<PAGE>   1
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                                  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

<TABLE>
<S>                                                         <C>
For the quarterly period ended September 30, 1998           Commission file number 1-5663
</TABLE>

                                       Or

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

                                CLECO CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

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


2030 DONAHUE FERRY ROAD, PINEVILLE, LOUISIANA            71360-5226
  (Address of principal executive offices)                (Zip Code)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (318) 484-7400

    Indicate by check mark whether the Registrant: (1) has 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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 
                                            Yes [X]    No
                                                ----     ----

    As of November 1, 1998, there were 22,486,530 shares outstanding of the
Registrant's Common Stock, par value $2.00 per share.

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<PAGE>   2



                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                              Page
PART I.   FINANCIAL INFORMATION                                                                               ----
<S>         <C>                                                                                               <C>
  Item 1.   Financial Statements..........................................................................     1
              Report of Independent Accountants...........................................................     2
              Consolidated Statements of Income...........................................................     3
              Consolidated Balance Sheets.................................................................     5
              Consolidated Statements of Cash Flows.......................................................     7
              Notes to Consolidated Financial Statements..................................................     8
  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations
              Disclosure Regarding Forward-Looking Statements.............................................    11
              Results of Operations.......................................................................    11
              Financial Condition.........................................................................    14
  Item 3.   Quantitative and Qualitative Disclosures About
            Market Risk...................................................................................    16

PART II.  OTHER INFORMATION

  Item 5.   Other Information.............................................................................    17

  Item 6.   Exhibits and Reports on Form 8-K..............................................................    21

SIGNATURE.................................................................................................    22
</TABLE>


<PAGE>   3


                                     PART I

                              FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

    The consolidated financial statements for Cleco Corporation (the Company)
included herein are unaudited but reflect, in management's opinion, all
adjustments, consisting only of normal recurring adjustments, that are necessary
for a fair presentation of the Company's financial position and the results of
its operations for the interim periods presented. Because of the seasonal nature
of the Company's business, the results of operations for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the full fiscal year. The financial statements included herein
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997 (1997 Form 10-K).

The consolidated financial statements included herein have been subjected to a
limited review by PricewaterhouseCoopers LLP, independent accountants for the
Company, whose report is included herein.



                                        1
<PAGE>   4


                        REPORT OF INDEPENDENT ACCOUNTANTS


October 26, 1998


To the Board of Directors and Shareholders
    of Cleco Corporation:

We have made a review of the consolidated balance sheet of Cleco Corporation as
of September 30, 1998, and the related consolidated statements of income and
cash flows for the three-month and nine-month periods ended September 30, 1998
and 1997, in accordance with standards established by the American Institute of
Certified Public Accountants. These financial statements are the responsibility
of the Company's management.

A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997, and the
related consolidated statements of income, cash flows and changes in common
shareholders' equity for the year then ended (not presented herein); and in our
report dated January 27, 1998, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 1997, is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.




PricewaterhouseCoopers LLP



                                        2
<PAGE>   5


                                CLECO CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                     FOR THE THREE MONTHS ENDED SEPTEMBER 30
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                             (In thousands, except share and
                                                   per share amounts)
                                                  1998             1997
                                              ------------    ------------
<S>                                           <C>             <C>         
OPERATING REVENUES                            $    172,553    $    138,099
                                              ------------    ------------
OPERATING EXPENSES
     Fuel used for electric generation              44,034          44,607
     Power purchased                                17,154          10,171
     Other operation                                35,999          16,242
     Maintenance                                    11,524           5,308
     Depreciation                                   11,872          11,609
     Taxes other than income taxes                   9,488           9,161
     Federal and state income taxes                 13,580          12,377
                                              ------------    ------------
                                                   143,651         109,475
                                              ------------    ------------
OPERATING INCOME                                    28,902          28,624

Allowance for other funds used during
     construction                                      272             171
Other income and expenses, net                         722           1,033
                                              ------------    ------------
INCOME BEFORE INTEREST CHARGES                      29,896          29,828

Interest charges, including amortization of
     debt expense, premium and discount              7,243           7,124
Allowance for borrowed funds used during
     construction                                     (201)           (184)
                                              ------------    ------------
NET INCOME                                          22,854          22,888

Preferred dividend requirements, net                   534             528
                                              ------------    ------------

NET INCOME APPLICABLE TO COMMON STOCK         $     22,320    $     22,360
                                              ============    ============

WEIGHTED AVERAGE COMMON SHARES
     Basic                                      22,484,269      22,460,931
     Diluted                                    23,866,497      23,864,477

EARNINGS PER SHARE
     Basic                                    $       0.99    $       1.00
     Diluted                                  $       0.95    $       0.95

CASH DIVIDENDS PAID PER SHARE                 $      0.405    $      0.395
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.



                                        3

<PAGE>   6


                                CLECO CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                     FOR THE NINE MONTHS ENDED SEPTEMBER 30
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                             (In thousands, except share and
                                                   per share amounts)
                                                  1998            1997
                                              ------------    ------------
<S>                                           <C>             <C>         
OPERATING REVENUES                            $    398,060    $    341,091
                                              ------------    ------------
OPERATING EXPENSES
     Fuel used for electric generation             106,135          99,574
     Power purchased                                41,597          31,777
     Other operation                                75,696          46,357
     Restructuring charge                                0           1,891
     Maintenance                                    24,323          17,072
     Depreciation                                   35,766          34,321
     Taxes other than income taxes                  26,877          26,152
     Federal and state income taxes                 23,988          22,066
                                              ------------    ------------
                                                   334,382         279,210
                                              ------------    ------------
OPERATING INCOME                                    63,678          61,881

