Cleco Power Navigates New Legislation, Divestiture in Q3 2025

TL;DR

**Cleco Power is shedding non-core assets and bracing for new federal energy policies, making it a cautious hold as regulatory clarity emerges.**

AI Summary

CLECO POWER LLC's 10-Q filing for the quarter ended September 30, 2025, highlights significant regulatory and legislative changes impacting its operations. The company is navigating new federal tax legislation, including the One Big Beautiful Bill Act (OBBBA) and Executive Order 14315, both signed in July 2025, which could alter its tax liabilities and energy transition strategies. The Louisiana Public Service Commission (LPSC) issued a financing order in November 2024 for Energy Transition Property, allowing Cleco Power to recover costs from retail customers, and another in April 2022 for Storm Recovery Property. The company completed the Cleco Cajun Divestiture on June 1, 2024, selling its unregulated utility business to Big Pelican LLC and Pelican South Central LLC, which will impact future revenue streams. Demolition activities for the retired Dolet Hills Power Station are ongoing and expected to conclude in 2026. Cleco Power also operates Acadia Unit 1, a 580-MW natural gas-fired plant, and has a 30% ownership in Rodemacher Unit 2, a 523-MW coal-fired unit, indicating a mixed energy portfolio. The filing also mentions potential impacts from increased late or uncollectible customer payments due to volatile fuel prices and severe weather cost recoveries.

Why It Matters

This filing is crucial for investors as it details the significant regulatory and legislative shifts impacting Cleco Power's financial outlook, particularly the OBBBA and Executive Order 14315, which could reshape the energy sector's competitive landscape. The successful Cleco Cajun Divestiture on June 1, 2024, streamlines Cleco's focus but removes a revenue stream, requiring investors to re-evaluate its core utility business. Employees may face strategic shifts as the company adapts to new energy transition policies and the ongoing demolition of the Dolet Hills Power Station. Customers could see changes in their bills due to the LPSC-approved Energy Transition Property and Storm Recovery Property charges, directly affecting their cost of electricity.

Risk Assessment

Risk Level: medium — The risk level is medium due to significant regulatory and legislative uncertainties, specifically the impact of the OBBBA and Executive Order 14315 signed in July 2025, which could alter federal income tax laws and energy subsidies. Additionally, the company faces potential stranded costs from assets like the Dolet Hills Power Station, retired on December 31, 2021, and the ongoing demolition expected to be completed in 2026, alongside the risk of increased uncollectible customer payments due to volatile fuel prices and severe weather cost recoveries.

Analyst Insight

Investors should monitor the implementation details of the OBBBA and Executive Order 14315, as these will directly influence Cleco Power's future profitability and strategic direction. Evaluate the long-term implications of the Cleco Cajun Divestiture on the company's revenue stability and assess its ability to recover costs related to Energy Transition Property and Storm Recovery Property from customers.

Financial Highlights

revenue

$1,023,775,000

operating Margin

29.6%

net Income

$72,260,000

revenue Growth

+17.7%

Revenue Breakdown

Key Numbers

• $580 MW — Acadia Unit 1 capacity (Natural gas-fired, combined cycle power plant)
• $775 MW — Coughlin plant capacity (Natural gas-fired, combined cycle power plant)
• $641 MW — Madison Unit 3 capacity (Petroleum coke/coal-fired, steam generating unit)
• $523 MW — Rodemacher Unit 2 capacity (Coal-fired, steam generating unit; Cleco Power has a 30% ownership)
• $47 MW — St. Mary Clean Energy Center capacity (Waste-heat steam generating unit)
• 2025-09-30 — Quarter end date (Period covered by the 10-Q filing)
• 2025-11-07 — Filing date (Date the 10-Q was filed with the SEC)
• 2024-06-01 — Cleco Cajun Divestiture completion date (Date Cleco Cajun's unregulated utility business was sold)
• 2021-12-31 — Dolet Hills Power Station retirement date (Date the power station was retired)
• 2026 — Dolet Hills Power Station demolition completion (Expected year for demolition activities to conclude)

Key Players & Entities

• CLECO POWER LLC (company) — Registrant filing the 10-Q
• Cleco Corporate Holdings LLC (company) — Parent company of Cleco Power LLC
• Louisiana Public Service Commission (regulator) — Issued financing orders for Energy Transition Property and Storm Recovery Property
• Big Pelican LLC (company) — Purchaser in the Cleco Cajun Divestiture
• Pelican South Central LLC (company) — Purchaser in the Cleco Cajun Divestiture
• Dolet Hills Power Station (company) — Former power station retired on December 31, 2021, undergoing demolition
• Executive Order 14315 (regulator) — Signed by the President on July 7, 2025, impacting energy sources
• One Big Beautiful Bill Act (regulator) — Federal tax legislation enacted on July 4, 2025
• Macquarie Asset Management (company) — Investor in Cleco Partners L.P.
• British Columbia Investment Management Corporation (company) — Investor in Cleco Partners L.P.

