UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission file number 1-15759
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Cleco Corporation
(Exact name of Registrant as specified in its charter)
Louisiana 72-1445282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 318/484-7400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $2.00 Par Value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Cumulative Preferred Stock, $100 Par Value
4.50%
Convertible, Series of 1991
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X , No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
As of March 1, 2000, the aggregate value of the Registrant's voting stock held
by non-affiliates was $692,478,798. The Registrant's Cumulative Preferred Stock
is not listed on any exchange, nor are prices for the Cumulative Preferred Stock
quoted on NASDAQ; therefore, its market value is not readily determinable and is
not included in the foregoing amount.
As of March 1, 2000, there were 22,442,093 shares outstanding of the
Registrant's Common Stock, par value $2.00 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1999 (1999 Annual Report to Shareholders), furnished to the
Securities and Exchange Commission pursuant to Rule 14a-3(c) under the
Securities Exchange Act of 1934, are filed as Exhibit 13 to this report and
incorporated by reference into Part II herein. Portions of the Registrant's
definitive Proxy Statement relating to the Annual Meeting of Shareholders to be
held on April 28, 2000, are incorporated by reference into Part III herein.
<PAGE>
TABLE OF CONTENTS
Page
Disclosure Regarding Forward-Looking Statements........................... 1
PART I
Item 1. Business
General................................................. 3
Operations.............................................. 4
Regulatory Matters, Industry Developments
and Franchises.................................... 11
Item 2. Properties.................................................... 17
Item 3. Legal Proceedings............................................. 19
Item 4. Submission of Matters to a Vote
of Security Holders..................................... 20
Executive Officers of the Registrant.......................... 21
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters......................... 24
Item 6. Selected Financial Data....................................... 24
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition................. 25
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk....................................... 25
Item 8. Financial Statements and
Supplementary Data...................................... 25
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.................................... 25
PART III
Item 10. Directors and Executive Officers
of the Registrant....................................... 26
Item 11. Executive Compensation........................................ 26
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................... 26
Item 13. Certain Relationships and Related
Transactions............................................ 26
PART IV
Item 14. Exhibits, Financial Statement
Schedule, and Reports on Form 8-K....................... 27
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this Report, including, without
limitation, the statements under "Business -- Operations -- Utility Group --
Fuel and Purchased Power, Power Purchases," " -- Natural Gas Supply," "Business
- -- Operations -- Utility Group -- Sales," "Regulatory Matters, Industry
Developments and Franchises -- Industry Developments," "Business -- Operations
- -- Midstream," "Environmental Matters -- Environmental Quality -- Air Quality,"
"Legal Proceedings," "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Industry Developments," "-- Results of
Operations," "-- Financial Condition -- Liquidity and Capital Resources," "--
Financial Condition -- Regulatory Matters" and Note O to the Consolidated
Financial Statements, contain forward-looking statements. Included or
incorporated by reference elsewhere in this Report are forward-looking
statements regarding sales growth, capital expenditures, Utility Group's 1996
Louisiana Public Service Commission (LPSC) settlement the effect of certain
recent Federal Energy Regulatory Commission (FERC) regulations, development of
electric generating facilities, future legislative and regulatory changes
affecting electric utilities and other matters. Although the Company believes
the expectations reflected in such forward-looking statements are reasonable,
such forward-looking statements are based on numerous assumptions (some of which
may prove to be incorrect) and are subject to risks and uncertainties which
could cause the actual results to differ materially from the Company's
expectations. Forward-looking statements have been and will be made in written
documents and oral presentations of the Company. Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management. When used in the Company's documents or oral
presentations, the words "anticipate," "estimate," "expect," "objective,"
"projection," "forecast," "goal" and similar expressions are intended to
identify forward-looking statements. In addition to any assumptions and other
factors referred to specifically in connection with such forward-looking
statements, factors that could cause the Company's actual results to differ
materially from those contemplated in any forward-looking statements include,
among others, the following:
Factors affecting utility operations such as unusual weather
conditions; catastrophic weather-related damage; unscheduled generation
outages; unusual maintenance or repairs; unanticipated changes to fuel
costs, gas supply costs, or availability constraints due to higher
demand, shortages, transportation problems or other developments;
environmental incidents; or electric transmission or gas pipeline
system constraints;
Increased competition in the electric environment, including effects of
industry restructuring or deregulation, transmission system operation
or administration, retail wheeling or cogeneration;
Regulatory factors such as unanticipated changes in rate-setting
policies or procedures; recovery of investments made under traditional
regulation; and the frequency and timing of rate increases;
1
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Financial or regulatory accounting principles or policies imposed by
the Financial Accounting Standards Board, the Securities and Exchange
Commission (SEC), the FERC, the LPSC or similar entities with
regulatory or accounting oversight;
Economic conditions, including inflation rates and monetary
fluctuations;
Changing market conditions and a variety of other factors associated
with physical energy and financial trading activities, including, but
not limited to, price, basis, credit, liquidity, volatility, capacity,
transmission, interest rate and warranty risks;
Availability or cost of capital resulting from changes in the Company,
interest rates, and securities ratings or market perceptions of the
electric utility industry and energy related industries;
Employee work force factors, including changes in key executives;
Legal and regulatory delays and other obstacles associated with
mergers, acquisitions, capital projects, reorganizations or investments
in joint ventures;
Cost and other effects of legal and administrative proceedings,
settlements, investigations, claims and other matters; and
Changes in federal, state or local legislature requirements, such as
changes in tax laws or rates, regulating policies, or environmental
laws and regulations.
The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of changes in actual results,
changes in assumptions or other factors affecting such statements.
2
<PAGE>
PART I
Item 1. BUSINESS
GENERAL
REORGANIZATION
Effective July 1, 1999, Cleco Utility Group Inc. (Utility Group)
reorganized into a holding company structure. This reorganization resulted in
the creation of a new holding company, Cleco Corporation (the Company), which
holds investments in several subsidiaries, including Utility Group, Cleco
Midstream Resources LLC (Midstream) and Utility Construction & Technology
Solutions LLC (UtiliTech, formerly Cleco Services LLC).
Utility Group, incorporated on January 2, 1935 under the laws of the State
of Louisiana, contains the LPSC jurisdictional generation, transmission and
distribution electric utility operations serving the Company's traditional
retail and wholesale customers. Utility Group serves approximately 246,000
customers in 63 communities and rural areas in a 14,000-square-mile region in
the State of Louisiana.
Midstream, organized on September 4, 1998 under the laws of the State of
Louisiana, operates competitive LPSC nonjurisdictional electric generation,
develops wholesale generation projects, provides personnel to operate power
plants and operates oil and natural gas production, energy marketing and natural
gas pipeline businesses. Midstream operates primarily in Louisiana and Texas.
UtiliTech, organized on October 30, 1997 under the laws of the State of
Louisiana, provides utility engineering and line construction services to
municipal governments, rural electric cooperatives and investor-owned electric
companies. UtiliTech operates primarily in Louisiana, Arkansas, Texas and
Mississippi.
Pursuant to the reorganization, the Company became the owner of all of
Utility Group's outstanding common stock. Holders of Utility Group's existing
common stock and two series of preferred stock exchanged their stock in Utility
Group for stock in the Company. Shares of preferred stock in three series that
did not approve the reorganization were redeemed for $5.7 million. The
reorganization had no impact on the Company's Consolidated Financial Statements
because the reorganization was accounted for similarly to a pooling of interest.
The Company was incorporated on October 30, 1998 under the laws of the
State of Louisiana. At December 31, 1999, the Company employed 1,416 persons.
The Company's mailing address is P.O. Box 5000, Pineville, Louisiana 71361-5000,
and its telephone number is (318) 484-7400. The Company's home page on the
Internet's World Wide Web is located at http://www.cleco.com.
The Company, subject to certain limited exceptions, is exempt from
regulation as a public utility holding company pursuant to Section 3(a)(1) of
the Public Utility Holding Company Act of 1935 (1935 Act).
3
<PAGE>
OPERATIONS
UTILITY GROUP
Certain Factors Affecting Utility Group
As an electric utility, Utility Group is affected, to varying degrees, by a
number of factors affecting the electric utility industry in general. These
factors include, among others, increasingly competitive business conditions, the
cost of compliance with environmental regulations and changes in the federal and
state regulation of the generation, transmission and sale of electricity. For a
discussion of various regulatory changes and competitive forces affecting
Utility Group and other electric utilities, see "Regulatory Matters, Industry
Developments and Franchises -- Industry Developments" below.
Power Generation
Utility Group operates and either owns or has an ownership interest in
three steam electric generating stations and a gas turbine. Utility Group is the
sole owner of Teche Power Station and Rodemacher Power Station Unit 1. Utility
Group owns a 50% interest in Dolet Hills Power Station Unit 1 (Dolet Hills Unit
1) and a 30% interest in Rodemacher Power Station Unit 2 (Rodemacher Unit 2). At
December 31, 1999, Utility Group's aggregate electric generating capacity was
1,359,000 kilowatts (KW) (excluding Utility Group's 20,000 KW of firm purchases
from the Sabine River Authority). The following table sets forth certain
information with respect to Utility Group's generating facilities.
<TABLE>
<CAPTION>
Year Capacity Type of
of At fuel
Generating initial 12/31/99 used for
Generating Station Unit # operation (KW) generation(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin Gas Turbine 1973 7,000 gas
Teche Power Station 1 1953 23,000 gas
2 1956 48,000 gas
3 1971 359,000 gas/oil (standby)
Rodemacher Power Station 1 1975 440,000 gas/oil
2 1982 157,000 (2) coal/gas
Dolet Hills Power Station 1 1986 325,000 (3) lignite
Total Generating Capability 1,359,000
</TABLE>
(1) When oil is used on a standby basis, capacity may be reduced.
(2) Represents Utility Group's 30% interest in the capacity of Rodemacher Unit
2, a 523,000-KW generating unit.
(3) Represents Utility Group's 50% interest in the capacity of Dolet Hills Unit
1, a 650,000-KW generating unit.
Fuel and Purchased Power
Changes in fuel and purchased power expenses reflect fluctuations in
generation fuel mix, fuel costs, availability of economic purchased power and
deferral of expenses for recovery from customers through fuel adjustment clauses
in subsequent months.
4
<PAGE>
The following table sets forth, for the periods indicated, the percentages
of power generated from various fuels at Utility Group's electric generating
plants, the cost of fuel used per kilowatt hour (KWH) attributable to each such
fuel and the weighted average fuel cost per KWH.
<TABLE>
<CAPTION>
Lignite Coal Gas Fuel Oil
--------------------- -------------------- -------------------- -------------------- Weighted
Cost Cost Cost Cost average
per Percent per Percent per Percent per Percent cost per
kWh of kWh of kWh of kWh of kWh
Year (mills) generation (mills) Generation (mills) generation (mills) generation (mills)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 15.74 28.4 14.90 17.2 27.45 54.3 - - 21.96
1998 15.85 32.0 14.88 16.7 25.38 51.3 - - 20.57
1997 14.85 36.7 17.06 19.1 29.85 44.2 - - 21.90
1996 15.45 38.1 16.67 21.3 30.06 39.8 26.09 0.8 21.61
1995 14.86 35.9 18.88 14.3 19.48 49.8 24.77 0.0 17.74
</TABLE>
Power Purchases
Utility Group purchases electric energy from neighboring utilities when the
price of the energy purchased is less than Utility Group's cost of generating
such energy from its own facilities or when it needs power to supplement its own
electric generation if transmission capacity is available. Additionally, Utility
Group has a long-term contract under which it purchases a small percentage of
its total annual energy requirements from a hydroelectric generating plant.
In 1999 the amount of power purchased increased, compared to 1998, as a
result of the increased demand for electric energy and a scheduled major
maintenance outage at Dolet Hills Power Station. The following table sets forth
the amounts of power purchased by Utility Group on the wholesale market for the
years indicated.
% of Total
Million Energy
kWh Requirements
-------- ------------
1999 2,359 27%
1998 2,117 24%
1997 1,924 24%
1996 2,529 33%
1995 1,430 19%
For information with respect to the Company's ability to currently pass through
changes in costs of fuel to its customers, see "Regulatory Matters, Industry
Developments and Franchises -- Rates" below.
In future years, Utility Group's generating facilities may not supply
enough electric power to meet its growing native load demand. Following a
competitive bid process, Utility Group entered into contracts for firm electric
capacity and energy with two power marketing companies for 605 megawatts (MW) of
capacity in 2000, increasing to 760 MW of capacity in 2004. These contracts were
approved by the LPSC on March 22, 2000. Management expects the contracts,
combined with Utility Group's own
5
<PAGE>
generation, to meet substantially all its native load demand through 2004.
Because of its location on the transmission grid, Utility Group relies on one
main supplier of electric transmission and is sometimes constrained as to the
amount of purchased power it can bring into its system. These two contracts are
not expected to be affected by such transmission constraints.
Natural Gas Supply
During 1999 Utility Group purchased a total of 40,178 billion British
thermal units (MMBtu) of natural gas for the generation of electricity. The
annual and average per-day quantities of gas purchased by the Company from each
supplier are shown in the table below.
Average
amount
1999 purchased Percent
purchases per day of total
Natural gas supplier (MMMBtu) (MMMBtu) gas used
- --------------------------------------------------------------------------------
Amoco Natural Gas 8,236 22.6 20.50%
LIG Chemical Company 4,587 12.6 11.42%
Reliant Energy Services, Inc. 4,292 11.7 10.68%
Columbia Energy 3,014 8.3 7.50%
Exxon Corporation 2,378 6.5 5.92%
Others 17,671 48.3 43.98%
---------------- ----------- -----------
40,178 110.0 100.00%
================ =========== ===========
A wholly-owned subsidiary of Midstream, CLE Intrastate Pipeline Company,
Inc. (CLE Intrastate), owns a series of natural gas interconnections with
Trunkline Gas Company; Columbia Gulf Transmission Co. ; and ANR Pipeline Company
. The pipeline interconnections have allowed Utility Group to access various
additional natural gas supply markets, which helps to maintain the
competitiveness of Utility Group's generating units.
Natural gas was plentiful and available without interruption throughout
1999. Utility Group currently meets, and expects to continue to meet, its
natural gas requirements with purchases on the spot market through daily,
monthly and seasonal contracts with various natural gas suppliers. However,
future supplies to Utility Group remain vulnerable to disruptions due to weather
events and transportation disruptions. The potential for disruptions to Utility
Group has been decreased by the addition of the CLE Intrastate interconnections.
Nevertheless, large boiler fuel users of natural gas, including electric
utilities, generally have low priority among gas users in the event pipeline
suppliers are forced to curtail deliveries due to inadequate supplies. As a
result, supplies of natural gas may become unavailable from time to time, or
prices may increase rapidly in response to temporary supply disruptions. Such
events, though rare, may require Utility Group to shift its gas-fired generation
to alternative fuel sources, such as fuel oil, to the extent it has the
capability to burn those alternative fuels. Currently, Utility Group anticipates
that its alternative fuel capability, combined with its solid-fuel generation
resources, are adequate to meet its fuel needs during any temporary interruption
of natural gas supplies.
6
<PAGE>
Coal and Lignite Supply
The majority of the coal for Rodemacher Unit 2 is purchased from mines in
Wyoming under a long-term contract expiring in 2007 with Jacobs Ranch Coal
Company. The contract has been modified under price reopener procedures
initiated in early 1997. The pricing structure under the modified contract has
been defined through mid 2002. After purchasing a given annual quantity of base
coal (approximately 500,000 tons in 1999), Utility Group has the right to
purchase coal from third parties in the spot market through competitive bidding.
Provisions for pricing and terms can again be renegotiated under a contract
reopener provision in early 2002.
The coal for Rodemacher Unit 2 is transported under a long-term rail
transportation contract with the Union Pacific Railroad (Union Pacific). In
1997, Union Pacific began experiencing operating problems which resulted in
reduced volumes delivered to the unit. Throughout 1998, the delivery problems
persisted, and the coal inventory fluctuated at or below Utility Group's desired
minimum level. However, in 1999 the deliveries of coal by the railroad were back
to the normal schedule.
Substantially all of the lignite used to fuel Dolet Hills Unit 1 is
obtained under two long-term agreements. Utility Group and Southwestern Electric
Power Company (SWEPCO), each a 50% owner of Dolet Hills Unit 1, have entered
into agreements pursuant to which each acquired an undivided 50% interest in the
other's leased and owned lignite reserves in northwestern Louisiana. Utility
Group and SWEPCO have also entered into a long-term agreement expiring in 2011
with the Dolet Hills Mining Venture (DHMV) for the mining and delivery of such
lignite reserves. These reserves are expected to provide a substantial portion
of the fuel requirements for the projected operating life of Dolet Hills Unit 1.
Utility Group's minimum annual purchase requirement is 1,750,000 tons. The price
of lignite delivered pursuant to the agreement is a base price per ton, subject
to escalation based on certain inflation indices, plus specified "pass-through"
costs. Additional spot lignite may be obtained through competitive bidding.
Utility Group is currently engaged in litigation involving its contract with
DHMV. For information regarding the legal proceedings, see "Legal Proceedings"
in Item 3 of this Report.
Additionally, Utility Group and SWEPCO have entered into a long-term
agreement expiring in 2011 with Red River Mining Co., a joint venture of the
North American Coal Corporation and Phillips Coal Company, which provides for
base contract purchases and spot purchases of lignite. Utility Group's minimum
annual purchase requirement is 550,000 tons. The base lignite price under the
contract is a base price per MMMBtu, subject to escalation, plus certain
"pass-through" costs, while the spot lignite price is determined through
competitive bidding.
The continuous supply of coal and lignite from the mining sources described
above may be subject to interruption due to adverse weather conditions or other
factors which may disrupt mining operations or transportation. At December 31,
1999, Utility Group's coal inventory at Rodemacher Unit 2 was approximately
142,749 tons (about a 69-day supply), and Utility Group's lignite inventory at
Dolet Hills Unit 1 was approximately 186,920 tons (about a 32-day supply).
7
<PAGE>
Oil Supply
Utility Group stores fuel oil as an alternative fuel source. Rodemacher
Power Station has storage capacity for an approximate 75-day supply and other
generating stations have storage capacity totaling about a 20-day supply.
However, in accordance with Utility Group's current fuel oil inventory
practices, at December 31, 1999 Utility Group had between 5 to 10 days supply of
fuel oil stored at its generating stations. During 1999, no barrels of fuel oil
were burned.
Sales
Utility Group is a "public utility" engaged principally in the generation,
transmission, distribution and sale of electricity within Louisiana. For further
information regarding Utility Group's generating stations and its transmission
and distribution facilities, see "- Power Generation" above and "Properties -
Utility Group" in Item 2 of this Report.
Utility Group's 1999 system peak demand occurred in August and was
1,767,000 KW. Sales and peak demand are affected and influenced by weather and
are generally highest during the summer air-conditioning and winter heating
seasons. For information concerning the financial effects of seasonal demand on
Utility Groups quarterly operating results, see Note P to the Consolidated
Financial Statements on page 52 of the 1999 Annual Report to Shareholders, which
is filed as Exhibit 13 to this Report and incorporated herein by reference.
Utility Group expects the peak demand on the system to grow at a compound
annual rate of approximately 2% to 3% over the next five years. Utility Group
capacity reserve margin for 1999 was 6.3%. To meet Utility Group's capacity
reserve margin for 2000, Utility Group has purchased 605 MW of firm capacity and
transmission service beginning on June 1, 2000, increasing to 760 MW in 2004.
See "Fuel and Purchased Power - Power Purchases" above for a description of
these power purchase agreements. Utility Group believes it can meet its
anticipated growth in customer demand by purchasing the needed capacity on the
wholesale market. Future capacity needs may be met by continuing to purchase
power on the wholesale market, adding capacity to existing power plants or
building new power plants.
Energy Marketing Operations
For information concerning energy marketing operations within Utility
Group, see "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Results of Operations - Revenues and Sales - Utility
Group" and "Fuel and Purchased Power - Utility Group," on pages 19 and 21 of the
1999 Annual Report to Shareholders, which is filed as Exhibit 13 to this Report
and incorporated herein by reference.
8
<PAGE>
MIDSTREAM
Midstream wholly owns five limited liability companies which operate mainly
in Louisiana:
o Cleco Marketing & Trading LLC (CMT), which markets various energy
services and trades natural gas and power in several regional markets.
o Cleco Generation Services LLC (GEN), which offers power station
operations services. Initially, its main customers will be Utility
Group and Evangeline.
o Cleco Evangeline LLC (Evangeline), which is in the process of
repowering the Evangeline Power Station, a non-LPSC jurisdictional
power plant (formerly Coughlin Power Station).
o Acadia Power Holding LLC (ACH), which owns 50% of Acadia Power
Partners (APP). APP is a joint venture with Calpine Corporation which
intends to develop, build, own and operate a 1,000 MW non-LPSC
jurisdictional power plant near Eunice, Louisiana. Construction is
expected to start by midyear, and commercial operations are
anticipated to begin mid-2002.
o Cleco Business Development LLC (CBD), which is inactive.
Midstream also has a 98% ownership interest in Cleco Energy LLC (Energy).
Energy itself, and through its subsidiaries, manages natural gas pipelines,
natural gas production and natural gas procurement primarily in Texas and
Louisiana.
The following table sets forth certain information with respect to
Midstream's generating facilities.
<TABLE>
<CAPTION>
Year Capacity Type of
of At fuel
Generating initial 12/31/99 used for
Generating Station Unit # operation (KW) generation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Evangeline Power Station 6 1961 110,000 gas
7 1966 224,000 gas
Total Generating Capability 334,000
</TABLE>
In mid-January 2000, Evangeline was taken off-line and was not available
for power generation because of the requirements of the repowering project. For
information concerning the repowering of Evangeline, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Financial Condition - Cash Generation and Cash Requirements - Midstream
Construction" and the Notes to Consolidated Financial Statements - Note M -
Repowering Project on pages 24-25 and 50, respectively, of the 1999 Annual
Report to Shareholders, which is filed as Exhibit 13 to this Report and
incorporated herein by reference.
Midstream competes against regional and national companies which develop
non-LPSC jurisdictional power stations. CMT competes against regional energy
marketing companies. Energy competes against regional gas transportation and gas
marketing companies.
9
<PAGE>
CMT's primary customers are wholesale power marketers and power utilities
which resell power to the end user. Revenues are primarily based upon the demand
for energy verses the supply of energy. The demand for energy is primarily
driven by the weather and the mix of customers within power utilities' service
territories. The supply of energy is driven by the number of power plants that
are operational and the availability and price of natural gas.
Energy's revenues are primarily driven by the demand for natural gas, which
in turn is driven by the weather and the number of power stations, industrial
plants and residential houses, which use natural gas within its region.
During 1999, Midstream started the repowering of the Evangeline power
station, announced the development of the Acadia power station (through APP) and
started operating an energy trading floor (through CMT).
At December 31, 1999, Midstream employed 63 people, five within Evangeline,
24 within CMT and 34 within Energy.
For information concerning Midstream's operations, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Results of Operations - Revenues and Sales - Midstream," "Management's
Discussion and Analysis of Results of Operations - Results of Operations -
Nonfuel Operating Expenses and Income Taxes - All Segments," and the Notes to
Consolidated Financial Statements - Note K - Disclosures about Segments on pages
20-21, 22, and 48-49, respectively, of the 1999 Annual Report to Shareholders,
which is filed as Exhibit 13 to this Report and incorporated herein by
reference.
UTILITECH
UtiliTech provides utility engineering and line construction services to
municipal governments, rural electric cooperatives and investor-owned electric
companies. UtiliTech primarilSy operates in Louisiana, Texas, Arkansas and
Mississippi. The majority of UtiliTech's 1999 revenue came from the line
construction services.
The line construction business is highly competitive. Contractors typically
must submit bids for particular jobs. UtiliTech's primary competitors are
regional and local line construction businesses, some of which have greater
financial and human resources than UtiliTech. UtiliTech attempts to
differentiate itself from its competitors based upon quality of work, safety
culture, management style and competitive bids. The line construction business
is also affected by the weather. Rain may delay the completion of particular
contracts. Severe weather may cause a temporary increase in revenue due to large
numbers of downed lines and the urgency to restore service to an area.
The labor market for qualified line construction crews also is highly
competitive. UtiliTech uses competitive benefit plans and other incentives to
attract qualified crews. In 1999, UtiliTech grew from three line construction
crews to 29 line construction crews and now employs a total
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<PAGE>
of 152 persons. This growth resulted in part from the purchase of a local line
construction business.
For information concerning UtiliTech operations, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Results of Operations - Revenues and Sales - UtiliTech," Management's Discussion
and Analysis of Results of Operations and Financial Condition - Results of
Operations - Nonfuel Operating Expenses and Income Taxes - All Segments," and
the Notes to Consolidated Financial Statements - Note K - Disclosures about
Segments on pages 21, 22, and 48-49, respectively, of the 1999 Annual Report to
Shareholders, which is filed as Exhibit 13 to this Report and incorporated
herein by reference.
REGULATORY MATTERS, INDUSTRY DEVELOPMENTS AND FRANCHISES
Rates
Retail electric operations of Utility Group are subject to the jurisdiction
of the LPSC with respect to rates, standards of service, accounting and other
matters. Utility Group is also subject to the jurisdiction of the FERC with
respect to certain aspects of its electric business, including rates for
wholesale service, interconnections with other utilities, and the transmission
of power. Periodically, Utility Group has sought and received increases in base
rates from both the LPSC and the FERC to cover increases in operating costs and
costs associated with additions to generation, transmission and distribution
facilities.
Utility Group's electric rates include a fuel and purchased power cost
adjustment clause which enables Utility Group to adjust rates for monthly
fluctuations in the cost of fuel and short-term purchased power. Pretax income
from certain off-system sales to other utilities is passed on to customers
through a reduction in fuel cost adjustment billing factors. Fuel costs and fuel
adjustment billing factors are approved by the LPSC and the FERC. These cost
adjustments are based on costs from earlier periods which can result in over- or
under-recovery for the period in which the adjustment is made. Any over- or
under-recovery is corrected by an adjustment in later periods. As of December
31, 1999, the net accumulated liability for over-recovery on sales subject to
the LPSC's jurisdiction was approximately $1.4 million.
In 1996, the LPSC approved a settlement of Utility Group's earnings
review. The terms of the settlement were to be effective for a five-year period.
In February 1999, the period was extended three years until 2004. For
information regarding these agreements, see "Financial Condition - Retail Rates
of Utility Group" in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on page 26 of the 1999 Annual Report to
Shareholders, which is filed as Exhibit 13 to this Report and incorporated
herein by reference.
Franchises
Utility Group operates under nonexclusive franchise rights granted by
governmental units, such as municipalities and parishes (counties), and enforced
by state regulation. These franchises are for fixed terms, which vary from 10
years to 50 years. In the past, Utility Group has been
11
<PAGE>
substantially successful in the timely renewal of franchises as each reaches the
end of its term and expires.
A number of parishes have attempted in recent years to impose franchise
fees on retail revenues earned within the unincorporated areas Utility Group
serves. If the parishes are ultimately successful, taxes other than income taxes
could increase substantially in future years.
Industry Developments
Technological improvements in recent years have somewhat lessened the
historical barriers to entry in the electric utility industry and have set in
motion statutory and regulatory changes aimed at increased competition in this
industry. Federal and state legislation and new regulatory initiatives designed
to restructure electricity markets will likely produce even greater competition
at both wholesale and retail levels in the future. The LPSC is investigating
whether retail choice is in the best interest of Louisiana electric utility
customers. During 1999 the LPSC directed its Staff to develop a transition to
competition plan to be presented on or before January 1, 2001. Utility Group and
a number of parties, including the other Louisiana electric utilities, certain
power marketing companies and various associations representing industry and
consumers, have been participating in electric industry restructuring
proceedings before the LPSC since 1997. Several neighboring states have taken
steps to initiate retail choice by 2002. At the federal level, several bills,
some with conflicting provisions, were introduced during 1999 to promote a more
competitive environment in the electric utility industry. Management expects the
debate relating to customer choice and other related issues to continue in
legislative and regulatory bodies in 2000. At this time, the Company cannot
predict whether any legislation or regulation will be enacted or adopted during
2000 and, if enacted, what form such legislation or regulation would take.
Wholesale Electric Competition
The Energy Policy Act, enacted by Congress in 1992, significantly changed
U.S. energy policy, including regulations governing the electric utility
industry. The Energy Policy Act allows the FERC, on a case-by-case basis and
with certain restrictions, to order wholesale transmission access and to order
electric utilities to enlarge their transmission systems. The Energy Policy Act
prohibits FERC-ordered retail wheeling (i.e., opening up electric utility
transmission systems to allow customer choice of energy suppliers at the retail
level), including "sham" wholesale transactions. Further, under the Energy
Policy Act, a FERC transmission order requiring a transmitting utility to
provide wholesale transmission services must include provisions generally
permitting the utility to recover from the FERC applicant all of the costs
incurred in connection with the transmission services, including any enlargement
of the transmission system and any associated services.
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<PAGE>
In addition, the Energy Policy Act revised the 1935 Act to permit
utilities, including registered holding companies, and non-utilities to form
"exempt wholesale generators" without the principal restrictions of the 1935
Act. Under prior law, independent power producers were generally required to
adopt inefficient and complex ownership structures to avoid pervasive regulation
under the 1935 Act.
In 1996 the FERC issued Orders No. 888 and 889 requiring open access to
utilities' transmission systems. The open access provisions require
FERC-regulated electric utilities to offer third parties access to transmission
under comparable terms and conditions as the utilities' use of their own
systems. In addition, Order No. 888, as amended, provides for the full recovery
from a utility's departing customers of wholesale stranded costs to the extent
such costs were prudently incurred to serve wholesale customers and would go
unrecovered if those customers use open access transmission service and move to
another electricity supplier. The Order, as amended, also allows customers under
existing wholesale sales contracts to seek FERC approval to modify their
contracts on a case-by-case basis. Providing unbundled transmission service to
firm-requirements customers may have significant financial consequences to the
utility industry. Providing open access for non-firm sales may have significant
effects on utility operations.
In 1999 the FERC issued Order No. 2000 that further defines the
operation of utilities' transmission systems. This Order establishes a general
framework for all transmission owning entities in the nation to voluntarily
place their transmission facilities under the control of appropriate Regional
Transmission Organizations (RTO). Although participation is voluntary, the FERC
has made it clear that any jurisdictional entity not participating in an RTO
will be subject to further regulatory steps. Current objectives state that all
electric utilities that own, operate or control interstate transmission
facilities should participate in an RTO that will be operational by no later
than December 15, 2001. The transfer of control of Utility Group's transmission
facilities has the potential to significantly affect utility operations and
revenues.
Wholesale energy markets, including the market for wholesale electric
power, have been competitive and are becoming even more so as the number of
participants in these markets increases as a result of enactment of the Energy
Policy Act and the regulatory activities of the FERC. The Company competes to
make sales of electric power at wholesale with other public utilities,
cogenerators, qualified facilities in other forms and power marketing companies.
Power marketers often do not own transmission or generation facilities, but
compete in the wholesale market by buying electricity from utilities and other
generators and reselling the electricity at market-based rates. Many such power
marketers now transact business in all regions of the country.
Retail Electric Competition
Currently the LPSC does not provide exclusive service territories for
electric utilities under its jurisdiction. Instead, retail service is obtained
through the aforementioned long-term, nonexclusive franchises. The LPSC uses a
"300 foot rule" for determining the supplier for new customers. The application
of this law has led to competition with neighboring utilities for retail
customers at the borders of Utility Group's service areas. Utility Group also
competes in its service area with suppliers of alternative forms of energy, some
of which may be less costly than
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<PAGE>
electricity for certain applications. Utility Group could experience some
competition for electric sales to industrial customers in the form of
cogeneration or from independent power producers. However, Utility Group
believes that its rates, and the quality and reliability of its service, place
it in a favorable competitive position in current retail markets. For
information on retail electric competition affecting Utility Group, see
"Financial Condition -- Industry Developments/Customer Choice" in "Management's
Discussion and Analysis of Results of Operations and Financial Condition" on
page 25 of the 1999 Annual Report to Shareholders, which is filed as Exhibit 13
to this Report and incorporated herein by reference.
Legislative and Regulatory Changes and Matters
Various federal and state legislative and regulatory bodies are considering
a number of issues in addition to those discussed above that will shape the
future of the electric utility industry. Such issues include deregulation of
retail electricity sales; the ability of electric utilities to recover stranded
costs; the repeal or modification of the 1935 Act; the unbundling of vertically
integrated electric utility companies into separate business segments or
companies (i.e., generation, transmission, distribution and retail energy
service); the role of electric utilities, independent power producers and
competitive bidding in the construction and operation of new generating
capacity; and the pricing of transmission service on an electric utility's
transmission system. The Company is unable, at this time, to predict the outcome
of such issues or their effect on the Company's financial position, results of
operations or cash flows.
For information on certain regulatory matters and regulatory accounting
affecting the Company, see "Financial Condition -- Regulatory Matters" in
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 27 and 28 of the 1999 Annual Report to Shareholders, which
is filed as Exhibit 13 to this Report and incorporated herein by reference.
ENVIRONMENTAL MATTERS
Environmental Quality
The Company is subject to numerous laws and regulations administered by
federal, state and local authorities to protect the environment. These statutory
and regulatory provisions impose various substantive requirements, the violation
of which may result in substantial fines and penalties. Environmental
requirements continue to increase as a result of new legislation, administrative
actions and judicial interpretations. Therefore, the precise future effects of
existing and potential requirements are difficult to determine. During 1999, the
Company's capital expenditures related to environmental compliance were about
$3.7 million, due largely to the installation of peaking cooling towers at one
of the Company's generating stations. Expenditures related to environmental
compliance are estimated to total approximately $5.0 million in 2000.
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<PAGE>
Air Quality
The State of Louisiana regulates emissions from each of the Company's
generating units through regulations issued by the Air Quality Division (AQD) of
the Louisiana Department of Environmental Quality (LDEQ). In addition, the AQD
implements certain programs initially established by the federal Environmental
Protection Agency (EPA). The AQD establishes standards of performance or
requires permits for certain generating units in Louisiana. All of the Company's
generating units are subject to these requirements.
The federal Clean Air Act Amendments of 1990 (the Act) established a
regulatory program to address the effects of acid rain and imposed restrictions
on sulfur dioxide (SO2) emissions from certain generating units. The Act
essentially requires that utilities, like Utility Group, must hold a regulatory
"allowance" for each ton of SO2 emitted beginning in the year 2000. The EPA is
required to allocate a set number of allowances to each affected unit based on
its historic emissions. After the initial allocation, Utility Group requested an
adjustment to the allowance allocation for Rodemacher Unit 2 because of an
extended outage of the unit during one of the years used in the EPA's
calculation. Because the final allowance allocation did not reflect the
requested adjustment, Utility Group filed a petition for judicial review of the
EPA's action on May 21, 1993, in the United States Court of Appeals for the
District of Columbia Circuit. In October 1995, the EPA signed a settlement
agreement in which it agreed to give Rodemacher Unit 2 the additional allowances
requested. In December 1996, the EPA published proposed changes to the Acid Rain
Program that would grant Rodemacher Unit 2 the additional allowances. In June
1998, the proposed changes were made final.
The Act also requires the EPA to revise nitrogen oxides (NOx) emission
limits for existing coal-fired boilers. In November 1996, the EPA finalized
rules lowering the NOx emission rate for certain boilers, including Rodemacher
Unit 2 and Dolet Hills Unit 1. Under this rule, Rodemacher Unit 2 and Dolet
Hills Unit 1 would have to meet this new emission rate by January 1, 2000. The
rule also allows an option to "early elect," that is, achieve compliance with a
less restrictive NOx limit beginning January 1, 1997. Utility Group exercised
this option in December 1996. Early election protects Utility Group from any
further reductions in the NOx permitted emission rate until 2008. Rodemacher
Unit 2 and Dolet Hills Unit 1 were in compliance with the NOx early election
limits in 1998 and 1999 and are expected to continue to be in compliance in 2000
without undergoing significant capital improvements. Significant future
reductions in NOx emission limits may require modification of burners or other
capital improvements at either or both of the units.
Midstream's generating unit uses a combination of natural gas as a fuel and
modern turbine technology which reduces NOx or SO2 emissions to immaterial
levels.
Water Quality
The Company has received from the EPA all National Pollutant Discharge
Elimination System (NPDES) permits required under the Clean Water Act for
discharges from its four
15
<PAGE>
generating stations. NPDES permits have fixed dates of expiration, and the
Company has applied for renewal of these permits within the applicable time
periods. The Office of Water Resources of the LDEQ requires facilities which
discharge wastewater into Louisiana waters to be permitted under the Louisiana
Pollution Discharge Elimination System (LPDES). The Company has applied for and
received LPDES permits for its four generating stations.
The federal Clean Water Act, which was passed in 1972, contained provisions
requiring the EPA to evaluate all bodies of water to determine if they met water
quality standards and to establish a program to bring non-compliant bodies of
water into compliance with the standards. Given the enormous number of bodies of
water and the complexity of standards set forth in the Clean Water Act, the EPA
has not completed the requirements. In the last few years, environmental groups
have sued the EPA over the failure to address their requirements of the Clean
Water Act. In October 1999, the EPA received a federal Court Order to develop
and implement Total Maximum Daily Loadings (TMDL's) for all impacted streams in
Louisiana. The TMDL's will restrict the amount of specific covered pollutants
which may be discharged under revised permits which will incorporate the
limitations of TMDL. The Company is evaluating the potential impact of TMDL
limitations to its facilities. Similar court proceedings against the EPA are
occurring throughout the United States over enforcing the federal Clean Water
Act.
Solid Waste Disposal
The Solid Waste Division (SWD) of the LDEQ has adopted regulations and a
permitting system for the management and disposal of solid waste generated by
power stations. The Company has received all required permits from the SWD for
the on-site disposal of solid waste generated at its generating stations.
Hazardous Waste Generation
The Company produces certain wastes at its four generating stations and at
other locations that are classified as hazardous. The Hazardous Waste Division
of the LDEQ regulates these wastes and has issued identification numbers to the
sites where such wastes are produced. The Company does not treat, store or
dispose of these wastes on-site; therefore, no permits are required. All
hazardous wastes produced by the Company are disposed of at federally permitted
hazardous waste disposal sites.
Toxics Release Inventory
The Toxics Release Inventory (TRI) is a part of the Emergency Planning and
Community Right to Know Act and is administered by the EPA. The TRI is an annual
reporting requirement for industrial facilities on about 650 substances they
release into air, water and land. The TRI ranks companies based on how much of a
particular substance they release on a state level and a parish (county) level.
On May 1, 1997, the EPA added seven new industry groups to the TRI, including
electric utility facilities. Before the 1997 additions, the Company was exempt
from the reporting requirements of the TRI. The Company did submit TRI reports
on its 1998 activities before July 1, 1999. The TRI will be made public
knowledge and the rankings will be published
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<PAGE>
by the end of the second quarter of 2000. The rankings do not result in any
federal or state penalties, but may result in adverse public perceptions of the
Company. Management is aware of the potential adverse effects and is currently
taking steps to mitigate the situation.
Electric and Magnetic Fields
The possibility that exposure to electric and magnetic fields (EMFs)
emanating from electric power lines, household appliances and other electric
devices may result in adverse health effects or damage to the environment has
been a subject of current public attention. Utility Group funds research on
EMF's through various organizations. The scientific research conducted to date
concerning the effects of EMFs has not led to any definitive results; however,
such research is continuing. Lawsuits have arisen in several states against
electric utilities and others alleging that the presence or use of electric
power transmission and distribution lines has an adverse effect on health and/or
property values.
Midstream does not own any electric power lines.
Customers
No customer accounted for 10% or more of the Company's consolidated
revenues in 1999. Additional information regarding the Company's sales and
revenues is set forth in "Results of Operations" in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 18 through
21 of the 1999 Annual Report to Shareholders, which is filed as Exhibit 13 to
this Report and incorporated herein by reference.
Construction and Financing
For information on the Company's construction program, financing and
related matters, see "Financial Condition - Cash Generation and Cash
Requirements" in "Management's Discussion and Analysis of Results of Operations
and Financial Condition" on pages 23 through 25 of the 1999 Annual Report to
Shareholders, which is filed as Exhibit 13 to this Report and incorporated
herein by reference.
Item 2. PROPERTIES
UTILITY GROUP
All of Utility Group's electric generating stations and all other electric
operating properties are located in the State of Louisiana. Utility Group
considers all of its properties to be well maintained, in good operating
condition and suitable for their intended purposes.
Electric Generating Stations
As of December 31, 1999, Utility Group either owned or had an ownership
interest in three steam electric generating stations and a gas turbine with a
combined electric generating capacity
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of 1,359,000 KW. For additional information regarding Utility Group's generating
facilities, see "Operations -- Utility Group -- Power Generation" in Item 1 of
this Report.
Electric Substations
As of December 31, 1999, Utility Group owned 86 transmission substations
and 332 distribution substations.
Electric Lines
As of December 31, 1999, Utility Group's transmission system consisted of
approximately 67 circuit miles of 500 kilovolt (kV) lines; 461 circuit miles of
230 kV lines; 661 circuit miles of 138 kV lines; and 21 circuit miles of 69 kV
lines. Utility Group's distribution system consisted of approximately 2,213
circuit miles of 34.5 kV lines and 12,196 circuit miles of other lines.
