
            
            2008
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenueBase
            
            $
            270,937
            
            
            $
            270,933
            
            
            $
            4
            
            
            
            -Fuel cost
    recovery
            
            
            356,532
            
            
            
            532,464
            
            
            
            (175,932
            )
            
            
            (33.0
            )%Other operations
            
            
            25,609
            
            
            
            29,757
            
            
            
            (4,148
            )
            
            
            (13.9
            )%Affiliate
revenue
            
            
            17
            
            
            
            21
            
            
            
            (4
            )
            
            
            (19.0
            )%Intercompany
    revenue
            
            
            1,029
            
            
            
            1,506
            
            
            
            (477
            )
            
            
            (31.7
            )%Operating revenue,
      net
            
            
            654,124
            
            
            
            834,681
            
            
            
            (180,557
            )
            
            
            (21.6
            )%Operating
      expensesFuel used for electric
      generation – recoverable
            
            
            207,470
            
            
            
            154,347
            
            
            
            (53,123
            )
            
            
            (34.4
            )%Power purchased for
      utility  customers – recoverable
            
            
            149,063
            
            
            
            378,137
            
            
            
            229,074
            
            
            
            60.6
            %Non-recoverable fuel and power
      purchased
            
            
            20,889
            
            
            
            21,901
            
            
            
            1,012
            
            
            
            4.6
            %Other operations
            
            
            72,814
            
            
            
            65,862
            
            
            
            (6,952
            )
            
            
            (10.6
            )%Maintenance
            
            
            32,705
            
            
            
            32,556
            
            
            
            (149
            )
            
            
            (0.5
            )%Depreciation
            
            
            57,339
            
            
            
            56,886
            
            
            
            (453
            )
            
            
            (0.8
            )%Taxes other than income 
      taxes
            
            
            23,172
            
            
            
            24,727
            
            
            
            1,555
            
            
            
            6.3
            %Loss on sale of
      assets
            
            
            70
            
            
            
            -
            
            
            
            (70
            )
            
            
            -Total operating
      expenses
            
            
            563,522
            
            
            
            734,416
            
            
            
            170,894
            
            
            
            23.3
            %Operating
      income
            
            $
            90,602
            
            
            $
            100,265
            
            
            $
            (9,663
            )
            
            
            (9.6
            )%Interest
      income
            
            $
            999
            
            
            $
            3,121
            
            
            $
            (2,122
            )
            
            
            (68.0
            )%Allowance
      for other funds used during construction
            
            $
            52,341
            
            
            $
            46,462
            
            
            $
            5,879
            
            
            
            12.7
            %Other
      income
            
            $
            2,138
            
            
            $
            1,172
            
            
            $
            966
            
            
            
            82.4
            %Other
      expense
            
            $
            2,985
            
            
            $
            1,643
            
            
            $
            (1,342
            )
            
            
            (81.7
            )%Interest
      charges
            
            $
            40,286
            
            
            $
            31,435
            
            
            $
            (8,851
            )
            
            
            (28.2
            )%Federal
      and state income taxes
            
            $
            14,033
            
            
            $
            27,135
            
            
            $
            13,102
            
            
            
            48.3
            %Net
      income
            
            $
            88,776
            
            
            $
            90,807
            
            
            $
            (2,031
            )
            
            
            (2.2
            )%






Cleco
Power’s net income in the first nine months of 2009 decreased $2.0 million, or
2.2%, compared to the first nine months of 2008.  Contributing factors
include:




§
            higher
      interest charges,


§
            higher
      other operations and maintenance
expenses,


§
            lower
      other operations revenue,


§
            lower
      interest income, and


§
            higher
      other expense.




These
were partially offset by:




§
            higher
      allowance for other funds used during construction,


§
            lower
      non-recoverable fuel and power purchased expenses,


§
            lower
      taxes other than income taxes,


§
            higher
      other income, and


§
            lower
      effective income tax rate.





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(MILLION
      kWh)
            2009
            
            2008
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            2,814
            
            2,789
            
            0.9 %Commercial
            1,882
            
            1,874
            
            0.4 %Industrial
            1,633
            
            2,177
            
            (25.0)%Other retail
            103
            
            101
            
            2.0 %Total retail
            6,432
            
            6,941
            
            (7.3)%Sales for resale
            432
            
            327
            
            32.1 %Unbilled
            98
            
            12
            
            716.7 %Total
      retail and wholesale customer sales
            6,962
            
            7,280
            
            (4.4)%





FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,(THOUSANDS)
            
            2009
            
            
            2008
            
            
            FAVORABLE/
              (UNFAVORABLE)Electric
      salesResidential
            
            $
            122,486
            
            
            $
            121,236
            
            
            
            1.0
            %Commercial
            
            
            71,871
            
            
            
            71,258
            
            
            
            0.9
            %Industrial
            
            
            38,046
            
            
            
            41,580
            
            
            
            (8.5
            )%Other retail
            
            
            4,288
            
            
            
            4,205
            
            
            
            2.0
            %Storm surcharge
            
            
            14,674
            
            
            
            15,641
            
            
            
            (6.2
            )%Total retail
            
            
            251,365
            
            
            
            253,920
            
            
            
            (1.0
            )%Sales for resale
            
            
            16,034
            
            
            
            15,430
            
            
            
            3.9
            %Unbilled
            
            
            3,538
            
            
            
            1,583
            
            
            
            123.5
            %Total
      retail and wholesale customer sales
            
            $
            270,937
            
            
            $
            270,933
            
            
            
            -




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 30,2009 CHANGE2009
            
            2008
            
            NORMAL
            
            PRIOR YEAR
            
            NORMALHeating-degree
      days
            779
            
            860
            
            1,026
            
            (9.4)%
            
            (24.1)%Cooling-degree
      days
            2,763
            
            2,699
            
            2,436
            
            2.4  %
            
            13.4 
  %





49
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Base


Overall,
base revenue was essentially the same during the first nine months of 2009
compared to the first nine months of 2008.  Some of the significant
increases in base revenue during the first nine months of 2009 were attributable
to Cleco Power providing service to a new wholesale customer that commenced in
April 2009 and higher residential sales primarily from an increase in the number
of customers served.  Some of the significant decreases in base
revenue were attributable to lower sales to industrial customers as a result of
decreased production at one of Cleco Power’s large industrial customers and the
start of a large industrial customer cogenerating a portion of its electricity
requirements.  For information on the anticipated effects of changes
in revenue from an industrial customer, see “Overview — Cleco
Power.”  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, 2008.




Fuel
Cost Recovery


Fuel
cost recovery revenue billed to customers decreased $175.9 million, or 33.0%,
during the first nine months of 2009 compared to the first nine months in 2008
primarily due to decreases in the per-unit cost and volume of power purchased
for utility customers.  Partially offsetting the decrease were
increases in the per-unit cost and volume of fuel used for electric
generation.  For information on Cleco Power’s ability to recover fuel
and purchase power costs, see “— Comparison of the Three Months Ended September
30, 2009, and 2008 — Cleco Power — Fuel Cost Recovery.”




Other
Operations


Other
operations revenue decreased $4.1 million, or 13.9%, in the first nine months of
2009 compared to the first nine months of 2008 primarily due to a $2.1 million
net loss relating to economic hedge transactions associated with fixed-price
power being provided to a wholesale customer.  Also contributing to
this decrease was $2.0 million of lower other miscellaneous
revenue.  For information on Cleco’s energy commodity activities, see
Item 3, “Quantitative and Qualitative Disclosures about Market Risk — Risk
Overview — Commodity Price Risks.”




Operating
Expenses


Operating
expenses decreased $170.9 million, or 23.3%, in the first nine months of 2009
compared to the first nine months of 2008.  Fuel used for electric
generation (recoverable) increased $53.1 million, or 34.4%, primarily due to
recovery of higher fuel costs deferred in prior periods and higher per-unit
costs of fuel used as compared to the first nine months of 2008.  This
is a result of realized losses on fuel hedging due to the price volatility of
natural gas.  Also contributing to the increase were higher volumes of
fuel used for electric generation.  Power purchased for utility
customers (recoverable) decreased $229.1 million, or 60.6%, largely due to lower per-unit
costs and volumes of purchased power.  Fuel used for electric
generation and power purchased for utility customers generally are influenced by
natural gas prices, as well as availability of transmission.  However,
other factors such as scheduled and/or unscheduled outages, unusual maintenance
or repairs, or other developments may affect fuel used for electric generation
and power purchased for utility customers.  Non-recoverable fuel and
purchased power decreased $1.0 million, or 4.6%, primarily due to lower
non-recoverable expenses primarily related to fixed-price power being provided
to a wholesale customer.  Partially offsetting this decrease were
higher net capacity charges.  Other operations expense increased $7.0
million, or 10.6%, primarily due to higher general liability expense, higher
employee benefit costs, training, and administrative expenses.  Taxes
other than income taxes decreased $1.6 million, or 6.3%, primarily due to lower
property taxes and franchise fees.




Interest
Income


Interest
income decreased $2.1 million, or 68.0%, during the first nine months of 2009
compared to the first nine months of 2008 primarily due to a lower recovery of
interest costs relating to Cleco Power’s lower deferred lignite mining costs and
lower average investment balances.




Allowance
for Other Funds Used During Construction


Allowance
for other funds used during construction increased $5.9 million, or 12.7%,
during the first nine months of 2009 compared to the first nine months of 2008
primarily due to increased construction activity at Rodemacher Unit
3.  Allowance for other funds used during construction comprised 59.0%
of Cleco Power’s net income for the first nine months of 2009, compared to 51.2%
for the first nine months of 2008.  Cleco Power is currently recording
AFUDC associated with construction of Rodemacher Unit 3.  Once the
unit begins commercial operations, Cleco Power will no longer record AFUDC
related to Rodemacher Unit 3.




Other
Income


Other
income increased $1.0 million, or 82.4%, in the first nine months of 2009
compared to the first nine months of 2008 primarily due to higher revenue from
mutual assistance to other utilities for restoration efforts.




