UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-K

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

For the fiscal year ended December 31, ~~2011~~2012

[ ] 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Name of each exchange on which registered
Common Stock, $1.00 par value, and associated rights to purchase Preferred Stock		New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:

Title of each class
4.50% Cumulative Preferred Stock, $100 Par Value

__________________

Commission file number 1-05663

CLECO POWER LLC

(Exact name of registrant as specified in its charter)



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

2030 Donahue Ferry Road, Pineville, Louisiana (Address of principal executive offices)		71360-5226 (Zip Code)

Registrant’s telephone number, including area code: (318) 484-7400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Name of each exchange on which registered
6.50% Senior Notes due 2035		New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:

Title of each class
Membership Interests

Cleco Power LLC, a wholly owned subsidiary of Cleco Corporation, meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

Indicate by check mark if Cleco Corporation is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if Cleco Power LLC is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the Registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the Registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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 the 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

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

(Continuation of cover page)

The aggregate market value of the Cleco Corporation voting stock held by non-affiliates was $2,~~075~~509,~~188~~995,~~126~~974 as of the last business day of Cleco Corporation’s most recently completed second fiscal quarter, based on a price of $3441.8583 per common share, the closing price of Cleco Corporation’s common stock as reported on the New York Stock Exchange on such date. Cleco Corporation’s Cumulative Preferred Stock is not listed on any national securities exchange, nor are prices for the Cumulative Preferred Stock quoted on any national automated quotation system; therefore, its market value is not readily determinable and is not included in the foregoing amount. As of February 1, 2013, there were no outstanding shares of Cleco Corporation’s preferred stock.

As of February 1, ~~2012~~2013, there were 60,~~825~~356,~~604~~709 outstanding shares of Cleco Corporation’s Common Stock, par value $1.00 per share. As of February 1, ~~2012~~2013, all of Cleco Power’s membership ~~interests~~interest ~~were~~was owned by Cleco Corporation.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Cleco Corporation’s definitive Proxy Statement relating to its Annual Meeting of Shareholders to be held on April 2726, ~~2012~~2013, are incorporated by reference into Part III herein.

This combined Form 10-K 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 Financial Statements for the Registrants and certain other sections of this report are combined.

TABLE OF CONTENTS

		PAGE
GLOSSARY OF TERMS		3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		56
PART I
ITEM 1.	Business
	General	78
	Operations	78
	Regulatory Matters, Industry Developments, and Franchises	1213
	Environmental Matters	1314
ITEM 1A.	Risk Factors	18
ITEM 1B.	Unresolved Staff Comments	2325
ITEM 2.	Properties	2325
ITEM 3.	Legal Proceedings	2425
ITEM 4.	Mine Safety Disclosures	2426
	Board of Directors of Cleco	25
	Executive Officers of Cleco	27
	Executive Officers of Cleco	26
PART II
ITEM 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Cleco Corporation’s Purchases of Equity Securities	28
ITEM 6.	Selected Financial Data	2928
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3029
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	5755
ITEM 8.	Financial Statements and Supplementary Data	6058
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~117~~115
ITEM 9A.	Controls and Procedures	~~117~~116
ITEM 9B.	Other Information	~~117~~116
PART III
ITEM 10.	Directors, Executive Officers, and Corporate Governance of the Registrants	118
ITEM 11.	Executive Compensation	~~118~~119
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~118~~120
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	~~119~~120
ITEM 14.	Principal Accountant Fees and Services	~~119~~120
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	~~120~~121
	Signatures	~~132~~131

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K



GLOSSARY OF TERMS

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

ABBREVIATION OR ACRONYM	DEFINITION
401(k) Plan	Cleco Power 401(k) Savings and Investment Plan
ABR	Alternate Base Rate which is the greater of the prime rate, the federal funds effective rate plus 0.50%, or the LIBOR plus 1.0%
Acadia	Acadia Power Partners, LLC, a wholly owned subsidiary of APH. Acadia no longer owns any materials and supply inventory, property, plant, and equipment, or land as a result of the disposition of Acadia Unit 2 to Entergy Louisiana on April 29, 2011. From February 23, 2010 to April 29, 2011, Acadia was owned 100% by Cajun and consisted of Acadia Unit 2. Prior to February 23, 2010, Acadia was 50% owned by APH and 50% owned by Cajun and consisted of Acadia Unit 1 and Acadia Unit 2.
Acadia Unit 1	Cleco Power’s 580-MW unit, combined cycle, natural gas-fired power plant located at the Acadia Power Station near Eunice, Louisiana. Prior to February 2010, Acadia Unit 1 was owned by Acadia.
Acadia Unit 2	Entergy Louisiana’s 580-MW unit, combined cycle, natural gas-fired power plant located at the Acadia Power Station near Eunice, Louisiana. Prior to April 29, 2011, Acadia Unit 2 was owned by Acadia.
Acadiana Load Pocket	An area in south central Louisiana that has experienced 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 Construction
Amended EPC Contract	Amended and Restated EPC Contract between Cleco Power and Shaw, executed on May 12, 2006, for engineering, procurement, and construction of Madison 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.
Amended Lignite Mining Agreement	Amended and restated lignite mining agreement effective December 29, 2009
AMI	Advanced Metering Infrastructure
APH	Acadia Power Holdings LLC, a wholly owned subsidiary of Midstream
ARO	Asset Retirement Obligation
Attala	Attala Transmission LLC, a wholly owned subsidiary of Cleco Corporation
Brame Energy Center	~~Facility~~A facility consisting of Nesbitt Unit 1, Rodemacher Unit 2, and Madison Unit 3. On June 11, 2010, Rodemacher Power Station was renamed Brame Energy Center.
CAA	Clean Air Act
CAH	Calpine Acadia Holdings, LLC
Cajun	Cajun Gas Energy L.L.C., a wholly owned subsidiary of third parties. In conjunction with the disposition of Acadia Unit 2 on April 29, 2011, APH no longer has any ownership interest in Cajun. From February 23, 2010 to April 29, 2011, Cajun was 50% owned by APH and 50% owned by third parties. Prior to February 23, 2010, Cajun was 100% owned by third parties.
CSAPR	The Cross-State Air Pollution Rule
CERCLA	The Comprehensive Environmental Response, Compensation, and Liability Act of 1980
CCN	Certificate of Public Convenience and Necessity
CES	Calpine Energy Services, L.P.
CLE Intrastate	CLE Intrastate Pipeline Company LLC, a wholly owned subsidiary of Evangeline
Cleco Innovations LLC	A wholly owned subsidiary of Cleco Corporation
Cleco Katrina/Rita	Cleco Katrina/Rita Hurricane Recovery Funding LLC, a wholly owned subsidiary of Cleco Power
CO2	Carbon dioxide
Coughlin	Coughlin Power Station, a combined-cycle, natural gas-fired power plant located in Evangeline Parish, Louisiana~~. On June 11, 2010, Evangeline Power Station was renamed Coughlin Power Station.~~
CSAPR	The Cross-State Air Pollution Rule
DHLC	Dolet Hills Lignite Company, LLC, a wholly owned subsidiary of SWEPCO
Diversified Lands	Diversified Lands LLC, a wholly owned subsidiary of Cleco Innovations LLC
Dodd-Frank Act	The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010. ~~Section 1503 under Title XV – Miscellaneous Provisions include requirements for reporting mine safety.~~
DOE	United States Department of Energy
EAC	Environmental Adjustment Clause
Entergy	Entergy Corporation
Entergy Arkansas	Entergy Arkansas, Inc.
Entergy Gulf States	Entergy Gulf States Louisiana, L.L.C., formerly Entergy Gulf States, Inc.
Entergy Louisiana	Entergy Louisiana, LLC
Entergy Mississippi	Entergy Mississippi, Inc.
Entergy Services	Entergy Services, Inc., as agent for Entergy Louisiana and Entergy Gulf States
EPA	United States Environmental Protection Agency
EPC	Engineering, Procurement, and Construction
ERO	Electric Reliability Organization
ESPP	Cleco Corporation Employee Stock Purchase Plan
Evangeline	Cleco Evangeline LLC, a wholly owned subsidiary of Midstream~~, and its combined cycle, natural gas-fired power plant located in Evangeline Parish, Louisiana. On June 11, 2010, the power plant was renamed Coughlin Power Station.~~
Evangeline 2010 Tolling Agreement	Capacity Sale and Tolling Agreement between Evangeline and JPMVEC, which was executed in February 2010 and expired on December 31, 2011
Evangeline Restructuring Agreement	Purchase, Sale and Restructuring Agreement entered into on February 22, 2010, by Evangeline and JPMVEC

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

ABBREVIATION OR ACRONYM	DEFINITION
Evangeline Restructuring Agreement	Purchase, Sale and Restructuring Agreement entered into on February 22, 2010, by Evangeline and JPMVEC
Evangeline Tolling Agreement	Capacity Sale and Tolling Agreement between Evangeline and BE Louisiana LLC (as successor to Williams Power Company, Inc.) which was set to expire in 2020 and was terminated in February 2010. In September 2008, BE Louisiana LLC was merged into JPMVEC.
FAC	Fuel Adjustment Clause
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FRP	Formula Rate Plan
GAAP	Generally Accepted Accounting Principles in the United States
GDP-IPD	Gross Domestic Product – Implicit Price Deflator
Generation Services	Cleco Generation Services LLC, a wholly owned subsidiary of Midstream
GO Zone	Gulf Opportunity Zone Act of 2005 (Public Law 109-135)
ICT	Independent Coordinator of Transmission
Interconnection Agreement	One of two Interconnection Agreement and Real Estate Agreements, one between Attala and Entergy Mississippi, and the other between Perryville and Entergy Louisiana
IRP	Integrated Resource Planning
IRS	Internal Revenue Service
JPMVEC	J.P. Morgan Ventures Energy Corporation. In September 2008, BE Louisiana LLC was merged into JPMVEC.
ISO	Independent System Operator
JPMVEC	J.P. Morgan Ventures Energy Corporation. In September 2008, BE Louisiana LLC (an indirect wholly owned subsidiary of JPMorgan Chase & Co.) was merged into JPMVEC.
kWh	Kilowatt-hour(s) as applicable
LDEQ	Louisiana Department of Environmental Quality
LIBOR	London Inter-Bank Offer Rate
Lignite Mining Agreement	Dolet Hills Mine Lignite Mining Agreement, dated as of May 31, 2001
LPSC	Louisiana Public Service Commission
LTICP	Cleco Corporation Long-Term Incentive Compensation ~~Plan~~Plans
Madison Unit 3	A 600-MW solid-fuel generating unit at Cleco Power’s plant site in Boyce, Louisiana that commenced commercial operation on February 12, 2010. ~~Prior to June 11, 2010, Madison Unit 3 was known as Rodemacher Unit 3.~~
MATS	Mercury and Air Toxics Standards
Midstream	Cleco Midstream Resources LLC, a wholly owned subsidiary of Cleco Corporation
MISO	Midwest Independent Transmission System Operator
MMBtu	Million British thermal units
Moody’s	Moody’s Investors Service
MW	Megawatt(s) as applicable
MWh	Megawatt-hour(s) as applicable
NAC	North American Coal Corporation
NERC	North American Electric Reliability Corporation
NMTC Fund	USB NMTC Fund 2008-1 LLC was formed to invest in projects qualifying for New Markets Tax Credits and Solar Projects
Not Meaningful	A percentage comparison of these items is not statistically meaningful because the percentage difference is greater than 1,000%
NO2	Nitrogen dioxide
NOx	Nitrogen oxides
OATT	Open Access Transmission Tariff
OCI	Other Comprehensive Income
Oxbow	Oxbow Lignite Company, LLC, 50% owned by Cleco Power and 50% owned by SWEPCO
PCAOB	Public Company Accounting Oversight Board
PCB	Polychlorinated biphenyl
PEH	Perryville Energy Holdings LLC, a wholly owned subsidiary of Midstream
Perryville	Perryville Energy Partners, L.L.C., a wholly owned subsidiary of Cleco Corporation
Perryville and PEH Bankruptcy Court	U.S. Bankruptcy Court for the Western District of Louisiana, Alexandria Division
PLR	Private Letter Ruling
Power Purchase Agreement	Power Purchase Agreement, dated as of January 28, 2004, between Perryville and Entergy Services
PPACA	Patient Protection and Affordable Care Act (HR 3590)
PRP	Potentially responsible party
Registrant(s)	Cleco Corporation and Cleco Power
RFP	Request for Proposal
RTO	Regional Transmission Organization
Sale Agreement	Purchase and Sale Agreement, dated as of January 28, 2004, between Perryville and Entergy Louisiana
SEC	Securities and Exchange Commission
SERP	Cleco Corporation Supplemental Executive Retirement Plan
Shaw	Shaw Contractors, Inc., a subsidiary of The Shaw Group Inc.
SO2	Sulfur dioxide
SPP	Southwest Power Pool
SPP RE	Southwest Power Pool Regional Entity
Support Group	Cleco Support Group LLC, a wholly owned subsidiary of Cleco Corporation
SWEPCO	Southwestern Electric Power Company, a wholly owned subsidiary of American Electric Power Company, Inc.
Teche	Teche Electric Cooperative, Inc.
VaR	Value-at-risk
VIE	Variable Interest Entity

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K



ABBREVIATION OR ACRONYM	DEFINITION
SPP	Southwest Power Pool
SPP RE	Southwest Power Pool Regional Entity
Support Group	Cleco Support Group LLC, a wholly owned subsidiary of Cleco Corporation
SWEPCO	Southwestern Electric Power Company, a wholly owned subsidiary of American Electric Power Company, Inc.
Teche	Teche Electric Cooperative, Inc.
VaR	Value-at-Risk
VIE	Variable Interest Entity



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes “forward-looking statements” about future events, circumstances, and results. All statements other than statements of historical fact included in this Annual Report are forward-looking statements, including, without limitation, future capital expenditures; projections, including with respect to base revenue; business strategies; goals, beliefs, plans and objectives; competitive strengths; market developments; development and operation of facilities; growth in sales volume; meeting capacity requirements, including through RFPs; expansion of service to certain customers and service to new customers; future environmental regulations and remediation liabilities; electric customer credits; 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 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 or severe drought conditions), unscheduled generation outages, unanticipated maintenance or repairs, unanticipated changes to fuel cost, fuel supply costs or availability constraints due to higher demand, shortages, transportation problems, or other developments, fuel mix of Cleco’s generation facilities, decreased customer load, environmental incidents, environmental compliance costs, and 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 ~~participation~~ability into ~~any~~maintain ~~government~~its ~~grants~~right to sell wholesale generation at market-based rates within its control area,

• dependence of Cleco Power's ~~ability~~for toenergy ~~maintain~~from ~~its~~sources ~~right~~other tothan ~~sell~~its ~~wholesale~~facilities ~~generation~~and atfuture ~~market-based~~sources ~~rates~~of ~~within~~such ~~its~~additional ~~control area~~energy,

• ~~dependence~~nonperformance ofby ~~Cleco~~and ~~Power~~creditworthiness ~~for~~of ~~energy~~counterparties ~~from~~under ~~sources~~power ~~other~~purchase ~~than~~agreements, ~~its~~or ~~facilities and~~ the ~~uncertainty~~restructuring of ~~future~~those ~~sources~~agreements, ofincluding ~~such~~possible ~~additional energy~~termination,

• nonperformance by and creditworthiness of ~~counterparties~~the ~~under~~guarantor ~~tolling~~counterparty ~~and~~of ~~power purchase agreements, or~~ the ~~restructuring~~NMTC ~~of those agreements~~Fund, ~~including possible termination,~~

• ~~nonperformance~~regulatory byfactors ~~and~~such ~~creditworthiness~~as changes in rate-setting policies, recovery of ~~the~~investments ~~guarantor~~made ~~counterparty~~under traditional regulation, recovery of ~~the~~storm ~~U.S.~~restoration ~~Bank~~costs, ~~New~~the ~~Markets~~frequency ~~Tax~~and ~~Credit~~timing ~~Fund~~of ~~2008-1~~rate ~~LLC~~increases or decreases, the results of

•periodic ~~regulatory~~NERC ~~factors~~and ~~such~~LPSC asaudits, ~~changes~~the formation of ICTs, including participation in ~~rate-setting~~an RTO and Cleco Power’s ability to recover related transmission upgrade costs, and the compliance with the ERO reliability standards for bulk power systems by Cleco Power and Evangeline,

~~policies,~~• ~~recovery~~reliance ofon ~~investments~~third ~~made~~parties ~~under~~for ~~traditional~~determination ~~regulation, recovery~~ of storm restoration costs, the frequency and timing of rate increases or decreases, the results of periodic NERC audits and LPSC audits, the formation of ICTs, including possible participation in an RTO and Cleco Power’s ~~ability~~commitments ~~to recover related transmission upgrade costs,~~ and ~~the~~obligations ~~compliance~~to ~~with~~markets ~~the ERO reliability standards~~ for ~~bulk~~generation ~~power~~resources ~~systems~~and byreliance ~~Cleco~~on ~~Power~~third ~~and~~party ~~Evangeline~~transmission services,


•	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 and U.S. economic environment,


•	credit ratings of Cleco Corporation and Cleco Power,


•	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,


•	the availability and use of alternative sources of energy and technologies,

• the imposition of energy efficiency requirements or of increased conservation efforts of customers,

• reliability of ~~all~~ Cleco Power’s and Midstream’s generating facilities, ~~particularly Madison Unit 3,~~

• acts of terrorism, cyber attacks, data security breaches or other attempts to disrupt Cleco’s business or the business of third parties, or other man-made disasters,


•	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,


•	changes in tax laws or disallowances of uncertain tax positions that may result in a change to tax benefits or expenses,


•	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 the ~~joint project to upgrade the Acadiana Load Pocket transmission system and the~~ AMI project,


•	costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters,

~~• changes in federal, state, or local laws, and changes~~6

5CLECO CORPORATION CLECO POWER 2012 FORM 10-K

~~CLECO~~• ~~CORPORATIONCLECO~~changes ~~POWER~~in ~~2011~~federal, ~~FORM~~state, ~~10-K~~or local laws, and changes in tax laws or rates, or regulating policies,

in• ~~tax~~the impact of current or future environmental laws and regulations, including those related to greenhouse gases and energy efficiency that could limit or ~~rates~~terminate the operation of certain generating units, increase costs, or ~~regulating~~reduce ~~policies~~customer demand for electricity,

• ~~the~~ability ~~impact~~ of ~~current~~Cleco orPower ~~future environmental laws and regulations, including those related~~ to ~~greenhouse~~recover ~~gases~~from ~~and~~its ~~energy~~customers ~~efficiency, which could limit, or terminate,~~ the ~~operation~~costs of ~~certain~~compliance ~~generating~~with ~~units,~~environmental ~~increase~~laws ~~costs,~~and ~~reduce customer demand for electricity or otherwise materially adversely impact the Registrants’ financial condition or results of operations~~regulations, and

• ability of Cleco Power to recover from its customers the costs of compliance with environmental laws and

regulations, and


•	ability of the Dolet Hills lignite reserve to provide sufficient fuel to the Dolet Hills Power Station until at least 2026.

For more discussion of these factors and other factors that could cause actual results to differ materially from those contemplated in the Registrants’ forward-looking statements, see Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Cleco Power — Significant Factors Affecting Cleco Power” and “— Results of Operations — Midstream — Significant Factors Affecting Midstream,” in this Annual Report.

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.

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K



PART I



ITEM 1. BUSINESS



GENERAL

Cleco Corporation was incorporated on October 30, 1998, under the laws of the State of Louisiana. Cleco Corporation is a public utility holding company which holds investments in several subsidiaries, including Cleco Power and Midstream, which are its operating business segments. Cleco Corporation, subject to certain limited exceptions, is exempt from regulation as a public utility holding company pursuant to provisions of the Public Utility Holding Company Act of 2005.

Cleco Power’s predecessor was incorporated on January 2, 1935, under the laws of the State of Louisiana. Cleco Power was organized on December 12, 2000. Cleco Power is an electric utility engaged principally in the generation, transmission, distribution and sale of electricity within Louisiana. Cleco Power is regulated by the LPSC and FERC, along with other governmental authorities, which determine the rates Cleco Power can charge its customers. Cleco Power serves approximately ~~281~~283,000 customers in Louisiana through its retail business and 10 communities across Louisiana and Mississippi through wholesale power contracts. Cleco Power’s operations are described below in the consolidated description of Cleco’s business segments.

Midstream, which was organized ~~effective~~on September 1, 1998, under the laws of the State of Louisiana, is a merchant energy subsidiary that owns and operates a merchant power plant (Coughlin). Prior to April 29, 2011, Midstream also owned an indirect interest in a merchant power plant (Acadia). During 2009, Cleco Power and Entergy Louisiana executed definitive agreements whereby Cleco Power and Entergy Louisiana would each acquire one 580-MW unit of the Acadia Power Station. The transaction with Cleco Power was completed in February 2010, and the transaction with Entergy Louisiana was completed in April 2011. On October 30, 2012, Cleco Power announced that Evangeline was the winning bidder in Cleco Power’s 2012 Long-Term RFP. In December 2012, Cleco Power and Evangeline executed definitive agreements to transfer ownership and control of Coughlin from Evangeline to Cleco Power. For more information on Acadia, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments — Acadia Transactions” and Note 18 — “Acadia Transactions.” For more information on Evangeline, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP.”

At December 31, ~~2011~~2012, Cleco had 1,~~234~~259 employees.

Cleco’s mailing address is P.O. Box 5000, Pineville, Louisiana 71361-5000, and its telephone number is (318) 484-7400.

Cleco’s homepage on the Internet is located at http://www.cleco.com. Cleco Corporation’s and Cleco Power’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC are available, free of charge, through Cleco’s website after those reports or filings are filed electronically with or furnished to the SEC. Cleco’s filings also can be obtained at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Cleco’s electronically filed reports also can be obtained on the SEC’s Internet site located at http://www.sec.gov. Cleco’s corporate governance guidelines, code of business conduct, ethics and business standards, and the charters of its board of directors’ audit, compensation, executive, finance, nominating/governance, and qualified legal compliance committees are available on its website and available in print to any shareholder upon request. Information on Cleco’s website or any other website is not incorporated by

Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Cleco’s electronically filed reports also can be obtained on the SEC’s Internet site located at http://www.sec.gov. Cleco’s corporate governance guidelines, code of conduct for financial matters, ethics and business standards, and the charters of its board of directors’ audit, compensation, finance, and nominating/governance committees are available on its website and available in print to any shareholder upon request. Information on Cleco’s website or any other website is not incorporated by reference into this Report and does not constitute a part of this Report.

At December 31, ~~2011~~2012, Cleco Power had ~~975~~992 employees. Cleco Power’s mailing address is P.O. Box 5000, Pineville, Louisiana, 71361-5000, and its telephone number is (318) 484-7400.

Cleco Power meets the conditions specified in General Instructions I(1)(a) and (b) to Form 10-K and therefore is 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 the following Part II items of Form 10-K: Item 6 (Selected Financial Data) and Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations); and the following Part III items of Form 10-K: Item 10 (Directors, Executive Officers, and Corporate Governance of the Registrants), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), and Item 13 (Certain Relationships and Related Transactions, and Director Independence).



OPERATIONS

Cleco Power

Segment Financial Information

Summary financial results of the Cleco Power segment for years ~~2011~~2012, ~~2010~~2011, and ~~2009~~2010 are presented in the following table.

(THOUSANDS)	~~2011~~2012			~~2010~~2011			~~2009~~2010
Revenue
Electric operations	$	1944,~~051,956~~169		$	1,~~086~~051,~~102~~956		$	~~808~~1,~~646~~086,102
Other operations	$48,156	~~50,948~~		4250,~~578~~948			3342,~~558~~578
Electric customer credits	$(630	~~(6,811~~	)	(96,~~596~~811		)	—(9,596		)
Affiliate revenue	$1,372	~~1,389~~		1,~~371~~389			1,~~395~~371
Operating revenue, net	$	1993,~~097,482~~067		$	1,~~120~~097,~~455~~482		$	~~843~~1,~~599~~120,455
Depreciation expense	$	~~112~~125,~~846~~486		$	~~105~~115,~~586~~634		$	77107,~~064~~966
Interest charges	$	9780,~~090~~502		$	7897,~~731~~090		$	5878,~~562~~731
Interest income	$	~~630~~333		$	~~379~~630		$	~~1,449~~379
Federal and state income taxes	$	6968,~~409~~133		$	7569,~~107~~409		$	1575,~~297~~107
Segment profit	$	~~142~~146,~~835~~848		$	~~147~~142,~~405~~835		$	~~111~~147,~~166~~405
Additions to long-lived assets	$	~~201~~222,~~980~~104		$	~~449~~201,~~052~~980		$	~~235~~449,~~385~~052
Equity investment in investee	$	14,532		$	1314,~~073~~532		$	1213,~~873~~073
Segment assets	$	3,~~726~~871,~~471~~729		$	3,~~795~~726,~~205~~471		$	3,~~363~~795,~~962~~227



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

For more information on Cleco Power’s results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Cleco Power’s Results of Operations.”

Certain Factors Affecting Cleco Power

7discussion of risk factors affecting Cleco Power’s business, see Item 1A, “Risk Factors — Transmission Constraints,” “— LPSC Audits,” “— Hedging and Risk Management Activities,” “— Commodity Prices,” “— Global Economic Environment and Uncertainty; Access to Capital,” “— Future Electricity Sales,” “— Cleco Power Generation Facilities,” “— MISO,” “— Reliability and Infrastructure Protection Standards Compliance,” “— Environmental Compliance,” “— Regulatory Compliance,” “— Cleco Power’s Rates,” “— Retail Electric Service,” “— Wholesale Electric Service,” “— Weather Sensitivity,” “— Cleco Credit Ratings,” “— Alternative Generation Technology,” “— Insurance,” “— Litigation,” “— Taxes,” “— Health Care Reform,” “— Technology and Terrorism Threats,” and “— Cleco Power Unsecured and Unsubordinated Obligations.”

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

of electricity, and the increasing uncertainty of future federal regulatory and environmental policies. For a discussion of various regulatory changes and competitive forces affecting Cleco Power and other electric utilities, see “Cautionary Note Regarding Forward-Looking Statements” and “— Regulatory Matters, Industry Developments, and Franchises” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring.” For a discussion of risk factors affecting Cleco Power’s business, see Item 1A, “Risk Factors — Transmission Constraints,” “— LPSC Audits,” “— Hedging and Risk Management Activities,” “— Commodity Prices,” “— Global Economic Environment and Uncertainty,” “— Future Electricity Sales,” “— Cleco Power Generation Facilities,” “— Reliability and Infrastructure Protection Standards Compliance,” “— Environmental

Compliance,” “— Regulatory Compliance,” “— Weather Sensitivity,” “— Retail Electric Service,” “— Wholesale Electric Service,” “— Cleco Credit Ratings,” “— Cleco Power’s Rates” “— Alternative Generation Technology,” “— Insurance,” “— Litigation,” “— Taxes,” “— Health Care Reform,” “— Technology and Terrorism Threats,” and “— Cleco Power Unsecured and Unsubordinated Obligations.”

Power Generation

~~In December 2011, Cleco Power retired Teche Unit 2.~~ As of December 31, ~~2011~~2012, Cleco Power’s aggregate net electric generating capacity was 2,~~488~~436 MW. This amount reflects the maximum production capacity these units can sustain over a specified period of time. The following table sets forth certain information with respect to Cleco Power’s generating facilities:

GENERATING STATION	YEAR OF INITIAL OPERATION	NAMEPLATE CAPACITY (MW)	(1)	NET CAPACITY (MW) (12)	TYPE OF FUEL USED FOR GENERATION ~~(2)~~	GENERATION TYPE
Brame Energy Center
Nesbitt Unit 1	1975	440		422	natural gas~~/oil~~	steam
Rodemacher Unit 2	1982	157	(3)	148	coal/natural gas	steam
Madison Unit 3	2010	~~600~~641		628	petroleum coke/coal/biomass	steam
Acadia Unit 1	2002	580		~~583~~562	natural gas	combined cycle
Teche Unit 1	1953	23		18	natural gas	steam
Teche Unit 3	1971	359		~~328~~297	natural gas~~/oil~~	steam
Teche Unit 4	2011	33		34	natural gas	~~simple cycle~~combustion
Dolet Hills Power Station	1986	325	(4)	319	lignite/natural gas	steam
Franklin Gas Turbine	1973	7		8	natural gas	~~gas~~combustion
Total generating capability		2,~~524~~565		2,~~488~~436

(1) ~~Based~~Nameplate on capacity ~~testing~~is of the ~~generating~~capacity ~~units~~at ~~performed~~the ~~between~~start ~~June~~of ~~and~~commercial ~~September 2011~~operations.

(2) ~~When~~Based ~~oil~~on iscapacity ~~used~~testing onof athe ~~standby~~generating ~~basis,~~units ~~capacity~~and ~~may~~operational betests ~~reduced~~performed between January and August 2012.

⁽³⁾ Represents Cleco Power’s 30% ownership interest in the capacity of Rodemacher Unit 2, a 523-MW generating unit.

⁽⁴⁾Represents Cleco Power’s 50% ownership interest in the capacity of Dolet Hills, a 650-MW generating unit.

The following table sets forth the amounts of power generated by Cleco Power for the years indicated.

PERIOD	THOUSANDMWh	PERCENT OF TOTALENERGYREQUIREMENTS
2012	9,143	81.3
2011	10,025	86.5
2010	8,753	74.7
2009	4,943	46.4
2008	4,747	44.3
2007	4,504	42.0

The primary ~~factor~~factors causing the ~~increase~~decrease in power generated at Cleco Power’s own facilities ~~was~~in a2012 ~~result~~were ofmilder weather and more power purchased due to the ~~acquisition~~NRG ofPower ~~Acadia~~Marketing ~~Unit~~LLC 1agreement and the ~~completion~~contracts ofwith ~~Madison~~Evangeline. Also ~~Unit~~contributing 3to ~~during~~the ~~2010~~decrease was lower natural gas prices which lowered the market costs of power purchases.

Fuel and Purchased Power

Changes in fuel and purchased power expenses reflect fluctuations in types and pricing of fuel used for electric generation, fuel transportation and delivery costs, availability of economical power for purchase, and deferral of expenses for recovery from customers through the ~~fuel~~FAC ~~adjustment clause~~ in subsequent months. For a discussion of certain risks associated with changes in fuel costs and their impact on utility customers, see Item 1A, “Risk Factors — LPSC Audits” and “— Transmission Constraints.”

The following table sets forth the percentages of power generated from various fuels at Cleco Power’s electric generating plants, the cost of fuel used per MWh attributable to each such fuel, and the weighted average fuel cost per MWh.

			LIGNITE			COAL			NATURAL GAS				BIOMASS	PETROLEUM COKE
YEAR	COST PER MWh		PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	COST PER MWh			PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	WEIGHTEDAVERAGE COST PER MWh
2011	$	30.99	23.6	$	29.48	15.6	$	46.39		33.8	$	65.06	—	$	31.70	27.0	$	36.12
2010	$	27.56	26.9	$	27.35	12.1	$	55.61		40.4	$	—	—	$	23.14	20.6	$	37.96
2009	$	26.04	45.1	$	27.10	21.5	$	105.22		33.1	$	—	—	$	34.64	0.3	$	52.49
2008	$	24.09	51.3	$	27.50	18.4	$	108.48		30.3	$	—	—	$	—	—	$	50.27
2007	$	19.80	42.2	$	26.07	24.8	$	129.80		33.0	$	—	—	$	—	—	$	57.65

8CLECO CORPORATION CLECO POWER 2012 FORM 10-K

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K



			LIGNITE			COAL			NATURAL GAS				BIOMASS	PETROLEUM COKE
YEAR	COST PER MWh		PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	COST PER MWh			PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	COST PER MWh		PERCENT OF GENERATION	WEIGHTED AVERAGE COST PER MWh
2012	$	36.36	25.2	$	33.03	17.0	$	27.81		45.8	$	17.74	*	$	23.54	12.0	$	30.37
2011	$	30.99	23.6	$	29.48	15.6	$	46.39		33.8	$	65.06	*	$	31.70	27.0	$	36.12
2010	$	27.56	26.9	$	27.35	12.1	$	55.61		40.4	$	—	—	$	23.14	20.6	$	37.96
2009	$	26.04	45.1	$	27.10	21.5	$	105.22		33.1	$	—	—	$	34.64	0.3	$	52.49
2008	$	24.09	51.3	$	27.50	18.4	$	108.48		30.3	$	—	—	$	—	—	$	50.27
* Not meaningful

Power Purchases

When the market price of power is more economical than self-generation of power or when Cleco Power needs power to supplement its own electric generation, and when transmission capacity is available, Cleco Power purchases power from energy marketing companies or neighboring utilities. These purchases are made from the wholesale power market. During ~~2011~~2012, power purchases were made at prevailing market prices. The lower cost per MWh of purchased power was primarily due to lower natural gas prices.

The following table sets forth the average cost and amounts of power purchased by Cleco Power on the wholesale market.

PERIOD	COST PER MWh		THOUSAND MWh	PERCENT OF TOTAL ENERGY REQUIREMENTS
2012	$	27.43	2,098	18.7
2011	$	38.94	1,569	13.5
2010	$	43.66	2,966	25.3
2009	$	34.57	5,712	53.6
2008	$	73.72	5,959	55.7
2007	$	58.08	6,221	58.0

During 2011, 13.5% of Cleco Power’s energy requirements were met with purchased power, down from 25.3% in 2010. The primary factor causing the decrease was the absence of power purchase agreements and increased generation from Cleco Power’s own facilities as a result of the acquisition of Acadia Unit 1 and the completion of Madison Unit 3. The lower cost per MWh of purchased power was primarily due to lower natural gas prices. For information on Cleco Power’s ability to pass on to its customers substantially all of its fuel and purchased power expenses, see “— Regulatory Matters, Industry Developments, and Franchises — Rates.”

During ~~2011~~2012, Cleco Power met its capacity requirements with its owned generation, ~~and~~ one long-term power purchase agreement, and the contracts with NRG Power Marketing LLC and Evangeline. ~~This~~The long-term contract, which expires in April 2018, is for the purchase of 20 MW of power from the Sabine River Authority, which operates a hydroelectric generating plant. The NRG Power Marketing LLC agreement provided 200 MW of capacity and energy from January 1, 2012, through April 30, 2012. The first agreement with Evangeline provided 250 MW of capacity and energy beginning January 1, 2012, through April 30, 2012. The second agreement was a three-year power purchase agreement providing 730 MW of capacity and energy with Evangeline for a delivery term beginning May 1, 2012, and ending April 30, 2015. Cleco expects to meet its native load demand in ~~2012~~2013 with Cleco Power’s own generation capacity and the ~~contracts~~contract with ~~NRG Power Marketing LLC and~~ Evangeline. For more information on these contracts, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP.”

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. Cleco Power’s power contracts, as well as spot market power purchases, may be affected by these transmission constraints. For information on the Acadiana Load Pocket project and how transmission constraints in this area are expected to be reduced, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Cleco Power — Acadiana Load Pocket Project.”

may be affected by these transmission constraints. For information on the Acadiana Load Pocket transmission project and how transmission constraints in this area have been reduced, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Cleco Power — Acadiana Load Pocket Transmission Project.”

Coal, Petroleum Coke, and Lignite Supply

Cleco Power uses coal for generation at Rodemacher Unit 2. ~~In 2007,~~ Cleco Power ~~entered~~has ~~into~~ agreements with ~~Rio~~Cloud ~~Tinto~~Peak Energy ~~America~~ and Peabody Energy to provide the majority of coal needs through 2014. The coal supply agreements are fixed-priced for each year of the contract and together provide for the full requirements to support Cleco Power’'s minimum planned dispatch of Rodemacher Unit 2. Cleco ~~(four~~Power ~~million~~actively ~~tons~~manages ~~total~~its inventory levels throughout the year with spot purchases if necessary. With respect to transportation of coal, Cleco Power has an agreement with Union Pacific Railroad Company for transportation of coal from Wyoming's Powder River Basin to Rodemacher Unit 2 through December 31, 2016. Cleco Power leases approximately 241 railcars to transport its coal under two long-term leases, one expiring in March 2017, and the other expiring in March 2021.

~~over~~Cleco ~~the~~Power ~~seven-year~~uses ~~period). To~~a ~~the~~combination ~~extent~~of ~~that~~petroleum ~~the~~coke ~~actual~~and ~~dispatch~~Illinois ofBasin ~~the~~Coal ~~unit~~for ~~exceeds~~generation ~~the~~at ~~planned~~Madison ~~dispatch,~~Unit ~~Cleco~~3. Petroleum ~~Power~~coke ~~expects~~is toa ~~make~~by-product ~~additional~~of ~~spot~~the ~~purchases~~oil torefinery ~~maintain~~process ~~inventory~~and ~~within~~is ~~targeted~~not ~~levels. The~~considered ~~volume~~a ~~commitment~~fuel ~~was~~specifically ~~designed~~produced tofor ~~reasonably~~a ~~assure~~market; ~~that~~however, ~~excess~~more ~~inventory~~than ~~will~~adequate ~~not~~petroleum ~~accumulate~~coke ~~during~~supplies ~~the~~are ~~term~~produced offrom refineries each year throughout the ~~agreement. With~~world, ~~respect~~particularly toin ~~transportation~~the ofGulf ~~coal~~Coast region. During 2012, Cleco ~~Power~~received ~~has~~the ~~amended~~majority ~~and~~of ~~extended~~its anpetroleum ~~agreement~~coke ~~with~~supply ~~Union~~from ~~Pacific~~refineries ~~Railroad~~located ~~Company~~along ~~for~~the ~~transportation~~Lower Mississippi River. The majority of ~~coal~~the ~~from~~petroleum ~~Wyoming’s~~coke ~~Powder~~purchases ~~River~~were ~~Basin~~in toaccordance ~~Rodemacher~~with ~~Unit~~existing 2contracts ~~through~~ranging in terms of three to five years ending December 31, ~~2016~~2014. ~~Cleco~~ Petroleum ~~Power~~coke ~~leases~~spot ~~approximately~~purchases ~~241~~are ~~railcars~~typically toshort-term ~~transport~~in ~~its~~nature ~~coal~~ranging ~~under~~from ~~two~~one ~~long-term~~to ~~leases~~three month terms. ~~One~~ Each of the ~~railcar~~agreements ~~leases~~are ~~expires~~priced inper ~~March~~the ~~2017,~~Jacobs ~~and~~Consultancy ~~the~~Petroleum ~~other~~Coke ~~expires~~Quarterly inMonthly ~~March~~Price ~~2021~~Index or the “PACE” Monthly Index.

During 2012, Cleco ~~Power~~purchased ~~uses~~approximately a19,000 ~~combination~~tons of ~~petroleum coke and~~ Illinois Basin Coal ~~for~~from ~~generation~~Peabody atEnergy ~~Madison~~and ~~Unit~~approximately ~~3. The~~319,000 ~~blending~~tons offrom ~~this~~Knight ~~coal~~Hawk ~~with~~Coal, ~~petroleum~~LLC. Cleco’s ~~coke~~agreement ~~has~~with ~~proven~~Knight toHawk beCoal, aLLC ~~fuel~~was ~~mix~~for ~~that~~delivery ~~ensures reliable operation~~ of ~~Madison~~400,000 ~~Unit~~tons ~~3. Petroleum~~during ~~coke~~2012 ~~is a by-product of the oil refinery process~~ and ~~is not considered a fuel specifically produced for a market; however~~200,000 ~~more~~tons ~~than~~in ~~adequate~~2013. The ~~petroleum~~undelivered ~~coke~~contract ~~supplies~~volume ~~are produced~~ from ~~refineries~~2012 ~~each~~will ~~year~~be ~~throughout~~purchased ~~the~~and ~~world~~delivered ~~particularly~~ in ~~the~~2013 ~~Gulf~~at ~~Coast region. During 2011, Cleco received~~ the ~~majority~~original ofcontract ~~its~~price ~~petroleum~~along ~~coke~~with ~~supply~~the ~~from~~2013 ~~Valero~~contracted ~~Energy and Marathon Petroleum, while a small~~ volume. Cleco ~~was~~Power ~~purchased~~continues ~~from~~to ~~ConocoPhillips’~~use ~~newly~~Louisiana ~~constructed~~waterways ~~Coking~~such ~~Unit~~as atthe ~~its~~Mississippi ~~Wood~~ River ~~Refinery~~and ~~located near Roxana, Illinois on~~ the ~~Upper~~Red ~~Mississippi~~ River~~. The~~ ~~majority~~to ofdeliver ~~the~~both petroleum coke ~~purchases~~and ~~were~~Illinois inBasin ~~accordance~~Coal ~~with existing contracts ranging in terms of three~~ to ~~five~~the ~~years~~plant ~~ending December 31, 2014~~site. ~~The~~Savage ~~ConocoPhillips~~Services ~~purchase~~is ~~was~~Cleco aPower’s ~~short-term~~exclusive ~~purchase~~transportation ~~for delivery over a two-month term~~provider. ~~Each~~On ofDecember ~~the~~28, ~~agreements~~2012, ~~are~~Cleco ~~priced~~Power ~~per~~entered ~~the~~into ~~Jacobs~~an ~~Consultancy~~amended ~~Petroleum~~agreement ~~Coke~~for ~~Quarterly~~42 ~~Monthly~~dedicated ~~Price Index or the “PACE” Monthly Index~~barges.