General Properties
Utility Group owns various properties, which include a seven-story
headquarters office building, regional offices, a central warehouse, service
centers, telecommunications equipment and other facilities owned for general
purposes.
Title
Utility Group's electric generating plants and certain other principal
properties are owned in fee. Electric transmission and distribution lines are
located either on private rights-of-way or along streets or highways by public
consent.
Substantially all of Utility Group's property, plant and equipment is
subject to a lien securing obligations of Utility Group under an Indenture of
Mortgage, which does not impair the use of such properties in the operation of
its business.
MIDSTREAM
Midstream considers all of its properties to be well maintained, in good
operating condition and suitable for their intended purposes.
Electric Generation
As of December 31, 1999, Midstream owned one steam electric generating
station (Evangeline) with an electric generating capacity of 334,000 KW.
Oil and Gas Related
As of December 31, 1999, Midstream had an ownership interest in 535 miles
of gas gathering and transmission pipeline in Texas and Louisiana as well as oil
and gas producing properties in Texas.
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<PAGE>
Assets Held for Sale
For information concerning Midstream's assets held for sale see the Notes
to Consolidated Financial Statements - Note G - Assets Held for Sale on page 43
of the 1999 Annual Report to Shareholders, which is filed as Exhibit 13 to this
Report and incorporated herein by reference.
Title
Midstream's assets are owned in fee. Midstream's generation station is
subject to a lien securing obligations under an Indenture of Mortgage, which
does not impair the use of such properties in the operation of its business.
Various other properties are also subject to mortgages associated with the debt
used to acquire such properties.
UTILITECH
UtiliTech owns various line construction equipment located mainly within
Louisiana, but such equipment is also utilized in Arkansas, Texas and
Mississippi. UtiliTech considers all of its properties to be well maintained, in
good operating condition and suitable for their intended purposes.
Title
UtiliTech's assets are owned in fee.
Item 3. LEGAL PROCEEDINGS
Utility Group and SWEPCO, each a 50% owner of Dolet Hills Unit 1, jointly
own lignite reserves in the Dolet Hills area of northwestern Louisiana. In 1982,
Utility Group and SWEPCO entered into a Lignite Mining Agreement (LMA) with the
Dolet Hills Mining Venture (DHMV), a partnership for the mining and delivery of
lignite from a portion of these reserves (Dolet Hills Mine). The LMA expires in
2011. The price of lignite delivered pursuant to the LMA is a base price per
ton, subject to escalation based on certain inflation indices, plus specified
"pass-through" costs.
Currently, Utility Group is receiving annually a minimum delivery of
1,750,000 tons under the LMA. Since the late 1980s, additional spot lignite
deliveries have been obtained through competitive bidding from DHMV and another
lignite supplier. In 1999, Utility Group and SWEPCO received deliveries which
approximated 25% of the annual lignite consumption at the Dolet Hills Unit 1
from the other lignite supplier.
On April 15, 1997, Utility Group and SWEPCO filed suit against DHMV and its
partners in the United States District Court for the Western District of
Louisiana (Federal Court Suit) seeking to enforce various obligations of DHMV to
Utility Group and SWEPCO under the LMA, including provisions relating to the
quality of the delivered lignite, pricing, and mine reclamation practices. On
June 15, 1997, DHMV filed an answer denying the allegations in Utility Group's
19
<PAGE>
suit and filed a counterclaim asserting various contract-related claims against
Utility Group and SWEPCO. Utility Group and SWEPCO have denied the allegations
in the counterclaims on the grounds the counterclaims have no merit.
The counterclaims filed by DHMV in the Federal Court Suit resulted in
Utility Group and SWEPCO filing a separate lawsuit against the parent companies
of DHMV, namely Jones Capital Corporation and Philipp Holzmann USA, Inc., on
August 13, 1997, in the First Judicial District Court for Caddo Parish,
Louisiana (State Court Suit). The State Court Suit seeks to enforce a separate
1995 agreement by Jones Capital Corporation and Philipp Holzmann USA, Inc.
related to the LMA. Jones Capital Corporation and Philipp Holzmann USA, Inc.
have asked the state court to stay that proceeding until the Federal Court Suit
is resolved.
On January 8, 1999, Utility Group and SWEPCO filed an amended complaint in
the Federal Court Suit seeking, among other things, a termination of the LMA
after trial based on DHMV's breach of the contract. DHMV has answered the
amended complaint and denied all claims of breach. The parties are in the expert
witness deposition phase of discovery at this time. Under the revised Scheduling
Order, discovery, other than expert witness depositions, ceased on March 14,
2000. Trial is set to begin on May 22, 2000.
On March 1, 2000, the Court in the Federal Court Suit ruled that DHMV was
not in breach of certain financial covenants under the LMA and denied the
Utility Group's and SWEPCO's claim to terminate the LMA on that basis. The
ruling has no material adverse effect on the operations of the Utility Group and
does not affect the other claims scheduled for trial in May. The Utility Group
and SWEPCO plan to appeal the Court's decision.
Utility Group and SWEPCO will continue to aggressively prosecute the claims
against DHMV and defend against the counterclaims which DHMV has asserted.
Utility Group and SWEPCO continue to pay DHMV for lignite delivered pursuant to
the LMA. Normal day-to-day operations continue at the Dolet Hills Mine and Dolet
Hills Unit 1. Although the ultimate outcome of this litigation cannot be
predicted at this time, based on information currently available to Utility
Group, management does not believe that the counterclaims asserted by the DHMV
in the Federal Court Suit will have a significant adverse effect on Utility
Group's financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of 1999.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the executive officers of the Company, their positions held,
five-year employment history, ages and years of service as of December 31, 1999,
are presented below. Executive officers are appointed annually to serve for the
ensuing year or until their successors have been appointed.
<TABLE>
<CAPTION>
Position and Five-Year
Name of Executive Employment History
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Gregory L. Nesbitt....................... Chairman and Chief Executive Officer since Jan. 1999; President and
Chief Executive Officer from April 1993 to Jan. 1999; President and
Chief Operating Officer from April 1992 to April 1993; Executive
Vice President and Chief Operating Officer from July 1991 to April
1992; Executive Vice President from January 1988 to July 1991. (Age
61; 19 years of service)
David M. Eppler.......................... President and Chief Operating Officer since Jan. 1999; Executive
Vice President and Chief Operating Officer from July 1997 to Jan.
1999; Executive Vice President from January 1997 to July 1997; Vice
President-Power Supply and Energy Transmission from July 1995 to
January 1997; Vice President-Finance from October 1993 to July 1995;
Vice President and Treasurer from July 1987 to October 1993. (Age
49; 18 years of service)
Thomas J. Howlin......................... Senior Vice President-Financial Services and Chief Financial Officer
since July 25 1997; Vice President- Finance and Chief Financial
Officer from July 14, 1997 to July 25, 1997. Vice President and
Chief Financial Officer of TransAmerican Natural Gas Corporation
from April 1995 to March 1997; Director of Financial Activity,
Business Development for Detroit Edison Company from January 1994 to
March 1995. (Age 51; 2 years of service)
Catherine C. Powell...................... Senior Vice President-Employee and Corporate Services since July
1997; Vice President-Employee and Corporate Services from July 1995
to July 1997; Vice President-Human Resources from October 1993 to
July 1995; General Manager-Human Resources from August 1993 to
October 1993; Administrator-Compensation from May 1991 to August
1993. (Age 44; 8 years of service)
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
Darrell J. Dubroc........................ Sr. Vice President - Generation Services since Dec. 1999; Vice
President-Generation Services from July 1997 to Dec. 1999; General
Manager-Wholesale Merchant Operations from July 1996 to July 1997;
Manager-Regulatory Affairs and Business Development from March 1995
to July 1996; Manager-Contracts and Business Development from July
1994 to March 1995; Director-Contracts and Business Development from
October 1993 to July 1994. (Age 38; 14 years of service)
Jeffrey W. Hall.......................... Vice President-Retail Energy Services since July 1997; General
Manager-Customer Revenue from July 1996 to July 1997; Manager-Public
Affairs from October 1995 to July 1996; Regional Manager-Customer
Services from October 1993 to October 1995; Manager-Customer
Services, Opelousas from May 1991 to October 1993; Manager-Customer
Services, Mansfield from May 1983 to May 1991. (Age 48; 18 years of
service)
Mark H. Segura........................... Sr. Vice President - Utility Operations since Apr. 1999; Vice
President-Distribution Services from July 1997 to Apr. 1999; General
Manager-Distribution Services from July 1996 to July 1997;
Manager-Stores and Transformer Management from October 1993 to July
1996; Supervisor-Distribution Engineering from June 1991 to October
1993. (Age 41; 15 years of service)
Robert A. Pulaski........................ Controller since April 1998; Manager-Internal Audit from October
1993 to April 1998; Manager-Plant and Area Accounting from December
1985 to October 1993. (Age 42; 15 years of service)
Michael P. Prudhomme..................... Secretary-Treasurer since January 1994; Secretary from October 1993
to January 1994; Vice President- Customer Services from May 1985 to
October 1993. (Age 56; 30 years of service)
Carla D. Boothe.......................... Assistant Corporate Secretary since July 1998; Lead
Accountant-Payroll & Payables from November 1997 to July 1998;
Accountant-Payroll & Payables from November 1996 to November 1997;
Systems Accountant, U.S. Department of Agriculture from December
1992 to November 1996. (Age 35; 3 years of service)
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
Larry R. Wells........................... Vice President - Transmission Services since April 1999; General
Manager - Transmission Services from July 1996 to April 1999;
General Manager - Transmission Engineering and Construction from
October 1993 to July 1996. (Age 57; 33 years of service)
David A. Miller.......................... Vice President - Strategic Services and Chief Information Officer
since April 1999; General Manager - Information Technology Services
from October 1994 to April 1999; Director - Information and
Administrative Services, Birdsall, Inc., West Palm Beach, FL, from
1989 to October 1994. (Age 52, 5 years of service)
Kathleen F. Nolen........................ Assistant Treasurer since April 1999; Manager - Purchasing from
October 1993 to April 1999. (Age 39; 16 years of service)
</TABLE>
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<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is listed for trading on the New York Stock
Exchange (NYSE) and the Pacific Stock Exchange. For information concerning the
high and low sales prices for the Company's common stock as reported on the NYSE
Composite Tape and dividends paid per share during each calendar quarter of 1999
and 1998, see the Notes to Consolidated Financial Statements - Note P -
Miscellaneous Financial Information (Unaudited) on page 52 of the 1999 Annual
Report to Shareholders, which is filed as Exhibit 13 to this Report and
incorporated herein by reference.
Subject to the prior rights of the holders of the respective series of the
Company's preferred stock, such dividends as determined by the board of
directors of the Company may be declared and paid on the common stock from time
to time out of funds legally available therefor. The provisions of the Company's
charter applicable to preferred stock and certain provisions contained in the
debt instruments of the Company under certain circumstances restrict the amount
of retained earnings available for the payment of dividends by the Company. The
most restrictive covenant requires that common shareholders' equity be not less
than 35% of total capitalization, including short-term debt. At December 31,
1999 approximately $111.8 million of retained earnings were not restricted. On
January 28, 2000 the Company's Board of Directors declared a quarterly dividend
of $0.415 per share, which dividend was paid on February 15, 2000 to common
shareholders of record on February 4, 2000.
As of March 1, 2000, there were 9,984 holders of record of the Company's
common stock, and the closing price of the Company's common stock as reported on
the NYSE Composite Tape was $31.1875 per share.
Item 6. SELECTED FINANCIAL DATA
The information set forth in "Selected Financial Data" on page 54 of the
1999 Annual Report to Shareholders is incorporated herein by reference; such
information is filed as Exhibit 13 to this Report. This information should be
read in conjunction with the Consolidated Financial Statements and the related
Notes thereto set forth on pages 31 through 53 of the 1999 Annual Report to
Shareholders, which is filed as Exhibit 13 to this Report and incorporated
herein by reference.
24
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The information set forth in "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on pages 18 through 29 of the
1999 Annual Report to Shareholders is incorporated herein by reference; such
information is filed as Exhibit 13 to this Report.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
For information concerning the quantitative and qualitative disclosures
about market risk see "Financial Risk Management" in "Management's Discussion
and Analysis of Results of Operations and Financial Condition - Financial
Condition" on pages 28 and 29 of the 1999 Annual Report to Shareholders, which
is filed as Exhibit 13 to this Report and incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on pages 31 through 53 of the 1999 Annual Report
to Shareholders is incorporated herein by reference; such information is filed
as Exhibit 13 to this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth (i) under "Proposal Number 1 -- Election of Four
Class III Directors" on pages 5 and 6 of, and (ii) under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" on page 10 of the Company's
definitive Proxy Statement dated March 22, 2000 relating to the Annual Meeting
of Shareholders to be held on April 28, 2000, filed with the SEC pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (2000 Proxy Statement),
is incorporated herein by reference. See also "Executive Officers of the
Registrant" on pages 21 and 23 of this Report.
Item 11. EXECUTIVE COMPENSATION
The information set forth (i) under the subcaption "Organization and
Compensation of the Board of Directors" under the caption "Proposal Number 1 --
Election of Four Class III Directors" on pages 6 and 7 of, and (ii) under the
caption "Executive Compensation" on pages 11 through 21 of the 2000 Proxy
Statement (excluding the information required by paragraphs (k) and (l) of Item
402 of Regulation S-K) is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth (i) under the caption "Security Ownership of
Directors and Management" on pages 8 and 9 of, and (ii) under the caption
"Security Ownership of Certain Beneficial Owners" on page 10 of the 2000 Proxy
Statement is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Proposal Number 1 -- Election
of Four Class III Directors - Interests of the Board of Directors" on pages 7
and 8 of the 2000 Proxy Statement is incorporated herein by reference.
26
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
<TABLE>
<CAPTION>
1999 Annual
Form 10-K Report to
Annual Report Shareholders
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
14(a)(1) Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 31
Consolidated Balance Sheets at December 31, 1999 and 1998 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 34
Consolidated Statements of Changes in Common Shareholders'
Equity for the years ended December 31, 1999, 1998 and
1997 35
Notes to Consolidated Financial Statements 36
Report of Independent Accountants 53
14(a)(2) Financial Statement Schedules
Report of Independent Accountants 32
Schedule II - Valuation and Qualifying Accounts 33
Financial Statement Schedules other than those shown in the
Above index are omitted because they are either not Required
or are not applicable or the required information is shown
in the Consolidated Financial Statements and Notes thereto.
14(a)(3) List of Exhibits
</TABLE>
The Exhibits designated by an asterisk are filed herewith. The Exhibits not
so designated have been previously filed with the SEC and are incorporated
herein by reference. The Exhibits designated by two asterisks are management
contracts and compensatory plans and arrangements required to be filed as
Exhibits to this Report.
27
<PAGE>
<TABLE>
<CAPTION>
SEC File or Registration
Registration Statement Exhibit
Exhibits Number or Report Number
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2(a) Plan of Reorganization and 333-71643-01 S-4(6/30/99) C
Share Exchange Agreement
3(a) Articles of Incorporation of the 333-71643-01 S-4(6/30/99) A
Company, effective July 1, 1999
3(b) Bylaws of the Company, 333-71643-01 S-4(6/30/99) B
effective July 1, 1999
4(a)(1) Indenture of Mortgage dated as of July 1, 1-5663 10-K(1997) 4(a)(1)
1950, between the Company and First
National Bank of New Orleans, as Trustee
4(a)(2) First Supplemental Indenture dated as 1-5663 10-K(1997) 4(a)(2)
of October 1, 1951, to Exhibit 4(a)(1)
4(a)(3) Second Supplemental Indenture dated as 1-5563 10-K(1997) 4(a)(3)
of June 1, 1952, to Exhibit 4(a)(1)
4(a)(4) Third Supplemental Indenture dated as 1-5563 10-K(1997) 4(a)(4)
of January 1, 1954, to Exhibit 4(a)(1)
4(a)(5) Fourth Supplemental Indenture dated as 1-5563 10-K(1997) 4(a)(5)
of November 1, 1954, to Exhibit 4(a)(1)
4(a)(6) Tenth Supplemental Indenture dated as 1-5663 10-K(1986) 4(a)(11)
of September 1, 1965, to Exhibit 4(a)(1)
4(a)(7) Eleventh Supplemental Indenture dated 1-5663 10-K(1998) 4(a)(8)
as of April 1, 1969, to Exhibit 4(a)(1)
4(a)(8) Eighteenth Supplemental Indenture dated as 1-5663 10-K(1993) 4(a)(8)
of December 1, 1982, to Exhibit 4(a)(1)
4(a)(9) Nineteenth Supplemental Indenture dated as 1-5663 10-K(1993) 4(a)(9)
of January 1, 1983, to Exhibit 4(a)(1)
4(a)(10) Twenty-Sixth Supplemental Indenture dated as 1-5663 8-K(3/90) 4(a)(27)
of March 15, 1990, to Exhibit 4(a)(1)
4(b) Indenture between the Company and Bankers 33-24896 S-3(10/11/88) 4(b)
Trust Company, as Trustee, dated as of
October 1, 1988
4(b)(1) Agreement Appointing Successor Trustee dated 333-02895 S-3(4/26/96) 4(a)(2)
as of April 1, 1996 by and among Central
Louisiana Electric Company, Inc., Bankers
Trust Company and The Bank of New York
4(c) $100,000,000 Credit Agreement 1-5663 10-Q(6/95) 4
dated as of June 15, 1995, among Utility
Group, certain Banks parties thereto,
and The Bank of New York, as Agent
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SEC File or Registration
Registration Statement Exhibit
Exhibits Number or Report Number
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4(d) $120,000,000 364-Day Credit 333-71643-01 10-Q(9/99) 4(a)
Agreement dated August 25, 1999 among
the Company, the lenders party thereto, the
First National Bank of Chicago, as
Syndicate Agent, Westdeutsche Landesbank
Girozentrale, as Documentation Agent, Fleet
National Bank, as Managing Agent and the
Bank of New York, as Administrative Agent
4(e) $80,000,000 Three year Credit 333-71643-01 10-Q(9/99) 4(b)
Agreement dated August 25, 1999 among
the Company, the lenders party thereto, the
First National Bank of Chicago, as
Syndicate Agent, Westdeutsche Landesbank
Girozentrale, as Documentation Agent, Fleet
National Bank, as Managing Agent and the
Bank of New York, as Administrative Agent
4(f) Agreement Under Regulation S-K 333-71643-01 10-Q(9/99) 4(c)
Item 601(b)(4)(iii)(A)
*4(m) Trust Indenture dated as of December 10, 1999
Between Cleco Evangeline LLC and Bank
One Trust Company, N.A. as Trustee
Relating to $218,600,000, 8.82% Senior
Secured Bonds due 2019
**10(a) 1990 Long-Term Incentive Compensation Plan 1-5663 1990 Proxy A
Statement (4/90)
**10(b) 1981 Incentive Stock Option Plan 1-5663 10-K(1992) 10(i)
**10(c) Participation Agreement, Annual Incentive
Compensation Plan
**10(d) Deferred Compensation Plan for Directors 1-5663 10-K(1992) 10(n)
**10(e)(1) Supplemental Executive Retirement Plan 1-5663 10-K(1992)
10(o)(1)
**10(e)(2) Form of Supplemental Executive Retirement 1-5663 10-K(1992) 10(o)(2)
Plan Participation Agreement between the
Company and the following officers:
Gregory L. Nesbitt, David M. Eppler,
Catherine C. Powell, Darrell J. Dubroc and
Thomas J. Howlin
**10(f) Form of Executive Severance Agreement between 1-5663 10-K(1995) 10(f)
the Company and the following officers:
Gregory L. Nesbitt, David M. Eppler,
Catherine C. Powell, Darrell J. Dubroc and
Thomas J. Howlin.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SEC File or Registration
Registration Statement Exhibit
Exhibits Number or Report Number
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10(h)(1) Term Loan Agreement dated as of April 2, 1991, 1-5663 10-Q(3/91) 4(b)
among the 401(k) Savings and Investment Plan
ESOP Trust, the Company, as Guarantor, the
Banks listed therein and The Bank of New York,
as Agent
10(h)(2) Assignment and Assumption Agreement, effective 1-5663 10-Q(3/91) 4(c)
as of May 6, 1991, between The Bank of New York
and the Canadian Imperial Bank of Commerce,
relating to Exhibit 10(h)(1)
10(h)(3) Assignment and Assumption Agreement dated as of 1-5663 10-K(1991) 10(y)(3)
July 3, 1991, between The Bank of New York
and Rapides Bank and Trust Company in
Alexandria, relating to Exhibit 10(h)(1)
10(h)(4) Assignment and Assumption Agreement dated as of 1-5663 10-K(1992) 10(bb)(4)
July 6, 1992, among The Bank of New York,
CIBC, Inc. and Rapides Bank and Trust Company
in Alexandria, as Assignors, the 401(k) Savings and Investment
Plan ESOP Trust, as Borrower, and the Company, as Guarantor,
relating to Exhibit 10(h)(1)
10(i) Reimbursement Agreement (The Industrial 1-5663 10-K(1997) 10(i)
Development Board of the Parish of Rapides,
Inc. (Louisiana) Adjustable Tender Pollution
Control Revenue Refunding Bonds, Series
1991) dated as of October 15, 1997, among the
Company, various financial institutions, and
Westdeutsche Landesbank Gironzentiale,
New York Branch, as Agent
10(l) Selling Agency Agreement between the Company 333-02895 S-3(12/10/96) 1
and Salomon Brothers Inc, Merrill Lynch & Co.,
Smith Barney Inc. and First Chicago Capital Markets, Inc.
dated as of December 12, 1996
10(m) 401(k) Savings and Investment Plan ESOP 1-5663 10-K(1997) 10(m)
Trust Agreement dated as of August 1, 1997,
between UMB Bank, N.A. and the Company
10(m)(1) First Amendment to 401(k) Savings and Investment 1-5663 10-K(1997) 10(m)(1)
Plan ESOP Trust Agreement dated as of
October 1, 1997, between UMB Bank, N.A. and
the Company
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SEC File or Registration
Registration Statement Exhibit
Exhibits Number or Report Number
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10(n) Form of Notice and Acceptance of Grant 333-71643-01 10-Q(9/99) 10(a)
of Nonqualified Stock Options, with
fixed option price.
10(o) Form of Notice and Acceptance of Grant 333-71643-01 10-Q(9/99) 10(b)
of Nonqualified Stock Options, with
variable option prices.
10(p) Form of Notice and Acceptance of Grant 333-71643-01 10-Q(9/99) 10(c)
of Nonqualified Stock Options, awarded to
Gregory L. Nesbitt.
* 11 Computation of Net Income Per Common Share
* 12 Computation of Earnings to Fixed Charges and Earnings
to Combined Fixed Charges and Preferred Stock Dividends
* 13 Management's Discussion and Analysis of Financial
Condition and Results of Operations, Consolidated
Financial Statements and Notes and Report of
Independent Accountants
* 21 Subsidiaries of the Registrant
* 23 Consent of Independent Accountants
* 24 Power of Attorney from each Director of the Company whose
signature is affixed to this Form 10-K for the year ended December
31, 1999
* 27 Financial Data Schedule UT
14(b) Reports on Form 8-K
</TABLE>
During the three-month period ended December 31, 1999, the Company filed no
Current Reports on Form 8-K.
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Cleco Corporation
Our audits of the consolidated financial statements referred to in our reports
dated January 31, 2000 appearing in the 1999 Annual Report to Shareholders of
Cleco Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respect, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
New Orleans, Louisiana
January 31, 2000
32
<PAGE>
CLECO CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions Uncollectible
Balance at Charged to Accounts Balance at
Beginning Costs and Write-offs, End
Allowance for Uncollectible Accounts of Period Expenses Less Recoveries of Period (1)
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1999 $812 $751 $725 $838
Year Ended December 31, 1998 $684 $1,069 $942 $812
Year Ended December 31, 1997 $681 $770 $767 $684
</TABLE>
(1) Deducted in the balance sheet.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CLECO CORPORATION
(Registrant)
/s/ Gregory L. Nesbitt
------------------------------
(Gregory L. Nesbitt, Chairman
and Chief Executive Officer)
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Gregory L. Nesbitt Chairman, Chief Executive Officer and Director March 30, 2000
- ------------------------ (Principal Executive Officer)
(Gregory L. Nesbitt)
/s/ David M. Eppler President, Chief Operating Officer and Director March 30, 2000
- ------------------------
(David M. Eppler)
/s/ Thomas J. Howlin Senior Vice President, Finance and Chief March 30, 2000
- ------------------------ Financial Officer (Principal Accounting Officer)
(Thomas J. Howlin)
</TABLE>
DIRECTORS*
----------------------
SHERIAN G. CADORIA
RICHARD B. CROWELL
J. PATRICK GARRETT
F. BEN JAMES, JR.
ELTON R. KING
A. DELOACH MARTIN, JR.
ROBERT T. RATCLIFF
EDWARD M. SIMMONS
WILLIAM H. WALKER, JR.
/s/ Thomas J. Howlin
- ----------------------------------
*By: THOMAS J. HOWLIN
(Thomas J. Howlin, as Attorney-in-Fact) March 30, 2000
Execution Copy
CLECO EVANGELINE LLC
to
BANK ONE TRUST COMPANY, N.A.
as Trustee
-----------------------------
TRUST INDENTURE
Dated as of December 10, 1999
-----------------------------
$218,600,000 8.82% Senior Secured Bonds due 2019
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS; INDENTURE TO CONSTITUTE CONTRACT........................................1
SECTION 1.1 Definition; Construction.....................................................1
SECTION 1.2 Equal and Ratable Benefit....................................................2
SECTION 1.3 Compliance Certificates and Opinions.........................................2
SECTION 1.4 Form of Documents Delivered to Trustee.......................................3
ARTICLE II THE BONDS...........................................................................4
SECTION 2.1 Authorization, Amount, Terms, and Issuance of Bonds..........................4
SECTION 2.2 Authorization and Terms of the Bonds; Payments on the Bonds..................4
SECTION 2.3 Additional Bonds.............................................................5
SECTION 2.4 Registered Holders Deemed Holders............................................7
SECTION 2.5 Register; Registration of Bonds; Transfer and Exchange.......................8
SECTION 2.6 Execution....................................................................8
SECTION 2.7 Authentication...............................................................9
SECTION 2.8 Mutilated, Destroyed, Lost or Stolen Bonds...................................9
SECTION 2.9 Cancellation and Destruction of Surrendered Bonds...........................10
ARTICLE III REDEMPTION OF BONDS...............................................................10
SECTION 3.1 Optional Redemption.........................................................10
SECTION 3.2 Election or Requirement to Redeem; Notice to Trustee........................10
SECTION 3.3 Mandatory Redemption; Selection of Bonds to Be Redeemed.....................11
SECTION 3.4 Notice of Redemption........................................................14
SECTION 3.5 Bonds Payable on Redemption Date............................................15
SECTION 3.6 Bonds Redeemed in Part......................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES.....................................................15
SECTION 4.1 Organization, Power and Status of the Company...............................15
SECTION 4.2 Authorization; Enforceability; Execution and Delivery.......................15
SECTION 4.3 No Conflicts; Laws and Contracts; No Default; Representations and
Warranties..................................................................16
SECTION 4.4 Governmental Approvals......................................................16
SECTION 4.5 Litigation..................................................................17
SECTION 4.6 Utility Regulation..........................................................17
SECTION 4.7 Environmental Matters.......................................................17
SECTION 4.8 Employee Benefit Plans......................................................17
SECTION 4.9 Business of the Company.....................................................17
SECTION 4.10 Investment Company Act......................................................18
SECTION 4.11 Zoning......................................................................18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE V COVENANTS...........................................................................18
SECTION 5.1 Payment of Principal of and Interest on Bonds...............................18
SECTION 5.2 Reporting Requirements......................................................18
SECTION 5.3 Limited Liability Company Existence.........................................20
SECTION 5.4 Compliance with Laws........................................................20
SECTION 5.5 Governmental Approvals; EWG Status..........................................20
SECTION 5.6 Insurance...................................................................20
SECTION 5.7 Payment of Taxes and Claims.................................................20
SECTION 5.8 Books and Records...........................................................21
SECTION 5.9 Right of Inspection.........................................................21
SECTION 5.10 Maintenance of Property and Security........................................21
SECTION 5.11 Performance of Transaction Documents; Construction of the Project...........22
SECTION 5.12 Rule 144A Information.......................................................22
SECTION 5.13 Project Revenues............................................................22
SECTION 5.14 Independent Engineer........................................................22
SECTION 5.15 Annual Operating Budget.....................................................22
SECTION 5.16 Use of Proceeds.............................................................23
SECTION 5.17 Independent Auditor.........................................................23
SECTION 5.18 Debt 23
SECTION 5.19 Permitted Liens.............................................................25
SECTION 5.20 Business Activities.........................................................26
SECTION 5.21 Fundamental Changes, etc....................................................26
SECTION 5.22 Affiliate Transactions......................................................26
SECTION 5.23 Restricted Payments.........................................................26
SECTION 5.24 Investments.................................................................26
SECTION 5.25 Investment Company Act......................................................27
SECTION 5.26 Formation Documents.........................................................27
SECTION 5.27 Guaranty Obligations........................................................27
SECTION 5.28 Amendments to Project Documents.............................................27
SECTION 5.29 Additional Project Documents................................................28
SECTION 5.30 Change Orders...............................................................28
SECTION 5.31 Alterations and Additions...................................................28
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES.....................................................29
SECTION 6.1 Events of Default Defined...................................................29
SECTION 6.2 Enforcement of Remedies.....................................................32
SECTION 6.3 Judicial Proceedings Instituted by Trustee..................................33
SECTION 6.4 Holders May Demand Enforcement of Rights by Trustee.........................35
SECTION 6.5 Control by Holders..........................................................35
SECTION 6.6 Waiver of Past Defaults or Events of Default................................35
SECTION 6.7 Holder May Not Bring Suit Except Under Certain Conditions...................36
SECTION 6.8 Undertaking to Pay Court Costs..............................................36
SECTION 6.9 Right of Holders to Receive Payment Not to Be Impaired......................37
SECTION 6.10 Application of Moneys Collected by Trustee..................................37
SECTION 6.11 Bonds Held by Certain Persons Not to Share in Distribution..................38
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 6.12 Waiver of Appraisement, Valuation, Stay, Right to Marshalling...............38
SECTION 6.13 Remedies Cumulative; Delay or Omission Not a Waiver.........................39
SECTION 6.14 The Intercreditor Agreement.................................................39
SECTION 6.15 The Depositary Agreement....................................................39
ARTICLE VII ACTS OF HOLDERS...................................................................40
SECTION 7.1 Acts of Holders.............................................................40
SECTION 7.2 Proof of Execution of Instruments and of Holding of Bonds...................40
SECTION 7.3 Bonds Owned by the Company or Affiliate Deemed Not Outstanding..............40
SECTION 7.4 Right of Revocation of Action Taken.........................................41
ARTICLE VIII AMENDMENTS AND SUPPLEMENTS.......................................................41
SECTION 8.1 Amendments and Supplements to Indenture without Consent of Holders..........41
SECTION 8.2 Amendments and Supplements to Indenture with Consent of Holders.............42
SECTION 8.3 Trustee Authorized to Join in Amendments and Supplements; Reliance on
Counse......................................................................42
SECTION 8.4 Effect of Supplemental Indentures...........................................43
SECTION 8.5 Reference in Bonds to Supplemental Indentures...............................43
ARTICLE IX SATISFACTION AND DISCHARGE.........................................................43
SECTION 9.1 Satisfaction and Discharge of Indenture.....................................43
ARTICLE X THE TRUSTEE.........................................................................44
SECTION 10.1 Certain Duties and Responsibilities of Trustee..............................44
SECTION 10.2 Notice of Defaults..........................................................45
SECTION 10.3 Certain Rights of Trustee...................................................45
SECTION 10.4 Not Responsible for Recitals or Issuance of Bonds...........................46
SECTION 10.5 May Hold Bonds..............................................................46
SECTION 10.6 Money Held in Trust.........................................................47
SECTION 10.7 Compensation; Reimbursement; Indemnification................................47
SECTION 10.8 Eligibility.................................................................47
SECTION 10.9 Resignation and Removal; Appointment of Successor...........................47
SECTION 10.10 Acceptance of Appointment by Successor......................................48
SECTION 10.11 Merger, Conversion, Consolidation or Succession to Business.................49
SECTION 10.12 Maintenance of Offices and Agencies.........................................49
ARTICLE XI MISCELLANEOUS PROVISIONS...........................................................51
SECTION 11.1 Return of Monies Held by Trustee.........................................51
SECTION 11.2 Third Party Beneficiaries; No Rights Conferred on Others.................52
SECTION 11.3 Illegal Provisions Disregarded...........................................52
SECTION 11.4 Substitute Notice........................................................52
SECTION 11.5 Notice to the Rating Agency..............................................52
SECTION 11.6 Notices..................................................................52
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 11.7 Successors and Assigns...................................................53
SECTION 11.8 Headings for Convenience Only............................................54
SECTION 11.9 Counterparts.............................................................54
SECTION 11.10 APPLICABLE LAW...........................................................54
SECTION 11.11 Holidays.................................................................55
SECTION 11.12 Limitation of Liability..................................................55
SECTION 11.13 Trustee Actions as Secured Party Under Intercreditor Agreement...........55
</TABLE>
SCHEDULE I - Principal Amortization
SCHEDULE II - Major Maintenance Reserve Required Balance
EXHIBIT A - Definitions
EXHIBIT B - Form of Initial Bond
EXHIBIT C - Subordination Provisions
EXHIBIT D - Insurance Requirements
iv
<PAGE>
TRUST INDENTURE
THIS TRUST INDENTURE, dated as of December 10, 1999 (this
"Indenture"), by and between CLECO EVANGELINE LLC, a limited liability company
organized under the laws of the State of Louisiana (the "Company"), and BANK ONE
TRUST COMPANY, N.A., a national banking association (together with its
successors in such capacity, the "Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company has been formed for the purposes of
acquiring, improving and operating the Project (these and other capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
them in Exhibit A); and
WHEREAS, in furtherance of such purposes, the Company has
determined to issue its 8.82% Senior Secured Bonds due 2019 in the aggregate
principal amount of $218,600,000 (collectively, with any bonds from time to time
issued hereunder in substitution therefor, the "Initial Bonds"); and
WHEREAS, pursuant to this Indenture, the proceeds of the
Initial Bonds will be used by the Company to pay the costs associated with the
development, construction and start-up of the Project, including, without
limitation, interest during construction and pre-Completion O&M Costs; and
WHEREAS, the execution and delivery of the Initial Bonds and
of this Indenture have been duly authorized and all things necessary to make the
Initial Bonds, when executed by the Company and authenticated by the Trustee,
valid and binding legal obligations of the Company and to make this Indenture a
valid and binding legal obligation of the Company and to make this Indenture a
valid and binding agreement have been done.
NOW, THEREFORE, for and in consideration of the premises and
of the covenants herein contained and of the purchase of the Initial Bonds by
the Holders thereof, it is mutually covenanted and agreed, for the benefit of
the parties hereto and the equal and proportionate benefit of all Holders of the
Initial Bonds and any Additional Bonds hereafter issued hereunder, as follows:
ARTICLE I
DEFINITIONS; INDENTURE TO CONSTITUTE CONTRACT
SECTION 1.1 Definition; Construction. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(a) capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in Exhibit A, which Exhibit A is hereby
incorporated by reference herein, and shall include the plural as well as the
singular;
<PAGE>
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(c) all references in this Indenture to designated "Articles,"
"Sections," "Exhibits" and other subdivisions are to the designated Articles,
Sections, Exhibits and other subdivisions of this Indenture;
(d) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) unless otherwise expressly specified, any agreement,
contract or document defined or referred to herein shall mean such agreement,
contract or document as in effect as of the date hereof, as the same may
thereafter be amended, restated, supplemented or otherwise modified from time to
time in accordance with the terms thereof and of this Indenture and the other
Financing Documents and including any agreement, contract or document in
substitution or replacement of any of the foregoing in accordance with the terms
of this Indenture and the other Financing Documents;
(f) unless the context clearly intends to the contrary,
pronouns having a masculine or feminine gender shall be deemed to include the
other; and
(g) any reference to any Person shall include its successors
and assigns, and in the case of any Governmental Authority, any Person
succeeding to its functions and capacities.
SECTION 1.2 Equal and Ratable Benefit. The provisions,
covenants and each of the agreements herein set forth to be performed by or on
behalf of the Company shall be for the equal benefit, protection and security of
the Holders of any and all of the Bonds. All of the Bonds, regardless of the
time or times of their issuance or maturity, shall be of equal rank without
preference, priority or distinction of any of the Bonds over any other thereof
except as expressly provided in or pursuant to this Indenture.
SECTION 1.3 Compliance Certificates and Opinions. Except as
otherwise expressly provided by this Indenture, upon any application or request
by the Company to the Trustee that the Trustee take any action under any
provision of this Indenture, the Company shall furnish to the Trustee (i) an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and (ii) an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with, except that in the
case of any particular application or request as to which the furnishing of
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion
need be furnished unless otherwise required hereby.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition;
2
<PAGE>
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
such examination or investigation has been made as is necessary to enable such
individual to express an informed opinion as to whether or not such covenant or
condition has been complied with;
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with;
(e) in the case of an Officer's Certificate of the Company, a
statement that no Default or Event of Default under this Indenture has occurred
and is continuing (unless such Officer's Certificate relates to a Default or
Event of Default); and
(f) a statement that, in the opinion of each such individual,
such opinion or certificate complies with the provisions of this Section 1.3 and
that the Trustee may rely on such certificate.
SECTION 1.4 Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel (which shall be additionally addressed to the
Trustee and the Holders of the Bonds), unless such officer knows or has reason
to believe that the certificate or opinion or representations with respect to
the matters upon which such Officer's Certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate of or representations by an
Authorized Representative of the Company stating that the information with
respect to such factual matters is in the possession of the Company, unless such
counsel knows that the certificate or representations with respect to such
matters are erroneous.
Any Opinion of Counsel stated to be based on the opinion of
other counsel shall be accompanied by a copy of such other opinion (which shall
be additionally addressed to the Trustee and the Holders of the Bonds).
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
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ARTICLE II
THE BONDS
SECTION 2.1 Authorization, Amount, Terms, and Issuance of
Bonds(a) . (a) Bonds may be issued hereunder from time to time. No Bonds may be
issued under this Indenture except in accordance with this Article II. The
maximum principal amount of Bonds which may be issued hereunder is not limited.
The Bonds shall be designated "Cleco Evangeline LLC Senior Secured Bonds" or a
substantially similar designation. The Bonds may bear such notations,
endorsements or legends as may be required to conform to usage or Law and as
incorporated or used or directed to be incorporated or used by the Company. The
Initial Bonds shall be in the form of Initial Bond set forth in Exhibit B.
(b) "Private Placement" numbers issued by S&P's CUSIP Service
Bureau may be printed on the Bonds. Neither the Company nor the Trustee shall
have any responsibility for any defect in the Private Placement number that
appears on any Bond, check, advice of payment or redemption notice, and any such
document may contain a statement to the effect that Private Placement numbers
have been assigned by an independent service for convenience of reference and
that neither the Company nor the Trustee shall be liable for any inaccuracy in
such numbers.
SECTION 2.2 Authorization and Terms of the Bonds; Payments on
the Bonds(a) . (a) The Initial Bonds to be issued under this Indenture are
hereby created. The Company may issue the Initial Bonds, in the form of Exhibit
B, upon the execution of this Indenture, and the Trustee shall, at the Company's
written request, authenticate the Initial Bonds and deliver them as specified in
the request.
(b) The Initial Bonds shall be dated as of the Closing Date,
shall be issued in the aggregate principal amount of $218,600,000 and shall have
a final maturity date of September 1, 2019 and bear interest at the rate of
8.82% per annum. Initial Bonds subsequently issued pursuant to Section 2.5(b)
hereof shall be dated as of the date of authentication thereof.
(c) The principal of, premium (if any) and interest on, each
Initial Bond shall be payable in any coin or currency of the United States of
America which, at the respective dates of payment thereof, is legal tender for
the payment of public and private debts. Subject to Section 2.2(f), payment of
principal of, premium (if any) and interest on the Initial Bonds shall be made
on the Scheduled Payment Date to the registered owner thereof at the Corporate
Trust Office against presentation of the Initial Bonds for notation of the
payment or prepayment made thereon or, in the case of a payment or prepayment
which will discharge all Debt of the Company evidenced thereby, against
surrender thereof.
(d) Interest on the Initial Bonds shall be paid semiannually
in arrears on each Scheduled Payment Date commencing March 1, 2000 and
concluding on the Final Maturity Date. Interest on the Initial Bonds shall be
computed upon the basis of a 360-day year, consisting of twelve (12) thirty
(30)-day months. The Initial Bonds shall bear interest on any overdue principal
and, to the extent enforceable under applicable law, on any overdue interest and
premium (if any) at the Default Rate.