Other
Expense


Other
expense increased $1.3 million, or 81.7%, in the first nine months
of 2009 compared to the first nine months
of 2008 primarily due to higher expenses from mutual assistance to other
utilities for restoration efforts.




Interest
Charges


Interest
charges increased $8.9 million, or 28.2%, during the first nine months
of 2009 compared to the first nine months
of 2008 primarily due to $7.0 million related to the May 2008 issuance of senior
notes, $5.3 million related to the December 2008 issuance of GO Zone bonds, $1.4
million related to the March 2008 issuance of storm recovery bonds, and $1.1


50
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





million
related to solid waste disposal facility bonds.  Partially offsetting
these increases were the capitalization of an additional $4.6 million of
allowance for borrowed funds used during construction associated with Rodemacher
Unit 3 and $1.3 million of lower other miscellaneous interest
charges.




Income
Taxes


Federal
and state income taxes decreased $13.1 million, or 48.3%, during the first nine
months of 2009 compared to the first nine months of 2008 primarily due to a
decrease in pre-tax income, increases in forecasted equity AFUDC and forecasted
permanent tax deductions, and a decrease in deferred state income taxes related
to changes in state flow-through items.  The effective income tax rate
is less than the expected statutory rate primarily due to the significant impact
of flow-through treatment on plant-related differences such as equity
AFUDC.




Midstream


FOR THE NINE MONTHS ENDED
      SEPTEMBER 30,FAVORABLE/(UNFAVORABLE)(THOUSANDS)
            
            2009
            
            
            2008
            
            
            VARIANCE
            
            
            CHANGEOperating
      revenueOther operations
            
            $
            1
            
            
            $
            1
            
            
            $
            -
            
            
            
            -Affiliate
revenue
            
            
            6,627
            
            
            
            5,892
            
            
            
            735
            
            
            
            12.5
            %Operating
    revenue
            
            
            6,628
            
            
            
            5,893
            
            
            
            735
            
            
            
            12.5
            %Operating
      expensesOther operations
            
            
            4,887
            
            
            
            4,662
            
            
            
            (225
            )
            
            
            (4.8
            )%Maintenance
            
            
            2,963
            
            
            
            2,667
            
            
            
            (296
            )
            
            
            (11.1
            )%Depreciation
            
            
            132
            
            
            
            230
            
            
            
            98
            
            
            
            42.6
            %Taxes other than income
      taxes
            
            
            310
            
            
            
            272
            
            
            
            (38
            )
            
            
            (14.0
            )%Loss (gain) on sales of 
      assets
            
            
            5
            
            
            
            (99
            )
            
            
            (104
            )
            
            
            (105.1
            )%Total operating 
      expenses
            
            
            8,297
            
            
            
            7,732
            
            
            
            (565
            )
            
            
            (7.3
            )%Operating
      loss
            
            
            (1,669
            )
            
            
            (1,839
            )
            
            
            170
            
            
            
            9.2
            %Equity
      (loss) income from investees
            
            $
            (782
            )
            
            $
            1,660
            
            
            $
            (2,442
            )
            
            
            (147.1
            )%Interest
      charges
            
            $
            6,034
            
            
            $
            5,057
            
            
            $
            (977
            )
            
            
            (19.3
            )%Federal
      and state income tax benefit
            
            $
            (3,469
            )
            
            $
            (2,298
            )
            
            $
            1,171
            
            
            
            51.0
            %Net
      loss
            
            $
            (4,997
            )
            
            $
            (2,955
            )
            
            $
            (2,042
            )
            
            
            (69.1
            )%




Factors
affecting Midstream during the first nine months of 2009 are described
below.




Operating
Revenue and Operating Expenses


Operating
revenue increased $0.7 million, or 12.5%, during the first nine months of 2009
compared to the first nine months of 2008.  Operating expenses
increased $0.6 million, or 7.3%, during the first nine months of 2009 compared
to the first nine months of 2008.  The increases were primarily due to
additional employees hired by Cleco Generation Services LLC for the benefit of
Midstream to provide power plant operations, maintenance, and engineering
services to Acadia and Evangeline.  As a result, revenue and expenses
associated with these services are included in affiliate revenue and operating
expenses, respectively.




Equity
Income from Investees


Equity
income from investees decreased $2.4 million, or 147.1%, during the first nine
months of 2009 compared to the first nine months of 2008.  The
decrease was due to a $3.7 million increase in equity losses at APH, partially
offset by a $1.3 million increase in equity earnings at
Evangeline.  The increased loss at APH was primarily due to an
unplanned outage at the facility during 2009, resulting in higher removal and
retirement costs and higher turbine and general maintenance
expenses.  Also contributing to the increased losses were higher legal
fees.  These decreases were partially offset by higher net revenue
from Acadia’s short-term tolling agreement with Cleco Power.  The
increased earnings at Evangeline were primarily due to the absence of
replacement power purchases resulting from Evangeline’s 2008 unplanned
outage.  Also contributing to the increase were lower gas tax expenses
and lower interest charges.  For additional information on Evangeline
and Acadia, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 9 — Equity Investment in Investees.”




Interest
Charges


Interest
charges increased $1.0 million, or 19.3%, during the first nine months of 2009
compared to the first nine months of 2008 primarily due to additional estimated
interest costs related to an IRS audit.  Partially offsetting this
increase was a lower interest rate and a lower balance on affiliate debt
relating to APH’s investment in Acadia.




Income
Taxes


Federal
and state income taxes decreased $1.2 million, or 51.0%, during the first nine
months of 2009 compared to the first nine months of 2008 primarily due to a
decrease in pre-tax income.




FINANCIAL
CONDITION





Liquidity
and Capital Resources




General
Considerations and Credit-Related Risks




Credit
Ratings and Counterparties


At
September 30, 2009, Standard & Poor’s outlooks for both Cleco Corporation
and Cleco Power were stable.  In June 2009, Moody’s affirmed Cleco
Corporation’s rating with a stable outlook and placed Cleco Power’s ratings
under review for possible downgrade.  If Cleco Corporation’s credit
ratings were to be downgraded by Moody’s and Standard & Poor’s, Cleco
Corporation would be required to pay additional fees and higher interest rates
under its bank credit and other debt agreements.  Cleco Power is
currently rated one level higher by Moody’s than by Standard &
Poor's.  Cleco Power pays fees and interest under its bank credit and
other debt agreements based on the higher of the two credit
ratings.  If Cleco


51
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Power’s
credit ratings were to be downgraded by Moody’s, Cleco Power would be required
to pay additional fees and higher interest rates.  Cleco Power’s
collateral for derivatives is based on the lower of the two credit
ratings.  If Cleco Power’s credit ratings were to be downgraded by
Standard & Poor’s, Cleco Power would be required to pay additional
collateral for derivatives.


During
2008, JPMorgan Chase & Co. acquired The Bear Stearns Companies
Inc.  In connection with the acquisition, JPMorgan Chase & Co.
guaranteed certain obligations of The Bear Stearns Companies Inc. and its
subsidiaries, including obligations under the Evangeline Tolling
Agreement.  In September 2008, Bear Energy was merged into
JPMVEC.  At September 30, 2009, Moody’s outlook for Evangeline was
stable.  The tolling agreement is the principal source of cash flow
for Evangeline.  For more information regarding Evangeline’s tolling
agreement, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial
Statements — Note 10 — Litigation, Other Commitments and Contingencies, and
Disclosures about Guarantees — Risk and Uncertainties — Cleco Corporation —
Evangeline Tolling Agreement.”


In
August 2005, Cleco Power entered into an EPC contract with Shaw to construct
Rodemacher Unit 3.  In May 2006, Cleco Power and Shaw entered into an
Amended EPC Contract.  Under the terms of the Amended EPC Contract, in
the event Cleco Power does not maintain a senior unsecured credit rating of
either: (i) Baa3 or better from Moody’s or (ii) BBB- or better from Standard
& Poor’s, Cleco Power will be required to provide a letter of credit to Shaw
in the amount of $20.0 million.  In the event of further downgrade to
both of its credit ratings to: (i) Ba2 or below from Moody’s, and (ii) BB or
below from Standard & Poor’s, Cleco Power will be required to provide an
additional $15.0 million letter of credit to Shaw.


With
respect to any open power or natural gas trading positions that Cleco may
initiate in the future, Cleco may be required to provide credit support (or pay
liquidated damages).  The amount of credit support that Cleco may be
required to provide at any point in the future is dependent on the amount of the
initial transaction, changes in the market price of power and natural gas, the
changes in open power and gas positions, and changes in the amount
counterparties owe Cleco.  Changes in any of these factors could cause
the amount of requested credit support to increase or decrease.  For
additional information, as well as a discussion of other factors affecting
Cleco’s financial condition relating to its credit ratings, the credit ratings
of its counterparties, and other credit-related risks, please read “Management’s
Discussion and Analysis of Financial Condition and Results of Operations —
Financial Condition — Liquidity and Capital Resources — General Considerations
and Credit-Related Risks — Credit Ratings and Counterparties” in the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.




Global
Financial Crisis


The
continued credit crisis and related turmoil in the global financial system may
have an impact on Cleco’s business and financial condition.  Cleco may
face significant challenges if conditions in the financial markets do not
improve.  Cleco’s ability to access the capital markets may be
severely restricted at a time when Cleco would like, or need, to do so, which
could have a material impact on its ability to fund capital expenditures or debt
service or on Cleco’s flexibility to react to
changing economic and business conditions.  The credit crisis could
have a material negative impact on Cleco’s lenders or Cleco’s customers causing
them to fail to meet their obligations to Cleco or to delay payment of such
obligations.  Moreover, as a result of the global financial crisis,
the pension plan portfolio could continue to experience significant losses in
the future.




Fair
Value Measurements


Various
accounting pronouncements require certain assets and liabilities to be measured
at their fair values.  Some assets and liabilities are required to be
measured at their fair value each reporting period, while others are required to
be measured only one time, generally the date of acquisition or
issuance.  Cleco and Cleco Power are required to disclose the fair
value of certain assets and liabilities by one of three levels when required for
recognition purposes under GAAP.  Other financial assets and liabilities,
such as long-term debt, are reported at their carrying values at their date of
issuance on the condensed consolidated balance sheets with their fair values
disclosed without regard to the three levels.  For more information
about fair value levels, see Item 1, “Notes to the Unaudited Condensed
Consolidated Financial Statements — Note 4 — Fair Value
Accounting.”




