Cleco Corporation 2030 Donahue Ferry Road P.O. Box 5000 Pineville, La
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CLECO CORPORATION 2030 Donahue Ferry Road P.O. Box 5000 Pineville, La. 71361-5000 (318) 484-7400 www.cleco.com CLECO CORPORATION UNLOCKING OUR 2009 Annual Report and Form 10-K POWER for SHAREHOLDERS “What Cleco says, Cleco does. Its new generating unit and rate plan are two good examples. These two projects are the start of long-term future growth and higher returns to shareholders.” — RicHarD J. MILLer (left) Chairman, Truman Bancorp Inc. St. Louis, Mo. In November 2009, Cleco won the Edison Electric Institute’s index award for exceptional shareholder return (stock price appreciation plus reinvested dividends) in the small- market-capitalization category. Cleco earned the top rating in this index by delivering a total return of 76.3 percent to shareholders for the five-year period ended Sept. 30, 2009. The opportunity exists for the continuation of positive returns as the income stream from projects like Rodemacher Unit 3 is expected to increase Cleco’s cash flow and position the company for future earnings growth. Based on the current outlook for our business, our board of directors recently approved a dividend policy that will initially increase Cleco’s quarterly dividend rate from $0.225 per common share to $0.25 per common share beginning with the dividend payable May 15, 2010. The 11 percent increase, subject to the board’s official declaration in April 2010, will result in an annual dividend rate of $1.00 per common share. We’ve made wise investments in our infrastructure to meet our customers’ current and future energy needs. Now we’re unlocking our power for shareholders. Richard J. Miller is one of Cleco’s retail shareholders. He currently serves as chairman of Truman Bancorp Inc., the holding company for Truman Bank, a financial institution with six banking centers in the St. Louis region. for CUSTOMERS “We’re pleased Cleco has delivered on a generation project that will lower customers’ fuel costs and help meet demand. As a large industrial business with 24-hour operations, the cost, availability, and reliability of electricity can impact our bottom line.” — DOnaLD FOntenOT (left) Storage Facility Manager, Pine Prairie Energy Center Pine Prairie, La. Fossil fuel, water, and nuclear generation are the energy sources that have traditionally powered our state and nation. Today, we are witnessing the rise of biomass, solar, wind, and other renewable sources of energy. History has demonstrated, however, that no single fuel can meet all of our electricity needs. Fuel diversity has always been important to Cleco Power, but it became critical over the last decade as we began to see significant fluctuations in the price of natural gas resulting in unpredictable fuel costs on our customers’ bills. In the past, natural gas made up 70 percent of our fuel mix, as we were heavily dependent on electricity purchased from the market and older, natural-gas-fired generating units to meet our energy requirements. Projects like Rodemacher Unit 3 are freeing us from our dependence on purchased power and diversifying our fuel mix, enabling us to provide reliable power at a competitive price. The Pine Prairie Energy Center, a subsidiary of Plains All American Pipeline, L.P., operates a natural gas storage facility in Pine Prairie, La. The facility uses underground salt caverns in the Pine Prairie Salt Dome to store its gas. CORPORATE PROFILE Cleco Corporation operates both a regulated electric utility that serves customers across Louisiana and an unregulated wholesale generation business. We’ve been generating and delivering electricity through our core business, Cleco Power, for more than 70 years. We’re recognized by our peers and industry regulators for our superior customer service and expertise in responding to hurricanes and other emergencies. Our strategy is to strengthen our utility business so we can continue providing our customers with reliable, affordable power for years to come and to extract maximum value from our unregulated business. 