Allowance for other funds used during
     construction                                      854             297
Other income and expenses, net                       1,200           1,061
                                              ------------    ------------
INCOME BEFORE INTEREST CHARGES                      65,732          63,239

Interest charges, including amortization of
     debt expense, premium and discount             21,491          21,650
Allowance for borrowed funds used during
     construction                                     (630)            (94)
                                              ------------    ------------
NET INCOME                                          44,871          41,683

Preferred dividend requirements, net                 1,591           1,577
                                              ------------    ------------

NET INCOME APPLICABLE TO COMMON STOCK         $     43,280    $     40,106
                                              ============    ============

WEIGHTED AVERAGE COMMON SHARES
     Basic                                      22,478,499      22,459,128
     Diluted                                    23,866,259      23,864,181

EARNINGS PER SHARE
     Basic                                    $       1.93    $       1.79
     Diluted                                  $       1.87    $       1.73

CASH DIVIDENDS PAID PER SHARE                 $      1.215    $      1.175
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.



                                        4

<PAGE>   7


                                CLECO CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                   (In thousands)
                                                       SEPTEMBER 30, 1998  DECEMBER 31, 1997
                                                       ------------------  -----------------
     ASSETS
<S>                                                       <C>              <C>          
Utility plant
     Property, plant and equipment                        $   1,534,953    $   1,506,949
     Accumulated depreciation                                  (543,785)        (518,664)
                                                          -------------    -------------
                                                                991,168          988,285
     Construction work-in-progress                               49,210           37,277
                                                          -------------    -------------
         Total utility plant, net                             1,040,378        1,025,562
                                                          -------------    -------------

Investments and other assets                                     23,980            3,479
                                                          -------------    -------------
Current assets
     Cash and cash equivalents                                   21,198           18,015
     Accounts receivable, net                                    65,865           48,353
     Notes Receivable                                               930                0
     Unbilled revenues                                            6,099           11,090
     Fuel inventory, at average cost                              7,500            8,648
     Materials and supplies, inventory, at average cost          12,887           14,413
     Accumulated deferred fuel                                    3,653                0
     Prepayments and other current assets                         1,330            1,894
                                                          -------------    -------------
         Total current assets                                   119,462          102,413
                                                          -------------    -------------

Prepayments                                                       8,169            8,331
Regulatory assets - deferred taxes                              111,414          115,285
Other deferred charges                                           45,056           29,418
Accumulated deferred federal and
     state income taxes                                          77,099           76,556
                                                          -------------    -------------

         TOTAL ASSETS                                     $   1,425,558    $   1,361,044
                                                          =============    =============
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.






                            (Continued on next page)

                                        5

<PAGE>   8


                                CLECO CORPORATION
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                             (In thousands,
                                                          except share amounts)
                                                SEPTEMBER 30, 1998       DECEMBER 31, 1997
                                                ------------------       -----------------

     CAPITALIZATION AND LIABILITIES
<S>                                             <C>                      <C>        
Common shareholders' equity
Common stock, $2 par value, authorized
     50,000,000 shares, issued 22,485,280
     and 22,462,912 shares at September 30, 1998
     and December 31, 1997, respectively           $    45,536            $    45,525
Premium on capital stock                               113,856                113,763
Retained earnings                                      271,741                255,549
Treasury stock, at cost, 282,474 and
     299,842 shares at September 30, 1998
     and December 31, 1997, respectively                (5,745)                (6,086)
                                                   -----------            -----------
                                                       425,388                408,751
                                                   -----------            -----------
Preferred stock, cumulative, $100 par value
     Not subject to mandatory redemption                29,718                 30,102
     Deferred compensation related to
         preferred stock held by ESOP                  (17,183)               (18,766)
                                                   -----------            -----------
                                                        12,535                 11,336
     Subject to mandatory redemption                     5,990                  6,120
                                                   -----------            -----------
                                                        18,525                 17,456
                                                   -----------            -----------

Long-term debt, net                                    369,107                365,897
                                                   -----------            -----------

     Total capitalization                              813,020                792,104
                                                   -----------            -----------
Current liabilities
     Short-term debt                                    52,750                 34,219
     Long-term debt due within one year                 10,000                 15,000
     Accounts payable                                   47,623                 53,365
     Customer deposits                                  20,213                 20,172
     Taxes accrued                                      49,006                 12,211
     Interest accrued                                    1,536                  7,681
     Accumulated deferred fuel                               0                  2,965
     Other current liabilities                          13,494                  5,102
                                                   -----------            -----------
       Total current liabilities                       194,622                150,715
                                                   -----------            -----------
Deferred credits
     Accumulated deferred federal and state
         income taxes                                  293,197                296,123
     Accumulated deferred investment tax
         credits                                        28,231                 29,574
     Regulatory liabilities - deferred taxes            63,515                 62,468
     Other deferred credits                             32,973                 30,060
                                                   -----------            -----------
       Total deferred credits                          417,916                418,225
                                                   -----------            -----------

      TOTAL CAPITALIZATION AND LIABILITIES         $ 1,425,558            $ 1,361,044
                                                   ===========            ===========
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.