Debt


At
September 30, 2009, Cleco Corporation and Cleco Power were in compliance with
the covenants in their credit facilities.  In August 2009, Cleco
Corporation and Cleco Power entered into amendments to their respective credit
facilities that increased thresholds in a representation relating to pension
plan obligations above the amount of the current plan assets.  Cleco
Corporation and Cleco Power incurred $0.1 million in expenses obtaining bank
waivers related to the amendments.  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 ratings 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 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, 2009, or December 31,
2008.  At September 30, 2009, Cleco’s long-term debt outstanding was
$1.2 billion, of which $11.5 million was due within one year, compared to $1.2
billion outstanding at December 31, 2008, which included $63.5 million due
within one year.  The long-term debt due within one year


52
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





at
September 30, 2009, represents principal payments for the Cleco Katrina/Rita
storm recovery bonds scheduled to be paid in the next twelve
months.


For
Cleco, long-term debt increased $79.4 million primarily due to an $88.0 million
increase in Cleco Corporation’s credit facility draws, the execution of a $50.0
million variable-rate monthly bank loan in August 2009, a $35.0 million increase
in Cleco Power’s credit facility draws, and a $19.5 million increase in
long-term capital leases.  These increases were partially offset by
the $50.0 million repayment of a medium-term note at maturity in May 2009, the
$49.5 million repayment of insured quarterly notes in August 2009, and $13.5
million related to scheduled Cleco Katrina/Rita storm recovery bond principal
payments.  During January 2009, Cleco Power entered into a lease
agreement for barges to be used for fuel transportation for Rodemacher Unit
3.  For additional information, see Item 1, “Notes to the Unaudited
Condensed Consolidated Financial Statements — Note 10 — Litigation, Other
Commitments and Contingencies, and Disclosures about Guarantees — Other
Contingencies — Fuel Transportation Agreement” and “— Cleco Corporation (Holding
Company Level)” and “— Cleco Power” below.


During
July 2009, Cleco Power elected to redeem all $49.5 million principal amount of
its outstanding 6.05% insured quarterly notes due June 2012.  The
notes were redeemed on August 19, 2009.  Once redeemed, the notes were
replaced with a one-month LIBOR plus 3.00% floating rate bank loan, maturing on
August 19, 2012.  In July 2009, Cleco Power locked in a $50.0 million
interest rate swap arrangement related to this loan.  This swap was
effective on August 19, 2009 and will mature on May 31, 2012.  For
additional information, see Item 1, “Notes to the Unaudited Condensed
Consolidated Financial Statements — Note 4 — Fair Value Accounting — Interest
Rate Swap.”


At
September 30, 2009, and December 31, 2008, Cleco had a working capital surplus
of $135.2 million and $105.5 million, respectively.  Included in
working capital at September 30, 2009, and December 31, 2008, was $25.1 million
and $62.3 million, respectively, which was restricted for the use of debt
payments and other restricted uses.  The $29.7 million increase in
working capital is primarily due to the repayment of a medium-term note and the
decreases in accounts payable.  These increases were partially offset
by the payment of dividends, the deferral of additional construction carrying
costs to be refunded to customers over the next twelve months, and additions to
property, plant and equipment, including Rodemacher Unit 3.  An
uncommitted bank line of credit up to $10.0 million also is available to support
Cleco’s working capital needs.


Cash
and cash equivalents available at September 30, 2009, were $49.3 million
combined with $257.0 million facility capacity ($17.0 million from Cleco
Corporation and $240.0 million from Cleco Power) for total liquidity of $306.3
million.  Cash and cash equivalents decreased $48.2 million as
compared to December 31, 2008.  This decrease is primarily due to
additions to property, plant and equipment, including Rodemacher Unit
3.




Cleco
Corporation (Holding Company Level)


Cleco
Corporation had no short-term debt outstanding at September 30, 2009 or December
31, 2008.  At September 30, 2009, and December 31, 2008, Cleco
Corporation had $118.0 million and $30.0 million, respectively, of long-term
debt outstanding.  The increase in long-term debt was due to the
increase in draws on Cleco Corporation’s credit facility.  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 0.65%, including facility fees.


At
September 30, 2009, credit facility draws and off-balance sheet commitments
reduced available borrowings by $118.0 million and $15.0 million, respectively,
leaving available capacity of $17.0 million.  For more information
about these commitments, see “— Off-Balance Sheet Commitments.”  An
uncommitted bank line of credit up to $10.0 million also is available to support
Cleco Corporation’s working capital needs.


Cash and
cash equivalents available at September 30, 2009, were $14.3 million, combined
with $17.0 million facility capacity for total liquidity of $31.3
million.  Cash and cash equivalents increased $8.4 million, when
compared to December 31, 2008, primarily due to draws under Cleco Corporation’s
credit facility, partially offset by the use of those funds for general
operating needs.




Cleco
Power


There
was no short-term debt outstanding at Cleco Power at September 30, 2009, or
December 31, 2008.  At September 30, 2009, Cleco Power’s long-term
debt outstanding was $1.1 billion, of which $11.5 million was long-term debt due
within one year, compared to $1.1 billion at December 31, 2008, of which $63.5
million was due within one year.


For
Cleco Power, long-term debt decreased $8.6 million primarily due to the $50.0
million repayment of a medium-term note at maturity in May 2009, the $49.5
million repayment of insured quarterly notes in August 2009, and $13.5 million
related to scheduled Cleco Katrina/Rita storm recovery bond principal
payments.  These decreases were partially offset by the execution of a
$50.0 million variable-rate monthly bank loan in August 2009, an increase of
$35.0 million in Cleco Power’s credit facility draws, and a $19.5 million
increase in long-term capital leases.  During January 2009, Cleco
Power entered in a lease agreement for barges to be used for fuel transportation
for Rodemacher Unit 3.  For additional information, see Note 10 —
“Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees — Other Contingencies — Fuel Transportation Agreement.”


During
July 2009, Cleco Power elected to redeem all $49.5 million principal amount of
its outstanding 6.05% insured quarterly notes due June 2012.  The
notes were redeemed on August 19, 2009.  Once redeemed, the notes were
replaced with a one-month LIBOR plus 3.00% floating rate bank loan, maturing on
August 19, 2012. In July 2009, Cleco Power locked in a $50.0 million interest
rate swap arrangement related to this loan.  This swap was effective
on August 19, 2009 and will





53
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





mature
on May 31, 2012.  For additional information, see Item 1, “Notes to
the Unaudited Condensed Consolidated Financial Statements — Note 4 — Fair Value
Accounting — Interest Rate Swap.”


At
September 30, 2009, and December 31, 2008, Cleco Power had a working capital
surplus of $40.4 million and $88.0 million, respectively.  Included in
working capital at September 30, 2009, and December 31, 2008 was $25.1 million
and $62.3 million, respectively, which was restricted for the use of debt
payments.  The $47.6 million decrease in working capital is primarily
due to increased federal income taxes payable, the deferral of additional
construction carrying costs to be refunded to customers over the next twelve
months, and additions to property plant and equipment, including Rodemacher Unit
3.


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, 2009,
$35.0 million was outstanding under Cleco Power’s $275.0 million, five-year
revolving facility.  An uncommitted line of credit with a bank in an
amount up to $10.0 million also is available to support Cleco Power’s working
capital needs.


Cash
and cash equivalents available at September 30, 2009, were $35.0 million,
combined with $240.0 million facility capacity for total liquidity of $275.0
million.  Cash and cash equivalents decreased $56.5 million as
compared to December 31, 2008.  This decrease is primarily due to
additions to property, plant and equipment, including Rodemacher Unit
3.


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 $134.4 million and $85.5 million at
September 30, 2009, and December 31, 2008, respectively.  In addition
to this recovery, Cleco Power is funding the construction costs related to
Rodemacher Unit 3 by utilizing cash on hand, available funds from its credit
facility, the issuance of long-term debt, and equity contributions from Cleco
Corporation.  On October 14, 2009, the LPSC approved Cleco Power’s new
retail rate plan, which established that a minimum of $183.2 million be returned
to customers over a  five-year period.  For more information
regarding the refunding of Rodemacher Unit 3 construction carrying costs please
read Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements
— Note 3 — Regulatory Assets and Liabilities — Deferred Construction Carrying
Cost.”




Midstream


Midstream
had no debt outstanding at September 30, 2009, or December 31,
2008.


Evangeline,
which is accounted for under the equity method, had no short-term debt
outstanding at September 30, 2009, or December 31, 2008.  Evangeline
had $161.8 million and $168.9 million of long-term debt outstanding at September
30, 2009, and December 31, 2008, respectively, in the form of 8.82% Senior
Secured Bonds due 2019.  Of these amounts, $8.2 million and $7.1
million were due within one year at September 30, 2009, and December 31, 2008,
respectively.  The bonds issued by Evangeline are non-recourse to
Cleco Corporation.




Restricted
Cash


Various agreements to which Cleco
is subject contain covenants that restrict its use of cash.  As
certain provisions under these agreements are met, cash is transferred out of
related escrow accounts and becomes available for general corporate
purposes.  At September 30, 2009, and December 31, 2008, $56.0 million
and $103.0 million of cash, respectively, were restricted.  The $47.0
million decrease is primarily due to the use of $17.4 million of funds for GO
Zone project costs, the release of $14.7 million for the construction of Cleco
Power's solid waste disposal facilities at Rodemacher Unit 3, a $12.7 million
net decrease in Cleco Katrina/Rita restricted cash due to the payment of
operating expenses, interest, and principal on storm recovery bonds, offset by
collections, and Cleco Power's use of $2.2 million for approved storm damage
costs.  At September 30, 2009, the $56.0 million of restricted cash
consisted of $0.1 million under the Diversified Lands mitigation escrow
agreement, $27.2 million reserved at Cleco Power for GO Zone project costs,
$25.2 million reserved at Cleco Power for future storm restoration costs, and
$3.5 million at Cleco Katrina/Rita restricted for payment of operating expense,
interest and principal on storm recovery bonds.