During 2011, Cleco purchased approximately 370,000 tons of Illinois Basin Coal from Peabody Energy and approximately 40,000 tons from Knight Hawk Coal, LLC. Cleco has entered into an agreement with Knight Hawk Coal, LLC for delivery of 400,000 and 200,000 tons in 2012 and 2013, respectively. Cleco continues to use Louisiana waterways such as the Mississippi and the Red Rivers to deliver both petroleum coke and Illinois Basin Coal to the plant site. Savage Services continues to be Cleco's exclusive transportation provider pursuant to an agreement that ends December 31, 2013. Cleco has an option to extend the agreement for an additional five years. Additional equipment was chartered per the existing transportation agreement to deliver fuel during 2011. Product delivery during 2012 is anticipated to require 54 barges and 4 tug boats dedicated to Cleco for service to transport petroleum coke, Illinois Basin Coal, and limestone from each of the suppliers to the plant, as well as provide logistics coordination and terminaling operations at Cleco’s unloading dock located near the plant. At December 31, 2011, Cleco Power’s petroleum coke inventory at Madison Unit 3 was approximately 143,000 tons (approximately a 44-day supply), and Cleco Power’s Illinois Basin Coal inventory at Madison Unit 3 was approximately 198,000 tons (approximately a 113-day supply). 10

~~Cleco~~CLECO ~~Power~~CORPORATION ~~uses~~CLECO ~~lignite~~POWER ~~for~~2012 ~~generation~~FORM at the Dolet Hills Power Station. Cleco Power and SWEPCO each own an undivided 50% interest in the other’s leased and owned lignite reserves within the Dolet Hills mine in northwestern Louisiana. Additionally, through Oxbow, which is owned 50% by Cleco Power and 50% by SWEPCO, Cleco Power and SWEPCO control approximately 43 million tons of estimated recoverable lignite reserves in the Red River mine, also located in 10-K

9The initial term of this agreement is from the date of the amendment until August 31, 2017. The term of this agreement will automatically renew for successive periods of two years each unless written notice is provided by either party. After September 2014, Cleco Power has the option to purchase any or all of the dedicated barges. At December 31, 2012, Cleco Power’s petroleum coke inventory at Madison Unit 3 was approximately 244,000 tons and Cleco Power’s Illinois Basin Coal inventory at Madison Unit 3 was approximately 102,000 tons. The total fuel inventory is 346,000 tons (approximately a 69-day supply).

~~CLECO~~Cleco ~~CORPORATIONCLECO~~Power ~~POWER~~uses ~~2011~~lignite ~~FORM~~for 10generation at the Dolet Hills Power Station. Cleco Power and SWEPCO each own an undivided 50% interest in the other’s leased and owned lignite reserves within the Dolet Hills mine in northwestern Louisiana. Additionally, through Oxbow, which is owned 50% by Cleco Power and 50% by SWEPCO, Cleco Power and SWEPCO control approximately 43 million tons of estimated recoverable lignite reserves also located in northwestern Louisiana. Cleco Power and SWEPCO have entered into a long-Kterm agreement with DHLC for the mining and delivery of lignite reserves at both mines, the operations of which are conducted together by SWEPCO. The Amended Lignite Mining Agreement requires Cleco Power and SWEPCO to purchase the lignite mined and delivered by DHLC at cost plus a specified management fee. The term of this contract runs until all economically mineable lignite has been mined. The reserves from these mines are expected to be sufficient to fuel the Dolet Hills Power Station until at least 2026. At December 31, 2012, Cleco Power’s investment in Oxbow was $14.5 million. For information regarding deferred mining costs and obligations associated with this mining agreement see, Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 3 — Regulatory Assets and Liabilities — Mining Costs” and Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Off-Balance Sheet Commitments.” For more information on Oxbow, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Equity Method VIEs — Oxbow.”

~~northwestern~~The ~~Louisiana. Cleco~~continuous ~~Power~~supply ~~and~~of ~~SWEPCO~~coal ~~have entered into a long-term agreement with DHLC for the mining~~ and ~~delivery of~~ lignite ~~reserves~~may atbe ~~both~~subject ~~mines,~~to ~~the~~interruption ~~operations~~due ~~of which are conducted together by SWEPCO. The Amended Lignite Mining Agreement requires Cleco Power and SWEPCO~~ to ~~purchase~~adverse ~~the~~weather ~~lignite~~conditions ~~mined~~or ~~and~~other ~~delivered~~factors bythat ~~DHLC~~may atdisrupt ~~cost~~mining ~~plus~~operations aor ~~specified~~transportation ~~management fee. The term of this contract runs until all economically mineable lignite has been mined. The reserves from these mines are expected~~ to ~~be sufficient to fuel~~ the ~~Dolet~~plant ~~Hills Power Station until at least 2026~~site. At December 31, ~~2011~~2012, Cleco Power’s ~~investment~~coal ininventory ~~Oxbow~~at ~~was~~Rodemacher ~~$14.5~~Unit ~~million. For~~2 ~~information~~was ~~regarding~~approximately ~~deferred~~194,000 ~~mining~~tons ~~costs~~(approximately ~~and~~an ~~obligations~~88-day ~~associated with this mining agreement see~~supply), ~~Part II, Item 8, “Financial Statements~~ and ~~Supplementary~~Cleco ~~Data~~Power’s —lignite ~~Notes~~inventory toat ~~the~~Dolet ~~Financial~~Hills ~~Statements~~was —approximately ~~Note 3 — Regulatory Assets and Liabilities — Mining Costs” and Note 14 — “Litigation~~227,000 ~~Other~~tons ~~Commitments~~(approximately ~~and~~a ~~Contingencies, and Disclosures about Guarantees — Off~~36-~~Balance~~day ~~Sheet Commitments~~supply).” For more information on Oxbow, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Equity Method VIEs — Oxbow.”

The continuous supply of coal and lignite may be subject to interruption due to adverse weather conditions or other factors that may disrupt mining operations or transportation to the plant site. At December 31, 2011, Cleco Power’s coal inventory at Rodemacher Unit 2 was approximately 140,000 tons (approximately a 64-day supply), and Cleco Power’s lignite inventory at Dolet Hills was approximately 223,000 tons (approximately a 37-day supply).

Natural Gas Supply

During ~~2011~~2012, Cleco Power purchased 3236.78 million MMBtus of natural gas for the generation of electricity. The annual and average per-day quantities of gas purchased by Cleco Power from each supplier are shown in the following table.

NATURAL GAS SUPPLIER	~~2011PURCHASES~~2012PURCHASES(MMBtu)	AVERAGE AMOUNTPURCHASED PER DAY (MMBtu)	PERCENT OFTOTAL NATURALGAS USED
Gavilon, LLC	1013,~~034~~253,~~834~~475	2736,~~500~~300	3035.76	%
Shell Energy North America	47,~~819~~205,~~522~~000	1319,~~200~~700	1419.73	%
Citigroup Energy Inc.	3,324,822	9,100	10.2	%
ConocoPhillips Company	4,711,651	12,900	12.7	%
Southwestern Energy Services Co.	3,145,900	8,600	9.6	%
ChevronTexaco	3,528,286	9,700	9.5	%
QEP Energy Company	2,733,414	7,500	8.4	%
Southwestern Energy Services	2,071,800	6,700	6.6	%
Tauber Oil Company	2,201,175	6,000	6.7	%
Citigroup Energy Inc.	1,720,732	4,700	4.6	%
Total Gas & Power North America	1,622,000	4,400	5.0	%
Tauber Oil Company	783,703	2,100	2.1	%
Others	43,~~816~~561,~~750~~050	139,~~200~~800	149.76	%
Total	3236,~~698~~835,~~417~~697	89101,~~500~~900	100.0	%

Cleco Power owns natural gas pipelines and interconnections at all of its generating facilities which allow it to access various natural gas supply markets and maintain a more economical fuel supply for Cleco Power’s customers.

Natural gas was available without interruption throughout ~~2011~~2012. Cleco Power expects to continue to meet its natural gas requirements with purchases on the spot market through daily, monthly, and seasonal contracts with various natural gas suppliers. However, future supplies to Cleco Power remain vulnerable to disruptions due to weather events and transportation ~~delays~~issues. Large industrial users of natural gas, including electric utilities, generally have low priority among gas users in the event pipeline suppliers are forced to curtail deliveries due to inadequate supplies. As a result, prices may increase rapidly in response to temporary supply interruptions. Partially addressing potential natural gas fuel curtailments and interruptions during 2012, Cleco contracted for natural gas storage with Pine Prairie Energy Center in 2010 for a period of five years ending in April 2015. Gas storage will be used to supply gas to Cleco Power’s generating facilities in the event of an interruption of supply due to events of force majeure and to operationally balance gas supply to the units. It will also be used to mitigate short-term natural gas price spikes that may occur. The storage volume is contracted by paying a capacity reservation charge at a fixed rate. There are also variable charges incurred to withdraw and inject gas from storage. To further address natural gas supply reliability, flexibility, and cost reduction, a capital project to connect Pine Prairie Energy Center to Acadia was approved in 2011. The new pipeline was completed in 2012 and is being used to supply fuel to Acadia. Currently, Cleco Power anticipates that its diverse supply options, gas storage, and alternative fuel capability, combined with its solid-fuel generation resources, are adequate to meet its fuel needs during any temporary interruption of natural gas supplies.

Partially addressing potential natural gas fuel curtailments and interruptions during 2011, Cleco contracted for natural gas storage with Pine Prairie Energy Center in 2010 for a period of five years ending in April 2015. Gas storage will be used to supply gas to Cleco Power’s generating facilities in the event of an interruption of supply due to events of force majeure and to operationally balance gas supply to the units. It will also be used to mitigate short-term natural gas price spikes that may occur. The storage volume is contracted by paying a capacity reservation charge at a fixed rate. There are also variable charges incurred to withdraw and inject gas from storage. During 2011, Cleco’s Board of Directors approved a capital project to connect Pine Prairie Energy Center to Acadia. This new pipeline is expected to provide added flexibility and reduce the cost of gas transportation to Acadia. The project is expected to be complete by December 31, 2012. Currently, Cleco Power anticipates that its diverse supply options, gas storage, and alternative fuel capability, combined with its solid-fuel generation resources, are adequate to meet its fuel needs during any temporary interruption of natural gas supplies.

Fuel Oil Supply

Cleco Power has in the past stored fuel oil at its Brame Energy Center and its Teche Power Station. The Brame Energy Center has storage capacity for an approximate 95-day supply, and the Teche Power Station has storage capacity for an approximate 28-day supply. During 2011, Cleco Power sold its entire fuel oil supply. Cleco Power does not anticipate a need to use fuel oil as a fuel source going forward.

Sales

Cleco Power’s ~~2011~~2012 and ~~2010~~2011 system peak demands, which occurred on ~~August~~June 326, ~~2011~~2012, and August 23, ~~2010~~2011, were 2,~~355~~282 MW and 2,~~348~~355 MW, respectively. Sales and system peak demand are affected by weather and are typically highest during the summer air-conditioning season. In ~~2010~~2012, Cleco Power experienced above- normal summer weather conditions and well below normal winter conditions. In 2011, Cleco Power experienced well above- normal summer weather conditions and aslightly ~~milder~~below normal winter conditions. For information on the effects of future energy sales on Cleco Power’s ~~financial condition,~~ results of operations, financial position, and cash flows, see Item 1A, “Risk Factors — Weather Sensitivity” and “— Future Electricity Sales.” For information on the financial effects of seasonal demand on Cleco Power’s quarterly operating results, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 20 — Miscellaneous Financial Information (Unaudited).”

Capacity margin is the net capacity resources (either owned or purchased) less native load demand divided by net capacity resources. Each year, members of the SPP submit forecasted native load demand and the forecasted mix of net capacity resources to meet this demand. During 2010, Cleco Power’s capacity margin was 13.9%, which is above the SPP’s capacity margin benchmark of 12.0%, primarily due to the addition of Acadia Unit 1 and Madison Unit 3 to Cleco Power’s capacity resources. During 2011, Cleco Power’s capacity margin was 13.0%. Cleco Power expects to meet the SPP’s capacity benchmark of 12.0% in 2012. 11



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

effects of seasonal demand on Cleco Power’s quarterly operating results, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 21 — Miscellaneous Financial Information (Unaudited).”

Capacity margin is the net capacity resources (either owned or purchased) less native load demand divided by net capacity resources. Each year, members of the SPP submit forecasted native load demand and the forecasted mix of net capacity resources to meet this demand. During 2012, Cleco Power’s capacity margin was 34.0%, which is above the SPP’s capacity margin benchmark of 12.0%, primarily due to the three-year power purchase agreement with Evangeline which provides 730 MW of capacity and energy. During 2011, Cleco Power’s capacity margin was 13.0%, primarily due to the addition of Acadia Unit 1 and Madison Unit 3 to Cleco Power’s capacity resources in 2010. Cleco Power expects to meet the SPP’s capacity benchmark of 12.0% in 2013.

Capital Investment Projects

For a discussion of Cleco Power’s capital investment projects, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Cleco Power — Acadiana Load Pocket Transmission Project,” and “— AMI Project.”

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

Midstream

Summary financial results of the Midstream segment for ~~2011~~2012, ~~2010~~2011, and ~~2009~~2010 are presented in the following table. In accordance with authoritative guidance during 2010, Cleco was required to reconsolidate Evangeline with its consolidated financial statements and discontinue reporting its investment in Evangeline on the equity method of accounting. As a result, effective January 1, 2010, the assets and liabilities of Evangeline are no longer represented by one line item corresponding to Midstream’s equity investment in Evangeline but instead are being reported in the corresponding line items in the consolidated financial statements of Midstream. Effective January 1, 2010, Evangeline’s revenues and expenses were reported on several line items, as compared to previously being netted and reported on one line item as equity income (loss) from investees on the consolidated financial statements of Midstream.

(THOUSANDS)	~~2011~~2012			~~2010~~2011			~~2009~~2010
Revenue
Tolling operations	$	1925,~~004~~559		$	2619,~~067~~004		$	—26,067
Other operations	93			39			13
Affiliate revenue	45—			~~960~~45			~~8,748~~960
Operating revenue, net	$	1925,~~058~~562		$	2719,~~030~~058		$	827,~~749~~030
Depreciation expense	$	56,~~872~~006		$	5,~~779~~872		$	~~177~~5,779
Interest charges	$	~~(28,996~~770	)	$	7(28,~~140~~996	)	$	7,~~408~~140
Equity income (loss) from investees, before tax	$	62,053		$	38,848		$	(19,339	)
Equity income from investees, before tax	$	—		$	62,053		$	38,848
Gain on toll settlement	$	—		$	~~148,402~~—		$	—148,402
Federal and state income tax expense (benefit)	$	44,637		$	71,255		$	(11,027	)
Federal and state income tax expense	$	6,404		$	44,637		$	71,255
Segment profit (loss)	$	42,792		$	114,467		$	(17,730	)
Segment profit	$	9,155		$	42,792		$	114,467
Additions to long-lived assets	$	8,~~437~~759		$	28,~~113~~437		$	552,113
Equity investment in investees	$	—		$	~~73,648~~—		$	~~223~~73,~~652~~648
Total segment assets	$	~~233~~215,~~666~~342		$	~~316~~233,~~165~~891		$	~~270~~316,~~713~~166

As of December 31, ~~2011~~2012, Midstream wholly and directly owned three active limited liability companies that operated mainly in Louisiana.


•	Evangeline, which owns and operates Coughlin, a combined-cycle natural gas-fired power plant and owns a natural gas interconnection that allows for access to the natural gas supply market.


•	APH, which prior to April 29, 2011, owned a 50% indirect interest in Acadia, a combined-cycle natural gas-fired power plant.


•	Generation Services, which prior to December 24, 2011, offered power station operations and maintenance services. Its customers were Evangeline and Acadia. On December 24, 2011, Generation Services’ employees were transferred to Midstream.

The following table sets forth certain information with respect to Midstream’s operating generating facilities.

GENERATING STATION	COMMENCEMENT OF COMMERCIALOPERATION	NAMEPLATECAPACITY (MW)	NETCAPACITY(MW)		TYPE OF FUELUSED FORGENERATION
Coughlin Unit 6	2000	264	~~258~~259	(1)	natural gas
Coughlin Unit 7	2000	511	~~497~~494	(1)	natural gas
Total capacity		775	~~755~~753
(1) Based on capacity testing of generating units performed in June 2009.
(1) Based on capacity testing of generating units performed in December 2012.

Prior to December 31, 2011, Evangeline’s capacity was dedicated to one customer, JPMVEC. On February 22, 2010, Evangeline and JPMVEC entered into the Evangeline Restructuring Agreement whereby the parties agreed to terminate the Evangeline Tolling Agreement which was set to expire in 2020 and entered into the Evangeline 2010 Tolling Agreement, effective March 1, 2010. The Evangeline 2010 Tolling Agreement was an exclusive, market-based tolling agreement for Coughlin’s generating Units 6 and 7, expiring December 31, 2011, with an option for JPMVEC to extend the term of the agreement through December 31, 2012. The tolling agreement gave the tolling counterparty the right to own, dispatch, and market all of the electric generation capacity of the respective facility. Under the tolling agreement, the tolling counterparty was responsible for providing its own natural gas to the facility and paid a fixed fee and a variable fee for operating and maintaining the respective facility. JPMVEC did not exercise the option to extend the tolling agreement and as a result, Coughlin’s capacity and energy became available to Midstream ~~competes~~beginning ~~against~~January ~~regional~~1, 2012. In January 2012, Evangeline began serving Cleco Power 250 MW of capacity and ~~national~~energy ~~companies~~under an agreement through April 30, 2012, with the remaining output at Evangeline being marketed through an energy management services agreement with a third party marketer. In December 2011, Evangeline was notified that ~~own~~Cleco Power selected its proposal to fulfill Cleco Power’s capacity and ~~operate~~energy ~~merchant~~needs ~~power~~as ~~stations~~defined in the Cleco Power RFP for contractual resources beginning in May 2012. The proposal was for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and was approved by the LPSC in March 2012 and FERC in April 2012. On October 30, 2012, Cleco Power announced that Evangeline was the winning bidder in Cleco Power’s 2012 Long-Term RFP. In December 2012, Cleco Power and Evangeline executed definitive agreements to transfer ownership and control of Coughlin from Evangeline to Cleco Power. For information on the RFP, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP.”

~~Prior~~During ~~to December 31~~2009, ~~2011,~~Acadia ~~Evangeline’s~~executed ~~capacity~~definitive ~~was~~agreements ~~dedicated~~with toboth ~~one~~Cleco ~~customer,~~Power ~~JPMVEC. On February 22, 2010, Evangeline~~ and ~~JPMVEC~~Entergy ~~terminated~~Louisiana ~~the~~whereby ~~Evangeline~~Cleco ~~Tolling~~Power ~~Agreement which was set to expire in 2020~~ and ~~entered~~Entergy ~~into~~Louisiana ~~the~~would ~~Evangeline~~each ~~2010~~acquire ~~Tolling~~one ~~Agreement, effective March 1, 2010. The new tolling agreement was an exclusive, market~~580-~~based~~MW ~~tolling~~unit ~~agreement for Coughlin’s generating Units 6 and 7, expiring December 31, 2011, with an option for JPMVEC to extend the term~~ of the ~~agreement~~Acadia ~~through December 31, 2012~~plant. ~~The~~In ~~tolling~~February ~~agreement gave the tolling counterparty the right to own~~2010, ~~dispatch, and market all of~~ the ~~electric~~transaction ~~generation~~with capacity of the respective facility. Under the tolling agreement, the tolling counterparty was responsible for providing its own natural gas to the facility and paid a fixed fee and a variable fee for operating and maintaining the respective facility. JPMVEC did not exercise the option to extend the tolling agreement and as a result, Coughlin’s capacity and energy became available to Midstream beginning January 1, 2012. In January 2012, Evangeline began serving Cleco Power ~~250~~was MWcompleted ~~of capacity~~ and ~~energy~~in ~~under an agreement through~~ April 302011, ~~2012, with~~ the ~~remaining~~transaction ~~output at Evangeline being marketed through an energy management services agreement~~ with aEntergy ~~third~~Louisiana ~~party~~was ~~marketer~~completed. ~~In December 2011, Evangeline was notified that~~ Cleco Power ~~selected~~assumed ~~its~~responsibility ~~proposal~~for tooperation ~~fulfill~~of ~~Cleco~~both ~~Power’s~~units ~~capacity~~ and continues ~~energy~~to ~~needs~~operate asboth ~~defined~~units inat the ~~Cleco~~Acadia Power ~~RFP for contractual resources to meet CSAPR beginning in May 2012~~Station. The proposal was for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and has been submitted to the LPSC and FERC for approval. Currently, Midstream is marketing Coughlin’s capacity for periods beginning after April 30, 2015 and is evaluating various options to optimize Coughlin’s value. For more information ~~about~~on ~~CSAPR,~~these ~~see "—~~related ~~Environmental~~transactions ~~Matters.” For~~and ~~information~~risks onand ~~the RFP~~uncertainties, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — ~~Financial~~Results ~~Condition~~of Operations — ~~Regulatory~~Midstream ~~and~~— ~~Other~~Significant ~~Matters~~Factors Affecting Midstream — ~~Generation~~Earnings ~~RFP.”~~are primarily affected by the

During 2009, Acadia executed definitive agreements with both Cleco Power and Entergy Louisiana whereby Cleco Power and Entergy Louisiana would each acquire one 580-MW unit of the Acadia plant. In February 2010, the transaction with Cleco Power was completed and in April 2011, the transaction with Entergy Louisiana was completed. Cleco Power assumed responsibility for operation of both units and continues to operate both units at the Acadia Power Station. For more information on these related transactions and risks and uncertainties, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Midstream — Significant Factors Affecting Midstream — Earnings are primarily affected by the following factors.” For more information on Acadia’s transactions with Cleco Power and Entergy Louisiana, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments — Acadia Transactions,” and Note 18 — “Acadia Transactions.”12

InCLECO ~~December~~CORPORATION ~~2011,~~CLECO ~~Midstream~~POWER ~~contributed~~2012 ~~all~~FORM of its ownership interests in CLE Intrastate to Evangeline. Prior to this transaction, CLE Intrastate’s revenue was generated primarily from a monthly reservation fee paid by Evangeline for access to the Columbia Gulf interconnect and from a 10-K

11following factors.” For more information on Acadia’s transactions with Cleco Power and Entergy Louisiana, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Other Commitments — Acadia Transactions,” and Note 18 — “Acadia Transactions.”

~~CLECO~~In ~~CORPORATIONCLECO~~December ~~POWER~~ 2011, ~~FORM~~Midstream ~~10-K~~contributed all of its ownership interests in CLE Intrastate to Evangeline. Prior to this transaction, CLE Intrastate’s revenue was generated primarily from a monthly reservation fee paid by Evangeline for access to the Columbia Gulf interconnect and from a transportation fee that varied depending on the amount of gas transported through the interconnect for use by Coughlin.

~~transportation~~At ~~fee~~December 31, ~~that~~2012, ~~varied~~Midstream ~~depending~~had 32 employees. For more information on ~~the~~Midstream’s ~~amount~~operations, see Part II, Item 7, “Management’s Discussion and Analysis of ~~gas~~Financial ~~transported~~Condition ~~through~~and ~~the~~Results ~~interconnect~~of ~~for~~Operations ~~use~~— byResults ~~Coughlin~~of Operations — Midstream.”

At December 31, 2011, Midstream had 32 employees.

For more information on Midstream’s operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Midstream.”

Customers

No single customer accounted for 10% or more of Cleco’s consolidated revenue or Cleco Power’s consolidated revenue in ~~2011~~2012, ~~2010~~2011, or ~~2009~~2010. For more information regarding Cleco’s sales and revenue, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Capital Expenditures and Financing

For information on Cleco’s capital expenditures, financing and related matters, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements.”



REGULATORY MATTERS, INDUSTRY DEVELOPMENTS, AND FRANCHISES

Rates

Cleco Power’s electric operations are subject to the jurisdiction of the LPSC with respect to retail rates, standards of service, accounting, and other matters. Cleco Power also is subject to the jurisdiction of FERC with respect to rates for wholesale service, accounting, interconnections with other utilities, and the transmission of power and reliability. Periodically, Cleco Power has sought and received from both the LPSC and FERC increases in base rates to cover increases in operating costs and costs associated with additions to generation, transmission, and distribution facilities.

~~Beginning~~The incurrent ~~2010, the~~ amount of Cleco Power’s ~~yearly~~annual retail earnings is subject to the terms of aan FRP established by the LPSC~~. The~~ ~~new rates and the FRP became~~ effective ~~upon commencement of commercial operations at Madison Unit 3 on~~ February 12, 2010. The 2010 FRP establishes a target return on equity and requires all or a portion of regulated earnings for each yearly review period above the targeted regulatory rate of return on equity to be credited to Cleco Power’s retail customers. The 2010 FRP allows Cleco Power the opportunity to earn a target return on equity of 10.7%, including returning to retail customers 60.0% of retail earnings between 11.3% and 12.3% and all retail earnings over 12.3%. The amount of credits due customers, if any, is determined by Cleco Power and the LPSC annually. The capital structure assumes an equity ratio of 51.0%. The 2010 FRP included a mechanism that allowed for the recovery of revenue requirements related to Cleco Power’s acquisition of Acadia Unit 1, which was completed in February 2010, ~~and~~ the Acadiana Load Pocket transmission project, which iswas ~~expected to be~~ completed byin December 2012. The 2010 FRP allows Cleco Power to propose additional capital projects to the LPSC during its initial four-year term. For more information on Cleco Power’s acquisition of Acadia Unit 1 and the Acadiana Load Pocket project, ~~see Part II, Item 8, “Financial Statements~~ and ~~Supplementary~~incremental ~~Data~~capacity —costs Notes to the Financial Statements — Note 18 — Acadia Transactions — Acadia Unit 1” and Part II, Item 7, “Managements Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition —

above the level included in base rates. The 2010 FRP allows Cleco Power to propose additional capital projects to the LPSC during its initial four-year term. Cleco Power anticipates requesting an extension of its current FRP in a second quarter 2013 filing with the LPSC. For more information on Cleco Power’s acquisition of Acadia Unit 1 and the Acadiana Load Pocket transmission project, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions — Acadia Unit 1” and Part II, Item 7, “Managements Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Acadiana Load Pocket Transmission Project.”

~~Cleco~~The ~~Power’s~~cost ~~electric~~of ~~rates include a~~ fuel ~~and~~used ~~purchased power cost adjustment clause that enables it to adjust rates~~ for ~~monthly~~electric ~~fluctuations~~generation inand the cost of ~~fuel~~power ~~and~~ purchased ~~power. Revenue~~for ~~from~~utility ~~certain~~customers ~~off-system~~are ~~sales~~recovered ~~to other utilities and energy marketing companies is passed on to customers~~ through aan ~~reduction~~LPSC-established inFAC ~~fuel~~that ~~cost~~enables ~~adjustment~~Cleco ~~billing~~Power ~~factors. Fuel adjustment clause costs are subject~~ to ~~monthly~~pass ~~approval~~on ~~from the LPSC and recovery is subject~~ to ~~refund~~its ~~pending~~customers ~~the~~substantially ~~completion~~all ofsuch ~~a periodic fuel audit by the LPSC~~charges. The LPSC ~~Fuel~~FAC ~~Adjustment Clause~~ General Order issued November 6, 1997, in Docket No. U-21497 provides that an audit of ~~fuel~~FAC ~~adjustment clause~~ filings will be performed not less than every other year. ~~Cleco~~In ~~Power’s~~February ~~last~~2012, ~~fuel~~after an audit ~~was~~of ~~for~~FAC ~~the years 2001 and 2002. Cleco Power currently has fuel adjustment clause~~ filings, ~~for~~the ~~2003~~LPSC ~~through~~Staff’s ~~2011~~consultant ~~subject~~issued toa preliminary audit~~. In~~ ~~March~~report ~~2009,~~recommending ~~the~~a ~~LPSC~~cost ~~proceeded~~disallowance ~~with the audit~~ of ~~fuel~~approximately ~~adjustment~~$0.4 ~~clause~~million ~~filings~~plus interest for the years 2003 through 2008. ~~The~~There ~~total~~was ~~amount~~no ofopposition ~~fuel~~from ~~expenses~~intervenors ~~included~~to in the ~~audit~~recommendations isof ~~approximately~~the ~~$3.26~~LPSC ~~billion. Cleco~~Staff’s ~~Power~~consultant ~~has~~and ~~responded~~the toreport ~~several~~was ~~sets~~approved ofby ~~data requests from~~ the LPSC ~~and~~on ~~the~~July ~~responses~~18, ~~are currently under review~~2012. ~~The~~Cleco ~~LPSC~~Power ~~has~~made ~~not~~refunds ~~stated an amount~~ of ~~the~~$0.4 ~~fuel~~million ~~costs,~~plus ifinterest ~~any, that would be disallowed and result in a refund~~ to ~~the~~ customers~~. Management~~ isduring ~~not able to predict or give a reasonable estimate of~~ the ~~possible~~September ~~range~~2012 ofbilling ~~the disallowance, if any, related to this audit~~cycle. ~~However,~~Cleco ifPower ahas ~~disallowance~~FAC offilings ~~fuel~~for ~~costs is ordered resulting in a refund, any such refund could have a material adverse effect on~~ the ~~Registrants’~~years ~~results~~2009 ofthrough ~~operations,~~2012 ~~financial~~that ~~condition,~~remain ~~and~~subject ~~cash~~to ~~flows~~audit.

In July 2009, the LPSC issued Docket No. U-29380 Subdocket A, which provides for an EAC to recover certain costs of environmental compliance as an adder to customers’ bills. The costs eligible for recovery are prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to the generation of electricity reduced by the sale of such allowances. ~~Also~~Variable ~~eligible for recovery are variable~~ emission mitigation costs, which are the cost of reagents such as ammonia and limestone that are used to reduce air emissions~~. These~~, ~~variable~~are ~~emission~~also ~~mitigation~~eligible ~~costs~~for ~~were historically recovered through the Fuel Adjustment Clause~~recovery. OnIn November ~~11,~~ 2011, the LPSC opened Docket No. X-32150 to audit the costs for the periods October 2009 through October 2010. The total amount of environmental expenses included in the audit iswas approximately $211.43 million. ~~Cleco~~In ~~Power~~April ~~has~~2012, ~~responded~~the toLPSC ~~data~~Staff’s ~~requests~~consultant ~~from~~issued ~~the~~an ~~LPSC. These~~audit ~~responses~~report ~~are~~recommending ~~currently~~no ~~under~~cost ~~review~~disallowance byfor the ~~LPSC~~review period. ~~The~~There ~~LPSC~~was ~~has~~no ~~not~~opposition ~~stated~~from anintervenors ~~amount~~to of the ~~environmental~~recommendations ~~costs,~~of ifthe ~~any,~~LPSC ~~that~~Staff’s ~~would~~consultant ~~be disallowed~~ and ~~result~~the inreport awas ~~refund~~approved toby ~~customers. However,~~the ifLPSC aon ~~disallowance~~July ~~of environmental costs is ordered resulting in a refund~~18, ~~any~~2012. Cleco ~~such~~Power ~~refund~~has isEAC ~~not~~filings ~~expected~~for ~~to have a material effect on~~ the ~~Registrants’~~years ~~results~~2010 ofthrough ~~operations,~~2012 ~~financial~~that ~~condition,~~remain ~~and~~subject ~~cash~~to ~~flows~~audit.

For more information on Cleco Power’s retail and wholesale rates, including Cleco Power’s FRP, see Item 1A, “Risk Factors — LPSC Audits,” “— Retail Electric Service,” “— Wholesale Electric Service,” and “— Cleco Power’s Rates” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Retail Rates of Cleco Power,” and — “Wholesale Rates of Cleco.”

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

Franchises

Cleco Power operates under nonexclusive franchise rights granted by governmental units, such as municipalities and parishes (counties), and enforced by state regulation. These franchises are for fixed terms, which may vary from 10 years to 50 years or more. Historically, Cleco Power has been ~~substantially successful in the timely renewal of franchises as each neared the end of its term. Cleco Power’s next municipal franchise expires in July 2014.~~



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

substantially successful in the timely renewal of franchises as each neared the end of its term. Cleco Power’s next municipal franchise expires in July 2014.

Franchise Renewals

Cleco Power renewed the following franchise agreements during ~~2010~~2011 and ~~2011~~2012.

DATE	CITY	TERM	NUMBER OF CUSTOMERS
July 2010	Pearl River	35 years	1,250
September 2010	Lecompte	30 years	711
October 2010	Crowley	20 years	6,195
November 2010	Grand Cane	30 years	160
December 2010	South Mansfield	30 years	180
July 2011	Opelousas	10 years	10,000
July 2011	Colfax	30 years	800
November 2011	Keachi	30 years	60
November 2011	Patterson	22 years	2,760
December 2011	Baldwin	22 years	945
April 2012	Oakdale	27 years	3,300
April 2012	Slidell	33 years	15,900
May 2012	Berwick	22 years	2,600
October 2012	Basile	30 years	900
October 2012	Campti	30 years	600

Other Franchise Matters

On March 9, 2010, a complaint was filed in the 27th Judicial District Court of St. Landry Parish, State of Louisiana, on behalf of three Cleco Power customers in Opelousas, Louisiana. The complaint ~~alleges~~alleged that Cleco Power overcharged the plaintiffs by applying to customers in Opelousas the same retail rates as Cleco Power applies to all of its retail customers. In addition, on May 11, 2010, a second complaint repeating the allegations of the first was filed on behalf of a number of Opelousas residents. On December 4, 2012, the Louisiana Supreme Court issued its opinion accepting Cleco’s jurisdictional arguments and dismissed the state court claims. The only matter remaining is before the 19th Judicial District Court to review the LPSC ruling in Cleco’s favor that it had properly charged the ratepayers of Opelousas. For more information regarding these complaints, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — City of Opelousas.”

Industry Developments

For information on industry developments, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring.”

Wholesale Electric Competition

For a discussion of wholesale electric competition, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Wholesale Electric Markets.”

Retail Electric Competition

For a discussion of retail electric competition, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Market Restructuring — Retail Electric Markets.”

Legislative and Regulatory Changes and Matters

Various federal and state legislative and regulatory bodies are considering a number of issues that could shape the future of the electric utility industry. Such issues include, among others:


•	the ability of electric utilities to recover stranded costs,

• the role of electric utilities, independent power producers, and competitive bidding in the purchase, construction, and operation of new generating capacity,

• the pricing of transmission service on an electric utility’s transmission system, or the cost of transmission services provided by an RTO/ISO,


•	FERC’s assessment of market power and utilities’ ability to buy generation assets,


•	mandatory transmission reliability standards,


•	FERC rulemakings encouraging migration of utility operations to RTOs,


•	the authority of FERC to grant utilities the power of eminent domain,


•	increasing requirements for renewable energy sources,


•	demand response and energy efficiency standards,


•	comprehensive multi-emissions environmental regulation in the areas of air, water, and waste,


•	regulation of greenhouse gas emissions,


•	FERC’s increased ability to impose financial penalties,


•	the American Recovery and Reinvestment Act of 2009,


•	the Dodd-Frank Act, and

• the SEC’s requirement ofthat financial statements be prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board by U.S. issuers for purposes of their filings with the SEC.

The Registrants are unable, at this time, to predict the outcome of such issues or effects on their ~~financial position,~~ results of operations, financial position, or cash flows.

For information on certain regulatory matters and regulatory accounting affecting Cleco, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters.”



ENVIRONMENTAL MATTERS

Environmental Quality

Cleco is subject to federal, state, and local laws and regulations governing the protection of the environment. Violations of these laws and regulations may result in substantial fines and penalties. Cleco has obtained the environmental permits necessary for its operations, and management believes Cleco is in compliance in all material respects with these permits, as well as all applicable environmental laws and regulations. Environmental requirements affecting electric power generation facilities are complex, change frequently, and have become more stringent over time as a result of new legislation, administrative actions, and judicial interpretations. Therefore, the capital costs and other expenditures necessary to comply with existing and new environmental requirements are difficult to determine. Cleco Power may request recovery, from its retail customers, of the costs to comply with environmental laws and regulations. If revenue relief were to be approved by the LPSC, then Cleco Power’s retail rates could increase. If the LPSC were to deny Cleco Power’s request to recover all or part of its environmental compliance costs, then Cleco Power would bear those costs directly. Such a decision could negatively impact, perhaps significantly, the Registrants’ results of operations, financial condition, and cash flows. Cleco’s capital expenditures related to environmental compliance were $8.1 million during

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~~2011~~costs to comply with environmental laws and regulations. If revenue relief were to be approved by the LPSC, then Cleco Power’s retail rates could increase. If the LPSC were to deny Cleco Power’s request to recover all or part of its environmental compliance costs, then Cleco Power would bear those costs directly. Such a decision could negatively impact, perhaps significantly, the Registrants’ results of operations, financial condition, and cash flows. Cleco’s capital expenditures related to environmental compliance were $16.1 million during 2012 and are estimated to be $4187.05 million in ~~2012~~2013. The following table lists capital expenditures, including AFUDC, for environmental matters by subsidiary. ~~All amounts include AFUDC.~~

SUBSIDIARY (THOUSANDS)	ENVIRONMENTAL CAPITAL EXPENDITURES FOR ~~2011~~2012		PROJECTEDENVIRONMENTALCAPITAL EXPENDITURES FOR ~~2012~~2013
Cleco Power	$	616,~~980~~096	$	4187,~~000~~474
Evangeline	~~1,103~~7		—
Total	$	816,~~083~~103	$	4187,~~000~~474

Projected environmental capital expenditures for ~~2012~~2013 include $2285.0 million related to compliance with MATS, and $112.0 million related to ~~compliance~~the ~~with~~selective ~~CSAPR,~~non-catalytic ~~and~~reduction ~~$6.0~~systems ~~million~~used ~~related~~ to ~~the~~treat ~~expansion~~pollutants ofin ~~the~~order ~~ash~~to ~~disposal~~comply ~~landfill~~with ~~for~~environmental ~~Madison Unit 3~~regulations.

Air Quality

Air emissions from each of Cleco’s generating units are strictly regulated by the EPA and the LDEQ. The LDEQ has authority over and implements certain air quality programs established by the EPA under the federal CAA, as well as its own air quality regulations. The LDEQ establishes standards of performance and requires permits for electric generating units in Louisiana. All of Cleco’s generating units are subject to these requirements.

The EPA has proposed and adopted rules under the authority of the CAA relevant to the emissions of SO2 and NOx from Cleco’s generating units. The CAA established the Acid Rain Program to address the effects of acid rain and imposed restrictions on SO2 emissions from certain generating units. The CAA requires these generating units to possess a regulatory “allowance” for each ton of SO2 emitted beginning in the year 2000. The EPA allocates a set number of allowances to each affected unit based on its historic emissions. As of December 31, ~~2011~~2012, Cleco Power and Midstream had sufficient allowances for ~~2011~~2012 operations and expect to have sufficient allowances for ~~2012~~2013 operations under the Acid Rain Program.