                                        6
<PAGE>   9


                                CLECO CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE NINE MONTHS ENDED SEPTEMBER 30
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                  (In thousands)
                                                              1998               1997
                                                            --------           --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                         <C>                <C>     
     Net income                                             $ 44,871           $ 41,683
     Adjustments to reconcile net income
        to net cash provided by operating activities
         Depreciation and amortization                        37,236             35,673
         Allowance for funds used during construction         (1,483)               391
         Amortization of investment tax credits               (1,343)            (1,343)
         Deferred income taxes                                 2,119             (2,083)
         Deferred fuel costs                                  (6,618)            (4,045)
         Restructuring charges                                     0              1,632
         (Gain) loss on disposition of utility plant, net          0               (236)
     Changes in assets and liabilities
         Accounts receivable, net                            (18,442)            (9,487)
         Unbilled revenues                                     4,991             (1,734)
         Fuel inventory, materials and supplies                2,674              2,431
         Accounts payable                                     (9,742)           (16,034)
         Customer deposits                                        41                422
         Other deferred accounts                             (16,221)            (1,824)
         Taxes accrued                                        36,795             33,655
         Interest accrued                                     (6,145)            (5,917)
            Other, net                                         3,655              9,189
                                                            --------           --------
         Net cash provided by operating activities            72,388             82,373
                                                            --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Additions to utility plant                              (45,478)           (59,640)
     Allowance for funds used during construction              1,483               (391)
     Sale of utility plant                                       395                371
     Purchase of investments                                    (340)              (222)
     Sale of investments                                           0                  1
                                                            --------           --------
         Net cash used in investing activities               (43,940)           (59,881)
                                                            --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of common stock                                     94                 22
     Issuance of long-term debt                                    0             40,000
     Retirement of long-term debt                            (10,000)           (15,000)
     Increase (decrease) in short-term debt, net              13,531            (17,817)
     Issuance of preferred stock                                   0                178
     Redemption of preferred stock                              (212)              (237)
     Dividends paid on common and preferred stock, net       (28,678)           (27,973)
                                                            --------           --------
         Net cash used in financing activities               (25,265)           (20,827)
                                                            --------           --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                      3,183              1,665
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              18,015             20,307
                                                            --------           --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $ 21,198           $ 21,972
                                                            ========           ========

Supplementary cash flow information
     Interest paid (net of amount capitalized)              $ 27,201           $ 27,709
                                                            ========           ========
     Income taxes paid                                      $  2,640           $  9,876
                                                            ========           ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.



                                        7

<PAGE>   10


                                CLECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE A.  RECLASSIFICATION

Certain prior-period amounts have been reclassified to conform with the
presentation shown in the current year's financial statements. These
reclassifications had no effect on net income applicable to common stock or
common shareholders' equity.

NOTE B.  LEGAL PROCEEDING:  FUEL SUPPLY - LIGNITE

The Company and Southwestern Electric Power Company (SWEPCO), each a 50% owner
of Dolet Hills Power Station Unit 1 (Dolet Hills Unit 1), jointly own lignite
reserves in the Dolet Hills area of northwestern Louisiana. In 1982 the Company
and SWEPCO entered into a Lignite Mining Agreement (LMA) with the Dolet Hills
Mining Venture (DHMV), a partnership for the mining and delivery of lignite from
a portion of these reserves (Dolet Hills Mine). The LMA expires in 2011. The
price of lignite delivered pursuant to the LMA is a base price per ton, subject
to escalation based on certain inflation indices, plus specified "pass-through"
costs.

Currently, the Company is receiving annually a minimum delivery of 1,187,500
tons under the LMA. Since the late 1980s, additional spot lignite deliveries
have been obtained through competitive bidding from DHMV and another lignite
supplier. In 1996 the Company and SWEPCO received deliveries which approximated
28% of the annual lignite consumption at Dolet Hills Unit 1 from the other
lignite supplier.

On April 15, 1997, the Company and SWEPCO filed suit against DHMV and its
partners in the United States District Court for the Western District of
Louisiana (Federal Court Suit) seeking to enforce various obligations of DHMV to
the Company and SWEPCO under the LMA, including provisions relating to the
quality of the delivered lignite, pricing, and mine reclamation practices. On
June 15, 1997, DHMV filed an answer denying the allegations in the Company's
suit and filed a counterclaim asserting various contract-related claims against
the Company and SWEPCO. The Company and SWEPCO have denied the allegations in
the counterclaims on the grounds the counterclaims have no merit.

The counterclaims filed by DHMV in the Federal Court Suit resulted in the
Company and SWEPCO filing a separate lawsuit against the parent companies of
DHMV, namely Jones Capital Corporation and Philipp Holzmann USA, Inc., on August
13, 1997, in the First Judicial District Court for Caddo Parish, Louisiana
(State Court Suit). The State Court Suit seeks to enforce a separate 1995
agreement by Jones Capital Corporation and Philipp Holzmann USA, Inc. related to
the LMA. Jones Capital Corporation and Philipp Holzmann USA, Inc. have asked the
State Court to stay that proceeding until the Federal Court Suit is resolved.

A scheduling conference was held on November 5, 1998. At that scheduling
conference, the Court set this Federal Court suit for trial beginning November
15, 1999. A discovery cut-off date of August 15, 1999 has also been established.



                                        8
<PAGE>   11


The Company and SWEPCO will aggressively prosecute the claims against DHMV and
defend against the counterclaims which DHMV has asserted. The Company and SWEPCO
continue to pay DHMV for lignite delivered pursuant to the LMA. Normal
day-to-day operations continue at the Dolet Hills Mine and Dolet Hills Unit 1.
Although the ultimate outcome of this litigation cannot be predicted at this
time, based on information currently available to the Company, management does
not believe that the counterclaims asserted by the DHMV in the Federal Court
Suit will have a significant adverse effect on the Company's financial position
or results of operations.