Evangeline’s
restricted cash is not reflected in Cleco Corporation’s Condensed Consolidated
Balance Sheets due to the equity method of accounting.  Evangeline’s
restricted cash at September 30, 2009, and December 31, 2008, was $22.3 million
and $25.0 million, respectively.  This cash is restricted under
Evangeline’s senior secured bond indenture.




Cleco
Cash Flows




Net
Cash Provided by Operating Activities


Net cash
provided by operating activities was $53.4 million during the first nine months
of 2009 compared to $77.1 million during the first nine months of
2008.


Cash
provided by operating activities during the first nine months of 2009 decreased
$23.7 million from that reported during the first nine months of 2008, primarily
due to higher purchases of fuel, materials, and supplies inventories, mostly
related to preparation for Rodemacher Unit 3 to begin commercial operation;
higher gas and power purchase payments being made in 2009 than in 2008; higher
post retirement benefit contribution payments into the Cleco pension plan; a
large retainage payment made to Shaw related to work completed on Rodemacher
Unit 3; higher state income tax payments, and a 2008 property tax bill that was
received and paid in January 2009.  These were partially offset by
higher deferred fuel costs, mostly due to fluctuations in fuel prices, higher
add back of non-cash depreciation, primarily due to


54
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




higher
New Market Tax Credit amortization, and increased collections of customer
accounts.




Net
Cash Used in Investing Activities


Net cash
used in investing activities was $119.7 million during the first nine months of
2009 compared to $276.1 million during the first nine months of
2008.  Net cash used in 2009 was $156.4 million lower than 2008
primarily due to lower additions to property, plant and equipment related to the
Rodemacher Unit 3 project, and transfers from restricted
accounts.  This was partially offset by higher investments in equity
investees.


During
the first nine months of 2009, Cleco had additions to property, plant and
equipment, net of AFUDC, of $138.0 million, a $15.7 million investment in New
Market Tax Credits, and a $13.9 million investment in Acadia.  This
was partially offset by $46.9 million of cash transferred from restricted
accounts, primarily related to solid waste disposal, GO Zone, and storm
restoration bonds.


During
the first nine months of 2008, Cleco had additions to property, plant and
equipment, net of AFUDC, of $217.8 million, an $8.4 million investment in New
Market Tax Credits, a $6.4 million investment in Perryville, and $44.6 million
of cash became restricted, primarily related to storm restoration
bonds.




Net
Cash Provided by Financing Activities


Net cash
provided by financing activities was $18.0 million during the first nine months
of 2009 compared to $147.3 million during the first nine months of
2008.  Net cash provided by financing activities in 2009 was $129.3
million lower than 2008, primarily due to the lower issuances of long-term debt,
partially offset by lower retirements of long-term debt.


During
the first nine months of 2009, Cleco received net proceeds of $173.0 million
from the issuance of long-term debt.  This was partially offset by
$115.8 million of cash used for repayment of long-term debt and capital leases,
and $40.7 million used to pay dividends.


During
the first nine months of 2008, Cleco received net proceeds of $537.5 million
from the issuance of long-term debt, which was partially offset by $190.0
million of cash used to repay borrowings under Cleco Power’s credit facility,
$160.3 million of cash used for repayment of long-term debt and capital leases,
and $40.5 million used to pay dividends.




Cleco
Power Cash Flows




Net
Cash Provided by Operating Activities


Net cash
provided by operating activities was $95.0 million during the first nine months
of 2009 compared to $79.1 million during the first nine months of
2008.


Cash
provided by operating activities during the first nine months of 2009 increased
$15.9 million from that reported during the first nine months of 2008 primarily
due to higher deferred fuel costs, mostly due to fluctuations in fuel prices;
higher collections of customer accounts; and the 2009 receipt of a federal
income tax refund.  These were partially offset by higher purchases of
fuel, materials, and supplies inventories, mostly related to preparation for
Rodemacher Unit 3 to begin commercial operation; higher gas and power purchase
payments being made in 2009 than in 2008; higher post retirement benefit
contribution payments into the Cleco pension plan; and a large retainage payment
made to Shaw related to work completed on Rodemacher Unit 3.




Net
Cash Used in Investing Activities


Net cash
used in investing activities was $90.2 million during the first nine months of
2009 compared to $261.9 million during the first nine months of
2008.  Net cash used during the first nine months of 2009 was $171.7
million lower than the first nine months of 2008, primarily due to lower
additions to property, plant and equipment related to the Rodemacher Unit 3
project, and transfers from restricted accounts.


During
the first nine months of 2009, Cleco Power had additions to property, plant and
equipment, net of AFUDC, of $137.7 million.  This was partially offset
by $46.9 million of cash transferred from restricted accounts, primarily related
to solid waste disposal, GO Zone, and storm restoration bonds.


During
the first nine months of 2008, Cleco had additions to property, plant and
equipment, net of AFUDC, of $217.0 million and $44.6 million of cash became
restricted, primarily related to storm restoration bonds.




Net
Cash Provided by Financing Activities


Net cash
used in financing activities was $61.4 million during the first nine months of
2009 compared to cash provided of $238.9 million during the first nine months of
2008.  Net cash provided by financing activities during the first nine
months of 2009 was $300.3 million lower than the first nine months of 2008,
primarily due to distributions to Cleco Corporation and lower issuances of
long-term debt, partially offset by lower retirements of long-term
debt.


During
the first nine months of 2009, Cleco Power used $115.8 million of cash for
repayment of long-term debt and capital leases, and paid $30.0 million in
distributions to Cleco Corporation.  This was partially offset by net
proceeds of $85.0 million from the issuance of long-term debt.


During
the first nine months of 2008, Cleco Power received net proceeds of $489.5
million from the issuance of long-term debt, which was partially offset by
$190.0 million of cash used to repay borrowings under Cleco Power’s credit
facility, and $60.3 million of cash used for repayment of long-term debt and
capital leases.




Shelf
Registrations


Cleco
Corporation has one shelf registration statement on file (Registration No.
333-162772) with the SEC.  Registration Statement No. 333-162772
became effective on October 30, 2009, and allows for the issuance by Cleco
Corporation of up to $300.0 million of debt securities.  Cleco Power
also has one shelf registration statement on file (Registration No. 333-162773)
with the SEC.  Registration Statement No. 333-162773 became effective
on October 30, 2009, and allows for the issuance by Cleco Power of up to $500.0
million of debt securities.




55
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




Contractual
Obligations and Other Commitments


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


For
additional information regarding Cleco’s Contractual Obligations and Other
Commitments, please read “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Financial Condition — Liquidity and
Capital Resources — Cash Generation and Cash Requirements — Contractual
Obligations and Other Commitments” in the Registrants’ Combined Annual Report on
Form 10-K for the fiscal year ended December 31, 2008.




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 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 the authoritative guidance.


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 the 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, 2009, 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, 2009REDUCTIONS TO THEAMOUNT AVAILABLETO BE DRAWN ONFACE
            
            
            
            
            
            NET
            
            
            CLECO
      CORPORATION’S(THOUSANDS)
            
            AMOUNT
            
            
            REDUCTIONS
            
            
            AMOUNT
            
            
            CREDIT FACILITYCleco
      CorporationGuarantee issued to Entergy
      companies for performance obligations of Perryville
            
            $
            177,400
            
            
            $
            135,000
            
            
            $
            42,400
            
            
            $
            328Guarantees issued to purchasers
      of the assets of Cleco Energy
            
            
            1,000
            
            
            
            -
            
            
            
            1,000
            
            
            
            1,000Obligations under standby letter
      of credit issued to the Evangeline Tolling Agreement
      counterparty
            
            
            15,000
            
            
            
            -
            
            
            
            15,000
            
            
            
            15,000Guarantee issued to Entergy
      Mississippi on behalf of Attala
            
            
            500
            
            
            
            -
            
            
            
            500
            
            
            
            500Guarantee issued to Tenaska Gas
      Storage, LLC on behalf of Acadia
            
            
            10,000
            
            
            
            -
            
            
            
            10,000
            
            
            
            10,000Cleco
      PowerObligations under standby letter
      of credit issued to the Louisiana Department of Labor
            
            
            3,525
            
            
            
            -
            
            
            
            3,525
            
            
            
            -Obligations under the Lignite
      Mining Agreement
            
            
            3,488
            
            
            
            -
            
            
            
            3,488
            
            
            
            -Total
            
            $
            210,913
            
            
            $
            135,000
            
            
            $
            75,913
            
            
            $
            26,828





Cleco
Corporation provided a limited guarantee and an indemnification 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, 2009, the aggregate
guarantee of $177.4 million is limited to $42.4 million due to the performance
of some of the underlying obligations that were
guaranteed.  Management believes 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, 2009, was $0.3 million,
resulting in a corresponding reduction in the available credit under Cleco’s
credit facility, which was determined in accordance with the facility’s
definition of a contingent obligation.  The contingent obligation
reduces the amount available under the credit facility by an amount equal to the
maximum reasonably anticipated liability in respect of the contingent obligation
as determined in good faith.


In
November 2004, Cleco completed the sale of substantially all of the assets of
Cleco Energy.  Cleco Corporation provided guarantees to the buyers of
Cleco Energy’s assets for the payment and performance of the indemnity
obligations of Cleco Energy.  The aggregate amount of the guarantees
was $1.4 million, of which $0.4 million expired on September 27, 2009, and $1.0
million expired on October 20, 2009.  These guarantees do not fall
within the scope of the authoritative guidance for guarantees.  Cleco
Energy issued guarantees and indemnifications that fall within the recognition
scope of the authoritative guidance for guarantees, 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 as of September 30,
2009, was $1.0 million.  The discounted probability-weighted liability
as of September 30, 2009, was $0.1 million.