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(e) On each Scheduled Payment Date, commencing March 1, 2001,
principal on the Initial Bonds shall be paid in the respective principal amounts
set forth in Schedule I annexed to each Initial Bond, which amounts shall be in
the same proportion, respectively, to the amounts set forth in Schedule I hereto
as the original principal amount of such Initial Bond bears to $218,600,000,
provided that the final such payment shall in any event be sufficient to pay in
full the accrued interest on, premium, if any, and unpaid principal amount of
such Initial Bond.
(f) Notwithstanding any provision of this Indenture or the
Initial Bonds to the contrary, payments of all amounts which become due and
payable in respect of any Initial Bond shall be payable in U. S. Dollars and
shall be made by the Trustee directly to the Holder of such Initial Bond,
without surrender or presentation of such Initial Bond to the Trustee, if there
shall be filed with the Trustee a copy of an agreement between the Company and
such Holder (or the Person for whom such Holder is a nominee) providing that (1)
such payments will be so made and (2) such Holder will not sell, transfer or
otherwise dispose of such Initial Bond unless, if applicable, the date to which
payments thereon have been paid shall be noted thereon or otherwise provided to
the transferee thereof. The Trustee hereby acknowledges receipt of a copy of the
Bond Purchase Agreement in satisfaction of the foregoing provisions of this
Section in respect of the Initial Purchasers party thereto. The Trustee shall
have no responsibility regarding notations of payment by any Holder who has
entered into such an agreement and the Trustee shall be responsible only for
maintaining its records in accordance with this Indenture and absent manifest
error the records of the Trustee shall be controlling as to payments and
repayments in respect of the Initial Bonds.
(g) The Trustee is authorized to set up such funds and
accounts from time to time as may be necessary to receive and disburse funds as
provided under this Indenture.
SECTION 2.3 Additional Bonds(a) . (a) Additional Bonds may,
upon the satisfaction of the conditions set forth in this Section, be issued in
the amounts and for the purposes permitted herein. All Additional Bonds shall
rank pari passu with the Initial Bonds, shall be secured by the Collateral and
shall bear such date or dates, bear such interest rate or rates, have such
maturity dates, redemption dates and redemption premiums, be in such form, and
be issued at such prices as shall be approved in writing by the Company.
(b) Upon (i) the satisfaction of the applicable conditions set
forth in paragraph (c) of this Section 2.3, (ii) the execution and delivery of
(x) an appropriate Supplemental Indenture in compliance with paragraph (c) of
this Section 2.3, and (y) appropriate supplements to the Financing Documents (if
any), and (iii) receipt by the Securities Intermediary of an Officer's
Certificate confirming that the sum of cash and Permitted Investments in, plus,
if applicable, the available amount of any Acceptable Credit Support provided
for, the Debt Service Reserve Account shall, after giving effect to the issuance
of such Additional Bonds, be equal to the Debt Service Reserve Required Balance,
the Company shall execute Additional Bonds and deliver them to the Trustee, and
the Trustee upon the written request of the Company shall authenticate such
Additional Bonds and deliver them to the purchasers thereof as may be directed
by the Company; provided, however, that notwithstanding anything to the contrary
contained herein, no Additional Bonds may be issued hereunder (A) without the
prior written consent of the Company, and (B) at any time when a Default or
Event of Default shall have occurred and be continuing or if such issuance
would, upon notice or the passage of time, cause a
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Default or Event of Default. Upon the issuance of any Additional Bonds, the
Company shall promptly provide the Trustee with a revised Schedule I to this
Indenture that will provide for the payment of principal of and interest on such
Additional Bonds.
(c) Additional Bonds may be issued by the Company, provided
that the following conditions are satisfied: --------
(i) such Additional Bonds shall constitute Permitted
Debt under clause (a) of the definition thereof as certified
at the time of authentication of such Additional Bonds to the
Trustee by an Authorized Officer of the Company (on which the
Trustee may conclusively rely);
(ii) no Default or Event of Default shall exist at
time of such issuance of the Additional Bonds, before and
after giving effect to such issuance, and an Authorized
Officer of the Company so certifies to the Trustee;
(iii) all of the net proceeds of such Additional Bonds
shall be used by the Company to fund or refinance capital
improvements described in subclause (A), (B), (C) or (D) of
clause (a) of Section 5.18, in each case as certified at the
time of authentication of such Additional Bonds to the Trustee
by an Authorized Officer of the Company;
(iv) the Trustee shall have received an Opinion of
Counsel reasonably satisfactory to the Trustee as to such
matters as the Trustee may request (on which the Trustee may
conclusively rely);
(v) there shall have been delivered to the Trustee the
certifications and other information, if any, required by this
Section 2.3(c) (on which the Trustee may conclusively rely);
and
(vi) there shall be established in one or more
Supplemental Indentures, prior to the issuance of Additional
Bonds of any series:
(A) the title of the Additional Bonds of such series
(which shall distinguish the Additional Bonds of such series
from all other Bonds) and the form or forms of Additional
Bonds of such series;
(B) any limit upon the aggregate principal amount of the
Additional Bonds of such series that may be authenticated and
delivered under this Indenture and the Supplemental Indenture
(except for Additional Bonds authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu
of, other Additional Bonds of such series and except for Bonds
that are deemed never to have been authenticated and delivered
hereunder or under the Supplemental Indenture);
(C) the date or dates on which the principal of the
Additional Bonds of such series is payable, the amounts of
principal payable on such date or dates; and the date or dates
on or as of which the Additional Bonds of such series shall be
dated;
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(D) the rate or rates at which the Additional Bonds of
such series shall bear interest, or the method by which such
rate or rates shall be determined, the date or dates from
which such interest shall accrue, the interest payment dates
on which such interest shall be payable, and the basis of
computation of interest;
(E) the place or places where (x) the principal of,
premium, if any, and interest on Additional Bonds of such
series shall be payable, (y) Additional Bonds of such series
may be surrendered for registration of transfer or exchange
and (z) notices and demands to or upon the Company in respect
of the Additional Bonds of such series and this Indenture or
the Supplemental Indenture may be served;
(F) the price or prices at which, the period or periods
within which and the terms and conditions upon which
Additional Bonds of such series may be redeemed, in whole or
in part, at the option of the Company;
(G) the obligation, if any, of the Company to redeem,
purchase or repay Additional Bonds of such series pursuant to
any sinking fund or analogous provision or at the option of a
Holder thereof and the price or prices at which, the period or
periods within which and the terms and conditions upon which
Additional Bonds of such series shall be redeemed, purchased
or repaid, in whole or in part, pursuant to such obligations;
(H) the denominations in which Additional Bonds of such
series shall be issuable;
(I) the restrictions or limitations, if any, on the
transfer or exchange of the Additional Bonds of such series;
(J) any other terms of such series (which terms shall not
contravene the provisions of this Indenture); and
(K) any trustees, authenticating or paying agents, warrant
agents, transfer agents or registrars with respect to the
Additional Bonds of such series.
SECTION 2.4 Registered Holders Deemed Holders. The Company and
the Trustee may deem and treat the Person in whose name any Bond shall be
registered as provided in Section 2.5 as the absolute owner and holder of such
Bond for the purpose of receiving payment of all amounts payable with respect to
such Bond and for all other purposes, and the Company and the Trustee shall not
be affected by any notice to the contrary.
SECTION 2.5 Register; Registration of Bonds; Transfer and
Exchange(a) . (a) The Company shall cause to be kept a register (herein
sometimes referred to as the "Bonds Register") in which the registration of
Bonds of each series and the registration of transfers and exchanges of
registered Bonds shall be entered. The Bonds Register shall be kept at the
Corporate Trust Office of the Trustee, and the Trustee is hereby appointed
"Registrar" for the
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purpose of registering Bonds and transfers and exchanges of Bonds as herein
provided. Upon surrender for transfer of any Bonds at the Corporate Trust Office
of the Trustee, the Company shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Bonds of the same series and in a like aggregate principal amount. At
the option of the Holder thereof, Bonds may be exchanged for other Bonds of the
same series and in a like aggregate principal amount upon surrender of the Bonds
to be exchanged at the Corporate Trust Office. Every Bond presented or
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company, the Trustee and the Registrar or any transfer agent, duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing.
Whenever any Bonds are so surrendered for exchange the Company shall execute,
and the Trustee shall authenticate and deliver, the Bonds which the Holder
making the exchange is entitled to receive. All Bonds issued upon any transfer
or exchange of any Bonds shall be the same valid obligation, and entitled to the
same security and benefits under this Indenture, as the Bonds surrendered upon
such transfer or exchange. The Trustee shall make a notation on each new Bond of
the amount of all payments of principal previously made on the old Bond or Bonds
with respect to which such new Bond is issued and the date to which interest on
such old Bond or Bonds has been paid.
(b) All Bonds delivered in transfer or exchange shall be dated
pursuant to Section 2.2(b) hereof so that neither gain nor loss in interest
shall result from the transfer or exchange. No service charge shall be made for
any exchange or transfer, but the Company or the Trustee, as the case may be,
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto.
(c) Each Bond (and all Bonds issued in exchange therefor or
substitution thereof), shall bear the legend in substantially the form set forth
in the form of Initial Bond attached hereto as Exhibit B.
(d) New Bonds delivered upon any transfer or exchange shall be
valid obligations of the Company, evidencing the same debt as the Bonds
surrendered, shall be secured by this Indenture and shall be entitled to all of
the security and benefits of the Indenture to the same extent as the Bonds
surrendered.
SECTION 2.6 Execution(a) . (a) The Bonds shall be executed by
the manual or facsimile signature of the Chairman of the Board, the Chief
Executive Officer, the President or any Senior Vice President or Vice President
of the Company.
(b) Bonds executed as provided in clause (a) above shall be
issued and shall be authenticated by the Trustee upon the written direction of
the Company (upon which the Trustee may exclusively rely), notwithstanding that
any officer signing such Bonds or whose facsimile signature appears thereon
shall have ceased to hold office at the time of issuance or authentication or
shall not have held office at the date of the Bond.
SECTION 2.7 Authentication. No Bond shall be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose until a
certificate of authentication in the form set forth on Exhibit B shall have been
duly executed by the Trustee. Such authentication
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shall be conclusive proof that such Bond has been duly authenticated and
delivered under this Indenture and that the Holder thereof is entitled to the
benefit of the trust hereby created. The Trustee shall, at the written request
of the Company, authenticate the Bonds at the initial issuance thereof and
deliver them to the purchasers thereof upon payment to the Trustee of the
purchase price therefor.
ANY BONDS SUBSEQUENTLY ISSUED UNDER THIS INDENTURE MAY BE
AUTHENTICATED BY THE TRUSTEE OR ANY AUTHENTICATING AGENT APPOINTED BY THE
TRUSTEE, AND SUCH AUTHENTICATION SHALL, FOR ALL PURPOSES OF THIS INDENTURE, BE
DEEMED TO BE THE AUTHENTICATION OF AND DELIVERY BY THE TRUSTEE.
SECTION 2.8 Mutilated, Destroyed, Lost or Stolen Bonds(a) .
(a) If any Bond shall become mutilated, destroyed, lost or stolen, the Company
shall, subject to the satisfaction of applicable conditions contained in this
Section 2.8(a), upon the written request of the registered Holder of a Bond,
execute, and the Trustee shall authenticate and deliver, in replacement thereof
a new Bond of the same series and of like tenor, payable in like principal
amount and dated the same date as the Bond so mutilated, destroyed, lost or
stolen. If the Bond being replaced has been mutilated, it shall be surrendered
at the Corporate Trust Office. If the Bond being replaced has been destroyed,
lost or stolen, the Holder of such Bond shall furnish to the Company and the
Trustee such reasonable security or indemnity as may be required by them to save
the Company and the Trustee harmless, together with evidence satisfactory to the
Company and the Trustee and their respective agents of the destruction, loss or
theft of such Bond and the ownership and authentication thereof; provided,
however, that if the Holder of such Bond is an Initial Purchaser or an
institutional investor with a net worth of not less than $100,000,000, the
written undertaking of such Holder delivered to the Company and the Trustee
shall be sufficient security and indemnity and the written statement of such
Holder to such effect shall be satisfactory evidence of the destruction, loss or
theft of such Bond and the ownership thereof. The cost of providing any
substitute Bond under the provisions of this Section shall be borne by the
Holder for whose benefit such substitute Bond is provided. If, after the
delivery of such new Bond, a bona fide purchaser of the original Bond in lieu of
which such new Bond was issued presents for payment such original Bond, the
Company, the Registrar and the Trustee shall be entitled to recover such new
Bond for the Person to whom it was delivered or any Person taking therefrom,
except a bona fide purchaser, and in any case shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expense incurred by the Company, the Registrar or the Trustee in
connection therewith.
(b) Every substitute Bond issued pursuant to this Section 2.8
shall constitute an additional contractual obligation of the Company, whether or
not the Bond alleged to have been destroyed, lost or stolen shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Bonds duly issued
hereunder.
(c) All Bonds shall be held and owned upon the express
condition that the foregoing provisions are, to the extent permitted by Law,
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Bonds, and shall preclude any and all other rights or remedies.
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SECTION 2.9 Cancellation and Destruction of Surrendered Bonds.
Bonds surrendered for payment, or exchanged and surrendered to the Trustee for
cancellation by the Company, shall be cancelled and destroyed by the Trustee.
ARTICLE III
REDEMPTION OF BONDS
SECTION 3.1 Optional Redemption. At any time the Bonds or any
series of the Bonds may be redeemed at the election of the Company, as a whole
or, after Completion, in part, at any time on any Business Day, at the option of
the Company, at par plus in the case of the Initial Bonds accrued interest to
but excluding the date of redemption plus a Make-Whole Premium specified in the
form of Initial Bond attached hereto as Exhibit B. Any redemption of less than
all of the Bonds pursuant to this Section 3.1 shall be pro rata among all of the
series of Bonds Outstanding at such time, and any redemption of less than all of
the Bonds of any series pursuant to this Section 3.1 shall be pro rata among all
of the Bonds of such series Outstanding at such time.
SECTION 3.2 Election or Requirement to Redeem; Notice to
Trustee. If the Company elects or is required to redeem any Bonds pursuant to
this Indenture or otherwise, it shall, except to the extent that the Trustee is
required to select the Redemption Date pursuant to Section 3.3(a), at least
thirty (30) days prior to the date upon which notice of redemption is required
to be given to the Holders pursuant to Section 3.4 hereof (unless a shorter
notice period shall be satisfactory to the Trustee, provided that the Trustee
shall be under no obligation to agree to a shorter period), deliver to the
Trustee and the Securities Intermediary an Officer's Certificate, specifying the
date on which such redemption shall occur (the "Redemption Date") as determined
in accordance with this Article III and the series and the principal amount of
Bonds to be redeemed. Upon receipt of any such Officer's Certificate, the
Trustee shall establish a non-interest bearing special purpose trust fund (the
"Redemption Fund") into which shall be deposited by the Company, the Securities
Intermediary, the Collateral Agent or any other Person, as the case may be, not
later than one (1) Business Day prior to the Redemption Date, immediately
available funds to be held by the Trustee and applied to the redemption of such
Bonds on the Redemption Date. The Redemption Fund shall at all times be in the
exclusive possession of, and under the exclusive dominion and control of, the
Trustee.
SECTION 3.3 Mandatory Redemption; Selection of Bonds to Be
Redeemed(a) . (a) All or a portion of the Bonds shall be redeemed, prior to
maturity, at a Redemption Price equal to par plus accrued interest to and
including the date of redemption, in the following circumstances:
(A) (a) if the Company receives Loss Proceeds in excess of
$5,000,000 in connection with a Loss Event and determines not
to, or cannot, restore the Project to permit operation on a
commercially feasible basis, in which case all of the Loss
Proceeds received will (subject to the terms of the
Intercreditor Agreement) be applied to the mandatory
redemption of Bonds (any such redemption being referred to as
a "Loss Event Redemption"), and (b) if the Company receives
Loss Proceeds in connection with a Loss
Event and more than
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$5,000,000 of such Loss Proceeds remain after the Company uses
a portion of such Loss Proceeds to restore the Project to
permit operation on a commercially feasible basis, in which
case all remaining Loss Proceeds will (subject to the terms of
the Intercreditor Agreement) be applied to the mandatory
redemption of Bonds (any such redemption being referred to as
an "Excess Loss Proceeds Redemption");
(B) (a) if the Company receives Title Insurance Proceeds
in excess of $5,000,000 in connection with a Title Defect and
determines not to, or cannot, correct such Title Defect to
permit operation of the Project on a commercially feasible
basis, then all of the Title Insurance Proceeds received will
(subject to the terms of the Intercreditor Agreement) be
applied to the mandatory redemption of Bonds (any such
redemption a "Title Event Redemption"), and (b) if the Company
receives Title Insurance Proceeds in connection with a Title
Defect and more than $5,000,000 of such Title Insurance
Proceeds remain after the Company uses a portion of such Title
Insurance Proceeds to correct such Title Defect to permit
operation of the Project on a commercially feasible basis, in
which case all remaining Title Insurance Proceeds will
(subject to the terms of the Intercreditor Agreement) be
applied to the mandatory redemption of Bonds (any such
redemption an "Excess Title Proceeds Redemption");
(C) the Company receives performance liquidated damages
pursuant to the EPC Contract and more than $5,000,000 of such
performance liquidated damages remain after application
thereof to an Approved Completion Plan (if any) ("Buydown
Damages"), in which case such remaining performance liquidated
damages will (subject to the terms of the Intercreditor
Agreement) be applied to the mandatory redemption of Bonds;
(D) the Company (a) fails to cause the Project to achieve
Completion on or prior to the Guaranteed Completion Date or
(b) abandons the construction of the Project (any such event a
"Non-Completion Event"), in which case the Company will be
required to redeem all of the Outstanding Bonds unless, in the
case of clause (a), the Rating Agency confirms in writing that
such failure will not result in the Bonds being rated lower
than "Baa3" by the Rating Agency; and
(E) the Company receives a payment of damages pursuant to
Paragraph 1(ii) of the Tolling Guaranty upon a termination of
the Tolling Agreement for cause by the Company (any such
payment a "Tolling Agreement Damages Payment"), in which case
such payment will (subject to the terms of the Intercreditor
Agreement) be applied to the mandatory redemption of Bonds.
The Redemption Date shall be: (i) in the case of a Loss Event
Redemption, any date selected by the Trustee during the 10-day period following
the date on which Loss Proceeds in excess of $5,000,000 are received by the
Collateral Agent on behalf of the Company; (ii) in the case of an Excess Loss
Proceeds Redemption, any date selected by the Trustee during the 10-day period
following the date on which the Company establishes that there are Loss Proceeds
in excess of $5,000,000 remaining in the Loss Proceeds Sub-account following
completion of any
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rebuilding, repairing, or restoring of the Project; (iii) in the case of a Title
Event Redemption, any date selected by the Trustee during the 10-day period
following the date on which such Title Proceeds in excess of $5,000,000 are
received by the Collateral Agent on behalf of the Company; (iv) in the case of
an Excess Title Proceeds Redemption, any date selected by the Trustee during the
10-day period following the date on which the Company establishes that there are
Title Insurance Proceeds in excess of $5,000,000 in the Title Defect Sub-account
following completion of curing the Title Defect, (v) in the case of Buydown
Damages, following application of the performance liquidated damages giving rise
to such Buyout Damages to an Approved Completion Plan (if applicable), any date
selected by the Trustee during the 10-day period following the date on which
such Buydown Damages are received by the Collateral Agent on behalf of the
Company, (vi) in the case of a Non-Completion Event, any date selected by the
Trustee during the 10-day period following the date of occurrence of such
Non-Completion Event and (vii) in the case of a Tolling Agreement Damages
Payment, any date selected by the Trustee during the 10-day period following the
date on which such Tolling Agreement Damages Payment is received by the
Collateral Agent on behalf of the Company.
(b) Within thirty (30) days of the occurrence of any Change of
Control, the Company shall provide written notice of such Change of Control (a
"Change of Control Notice") to the Trustee, which Change of Control Notice shall
contain an offer by the Company to redeem from each Holder, on the Redemption
Date specified in such Change of Control Notice (which shall be not less than 30
days nor more than 60 days after the date of such Change of Control Notice) all
of the Outstanding Bonds held by each Holder at a Redemption Price equal to 101%
of the principal amount of the Outstanding Bonds held by such Holder plus
accrued and unpaid interest on the principal amount of such Outstanding Bonds to
and including such Redemption Date. Upon receipt thereof, the Trustee shall
immediately forward such Change of Control Notice to the Holders in accordance
with the terms of this Indenture. The offer contained in such Change of Control
Notice shall be deemed to lapse as to any Holder whose affirmative reply in
writing shall not have been received by the Trustee within 15 days of the date
on which the Company provided such Change of Control Notice to the Trustee.
Within 10 (ten) days after any such affirmative reply by a Holder, the Company
shall pay to the Trustee for deposit in the Redemption Fund an amount of funds
sufficient to redeem the Outstanding Bonds subject to such request in accordance
with this clause (b). The Trustee shall apply all such funds received by it to
the redemption of the Outstanding Bonds pursuant to this Section 3.3(b) on the
Redemption Date in accordance with written allocation instructions from the
Company provided to the Trustee in accordance with the notice provisions set
forth in this Article III. The Company will not be required to make an offer to
redeem Bonds upon the occurrence of any Change of Control pursuant to this
Section 3.3(b) if another Person makes such offer at the same purchase price, at
the same times and otherwise in substantial compliance with the requirements of
this Section 3.3(b) and such Person purchases all Bonds validly tendered and not
withdrawn under such offer in accordance with the terms of such offer.
(c) If Cleco makes a Default Equity Contribution, the Company
shall, upon receipt of such Default Equity Contribution, provide written notice
thereof (a "Default Equity Contribution Notice") to the Trustee, which Default
Equity Contribution Notice shall specify the amount of such Default Equity
Contribution and shall contain an offer by the Company to redeem from each
Holder, on the Redemption Date specified by the Company in such Default Equity
Contribution Notice (which shall be not less than 30 nor more than 60 days after
the date
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of such notice), a principal amount of the Initial Bonds held by such Holder
equal to such Holder's pro-rata share of such Default Equity Contribution at par
plus accrued interest. Upon receipt thereof, the Trustee shall immediately
forward such notice to the Holders in accordance with the terms of this
Indenture. The offer contained in such notice shall be deemed to lapse as to any
Holder whose affirmative reply in writing shall not have been received by the
Trustee within 15 days of the date on which the Company provided such Default
Equity Contribution Notice to the Trustee. On the Redemption Date specified by
the Company in such Default Equity Contribution Notice, the Company shall make a
mandatory redemption of a principal amount of the Initial Bonds held by each
Holder which has affirmatively replied to such Default Equity Contribution
Notice, such mandatory redemption to be of a principal amount of Bonds held by
such Holder equal to such Holder's pro-rata share of such Default Equity
Contribution at par plus accrued interest to and including the Redemption Date.
(d) Upon any partial mandatory redemption of the Bonds in
accordance with this Section 3.3, each payment remaining in the scheduled
principal amortization of the Bonds as set forth on Schedule I hereto shall be
reduced by an amount equal to the product of (x) such scheduled principal
amortization of the Bonds then in effect, multiplied by (y) a fraction, the
numerator of which is equal to the principal amount of the Outstanding Bonds to
be redeemed and the denominator of which is the principal amount of the
Outstanding Bonds immediately prior to such redemption.
(e) If less than all the Bonds are to be redeemed pursuant to
clause (a) of this Section 3.3, the Bonds shall be redeemed ratably by the
Trustee from the Outstanding Bonds not previously called for redemption in
whole.
(f) For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Bonds shall
relate, in the case of any Bonds redeemed or to be redeemed only in part, to the
portion of the principal amount of such Bonds that has been or is to be
redeemed.
SECTION 3.4 Notice of Redemption. Notice of redemption shall
be given in the manner provided in Section 11.6 hereof to the Holders of Bonds
of such series to be redeemed at least thirty (30) days but not more than sixty
(60) days prior to the Redemption Date. All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the new scheduled principal amortization of the Bonds, as
reflected in a revised Schedule I hereto;
(d) if less than all Outstanding Bonds are to be redeemed, the
principal amount of the Bonds held by each Holder to be redeemed;
(e) in the case of Bonds to be redeemed in part, if requested
by the Holder thereof, the principal amount of such Bonds to be redeemed and
that after the Redemption Date
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upon surrender of such Bonds, new Bonds in the aggregate principal amount equal
to the unredeemed portion thereof will be issued;
(f) that Bonds called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(g) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Bond or portion thereof, and that (unless
the Company shall default in payment of the Redemption Price) interest thereon
shall cease to accrue on and after said date;
(h) that the availability in the Redemption Fund on the
Redemption Date of an amount of immediately available funds to pay the
Redemption Price in full is a condition precedent to the redemption; and
(i) the paragraph of the Bonds or the Indenture pursuant to
which the Bonds are being redeemed.
Notice of redemption of Bonds to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company. Notice of
a mandatory redemption of the Bonds shall be given by the Trustee, in the name
and at the expense of the Company.
With respect to mandatory redemption pursuant to Section 3.3
hereof, notice of redemption may be given by the Trustee prior to receipt of
funds sufficient to pay the Redemption Price.
Failure to give notice of redemption in the manner provided in
Section 11.6 or any defect in such notice to the Holder of any Bond designated
for redemption in whole or in part shall not affect the validity of the notice
to any other Holder.
SECTION 3.5 Bonds Payable on Redemption Date. If notice of
redemption is given in accordance with this Article III, and the conditions, if
any, set forth in such notice have been satisfied, the Bonds or portions thereof
to be redeemed shall become due and payable on the Redemption Date, and (unless
the Company shall default in payment of the Redemption Price) from and after
such date such Bonds or portions thereof shall cease to bear interest.
SECTION 3.6 Bonds Redeemed in Part. At the option of any
Holder thereof, any Bond that is to be redeemed only in part may be surrendered
at the place of payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Bond, without service charge, a new Bond or Bonds of the same series, in
denominations of $100,000 or any multiple thereof as may requested (plus, if
applicable, one Bond in such other denomination as may be requested by such
Holder) and of like tenor and in aggregate principal amount equal to and in
exchange for the remaining unpaid principal amount of the Bond so surrendered.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Trustee as of the
date of issuance of the Bonds:
SECTION 4.1 Organization, Power and Status of the Company. The
Company (a) is a limited liability company duly organized and validly existing
under the laws of the State of Louisiana and (b) is duly qualified and in good
standing, if applicable, as a foreign limited liability company or other limited
liability entity in each jurisdiction where the nature of its activities makes
such qualification necessary. The Company has all requisite limited liability
company power and authority to carry on its business as now being conducted and
as proposed to be conducted.
SECTION 4.2 Authorization; Enforceability; Execution and
Delivery(a) . (a) The Company has all necessary limited liability company power
and authority to execute, deliver and perform its obligations under this
Indenture, the Bonds and each other Transaction Document to which it is a party.
(b) All action on the part of the Company that is required for
the authorization, execution, delivery and performance of this Indenture, the
Bonds and each other Transaction Document to which the Company is a party has
been duly and effectively taken, and the execution, delivery and performance of
this Indenture, the Bonds and each other Transaction Document to which it is a
party does not require the approval or consent of any holder or trustee of any
debt or other obligations of the Company, except such approvals or consents as
have been duly obtained and are in full force and effect.
(c) This Indenture, the Bonds and each other Transaction
Document to which the Company is a party have been duly authorized, executed and
delivered by the Company. Each of this Indenture, the Bonds and each other
Transaction Document to which the Company is a party constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with the terms hereof and thereof, except as the enforceability
thereof may be limited by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally, and subject to general principles of equity.
SECTION 4.3 No Conflicts; Laws and Contracts; No Default;
Representations and Warranties(a). (a) Neither the execution, delivery and
performance of this Indenture, the Bonds or each other Transaction Document to
which the Company is a party, nor the consummation of any of the transactions
contemplated hereby or thereby (i) contravenes any provision of Law applicable
to the Company or any of the Collateral, (ii) conflicts or is inconsistent with
or constitutes a default under or results in the acceleration of (x) any
obligation under the Certificate of Limited Liability Company, Operating
Agreement or other constituent documents of the Company or (y) any terms of any
other Transaction Document or any other agreement or instrument to which the
Company is a party or by which the Company or any of its property or assets is
bound or to which the Company may be subject except any such conflict,
inconsistency, default or violation which, individually or in the aggregate,
could not reasonably
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be expected to result in a Material Adverse Effect or (iii) results in the
creation or imposition of (or the obligation to create or impose) any Liens
(other than Permitted Liens) on the Collateral.
(b) The Company is in compliance with any and all Laws
applicable to it, except any such noncompliance which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 4.4 Governmental Approvals. All Governmental Approvals
which are required to be obtained by, in the name of or on behalf of the Company
in connection with (a) the issuance of the Bonds (b) the execution, delivery and
performance by the Company of the Transaction Documents to which the Company is
a party and (c) the construction and the operation of the Project have been duly
obtained or made, were validly issued and are in full force and effect, other
than any such Governmental Approvals the failure of which to obtain,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No event has occurred which permits, or after notice
or lapse of time or both would permit, the revocation or termination of any of
the foregoing Governmental Approvals. The Company does not have knowledge of any
fact that is likely to result in the denial of an application or renewal, or the
revocation, modification, nonrenewal or suspension of any of the foregoing
Governmental Approvals.
SECTION 4.5 Litigation. There are no claims, actions, suits,
investigations or proceedings at law or in equity (including any Environmental
Claims) or by or before any arbitrator or Governmental Authority now pending
against or, to the knowledge of the Company, threatened against the Company or
any property or other assets or rights of the Company which (a) question the
validity of any Transaction Document or any action taken or to be taken pursuant
to or in connection with any Transaction Document or (b) could reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.6 Utility Regulation. The Company is not subject to
regulation by any Governmental Authority under PUHCA as a "public utility
company" or an "affiliate" or "subsidiary company" of a "registered holding
company" or a company subject to registration under PUHCA.
SECTION 4.7 Environmental Matters(a) . (a) The Project is in
compliance with all existing applicable Environmental Laws, except any such
noncompliance which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(b) To the Company's knowledge, there are no existing facts,
circumstances or conditions which could under any existing Environmental Law,
individually or in the aggregate with all other circumstances or conditions,
reasonably be expected to result in a Material Adverse Effect.
SECTION 4.8 Employee Benefit Plans. Except to the extent that
the following could not reasonably be expected to result in a Material Adverse
Effect, each Plan (including without limitation each Plan of a Commonly
Controlled Entity) as to which the Company may have any liability complies in
all material respects with all applicable requirements of Law and regulations,
and (i) no "reportable event" (as defined in Section 4043 of
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ERISA (other than an event for which a 30-day notice requirement has been waived
by the PBGC) has occurred with respect to any such Plan, (ii) there has been no
withdrawal from any Multiemployer Plan or steps taken to do so, (iii) no Plan
has been terminated or has commenced to be terminated other than in a "standard
termination" under Section 4041(b) of ERISA, (iv) no contribution failure has
occurred with respect to any Plan sufficient to give rise to a lien under
Section 302(f) of ERISA or Section 412 of the Code and (v) no condition exists
or event or transaction has occurred with respect to any Plan, in each case,
that could reasonably be expected to result in a Material Adverse Effect.
SECTION 4.9 Business of the Company. The Company is a special
purpose limited liability company and is not and has not engaged in any
activities other than those incident to its organization, acquisition,
improvement and operation of the Project, the offering of the Bonds, and
transactions related thereto.
SECTION 4.10 Investment Company Act. The Company is not, and
following the issuance and sale of the Bonds, will not be, an "investment
company" or, to the knowledge of the Company, an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
SECTION 4.11 Zoning. The construction, operation and use of
the Project as an electric generating facility complies, and upon the completion
of construction shall comply, with all Laws (if any) relating to zoning
including, without limitation, those relating to use, height, setback lines,
building coverage and gross floor area of building space.
ARTICLE V
COVENANTS
SECTION 5.1 Payment of Principal of and Interest on Bonds. The
Company shall promptly pay or cause to be paid the principal of, premium (if
any) and interest on every Bond issued hereunder according to the terms hereof
and thereof.
SECTION 5.2 Reporting Requirements. The Company shall deliver
to the Trustee (and the Trustee shall deliver copies to any Holder of an Initial
Bond and, upon written request, which may be a continuing request, to any Holder
of an Additional Bond), the Collateral Agent, the Rating Agency and, with
respect to clauses (f), (h), (i) and (j) only (and, in the case of clause (j),
only with respect to amendments and supplements to the Project Documents which
are material) the Independent Engineer:
(a) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, unaudited
quarterly financial statements of the Company;
(b) within 90 days after the end of each fiscal year of the
Company, audited annual financial statements of the Company;
(c) at the time of delivery of the financial statements
described in clauses (a) and (b) above, a certificate of an
Authorized Officer of the Company on behalf of the
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Company to the effect that (i) the Company is in compliance with all of its
material obligations under the terms of the Transaction Documents, and (ii) no
Default or Event of Default known to the Company has occurred and is continuing
or, if any Default or Event of Default known to the Company has occurred and is
continuing, specifying the nature and extent thereof and what action the Company
is taking or proposes to take in response thereto;
(d) promptly and in any event within ten days after an
Authorized Officer of the Company obtains actual knowledge thereof, notice of
the occurrence of any event or condition which constitutes a Default or an Event
of Default, describing such event or condition and any action that the Company
is taking or proposes to take with respect thereto;
(e) promptly and in any event within ten days after an
Authorized Officer of the Company obtains actual knowledge thereof, notice of
any litigation, arbitration or other governmental proceeding against the Company
or with respect to any Transaction Document to which the Company is a party
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect;
(f) promptly and in any event within ten days after an
Authorized Officer of the Company obtains knowledge thereof, notice of the
occurrence of any Loss Event or Title Defect, describing such Loss Event or
Title Defect, as the case may be, and any action that the Company is taking or
proposes to take with respect thereto;
(g) copies of material notices delivered in connection with
the Project Documents;
(h) until the Project has achieved Completion, within 30 days
after the end of each fiscal quarter of the Company, a quarterly construction
report describing the progress of the Project's construction and the expenditure
of funds in connection therewith;
(i) within 30 days after the end of each fiscal year of the
Company occurring after the Project has achieved Completion (including the year
in which Completion occurs), an annual operation and maintenance report for the
Project;
(j) all amendments and supplements to the Project Documents;
(k) notice of any pending Environmental Claim against the
Company which could reasonably be expected to result in a Material Adverse
Effect; and
(l) within 45 days after the end of each fiscal year of the
Company, an Officer's Certificate of the Company (i) confirming that all
insurance policies required pursuant to Section 5.6 are in full force and effect
on the date thereof, (ii) confirming the names of the companies issuing such
policies, (iii) confirming the amounts and expiration dates of such policies,
(iv) including evidence of payment of all premiums or other amounts due on such
insurance policies during such fiscal year and (v) stating that such policies
comply with the requirements of the Financing Documents. The Trustee may
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conclusively rely upon any Officer's Certificate delivered pursuant to this
clause (l) and shall have no responsibility to examine any policies referred to
therein to determine compliance with the provisions of this Indenture.
SECTION 5.3 Limited Liability Company Existence. The Company
shall at all times preserve and maintain (a) its existence as a limited
liability company under the laws of the State of Louisiana, (b) its
qualification to do business and good standing, if applicable, in each other
jurisdiction in which the character of its properties or the nature of its
activities makes such qualification necessary and (c) its rights, powers,
privileges and franchises, except, in the case of clauses (b) and (c) where the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.4 Compliance with Laws. The Company shall comply
with all applicable Laws, except where the failure to do so could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 5.5 Governmental Approvals; EWG Status(a) . (a) The
Company shall obtain, maintain and comply with all Governmental Approvals
necessary for (i) the issuance of the Bonds, (ii) the ownership, construction
and operation of the Project and (iii) the execution, delivery and performance
of its obligations under the Transaction Documents to which it is a party,
except, in the case of clauses (ii) and (iii), where the failure to do so could
not reasonably be expected to result in a Material Adverse Effect.
(b) The Company shall maintain the Project as an Eligible
Facility owned by an Exempt Wholesale Generator.
SECTION 5.6 Insurance. For all periods both prior to and after
completion of construction of the Project, the Company shall maintain or cause
to be maintained insurance as is generally carried by companies engaged in
similar businesses during such respective periods and owning similar properties
in the same general area and financed in the same general manner. As of the
Closing Date, the Company has in place the insurance set forth in Exhibit D. In
the event the Company desires to maintain insurance that is materially different
than the type and amounts of insurance set forth in Exhibit D, the Company shall
provide to the Trustee a certificate of the Insurance Consultant stating that
the criteria set forth in the first sentence of this Section 5.6 will be met by
the Company. All insurance maintained by the Company pursuant to this Section
5.6 shall (i) name the Trustee, the Collateral Agent and the Company, in the
case of all liability policies, as insureds, and in all other cases, as loss
payees, as their interests may appear; (ii) provide that all insurance proceeds
shall be payable to the Collateral Agent; (iii) include effective waivers by the
insurer of all claims for insurance premiums against the Trustee, the Collateral
Agent and the Holders; (iv) provide that any losses shall be payable
notwithstanding (A) any foreclosure or other proceedings or notice of sale
relating to the Facility or (B) any change in title to or ownership of the
Facility; and (v) provide that no cancellation thereof shall be effective until
at least 30 days after receipt by the Collateral Agent and the Trustee of
written notice thereof.
SECTION 5.7 Payment of Taxes and Claims. The Company shall,
prior to the time penalties attach thereto, pay and discharge, or cause to be
paid and discharged, all taxes,
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assessments, claims and governmental charges or levies imposed upon it, its
assets or property or its income or profits; provided that the Company shall not
be required to pay any such obligation if the same is being diligently contested
in good faith by appropriate proceedings and adequate cash reserves are
established in accordance with GAAP.
SECTION 5.8 Books and Records. The Company shall at all times
keep proper books and records of all of its business and financial affairs in
accordance with GAAP.
SECTION 5.9 Right of Inspection. The Company shall permit the
Trustee, the Collateral Agent, the Securities Intermediary, the Independent
Engineer or any duly authorized agents or representatives of any of the
foregoing, from time to time during normal business hours, (i) to conduct
reasonable inspections and examinations of the records, assets and property of
the Company and (ii) to discuss the affairs, finances and accounts of the
Company with the principal officers of the Company, all upon reasonable notice
and at such reasonable times as the Trustee, the Collateral Agent, the
Securities Intermediary or the Independent Engineer may desire, provided,
however, that, in the absence of a specific instruction to the contrary from the
Required Holders, this right shall not be deemed to be a duty or responsibility
of the Trustee, the Collateral Agent or the Securities Intermediary.
SECTION 5.10 Maintenance of Property and Security(a) . (a) The
Company (i) shall use, maintain and operate the Project and the site thereof in
material compliance with prudent industry practice, all applicable laws and
Governmental Approvals and the Project Documents and (ii) shall preserve and
maintain (except as otherwise specifically contemplated or permitted pursuant to
the Mortgage) (x) good and marketable title to or valid leasehold or other
rights to or in the Project, the site of the Project and all other Collateral
owned by it (subject only to Permitted Liens) and (y) a valid and subsisting
grant of all easements, licenses, franchises, rights of way and similar
non-possessory real property interests necessary for the construction and
operation of the Project and the use of the site of the Project.
(b) The Company shall take or cause to be taken all acts
reasonably required to maintain and preserve the Liens purported to be created
by the Security Documents. The Company shall from time to time execute, or cause
to be executed, any and all further instruments (including financing statements,
continuation statements and similar statements) reasonably required to maintain
and preserve the Liens purported to be created by the Security Documents.
(c) In the event the Project or the Land shall become subject
to any zoning Laws, the Company shall not, without the Trustee's prior written
consent, use or permit the use of the Project or the Land in a manner which
would result in such use becoming a nonconforming use under such zoning Laws.
SECTION 5.11 Performance of Transaction Documents;
Construction of the Project(a) . (a) The Company shall (i) perform all of its
obligations and covenants contained in the Transaction Documents to which it is
a party, (ii) enforce, defend and protect all of its rights contained in such
Transaction Documents and (iii) take all actions necessary to prevent the
termination or cancellation of any such Transaction Documents, except in each
case where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
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(b) The Company shall cause the construction of the Project to
be completed in a timely manner and in accordance with prudent industry
practice, all applicable Laws and Governmental Approvals and the Project
Documents.
SECTION 5.12 Rule 144A Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of any Holder of the Bonds, the Company shall promptly furnish to such
Holder or to a prospective purchaser of a Bond designated by such Holder, or
beneficial owner the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 5.13 Project Revenues. The Company shall deposit all
revenues received by it into the Revenue Account and shall irrevocably instruct
all Project Parties that make payments to the Company under the Project
Documents to deposit such payments into the Revenue Account.
