CNL Cleco Corp.

Cleco Corp. (NYSE:CNL) today reported first-quarter net income of $11.7 million, up 30 percent from the $9.0 million recorded in the first quarter of 2005. Earnings per diluted share were $0.23 for the quarter, a $0.05 per share increase from the $0.18 per diluted share reported in the same period a year ago. The improved results were largely attributable to higher Cleco Power and corporate income compared to the first quarter of 2005. Partially offsetting first-quarter 2006 earnings was a loss at Cleco Midstream Resources, almost all of which was due to a reserve for uncollectible revenue from the Acadia project caused by the bankruptcy filing of Calpine Corp. A Calpine subsidiary stopped making payments on tolling agreements it holds for the output of the Acadia plant after it filed for bankruptcy protection and moved to reject the agreements. Although the agreements have not been formally rejected, they have been amended to give Acadia Power Partners, LLC (APP), jointly owned by Cleco and Calpine, effective control of the plant's output. -0- *T Consolidated Diluted Earnings Per Share Allocated to Subsidiaries ---------------------------------------------------------------------- Diluted EPS ---------------------------- Three Months Ended March 31, ---------------------------- Subsidiary 2006 2005 ---------- ----- ---- Cleco Power LLC $0.28 $0.15 Cleco Midstream Resources LLC (0.07) 0.06 Corporate and Other(1) 0.02 (0.03) ---- ------ Earnings applicable to common stock $0.23 $0.18 (1) Includes dividends on preferred stock *T "We've had a good start to the year. Site preparation work is under way on Cleco Power's new $1 billion solid-fuel unit at our Rodemacher Power Station, which puts us that much closer to realizing our goal of diversifying our fuel portfolio and lowering customers' costs," Cleco President and CEO Michael Madison said. "A project of this size will require a lot of our company's resources, but we're continuing to focus on providing the best service possible to our customers. In fact, for the second straight year the nation's retail chains recognized Cleco Power as one of a handful of utilities offering the best overall customer service," Madison said. -0- *T Major Reconciling Items for First-Quarter EPS 2006 vs. 2005: ------------------------------------------------------------ $0.18 2005 First-Quarter Diluted EPS 0.01 Higher Cleco Power nonfuel revenue 0.06 Reversal of accruals for customer refunds (0.02) Absence of Cleco Power fuel surcharge 0.07 Lower Cleco Power expenses 0.02 Lower Cleco Power income taxes (0.01) Impact of increased number of dilutive shares (0.13) Lower Cleco Midstream contribution 0.05 Higher corporate income ---------- $0.23 2006 First-Quarter Diluted EPS *T Cleco Power LLC Cleco Power posted 2006 first-quarter earnings of $0.28 per share, $0.13 per share higher than the same period of 2005. Nonfuel revenue increased by $0.01 per share in the quarter-to-quarter comparison due to higher revenue from sales to municipal customers, including sales related to a fixed-price power contract with a municipality that went into effect in January 2006. Transmission and miscellaneous revenues were up $0.02 per share, but the market value of energy hedging positions tied to the new fixed-price power contract declined $0.02 per share. One of the largest drivers of Cleco Power's results was a $0.06 per share reversal of accruals for customer refunds stemming from the partial approval of rate reviews for the years 2002, 2003 and 2004 by the Louisiana Public Service Commission (LPSC). Customer refund accruals were fully reversed for the rate plan years 2005 and 2006 as well. In addition, the absence of a favorable Cleco Power fuel surcharge associated with fuel transportation charges originally recorded in the first quarter of 2005 lowered results by $0.02 per share in the quarter-to-quarter comparison. Mild winter weather caused a 1 percent drop in retail kilowatt-hour sales. Heating degree-days were comparable to the first quarter of 2005 but 30 percent below normal. -0- *T (Million kWh) For the three months ended March 31, ------------------------------------ 2006 2005 Change ---- ---- ------ Electric Sales Residential 750 790 (5.06)% Commercial 407 406 0.25% Industrial 692 681 1.62% Other retail 131 136 (3.68)% Unbilled (82) (93) 11.83% -------- ------- Total retail 1,898 1,920 (1.15)% Sales for resale 236 140 68.57% -------- ------- Total retail and wholesale customer sales 2,134 2,060 3.59% *T Cleco Power expenses were $0.07 per share lower than in the same period of 2005. Operating and maintenance expenses were down $0.09 per share compared to the first quarter of 2005, with $0.08 per share of that attributable to the establishment of a regulatory asset -- consisting of previously recorded storm expenses -- as a result of the LPSC's interim approval of a request to recover storm restoration costs. LPSC approved recovery of the expenses through an interim increase in base rates. The LPSC's final treatment of 2005 storm cost recovery will be determined after it evaluates and verifies the costs during a second phase of the process currently scheduled to wrap up in the second quarter of 2007. The remaining $0.01 per share reduction in operating and maintenance expenses was largely due to lower administrative costs and employee benefits, partially offset by the higher customer collection costs compared to the first quarter of 2005. Capacity charges were also $0.01 per share lower compared to the same quarter of 2005. Nonrecoverable fuel expenses increased $0.02 per share compared to the first quarter of 2005 largely due to the purchase of power and fuel to fulfill a new fixed-price municipal contract. Other expenses, primarily depreciation, were up $0.01 per share compared to the first quarter of 2005. In addition, income taxes were $0.02 per share lower in the quarter-to-quarter comparison mainly due to a true up of state income taxes. Finally, the utility's earnings were