FAQ

Risk Factors

• New Federal Tax Legislation [high — regulatory]: The One Big Beautiful Bill Act (OBBBA) and Executive Order 14315, enacted in July 2025, could significantly alter Cleco Power's tax liabilities. The company is assessing the full impact on its financial structure and future investments.
• LPSC Financing Orders [medium — regulatory]: The Louisiana Public Service Commission (LPSC) issued financing orders for Energy Transition Property (November 2024) and Storm Recovery Property (April 2022). While these allow cost recovery from customers, they introduce regulatory oversight and potential for future adjustments.
• Dolet Hills Power Station Demolition [medium — operational]: Ongoing demolition of the retired Dolet Hills Power Station, expected to conclude in 2026, presents operational risks and costs. The company is managing the environmental and safety aspects of this large-scale project.
• Volatile Fuel Prices [medium — market]: Increased volatility in fuel prices poses a risk to operating expenses. This can lead to higher costs for fuel used in electric generation, impacting profitability if not fully recoverable through rates.
• Customer Payment Delinquencies [low — financial]: Severe weather events and volatile fuel prices increase the risk of late or uncollectible customer payments. This could negatively impact cash flow and require higher provisions for bad debt.
• Energy Transition Strategy [high — operational]: Cleco Power is navigating its energy transition strategies in light of new legislation. This involves potential shifts in its energy portfolio, which could entail significant capital expenditures and operational changes.

Industry Context

Cleco Power operates in the regulated utility sector, characterized by significant capital investments in generation and transmission infrastructure. The industry is undergoing a transition towards cleaner energy sources, driven by regulatory pressures and evolving market demands. Competition exists from other utilities and, increasingly, from independent power producers and renewable energy developers.

Regulatory Implications

Cleco Power faces substantial regulatory risk and compliance obligations. New federal tax legislation (OBBBA, EO 14315) and LPSC financing orders for energy transition and storm recovery property will shape its financial performance and strategic direction. The company must navigate these changes while ensuring reliable service delivery.

What Investors Should Do

1. Monitor impact of new federal tax legislation
2. Analyze LPSC financing order effects
3. Evaluate impact of Cleco Cajun Divestiture
4. Assess operational risks from Dolet Hills demolition

Key Dates

• 2025-09-30: Quarter end date — Marks the end of the reporting period for the 10-Q filing.
• 2025-11-07: Filing date — Indicates when the 10-Q was submitted to the SEC, providing timely information to investors.
• 2024-06-01: Cleco Cajun Divestiture completion date — The sale of the unregulated utility business impacts future revenue streams and operational focus.
• 2021-12-31: Dolet Hills Power Station retirement date — The station is no longer operational, and demolition is underway.
• 2026: Dolet Hills Power Station demolition completion — Marks the expected end of significant costs and operational activities related to the retired power station.
• 2024-11-01: LPSC Financing Order for Energy Transition Property — Allows Cleco Power to recover energy transition costs from retail customers, impacting future rate structures.

Glossary

Energy Transition Property

Assets or costs associated with transitioning to cleaner energy sources or retiring older, less efficient facilities. (Allows Cleco Power to recover costs related to its energy transition initiatives from customers, as approved by the LPSC.)

Storm Recovery Property

Costs incurred by a utility company to repair or restore infrastructure damaged by severe weather events. (The LPSC financing order allows Cleco Power to recover these costs from customers, impacting future rates.)

Cleco Cajun Divestiture

The sale of Cleco Power's unregulated utility business to Big Pelican LLC and Pelican South Central LLC. (This transaction significantly alters Cleco Power's business mix and future revenue profile.)

One Big Beautiful Bill Act (OBBBA)

A hypothetical new federal tax legislation enacted in July 2025. (Could materially impact Cleco Power's tax liabilities and financial planning.)

Executive Order 14315

A hypothetical executive order signed in July 2025. (May influence Cleco Power's energy transition strategies and operational decisions.)

Allowance for equity funds used during construction

A non-cash accounting entry that capitalizes the cost of equity capital used to finance construction projects. (Represents a component of income related to construction work in progress.)

Allowance for borrowed funds used during construction

A non-cash accounting entry that capitalizes the cost of debt capital used to finance construction projects. (Represents a component of interest expense that is capitalized rather than expensed.)

Year-Over-Year Comparison

For the three months ended September 30, 2025, Cleco Power reported operating revenue of $406,770,000, a significant increase from $340,135,000 in the prior year period, driven by higher electric and other operations revenue. Net income, however, decreased to $72,260,000 from $94,592,000, largely due to a substantial increase in federal and state income tax expense in the current period compared to a benefit in the prior year. Operating expenses also rose, particularly fuel costs, reflecting market volatility. New risks related to federal tax legislation and ongoing regulatory changes are now prominent.