The Acid Rain Program also established emission rate limits on NO_x emissions for certain generating units. Cleco Power is able to achieve compliance with the acid rain permit limits for NO_x at all of its affected facilities.

On July 6, 2011, the EPA finalized a rule titled “Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone” known as CSAPR that would require significant reductions in SO2 and NOx emissions from electric generating units (EGUs) in 28 states, including Louisiana. Under CSAPR, the EPA would set total emissions limits for each state allowing limited interstate trading (and unlimited intrastate trading) of emission allowances among power plants to comply with these limits beginning May 1, 2012. Specifically for Louisiana, CSAPR would limit NOx emissions for the ozone season, ~~consisting~~which consists of the months of May through September.

On December 30, 2011, in response to numerous petitions by both state and industry participants, the D.C. Circuit Court of Appeals issued an order staying implementation of CSAPR pending resolution of legal challenges to the rule. The Court further ordered that the Clean Air Interstate Rule (CAIR), a predecessor rule to CSAPR, remain in place while CSAPR iswas stayed. ~~Oral~~On ~~arguments~~August ~~are~~21, ~~scheduled~~2012, the D.C. Circuit Court of Appeals issued a 2-1 opinion vacating and remanding CSAPR. As such, CSAPR is vacated and CAIR is reinstated in its place for now. The D.C. Circuit Court ordered the EPA to berewrite ~~heard~~the rule in ~~April~~an ~~2012~~expeditious ~~and~~fashion to address the ~~Court~~flaws ~~could~~of ~~decide~~CSAPR. Early this year, the ~~case~~D.C asCircuit ~~early~~Court asdenied a petition for rehearing by the ~~summer~~EPA, leaving its only recourse filing a writ of ~~2012~~certiorari seeking a Supreme Court review. ~~Cleco~~If the EPA is ~~considering~~unsuccessful ~~various~~in ~~options~~the ~~for~~appeals ~~meeting~~process and undertakes rewriting a new rule, it is uncertain what the ~~NOx~~new rule will entail. ~~allocation~~It ~~established~~is byvery ~~CSAPR~~likely that any compliance requirements of a new rule will be delayed for ~~Cleco’s~~at least a year or more. Until then, CAIR remains in effect.

generating units, in the event the stay is eventually lifted. These options include the installation of additional emission controls, the purchase of allowances, the implementation of alternate dispatch schedules for generation units, and the acquisition of alternate generation resources. For more information, see the chart above detailing Cleco Power’s anticipated capital expenditures and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP” for a discussion of Cleco Power’s RFP for contractual resources to meet CSAPR requirements. If the stay is lifted and Cleco cannot obtain sufficient ozone season allowances to cover its ozone season emissions then despite the implementation of one or more of the above options, Cleco may not be able to meet its customers’ demand without incurring significant fines and penalties.

The EPA also has adopted rules under Section 112 of the CAA governing the emissions of mercury and other hazardous air pollutants from certain EGUs. The EPA established maximum achievable control technology (MACT) standards for coal-fired EGUs in late 2011, and signed a final rule setting forth national emissions standards for hazardous air pollutants (NESHAP) from coal- and oil-fired electric utility steam generating units on December 16, 2011. The final rule is now known as MATS. MATS requires affected EGUs to meet specific numeric emission standards and work practice standards to address hazardous air pollutants.

MATS imposes strict emission limits on new and existing coal- and liquid oil-fired EGUs for mercury, acid gases (hydrochloric acid, or HCI, as a surrogate), and non-mercury metallic pollutants (filterable particulate matter ~~(filterable PM)~~ as a surrogate). Affected EGUs also have to comply with certain work practice standards to control the emission of organic air toxins.

MATS allows existing sources approximately three years to comply with the rule. The actual compliance deadline is April 16, 2015. A one-year compliance extension is available with approval from the relevant permitting authority, which in Cleco’s case is the LDEQ, if that facility is actively installing control equipment to comply with the rule.

Cleco ~~continues~~completed its evaluation of control technology options for Dolet Hills, Madison Unit 3, and Rodemacher Unit 2. ~~Significant~~As noted previously, Cleco has identified capital expenditures ~~could~~that will be required ~~beginning in 2012~~ to engineer, procure, and install pollution controls and emissions monitoring equipment to ensure Cleco will be in a position to comply with MATS in a timely manner. Cleco’s liquid oil-fired units should not be affected by the rule. For more information, see the chart above and the language that follows for a discussion of Cleco Power’s anticipated control installations and associated capital expenditures required to comply with MATS.

Greenhouse gases (GHG) and their role in climate change have been the focus of recent study and legal action, including proposed federal legislation, final and proposed federal rulemakings, and civil actions. Fossil fuel-fired EGUs emit a significant amount of GHG in the combustion process. Congress has attempted to craft specific legislation that would reduce emissions of GHG by utilities, industrial facilities, and other manufacturing sectors of the economy. While Congressional attempts have not been successful, the possibility exists that federal GHG legislation may be enacted within the next several years.

In the absence of federal legislation, the EPA has recently adopted a series of rules under the CAA that, taken together, regulate GHG emissions from both mobile and stationary sources. As a result, beginning July 1, 2011, new major stationary sources of GHG emissions and major modifications

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~~regulate GHG emissions from both mobile and stationary sources. As a result, beginning July 1, 2011, new major stationary sources~~ of ~~GHG emissions and major modifications of~~ existing stationary sources are required to obtain a permit for their GHG emissions. In its May 13, 2010, Prevention of Significant Deterioration (PSD) and Title V GHG “Tailoring Rule,” the EPA set the threshold for new major sources and major modifications of existing sources of GHG emissions at 100,000 tons per year and 75,000 tons per year of CO2 equivalents, respectively.

At this time, Cleco does not anticipate a modification at any of its existing sources that would trigger PSD and an associated Best Available Control Technology (BACT) demonstration for GHG.

In addition to its program for applying PSD and Title V permitting requirements to the largest stationary sources of GHG, the EPA has also committed to establish New Source Performance Standards (NSPS) for GHG emissions from fossil fuel power plants and refineries. On December 23, 2010, the EPA announced that it had settled litigation with states and environmental groups that sought to compel the EPA to establish NSPS. ~~The EPA and the petitioners in the case are in the process of negotiating a revised schedule for the NSPS rulemaking.~~ Under the settlement, the EPA committed to issue standards for new and modified facilities, and the power plant settlement also commits the EPA to issue standards for existing facilities. The EPA issued proposed NSPS rules for CO2 on April 13, 2012. This proposal only affects new units and contains no requirements for modifications or for existing units. This rule has not yet been finalized. Cleco expects that the EPA will eventually issue guidelines to the states requiring them to adopt and submit to the EPA for approval standards for existing, unmodified facilities that conform to those guidelines. Once the state standards are approved by the EPA and become effective, existing unmodified facilities must be given a reasonable amount of time to comply with the standards. At this time, Cleco cannot predict what these standards will entail or what level of GHG controls the EPA and the state of Louisiana will require. However, any new rules that require significant reductions of GHG emissions from EGUs could require potentially significant expenditures ~~by Cleco,~~ or modification or curtailment of operations, to maintain or achieve compliance.

The enactment of federal or state renewable portfolio standards (RPS) mandating the use of renewable and alternative fuel sources, such as wind, solar, biomass, and geothermal, could result in certain changes in Cleco’s business or its competitive position. These changes could include additional costs for renewable energy credits, alternate compliance payments, or capital expenditures for renewable generation resources. RPS legislation has been enacted in many states and Congress is considering various bills that would create a national RPS. Cleco continues to evaluate the impacts of potential RPS legislation on its businesses based on the RPS programs in other states. Cleco will continue to monitor developments related to RPS at the federal and state levels. For information on Cleco’s actions resulting from the LPSC’s ~~recently passed~~ Renewable Energy Order, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP — Renewable Energy Pilot Program.”

As part of its periodic re-evaluation of the protectiveness of the National Ambient Air Quality Standards (NAAQS), the EPA has adopted rules that strengthen the NAAQS for specific criteria pollutants including ozone, NO₂, and SO₂. In 2008, the EPA issued a NAAQS for ozone of 75 parts per billion (ppb). The EPA subsequently proposed to lower that standard, but dropped its proposed reconsideration and is currently moving

ahead with states, including Louisiana, to implement the 75 ppb ozone under the 2008 NAAQS. The EPA has recommended the five -parish area around Baton Rouge as a non-attainment area for ozone under the 2008 NAAQS, which will require Louisiana to establish a state implementation plan to bring those areas back into attainment by 2015. Since NOx emissions are a precursor to ozone formation, existing fossil fuel-fired EGUs located in or near ozone non-attainment areas could be targeted for installation of additional NOx emission controls. Cleco cannot determine the potential impact of this rule on its generating units until Louisiana finalizes its state implementation plan for this rule.

A revised primary NAAQS for NO2 promulgated by the EPA took effect on April 12, 2010. The EPA established a new one-hour standard at a level of 100 ppb to supplement the existing annual standard. ~~The~~In January 2012, the EPA determined that no area in the country was violating the standard. However, the LDEQ ~~has~~expects ~~recommended~~to ~~designating~~operate new monitors at two portions of highway in the Baton Rouge and New Orleans areas. The ~~as non-attainment for NO2; however, the~~ EPA may redesignate areas based on new data it receives from states. Due to the fact that fossil fuel-fired EGUs are a significant source of NO2 emissions in the country, a non-attainment designation could result in utilities such as Cleco being required to substantially reduce their NO2 emissions. However, because no state implementation plan has been proposed, Cleco cannot predict the potential impacts of such a rule on its generating units at this time.

The EPA revised the NAAQS for SO2 on June 22, 2010. The new standard is now a one-hour health standard of 75 ppb, designed to reduce short-term exposures to SO2 ranging from five minutes to 24 hours. An important aspect of the new SO2 standard is a revised emission monitoring network combined with a new ambient air modeling approach to determine compliance with the new standard. The LDEQ has recommended St. Bernard and East Baton Rouge as non-attainment areas. The EPA expects to identify or designate areas not meeting the new standard by July ~~2012~~2013. Utilities could be required to substantially reduce their SO2 emissions to comply with this NAAQS. However, because no state implementation plan has been proposed, Cleco is unable to determine the potential impacts of this rule on its generating units at this time.

In February 2005, Cleco Power received notices from the EPA requesting information relating to the Brame Energy Center and the Dolet Hills Power Station. The apparent purpose of the data request is to determine whether Cleco Power has complied with New Source Review and NSPS requirements under the CAA in connection with capital expenditures, modifications, or operational changes made at these facilities. Cleco Power has completed its response to the initial data request. It is unknown at this time whether the EPA will take further action as a result of the information provided by Cleco Power.

Water Quality

Cleco’s facilities ~~are~~ also are subject to federal and state laws and regulations regarding wastewater discharges. Cleco has received from the EPA and the LDEQ permits required under the federal Clean Water Act (CWA) for wastewater discharges from its generating stations. Wastewater discharge permits have fixed dates of expiration, and Cleco applies for renewal of these permits within the applicable time periods.

On March 28, 2011, the EPA proposed regulations which would establish standards for cooling water intake structures at ~~existing power plants and other facilities pursuant to Section 316(b) of the CWA. The standards are intended to protect fish~~

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existing power plants and other facilities pursuant to Section 316(b) of the CWA. The standards are intended to protect fish and other aquatic wildlife by minimizing capture both in screens attached to intake structures (impingement mortality), and in the actual intake structures themselves (entrainment mortality). For existing facilities that are designed to draw at least two million gallons per day of water from waters of the United States and use at least 25% of the water they withdraw exclusively for cooling, the proposed standards would (1) set a performance standard, measured as a fish mortality rate due to impingement, or reduce the flow velocity at cooling water intakes to less than 0.5 feet per second, and (2) require entrainment standards to be determined on a case-by-case basis by state delegated permitting authorities. Facilities subject to the proposed standards would have a maximum of eight years to comply with the impingement requirements, although state permitting authorities would have discretion to set a shorter deadline. Compliance with entrainment standards would be required “as soon as possible,” by a date to be determined by the same permitting authorities. As presently drafted, portions of the proposed rule could apply to all of Cleco’s fossil fuel steam electric generating stations. Until more thorough studies are conducted, including technical and economic evaluations of the control options available and a final rule is issued, Cleco remains uncertain which technology options or retrofits would be required to be installed on its affected facilities. However, the costs of required technology options and retrofits could be significant, especially if closed cycle cooling is required.

The byCWA arequires ~~date~~the EPA to beperiodically ~~determined~~review byand, ~~the~~if ~~same~~appropriate, ~~permitting~~revise ~~authorities. As~~technology ~~presently~~based ~~drafted,~~effluent ~~portions~~limitations guidelines for categories of ~~the~~industrial ~~proposed~~facilities, ~~rule~~including ~~could~~power ~~apply~~generating tofacilities. The ~~all~~EPA ofis ~~Cleco’s~~currently ~~fossil~~expected ~~fuel~~to issue proposed revised steam electric ~~generating~~effluent ~~stations. Until~~limitations ~~more~~guidelines ~~thorough~~by ~~studies~~May ~~are~~2013 ~~conducted,~~and ~~including~~final ~~technical~~revised ~~and~~steam ~~economic~~electric ~~evaluations~~effluent oflimitations ~~the~~guidelines ~~control~~by ~~options~~June ~~available~~2014. The ~~and~~revised aeffluent ~~final~~limitations ~~rule~~guidelines iscould ~~issued,~~require costly technological upgrades at Cleco’s ~~remains~~existing ~~uncertain~~facilities, ~~which~~in ~~technology~~particular ~~options~~if oradditional ~~retrofits~~wastewater ~~would~~treatment besystems are required to be installed. Since onthe ~~its~~revised ~~affected~~regulations ~~facilities. However~~are yet to be proposed, ~~the~~Cleco ~~costs~~is ofunable ~~required~~to ~~technology~~predict ~~options~~what ~~and~~the ~~retrofits~~new ~~could~~effluent limitations guidelines will be or how significant, ~~especially~~the ifcosts ~~closed~~may ~~cycle~~be ~~cooling~~for isCleco ~~required~~to comply.

The CWA requires the EPA to periodically review and, if appropriate, revise technology based effluent limitations guidelines for categories of industrial facilities, including power generating facilities. The EPA is currently expected to issue proposed revised steam electric effluent limitations guidelines by July 2012, and final revised steam electric effluent limitations guidelines by January 2014. The revised effluent limitations guidelines could require costly technological upgrades at Cleco’s existing facilities, in particular if additional wastewater treatment systems are required to be installed. Since the revised regulations are yet to be proposed, Cleco is unable to predict what the new effluent limitations guidelines will be or how significant the costs may be for Cleco to comply.

Solid Waste Disposal

In the course of operations, Cleco’s facilities generate solid and hazardous waste materials requiring management or eventual disposal. ~~With the exception of coal combustion by-products or residuals (CCRs), Cleco does not dispose of wastes generated by its facilities on-site.~~ The Solid Waste Division of the LDEQ has adopted a permitting system for the management and disposal of solid waste generated by power stations. Cleco has received all required permits from the LDEQ for the on-site disposal of solid waste from its generating stations. Cleco has renewed the solid waste permits for the existing Brame Energy Center and Dolet Hills solid waste units and has upgraded them according to the current Solid Waste Regulations and permit requirements.

On May 18, 2010, the EPA released a proposed rule for regulating the disposal and management of coal combustion by products or residuals (CCRs) from coal-fired power plants. Rather than offering a single approach, the EPA requested comments on two options for regulating CCRs. The first, known as the “Subtitle C” option, would regulate CCRs as a new special waste subject to many of the requirements for hazardous waste, while the second, known as the “Subtitle D” option, would regulate CCRs in a manner similar to industrial solid waste. Either of the EPA proposed options represents a shift toward more comprehensive and costly requirements for CCR disposal and management, but the Subtitle C option contains significantly more stringent requirements and will

~~costly requirements for CCR disposal and management, but the Subtitle C option contains significantly more stringent requirements and will~~ require greater capital and operating costs to comply with that rule, if finalized. Both options seem to allow the continued use of ash for certain beneficial reuses. Depending upon the outcome of the final rule, this regulatory proposal could significantly impact the manner and cost in which Cleco Power manages its CCRs. The final CCR rule is ~~now~~ expected to be issued by the EPA in late ~~2012~~2013 or ~~early~~by ~~2013~~mid 2014. Any stricter requirements imposed on coal ash and associated ash management units by the EPA as a result of this new rule could significantly increase the cost of operating existing units or require them to be significantly upgraded. Until a final rule is promulgated, Cleco is unable to determine how significant the costs associated with potentially stricter requirements isare likely to be.

Cleco produces certain wastes that are classified as hazardous at its electric generating stations and at other locations. Cleco does not treat, store long-term, or dispose of these wastes on-site; therefore, no permits are required. All hazardous wastes produced by Cleco are properly disposed of at permitted hazardous waste disposal sites.

Toxic Substances Control Act (TSCA)

The TSCA directs the EPA to regulate the marketing, disposal, manufacturing, processing, distribution in commerce, and use of PCBs. Cleco may continue to operate equipment containing PCBs under the TSCA. Once the equipment reaches the end of its usefulness, the EPA regulates handling and disposal of the equipment and fluids containing PCBs. Within these regulations, the handling and disposal is allowed only through the EPA approved and permitted facilities. Cleco properly disposes its PCB waste material at TSCA permitted disposal facilities.

Toxics Release Inventory (TRI)

The TRI requires an annual report from industrial facilities on about 650 substances that the facilities release into air, water, and land. The TRI ranks companies based on how much of a particular substance they release on a state and parish (county) level. Annual reports are due to the EPA on July 1 following the reporting year-end. Cleco has submitted required TRI reports on its activities, and the TRI rankings are available to the public. The rankings do not result in any federal or state penalties.

Electric and Magnetic Fields (EMFs)

The possibility that exposure to EMFs emanating from electric power lines, household appliances, and other electric devices may result in adverse health effects or damage to the environment has been a subject of some public attention. ~~Cleco Power funds scientific research on EMFs through various organizations. To date, there are no definitive results, but research is continuing.~~ Lawsuits alleging that the presence of electric power transmission and distribution lines has an adverse effect on health and/or property values have arisen in several states. Cleco Power is not a party in any lawsuits related to EMFs.

Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

In October 2007, Cleco received a Special Notice for Remedial Investigation and Feasibility Study (RI/FS) from the EPA pursuant to CERCLA (also known as the Superfund statute). CERCLA establishes several classes of PRPs for a contaminated site and imposes strict, joint and several liability on those PRPs for the cost of response to the contamination. The special notice requested that Cleco Corporation and Cleco Power, along with many other listed PRPs, enter into

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

contaminated site, and imposes strict, joint and several liability on those PRPs for the cost of response to the contamination. The special notice requested that Cleco Corporation and Cleco Power, along with many other listed PRPs, enter into negotiations with the EPA for the performance of an RI/FS at an area known as the Devil’s Swamp Lake site just northwest of Baton Rouge, Louisiana. The EPA has identified Cleco as one of many companies sending PCB wastes for disposal to the site. The Devil’s Swamp Lake site has been proposed to be added to the National Priorities List (NPL) based on the release of PCBs to fisheries and wetlands located on the site. The EPA has yet to make a final determination on whether to add Devil’s

Swamp Lake site to the NPL. The PRPs began discussing a potential proposal to the EPA in February 2008. Negotiations among the PRPs and the EPA are ongoing in regard to the RI/FS at the Devil’s Swamp Lake site, with little progress having been made since February 2008. The PRPs alleged to have disposed PCBs at the site have proposed a tentative cost-sharing formula with the facility owner to fund the RI/FS. The response to the proposal has been pending for months. Management is unable to determine how significant Cleco’s share of the costs associated with the RI/FS and possible response action at the facility site may be.

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

negotiations with the EPA for the performance of an RI/FS at an area known as the Devil’s Swamp Lake site just northwest of Baton Rouge, Louisiana. The EPA has identified Cleco as one of many companies sending PCB wastes for disposal to the site. The Devil’s Swamp Lake site has been proposed to be added to the National Priorities List (NPL) based on the release of PCBs to fisheries and wetlands located on the site, but no final determination has been made. The PRPs began discussing a potential proposal to the EPA in February 2008. The EPA issued a Unilateral Administrative Order to PRP’s

Clean Harbors, Inc. and Baton Rouge Disposal to conduct an RI/FS on December 3, 2009. The Tier 1 and Tier 2 parts of the study were complete as of June 25, 2012. Currently, the study/remedy selection task continues. Therefore, management is unable to determine how significant Cleco’s share of the costs associated with the RI/FS and possible response action at the facility site, if any, may be and whether or not this will have a material adverse effect on the Registrants’ results of operations, financial condition, or cash flows.



ITEM 1A. RISK FACTORS

The following risk factors could have a material adverse effect on results and cause results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Registrants.

Transmission Constraints

Transmission constraints could have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Cleco Power relies on two main suppliers of electric transmission when accessing external power markets. At times, even after completion of the Acadiana Load Pocket transmission project, physical constraints limit the amount of purchased power these transmission providers can deliver into Cleco Power’s service territory, which in turn can affect capacity or power purchases under long-term contracts, as well as spot market power purchases. If the amount of purchased power actually delivered into Cleco’s transmission system were to be less than the amount of power contracted for delivery, Cleco Power may rely on its own generation facilities to meet customer demand. Cleco Power’s incremental generation cost at that time could be higher than the cost to purchase power from the wholesale power market, thereby increasing its customers’ ultimate cost. In addition, the LPSC may not allow Cleco Power to recover part or all of its ~~incremental~~ generation cost, which could be substantial.

LPSC Audits

The LPSC conducts fuel audits that could result in Cleco Power making substantial refunds of previously recorded revenue.

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 expenses. Recovery of ~~fuel~~FAC ~~adjustment clause~~ costs is subject to a periodic fuel audit by the LPSC. The LPSC ~~Fuel~~FAC ~~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~~FAC ~~adjustment clause~~ filings for ~~2003~~2009 through ~~2011~~2012 subject to audit. In March 2009, the LPSC proceeded with the audit of fuel adjustment clause filings for the years 2003 through 2008. The total amount of fuel expenses included in the audit is approximately $3.26 billion. Cleco Power has responded to several data requests from the LPSC. These responses are currently under review by the LPSC. The LPSC has not stated an amount of the fuel costs, if any, that would be disallowed and result in a refund to the customers. Management is not able to predict or give a reasonable estimate of the possible range of the disallowance, if any, related to ~~this~~these ~~audit~~filings. However, if a disallowance of fuel costs is ordered resulting in a refund, any such refund could have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows. The most recent fuel audit completed by the LPSC ~~covered~~was ~~2001~~for ~~and~~the ~~2002~~years 2003 through 2008 and resulted in aCleco ~~refund~~Power making refunds of $~~16.~~0.4 million toplus ~~Cleco~~interest ~~Power’s~~to ~~retail~~ customers induring the ~~first~~September ~~quarter~~2012 ofbilling ~~2005~~cycle.

The LPSC conducts environmental audits that could result in Cleco Power making substantial refunds of previously recorded revenue.

~~environmental~~Cleco ~~compliance~~Power ashas anenvironmental ~~adder~~adjustment toclause ~~customers’~~filings ~~bills. The costs eligible~~ for ~~recovery are prudently incurred air emissions credits associated with complying with federal, state, and local air emission regulations that apply to~~ the ~~generation~~years of2010 ~~electricity~~through ~~reduced~~2012 ~~by the sale of such allowances. Also eligible for recovery are variable emission mitigation costs, which are the cost of reagents such as ammonia and limestone~~ that ~~are~~remain ~~used~~subject to ~~reduce air emissions~~audit. These variable emission mitigation costs were historically recovered through the ~~Fuel Adjustment Clause~~FAC. OnManagement ~~November~~is ~~11,~~not ~~2011,~~able ~~the LPSC opened Docket No. X-32150~~ to ~~audit~~predict ~~the~~or ~~costs~~give ~~for~~a ~~the~~reasonable ~~periods~~estimate ~~October 2009 through October 2010. The total amount~~ of ~~environmental expenses included in~~ the ~~audit~~possible isrange ~~approximately $2.4 million. Cleco Power has responded to data requests from the LPSC. These responses are currently under review by the LPSC. The LPSC has not stated an amount~~ of the ~~environmental costs~~disallowance, if any, ~~that~~related ~~would be disallowed and result in a refund~~ to ~~customers~~these filings. However, if a disallowance of environmental costs is ordered resulting in a refund, any such refund could ~~affect~~have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Hedging and Risk Management Activities

Cleco Power is subject to market risk associated with fuel cost hedges relating to open natural gas contracts. Cleco has risk management policies which cannot eliminate all risk involved in its energy commodity activities.

Cleco Power ~~enters~~may enter into fuel cost hedge positions to mitigate the volatility in fuel costs passed through to its retail customers. When these positions close, actual gains or losses are deferred and included in the ~~fuel~~FAC ~~adjustment clause~~ in the month the physical contract settles. However, recovery of any of these ~~fuel~~FAC ~~adjustment clause~~ costs is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC.

Cleco Power manages its exposure to energy commodity activities by maintaining risk management policies and establishing and enforcing risk limits and risk management procedures. These risk limits and risk management procedures cannot eliminate all risk associated with these activities, particularly if intentional misconduct is involved.

Financial derivatives reforms could increase the liquidity needs and costs of Cleco Power’s commercial trading operations.

In July 2010, Congress enacted federal legislation to reform financial markets that significantly altered how over-the-counter (OTC) derivatives are regulated. The law increased regulatory oversight of OTC energy derivatives, including (1) requiring standardized OTC derivatives to be traded on registered exchanges regulated by the Commodity Futures Trading Commission (CFTC), (2) imposing new and potentially higher capital and margin requirements and (3) authorizing the establishment of overall volume and position limits. The law gave the CFTC authority to exempt end users of energy commodities which could reduce, but not eliminate, the applicability of these measures to Cleco Power and other end users. These requirements could cause Cleco Power’s future OTC transactions to be more costly and have an adverse effect on its liquidity due to additional capital requirements. In addition, by standardizing OTC products, these reforms could limit the effectiveness of Cleco Power’s hedging programs because Cleco Power would have less ability to tailor OTC

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

standardized OTC derivatives to be traded on registered exchanges regulated by the Commodity Futures Trading Commission (CFTC), (2) imposing new and potentially higher capital and margin requirements and (3) authorizing the establishment of overall volume and position limits. The law gave the CFTC authority to exempt end users of energy commodities. The end user exemption reduces, but does not eliminate, the applicability of these measures. Cleco Power qualifies for the end user exemption and intends to apply for it at the appropriate time. These requirements could cause Cleco Power’s future OTC transactions to be more costly and have an adverse effect on its liquidity due to additional capital requirements. In addition, by standardizing OTC products, these reforms could limit the effectiveness of Cleco Power’s hedging programs because Cleco Power would have less ability to tailor OTC derivatives to match the precise risk it is seeking to protect.

Commodity Prices

Cleco Power is subject to the fluctuation in the market prices of various commodities which may increase the cost of producing power.

Cleco Power purchases natural gas, petroleum coke, lignite, and coal under long-term contracts and on the spot market. Historically, the markets for natural gas, petroleum coke, and coal have been volatile and are likely to remain volatile in the future. Cleco Power’s retail and wholesale rates include a ~~fuel~~FAC ~~adjustment clause~~ that enables it to adjust rates for monthly fluctuations in the cost of fuel and purchased power. However, recovery of any of these ~~fuel~~FAC ~~adjustment clause~~ costs is subject to, and may be disallowed as part of, a prudency review or a periodic fuel audit conducted by the LPSC or FERC.

Global Economic Environment and Uncertainty; Access to Capital

The global economic environment and uncertainty may negatively impact Cleco’s business and financial condition, pension plan, lenders, and customers.

The global economic environment and uncertainty may have an impact on Cleco’s business and financial condition. Cleco’s ability to access capital markets could be severely restricted. This could have a material adverse impact on Cleco’s ability to fund capital expenditures or debt service, or on Cleco’s flexibility to react to changing economic and business conditions. Cleco’s pension plan portfolio has experienced significant volatility due to market conditions and may experience material losses in the future. The losses, in conjunction with plan funding requirements, could result in required pension plan contributions significantly higher and earlier than previously anticipated, which could have a material adverse impact on Cleco’s results of operations, financial condition, and cash flows. Further, the current economic environment and uncertainty could have a material adverse impact on Cleco’s lenders or its customers, causing them to fail to meet their obligations to Cleco or to delay payment of such obligations. Additionally, the current economic environment and uncertainty could lead to reduced electricity usage, which could have a material adverse impact on the Registrants’ results of operations, financial condition, and cash flows.

The Registrants depend on access to the capital markets and, at times, may face potential liquidity constraints, which could make it more difficult to handle future contingencies such as natural disasters or substantial increases in commodity prices. Disruptions in the capital and credit markets may adversely affect the Registrants’ ability to meet liquidity needs, access capital to operate and grow their businesses, and the cost of capital.

The Registrants’ business is capital intensive and dependent upon their respective ability to access capital at reasonable rates and other terms. At times there are spikes in the price for natural gas and other commodities that increase the Registrants' liquidity requirements. In addition, the Registrants' liquidity needs could significantly increase in the event of a hurricane or other weather-related or unforeseen disaster similar to that experienced in the Registrants' service territory with Hurricanes Katrina and Rita in 2005. The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel, purchased power, or storm restoration costs, higher than expected pension contributions, an acceleration of payments or decreased credit lines, less cash flow from operations than expected, or other unknown events, such as future storms, could cause the financing needs of the Registrants to increase. In addition, accessing the debt capital markets more frequently in these situations may result in an increase in leverage. Material leverage increases could negatively affect the Registrants' respective credit ratings, which in turn could negatively affect access to capital markets.

The global capital and credit markets have experienced extreme volatility and disruption in the recent past. The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could negatively affect the Registrants' ability to maintain and expand their business. Events beyond the Registrants' control, such as volatility and disruption in global capital and credit markets, may create uncertainty that could increase their cost of capital or impair their ability to access the capital markets, including the ability to draw on their respective bank credit facilities. The Registrants are unable to predict the degree of success they will have in renewing or replacing their respective credit facilities as they come up for renewal. Moreover, the size, terms, and covenants of any new credit facilities may not be comparable to, and may be more restrictive than, existing facilities. If the Registrants are unable to access the credit and capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities, and/or bear an unfavorable cost of capital, which, in turn, could have a material adverse impact on the Registrants' ability to fund capital expenditures or debt service or on the Registrants' flexibility to react to changing economic and business conditions.

Future Electricity Sales

Cleco Power’s future electricity sales and corresponding base revenue and cash flows could be adversely affected by general economic conditions.

General economic conditions can negatively impact the businesses of Cleco Power’s industrial and commercial customers, resulting in decreased power ~~purchases~~consumption, ~~and~~which ~~lower~~causes ~~base~~a corresponding decrease in revenue. ~~The~~In ~~recent~~the ~~recession~~past, recessions have adversely affected MWh sales due to closures and areductions ~~reduction~~ in load requirements across Cleco Power’s industrial customer base, particularly among manufacturers of wood and paper products. The paper industry ~~remains~~continues to be vulnerable to decreasing demand for its products, and the downturn in residential home construction ~~has~~ also has caused a significant reduction in the demand and prices for lumber and other wood products. Reduced production or the shut down of any of these customers’ facilities could substantially reduce Cleco Power’s base revenue.

~~revenue.~~ 19

~~Future~~CLECO ~~electricity~~CORPORATION ~~sales~~CLECO ~~could~~POWER be2012 ~~impacted~~FORM ~~by industrial customers switching to alternative sources of energy, including on~~10-~~site power generation, and retail customers consuming less electricity due to increased conservation efforts or increased electric usage efficiency.~~K

Energy conservation and energy efficiency efforts could have a material adverse effect on Registrant's results of operations, financial condition, and cash flows.

Regulatory and legislative bodies have proposed or introduced requirements and incentives to reduce energy consumption. Conservation and energy efficiency programs are designed to reduce energy demand. Future electricity sales could be impacted by industrial customers switching to alternative sources of energy, including on-site power generation and retail customers purchasing less electricity due to increased conservation efforts or expanded energy efficiency measures. Unless there is a regulatory solution, declining usage will result in an under-recovery of fixed costs at Cleco Power's rate regulated business. A reduction in energy demand could have a material adverse effect on the Registrants' results of operations, financial condition, and cash flows.

Cleco Power Generation Facilities

Cleco Power’s generation facilities are susceptible to unplanned outages, significant maintenance requirements, and interruption of fuel deliveries.

The operation of power generation facilities involves many risks, including breakdown or failure of equipment, fuel supply interruption, and performance below expected levels of output or efficiency. Almost one-third of Cleco Power’s net capacity is at facilities that were originally constructed before 1980. Older equipment, even if maintained in accordance with good engineering practices, may require significant expenditures to operate at peak ~~efficiency~~capacity or availability, or into ~~compliance~~comply with environmental permits. If Cleco Power fails to make adequate expenditures for equipment maintenance, Cleco Power risks incurring more frequent unplanned outages, higher than anticipated operating and maintenance expenditures, increased fuel or power purchase costs, and potentially the loss of revenue related to competitive opportunities. Newer equipment, ~~such as that installed at Madison Unit 3,~~ can be subject to ~~startup~~premature ~~issues, such as~~ failures ~~due to immaturity of control equipment safeguards and experience with operating under forced outage conditions~~.

Cleco Power’s generating facilities are fueled primarily by coal, natural gas, petroleum coke, and lignite. The deliverability of these fuel sources may be constrained due to such factors as higher demand, production shortages, weather-related disturbances, waterway levels, or lack of transportation capacity. If the suppliers are unable to deliver the contracted volume of fuel, Cleco Power would have to replace any deficiency with alternative sources, which may not be as favorable and could increase the ultimate cost of fuel to customers. Fuel and purchased power expenses are recovered from customers through the ~~fuel adjustment clause~~FAC, which is subject to refund until either a prudency review or a periodic fuel audit is conducted by the LPSC.

Competition for access to other natural resources, particularly oil and natural gas, could negatively impact Cleco Power’s ability to access its lignite reserves. Land owners may grant other parties access for oil and natural gas drilling in the same area to which Cleco has been granted access for lignite reserves. Placement of drilling rigs and pipelines for developing oil and gas reserves can preclude access to lignite in the same areas, making the right of first access critical with respect to extracting lignite. Competition for the right of first access may need to be determined through legal processes. Additionally, Cleco Power could be indirectly liable for the impacts of other companies’ activities on lands that have been mined and reclaimed by Cleco Power. Loss of access to ~~lignite reserves or the liability for impacts on reclaimed lands could have material adverse effects to the Registrants’ results of operations, financial condition, and cash flows.~~

19lignite reserves or the liability for impacts on reclaimed lands could have material adverse effects to the Registrants’ results of operations, financial condition, and cash flows.

~~CLECO~~The ~~CORPORATIONCLECO~~construction ~~POWER~~of, ~~2011~~and ~~FORM~~capital ~~10-K~~improvements to, power generation facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful, the financial condition, results of operations, or liquidity of Cleco Power could be materially affected.

Cleco Power's ability to complete construction of, or capital improvements to, power generation facilities in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include, but are not limited to, engineering and project execution risk and escalating costs for materials, labor, and environmental compliance. Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing as required under their contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs, downward changes in the economy, changes in laws or regulations, including environmental compliance requirements, and other events beyond the control of Cleco Power may occur that may materially affect the schedule, cost, and performance of these projects. If these projects are significantly delayed or become subject to cost overruns or cancellation, Cleco Power could incur additional costs and termination payments, face increased risk of potential write-off of the investment in the project, or may not be able to recover such costs.

MISO

MISO market operations could have a material adverse effect on

the Registrants' results of operations, production costs, financial condition, and cash flows.

On December 6, 2012, Cleco Power filed an application with the LPSC requesting a public interest determination to find in favor of the transfer of functional control of certain transmission assets to MISO, to create an accounting order deferring costs related to Cleco Power’s transition into the MISO organization, and to expedite treatment. Cleco Power anticipates joining the MISO RTO by January 2014.

The MISO market region that Cleco Power will be a part of is referred to as “MISO South,” which encompasses parts of Arkansas, Louisiana, Mississippi and Texas. Once integrated, Cleco Power will no longer make economic or routine dispatch decisions regarding its generating assets that affect reliability of the bulk transmission electric system. Commitment of generation resources to the market will be determined by MISO based on priced offers. All operational impacts and production cost projections have been based on analytical assumptions on how the region will operate with both Cleco Power and Entergy as members. Future energy costs will be heavily influenced by MISO's dispatch of the generating assets owned not only by Cleco Power, but all market participants in the new MISO South region. Also, the recovery of transition costs to join MISO and new MISO billing determinants is dependent on a favorable accounting order from the LPSC.

MISO will evaluate forced outage rates to assess each generating unit capacity for planning reserve functions. Should Cleco Power units not perform to MISO standards, Cleco Power may not possess sufficient planning reserves to



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

serve its needs and could be forced to purchase capacity from the market. The costs of such capacity may not be recoverable and could have a material adverse effect on the Registrants’ results of operations, production costs, financial condition, and cash flows.

Reliability and Infrastructure Protection Standards Compliance

Cleco is subject to mandatory reliability and critical infrastructure protection standards. Fines and civil penalties are imposed on those who fail to comply with these standards.

NERC serves as the ERO with authority to establish and enforce mandatory reliability and infrastructure protection standards, subject to FERC approval, for users of the nation’s transmission system. FERC enforces compliance with these standards. New standards are being developed and existing standards are continuously being modified.

As these standards continue to be adopted and modified, they may impose additional compliance requirements on Cleco Power and Midstream operations, which may result in an increase in capital expenditures and operating expenses. Failure to comply with these standards can result in the imposition of material fines and civil penalties.

In February 2010, the SPP RE notified Cleco that an audit would be conducted to determine Cleco’s compliance with the NERC Reliability Standard and Critical Infrastructure Protection cybersecurity standard requirements. The audit was conducted in April 2010. Cleco submitted mitigation plans and evidence of remedial efforts in connection with the SPP’s initial findings from the audit. Cleco and the SPP agreed to a financial settlement totaling less than $0.1 million, which has been approved by NERC. Cleco’s next scheduled NERC Critical Infrastructure Protection audit ~~will~~is expected to begin in March 2013. The next NERC Reliability audit is scheduled to begin in November 2013. Management is unable to predict the outcome of the future audit or whether it will have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Environmental Compliance

Cleco’s costs of compliance with environmental laws and regulations are significant. The costs of compliance with new environmental laws and regulations, as well as the incurrence of incremental environmental liabilities, could be significant to the Registrants.

Cleco is subject to extensive environmental oversight by federal, state, and local authorities and is required to comply with numerous environmental laws and regulations related to air quality, water quality, waste management, natural resources, and health and safety. Cleco also is required to obtain and comply with numerous governmental permits in operating its facilities. Existing environmental laws, regulations, and permits could be revised or reinterpreted, and new laws and regulations could be adopted or become applicable to Cleco. For example, the EPA has announced rules that it will regulate CO2 and hazardous air pollutants from electric generating units. Cleco may incur significant capital expenditures or additional operating costs to comply with these revisions, reinterpretations, and new requirements. If Cleco fails to comply, it could be subject to civil or criminal liabilities and fines or may be forced to shut down or reduce production from its facilities. Cleco cannot predict the ~~outcome of pending or future legislative and rulemaking proposals.~~

~~Environmental~~outcome advocacy groups, states, other organizations, some government agencies, and the presidential administration are focusing considerable attention on the potential role in climate change from power generation facilities emissions, including CO2 emissions. Future changes in environmental regulations governing power plant emissions could make some of ~~Cleco’s~~pending ~~electric generating units uneconomical to maintain~~ or ~~operate.~~future Inlegislative ~~addition,~~and ~~any~~rulemaking ~~legal~~ proposals.