56
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




If
Evangeline fails to perform certain obligations under its tolling agreement,
Cleco Corporation will be required to make payments to the Evangeline Tolling
Agreement counterparty.  Cleco Corporation’s obligation under the
Evangeline commitment is in the form of a standby letter of credit from
investment grade banks and is limited to $15.0 million.  Rating
triggers do not exist in the Evangeline Tolling Agreement.  Cleco
expects Evangeline to be able to meet its obligations under the tolling
agreement and does not expect Cleco Corporation to be required to make payments
to the counterparty.  However, under the covenants associated with
Cleco Corporation’s credit facility, the entire net amount of the Evangeline
commitment reduces the amount that can be borrowed under the credit
facility.  The letter of credit for Evangeline is expected to be
renewed annually until 2020.


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


In
February 2009, Cleco Corporation provided a $10.0 million guarantee to Tenaska
Gas Storage, LLC for Acadia’s obligation under the Energy Management Services
Agreement.  This guarantee expired on October 31, 2009.


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 $3.5 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, 2009, Cleco Power’s 50% exposure
for this obligation was approximately $3.5 million.  The lignite
mining contract is in place until 2011 and does not affect the amount Cleco
Corporation can borrow under its credit facility.


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





AT SEPTEMBER 30,
    2009AMOUNT OF COMMITMENT EXPIRATION
      PER PERIODNET
            
            
            
            
            
            
            
            
            
            
            
            MOREAMOUNT
            
            
            LESS THAN
            
            
            
            
            
            
            
            
            THAN(THOUSANDS)
            
            COMMITTED
            
            
            ONE YEAR
            
            
            1-3 YEARS
            
            
            3-5 YEARS
            
            
            5 YEARSGuarantees
            
            $
            57,388
            
            
            $
            11,000
            
            
            $
            3,488
            
            
            $
            -
            
            
            $
            42,900Standby
      letters of credit
            
            
            18,525
            
            
            
            3,525
            
            
            
            -
            
            
            
            -
            
            
            
            15,000Total commercial
      commitments
            
            $
            75,913
            
            
            $
            14,525
            
            
            $
            3,488
            
            
            $
            -
            
            
            $
            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 of such individual 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 for 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.





Regulatory
Matters




Wholesale
Rates of Cleco


For
information on the wholesale rates of Cleco, please read “Management’s
Discussion and Analysis of Financial Condition and Results of Operations —
Financial Condition —


Liquidity
and Capital Resources — Regulatory Matters — Wholesale Rates of Cleco” in the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.





Retail
Rates of Cleco Power


In
January 2008, Cleco Power filed its monitoring report for the 12-month period
ended September 30, 2007.  On June 1, 2009, Cleco Power filed its
monitoring report for the year ended September 30, 2008.  Cleco Power
does not anticipate that the LPSC will proceed with its review of these reports
until the fourth quarter of 2009.


On July
14, 2008, Cleco Power filed a request for a new rate plan with the LPSC to
increase its base rates for electricity.  Cleco Power sought recovery
of revenues sufficient to cover the addition of Rodemacher Unit 3 to its
existing expense and rate base levels.  Cleco Power and the LPSC Staff
filed testimony in support of an uncontested stipulated settlement on September
21, 2009.


The
retail rate plan is expected to increase retail base revenues, in the first
twelve months of Rodemacher Unit 3 commercial operations, by approximately
$173.0 million with an anticipated net billing decrease for retail customers of
approximately $40.0 million, or 5.0% (assuming a gas price of $5/MMBtu),
including a reduction of approximately $97.0 million resulting from the
cessation of collection of and the refund of Rodemacher Unit 3 construction
financing based on a five-





57
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





year
crediting period.  The retail rate plan provides for the placement of
Rodemacher Unit 3 in rate base and recovery of the operating costs of Rodemacher
Unit 3 in rate base and recovery of other costs including costs associated with
damage caused by Hurricanes Gustav and Ike.


The
retail rate plan includes a Formula Rate Plan (FRP) that has a target return on
equity of 10.7%, including returning to retail customers 60.0% of earnings over
11.3% and all earnings over 12.3%.  The capital structure assumes an
equity ratio of 51.0%.  The FRP also has a mechanism allowing for
recovery of future revenue requirements for the Acadiana Load Pocket
transmission project and, if approved by a separate proceeding, the acquisition
of the Acadia power plant as a result of the Cleco Power 2007 Long-Term
RFP.  The retail rate plan allows Cleco Power to propose additional
projects to the LPSC during the FRP’s initial four-year term.


On
October 14, 2009, the LPSC voted unanimously to approve the retail rate plan for
Cleco Power.  The retail rate plan will be effective upon commercial
operation of Rodemacher Unit 3.  Shaw has informed Cleco that it
anticipates the plant will be substantially complete and operational in late
December 2009.


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, 2008.




Wholesale
Electric Markets


For
information on regulatory aspects of wholesale electric markets affecting Cleco,
please read “Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Financial Condition — Liquidity and Capital Resources —
Regulatory Matters — Market Restructuring — Wholesale Electric Markets” in the
Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.




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,
2008.




Generation
RFP




2008
Short-Term RFP for 2009 Resources


In March
2008, Cleco Power issued a RFP for a minimum of 50 MW up to 450 MW to meet its
2009 capacity and energy requirements.  Cleco Power selected and
negotiated a 235-MW peaking product with Acadia.  The product was for
supply that started March 1, 2009, and ended October 1, 2009.


On
January 6, 2009, Cleco Power issued a RFP for a minimum capacity amount of 50 MW
up to 200 MW in order to serve additional load.  Cleco Power has
selected and negotiated a 200-MW intermediate product with NRG Power Marketing,
Inc.  The product was for supply that started April 1, 2009, and ended
November 1, 2009.





2007
Long-Term RFP


In June
2007, Cleco Power filed a proposed RFP with the LPSC for up to approximately 600
MW of intermediate and/or peaking resources to meet projected load growth over a
10-year period beginning in 2010.  To meet these needs, Cleco Power
asked for products with a term of 2 to 30 years.  Out of the
approximately 600-MW total, up to approximately 350 MW may be sourced from a
peaking resource.  After the LPSC review, the RFP was issued in
October 2007, and bids were received in December 2007.  On February
26, 2009, Cleco Power announced that it had chosen the acquisition of 50% of the
Acadia power station, or one of its two 580-MW units, as the lowest bid in its
2007 long-term RFP.  Cleco Power will own and operate one unit and
operate the other 580-MW unit on behalf of Acadia or a future
owner.  Cleco Power and the parties have executed the definitive
agreements.  However, prior to closing the transaction, valued at
approximately $300 million, Cleco Power must receive approvals from the LPSC and
FERC.  In a process that remains under the supervision of an
independent monitor appointed by the LPSC, Cleco Power and Acadia plan to
complete the transaction in the first quarter of 2010.  Beginning in
January 2010, the agreements provide that Acadia will operate the plant and
serve Cleco Power under a tolling agreement covering 50% of the Acadia power
station until the transaction is closed, after which Cleco Power will own and
operate one unit and operate the other 580-MW unit on behalf of Acadia or a
future owner.  This tolling agreement was approved by the LPSC in
October 2009.  The tolling agreement must also be approved by
FERC.




Rodemacher
Unit 3


In May
2006, Cleco Power began construction of Rodemacher Unit 3 which will provide a
portion of the utility’s 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.  Cleco Power has entered into contracts with suppliers to
collectively supply over 1.4 million tons of petroleum coke annually for a
three-to-five year period beginning in 2009, representing over 90% of Rodemacher
Unit 3 fuel requirements for such period.  All environmental permits
for the unit have been received.  Shaw anticipates the plant will be
substantially complete and operational in late December 2009.


In May
2006, Cleco Power and Shaw entered into an Amended EPC Contract, which provided
for substantial completion of the construction of Rodemacher Unit 3 by September
30, 2009.  On July 2, 2008, Cleco Power and Shaw amended this contract
further to provide for substantial completion as early as June 30,
2009.  On October 19, 2009, Cleco and Shaw again amended the EPC
Contract to extend


58
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





the
substantial completion date to September 28, 2009, as a result of a broader
settlement of fuel and force majeure related Shaw claims.  Under the
amended contract, the lump-sum price is $795.5 million.  Under the
terms of this amendment, Shaw withdrew its request for recovery of any and all
claims relating to fuel quality and agreed to limit the claims for force majeure
related costs, not to exceed $24.0 million less a settlement credit of $6.0
million.  The force majeure related claims remain in dispute
resolution.  The total capital cost estimate for the project,
including AFUDC, Amended EPC Contract costs, and other development expenses, is
approximately $1.0 billion.  As of September 30, 2009, Cleco Power had
incurred approximately $970.9 million in project costs, including
AFUDC.  Under the Amended EPC Contract, Shaw is subject to payment of
liquidated damages if certain operating performance criteria and schedule dates
are not met.  The Amended EPC Contract allows for termination if
certain milestones, approvals, or other terms and conditions are not met, or at
Cleco Power’s sole discretion, which would require payment of termination
fees.  As of September 30, 2009, the maximum termination costs would
have been $795.1 million or an additional $7.0 million more than the capital
expended to date.  In support of its performance obligations, Shaw has
provided a $58.9 million letter of credit to Cleco Power.  In addition
to the letter of credit, Shaw also posted a $200.0 million payment and
performance bond in favor of Cleco Power in support of its performance
obligations under the Amended EPC Contract.  The Amended EPC Contract
also provides for Shaw to: (a) allow retention or (b) issue an additional letter
of credit, in an amount equal to 7.5% of the payments made by Cleco Power under
the contract. Effective September 30, 2009, Shaw’s amended letter of credit for
retainage was $58.1 million.  The retention and letters of credit are
provided in support of Shaw’s potential payment of liquidated damages, or other
payment performance obligations.  Both letters of credit have been
extended to September 2010.  The Amended EPC Contract also provides 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, that 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.




Lignite
Deferral


Cleco
Power operates a generating unit jointly owned with SWEPCO that uses lignite as
its fuel source.