SECTION 5.14 Independent Engineer. The Company shall permit
the Independent Engineer to (a) inspect the Project upon reasonable notice and
(b) witness and verify the performance tests under the EPC Contract. SECTION
5.15 Annual Operating Budget(a). (a) Not less than 30 days prior to (a) the date
on which the Project is expected to commence commercial operation, and
thereafter (b) the commencement of each fiscal year of the Company, the Company
shall submit to the Independent Engineer a proposed operating budget, detailed
by month (an "Annual Operating Budget"). The first Annual Operating Budget shall
cover the period from the date of commencement of commercial operation through
the end of the fiscal year in which commercial operation occurs or, if such
period consists of less than 6 months, through the end of the immediately
succeeding fiscal year. Each Annual Operating Budget (other than the first
Annual Operating Budget referred to above) shall be, in all material respects,
consistent with the provisions of the Project Documents and shall specify the
Company's good faith estimate of sales of power from the Project, the rates and
revenues for such sales, all O&M Costs and working capital requirements, all
major maintenance costs, a forecast of personnel to operate and maintain the
Project and a periodic inspection, maintenance and repair schedule. To the
extent the Independent Engineer shall have provided its comments, if any, to the
Company within 30 days of the Independent Engineer's receipt of the proposed
Annual Operating Budget, the Company shall reasonably consider such comments in
its preparation of a final Annual Operating Budget, which shall then be provided
to the Trustee, the Collateral Agent, the Independent Engineer and the Rating
Agency. The Trustee and the Collateral Agent shall have no responsibility to
review or approve the Annual Operating Budget. SECTION 5.16 Use of Proceeds. The
Company shall use the net proceeds of the Bonds only to pay Project Costs.
SECTION 5.17 Independent Auditor. The Company shall retain a
nationally recognized independent accounting firm and permit the Trustee, the
Collateral Agent, the Securities Intermediary and, upon an Event of Default, the
initial Holders of the Bonds, to discuss the affairs, finances and accounts of
the Company with such accounting firm upon reasonable notice and at reasonable
times (and by this provision the Company authorizes such
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accounting firm to so discuss the affairs, finances and accounts of the
Company); provided, however, that this right shall not be deemed to be a duty or
responsibility of the Trustee, the Collateral Agent or the Securities
Intermediary.
SECTION 5.18 Debt. The Company shall not create or incur or
suffer to exist any Debt in addition to the Initial Bonds other than the
following (such Debt, together with the Initial Bonds, being referred to as
"Permitted Debt"):
(a) Additional Bonds, the proceeds of which are used for any
of the following purposes:
(A) to finance Required Modifications, provided that
either (i) after giving effect to the incurrence of such Debt,
the minimum projected Debt Service Coverage Ratio for each
fiscal year during the remaining term of the Bonds is equal to
or greater than 1.30 to 1.0, as confirmed in writing by the
Independent Engineer, or (ii) the Rating Agency confirms in
writing that, after giving effect to the incurrence of such
Debt for such purpose, the Bonds will be rated at least "Baa3"
by the Rating Agency;
(B) to finance Optional Modifications, provided that (i)
no Default or Event of Default has occurred and is --------
continuing or would result from the incurrence of such Debt
for such purpose, (ii) either (A) after giving effect to the
incurrence of such Debt, (1) the minimum projected Debt
Service Coverage Ratio for each fiscal year during the
remaining term of the Bonds is equal to or greater than 1.70
to 1.0, as confirmed in writing by the Independent Engineer,
and (2) the average annual projected Debt Service Coverage
Ratio during the remaining term of the Bonds is equal to or
greater than 1.80 to 1.0, as confirmed in writing by the
Independent Engineer, or (B) the Rating Agency confirms in
writing that the incurrence of such Debt for such purpose will
not result in the Bonds being rated lower than "Baa3" by the
Rating Agency, and (iii) so long as the Williams Subordination
Agreement remains in effect, the incurrence of such Debt is
permitted thereunder;
(C) to finance Expansion Modifications, provided that (i)
no Default or Event of Default has occurred and is continuing
or would result from the incurrence of such Debt for such
purpose, (ii) the Rating Agency confirms in writing that the
incurrence of such Debt for such purpose will not result in a
Rating Downgrade and that, after giving effect to the
incurrence of such Debt, the ratings for the Bonds will be at
least "Baa3", (iii) at least 80% of the total capacity of the
Project, after giving effect to the Expansion Modifications,
must be contracted under a power purchase agreement, tolling
agreement or similar agreement with a term that extends to at
least the final maturity date of the Bonds, and (iv) so long
as the Williams Subordination Agreement remains in effect, the
incurrence of such Debt is permitted thereunder; and
(D) in addition to Debt permitted under clauses (A), (B)
and (C) above, to finance the acquisition of assets useful in
the development, construction,
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operation or maintenance of the Project, provided that (i) no
Default or Event of Default has occurred and is continuing or
would result from the incurrence of such Debt for such
purpose, (ii) the aggregate amount of such Debt outstanding at
any one time shall not exceed $10,000,000, (iii) such assets
are subjected to the liens of the Security Documents, and (iv)
so long as the Williams Subordination Agreement remains in
effect, the incurrence of such Debt is permitted thereunder;
(b) Debt issued to one or more Affiliates of the Company which
is (x) subordinated to the Bonds pursuant to subordination terms set forth in
Exhibit C ("Subordinated Debt") and (y) not secured by the Collateral, provided
that no Default or Event of Default has occurred and is continuing or would
result from the incurrence of such Debt;
(c) Debt incurred pursuant to an ACS LOC Reimbursement
Agreement, provided that the conditions set forth in clause (a) of the
definition of "Acceptable Credit Support" have been satisfied;
(d) unsecured Debt for working capital purposes in an amount
not to exceed $5,000,000;
(e) letters of credit and other financial obligations arising
under the Project Documents;
(f) purchase money obligations incurred to finance discrete
items of equipment not comprising an integral part of the Project that extend
only to the equipment being financed and that do not in the aggregate have
annual debt service or lease obligations exceeding $5,000,000 (such amount to be
escalated for inflation based on the Consumer Price Index);
(g) trade accounts payable (other than for borrowed money)
which arise in the ordinary course of business and which are payable within 90
days;
(h) obligations in respect of surety bonds or similar
instruments in an amount not to exceed $5,000,000; and
(i) Debt incurred under Interest Rate Protection Agreements
entered into in order to provide a hedge against changes in the rates of
interest on Permitted Debt which accrues interest at a floating or variable
rate, provided that the notional amount of the obligations subject to any such
Interest Rate Protection Agreement cannot at any time exceed the aggregate
principal amount of such Permitted Debt.
SECTION 5.19 Permitted Liens. The Company shall not create,
suffer to exist or permit any Lien upon or with respect to any of its properties
other than the following ("Permitted Liens"):
(a) Liens specifically permitted or required by, or created
by, any Security Document;
(b) Liens to secure Permitted Debt permitted under clause (c)
and clause (i) of Section 5.18, provided that the holder of such Debt (or an
agent or trustee on behalf of such
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holder), becomes a "Secured Party" under the Intercreditor Agreement in
accordance with the terms thereof;
(c) Liens for taxes, assessments or governmental charges which
are either not yet due or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves are established in
accordance with GAAP;
(d) liens in connection with workers' compensation,
unemployment insurance or other social security or pension obligations;
(e) mechanics', workmen's, materialmen's, suppliers',
construction or other statutory liens arising in the ordinary course of
business, so long as such liens are securing amounts not yet due and payable or
are being diligently contested in good faith and by appropriate proceedings and
for which adequate reserves are established in accordance with GAAP;
(f) servitudes, easements, rights-of-way, restrictions, minor
defects or irregularities in title and such other encumbrances or charges
against real property or interests therein as are of a nature generally existing
with respect to properties of a similar character and which do not in any
material way interfere with (i) the use thereof by the Company in the conduct of
its business or (ii) the Lien of the Mortgage;
(g) other liens incidental to the conduct of the Company's
business or the ownership of properties and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than vendor's liens for accounts payable in the ordinary course of
business) and which do not materially impair the use thereof by the Company in
the conduct of its business; and
(h) liens arising from judgments, provided that (1) the
execution or other enforcement of such lien is effectively stayed and evidence
reasonably satisfactory to the Trustee and its counsel to that effect is
delivered to the Trustee and its counsel, (2) the judgment secured thereby is
being actively appealed in good faith and by appropriate proceedings and (3)
adequate reserves shall have been established and be maintained with respect
thereto in accordance with GAAP.
SECTION 5.20 Business Activities. The Company shall not engage
in any business other than (a) the issuance of the Bonds, (b) the development,
construction, ownership, operation and maintenance of the Project and (c) as
otherwise contemplated by the Financing Documents.
SECTION 5.21 Fundamental Changes, etc. The Company shall not
(a) enter into any transaction of merger or consolidation, change its form of
organization or its business, liquidate or dissolve itself (or suffer any
liquidation or dissolution) or sell all or substantially all of its assets, (b)
sell, transfer, assign, hypothecate, pledge, lease, sublease or otherwise
dispose of (in one transaction or in a series of transactions) any of its assets
except in the ordinary course of business or to the extent that such property is
worn out or is no longer useful or necessary in connection with the operation of
the Project, (c) acquire, by purchase or otherwise, all or substantially all of
the property or assets of any Person or (d) create or acquire any subsidiary.
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SECTION 5.22 Affiliate Transactions. The Company shall not
enter into any transaction or agreement with any Affiliate other than (a)
transactions contemplated by the Transaction Documents and (b) transactions and
agreements in the ordinary course of business on fair and reasonable terms no
less favorable to the Company than the Company would obtain in an arm's-length
transaction with a Person that is not an affiliate of the Company.
SECTION 5.23 Restricted Payments. The Company shall not make
any Restricted Payment other than as permitted by the terms of this Indenture
and the Depository Agreement.
SECTION 5.24 Investments. The Company shall not make any
investments other than the following ("Permitted Investments"):
(a) securities issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof) having a maturity not exceeding 180 days from the
date of issuance;
(b) time deposits and certificates of deposit having a
maturity not exceeding 180 days of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000;
(c) commercial paper issued by the parent corporation of any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500,000,000 and commercial paper of any domestic corporation rated at
least "A-1" or the equivalent thereof by S&P or at least "P-1" or the equivalent
thereof by Moody's and, in each case, having a maturity not exceeding 180 days
from the date of acquisition;
(d) fully secured repurchase obligations with a term of not
more than 7 days for underlying securities of the types described in clause (a)
above entered into with any bank meeting the qualifications established in
clause (b) above;
(e) corporate bonds rated at least "AA" or the equivalent
thereof by S&P and at least "Aa2" or the equivalent thereof by Moody's; and
(f) money market funds registered under the Federal Investment
Company Act of 1940, whose shares are registered under the Securities Act and
which are rated "AAAm" or "AAAmG" or better by S&P.
SECTION 5.25 Investment Company Act. The Company shall not
take any action which would cause it to be in violation of the Investment
Company Act of 1940.
SECTION 5.26 Formation Documents. The Company shall not amend its Certificate of
Limited Liability Company or Operating Agreement or any of its other
organizational documents unless (a) such amendment may be required in connection
with and to give effect to a transfer by Cleco Midstream Resources LLC,
Louisiana limited liability company and the holder of 100% of the outstanding
member interests in the Company ("Cleco Midstream"), of all of its member
interests in the Company to Cleco Business Development
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LLC, a Louisiana limited liability company and a wholly-owned subsidiary of
Cleco Midstream ("Cleco Business Development") or (b) such amendment could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.27 Guaranty Obligations. The Company shall not
contingently or otherwise be or become liable, directly or in directly, in
connection with any Guaranty Obligation.
SECTION 5.28 Amendments to Project Documents. The Company
shall not terminate (except in the case of a scheduled termination), assign
(other than pursuant to the Security Documents), amend, supplement, modify,
waive its rights under or consent to any termination (except in the case of a
schedule termination), assignment (other than pursuant to the Security
Documents), amendment, supplement or modification of or waiver under, any
Project Document, unless (a) such termination, assignment (other than pursuant
to the Security Documents), amendment, supplement, modification, waiver or
consent could not reasonably be expected to result in a Material Adverse Effect,
(b) in the case of any termination of the Tolling Agreement or the EPC Contract
and any material amendment, supplement or modification, waiver or consent to or
under the Tolling Agreement or the EPC Contract, (i) the Rating Agency shall
have confirmed in writing that such termination, amendment, supplement,
modification, waiver or consent will not result in a Rating Downgrade or in the
Bonds being rated lower than "Baa3" and (ii) the Independent Engineer shall have
certified that such termination, amendment, supplement, modification, waiver or
consent could not reasonably be expected to result in a Material Adverse Effect
and (c) in the case of any termination of all or any part of the Maintenance
Agreement pursuant to Section 12.4 thereof, the Independent Engineer shall have
certified that the arrangements entered into by the Company for the provision of
services to replace those formerly provided pursuant to the Maintenance
Agreement, including the identity of the replacement vendor providing such
services, are reasonably satisfactory.
SECTION 5.29 Additional Project Documents. The Company shall
not enter into any Additional Project Document or any other additional agreement
or undertaking unless (a) entering into such Additional Project Document or such
additional agreement or undertaking could not reasonably be expected to result
in a Material Adverse Effect and (b) if such Additional Project Document is a
Material Project Document, the Company delivers a Consent with respect to such
Additional Project Document to the Collateral Agent.
SECTION 5.30 Change Orders. The Company shall not initiate or consent to any
change order under the EPC Contract unless an Authorized Officer of the Company
certifies to the Trustee and the Collateral Agent that (a) such change order
would not reasonably be expected to result in a Material Adverse Effect, (b) the
implementation of such change order is not reasonably expected to cause the
Project to achieve Completion after the Guaranteed Completion Date, (c) such
change order is reasonable and is consistent with sound engineering practice and
(d) unless the Independent Engineer has concurred in writing with the
certifications set forth in clauses (a), (b) and (c) above, such change order
does not individually exceed $3,000,000, or when aggregated with all other
change orders that have not been concurred with in writing or otherwise approved
or ratified by the Independent Engineer, exceed $6,000,000; provided that such
maximum amounts shall be increased by the amount of a related increase in
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the maximum amount of equity contributions required to be made by Cleco pursuant
to Section 2(c) of the Equity Contribution Agreement.
SECTION 5.31 Alterations and Additions(a) . (a) The Company may make, cause,
suffer or permit to be made, alterations of, additions or improvements to, the
Project, provided that (i) any such alteration, addition or improvement shall
not reasonably be expected to have a Material Adverse Effect; (ii) any such
alteration, addition or improvement shall be effected with due diligence, in a
good and workmanlike manner and, except where the failure so to do could not
reasonably be expected to result in a Material Adverse Effect, in compliance
with all applicable Laws, insurance requirements and any agreements, contracts
or documents of record by which the Company is bound, other than, in the case of
any thereof, where the failure to be in compliance therewith could not
reasonably be expected to result in a Material Adverse Effect; (iii) any such
alteration, addition or improvement shall be conducted under the supervision of
a licensed architect or engineer; and (iv) each such alteration, addition or
improvement shall be promptly and fully paid for by the Company.
(b) The Company's right to make, or suffer or permit to be
made, any alteration, addition or improvement which may cost in excess of
$5,000,000 shall also be subject to the following additional provisions: (i) any
such alteration, addition or improvement shall not, in the reasonable judgment
of the Company, diminish the value of the Collateral; (ii) prior to the
commencement of any such alteration, addition or improvement, the Company shall
deliver to the Trustee certified copies of all approvals from all municipal or
governmental authorities having jurisdiction thereof and permits required with
respect thereto; (iii) the Company shall procure and maintain such insurance and
performance, labor, and material bonds as are customary for similar projects;
and (iv) promptly upon completion of any such alteration, addition or
improvement, the Company shall give notice thereof to the Trustee, together with
(A) certificates of the Company and a licensed architect or engineer, to the
effect that (1) such alteration, addition or improvement has been completed
substantially in accordance with the applicable plans and specifications, to the
satisfaction of the Company and such architect or engineer, and in a good and
workmanlike manner and in compliance with all applicable Laws and insurance
requirements and (2) all contractors, subcontractors, materialmen and other
suppliers who could claim a lien on the Land or the Project by reason of having
supplied labor or materials in connection with such alteration, addition or
improvement have been paid in full or bonded or have duly and effectually waived
or released all rights to any such liens; (B) original counterparts of receipts
and waivers of liens from or copies of bonds relating to such contractors,
subcontractors, materialmen and other suppliers who supply labor or materials
costing in excess of $50,000; (C) a permanent certificate of occupancy covering
such alteration, addition or improvement, if required to permit the use and
occupancy thereof; and (D) such other certificates, information and documents as
the Trustee may reasonably request.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1 Events of Default Defined. The term "Event of
Default," whenever used herein, shall mean any of the following events (whatever
the reason for such event and whether it shall be voluntary or involuntary or
come about or be effected by operation of Law, or be pursuant to or in
compliance with any applicable Law), and any such event shall continue to be an
Event of Default if and for so long as it has not been remedied:
(a) the Company shall fail to pay any principal of, premium
(if any) or interest on any Bond when the same becomes due and payable, whether
by scheduled maturity or required redemption or by acceleration or otherwise,
and such failure shall continue uncured for five or more days; or
(b) any representation or warranty made by the Company in any
Financing Document, or in any certificate or other document furnished to any
Person in accordance with the terms of the Financing Documents, shall prove to
have been false or misleading in any respect as of the time made, and the fact,
event or circumstance that gave rise to such misrepresentation has resulted in
or is reasonably expected to result in a Material Adverse Effect and such
misrepresentation or such Material Adverse Effect shall continue uncured for 30
or more days from the date an Authorized Officer of the Company obtains
knowledge thereof; provided that if the Company commences efforts to cure (or to
cause to be cured) such misrepresentation by curing (or causing to be cured) the
factual situation resulting in such misrepresentation or such Material Adverse
Effect within such 30-day period, the Company may continue to effect (or cause)
such cure, and such misrepresentation shall not be deemed an Event of Default,
for an additional 60 days so long as an Authorized Officer of the Company
certifies to the Trustee and the Collateral Agent that such misrepresentation or
such Material Adverse Effect is reasonably capable of being cured within such
period and that the Company is diligently pursuing (or causing) such cure; or
(c) the Company fails to perform or observe any covenant or
agreement contained in Sections 5.2(d), 5.3, 5.6, 5.10(a)(ii), 5.18, 5.19, 5.20,
5.21, 5.22, 5.23, 5.24, 5.25, 5.26, 5.27, 5.28, 5.29 or 5.30, and such failure
shall continue uncured for 30 or more days after an Authorized Officer of the
Company has actual knowledge of such failure; or
(d) the Company shall fail to perform or observe any of its
covenants contained in any other provision herein (other than those referred to
in clause (a) or (c) above) or any other Financing Document and such failure
shall continue uncured for 30 or more days after an Authorized Officer of the
Company has actual knowledge of such failure; provided that if the Company
commences efforts to cure such default within such 30-day period, the Company
may continue to effect such cure of the default (and such default shall not be
deemed an Event of Default) for an additional 60 days so long as an Authorized
Officer of the Company provides an Officer's Certificate to the Trustee and the
Collateral Agent stating that such default is reasonably capable of being cured
within such period and that the Company is diligently pursuing such cure; or
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(e) the Company, Cleco or any provider of Acceptable Credit
Support under the Equity Contribution Agreement (if such Acceptable Credit
Support is not replaced within 30 days) (i) applies for or consents to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
admits in writing its inability, or be generally unable to pay its debts as such
debts become due, (iii) makes a general assignment for the benefit of its
creditors, (iv) commences a voluntary case under the Federal Bankruptcy Code,
(v) files a petition seeking to take advantage of any other Law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (vi) fails to controvert within sixty (60) days, or
acquiesces in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or (vii) takes any formal limited liability
company action for the purpose of effecting any of the foregoing; or
(f) a proceeding or case is commenced without the application
or consent of the Company, Cleco or any provider of Acceptable Credit Support
under the Equity Contribution Agreement (if such Acceptable Credit Support is
not replaced within 30 days) in any court of competent jurisdiction, seeking (i)
its liquidation, reorganization, dissolution, winding-up, or the composition or
readjustment of debts or (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like for it or a substantial part of its property or assets
under any Laws relating to bankruptcy, insolvency, reorganization, winding-up,
or the composition or readjustment of debts, and such proceeding or case
continues undismissed, or any order, judgment or decree approving or ordering
any of the foregoing is entered and continues unstayed and in effect, for a
period of sixty (60) or more consecutive days, or any order for relief against
the Company, Cleco or any such provider of Acceptable Credit Support is entered
in an involuntary case under the Federal Bankruptcy Code; or
(g) any Lien granted or purported to be granted in the
Security Documents shall cease to be a perfected lien in favor of the Collateral
Agent on the Collateral described therein with the priority purported to be
created under the Security Documents; or
(h) any event of default under any Debt of the Company
(including Permitted Debt) shall occur and, as a result thereof, Debt of the
Company in excess of $10,000,000 shall become due and payable prior to its
stated maturity; or
(i) a final and non-appealable judgment or judgments for the
payment of money in excess of $10,000,000 shall be rendered against the Company
and the same shall remain unpaid or unstayed for a period of 60 or more
consecutive days; or
(j) an Event of Abandonment shall occur; or
(k) any Governmental Approval required for the construction or
operation of the Project is revoked, terminated, withdrawn or ceases to be in
full force and effect and such revocation, termination, withdrawal or cessation
could reasonably be expected to result in a Material Adverse Effect and is not
cured within 60 days following the occurrence thereof; or
(l) with respect to any Project Document, (x) a material term
of such Project Document (i) ceases to be a valid and binding obligation of the
parties thereto or (ii) is declared unenforceable by a Governmental Authority,
(y) such Project Document is terminated (prior to
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its normal expiration), or (z) a Project Party denies its liability with respect
to such Project Document or a Project Party defaults in respect of its
obligations under such Project Document (and any grace or cure period with
respect to such failure has expired), and in any such case other than a
termination of the Tolling Agreement (prior to its normal expiration), such
event described in clause (x), (y) or (z) could reasonably be expected to result
in a Material Adverse Effect; provided that, with respect to any Project
Document other than the Tolling Agreement, none of such events described in
clause (x), (y) or (z) shall be deemed an Event of Default with respect to such
Project Document if within 180 days from the occurrence of any such event, the
Company shall have (i) with respect to any such event which is curable,
diligently proceeded to cure and cured or caused the relevant Project Party to
cure the circumstances described in clause (x), (y) or (z), as applicable, and
caused the relevant Project Party to resume performance in accordance with the
relevant Project Document, or (ii) entered into a Replacement Project Document
in substitution of the relevant Project Document which is reasonably
satisfactory to the Independent Engineer; or
(m) Cleco shall fail to perform any of its obligations under
the Equity Contribution Agreement.
SECTION 6.2 Enforcement of Remedies(a). (a) If one or more
Events of Default occurs and is continuing, then:
(i) in the case of an Event of Default described in
Section 6.1(a), the Trustee shall, upon the direction of the
Holders of at least 33-1/3% in aggregate principal amount of the
Outstanding Bonds, declare the entire principal amount of the
Outstanding Bonds, all interest accrued and unpaid thereon and all
other amounts payable under this Indenture to be due and payable
whereupon the same shall become immediately due and payable;
(ii) in the case of an Event of Default described in
Section 6.1(e) or (f), the entire principal amount of the
Outstanding Bonds, all interest accrued and unpaid thereon and all
other amounts payable under this Indenture shall automatically
become due and payable without any action by the Trustee, the
Holders of the Bonds or any other Person; and
(iii) in the case of any other Event of Default, the
Trustee shall, upon the direction of the Required Holders, declare
the entire principal amount of the Outstanding Bonds, all interest
accrued and unpaid thereon and all other amounts payable under
this Indenture to be due and payable, whereupon the same shall
become immediately due and payable.
(b) At any time after the principal of the Bonds shall have
become due and payable upon a declared acceleration as provided herein, and
before any judgment or decree for the payment of the money so due, or any
portion thereof, is entered, the Required Holders by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
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(i) there shall have been paid to or deposited with the
Trustee a sum sufficient to pay:
(A) all overdue installments of interest on the Bonds;
(B) the principal of and premium (if any) on any Bonds that
have become due other than by such declaration of acceleration and
interest thereon at the respective rates provided in the Bonds for
late payments of principal;
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the respective
rates provided in the Bonds for late payments of interest; and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation of the Trustee for ordinary and
extraordinary services, expenses, disbursements, and advances of
the Trustee, its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Bonds that has become due solely by such acceleration,
have been cured or waived as provided in Section 6.6 hereof.
No such rescission shall affect any subsequent Default or
Event of Default or impair any right consequent thereon.
SECTION 6.3 Judicial Proceedings Instituted by Trustee.
(a) Trustee May Bring Suit. Subject to the terms of the
Intercreditor Agreement and Section 6.2 hereof, if an Event of Default shall
have occurred and be continuing, then the Trustee, in its own name, and as
trustee of an express trust, subject to the provisions of Section 6.2 hereof,
shall be entitled and empowered to institute any suits, actions or proceedings
at Law, in equity or otherwise, for the collection of the sums so due and unpaid
on the Bonds, and may prosecute any such claim or proceeding to judgment or
final decree, and, subject to the Intercreditor Agreement with respect to the
Collateral, may enforce any such judgment or final decree and collect the moneys
adjudged or decreed to be payable in any manner provided by Law, whether before,
after or during the pendency of any proceedings for the enforcement of any of
the Trustee's rights or the rights of the Holders under this Indenture, and such
power of the Trustee shall not be affected by any sale hereunder or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Indenture.
(b) Trustee May Recover Unpaid Debt after Sale of Collateral.
Subject to the terms of the Intercreditor Agreement, in the case of a sale of
the Collateral and of the application of the proceeds of such sale to the
payment of the Debt secured by this Indenture, the Trustee in its own name, and
as trustee of an express trust, shall be entitled and empowered, by any
appropriate means, legal, equitable or otherwise, to enforce payment of, and to
receive all amounts then remaining due and unpaid upon, all or any of the Bonds,
for the benefit of the Holders thereof, with interest at the rates specified in
the respective Bonds on the overdue principal of and premium (if any) and (to
the extent that payment of such interest is legally enforceable) on the overdue
installments of interest.
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(c) Recovery of Judgment Does Not Affect Rights. No recovery
of any such judgment or final decree by the Trustee and no levy of any execution
under any such judgment upon any of the Collateral, or upon any other property,
shall in any manner or to any extent affect any rights, powers or remedies of
the Trustee, or any liens, rights, powers or remedies of the Holders, but all
such liens, rights, powers or remedies shall continue unimpaired as before.
(d) Trustee May File Proofs of Claim; Appointment of Trustee
as Attorney-in-Fact in Judicial Proceedings. Subject to the terms of the
Intercreditor Agreement, the Trustee in its own name, and as trustee of an
express trust, or as attorney-in fact for the Holders, or in any one or more of
such capacities (irrespective of whether the principal of the Bonds shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand for the payment
of overdue principal, premium (if any) or interest), shall be entitled and
empowered to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee and of the
Holders (whether such claims be based upon the provisions of the Bonds or of
this Indenture) allowed in any equity, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial proceedings
relating to the Company or any other obligor on the Bonds, the creditors of the
Company or any such obligor, the Collateral or any other property of the Company
or any such obligor, and any receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel. Subject to the terms of the Intercreditor Agreement, the Trustee is
hereby irrevocably appointed (and the successive respective Holders of the
Bonds, by taking and holding the same, shall be conclusively deemed to have so
appointed the Trustee) the true and lawful attorney-in-fact of the respective
Holders, with authority to:
(i) make and file in the respective names of the Holders
(subject to deduction from any such claims of the amounts of any
claims filed by any of the Holders themselves), any claim, proof
of claim or amendment thereof, debt, proof of debt or amendment
thereof, petition or other document in any such proceedings and to
receive payment of any amounts distributable on account thereof;
(ii) execute any such other papers and documents and to do and
perform any and all such acts and things for and on behalf of such
Holders, as may be necessary or advisable in order to have the
respective claims of the Trustee and of the Holders against the
Company or any such obligor, the Collateral or any other property
of the Company or any such obligor allowed in any such proceeding;
and
(iii) receive payment of or on account of such claims and
debt;
provided, however, that nothing contained in this Indenture shall be deemed to
give to the Trustee any right to accept or consent to any plan of reorganization
or otherwise by action of any character in any such proceeding to waive or
change in any way any right of any Holder. Any moneys collected by the Trustee
under this Section shall be applied as provided in Section 6.10 hereof.
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(e) Trustee Need Not Have Possession of Bonds. All proofs of
claim, rights of action and rights to assert claims under this Indenture or
under any of the Bonds may be enforced by the Trustee without the possession of
the Bonds or the production thereof at any trial or other proceedings instituted
by the Trustee. In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the Bonds to which the Trustee shall be a party) the Trustee shall be held to
represent all the Holders of the Bonds and it shall not be necessary to make any
such Holders parties to such proceedings.
(f) Suit to Be Brought for Ratable Benefit of Holders. Except
with respect to a suit, action or other proceeding at law brought to seek moneys
owed to the Trustee, any suit, action or other proceeding at law, in equity or
otherwise which is instituted by the Trustee under any of the provisions of this
Indenture or the Bonds shall be for the equal, ratable and common benefit of all
the Holders, subject to the provisions of this Indenture.
(g) Trustee May Be Restored to Former Position and Rights in
Certain Circumstances. If the Trustee institutes any proceeding to enforce any
right, power or remedy under this Indenture or the Bonds by foreclosure, entry
or otherwise, and such proceedings are determined adversely to the Trustee, then
and in every such case the Company and the Trustee shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
the Trustee shall continue as if no such proceedings had been taken.
SECTION 6.4 Holders May Demand Enforcement of Rights by
Trustee. If any Event of Default shall have occurred and shall be continuing,
the Trustee shall, subject to the terms of the Intercreditor Agreement, upon the
written request of the Required Holders proceed to institute one or more suits,
actions or proceedings at law, in equity or otherwise, or take any other
appropriate remedy, to enforce payment of the principal of, or premium (if any)
or interest on, the Bonds, to deliver notice to the Collateral Agent in
accordance with the Intercreditor Agreement requesting that the Collateral Agent
foreclose under the Security Documents or to sell the Collateral under a
judgment or decree of a court or courts of competent jurisdiction or under the
power of sale granted in the Security Documents, or the Trustee may, subject to
the terms of the Intercreditor Agreement, take such other appropriate legal,
equitable or other remedy, as the Trustee, which may be advised by counsel,
deems reasonably designed to protect and enforce any of the rights or powers of
the Trustee or the Holders, or, in case such Holders request a specific method
of enforcement permitted hereunder, in the manner required, subject to the terms
of the Intercreditor Agreement, provided that such action shall not be otherwise
than in accordance with Law and the provisions of this Indenture, and the
Trustee, subject to Section 10.1, shall have the right to decline to follow any
such request if the Trustee in good faith shall determine that the suit,
proceeding or exercise of the remedy so requested would expose the Trustee to
personal liability or expense.
SECTION 6.5 Control by Holders. The Required Holders shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee, provided that (i) such direction shall not be in
conflict with any Law, this Indenture or the Intercreditor Agreement, and (ii)
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
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SECTION 6.6 Waiver of Past Defaults or Events of Default. The
Required Holders may, on behalf of the Holders of all Bonds, waive any past
Default or Event of Default and its consequences except that (i) in the case of
a Default or Event of Default in respect of a covenant or provisions hereof that
under Section 8.2 hereof cannot be modified or amended without the consent of
Holders holding at least 662/3% in aggregate principal amount of the Outstanding
Bonds, the Holders of not less than 662/3% in aggregate principal amount of the
Outstanding Bonds must vote to waive such Default or Event of Default and (ii)
in the case of a Default or Event of Default in respect of a covenant or
provisions hereof that under Section 8.2 hereof cannot be modified or amended
without the consent of each Holder affected by such modification or amendment,
each Holder affected by such Default or Event of Default must vote to waive such
Default or Event of Default. Upon any such waiver such Default shall cease to
exist and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture or the Intercreditor Agreement, but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon.
SECTION 6.7 Holder May Not Bring Suit Except Under Certain
Conditions. A Holder shall not have the right to institute any suit, action or
proceeding at law or in equity or otherwise for the appointment of a receiver or
for the enforcement of any other remedy under or upon this Indenture, unless:
(a) such Holder previously has given written notice to the
Trustee of a continuing Event of Default;
(b) the Required Holders (or, in the case of an Event of
Default described in Section 6.1(a), the Holders of at least twenty-five percent
(25%) in aggregate principal amount of the Outstanding Bonds) request the
Trustee in writing to institute such action, suit or proceeding;
(c) the Trustee refuses or neglects to institute any such
action, suit or proceeding for sixty (60) days after the Trustee receives such
notice;
(d) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Required Holders; and
(e) the institution of such suit, action or proceeding is not
prohibited by the Intercreditor Agreement.
It is understood and intended that no one or more of the
Holders has any right in any manner whatever hereunder or under the Bonds to (i)
surrender, impair, waive, affect, disturb or prejudice the Lien of the Security
Documents on any property subject thereto or the rights of the Holders of any
other Bonds, (ii) obtain or seek to obtain priority or preference over any other
such Holder or (iii) enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all the
Holders, subject to the provisions of this Indenture and the Intercreditor
Agreement.
SECTION 6.8 Undertaking to Pay Court Costs. All parties to
this Indenture, and each Holder by his acceptance of a Bond, shall be deemed to
have agreed that any court may in its discretion require, in any suit, action or
proceeding for the enforcement of any right or remedy hereunder, or in any suit
against the Trustee for any action taken or omitted by it as
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Trustee hereunder, the filing by any party litigant in such suit, action or
proceeding of any undertaking to pay the costs of such suit, action or
proceeding, and that such court may, in its discretion, assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
action or proceeding having due regard to the merits and good faith of the
claims or defenses made by such party litigant; provided, however, that the
provisions of this Section 6.8 shall not apply to (a) any suit, action or
proceeding instituted by the Trustee, (b) any suit, action or proceeding
instituted by any Holder or group of Holders holding in the aggregate more than
ten percent (10%) in aggregate principal amount of the Outstanding Bonds (other
than with respect to the Trustee if it is an adverse party in such suit, action
or proceeding) or (c) any suit, action or proceeding instituted by any Holder
for the enforcement of the payment of the principal of, or premium (if any) or
interest on, any of the Bonds, on or after the respective due dates expressed
therein (other than with respect to the Trustee if it is an adverse party in
such suit, action or proceeding).
SECTION 6.9 Right of Holders to Receive Payment Not to Be Impaired. Anything in
this Indenture to the contrary notwithstanding, the right of any Holder to
receive payment of the principal of, premium (if any) and interest on, a Bond,
on or after the respective due dates expressed in such Bond (or, in case of
redemption, on the Redemption Date fixed for such Bond), or to institute suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.10 Application of Moneys Collected by Trustee. At any time when the
Company is in default of payment of fees owed to the Trustee or following the
application of funds as provided in the Intercreditor Agreement, any money
collected or to be applied by the Trustee pursuant to this Article VI in respect
of the Bonds of a series, together with any other moneys which may then be held
by the Trustee under any of the provisions of this Indenture as security for the
Bonds of such series (other than moneys at the time required to be held for the
payment of specific Bonds of such series at their stated maturities or at a time
fixed for the redemption thereof) shall be applied in the following order from
time to time, on the date or dates fixed by the Trustee:
FIRST: to the payment of all amounts due the Trustee or any
predecessor Trustee under Section 10.7 Thereof;
SECOND: if the unpaid principal amount of the Outstanding Bonds of
such series or any of them has not become due, to the payment of any
interest in default, in the order of the maturity of the payments
thereof, with interest at the rates specified in the respective Bonds
of such series in respect of overdue payments (to the extent that
payment of such interest shall be legally enforceable) on the payments
of interest then overdue;
THIRD: if the unpaid principal amount of a portion of the
Outstanding Bonds of such series has become due, first to the payment
of accrued interest on all Outstanding Bonds of such series in the
order of the maturity of the payments thereof, with interest at the
respective rates specified in the Bonds of such series for overdue
payments of principal, premium (if any) and (to the extent that payment
of such interest shall be
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legally enforceable) interest then overdue, and next to the payment of
the unpaid principal amount of the portion of all Outstanding Bonds of
such series then due;
FOURTH: if the unpaid principal amount of all the Outstanding
Bonds of such series has become due, first to the payment of the whole
amount then due and unpaid upon the Outstanding Bonds of such series
for interest, including interest at the respective rates specified in
the Bonds of such series for overdue payments on principal, premium (if
any) and (to the extent that payment of such interest shall be legally
enforceable) interest then overdue and second, to the payment of the
whole amount then due and unpaid upon the Outstanding Bonds of such
series for principal and premium (if any); and
FIFTH: if the unpaid principal amount of all the Outstanding Bonds
of such series has become due, and all of the Outstanding Bonds of such
series shall have been fully paid, any surplus then remaining shall be
paid to the Company, or to whomsoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct;
provided, however, that all payments in respect of the Bonds of a
series to be made pursuant to clauses "SECOND" through "FOURTH" of this
Section 6.10 shall be made ratably to the Holders of Bonds of such
series entitled thereto, without discrimination or preference, based
upon the ratio of (i) the unpaid principal amount of the Bonds of such
series in respect of which such payment is to be made that are held by
each such Holder to (ii) the unpaid principal amount of all Bonds of
such series.
SECTION 6.11 Bonds Held by Certain Persons Not to Share in
Distribution. Any Bonds known to the Trustee to be owned or held by, or for the
account or benefit of, the Company or an Affiliate of the Company shall not be
entitled to share in any payment or distribution provided for in this Article VI
until all Bonds held by other Persons have been indefeasibly paid in full.
SECTION 6.12 Waiver of Appraisement, Valuation, Stay, Right to
Marshalling. To the full extent it may lawfully do so, the Company, for itself
and for any other Person who may claim through or under it, hereby:
(a) agrees that neither it nor any such Person will set up,
plead, claim or in any manner whatsoever take advantage of, any appraisal,
valuation, stay, extension or redemption laws, now or hereafter in force in any
jurisdiction which may delay, prevent or otherwise hinder (i) the performance or
enforcement of this Indenture, (ii) the foreclosure of the Security Documents,
(iii) the sale of any of the Collateral or (iv) the putting of the purchaser or
purchasers thereof into possession of such Collateral immediately after the sale
thereof;
(b) waives all benefit or advantage of any such Laws;
(c) consents and agrees that the Collateral may be sold by the
Collateral Agent as an entirety or in parts; and
(d) waives and releases all rights to have the Collateral
marshaled upon any foreclosure, sale or other enforcement of this Indenture or
the Security Documents.
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SECTION 6.13 Remedies Cumulative; Delay or Omission Not a
Waiver. Each and every right, power and remedy herein specifically given to the
Trustee shall be cumulative and shall be in addition to every other right, power
and remedy herein specifically given or now or hereafter existing at law, in
equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Trustee
and the exercise or the commencement of the exercise of any right, power or
remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy, and no delay or
omission by the Trustee in the exercise of any right, power or remedy or in the
pursuance of any remedy shall impair any such right, power or remedy or to be
construed to be a waiver of any default on the part of the Company or be an
acquiescence therein.
SECTION 6.14 The Intercreditor Agreement. Simultaneously with the execution and
delivery of this Indenture and the Depositary Agreement, the Trustee shall enter
into the Intercreditor Agreement as a Secured Party thereunder on behalf of
itself and all Holders of the Outstanding Bonds and all future Holders of any of
the Bonds. All rights, powers and remedies available to the Trustee and the
Holders of the Outstanding Bonds and all future Holders of any of the Bonds with
respect to the Security Documents shall be subject to the Intercreditor
Agreement. In the event of any conflict or inconsistency between the terms and
provisions of this Indenture and the terms and provisions of the Intercreditor
Agreement, the terms and provisions of the Intercreditor Agreement shall govern
and control. By their purchase of the Bonds and by the sale of the Bonds, the
Holders and the Company, respectively, authorize and direct the Trustee to enter
into the Intercreditor Agreement. Any actions taken by the Trustee as Secured
Party under the Intercreditor Agreement shall be subject to the terms of Section
11.13 of this Indenture. The Trustee shall have no responsibility or liability
for the acts of the Collateral Agent under the Intercreditor Agreement.
SECTION 6.15 The Depositary Agreement. On the Closing Date, the Collateral Agent
shall enter into the Depositary Agreement on behalf of the Trustee, all Holders
of the Outstanding Bonds, all future Holders of any Bonds and all other present
and future Secured Parties. In the event of any conflict or inconsistency
between the terms and provisions of this Indenture and the terms and provisions
of the Depositary Agreement, the terms and provisions of the Depositary
Agreement shall govern and control. By their purchase of the Bonds and by the
sale of the Bonds, the Holders and the Company, respectively, authorize and
direct the Trustee to direct the Collateral Agent to enter into the Depositary
Agreement. The Trustee shall have no liability for the acts of the Securities
Intermediary or the Collateral Agent under the Depositary Agreement.
ARTICLE VII
ACTS OF HOLDERS
SECTION 7.1 Acts of Holders. Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders (collectively, an "Act" of such Holders, which term also
shall refer to the instrument or instruments and/or record embodying or
evidencing the same) may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in
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Person or by agent or proxy duly appointed in writing. Except as herein
otherwise expressly provided, any such Act shall become effective when such
instrument or instruments are delivered to the Trustee, and when it is
specifically required herein, to the Company. Proof of execution of any such
instrument or instruments or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section 7.1.
