Alliance for Affordable Energy Calls for Immediate Credit Ratings Agency Review of Cleco Sale

With major risk-enhancing changes made to deal since credit
agencies’ last review, consumer advocacy organization calls for new
review of Cleco’s long-term financial health

BATON ROUGE, La.–(BUSINESS WIRE)–Today, the Alliance for Affordable Energy, a consumer advocacy group
based in New Orleans, urged credit ratings agencies to review the
details of the sale of Cleco Power that was passed in a special meeting
held by the Louisiana Public Service Commission on March 28. Several
deal points that will likely increase risk to Louisiana ratepayers were
made during the special meeting, an unusual move that did not allow for
proper review by the LPSC staff or the public.

“The deal negotiated in the last 20 minutes of the 6-hour special
meeting included commitments that will likely affect Cleco’s credit
rating. A downgraded credit rating from Moody’s or S&P would
significantly impact Cleco’s financial standing, especially in light of
the fact that Cleco will already be taking on $2.8 billion of debt to
$2.9 billion worth of assets,” said Casey DeMoss, CEO of Alliance for
Affordable Energy. “It is simply prudent to know what Cleco’s future
outlook will be when we’re talking about billions of dollars of debt
carried on the shoulders of Cleco’s customers.”

In late January, both Moody’s and Standard and Poor’s (S&P) issued a
revised credit rating assessments that Cleco Corp. would be downgraded
to the lowest investment-grade status as a result of the
transaction. However, according to DeMoss, some new stipulations,
including $136 million in upfront rate credits, attached to the approved
deal (released in a Cleco press release, would
almost certainly have a negative impact on that outlook.

“Other stipulations were added during the March 28 hearing that could
further negatively impact Cleco’s credit rating status. The prior credit
assessment did not contemplate a utilities rate freeze through 2020,”
said DeMoss. “Furthermore, their latest promise is to return $0.50 on
the dollar for money charged customers for taxes the company never
intend to pay — intended as a short term sweetener to the Commission and
customers, it is expected to directly result in the loss of any Cleco
tax payments to the state of Louisiana while the state is struggling
with the worst budget crisis in its history. While these schemes would
directly enrich foreign investors, they will financially weaken the
company, increase risk for customers and further imperil Louisiana’s
crumbling state budget.”

The minutes of the Feb. 24 Louisiana Public Service Commission’s hearing
are a reference for the Commission’s discussion of future denial of
taxes paid as profit and double leveraging: (

“The Alliance is formally calling on the Commission to solicit new
ratings from credit agencies. This is a matter of due diligence. The
rating agencies must review all of the details of the new deal and
provide a new ratings assessment. Louisiana cannot afford to be
blindsided by a downgraded credit rating,” DeMoss added.

Founded in 1985, the Alliance for Affordable Energy promotes fair,
affordable and environmentally responsible energy through education,
advocacy and policy. From inception, the Alliance has advanced a
philosophy that there is no conflict between lower energy costs and
lower pollution, between good jobs and regulation, or between serving
the public interest and making a reasonable profit.


Alliance for Affordable Energy
Logan Burke, 504-208-9761