In May
2001, Cleco Power (along with SWEPCO) entered into the Lignite Mining Agreement
with DHLC, the operator of the Dolet Hills mine.  As ordered then by
the LPSC, Cleco Power’s retail customers began receiving fuel cost savings equal
to 2% of the projected costs under the previous mining contract (the benchmark
price) through the year 2011.  Actual mining costs incurred above 98%
of the benchmark price were deferred, and can be recovered from retail customers
through the fuel adjustment clause only when the actual mining costs are below
98% of the benchmark price.  The benchmark price used the GDP-IPD
index as a proxy for the numerous escalators in the previous mining
contract.  During the course of the contract, Cleco Power and SWEPCO
determined that the GDP-IPD index did not appropriately reflect the increase in
mining costs caused by sharp increases in diesel fuel and electricity costs
associated with the mining operation.  Because of this disconnect
between the GDP-IPD index and actual mining costs, a significant amount of
mining costs was being deferred by Cleco Power.  At September 30,
2009, and December 31, 2008, Cleco Power had $24.9 million and $26.8 million,
respectively, in deferred costs remaining uncollected.


In 2006,
Cleco Power recognized that there was a possibility it may not recover all or
part of the lignite mining costs it had deferred.  On November 15,
2006, Cleco Power and SWEPCO submitted a joint application to the LPSC
requesting approval for Cleco Power to recover its existing deferral balance,
and eliminate any future benchmarking of lignite mining costs.  In
December 2007, the LPSC approved a settlement agreement between Cleco Power,
SWEPCO and the LPSC Staff authorizing Cleco Power to recover the existing
deferred mining cost balance, including interest, over approximately 11.5
years.  The settlement also established a new benchmark utilizing the
contract’s escalators to assure a minimum 2% savings to customers compared to
the costs under the prior mining contract.  Under the settlement, the
benchmarking was scheduled to end after April 2011.  Cleco Power and
SWEPCO also agreed to commit to continued operation of the mining operation
through 2016 as long as the operation of the mine was considered
prudent.  Cleco Power did not record any additional deferred fuel
costs under the new benchmarking method.


On
September 30, 2009, the LPSC agreed to discontinue benchmarking and the
corresponding potential to defer future lignite mining costs while preserving
the recovery of the legacy deferred fuel balance previously
authorized.




Oxbow
Lignite Mine Acquisition


In April
2009, Cleco Power entered into an agreement with SWEPCO to purchase the Oxbow
Lignite Company from NAC.  In September 2009, the LPSC approved the
joint application authorizing the acquisition of the Oxbow Lignite
Company.  The purchase price of approximately $42.0 million includes
the lignite reserves, mining equipment, and related assets and
permits.  Cleco Power’s 50% portion of the purchase price for the
lignite reserves is approximately $12.9 million.  The lignite reserves
of approximately 120 million tons acquired under this agreement are expected to
fuel the Dolet Hills Power Station through 2026.  SWEPCO’s subsidiary,
Dolet Hills Lignite Company, LLC, will acquire the mining equipment and related
assets and permits for approximately $15.8 million and will operate the new mine
along with its current operations at the Dolet Hills Lignite Mine on similar
terms.  The existing Red River Lignite Supply and Transportation
Agreement with NAC will terminate upon the closing of this
transaction.  Pending approval by the Arkansas Public Service
Commission, a


59
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




condition
precedent for SWEPCO to close, the closing of this transaction is expected to
occur in December 2009.




Acadiana
Load Pocket


In
September 2008, Cleco Power entered into an agreement with Lafayette Utilities
System, a municipal utility, and Entergy Gulf States Louisiana, a subsidiary of
Entergy Corporation, to upgrade interconnected transmission systems in south
Louisiana.  The project received the LPSC’s approval in February 2009
and confirmation that it is in the public’s interest.  Also in
February 2009, approval was received from Southwest Power Pool, Cleco Power’s
reliability coordinator, to begin construction.  The joint project
includes expanding and upgrading the electric transmission infrastructure in
south central Louisiana in an area known as the “Acadiana Load
Pocket.”


The
project includes upgrades to certain existing electric facilities as well as the
construction of new substations, transmission lines, and capacitor
banks.  The total estimated cost is approximately $250.0
million.  Each utility is responsible for various components of the
project.  Cleco Power’s portion of the cost is approximately $150.0
million, including AFUDC.  The first phase of construction began in
September 2009, with the final phase scheduled to be completed in
2012.  At September 30, 2009, Cleco Power had spent $5.4 million on
the Acadiana Load Pocket project.  Upgrading the interconnected
transmission system is expected to increase capacity, reduce transmission
constraints, and improve electric service for customers served by all three
utilities.




Franchises


On
January 13, 2009, the Coushatta City Council voted to accept the early renewal
of its franchise agreement with Cleco Power.  The Coushatta agreement
was set to expire in November 2010.  The renewal extends the agreement
for 30 years until January 2039.  Approximately 1,400 Cleco Power
customers are located in Coushatta.


On May
14, 2009, the Bunkie City Council voted to accept the early renewal of its
franchise agreement with Cleco Power.  The Bunkie agreement was set to
expire in September 2012. The renewal extends the agreement for 27 years until
May 2036.  Approximately 2,200 Cleco Power customers are located in
Bunkie.


On May
19, 2009, the mayor of Abita Springs signed into ordinance a new franchise
agreement with Cleco Power.  This franchise agreement replaced the
previous Abita Springs agreement which was set to expire in July
2012.  The new agreement term is for 25 years and is set to expire May
2034.  Approximately 710 Cleco Power customers are located in Abita
Springs.


On July
22, 2009, the Simmesport City Council voted to accept the early renewal of its
franchise agreement with Cleco Power.  The Simmesport agreement was
set to expire in January 2012.  The renewal extends the agreement for
28 years until July 2037.  Approximately 1,200 Cleco Power customers
are located in Simmesport.


In July
2009, the City of Opelousas notified Cleco Power that it will begin formally
requesting proposals from other power companies to supply its electricity needs.
The current agreement is set to expire in August 2011.  The City of
Opelousas has until December 31, 2009, to notify Cleco of its intent to
terminate the agreement at the end of its current term.  If
notification is not received, the franchise agreement will automatically renew
for an additional ten years.  For the twelve-month period ended
September 30, 2009, Cleco Power’s base revenue was $8.2 million from the City of
Opelousas.  Approximately 10,000 customers are located in the City of
Opelousas.  While the City of Opelousas owns the power system, Cleco
Power has performed upgrades and expansions since the inception of the
agreement.  If the franchise agreement is not renewed by the City of
Opelousas, the City of Opelousas will be liable to Cleco Power for the cost of
the upgrades and expansions.


On
September 14, 2009, the Mansfield City Council voted to accept the early renewal
of its franchise agreement with Cleco Power.  The Mansfield agreement
was set to expire in June 2012.  The renewal extends the agreement for
30 years until September 2039.  Approximately 2,700 Cleco Power
customers are located in Mansfield.


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, 2008.




Environmental
Matters


Cleco is
subject to extensive environmental regulation by federal, state and local
authorities and is required to comply with numerous environmental laws and
regulations, and to obtain and to comply with numerous governmental permits, in
operating its facilities.  In addition, existing environmental laws,
regulations and permits could be revised or reinterpreted; new laws and
regulations could be adopted or become applicable to Cleco or its facilities;
and future changes in environmental laws and regulations could occur, including
potential regulatory and enforcement developments related to air
emissions.  Cleco may incur significant additional costs to comply
with these revisions, reinterpretations, and requirements.  If Cleco
fails to comply with these revisions, reinterpretations, and requirements, it
could be subject to civil or criminal liabilities and fines.


On March
19, 2008, Cleco Power received a consolidated compliance order and notice of
potential penalty (CO/NOPP) from the Louisiana Department of Environmental
Quality (LDEQ) for alleged violations of the air quality rules at its Dolet
Hills and Rodemacher Power Stations.  On May 15, 2008, Cleco Power and
the LDEQ entered into a dispute resolution agreement to give the parties
additional time to discuss resolution of this CO/NOPP.  The dispute
resolution agreement has been extended on several occasions.  Cleco
and the LDEQ have reached a tentative agreement to settle the pending
enforcement action for approximately $22,850.  The matter is currently
pending before the Administrative Law Judge until the settlement agreement is
finally executed.  The proposed settlement was publicly noticed in
accordance with LDEQ


60
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





procedures
in September and October 2009.  Cleco expects the proposed agreement
to be executed during the fourth quarter of 2009 or the first quarter of 2010,
at which time the matter will be closed.


On
September 3, 2009, Dolet Hills Power Station received a notice from EPA Region
6, alleging that the facility may be in violation of the Accident Prevention
requirements of Section 112 (r)(7) of the CAA and the Chemical Accident
Prevention provisions in 40 CFR Part 68.  EPA claims that the facility
may have been required to have a risk management plan (RMP) for the chemical,
anhydrous ammonia, which is used and stored on site.  EPA alleges that
Dolet Hills exceeded the threshold quantity of 10,000 pounds of anhydrous
ammonia in a single process which triggers the requirement to have such a plan
in place.  EPA made this claim after a review of their Central Data
Exchange which includes information submitted to EPA in the Toxic Release
Inventory.  In the notice, EPA has offered to settle the matter which
would include the payment of a non-negotiable penalty of $145,802 and the
correction of the alleged deficiencies.  Cleco Power contends that
Dolet Hills employed administrative controls to limit the quantity of ammonia
stored to less than 10,000 pounds which was sufficient to exempt the facility
from the RMP program requirements.  Cleco Power has provided
documentation supporting its position and awaits a response from EPA Region
6.