NOTE C.  SABINE TEXICAN PIPELINE ACQUISITION

On August 1, 1998, Cleco Energy, LLC, (Energy) a joint venture between Cleco
Corporation and Covenant Energy Corporation of Houston, purchased Sabine Texican
Pipeline Company of Lufkin, Texas (Sabine). Sabine is an energy company engaged
in the exploration, production, gathering, marketing and transportation of
natural gas. Energy paid the sole shareholder of Sabine $2.5 million and gave
him a 13% equity interest in Energy. Sabine has approximately $24.6 million in
assets, $4 million in current liabilities, and $13.2 million in long term debt.
The acquisition added 415 miles of gathering and transmission pipeline in Texas
and Louisiana,  serving wholesale customers as well as oil and gas producing
properties in West Texas. After the acquisition of Sabine, the Company has a
44% equity interest and a 51% voting interest in Energy.

NOTE D.  ACCRUAL FOR ESTIMATED CUSTOMER CREDITS

The Company's results for the nine months ended September 30, 1998 reflect an
accrual for estimated customer credits which may be required under terms of an
earnings review settlement reached with the Louisiana Public Service Commission
(LPSC) in 1996. The accrual for estimated customer credits was reduced from the
second quarter estimate of $4 million to the current estimate of $1.9 million.
The settlement set the Company's rates for a period of five years, and also
provided for annual base rate tariff reductions of $3 million in 1997 and an
additional $2 million in 1998. As part of the settlement, the Company is allowed
to retain all regulated earnings up to a 12.25% return on equity, and to share
equally with customers as credits on their bills all regulated earnings between
12.25% and 13% return on equity. All regulated earnings above a 13% return on
equity are credited to customers. The amount of credits due customers, if any,
is determined by the LPSC annually based on the Company's 12-month-ending
results as of September 30 of each year. The amount of the credit has not yet
been determined by the LPSC. The settlement directs such credits to be made on
customers' bills the following summer.

NOTE E.  REPOWERING PROJECT

In July, 1998, the Company's Board of Directors approved the construction of a
750-megawatt repowering project (Project) to be implemented at the site of its
existing Coughlin Power Station (CPS). The Project will use three new natural
gas-fueled combustion turbine generators to repower two existing units at CPS.




                                       9
<PAGE>   12
It is anticipated that the Project's generation capacity and energy will be
available to the Company at competitive market rates and that any excess will be
available for sale to the regional wholesale market.

One of the Company's subsidiaries will own and operate the Project. The total
cost of the Project is expected to be $240 million and is scheduled to be
completed by June 1, 2000. As of September 30, 1998, the Company has spent
approximately $13.9 million on the project, which is being funded through the
Company's commercial paper program. Permanent financing for the Project has not
yet been determined and is expected to be finalized during the first quarter of
1999. Implementation of the Project is subject to approval by the LPSC and the
Federal Energy Regulatory Commission (FERC). Approval from both agencies is
expected to be obtained by Spring 1999.

NOTE F.  NEW REVOLVING CREDIT FACILITY

The Company's $25 million revolving credit facility was terminated on August 28,
1998 and a new $80 million, 364 day revolving credit facility was entered into
on August 28, 1998. The new $80 million facility provides for borrowings at
interest rates established by competitive bid and will expire on August 27,
1999. Compensating balances are not required for the facility. The commitment
fees are based upon the Company's lowest secured debt ratings and are currently
0.085%.



                                       10
<PAGE>   13


                                CLECO CORPORATION

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
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of the 1997 Form 10-K, the financial statements and notes
contained in Item 8 of the 1997 Form 10-K and the interim financial statements
and notes thereto contained elsewhere in this Report.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

    This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical fact included in this Report, are forward-looking
statements. Although the Company believes 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 which could cause the actual results to
differ materially from the Company's expectations. Such risks and uncertainties
include, without limitation, the effects of competition in the power industry,
legislative and regulatory changes affecting electric utilities, fluctuations in
the weather and changes in general economic and business conditions, as well as
other factors discussed in this and the Company's other filings with the
Securities and Exchange Commission (Cautionary Statements). All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.

RESULTS OF OPERATIONS

For the Three Months Ended September 30, 1998

    Net income applicable to common stock totaled $22.3 million or $0.99 per
share for the third quarter of 1998, as compared to $22.4 million or $1.00 per
share for the corresponding period in 1997. The following principal factors
contributed to these results:

Operating revenues for the quarter increased $34.5 million or 24.9% compared to
the same period in 1997, due to an increase in kilowatt-hour sales to all
classes of customers resulting from warmer weather during the third quarter of
1998 and increased activity by the Company's power marketing operations during
the third quarter of 1998 as compared to the third quarter of 1997. Fuel cost
recovery revenues for the third quarter of 1998 were $9.3 million more than the
third quarter of 1997. This increase is primarily attributable to higher
kilowatt-hour sales. The Company's power marketing operations were able to
capitalize on above-average demand of other utilities and increase operating
revenues by $16 million during the third quarter of 1998 compared to the
corresponding period in 1997. For a descripton of the Company's power marketing
operations, see Part II, Item 5, "Other Information -- Power Marketing
Operations."

                                       11
<PAGE>   14
Changes in fuel cost have historically had no effect on net income, as fuel
costs are generally recovered through a fuel cost adjustment clause that enables
the Company to pass on to customers substantially all changes in the cost of
generating fuel and purchased power. These adjustments are audited monthly and
are regulated by the LPSC (representing about 99% of the total fuel cost
adjustment) while the remaining portion, regulated by the FERC, is audited
periodically for several years at a time. Until approval is received, the
adjustments are subject to refund.