SECTION 7.2 Proof of Execution of Instruments and of Holding of Bonds. Proof of
execution of any instrument by a Holder, of a writing appointing any agent of a
Holder or of a written proxy of a Holder and proof of the holding by any Person
of any of the Bonds shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any Person of any such instrument or
writing may be proved by the certificate of any notary public or other officer
of any jurisdiction authorized to take acknowledgments of deeds or administer
oaths that the Person executing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution sworn to
before any such notary or other such officer, and where such execution is by an
officer of a corporation, association or partnership, on behalf of such
corporation, association or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(b) The principal amount and serial numbers of Bonds held by any Person, the
date or dates of holding the same, and the ownership of Bonds shall be proved by
the Bonds Register and the Trustee shall not be affected by notice to the
contrary.
(c) Bonds of any series authenticated and delivered after any Act of Holders
may, and shall if required by the Trustee, bear a notation in form approved by
the Trustee as to any action taken by such Act of Holders. If the Company shall
so determine, new Bonds of any series so modified as to conform, in the opinion
of the Trustee and the Company, to such Act, may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for the
Outstanding Bonds of such series.
SECTION 7.3 Bonds Owned by the Company or Affiliate Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Bonds have concurred in any request, demand, authorization, direction, notice,
consent and waiver or other act under this Indenture, Bonds which are owned by
the Company , any Affiliate of the Company, The Williams Companies, Inc. or any
entity known by the Trustee to be an Affiliate of The Williams Companies, Inc.
shall be disregarded and deemed not to be Outstanding for the purpose of any
such determination except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Bonds for which the Trustee has received written notice of such ownership
as conclusively evidenced by the Bonds Register shall be so disregarded. The
Company shall furnish the Trustee, upon its reasonable request, with a list of
its Affiliates.
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SECTION 7.4 Right of Revocation of Action Taken. At any time prior to (but not
after) the evidencing to the Trustee, as provided in Section 7.1 hereof, of the
taking of any Act by the Holders of the percentage in aggregate principal amount
of the Bonds or of any series of Bonds specified in this Indenture in connection
with such Act, any Holder of a Bond the serial number of which is shown by the
evidence to be included in the Bond the Holders of which have consented to such
Act may, by filing written notice with the Trustee (or causing its duly
appointed agent to file written notice with the Trustee) and upon proof of
holding as provided in Section 7.2 hereof, revoke such Act so far as concerns
such Bond. Except as aforesaid, any such Act taken by the Holder of any Bond
shall be conclusive and binding upon such Holder and upon all future Holders and
owners of such Bond, and of any Bond issued in exchange therefor or in place
thereof, irrespective of whether or not any notation in regard thereto is made
upon such Bond or any Bond issued in exchange therefor or in place thereof and
shall be valid notwithstanding that such Act is taken in connection with the
transfer of such Bond to any other Person, including the Company or any
Affiliate thereof. Any Act taken by the Holders of the percentage in aggregate
principal amount of the Bonds specified in this Indenture in connection with
such Act shall be conclusively binding upon the Company, the Trustee and the
Holders of all the Bonds.
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1 Amendments and Supplements to Indenture without Consent of Holders.
This Indenture may be amended or supplemented by the Company and the Trustee at
any time and from time to time, without the consent of the Holders, by a
Supplemental Indenture authorized by a resolution of the Members of the Company
filed with, and in form satisfactory to the Trustee, solely for one or more of
the following purposes:
(a) to add additional covenants of the Company, to surrender any right or power
herein conferred upon the Company or to confer upon the Holders any additional
rights, remedies, benefits, powers or authorities that may lawfully be
conferred;
(b) to increase the assets securing the Company's obligations
under this Indenture;
(c) to provide for the issuance of Additional Bonds on the
conditions set forth in Article II hereof;
(d) for any purpose not inconsistent with the terms of this
Indenture to cure any ambiguity or to correct or supplement any provision
contained herein or in any Supplemental Indenture which may be defective or
inconsistent with any other provision contained herein or in any Supplemental
Indenture, provided that such amendments do not adversely affect Trustee or any
Holder;
(e) in connection with, and to reflect, any amendments to the provisions hereof
required by the Rating Agency in circumstances where confirmation of the ratings
of the Bonds are required under this Indenture or the Company otherwise desires
to obtain a Rating
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Reaffirmation; provided, however, that such amendments do not adversely affect
the Trustee or any Holder; or
(f) to appoint a successor Trustee in accordance with the
terms and conditions of Article XI.
SECTION 8.2 Amendments and Supplements to Indenture with Consent of Holders.
With the prior written consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Bonds of each series then
outstanding, this Indenture may be amended or supplemented by the Company and
the Trustee at any time and from time to time, for the purpose of adding any
mutually agreeable provisions to or changing in any manner or eliminating any of
the provisions of, this Indenture, and compliance with any provision hereof may
be waived; provided that, without the prior written consent of each Holder of an
Outstanding Bond of each series affected thereby, no such supplement or
amendment and no such waiver of compliance with any of the provisions hereof
shall alter or modify or waive compliance with (i) any provision governing the
amount of principal, premium (if any) or interest payable upon any Bonds of any
series, (ii) any provision governing the time of payment of principal of or
premium or interest on any Bonds of any series, (iii) any provision governing
the dates of maturity of any Bonds of any series or (iv) any provision of this
Article VIII. Notice of any such amendment shall be given by the Company to any
Rating Agency then maintaining a rating for the Bonds.
SECTION 8.3 Trustee Authorized to Join in Amendments and Supplements; Reliance
on Counsel. The Trustee is authorized to join with the Company in the execution
and delivery of any Supplemental Indenture or amendment permitted by this
Article VIII and in so doing shall be fully protected by an Opinion of Counsel
that such Supplemental Indenture or amendment is so permitted and has been duly
authorized by the Company and that all things necessary to make it a valid and
binding agreement have been done.
SECTION 8.4 Effect of Supplemental Indentures. Upon the execution of any
Supplemental Indenture under this Article VIII, this Indenture shall be modified
in accordance therewith, and such Supplemental Indenture shall form a part of
this Indenture for all purposes; and every Holder of Bonds therefore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 8.5 Reference in Bonds to Supplemental Indentures. Bonds authenticated
and delivered after the execution of any Supplemental Indenture pursuant to this
Article VIII may, and shall if required by the Company, bear a notation in form
approved by the Company and the Trustee as to any matter provided for in such
Supplemental Indenture; and, in such case, suitable notation may be made upon
Outstanding Bonds after proper presentation and demand. If the Company shall so
determine, new Bonds so modified as to conform, in the opinion of the Company
and the Trustee, to any such Supplemental Indenture may be prepared and executed
by the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Bonds.
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ARTICLE IX
SATISFACTION AND DISCHARGE
SECTION 9.1 Satisfaction and Discharge of Indenture. This Indenture shall upon
request of the Company cease to be of further effect (except as hereinafter
expressly provided), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when:
(a) the Company shall have indefeasibly paid in full the principal of, premium,
if any, and interest on all of the Outstanding Bonds in accordance with the
terms hereof and of the Bonds, and all other amounts, if any, for which the
Company is obligated hereunder or under any other Transaction Document (in
respect of the Bonds) as and when the same shall have become due and payable;
and
(b) the Company shall have delivered to the Trustee an Officer's Certificate
stating that the condition set forth in the preceding clause (a) has been
complied with.
Upon satisfaction of the aforesaid conditions, the Trustee
shall, upon receipt of a written request from the Company, acknowledge in
writing the satisfaction and discharge of this Indenture and take all other
action reasonably requested by the Company to evidence the termination of any
and all Liens created with respect to this Indenture or the Security Documents.
Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, the obligations of the Company and the Trustee under
Section 10.7 hereof and this Article IX shall survive.
Upon satisfaction and discharge of this Indenture as provided
in this Section 9.1, the Trustee shall assign, transfer and turn over to or upon
the order of the Company any and all money, securities and other property then
held by the Trustee for the benefit of the Holders.
ARTICLE X
THE TRUSTEE
SECTION 10.1 Certain Duties and Responsibilities of Trustee. (a) Except
during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by any provision
hereby are specifically required to be furnished to the Trustee,
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the Trustee shall be under a duty to examine the same to determine whether or
not they appear on their face to conform to the requirements of this Indenture,
provided that the Trustee may rely upon an Opinion of Counsel in making such
determinations.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that
(i) this subsection (c) shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by an Authorized Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the
direction of the Holders of at least a majority in principal amount of
the Outstanding Bonds; and
(iv) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture, the Depositary Agreement and the Intercreditor Agreement relating to
the conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
(e) The Trustee shall deliver to each Holder of an Initial Bond, promptly upon
receipt thereof, duplicates or copies of all notices, requests, instruments and
other documents received by it in connection with the Project or under or
pursuant to this Indenture, to the extent that the same have not been furnished
hereto or thereto to such Holders.
(f) The Trustee shall not be responsible for insuring the Project or determining
whether any insurance complies with the requirements of this Indenture or for
collecting any insurance moneys and shall have no responsibility for the
financial, physical or other condition of the Project.
(g) The Trustee shall not be responsible for the creation,
perfection, continuation or priority of any security interest in or Lien on the
Collateral.
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SECTION 10.2 Notice of Defaults. If payment of any interest on any Bond is not
made when it becomes due and payable and such failure continues unremedied for a
period of three (3) days, the Trustee shall, as soon thereafter as practicable,
notify the Company that it has failed to make interest payments by telephone or
telecopy. Any telephonic notice shall be promptly confirmed in writing. Within
three (3) days after the occurrence of any Event of Default of which a
Responsible Officer of the Trustee has actual knowledge, the Trustee shall
transmit by mail to all Holders of Bonds, as their names and addresses appear in
the Bonds Register, notice of such Event of Default known to the Trustee, unless
such Event of Default shall have been cured or waived.
Except as otherwise expressly provided herein, the Trustee
shall not be bound to ascertain or inquire as to the performance or observance
of any of the terms, conditions, covenants or agreements herein, in the Security
Documents, or of any of the documents executed in connection with the Bonds, or
as to the existence of a Default or an Event of Default thereunder, and shall
not be deemed to have actual knowledge of a Default or an Event of Default
unless the Trustee shall have been notified in writing in accordance with the
terms hereof.
SECTION 10.3 Certain Rights of Trustee(a) . The Trustee may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Debt or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company shall be
sufficiently evidenced by written instrument signed by an Authorized Officer of
the Company;
(c) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence is herein
specifically prescribed to be relied upon) may, in the absence of bad faith on
its part, rely upon a certificate of an Authorized Officer of the Company
delivered to the Trustee;
(d) the Trustee may consult with counsel and the written advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities and ordinary and extraordinary compensation which might be incurred
by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of Debt or other paper or
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document, nor shall it be obligated to review the financial statements of the
Company to determine whether the Company is in compliance with its covenants
contained herein;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder; and
(h) the Trustee may at any time request written instructions from the Required
Holders with respect to the interpretation of this Agreement or with respect to
any action to be taken or suffered or not taken or any condition to be satisfied
hereunder, and upon receipt of any such written instructions the Trustee shall
be entitled to rely conclusively thereon.
SECTION 10.4 Not Responsible for Recitals or Issuance of Bonds. The recitals
contained herein and in the Bonds, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Bonds. The Trustee shall not be accountable for the use or application by the
Company of Bonds or the proceeds thereof.
SECTION 10.5 May Hold Bonds. The Trustee or any other agent of the Company, in
its individual or any other capacity, may become the owner or pledgee of Bonds
and may deal with the Company with the same rights it would have if it were not
Trustee or such other agent.
SECTION 10.6 Money Held in Trust. Money held by the Trustee in trust hereunder
need not be segregated from other funds except to the extent required by Law.
The Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Company.
SECTION 10.7 Compensation; Reimbursement; Indemnification. The Company agrees
(a) to pay to the Trustee from time to time reasonable ordinary compensation and
from time to time extraordinary compensation for all services rendered by it
hereunder (to the extent permitted by Law) (b) except as otherwise expressly
provided herein, to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances (provided that the Trustee shall be under
no obligation to make advances) incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation and
the reasonable expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its gross
negligence or bad faith, and (c) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. All
indemnifications and releases from liability granted hereunder to the Trustee
shall extend to its officers, directors, employees, agents, successors and
assigns.
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SECTION 10.8 Eligibility. There shall at all times be a Trustee hereunder which
shall be a corporation either (a) having a combined capital and surplus of at
least $100,000,000 or (b) having a combined capital and surplus of at least $
10,000,000 and being a wholly-owned subsidiary of a corporation having a
combined capital and surplus of at least $100,000,000, and in each case subject
to supervision or examination by Federal or state or District of Columbia
authority and having a corporate trust office in New York, New York to the
extent there is such an institution eligible and willing to serve. If such
corporation publishes reports of condition at least annually, pursuant to Law or
to the requirements, of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article X.
SECTION 10.9 Resignation and Removal; Appointment of Successor(a) . (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article X shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 10.10 hereof.
(b) The Trustee may resign at any time by giving written notice thereof to the
Company, provided that in the event the Trustee is also the Collateral Agent and
Securities Intermediary, it must also at the same time resign as Collateral
Agent and Securities Intermediary. If the instrument of acceptance by a
successor Trustee required by Section 10.10 hereof shall not have been delivered
to the Trustee within thirty (30) days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by act of the
Required Holders of the Outstanding Bonds, delivered to the Trustee and to the
Company.
(d) If at any time:
(i) the Trustee ceases to be eligible under Section 10.8
hereof and falls to resign after written request therefor by the Company or by
any such Holder, or
(ii) the Trustee becomes incapable of acting or is adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property is
appointed or any public officer takes charge or control of the Trustee or of its
property of affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company by a resolution of its
Members or (ii) the Required Holders may remove the Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of action, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a resolution of its Members, shall promptly appoint a
successor Trustee or Trustees and a successor Collateral Agent and successor
Securities Intermediary and shall comply with the applicable requirements of
Section 10.10 hereof. If, within thirty (30) days after such resignation,
removal or incapability, or the occurrence of such vacancy, no successor Trustee
shall have been so
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appointed by the Company a successor Trustee shall be appointed by the Required
Holders by written instrument delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 10.10
hereof, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner required by
Section 10.10 hereof, any Holder who has been a bona fide Holder of a Bond for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each removal of the
Trustee and each appointment of a successor Trustee by mailing written notice of
such event by first-class mail, postage prepaid, to all Holders of Bonds as
their names and addresses appear in the Bonds Register and to the Rating Agency.
Each notice shall include the name of the successor Trustee and the address of
its principal trust office.
SECTION 10.10 Acceptance of Appointment by Successor(a) . (a) If a successor
Trustee is appointed hereunder, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trust and duties of the retiring Trustee; but, on the request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article X.
SECTION 10.11 Merger, Conversion, Consolidation or Succession to Business. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be otherwise qualified and eligible under this Article X,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Bonds shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Bonds so authenticated with the same effect as if
such successor Trustee had itself authenticated such Bonds.
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SECTION 10.12 Maintenance of Offices and Agencies(a) . (a) There shall at all
times be maintained in the Borough of Manhattan, the City of New York, and in
such other places of payment, if any, as shall be specified for the Bonds of any
series in the related Supplemental Indenture, an office or agency of the Paying
Agent where Bonds may be presented or surrendered for registration of transfer
or exchange and for payment of principal, premium, if any, and interest. Such
Paying Agent shall be initially:
Bank One Trust Company, N.A.
14 Wall Street
8th Floor, Suite 4607
New York, NY 10005
(b) There shall at all times be a Registrar and a Paying Agent hereunder. In
addition, at any time when any Bonds remain Outstanding, the Trustee may appoint
an authenticating agent or agents with respect to the Bonds of one or more
series which shall be authorized to act on behalf of the Trustee to authenticate
Bonds of such series issued upon original issuance, exchange, registration of
transfer or partial redemption thereof or pursuant to Section 2.8, and Bonds so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder (it being understood that wherever reference is made in this Indenture
to the authentication and delivery of Bonds by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an authenticating agent
and a certificate of authentication executed on behalf of the Trustee by an
authenticating agent). If an appointment of an authenticating agent with respect
to the Bonds of one or more series shall be made pursuant to this Section
10.12(b), the Bonds of such series may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternate certificate of
authentication in the following form:
This Bond is one of the series of Bonds referred to in the
within-mentioned Indenture.
________________________________________
Trustee
By:_____________________________________
Authenticating Agent
By:_____________________________________
Authorized Signatory
Any authorized agent shall be a bank or trust company, shall
be a Person organized and doing business under the laws of the United States or
any State thereof, having a combined capital and surplus of at least
$250,000,000 and shall be authorized under such laws to exercise corporate trust
powers, subject to supervision by Federal or state authorities. If such
authorized agent publishes reports of its condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this
47
<PAGE>
Section 10.12, the combined capital and surplus of such authorized agent shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time an authorized agent shall cease
to be eligible in accordance with the provisions of this Section 10.12, such
Authorized Agent shall resign immediately in the manner and with the effect
specified in this Section 10.12. The Trustee at its office specified in Section
10.12(a) is hereby appointed as Paying Agent and Bonds Registrar hereunder.
(c) Any Paying Agent (other than the Trustee) from time to time appointed
hereunder shall execute and deliver to the Trustee an instrument in which said
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 10.12, that such Paying Agent will:
(i) hold all sums held by it for the payment of principal of, and premium,
if any, and interest on Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(ii) give the Trustee within three (3) days thereafter notice of any default
by any obligor upon the Bonds in the making of any such payment of
principal, premium, if any, or interest; and
(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
Notwithstanding any other provision of this Indenture, any
payment required to be made to or received or held by the Trustee may, to the
extent authorized by written instructions of the Trustee, be made to or received
or held by a Paying Agent in the Borough of Manhattan, the City of New York, for
the account of the Trustee.
(d) Any Person into which any authorized agent may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
consolidation or conversion to which any authorized agent shall be a party, or
any corporation succeeding to the corporate trust business of any authorized
agent, shall be the successor of such authorized agent hereunder, if such
successor Person is otherwise eligible under this Section 10.12, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such authorized agent or such successor Person.
(e) Any authorized agent may at any time resign by giving written notice of
resignation to the Trustee and the Company. The Company may, and at the request
of the Trustee shall, at any time, terminate the agency of any authorized agent
by giving written notice of such termination to the authorized agent and to the
Trustee. Upon the resignation or termination of an authorized agent or in case
at any time any such authorized agent shall cease to be eligible under this
Section 10.12 (when, in either case, no other authorized agent performing the
functions of such authorized agent shall have been appointed), the Company shall
promptly appoint one or more qualified successor authorized agents approved by
the Trustee to perform the functions of the authorized agent which has resigned
or whose agency has been terminated or
48
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who shall have ceased to be eligible under this Section 10.12. The Company shall
give written notice of any such appointment to all Holders as their names and
addresses appear on the Bonds Register.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Return of Monies Held by Trustee
(a) If the principal of any Bonds becoming due, either at maturity or otherwise,
together with all interest accruing thereon to the due date, has been paid to
the Trustee for the benefit of such Holder, all interest on such Bonds shall
cease to accrue on the due date and all liability of the Company with respect
thereto shall likewise cease, except as hereinafter provided. Thereafter the
Holders of such Bonds shall be restricted exclusively to the funds so deposited
with the Trustee for any claim of whatsoever nature with respect to such Bonds,
and the Trustee shall hold such funds in trust for such Holders.
(b) Moneys so deposited with the Trustee which remain unclaimed three years
after the date payment thereof becomes due shall, at the request of the Company
if at the time, to the knowledge of the Trustee, no Event of Default shall have
occurred and be continuing, be paid to the Company and the Holders of the Bonds
for which the deposit was made shall thereafter be limited to a claim against
the Company; provided, however, that the Trustee, before making payment to the
Company, may, at the expense of the Company, cause a notice to be published once
in a newspaper or financial journal of general circulation in the State of New
York and the City of New York, New York, stating that the moneys remaining
unclaimed will be returned to the Company after a specified date.
SECTION 11.2 Third Party Beneficiaries; No Rights Conferred on Others. Nothing
herein contained shall confer any benefit or any legal or equitable right,
remedy or claim under this Indenture upon any Person other than the parties
hereto and their respective successors and permitted assigns and the registered
Holders of the Bonds.
SECTION 11.3 Illegal Provisions Disregarded. In case any provision in this
Indenture or the Bonds shall for any reason be held invalid, illegal or
unenforceable in any respect, this Indenture or the Bonds, as the case may be,
shall be construed as if such provision had never been contained herein.
SECTION 11.4 Substitute Notice. If for any reason it shall be impossible to make
publication of any notice required hereby in a newspaper or financial journal of
general circulation in the State of New York and the City of New York, New York,
then such publication or other notice in lieu thereof as shall be made with the
approval of the Trustee shall constitute a sufficient giving of such notice.
SECTION 11.5 Notice to the Rating Agency. Upon the occurrence of any Event of
Default of which a Responsible Officer of the Trustee has actual knowledge
hereunder, the Trustee shall promptly give notice thereof to the Rating Agency.
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SECTION 11.6 Notices. (a) Any notice, request, complaint, demand,
communication or other paper shall be sufficiently given and shall be deemed
given when delivered or mailed by registered or certified mail, postage prepaid,
or sent by overnight delivery, telecopy, telegram or telex, addressed to the
parties as follows:
The Company: Cleco Evangeline LLC
2030 Donahue Ferry Road
Pineville, Louisiana 71367
Attention: Chief Financial Officer
Telephone: (318) 484-7400
Fax: (318) 484-7777
Trustee: Bank One Trust Company, N.A.
27th Floor
201 St. Charles Avenue
New Orleans, LA 70170
Telephone: (504) 623-1640
Fax: (504) 623-1432
Attention: Denis Milliner
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Telephone: (212) 553-0300
Fax: (212) 553-4997
Attention: Project Finance Group
The above parties may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
(b) Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid or made, given or
furnished by courier service, to each Holder, at its address as it appears in
the Bonds Register, not later than the latest date, if any, and not earlier than
the earliest date, if any, prescribed for the giving of such notice. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver. In any case where notice to Holders is given by mail or courier service,
neither the failure to give such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders, and any notice that is mailed
50
<PAGE>
or sent by courier service in the manner herein provided shall be conclusively
presumed to have been duly given.
SECTION 11.7 Successors and Assigns. All of the covenants, promises and
agreements in this Indenture by or on behalf of the Company, or by or on behalf
of the Trustee, shall bind and inure to the benefit of and be enforceable by
their respective successors and assigns, whether so expressed or not.
SECTION 11.8 Headings for Convenience Only. The descriptive headings in this
Indenture are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
SECTION 11.9 Counterparts. The Indenture may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original; but such counterparts shall together constitute but one and the
same instrument.
SECTION 11.10 APPLICABLE LAW. (a) THIS INDENTURE AND THE BONDS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW
EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS INDENTURE AND THE BONDS
AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
INDENTURE, EACH OF THE COMPANY AND THE TRUSTEE HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE
COMPANY HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION
SYSTEMS AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE
FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY ACTION
OR PROCEEDING IN THE STATE OF NEW YORK. IF FOR ANY REASON SUCH DESIGNEE,
APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE COMPANY
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE
TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE TRUSTEE. EACH
OF THE COMPANY AND THE TRUSTEE IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE COMPANY AND THE TRUSTEE AT ITS ADDRESS REFERRED TO IN SECTION 11.6. EACH OF
THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY DO SO UNDER
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<PAGE>
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS INDENTURE BROUGHT IN THE COURTS REFERRED TO ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES ALL RIGHT OF
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS INDENTURE OR ANY MATTER ARISING HEREUNDER.
SECTION 11.11 Holidays. If any date for the payment of principal, premium (if
any) or of interest on the Bonds is not a Business Day, then such payment shall
be due on the first Business Day thereafter.
SECTION 11.12 Limitation of Liability. Notwithstanding anything to the contrary
contained in this Indenture, the liability and obligation of the Company to
perform and observe and make good the obligations contained in this Indenture
shall not be enforced by any action or proceeding wherein damages or any money
judgment or any deficiency judgment or any judgment establishing any personal
obligation or liability shall be sought, collected or otherwise obtained against
any member, manager, officer, director or shareholder or related Person of the
Company, and the Trustee, for itself and its successors and assigns, irrevocably
waives any and all right to sue for, seek or demand any such damages, money
judgment, deficiency judgment or personal judgment against any member, manager,
officer, director or shareholder or related Person of the Company under or by
reason of or in connection with this Indenture and agrees to look solely to the
Company and the security and Collateral held in connection with the Security
Documents for the enforcement for such obligations of the Company under this
Indenture.
SECTION 11.13 Trustee Actions as Secured Party Under Intercreditor Agreement.
The Trustee shall not take any action in its capacity as Secured Party under the
Intercreditor Agreement, including, without limitation, the giving of any
notice, direction or consent thereunder or the waiver of any of the terms
thereof, unless directed to do so by the Required Holders, and any such action
so taken by the Trustee upon the direction of the Required Holders shall be
treated as having been taken on behalf of the Holders of all Bonds then
Outstanding.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Trust Indenture to be executed by one of its duly Authorized Officers, all as of
the day and year first above written.
CLECO EVANGELINE LLC
By: /s/ Thomas J. Howlin
Name: Thomas J. Howlin
Title: Manager
BANK ONE TRUST COMPANY, N.A.
as Trustee
By: /s/ Denis L. Milliner
Name: Denis L. Milliner
Title: Reginal Account Executive Authorized
Banking Officer
<PAGE>
53
Schedule I to
Trust Indenture
PRINCIPAL AMORTIZATION
The principal of the Initial Bonds due September 1, 2019 will be payable in
semiannual installments, commencing March 1, 2001, as follows:
Principal Amount Payable on $218,600,000
Bonds Issued
Principal Payment Date Pursuant to this Indenture
March 1, 2001 $2,186,000
September 1, 2001 2,186,000
March 1, 2002 2,733,000
September 1, 2002 2,733,000
March 1, 2003 3,006,000
September 1, 2003 3,006,000
March 1, 2004 2,459,000
September 1, 2004 2,459,000
March 1, 2005 3,006,000
September 1, 2005 3,006,000
March 1, 2006 3,552,000
September 1, 2006 3,552,000
March 1, 2007 3,826,000
September 1, 2007 3,826,000
March 1, 2008 4,099,000
September 1, 2008 4,099,000
March 1, 2009 3,552,000
September 1, 2009 3,552,000
March 1, 2010 4,099,000
September 1, 2010 4,099,000
March 1, 2011 4,645,000
September 1, 2011 4,645,000
March 1, 2012 5,192,000
September 1, 2012 5,192,000
March 1, 2013 6,012,000
September 1, 2013 6,012,000
March 1, 2014 7,378,000
September 1, 2014 7,378,000
March 1, 2015 8,198,000
September 1, 2015 8,198,000
March 1, 2016 9,017,000
September 1, 2016 9,017,000
March 1, 2017 10,383,000
S-1
<PAGE>
September 1, 2017 10,383,000
March 1, 2018 11,202,000
September 1, 2018 11,202,000
March 1, 2019 14,755,000
September 1, 2019 14,755,000
- --------------------------------------------------------------------------------
<PAGE>
S-2
Exhibit A
to Trust Indenture
Definitions
The following terms shall have the respective meanings
assigned to them:
"Acceptable Credit Support" means (a) an irrevocable letter of
credit issued by a bank or other financial institution with a combined capital
and surplus of at least $1,000,000,000 that is rated at least "A2" by Moody's
and at least "A" by S&P, provided that (i) the Company cannot in any event be
named as the account party for any letter of credit issued to support Cleco's
obligations under the Equity Contribution Agreement and (ii) the Company cannot
be named as the account party for any letter of credit provided for the Debt
Service Reserve Account or the Major Maintenance Reserve Account unless (x) the
minimum projected Debt Service Coverage Ratio for each fiscal year during the
remaining term of the Bonds is equal to or greater than 1.85 to 1.0, as
confirmed in writing by the Independent Engineer, and (y) the Rating Agency
confirms in writing that the naming of the Company as an account party for such
letter of credit will not result in the Bonds being rated lower than "Baa3" by
the Rating Agency, and provided further that if at any time after such
confirmation by the Rating Agency the Bonds are rated lower than "Baa3" by the
Rating Agency, any such letter of credit in respect of which the Company is
named as the account party will cease constituting Acceptable Credit Support, or
(b) an unconditional guarantee from (i) with respect to any guarantee provided
for the Debt Service Reserve Account, a Person (including Cleco but not
including the Company) that has a long-term unsecured debt rating of at least
"Baa2" from Moody's and at least "BBB" from S&P, and (ii) with respect to any
other guarantee, Cleco, so long as Cleco has a long-term unsecured debt rating
of at least as high as it was rated by Moody's and S&P on the Closing Date.
"Account Collateral" has the meaning specified in Section 2.3
of the Depositary Agreement.
"Accounts" means, collectively, the accounts established
between the Company and the Securities Intermediary pursuant to the Depositary
Agreement, which shall include, but not be limited to, the Construction Account,
the Revenue Account, the O&M Account, the Debt Service Payment Account, the Debt
Service Reserve Account, the Major Maintenance Reserve Account, the Distribution
Account and the Redemption Account.
"ACS LOC" means any letter of credit described in and meeting
the requirements of clause (a) of the definition of Acceptable Credit Support
for which the Company is the account party.
"ACS LOC Provider" means any commercial bank or other
financial institution issuing an ACS LOC.
"ACS LOC Reimbursement Agreement" means an agreement to which
the Company is a party providing for the issuance of one or more ACS LOCs.
A-1
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"Act" when used with respect to any Holder, has the meaning
specified in Section 7.1 of the Indenture.
"Additional Bonds" means any additional Bonds issued pursuant
to the provisions of Section 2.3 of the Indenture.
"Additional Project Document" means any agreement entered into
after the Closing Date by or on behalf of the Company related to the
development, construction, operation, administration, maintenance or improvement
of the Project.
"Affiliate" means, with respect to a Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Allocation Certificate" means each certificate provided by
the Company pursuant to Section 3 of the Intercreditor Agreement or by the
Required Secured Parties pursuant to Section 6(c) of the Intercreditor
Agreement, as applicable, setting forth the allocation of Loss Proceeds, Title
Insurance Proceeds, Buydown Damages and Tolling Agreement Damages Payments or
cash proceeds resulting from liquidation of the Collateral among the Secured
Parties (to the extent the Secured Obligations of such Secured Parties may be
redeemed or prepaid under the applicable Financing Documents).
"Annual Operating Budget" has the meaning specified in Section
5.15.
"Approved Completion Plan" means a plan (including budget and
schedule) to construct and complete the Project using liquidated damages
payments and/or other funds available to the Company (by borrowing or otherwise,
so long as permitted under the Indenture), which plan includes a certificate of
the Company, confirmed (with customary assumptions and qualifications) as
reasonable by the Independent Engineer, stating that (a) the funds available to
the Company are reasonably expected to be sufficient to reach Completion of the
Project and (b) after reaching Completion of the Project, the minimum and
average projected Debt Service Coverage Ratios (as confirmed in writing by the
Independent Engineer) for the remaining term of the Bonds will not be less than
1.65 to 1.0 and 1.75 to 1.0, respectively.
"Approved Construction Budget and Schedule" means a
construction budget and schedule (containing customary assumptions and
qualifications) prepared by the Company for the Project and confirmed as
reasonable by the Independent Engineer as referenced in the Independent
Engineer's Report contained as an appendix to the Final Memorandum, as may
thereafter be amended in connection with an event of force majeure, an event of
default or a change order under the EPC Contract, provided that the Independent
Engineer confirms as reasonable the certification of the Company that (a) such
amendment could not reasonably be expected to result in a Material Adverse
Effect, (b) the Project is reasonably expected to achieve Completion on or prior
to the Guaranteed Completion Date and (c) the funds available to the Company are
reasonably expected to be sufficient to fund the costs of achieving Completion
on or prior to the Guaranteed Completion Date.
A-2
<PAGE>
"Authorized Officer" or "Authorized Representative" means with
respect to any Person, (i) in the case of knowledge of any default under any
Financing Document, the manager, president, general counsel, principal
accounting officer, treasurer, senior vice president, vice president or other
officer of such Person, as the case may be, who in the normal performance of his
or her operational duties would have knowledge of such default and the subject
matter relating thereto, and (ii) in all other cases, the manager, president,
general counsel, principal accounting officer, treasurer, senior vice president,
vice president or other officer or any Person authorized by the Board of
Directors (or in the case of the Company, by the operating manager or managers
thereof) of such Person, as the case may be.
"Bonds" means, collectively, the Initial Bonds issued by the
Company under the Indenture pursuant to the Bond Purchase Agreement and any
Additional Bonds which may be issued by the Company under the Indenture from
time to time in accordance with the terms thereof.
"Bond Proceeds Sub-account" means the sub-account of such name
established under the Depositary Agreement and held under account number 6800
0603 09.
"Bond Purchase Agreement" means the Bond Purchase Agreement,
dated as of the Closing Date, between the Company and the Initial Purchasers.
"Bonds Register" has the meaning specified in Section 2.5(a)
of the Indenture.
"Business Day" means any day that is not a Saturday, Sunday or
legal holiday in the State of New York, or a day on which banking institutions
chartered by the State of New York, or the United States, are legally required
or authorized to close.
"Buydown Damages" has the meaning specified in Section
3.3(a)(C) of the Indenture.
"Buydown Damages Sub-account" means the sub-account of such
name established under the Depositary Agreement and held under account number
6800 0603 15.
"Change of Control" means Cleco fails to maintain a direct or
indirect interest in at least 51% of the voting and ownership interests in the
Company, unless (1) prior to the date on which the Project achieves Completion,
such failure is approved by Holders holding at least 66 2/3% of the Outstanding
Bonds, and (2) from and after the date on which the Project achieves Completion,
(a) the Rating Agency confirms in writing that such failure will not result in a
Rating Downgrade and (b) the Independent Engineer confirms that the new operator
of the Project is experienced in the operation of similar facilities in
accordance with prudent utility practice.
"Change of Control Notice" has the meaning specified in
Section 3.3(b) of the Indenture.
"Cleco" means Cleco Corporation, a Louisiana corporation.
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<PAGE>
"Cleco Business Development" has the meaning specified in
Section 5.26 of the Indenture.
"Cleco Midstream" has the meaning specified in Section 5.26 of
the Indenture.
"Closing Date" means December 15, 1999.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means (a) a first priority perfected mortgage on
the Project and the Site, all fixtures thereon and all related easements,
rights-of-way, servitudes, licenses and other real property rights of the
Company, (b) a first priority perfected security interest in all tangible and
intangible personal property of the Company, including, without limitation, (i)
all equipment, inventory and other goods used in connection with the Project,
(ii) all rights of the Company under the Project Documents, (iii) the project
accounts and all cash, securities and other property on deposit therein or
credited thereto, and (iv) all Governmental Approvals obtained in connection
with the Project (to the extent assignable), and (c) a first priority perfected
pledge of all of the membership interests in the Company.
"Collateral Agent" means Bank One Trust Company, N.A., as
collateral agent for the benefit of the Secured Parties under the Intercreditor
Agreement, together with its successors and assigns.
"Combined Exposure" has the meaning specified in the
Intercreditor Agreement.
"Commonly Controlled Entity" means, as applied to the Company,
any Person who is a member of a group which is under common control with the
Company, who together with the Company, is treated as a single employer within
the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.
"Company" means Cleco Evangeline LLC, a Louisiana limited
liability company.
"Completion" means and shall occur when (1) all work to be
performed by the contractor under the EPC Contract shall have been performed
(other than "punch list" items not to exceed $3,903,000 in respect of which the
Company has reserved funds for the payment thereof) in accordance with the terms
of the EPC Contract, (2) all acceptance or other tests under the EPC Contract
shall have been performed and any defects in the Project shall have been
corrected to the satisfaction of the Company and the Independent Engineer (or,
to the extent such defects have not been corrected, the EPC Contractor shall
have paid in full the liquidated damages due in respect thereof), (3) the EPC
Contractor shall have paid in full any other liquidated damages payable under
the EPC Contract, unless such liability to pay liquidated damages shall have
been fully reserved for with a bond or irrevocable letter of credit issued by a
financial institution with a rating of at least "A2" by Moody's and at least "A"
by S&P, (4) all Governmental Approvals required for the operation of the Project
shall have been obtained, (5) the Project shall be capable of being operated
safely in accordance with all applicable laws and Governmental Approvals, (6) no
defective or incomplete portions of the Project shall exist that have or could
reasonably be expected to have a material adverse effect on the operation or
performance thereof in accordance with the operating and performance conditions
specified in
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the EPC Contract, and (7) the Project shall have been
interconnected with all utilities necessary for the operation thereof; provided,
however, that the Project shall be deemed to have achieved Completion
notwithstanding its failure to satisfy the condition set forth in clause (2)
above if (a) the Company shall have redeemed an amount of Bonds such that the
minimum and average projected Debt Service Coverage Ratios for the term of the
Bonds are greater than or equal to 1.65 to 1 and 1.75 to 1, respectively and (b)
the Company shall have taken such other measures as the Rating Agency may
require in order to enable it to confirm (and upon which the Rating Agency shall
confirm) in writing that such failure to achieve Completion on or before the
Guaranteed Completion Date will not lower the rating of the Bonds below the
rating assigned to the Bonds by the Rating Agency on the Closing Date.
"Consent" means a consent to assignment executed by a Project
Party in favor of the Collateral Agent in form and substance similar to the form
of consent to be attached as an exhibit to this Indenture or otherwise
satisfactory in form and substance to the Required Holders.
"Construction Account" means the Account of such name
established under the Depositary Agreement and held under account number 6800
0603 01.
"Construction Costs" means all costs and expenses due and
payable by the Company to the EPC Contractor pursuant to the EPC Contract.
"Construction Debt Sub-account" means the sub-account of such
name established under the Depositary Agreement and held under account number
6800 0603 19.
"Construction Debt Service Reserve Sub-account" means the
sub-account of such name established under the Depositary Agreement and held
under account number 6800 0603 18.
"Construction Period" means the period commencing on the
Effective Date and ending on the Final Completion Date.
"Consumer Price Index" means the consumer price index as
published from time to time by the United States Department of Labor, Bureau of
Labor Statistics.
"Corporate Trust Office" means the corporate trust office of
the Trustee located in New Orleans, Louisiana, which office is, on the date of
delivery of this Indenture, located at the address specified in Section 11.6.
"Cost Overrun Certificate" has the meaning specified in the
Equity Contribution Agreement.
"Damages" has the meaning specified in Section 12(b) of the
Intercreditor Agreement.
"Debt" of any Person at any date means, without duplication,
(1) all obligations of such Person for borrowed money, (2) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(3) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the
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<PAGE>
ordinary course of business, (4) all obligations of such Person under leases
which are or should be, in accordance with GAAP, recorded as capital leases for
which such Person is liable, (5) all obligations of such Person under interest
rate or currency protection agreements or other hedging instruments, (6) all
obligations of such Person to purchase securities (or other property) which
arise out of or in connection with the sale of the same or substantially similar
securities (or property), (7) all deferred obligations of such Person to
reimburse any bank or other Person for amounts paid or advanced under a letter
of credit or other instrument, (8) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, and
(9) all Debt of others guaranteed directly or indirectly by such Person or as to
which such Person has an obligation substantially the economic equivalent of a
guarantee or other arrangement to assure a creditor against loss.
"Debt Service Coverage Ratio" means without duplication, the
ratio of (1) (a) all revenues of the Company (including interest and fee income,
business interruption and delay in start-up insurance and Loss Proceeds and
Title Insurance Proceeds deposited into the Revenue Account, but excluding Loss
Proceeds and Title Insurance Proceeds not deposited into the Revenue Account and
other similar non-recurring receipts not deposited into the Revenue Account) for
such period minus (b) all O&M Costs for such period and all deposits into the
Major Maintenance Reserve Account during such period, to (2) the sum of (a) all
principal and interest (other than interest during construction and other
similar payments which are pre-funded with the proceeds of a debt issuance or
otherwise) payments due with respect to outstanding (without duplication) Bonds
and other Permitted Debt (other than Subordinated Debt) during such period, and
(b) all unpaid principal and interest (other than interest during construction
and other similar payments which are pre-funded with the proceeds of a debt
issuance or otherwise) payments due with respect to outstanding (without
duplication) Bonds and other Permitted Debt (other than Subordinated Debt)
during all previous periods, all as determined on a cash basis in accordance
with GAAP and as confirmed in writing by the Independent Engineer.
"Debt Service Payment Account" means the Account of such name
established pursuant to the Depositary Agreement and held under account number
6800 0603 04.
"Debt Service Reserve Account" means the Account of such name
established pursuant to the Depositary Agreement and held under account number
6800 0603 06.
"Debt Service Reserve Required Balance" means, at any date of
determination thereof, the sum of (a) the next succeeding semiannual principal
and interest payment on the Initial Bonds, (b) the next succeeding principal and
interest payment on the Additional Bonds, if any, and (c) the next succeeding
interest payment under any ACS LOC Reimbursement Agreement with respect to which
the Company is the obligor.