reduced by $0.01 per share because of an increase in the number of dilutive common stock shares. Cleco Midstream Resources LLC Cleco Midstream posted a loss of $0.07 per share, down $0.13 per share from the $0.06 per share earned in the first quarter of 2005, almost all of which was attributable to results from the Acadia project. In a quarter-to-quarter comparison, Acadia's contributions were down $0.12 per share from a year ago due to a reserve for uncollectible revenue from tolling agreements that a subsidiary of Calpine has asked to reject as part of its bankruptcy proceeding. Calpine Energy Services L.P. (CES) holds the tolling agreements for the entire 1,160 MW output of the Acadia plant, although the agreements have been amended to give APP the right to market the plant's output. An offsetting factor in Acadia's negative results was equity income received from the $2.8 million draw on the $15 million letter of credit secured from Calpine. Cleco Evangeline's results were down $0.02 per share compared to the first quarter of 2005 largely due to higher turbine maintenance expenses and increased sales taxes on natural gas caused by increased run times, as well as increased heat rate penalties. Partly offsetting the higher expenses was an increase in revenue due to a higher capacity factor. In addition, Midstream's administrative costs were $0.01 per share lower than in the same period of 2005. Other Earnings contributions from Corporate and other were $0.05 per share higher in the quarter-to-quarter comparison largely due to lower interest expense relating to the June 2005 repayment of $100 million of senior notes, as well as an increase in interest income and a positive true up of 2005 federal and state income taxes. Rodemacher Unit 3 Update: A groundbreaking ceremony has been set for 10 a.m. May 16 to celebrate the formal start of construction on the new solid-fuel unit at Rodemacher Power Station. "With the start of construction of the Rodemacher unit, we're entering a new phase of the project. Now that we've completed the development and design phase, our primary job will be ensuring that the unit is completed on time, on budget, and meets all of the performance specifications," Madison said. "And we will regularly update the LPSC to keep them informed of the project's status and any changes that may occur as it moves toward completion." Rate Stabilization Plans: "The LPSC approved a refund of $1.3 million for the 2002 rate year plan at its April 26 meeting," Madison said. "Commissioners did not order refunds for the 2003 and 2004 rate years; however, there is at least one issue outstanding that could result in additional refunds for 2002, as well as 2003 and 2004. We expect that matter to be decided when the 2006 rate plan is reviewed in 2007." Madison added, "We also expect the LPSC to vote before October 2006 on the rate stabilization plan that would cover Oct. 1, 2006, through the start of operations at the new Rodemacher unit. If you'll recall, the staff has proposed a plan that sets an effective maximum regulated return on equity of 11.65 percent. The current timeline is for a rate case to be filed about one year prior to the commercial operation date of the unit." Acadia Issues: "APP continues to pursue its claims in bankruptcy court against Calpine Energy Services stemming from the Acadia tolling agreements," Madison said. "The output of the plant is being actively marketed following the bankruptcy court's approval of an amendment to the tolling agreements giving APP the authority to sell the plant's output. "On a related issue, Cleco Power and CES mutually terminated a one-year agreement for up to 200 MW," Madison said. "We have since secured other sources to meet our customers' energy needs. Evangeline Credit Review: "We were pleased to learn that Moody's is reviewing for possible upgrade the B1 rating of Cleco Evangeline's secured bonds," Madison said. "Evangeline's credit rating is dependent to a large degree on the financial strength of The Williams Companies Inc., a subsidiary of which holds the sole tolling agreement for the plant. Moody's is also reviewing Williams for a possible upgrade, which we think bodes well for Evangeline." 2006 Earnings Guidance Unchanged "Since it is still early in the year, we will maintain the $1.25 to $1.35 per share we originally set. However, we'll continue to review the target range throughout the year," Madison said. "Summer weather as well as the final outcome of the LPSC storm recovery docket will be key earnings drivers." The target range assumes normal weather patterns, continuation of the current rate plan through September, the start of the construction phase rate plan in October, and the continued performance of the tolling agreement at Evangeline. The earnings guidance also includes assumptions about Acadia that include plant operations, market conditions, and earnings from drawing down the remainder of the $15 million letter of credit from Calpine. Cleco management will discuss the company's 2006 first-quarter results during a conference call scheduled for 11 a.m. EDT (10 a.m. CDT) Friday, May 5, 2006. The call will be broadcast live on the Internet, and replays will be available for 12 months. Investors may access the webcast through the company's Web site at www.cleco.com by selecting "For Investors" and then "1st Quarter 2006 Earnings Conference Call." Cleco's businesses referred to in this news release are: -0- *T Cleco Power LLC Cleco Midstream Resources LLC Perryville Energy Partners, LLC; Perryville Energy Holdings, LLC Other (Cleco Corporation; Cleco Support Group LLC, Cleco Innovations LLC; CLE Resources, Inc.) *T Cleco Corp. is a regional energy provider headquartered in Pineville, La. It operates a regulated electric utility company that serves about 267,000 customers across Louisiana. Cleco also operates a wholesale energy business that has approximately 1,350 megawatts of generating capacity. For more information about Cleco, visit