Base revenues increased $9.2 million during the third quarter of 1998 compared
to the corresponding period in 1997. The increase in base revenues is primarily
the result of an increase in kilowatt-hour sales to residential customers, the
most weather-sensitive customer class. The increased consumption by residential
customers was due primarily to a warmer-than-normal summer in 1998. Weather
during the third quarter of 1998 was 3.6% warmer than the third quarter of 1997
and 15% warmer than normal as measured by degree day calculations. Kilowatt-hour
sales to regular customers improved 8.6% over the third quarter of 1997. Base
revenues were also affected by the Company's acquisition of residential and
commercial customers from the former Teche Electric Cooperative (Teche). The
Company acquired Teche on September 30, 1997. The acquisition resulted in the
addition of 7,700 mostly residential customers to the Company's service area.

Also contributing to the third quarter base revenue increase was a $2.1 million
decrease over the prior quarter in the accrual for estimated customer credits.
See Note D of the Notes to Consolidated Financial Statements. The amount of
credits due customers, if any, will be determined by the LPSC annually based on
12-month-ending results as of September 30 of each year. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Financial Condition - Retail Rates" in Item 7 of the 1997 Form 10-K for a
discussion of the LPSC settlement.

Operating expenses increased $34 million, or 31%, during the third quarter of
1998 compared to the same period in 1997. The rise in operating expenses is the
result of increases in the cost of fuel used for electric generation, other
operation expenses, maintenance expenses, and an increase in purchases
associated with power marketing operations. The increase in the cost of fuel
used for electric generation and purchased power is primarily attributable to
fluctuations in the Company's generation mix, higher fuel costs, availability of
economy power and deferral of expenses for recovery from customers through fuel
adjustment clauses in subsequent months, as compared to the same period in 1997.
The Company purchases electric energy from other electric power generators when
the price of the energy purchased is less than the cost to the Company of
generating such energy from its own facilities and when the Company's generating
units are unable to provide electricity to satisfy the Company's load.
Twenty-two percent of the Company's energy requirements during the third quarter
of 1998 were met with purchased power, compared to 16% for the corresponding
period in 1997. This increase was primarily due to unanticipated mechanical
problems at the Company's generation facilities during heavy load periods. Other
operation expenses increased $19.8 million, or 121.6%, compared to the same
period in 1997, primarily due to purchases of power by the Company's power
marketing operations, costs associated with employee incentive compensation and
preliminary investigation of holding company formation. See "Part II, Item 5,
Other Information - Holding Company Formation" for a discussion of the potential
formation of a holding company. Maintenance expense increased $6.2 million, or
117.1% compared to the same period in 1997, primarily due to the incurrence of
expenses originally planned for earlier in the year, additional

                                       12
<PAGE>   15
spending for maintenance on the Company's generation facilities to increase
unit reliability, some unanticipated generating unit repairs caused by
mechanical problems during heavy load periods and an increase in right-of-way
reclearing expenses relating to transmission and distribution.

For the Nine Months Ended September 30, 1998

    Net income applicable to common stock totaled $43.3 million or $1.93 per
share for the first nine months of 1998, as compared to $40.1 million or $1.79
per share for the corresponding period in 1997. Net income applicable to common
stock for the 1997 period was affected by a restructuring charge of $1.9 million
($1.2 million net-of-tax) or $0.05 per share. The following principal factors
also contributed to these results:

Operating revenues for the first nine months of 1998 increased $57 million, or
16.7%, compared to the same period in 1997, due to an increase in fuel cost
recovery revenues, increased activity of the Company's power marketing
operations, and a rise in kilowatt-hour sales to residential customers. Fuel
cost recovery revenues for the first nine months of 1998 were $17.1 million
greater than the same period in 1997. Fuel costs for the first nine months of
1998 were higher than fuel costs in 1997, for the same reasons discussed above
under results for the three months ended September 30, 1998. Operating revenues
increased $25.4 million for the first nine months of 1998 compared to the
corresponding period in 1997 due to the increased activity of the Company's
power marketing operations. Numerous events in the Midwest, such as extremely
high temperatures, several power plants owned by other companies being out of
operation, damages to transmission lines of other companies, and the default of
a major power marketer, caused the wholesale price and demand of electricity in
the Midwest to increase dramatically for a very short time frame in June. Also,
efforts by the Company's power marketing operations as discussed under the
results for the three months ended September 30, 1998 contributed to the
increase in operating revenues.

Base revenues increased $14.5 million for the first nine months of 1998 compared
to the corresponding period in 1997. The increase in base revenues is primarily
attributable to a 12.8% increase in kilowatt-hour sales to residential
customers, the most weather-sensitive of the Company's customers, and 9.6%
increase in kilowatt-hour sales to commercial customers. The increase in
consumption by residential customers is primarily due to a warmer-than-normal
spring and summer of 1998, and the acquisition of 7,700 mostly residential
customers from Teche. Kilowatt-hour sales to regular customers increased 8.3%
from the same period in 1997. Offsetting the increase in base revenues was the
$2.0 million reduction of the Company's annual base rate tariff for electric
service effective January 1998 as part of the Company's October 1996 LPSC
earnings review settlement and a $1.9 million accrual for estimated customer
credits which may be required under terms of an earnings review settlement
reached with the LPSC in 1996. See Note D of the Notes To Consolidated
Financial Statements. The amount of credits due customers, if any, will be
determined by the LPSC annually based on the Company's 12-month-ending results
as of September 30 of each year.