Environmental advocacy groups, states, other organizations, some government agencies, and the presidential administration are focusing considerable attention on the potential role in climate change from power generation facilities emissions, including CO2 emissions. Future changes in environmental regulations governing power plant emissions could make some of Cleco’s electric generating units uneconomical to maintain or operate. In addition, any legal obligation that would require Cleco to substantially reduce its emissions beyond present levels could require extensive mitigation efforts and could raise uncertainty about the future viability of some fossil fuels as an energy source for new and existing electric generation facilities. Cleco cannot predict the outcome of pending or future legislative and rulemaking proposals.

Cleco Power may request recovery from its customers of its costs to comply with new environmental laws and regulations. If the LPSC were to deny Cleco Power’s request to recover all or part of its environmental compliance costs, there could be a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Regulatory Compliance

Cleco operates in a highly regulated environment, and adverse regulatory decisions or changes in applicable regulations could have a material adverse effect on the Registrants’ businesses or result in significant additional costs.

Cleco’s business is subject to extensive federal, state, and local ~~energy, environmental and other~~ laws and regulations. The LPSC regulates Cleco’s retail operations, and FERC regulates Cleco’s wholesale operations. The construction, planning, and siting of Cleco’s power plants and transmission lines also are subject to the jurisdiction of the LPSC and FERC. Additional regulatory authorities have jurisdiction over some of Cleco’s operations and construction projects including the EPA, the U.S. Bureau of Land Management, the U.S. Fish and Wildlife Services, the ~~U.S. Department of Energy~~DOE, the U.S. Army Corps of Engineers, the U.S. Department of Homeland Security, the Occupational Safety and Health Administration, the U.S. Department of Transportation, the Federal Communications Commission, the LDEQ, the Louisiana Department of Health and Hospitals, the Louisiana Department of Natural Resources, the Louisiana Department of Public Safety, regional water quality boards, and various local regulatory districts.

Cleco must periodically apply for licenses and permits from these various regulatory authorities and abide by their respective orders. Should Cleco be unsuccessful in obtaining necessary licenses or permits or should these regulatory authorities initiate any investigations or enforcement actions or impose penalties or disallowances on Cleco, Cleco’s business could be adversely affected. Existing regulations may be revised or reinterpreted and new laws and regulations may be adopted or become applicable to Cleco or Cleco’s facilities in a manner that may have a detrimental effect on the Registrants’ business or result in significant additional costs because of Cleco’s need to comply with those requirements.

~~Weather Sensitivity~~21

~~The~~CLECO ~~operating~~CORPORATION ~~results~~CLECO ofPOWER ~~Cleco~~2012 ~~Power~~FORM ~~are affected by weather conditions and may fluctuate on a seasonal and quarterly basis.~~10-K

~~Weather conditions directly influence the demand for electricity, particularly kWh sales to residential customers. In~~ Cleco Power’s ~~service~~Rates territory, demand for power typically peaks during the hot summer months. As a result, Cleco Power’s financial results may fluctuate on a seasonal basis. In addition, Cleco Power has sold less power, and consequently earned less income, when weather conditions were milder. Unusually mild weather in the future could have a material adverse impact on the Registrants’ results of operations, financial condition, and cash flows.

~~Severe~~The ~~weather,~~LPSC ~~including~~and ~~hurricanes~~FERC ~~and~~regulate ~~winter~~the ~~storms,~~rates that Cleco Power can charge its customers.

20Cleco Power’s ongoing financial viability depends on its ability to recover its costs from its LPSC-jurisdictional customers in a timely manner through its LPSC-approved rates and its ability to pass to its FERC customers through rates its FERC-authorized revenue requirements. Cleco Power’s financial viability also depends on its ability to recover in rates an adequate return on capital, including long-term debt and equity. If Cleco Power is unable to recover any material amount of its costs in rates in a timely manner or recover an adequate return on capital, the Registrants’ results of operations, financial condition, and cash flows could be materially adversely affected.

~~CLECO~~Cleco ~~CORPORATIONCLECO~~Power’s ~~POWER~~revenues ~~2011~~and ~~FORM~~earnings ~~10-K~~are substantially affected by regulatory proceedings known as rate cases. During those cases, the LPSC or FERC determines Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its retail or wholesale customers through its rates. These proceedings may examine, among other things, the prudence of Cleco Power’s operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC and FERC have the authority to disallow costs found not to have been prudently incurred. These regulatory proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or reducing rates. Rate cases generally have long timelines, which may be limited by statute. Decisions are typically subject to appeal, potentially leading to additional uncertainty.

can be destructive, causing outages and property damage that can potentially result in additional expenses and lower revenue. Extreme drought conditions can impact the availability of cooling water to support the operations of generating plants, which can also result in additional expenses and lower revenue.

Retail Electric Service

Cleco Power’s retail electric rates and business practices are regulated by the LPSC, and reviews may result in refunds to customers.

Cleco Power’s retail rates for residential, commercial, and industrial customers and other retail sales are regulated by the LPSC, which conducts an annual review of Cleco Power’s earnings and regulatory return on equity. ~~Through 2009,~~ Cleco Power filed annual monitoring reports with the LPSC for 12-month periods ended September 30. In 2010, the reports were filed for 12-month periods ended June 30 and September 30. Beginning in 2011, Cleco Power filed the annual monitoring report for the 12-month period ended June 30. Cleco Power could be required to make a substantial refund of previously recorded revenue as a result of the LPSC review, and such refund could result in a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Wholesale Electric Service

Cleco Power’s wholesale electric rates and business practices are regulated by FERC, and Cleco could lose the right to sell at market-based rates.

Cleco Power’s wholesale rates are regulated by FERC, which conducts a review of Cleco Power’s generation market power every three years in addition to each time generation capacity changes. IfIn ~~FERC~~January ~~determines~~2012, Cleco ~~Power~~filed ~~possesses~~a ~~generation~~Notice ~~market~~of ~~power~~Change ~~in excess~~ of ~~certain~~Status ~~thresholds,~~with ~~Cleco~~FERC ~~Power~~resulting ~~could~~from ~~lose~~ the ~~right~~termination toof ~~sell~~the ~~wholesale~~Evangeline ~~generation~~2010 atTolling ~~market-based~~Agreement. In ~~rates~~connection ~~within~~with ~~its~~such ~~control area~~notice, ~~which~~Cleco ~~could~~included ~~result~~an inanalysis ~~a material adverse effect on the Registrants’ results~~ of ~~operations,~~Cleco's ~~financial~~generation ~~condition, and cash flows.~~

market power. In June 2012, Cleco filed its triennial market power analysis with FERC. FERC has not yet issued any findings in connection with either filing. If FERC determines Cleco Power possesses generation market power in excess of certain thresholds, Cleco Power could lose the right to sell wholesale generation at market-based rates within its control area, which could result in a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Weather Sensitivity

The operating results of Cleco Power are affected by weather conditions and may fluctuate on a seasonal and quarterly basis.

Weather conditions directly influence the demand for electricity, particularly kWh sales to residential customers. In Cleco Power’s service territory, demand for power typically peaks during the hot summer months. As a result, Cleco Power’s financial results may fluctuate on a seasonal basis. In addition, Cleco Power has sold less power and, consequently, earned less income when weather conditions were milder. Unusually mild weather in the future could have a material adverse impact on the Registrants’ results of operations, financial condition, and cash flows.

Severe weather, including hurricanes and winter storms, can be destructive causing outages and property damage that can potentially result in additional expenses and lower revenue. Extreme drought conditions can impact the availability of cooling water to support the operations of generating plants, which can also result in additional expenses and lower revenue.

The physical risks associated with climate change could impact the Registrants’ results of operations, financial condition, and cash flows.

The physical risks from climate change, such as an increase in sea level, wetland and barrier island erosion, risks of flooding and changes in weather conditions, such as changes in temperature and precipitation patterns, and potential increased impacts of extreme weather conditions or storms, could affect the Registrants' operations. The Registrants’ assets are in and serve communities that are at risk from sea level rise, changes in weather conditions, storms, and loss of the protection offered by coastal wetlands. A significant portion of the nation's oil and gas infrastructure is located in these areas and is susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to fuel supply interruptions and price spikes.

These and other physical changes could result in changes in customer demand, increased costs associated with repairing and maintaining generation facilities and transmission and distribution systems resulting in increased maintenance and capital costs (and potential increased financing needs), limits on Cleco Power's ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction. Also, to the extent that climate change adversely impacts the economic health of a region or results in energy conservation or demand side management programs, it may adversely impact customer demand and revenues. Such physical or operational risks could have a material effect on the Registrants' results of operations, financial condition, and cash flows.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

Cleco Credit Ratings

A downgrade in Cleco Corporation’s or Cleco Power’s credit ~~rating~~ratings could result in an increase in their respective borrowing costs and a reduced pool of potential investors and funding sources.

While the senior unsecured debt ratings of Cleco Corporation and Cleco Power are currently investment grade, in recent years such ratings have been downgraded or put on negative watch by Moody’s and Standard & Poor’s. Neither Cleco Corporation nor Cleco Power can assure that its current debt ratings will remain in effect for any given period of time or that one or more of its debt ratings will not be lowered or withdrawn entirely by a rating agency. Credit ratings are not recommendations to buy, sell, or hold securities and each rating should be evaluated independently of any other rating. If Moody’s and Standard & Poor’s were to downgrade Cleco Corporation’s or Cleco Power’s long-term ratings, particularly below investment grade, the value of their debt securities would likely be adversely affected, and the borrowing cost of Cleco Corporation or Cleco Power, as the case may be, would likely increase. In addition, Cleco Corporation or Cleco Power, as the case may be, would likely be required to pay higher interest rates in future debt financings and be subject to more onerous debt covenants, and its pool of potential investors and funding sources could decrease.

onerous debt covenants, and its pool of potential investors and funding sources could decrease.

Holding Company

Cleco Corporation is a holding company, and its ability to meet its debt obligations and pay dividends on its common stock is dependent on the cash generated by its subsidiaries.

Cleco Corporation is a holding company and conducts its operations primarily through its subsidiaries. Substantially all of Cleco’s consolidated assets are held by its subsidiaries. Accordingly, Cleco Corporation’s ability to meet its debt obligations and to pay dividends on its common stock is largely dependent upon the cash generated by these subsidiaries. Cleco Corporation’s subsidiaries are separate and distinct entities and have no obligation to pay any amounts due on Cleco Corporation’s debt or to make any funds available for such payment. In addition, Cleco Corporation’s subsidiaries’ ability to make dividend payments or other distributions to Cleco Corporation may be restricted by their obligations to holders of their outstanding securities and to other general business creditors. Cleco Corporation’s right to receive any assets of any subsidiary, and therefore the right of its creditors to participate in those assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors. In addition, even if Cleco Corporation were a creditor of any subsidiary, its rights as a creditor would be subordinated to any security interest in the assets of that subsidiary and any indebtedness of the subsidiary senior to that held by Cleco Corporation. Moreover, Cleco Power, Cleco Corporation’s principal subsidiary, is subject to regulation by the LPSC, which may impose limits on the amount of dividends that Cleco Power may pay Cleco Corporation.

Midstream Generation Facility

Midstream’s generation facility is susceptible to unplanned outages, significant maintenance requirements, interruption of fuel deliveries, and transmission constraints.

The operation of power generation facilities involves many risks, including breakdown or failure of equipment, fuel interruption, and performance below expected levels of output or efficiency. If adequate expenditures for equipment maintenance are not made, a facility may incur more frequent ~~unplanned outages, higher than anticipated operating and maintenance expenditures, increased fuel costs, and potentially the loss of revenue related to competitive opportunities.~~

unplanned outages, higher than anticipated operating and maintenance expenditures, increased fuel costs, and potentially the loss of revenue related to competitive opportunities.

Midstream’s generation facility is fueled by natural gas. The deliverability of this fuel source may be constrained due to such factors as higher demand, production shortages, weather-related disturbances, or lack of transportation capacity.

Due to Midstream’s generation facility’s location on the transmission grid, Midstream relies on one main supplier of electric transmission when accessing external power markets. However, at times, physical constraints limit the amount of power this transmission provider can deliver.

Cleco Power’s Rates

The LPSC and FERC regulate the rates that Cleco Power can charge its customers.

Cleco Power’s ongoing financial viability depends on its ability

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

to recover its costs from its LPSC-jurisdictional customers in a timely manner through its LPSC-approved rates and its ability to pass through to its FERC customers in rates its FERC-authorized revenue requirements. Cleco Power’s financial viability also depends on its ability to recover in rates an adequate return on capital, including long-term debt and equity. If Cleco Power is unable to recover any material amount of its costs in rates in a timely manner or recover an adequate return on capital, the Registrants’ results of operations, financial condition, and cash flows could be materially adversely affected.

Cleco Power’s revenues and earnings are substantially affected by regulatory proceedings known as rate cases. During those cases, the LPSC or FERC determines Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its retail or wholesale customers through its rates. These proceedings may examine, among other things, the prudence of Cleco Power’s operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC and FERC have the authority to disallow costs found not to have been prudently incurred. These regulatory proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or reducing rates. Rate cases generally have long timelines, which may be limited by statute. Decisions are typically subject to appeal, potentially leading to additional uncertainty.

Alternative Generation Technology

Changes in technology may negatively impact the value of the Cleco Power and Midstream generation facilities.

A basic premise of Cleco’s business is that generating electricity at central power plants achieves economies of scale and produces electricity at a relatively low price. There are alternative technologies to produce electricity, most notably fuel cells, microturbines, wind turbines, and photovoltaic (solar) cells. Many companies and organizations conduct research and development activities to seek improvements in alternative technologies. It is possible that advances will reduce the cost of alternative methods of electricity production to a level that is equal to or below that of most central station production. Also, as new technologies are developed and become available, the quantity and pattern of electricity ~~usage~~purchased by customers could decline, with a corresponding decline in revenues derived by generators. In addition, the current presidential administration and certain members of the U.S. Congress have voiced support for such alternative energy sources. As a result, the value of the Cleco Power and Midstream generation facilities could be significantly reduced.

Insurance

Cleco’s insurance coverage may not be sufficient.

Cleco currently has general liability and property insurance in place to cover certain of its facilities in amounts that it considers appropriate. Such policies are subject to certain limits and deductibles and do not include business interruption coverage. Insurance coverage may not be available in the future at current costs or on commercially reasonable terms, and the insurance proceeds received for any loss of, or any damage to, any of Cleco’s facilities may not be sufficient to restore the loss or damage without negative impact on Cleco’s results of operations, financial condition, and cash flows.

damage to, any of Cleco’s facilities may not be sufficient to restore the loss or damage without negative impact on Cleco’s results of operations, financial condition, and cash flows.

Like other utilities that serve coastal regions, Cleco does not have insurance covering its transmission and distribution system, other than substations, because it believes such insurance to be cost prohibitive. In the future, Cleco may not be able to recover the costs incurred in restoring transmission and distribution properties following hurricanes or other natural disasters through issuance of storm recovery bonds or a change in Cleco Power’s regulated rates or otherwise, or any such recovery may not be timely granted. Therefore, Cleco may not be able to restore any loss of, or damage to, any of its transmission and distribution properties without negative impact on its results of operations, financial condition, and cash flows.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

Litigation

The outcome of legal proceedings cannot be predicted. An adverse finding could have a material adverse effect on the Registrants’ financial condition.

The Registrants are party to various litigation matters arising out of their business operations. The ultimate outcome of these matters cannot presently be determined, nor, in many cases, can the liability that could potentially result from a negative outcome in each case presently be reasonably estimated. The liability that the Registrants may ultimately incur with respect to any of these cases in the event of a negative outcome may be in excess of amounts currently reserved and insured against with respect to such matters and, as a result, these matters may have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Taxes

Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact the Registrants’ financial condition.

The Registrants make judgments regarding the potential tax effects of various financial transactions and results of operations to estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use, and employment-related taxes. These judgments include reserves for potential adverse outcomes regarding tax positions that have been taken. Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken by the Registrants could negatively affect their results of operations, financial condition, and cash flows.

Health Care Reform

Cleco may experience increased costs arising from health care reform.

In March 2010, Congress passed, and the President signed, the PPACA. This law may have a significant impact on health care providers, insurers, and others associated with the health care industry. Cleco is continuing to evaluate the impact of this comprehensive law on its business and has made the required changes to its health plan for ~~2012~~2013. Federal and state governments may propose other health care initiatives and revisions to the health care and health insurance systems. It is uncertain what legislative programs, if any, will be adopted in the future, or what action Congress or state legislatures may take regarding other health care reform proposals or legislation. Although the law has passed, many regulations have yet to be written; therefore, management cannot quantify the impact of these regulations, including those relating to the establishment of exchanges and the applicability of excise taxes on excess health benefits. The new regulations may have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

the future, or what action Congress or state legislatures may take regarding other health care reform proposals or legislation. Although the law has passed, many regulations have yet to be written; therefore, management cannot quantify the impact of these regulations, including those relating to the establishment of exchanges and the applicability of excise taxes on excess health benefits. The new regulations may have a material adverse effect on the Registrants’ results of operations, financial condition, and cash flows.

Technology and Terrorism Threats

Man-made problems such as computer viruses or terrorism may negatively impact the Registrants’ operating results.

Man-made problems such as computer viruses or terrorism may disrupt the Registrants’ operations and harm the Registrants’ operating results. The Registrants operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite the implementation of security measures, all of the Registrants’ technology systems are vulnerable to disability or failures due to hacking, viruses, acts of war or terrorism, and other causes. If the Registrants’ technology systems were to fail and the Registrants were unable to recover in a timely way, the Registrants would be unable to fulfill critical business functions, which could have a material adverse effect on the Registrants’ business, operating results, financial condition, and cash flows. In addition, the Cleco Power and Midstream generation plants, fuel storage facilities, transmission, and distribution facilities may be targets of terrorist activities that could disrupt the Registrants’ ability to produce or distribute some portion of their energy products. Any such disruption could result in a material decrease in revenues and significant additional costs to repair and insure the Registrants’ assets, which could have a material adverse effect on the Registrants’ business, operating results, financial condition, and cash flows. The continued threat of terrorism and heightened security and military action in response to this

~~threat~~Registrants’ operating results. The Registrants operate in a highly-regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite the implementation of security measures, all of the Registrants’ technology systems are vulnerable to disability or ~~any~~failures ~~future~~due to hacking, viruses, acts of war or terrorism, ~~may~~and ~~cause~~other ~~further~~causes. If ~~disruptions~~the Registrants’ technology systems were to fail and the ~~economies~~Registrants ofwere unable to recover in a timely way, the ~~U.S.~~Registrants ~~and~~would ~~other~~be ~~countries~~unable ~~and~~to ~~create~~fulfill ~~further~~critical ~~uncertainties~~business orfunctions, ~~otherwise~~which ~~materially~~could ~~harm~~have a material adverse effect on the Registrants’ business, operating results, financial condition, and cash flows. In addition, the Cleco Power and Midstream generation plants, fuel storage facilities, transmission, and distribution facilities may be targets of terrorist activities that could disrupt the Registrants’ ability to produce or distribute some portion of their energy products.

~~Cleco~~Any ~~Power~~such ~~Unsecured~~disruption could result in a material decrease in revenues and ~~Unsubordinated~~significant ~~Obligations~~additional costs to repair and insure the Registrants’ assets, which could have a material adverse effect on the Registrants’ business, operating results, financial condition, and cash flows. The continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of the U.S. and other countries and create further uncertainties or otherwise materially harm the Registrants’ business, operating results, financial condition, and cash flows.

Cleco Power LLC’s ~~unsecured~~Unsecured and ~~unsubordinated~~Unsubordinated obligations, including, without limitation, its senior notes, will be effectively subordinated to any secured debt of Cleco Power and the debt and any preferred equity of any of Cleco Power’s subsidiaries.Obligations

Cleco Power’s senior notes and its obligations under various loan agreements and refunding agreements with the Rapides Finance Authority, the Louisiana Public Facilities Authority and other issuers of tax-exempt bonds for the benefit of Cleco Power are unsecured and rank equally with all of Cleco PowerLLC’s ~~existing and future~~ unsecured and unsubordinated ~~indebtedness. As of December 31~~obligations, ~~2011~~including, ~~Cleco~~without ~~Power~~limitation, ~~had~~its ansenior ~~aggregate~~notes, ~~of $1.21 billion of unsecured and unsubordinated indebtedness. The unsecured and unsubordinated indebtedness of Cleco Power~~ will be effectively subordinated to, ~~and thus have a junior position to,~~ any secured debt ~~that~~of Cleco Power ~~may~~LLC ~~have~~and ~~outstanding from time to time (including any mortgage bonds) with respect to~~ the ~~assets securing such~~ debt~~. As~~ ~~of December 31, 2011, Cleco Power had no secured indebtedness outstanding. Cleco Power may issue mortgage bonds in the future under its Indenture of Mortgage,~~ and ~~holders~~any ofpreferred ~~mortgage~~equity ~~bonds would have a prior claim on certain Cleco Power material assets upon dissolution, winding up, liquidation or reorganization. Additionally, Cleco Power’s ability (and the ability~~ of ~~Cleco~~any ~~Power’s creditors, including holders~~ of ~~its senior notes) to participate in the assets of~~ Cleco Power’s ~~subsidiary, Cleco Katrina/Rita, is subject to the prior claims of the subsidiary’s creditors~~subsidiaries. ~~As of December 31, 2011, Cleco Katrina/Rita had $143.2 million of indebtedness outstanding.~~

Cleco Power LLC’s senior notes and its obligations under various loan agreements and refunding agreements with the Rapides Finance Authority, the Louisiana Public Facilities Authority, and other issuers of tax-exempt bonds for the benefit of Cleco Power LLC are unsecured and rank equally with all of Cleco Power LLC’s existing and future unsecured and unsubordinated indebtedness. As of December 31, 2012, Cleco Power LLC had an aggregate of $1.19 billion of unsecured and unsubordinated indebtedness. The unsecured and unsubordinated indebtedness of Cleco Power LLC will be

effectively subordinated to, and thus have a junior position to, any secured debt that Cleco Power LLC may have outstanding from time to time (including any mortgage bonds) with respect to the assets securing such debt. As of December 31, 2012, Cleco Power LLC had no secured indebtedness outstanding. Cleco Power LLC may issue mortgage bonds in the future under its Indenture of Mortgage and holders of mortgage bonds would have a prior claim on certain Cleco Power LLC

material assets upon dissolution, winding up, liquidation, or reorganization. Additionally, Cleco Power LLC’s ability (and the ability of Cleco Power LLC’s creditors, including holders of its senior notes) to participate in the assets of Cleco Power LLC’s subsidiary, Cleco Katrina/Rita, is subject to the prior claims of the subsidiary’s creditors. As of December 31, 2012, Cleco Katrina/Rita had $130.1 million of indebtedness outstanding, net of debt discount.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K



ITEM 1B. UNRESOLVED STAFF COMMENTS

None.



ITEM 2. PROPERTIES



CLECO CORPORATION

Electric Transmission Substations

As of December 31, ~~2011~~2012, Cleco Corporation, through two wholly owned subsidiaries, owned one transmission substation in Louisiana and one transmission substation in Mississippi.



CLECO POWER

All of Cleco Power’s electric generating stations and all other electric operating properties are located in the state of Louisiana. Cleco Power considers all of its properties to be well maintained, in good operating condition, and suitable for their intended purposes. For information on Cleco Power’s generating facilities, see Item 1, “Business — Operations — Cleco Power — Power Generation.”

Electric Generating Stations

As of December 31, ~~2011~~2012, Cleco Power either owned or had an ownership interest in three steam electric generating stations, two gas turbines, and one combined cycle unit with a combined nameplate capacity of 2,565 MW, and a combined electric net generating capacity of 2,436 MW. The net generating capacity is the result of capacity tests and operational tests performed between January and August 2012, as required by SPP criteria. This amount reflects the maximum production capacity these units can sustain over a specified period of time. For more information on Cleco Power’s generating facilities, see Item 1, “Business — Operations — Cleco Power — Power Generation.”

stations, one gas turbine, one combined cycle unit, and one simple cycle unit with a combined nameplate capacity of 2,524 MW, and a combined electric net generating capacity of 2,488 MW. The net generating capacity is the result of capacity tests performed between June and September 2011, as required by NERC. This amount reflects the maximum production capacity these units can sustain over a specified period of time. For more information on Cleco Power’s generating facilities, see Item 1, “Business — Operations — Cleco Power — Power Generation.”

Electric Substations

As of December 31, ~~2011~~2012, Cleco Power owned 7274 active transmission substations and ~~223~~222 active distribution substations.

Electric Lines

As of December 31, ~~2011~~2012, Cleco Power’s transmission system consisted of approximately 67 circuit miles of 500-kiloVolt (kV) lines; ~~510~~534 circuit miles of 230-kV lines; ~~685~~671 circuit miles of 138 kV lines; and 28 circuit miles of 69-kV lines. Cleco Power’s distribution system consisted of approximately 3,609 circuit miles of 34.5-kV lines and 8,221 circuit miles of other lines.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

kV lines; and 21 circuit miles of 69-kV lines. Cleco Power’s distribution system consisted of approximately 3,521 circuit miles of 34.5-kV lines and 8,199 circuit miles of other lines.

General Properties

Cleco Power owns various properties throughout Louisiana, which include a headquarters office building, regional offices, service centers, telecommunications equipment, and other general-purpose facilities.

Title

Cleco Power’s electric generating plants and certain other principal properties are owned in fee simple. Electric ~~transmission and distribution lines are located either on private rights-of-way or along streets or highways by public consent.~~

~~Substantially~~transmission ~~all of Cleco Power’s property, plant,~~ and ~~equipment~~distribution lines are ~~subject~~located toeither aon ~~lien~~private rights-of-way ~~Cleco~~or ~~Power’s~~along ~~Indenture~~streets ofor ~~Mortgage,~~highways ~~which~~by ~~does~~public ~~not impair the use of such properties in the operation of its business~~consent. As of December 31, 2011, no mortgage bonds were outstanding under the Indenture of Mortgage. The unsecured and unsubordinated indebtedness of Cleco Power will be effectively subordinated to, and thus have a junior position to, any mortgage bonds that Cleco Power may have outstanding from time to time with respect to the assets subject to the lien of the Indenture of Mortgage. Cleco Power may issue mortgage bonds in the future under its Indenture of Mortgage, and holders of mortgage bonds would have a prior claim on certain Cleco Power material assets upon dissolution, winding up, liquidation, or reorganization.

Substantially all of Cleco Power’s property, plant, and equipment are subject to a lien of Cleco Power’s Indenture of Mortgage, which does not impair the use of such properties in the operation of its business. As of December 31, 2012, no mortgage bonds were outstanding under the Indenture of Mortgage. Some of the unsecured and unsubordinated indebtedness of Cleco Power will be effectively subordinated to, and thus have a junior position to, any mortgage bonds that Cleco Power may have outstanding from time to time with respect to the assets subject to the lien of the Indenture of Mortgage. Cleco Power may issue mortgage bonds in the future under its Indenture of Mortgage, and holders of mortgage bonds would have a prior claim on certain Cleco Power material assets upon dissolution, winding up, liquidation, or reorganization.



MIDSTREAM

Midstream considers all of its properties to be well maintained, in good operating condition, and suitable for their intended purposes. For information on Midstream’s generating facilities, see Item 1, “Business — Operations — Midstream.”

Electric Generation

As of December 31, ~~2011~~2012, Midstream, through one wholly owned subsidiary, owned one electric generating station, with a nameplate capacity of 775 MW and an electric net generating capacity of ~~755~~753 MW. For information on Midstream’s generating facilities, see Item 1, “Business — Operations — Midstream.”

Title

Midstream’s assets are owned in fee simple. ~~Prior~~In toJanuary ~~the~~2012, ~~Evangeline~~Midstream ~~Restructuring~~began ~~Agreement~~marketing ~~and~~Coughlin’s ~~the~~capacity. Evangeline ~~associated~~was ~~extinguishment~~one of ~~debt,~~the ~~Evangeline~~successful ~~was~~bidders ~~subject~~in toCleco aPower’s ~~lien~~RFP ~~securing~~for ~~obligations~~short-term ~~under~~2012 anresources ~~Indenture~~beginning ofJanuary ~~Mortgage~~1, ~~which~~2012. On ~~did~~October ~~not~~30, ~~impair~~2012, ~~the~~Cleco ~~use~~Power ofannounced ~~such~~that ~~properties~~Evangeline inwas the ~~operation~~winning ofbidder ~~its~~in ~~business. On~~Cleco ~~February~~Power’s ~~22,~~2012 ~~2010~~Long-Term RFP, ~~Evangeline~~subject ~~and~~to ~~JPMVEC~~further ~~terminated~~due diligence, the ~~Evangeline~~completion ~~Tolling~~of ~~Agreement~~definitive agreements, and ~~executed~~regulatory ~~the~~approvals ~~Evangeline~~from ~~2010~~the ~~Tolling~~LPSC ~~Agreement~~and FERC. ~~The~~In December 2012, Cleco Power and Evangeline ~~2010~~executed ~~Tolling~~definitive ~~Agreement~~agreements ~~expired~~to ontransfer ~~December~~ownership ~~31,~~and ~~2011,~~control ~~(with~~of aCoughlin ~~JPMVEC~~from ~~option~~Evangeline to ~~extend~~Cleco ~~one year)~~Power. ~~JPMVEC~~The ~~did~~transaction ~~not~~is ~~exercise~~expected ~~the option~~ to ~~extend~~close ~~the~~as ~~tolling~~early ~~agreement and~~ as athe ~~result,~~fourth ~~Coughlin's~~quarter ~~capacity~~of ~~was~~2013, ~~available~~after tocompletion ~~Midstream~~of ~~beginning~~regulatory ~~January 1, 2012~~approvals. For more information, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Regulatory and Other Matters — Generation RFP.”



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K



ITEM 3. LEGAL PROCEEDINGS



CLECO

For information on legal proceedings affecting Cleco, see Part I, Item I, “Business — Environmental Matters — Environmental Quality — Air Quality” and “— Water Quality” and Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”



CLECO POWER

For information on legal proceedings affecting Cleco Power, see Part II, Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation.”



ITEM 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 of this Annual Report on Form 10-K.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

Board of Directors of Cleco

The names of the members of the Board of Directors of Cleco, their ages, dates of election, employment history and committee assignments as of December 31, 2011, are as follows. The term of each directorship is three years, and directors are divided among three classes. The terms of the three classes are staggered in a manner so that only one class is elected by the shareholders annually.

NAME OF DIRECTOR	AGES AS OF DECEMBER 31, 2011
Sherian G. Cadoria	Age 71; Elected 1993Brigadier General, U.S. Army (retired)Retired President, Cadoria Speaker and Consultancy Service, Mansura, LAMember of the Audit, Nominating/Governance and Qualified Legal Compliance Committees
J. Patrick Garrett	Age 68; Elected 1981Retired President and Chief Executive Officer, Windsor Food Company, Ltd., Houston, TXChairman of the Board and chairman of the Executive, Nominating/Governance and Qualified Legal Compliance Committees
Elton R. King	Age 65; Elected 1999Retired President of Network and Carrier Services Group, BellSouth Telecommunications, Inc., Atlanta, GA. Also retired President and Chief Executive Officer of Visual Networks, Inc.Member of the Finance, Nominating/Governance and Qualified Legal Compliance Committees
Logan W. Kruger	Age 61; Elected 2008Former President, Chief Executive Officer and Director of Century Aluminum Company, Monterey, CAMember of the Audit and Compensation Committees
William L. Marks	Age 68; Elected 2001Retired Chairman and Chief Executive Officer, Whitney Holding Corporation and Whitney National Bank, New Orleans, LAChairman of the Finance Committee and member of the Compensation and Executive Committees
Robert T. Ratcliff Sr.	Age 69; Elected 1993Chairman and Chief Executive Officer, The Ratcliff Companies, Alexandria, LAMember of the Audit and Finance Committees
Peter M. Scott III	Age 62; Elected 2009Retired Executive Vice President and Chief Financial Officer, Progress Energy, Inc., Raleigh, NC. Also retired President and Chief Executive Officer of Progress Energy Service Company, LLCChairman of the Audit Committee and member of the Compensation and Executive Committees
Shelley Stewart Jr.	Age 58; Elected 2010Senior Vice President, Operational Excellence & Chief Procurement Officer, Tyco International Limited, Princeton, NJMember of the Audit, Nominating/Governance and Qualified Legal Compliance Committees
William H. Walker Jr.	Age 66; Elected 1996Retired Chairman, Howard Weil, Inc., New Orleans, LAChairman of the Compensation Committee and member of the Executive, Finance, Nominating/Governance and Qualified Legal Compliance Committees
Bruce A. Williamson	Age 52; Elected 2011President and Chief Executive Officer, Cleco Corporation, Pineville, LA since July 2011; Chairman, President and Chief Executive Officer, Dynegy, Inc. from 2004 to 2011Member of the Executive Committee

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

Executive Officers of Cleco

The names of the executive officers of Cleco and certain subsidiaries, their positions held, five-year employment history, ages, and years of service as of December 31, 2011, are as follows. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed.

NAME OF EXECUTIVE	POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
Bruce A. WilliamsonCleco Corporation Cleco Power	President and Chief Executive Officer since July 2011; Chairman, President and Chief Executive Officer, Dynegy, Inc. from 2004 to 2011. Chief Executive Officer since July 2011.(Age 52; less than one year of service)
George W. BausewineCleco Corporation Cleco Power	Senior Vice President - Corporate Services from May 2005 to August 2010. President and Chief Operating Officer since August 2010; Senior Vice President - Corporate Services from May 2005 to August 2010.(Age 56; 26 years of service)
Darren J. OlaguesCleco CorporationCleco Power Midstream	Senior Vice President, Chief Financial Officer and Treasurer since November 2011; Senior Vice President and Chief Financial Officer from May 2009 to November 2011. Senior Vice President from July 2007 to May 2009; Vice President, Power - Asset Management and Development, Exelon Corporation from November 2006 to July 2007; Director - Corporate Development, Exelon Corporation from March 2005 to November 2006.(Age 41; 4 years of service)
R. Russell DavisCleco CorporationCleco Power	Senior Vice President - External Relations and Information Technology since November 2011; Vice President - Investor Relations and Chief Accounting Officer from May 2009 to November 2011; Vice President, Chief Accounting Officer & Interim CFO from June 2008 to May 2009; Vice President and Chief Accounting Officer from May 2005 to June 2008.(Age 55; 12 years of service)
Jeffrey W. HallCleco Corporation Cleco Power	Senior Vice President - Governmental Affairs and Chief Diversity Officer since July 2006; Vice President - Governmental and Community Affairs from July 2005 to July 2006. Senior Vice President - Governmental Affairs and Chief Diversity Officer since July 2006; Vice President - Governmental and Community Affairs from October 2004 to July 2006.(Age 60; 30 years of service)
Wade A. HoeflingCleco CorporationCleco Power	Senior Vice President, General Counsel & Director - Regulatory Compliance since April 2008; Senior Vice President, General Counsel, Director - Regulatory Compliance and Assistant Corporate Secretary from January 2007 to April 2008; General Counsel, Northeast Utilities Enterprises, Inc. from July 2004 to January 2007.(Age 56; 5 years of service)
Judy P. MillerCleco CorporationCleco Power	Senior Vice President - Corporate Services and Internal Audit since November 2011; Corporate Secretary from January 2004 to November 2011.(Age 54; 27 years of service)
Keith D. CrumpCleco Corporation Cleco Power	Treasurer from May 2005 to March 2007. Group Vice President since March 2010; Vice President - Regulatory, Retail Operations and Resource Planning from March 2007 to March 2010.(Age 50; 22 years of service)
William G. FontenotCleco Power	Group Vice President since March 2010; Vice President - Regulated Generation Development from July 2005 to March 2010.(Age 48; 26 years of service)

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

NAME OF EXECUTIVE	POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
Anthony L. BuntingCleco Power	Vice President - Customer Services and Energy Delivery since October 2004.(Age 52; 20 years of service)
Stephen M. CarterCleco Power	Vice President - Regulated Generation since April 2003. (Age 52; 23 years of service)
Robert R. LaBorde, Jr.Cleco CorporationCleco Power	Vice President - Strategic Planning, Development and Environmental Policy since November 2011; General Manager - Environmental Services from August 2006 to November 2011; General Manager - Project Development from May 2004 to August 2006.(Age 44; 20 years of service)
Terry L. TaylorCleco CorporationCleco Power	Controller and Chief Accounting Officer since November 2011; Assistant Controller from August 2006 to November 2011; Director of Accounting Services and Affiliate Compliance from January 2004 to August 2006.(Age 56; 11 years of service)
Julia E. CallisCleco CorporationCleco Power	Associate General Counsel and Corporate Secretary since November 2011; Senior Attorney from August 2007 to November 2011; Partner, Thompson & Knight LLP from 2004 to 2007.(Age 43; 4 years of service)
W. Keith Johnson Jr.Midstream	Acting Vice President since May 2009; General Manager - Midstream Commercial Operations from October 2007 to May 2009; Director - Business Development from October 2002 to October 2007.(Age 50; 17 years of service)

Executive Officers of Cleco

The names of the executive officers of Cleco and certain subsidiaries, their positions held, five-year employment history, ages, and years of service as of February 19, 2013, are as follows. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed.



NAME OF EXECUTIVE	POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
Bruce A. Williamson Cleco Corporation Cleco Power	President and Chief Executive Officer since July 2011; Chairman, President and Chief Executive Officer, Dynegy, Inc. from 2004 to 2011. Chief Executive Officer since July 2011. (Age 53; one year of service)
Darren J. Olagues Cleco Corporation Cleco Power Midstream	Senior Vice President, Chief Financial Officer since July 2012; Senior Vice President, Chief Financial Officer and Treasurer from November 2011 to July 2012; Senior Vice President and Chief Financial Officer from May 2009 to November 2011. Senior Vice President from July 2007 to May 2009. (Age 42; 5 years of service)
Wade A. Hoefling Cleco Corporation Cleco Power	Senior Vice President, General Counsel & Director - Regulatory Compliance since April 2008; Senior Vice President, General Counsel, Director - Regulatory Compliance and Assistant Corporate Secretary from January 2007 to April 2008. (Age 57; 6 years of service)
Judy P. Miller Cleco Corporation Cleco Power	Senior Vice President - Corporate Services and Internal Audit since November 2011; Corporate Secretary from January 2004 to November 2011. (Age 55; 28 years of service)
Keith D. Crump Cleco Power	Senior Vice President - Commercial Operations since March 2012; Group Vice President from March 2010 to March 2012; Vice President - Regulatory, Retail Operations and Resource Planning from March 2007 to March 2010. (Age 51; 23 years of service)
William G. Fontenot Cleco Power	Senior Vice President - Utility Operations since March 2012; Group Vice President from March 2010 to March 2012; Vice President - Regulated Generation Development from July 2005 to March 2010. (Age 50; 26 years of service)
Thomas R. Miller Cleco Corporation Cleco Power	Vice President - Treasurer since July 2012; Senior Vice President & Treasurer, Solar Trust of America LLC from October 2010 to July 2012; Vice President, Treasury, Exelon Corporation from June 2002 to August 2010. (Age 52; less than one year of service)
Anthony L. Bunting Cleco Power	Vice President - Transmission & Distribution Operations since October 2012; Vice President - Customer Services and Energy Delivery from October 2004 to October 2012. (Age 53; 21 years of service)
Robert R. LaBorde, Jr. Cleco Corporation Cleco Power	Vice President - Strategic Planning, Development and Environmental Policy from November 2011 to November 2012; General Manager - Environmental Services from August 2006 to November 2011. Vice President - Generation Operations since November 2012. (Age 45; 21 years of service)
Terry L. Taylor Cleco Corporation Cleco Power	Controller and Chief Accounting Officer since November 2011; Assistant Controller from August 2006 to November 2011. (Age 58; 12 years of service)
Julia E. Callis Cleco Corporation Cleco Power	Associate General Counsel and Corporate Secretary since November 2011; Senior Attorney from August 2007 to November 2011. (Age 44; 5 years of service)

In January 2004, Perryville entered into an agreement to sell its 718-MW power plant to Entergy Louisiana. As part of the sales process, Perryville and PEH filed voluntary petitions in the Perryville and PEH Bankruptcy Court for protection under Chapter 11 of the U.S. Bankruptcy Code. Mr. Fontenot was a manager of Perryville and/or PEH within the two years preceding the voluntary bankruptcy filing.