The LDEQ
issued a Louisiana Pollutant Discharge Elimination System (LPDES) waste water
permit renewal for Evangeline Power Station on June 22, 2006.  This waste
water permit contained certain additional Copper and Total Dissolved Solids
(TDS) permit limitations that Cleco contended were beyond the legal authority of
LDEQ to include in the waste water permit.  Cleco challenged these permit
provisions by filing a de novo review judicial appeal on September 26, 2006, in
district court in East Baton Rouge Parish, Louisiana.  The appealed
Copper and TDS permit limitations were stayed during litigation.  The
uncontested portions of the Evangeline waste water permit were effective January
1, 2007.   During the litigation, Cleco and LDEQ were actively
engaged in settlement discussions regarding the appealed provisions of the waste
water permit.  In December 2008, Cleco filed an application with the LDEQ
modifying its LPDES permit to incorporate new Copper and TDS discharge
limitations that were agreed to by both parties.  On August 27, 2009, LDEQ
issued a modified water permit with the agreed upon Copper and TDS limits which
the facility does expect can be met.  The effective date of the
modified permit is October 1, 2009.  The modified permit resolves the
issues on appeal, and the matter is now closed.


On May
1, 2009, the Acadia power station became subject to certain daily maximum and
monthly average discharge limitations for total sulfate under the terms of LPDES
Water Discharge Permit No. LA0112836, issued by the LDEQ in April
2006.  The facility was unable to achieve compliance with these
discharge limitations, and received a compliance order from LDEQ on July 31,
2009 to address the total sulfate violations.  Acadia believes that
the total sulfate limits in the LPDES permit were calculated in error and are
erroneously low.  Acadia has since submitted a permit modification
application to LDEQ which, once acted on and issued, should result in increased
total sulfate limitations to levels that can be met by the
facility.  Acadia has also submitted to the agency a detailed plan of
action that has been or will be taken to comply with the proposed new
limits.  Further, in issuing the subject compliance order, LDEQ also
conducted a file review of the Acadia power station’s LPDES records dating back
to May 2006.  During the file review, LDEQ noted violations of various
daily maximum temperatures and whole effluent toxicity limits.  LDEQ
also found that Acadia had previously corrected and resubmitted discharge
monitoring reports for four months in 2007, which LDEQ contends are not timely
submittals.  LDEQ included these violations as well as the total
sulfate violations in the compliance order.  Pending issuance of an
amended permit, Acadia will continue to operate under the terms of the
compliance order until the modified LPDES permit is received and becomes
effective.  For each of the violations described above, LDEQ has the
right to seek civil penalties.  At this time, Acadia is unable to
determine whether LDEQ will pursue any civil penalties as part of this
enforcement action or what the penalty amounts will be.


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, 2008.




Recent
Accounting Standards


For a
discussion of recent accounting standards, see Item 1, “Notes to the Unaudited
Condensed Consolidated Financial Statements — Note 2 — Recent Accounting
Standards” of this form 10-Q, which discussion is incorporated herein by
reference.




CRITICAL
ACCOUNTING POLICIES





Cleco’s
critical accounting policies include those accounting policies that are both
important to Cleco’s financial condition and results of operations and those
that require management to make difficult, subjective, or complex judgments
about future events, which could result in a material impact to the financial
statements of Cleco Corporation’s segments or to Cleco as a consolidated
entity.  The financial statements contained in this report are prepared in
accordance with accounting principles generally accepted in the United States of
America, which require Cleco to make estimates and 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


61
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Results
of Operations — Critical Accounting Policies” in the Registrant’s Combined
Annual Report on Form 10-K for the fiscal year ended December 31,
2008.




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, 2009, and September 30,
2008.  The following narrative analysis should be read in combination
with Cleco Power’s Unaudited Condensed Consolidated Financial Statements and the
Notes contained in this Form 10-Q.


Cleco
Power meets the conditions specified in General Instructions H(1)(a) and (b) to
Form 10-Q and is therefore permitted to use the reduced disclosure format for
wholly owned subsidiaries of reporting companies.  Accordingly, Cleco
Power has omitted from this report the information called for by Item 2
(Management’s Discussion and Analysis of Financial Condition and Results of
Operations) and Item 3 (Quantitative and Qualitative Disclosures about Market
Risk) of Part I of Form 10-Q and the following Part II items of Form 10-Q: Item
2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3
(Defaults upon Senior Securities).  Pursuant to the General
Instructions, Cleco Power has included an explanation of the reasons for
material changes in the amount of revenue and expense items of Cleco Power
between the first nine months of 2009 and the first nine months of
2008.  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,
2008.


For an
explanation of material changes in the amount of revenue and expense items of
Cleco Power between the third quarter of 2009 and the third quarter of 2008, see
“— Results of Operations — Comparison of the Three Months Ended September 30,
2009, and 2008 — 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 2009 and the first nine months of
2008, see “ — Results of Operations — Comparison of the Nine Months Ended
September 30, 2009, and 2008 — Cleco Power” of this Form 10-Q, which discussion
is incorporated herein by reference.




ITEM
3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK





Risk
Overview





Market
risk inherent in Cleco’s market risk-sensitive instruments and positions
includes potential changes arising from changes in interest rates and the
commodity market prices of power and natural gas in the industry on different
energy exchanges.  Cleco is subject to market risk associated with
economic hedges relating to open natural gas contracts.  Cleco also is
subject to market risk associated with its remaining tolling agreement
counterparty.  For additional information concerning Cleco’s market
risk associated with its remaining counterparty, see Item 2, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations —
Financial Condition — Liquidity and Capital Resources — General Considerations
and Credit-Related Risks.”


Cleco
uses the authoritative guidance on derivatives and hedging 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 since Cleco Power takes physical delivery and the
instruments and positions are used to satisfy customer
requirements.


Cleco’s
exposure to market risk, as discussed below, represents an estimate of possible
changes in the fair value or future earnings that would occur, assuming possible
future movements in the interest rates and commodity prices of power and natural
gas.  Management’s views on market risk are not necessarily indicative
of actual results, nor do they represent the maximum possible gains or
losses.  The views do represent, within the parameters disclosed, what
management estimates may happen.


Cleco
monitors credit risk exposure through reviews of counterparty credit quality,
aggregate counterparty credit exposure, and aggregate counterparty concentration
levels.  Cleco 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.


Access
to capital markets is a significant source of funding for both short- and
long-term capital requirements not satisfied by operating cash
flows.  Recent market conditions have limited the availability and
have increased the costs of capital for many companies.  The inability
to raise capital on favorable terms could negatively affect Cleco’s ability to
maintain and expand its businesses.  After assessing the current
operating performance, liquidity, and credit ratings, management believes that
it will have access to the capital markets at prevailing market rates for
companies with comparable credit ratings.  If Cleco Corporation’s
credit ratings were to be downgraded by Moody’s and Standard & Poor’s, Cleco
Corporation would be required to pay additional fees and higher interest rates
under its bank credit and other debt agreements.  Cleco Power is
currently rated one level higher by Moody’s than by Standard &
Poor’s.  Cleco Power pays fees and interest under its bank credit and
other debt agreements based on the higher of the two credit
ratings.  If Cleco Power’s credit ratings were to be downgraded by
Moody’s, Cleco Power would be required to pay additional fees and higher
interest rates.  Cleco Power’s collateral for derivatives is
based


62
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





on the
lower of the two credit ratings.  If Cleco Power’s credit ratings were
to be downgraded by Standard & Poor’s, Cleco Power would be required to pay
additional collateral for derivatives.




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.


At
September 30, 2009, Cleco Corporation had $118.0 million principal amount of
long-term variable-rate debt outstanding under its $150.0 million five-year
credit facility at a weighted average interest rate of 0.768%.  The
borrowings under the credit facility are considered long-term as the credit
facility does not expire until 2011.  The borrowing costs under the
facility are equal to LIBOR plus 0.65%, including facility fees.  The
existing borrowings had 30-day terms and matured on October 16, 2009, and
October 30, 2009.  The amounts of the borrowings were renewed at
maturity, rather than repaid.  Each 1% increase in the interest rate
applicable to such debt would have resulted in a $1.2 million decrease in
pre-tax earnings of Cleco.  Cleco had no short-term variable-rate debt
as of September 30, 2009.


For more
information regarding Cleco Power’s current variable-rate debt outstanding and
interest rate swap, please refer to “— Cleco Power” below.




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


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 the authoritative guidance on
derivatives and hedging 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.  At September 30, 2009, the positions had a negative
mark-to-market value of $0.4 million, which is a decrease of $0.2 million from
the negative mark-to-market value of $0.2 million at December 31,
2008.  In addition, these positions resulted in a realized loss of
$1.4 million for the nine-month period ended September 30, 2009.  In
light of these economic hedge transactions, volatility in natural gas prices
will likely cause fluctuations in the market value of open natural gas positions
and ultimately in Cleco Power’s future earnings.


Cleco
Power provides fuel for generation and purchases power to meet the power demands
of customers.  Cleco Power has entered into positions to mitigate the
volatility in customer fuel costs, as encouraged by an LPSC
order.  Cleco Power’s fuel stabilization policy targets higher levels
of minimum hedging percentages and mitigates the volatility in customer fuel
costs.  The change in positions could result in increased volatility
in the marked-to-market amounts for the financial positions.  These
positions are marked-to-market with the resulting gain or loss recorded on the
balance sheet as a component of the accumulated deferred fuel asset or liability
and a component of the risk management assets or liabilities.  When
these positions close, actual gains or losses are deferred and included in the
fuel adjustment clause in the month the physical contract
settles.  Based on market prices at September 30, 2009, the net
mark-to-market impact related to open natural gas positions was a loss of $29.6
million.  The majority of these natural gas positions will close over
the next twelve months.  Deferred losses relating to closed natural
gas positions totaled $6.4 million at September 30, 2009, and December 31,
2008.