Operating expenses increased $55.2 million, or 19.8%, for the first nine months
of 1998 compared to the corresponding period in 1997. The increase in operating
expenses is primarily due to an

                                       13
<PAGE>   16
increase in fuel and purchased power costs, other operations expenses,
maintenance expenses, and depreciation. The changes in the cost of fuel used for
electric generation and purchased power are attributable primarily to
fluctuations in the Company's generation mix, fuel costs, availability of
economy power and deferral of expenses for recovery from customers through fuel
adjustment clauses in subsequent months, as compared to the same period in 1997.
The Company purchases power from other electric power generators when the cost
of energy purchased is less than the Company's cost to produce power at its own
facilities and when the Company's generating units are unable to provide
electricity to satisfy the Company's load. Twenty-three  percent of the
Company's energy requirements during the first nine months of 1998 were met with
purchased power compared to 22% for the corresponding period in 1997. Other
operation expenses for the first nine months of 1998 increased $29.3 million, or
63.3%, compared to the same period in 1997, primarily due to the increase in
power purchased by the Company's power marketing operations for resale and an
increase in employee incentive plan expense. The increase in other operating
expenses is also partially attributable to the launching of a "branding equity"
campaign designed to increase the Company's presence throughout the community in
anticipation of the utility industry deregulation and to increase customer
loyalty. Other operating expenses also increased due to company-wide computer
upgrades, and to increased use of outside consulting services related to
investigating the possibility of the formation of a holding company. See Part
II, Item 5, "Other Information - Holding Company Formation" for a discussion of
the potential formation of a holding company. Maintenance expenses increased by
$7.3 million, or 42.5%, for the same reasons discussed above under the results
for the three months ended September 30, 1998. The increase in operating
expenses was partially offset by the absence of restructuring charges relating
to the reorganization of the Company's electric production section of its
generation services in 1997. Depreciation expense increased $1.4 million
compared to the same period in 1997, primarily due to the Teche assets being
placed into service in late 1997.

FINANCIAL CONDITION

Liquidity and Capital Resources

    At September 30, 1998 and 1997, the Company had $52.8 million and $47.3
million, respectively, of short-term debt outstanding in the form of commercial
paper borrowing and bank loans.

During August 1998, the Company terminated its 364-day, $25 million revolving
credit facility. An existing $100 million revolving credit facility is scheduled
to terminate on June 15, 2000. A new 364-day, $80 million revolving credit
facility was entered into during August 1998. See Note F of the Notes to
Consolidated Financial Statements. These facilities provide support for the
issuance of commercial paper and working capital needs. Uncommitted lines of
credit with banks totaling $20 million are also available to support working
capital needs.

At September 30, 1998, CLE Resources, Inc., an unregulated consolidated
subsidiary of the Company, had $13.4 million of cash and temporary cash
investments in securities with original maturities of 90 days or less. Of these
funds, $10 million has been committed to provide credit support for working
capital and electricity or natural gas commodity positions for CLECO Energy
L.L.C. In addition, CLE Resources, Inc. has committed up to $25 million over a
five-year period

                                       14
<PAGE>   17
for acquisitions, strategic alliances, and investments in
capital projects to be made by CLECO Energy L.L.C., subject to the satisfaction
of certain conditions.

The cost of the repowering project announced by the Company in July is estimated
to be $240 million. The structure of permanent financing for the project has not
yet been determined and is expected to be finalized by the first quarter of
1999. The Company will use its commercial paper program to fund the interim
needs of the project, which are expected to total approximately $80 million. As
of September 30, 1998, the Company has spent approximately $13.9 million on the
project.

Regulatory Matters - Retail Electric Competition

    In December 1997, the LPSC Staff made a recommendation to the LPSC that
restructuring of the retail electric market in Louisiana could be in the public
interest if solutions for key issues were determined and properly implemented.
This recommendation was based upon preliminary findings in the LPSC electric
restructuring investigation in Docket U-21453. The LPSC accepted the
recommendation and directed the Staff to further investigate the issues. The
LPSC has scheduled a series of six separate hearings in Docket U-21453 during
1998 to receive input from interested parties, including the utilities that it
regulates, and to investigate alternative courses of action in electric
restructuring. Through the month of September 1998, hearings have been held on
electric restructuring issues including tax implications; unbundling of
functions and charges; market structure, market power, and utilization of
independent system operators; stranded costs and benefits and consumer
protection, public policy programs and environmental issues. During the
remainder of 1998, hearings are expected on the topics of future regulatory
structure and affiliate relationships. The Company has participated actively in
these proceedings by offering alternative plans to implement electric
restructuring and expects to continue to do so. The state of Louisiana has not
yet adopted any retail electric competition or restructuring legislation.
However, it is expected that the LPSC will make a report to the legislature in
1999 and that retail electric competition or restructuring legislation will be
considered during the 1999 regular session of the Louisiana legislature.

Regulatory Matters - Wholesale Electric Competition

Wholesale power markets, as regulated by the FERC, involve sales of power
between power suppliers, marketers, and brokers for subsequent resale to retail,
or end-use, customers. Competition in this market has increased since the FERC
mandated, through its Order number 888 and subsequent interpretations thereof,
open access to transmission facilities that are necessary to complete these
sales. The Company, under FERC rules, has an open access transmission tariff
through which it offers wholesale transmission service to other parties that is
comparable to the service that it provides itself from its facilities. The
Company, as a member of the Southwest Power Pool, may also provide certain
specialized transmission services under an open access tariff administered by
the pool, and as approved by the FERC. In recent years, the Company has
purchased a part of its power requirements from the wholesale market when it is
economical to do so or when the Company's generating units are unable to provide
electricity to satisfy the Company's load. In this role, the Company has also
been a purchaser of open access transmission service from other parties, and
expects to continue to do so in the immediate future.



                                       15
<PAGE>   18
In September 1998, the FERC announced that it expects to issue a rulemaking
during 1999 for the purpose of furthering the orderly formation of regional
transmission organizations to operate the nations's transmission grid. It is
expected that the development of independent operators of the transmission grid
would lead to further increases in competition in wholesale power markets.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Not Applicable.