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K



PART II



ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND CLECO CORPORATION’S PURCHASES OF EQUITY SECURITIES



CLECO CORPORATION

Cleco Corporation’s common stock is listed for trading on the New York Stock Exchange (NYSE). For information on the high and low sales prices for Cleco Corporation’s common stock as reported on the NYSE Composite Tape and dividends paid per share during each calendar quarter of ~~2011~~2012 and ~~2010~~2011, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2021 — Miscellaneous Financial Information (Unaudited).” During the ~~year~~years ended December 31, 2012 and 2011, Cleco Corporation repurchased 200,000 shares and 400,000 shares, respectively, of common stock. For information on Cleco Corporation’s common stock repurchase program, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 7 — Common and Preferred Stock — Common Stock Repurchase Program.”

Dividends, as determined by the Board of Directors of Cleco Corporation, may be declared and paid on the common stock from time to time out of funds legally available, subject to prior rights to dividends on any outstanding series of preferred stock. The provisions of Cleco Corporation’s amended and restated articles of incorporation applicable to preferred stock and certain provisions contained in the debt instruments of Cleco under certain circumstances restrict the amount of retained earnings available for the payment of dividends by Cleco Corporation. The most restrictive covenant, which is in Cleco Corporation’s credit facility, requires Cleco Corporation’s total indebtedness to be less than or equal to 65% of total capitalization. At December 31, ~~2011~~2012, approximately $~~661~~758.53 million of retained earnings ~~were~~was unrestricted.

OnIn January 272011, ~~2012,~~the Board of Directors of Cleco Corporation’s ~~Board~~declared dividends of ~~Directors~~$0.25 ~~declared~~per ashare ~~quarterly~~of ~~dividend~~common stock. In April 2011 and July 2011, dividends of $0.~~3125~~28 per share ~~payable~~of oncommon ~~February~~stock 15were declared. In October 2011, January 2012, toand ~~common~~April ~~shareholders~~2012, ofthe ~~record~~Board atof ~~the~~Directors ~~close~~declared dividends of ~~business~~$0.3125 onper ~~February~~share 6,of ~~2012~~common stock.

AsIn ofJuly ~~January~~and ~~31,~~October 2012, ~~there~~the ~~were~~quarterly ~~6,120~~dividend ~~holders~~declared by the Board of ~~record~~Directors increased to $0.3375 per share of common stock. On January 24, 2013, Cleco Corporation’s ~~common~~Board ~~stock,~~of ~~and~~Directors ~~the~~declared ~~closing~~a ~~price~~quarterly dividend of ~~Cleco~~$0.3375 ~~Corporation’s~~per share payable on February 15, 2013, to common ~~stock~~shareholders asof ~~reported~~record onat the ~~NYSE~~close ~~Composite~~of ~~Tape~~business ~~was~~on ~~$39.76~~February ~~per~~5, ~~share~~2013. The declaration of dividend payments is at the Board of Directors’ sole discretion and future dividends are subject to numerous factors that ordinarily affect the dividend policy,

In April 2011, the Board of Directors of Cleco Corporation declared a dividend of $0.28 per share of common stock payable on May 16, 2011. In October 2011, the Board of Directors raised the quarterly dividend from $0.28 per share of common stock to $0.3125 per share of common stock, payable on November 15, 2011. The declaration of dividend payments is at the Board of Directors’ sole discretion and future dividends are subject to numerous factors that ordinarily affect the dividend policy, including the result of Cleco’s operations and its financial position, as well as general economic and business conditions.

As of February 1, 2013, there were 5,824 holders of record of Cleco Corporation’s common stock, and the closing price of Cleco Corporation’s common stock as reported on the NYSE Composite Tape was $42.65 per share.

In January 2011, Cleco Corporation’s Board of Directors authorized and approved the redemption of all outstanding shares of the 4.5% cumulative preferred stock not subject to mandatory redemption, provided that no shares of such preferred stock were redeemed prior to the repayment in full and termination of the $150.0 million bank term loan that matured on August 19, 2011. During 2011, the $150.0 million bank term loan was repaid and on June 24, 2011, Cleco Corporation redeemed all 10,288 outstanding shares of its 4.5% preferred stock. The redemption price was $101 per share, plus accrued and unpaid dividends to the redemption date, or $101.296 per share.



CLECO POWER

There is no market for Cleco Power’s membership interests. All of Cleco Power’s outstanding membership interests are owned by Cleco Corporation. Distributions on Cleco Power’s membership interests are paid when and if declared by Cleco Power’s Board of Managers. Any future distributions also may be restricted by any credit or loan agreements that Cleco Power may enter into from time to time.

Some provisions in Cleco Power’s debt instruments restrict the amount of equity available for distribution to Cleco Corporation by Cleco Power under specified circumstances. The most restrictive covenant requires Cleco Power’s total indebtedness to be less than or equal to 65% of total capitalization. At December 31, ~~2011~~2012, approximately $~~519~~623.7 million of member’s equity was unrestricted.

During ~~2011~~2012, ~~2010~~2011, and ~~2009~~2010, Cleco Power made $~~130~~58.0 million, $~~150~~130.0 million, and $30150.0 million of distribution payments to Cleco Corporation, respectively.

During 2010, Cleco Power received $225.7 million in non-cash equity contributions from Cleco Corporation relating to Acadia Unit 1. For more information regarding this transaction, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions — Acadia Unit 1.” Cleco Power received no equity contributions from Cleco Corporation in ~~2011~~2012 or ~~2009~~2011.

28ITEM 6. SELECTED FINANCIAL DATA

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

ITEM 6.SELECTED FINANCIAL DATA



CLECO

The information set forth in the following table should be read in conjunction with the Consolidated Financial Statements and the related Notes in Item 8, “Financial Statements and Supplementary Data.”

Cleco’s consolidated financial results for ~~2007~~2010 include the ~~settlement~~gain ofon ~~Acadia’s~~toll ~~pre-petition~~settlement ~~unsecured~~due ~~claims~~to ~~against~~transactions ~~CES~~related ~~and Calpine Corporation and amounts received by APH relating~~ to ~~Cajun’s~~the ~~purchase of CAH’s 50% equity ownership interest in Acadia, offset by a pre-tax impairment loss.~~

~~Cleco’s consolidated financial results for 2010 include the gain on toll settlement due to transactions related to the~~ termination of the Evangeline Tolling Agreement and the execution of the Evangeline 2010 Tolling Agreement and also include the gain related to the acquisition of Acadia Unit 1 and half of Acadia Power Station’s related common facilities.

Cleco’s consolidated financial results for 2011 include the gain related to the disposition of Acadia Unit 2 and the remaining half of Acadia Power Station’s related common facilities.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

Five-Year Selected Financial Data

(THOUSANDS, EXCEPT PER SHARE AND PERCENTAGES)	~~2011~~2012			~~2010~~2011			~~2009~~2010			~~2008~~2009			~~2007~~2008
Operating revenue, net (excluding intercompany revenue)
Operating revenue (loss), net (excluding intercompany revenue)
Cleco Power	$	1991,~~096,093~~695		$	1,~~119~~096,~~084~~093		$	~~842~~1,~~227~~119,084		$	1842,~~069,674~~227		$	1,~~023~~069,~~411~~674
Midstream	1925,~~013~~562			2719,~~030~~013			827,~~749~~030			78,~~921~~749			57,~~066~~921
Other	2(23,~~207~~560		)	2,~~552~~207			2,~~782~~552			2,~~603~~782			2,~~139~~603
Total	$	1993,~~117,313~~697		$	1,~~148~~117,~~666~~313		$	~~853~~1,~~758~~148,666		$	1853,~~080,198~~758		$	1,~~030~~080,~~616~~198
Income from continuing operations before income taxes	$	298,745		$	397,889		$	115,886		$	120,598		$	222,561
Income before income taxes	$	228,975		$	298,745		$	397,889		$	115,886		$	120,598
Net income applicable to common stock	$	~~195~~163,~~710~~648		$	~~255~~195,~~345~~710		$	~~106~~255,~~261~~345		$	~~102~~106,~~095~~261		$	~~151~~102,~~331~~095
Basic earnings per share applicable to common stock	$	32.2471		$	43.2324		$	14.7723		$	1.7077		$	21.5570
Diluted earnings per share applicable to common stock	$	32.2270		$	43.2022		$	14.7620		$	1.7076		$	21.5470
Capitalization
Common shareholders’ equity	5154.5039		%	4851.4650		%	4548.7746		%	4845.8977		%	5648.7489		%
Preferred stock	—			~~0.04~~—		%	0.04		%	0.0504		%	0.0605		%
Long-term debt	4845.5061		%	5148.50		%	5451.1950		%	5154.0619		%	4351.2006		%
Common shareholders’ equity	$	1,~~419~~499,~~857~~213		$	1,~~317~~419,~~178~~857		$	1,~~115~~317,~~043~~178		$	1,~~059~~115,~~836~~043		$	1,~~010~~059,~~340~~836
Preferred stock	$	—		$	~~1,029~~—		$	1,029		$	1,029		$	1,029
Long-term debt, net	$	1,~~337~~257,~~056~~258		$	1,~~399~~337,~~709~~056		$	1,~~320~~399,~~299~~709		$	1,~~106~~320,~~819~~299		$	~~769~~1,~~103~~106,819
Total assets	$	4,~~050~~147,~~202~~349		$	4,~~161~~050,~~410~~202		$	34,~~694~~161,~~847~~430		$	3,~~341~~696,~~204~~479		$	23,~~706~~346,~~623~~143
Cash dividends declared per common share	$	1.~~1225~~30		$	01.~~975~~1225		$	0.~~900~~975		$	0.~~900~~90		$	0.~~900~~90



CLECO POWER

The information called for by Item 6 with respect to Cleco Power is omitted pursuant to General Instruction I(2)(a) to Form 10-K (Omission of Information by Certain Wholly Owned Subsidiaries).

29ITEM 7. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



OVERVIEW

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

• Cleco Power, a regulated electric utility company, which owns 9 generating units with a total nameplate capacity of 2,~~524~~565 MW and serves approximately ~~281~~283,000 customers in Louisiana through its retail business and 10 communities across Louisiana and Mississippi through wholesale power contracts, and

• Midstream, a wholesale energy business, which owns Evangeline (which owns and operates Coughlin).

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. ~~Key~~A ~~initiatives~~key ~~that~~initiative Cleco Power iscompleted ~~currently~~during ~~working~~2012 onwas ~~include~~ the Acadiana Load Pocket transmission project,. Key initiatives on which Cleco Power is currently working include completion of the AMI project, completion of the transfer of ownership and ~~power~~control ~~supply~~of ~~options~~Coughlin ~~for~~from ~~2012~~Evangeline, and ~~beyond~~integration into MISO by January 2014. These initiatives are discussed below.

Acadiana Load Pocket Transmission Project

In September 2008, Cleco Power entered into an agreement with two other utilities to upgrade and expand interconnected transmission systems in south central Louisiana in an area known as the Acadiana Load Pocket. The project received LPSC and SPP approval in February 2009. Cleco Power’s initial portion of the estimated cost was approximately $150.0 million, including AFUDC. Due to lower material and labor costs than initially expected, Cleco Power’s estimated costs for its portion of the project were reduced to $125.0 million, including AFUDC. At December 31, 2011, Cleco Power had spent $96.2 million on the project. A return on and recovery of the costs associated with the completed portions of the Acadiana Load Pocket project are included in base revenue. The project is estimated to be 87% complete with the completion expected by December 2012. For information on the impact the Acadiana Load Pocket project is expected to have on base revenue, see “— Cleco Power’s Results of Operations — Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 — Base.” For more information, see “— Financial Condition — Regulatory and Other Matters — Acadiana Load Pocket Project.”

transmission systems in south central Louisiana in an area known as the Acadiana Load Pocket. At December 31, 2012, Cleco Power had spent $123.7 million, including AFUDC, on the project. A return on and recovery of the costs associated with the completed portions of the Acadiana Load Pocket transmission project are included in base rates. The project was completed in December 2012. For information on the impact the Acadiana Load Pocket transmission project is expected to have on base revenue, see “— Cleco Power’s Results of Operations — Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 — Base.” For more information, see “— Financial Condition — Regulatory and Other Matters — Acadiana Load Pocket Transmission Project.”

AMI Project

In May 2010, Cleco Power accepted the terms of a $20.0 million grant from the DOE under the DOE’s small-grant process to implement advanced metering technology for all of Cleco Power’s retail customers. Cleco Power estimates the project will cost $73.0 million, with the DOE grant providing $20.0 million toward the project and Cleco Power providing the remaining $53.0 million. The grant program is a part of the American Recovery and Reinvestment Act of 2009, an economic stimulus package passed by Congress in February 2009. Advanced metering technology includes the installation of electric meters that enable two-way communication capabilities between a home or business and a utility company. At December 31, 2012, Cleco Power had incurred $55.5 million in project costs, of which $20.0 million has been submitted to and reimbursed by the DOE. The project is expected to be completed in the third quarter of 2013. For

capabilities between a home or business and a utility company. At December 31, 2011, Cleco Power had incurred $9.8 million in project costs, of which $4.4 million has been submitted to the DOE for reimbursement. As of December 31, 2011, Cleco Power had received $3.5 million in payments from the DOE. The project is expected to be completed in the third quarter of 2013. For more information on the AMI Project, see “— Financial Condition — Regulatory and Other Matters — AMI Project.”29



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

more information on the AMI Project, see “— Financial Condition — Regulatory and Other Matters — AMI Project.”

The risks associated with cybersecurity issues increase as Cleco moves toward more dependence on digital technology to conduct its daily operations, such as, but not limited to, AMI. Cleco has security measures in place to protect its technology systems from hacking, viruses, and other causes. In addition, Cleco is under the jurisdiction of the NERC Critical Infrastructure Protection cybersecurity standards and has implemented mechanisms, policies, and procedures to meet those standards. If Cleco’s security measures were to fail, revenues could decrease and costs to repair the assets could have a material adverse effect on the Registrants’ business, operating results, financial condition, and cash flows. For more information on cybersecurity, see Part 1, Item 1A, “Risk Factors — Technology and Terrorism Threats.”

Power Supply Options/Coughlin Transfer from Midstream

Cleco Power is ~~evaluating a range of capacity and energy supply options for 2012 and beyond. Cleco Power is~~ continuing to update its IRP to look at future sources of supply to meet its capacity and energy requirements and to comply with new environmental standards~~, primarily CSAPR~~. In August 2011, Cleco Power issued ~~one~~an RFP for resources to enhance reliability for January through April 2012 and ~~has since~~ selected and negotiated two agreements from the RFP, a power purchase agreement with NRG Power Marketing LLC and a tolling agreement with Evangeline. Both agreements began on January 1, 2012 and ended on April 30, 2012. In October 2011, a second RFP, seeking up to approximately 750 MW of capacity and energy, for a three- or five-year period was issued for supply starting May 1, 2012~~, to meet CSAPR~~. Cleco Power selected Evangeline’s proposal for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and ~~has~~approved ~~been~~by ~~submitted to~~ the LPSC in March 2012 and FERC ~~for~~in ~~approval~~April 2012. ~~Cleco~~In ~~Power~~May ~~also~~2012, ~~expects~~Cleco toPower ~~issue~~issued ana ~~additional~~draft RFP ~~in 2012~~ seeking long-term ~~access to~~ resources beyond April 2015. ~~For~~The ~~more~~final ~~information~~RFP onwas ~~CSAPR,~~issued ~~see~~in ~~Part~~July 12012 and proposals were received from potential suppliers in August 2012. On October 30, ~~Item~~2012, 1Cleco Power announced Evangeline as the winning bidder in Cleco Power’s 2012 Long-Term RFP. In December 2012, ~~“Business~~Cleco —Power ~~Environmental~~and ~~Matters”~~Evangeline executed definitive agreements to transfer ownership and ~~for~~control of Coughlin from Evangeline to Cleco Power. For more information on the RFP, see “— Financial Condition — Regulatory and Other Matters — Generation RFP.”

MISO

Cleco Power’s transmission system is heavily interconnected with Entergy’s system; therefore, Cleco Power plans to follow Entergy and join MISO by January 2014. On December 6, 2012, Cleco Power filed an application with the LPSC indicating Cleco’s intent to join MISO, asking the commission to find that transferring control of certain transmission assets to MISO is in the public interest, to create an accounting order deferring costs related to Cleco Power’s transition into the MISO market, and to expedite treatment. For more information on MISO, see “— Financial Condition — Regulatory and Other Matters — Market Restructuring” and Part 1, Item 1A, “Risk Factors — MISO.”

Cleco Midstream

Evangeline

In March 2010, Evangeline restructured its tolling agreement with JPMVEC and entered into the Evangeline 2010 Tolling Agreement whereby the parties shortened the expiration of the prior long-term agreement from 2020 to December 31, 2011 (with a JPMVEC option to extend one year). JPMVEC did not exercise the option to extend the ~~tolling~~Evangeline ~~agreement~~2010 Tolling Agreement and as a result, Coughlin’s capacity and energy became available to Midstream beginning January 1, 2012. Evangeline was one of the successful bidders in Cleco Power’s RFP for short-term 2012 resources beginning January 1, 2012, and ~~currently~~began is providing 250 MW of capacity and energy to Cleco Power under a tolling agreement through April 30, 2012. In addition, in December 2011, Evangeline also was notified that Cleco Power selected its proposal to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power RFP for contractual resources beginning in 2012. The proposal was for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and was approved by the LPSC in March 2012 and FERC in April 2012. Midstream had been marketing Coughlin’s capacity for periods beginning after April 30, 2015, and had been evaluating various options to optimize Coughlin’s value. On October 30, 2012, Cleco Power announced that Evangeline was the winning bidder in Cleco Power’s 2012 Long-Term RFP. In December 2012, Cleco Power and Evangeline executed definitive agreements to transfer ownership and control of Coughlin from Evangeline to Cleco Power. For more information, see “— Financial Condition — Regulatory and Other Matters — Generation RFP.”

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

under a tolling agreement through April 30, 2012. In addition to Cleco Power’s RFP referenced above, in December 2011, Evangeline was also notified that Cleco Power selected its proposal to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power RFP for contractual resources to meet CSAPR beginning in 2012. The proposal was for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and has been submitted to the LPSC and FERC for approval. Currently, Midstream is marketing Coughlin’s capacity for periods beginning after April 30, 2015, and is evaluating various options to optimize Coughlin’s value. For more information, see “— Financial Condition — Regulatory and Other Matters — Generation RFP.”

Acadia

In October 2009, Acadia and Entergy Louisiana executed definitive agreements whereby Entergy Louisiana would purchase Acadia Unit 2. On April 29, 2011, Acadia completed its disposition of Acadia Unit 2 to Entergy Louisiana for $298.8 million. APH’s portion of the proceeds from the sale were used to repay Cleco Corporation’s $150.0 million bank term loan. For more information on the Acadia Unit 2 transaction, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions — Acadia Unit 2.”



RESULTS OF OPERATIONS

Use of Estimates

The preparation of financial statements in conformity with ~~accounting~~GAAP ~~principles generally accepted in the United States of America~~ requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Cleco Consolidated Results of Operations — Year ended December 31, 2011, Compared to Year ended December 31, 2010
				FOR THE YEAR ENDED DECEMBER 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2011			2010			VARIANCE			CHANGE
Operating revenue, net	$	1,117,313		$	1,148,666		$	(31,353	)	(2.7	)%
Operating expenses	816,278			853,325			37,047			4.3	%
Operating income	$	301,035		$	295,341		$	5,694		1.9	%
Allowance for other funds used during construction	$	4,947		$	12,413		$	(7,466	)	(60.1	)%
Equity income from investees, before tax	$	62,050		$	38,849		$	23,201		59.7	%
Gain on toll settlement	$	—		$	148,402		$	(148,402	)	(100.0	)%
Other income	$	8,914		$	5,242		$	3,672		70.0	%
Other expense	$	(8,434	)	$	(6,991	)	$	(1,443	)	(20.6	)%
Interest charges	$	70,658		$	95,776		$	25,118		26.2	%
Federal and state income taxes	$	102,897		$	142,498		$	39,601		27.8	%
Net income applicable to common stock	$	195,710		$	255,345		$	(59,635	)	(23.4	)%

~~Consolidated~~CLECO ~~net~~CORPORATION ~~income~~CLECO ~~applicable~~POWER to2012 ~~common~~FORM stock decreased $59.6 million, or 23.4%, in 2011 compared to 2010 primarily due to the absence of 2010 gains at Midstream related to the termination of the Evangeline Tolling Agreement and Acadia Unit 1 transaction, partially offset by the 2011 gain from the Acadia Unit 2 transaction. Also contributing to the decrease were lower Cleco Power earnings. Partially offsetting these decreases were higher corporate earnings.10-K

Operating revenue, net decreased $31.4 million, or 2.7%, in 2011 compared to 2010 largely as a result of lower fuel cost recovery revenue at Cleco Power due to lower per unit costs of fuel used for electric generation and lower per unit costs and volumes of power purchased for utility customers.



Cleco Consolidated Results of Operations — Year ended December 31, 2012, Compared to Year ended December 31, 2011
			FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2012		2011		VARIANCE			CHANGE
Operating revenue, net	$	993,697	$	1,117,313	$	(123,616	)	(11.1	)%
Operating expenses	712,046		819,066		107,020			13.1	%
Operating income	$	281,651	$	298,247	$	(16,596	)	(5.6	)%
Allowance for other funds used during construction	$	6,711	$	4,947	$	1,764		35.7	%
Equity income from investees, before tax	$	—	$	62,050	$	(62,050	)	(100.0	)%
Other income	$	29,117	$	8,914	$	20,203		226.6	%
Interest charges	$	84,156	$	70,658	$	(13,498	)	(19.1	)%
Federal and state income taxes	$	65,327	$	102,897	$	37,570		36.5	%
Net income applicable to common stock	$	163,648	$	195,710	$	(32,062	)	(16.4	)%

~~Operating~~Consolidated ~~expenses~~net income applicable to common stock decreased $3732.01 million, or 416.34%, in ~~2011~~2012 compared to ~~2010~~2011 primarily due to ~~lower~~the ~~per~~absence ~~unit~~of ~~costs~~the ~~and~~gain ~~volumes~~from the disposition of ~~power~~Acadia ~~purchased~~Unit ~~for~~2 ~~utility~~during ~~customers~~2011, partially offset by the contractual expiration of underlying indemnifications resulting from the disposition of Acadia Units 1 and 2. Also contributing to the decrease were lower corporate earnings. Partially offsetting these decreases were higher Cleco Power earnings.

~~Allowance~~Operating ~~for~~revenue, ~~other~~net ~~funds used during construction~~ decreased $7123.56 million, or 6011.1%, in ~~2011~~2012 compared to ~~2010,~~2011 ~~primarily~~largely as a result of lower fuel cost recovery revenue at Cleco Power due to ~~the~~lower ~~cessation~~per unit costs of ~~AFUDC~~fuel ~~accruals~~used ~~related~~for toelectric ~~the~~generation ~~completion~~and ofpower ~~construction~~purchased ~~activity~~for atutility ~~Madison~~customers ~~Unit~~and 3lower volumes of fuel used for electric generation.

~~Equity~~Operating ~~income~~expenses ~~from~~decreased ~~investees increased~~ $23107.20 million, or 5913.71%, in ~~2011~~2012 compared to ~~2010~~2011 primarily due to ~~increased~~lower ~~equity~~per ~~earnings~~unit atcosts ~~APH primarily from the recognition of a $62.0 million gain from the disposition of Acadia Unit 2~~ and ~~Acadia~~volumes ~~Power Station’s remaining common facilities to Entergy Louisiana. Partially offsetting this increase was the absence~~ of ~~the~~fuel ~~$41.0~~used ~~million~~for ~~gain~~electric ~~from Cleco Power’s acquisition of Acadia Unit 1 and half of Acadia Power Station’s related common facilities during 2010~~generation. ~~For more information on the Acadia Unit 1 and 2 transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions.”~~

~~Gain~~Allowance onfor ~~toll~~other ~~settlement~~funds ~~was~~used during construction increased $~~148~~1.48 million, or 35.7%, in ~~2010~~2012 ~~due~~compared to ~~transactions~~2011, ~~related~~primarily due to ~~the~~higher ~~termination~~AFUDC ofaccruals ~~the~~related ~~existing~~to ~~Evangeline~~the ~~Tolling~~AMI ~~Agreement~~Project and ~~the~~miscellaneous ~~execution~~transmission ofprojects, ~~the~~partially ~~Evangeline~~offset ~~2010~~by ~~Tolling~~lower ~~Agreement. For~~amounts ~~more~~from ~~information,~~the ~~see~~Acadiana ~~Item~~Load 8,Pocket ~~“Financial~~transmission ~~Statements~~project and ~~Supplementary~~the ~~Data~~absence —of ~~Notes~~accruals related to the ~~Financial~~completion ~~Statements~~of —Teche ~~Note~~Unit ~~17 — Evangeline Transactions~~4.”

~~Other~~Equity income ~~increased~~from investees decreased $362.71 million, or 70100.0%, in ~~2011~~2012 compared to ~~2010~~2011 primarily due to ~~death~~the ~~benefits~~absence ~~paid~~of the gain from the disposition of Acadia Unit 2 during 2011. For more information on ~~life~~the ~~insurance~~Acadia ~~policies~~Unit at2 ~~Cleco~~transaction, ~~Corporation~~see ~~and~~Item ~~higher~~8, ~~royalty~~“Financial ~~payments~~Statements and ~~higher~~Supplementary ~~revenue~~Data ~~from~~— ~~mutual~~Notes ~~assistance~~ to ~~other~~the ~~utilities~~Financial ~~for~~Statements ~~restoration~~— ~~efforts~~Note at18 ~~Cleco~~— ~~Power~~Acadia Transactions. ”

Other ~~expense~~income increased $120.42 million, or 20226.6%, in ~~2011~~2012 compared to ~~2010~~2011 primarily due to athe ~~decrease~~contractual inexpiration ~~the~~of ~~cash~~underlying ~~surrender~~indemnifications ~~value~~resulting from the disposition of ~~life~~Acadia ~~insurance~~Units ~~policies~~1 atand ~~Cleco~~2 ~~Corporation~~and higher royalty payments.

Interest charges ~~decreased~~increased $2513.15 million, or 2619.21%, in ~~2011~~2012 compared to ~~2010~~2011 largely due to anthe ~~IRS~~absence ~~settlement~~of ata ~~Evangeline~~favorable ~~and~~tax ~~the~~settlement ~~retirement~~recorded ofin ~~Evangeline’s~~2011 ~~debt~~relating into ~~2010~~Evangeline. ~~Also~~Partially ~~contributing~~offsetting tothis ~~the~~increase ~~decrease~~was ~~were~~lower interest charges at Cleco Power and lower corporate interest charges related to ~~uncertain tax positions and~~ the repayment of a bank term loan in April 2011. ~~Partially offsetting these decreases was higher interest charges at Cleco Power.~~

Federal and state income taxes decreased $3937.6 million, or 2736.85%, in ~~2011~~2012 compared to ~~2010~~2011. Tax expense decreased primarily due to athe ~~decrease~~change in pre-tax income, excluding AFUDC equity, the settlement of legacy tax issues, and an increase in tax credits, partially offset by ~~adjustments~~increases ~~related~~for to the ~~settlement~~absence of ~~the~~a ~~2001~~valuation ~~through~~allowance ~~2003~~reversal ~~IRS~~recorded ~~audit~~in 2011 and tax returns filed. The effective income tax rate is 28.5% which is different than the federal statutory rate primarily due to ~~prior~~the ~~year~~effect ~~adjustments~~of ~~related~~state toincome ~~the~~taxes, ~~settlement~~tax ofcredits, and the ~~2001~~effects ~~through~~of ~~2003~~settlements ~~IRS~~of ~~audit~~legacy ~~and state~~ tax ~~expense~~issues.

On July 3, 2012, Cleco and Cleco Power filed a PLR request with the IRS in order to determine the appropriateness and timing of the special allowance for depreciation for Madison Unit 3. Subsequently, on December 28, 2012, Cleco received a favorable PLR from the IRS, consistent with the request allowing for the additional first year depreciation deduction in the amount of $411.0 million as reflected on Cleco Corporation’s 2011 federal income tax return. Cleco and Cleco Power consider it more likely than not that these income tax losses generated on the 2011 income tax return will be utilized to reduce future payments of income taxes and both Cleco and Cleco Power expect to utilize the entire net operating loss carryforward within the statuatory deadlines.

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

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

CLECO POWER

Significant Factors Affecting Cleco Power

Revenue is primarily affected by the following factors:

As an electric utility, Cleco Power is affected, to varying degrees, by a number of factors influencing the electric utility industry in general. These factors include, among others, an increasingly competitive business environment, the cost of compliance with environmental and reliability regulations, conditions in the credit markets and global economy, and changes in the federal and state regulation of generation, transmission, and the sale of electricity. For a discussion of various regulatory changes and competitive forces affecting Cleco Power and other electric utilities, see Part I, Item 1 “Business — Regulatory Matters, Industry Developments, and Franchises — Franchises” and “— Financial Condition — Regulatory and Other Matters — Market Restructuring.” For a discussion of risk factors affecting Cleco Power’s business, see Item 1A, “Risk Factors — Transmission Constraints,” “— LPSC Audits,” “— Hedging and Risk Management Activities,” “— Commodity Prices,” “— Global Economic Environment and Uncertainty; Access to Capital,” “— Future Electricity Sales,” “— Cleco Power Generation Facilities,” “— MISO,” “— Reliability and Infrastructure Protection Standards Compliance,” “— Environmental Compliance,” “— Regulatory Compliance,” “— ~~Weather~~Cleco ~~Sensitivity~~Power’s Rates,” “— Retail Electric Service,” “— Wholesale Electric Service,” “— ~~Cleco~~Weather ~~Credit Ratings~~Sensitivity,” “— Cleco ~~Power’s~~Credit ~~Rates~~Ratings,” “— Alternative Generation Technology,” “— Insurance,” “— Litigation,” “— Taxes,” “— Health Care Reform,” ~~and~~ “— Technology and Terrorism Threats,” and “— Cleco Power Unsecured and Unsubordinated Obligations.”

Cleco Power’s residential customers’ demand for electricity ~~largely~~ is largely affected by weather. Weather generally is measured in cooling degree-days and heating degree-days. A cooling degree-day is an indication of the likelihood that a consumer will use air conditioning, while a heating degree-day is an indication of the likelihood that a consumer will use heating. An increase in heating degree-days does not produce the same increase in revenue as an increase in cooling degree-days, because alternative heating sources are more available and because winter energy is priced below the rate charged for energy used in the summer. Normal heating degree-days and cooling degree-days are calculated for a month by separately calculating the average actual heating and cooling degree-days for that month over a period of 30 years.

Cleco Power has experienced over the last five years, and anticipates over the next five years, moderate growth in retail non-industrial sales volume. For the retail industrial class, Cleco Power expects new industrial load to be added during 2012 and 2013 principally driven by expected development in northwestern Louisiana associated with the development of Haynesville shale gas recently discovered in that area. In addition, Cleco Power also expects to begin providing service to expansions of current customers’ operations, as well as service to a new customer. These expansions of service to current customers and service to a new customer are expected to contribute base revenue of $1.8 million in 2012 and an additional $0.4 million in 2013. Cleco Power’s expectations and projections regarding retail sales are dependent upon factors such as weather conditions, natural gas prices, customer conservation efforts, retail marketing and business development programs, and the economy of Cleco Power’s service area. For more information, see “Cautionary Note Regarding Forward-Looking Statements.”31



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

is an indication of the likelihood that a consumer will use heating. An increase in heating degree-days does not produce the same increase in revenue as an increase in cooling degree-days, because alternative heating sources are more available and because winter energy is priced below the rate charged for energy used in the summer. Normal heating degree-days and cooling degree-days are calculated for a month by separately calculating the average actual heating and cooling degree-days for that month over a period of 30 years.

Cleco Power has experienced over the last five years, and anticipates over the next five years, moderate growth in retail non-industrial sales volume. For the retail industrial class, Cleco Power expects new industrial load to be added in 2013, 2014, and 2015, principally driven by expected development in northwestern Louisiana associated with the development of Haynesville shale gas discovered in that area. In addition, Cleco Power also expects to begin providing service to expansions of current retail customers’ operations, as well as service to a new retail customer. These expansions of service to current customers and service to a new customer are expected to contribute additional base revenue of $2.0 million in 2013, an additional $1.0 million in 2014, and an additional $2.8 million in 2015. Cleco Power’s expectations and projections regarding retail sales are dependent upon factors such as weather conditions, natural gas prices, customer conservation efforts, retail marketing and business development programs, and the economy of Cleco Power’s service area. For more information, see “Cautionary Note Regarding Forward-Looking Statements.”

Other issues facing the electric utility industry that could affect sales include:


•	imposition of federal and/or state renewable portfolio standards,


•	imposition of energy efficiency mandates,


•	legislative and regulatory changes,


•	increases in environmental regulations and compliance costs,


•	cost of power impacted by the price movement of natural gas, the addition of solid-fuel plants which could increase or decrease costs depending on environmental regulations and commodity costs, and the addition of new generation capacity,


•	increase in capital and operations and maintenance costs due to higher construction and labor costs,


•	changes in electric rates compared to customers’ ability to pay,


•	access to transmission systems,


•	need for additional transmission capacity for reliability purposes,

• changes in the credit markets and global economy, ~~and~~

• implementation of automated metering initiatives or advanced metering technologies., and


•	integration into MISO.

For more information on energy legislation in regulatory matters that could affect Cleco, see “— Financial Condition — Regulatory and Other Matters — Market Restructuring — Wholesale Electric Markets.”

Cleco Power’s revenues and earnings also are substantially affected by regulatory proceedings known as rate cases. During those cases, the LPSC and FERC determine Cleco Power’s rate base, depreciation rates, operation and maintenance costs, and administrative and general costs that Cleco Power may recover from its customers through the rates charged for electric service. These proceedings may examine, among other things, the prudence of Cleco Power’s operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC has the authority to disallow costs found not to have been prudently incurred. These regulatory proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or reducing rates. Rate cases generally have long timelines, which may be limited by statute. Decisions are typically subject to appeal, leading to additional uncertainty.

maintenance costs, and administrative and general costs that Cleco Power may recover from its customers through the rates charged for electric service. These proceedings may examine, among other things, the prudence of Cleco Power’s operation and maintenance practices, level of subject expenditures, allowed rates of return, and previously incurred capital expenditures. The LPSC has the authority to disallow costs found not to have been prudently incurred. These regulatory proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or reducing rates. Rate cases generally have long timelines which may be limited by statute. Decisions are typically subject to appeal, leading to additional uncertainty.

Other expenses are primarily affected by the following factors:

The majority of Cleco Power’s non-fuel cost recovery expenses consist of other operations, maintenance, depreciation, and taxes other than income taxes. Other operations expenses are affected by, among other things, the cost of employee benefits, insurance expenses, and the costs associated with energy delivery and customer service. Maintenance expenses associated with Cleco Power’s plants generally depend upon their physical characteristics, as well as the effectiveness of their preventive maintenance programs. Transmission and distribution maintenance expenses are generally affected by the level of repair and rehabilitation of lines to maintain reliability. Depreciation expense primarily is affected by the cost of the facilities in service, the time the facilities were placed in service, and the estimated useful life of the facilities. Taxes other than income taxes generally include payroll taxes, franchise taxes, and ad valorem taxes. Cleco Power anticipates certain non-fuel cost recovery expenses to be higher in 2013 compared to 2012. These expenses include higher plant maintenance expenses, higher taxes other than income taxes, and higher depreciation expense. In addition, Cleco Power expects its postretirement benefit expenses to be affected by changes in discount rates, actual returns on plan assets, level of benefits provided, and actuarial assumptions used in the calculations.



Cleco Power’s Results of Operations — Year ended December 31, 2012, Compared to Year ended December 31, 2011
	FOR THE YEAR ENDED DEC. 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2012			2011			VARIANCE			CHANGE
Operating revenue
Base	$	606,577		$	605,024		$	1,553		0.3	%
Fuel cost recovery	337,592			446,932			(109,340		)	(24.5	)%
Electric customer credits	(630		)	(6,811		)	6,181			90.8	%
Other operations	48,156			50,948			(2,792		)	(5.5	)%
Affiliate revenue	1,372			1,389			(17		)	(1.2	)%
Operating revenue, net	$	993,067		$	1,097,482		$	(104,415	)	(9.5	)%
Operating expenses
Fuel used for electric generation – recoverable	277,605			379,771			102,166			26.9	%
Power purchased for utility customers – recoverable	59,989			67,167			7,178			10.7	%
FAC non-recoverable fuel and power purchased	21,338			6,778			(14,560		)	(214.8	)%
Other operations	115,072			116,988			1,916			1.6	%
Maintenance	72,386			74,603			2,217			3.0	%
Depreciation	125,486			115,634			(9,852		)	(8.5	)%
Taxes other than income taxes	33,999			32,157			(1,842		)	(5.7	)%
Gain on sale of assets	(2		)	(9		)	(7		)	77.8	%
Total operating expenses	$	705,873		$	793,089		$	87,216		11.0	%
Operating income	$	287,194		$	304,393		$	(17,199	)	(5.7	)%
Allowance for other funds used during construction	$	6,711		$	4,947		$	1,764		35.7	%
Other income	$	5,847		$	3,163		$	2,684		84.9	%
Interest charges	$	80,502		$	97,090		$	16,588		17.1	%
Federal and state income taxes	$	68,133		$	69,409		$	1,276		1.8	%
Net income	$	146,848		$	142,835		$	4,013		2.8	%

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

cost of the facilities in service, the time the facilities were placed in service, and the estimated useful life of the facilities. Taxes other than income taxes generally include payroll taxes and ad valorem taxes. Cleco Power’s ~~anticipates~~net ~~certain~~income ~~non-fuel~~for ~~cost recovery expenses to be higher in~~ 2012 ~~compared~~increased ~~to 2011~~$4. ~~These~~0 ~~expenses include higher depreciation expense~~million, ~~higher~~or ~~generation expenses~~2.8%, ~~and~~compared ~~higher~~to ~~taxes other than income taxes~~2011. InContributing ~~addition,~~factors Cleco Power expects its postretirement benefit expenses to be affected by changes in discount rates, actual returns on plan assets, level of benefits provided and actuarial assumptions used in the calculations.include:

Cleco Power’s Results of Operations — Year ended December 31, 2011,Compared to Year ended December 31, 2010
	FOR THE YEAR ENDED DECEMBER 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2011			2010			VARIANCE			CHANGE
Operating revenue
Base	$	605,024		$	592,676		$	12,348		2.1	%
Fuel cost recovery	446,932			493,426			(46,494		)	(9.4	)%
Electric customer credits	(6,811		)	(9,596		)	2,785			29.0	%
Other operations	50,948			42,578			8,370			19.7	%
Affiliate revenue	1,389			1,371			18			1.3	%
Total operating revenue	1,097,482			1,120,455			(22,973		)	(2.1	)%
Operating expenses
Fuel used for electric generation – recoverable	379,771			355,425			(24,346		)	(6.8	)%
Power purchased for utility customers – recoverable	67,167			138,051			70,884			51.3	%
Non-recoverable fuel and power purchased	4,214			11,938			7,724			64.7	%
Other operations	119,553			111,966			(7,587		)	(6.8	)%
Maintenance	74,603			72,048			(2,555		)	(3.5	)%
Depreciation	112,846			105,586			(7,260		)	(6.9	)%
Taxes other than income taxes	32,157			32,744			587			1.8	%
(Gain) loss on sales of assets	(9		)	47			56			119.1	%
Total operating expenses	790,302			827,805			37,503			4.5	%
Operating income	$	307,180		$	292,650		$	14,530		5.0	%
Allowance for other funds used during construction	$	4,947		$	12,413		$	(7,466	)	(60.1	)%
Other income	$	3,163		$	2,007		$	1,156		57.6	%
Interest charges	$	97,090		$	78,731		$	(18,359	)	(23.3	)%
Federal and state income taxes	$	69,409		$	75,107		$	5,698		7.6	%
Net income	$	142,835		$	147,405		$	(4,570	)	(3.1	)%


•	lower interest charges,

~~Cleco~~• ~~Power’s~~lower ~~net~~electric ~~income~~customer ~~for 2011 decreased $4.6 million~~credits, ~~or 3.1%, compared to 2010. Contributing factors include:~~

• ~~higher~~lower ~~interest~~other ~~charges~~operations and maintenance expenses,

• higher other ~~operations and maintenance expenses~~income,

• ~~lower~~higher allowance for other funds used during construction, ~~and~~

• higher ~~depreciation~~base ~~expense.~~revenue, and


•	lower income taxes.