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 Cleco Power’s hedge transactions for the
three and nine months ended September 30, 2009, as well as the VaR at December
31, 2008, is summarized below:





FOR THE THREE MONTHS
              ENDED SEPTEMBER 30, 2009(THOUSANDS)
            
            HIGH
            
            
            LOW
            
            
            AVERAGEEconomic
      hedges
            
            $
            157.0
            
            
            $
            69.4
            
            
            $
            114.0Fuel
      cost hedges
            
            $
            4,857.8
            
            
            $
            1,846.0
            
            
            $
            3,262.8





FOR THE NINE MONTHS
              ENDED SEPTEMBER 30, 2009
            
            
            AT
              SEPTEMBER 30,
            
            
            AT
              DECEMBER
31,(THOUSANDS)
            
            HIGH
            
            
            LOW
            
            
            AVERAGE
            
            
            2009
            
            
            2008Economic
      hedges
            
            $
            268.1
            
            
            $
            69.4
            
            
            $
            161.2
            
            
            $
            140.3
            
            
            $
            239.0Fuel
      cost hedges
            
            $
            7,292.8
            
            
            $
            1,846.0
            
            
            $
            4,061.6
            
            
            $
            3,885.9
            
            
            $
            6,519.0




63
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





Cleco
Power





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


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


At
September 30, 2009, Cleco Power had $35.0 million principal amount of long-term
variable-rate debt outstanding under its $275.0 million five-year credit
facility at a weighted average interest rate of 0.574%.  The
borrowings under the credit facility are considered long-term as the credit
facility does not expire until 2011.  The borrowing costs under the
facility are equal to LIBOR plus 0.40%, including facility fees.  The
existing borrowings had 30-day terms and matured on October 2, 2009, and October
28, 2009.  The amounts of the borrowings were renewed at maturity,
rather than repaid.  Each 1% increase in the interest rate applicable
to such debt would have resulted in a $0.3 million decrease in pre-tax earnings
of Cleco Power.  Cleco Power had no short-term variable-rate debt as
of September 30, 2009.


At
September 30, 2009, Cleco Power had an additional $50.0 million principal amount
of long-term variable-rate debt outstanding with an interest rate of 3.00% plus
one-month LIBOR.  Each 1% increase in the interest rate applicable to
such debt would cause a $0.5 million decrease in the pre-tax earnings of Cleco
Power.  During 2009, Cleco Power locked in an interest rate swap,
effective concurrent with issuing the $50.0 million variable-rate debt, for the
notional amount of the debt requiring a monthly net settlement between Cleco
Power’s fixed 1.84% and the swap counterparty’s floating payment of the
one-month LIBOR.  Each 1% increase in the interest rate applicable to
the interest rate swap would cause a $0.5 million increase in the pre-tax
earnings of Cleco Power.


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
AND 4T.CONTROLS AND PROCEDURES








Disclosure
Controls and Procedures


As of
September 30, 2009, evaluations were performed under the supervision and with
the participation of Cleco Corporation and Cleco Power LLC (individually
“Registrant” and collectively the “Registrants”) management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO).  The
evaluations assessed the effectiveness of the Registrants’ disclosure controls
and procedures.  Based on the evaluations, the CEO and CFO have
concluded that the Registrants’ disclosure controls and procedures are effective
to ensure that information required to be disclosed by each Registrant in
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms; and that the Registrants’
disclosure controls and procedures are also effective in ensuring that such
information is accumulated and communicated to the Registrants’ management,
including the CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure.




Changes
in Internal Controls over Financial Reporting


Under
the supervision and with the participation of the Registrants’ management,
including the CEO and CFO, the Registrants evaluated changes in internal control
over financial reporting that occurred during the quarter ended September 30,
2009, and found no change that has materially affected, or is reasonably likely
to materially affect, internal control over financial reporting.


64
 CLECO
      CORPORATIONCLECO POWER
                      2009 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 Consolidated Financial Statements — Note 10 —
Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees — Litigation.”




CLECO
POWER





For
information on legal proceedings affecting Cleco Power, see Part I, Item 1,
“Notes to the Unaudited Condensed Consolidated Financial Statements — Note 10 —
Litigation, Other Commitments and Contingencies, and Disclosures about
Guarantees — Litigation.”









ITEM
1A.RISK FACTORS


There
have been no material changes from the risk factors disclosed under the heading
“Risk Factors” in Item 1A of the Registrants’ Combined Annual Report on Form
10-K for the fiscal year ended December 31, 2008 (the “2008 Annual Report on
Form 10-K”).  For risks that could affect actual results and cause
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Registrants, see the risk factors
disclosed under “Risk Factors” in Item 1A of the 2008 Annual Report on Form
10-K.







ITEM
5.OTHER
INFORMATION





On
October 30, 2009, Cleco Corporation’s Board of Directors amended Cleco
Corporation’s Bylaws (the “Amendment”) to effect certain changes with respect to
the adjournment of shareholder meetings and to the procedures for shareholders
to nominate directors and propose other matters for consideration at a meeting
of shareholders.  Among other provisions, the Amendment amended the
Bylaws to permit the Chairman of the Board of Directors to adjourn a shareholder
meeting, whether or not a quorum is present.  The Amendment also
amended the Bylaws to clarify that the advance notice provisions of the Bylaws
are the exclusive means for a shareholder to make director nominations or submit
other business before a meeting of shareholders (other than matters properly
brought under Rule 14a-8 of the SEC’s proxy rules, which contains its own
procedural requirements).


The
Amendment also amended the Bylaws to require any shareholder submitting a
proposal or a nomination of a person for election as a director to include the
following additional information in the notice:




§
            as
      to the shareholder proposing such business and the beneficial owner, if
      any, on whose behalf the proposal is made (each such shareholder or
      beneficial owner, a “Proposing Person”), all ownership interests,
      including derivatives, hedged positions and other economic and voting
      interests, any proportionate interest in shares of Cleco Corporation
      common stock or derivative instruments held by a general or limited
      partnership in which such Proposing Person is a general partner or
      beneficially owns an interest in a general partner, any pledge by or short
      interest of such Proposing Person of any shares of Cleco Corporation
      common stock, any rights to dividends on shares of Cleco Corporation
      common stock owned beneficially by such Proposing Person that are
      separated or separable from the underlying shares, any performance-related
      fees to which such Proposing Person is entitled based on any increase or
      decrease in the value of shares of Cleco Corporation common stock or
      derivative instruments, a representation regarding whether such Proposing
      Person intends to solicit proxies with respect to the business desired to
      be brought before the meeting and whether such Proposing Person intends to
      appear in person or by proxy at the
meeting;


§
            any
      other information relating to such Proposing Person that would be required
      to be disclosed in solicitations of proxies for the
    proposal;


§
            a
      description of all agreements, arrangements and understandings between the
      Proposing Person and any other person or persons in connection with any
      business or proposal by such shareholder;
and


§
            with
      respect to a nomination of a director, a description of the material terms
      of all direct and indirect compensation and other material monetary
      arrangements during the past three years, and any other material
      relationships between or among any Proposing Person and their respective
      affiliates, on the one hand, and each proposed nominee and his or her
      respective affiliates, on the other hand, including all information that
      would be required to be disclosed pursuant to Rule 404 promulgated under
      Regulation S-K if such Proposing Person were the “registrant” for purposes
      of such rule and the nominee were a director or executive officer of such
      registrant.




The
Amendment also provides that a Proposing Person must be a shareholder of record
as of the time of giving the notice provided for in the Bylaws and at the time
of the meeting at which the nomination or proposal will be
considered.  The Proposing Person must update and supplement the
required information as of the record date and within 10 business days prior to
the date of the meeting.


65
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q




The
Amendment also amended the Bylaws to permit Cleco Corporation to require
director nominees to complete a written questionnaire in a form provided by
Cleco Corporation and make certain representations to Cleco Corporation relating
to voting commitments, compensation and other economic arrangements and future
compliance with Cleco Corporation’s corporate governance and other policies and
guidelines applicable to directors.


The
foregoing description of the Amendment does not purport to be complete and is
qualified in its entirety by reference to the Amendment being filed with this
report as Exhibit 3.1 and incorporated by reference herein.  Pursuant
to Cleco Corporation’s Bylaws, the Amendment will become effective on October
30, 2010.








66
 CLECO
      CORPORATIONCLECO POWER
                      2009 3RD QUARTER
      FORM 10-Q





ITEM
6.EXHIBITS





CLECO
      CORPORATION3.1
            Amendment
      to the Bylaws of Cleco Corporation, effective October 30,
20103.2
            Bylaws
      of Cleco Corporation, revised effective July 1, 2009 (Filed as Exhibit 3.1
      to Form 10-Q of Cleco Corporation (Commission File No. 001-15759) for the
      quarter ended June 30, 2009 and incorporated herein by
      reference)10.1
            Summary
      of Director Compensation, Benefits and Policies, Revised on July 31,
      200910.2
            First
      Amended and Restated Credit Agreement dated as of June 2, 2006 among Cleco
      Corporation, The Bank of New York, as Administrative Agent, and the
      lenders and other parties thereto10.3
            Second
      Amended and Restated Limited Liability Company Agreement of Acadia Power
      Partners, LLC, dated as of May 9, 200310.4
            Amendment
      No. 1 and Waiver No. 1, dated as of August 18, 2009, to and under the
      First Amended and Restated Credit Agreement, dated as of June 2, 2006,
      among Cleco Corporation, the Lenders party thereto12(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, 2009, for Cleco
      Corporation31.1
            CEO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200231.2
            CFO
      Certification in accordance with section 302 of the Sarbanes-Oxley Act of
      200232.1
            CEO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      200232.2
            CFO
      Certification pursuant to section 906 of the Sarbanes-Oxley Act of
      2002CLECO
      POWER3.3
            Operating
      Agreement of Cleco Power LLC, revised effective July 1, 2009 (Filed as
      Exhibit 3.2 to Form 10-Q of Cleco Power LLC (Commission File No.
      001-05663) for the quarter ended June 30, 2009 and incorporated herein by
      reference)10.5
            Amendment
      No. 1 and Waiver No. 1, dated as of August 18, 2009, to and under the
      First Amended and Restated Credit Agreement, dated as of June 2, 2006,
      among Cleco Power LLC, the Lenders party thereto12(b)
            Computation
      of Ratios of Earnings to Fixed Charges for the three-, nine-, and
      twelve-month periods ended September 30, 2009, 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





67
 CLECO
      CORPORATIONCLECO POWER
                      2009 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 - Investor
      Relations & Chief Accounting
Officer










Date:  October
30, 2009





68
 CLECO
      CORPORATIONCLECO POWER
                      2009 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 - Investor
      Relations & Chief Accounting
Officer














Date:  October 30, 2009





69