"Debt Termination Date" has the meaning specified in the
Intercreditor Agreement.
"Default" means any event or condition that, with the giving
of notice, lapse of time or failure to satisfy certain specified conditions, or
any combination thereof, would become an Event of Default.
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<PAGE>
"Default Equity Contribution" means any Equity Contribution
required to be made by Cleco pursuant to Section 2(b) of the Equity Contribution
Agreement.
"Default Equity Contribution Notice" has the meaning specified
in Section 3.3(d) of the Indenture.
"Default Equity Contribution Sub-account" means the
sub-account of such name established under the Depositary Agreement and held
under account number 6800 0603 16.
"Default Rate" means, on any date, a per annum rate of
interest equal to the higher of (i) 10.82% and (ii) the per annum rate of
interest from time to time announced by Chase Manhattan Bank in New York, New
York as its prime commercial lending rate plus 2%.
"Depositary Agreement" means the Deposit and Disbursement
Agreement, dated as of December 10, 1999, among the Company, the Collateral
Agent and the Securities Intermediary.
"Distribution Account" means the Account of such name
established under the Depositary Agreement and held under account number 6800
0603 08.
"Eligible Facility" means an "eligible facility," as that term
is defined in 15 U.S.C.ss.
79z-5a(a)(2).
"Environmental Claim" means any complaint, order, citation,
decree, demand, judgment or written notice actually received by the Company from
any Person alleging or asserting that (i) the Company or the Site is or could be
in violation of any Environmental Law or (ii) that the Company may have
liability under any Environmental Law as a result of any activity or operations
at any time conducted by the Company, including, without limitation:
(i) the existence of any Environmentally Regulated Materials
at the Site in violation of any Environmental Law;
(ii) the release or threatened release of any Environmentally
Regulated Materials generated at
the Site in violation of any Environmental Law;
(iii) remediation of any such release at the Site; and
(iv) any violation of any relevant Environmental Law in
connection with the Site.
"Environmental Laws" means any and all Laws (as well as
obligations, duties and requirements under common law) relating to: (i) noise,
emissions, discharges, spills, releases or threatened releases of pollutants,
contaminants, Environmentally Regulated Materials, materials containing
Environmentally Regulated Materials, or hazardous or toxic materials or wastes
into ambient air, surface water, groundwater, watercourses, publicly or
privately-owned treatment works, drains, sewer systems, wetlands, septic systems
or onto land surface or subsurface strata; (ii) the use, treatment, storage,
disposal, handling, manufacture, processing, distribution, transportation, or
shipment of Environmentally Regulated Materials, materials containing
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<PAGE>
Environmentally Regulated Materials or hazardous and/or toxic wastes, material,
products or by-products (or of equipment or apparatus containing Environmentally
Regulated Materials); or (iii) pollution or the protection of human health, the
environment or natural resources.
"Environmentally Regulated Materials" means (i) hazardous
materials, hazardous wastes, hazardous substances, extremely hazardous wastes,
restricted hazardous wastes, toxic substances, toxic pollutants, contaminants,
pollutants or words of similar import, as used under Environmental Laws,
including but not limited to the following: the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. 9601 et seq., the Clean Water
Act, 33 U.S.C. 1251 et seq., the Clean Air Act, 42 U.S.C.ss. 7401 et seq., the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Safe Drinking Water
Act, 42 U.S.C.ss. 3808 et seq., and the Oil Pollution Act, 33 U.S.C.ss. 2701 et
seq., and their State and local counterparts or equivalents; (ii) petroleum and
petroleum products including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas and any mixtures thereof; (iv) radon; (v) any other
hazardous, radioactive, toxic or noxious substance, material, pollutant, or
solid, liquid or gaseous waste; and (vi) any substance that, whether by its
nature or its use, is now or hereafter subject to regulation under any
Environmental Law or with respect to which any Federal, state or local
Environmental Law requires environmental investigation, monitoring or
remediation.
"EPC Contract" means the Agreement for Engineering,
Procurement and Construction Services to be executed by and between the Company
and the EPC Contractor and any Replacement Project Document entered into in
substitution therefor.
"EPC Contractor" means Cleco Midstream or such other Person
that becomes contractor under the EPC Contract.
"EPC Guaranty" means the Engineering, Procurement and
Construction Completion Guaranty to be executed by Cleco in favor of the
Company, and any Replacement Project Document entered into in substitution
therefor.
"Equity Contribution" has the meaning specified in Section 1
of the Equity Contribution Agreement.
"Equity Contribution Agreement" means the Equity Contribution
Agreement, dated as of the Closing Date, among Cleco, the Company and the
Collateral Agent.
"Equity Letter of Credit" has the meaning specified in Section
1 of the Equity Contribution Agreement.
"Equity Requisition Certificate" has the meaning specified in
Section 1 of the Equity Contribution Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
A-8
<PAGE>
"Event of Abandonment" means: (1) prior to the date of
Completion, (a) the cessation or deferral of all or substantially all
construction or completion of the Project for more than 120 consecutive days (as
such period may be extended on a day-for-day basis corresponding with the
occurrence and continuance of any event of force majeure (as defined in any of
the Project Documents) so long as the Company is diligently proceeding to
mitigate the consequences of such event) other than by reason of a Loss Event or
(b) the announcement by the Company of a decision to permanently cease or
indefinitely defer the construction or completion of the Project; or (2) after
the date of Completion, (a) the suspension for more than 120 consecutive days
(as such period may be extended on a day-for-day basis corresponding with the
occurrence and continuance of any event of force majeure (as defined in any of
the Project Documents) so long as the Company is diligently proceeding to
mitigate the consequences of such event) of all or substantially all operation
of the Project (other than (i) by reason of the failure to be dispatched or (ii)
by reason of the occurrence of a Loss Event ) or (b) the announcement by the
Company of a decision to permanently cease operation of the Project.
"Event of Default" means the occurrence of any of the events
specified in Section 6.1 of the Indenture.
"Excess Loss Event Redemption" has the meaning specified in
3.3(a)(A) of the Indenture.
"Excess Title Proceeds Redemption" has the meaning specified
in Section 3.3(a)(B)(b) of the Indenture.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Exempt Wholesale Generator" means an "exempt wholesale
generator," as that term is defined in 15 U.S.C. ss. 79z-5a(a)(1).
"Expansion Modifications" means modifications or improvements
to the Project that are designed to materially increase the net generating
capacity of the Project, provided that Expansion Modifications do not include
modifications that are Required Modifications.
"Facility" means the approximately 710 MW combined-cycle
electric generating facility with 60 MW of supplemental duct firing capability
consisting of refurbished and repowered Units 6 and 7 and three 160 MW natural
gas-fired combustion generators which is owned by the Company and located in
Evangeline Parish, Louisiana, together with the land on which the generation
units are located, the electrical substation on the site, gas pipelines that
connect the facility to the off-site pipeline system of CLE Intrastate Pipeline
Company, Inc. and the transmission lines that connect the substation with a
utility transmission system.
"Federal Bankruptcy Code" means Title 11 of the United States
Code.
"Final Completion" has the meaning specified in the EPC
Contract in effect as of the Effective Date, without giving effect to any
subsequent amendments or modifications thereto (other than such amendments or
modifications which are made in accordance with the Financing Documents).
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<PAGE>
"Final Completion Date" means the later of (a) June 1, 2001
and (b) the date on which (i) all of the conditions to Final Completion have
been fully satisfied, (ii) no Default or Event of Default has occurred and is
continuing and (iii) all of the Accounts are fully funded to their then required
levels in accordance with the Depositary Agreement.
"Final Maturity Date" means the latest stated maturity date of
any series of the Bonds.
"Final Memorandum" means the confidential private placement
memorandum of the Company, dated December 13, 1999 distributed in connection
with the offering of the Initial Bonds.
"Financing Commitments" has the meaning specified in the
Intercreditor Agreement.
"Financing Documents" means, collectively, the Bond Purchase
Agreement, the Indenture, the Bonds, the Equity Contribution Agreement, the
Depositary Agreement, the Intercreditor Agreement and the Security Documents.
"Funding Date" has the meaning specified in the Depositary
Agreement.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Gas Transportation Guaranty" means the Gas Transportation
Guaranty to be executed by Cleco in favor of the Company.
"Gas Transportation Agreement" means the Agreement for
Intrastate Transportation of Natural Gas, dated as of November 10, 1999, between
the Company and CLE Intrastate Pipeline Company, Inc., and any Replacement
Project Document entered into in substitution therefor.
"Governmental Approvals" means all governmental approvals,
authorizations, consents, decrees, permits, licenses, waivers, privileges and
filings with all Governmental Authorities required to be obtained for the
development, acquisition, construction, ownership, start-up and operation of the
Project and the sale of capacity, energy and/or ancillary services therefrom.
"Governmental Authority" means any government, governmental
department, ministry, commission, board, bureau, agency, regulatory
instrumentality of any government (central or state), judicial, legislative or
administrative body, federal, state or local, having jurisdiction over the
matter or matters in question.
"Guaranteed Completion Date" means December 1, 2000.
"Guaranty Obligation" means, with respect to any Person, any
obligation, contingent or otherwise, of such Person directly or indirectly
guaranteeing in any manner any Debt or similar obligation of any other Person.
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<PAGE>
"Holder" means the registered holder of any Bond from time to
time.
"Indenture" means this Trust Indenture, dated as of December
10, 1999, between the Company and the
Trustee.
"Independent Engineer" means Stone & Webster or another
recognized independent engineering firm or engineer retained as independent
engineer by the Company (provided, however, that the Company shall not replace
such independent engineer in connection with any substantive disagreement
between the Company and such independent engineer in connection with a
certification to be delivered by the Company or such independent engineer or a
consent to be given by such independent engineer, in each case, as required
under a Transaction Document).
"Initial Bonds shall have the meaning specified in the second
"WHEREAS" clause of this Indenture.
"Initial Purchasers" means the institutional investors which
are named in Schedule A to the Bond Purchase Agreement.
"Insurance Consultant" means Marsh USA Inc.
"Interconnection Agreement" means the Cleco Standard
Interconnection Agreement to be executed by and between Cleco Utility Group Inc.
and the Company, and any Replacement Project Document entered into in
substitution therefor.
"Intercreditor Agreement" means the Collateral Agency and
Intercreditor Agreement, dated as of December 10, 1999, among the Company, the
Trustee, the Securities Intermediary, the Collateral Agent on behalf of the
Secured Parties and any Secured Parties from time to time a party thereto.
"Interest Payment Date" means (i) with respect to the Bonds,
each March 1 and September 1, commencing on March 1, 2000 and concluding on the
Final Maturity Date and each other date on which interest on the Bonds becomes
due and payable, whether on a Redemption Date, the Final Maturity Date,
declaration of acceleration or otherwise and (ii) with respect to any other
Secured Obligations, each regularly scheduled date on which interest is due and
payable with respect to such Secured Obligations, as such date may be
established from time to time, and any date on which interest on such Secured
Obligations becomes due and payable, whether at redemption, the final maturity
date or declaration of acceleration or otherwise.
"Interest Rate Protection Agreements" means any agreements
between the Company and a Permitted Counterparty providing for swaps, ceiling
rates, ceiling and floor rates, contingent participation or other hedging
mechanisms with respect to the payment of interest.
"Land" has the meaning specified in the Mortgage.
"Law" means any constitution or treaty, any law (including,
without limitation, Environmental Laws, laws pertaining to land use or zoning
restrictions, and building, health, fire
A-11
and water use laws), ordinance, decree, code, regulation (including regulations
governing environmental matters), order, rule, permit, approval, concession,
grant, franchise, license, agreement, directive, guideline, policy, requirement,
final judicial or arbitral decision or other governmental restriction or any
similar form of decisions or determination by, or any interpretation or
administration of the foregoing by, any Governmental Authority.
"Lien" means any mortgage, pledge, hypothecation, assignment,
mandatory deposit arrangement with any Person owning Debt of such Person,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing and the filing of any
financing statement or similar instrument under the Uniform Commercial Code or
comparable law of any jurisdiction, domestic or foreign.
"Loss Event" means (1) an event (other than a Title Defect)
which causes all or a portion of the Project to be damaged, destroyed or
rendered unfit for normal use, or (2) a compulsory transfer or taking or
transfer under threat of compulsory transfer or taking of all or a substantial
portion of the Project by a Governmental Authority.
"Loss Event Redemption" has the meaning specified in Section
3.3(a)(A)(a) of the Indenture.
"Loss Proceeds" means all proceeds received by or on behalf of
the Company in connection with a Loss Event.
"Loss Proceeds Sub-account" means the sub-account of such name
established under the Depositary Agreement and held under account number 6800
0603 13.
"Maintenance Agreement" means the Program Parts, Shop Repairs
and Scheduled Outage Services Contract, dated as of September 2, 1999, between
the Company and Siemens Westinghouse Power Corporation, and any Replacement
Project Document entered into in substitution therefore.
"Major Maintenance Reserve Account" means the Account of such
name established under the Depositary Agreement and held under account number
6800 0603 05.
"Major Maintenance Reserve Required Balance" means, for any
Funding Date, the amount set forth for such Funding Date on Schedule II to the
Indenture, provided that Schedule II may be revised from time to time by the
Company as set forth in a substitute Schedule II prepared by the Company to more
closely reflect the anticipated amount and timing of major maintenance expenses
based on (i) a certificate of an Authorized Representative of the Company
delivered to the Trustee certifying that such substitute Schedule II more
closely reflects the anticipated amount and timing of major maintenance expenses
than the then existing Schedule II and otherwise complies with the requirements
of this definition and (ii) a certificate of the Independent Engineer confirming
that in its view such substitute Schedule II more closely reflects the
anticipated amount and timing of major maintenance expenses than the then
existing Schedule II and is prudent based on the operating characteristics of
the Facility.
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<PAGE>
"Make-Whole Premium" means, with respect to any Initial Bond,
an amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Bond over the
amount of such Called Principal, provided that the Make-Whole Premium may in no
event be less than zero. For the purposes of determining the Make-Whole Premium,
the following terms have the following meanings:
"Called Principal" means, with respect to any Initial Bond,
the principal of such Initial Bond that is to be redeemed pursuant to
Section 3.1.
"Discounted Value" means, with respect to the Called Principal
of any Initial Bond, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Redemption Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that on
which interest on such Initial Bond is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Initial Bond, 50 basis points (0.50%) over the yield
to maturity implied by (i) the yields reported, as of 10:00 A.M. (New
York City time) on the second Business Day preceding the Redemption
Date with respect to such Called Principal, on the display designated
as "Gov't PX" of the Bloomberg Financial Market Services (or, if not
available, such other display as may replace such display on the
Bloomberg Financial Market Services or any other nationally recognized
trading screen reporting on-line intra-day trading in U.S. Treasury
securities), for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal
as of such Redemption Date, or (ii) if such yields are not reported as
of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day
preceding the Redemption Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal and trading in the secondary market at the price
closest to par as of such Redemption Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with a remaining average life
closest to and greater than the Remaining Average Life and trading in
the secondary market at the price closest to par and (2) the actively
traded U.S. Treasury security with a remaining average life closest to
and less than the Remaining Average Life and trading in the secondary
market at the price closest to par.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between
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the Redemption Date with respect to such Called Principal and the scheduled due
date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Initial Bond, all payments of such Called
Principal and interest thereon that would be due after the Redemption
Date with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that, if
such Redemption Date is not a date on which interest payments are due
to be made under the terms of such Initial Bond, then the amount of the
next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Redemption Date and required to be
paid on such Redemption Date pursuant to Article III.
"Master Services Agreements" means, collectively, the Human
Resources Master Services Agreements, dated as of July 1, 1999, entered into by
the Company with each of Cleco, Cleco Utility Group Inc., Utility Construction &
Technology Solutions LLC, Cleco Energy LLC, CLE Intrastate Pipeline and CLE
Resources, and any Replacement Project Document entered into in substitution
therefor.
"Master Use Agreements" means, collectively, the Master Use
Agreements for Transfer of Assets, Goods and Services, dated as of July 1, 1999,
entered into by the Company with each of Cleco, Cleco Utility Group Inc.,
Utility Construction & Technology Solutions LLC, Cleco Energy LLC, CLE
Intrastate Pipeline and CLE Resources, and any Replacement Project Document
entered into in substitution therefor.
"Material Adverse Effect" means a material adverse effect on
(1) the business, property, prospects, financial position or results of
operation of the Company, (2) the validity, perfection or priority of the Liens
on the Collateral, (3) the ability of the Collateral Agent to enforce its rights
and remedies under the Financing Documents or (4) the ability of the Company to
perform any of its material obligations under the Transaction Documents.
"Material Project Document" means (a) the Project Documents in
effect as the Closing Date and (b) any Additional Project Document (i) with a
term of at least six months or (ii) pursuant to which the revenues earned or
payments made are in excess of $2,000,000 on an annual basis.
"Members" means the members of the Company as set forth in the
Operating Agreement.
"Monies" means all cash, payments, Permitted Investments and
other amounts (including instruments evidencing such amounts) on deposit in or
credited to any Account.
"Monthly Date" means the last day of each calendar month.
"Moody's" means Moody's Investors Service, Inc., provided that
it maintains a rating on the Bonds or the Person in question, as the case may
be.
A-14
<PAGE>
"Mortgage" means the Mortgage, Assignment of Rents, Security
Agreement and Financing Statement, dated as of December 10, 1999, by the Company
in favor of the Collateral Agent.
"Mortgaged Property" has the meaning specified in the
Mortgage.
"Multiemployer Plan" means a Plan which is a multliemployer
plan as defined in Section 4001(a)(3) of ERISA.
"MW" means a unit of electrical energy equal to one million
watts of power.
"Non-Cleco Parties" means, collectively, Siemens Westinghouse
Power Corporation, Williams Energy Marketing & Trading Company and The Williams
Companies, Inc.
"Non-Completion Event" has the meaning specified in Section
3.3(a)(D) of the Indenture.
"Officer's Certificate" means a certificate executed by an
Authorized Representative.
"O&M Account" means the Account of such name established under
the Depositary Agreement and held under account number 6800 0603 03.
"O&M Contract" means the Operations and Maintenance Agreement
to be executed by and between the Company and Cleco Generation Services LLC, and
any Replacement Project Document entered into in replacement thereof.
"O&M Costs" means all amounts disbursed by or on behalf of the
Company for the operation, maintenance, administration, repair or improvement of
the Project (other than costs funded with withdrawals from the Major Maintenance
Reserve Account), including, without limitation, premiums on insurance policies,
property and other taxes, and payments under the relevant operating and
maintenance agreements, leases, royalty and other land use agreements, fees,
expenses and any other payments required under the Project Documents.
"O&M Guaranty" means the Operation and Maintenance Guaranty to
be executed by Cleco in favor of the Company, and any Replacement Project
Document entered into in replacement thereof.
"O&M Operator" means Cleco Generation Services LLC or such
other Person that becomes operator under the O&M Contract.
"Opinion of Counsel" means a written opinion of counsel for
any Person either expressly referred to herein or otherwise reasonably
satisfactory to the Trustee which may include, without limitation, counsel for
the Company and counsel for any Affiliate of the Company, whether or not such
counsel is an employee of the Company or such Affiliate.
A-15
<PAGE>
"Optional Modifications" means modifications or improvements
to, and for the benefit of, the Project other than Required Modifications or
Expansion Modifications.
"Ordinary Equity Contribution" has the meaning specified in
the Equity Contribution Agreement.
"Outstanding," in connection with Bonds means, as of the time
in question, all Bonds authenticated and delivered under the Indenture, except
(i) Bonds theretofore cancelled or required to be cancelled under Section 2.10
of the Indenture; (ii) Bonds for which provision for payment shall have been
made in accordance with the Indenture; and (iii) Bonds in substitution for which
other Bonds have been authenticated and delivered pursuant to the Indenture, and
subject in any event to the terms and provisions of Section 7.3 of the
Indenture.
"Paying Agent" means the Trustee or any other Person appointed
to serve as Paying Agent under Section 10.12 of the Indenture.
"Payment Date" means, with respect to any Secured Obligations,
the next Interest Payment Date or Principal Payment Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Counterparty" means, in connection with an Interest
Rate Protection Agreement, a financial institution whose long term unsecured and
unguaranteed senior debt is rated "A" or higher by S&P and "A2" or higher by
Moody's or which can be collateralized to such a level.
"Permitted Debt" is defined in Section 5.18 of the Indenture.
"Permitted Investments" is defined in Section 5.24 of the
Indenture.
"Permitted Lien" is defined in Section 5.19 of the Indenture.
"Person" means any individual, sole proprietorship,
corporation, partnership, joint venture, limited liability partnership, limited
liability company, trust, unincorporated association, institution, Governmental
Authority or any other entity.
"Plan" means an employee benefit or other plan established or
maintained by the Company or any Commonly Controlled Entity and which is covered
by Title IV of ERISA, other than a Multiemployer Plan.
"Pledge Agreement" means the Pledge Agreement, dated as of
December 10, 1999, from Cleco Midstream to the Collateral Agent.
"Pre-Completion Revenues" means all revenues received by or on
behalf of the Company prior to the date on which the Project achieves
Completion, but excluding Loss Proceeds and Title Insurance Proceeds required to
be deposited into the Redemption Account and other similar non-recurring
receipts required to be deposited into the Redemption Account.
A-16
<PAGE>
"Principal Payment Date" means (i) with respect to the Bonds,
the date on which all or a portion of the principal of such Bonds becomes due
and payable as provided therein or in the Indenture, whether on a scheduled date
for payment of principal, at a Redemption Date, the Final Maturity Date,
declaration of acceleration or otherwise and (ii) with respect to any other
Secured Obligations, the date on which all or a portion of the principal of such
Secured Obligations becomes due and payable pursuant to the terms thereof,
whether on a scheduled date for payment of principal, at a redemption date, a
final maturity date, declaration of acceleration or otherwise.
"Project" means the Facility, together with the associated
equipment, facilities, ancillary structures and related contractual and property
interests, including, without limitation, any capital improvements thereto.
"Project Costs" has the meaning specified in the Depository
Agreement.
"Project Documents" means collectively, the Tolling Agreement,
the Tolling Guaranty, the Tolling Side Letter, the Tolling Subordination
Agreement, the EPC Contract, the EPC Guaranty, the O&M Contract, the O&M
Guaranty, the Maintenance Agreement, the Master Use Agreement, the Gas
Transportation Guaranty, the Master Services Agreements, the Interconnection
Agreement, the Gas Transportation Agreement, the Start-Up Gas Agreement, the
Start-Up Power Agreement and any Additional Project Document.
"Project Party" means any party to a Project Document other
than the Company.
"PUHCA" means the Public Utility Holding Company Act of 1935,
as amended.
"Rating Agency" means Moody's, provided that Moody's maintains
a rating on the Bonds or, if Moody's does not retain a rating of the Bonds, S&P
or any other nationally recognized credit rating agency of similar standing
which maintain a rating of the Bonds.
"Rating Downgrade" means, at any time, a lowering of the
Rating Agency's then-current rating of the Bonds.
"Rating Reaffirmation" means a reaffirmation by the Rating
Agency of its then current credit ratings of the Bonds.
"Redemption Account" means the Account of such name
established pursuant to the Depositary Agreement and held under account
number6800 0603 07.
"Redemption Date" means the date on which Bonds will be
redeemed in accordance with the terms of this Indenture, which date will be
specified in an Officer's Certificate of the Company or a written determination
of the Trustee, in each case delivered in accordance with this Indenture.
"Redemption Fund" has the meaning specified in Section 3.2 of
the Indenture.
"Redemption Price" means an amount equal to the principal
amount, premium (if any) and interest accrued through the Redemption Date to be
paid for Bonds redeemed prior to
A-17
<PAGE>
maturity in accordance with the terms of this Indenture, as specified in the
notice of redemption given pursuant to Section 3.4 of the Indenture.
"Registrar" has the meaning specified in Section 2.5 of the
Indenture.
"Replacement Project Document" means any Additional Project
Document entered into in replacement of a Project Document (1) with
substantially similar economic effect on the Company as the Project Document
being replaced and (2) with a counterparty having substantially similar
creditworthiness and experience as the counterparty to the Project Document
being replaced.
"Required Holders" means those Holders holding more than 50%
in aggregate principal amount of the Outstanding Bonds, except where otherwise
expressly provided.
"Required Modifications" means those modifications or
improvements to the Project which are reasonably necessary for the Project to
remain in compliance with applicable laws and Governmental Approvals, as
confirmed in writing by the Independent Engineer.
"Required Project Completion Date" has the meaning specified
in the EPC Contract in effect as of the Closing Date, without giving effect to
any subsequent amendments or modifications thereto (other than such amendments
or modifications which are made in accordance with the Financing Documents).
"Required Secured Parties" means, at any time, Persons that at
such time hold at least a majority of the Combined Exposure; provided that, for
purposes of directing actions of the Collateral Agent, the Trustee shall vote on
all matters under the Intercreditor Agreement in an amount equal to the
aggregate principal amount of the Outstanding Bonds, subject, however, in all
events, to the terms and provisions of the Indenture.
"Responsible Officer" means (i) with respect to the Collateral
Agent, the president or any vice president, assistant vice president or the
trust officer of the Collateral Agent to whom any matter has been referred
because of such officer's knowledge and familiarity with the particular subject
and (ii) with respect to the Trustee, the president or any vice president,
assistant vice president or the trust officer of the Trustee to whom any matter
has been referred because of such officer's knowledge and familiarity with the
particular subject.
"Restricted Payments" means, with respect to any Person, (1)
the declaration and payment of distributions, dividends or any other similar
payment made on account of the equity of such Person in cash, property,
obligations or other securities, (2) any payment of the principal of or interest
on any Subordinated Debt of such Person or (3) the making of loans or advances
by such Person to any Affiliate of such Person.
"Revenue Account" means the Account of such name established
under the Depositary Agreement and held under account number 6800 0603 02.
"S&P" means Standard & Poor's Ratings Group.
A-18
<PAGE>
"Scheduled Payment Date" means, (1) with respect to the
Indenture and the Bonds, each March 1 and September 1, and (2) with respect to
any other Permitted Debt, the dates set forth in the documents evidencing such
Permitted Debt for the scheduled payment of principal of and interest on such
Permitted Debt.
"Secured Obligations" shall have the meaning specified in the
Intercreditor Agreement.
"Secured Parties" means, collectively, the Trustee (on behalf
of the Holders of the Bonds) and any other holder of Permitted Debt (or any
agent or trustee therefor) which becomes a "Secured Party" under the
Intercreditor Agreement in accordance with the terms thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Intermediary" means Bank One Trust Company, N.A.,
and its successors in such capacity.
"Security Agreement" means the Security Agreement, dated as of
December 10, 1999, between the Company and the Collateral Agent.
"Security Documents" means, collectively, the Security
Agreement, the Mortgage, the Pledge Agreement, all other documents pursuant to
which a Lien on the Collateral is granted or purported to be granted to the
Collateral Agent and the consents to assignment of the Project Documents.
"Security Interest" means any perfected and enforceable Lien
on Collateral granted to the Collateral Agent pursuant to the requirements of
any applicable Financing Document.
"Site" means the "Premises" as such term is defined in the
Mortgage.
"Start-Up Gas Agreement" means the Base Contract for
Short-Term Sale and Purchase of Natural Gas, dated as of November 1, 1999, by
and between CLE Intrastate Pipeline Company, Inc. and the Company.
"Start-Up Power Agreement" means the Agreement for Electric
Service by and between Cleco Utility Group, Inc. and the Company.
"Subordinated ACS LOC Payment Sub-account" means the
sub-account of such name established under the Depositary Agreement and held
under account number 6800 0603 010.
"Subordinated ACS LOC Principal Amount" means the principal
amount due on any ACS LOC Loan which is subordinated to the Senior Debt.
"Subordinated Claims Account" means the Account of such name
established under the Depositary Agreement and held under the following account
number 6800 0603 12.
A-19
<PAGE>
"Subordinated Debt" means Debt (and the note or other
instrument evidencing the same) which has been subordinated on terms and
conditions substantially the same as those attached hereto as Exhibit C, to the
prior payment of amounts owing under this Indenture and the Bonds.
"Subordinated Debt Account" means the Account of such name
established under the Depositary Agreement and held under account number 6800
0603 12.
"Supplemental Indenture" means an indenture supplemental to
this Indenture entered into by the Company and the Trustee for any of the
purposes set forth in Article VIII.
"Title Defect" means the existence of any material defect in
the title to the Site (other than Permitted Liens) in effect on the Closing Date
which entitles the Collateral Agent to make a claim under the title insurance
policy for the Project required to be delivered under the Bond Purchase
Agreement.
"Title Defect Sub-account" means the sub-account of such name
established under the Depositary Agreement and held under account number 6800
0603 14.
"Title Event Redemption" has the meaning specified in Section
3.3(a)(B) of the Indenture.
"Title Insurance Proceeds" means all proceeds received in
connection with a Title Defect by the Company under the title insurance policy
for the Project required to be delivered under the Bond Purchase Agreement.
"Tolling Agreement" means the Capacity Sale and Tolling
Agreement, dated as of November 10, 1999, between the Company and Williams
Energy Marketing & Trading Company, and any Replacement Project Document entered
into in substitution therefore.
"Tolling Agreement Damages Payment" has the meaning specified
in Section 3.3(a)(E) of the Indenture.
"Tolling Agreement Damages Sub-account" means the sub-account
of such name established under the Depositary Agreement and held under account
number 6800 0603 17..
"Tolling Guaranty" means the Corporate Guaranty to be executed
by The Williams Companies, Inc. in favor of the Company, and any Replacement
Project Document entered into in substitution therefor.
"Tolling Side Letter" means the Tolling Guaranty Side Letter
to be executed by and between Williams Energy Marketing & Trading Company and
the Company.
"Tolling Subordination Agreement" means the Subordination
Agreement to be executed by and between Williams Energy Marketing & Trading
Company, the Trustee and the Collateral Agent.
A-20
<PAGE>
"Transaction Documents" means, collectively, the Project
Documents and the Financing Documents.
"Trigger Event" has the meaning specified in the Intercreditor
Agreement.
"Trigger Event Date" has the meaning specified in Section 6(a)
of the Intercreditor Agreement.
"Trustee" means the Person named as "Trustee" in the Preamble
of this Indenture and its successors, and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party, or any successor to all or substantially all of its corporate trust
business, provided that any such successor or surviving corporation shall be
eligible for appointment as trustee pursuant to Section 10.8, until a successor
Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter shall mean such successor Trustee.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York or any other relevant
jurisdiction.
"Williams Subordination Agreement" means the Subordination
Agreement, dated as of December 10, 1999, among Williams Energy Marketing &
Trading Company, Bank One Trust Company, N.A., as Trustee and Collateral Agent,
and the Company.
A-21
<PAGE>
Exhibit B
to Trust Indenture
[Form of Initial Bond]
CLECO EVANGELINE LLC
8.82% Senior Secured Bond
due 2019
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAWS, AND ACCORDINGLY MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNDER
CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR SUCH OTHER LAWS.
CLECO EVANGELINE LLC
8.82% Senior Secured Bond due 2019
No. R-__ Issue Date: ______________
$_________ Maturity Date: September 1, 2019
Private Placement Number: 18551* AA 3 New York, New York
CLECO EVANGELINE LLC, a Louisiana limited liability company
(hereinafter called the "Company", which term includes any successor or assign
under the Indenture referred to below), for value received hereby promises to
pay to [__________], or its registered assigns, the principal amount of
_____________ DOLLARS ($__________) such payment to be made in semiannual
installments on March 1 and September 1 of each year (commencing March 1, 2001)
and ending on the Maturity Date set forth above (the "Maturity Date"), each such
installment to be in an amount equal to the principal amount specified for the
applicable payment date on Schedule I attached hereto (provided that the portion
of the principal amount remaining unpaid on the Maturity Date, together with all
interest accrued thereon, shall in any and all cases be due and payable on the
Maturity Date), and to pay interest on the unpaid portion of the principal
amount hereof at an interest rate per annum equal to 8.82% (the "Interest
Rate"), such interest to be payable from the most recent interest payment date
to which interest has been paid or, if no interest has been paid, from the Issue
Date set forth above, semiannually on March 1 and September 1 of each year,
commencing March 1, 2000, until the principal amount hereof is paid in full.
This Bond shall bear interest on any overdue principal and, to the extent
enforceable under applicable law, on any overdue interest and premium (if any)
at the Default Rate specified in the Indenture referred to below. Interest on
this Bond shall be computed on the basis of a 360-day year, consisting of twelve
(12) thirty (30) day months.
Payments of principal of, interest on and any premium (if any)
with respect to this
B-1
Bond are to be made in lawful money of the United States of America at the
Corporate Trust Office of the Trustee in New Orleans, Louisiana or at such other
place as may be provided pursuant to the Indenture referred to below or, in
certain circumstances, to the holder of this Bond as provided in Section 2.2(f)
of said Indenture.
This Bond is one of an authorized series of Bonds of the
Company known as its 8.82% Senior Secured Bonds due 2019 (the "Bonds")
originally issued in the aggregate principal amount of $218,600,000 pursuant to
the Trust Indenture, dated as of December 10, 1999 (as the same may be amended,
modified or supplemented from time to time, the "Indenture"), between the
Company and Bank One Trust Company, N.A., as trustee (the "Trustee", which term
includes any successor Trustee under the Indenture), as contemplated by the Bond
Purchase Agreement, dated as of December 10, 1999 (the "Bond Purchase
Agreement"), between the Company and the institutional investors named in
Schedule A thereto. All capitalized terms used herein, unless defined herein,
shall have the meanings ascribed to them in the Indenture.
All Bonds are secured equally and ratably with one another.
Reference is hereby made to the Indenture for a description of the nature and
extent of the Bonds and the respective rights of the Holders of the Bonds and of
the Trustee and the Company in respect of the Bonds and the terms upon which the
Bonds are made and are to be authenticated and delivered.
The principal of, and interest on, this Bond are payable from,
and secured by, assets subject to the Liens on the Collateral, in accordance
with the terms of the Indenture and the Security Documents. The Holder of this
Bond is entitled to the benefits of the Bond Purchase Agreement, the Indenture
and the Security Documents and, subject in the case of the Security Documents to
the terms of the Intercreditor Agreement referred to below, may enforce the
agreements of the Company contained therein and exercise the remedies provided
for thereby or otherwise available in respect thereof.
The Bonds are subject to a Collateral Agency and Intercreditor
Agreement dated as of December 10, 1999 (the "Intercreditor Agreement"), among
the Company, the Trustee, Bank One Trust Company, N.A. as Securities
Intermediary and Bank One Trust Company, N.A. as Collateral Agent.
The Bonds are subject to optional redemption by the Company at
any time in whole or, after Completion, in part at the Redemption Price
specified in the Indenture, which Redemption Price will include a Make-Whole
Premium.
The Bonds are, under certain conditions, subject to mandatory
redemption as set forth in Section 3.3 of the Indenture.
Notice of any redemption of Bonds will be given at least
thirty (30) days but not more than sixty (60) days prior to the Redemption Date
to each Holder at its registered address.
The unpaid portion of principal, together with all interest
accrued thereon and all other amounts due hereunder, shall be due and payable in
full, as provided in the Indenture, upon the occurrence of certain Events of
Default as set forth in Section 6.1 of the Indenture.
Recourse under this Bond is limited as set forth in Section
11.12 of the Indenture.
B-2
<PAGE>
This Bond is a registered Bond, and as provided in the
Indenture, upon surrender of this Bond for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Bond for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company and the Trustee may treat the Person in
whose name this Bond is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and neither the Company nor the
Trustee will be affected by any notice to the contrary. No service charge will
be made to any Holder of Bonds for any transfer or exchange, but the Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
THIS BOND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
Unless the certificate of authentication hereon has been
executed by the Trustee by manual or facsimile signature, this Bond shall not be
entitled to any benefit under such Indenture, or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
CLECO EVANGELINE LLC
By:___________________________
Name:
Title:
Dated:
B-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Initial Bonds referred to in the within-mentioned
Indenture.
BANK ONE, TRUST COMPANY, N.A.
as Trustee
By:
Name:
Title:
Dated:
B-4
<PAGE>
ASSIGNMENT FORM
(To be executed by the registered Holder if such Holder
desires to transfer this Bond)
To: Bank One Trust Company, N.A.
27th Floor
201 St. Charles Avenue
New Orleans, Louisiana 70170
Attention: Denis Milliner
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto:
Name of Assignee: ________________________________
Social Security Number or Other Identifying
Number of Assignee:_____________________________
Typewritten Name and Address
(including zip code) of Assignee: ___________________________________
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing __________________ attorney to transfer said Bond on the books of the
Company, with full power of substitution in the premises.
By: _________________________
Dated:_______________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the first page of the within instrument in every
particular, without alteration or enlargement or any change whatsoever
B-5
<PAGE>
Schedule I
PRINCIPAL AMORTIZATION
The principal of this Bond is payable in semiannual installments on
each Principal Payment Date specified in the table below, commencing March 1,
2001, each such installment to be in an amount equal to the product of (a) the
principal amount set forth opposite the applicable Principal Payment Date
specified in such table multiplied by (b) a fraction, the numerator of which is
the stated principal amount of this Bond and the denominator of which is
$218,600,000:
Principal Amount Payable on $218,600,000
Bonds Issued
Principal Payment Date Pursuant to this Indenture
March 1, 2001 $2,186,000
September 1, 2001 2,186,000
March 1, 2002 2,733,000
September 1, 2002 2,733,000
March 1, 2003 3,006,000
September 1, 2003 3,006,000
March 1, 2004 2,459,000
September 1, 2004 2,459,000
March 1, 2005 3,006,000
September 1, 2005 3,006,000
March 1, 2006 3,552,000
September 1, 2006 3,552,000
March 1, 2007 3,826,000
September 1, 2007 3,826,000
March 1, 2008 4,099,000
September 1, 2008 4,099,000
March 1, 2009 3,552,000
September 1, 2009 3,552,000
March 1, 2010 4,099,000
September 1, 2010 4,099,000
March 1, 2011 4,645,000
September 1, 2011 4,645,000
March 1, 2012 5,192,000
September 1, 2012 5,192,000
March 1, 2013 6,012,000
September 1, 2013 6,012,000
March 1, 2014 7,378,000
September 1, 2014 7,378,000
March 1, 2015 8,198,000
September 1, 2015 8,198,000
March 1, 2016 9,017,000
B-6
September 1, 2016 9,017,000
March 1, 2017 10,383,000
September 1, 2017 10,383,000
March 1, 2018 11,202,000
September 1, 2018 11,202,000
March 1, 2019 14,755,000
September 1, 2019 14,755,000
B-7
<PAGE>
Exhibit C
to Trust Indenture
SUBORDINATION PROVISIONS
All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed thereto in the Trust Indenture dated as
of December 10, 1999 (as amended, supplemented or modified from time to time,
the "Indenture") between Cleco Evangeline LLC and Bank One Trust Company, N.A.,
in its capacity as Trustee for the holders of the Bonds.
[NAME OF SUBORDINATED LENDER] (together with its successors
and assigns, the "Subordinated Lender") hereby agrees for the benefit of the
Secured Parties that all [DESCRIBE SUBORDINATED LIABILITIES] (the "Subordinated
Obligations") are and shall be junior and subordinate, to the extent and in the
manner set forth hereinafter, in right of payment to the prior indefeasible
payment or satisfaction in full of all Secured Obligations. In furtherance
thereof, each of the Secured Parties, the Collateral Agent and the Subordinated
Lender further agrees that:
(a) (i) The Subordinated Lender shall not ask, demand, sue
for, take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner (including, without limitation,
from or by way of the Collateral or any guaranty of payment or performance),
payment of all or any of the Subordinated Obligations unless and until the
Financing Commitments shall have been terminated and the Secured Obligations
shall have been paid or otherwise satisfied in full except to the extent of
payments from the Subordinated Claims Account and payments from the Subordinated
Debt Account, in each case in accordance with Section 3.2(b) of the Depositary
Agreement. For the purposes of these provisions, the Secured Obligations shall
not be deemed to have been paid or satisfied in full until those Secured
Obligations shall have been indefeasibly so paid to the Secured Parties or so
otherwise satisfied (after the passage of any relevant preference periods).
(ii) Upon any distribution of all or any of the assets of the
Company to creditors of the Company upon the dissolution, winding up,
liquidation, arrangement, reorganization or composition of the Company, whether
in any bankruptcy, insolvency, arrangement, reorganization, receivership or
similar proceedings or upon an assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of the Company or otherwise, any
payment or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to the
Subordinated Obligations shall be paid or delivered directly to the Collateral
Agent for application (in the case of cash) to, or as collateral (in the case of
non-cash property or securities) for, the payment or prepayment of the Secured
Obligations until the Secured Obligations have been paid or otherwise satisfied
in full.
(iii) Each of the Secured Parties may demand specific
performance of these terms of subordination, whether or not the Company shall
have complied with any of the provisions hereof applicable to them at any time
when the Subordinated Lender shall have failed to comply with any of such
provisions applicable to it. The Subordinated Lender hereby irrevocably
C-1
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
(iv) So long as there are any Financing Commitments or any of
the Secured Obligations shall remain unpaid or otherwise unsatisfied, the
Subordinated Lender shall not commence or join with any creditor other than the
Collateral Agent in commencing any proceeding referred to in subsection (ii)
above for the payment of any amounts which otherwise would be payable or
deliverable upon or with respect to the Subordinated Obligations.