These were partially offset by:

• higher ~~base~~FAC ~~revenue~~non-recoverable fuel and power purchased,

• higher ~~other~~depreciation ~~operations revenue~~expense,

• lower ~~non-recoverable~~other ~~fuel~~operations ~~and power purchased~~revenue, and

• ~~lower~~higher ~~electric~~taxes ~~customer~~other ~~credits,~~than ~~and~~income taxes.

• lower effective income tax rate.



	FOR THE YEAR ENDED DEC. 31,
					FAVORABLE/
(MILLION kWh)	2012		2011		(UNFAVORABLE)
Electric sales
Residential	3,624		3,877		(6.5	)%
Commercial	2,655		2,650		0.2	%
Industrial	2,311		2,366		(2.3	)%
Other retail	133		134		(0.7	)%
Total retail	8,723		9,027		(3.4	)%
Sales for resale	1,934		1,888		2.4	%
Unbilled	(43	)	(139	)	69.1	%
Total retail and wholesale customer sales	10,614		10,776		(1.5	)%

	FOR THE YEAR ENDED DECEMBER 31,
	FOR THE YEAR ENDED DEC. 31,
							~~FAVORABLE/~~		FAVORABLE/
(MILLION kWh)	2011			2010			(UNFAVORABLE)
(THOUSANDS)	2012				2011				(UNFAVORABLE)
Electric sales
Residential	~~3,877~~$	281,378		~~3,978~~	$	294,076	~~(2.5~~	)%	(4.3	)%
Commercial	2181,~~650~~093			~~2,605~~	179,786		~~1.7~~	%	0.7	%
Industrial	285,~~366~~675			~~2,271~~	85,965		~~4.2~~	%	(0.3	)%
Other retail	~~134~~9,908			~~138~~	9,815		~~(2.9~~	)%	0.9	%
Total retail	9,027			8,992			0.4	%
Surcharge	9,133				10,695				(14.6	)%
Sales for resale	1,888			1,983			(4.8	)%
Other	(6,252		)		(6,426		)		2.7	%
Unbilled	(139	)		46			(402.2	)%
Total retail	$	560,935			$	573,911			(2.3	)%
Total retail and wholesale customer sales	10,776			11,021			(2.2	)%
Sales for resale	47,767				45,633				4.7	%
Unbilled	(2,125		)		(14,520		)		85.4	%
Total retail and wholesale customer sales	$	606,577			$	605,024			0.3	%

	FOR THE YEAR ENDED DECEMBER 31,
							FAVORABLE/
(THOUSANDS)	2011			2010			(UNFAVORABLE)
Electric sales
Residential	$	294,076		$	271,781		8.2	%
Commercial	179,786			160,039			12.3	%
Industrial	85,965			78,158			10.0	%
Other retail	9,815			9,186			6.8	%
Surcharge	10,695			8,888			20.3	%
Other	(6,426		)	(6,005		)	(7.0	)%
Total retail	573,911			522,047			9.9	%
Sales for resale	45,633			47,954			(4.8	)%
Unbilled	(14,520		)	22,675			(164.0	)%
Total retail and wholesale customer sales	$	605,024		$	592,676		2.1	%

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 cooling and heating degree-days.

			FOR THE YEAR ENDED DECEMBER 31,
			FOR THE YEAR ENDED DEC. 31,
				2011 CHANGE
				2012 CHANGE
	2011	2010	NORMAL	PRIOR YEAR		NORMAL
	2012	2011	NORMAL	PRIOR YEAR		NORMAL
Cooling degree-days	3,~~255~~189	3,~~150~~255	2,~~689~~779	3(2.30	)%	2114.08	%
Heating degree-days	1,~~510~~018	1,~~967~~510	1,~~620~~545	(2332.26	)%	(634.81	)%

Base

Base revenue increased $121.36 million, or 20.13%, during ~~2011~~2012 compared to ~~2010~~2011 primarily due to ~~the~~an ~~base~~annual rate ~~increase~~adjustment ~~that~~associated ~~became~~with ~~effective~~Cleco’s inFRP ~~February 2010,~~ which ~~included~~resulted ~~Madison Unit 3 and the investment~~ in ~~Acadia~~an ~~Unit 1~~$11. ~~Also~~2 ~~included~~million inincrease ~~base revenue were amounts related~~ to ~~the~~base ~~completed portions of the Acadiana Load Pocket transmission project~~revenue. Partially offsetting ~~these~~this ~~increases~~increase ~~were~~was ~~lower~~$9.6 ~~kWh~~million ~~electric sales,~~ primarily ~~related~~due to milder ~~winter~~ weather ~~in 2011~~.

Cleco Power expects ~~new~~to ~~industrial~~begin ~~load~~providing service to beexpansions ~~added~~of ~~during~~current ~~2012~~retail ~~and~~customers’ ~~2013~~operations, ~~principally~~as ~~driven~~well byas service to a new retail customer. These expansions of service to current customers and service to a new customer are expected ~~development~~to contribute additional base revenue of ~~Haynesville~~$2.0 ~~shale~~million ~~recently~~in ~~discovered~~2013, an additional $1.0 million in ~~Northwestern~~2014, ~~Louisiana~~and an additional $2.8 million in 2015. In ~~addition~~2013, Cleco Power also anticipates additional base revenue of $9.0 million annually associated with the adoption of a FERC formula rate methodology for transmission delivery and ancillary services, $2.0 million associated with the Acadiana Load Pocket transmission project, and $1.9 million associated with the recovery of expenditures for compliance of anticipated environmental laws. In January 2012, Cleco Power signed a new 10-year

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

~~expects~~wholesale topower ~~begin~~contract ~~providing~~with service to ~~expansions~~begin of current customers’ operations, as well as service to a new customer. These expansions of service to current customers and service to a new customer are expected to contribute base revenue of $1.8 million in ~~2012~~April ~~and an additional $0~~2014.~~4 million in 2013.~~ ~~Cleco~~The ~~Power~~contract ~~also~~was ~~anticipates~~approved anby ~~additional~~the ~~$3.9~~LPSC ~~million of base revenue~~ in ~~2012~~December ~~associated with the completed portions of the Acadiana Load Pocket transmission project~~2012. ~~In January 2012,~~ Cleco Power’s ~~signed~~load ~~a new 10-year wholesale power contract with service to begin in April 2014 pending LPSC approval. The contract~~ is expected to grow ~~Cleco Power’s load~~ by more than 20%. For information on other effects of future energy sales on Cleco Power’s financial condition, results of operations, and cash flows, see “— Significant Factors Affecting Cleco Power” and Part I, Item 1A, “Risk Factors — Future Electricity Sales.”

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers during ~~2011~~2012 compared to ~~2010~~2011 decreased $46109.53 million, or 924.45%, primarily due to decreases in the per-unit costs of fuel used for electric generation and power purchased for utility customers, and lower volumes of ~~power~~fuel ~~purchased~~used for ~~utility~~electric ~~customers~~generation. Partially offsetting the decrease were higher volumes of ~~fuel used for electric generation and lower volumes of~~ power purchased, ~~primarily~~for ~~due~~utility ~~to Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1 during 2010~~customers.

Electric Customer Credits

Electric customer credits decreased $26.82 million, or 2990.08%, in ~~2011~~2012 compared to ~~2010~~2011 asprimarily due to a ~~result~~change ofin arate ~~lower~~refunds ~~estimated~~due ~~accrual~~to ~~for~~customers, apartially ~~rate~~offset by new transmission rates subject to refund. For more information on the accrual of electric customer credits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Electric Customer Credits.”

Other Operations

Other operations revenue ~~increased~~decreased $82.48 million, or 195.75%, in ~~2011~~2012 compared to ~~2010~~2011, primarily due to a $45.19 million ~~gain~~related onto ~~the~~lower ~~sale of Cleco Power’s fuel oil supply, $2.5 million of higher~~ mineral lease payments, ~~$0.7~~and ~~million of higher transmission revenue,~~ $04.79 million related to the absence of ~~net~~a ~~unfavorable~~gain ~~results~~on ~~relating~~the tosale ~~economic~~of ~~hedge~~Cleco ~~transactions~~Power’s ~~associated~~fuel ~~with~~oil ~~fixed-price~~supply. Partially ~~power~~offsetting ~~that~~these ~~was~~amounts ~~provided~~were $7.0 million related to aan increase in wholesale ~~customer,~~power sales and $01.40 million ofrelated ~~higher~~to ~~customer~~other ~~fees~~miscellaneous revenue.

Operating Expenses

Operating expenses decreased $3787.52 million, or 411.50%, in ~~2011~~2012 compared to ~~2010~~2011. Fuel used for electric generation (recoverable) ~~increased~~decreased $24102.32 million, or 626.89%, primarily due to ~~higher volumes of fuel used as compared to 2010. Partially offsetting this increase were~~ lower per unit costs and volumes of fuel used for electric generation as compared to 2011. Power purchased for utility customers (recoverable) decreased $707.92 million, or 5110.37%, largely due to lower ~~volumes and lower~~ per-unit costs of purchased power. ~~Lower~~Partially ~~volumes~~offsetting ofthis ~~power~~decrease ~~purchased~~was ~~were~~higher ~~primarily~~volumes ~~due to Madison Unit 3 being placed in service and the acquisition~~ of ~~Acadia~~purchased ~~Unit 1~~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~~FAC non-recoverable fuel and power purchased increased $14.6 million, or 214.8%, primarily due to higher non-recoverable wholesale power purchases and other capacity payments. Other operations expense decreased $71.79 million, or 641.76%, primarily due to lower customer service, administrative, and distribution expenses, partially offset by higher generating station and transmission expenses. Maintenance expenses decreased $2.2 million, or 3.0%, during 2012 compared to 2011 primarily due to lower generating station and distribution maintenance work performed during 2012. Depreciation expense increased $9.9 million, or 8.5%, largely due to portions of the Acadiana Load Pocket transmission project being placed in service, other normal recurring additions to fixed assets, and the

~~primarily~~reclassification ~~due~~of to the ~~absence~~Acadia ofacquisition ~~non-recoverable~~adjustment ~~expenses related to fixed-price power that was provided to a wholesale customer during 2010 and lower capacity payments made during 2011~~amortization. ~~Other~~Taxes ~~operations~~other ~~expense~~than ~~increased~~income ~~$7.6~~taxes million, or 6.8%, primarily due to higher generating station, transmission, and distribution expenses and higher employee benefit costs and administrative expenses. Partially offsetting these increases were lower professional fees. Maintenance expenses increased $21.68 million, or 3.5.7%, ~~during 2011 compared to 2010~~ primarily due to higher ~~generating~~property ~~station and distribution maintenance work performed during 2011~~taxes. ~~Other~~ operations and maintenance expenses were impacted during 2011 as a result of Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1. Depreciation expense increased $7.3 million, or 6.9%, largely due to Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1.

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction ~~decreased~~increased $71.58 million, or 6035.17%, during ~~2011~~2012 compared to ~~2010~~2011 primarily due to ~~the~~higher ~~cessation of~~ AFUDC accruals related to the ~~completion~~AMI Project and miscellaneous transmission projects, partially offset by lower amounts from the Acadiana Load Pocket transmission project and the absence of ~~construction~~accruals ~~activity~~related atto ~~Madison~~the completion of Teche Unit 34.

Other Income

Other income increased $1.2.7 million, or 5784.69%, during ~~2011~~2012 compared to ~~2010~~2011 primarily due to higher royalty payments ~~and higher revenue from mutual assistance to other utilities for restoration efforts~~.

Interest Charges

Interest charges ~~increased~~decreased $1816.46 million, or 2317.31%, during ~~2011~~2012 compared to ~~2010~~2011 primarily due to $1312.31 million related to ~~the~~uncertain ~~November~~tax ~~2010~~positions, ~~issuance of~~ $~~250~~7.08 million ofrelated ~~senior~~to ~~notes~~reacquired debt in October and December 2011, $82.95 million related to ~~uncertain~~the ~~tax~~retirement ~~positions,~~of ~~and~~pollution ~~$2.8~~control ~~million~~bonds ofin ~~lower~~January ~~interest~~and ~~charges~~May ~~capitalized~~2012, inand ~~2011~~$0.5 ~~compared~~million toof ~~2010~~lower ~~associated~~other ~~with~~net ~~Madison~~miscellaneous ~~Unit~~interest 3charges. Partially offsetting ~~this~~these ~~increase~~decreases was $36.3 million ~~from~~related to the ~~repayment~~issuance of ~~insured~~private ~~quarterly~~placement notes ~~and a bank term loan~~ in ~~October~~December ~~2010~~2011 and ~~November~~May ~~2010, respectively, and $3~~2012.~~3 million of other miscellaneous interest charges.~~

Income Taxes

Federal and state income taxes decreased $51.73 million, or 71.68%, during ~~2011~~2012 compared to ~~2010,~~2011. Tax expense decreased primarily due to the settlement of legacy tax issues, tax returns as filed, and an increase in tax credits, partially offset by the absence of a valuation allowance reversal recorded in 2011 and a decrease in ~~pre-tax~~state income ~~excluding~~tax ~~AFUDC equity~~benefits. The effective income tax rate is 31.7% which is different than the federal statutory rate primarily due to the effects of state income taxes, tax ~~expense~~credits, and the settlement of legacy tax issues.

On July 3, 2012, Cleco and Cleco Power filed a PLR request with the IRS in order to determine the appropriateness and timing of the special allowance for depreciation for Madison Unit 3 Generating Station. Subsequently, on December 28, 2012, Cleco received a favorable PLR from the IRS, consistent with the request allowing for the additional first year depreciation deduction in the amount of $411.0 million as reflected on Cleco Corporation’s 2011 federal income tax return. Cleco and Cleco Power consider it more likely than not that these income tax losses generated on the 2011 income tax return will be utilized to reduce future payments of income taxes and both Cleco and Cleco Power expect to utilize the entire net operating loss carryforward within the statutory deadlines.

MIDSTREAM

Significant Factors Affecting Midstream

Earnings ~~are~~ primarily are affected by the following factors:

Midstream’s 2012 earnings were derived ~~in 2011~~ primarily from the ~~Evangeline~~power ~~2010~~purchase ~~Tolling~~agreement ~~Agreement~~with ~~and,~~Cleco ~~prior~~Power tofor ~~April~~Unit ~~29,~~6 ~~2011,~~for ~~from~~the ~~its~~period ~~50%~~of ~~indirect~~January ~~interest~~2012 inthrough ~~Acadia, which derived its revenue from energy sales. On~~ April ~~29,~~2012 ~~2011,~~and ~~Acadia~~the ~~completed~~new ~~its~~power ~~disposition~~purchase ofagreement ~~Acadia~~with ~~Unit~~Cleco 2Power tofor ~~Entergy~~Units ~~Louisiana. In~~6 ~~2011,~~and ~~Acadia’s~~7 ~~revenues~~that ~~were~~began ~~primarily~~in ~~derived~~May ~~from a short-term capacity agreement with Entergy Louisiana~~2012. ~~The~~On ~~expiration~~April ~~of the Evangeline 2010 Tolling Agreement was December 31~~29, 2011, ~~(with~~Acadia acompleted ~~JPMVEC~~its ~~option to extend one year). JPMVEC did not exercise the option to extend the tolling agreement and as a result, Coughlin’s capacity and~~

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

disposition of Acadia Unit 2 to Entergy Louisiana. In 2011, Acadia’s revenues were derived primarily from a short-term capacity agreement with Entergy Louisiana. The expiration of the Evangeline 2010 Tolling Agreement was December 31, 2011, (with a JPMVEC option to extend one year). JPMVEC did not exercise the option to extend the tolling agreement and as a result, Coughlin’s capacity and energy became available to Midstream beginning January 1, 2012. Evangeline was one of the successful bidders in Cleco Power’s RFP for short-term 2012 resources beginning January 1, 2012, and ~~currently~~began is providing 250 MW of capacity and energy to Cleco Power under a tolling agreement through April 30, 2012. In addition ~~to Cleco Power’s RFP referenced above~~, in December 2011, Evangeline was also notified that Cleco Power selected its proposal to fulfill Cleco Power’s capacity and energy needs as defined in the Cleco Power RFP for contractual resources ~~to meet CSAPR~~ beginning in 2012. The proposal was for a 730-MW product beginning May 1, 2012, and ending April 30, 2015. The definitive agreement between Evangeline and Cleco Power was executed in January 2012 and ~~has~~was ~~been~~approved ~~submitted~~by to the LPSC in March 2012 and FERC ~~for~~in ~~approval~~April 2012. ~~Currently,~~ Midstream ishad been marketing Coughlin’s capacity for periods beginning after April 30, 2015 and ishad been evaluating various options to optimize Coughlin’s value. On October 30, 2012, Cleco Power announced that Evangeline was the winning bidder in Cleco Power’s 2012 Long-Term RFP. In December 2012, Cleco Power and Evangeline executed definitive agreements to transfer ownership and control of Coughlin from Evangeline to Cleco Power. For more information, see “— Financial Condition — Regulatory and Other Matters — Generation RFP.”

The Evangeline 2010 Tolling Agreement was accounted for as an executory contract and revenue under this agreement was reflected in operating revenue. Evangeline’s 2011 revenue was recognized in the following manner:

• 15% in the first quarter,

• 22% in the second quarter,

• 48% in the third quarter, and

• 15% in the fourth quarter.

Evangeline’s 2012 revenue is expected to be recognized in the following manner:

• 5% in the first quarter,

• 32% in the second quarter,

• 49% in the third quarter, and

• 14% in the fourth quarter.

For more information on recognition of revenue from the Evangeline 2010 Tolling Agreement, see “— Critical Accounting Policies — Midstream” and Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Revenue and Fuel Costs — Evangeline” and “— Note 17 — Evangeline Transactions.”

For more information on the factors affecting Midstream, see Part I, Item 1A, “Risk Factors — Midstream Generation Facility.”

Expenses ~~are~~ primarily are affected by the following factors:

Midstream’s expenses include depreciation, maintenance, and other operations expenses. Depreciation expense is affected by the cost of the facility in service, the time the facility was placed in service, and the estimated useful life of the facility. Maintenance expenses generally depend on the physical characteristics of the facility, the frequency and duration of the facility’s operations, and the effectiveness of preventive maintenance. Other operating expenses mainly relate to administrative expenses, employee benefits, and generation operating expenses.

Other Factors Affecting Midstream



Midstream’s Results of Operations — Year ended December 31, 2012, Compared to Year ended December 31, 2011
	FOR THE YEAR ENDED DEC. 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2012			2011			VARIANCE			CHANGE
Operating revenue
Tolling operations	$	25,559		$	19,004		$	6,555		34.5	%
Other operations	3			9			(6		)	(66.7	)%
Affiliate revenue	—			45			(45		)	(100.0	)%
Total operating revenue	$	25,562		$	19,058		$	6,504		34.1	%
Operating expenses
Fuel used for electric generation	$	304		$	—		$	(304	)	—
Power purchased for utility customers	9			—			(9		)	—
Other operations	7,786			8,408			622			7.4	%
Maintenance	13,693			7,204			(6,489		)	(90.1	)%
Depreciation	6,006			5,872			(134		)	(2.3	)%
Taxes other than income taxes	2,559			2,399			(160		)	(6.7	)%
Loss on sales of assets	64			404			340			84.2	%
Total operating expenses	$	30,421		$	24,287		$	(6,134	)	(25.3	)%
Operating loss	$	(4,859	)	$	(5,229	)	$	370		7.1	%
Equity income from investees, before tax	$	—		$	62,053		$	(62,053	)	(100.0	)%
Other income	$	21,216		$	1,619		$	19,597		*
Interest charges (income)	$	770		$	(28,996	)	$	(29,766	)	(102.7	)%
Federal and state income tax expense	$	6,404		$	44,637		$	38,233		85.7	%
Net income	$	9,155		$	42,792		$	(33,637	)	(78.6	)%
* Not meaningful

~~Evangeline~~Factors affecting Midstream during 2012 are described below.

In accordance with the authoritative guidance on consolidations, Cleco reported its investment in Evangeline on

the equity method of accounting and reflected Evangeline’s net operating results in the equity income (loss) from investees’ line during 2009. Effective January 1, 2010, the requirements for consolidation changed. On and after January 1, 2010, Evangeline’s assets, liabilities, revenues, expenses, and cash flows were presented in the corresponding line items of the consolidated financial statements. For more information, see “— Critical Accounting Policies.” For more information on the consolidation guidelines, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities.” On February 22, 2010, Evangeline and JPMVEC terminated the Evangeline Tolling Agreement and executed the Evangeline 2010 Tolling Agreement. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions.”

Midstream’s Results of Operations — Year ended December 31, 2011,Compared to Year ended December 31, 2010
	FOR THE YEAR ENDED DECEMBER 31,
						FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2011			2010		VARIANCE			CHANGE
Operating revenue
Tolling operations	$	19,004		$	26,067	$	(7,063	)	(27.1	)%
Other operations	9			3		6			200.0	%
Affiliate revenue	45			960		(915		)	(95.3	)%
Total operating revenue	19,058			27,030		(7,972		)	(29.5	)%
Operating expenses
Other operations	8,408			8,082		(326		)	(4.0	)%
Maintenance	7,204			8,868		1,664			18.8	%
Depreciation	5,872			5,779		(93		)	(1.6	)%
Taxes other than income taxes	2,399			342		(2,057		)	(601.5	)%
Loss on sales of assets	404			387		(17		)	(4.4	)%
Total operating expenses	24,287			23,458		(829		)	(3.5	)%
Operating (loss) income	$	(5,229	)	$	3,572	$	(8,801	)	(246.4	)%
Equity income from investees, before tax	$	62,053		$	38,848	$	23,205		59.7	%
Gain on toll settlement	$	—		$	148,402	$	(148,402	)	(100.0	)%
Interest charges	$	(28,996	)	$	7,140	$	36,136		506.1	%
Federal and state income tax expense	$	44,637		$	71,255	$	26,618		37.4	%
Net income	$	42,792		$	114,467	$	(71,675	)	(62.6	)%

Factors affecting Midstream during 2011 are described below.

Operating Revenue

Operating revenue ~~decreased~~increased $86.05 million, or 2934.51%, in ~~2011~~2012 compared to ~~2010~~2011, largely as a result of ~~lower~~higher tolling revenue ~~resulting~~at ~~from the~~ Evangeline ~~restructuring~~resulting ~~and~~from ~~pricing of~~ the ~~Evangeline~~new ~~2010~~power ~~Tolling~~purchase ~~Agreement. Affiliate~~agreement ~~revenue~~with ~~decreased~~Cleco ~~$0.9~~Power ~~million,~~for orUnits ~~95.3%,~~6 inand ~~2011~~7 ~~compared~~that tobegan ~~2010 primarily due to a decrease~~ in ~~services~~May ~~provided~~2012 byas ~~Generation~~compared ~~Services employees who were transferred~~ to ~~Cleco~~the ~~Power~~Evangeline ~~during~~ 2010 asTolling aAgreement ~~result~~with ofJPMVEC ~~Cleco~~for ~~Power’s acquisition of Acadia~~ Unit 17.

Operating Expenses

~~Maintenance~~Operating expenses ~~decreased~~increased $16.71 million, or 1825.83%, in ~~2011~~2012 compared to ~~2010~~2011 primarily due to higher maintenance expenses. Maintenance expenses increased $6.5 million, or 90.1%, largely as a result of ~~lower~~higher turbine maintenance expenses, higher routine maintenance expenses, and higher fall outage expenses at ~~Evangeline~~the Coughlin facility. ~~Taxes~~For ~~other~~more ~~than~~information on Evangeline, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Consolidated VIEs — Evangeline.”

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

income taxes increased $2.1 million, or 601.5%, primarily due to higher property taxes at Evangeline as a result of the expiration of a 10-year property tax exemption. For more information on Evangeline, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Consolidated VIEs — Evangeline.”

Equity Income from Investees

Equity income from investees ~~increased~~decreased $2362.21 million, or 59100.70%, in ~~2011~~2012 compared to ~~2010~~2011 ~~primarily~~ due to ~~increased equity earnings at APH primarily from~~ the ~~recognition~~absence of athe ~~$62.0 million~~ gain from the disposition of Acadia Unit 2 and Acadia Power Station’s remaining common facilities to Entergy Louisiana. Partially offsetting this increase was the absence of the gain from Cleco Power’s acquisition of Acadia Unit 1 and half of Acadia Power Station’s related common facilities during ~~2010~~2011. For more information on the Acadia Unit ~~1 and~~ 2 transactions, see Item 8, ~~“Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions.”~~

~~Gain on Toll Settlement~~35

~~Gain~~CLECO onCORPORATION ~~toll~~CLECO ~~settlement~~POWER ~~was~~2012 ~~$148.4~~FORM million in 2010 due to transactions related to the termination of the Evangeline Tolling Agreement and the execution of the Evangeline 2010 Tolling Agreement. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions.”10-K

“Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions.”

Other Income

Other income increased $19.6 million in 2012 compared to 2011 primarily due to the contractual expiration of underlying indemnifications resulting from the disposition of Acadia Units 1 and 2.

Interest Charges

Interest charges ~~decreased~~increased $3629.18 million, or ~~506~~102.17%, during ~~2011~~2012 compared to ~~2010~~2011 largely as a result of anthe ~~IRS~~absence ~~settlement~~of ata ~~Evangeline~~favorable ~~and~~tax ~~the~~settlement ~~retirement~~recorded ofin ~~Evangeline’s~~2011 ~~debt~~relating into ~~2010~~legacy tax issues. For more information on the IRS settlement, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Income Taxes.”

Income Taxes

Federal and state income taxes decreased $2638.62 million, or 3785.47%, during ~~2011~~2012 compared to ~~2010,~~2011. Tax expense decreased primarily due to athe ~~decrease~~change in pre-tax income, ~~partially~~and ~~offset~~the bysettlement ~~adjustments~~of ~~related~~legacy totax ~~the~~issues, ~~settlement~~partially ofoffset ~~the~~by ~~2001~~tax ~~through~~returns ~~2003~~as ~~IRS audit~~filed. The effective income tax rate is 41.2% which is different than the federal statutory rate primarily due to ~~prior year adjustments related to~~ the ~~settlement~~effects of ~~the~~state ~~2001~~income ~~through~~taxes ~~2003~~and ~~IRS~~the ~~audit~~settlement ~~and~~of ~~state~~legacy tax ~~expense~~issues.

Cleco Consolidated Results of Operations — Year ended December 31, 2010, Compared to Year ended December 31, 2009
Cleco Consolidated Results of Operations — Year ended December 31, 2011, Compared to Year ended December 31, 2010
				FOR THE YEAR ENDED DECEMBER 31,
				FOR THE YEAR ENDED DEC. 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	~~2010~~2011			~~2009~~2010			VARIANCE			CHANGE
Operating revenue, net	$	1,~~148~~117,~~666~~313		$	~~853~~1,~~758~~148,666		$	~~294~~(31,~~908~~353	)	34(2.57	)%
Operating expenses	~~853~~819,~~325~~066			~~746~~855,~~949~~707			~~(106~~36,~~376~~641		)	~~(14~~4.23	)%
Operating income	$	~~295~~298,~~341~~247		$	~~106~~292,~~809~~959		$	~~188~~5,~~532~~288		~~176~~1.58	%
Interest income	$	409		$	1,512		$	(1,103	)	(72.9	)%
Allowance for other funds used during construction	$	4,947		$	12,413		$	(7,466	)	(60.1	)%
Allowance for other funds used during construction	$	12,413		$	73,269		$	(60,856	)	(83.1	)%
Equity income from investees, before tax	$	62,050		$	38,849		$	23,201		59.7	%
Equity income (loss) from investees, before tax	$	38,849		$	(17,423	)	$	56,272		323.0	%
Gain on toll settlement	$	—		$	148,402		$	(148,402	)	(100.0	)%
Gain on toll settlement	$	148,402		$	—		$	148,402		—
Other income	$	8,914		$	5,242		$	3,672		70.0	%
Other expense	$	(65,~~991~~646	)	$	(24,~~807~~609	)	$	(41,~~184~~037	)	(~~149~~22.15	)%
Interest charges	$	9570,~~776~~658		$	5195,~~055~~776		$	~~(44~~25,~~721~~118	)	~~(87~~26.62	)%
Federal and state income taxes	$	~~142~~102,~~498~~897		$	9142,~~579~~498		$	~~(132~~39,~~919~~601	)	*27.8	%
Net income applicable to common stock	$	~~255~~195,~~345~~710		$	~~106~~255,~~261~~345		$	~~149~~(59,~~084~~635	)	~~140~~(23.34	)%
* Not meaningful

Consolidated net income applicable to common stock ~~increased~~decreased $~~149~~59.16 million, or ~~140~~23.34%, in ~~2010~~2011 compared to ~~2009~~2010 primarily due to ~~increased~~the ~~Midstream~~absence ~~and~~of ~~Cleco~~2010 ~~Power~~gains ~~earnings.~~ at Midstream’s ~~earnings were significantly impacted due to transactions~~ related to the termination of the Evangeline Tolling Agreement and ~~the~~Acadia ~~execution~~Unit of1 ~~the~~transaction, ~~Evangeline~~partially ~~2010~~offset ~~Tolling~~by ~~Agreement. Cleco~~the ~~Power’s~~2011 ~~earnings~~gain ~~were~~from ~~significantly~~the ~~impacted~~Acadia byUnit ~~the~~2 ~~new~~transaction. Also ~~retail~~contributing ~~base~~to ~~rate~~the ~~increase~~decrease ~~that~~were ~~became~~lower ~~effective~~Cleco inPower ~~February 2010~~earnings. Partially offsetting ~~this~~these ~~increase~~decreases were ~~lower~~higher corporate earnings.

Operating revenue, net ~~increased~~decreased $~~294~~31.94 million, or 342.57%, in ~~2010~~2011 compared to ~~2009~~2010 largely as a result of higher base revenue at Cleco Power.

Operating expenses ~~increased~~decreased $~~106~~36.46 million, or 144.23%, in ~~2010~~2011 compared to ~~2009~~2010 primarily due to ~~higher~~lower ~~volumes~~per ofunit ~~fuel~~costs ~~used for electric generation, higher depreciation expense,~~ and ~~higher~~volumes ~~other~~of ~~operations~~power ~~and~~purchased ~~maintenance~~for ~~expenses~~utility ~~at Cleco Power~~customers.

~~Interest~~Allowance ~~income~~for other funds used during construction decreased $17.15 million, or 7260.91%, in ~~2010~~2011 compared to ~~2009~~2010, primarily due to ~~lower~~the ~~interest~~cessation ~~income~~of AFUDC accruals related to the completion of construction activity at ~~Cleco~~Madison ~~Power~~Unit 3.

~~Allowance~~Equity ~~for~~income ~~other~~from ~~funds~~investees ~~used~~increased ~~during construction decreased~~ $6023.92 million, or 8359.17%, in ~~2010~~2011 compared to ~~2009,~~2010 primarily due to increased equity earnings at APH primarily from the ~~cessation~~recognition of ~~AFUDC~~a ~~accruals~~$62.0 ~~related~~million gain from the disposition of Acadia Unit 2 and Acadia Power Station’s remaining common facilities to Entergy Louisiana. Partially offsetting this increase was the ~~completion~~absence of ~~construction~~the ~~activity~~$41.0 atmillion ~~Madison~~gain from Cleco Power’s acquisition of Acadia Unit 31 and half of Acadia Power Station’s related common facilities during 2010. For more information on the Acadia Unit 1 and 2 transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions.”

Equity income from investees increased $56.3 million, or 323.0%, in 2010 compared to 2009 largely due to increased equity earnings at APH primarily from the recognition of a $41.0 million gain from Cleco Power’s acquisition of Acadia Unit 1 and half of Acadia Power Station’s related common facilities. Also contributing to the increased equity earnings at APH were lower net operating expenses.

Gain on toll settlement was $148.4 million in 2010 due to transactions related to the termination of the existing Evangeline Tolling Agreement and the execution of the Evangeline 2010 Tolling Agreement. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions.”

Other ~~expense~~income increased $43.27 million, or ~~149~~70.10%, in ~~2010~~2011 compared to ~~2009~~2010 primarily due to ~~the~~death ~~amortization~~benefits ofpaid aon ~~plant~~life insurance policies at Cleco Corporation and higher royalty payments and higher revenue from mutual assistance to other utilities for restoration efforts at Cleco Power.

36Other expense increased $1.0 million, or 22.5%, in 2011 compared to 2010 primarily due to a decrease in the cash surrender value of life insurance policies at Cleco Corporation.

~~CLECO~~Interest ~~CORPORATIONCLECO~~charges ~~POWER~~decreased $25.1 million, or 26.2%, in 2011 ~~FORM~~compared ~~10-K~~to 2010 largely due to the settlement of legacy tax issues and the retirement of Evangeline’s debt in 2010. Also contributing to the decrease were lower corporate interest charges related to the repayment of a bank term loan in April 2011. Partially offsetting these decreases was higher interest charges at Cleco Power.

~~acquisition~~Federal ~~adjustment~~and ~~related~~state income taxes decreased $39.6 million in 2011 compared to ~~Cleco~~2010 ~~Power’s~~primarily ~~acquisition~~due ofto ~~Acadia~~a ~~Unit~~decrease 1in ~~and~~pre-tax ~~half~~income excluding AFUDC equity, partially offset by the settlement of ~~Acadia~~legacy ~~Power~~tax ~~Station’s~~issues. The ~~related~~effective ~~common~~income ~~facilities,~~tax ~~and~~rate ~~amounts~~is ~~related~~34.4% towhich is different than the ~~November~~federal ~~2010~~statutory ~~termination~~rate primarily due to the settlement of anlegacy ~~interest~~tax ~~rate~~issues ~~swap~~and atstate ~~Cleco~~tax ~~Power~~expense.

Interest charges increased $44.7 million, or 87.6%, in 2010 compared to 2009 primarily due to higher interest charges at Cleco Power and higher corporate interest charges primarily related to a bank term loan executed in February 2010, the absence of a 2009 favorable settlement of a franchise tax lawsuit, and net interest charges related to uncertain tax positions.

Federal and state income taxes increased $132.9 million in 2010 compared to 2009 primarily due to an increase in pre-tax income excluding equity AFUDC. The effective income tax rate is different than the federal statutory rate due to state tax expense.

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

Cleco Power’s Results of Operations — Year ended December 31, 2010,Compared to Year ended December 31, 2009
Cleco Power’s Results of Operations — Year ended December 31, 2011,Compared to Year ended December 31, 2010
	FOR THE YEAR ENDED DECEMBER 31,
	FOR THE YEAR ENDED DEC. 31,
							FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	~~2010~~2011			~~2009~~2010			VARIANCE			CHANGE
Operating revenue
Base	$	~~592~~605,~~676~~024		$	~~355~~592,~~091~~676		$	~~237~~12,~~585~~348		662.91	%
Fuel cost recovery	~~493~~446,~~426~~932			~~453~~493,~~555~~426			39(46,~~871~~494		)	8(9.84	)%
Electric customer credits	(96,~~596~~811		)	—(9,596		)	(92,~~596~~785		)	—29.0	%
Other operations	4250,~~578~~948			3342,~~558~~578			98,~~020~~370			2619.97	%
Affiliate revenue	1,~~371~~389			1,~~395~~371			~~(24~~18		)	(1.73	)%
Total operating revenue	1,120,455			843,599			276,856			32.8	%
Operating revenue, net	$	1,097,482		$	1,120,455		$	(22,973	)	(2.1	)%
Operating expenses
Fuel used for electric generation – recoverable	~~355,425~~$	379,771		~~253,911~~$	355,425		~~(101,514~~$	(24,346	)	(406.08	)%
Power purchased for utility customers – recoverable	~~138~~67,~~051~~167			~~199~~138,~~619~~051			6170,~~568~~884			3051.83	%
Non-recoverable fuel and power purchased	11,938			24,832			12,894			51.9	%
FAC non-recoverable fuel and power purchased	6,778			14,226			7,448			52.4	%
Other operations	~~111~~116,~~966~~988			99109,~~704~~678			(127,~~262~~310		)	(126.37	)%
Maintenance	7274,~~048~~603			4772,~~179~~048			(242,~~869~~555		)	(523.75	)%
Depreciation	~~105~~115,~~586~~634			77107,~~064~~966			(287,~~522~~668		)	(377.01	)%
Taxes other than income taxes	32,~~744~~157			2932,~~758~~744			~~(2,986~~587		)	~~(10~~1.08	)%
Loss on sales of assets	47			70			23			32.9	%
(Gain) loss on sale of assets	(9		)	47			56			119.1	%
Total operating expenses	~~827,805~~$	793,089		~~732,137~~$	830,185		~~(95,668~~$	37,096	)	~~(13~~4.15	)%
Operating income	$	~~292~~304,~~650~~393		$	~~111~~290,~~462~~270		$	~~181~~14,~~188~~123		~~162~~4.69	%
Interest income	$	379		$	1,449		$	(1,070	)	(73.8	)%
Allowance for other funds used during construction	$	4,947		$	12,413		$	(7,466	)	(60.1	)%
Allowance for other funds used during construction	$	12,413		$	73,269		$	(60,856	)	(83.1	)%
Other income	$	3,163		$	2,007		$	1,156		57.6	%
Other expense	$	(6,206	)	$	(3,525	)	$	(2,681	)	(76.1	)%
Interest charges	$	97,090		$	78,731		$	(18,359	)	(23.3	)%
Interest charges	$	78,731		$	58,562		$	(20,169	)	(34.4	)%
Federal and state income taxes	$	69,409		$	75,107		$	5,698		7.6	%
Federal and state income taxes	$	75,107		$	15,297		$	(59,810	)	(391.0	)%
Net income	$	142,835		$	147,405		$	(4,570	)	(3.1	)%
Net income	$	147,405		$	111,166		$	36,239		32.6	%

Cleco Power’s net income for ~~2010~~2011 ~~increased~~decreased $364.26 million, or 323.61%, compared to ~~2009~~2010. Contributing factors include:

• higher base revenue,

• lower non-recoverable fuel and power purchased, and

• higher other operations revenue.

These were partially offset by:

• lower allowance for other funds used during construction,

• higher other operations and maintenance expenses,


•	higher interest charges,

• higher ~~electric~~other ~~customer~~operations ~~credits~~and maintenance expenses,

• ~~higher~~lower ~~taxes~~allowance for other ~~than~~funds ~~income~~used ~~taxes~~during construction, and

~~• higher other expense,~~36

•CLECO ~~lower~~CORPORATION ~~interest~~CLECO ~~income,~~POWER ~~and~~2012 FORM 10-K

• higher ~~effective~~depreciation ~~income tax rate~~expense.