5-YEAR FINAN CIAL HIGHLIGHTS (YEARS ENDED DEC. 31) COMPOUND (THOUSANDS EXCEPT SHARE, PER SHARE AND percentaGES) 2009 2008 2007 CHANGE FINANCIAL DATA Total operating revenue, net $ 853,758 $ 1,080,198 $ 1,030,616 (1.5)% Operating income $ 106,809 $ 114,877 $ 97,544 (0.9)% Equity (loss) income from investees $ (17,423) $ (5,542) $ 93,148 (39.7)% Net income applicable to common stock $ 106,261 $ 102,095 $ 151,331 (10.1)% Consolidated total assets $ 3,694,847 $ 3,341,204 $ 2,706,623 11.4 % Capital investments $ 236,420 $ 322,512 $ 493,439 4.8 % Consolidated long-term debt as percentage of capitalization 54.19% 51.06% 43.20% 3.2 % SHAREHOLDER VALUE Average shares of common stock outstanding, basic 60,187,894 59,990,229 58,976,052 4.0 % Average shares of common stock outstanding, diluted 60,498,205 60,214,640 59,717,528 3.2 % Basic earnings per share applicable to common stock $ 1.77 $ 1.70 $ 2.55 (12.9)% Diluted earnings per share applicable to common stock $ 1.76 $ 1.70 $ 2.54 (13.0)% Cash dividends declared per common share $ 0.900 $ 0.900 $ 0 .900 — Return on average common equity 9.8% 9.9% 16.0% (19.7)% Book value per share at year-end $ 18.43 $ 17.60 $ 16.92 6.8 % Market price per share at year-end $ 27.33 $ 22.83 $ 27.80 5.6 % Dividend yield at year-end 3.3% 3.9% 3.2% (5.2)% CONSOLIDATED DILUTED EARNINGS PER SHARE ALLOCATED TO SUBSIDIARIES Cleco Power $ 1.84 $ 1.89 $ 1.42 Cleco Midstream Resources $ (0.29) $ (0.17) $ 1.00 Other (including Corporate) $ 0.21 $ (0.02) $ 0.12 Consolidated earnings from continuing operations allocated to subsidiaries $ 1.76 $ 1.70 $ 2.54 Net earnings applicable to common stock $ 1.76 $ 1.70 $ 2.54 29.4 3.53 $2,000 $1,500 2.54 16.0 $1,000 1.70 1.76 1.36 9.3 9.9 9.8 $ 500 04 05 06 07 08 09 $1,000 $1,074 $1,351 $1,542 $1,315 $1,637 0.90 0.90 0.90 0.90 0.90 $1,000 $1,049 $1,215 $1,281 $ 807 $1,021 $1,000 $1,161 $1,402 $1,634 $1,211 $1,341 05 06 07 08 09 05 06 07 08 09 RETURN ON AVERAGE DIVIDENDS AND EARNINGS COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN COMMON EQUITY IN DOLLARS (PER DILUTED SHARE) CLECO S&P 500 EEI IN PERCENT DIVIDENDS EARNINGS Assumes $1,000 was invested on Dec. 31, 2004, in Cleco common stock and each index. Values are as of Dec. 31 assuming dividends are reinvested. Refer to page 158 of the Form 10-K for a list of companies comprising the EEI Index. 4 CLECO CORPORATION 2009 ANNUAL REPORT Letter TO SHareHOLDers UNLOckinG Our POwer Dear Shareholders, In 2009 and early 2010, we completed the foundation of our strategy — a strategy that began in 2003. For several years, we’ve been working to strengthen the basic infrastructure of our regulated electric utility business and to extract maximum value from the generating assets in our unregulated wholesale energy business, and we’re achieving our goals. Rodemacher Unit 3, featured on the cover of our annual report, is complete. The new unit increases our generating capacity and diversifies our fuel mix.I t also is expected to lower the fuel cost portion of our customers’ bills — fuel savings customers can expect for decades. In addition, we received approval from the Louisiana Public Service Commission (LPSC) to implement new retail rates, from which we expect future earnings growth. The LPSC and the Federal Energy Regulatory Commission (FERC) also approved the transfer of half of Acadia Power Station to Cleco Power, which when combined with Rodemacher Unit 3 eliminates Cleco Power’s dependence on purchased power to meet capacity requirements. We also began constructing the new facilities for our joint transmission upgrade project in the southern portion of our service territory. Additionally, we made significant strides toward extracting value from our assets in Cleco Midstream Resources (Midstream) and reducing our exposure in the unregulated wholesale power market. We have a pending sale agreement with a subsidiary of Entergy Corporation for the remaining half of Acadia Power Station, and we terminated the existing tolling agreement for Evangeline Power Station, our last remaining wholesale plant, and entered into a new tolling agreement. The new tolling agreement gives us the flexibility needed to optimize the plant’s value. Cleco planned conservatively but wisely for future growth. Now we are unlocking the power of this great company. CLECO CORPORATION 2009 ANNUAL REPORT 5 “I’m excited about our future. We’ll continue to execute our growth strategy by focusing on what matters — providing safe, reliable, and courteous service to our customers; valuing and respecting employees; contributing to our communities; and delivering superior returns to our shareholders.” MIchAEL H. MADISON President and Chief Executive Officer Hurricanes, turbulent financial markets, and the revenues in line with today’s operating costs, and wholesale power market collapse have tested to provide a fair return to our shareholders. In addition, our mettle in recent years. In our business, we the fuel savings from Unit 3 and the refund of the know eventful times aren’t always occasions customer-supplied financing collected during for celebration. construction are expected to offset the increase The year 2009, however, was different. It was in base rates and lower bills. a defining year for Cleco. We believe we’ll look upon Our new rate plan has a term of four years. We it for decades to come as the year we unlocked expect retail base revenues to increase by approximately the power of our company.