(v) Subject to the termination of the Financing Commitments
and the indefeasible payment or satisfaction in full of all of the Secured
Obligations, the Subordinated Lender shall be subrogated to the rights of the
Secured Parties to receive payments or distributions of assets of the Company
made on the Secured Obligations until the Subordinated Obligations have been
satisfied in full.
The foregoing provisions regarding subordination are for the
benefit of the Secured Parties and the Company and shall be enforceable by them
directly against the Subordinated Lender, and no Secured Party or the Company
shall be prejudiced in its right to enforce subordination of any of the
Subordinated Obligations by any act or failure to act by the Company or anyone
in custody of any of its respective assets or property. Notwithstanding anything
to the contrary contained in the foregoing provisions, the Subordinated Lender
may receive distributions in respect of the Subordinated Obligations from the
Company to the extent that such distributions are permitted pursuant to the
Depositary Agreement.
(b) So long as any Secured Obligations remain outstanding, the
following provisions shall apply:
(i) If a Trigger Event shall have occurred and be continuing,
the Collateral Agent, on behalf of the Secured Parties and the Company, shall be
permitted and is hereby authorized to take any and all actions to exercise any
and all rights, remedies and options which it may have under the Security
Documents or the Intercreditor Agreement.
(ii) Until the Debt Termination Date, the Subordinated Lender
shall not, without the prior written consent of the Secured Parties, (x)
exercise any rights or enforce any remedies or assert any claim with respect to
the Collateral, (y) seek to foreclose any Lien or sell the Collateral, or (z)
take any action, directly or indirectly, or institute any proceedings, directly
or indirectly, with respect to any of the foregoing.
(iii) The Subordinated Lender hereby waives (x) notice of the
existence, creation or non-payment of all or any of the Secured Obligations and
(y) to the fullest extent permitted by law, any right it may have to require the
Collateral Agent to marshal assets.
(c) Subject to the terms of the Intercreditor Agreement, the
Secured Parties may, at any time and from time to time, without any consent of
or notice to the Subordinated Lender and without impairing or releasing the
obligations of the Subordinated Lender: (v) amend in any manner any agreement
under which any of the Secured Obligations is outstanding in accordance with the
terms thereof (other than the priority of payments to Subordinated Debt under
the Depositary Agreement); (w) sell, exchange, release, not perfect and
otherwise deal with the
C-2
<PAGE>
Collateral or other property at any time pledged,
assigned or mortgaged to secure the Secured Obligations in accordance with the
Security Documents; (x) release anyone liable in any manner under or in respect
of the Secured Obligations; (y) exercise or refrain from exercising any rights
against the Company and others; and (z) apply any sums from time to time
received to payment or satisfaction of the Secured Obligations.
C-3
<PAGE>
Exhibit D
to Trust Indenture
D-1
<PAGE>
EXHIBIT 11
CLECO CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
For the years ended December 31,
(In thousands, except share and per share amounts)
--------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
BASIC
Net income applicable to common stock $54,756 $51,664 $50,402
================= ================= =================
Weighted average number of shares of common
Stock outstanding during the year 22,501,324 22,480,163 22,459,770
================= ================= =================
Basic net income per common share $2.43 $2.30 $2.24
================= ================= =================
DILUTED
Net income applicable to common stock $54,756 $51,664 $50,402
Adjustments to net income related to Employee Stock
Ownership Plan (ESOP) under the "if-converted" method:
Add loss of deduction from net income for actual
dividends paid on convertible preferred stock,
net of tax 1,403 1,435 1,456
Deduct additional cash contribution required which is
Equal to dividends on preferred stock less dividends
paid at the common dividend rate, net of tax (36) (70) (107)
Add tax benefit associated with dividends paid on
Allocated common shares 356 342 297
----------------- ----------------- -----------------
Adjusted income applicable to common stock $56,479 $53,371 $52,048
================= ================= =================
Weighted average number of shares of common
Stock understanding during the year 22,501,324 22,480,163 22,459,770
Number of equivalent common shares attributable
To ESOP 1,347,081 1,380,614 1,397,532
Common stock under stock option grants 110 6,681 6,729
----------------- ----------------- -----------------
Average shares 23,848,515 23,867,458 23,864,031
================= ================= =================
Diluted net income per common share $2.37 $2.24 $2.18
================= ================= =================
</TABLE>
EXHIBIT 12
CLECO CORPORATION
COMPUTATION OF EARNINGS TO
FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings from continuing operations $ 56,766 $ 53,801 $ 52,519 $ 52,135 $ 48,703
Income taxes 27,224 26,666 27,729 26,154 25,229
------------ ------------ ------------ ------------ ------------
Earnings from continuing operations
Before income taxes $ 83,990 $ 80,467 $ 80,248 $ 78,289 $ 73,932
------------ ------------ ------------ ------------ ------------
Fixed charges:
Interest, long-term debt $ 25,337 $ 23,350 $ 23,676 $ 25,134 $ 24,516
Interest, other 3,035 3,666 3,873 2,359 3,482
Amortization of debt expense and
premium, net 1,282 1,248 1,206 1,107 1,234
Portion of rental expense
representative of interest factor 607 486 487 445 457
------------ ------------ ------------ ------------ ------------
Total fixed charges $ 30,301 $ 28,750 $ 29,242 $ 29,045 $ 29,689
------------ ------------ ------------ ------------ ------------
Earnings from continuing operations
Before income taxes and fixed charges $ 114,291 $ 109,217 $ 109,490 $ 107,334 $ 103,621
============ ============ ============ ============ ============
Ratio of earnings to fixed charges 3.77x 3.80x 3.74x 3.70x 3.49x
============ ============ ============ ============ ============
Fixed charges from above $ 30,301 $ 28,750 $ 29,242 $ 29,045 $ 29,689
Preferred dividends 2,531 2,814 2,884 2,909 2,960
------------ ------------ ------------ ------------ ------------
Total fixed charges and preferred
Stock dividends $ 32,832 $ 31,564 $ 32,126 $ 31,954 $ 32,649
============ ============ ============ ============ ============
Ratio of earnings to combined fixed
Charges and preferred stock dividends 3.48x 3.46x 3.41x 3.36x 3.17x
============ ============ ============ ============ ============
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
REORGANIZATION
Effective July 1, 1999, Cleco Utility Group Inc. (Utility Group)
reorganized into a holding company structure. This reorganization resulted in
the creation of a new holding company, Cleco Corporation (the Company), which
holds investments in several subsidiaries, one of which, Utility Group, contains
the Louisiana Public Service Commission (LPSC) jurisdictional generation,
transmission and distribution electric utility operations serving the Company's
traditional retail and wholesale customers. Another subsidiary, Cleco Midstream
Resources LLC (Midstream), operates competitive LPSC nonjurisdictional electric
generation, oil and natural gas production, energy marketing and natural gas
pipeline businesses. A third subsidiary, Utility Construction & Technology
Solutions LLC (UtiliTech, formerly Cleco Services LLC), provides utility
engineering and line construction services to municipal governments, rural
electric cooperatives and investor-owned electric companies. There was no impact
on the Company's Consolidated Financial Statements because the reorganization
was accounted for similarly to a pooling of interest.
Under the terms of the reorganization, the Company became the owner of
all of Utility Group's outstanding common stock, and holders of existing common
and two series of preferred stock exchanged their stock in Utility Group for
common stock in the Company. Shares of preferred stock in three series that did
not approve the reorganization were redeemed for $5.7 million.
RESULTS OF OPERATIONS
Earnings
The Company's consolidated 1999 earnings (net income applicable to
common stock) totaled $54.8 million, or $2.43 per basic average common share, an
increase of $3.1 million, or $0.13 per share, compared to 1998. Earnings
increased primarily due to increased energy marketing operations within Utility
Group and Midstream. Gross margins from energy marketing operations (energy
sales less energy purchases) increased $6.9 million. Moderating the increase in
gross margin were $0.9 million of costs for holding company structure
implementation, $2.0 million of costs for process redesign, consultants, and
$1.3 million of start-up costs for Cleco Evangeline LLC (Evangeline).
Earnings in 1998 increased $1.2 million over 1997 due to increased
kilowatt-hour sales within Utility Group to regular customers and activities of
the energy marketing operations. Earnings were adversely affected by expected
increases in such nonfuel operating expenses as depreciation and ad valorem
taxes, as well as a $2 million annual base rate reduction ordered by the LPSC
and a $4.8 million reserve for customer rate refunds associated with the 1996
LPSC settlement discussed under "Financial Condition - Retail Rates of Utility
Group."
Earnings for past years are not necessarily indicative of future
earnings and results. Future earnings will be affected by, among other things,
weather conditions, the Company's business development programs, the overall
economy of Utility Group's service area, legislative and other regulatory
changes and increased competition.
Consolidated Revenues
Consolidated operating revenues were $768.2 million in 1999, an
increase of $253.0 million over 1998. The majority of the increase in 1999
revenue was due to increased sales in both energy marketing and retail electric
operations. Consolidated 1998 revenues were $515.2 million, an increase of $58.9
million over 1997 revenues. The majority of the increase was due to increased
sales in energy marketing and in retail electric operations. Changes in
consolidated revenues are further explained in the discussion of revenues
relating to each major subsidiary of the Company.
18
<PAGE>
Revenues and Sales - Utility Group
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- -------------------- --------------------
In Percent In Percent In Percent
Revenues: Thousands Change Thousands Change Thousands Change
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Base...........................................$306,225 3.1% $296,893 6.6% $278,412 3.9%
Fuel cost recovery..............................202,565 6.4% 190,387 7.1% 177,833 5.2%
Estimated customer credits......................(2,776) (42.2%) (4,800)
Energy marketing................................237,731 627.1% 32,695
Total revenues............................$743,745 44.4% $515,175 12.9% $456,245 4.4%
</TABLE>
Retail rates for residential, commercial and industrial customers and
other retail sales (approximately 66% of the Company's consolidated revenues in
1999) are regulated by the LPSC. Rates for transmission and wholesale power
sales are regulated by the Federal Energy Regulatory Commission (FERC). Retail
rates consist of a base rate and a fuel rate. Base rates are designed to allow
recovery of the cost of providing service and a return on utility assets. Fuel
rates fluctuate, allowing recovery of, with no profit, the majority of costs of
purchased power and fuel used to generate electricity. Energy marketing revenues
are based on the electric and natural gas markets, which are affected by supply
and demand of those commodities.
Utility Group's base revenues were reduced $3.0 million annually
beginning November 1, 1996, and were reduced by an additional $2.0 million
annually beginning January 1, 1998, as part of an LPSC earnings review. Revenues
in 1999 and 1998 were reduced further by $2.8 million and $4.8 million,
respectively, for customer rate refunds based on the same LPSC settlement. For
more information on the LPSC settlement, see "Financial Condition -- Retail
Rates of Utility Group" below.
Approximately half of the $9.3 million increase in base revenues in
1999 was due to a 2.9% increase in sales to regular customers. The remainder of
the increase was due to increased transmission and miscellaneous revenues.
Fuel cost recovery revenues collected in 1999 increased $12.2 million
because increased demand for power necessitated the purchase of more power on
the wholesale market at higher prices than in 1998. Net income is not materially
affected by changes in the cost of fuel and purchased power because most of
these cost fluctuations are currently passed on to customers through fuel cost
adjustment clauses. For information on changes in the fuel adjustment clauses,
see "Financial Condition -- Retail Rates of Utility Group" below.
Energy marketing revenues increased $205.0 million in 1999 as compared
to 1998 due to several factors. The first factor was that Utility Group's
electric marketing operation was not operational until late in the second
quarter of 1998 and was still in start-up mode in the third quarter of 1998. The
second factor was that in 1998 the operation traded only in the Into Entergy
market, whereas in 1999 it expanded into the Cinergy market. In 1999 the
operation also started marketing natural gas. Management does not expect Utility
Group's marketing revenues to increase at the same rate in 2000 as in 1999, and
they may decline because of the transfer of Coughlin Power Station (CPS) from
Utility Group to Evangeline.
Revenues in 1998 were reduced, compared to 1997, by a $4.8 million
provision for customer rate refunds based on the 1996 LPSC settlement.
Approximately $18.4 million of the $58.9 million increase in 1998 operating
revenues was due to an increase in base revenues from a 9.2% growth in
kilowatt-hour sales to regular customers. Approximately $32.7 million of the
increase was due to sales from energy marketing operations, which began in 1998.
Fuel cost recovery revenues collected in 1998 increased $12.5 million
over 1997 due to the increased demand for power, higher market prices for
purchased power, and the increased use of natural gas as generating fuel instead
of coal and lignite.
Weather influences the demand for electricity, especially among
residential customers. Demand for electricity by commercial and industrial
customers is primarily dependent upon the strength of the economy in the service
territory and the nation and is less affected by weather. Sales to industrial
customers are also affected by the worldwide demand for wood products, since
Utility Group's two largest customers are producers of such products. The
following chart compares the kilowatt-hour sales by customer class, for 1999,
1998 and 1997.
19
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Million Percent Million Percent Million Percent
kWh Change kWh Change kWh Change
--- ------- --- ------ --- ------
Retail electric customers
<S> <C> <C> <C> <C> <C> <C>
Residential................................3,208 (0.7%) 3,230 13.8% 2,838 4.2%
Commercial.................................1,597 4.4% 1,529 9.8% 1,393 4.1%
Industrial.................................2,720 8.0% 2,518 2.1% 2,467 4.1%
Other retail.................................574 3.4% 555 4.1% 533 1.3%
Sales for resale.............................373 (7.2%) 402 29.3% 311 6.9%
Total sales to regular customers.............8,472 2.9% 8,234 9.2% 7,542 4.1%
Short-term sales to other utilities............126 65.8% 76 (51.6%) 157 (52.4%)
Sales from marketing activities..............5,815 467.3% 1,025
Total electric sales..............14,413 54.4% 9,335 21.2% 7,699 1.6%
</TABLE>
The increase in sales to commercial and industrial customers during
1999 as compared to 1998 resulted primarily from increased economic growth in
the region served by Utility Group and in the United States generally.
The increase in sales to residential customers during 1998 as compared
to 1997 resulted primarily from warmer than normal spring and summer seasons in
1998. Sales to residential customers were also boosted by the addition of 7,700
mostly residential customers on September 30, 1997, through the acquisition of
the business of a rural electric cooperative utility, Teche Electric
Cooperative, Inc. (Teche). Sales to commercial and industrial customers grew
from 1997 as a result of customer growth and increased economic growth in the
region served by Utility Group.
During the last five years, electric sales growth to retail electric
customers averaged 5.6% and, based on current information, is expected to range
from 2% to 3% per year during the next five years. The levels of future sales
will depend upon factors such as weather conditions, customer conservation
efforts, Utility Group's retail marketing and business development programs, and
the overall economy of the service area. Some of the issues facing the electric
utility industry that could affect sales include deregulation, retail wheeling,
legislative and regulatory changes, retention of large industrial customers,
franchises and access to transmission systems.
Sales from energy marketing activities are primarily affected by
transmission constraints, demand versus supply, and market prices. The increase
in sales of electricity in 1999 over 1998 was due to the fact that in 1999 there
was a full year of marketing of electricity. Natural gas was not marketed within
Utility Group until 1999.
Revenues and Sales - Midstream
Midstream's revenue in 1999 was $20.9 million and was derived mainly
from one of its subsidiaries, Cleco Marketing & Trading LLC (CMT), which
represents approximately 89% of Midstream's revenues. CMT began operations in
July 1999 and markets wholesale natural gas and electricity in Louisiana and
Texas. Sales from energy marketing activities are primarily affected by
transportation constraints, demand versus supply and market prices. Management
expects the percentage of Midstream sales from energy marketing to decline
relative to total Midstream sales as the Evangeline facility comes on line in
June 2000. In 1998 Midstream's revenue was $10.1 million and was solely derived
from a majority owned subsidiary, Cleco Energy LLC (Energy). The increase in
revenue from 1998 to 1999 was due to marketing electricity and natural gas,
whereas in 1998 only natural gas was marketed.
Revenue in 1998 increased to $10.1 million from $0.1 million in 1997
because Energy was in start-up mode during all of 1997. In 1998 Energy acquired
Sabine Texican Pipeline Company, Inc., which significantly increased Midstream's
revenues.
The 750 MW Evangeline generating station is expected to begin
operations in June 2000. Evangeline has signed a 20-year Capacity Sale and
Tolling Agreement with Williams Energy Marketing and Trading Company (Williams).
Under the terms of the agreement, Williams has the right to own and market the
electricity produced by the Evangeline facility and will supply the natural gas
fuel required by the facility. Evangeline will collect a fee from Williams for
operating and maintaining the Evangeline facility. The amount of the fee paid by
Williams is dependent upon Evangeline meeting
20
<PAGE>
certain measures, such as minimum base capacity and a guaranteed unit heat rate.
If the minimum measures set forth in the Capacity Sale and Tolling Agreement are
not met, the fee paid to Evangeline may be reduced.
Revenues and Sales - UtiliTech
UtiliTech's revenue in 1999 increased to $6.8 million from $0.2 million
in 1998 because it was in start-up mode during 1998. At the end of 1998,
UtiliTech had three line construction crews, whereas at the end of 1999
UtiliTech had 29 line construction crews. UtiliTech offers distribution line
construction services, maintenance of utility systems and utility engineering
services. During 1999 distribution line services were approximately 89% of
sales, which was up from 66% in 1998. Management expects distribution line
construction to remain UtiliTech's primary source of sales and revenue for 2000,
but the percentage relative to total UtiliTech revenues may decline as
UtiliTech's other services expand.
Fuel and Purchased Power - Utility Group
Changes in fuel and purchased power expenses reflect fluctuations in
generation mix, fuel costs, availability of economy power and deferral of
expenses for recovery from customers through fuel adjustment clauses in
subsequent months. The following table shows the amount and changes in fuel and
purchased power expenses for 1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ----------------------- -----------------------
In Percent In Percent In Percent
Thousands Change Thousands Change Thousands Change
<S> <C> <C> <C> <C> <C> <C>
Fuel used for electric generation........$145,229 1.7% $142,737 4.9% $136,009 17.6%
Power purchased ......................... 65,303 23.2% 53,011 18.9% 44,590 (19.8%)
Total fuel expenses............$210,532 7.5% $195,748 8.4% $180,599 5.4%
Gas purchased for marketing..............$ 24,687
Power purchased for marketing............$205,397 651.8% $ 27,322
</TABLE>
Total fuel expense increased $14.8 million in 1999. Total fuel expense
increased primarily due to increased demand from native load customers, which
necessitated the purchase of more power on the wholesale market at higher prices
than in 1998. Power purchased for marketing increased primarily due to a full
year of activity in the energy marketing operations in 1999. Natural gas
marketing did not begin until 1999.
Total fuel expense increased $15.1 million in 1998 over 1997. The
increase was primarily a result of the increased demand for power, higher market
prices for purchased power, and the increased use of natural gas as generating
fuel instead of coal and lignite. Power marketing was in its first year of
operation in 1998.
Coal and lignite are obtained under long-term contracts. Natural gas is
purchased for Utility Group's use under short-term contracts on the spot market
when prices are advantageous. Power is purchased from other utilities to
supplement Utility Group's generation resources at times of relatively high
demand as well as when the purchase price is less than Utility Group's cost of
generation and when transmission capacity is available to transport the energy
to Utility Group's system. During 1999, 27% of Utility Group's energy
requirements were met with purchased power, up from 24% in 1998 and 1997.
In future years, the Utility Group's generating facilities may not
supply enough electric power to meet its growing native load demand. Following a
competitive bid process, Utility Group entered into contracts for firm electric
capacity and energy with two power marketing companies for 605 MW of capacity in
2000, increasing to 760 MW of capacity in 2004. These contracts are subject to
final approval by the LPSC. Management expects the contracts, combined with
Utility Group's own generation, to meet substantially all its native load demand
through 2004. Because of its location on the transmission grid, Utility Group
relies on one main supplier of electric transmission and is sometimes
constrained as to the amount of purchased power it can bring into its system.
These two contracts are not expected to be affected by such transmission
constraints.
Utility Group and the joint owner of one of its electric generating
units jointly filed suit in 1997 against a joint venture and its partners who
mine lignite for the generating unit. The joint venture has filed counterclaims.
The counterclaims caused
21
<PAGE>
Utility Group and the joint owner to file another suit against the joint
venture's parent company. Management believes the counterclaims, if successful,
would not have a significant adverse effect on the Utility Group's financial
position or results of operations. Normal day-to-day operations continue at the
mining facility and the jointly owned electric generating unit.
Energy owns and operates natural gas pipelines at two of Utility
Group's power stations and the Evangeline power station where natural gas is
used as a primary fuel. These pipelines increase access to natural gas markets
and lower-cost gas supplies.
The coal for one of Utility Group's jointly owned electric generating
units is transported under a long-term contract with a railroad. The railroad
experienced operating problems beginning in 1997, which resulted in reduced
volumes delivered to the unit. Throughout 1998, the delivery problems persisted,
and the coal inventory fluctuated at or below Utility Group's desired minimum
level. However, in 1999, the deliveries of coal by the railroad were back to the
normal schedule.
Nonfuel Operating Expenses and Income Taxes - All Segments
Changes in consolidated nonfuel operating expenses for all segments
(excluding restructuring charges) for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ------------------------- -------------------------
In Percent In PercentChange In PercentChange
Thousands Change Thousands Thousands
<S> <C> <C> <C> <C> <C> <C>
Other operations.............. $ 84,743 19.2% $ 71,066 10.0% $ 64,618 (0.2%)
Maintenance................... 29,909 (1.2%) 30,285 30.0% 23,286 (0.9%)
Depreciation.................. 50,019 3.4% 48,369 5.4% 45,890 5.6%
Other taxes................... 36,072 1.8% 35,420 6.0% 33,422 12.9%
Total............... $200,743 8.4% $185,140 10.7% $167,216 4.0%
</TABLE>
Total 1999 nonfuel operating expenses increased 8.4% over 1998. The
increase in other operations expense was mainly due to start-up expenses in the
Midstream subsidiaries, the increased growth at UtiliTech, and increased charges
of wheeling purchased power into Utility Group's system.
Total 1998 nonfuel operating expenses, excluding 1997 restructuring
charges, increased 10.7% over 1997. For more information concerning the
restructuring charge incurred in 1997, see "Restructuring Charge" below. Other
operations expense increased 10.0% due to increases in staffing. Maintenance
expense increased due to several unanticipated Utility Group generating unit
repairs due to mechanical problems and increased right-of-way reclearing
relating to Utility Group transmission and distribution activities. Depreciation
expense increased primarily due to a full year of depreciation on property
additions associated with the acquisition of the Teche assets and planned
additions to Utility Group generation, transmission and distribution facilities.
A number of parishes (counties) have attempted in recent years to
impose franchise fees on retail revenues earned within the unincorporated areas
Utility Group serves. If the parishes are ultimately successful, Utility Group's
taxes other than income taxes could increase substantially in future years.
Restructuring Charge
During 1997 Utility Group reorganized its electric production staff.
The primary objective of this reorganization was to create a centralized power
production maintenance work force. As a result, approximately 30 employee
positions were eliminated, resulting in a charge to earnings of $1.9 million
($1.2 million on an after-tax basis), consisting mainly of voluntary severance
programs offered to eligible employees.
Other Income, Interest Income and Interest Expense - All Segments
"Other income (expenses), net" decreased $0.9 million in 1999 compared
to 1998 mainly due to start-up costs relating to reorganizing into a holding
company and mark-to-market losses on Utility Group's energy positions that are
classified as trading under Emerging Issues Task Force Consensus No. 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities." In 1998 "Other income (expenses), net" decreased $1.6 million from
1997 due to start-up costs
22
<PAGE>
relating to several nonregulated subsidiaries, primarily Evangeline, which was
in the process of repowering an existing generating station.
Interest income in 1999 increased $1.3 million as compared to 1998
mainly due to interest related to federal tax refunds and the Utility Group
carrying more investments than in previous years as a result of pre-funding the
refinancing of medium-term notes.
Interest expense for 1999 increased $1.4 million as compared to 1998.
The increase is due to several factors: higher interest rates on variable rate
short-term debt during 1999; higher interest expense on Utility Group's
pollution control bonds due to the refinancing of the bonds at a fixed rate; and
the replacement of short-term debt at Utility Group with medium-term notes in
order to pre-fund the refinancing of medium-term notes at Utility Group.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the estimated cost of financing LPSC and FERC
rate-regulated construction work-in-progress within Utility Group and is not a
current source of cash. A return on and recovery of AFUDC is permitted by
regulatory bodies in setting rates charged for utility services. AFUDC for 1999
decreased as a result of lower LPSC and FERC rate-regulated construction
expenditures. AFUDC for 1998 increased as a result of higher LPSC and FERC
rate-regulated construction. AFUDC accounted for 0.9% of net income applicable
to common stock in 1999, compared to 2.2% in 1998 and 0.9% in 1997.
FINANCIAL CONDITION
Liquidity and Capital Resources
Financing for construction requirements and operational needs is
dependent upon the cost and availability of external funds through capital
markets and from financial institutions. Access to funds is dependent upon
factors such as general economic conditions, regulatory authorizations and
policies, the Company's credit rating and the credit rating of its subsidiaries.
At December 31, 1999 and 1998, there was $25.9 million and $68.4
million, respectively, of short-term debt outstanding in the form of commercial
paper and bank loans. Short-term debt decreased as a result of the issuance of
$50 million of medium-term notes by Utility Group, which used the proceeds to
refinance $10 million in medium-term notes that matured in May 1999, redeem $20
million of putable medium term notes in November 1999, and pay down short-term
debt. An existing $100 million revolving credit facility within Utility Group is
scheduled to terminate on June 15, 2000, and an $80 million, 364-day credit
facility within Utility Group was terminated on August 25, 1999. These
facilities provided support for the issuance of commercial paper and working
capital needs. Two new credit facilities, for the Company totaling $200 million,
were finalized concurrently with the termination of the $80 million, 364-day
facility. These new facilities are structured so that $120 million is for a term
of 364 days and $80 million is for a term of three years. The facilities will
provide for working capital and other needs of the Company and its subsidiaries.
Guaranties issued by the Company to third parties for certain types of
transactions between those parties and the Company's subsidiaries, other than
Utility Group, will reduce the amount of the facilities available to the Company
by an amount equal to the stated or determinable amount of the primary
obligation. In addition, certain indebtedness incurred by the Company outside of
the facilities will reduce the amount of the facilities available to the
Company. The amount of such guaranties and other indebtedness totaled $18.2
million at December 31, 1999. Uncommitted lines of credit with banks totaling
$15 million are also available to support working capital needs. Additionally,
UtiliTech has $2.0 million line of credit exists at UtiliTech. The UtiliTech
line of credit is expected to continue to December 2000. At December 31, 1999,
there was no outstanding debt under the UtiliTech facility. Additionally, at
December 31, 1999, an LPSC non-jurisdictional subsidiary held $13.1 million of
cash and marketable securities, which are committed to supporting activities of
affiliates.
Cash Generation and Cash Requirements
Cash Flows
During 1999 cash flows from operating activities generated $114.7
million, as shown in the Consolidated Statements of Cash Flows. Net cash
provided by operating activities resulted from net income, adjusted for noncash
charges to income, and changes in working capital. Net cash used in investing
activities related to additions to property,
23
<PAGE>
plant and equipment and changes in utility and nonutility investments. Net cash
provided by financing activities resulted principally from the issuance of
$218.6 million in senior secured bonds by Evangeline and was reduced by payment
of dividends to shareholders, redemption of three issues of preferred stock,
reacquisition of common stock, transfer of cash into restricted escrow accounts,
and changes in short-term and long-term financing activities. See Notes to the
Consolidated Financial Statements, Note B, "Summary of Significant Accounting
Policies," "Restricted Cash" for a further discussion of restricted escrow
accounts.
Construction Overview
The Company has divided its construction along its major first-tier
subsidiaries - Utility Group, Midstream, UtiliTech and other. Utility Group
construction consists of assets that may be added to Utility Group's rate base,
and the cost, if considered prudent by the LPSC, may be passed on to
jurisdictional customers. Those assets earn a rate of return restricted by the
LPSC and are subject to the rate agreement described under "Retail Rates of
Utility Group." Construction consists of additions to Utility Group's
distribution system, improvements to its transmission system and improvements at
its generation stations. Midstream and UtiliTech and other construction consists
of assets whose rate of return is largely determined by the market, not the
LPSC. Examples of this type of construction are the repowering of the Evangeline
facility, additions to gas pipeline transmission systems, and the purchase of
line construction equipment.
Utility Group Construction
In recent years the Utility Group construction program has consisted
primarily of enhancements to its transmission and distribution system and
improvements at its generating stations. In 1997 Utility Group acquired the
assets of Teche for $22.4 million. Utility Group construction expenditures,
excluding AFUDC, totaled $51.7 million in 1999 and $53.9 million in 1998,
excluding the Teche assets.
Utility Group construction expenditures, excluding AFUDC, for 2000 are
estimated to be $54 million and for the five-year period ending 2004 are
expected to total $225 million. About one-half of the planned construction in
the five-year period will support line extensions and substation upgrades to
accommodate new business and load growth. Some investment will be made to
rehabilitate older transmission, distribution and generation assets. Utility
Group will also continue to invest in technology to allow it to operate more
efficiently.
In 1999, 100% of Utility Group construction requirements were funded
internally, as compared to 99.8% in 1998 and 100% in 1997. In 2000, 96% of
construction requirements are expected to be funded internally. For the
five-year period ending 2004, 99% of the construction requirements are expected
to be funded internally.
Midstream Construction
Before 1998, construction within Midstream companies had consisted of a
series of natural gas interconnections between several gas transmission
pipelines and Utility Group's generation stations that use natural gas. In 1998
Midstream started the repowering project at CPS, now named Evangeline. Additions
to property, plant and equipment for 1999, as shown on the Consolidated
Statements of Cash Flows, include a $125.2 million cash outlay during 1999 for
the repowering of Evangeline. Physical construction of the Evangeline project is
approximately 66% complete as of December 31, 1999. See Notes to the
Consolidated Financial Statements, Note M, "Repowering Project" for a further
explanation of the repowering of Evangeline. Midstream construction expenditures
totaled $127.3 million during 1999 and $40.1 million in 1998.
Midstream construction expenditures for 2000 are estimated to total
$229 million and for the five-year period ending 2004 are expected to total $1
billion. Most of the planned construction in the five-year period will consist
of the repowering of Evangeline, construction of the Acadia power facility and
the projected construction of 1,200 MW of additional electric generation.
Midstream has announced plans to develop the Acadia Power Project, a
1,000 MW natural gas-fired power plant near Eunice, Louisiana, on a 61.5-acre
site owned by Midstream. Permitting is under way, and construction is expected
to begin in mid-to-late 2000, pending receipt of approvals from local, state and
other regulatory officials. Commercial operations are planned to start mid-year
2002. Several nearby natural gas pipelines will provide ready access to fuel for
the plant. The plant will be adjacent to the existing 500/138 KV
24
<PAGE>
Richard transmission substation, giving it the ability to dispatch power
directly to the Southwest Power Pool and the Southeastern Electric Reliability
Council through both Utility Group's and neighboring transmission systems.
Midstream anticipates the majority of the output from the plant will be sold
under long-term contract. The plant will be owned through a joining venture,
Acadia Power Partners LLC, which is 50% owned by Midstream and 50% owned by
Calpine Corporation. The project cost is currently estimated at $500 million.
Midstream intends to seek project financing, such as nonrecourse debt, to fund
its share of construction costs.
In 1999, 1.6% of Midstream construction requirements were funded
internally, as compared to 14.3% in 1998 and 100% in 1997. In 2000, 4% of
Midstream construction requirements are expected to be funded internally. For
the five-year period ending 2004, 6% of Midstream construction requirements are
expected to be funded internally.
UtiliTech and Other Construction
UtiliTech and other subsidiaries had construction expenditures of $0.2
million during 1999. The expenditures relate to the start-up nature of
UtiliTech. UtiliTech and other construction expenditures for 2000 are estimated
to total $8 million and for the five-year period ending 2004 are expected to
total $16 million. The majority of the planned UtiliTech and other construction
in the five-year period will go toward the installation of new financial
software by Cleco Support Group LLC in order to meet the growing needs of the
Company and its subsidiaries.
In 1999, 100% of UtiliTech and other construction requirements were
funded internally. In 2000 and for the five-year period ending 2004, all
UtiliTech and other construction requirements are expected to be funded
internally.
Other Cash Requirements
Scheduled maturities of debt and preferred stock will total about $27.4
million for 2000 and approximately $154.6 million for the five-year period
ending 2004. In 1991 the Company began a common stock repurchase program, and as
part of that program up to $23 million of common stock may be repurchased. The
Company's purchases of common stock under its repurchase program depend on a
number of factors including market conditions. The purchases may not be
announced in advance and may be made in the open market or in privately
negotiated transactions. During 1999 the Company repurchased stock at a cost of
approximately $3.8 million.
Commitments for asset development projects for Energy will be made as
they occur up to $5 million per year for years 1998 through 2002. Amounts not
advanced in any year are added to the amount available for the remaining years.
A total of $2.5 million was advanced in 1998 for the acquisition of Sabine
Texican Pipeline Company, Inc. No amounts were advanced in 1999.
Industry Developments / Customer Choice
Forces driving increased competition in the electric utility industry
involve complex economic, technological, legislative and regulatory factors.
These factors have resulted in the introduction of federal and state legislation
and other regulatory initiatives that are likely to produce even greater
competition at both the wholesale and retail levels in the future. The LPSC has
been continuing its investigation into whether retail choice is in the best
interest of Louisiana electric utility customers. During 1999 the LPSC directed
its staff to develop a transition to competition plan to be presented on or
before January 1, 2001. Utility Group and a number of parties, including the
other Louisiana electric utilities, certain power marketing companies and
various associations representing industry and consumers, have been
participating in electric industry restructuring proceedings before the LPSC
since 1997. Several neighboring states have taken steps to initate retail choice
by 2002. At the federal level, several bills, some with conflicting provisions,
have been introduced this past year to promote a more competitive environment in
the electric utility industry. Management expects the debate relating to
customer choice and other related issues to continue in legislative and
regulatory bodies in 2000. At this time, the Company cannot predict whether any
legislation or regulation will be enacted or adopted during 2000 and, if
enacted, what form such legislation or regulation would take.
The increasingly competitive environment presents the opportunity to
supply electricity to new customers, as well as the risk of losing existing
customers. Management believes Utility Group is a reliable, low-cost provider of
electricity, and as such, is currently positioned to compete effectively in a
restructured electric marketplace.
25
<PAGE>
Retail Rates of Utility Group
Retail rates regulated by the LPSC accounted for approximately 66% of
the Company's consolidated 1999 revenues. Fuel costs and monthly fuel adjustment
billing factors are subject to audit by the LPSC. In the past, Utility Group has
sought increases in base rates to reflect the cost of service related to plant
facility additions and increases in operating costs. If Utility Group requests
an increase in its rates, and adequate rate relief is not granted on a timely
basis, its ability to attract capital at reasonable costs to finance operations
and capital improvements might be impaired.
The LPSC elected in 1993 to review the earnings of all electric, gas,
water and telecommunications utilities it regulates to determine whether the
returns on equity of these companies were higher than returns that might be
awarded in the economic environment at the time. In 1996 the LPSC approved a
settlement of Utility Group's earnings review, which provides its customers with
lower electricity rates. A base rate decrease of $3 million annually became
effective November 1, 1996, with a second decrease of an additional $2 million
annually effective January 1, 1998. The terms of this settlement were to be
effective for a five-year period. In February 1999 the period was extended three
years until 2004 under an agreement with the LPSC to transfer the existing
assets of CPS from the Utility Group's LPSC-regulated rate base into Evangeline,
which is repowering the generating plant.
During the eight-year period beginning November 1, 1996, an
LPSC-approved rate stabilization plan is in place. This plan allows Utility
Group to retain all earnings equating to a regulatory return on equity up to and
including 12.25% on its regulated utility operations. Any earnings which result
in a return on equity over 12.25% and up to and including 13% will be shared
equally between Utility Group and its customers. Any earnings above this level
will be fully refunded to customers. This effectively allows Utility Group the
opportunity to realize a regulatory rate of return of up to 12.625%. As part of
the rate stabilization plan, the LPSC will annually review Utility Group's
revenues and return on equity. If Utility Group is found to be achieving a
regulatory return on equity above the minimum 12.25%, a refund will be made in
the form of billing credits during the month of September following the
evaluation period. A refund of $6.1 million was given in September 1999,
reflective of the earnings level achieved in the previous earnings period. An
additional $0.5 million has been reserved for refund purposes from this same
period following a settlement with the LPSC. Management currently does not
anticipate any additional refunds in 2000 based upon 1999 earnings.
In November 1997, the LPSC issued an order in a generic docket that
promulgated new standards for the monthly Fuel Adjustment Clause (FAC) rate
filings of electric companies under its jurisdiction. The order adopted new
rules and procedures for the monthly FAC computation and changes in reporting of
fuel and purchased power cost. Although the order narrowed the types of costs
that can be included in the FAC, it offset this reduction with an increase in
base rates. New rate schedules that incorporate the shifting of costs from FAC
to base rates were calculated and subsequently approved by the LPSC for
implementation on January 1, 2000. The changes are expected to have no effect
upon the Company's financial position or results of operations.
Year 2000 Readiness Disclosure
On and subsequent to January 1, 2000, the Company experienced only
minor issues arising from year 2000 (Y2K) problems. The Y2K issues caused minor
inconvenience and were quickly corrected. The Company will continue to monitor
Y2K compliance until such time as management is assured that no material effects
will arise as a result of Y2K.
The Company's cost to achieve Y2K readiness was approximately $1.5
million. No further expenditures are expected. The expenses associated with Y2K
were funded through cash flows from operations. Only a nominal amount of the Y2K
budget was expended on hardware. Most of the budget was expended on software.
The Company's overall information technology operating budget for the year ended
December 31, 1999, was approximately $11 million; however, the bulk of the Y2K
expenses were budgeted and expended by the various departments that were
affected by Y2K issues.
Environmental Matters
The Company is subject to federal, state and local laws and regulations
governing the protection of the environment. Violations of these laws and
regulations may result in substantial fines and penalties.
26
<PAGE>
The Company has obtained all material environmental permits necessary for its
operations and believes it is in substantial compliance with these permits, as
well as all applicable environmental laws and regulations. The Company
anticipates that existing environmental rules will not affect operations
significantly, but some capital improvements may have to be made in response to
new environmental programs expected in the next few years.
Implementation of Phase I of the Clean Air Act did not require the
Company to reduce sulfur emissions at Utility Group's solid-fuel generating
units, which either burn low-sulfur coal or utilize pollution control equipment.
Installation of continuous emission monitoring equipment on Utility Group's
generating units was completed in 1996 at a cost of approximately $3 million.
Although Phase II of the legislation, effective in 2000, involves more stringent
limits on emissions, these requirements should not significantly affect the
operation of the Company's generating units. However, some capital investment
may be necessary in order to comply with Phase II requirements. Capital
expenditures for environmental matters were $3.7 million in 1999 and are
estimated to be $5 million for 2000.
Regulatory Matters
In 1996 the FERC issued Orders No. 888 and 889 requiring open access to
utilities' transmission systems. The open access provisions require
FERC-regulated electric utilities to offer third parties access to transmission
under comparable terms and conditions as the utilities' use of their own
systems. Providing unbundled transmission service to firm-requirements customers
may have significant financial consequences to the utility industry. Providing
open access for non-firm sales may have significant effects on utility
operations. Currently Utility Group has three wholesale full-requirements
customers representing about 0.9% of its total kilowatt-hour sales to regular
customers.
In 1999 the FERC issued Order No. 2000 that further defines the
operation of utilities' transmission systems. This order establishes a general
framework for all transmission owning entities in the nation to voluntarily
place their transmission facilities under the control of appropriate Regional
Transmission Organizations (RTO). Although participation is voluntary, the FERC
has made it clear that any jurisdictional entity not participating in an RTO
will be subject to further regulatory steps. Current objectives state that all
electric utilities that own, operate or control interstate transmission
facilities should participate in an RTO that will be operational by no later
than December 15, 2001. The transfer of control of the Utility Group's
transmission facilities has the potential to significantly affect utility
operations and revenues.
Federal and state regulators and legislators are studying potential
effects of restructuring the vertically integrated utility systems and providing
retail customers a choice of supplier. At this time, it is not possible to
predict when, if or to what extent retail customers will be able to choose their
electric service suppliers. The regulatory requirement to serve customers and
industry standards for reliability of electric supply have resulted in the
construction of facilities sufficient, when combined with power purchased
off-system for Utility Group to meet peak load conditions with a margin for
reserve. With customer choice, costs associated with utility assets specifically
dedicated to, or used by, departing customers, such as the Utility Group's
generating plants and power purchase contracts, would have to be paid by the
departing customers (stranded costs), absorbed by the remaining and new
customers, or written off by Utility Group.