	FOR THE YEAR ENDED DECEMBER 31,
			FAVORABLE/
(MILLION kWh)	2010	2009	(UNFAVORABLE)
Electric sales
Residential	3,978	3,637	9.4	%
Commercial	2,605	2,484	4.9	%
Industrial	2,271	2,232	1.7	%
Other retail	138	136	1.5	%
Total retail	8,992	8,489	5.9	%
Sales for resale	1,983	1,390	42.7	%
Unbilled	46	60	(23.3	)%
Total retail and wholesale customer sales	11,021	9,939	10.9	%

These were partially offset by:

	FOR THE YEAR ENDED DECEMBER 31,
						FAVORABLE/
(THOUSANDS)	2010			2009		(UNFAVORABLE)
Electric sales
Residential	$	271,781		$	157,672	72.4	%
Commercial	160,039			95,453		67.7	%
Industrial	78,158			50,957		53.4	%
Other retail	9,186			5,715		60.7	%
Storm surcharge	8,888			19,661		(54.8	)%
Other	(6,005		)	—		—
Total retail	522,047			329,458		58.5	%
Sales for resale	47,954			23,371		105.2	%
Unbilled	22,675			2,262		902.4	%
Total retail and wholesale customer sales	$	592,676		$	355,091	66.9	%


•	higher base revenue,


•	higher other operations revenue,


•	lower FAC non-recoverable fuel and power purchased,


•	lower electric customer credits, and


•	lower income taxes.



	FOR THE YEAR ENDED DEC. 31,
				FAVORABLE/
(MILLION kWh)	2011		2010	(UNFAVORABLE)
Electric sales
Residential	3,877		3,978	(2.5	)%
Commercial	2,650		2,605	1.7	%
Industrial	2,366		2,271	4.2	%
Other retail	134		138	(2.9	)%
Total retail	9,027		8,992	0.4	%
Sales for resale	1,888		1,983	(4.8	)%
Unbilled	(139	)	46	(402.2	)%
Total retail and wholesale customer sales	10,776		11,021	(2.2	)%



	FOR THE YEAR ENDED DEC. 31,
							FAVORABLE/
(THOUSANDS)	2011			2010			(UNFAVORABLE)
Electric sales
Residential	$	294,076		$	271,781		8.2	%
Commercial	179,786			160,039			12.3	%
Industrial	85,965			78,158			10.0	%
Other retail	9,815			9,186			6.8	%
Storm surcharge	10,695			8,888			20.3	%
Other	(6,426		)	(6,005		)	(7.0	)%
Total retail	$	573,911		$	522,047		9.9	%
Sales for resale	45,633			47,954			(4.8	)%
Unbilled	(14,520		)	22,675			(164.0	)%
Total retail and wholesale customer sales	$	605,024		$	592,676		2.1	%

FOR THE YEAR ENDED DECEMBER 31,

FOR THE YEAR ENDED DEC. 31,

2010 CHANGE

2011 CHANGE

2010

2009

NORMAL

PRIOR YEAR

NORMAL

2011

2010

NORMAL

PRIOR YEAR

NORMAL

Cooling degree-days

3,~~150~~255

23,~~977~~150

2,~~662~~689

53.83

1821.30

Heating degree-days

1,~~967~~510

1,~~447~~967

1,~~645~~620

35(23.92

~~19.~~(6.8

Base

Base revenue increased $~~237~~12.63 million, or 662.91%, during ~~2010~~2011 compared to ~~2009. The~~2010 primarily due to the base rate ~~increases~~increase that became effective in February 2010, which included Madison Unit 3 and the investment in Acadia Unit 1,. Also ~~accounted~~included ~~for~~in ~~approximately~~base ~~$208.9~~revenue ~~million~~were amounts related to the completed portions of the Acadiana Load Pocket transmission project. Partially offsetting these increases were lower kWh electric sales, primarily related to milder winter weather in 2011.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

the increase, while the impact from favorable weather and new service to a wholesale customer accounted for approximately $28.7 million of the increase. For information on other effects of future energy sales on Cleco Power’s financial condition, results of operations, and cash flows, see “— Significant Factors Affecting Cleco Power” and Part I, Item 1A, “Risk Factors — Future Electricity Sales.”

Fuel Cost Recovery

Fuel cost recovery revenue billed to customers during ~~2010~~2011 compared to ~~2009~~2010 ~~increased~~decreased $3946.95 million, or 89.84%, primarily due to ~~higher~~decreases ~~volumes~~in the per-unit costs of fuel used for electric generation and ~~increases in the per-unit cost of~~ power purchased for utility customers~~. Partially~~, ~~offsetting the increase were decreases in the per-unit cost of fuel used for electric generation~~ and lower volumes of power purchased for utility customers. ~~Higher~~Partially offsetting the decreases were higher volumes of fuel used for electric generation and lower volumes of power purchased, ~~were~~ primarily due to Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1 during 2010.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

Electric Customer Credits

Electric customer credits ~~increased~~decreased $92.68 million, or 29.0%, in ~~2010~~2011 compared to ~~2009~~2010 as a result of ~~recording~~a anlower estimated accrual for a rate refund ~~based on actual results for the 12 months ended September 30, 2010~~. ~~Beginning in 2011, potential refunds are based on results for the 12-month period ended June 30.~~ For more information on the accrual ~~for~~of electric customer credits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 11 — Electric Customer Credits.”

Other Operations

Other operations revenue increased $98.04 million, or 2619.97%, in ~~2010~~2011 compared to ~~2009~~2010, primarily due to a $4.31 million ~~related~~gain toon the sale of Cleco Power’s fuel oil supply, $2.5 million of higher mineral lease payments, $20.27 million of higher transmission revenue, $10.17 million related to the absence of ~~favorable~~net unfavorable results relating to economic hedge transactions associated with fixed-price power ~~being~~that was provided to a wholesale customer, ~~$0.8 million of higher customer forfeited discounts,~~ and $0.64 million of higher ~~other~~customer ~~miscellaneous revenue~~fees. ~~For information on Cleco’s energy commodity activities, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk — Risk Overview — Commodity Price Risks.”~~

Operating Expenses

Operating expenses ~~increased~~decreased $9537.71 million, or 134.15%, in ~~2010~~2011 compared to ~~2009~~2010. Fuel used for electric generation (recoverable) increased $~~101~~24.53 million, or 406.08%, primarily due to higher volumes of fuel used as compared to ~~2009~~2010. Partially offsetting this increase were lower per- unit costs of fuel used for electric generation. Power purchased for utility customers (recoverable) decreased $6170.69 million, or 3051.83%, largely due to lower volumes ofand ~~purchased~~lower ~~power. Partially offsetting this decrease were higher~~ per-unit costs of purchased power. Lower volumes of power purchased were ~~the~~primarily ~~result~~due ofto ~~the~~Madison ~~commencement~~Unit of3 ~~commercial~~being ~~operations~~placed ofin ~~Madison~~service ~~Unit 3~~ and the acquisition of Acadia Unit 1. 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~~FAC non-recoverable fuel and power purchased decreased $127.94 million, or 52.4%, primarily due to the absence of non-recoverable expenses related to fixed-price power that was provided to a wholesale customer during 2010 and lower capacity payments made during 2011. Other operations expense increased $7.3 million, or 6.7%, primarily due to higher generating station, transmission, and distribution expenses and higher employee benefit costs and administrative expenses. Partially offsetting these increases were lower professional fees. Maintenance expenses increased $2.6 million, or 3.5%, during 2011 compared to 2010 primarily due to higher generating station and distribution maintenance work performed during 2011. Other operations and maintenance expenses were impacted during 2011 as a result of Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1. Depreciation expense increased $7.7 million, or 7.1%, largely due to Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1.

million, or 51.9%, primarily due to the commencement of commercial operations of Madison Unit 3 and the acquisition of Acadia Unit 1, which resulted in less capacity purchased from third parties. Other operations expense increased $12.3 million, or 12.3%, primarily due to higher transmission and generating station expenses, higher customer service expenses, and higher professional fees. Partially offsetting these increases was lower general liability expense. Maintenance expenses increased $24.9 million, or 52.7%, during 2010 compared to 2009 primarily due to higher generating station maintenance work performed during 2010. Other operations and maintenance expenses include the impact of Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1. Depreciation expense increased $28.5 million, or 37.0%, largely due to Madison Unit 3 being placed in service and the acquisition of Acadia Unit 1. Taxes other than income taxes increased $3.0 million, or 10.0%, primarily due to higher payroll taxes and state franchise taxes.

Interest Income

Interest income decreased $1.1 million, or 73.8%, during 2010 compared to 2009 primarily due to the absence of interest income related to deferred tree trimming costs. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 3 — Regulatory Assets and Liabilities — Tree Trimming Costs.”

Allowance for Other Funds Used During Construction

Allowance for other funds used during construction decreased $607.95 million, or 8360.1%, during ~~2010~~2011 compared to ~~2009~~2010 primarily due to the cessation of AFUDC accruals related to the completion of construction activity at Madison Unit 3.

Other ~~Expense~~Income

Other ~~expense~~income increased $21.72 million, or 7657.16%, during ~~2010~~2011 compared to ~~2009~~2010 primarily due to ~~the~~higher ~~amortization~~royalty ofpayments aand ~~plant~~higher ~~acquisition~~revenue ~~adjustment~~from ~~related~~mutual toassistance ~~Cleco Power’s acquisition of Acadia Unit 1 and amounts related~~ to ~~the~~other ~~November~~utilities ~~2010~~for ~~termination~~restoration ~~of an interest rate swap~~efforts.

Interest Charges

Interest charges increased $2018.24 million, or 3423.43%, during ~~2010~~2011 compared to ~~2009~~2010 primarily due to a $2113.63 million ~~decrease~~related into ~~interest~~the ~~charges~~November ~~capitalized~~2010 ~~(allowance~~issuance ~~for~~of ~~borrowed~~$250.0 ~~funds~~million ~~used~~of ~~during~~senior ~~construction) associated with Madison Unit 3~~notes, $108.19 million related to ~~the~~uncertain ~~November~~tax ~~2009~~positions, and ~~2010~~$2.8 ~~issuances~~million of ~~senior~~lower ~~notes,~~interest ~~and~~charges ~~$1.2~~capitalized ~~million~~in ~~related~~2011 compared to a2010 ~~variable-rate~~associated ~~bank~~with ~~loan~~Madison ~~executed~~Unit ~~in August 2009~~3. Partially offsetting this increase was $~~8.8 million of lower interest charges primarily related to uncertain tax positions, $~~3.43 million ~~related~~from to the repayment of ~~medium-term~~insured quarterly notes and ~~insured~~a ~~quarterly~~bank ~~notes~~term loan in ~~May~~October ~~2009~~2010 and ~~August~~November ~~2009~~2010, respectively, and $03.53 ~~related~~million toof other miscellaneous interest charges.

Income Taxes

Federal and state income taxes ~~increased~~decreased $595.87 million, or ~~391~~7.06%, during ~~2010~~2011 compared to ~~2009~~2010, primarily due to ana ~~increase~~decrease in pre-tax income excluding ~~equity~~ AFUDC equity. The effective income tax rate is 32.7% which is different than the federal statutory rate due to the effects of state ~~tax~~income ~~expense~~taxes.



Midstream’s Results of Operations — Year ended December 31, 2011, Compared to Year ended December 31, 2010
	FOR THE YEAR ENDED DEC. 31,
						FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2011			2010			VARIANCE			CHANGE
Operating revenue
Tolling operations	$	19,004		$	26,067		$	(7,063	)	(27.1	)%
Other operations	9			3			6			200.0	%
Affiliate revenue	45			960			(915		)	(95.3	)%
Total operating revenue	$	19,058		$	27,030		$	(7,972	)	(29.5	)%
Operating expenses
Other operations	$	8,408		$	8,082		$	(326	)	(4.0	)%
Maintenance	7,204			8,868			1,664			18.8	%
Depreciation	5,872			5,779			(93		)	(1.6	)%
Taxes other than income taxes	2,399			342			(2,057		)	(601.5	)%
Loss on sales of assets	404			387			(17		)	(4.4	)%
Total operating expenses	$	24,287		$	23,458		$	(829	)	(3.5	)%
Operating (loss) income	$	(5,229	)	$	3,572		$	(8,801	)	(246.4	)%
Equity income from investees, before tax	$	62,053		$	38,848		$	23,205		59.7	%
Gain on toll settlement	$	—		$	148,402		$	(148,402	)	(100.0	)%
Interest (income) charges	$	(28,996	)	$	7,140		$	36,136		506.1	%
Federal and state income tax expense	$	44,637		$	71,255		$	26,618		37.4	%
Net income	$	42,792		$	114,467		$	(71,675	)	(62.6	)%

~~CLECO~~Factors ~~CORPORATIONCLECO~~affecting ~~POWER~~Midstream during 2011 ~~FORM~~are ~~10-K~~described below.

Midstream’s Results of Operations — Year ended December 31, 2010,Compared to Year ended December 31, 2009
	FOR THE YEAR ENDED DECEMBER 31,
						FAVORABLE/(UNFAVORABLE)
(THOUSANDS)	2010		2009				VARIANCE			CHANGE
Operating revenue
Tolling operations	$	26,067	$	—			$	26,067		—
Other operations	3		1				2			200.0	%
Affiliate revenue	960		8,748				(7,788		)	(89.0	)%
Total operating revenue	27,030		8,749				18,281			208.9	%
Operating expenses
Other operations	8,082		6,292				(1,790		)	(28.4	)%
Maintenance	8,868		3,887				(4,981		)	(128.1	)%
Depreciation	5,779		177				(5,602		)	*
Taxes other than income taxes	342		403				61			15.1	%
Loss on sales of assets	387		5				(382		)	*
Total operating expenses	23,458		10,764				(12,694		)	(117.9	)%
Operating income (loss)	3,572		(2,015		)		5,587			277.3	%
Equity income (loss) from investees, before tax	$	38,848	$	(19,339	)		$	58,187		300.9	%
Gain on toll settlement	$	148,402	$	—			$	148,402		—
Other income	$	2,071	$	37			$	2,034		*
Federal and state income tax expense (benefit)	$	71,255	$	(11,027	)		$	(82,282	)	(746.2	)%
Net income (loss)	$	114,467	$	(17,730	)		$	132,197		745.6	%
* Not meaningful

Factors affecting Midstream during 2010 are described below.

Operating Revenue

Operating revenue ~~increased~~decreased $188.30 million, or ~~208~~29.95%, in ~~2010~~2011 compared to ~~2009~~2010 largely as a result of the accounting treatment of tolling operations revenue at Evangeline. As a result of Evangeline’s reconsolidation with Cleco, Evangeline’s $26.1 million of revenue for 2010 is reflected in tolling operations revenue. Evangeline’s revenue of $59.9 million for 2009 was reported in equity income from investees. This $33.8 million decrease in Evangeline’s revenue was primarily due to lower tolling revenue resulting from the Evangeline restructuring and ~~the~~ pricing of the Evangeline 2010 Tolling Agreement. Affiliate revenue decreased $70.89 million, or 8995.03%, in ~~2010~~2011 compared to ~~2009~~2010 primarily due to ~~affiliate transactions with Evangeline now being eliminated as~~ a ~~result~~decrease ofin ~~Evangeline’s~~services ~~reconsolidation~~provided ~~with~~by ~~Cleco and~~ Generation Services’ employees who were transferred to Cleco Power as a result of the acquisition of Acadia Unit 1. For more information on Evangeline, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Consolidated VIEs — Evangeline.”



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

during 2010 as a result of Cleco Power’s acquisition of Acadia Unit 1.

Operating Expenses

~~Operating~~Maintenance expenses ~~increased~~decreased $121.7 million, or ~~117~~18.98%, in ~~2010~~2011 compared to ~~2009~~2010, ~~primarily~~largely as a result of ~~the~~lower ~~reconsolidation~~turbine ofmaintenance ~~Evangeline with Cleco. Evangeline’s operating~~ expenses ofat ~~$20~~Evangeline.~~9 million for 2010 are included in the table above in total operating expenses.~~ ~~Evangeline’s~~Taxes ~~operating~~other ~~expenses~~than ~~of $33.3 million for 2009 were reported in equity~~ income ~~from~~taxes ~~investees. The~~increased $122.41 million, ~~decrease~~or in601.5%, ~~Evangeline’s~~primarily ~~operating~~due ~~expenses~~to ~~was~~higher ~~primarily~~property ~~due~~taxes toat ~~lower~~Evangeline ~~maintenance~~as ~~expenses~~a ~~resulting~~result ~~from~~of the ~~absence~~expiration of a ~~2009~~10-year property tax exemption.

outage. For more information on Evangeline, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 12 — Variable Interest Entities — Consolidated VIEs — Evangeline.”

Equity Income from Investees

Equity income from investees increased $5823.2 million, or ~~300~~59.97%, in ~~2010~~2011 compared to ~~2009~~2010 primarily due to increased equity earnings at APH primarily from the ~~recognition~~disposition of ~~a $41.0 million gain from Cleco Power’s acquisition of~~ Acadia Unit 12 and ~~half of~~ Acadia Power Station’s ~~related~~remaining common facilities to Entergy Louisiana. ~~Also~~Partially ~~contributing~~offsetting tothis ~~the~~ increase was the absence of ~~2009~~the ~~equity~~gain ~~losses~~ from ~~Evangeline~~Cleco ~~and~~Power’s ~~the~~acquisition ~~subsequent~~of ~~change~~Acadia inUnit ~~method~~1 and half of ~~accounting~~Acadia ~~for~~Power ~~Evangeline~~Station’s ~~effective~~related ~~January~~common 1,facilities during 2010. For more information on ~~Cleco~~the ~~Power’s acquisition of~~ Acadia Unit 1 and 2 transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 18 — Acadia Transactions ~~— Acadia Unit 1~~.”

Gain on Toll Settlement

Gain on toll settlement was $148.4 million in 2010 due to transactions related to the termination of the Evangeline Tolling Agreement and the execution of the Evangeline 2010 Tolling Agreement. For more information, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions.”

~~Other~~Interest ~~Income~~Charges

~~Other~~Interest ~~income~~charges ~~increased~~decreased $236.01 million, or 506.1%, during ~~2010~~2011 compared to ~~2009~~2010 ~~largely~~primarily asdue ato ~~result of~~ the ~~contractual~~settlement ~~expiration~~ of anlegacy ~~underlying~~tax ~~indemnification~~issues ~~resulting~~and ~~from~~ the ~~acquisition~~retirement of ~~Acadia~~Evangeline’s ~~Unit~~debt 1in ~~by Cleco Power~~2010. For more information on the IRS settlement, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 149 — ~~Litigation,~~Income ~~Other Commitments and Contingencies, and Disclosures about Guarantees — Disclosures about Guarantees~~Taxes.”

Income Taxes

Federal and state income taxes ~~increased~~decreased $8226.36 million, or ~~746~~37.24%, during ~~2010~~2011 compared to ~~2009~~2010, primarily due to ana ~~increase~~decrease in pre-tax income, partially offset by adjustments related to the settlement of legacy tax issues. The effective income tax rate is 51.1% which is different than the federal statutory rate primarily due to ~~state~~prior year adjustments related to the settlement of legacy tax ~~expense~~issues and the effects of state income taxes.



CLECO POWER LLC — NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

For a narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items of Cleco Power between the year ended December 31, ~~2011~~2012, and the year ended December 31, ~~2010~~2011, see “Results of Operations — Cleco Power’s Results of Operations — Year ended December 31, ~~2011~~2012, Compared to Year ended December 31, ~~2010~~2011.”

For a narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items of Cleco Power between the year ended December 31, ~~2010~~2011, and the year ended December 31, ~~2009~~2010, see “Results of Operations — Cleco Power’s Results of ~~Operations — Year ended December 31, 2010, Compared to Year ended December 31, 2009.”~~

Operations — Year ended December 31, 2011, Compared to Year ended December 31, 2010.”

The narrative analyses referenced above should be read in combination with Cleco Power’s Financial Statements and the Notes contained in this Form 10-K.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K



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 GAAP, 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 more information on Cleco’s accounting policies, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies.”

Cleco believes that the following are the most significant critical accounting policies:

• Cleco accounts for pension and other postretirement benefits under applicable GAAP. To determine assets, liabilities, income, and expense relating to pension and other postretirement benefits, management must make assumptions about future trends. Assumptions and estimates include, but are not limited to, discount rate, expected return on plan assets, future rate of compensation increases, and medical inflation trend rates. These assumptions are reviewed and updated on an annual basis. Changes in the rates from year to year and newly -enacted laws could have a material effect on Cleco’s financial condition and results of operations by changing the recorded assets, liabilities, income, expense, or required funding of the pension plan obligation. One component of pension expense is the expected return on plan assets. It is an assumed percentage return on the market-related value of plan assets. The market-related value of plan assets differs from the fair value of plan assets by the amount of deferred asset gains or losses. Actual asset returns that differ from the expected return on plan assets are deferred and recognized in the market-related value of assets on a straight-line basis over a five-year period. The ~~2011~~2012 return on plan assets was 815.72% compared to an expected long-term return of 76.86%. For ~~2010~~2011, the return on plan assets was 138.67% compared to an expected long-term return of 7.8%. For the calculation of the ~~2012~~2013 periodic expense, Cleco is ~~lowering~~increasing the expected long-term return on plan ~~assets to 6.61%. This decrease was caused by a shift in investment policies from equity investments to fixed income investments. The decrease is expected to increase expense by $3.7 million.~~

~~Historically, Cleco used the Citigroup Pension Liability Index, adjusted for differences in cash flows, in determining the discount rate applied to its pension~~ 39

~~plans. For~~CLECO ~~the~~CORPORATION ~~December~~CLECO ~~31,~~POWER ~~2011~~2012 ~~measurement~~FORM of liabilities, management ceased using the Citigroup Pension Liability Index because the index’s cash flows were not similar to those of Cleco’s pension plans. Instead, Cleco began using a theoretical bond portfolio in order to calculate the discount rate as it is more representative of Cleco’s expected cash outflows. As a result of the annual review of assumptions, the discount rate decreased from 5.43% to 5.08%.10-K

Aassets ~~change in the assumed discount rate creates a deferred actuarial gain or loss. Generally, when the assumed discount rate decreases compared~~ to ~~the prior measurement date, a deferred actuarial loss is created~~6. ~~When the assumed discount rate increases compared to the prior measurement date, a deferred actuarial gain is created~~78%. ~~Actuarial~~This ~~gains~~increase ~~and~~was ~~losses~~caused ~~also~~by ~~are created when actual results, such as compensation increases, differ from assumptions. Deferred actuarial gains and losses are recorded as~~ a ~~regulatory~~slight ~~asset~~shift ~~or liability. The net of the deferred gains and losses is amortized~~ to ~~pension expense over~~ the ~~average~~upper ~~service~~target ~~life~~ of ~~the~~international ~~remaining~~equity ~~plan~~investments ~~participants,~~as ~~11.3~~allowed ~~years~~by ~~for Cleco’s plan, when it exceeds certain thresholds. This approach to amortization of gains and losses has~~ the ~~effect of reducing the volatility of pension expense attributable to~~ investment ~~returns~~policy statement. ~~Over~~The ~~time,~~change itin allocation is ~~not~~ expected to ~~reduce~~decrease ~~or increase the pension~~ expense ~~relative~~by toapproximately an$0.6 ~~approach that immediately recognizes losses and gains~~million.

~~The~~For ~~decrease~~the inDecember ~~the~~31, ~~discount~~2011, ~~rate~~measurement isof ~~expected~~liabilities, tomanagement ~~increase~~began ~~pension~~using ~~expense~~a bytheoretical ~~$1.7~~bond ~~million~~portfolio in ~~2012~~order ~~compared~~ to ~~2011~~calculate the discount rate. ~~Since~~As a result of the ~~assumption~~annual isreview ~~evaluated~~of ~~yearly~~assumptions, the ~~increase~~discount ~~may~~rate ~~not~~decreased ~~extend~~from ~~past~~5.08% to 4.19% for the December 31, 2012, measurement of liabilities.

~~Cleco~~A ~~Power~~change ~~made~~in athe ~~$60.0~~assumed ~~million~~discount ~~contribution~~rate tocreates ~~the~~a ~~pension~~deferred ~~plan~~actuarial ~~during~~gain ~~2011~~or asloss. Generally, ~~compared~~when tothe aassumed ~~$5.0~~discount ~~million~~rate ~~required~~decreases ~~contribution~~compared to the ~~pension~~prior ~~plan~~measurement ~~in 2010. During 2009~~date, ~~Cleco Power made~~ a ~~discretionary~~deferred ~~contribution~~actuarial ofloss ~~$18~~is created.8 When ~~million to~~ the ~~pension~~assumed ~~plan. The~~discount ~~$60.0~~rate ~~million~~increases ~~contribution~~compared into ~~2011~~the ~~was~~prior ~~primarily~~measurement date, a ~~pre-funding~~deferred ofactuarial ~~expected~~gain ~~minimum~~is ~~contributions through 2014~~created. ~~Based~~Actuarial ongains ~~current~~and ~~funding~~losses ~~assumptions,~~also ~~management~~are ~~estimates~~created ~~future~~when ~~pension~~actual ~~contributions~~results, ofsuch ~~$33.7~~as ~~million~~compensation ~~through 2016~~increases, ~~none~~differ offrom ~~which is required in 2012~~assumptions. ~~Future~~Deferred ~~discretionary~~actuarial ~~contributions~~gains ~~may~~and belosses ~~made~~are ~~depending~~recorded onas ~~changes~~a inregulatory ~~assumptions,~~asset ~~the~~or ~~ability~~liability. The tonet ~~utilize~~of the ~~contribution~~deferred asgains ~~a tax deduction,~~ and ~~requirements~~losses ~~concerning~~is ~~recognizing~~amortized ato ~~minimum~~ pension ~~liability. Future~~expense ~~required~~over ~~contributions~~the ~~are~~average ~~driven~~service bylife ~~liability~~of ~~funding~~the ~~target~~remaining ~~percentages~~plan ~~set~~participants, by11 ~~law~~years ~~which~~for ~~could~~Cleco’s ~~cause~~plan, ~~the~~when ~~required~~it ~~contributions~~exceeds tocertain ~~change~~thresholds. This ~~from~~approach ~~year~~ to ~~year. The~~amortization ~~ultimate~~of ~~amount~~gains and ~~timing~~losses ofhas the ~~contributions~~effect ~~will~~of bereducing ~~affected~~the byvolatility ~~changes~~of inpension ~~the~~expense ~~discount~~attributable ~~rate,~~to ~~changes~~investment inreturns. Over ~~the~~time, ~~funding~~it ~~regulations,~~is ~~and~~not ~~actual~~expected ~~returns~~to onreduce ~~fund~~or ~~assets. Adverse~~increase ~~changes~~the inpension ~~assumptions,~~expense orrelative ~~adverse~~to ~~actual~~an ~~events~~approach ~~could~~that ~~cause~~immediately ~~additional~~recognizes ~~minimum~~losses ~~contributions~~and gains.

InThe ~~March~~decrease ~~2010,~~in the ~~President~~discount ~~signed~~rate ~~the~~is ~~PPACA,~~expected ato ~~comprehensive~~increase ~~health~~pension ~~care~~expense ~~law. The~~by ~~PPACA~~approximately ~~contained~~$5.0 anmillion ~~excise tax beginning~~ in ~~2018~~2013 oncompared ~~health~~to ~~care~~2012. Since ~~benefits~~the ~~that~~assumption ~~exceeded~~is ~~certain~~evaluated ~~dollar~~yearly, ~~limits. If~~the aincrease ~~company~~may ~~sponsors~~not aextend ~~postretirement~~past ~~medical plan and~~ 2013.

40Cleco Power made no contributions to the pension plan during 2012 as compared to $60.0 million in discretionary contributions in 2011 and $5.0 million required contributions in 2010. In January 2013, Cleco Power made $34.0 million in discretionary contributions to the pension plan. Based on current funding assumptions, management estimates that no pension contributions will be required through 2017. Future discretionary contributions may be made depending on changes in assumptions, the ability to utilize the contribution as a tax deduction, and requirements concerning recognizing a minimum pension liability. Future required contributions are driven by liability funding target percentages set by law which could cause the required contributions to change from year to year. 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. Adverse changes in assumptions, or adverse actual events could cause additional minimum contributions.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

it expects to be required to pay the excise tax starting in 2018, it must reflect the effects of the tax liability and expense currently as a part of its normal accounting for postretirement benefits. Cleco’s assumption, based upon the ability to blend post-65 and pre-65 retiree benefits is that it will not be required to pay the tax starting in 2018. If the assumption is incorrect, Cleco expects an increase in the post-retiree medical liability of approximately $3.3 million and the related increase in expense of $1.0 million.

For more information on pension and other postretirement benefits, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 8 — Pension Plan and Employee Benefits.”

•

Income tax expense and related balance sheet amounts are comprised of a “current” portion and a “deferred” portion. The current portion represents Cleco’s estimate of the income taxes payable or receivable for the current year. The deferred portion represents Cleco’s estimate of the future income tax effects of events that have been recognized in the financial statements or income tax returns in the current or prior years. Cleco makes assumptions and estimates when it records income taxes, such as its ability to deduct items on its tax returns, the timing of the deduction, and the effect of regulation by the LPSC on income taxes. Cleco’s income tax expense and related assets and liabilities could be affected by changes in its assumptions and estimates and by ultimate resolution of assumptions and estimates with taxing authorities. The actual results may differ from the estimated results based on these assumptions and may have a material effect on Cleco’s results of operations. For more information about Cleco Corporation’s income taxes, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 9 — Income Taxes.”

The provisions of the authoritative guidance relating to uncertain tax positions require management to estimate the reliability of positions taken on tax returns. These estimates could differ significantly from the ultimate outcome. For more information on income taxes, see Item 8, “Financial Statements and Supplemental Data — Notes to the Financial Statements — Note 9 — Income Taxes.”

• Cleco Corporation consolidates entities as required by GAAP. Generally, a parent consolidates entities in which it controls, either directly or indirectly, the majority of the voting interest. Additionally, a parent could be required to consolidate an entity in which it does not control a majority voting interest if the subsidiary is a variable interest entity and meets certain criteria making the parent the primary beneficiary of an entity. An entity is a variable interest entity if it lacks the ability to finance its activities without support from other parties;, if its owners lack controlling financial interest in the entity;, or if the entity either conducts substantially all of its activities with or on behalf of an investor or if voting rights are disproportional to risks and rewards. While consolidation or the equity method of accounting will not affect net income applicable to common shareholders, it may affect specific line items within the income statement, such as revenue, specific expense line items, and income from equity investees. Consolidation or the equity method of accounting of an entity will affect specific balance sheet items such as property, plant, and equipment, and long-term debt, which will cause changes in total assets and total liabilities. Shareholders’ equity should not be affected by consolidation or the equity method of accounting of entities. Effective January 1, 2010, the requirements for consolidation changed, requiring Cleco Corporation to consolidate Perryville, Attala, and Evangeline which had been previously accounted for using the equity method.

the income statement, such as revenue, specific expense line items, and income from equity investees. Consolidation or the equity method of accounting of an entity will affect specific balance sheet items such as property, plant, and equipment, and long-term debt, which will cause changes in total assets and total liabilities. Shareholders’ equity should not be affected by consolidation or the equity method of accounting of entities. Effective January 1, 2010, the requirements for consolidation changed, requiring Cleco Corporation to consolidate three wholly owned subsidiaries that had been accounted for using the equity method. Prior to January 1, 2010, Perryville, Attala, and Evangeline were presented in the consolidated financial statements as follows;40

◦CLECO ~~all~~CORPORATION ~~entities’~~CLECO ~~results~~POWER of2012 ~~operations~~FORM ~~before taxes as one line item on the consolidated statements of income entitled equity income (loss) from investees,~~10-K

◦• ~~all~~Part ~~entities’~~of ~~assets~~the compensation employees and ~~liabilities~~directors onreceive is in the ~~consolidated~~form ~~balance~~of ~~sheets~~equity instruments. The instruments may take the form of restricted stock, stock equivalent units, or other types of equity instruments as ~~one~~described ~~line~~in ~~item~~the ~~entitled~~compensatory plans. Cleco recognizes equity ~~investment~~compensation at the grant date fair value for instruments settled in ~~investees~~equity and reporting date fair value for equity compensation settled in cash. Estimates used in the calculation require management judgments and could cause volatility in earnings. For more information on stock-based compensation, see Item 8, “Financial Statements and Supplemental Data — Notes to the Financial Statements — Note 7 — Common and Preferred Stock — Common Stock — Stock-Based Compensation.”

◦ all entities’ cash flows in the consolidated statement of cash flows as return on equity investment in investee, return of equity investment in investee and equity investment in investee.

On and after January 1, 2010, all entities’ assets, liabilities, revenues, expenses and cash flows are presented on the corresponding line items of the consolidated financial statements. Cleco has chosen to implement the consolidation prospectively and not retrospectively, therefore the consolidation was not carried back to comparative prior periods in financial statements issued after implementation. For more information on Perryville, Attala and Evangeline, see Item 8, “Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies — Recent Authoritative Guidance” and Note 12 — “Variable Interest Entities.”

• Part of the compensation employees and directors receive is in the form of equity instruments. The instruments may take the form of restricted stock, stock options, stock equivalent units, or other types of equity instruments as described in the compensatory plans. Cleco recognizes equity compensation at the grant date fair value for instruments settled in equity and reporting date fair value for equity compensation settled in cash. Estimates used in the calculation require management judgments and could cause volatility in earnings. For more information on stock-based compensation, see Item 8, “Financial Statements and Supplemental Data — Notes to the Financial Statements — Note 7 — Common and Preferred Stock — Common Stock — Stock-Based Compensation.”

Cleco Power

Cleco Power’s prices are regulated by the LPSC and FERC. By determining what costs can be recovered by Cleco Power through the price it charges its customers, regulatory assets and liabilities are recognized. Future changes made by the regulatory bodies could have a material impact on the operations and financial condition of Cleco Power. Three areas that could be materially impacted by future actions of regulators are:

41• The LPSC determines the ability of Cleco Power to recover prudent costs incurred in developing long-lived assets. If the LPSC were to rule that the cost of current or future long-lived assets was imprudent and not recoverable, Cleco Power could be required to write down the imprudent cost and incur a corresponding impairment loss. At December 31, 2012, the carrying value of Cleco Power’s long-lived assets was $2.64 billion. Currently, Cleco Power has concluded that none of its long-lived assets are impaired.

~~CLECO~~• ~~CORPORATIONCLECO~~Cleco ~~POWER~~Power ~~2011~~has ~~FORM~~concluded ~~10-K~~it is probable that regulatory assets can be recovered from ratepayers in future rates. At December 31, 2012, Cleco Power had $510.7 million in regulatory assets, net of regulatory liabilities. Actions by the LPSC could limit the recovery of these regulatory assets, causing Cleco Power to record a loss on some or all of the regulatory assets. For more information on the LPSC and regulatory assets, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Regulation,” Note 3 — “Regulatory Assets and Liabilities,” and “— Financial Condition — Regulatory and Other Matters — Lignite Deferral.”

~~operations~~• ~~and~~The ~~financial~~LPSC ~~condition~~determines the amount and type of fuel and purchased power costs that Cleco Power can charge customers through the FAC. ~~Three~~ ~~areas~~Changes ~~that~~in ~~could~~the bedetermination ~~materially~~of ~~impacted~~allowable costs already incurred by ~~future~~Cleco ~~actions~~Power could cause material changes in fuel revenue. For the years ended December 31, 2012, 2011, and 2010, Cleco Power reported fuel revenue of ~~regulators~~$337.6 ~~are:~~million, $446.9 million, and $493.4 million, respectively.

•At ~~The~~December ~~LPSC~~31, ~~determines~~2012, ~~the ability of~~ Cleco Power tohad ~~recover~~$12.4 ~~prudent~~million ~~costs~~in ~~incurred~~losses in ~~developing~~other ~~long-lived~~comprehensive ~~assets~~income and $7.3 Ifmillion ~~the~~of ~~LPSC~~losses ~~were~~and ineffectiveness deferred as a regulatory asset related to ~~rule~~interest ~~that~~rate ~~the~~derivatives ~~cost~~entered into in 2011. As a result of ~~current~~management’s orassessment ~~future~~that ~~long-lived~~it ~~assets~~is ~~was~~probable ~~imprudent~~that the losses and ~~not~~ineffectiveness ~~recoverable~~will be recovered through the rate-making process, Cleco Power ~~could~~will beamortize ~~required~~the toregulatory ~~write~~asset ~~down~~over the ~~imprudent~~30-year ~~cost~~term of the related debt. If management determines that the forecasted future interest payments will not occur and ~~incur~~the aLPSC ~~corresponding~~determines ~~impairment~~the costs were imprudent, then any gain or loss on the interest rate derivatives will be required to be recognized in income immediately. For Atmore ~~December~~information 31on these interest rate derivatives, ~~2011~~see Item 8, ~~the~~“Financial ~~carrying~~Statements ~~value~~and ofSupplementary ~~Cleco~~Data ~~Power’s~~— ~~long-lived~~Notes ~~assets~~to ~~was~~the ~~$2.56~~Financial ~~billion.~~Statements ~~Currently,~~— ~~Cleco~~Note ~~Power~~5 ~~has~~— ~~concluded~~“Fair ~~that~~Value ~~none~~Accounting of— ~~its~~Interest ~~long-lived~~Rate ~~assets~~Derivatives ~~are~~— ~~impaired~~Forward Starting Interest Rate Swap.”

• Cleco Power has concluded it is probable that regulatory assets can be recovered from ratepayers in future rates. At December 31, 2011, Cleco Power had $458.7 million in regulatory assets, net of regulatory liabilities. Actions by the LPSC could limit the recovery of these regulatory assets, causing Cleco Power to record a loss on some or all of the regulatory assets. For more information on the LPSC and regulatory assets, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Regulation,” Note 3 — “Regulatory Assets and Liabilities,” and “— Financial Condition — Regulatory and Other Matters — Lignite Deferral.”

• The LPSC determines the amount and type of fuel and purchased power costs that Cleco Power can charge customers through the fuel adjustment clause. Changes in the determination of allowable costs already incurred by Cleco Power could cause material changes in fuel revenue. For the years ended December 31, 2011, 2010, and 2009, Cleco Power reported fuel revenue of $446.9 million, $493.4 million, and $453.6 million, respectively.

During 2011, Cleco Power entered into two derivative instruments designated as cash flow hedges, one treasury rate lock and one forward starting interest rate swap. Also, during 2011, Cleco Power entered into a treasury rate lock extension which did not qualify for hedge accounting. The treasury rate locks were settled during the fourth quarter of 2011 for a combined loss of $26.7 million. At December 31, 2011, Cleco Power recorded $22.3 million in other comprehensive income and deferred $4.4 million of losses and ineffectiveness as a regulatory asset related to the settlement of the two treasury rate locks. As a result of management’s assessment that it is probable that the losses and ineffectiveness will be recovered through the rate-making process, Cleco Power will amortize the regulatory asset over the 30-year term of the related debt. The amount recorded in other comprehensive income will also be amortized as interest expense over the 30-year term of the related debt issuance. Of the $26.7 million loss, $8.1 million is related to interest payments on a forecasted $50.0 million debt issuance that will be issued on or before May 2013. If management determines that the forecasted future interest payments will not occur and the LPSC determines the costs were imprudent, then the $8.1 million settled loss and any gain or loss on the forward starting swap will be required to be recognized in income immediately. For more information on these interest rate derivatives, see Item 8, “Financial

Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — “Fair Value Accounting — Interest Rate Derivatives — Treasury Rate Locks" and "— Forward Starting Interest Rate Swap.”

Midstream

Generally, Midstream is most affected by market conditions and changes in contract counterparty credit ratings and financial condition. ~~The~~Currently, ~~most~~Cleco ~~important~~Power ~~are:~~is Midstream’s only counterparty.

• Certain triggering events could cause Midstream to determine that its long-lived assets may be impaired according to applicable accounting guidance. Triggering events which apply to long-lived assets include, but are not limited to, a significant decrease in the market value of long-lived assets, a significant change in legal factors, such as adverse changes in environmental laws, or a current operating or cash flow loss combined with a projection of continued losses in the future. Any impairment calculated is subject to many assumptions and estimations. Management must make assumptions about expected future cash flows, long-term interest rates, estimates about the probability of the occurrence of future events, and estimates of market value of assets without a readily observable market price. Differences between the estimate made at a particular balance sheet date and actual events could cause material adjustments to an impairment charge. In February 2010, a triggering event occurred at Evangeline when the long-term Evangeline Tolling Agreement was terminated. An impairment charge was not recorded since the undiscounted expected future net cash flows exceeded the carrying value of Evangeline’s property, plant, and equipment. Due to the lack of a long-term agreement, the expected future net cash flows of Evangeline are subject to an increased potential for variability as compared to prior years. Consequently, future impairment tests could occur more frequently and might result in an impairment charge. At December 31, 2011, Midstream had $183.1 million in long-lived assets. For more information on the Evangeline transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 17 — Evangeline Transactions.”