Filing Documents

• cnl-20250930.htm (10-Q) — 3425KB
• cnl-9302025xq3ex311.htm (EX-31.1) — 9KB
• cnl-9302025xq3ex312.htm (EX-31.2) — 9KB
• cnl-9302025xq3ex313.htm (EX-31.3) — 9KB
• cnl-9302025xq3ex314.htm (EX-31.4) — 9KB
• cnl-9302025xq3ex321.htm (EX-32.1) — 5KB
• cnl-9302025xq3ex322.htm (EX-32.2) — 5KB
• cnl-9302025xq3ex323.htm (EX-32.3) — 5KB
• cnl-9302025xq3ex324.htm (EX-32.4) — 5KB
• 0001089819-25-000022.txt ( ) — 18174KB
• cnl-20250930.xsd (EX-101.SCH) — 86KB
• cnl-20250930_cal.xml (EX-101.CAL) — 135KB
• cnl-20250930_def.xml (EX-101.DEF) — 760KB
• cnl-20250930_lab.xml (EX-101.LAB) — 926KB
• cnl-20250930_pre.xml (EX-101.PRE) — 908KB
• cnl-20250930_htm.xml (XML) — 3988KB

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 52 ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 65 ITEM 4.

Controls and Procedures

Controls and Procedures 67 PART II Other Information ITEM 1.

Legal Proceedings

Legal Proceedings 68 ITEM 1A.

Other Information

ITEM 5. Other Information 68 ITEM 6. Exhibits 68

Signatures

Signatures 69 2 CLECO CLECO POWER 2025 3RD QUARTER FORM 10-Q GLOSSARY OF TERMS Abbreviations or acronyms used in this filing, including all items in Parts I and II, are defined below. ABBREVIATION OR ACRONYM DEFINITION 2016 Merger Merger of Merger Sub with and into Cleco Corporation pursuant to the terms of the Merger Agreement which was completed on April 13, 2016 2016 Merger Commitments Cleco Partners', Cleco Group's, Cleco Holdings', and Cleco Power's 77 commitments to the LPSC as defined in Docket No. U-33434 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 SOFR plus 1.0% Acadia Acadia Power Partners, LLC, previously a wholly owned subsidiary of Cleco Midstream Resources LLC (a wholly owned subsidiary of Cleco Holdings). Acadia Power Partners, LLC was dissolved effective August 29, 2014 Acadia Unit 1 Cleco Power's 580-MW, natural gas-fired, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana Acadia Unit 2 Entergy Louisiana's 580-MW, natural gas-fired, combined cycle power plant located at the Acadia Power Station in Eunice, Louisiana, which is operated by Cleco Power ADIT Accumulated Deferred Income Tax AFUDC Allowance for Funds Used During Construction Amended Lignite Mining Agreement Amended and restated lignite mining agreement effective December 29, 2009 AOCI Accumulated Other Comprehensive Income (Loss) ARO Asset Retirement Obligation CCR Coal combustion by-products or residual CEO Chief Executive Officer CFO Chief Financial Officer Cleco Cleco Holdings and its subsidiaries Cleco Cajun Cleco Cajun LLC, a wholly owned subsidiary of Cleco Holdings, and its subsidiaries Cleco Cajun Acquisition The transaction between Cleco Cajun and NRG Energy, Inc. in which Cleco Cajun acquired all the membership interest in South Central Generating, which closed on February 4,

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Cleco These unaudited condensed consolidated financial statements should be read in conjunction with Cleco's Consolidated Financial Statements and Notes included in the Registrants' Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2024. For more information on the basis of presentation, see "Notes to the Unaudited Condensed Consolidated Financial Statements — Note 1 — Summary of Significant Accounting Policies — Basis of Presentation." 8 CLECO CLECO POWER 2025 3RD QUARTER FORM 10-Q CLECO Condensed Consolidated Statements of Income (Unaudited) FOR THE THREE MONTHS ENDED SEPT. 30, (THOUSANDS) 2025 2024 Operating revenue Electric operations $ 371,356 $ 312,397 Other operations 35,414 28,784 Gross operating revenue 406,770 341,181 Electric customer credits — ( 1,046 ) Operating revenue, net 406,770 340,135 Operating expenses Fuel used for electric generation 119,113 69,792 Purchased power 28,574 28,083 Other operations and maintenance 67,572 60,365 Depreciation and amortization 54,466 50,293 Taxes other than income taxes 16,838 15,633 Total operating expenses 286,563 224,166 Operating income 120,207 115,969 Interest income 4,062 6,366 Allowance for equity funds used during construction 780 977 Other income, net 3,034 1,331 Interest charges Interest charges, net 38,732 37,941 Allowance for borrowed funds used during construction ( 698 ) ( 505 ) Total interest charges 38,034 37,436 Income from continuing operations before income taxes 90,049 87,207 Federal and state income tax expense (benefit) 17,789 ( 6,643 ) Income from continuing operations, net of income taxes 72,260 93,850 Income from discontinued operations, net of income taxes — 742 Net income $ 72,260 $ 94,592 The accompanying notes are an integral part of the condensed consolidated financial statements. 9 CLECO CLECO POWER 2025 3RD QUARTER FORM 10-Q CLECO Condensed Cons

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