XML 25 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 1 — Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements of Cleco include the accounts of Cleco and its majority-owned subsidiaries after elimination of intercompany accounts and transactions. Cleco’s condensed consolidated financial statements include the financial results of Cleco Cajun from the closing of the Cleco Cajun Transaction on February 4, 2019, through June 30, 2020. For more information about the Cleco Cajun Transaction, see Note 2 — “Business Combinations.”
Basis of Presentation
The condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to the Form 10-Q and Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements. Because the interim condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary to fairly state the financial position and results of operations of Cleco and Cleco Power. Amounts reported in Cleco and Cleco Power’s interim financial statements are not necessarily indicative of amounts expected for the annual periods due to the effects of seasonal
temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices, discrete income tax items, and other factors.
On March 11, 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and on March 13, 2020, the U.S. declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory. State and local authorities have also implemented multistep policies with the goal of reopening various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. However, certain jurisdictions have begun reopening only to delay these plans or return to restrictions in the face of increases in new COVID-19 cases. For example, the governor of the state of Louisiana issued orders in May 2020 to allow businesses to reopen at varying levels of capacity in May and June 2020. To address the June 2020 spike in COVID-19 cases, such reopening activities were temporarily paused or scaled back, and also included closing certain establishments.
Cleco has modified some of its business operations, as these restrictions have significantly impacted many sectors of the economy. Impacts include record levels of unemployment, with businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. Cleco has also modified and continues to adjust certain business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, and other governmental and regulatory authorities.
Cleco cannot predict the full impact that COVID-19, or the significant disruption and volatility currently being experienced in the markets, will have on its business, cash flows, liquidity, financial condition, and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the
spread of COVID-19, the development of effective treatments, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. For information on recent authoritative guidance and its effect on financial results, see Note 3 — “Recent Authoritative Guidance.”
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 and Cleco Power’s restricted cash and cash equivalents consisted of the following:
Cleco
(THOUSANDS)AT JUNE 30, 2020AT DEC. 31, 2019
Current
Cleco Katrina/Rita’s storm recovery bonds$2,628  $9,632  
Cleco Power’s charitable contributions1,846  1,200  
Cleco Power’s rate credit escrow228  268  
Total current4,702  11,100  
Non-current
Diversified Lands’ mitigation escrow23  21  
Cleco Cajun’s defense fund
720  719  
Cleco Cajun’s margin deposits
100  100  
Cleco Power’s future storm restoration costs
8,327  12,269  
Cleco Power’s charitable contributions—  2,094  
Total non-current9,170  15,203  
Total restricted cash and cash equivalents$13,872  $26,303  
Cleco Power
(THOUSANDS)AT JUNE 30, 2020AT DEC. 31, 2019
Current
Cleco Katrina/Rita’s storm recovery bonds$2,628  $9,632  
Charitable contributions1,846  1,200  
Rate credit escrow228  268  
Total current4,702  11,100  
Non-current
Future storm restoration costs8,327  12,269  
Charitable contributions—  2,094  
Total non-current8,327  14,363  
Total restricted cash and cash equivalents$13,029  $25,463  

Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash was collected, it was restricted for payment of administration fees, interest, and principal on storm recovery bonds. The change from December 31, 2019, to June 30, 2020, was due to Cleco Katrina/Rita using $11.1 million for the final storm recovery bond principal payment and $0.3 million for the related final interest payment, partially offset by collections of $4.4 million net of administration fees. At June 30, 2020, the remaining $2.6
million of restricted cash is expected to be used for final administrative and winding up activities of Cleco Katrina/Rita.
Reserves for Credit Losses
Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivables are generally considered to become past due 20 days after the billing date. Cleco recognizes write-offs within the allowance for credit losses once all recovery methods have been exhausted. It is the policy of management to review accounts receivable and unbilled revenue monthly using a reserve matrix based on historical bad debt write-offs as well as current and forecasted economic conditions to establish a credit loss estimate. Management’s historical credit loss analysis included periods of economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of electricity, none of these past events have significantly impacted Cleco’s credit loss rates. Even though the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment in response to the COVID-19 pandemic from March 13, 2020, through July 16, 2020, and Cleco’s service territory experienced a recent decline in the economy related to the COVID-19 pandemic, the economic outlook of Cleco at June 30, 2020, was still within range of its historical credit loss analysis. As a result of the executive order from the LPSC, Cleco Power suspended the assessment of late fees, disconnections, and sending accounts to collection agencies, which resulted in no additions to charge-offs during the three months ended June 30, 2020. Cleco anticipates reinstating disconnections and late fees and utilizing collection agencies beginning September 1, 2020.
The table below presents the changes in the allowance for credit losses by receivable for Cleco and Cleco Power:
Cleco
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, Mar. 31, 2020$2,123  $1,638  $3,761  
Current period provision1,137  —  1,137  
Recovery226  —  226  
Balances, June 30, 2020$3,486  $1,638  $5,124  
* Loan held at Diversified Lands that was fully reserved for at June 30, 2020.
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, Dec. 31, 2019$3,005  $1,250  $4,255  
CECL adoption71  —  71  
Current period provision3,634  388  4,022  
Charge-offs(4,091) —  (4,091) 
Recovery867  —  867  
Balances, June 30, 2020$3,486  $1,638  $5,124  
* Loan held at Diversified Lands that was fully reserved for at June 30, 2020.
Cleco Power
(THOUSANDS)ACCOUNTS
RECEIVABLE
Balances, Mar. 31, 2020$2,123  
Current period provision1,137  
Recovery226  
Balances, June 30, 2020$3,486  
(THOUSANDS)ACCOUNTS
RECEIVABLE
Balances, Dec. 31, 2019$3,005  
CECL adoption71  
Current period provision3,634  
Charge-offs(4,091) 
Recovery867  
Balances, June 30, 2020$3,486  
Fair Value Measurements and Disclosures
Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes. For more information about fair value levels, see Note 7 — “Fair Value Accounting.”