•On AtOctober ~~December 31~~30, ~~2011~~2012, ~~Midstream~~Cleco ~~had~~Power ~~$29.4~~announced ~~million~~Evangeline inas ~~indemnification~~the ~~liabilities~~winning ~~related~~bidder toin the ~~Acadia~~Cleco ~~Unit~~Power 12012 ~~and~~Long-Term ~~Acadia~~RFP, ~~Unit~~subject 2to ~~transactions.~~further ~~The~~due ~~indemnification~~diligence, ~~liabilities~~the ~~contain~~completion ~~management’s~~of ~~assumptions~~definitive agreements, and ~~estimates~~regulatory ~~concerning~~approvals from the ~~amount,~~LPSC ~~timing~~and FERC. In December 2012, Cleco Power and ~~probability~~Evangeline ofexecuted ~~potential~~definitive ~~payments.~~agreements Ifto ~~those~~transfer ~~assumptions~~ownership and ~~estimates~~control doof ~~not~~Coughlin ~~reflect~~from ~~actual~~Evangeline ~~results,~~to ~~then~~Cleco ~~certain~~Power. The ~~triggering~~transaction ~~events~~is ~~could~~expected ~~cause~~to ~~Midstream~~close toas ~~make~~early ~~payments~~as inthe ~~excess~~fourth quarter of ~~the liability~~2013, ~~which~~after ~~could~~completion ~~result~~of inregulatory ~~additional expenses~~approvals. If ~~For~~this ~~more~~transaction ~~information~~does ~~regarding~~not ~~these~~close ~~transactions,~~and ~~see~~Evangeline ~~Item~~does 8,not ~~“Financial~~obtain ~~Statements~~a ~~and~~long-term ~~Supplementary~~agreement ~~Data~~for —Coughlin’s ~~Notes~~capacity, to the ~~Financial~~expected ~~Statements~~future —net ~~Note~~cash 14flows —of ~~Litigation,~~Evangeline ~~Other~~could ~~Commitments~~be ~~and~~subject ~~Contingencies,~~to ~~and~~an ~~Disclosures~~increased ~~about~~potential ~~Guarantees~~for —variability ~~Disclosures~~as ~~about~~compared ~~Guarantees."~~

4241

CLECO ~~CORPORATIONCLECO~~CORPORATION CLECO POWER ~~2011~~2012 FORM 10-K

to prior years. Consequently, future impairment tests could occur more frequently and might result in an impairment charge. At December 31, 2012, Midstream had $180.4 million in long-lived assets. For more information on the Evangeline transaction, see “— Financial Condition — Regulatory and Other Matters — Generation RFP — 2012 Long-Term RFP for Capacity and Energy Resources.”

•

At December 31, 2012, Midstream had $8.2 million in indemnification liabilities related to the Acadia Unit 1 and Acadia Unit 2 transactions. The indemnification liabilities contain management’s assumptions and estimates concerning the amount, timing, and probability of potential payments. If those assumptions and estimates do not reflect actual results, then certain triggering events could cause Midstream to make payments in excess of the liability, which could result in additional expenses. For more information regarding these transactions, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 14 — Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Disclosures about Guarantees.”



FINANCIAL CONDITION

Liquidity and Capital Resources

General Considerations and Credit-Related Risks

Credit Ratings and Counterparties

Financing for operational needs and capital expenditure requirements not satisfied by operating cash flows depends upon the cost and availability of external funds through both short- and long-term financing. The inability to raise capital on favorable terms could negatively affect Cleco’s or Cleco Power’s ability to maintain or expand its businesses. Access to funds is dependent upon factors such as general economic and capital market conditions, regulatory authorizations and policies, Cleco Corporation’s and Cleco Power’s credit ratings, the cash flows from routine operations, and the credit ratings of project counterparties. After assessing the current operating performance, liquidity, and credit ratings of Cleco and Cleco Power, management believes that Cleco and Cleco Power will have access to the capital markets at prevailing market rates for companies with comparable credit ratings. The following table presents the credit ratings of Cleco Corporation and Cleco Power at December 31, ~~2011~~2012:



	SENIOR UNSECURED DEBT
	MOODY’S	STANDARD & POOR’S
Cleco Corporation	Baa3	BBB-
Cleco Power	Baa2	BBB

Cleco notes that credit ratings are not recommendations to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

At December 31, ~~2011~~2012, Moody’s ~~and Standard & Poor’s~~ outlooks for both Cleco Corporation and Cleco Power were stable~~. Cleco~~ ~~Corporation~~ and ~~Cleco Power pay fees and interest under their bank credit agreements based on the highest rating held. If Cleco Corporation or Cleco Power’s credit rating were to be downgraded by Moody’s and~~ Standard & Poor’s, ~~Cleco~~outlooks ~~Corporation~~for ~~and/or~~both Cleco ~~Power~~Corporation ~~would be required to post additional fees~~ and ~~incur higher interest rates under their bank credit agreements.~~ Cleco Power’s ~~collateral~~were ~~for derivatives is based on the lowest rating held~~positive. If Cleco ~~Power’s~~Corporation ~~credit~~and ~~ratings were to be downgraded by Standard & Poor’s or Moody’s,~~ Cleco Power ~~would~~pay befees ~~required to post additional collateral for derivatives.~~

and interest under their bank credit agreements based on the highest rating held. If Cleco Corporation’s or Cleco Power’s credit ratings were to be downgraded by Moody’s or Standard & Poor’s, Cleco Corporation and/or Cleco Power would be required to post additional fees and incur higher interest rates under their bank credit agreements. Cleco Power’s collateral for derivatives is based on the lowest rating held. If Cleco Power’s credit ratings were to be downgraded by Moody’s or Standard & Poor’s, Cleco Power would be required to post additional collateral for derivatives.

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.

Global and U.S. Economic Environment

The current economic environment and uncertainty may have an impact on Cleco’s business and financial condition. Access to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. Market conditions during the past few years have limited the availability and have increased the costs of capital for many companies. Although the Registrants have not experienced restrictions in the financial markets, their ability to access the capital markets may be restricted at a time when the Registrants would like, or need, to do so. Any restrictions could have a material impact on the Registrants’ ability to fund capital expenditures or debt service, or on their flexibility to react to changing economic and business conditions. Credit constraints could have a material negative impact on the Registrants’ lenders or customers, causing them to fail to meet their obligations to the Registrants or to delay payment of such obligations. The lower interest rates that the Registrants have been exposed to have been beneficial to recent debt issuances; however, these rates have negatively affected interest income for the Registrants’ short-term investments.

costs of capital for many companies. Although the Registrants have not experienced restrictions in the financial markets, their ability to access the capital markets may be restricted at a time when the Registrants would like, or need, to do so. Any restrictions could have a material impact on the Registrants’ ability to fund capital expenditures or debt service, or on their flexibility to react to changing economic and business conditions. Credit constraints could have a material negative impact on the Registrants’ lenders or customers, causing them to fail to meet their obligations to the Registrants or to delay payment of such obligations. The lower interest rates that the Registrants have been exposed to have been beneficial to recent debt issuances; however, these rates have negatively affected interest income for the Registrants’ short-term investments.

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 debt 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 consolidated balance sheets with their fair values disclosed without regard to the three levels. For more information about fair value levels, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Fair Value Accounting.”



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

Cash Generation and Cash Requirements

Restricted Cash and Cash Equivalents

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 its intended purposes and/or general corporate purposes. Cleco’s restricted cash and cash equivalents consisted of:

	AT DECEMBER 31,
	AT DEC. 31,
(THOUSANDS)	~~2011~~2012		~~2010~~2011
Diversified Lands’ mitigation escrow	$	97	$	97
Cleco Katrina/Rita’s storm recovery bonds	8,~~761~~781		8,~~822~~761
Cleco Power’s future storm restoration costs	245,~~876~~343		2524,~~992~~876
Cleco Power’s renewable energy grant	~~381~~—		—381
Cleco Power’s GO Zone bonds	—		6,137
Cleco Power’s NOx allowance escrow	—		1,713
Cleco Power’s NOx allowance escrow	1,713		—
Total restricted cash and cash equivalents	$	14,221	$	35,828
Total restricted cash	$	35,828	$	41,048

Cleco Katrina/Rita has the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash is collected, it is restricted for payment of operating expenses, interest, and principal on storm recovery bonds. During ~~2011~~2012, Cleco Katrina/Rita collected $1920.71 million net of operating expenses. In March and September ~~2011~~2012, Cleco Katrina/Rita used $6.37 million and $6.04 million, respectively, for scheduled storm recovery bond principal payments and $3.86 million and $3.74 million, respectively for related interest. InCleco Power’s restricted cash and cash equivalents held for future storm restoration costs decreased $19.5 million from December 31, 2011, primarily due to the transfer of $10.9 million to restricted investments and the transfer of $10.0 million to cover expenses associated with Hurricane Isaac. These amounts were partially offset by $1.4 million of storm surcredits. Cleco Power’s ~~received~~restricted acash and cash equivalents NOx allowance escrow decreased $01.67 million ~~renewable~~from ~~energy~~December ~~grant~~31, 2011. The funds were transfered from restricted to non-restricted cash and cash equivalents due to the ~~Louisiana~~courts ~~Department~~vacating ofCSAPR. For ~~Natural~~more ~~Resources~~information about the restricted investments, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Fair Value Accounting — Restricted Investments” and for more information about Hurricane Isaac, see Item 8, “Financial Statements and Supplemental Data — Notes to the Financial Statements — Note 19 — Storm Restoration. ” For more information about CSAPR, see Part I, Item 1, “Business — Environmental Matters — Environmental Quality — Air Quality.”

43At December 31, 2012 and 2011, Midstream had no restricted cash and cash equivalents.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

At December 31, 2011, and 2010, Midstream had no restricted cash.

Debt

Cleco Consolidated

Cleco had no short-term debt outstanding at December 31, ~~2011,~~2012 compared to $150.0 million outstanding at December 31, 2010. Cleco’s short-term debt outstanding at December 31, 2010, was a bank term loan entered into in February 2010. The bank term loan had an interest rate of LIBOR plus 2.75% and was set to mature in February 2011. In January 2011, Cleco extended the bank term loan to mature August 19, 2011, and lowered the interest rate to LIBOR plus 2.50% or ~~ABR plus 1.50%. In April~~ 2011~~, Cleco repaid the $150~~.~~0 million bank term loan.~~ ~~As part of the repayment, Cleco paid $0.6 million for accrued interest on the term loan.~~

At December 31, ~~2011~~2012, Cleco’s long-term debt outstanding was $1.3635 billion, of which $2491.31 million was due within one year, compared to $1.4136 billion outstanding at December 31, ~~2010~~2011, which included $1226.31 million due within one year. The long-term debt due within one year at December 31, ~~2011~~2012, represents $1375.10 million ofin ~~principal~~senior ~~payments~~notes ~~for~~due ~~the~~May ~~Cleco~~1, ~~Katrina/Rita~~2013, ~~storm recovery bonds and~~ $1114.20 million of ~~5.875%~~principal ~~Rapides~~payments ~~pollution~~for ~~control~~the ~~revenue bonds that~~ Cleco ~~Power~~Katrina/Rita ~~redeemed~~storm atrecovery ~~par on January 25~~bonds, ~~2012, prior to maturity. In December 2011, Cleco Power issued the notice of redemption~~ and ~~as part of the redemption, paid~~ $02.31 million of ~~accrued~~capital ~~interest~~lease ~~on the redeemed notes~~payments.

For Cleco, long-term debt decreased $5014.78 million ~~primarily~~from ~~due to $132.0 million of debt reacquired in October and~~ December 31, 2011, ~~consisting~~primarily ofdue ~~$32.0~~to ~~million~~redeeming ~~of solid waste disposal bonds and~~ $~~100~~50.01 million of GODeSoto ~~Zone~~Parish ~~bonds. Also~~pollution ~~contributing~~control tobonds ~~the~~in ~~decrease~~May ~~was~~2012 and $1213.31 million of scheduled Cleco Katrina/Rita storm recovery bond principal payments made in March and September ~~2011,~~2012. aAlso contributing to the decrease was the redemption of $511.02 million ~~decrease~~of inRapides ~~credit~~Parish ~~facility~~pollution ~~draws~~control ~~outstanding,~~bonds in January 2012 and a $16.82 million ofdecrease in capital lease ~~payments~~obligations. These decreases were partially offset by the issuance of $~~100~~50.0 million of senior unsecured notes ~~issued~~in May 2012, a $15.0 million increase in ~~December~~credit ~~2011~~facility draws outstanding, and debt premium amortizations of $0.48 million.

~~Cash~~On ~~and~~January ~~cash equivalents available at December 31~~25, ~~2011~~2012, ~~were $93.6 million combined with $540.0 million credit facility capacity ($240.0 million from~~ Cleco ~~Corporation and $300.0 million from Cleco~~ Power) ~~for~~redeemed ~~total~~at ~~liquidity~~par of $~~633~~11.62 million~~. Cash~~ ~~and~~of ~~cash equivalents available at December 31, 2011, decreased $97~~5.6875% ~~million~~Rapides ~~when~~Parish ~~compared~~pollution tocontrol ~~cash~~bonds ~~and~~due ~~cash~~September ~~equivalents available at December 31, 2010~~2029. ~~This~~As ~~decrease~~part isof ~~primarily due to a contribution to~~ the ~~pension plan~~redemption, ~~additions~~Cleco toPower ~~property,~~paid ~~plant,~~$0.3 ~~and~~million ~~equipment, the net repayment~~ of ~~debt,~~accrued ~~the~~interest ~~repurchase~~on ~~of common and preferred stock, and~~ the ~~payment~~redeemed ~~of common dividends~~notes.

AtOn ~~December 31~~May 8, ~~2011~~2012, Cleco ~~and Cleco~~ Power ~~were~~issued ~~exposed~~$50.0 tomillion ~~concentrations~~senior ofunsecured ~~credit~~private ~~risk~~placement ~~through~~notes ~~their~~at ~~short-term~~an ~~investments~~interest ~~classified~~rate asof ~~cash equivalents~~4.33%. InThe ~~order~~maturity todate ~~mitigate~~of ~~potential~~the ~~credit~~notes ~~risk~~is May 15, ~~Cleco~~2027. The ~~and~~proceeds ~~Cleco~~were ~~Power~~used ~~have~~primarily ~~established guidelines~~ for ~~short-term~~the ~~investments. For~~early ~~more~~redemption ~~information~~of on$50.1 ~~the~~million ~~concentration~~ of ~~credit~~5.875% ~~risk~~DeSoto ~~through~~Parish ~~short-term~~pollution ~~investments~~control ~~classified~~bonds as ~~cash~~described ~~equivalents, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Fair Value Accounting~~above.”

AtOn ~~December 31,~~May ~~2011~~11, ~~and 2010~~2012, Cleco ~~had~~Power aredeemed ~~working~~at ~~capital~~par ~~surplus~~all of $~~135~~50.81 million ~~and~~of ~~$131~~5.2875% ~~million,~~DeSoto ~~respectively~~Parish pollution control bonds due September 2029. ~~The~~As part of the redemption, Cleco Power paid $40.6 million ~~increase~~of inaccrued ~~working~~interest ~~capital~~on isthe ~~primarily~~redeemed ~~due to:~~notes.

•Cash and cash equivalents available at December 31, 2012, were $~~150~~31.0 million ~~repayment~~combined with $525.0 million available credit facility capacity ($225.0 million from Cleco Corporation and $300.0 million from Cleco Power) for total liquidity of a$556.0 ~~bank~~million. Cash ~~term~~and ~~loan~~cash inequivalents ~~April~~available at December 31, 2012, decreased $62.6 million when compared to cash and cash equivalents available at December 31, 2011. This decrease is primarily due to additions to property, plant, and equipment, the net repayment of debt, the repurchase of common stock, and payment of common stock dividends.

•At ~~$34.2~~December 31, ~~million~~2012, ~~net~~Cleco ~~decrease~~and ~~related~~Cleco toPower ~~changes~~were inexposed ~~the~~to ~~recognition~~concentrations of ~~current~~credit ~~taxes~~risk ~~and~~through ~~uncertain~~their ~~tax~~short-term ~~positions~~investments ~~and~~classified ~~related~~as ~~interest~~cash ~~charges~~equivalents. In ~~expected~~order to bemitigate ~~settled~~potential incredit risk, Cleco and Cleco Power have established guidelines for short-term investments. For more information on the ~~next~~concentration 12of ~~months~~credit risk through short-term investments classified as cash equivalents, see Item 8, “Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 5 — Fair Value Accounting.”

•At December 31, 2012 and 2011, Cleco had a working capital surplus of $10152.57 million ~~reduction~~and in$135.8 ~~the~~million, ~~deferred~~respectively. The ~~construction~~$16.9 ~~carrying~~million ~~costs~~increase ~~owed~~in toworking ~~customers~~capital inis ~~the~~primarily ~~next~~due ~~12 months.~~to:


•	$75.4 million net decrease in current tax liabilities and uncertain tax positions and related interest charges expected to be settled in the next 12 months,


•	$24.8 million decrease in accounts payable,


•	$24.8 million decrease in regulatory liabilities,


•	$6.3 million increase in cash surrender value of company and trust-owned life insurance policies,


•	$5.7 million increase in accumulated deferred fuel,


•	$5.3 million decrease in energy risk management liabilities, and


•	$5.0 million increase in fuel inventories.



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

These increases in working capital were partially offset by:

• $9765.60 million ~~decrease~~increase in ~~cash~~long-term ~~and~~debt ~~cash~~due ~~equivalents~~within asone ~~discussed~~year ~~above,~~and

• $4062.96 million ~~reduction~~decrease ofin ~~fuel~~cash ~~inventories,~~and cash equivalents as discussed above.

•At December 31, 2012, Cleco’s Consolidated Balance Sheet reflected $222.765 billion of total liabilities compared to $2.63 billion at December 31, 2011. The $17.8 million ~~decrease~~increase in total liabilities was primarily due to increases in accumulated deferred ~~fuel~~federal and ~~unbilled~~state ~~revenue~~income taxes. These increases were partially offset by decreases in uncertain tax positions, regulatory liabilities, accounts payable, contingent sale obligations, and long-term debt. Accumulated deferred federal and state income taxes increased $113.1 million during 2012. During 2012, uncertain tax positions decreased $47.9 million, regulatory liabilities decreased $32.1 million, accounts payable decreased $24.8 million, and contingent sale obligations decreased $21.2 million. Long-term debt decreased $14.8 million during 2012, as discussed above.

• $12.0 million increase in long-term debt due within one year,

• $10.5 million decrease in other accounts receivable, primarily due to the return of the amounts drawn on Shaw’s letter of credit as a result of the arbitration settlement, and

• $6.2 million net reduction of current restricted cash used for GO Zone projects and Cleco Katrina/Rita debt service payments.

At December 31, 2011, Cleco’s Consolidated Balance Sheet reflected $2.63 billion of total liabilities compared to $2.84 billion at December 31, 2010. The $212.9 million decrease in total liabilities was primarily due to the decrease in short- and long-term debt, and the decrease in postretirement benefit obligations. As discussed above, short-term debt decreased $150.0 million from the repayment of a bank term loan in April 2011. Long-term debt decreased $50.7 million during 2011, as discussed above. Postretirement benefit obligations decreased $33.1 million primarily due to a $60.0 million contribution made to the pension plan in January 2011.

Cleco Corporation (Holding Company Level)

Cleco Corporation had no short-term debt outstanding at December 31, ~~2011,~~2012 compared to $150.0 million outstanding at December 31, 2010. Cleco Corporation’s short-term debt outstanding at December 31, 2010, was a bank term loan entered into in February 2010. The bank term loan had an interest rate of LIBOR plus 2.75% and was set to mature in February 2011. In January 2011, Cleco extended the bank term loan to mature August 19, 2011, and lowered the interest rate to LIBOR plus 2.50% or ~~ABR plus 1.50%. In April~~ 2011~~, Cleco repaid the $150~~.0 ~~million bank term loan. As part of the repayment, Cleco paid $0.6 million for accrued interest on the term loan.~~

At December 31, ~~2011~~2012, Cleco Corporation had $1025.0 million draws outstanding under its $250.0 million credit facility compared to $1510.0 million outstanding ~~on its $200.0 million credit facility~~ at December 31, ~~2010~~2011. The interest rate of outstanding borrowings under the credit facility at December 31, ~~2011~~2012, was 1.7871%. The existing borrowings had a 30-day ~~term~~terms. The $25.0 million draws outstanding consisted of a $15.0 million draw and a $10.0 million draw. The $15.0 million draw matured and was renewed on January 16 17, ~~2012~~2013, and was subsequently repaid on February 4, 2013. The ~~borrowings~~$10.0 ~~were~~million draw matured and was repaid aton ~~maturity~~January 28, 2013. Cleco Corporation and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.

Cash and cash equivalents available at December 31, ~~2011~~2012, were $227.64 million. Cash and cash equivalents available at December 31, 2012, decreased $15.2 million when compared to cash and cash equivalents available at December 31, 2011, primarily due to routine working capital fluctuations. At December 31, 2012, outstanding credit facility borrowings reduced available borrowings by $25.0 million, leaving an available capacity of $225.0 million.

CLECO CORPORATIONCLECO POWER 2011 FORM 10-K

at December 31, 2011, increased $17.3 million when compared to cash and cash equivalents available at December 31, 2010, primarily due to routine working capital fluctuations. At December 31, 2011, outstanding credit facility borrowings reduced available borrowings by $10.0 million, leaving an available capacity of $240.0 million.

Cleco Power

There was no short-term debt outstanding at Cleco Power at December 31, ~~2011,~~2012 or ~~2010. At December 31,~~ 2011~~, Cleco Power’s long-term debt outstanding was $1~~.35 billion, of which $24.3 million was due within one year, compared to $1.40 billion at December 31, 2010, of which $12.3 million was due within one year. The $24.3 million of long-term debt due within one year at December 31, 2011, represents $13.1 million principal payments for the Cleco Katrina/Rita storm recovery bonds and $11.2 million of 5.875% Rapides pollution control revenue bonds that Cleco Power redeemed at par on January 25, 2012, prior to maturity. In December 2011, Cleco Power issued the notice of redemption and as part of the redemption, Cleco Power paid $0.3 million of accrued interest on the redeemed notes.

~~For~~At December 31, 2012, Cleco Power,’s long-term debt ~~decreased~~outstanding was $451.732 ~~million~~billion, ~~primarily~~of ~~due~~which to $~~132~~91.01 million ofwas ~~debt~~due ~~reacquired~~within inone ~~October~~year, ~~and~~compared to $1.35 billion at December 31, 2011, ~~consisting~~ of which $3226.01 million ofwas ~~solid~~due ~~waste~~within ~~disposal~~one ~~bonds and $100~~year.0 The ~~million~~long-term ofdebt GOdue ~~Zone~~within ~~bonds. Also~~one ~~contributing~~year toat ~~the~~December 31, ~~decrease~~2012, ~~was~~represents $1275.30 million ofsenior ~~scheduled~~notes ~~Cleco~~due ~~Katrina/Rita~~May ~~storm~~1, ~~recovery~~2013, ~~bond~~$14.0 million principal payments ~~made~~for inthe ~~March~~Cleco ~~and~~Katrina/Rita ~~September~~storm ~~2011~~recovery bonds, and $12.81 million of capital lease payments. ~~These decreases were partially offset by $100.0 million of senior notes issued in December 2011 and debt premium amortizations of $0.4 million.~~

AtFor ~~December 31,~~Cleco ~~2011~~Power, nolong-term ~~borrowings~~debt ~~were~~decreased ~~outstanding under Cleco Power’s~~ $~~300~~29.08 million ~~credit~~from ~~facility. This~~December ~~facility~~31, ~~provides~~2011, ~~for~~primarily ~~working~~due ~~capital~~to ~~and~~redeeming ~~other needs~~$50. ~~Cleco~~1 ~~Corporation~~million ~~and Cleco Power have uncommitted lines~~ of ~~credit~~DeSoto ~~with~~Parish apollution ~~bank~~control ~~that~~bonds ~~allow up to $10.0 million each~~ in ~~short~~May ~~term~~2012 ~~borrowings,~~and ~~but no more than~~ $1013.01 million inof ~~aggregate,~~scheduled toCleco ~~support~~Katrina/Rita ~~their~~storm ~~working capital needs.~~

~~Cash~~recovery ~~and~~bond ~~cash~~principal ~~equivalents~~payments ~~available~~made atin ~~December 31,~~March ~~2011,~~and ~~were~~September ~~$67~~2012.5 Also ~~million~~contributing ~~combined~~to ~~with~~the ~~$300.0~~decrease ~~million~~was ~~credit~~the ~~facility~~redemption ~~capacity for total liquidity~~ of $~~367~~11.52 million~~. Cash~~ ~~and~~of ~~cash~~Rapides ~~equivalents~~Parish ~~decreased~~pollution ~~$117.5~~control ~~million,~~bonds ~~when~~in ~~compared~~January to2012 ~~cash~~ and ~~cash~~a ~~equivalents~~$6.2 atmillion ~~December 31,~~decrease ~~2010,~~in ~~primarily~~capital ~~due~~lease toobligations. These adecreases ~~contribution~~were topartially ~~the~~offset ~~pension~~by ~~plan,~~the ~~additions~~issuance toof ~~property,~~$50.0 ~~plant,~~million ~~and~~senior ~~equipment,~~unsecured ~~the~~notes ~~payment~~in ofMay ~~intercompany~~2012 ~~dividends,~~ and ~~the~~debt ~~net~~premium ~~repayment~~amortization of ~~debt~~$0.8 million.

AtOn ~~December 31,~~January ~~2011~~25, ~~and 2010~~2012, Cleco Power ~~had~~redeemed aat ~~working~~par ~~capital~~$11.2 ~~surplus~~million of ~~$36~~5.4875% ~~million~~Rapides ~~and~~Parish ~~$259.1~~pollution ~~million,~~control ~~respectively~~bonds due September 2029. ~~The~~As part of the redemption, Cleco Power paid $~~222~~0.73 million ~~decrease~~of inaccrued ~~working~~interest ~~capital~~on isthe ~~primarily~~redeemed ~~due to:~~notes.

•On May 8, 2012, Cleco Power issued $~~117~~50.50 million ~~decrease~~senior inunsecured ~~cash~~private ~~and~~placement ~~cash~~notes ~~equivalents~~at an interest rate of 4.33%. The maturity date of the notes is May 15, 2027. The proceeds were used primarily for the early redemption of $50.1 million of 5.875% DeSoto Parish pollution control bonds as ~~discussed~~described above,.

•On May 11, 2012, Cleco Power redeemed at par all $4050.91 million ~~reduction~~of 5.875% DeSoto Parish pollution control bonds due September 2029. As part of ~~fuel~~the ~~inventories~~redemption, Cleco Power paid $0.6 million of accrued interest on the redeemed notes.

•At December 31, 2012 and 2011, there were no borrowings outstanding under Cleco Power’s $22300.70 million ~~decrease~~credit infacility. This ~~accumulated~~facility ~~deferred~~provides ~~fuel~~for working capital and ~~unbilled~~other ~~revenue~~needs. Cleco Corporation and Cleco Power have uncommitted lines of credit with a bank that allow up to $10.0 million each in short term borrowings, but no more than $10.0 million in aggregate, to support their working capital needs.

•Cash and cash equivalents available at December 31, 2012, were $2223.4 million ~~net~~combined ~~decrease~~with ~~related~~$300.0 tomillion ~~changes~~credit infacility ~~the~~capacity ~~recognition~~for total liquidity of ~~current~~$323.4 ~~taxes~~million. Cash and ~~uncertain~~cash ~~tax~~equivalents ~~positions~~decreased $44.1 million, when compared to cash and ~~related~~cash ~~interest~~equivalents ~~charges~~at ~~expected~~December 31, 2011, primarily due to beadditions ~~settled~~to inproperty, plant, and equipment, the ~~next~~payment 12of ~~months~~intercompany dividends, and the net repayment of debt.

•At ~~$12.4~~December 31, ~~million~~2012 ~~decrease~~and in2011, ~~other~~Cleco ~~accounts~~Power ~~receivable,~~had ~~primarily~~a ~~due~~working tocapital ~~the~~surplus ~~return~~ of ~~the~~$96.3 ~~amounts~~million ~~drawn~~and on$36.4 ~~Shaw’s~~million, ~~letter~~respectively. The of$59.9 ~~credit~~million asincrease ain ~~result~~working ofcapital ~~the~~is ~~arbitration~~primarily ~~settlement,~~due to:

• $1298.0 million ~~increase~~net decrease in ~~long-term~~current ~~debt~~tax ~~due~~liabilities ~~within~~and ~~one~~uncertain ~~year,~~tax positions and related interest charges expected to be settled in the next 12 months,

• $623.25 million ~~net~~decrease ~~reduction~~in ofaccounts ~~current restricted cash used for GO Zone projects and Cleco Katrina/Rita debt service payments.~~payable,

~~These~~• ~~decreases~~$24.8 inmillion ~~working~~decrease ~~capital~~in ~~were~~regulatory ~~partially offset by:~~ liabilities,

• $~~10.~~5.7 million ~~reduction~~increase in ~~the~~accumulated deferred ~~construction carrying costs owed to customers in the next 12 months.~~fuel,

~~The~~• $325.0 million solid waste disposal facility bonds due in 2038, which were issued by the Rapides Finance Authority for the benefit of Cleco Power in October 2008, were required to be mandatorily tendered by the bondholders for purchase on October 1, 2011, pursuant to the terms of the indenture. The bonds were issued by the Rapides Finance Authority in connection with a loan agreement between the Rapides Finance Authority and Cleco Power. On October 3, ~~2011, Cleco Power purchased all $32.0~~ million ~~outstanding~~decrease bonds at face value plus $1.0 million of accrued interest. In connection with the purchase, the interest rate of the bonds was converted to a weekly mode and resets each week based on the SIFMA (Securities Industry and Financial Markets Association) index. Interest expense is recorded with a corresponding amount recorded as interest income, excluding amortization of debt issuance costs. Although the bonds remain outstanding, Cleco Power has the right to redeem and cancel the debt at any time without approval of the issuer. In accordance with the authoritative guidance, the bonds are considered extinguished and Cleco Power is holding the debt as treasury bonds, resulting in aenergy ~~net~~risk ~~presentation~~management ~~on Cleco and Cleco Power’s Consolidated Balance Sheets. Cleco Power has the option to remarket the bonds for new terms and new interest rates~~liabilities, ~~both to be determined by market conditions.~~ and

~~The~~• $~~100~~5.0 million GOincrease ~~Zone bonds due~~ in ~~2038,~~fuel which were issued by the Louisiana Public Facilities Authority for the benefit of Cleco Power, were required to be mandatorily tendered by the holders for purchase on December 1, 2011, pursuant to the terms of the indentureinventories. The bonds were issued by the Louisiana Public Facilities Authority in connection with a loan agreement between the Louisiana Public Facilities Authority and Cleco Power. On December 1, 2011, Cleco Power purchased all $100.0 million outstanding bonds at face value plus $3.5 million of accrued interest. In connection with the purchase, the interest rate of the bonds was converted to a weekly mode and resets each week based on the SIFMA index. Interest expense is recorded with a corresponding amount recorded as interest income, excluding amortization of debt issuance costs. Although the bonds remain outstanding, Cleco Power has the right to redeem and cancel the debt at any time without approval of the issuer. In accordance with the authoritative guidance, the bonds are considered extinguished and Cleco Power is holding the debt as treasury bonds, resulting in a net presentation on Cleco and Cleco Power’s Consolidated Balance Sheets. Cleco Power has the option to remarket the bonds for new terms and new interest rates, both to be determined by market conditions.

InThese ~~December~~increases ~~2011, Cleco Power issued $100.0 million aggregate principal amount of 5.12% senior unsecured notes~~ in aworking ~~private~~capital ~~placement. The notes will mature on December 16, 2041. The net proceeds from the issuance, along with short-term liquidity,~~ were ~~used~~partially tooffset ~~finance~~by: ~~the mandatory tender~~

45• $65.0 million increase in long-term debt due within one year and

~~CLECO~~• ~~CORPORATIONCLECO~~$44.1 ~~POWER~~million ~~2011~~decrease ~~FORM~~in ~~10-K~~cash and cash equivalents as discussed above.

ofIn ~~$32.0~~December ~~million~~2011, ~~and~~Cleco Power issued $100.0 million ~~tax~~aggregate ~~exempt~~principal ~~bonds~~amount inof ~~October~~5.12% ~~2011~~senior ~~and~~unsecured ~~December~~notes ~~2011,~~in ~~respectively. The~~a private placement. The ~~bonds~~notes ~~have~~will amature ~~covenant~~on ~~requiring~~December ~~Cleco~~16, ~~Power~~2041. The tonet ~~maintain~~proceeds ~~total~~from ~~indebtedness~~the ~~equal~~issuance, toalong orwith ~~less~~short-term ~~than~~liquidity, ~~65%~~were ofused ~~total~~to ~~capitalization. At~~finance ~~December 31,~~the ~~2011,~~mandatory ~~approximately~~tender of $~~519~~32.70 million ofand ~~Cleco~~$100.0 ~~Power’s~~million ~~retained~~tax ~~earnings~~exempt ~~was~~bonds ~~unrestricted.~~in

At December 31, 2011, Cleco Power’s Consolidated Balance Sheet reflected $2.50 billion of total liabilities compared to $2.56 billion at December 31, 2010. The $65.7 million decrease in total liabilities during 2011 was primarily due to decreases in long-term debt and postretirement benefit obligations. Long-term debt decreased $45.7 million during 2011, as discussed above. Postretirement benefit obligations decreased $36.6 million primarily due to a $60.0 million contribution made to the pension plan in January 2011.44



CLECO CORPORATION
CLECO POWER		2012 FORM 10-K

October 2011 and December 2011, respectively. The private placement bonds have a covenant requiring Cleco Power to maintain total indebtedness equal to or less than 65% of total capitalization. At December 31, 2012, approximately $623.7 million of Cleco Power’s member’s equity was unrestricted.

At December 31, 2012, Cleco Power’s Consolidated Balance Sheet reflected $2.55 billion of total liabilities compared to $2.50 billion at December 31, 2011. The $56.2 million increase in total liabilities during 2012 was primarily due to increases in accumulated deferred federal and state income taxes. These increases were partially offset by decreases in uncertain tax positions, long-term debt, regulatory liabilities, and accounts payable. Accumulated deferred federal and state income taxes increased $169.9 million during 2012. Long-term debt decreased $29.8 million during 2012, as discussed above. During 2012, uncertain tax positions decreased $47.1 million, regulatory liabilities decreased $32.1 million, and accounts payable decreased $23.5 million.

Credit Facilities

~~In November 2010,~~ Cleco Corporation’s ~~entered~~current ~~into a $200.0 million four-year revolving~~ credit facility~~. On~~ ~~October 7, 2011, Cleco Corporation amended its credit facility~~ agreement. ~~Under~~has ~~the~~a ~~amended agreement, Cleco Corporation’s~~ maximum capacity ~~was~~of ~~increased from~~ $~~200.0 million to $~~250.0 million, ~~the~~and ~~maturity~~matures ~~date~~on ~~was extended to~~ October 7, 2016,. The ~~and the~~ borrowing costs ~~were~~are ~~lowered to equal~~ LIBOR plus 1.50% or ABR ~~plus 0.50%~~, plus facility fees of 0.25%. If Cleco Corporation’s credit ratings were to be downgraded one level, Cleco Corporation would be required to pay fees and interest at a rate of 0.25% higher than the level for its current ~~amended $250.0 million~~ credit facility. ~~Under~~At ~~covenants~~December ~~contained~~31, in2012, Cleco Corporation’s ~~credit~~had ~~facility,~~$25.0 ~~Cleco~~million ~~Corporation~~borrowings isoutstanding ~~required~~under toits ~~maintain~~existing ~~total~~credit ~~indebtedness~~facility, ~~equal~~leaving toan oravailable ~~less~~borrowing ~~than~~capacity ~~65%~~ of ~~total capitalization. At December 31, 2011, approximately~~ $~~661~~225.50 million ~~of Cleco’s retained earnings was unrestricted~~.

~~In November 2010,~~ Cleco Power’s ~~entered~~current ~~into a $300.0 million four-year revolving~~ credit facility~~. On~~ ~~October 7,~~agreement ~~2011,~~has ~~Cleco~~a ~~Power~~maximum ~~amended~~capacity ~~its~~of ~~credit facility agreement~~$300.0 ~~Under~~million ~~the~~and ~~amended~~matures ~~agreement,~~on ~~the maturity date was extended to~~ October 7, 2016,. The ~~and the~~ borrowing costs ~~were~~are ~~lowered to equal~~ LIBOR plus 1.275% or ABR ~~plus 0.275%~~, plus facility fees of 0.225%. If Cleco Power’s credit ratings were to be downgraded one level, Cleco Power would be required to pay fees and interest at a rate of 0.25% higher than the level on its current ~~amended $300.0 million~~ credit facility. Under covenants contained in Cleco Power’s credit facility, Cleco Power is required to maintain total indebtedness equal to or less than 65% of total capitalization. At December 31, 2011, approximately $519.7 million of Cleco Power’s retained earnings was unrestricted.

At December 31, ~~2011~~2012, Cleco Corporation and Cleco Power were in compliance with the covenants in their credit facilities. If Cleco Corporation were to default under the covenants in its credit facility or other debt agreements, it would be unable to borrow additional funds under the facility, and the lenders could accelerate all principal and interest outstanding. Further, if Cleco Power were to default under its credit facility or other debt agreements, Cleco Corporation would be considered in default under its credit facility.

Midstream

Midstream had no debt outstanding at December 31, ~~2011,~~2012 or ~~2010~~2011.

Cleco Consolidated Cash Flows

Net Operating Cash Flow

Net cash provided by operating activities was $~~308~~263.01 million during ~~2011~~2012, $~~215~~310.21 million during ~~2010~~2011, and $~~141~~216.59 million in ~~2009~~2010. Cash provided by operating activities during 2012 decreased $47.0 million from 2011, primarily due to the following items:

~~Cash~~• ~~provided~~the byabsence ~~operating~~of ~~activities~~the ~~during~~return ~~2011~~on ~~increased~~equity ~~$92.8~~investment ~~million~~in ~~from~~Acadia ~~2010,~~of ~~primarily~~$58.7 ~~due to the following items:~~million,


•	the absence of 2011 fuel oil inventory sales of $31.5 million,


•	higher vendor payments of $29.2 million,


•	higher deferred fuel costs of $12.9 million,


•	higher expenditures for other fuel inventories and related transportation of $12.4 million,


•	the absence of $10.9 million cash received in exchange for accepting the contingent sale liability related to the Acadia Unit 2 transaction in 2011, and


•	lower collection of receivables of $5.4 million.

These decreases were partially offset by:


•	the absence of pension plan contributions of $60.0 million,


•	lower tax payments of $47.3 million, and


•	lower payments for gas and power purchases of $11.5 million.

Cash provided by operating activities during 2011 increased $93.2 million from 2010, primarily due to the following items:


•	return on equity investment in Acadia of $58.7 million,


•	absence of 2010 Madison Unit 3 construction carrying costs, Acadia Unit 1 acquisition costs, rate case costs, and IRP/FRP costs of $47.2 million,

• higher collection of receivables of $3730.26 million,


•	fuel oil inventory sales of $31.5 million,


•	lower income taxes paid of $28.9 million,


•	lower petroleum coke inventory purchases of $23.3 million due to the build-up of inventory in 2010,


•	lower natural gas purchases of $3.9 million due to the build-up of inventory in 2010, and

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