                                       16

<PAGE>   19
                                     PART II

                                OTHER INFORMATION


ITEM 5.  OTHER INFORMATION

FUEL SUPPLY - COAL

    The majority of the coal for Rodemacher Power Station Unit 2 (Rodemacher
Unit 2) is purchased under a long-term contract with Jacobs Ranch Coal Company
(formerly owned by Kerr-McGee Coal Corporation) from a mine in Wyoming. The
Company has a 30% interest in the capacity of Rodemacher Unit 2. The coal is
transported under a long-term rail transportation contract with the Union
Pacific Railroad. Union Pacific is currently experiencing operating problems
resulting in reduced volumes delivered to Rodemacher Unit 2. The Company's coal
inventory is currently near the Company's desired minimum level. Based on the
anticipated delivery schedule of future coal shipments, management does not
expect that Rodemacher Unit 2 operations will need to be curtailed due to
insufficient fuel supply. The Company is closely monitoring this situation.
Other regional utilities are experiencing similar delivery problems.

REPOWERING PROJECT

For information regarding the 750 megawatt repowering project approved by the
Company's Board of Directors in July, 1998, see Note E of the Notes to
Consolidated Financial Statements. It is management's opinion that the
additional generating capacity is needed to meet the Company's own needs and the
needs of the region. The additional capacity will also further the Company's
strategy to become a regional power supplier outside of the traditional service
area and to take advantage of emerging deregulated markets.

YEAR 2000 READINESS DISCLOSURE

The year 2000 (Y2K) problem occurs because many systems, both hardware and
software, were designed to accept only two digits instead of four digits for the
year in a date field. Having two digits instead of four digits may cause the
system to read "00" as 1900 instead of 2000. This may cause calculations that
are date sensitive to arrive at an incorrect or impossible solution. This may
affect items such as delivery dates, interest calculations, pension benefit
calculations, and a variety of other date-dependent calculations.

The Company is aware of the issues surrounding the Y2K and the problems that may
occur and has put into action a plan to address these issues. The Company is
aware that the Y2K problem may affect both internal information technology (IT)
and non-IT systems. IT systems consist of software programs such as the
operating system, spreadsheets, accounting and other programs. Non-IT systems
refer to embedded technology such as micro controllers found in computers and
other hardware systems. The Company has divided the IT and non-IT systems into
two categories; mission critical and non-mission critical. Mission critical
systems are those that would affect the 


                                       17
<PAGE>   20
health and safety of the public by causing a disruption in supplying
electricity. Non-mission critical systems are those that would not cause a
disruption in supplying electricity, but may still have a material, negative
impact on the liquidity and financial condition of the Company. The following
chart shows the initiatives, the completion percentage of the various stages and
an estimated completion date for the mission critical systems:

                            Mission Critical Systems

<TABLE>
<CAPTION>

                                                                                                           ESTIMATED
                          PLANNING-                                                                         DATE OF
    INITIATIVES          ASSESSMENT          CORRECTION             TESTING            IMPLEMENT           COMPLETION
    -----------          ----------          ----------             -------            ---------           ----------
<S>                      <C>                 <C>                    <C>                <C>                 <C>
Distribution                100%                100%                 100%                100%                 N/A
Generation                  100%                 82%                  82%                 82%               04/1999
IT Services*                100%                 51%                  23%                 23%               07/1999
Transmission                100%                 75%                   0%                  0%               04/1999
</TABLE>

*IT Services includes business applications and telecommunications.

The description of the stages are:

   Planning-
   Assessment:             Develop a project plan, compile a complete list of
                           affected systems, and prepare a detailed technical
                           plan.
   Correction:             Make the required changes identified in
                           Planning-Assessment.
   Testing:                Test all changes made in the Correction stage to
                           insure that systems will meet the compliance criteria
                           and the systems will be accepted by user management.
   Implementation:         Integrate the changed systems into a production
                           environment and begin use. Monitor subsequent changes
                           to other systems to ensure overall system integrity.

Management considers the Company's non-mission critical systems to be Y2K
compliant.

Internal systems are not the only ones that may have a material effect on the
Company. Institutions external to the Company, such as vendors and customers,
may also impact the Company's operations if their systems are not Y2K compliant.
Vendors could impact the Company by their inability to deliver goods and
services required by the Company to operate. Customers could impact the Company
by their inability to operate, reducing the sale of power, or their inability to
pay the Company for the power consumed. The Company has decided to address this
issue by identifying major vendors and customers and sending surveys to discover
their level of Y2K compliance. Major vendors are defined as those that provide
critical goods or services to the Company, or those that provide critical
components to the Company (such as fuel suppliers and financial institutions).
Major customers are identified as those customers that are at the greatest risk
of being impacted by the Y2K problem and are large consumers of power (mainly
industrial and commercial customers). To date, the surveys to the major vendors
have been sent out and approximately half of those vendors have responded to the
survey. The responses are in the process of being reviewed. The surveys to major



                                       18
<PAGE>   21
customers are in the process of being sent out. The projected completion date of
system surveys of external parties is expected to be December, 1998.

The Company's cost to address its Y2K problem is currently estimated at $1.7
million, with approximately $0.6 million expended so far. The remaining $1.1
million is expected to be spent before July, 1999. The expenses associated with
Y2K are being funded through cash flows from operations. Only a nominal amount
of the Y2K budget is being expended on hardware. Most of the budget is being
expended on software. The Company's overall IT operating budget for the year
ended December 31, 1998 is approximately $13.4 million, however, the bulk of the
Y2K expenses were budgeted and expended by the various departments that were
affected by Y2K issues.