www.cleco.com. Financial tables follow: -0- *T CLECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Thousands, except share and per share amounts) (UNAUDITED) ---------------------------------------------------------------------- For the three months ended March 31 2006 2005 ---------------------------------------------------------------------- Operating revenue Electric operations $210,989 $162,831 Other operations 6,596 7,151 Affiliate revenue 1,451 2,352 ---------------------------------------------------------------------- Gross operating revenue 219,036 172,334 Electric customer credits 4,382 (218) ---------------------------------------------------------------------- Operating revenue, net 223,418 172,116 ---------------------------------------------------------------------- Operating expenses Fuel used for electric generation 48,363 48,748 Power purchased for utility customers 100,784 50,514 Other operations 16,708 22,376 Maintenance 5,933 9,471 Depreciation 15,645 14,771 Taxes other than income taxes 10,012 10,428 ---------------------------------------------------------------------- Total operating expenses 197,445 156,308 ---------------------------------------------------------------------- Operating income 25,973 15,808 Interest income 2,492 966 Allowance for other funds used during construction 669 948 Equity income from investees 373 9,919 Other income 108 293 Other expense (328) (562) ---------------------------------------------------------------------- Income before interest charges 29,287 27,372 Interest charges Interest charges, including amortization of debt expenses, premium and discount, net of capitalized interest 11,176 12,118 Allowance for borrowed funds used during construction (227) (316) ---------------------------------------------------------------------- Total interest charges 10,949 11,802 ---------------------------------------------------------------------- Income from continuing operations before income taxes 18,338 15,570 Federal and state income tax expense 6,113 5,995 ---------------------------------------------------------------------- Income from continuing operations 12,225 9,575 Discontinued operations Loss from discontinued operations, net of tax (87) (134) ---------------------------------------------------------------------- Net income 12,138 9,441 Preferred dividends requirements, net 459 475 ---------------------------------------------------------------------- Net income applicable to common stock $11,679 $8,966 ====================================================================== CLECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Thousands, except share and per share amounts) (UNAUDITED) ---------------------------------------------------------------------- For the three months ended March 31 2006 2005 ---------------------------------------------------------------------- Average shares of common stock outstanding Basic 49,851,812 49,292,849 Diluted 52,120,948 49,373,623 Basic earnings per share From continuing operations $0. 23 $0.18 Net income applicable to common stock $0. 23 $0.18 Diluted earnings per share From continuing operations $0. 23 $0.18 Net income applicable to common stock $0. 23 $0.18 Cash dividends paid per share of common stock $0.225 $0.225 CLECO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands, except share and per share amounts) (UNAUDITED) At March 31, At Dec. 31, 2006 2005 ---------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $137,429 $219,153 Account receivable, net 69,319 89,750 Other current assets 163,512 125,565 ---------------------------------------------------------------------- Total current assets 370,260 434,468 Property, plant and equipment, net 1,108,301 1,188,703 Equity investment in investees 323,940 317,762 Prepayments, deferred charges and other 321,244 208,555 ---------------------------------------------------------------------- Total assets $2,123,745 $2,149,488 ====================================================================== Liabilities Current liabilities Long-term debt due within one year $50,000 $40,000 Accounts payable 91,352 144,461 Other current liabilities 126,138 109,643 ---------------------------------------------------------------------- Total current liabilities 267,490 294,104 Deferred credits and other liabilities 546,609 539,478 Long-term debt, net 599,597 609,643 ---------------------------------------------------------------------- Total liabilities 1,413,696 1,443,225 ---------------------------------------------------------------------- Shareholders' equity Preferred stock 20,987 20,034 Common stock 693,144 690,359 Other comprehensive income (4,082) (4,130) ---------------------------------------------------------------------- Total shareholders' equity 710,049 706,263 ---------------------------------------------------------------------- Total liabilities and shareholders' equity $2,123,745 $2,149,488 ====================================================================== *T Please note: In addition to historical financial information, this news release contains forward-looking statements about future results and circumstances with respect to which there are many risks and uncertainties, including the weather and other natural phenomena, state and federal legislative and regulatory initiatives, the timing and extent of changes in commodity prices and interest rates, the operating performance of Cleco Power's and Cleco Midstream's facilities, the financial condition of the company's tolling agreement counterparties, the performance of the tolling agreements by such counterparties, the resolution of claims arising from the Calpine bankruptcy, construction and operational startup of the new unit at Rodemacher Power Station, extension of Cleco Power's current rate plan, and the other risks and uncertainties more fully described in the company's latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Actual results may differ materially from those indicated in such forward-looking statements.