The Company's IT department did not defer any significant system
implementations, nor did the department accelerate any system implementations.
Many of the Y2K issues were addressed by the normal process of upgrades from
software vendors and from the planned migration from a 16-bit operating system
to a 32-bit operating system designed specifically for networking large numbers
of personal computers. The migration of operating systems included the
replacement of several hundred older personal computers that could not
efficiently run the new 32-bit operating system. The replacement computers were
modern personal computers which were Y2K compliant.

At this point in time, management has not engaged any firm, nor does it plan to
engage any firm, to perform an independent verification and validation of the
Company's Y2K compliance. The Company's independent accountants will review the
Y2K process, but will not issue an opinion on Y2K compliance.

The risks of not addressing the Y2K problem include the failure to bill
customers, collect payments, pay invoices, operate generation facilities,
operate substations, and order and receive critical materials. Each of these
risks, should they materialize, could have a material, negative impact on the
operations, liquidity and financial condition of the Company. However, it is the
opinion of management that the action plan outlined above will adequately
address the Y2K risks facing the Company and reduce them to manageable levels so
that Y2K issues will not materially impact the Company.

At present, the Company does not have a contingency plan in place to
specifically cover the Y2K issues. However, management is continually monitoring
the progress of each initiative. In the first quarter of 1999, management will
evaluate the reasonableness of the projected completion dates and at that time
determine if a contingency plan is required. As of the date of this filing,
Management reasonably expects the completion of the initiatives in a timely
manner; thus, a contingency plan is not required.

POWER MARKETING OPERATIONS

    Historically, the Company's power marketing operations focused solely upon
purchasing economic power from other utilities to meet the Company's native load
needs and, where economically feasible, selling any excess generation capacity
to other utilities. In January 1997, the scope of the Company's power marketing
operations was expanded to include the purchase and sale of electric commodity
products in the wholesale energy market. Activities include back-to-back 



                                       19
<PAGE>   22
sales of third party electric energy in short term (next day) or hourly
transactions along with the sale of municipal generation under partnership
agreements. The Company generally enters into longer term sales or trades,
greater than a month, but less than one year when backed by physical assets and
fixed fuel prices or forward purchases. Risk management controls are in place to
minimize risk. Such controls include risk management hardware/software,
mid-office risk management personnel, and an experienced corporate risk manager.

SABINE TEXICAN PIPELINE ACQUISITION

In order to compete in the emerging deregulated energy services market that
encompasses both natural gas and electric power, the Company must focus on
meeting the customer's total energy needs. The acquisition of Sabine has added
assets that are outside of the Company's traditional service territory. It is
management's opinion that the acquisition of Sabine will facilitate Cleco's
strategy to become an energy services company that produces, procures, and
transports energy. For more information regarding the acquisition of Sabine by
Cleco Energy, LLC, see Note C of the Notes to Consolidated Financial Statements.

HOLDING COMPANY FORMATION

At the October 23, 1998 meeting of the Cleco board of directors, the directors
approved a proposal to reorganize the Company into a public holding company
structure. The proposed holding company structure would create a parent company
that would include several subsidiaries, one of which would contain the
Company's generation, transmission and distribution electric utility operations.
Another subsidiary, Cleco Midstream Resources LLC, would operate the Company's
energy production, procurement and natural gas pipeline businesses.  A third
subsidiary, Cleco Services LLC, would sell utility support services to municipal
governments, rural electric cooperatives and investor-owned electric companies.

Under the terms of the proposal, the newly organized holding company would 
become the owner of all of Cleco Corporation's outstanding common and preferred 
stock and existing Cleco Corporation common and preferred shareholders would 
exchange their Cleco Corporation stock for stock in the holding company. The 
proposal is subject to prior approvals of the LPSC, the FERC, and Cleco's 
shareholders. It is anticipated that approval from Cleco's shareholders will be 
sought in connection with the 1999 Annual Meeting.




                                       20
<PAGE>   23
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Exhibits

                4    $80,000,000 364 Day Credit Agreement dated August 28, 1998
                     between the Company and the Bank of New York, as Agent.

                11   Computation of Net Income Per Common Share for the three
                     and nine months ended September 30, 1998 and September 30,
                     1997

                12   Computation of Earnings to Fixed Charges and Earnings to
                     Combined Fixed Charges and Preferred Stock Dividends for
                     the twelve months ended September 30, 1998

                15   Awareness letter, dated November 13, 1998, from
                     PricewaterhouseCoopers LLP regarding review of the
                     unaudited interim financial statements

                27   Financial Data Schedule

         (b)    Reports on Form 8-K

                During the three-month period ended September 30, 1998, the
                Company filed no Current Reports on Form 8-K.



                                       21
<PAGE>   24


                                    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/ Thomas J. Howlin
                                   --------------------------------------
                                          Thomas J. Howlin
                                   Senior Vice President of Finance
                                     and Chief Financial Officer
                                    (Principal Financial Officer)

Date:  November 16, 1998



                                       22
<PAGE>   25

                                 EXHIBIT INDEX


          EXHIBIT NO.                DESCRIPTION
          -----------                -----------   

                4    $80,000,000 364 Day Credit Agreement dated August 28, 1998
                     between the Company and the Bank of New York, as Agent.

                11   Computation of Net Income Per Common Share for the three
                     and nine months ended September 30, 1998 and September 30,
                     1997

                12   Computation of Earnings to Fixed Charges and Earnings to
                     Combined Fixed Charges and Preferred Stock Dividends for
                     the twelve months ended September 30, 1998

                15   Awareness letter, dated November 13, 1998, from
                     PricewaterhouseCoopers LLP regarding review of the
                     unaudited interim financial statements

                27   Financial Data Schedule