Utility Group has recorded regulatory assets and liabilities, primarily
for the effects of income taxes, as a result of past rate actions of regulators,
pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS 71). The effects of potential deregulation of the industry or
possible future changes in the method of rate regulation of Utility Group could
require Utility Group to discontinue the application of SFAS 71, pursuant to
SFAS No. 101, "Regulated Enterprises -- Accounting for the Discontinuation of
Application of FASB Statement No. 71" (SFAS 101). At December 31, 1999, Utility
Group had recorded $18.7 million of regulatory assets, net of regulatory
liabilities, because of the regulatory requirement to flow through the tax
benefits of accelerated deductions to current customers and an implied
regulatory compact that future customers would pay for additional taxes when
Utility Group paid additional taxes. These differences occur over the lives of
relatively long-lived assets, up to 30 years or more. Under the current
regulatory and
27
<PAGE>
competitive environment, Utility Group believes that these regulatory assets are
fully recoverable. However, if in the future, as a result of regulatory changes
or increased competition, the Utility Group's ability to recover these
regulatory assets would not be probable, then to the extent that these
regulatory assets were determined not to be recoverable, the Company would be
required to write off or write down these assets.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (SFAS 121), establishes accounting
standards for determining if long-lived assets are impaired, and when and how
losses, if any, should be recognized. The Company believes that the net cash
flows that will result from the operation of the Company's assets are currently
sufficient to cover the carrying value of the assets.
The Emerging Issues Task Force (EITF) assists the Financial Accounting
Standards Board (FASB) in identifying emerging issues affecting financial
reporting. In 1997 the EITF reached a consensus in Issue No. 97-4, "Deregulation
of the Pricing of Electricity -- Issues Related to the Application of SFAS No.
71 and No 101." EITF 97-4 specified that SFAS No. 71 should be discontinued at a
date no later than when the details of a transition plan toward the deregulation
of electric rates for all or a portion of the entity subject to such plan are
known. However, other factors could cause the discontinuation of SFAS 71 before
that date. Additionally, EITF 97-4 establishes that regulatory assets to be
recovered through cash flows derived from another portion of the entity which
continues to apply SFAS 71 should not be written off, but rather should continue
to be considered regulatory assets of the separable portion which will continue
to apply SFAS 71.
Financial Risk Management
The market risk inherent in the Company's market risk-sensitive
instruments and positions is the potential change arising from increases or
decreases in the short-, medium- and long-term interest rates and the commodity
price of electricity traded on the Into Entergy and Cinergy exchanges and the
commodity price of natural gas traded. Generally, Utility Group's market
risk-sensitive instruments and positions are characterized as "other than
trading;" however, Utility Group does have positions that are considered
"trading" as defined by EITF 98-10, "Accounting for Contracts Involved in Energy
Trading and Risk Management Activities." All of CMT's positions are
characterized as "trading" under EITF 98-10. The Company's exposure to market
risk, as discussed below, represents an estimate of possible changes in the fair
value or future earnings that would occur, assuming possible future movements in
the interest rates and the commodity price of electricity and natural gas.
Management's views on market risk are not necessarily indicative of actual
results, nor do they represent the maximum possible gains or losses. The views
do represent, within the parameters disclosed, what management estimates may
happen.
Interest
The Company has entered into various fixed and variable rate debt
obligations. See the Notes to the Consolidated Financial Statements, Note E,
"Debt" for details. The calculations of the changes in fair market value and
interest expense of the debt securities are made over a one-year period.
As of December 31, 1999, the carrying value of the Company's long-term,
fixed-rate debt was approximately $610.9 million, with a fair market value of
approximately $604.8 million. Fair value was determined using quoted market
prices. Each 1.0% change in the average interest rates applicable to such debt
would result in a change of approximately $46.4 million in the fair values of
these instruments. If these instruments are held to maturity, no change in fair
value will be realized.
As of December 31, 1999, the carrying value of the Company's long-term,
variable-rate debt was approximately $2.0 million, which approximates the fair
value. Each 1.0% change in the average interest rates applicable to such debt
would result in a change of approximately $20,000 in the Company's pretax
earnings.
As of December 31, 1999, the carrying value of the Company's long-term
debt to be paid in Company common stock was approximately $1.0 million, which
approximates market value. Fair value was determined using quoted market price
for Company common stock. Each $3 change in price of Company common stock would
result in a change of approximately $128,000 in the fair value of this debt.
As of December 31, 1999, the carrying value of the
28
<PAGE>
Company's short-term, variable-rate debt was approximately $25.9 million, which
approximates the fair market value. Each 1.0% change in the average interest
rates applicable to such debt would result in a change of approximately $0.3
million in the Company's pretax earnings.
The Company monitors its mix of fixed and variable-rate debt
obligations in light of changing market conditions and from time to time may
alter that mix by, for example, refinancing balances outstanding under its
variable-rate commercial paper program with fixed rate debt.
As of December 31, 1999, CLE Resources, Inc. (Resources), a wholly
owned subsidiary of the Company, held $13.1 million in cash equivalents in a
money market account. Each 1.0% change in average interest rates applicable to
such investments could result in a change of approximately $0.1 million in the
Company's pretax earnings.
Market Risk
CMT engages in marketing and trading of power and natural gas. All of
CMT's trades are considered "trading" under EITF 98-10 and are marked-to-market.
The mark-to-market procedures may introduce volatility to carrying values and
hence to the Company's financial statements. The Company does have in place
controls to help minimize the risks involved in marketing and trading. The
mark-to-market of trading positions of CMT at December 31, 1999, was a gain of
$14,607.
Most of Utility Group's positions are considered "other than trading"
under EITF 98-10. However, Utility Group did have financial positions that were
defined as "trading" under EITF 98-10. Controls similar to the ones in place for
CMT are in place for Utility Group to help minimize the risks involved in
marketing and trading. At December 31, 1999, the mark-to-market for those
positions was a loss of $570,136.
Both CMT and Utility Group utilize a value-at-risk model to assess the
market risk of their derivative financial instruments. Value-at-risk represents
the potential loss for an instrument from adverse changes in market factors for
a specified period of time and confidence level. The value-at-risk was estimated
using historical simulation calculated daily assuming a one-day period with a
99.7% confidence level and a holding period of one day. Total volatility is
based on historical cash volatility, implied market volatility, cash volatility
and option pricing. Based on these assumptions, the high, low and average
value-at-risk during 1999, as well as the value-at-risk as of December 31, 1999,
is summarized below:
<TABLE>
<CAPTION>
(In thousands)
High Low Average At 12/31/1999
<S> <C> <C> <C> <C>
CMT $ 325 $ 5 $ 325 $ 84
Utility Group $7,700 $21 $1,908 $ 93
Consolidated $7,700 $69 $1,941 $177
</TABLE>
New Accounting Standards
Periodically the Financial Accounting Standards Board (FASB) issues
Statements of Financial Accounting Standards (SFAS). These statements reflect
accounting, reporting and disclosure requirements the Company should follow in
the accumulation of financial data and in the presentation of financial
statements. The FASB, a nongovernmental organization, is the primary source of
generally accepted accounting principles within the United States.
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. This statement establishes accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. In June 1999 the FASB issued SFAS
No. 137, "Accounting for Derivatives Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," which changed the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
The Company plans on adopting SFAS No. 133 for the year beginning January 1,
2001. The effect of adopting this statement has not been determined.
29
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report to Shareholders includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical fact included in this report,
including, without limitation, the statements under "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Results of
Operations -- Revenues and Sales -- Utility Group, -- Results of Operations --
Revenues and Sales -- Midstream, -- Results of Operations -- Revenues and Sales
- -- UtiliTech, -- Results of Operations -- Fuel and Purchased Power -- Utility
Group -- Financial Condition -- Cash Generation and Cash Requirements -- Utility
Group Construction, -- Financial Condition -- Cash Generation and Cash
Requirements -- Midstream Construction, -- Financial Condition -- Cash
Generation and Cash Requirements--UtiliTech and Other Construction, -- Financial
Condition -- Industry Development/Customer Choice, -- Financial Condition --
Retail Rates of Utility Group, -- Financial Condition -- Regulatory Matters,"
Note D to the Consolidated Financial Statements and Note O to the Consolidated
Financial Statements contain forward-looking statements. Located elsewhere in
this report are forward-looking statements regarding sales growth, capital
expenditures, Utility Group's 1996 LPSC settlement, the effect of certain recent
FERC regulations, development of electric generating facilities, future
legislative and regulatory changes affecting electric utilities and other
matters. Although the Company believes the expectations reflected in such
forward-looking statements are reasonable, such forward-looking statements are
based on numerous assumptions (some of which may prove to be incorrect) and are
subject to 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 Utility Group's and Evangeline's facilities, and the other risks
and uncertainties more fully described in the Company's latest Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q. Actual results may differ
materially from those indicated in such forward-looking statements.
Forward-looking statements are based on management's beliefs as well as
assumptions made by and information currently available to management. When used
in this Annual Report, the words "anticipate," "estimate," "expect,"
"objective," "projection," "forecast," "goal" and similar expressions are
intended to identify forward-looking statements.
The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of changes in actual results,
changes in assumptions or other factors affecting such statements.
30
<PAGE>
CLECO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997
---- ---- ----
(In thousands,
except share and per share amounts)
<S> <C> <C> <C>
Operating revenue
Retail electric operations................................... $ 508,790 $ 487,280 $ 456,245
Energy marketing operations.................................. 256,429 32,695
Other operations............................................. 5,757
-----------
Gross operating revenue................................... 770,976 519,975 456,245
Less:
Retail electric customer credits............................. (2,776) (4,800)
----------- ------------
Total Operating Revenue................................... 768,200 515,175 456,245
Operating expenses
Fuel used for electric generation............................ 145,229 142,737 136,009
Power purchased for utility customers........................ 65,303 53,011 44,590
Purchases for energy marketing operations.................... 244,384 27,322
Other operations............................................. 84,743 71,066 64,618
Maintenance.................................................. 29,909 30,285 23,286
Depreciation................................................. 50,019 48,369 45,890
Taxes other than income taxes................................ 36,072 35,420 33,422
Restructuring charges........................................ 1,891
----------- ------------ ------------
Total operating expenses.................................. 655,659 408,210 349,706
----------- ------------ ------------
Operating Income............................................... 112,541 106,965 106,539
Interest income................................................ 1,688 372 427
Allowance for other funds used during construction............. 654 812 620
Other income (expense), net.................................... (1,290) (322) 1,248
------------ ------------- ------------
Income Before Interest Charges................................. 113,593 107,827 108,834
----------- ------------ ------------
Interest charges
Interest on debt and other, net of amount capitalized........ 28,412 27,016 27,549
Allowance for borrowed funds used during construction........ (91) (904) (169)
Amortization of debt discount, premium and expense, net...... 1,282 1,248 1,206
----------- ------------ ------------
Total interest charges.................................... 29,603 27,360 28,586
----------- ------------ ------------
Net income before income taxes and preferred
dividends................................................... 83,990 80,467 80,248
Federal and state income taxes................................. 27,224 26,666 27,729
----------- ------------ ------------
Net income..................................................... 56,766 53,801 52,519
----------- ------ ------
Preferred dividend requirements, net........................... 2,010 2,137 2,117
----------- ------------ ------------
Net income applicable to common stock.......................... $ 54,756 $ 51,664 $ 50,402
========== =========== ===========
Average shares of common stock outstanding
Basic......................................................... 22,501,324 22,480,163 22,459,770
========== ========== ==========
Diluted....................................................... 23,848,515 23,867,458 23,864,031
========== ========== ==========
Earnings per average share
Basic......................................................... $ 2.43 $ 2.30 $ 2.24
========== =========== ===========
Diluted....................................................... $ 2.37 $ 2.24 $ 2.18
========== =========== ===========
Cash dividends paid per share of common stock.................. $ 1.65 $ 1.61 $ 1.57
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
31
<PAGE>
CLECO CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
At December 31,
1999 1998
-------------- ---------------
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents................................................. $ 25,161 $ 19,457
Customer accounts receivable (less allowance for doubtful accounts of
$838 in 1999 and $812 in 1998)......................................... 32,968 27,436
Other accounts receivable................................................. 14,245 22,218
Notes receivable.......................................................... 930
Unbilled revenues......................................................... 20,816 9,712
Fuel inventory, at average cost........................................... 10,461 9,725
Material and supplies inventory, at average cost.......................... 14,768 12,674
Other current assets...................................................... 6,941 1,738
------------ -----------
Total current assets.............................................. 125,360 103,890
Property, plant and equipment
Property, plant and equipment............................................. 1,579,304 1,565,028
Accumulated depreciation.................................................. (555,675) (551,705)
------------ -----------
Net property, plant and equipment......................................... 1,023,629 1,013,323
Construction work-in-progress............................................. 187,988 76,475
------------ -----------
Total property, plant and equipment, net.......................... 1,211,617 1,089,798
Other assets................................................................ 4,225 3,500
Prepayments................................................................. 6,427 8,293
Restricted cash ............................................................ 77,251
Regulatory assets-- deferred taxes.......................................... 115,918 95,199
Other deferred charges...................................................... 38,213 30,975
Accumulated deferred federal and state income taxes......................... 125,639 97,345
------------ -----------
Total Assets........................................................ $1,704,650 $ 1,429,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
(Continued on next page)
32
<PAGE>
CLECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
At December 31,
1999 1998
-------------- ---------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Short-term debt ......................................................... $ 25,989 $ 68,416
Long-term debt due within one year ...................................... 27,374 33,330
Accounts payable......................................................... 74,700 61,041
Retainage................................................................ 7,733 745
Customer deposits........................................................ 20,326 20,120
Taxes accrued ........................................................... 4,786 11,942
Interest accrued......................................................... 9,634 7,340
Accumulated deferred fuel................................................ 2,638 4,613
Other current liabilities................................................ 5,263 3,868
---------- ---------
Total current liabilities.............................................. 178,443 211,415
Deferred credits
Accumulated deferred federal and state income taxes ..................... 321,197 286,619
Accumulated deferred investment tax credits ............................. 25,994 27,784
Regulatory liabilities-- deferred taxes ................................. 97,154 81,074
Other deferred credits................................................... 49,722 35,900
---------- ---------
Total deferred credits................................................. 494,067 431,377
Long-term debt, net ........................................................ 579,595 343,042
---------- ---------
Total Liabilities...................................................... 1,252,105 985,834
Preferred stock subject to mandatory redemption............................. 5,680
Stockholders' equity
Preferred stock
Not subject to mandatory redemption................................... 28,880 29,718
Deferred compensation related to preferred stock held by ESOP......... (14,991) (16,923)
---------- ---------
Total preferred stock not subject to mandatory redemption........... 13,889 12,795
---------- ---------
Common shareholders' equity
Common stock, $2 par value, authorized 50,000,000 shares, issued
22,531,870 and 22,767,754 shares at December 31,1999 and 1998, 45,064 45,535
respectively...........................................................
Premium on capital stock.................................................. 112,733 113,871
Long-term debt payable in Company's common stock.......................... 1,036
Retained earnings......................................................... 282,825 271,019
Treasury stock, at cost, 90,094 and 281,930 shares (3,002) (5,734)
---------- ---------
at December 31, 1999
And 1998, respectively
Total common shareholders' equity...................................... 438,656 424,691
Total shareholders' equity......................................... 452,545 437,486
---------- -----------
Total liabilities and shareholders' equity.................................. $1,704,650 $ 1,429,000
========= ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
33
<PAGE>
CLECO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income.............................................................. $ 56,766 $ 53,801 $ 52,519
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization....................................... 51,301 50,852 47,719
Allowance for funds used during construction........................ (745) (1,716) (789)
Amortization of investment tax credits.............................. (1,790) (1,790) (1,790)
Deferred income taxes............................................... 8,457 8,703 2,908
Deferred fuel costs................................................. (1,975) 1,648 797
Restructuring charge................................................ 1,285
Gain on sales of property, plant and equipment, net................. (711) (224)
Changes in assets and liabilities
Accounts receivable, net.......................................... 3,371 (2,231) (4,441)
Unbilled revenues................................................. (11,104) 1,378 103
Fuel, material and supplies inventories........................... (2,830) 662 3,334
Accounts payable.................................................. 20,647 4,421 2,058
Customer deposits................................................. 206 (52) 411
Taxes accrued..................................................... (7,156) (269) 6,405
Interest accrued.................................................. 2,294 (341) 160
Other, net........................................................ (1,985) (1,682) 7,321
------------- -------- --------
Net cash provided by operating activities......................... 114,746 113,384 117,776
------------ -------- --------
Investing activities
Additions to property, plant and equipment.............................. (179,226) (94,030) (77,525)
Allowance for funds used during construction............................ 745 1,716 789
Proceeds from sales of property, plant and equipment.................... 1,194 408 417
Purchase of investments................................................. (580) (480) (222)
Sale of investments..................................................... 1
----------- -------- --------
Net cash used in investing activities............................. (177,867) (92,386) (76,540)
----------- -------- --------
Financing activities
Issuance of common stock................................................ 243 100 66
Repurchase of common stock.............................................. (3,833) (16)
Redemption of preferred stock........................................... (6,518) (522) (252)
Transfer of cash into restricted accounts............................... (77,251)
Issuance of long-term debt.............................................. 269,352 40,000
Retirement of long-term debt............................................ (30,639) (30,000) (15,000)
Increase (decrease) in short-term debt, net............................. (43,383) 49,197 (30,942)
Dividends paid on common and preferred stock, net....................... (39,146) (38,331) (37,384)
----------- -------- --------
Net cash provided by (used in) financing activities............... 68,825 (19,556) (43,528)
----------- -------- --------
Net increase (decrease) in cash and cash equivalents...................... 5,704 1,442 (2,292)
Cash and cash equivalents at beginning of year............................ 19,457 18,015 20,307
----------- -------- ----------
Cash and cash equivalents at end of year.................................. $ 25,161 $ 19,457 $ 18,015
============ ========= =========
Supplementary cash flow information
Interest paid (net of amount capitalized)............................... $ 30,819 $ 28,118 $ 28,770
============ ========= =========
Income taxes paid....................................................... $ 24,614 $ 20,140 $ 23,752
============ ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE>
CLECO CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Long-term
debt
payable in
Premium on Company
Common Stock Capital common Retained Treasury Stock
Shares Amount Stock Stock Earnings Shares Cost
------ ------ ----- ----- -------- ------ ----
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.......... 22,760,154 $ 45,520 $ 113,702 $ $ 240,414 307,577 $ 6,242
Redemptions of preferred stock.... 18
Incentive stock options exercised. 2,600 5 38
Issuance of treasury stock........ 5 (8,528) (172)
Incentive shares forfeited........ 793 16
Dividend requirements, preferred
stock, net..................... (2,118)
Cash dividends paid, common stock,
$1.57 per share................ (35,266)
Net income........................ 52,519
----------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1997 22,762,754 45,525 113,763 255,549 299,842 6,086
----------- ---------- --------- --------- ---------- --------
Redemptions of preferred stock 10
Incentive stock options exercised 5,000 10 74
Issuance of treasury stock 24 (19,755) (401)
Incentive shares forfeited 1,987 54
Director's restricted stock award (144) (5)
Dividend requirements, preferred
stock, net (2,137)
Cash dividends paid, common stock,
$1.61 per share (36,194)
Net income 53,801
BALANCE, DECEMBER 31, 1998 22,767,754 45,535 113,871 271,019 281,930 5,734
Redemption of preferred stock 18
Repurchase of preferred stock (62)
Incentive stock options exercised 10,800 22 217
Issuance of treasury stock 5 (62,823) (1,545)
Treasury shares cancelled (246,684) (493) (1,316) (3,256) (246,684) (5,020)
Treasury shares purchased 117,671 3,833
Dividend requirements, preferred
stock, net (2,010)
Adjustment for step-by-step
acquistion of subsidiary 1,036 (2,558)
Cash dividends paid, common stock,
$1.65 per share (37,136)
Net Income 56,766
Balance, December 31, 1999 22,531,870 $ 45,064 $ 112,733 $ 1,036 $ 282,825 90,094 $ 3,002
=========== ========== ========= ========== ========= ========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A -- Holding Company Structure
Effective July 1, 1999, Cleco Utility Group Inc. (Utility Group)
reorganized into a holding company structure. This reorganization resulted in
the creation of a new holding company, Cleco Corporation (the Company), which
holds investments in several subsidiaries, one of which, Utility Group, contains
the Louisiana Public Service Commission (LPSC) jurisdictional generation,
transmission and distribution electric utility operations serving the Company's
traditional retail and wholesale customers. Another subsidiary, Cleco Midstream
Resources LLC (Midstream), operates competitive LPSC non-jurisdictional electric
generation, oil and natural gas production, energy marketing and natural gas
pipeline businesses. A third subsidiary, Utility Construction & Technology
Solutions LLC (UtiliTech, formerly Cleco Services LLC), provides utility
engineering and line construction services to municipal governments, rural
electric cooperatives and investor-owned electric companies. There was no impact
to the Company's Consolidated Financial Statements because the reorganization
was accounted for similarly to a pooling of interest.
Under the terms of the reorganization, the Company became the owner of all
of Utility Group's outstanding common stock, and holders of existing common
stock and two series of preferred stock exchanged their stock in Utility Group
for stock in the Company. Shares of preferred stock in three series that did not
approve the reorganization were redeemed for $5.7 million.
Note B - Summary of Significant Accounting Policies
General
The Company is an exempt holding company under the Public Utility Holding
Company Act of 1935. Its major, first-tier subsidiaries consist of Utility
Group, Midstream and UtiliTech.
Utility Group provides electric generation, transmission, distribution and
customer care services to a diversified base of residential, commercial and
industrial customers in 23 parishes (counties) of Louisiana. Utility Group also
operates energy marketing operations, which trade in the Cinergy and Into
Entergy power markets, and markets natural gas.
Midstream develops wholesale generation projects, provides personnel to
operate power plants, operates an energy marketing and trading business and owns
and operates natural gas pipelines in Louisiana and Texas. Midstream's
operations are primarily located in Louisiana and Texas.
UtiliTech specializes in engineering and line construction contracting
services. UtiliTech primarily operates in Louisiana, Arkansas, Texas and
Mississippi.
The consolidated financial statements include the accounts of the
Company and all subsidiaries that the Company owns directly or indirectly
through a majority interest. Intercompany transactions and balances are
eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1997 and 1998
consolidated financial statements to conform to the presentation used in the
1999 consolidated financial statements. These reclassifications had no effect on
net income applicable to common stock or total common shareholders' equity.
Regulation
Utility Group maintains its accounts in accordance with the Uniform
System of Accounts prescribed for electric utilities by the Federal Energy
Regulatory Commission (FERC), as adopted by the LPSC. Utility Group's retail
rates for residential, commercial and industrial customers and other retail
sales are regulated by the LPSC, and its rates for transmission services and
wholesale power sales are regulated by the FERC. Utility Group follows
Statements of Financial Accounting Statement No. 71 (SFAS 71), "Accounting for
the Effects of Certain Types of Regulation." This Statement allows utilities to
capitalize or defer certain costs based on regulatory approval
36
<PAGE>
and management's ongoing assessment that it is probable these items will be
recovered through the ratemaking process. During 1999 the LPSC directed its
staff to develop a transition to competition plan to be presented on or before
January 1, 2001. The plan under development by the LPSC Staff may affect the
regulatory assets and liabilities recorded in Utility Group under SFAS 71 if the
criteria for the application of SFAS 71 cannot continue to be met.
Utility Group has recorded regulatory assets and liabilities,
primarily for the effects of income taxes, as a result of past rate actions of
regulators pursuant to SFAS 71. The effects of potential deregulation of the
industry or possible future changes in the method of rate regulation of Utility
Group could require Utility Group to discontinue the application of SFAS 71 in
the future, pursuant to SFAS No. 101, "Regulated Enterprises -- Accounting for
the Discontinuation of Application of FASB Statement No. 71" (SFAS 101). At
December 31, 1999, Utility Group had recorded $18.7 million of regulatory
assets, net of regulatory liabilities, because of the regulatory requirement to
flow through the tax benefits of accelerated deductions to current customers and
an implied regulatory compact that future customers would fund these amounts
when Utility Group pays the additional taxes. These differences occur over the
lives of relatively long-lived assets, up to 30 years or more. Under the current
regulatory and competitive environment, Utility Group believes that these
regulatory assets will be fully recoverable. However, if in the future, as a
result of regulatory changes or increased competition, Utility Group's ability
to recover these regulatory assets would not be probable, then to the extent
that such regulatory assets were determined not to be recoverable, Utility Group
would be required to write-off or write-down such assets.
Property, Plant and Equipment
Electric Utility Plant. Electric utility plant consists of LPSC regulated
generation assets utilized for retail operations and electric transmission and
distribution properties. Electric utility plant is stated at the original cost
of construction, which includes certain materials, labor, payroll taxes and
benefits, administrative and general costs, and the estimated cost of funds used
during construction. The cost of repairs and minor replacements is charged as
incurred to the appropriate operating expense and clearing accounts. The cost of
improvements is capitalized. Upon retirement or disposition, the recorded cost
of depreciable plant and the cost of removal, net of salvage value, are charged
to accumulated depreciation.
The table below discloses the amounts of plant acquisition adjustments
reported in Utility Group's property, plant and equipment and the associated
accumulated amortization reported in accumulated depreciation. The plant
acquisition adjustment relates primarily to the acquisition of Teche Electric
Cooperative, Inc. in 1997.
At December 31,
Utility Group (In thousands)
1999 1998
Plant acquisition adjustment $5,379 $5,377
Less accumulated amortization (698) (446)
------- -------
Total plant acquisition adjustment $4,681 $4,931
======= ======
The provision for depreciation is computed using the straight-line
method at rates that will amortize the unrecovered cost of depreciable property
over its estimated useful life. Annual depreciation provisions expressed as a
percentage of average depreciable property were 3.28% for 1999, 3.32% for 1998
and 3.27% for 1997.
Other Property. Other property, plant and equipment consists primarily of
natural gas pipelines and construction work-in-progress on an LPSC
non-jurisdictional power plant. Other property, plant and equipment is stated
the same as utility plant, except that estimated cost of funds used during
construction is not included; instead, interest is capitalized during the
construction period.
Depreciation on other property, plant and equipment is calculated
primarily on a straight-line basis over the useful lives of the assets.
CASH EQUIVALENTS
The Company considers highly liquid, marketable securities and other
similar instruments with original maturity dates of three months or less at the
time of purchase to be cash equivalents.
RESTRICTED CASH
Restricted cash represents cash to be used for specific purposes.
Approximately $15 million in restricted cash represents deposits into an escrow
account for credit support as required by a provision of the Capacity Sale and
Tolling Agreement between Cleco Evangeline LLC (Evangeline) and Williams Energy
Marketing & Trading Company (Williams). The credit support is to be maintained
as security for
37
<PAGE>
the performance of Evangeline in regards to the Capacity Sale and Tolling
Agreement. Upon the fulfillment of certain conditions, the credit support can be
reduced to $13 million. The remaining restricted cash is the proceeds from the
sale of Evangeline senior secured bonds, which are to be used for the
construction of the Evangeline power plant.
INCOME TAXES
Deferred income taxes are provided at the current enacted income tax
rate on all temporary differences between tax and book basis of assets and
liabilities. The Company recognizes regulatory assets and liabilities incurred
within the Utility Group for the tax effect of temporary differences, which, to
the extent past ratemaking practices are continued by regulators, will be
realized over the accounting lives of the related properties. The Company files
a federal consolidated income tax return for all subsidiaries, except for Cleco
Energy LLC (Energy) and the subsidiaries in which Energy has an ownership
interest.
INVESTMENT TAX CREDITS
Investment tax credits, which were deferred for financial statement
purposes, are amortized to income over the estimated service life of the
properties that gave rise to the credits.
DEBT EXPENSE, PREMIUM AND DISCOUNT
Expense, premium and discount applicable to debt securities are
amortized to income ratably over the lives of the related issues. Expense and
call premium related to refinanced Utility Group debt are deferred and amortized
over the remaining life of the original issue.
REVENUES AND FUEL COSTS
Utility revenues. Revenues from sales of electricity are recognized
based upon the amount of energy delivered. The cost of fuel and purchased power
used for retail customers is currently recovered from customers through fuel
adjustment clauses, based upon fuel costs incurred in prior months. These
adjustments are subject to audit and final determination by regulators.
Energy marketing and other revenues. Revenues are recognized at the
time products or services are provided to customers.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
The capitalization of AFUDC is a utility accounting practice prescribed
by the FERC and the LPSC. AFUDC represents the estimated cost of financing
construction work-in-progress. AFUDC does not represent a current source of
cash, but under regulatory practices, a return on and recovery of AFUDC is
permitted in setting rates charged for utility services. The composite AFUDC
rate, including borrowed and other funds on a combined basis, for 1999 was
13.75% on a pretax basis (8.46% net of tax), for 1998 was 13.49% on a pretax
basis (8.30% net of tax), and for 1997 was 13.97% on a pre-tax basis (8.59% net
of tax).
CAPITALIZED INTEREST
The Company and its subsidiaries, except Utility Group, capitalize
interest costs for construction in accordance with SFAS No. 34 "Capitalization
of Interest Cost." SFAS No. 34 states interest should be capitalized on assets,
other than inventory, that require a period of time to construct and when
interest costs are incurred by the enterprise constructing the asset. During the
year ending December 31, 1999, the Company has capitalized approximately $5.3
million in interest costs, as compared to approximately $0.5 million during the
year ending December 31, 1998.
RISK MANANGEMENT
The market risk inherent in the Company's market risk-sensitive
instruments and positions is the potential change arising from increases or
decreases in the short-, medium- and long-term interest rates, the commodity
price of electricity traded on the Into Entergy and the Cinergy exchanges and
the commodity price of natural gas traded. Generally, Utility Group's market
risk-sensitive instruments and positions are characterized as "other than
trading;" however, Utility Group does have positions that are considered
"trading" as defined by Emerging Issues Task Force Consensus No. 98-10 (EITF
98-10). All of the positions held by Cleco Marketing & Trading LLC (CMT), a
subsidiary of Midstream, are characterized as "trading" under EITF 98-10.
Positions that are considered "trading" under EITF 98-10 are marked-to-market at
the end of reporting periods. The mark-to-market gains or losses are reflected
in the income statement in the energy marketing revenue line item. The
off-setting unrealized gain or loss is recorded on the balance sheet in other
current assets or other current liabilities. Positions that are considered
"other than trading" under EITF 98-10 are accounted for under SFAS No. 80,
"Accounting for Futures Contracts." Under SFAS No. 80, income or loss in such
positions is deferred until the underlying transactions have been realized.
38
<PAGE>
RECENT ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivatives Instruments and
Hedging Activities," was to be implemented during the Company's fiscal year
ending December 31, 2000. SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133," delayed the implementation of SFAS No. 133 until all fiscal years
beginning after June 15, 2000. The Company expects to adopt SFAS No. 133 for the
fiscal year beginning January 1, 2001. The effect of adopting SFAS No. 133 has
not been determined.
EARNINGS PER AVERAGE COMMON SHARE
Earnings per average common share (EPS) is computed using the weighted
average number of shares of common stock outstanding during the year. EPS is
reported for the years 1999, 1998 and 1997 to reflect the Company's adoption of
SFAS No. 128, "Earnings per Share." The following table is a reconciliation of
the components in the calculation of basic and diluted earnings per share.
Incentive stock options outstanding at December 31, 1999, as disclosed
in Note F - Common Stock, could potentially dilute EPS in the future but were
not included in the year ended December 31, 1999 calculation of diluted EPS
because during 1999, the options were antidilutive. For the years ended December
31, 1998 and 1997, the incentive stock options outstanding were dilutive and
included in the calculation of diluted EPS.
<TABLE>
<CAPTION>
For the year ended December 31,
(In thousands, except per share amounts)
1999 1998 1997
Income Shares Per share Income Shares Per share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $56,766 $53,801 $52,519
Less: preferred
dividend
requirements, net (2,010) (2,137) (2,117)
----- ------- -------
Basic EPS
Income available
for common
shareholders 54,756 22,501 $2.43 51,664 22,480 $2.30 50,402 22,460 $2.24
===== ===== =====
Effect of Dilutive
Securities
Stock option 7 7
grants
Convertible ESOP
preferred stock 1,723 1,347 1,707 1,380 1,646 1,397
----- ----- ----- ----- ----- -----
Diluted EPS
Income available
to common
shareholders +
assumed $56,479 23,848 $2.37 $53,371 23,867 $2.24 $52,048 23,864 $2.18
conversions ======= ====== ===== ======= ====== ===== ======= ====== =====
</TABLE>
Note C -- Jointly Owned Generating Units
Two electric generating units operated by Utility Group are jointly
owned with other utilities. The Company's proportionate share of operation and
maintenance expenses associated with these two units is reflected in the
financial statements.
At December 31, 1999
Rodemacher Dolet Hills
Unit #2 Unit #1
------- -------
(Dollar amounts in
thousands)
Percentage of ownership.................... 30% 50%
Utility plant in service................... $85,372 $274,231
Accumulated depreciation................... $44,819 $111,510
Unit capability (megawatts)................ 523.0 650.0
Share of capability (megawatts)............ 156.9 325.0
39
<PAGE>
Note D -- Fair Value of Financial Instruments
The amounts reflected in the financial statements at December 31, 1999
and 1998, for cash and cash equivalents, accounts receivable, accounts payable
and short-term debt approximate fair value because of their short-term nature.
The fair value of the Company's long-term debt and nonconvertible preferred
stock is estimated based upon the quoted market price for the same or similar
issues or by a discounted present value analysis of future cash flows using
current rates obtainable by the Company for debt and preferred stock with
similar maturities. The fair value of convertible preferred stock is estimated
assuming its conversion into common stock at the market price per common share
at December 31, 1999 and 1998, with proceeds from the sale of the common stock
used to repay the principal balance of the Company's loan to the Employee Stock
Ownership Plan (ESOP). The estimated fair value of energy market positions is
based upon observed market prices when available and when such market prices are
not available, management estimates market value at a discrete point in time
based on market conditions and observed volatility. These estimates are
subjective in nature and involve uncertainties. Therefore actual results may
differ from these estimates.
<TABLE>
<CAPTION>
At December 31,
---------------
1999 1998
---- ----
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----- ---------- ----- ----------
(In thousands)
<S> <C> <C> <C> <C>
Financial instruments not marked-to-market
Long-term debt...................................... $615,007 $608,838 $376,698 $400,738
Preferred stock
Not subject to mandatory redemption............... $ 12,863 $ 26,036 $ 12,795 $ 28,567
Subject to mandatory redemption................... $ 5,680 $ 5,143
Original Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial instruments not marked-to-market
Energy Market Positions...............................
Assets $10,097 $8,832
Liabilities $7,470 $6,760
</TABLE>
The financial instruments not marked-to-market are reported on the
Company's consolidated balance sheets at carring value. The financial
instruments marked-to-market represent off-balance-sheet resk because, to the
extent the Company has an open position, it is exposed to the risk that
fluctuating market prices may adversely impact its financial position or results
of operations upon settlement. Original value represents the fair value of the
positions at the time originated.
Note E -- Debt
The Company and its subsidiaries have revolving credit facilities
totaling $302 million, consisting of four separate facilities. Compensating
balances are not required for any of the facilities.
The Company has two credit facilities totaling $200 million. The first
facility is a $120 million facility which provides for borrowings at interest
rates based on either competitive bid, prime rate, or the London Interbank
Offered Rate and will expire on August 25, 2000. The commitment fees for this
facility are based upon the Company's lowest secured debt ratings and are
currently 0.10%. The second facility is an $80 million, three-year facility that
provides for borrowings at interest rates established by competitive bid and
will expire on August 25, 2002. The commitment fees for this facility are based
upon the Company's lowest secured debt ratings and are currently 0.125%.
Guaranties issued by the Company to third parties for certain types of
transactions between those parties and the Company's subsidiaries, other than
Utility Group, will reduce the amount of the facilities available to the Company
by an amount equal to the stated or determinable amount of the primary
obligation. In addition, certain indebtedness incurred by the Company outside of
the facilities will reduce the amount of the facilities available to the
Company. The amount of guaranties provided by the Company and other indebtedness
reducing the amount of the facilities available to be
40
<PAGE>
utilized was $18.2 million at December 31, 1999. This provision did not exist at
December 31, 1998
Utility Group has one credit facility for $100 million. This facility
provides for uncollaterialized borrowings at prevailing interest rates and is
scheduled to expire on June 15, 2000. Interest rates are established by
competitive bid. Commitment fees are based upon the Utility Group's lowest
secured debt ratings and are currently 0.10%.
UtiliTech has one credit facility for $2 million. This facility
provides for borrowings at prevailing interest rates and will expire on December
31, 2000. Commitment fees for the facility are based on a percentage of the
unused line of credit. The facility is collateralized by the assets of
UtiliTech, and is supported by a $1 million guarantee from the Company.
Total indebtedness as of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
At December 31,
(In thousands)
1999 1998
---- ----
<S> <C> <C>
Commercial paper, net $ 5,989 $ 68,226
Short-term bank loans 20,000 190
--------- ---------
Total short-term debt $ 25,989 $ 68,416
========= =========
First mortgage bonds
Series X, 9 1/2%, due 2005 $ 60,000 $ 60,000
Pollution control revenue bonds, variable rate, due 2018 61,260
Pollution control revenue bonds, fixed rate of 5.875%,
due 2029, callable after September 1, 2009 61,260
Long-term bank loans 9,106 10,438
Medium-term notes
7.85%. due 2000 25,000 25,000
7.55% due 2004, callable at 100%, 2002 15,000 15,000
7.50% due 2004, callable at 100%, 2002 10,000 10,000
7.00% due 2003 10,000 10,000
5.90% due 1999 10,000
6.55%, due 2003 15,000 15,000
6.33%, due 2002 25,000 25,000
5.78%, due 2001 10,000 10,000
6.20%, due 2006 15,000 15,000
6.42%, due 2001 15,000 15,000
6.95%, due 2006 10,000 10,000
6.53%, due 2007 10,000 10,000
6.32%, due 2006 15,000 15,000
6.28%, due 2008, putable at 100%, 1999 20,000
7.50%, due 2007 15,000 15,000
7.00%, due 2007 25,000 25,000
6.52%, due 2009 50,000
Total medium-term notes 265,000 245,000
Senior secured bonds, 8.82%, due 2019 218,600
Gross amount of long-term debt 613,966 376,698
Less:
Amount due within one year (27,374) (33,330)
Amount classified as assets available for sale (6,076)
Unamortized premium and discount, net (921) (326)
Total long-term debt, net $ 579,595 $ 343,042
========= =========
</TABLE>
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter
---- ---- ---- ---- ---- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts payable under long-term debt $27,374 $35,622 $30,635 $31,090 $29,924 $459,321
agreements ========== ========== ========== ========== ========== ===========
</TABLE>
The weighted average interest rate on short-term debt at December 31,
1999, was 6.8% compared to 5.26% at December 31, 1998.
The first mortgage bonds are collateralized by the LPSC jurisdictional
property, plant and equipment within Utility Group. In the various parishes that
contain such property, a lien is filed with the clerk
41
<PAGE>
of court. Before Utility Group can sell any of this property, it must get a
release signed by the trustee.
The senior secured bonds are collateralized with the Evangeline
generating station assets held by Evangeline.
The three issues of Utility Group's 1991 series pollution control bonds
totaling $61.3 million were refinanced on September 2, 1999. Two new series were
issued to replace the old bonds, which were retired using the legal defeasance
method and removed from the balance sheet as permitted under SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." The new bonds were issued at a fixed rate with a coupon of
5.875%, and were discounted and sold at 98.956%, with a final maturity of
September 1, 2029, subject to optional redemption by Utility Group after
September 1, 2009. The bonds are insurance-backed, thereby fixing the cost of
the credit support for the life of the bonds. In a related transaction, an
interest rate lock agreement was entered into for the notional amount of the
bonds, effectively locking the rate of the bonds at 5.663% for the 30-year
period. Utility Group received approximately $1.8 million from the interest rate
lock counterparty upon settlement, which will be amortized over the life of the
bonds.
Note F-- Common Stock
In association with incentive compensation plans in effect during the
three-year period ended December 31, 1999, certain officers and key employees of
the Company and its subsidiaries were awarded shares of restricted Company
common stock. The cost of the restricted stock awards, as measured by the market
value of the common stock at the time of the grant, is recorded as compensation
expense during the periods in which the restrictions lapse. As of December 31,
1999, the number of shares of restricted stock previously granted for which
restrictions had not lapsed totaled 139,141 shares.
The Company makes no charge to expense with respect to the granting of
options at fair market value or above to employees. Options may be granted to
certain officers or key employees of the Company or its subsidiaries. During
1999 the Company granted two types of non-qualified stock options under the
incentive compensation plan - basic and premium options. Basic options have an
exercise price approximately equal to the fair market value of the stock at
grant date. Premium options have three exercise prices that are above the fair
market value of the stock at grant date. Both types of options granted in 1999
vest one-third each year beginning on the third anniversary of the grant date.
Both types of options granted in 1999 expire after ten years. In accordance with
Accounting Principles Board Opinion No. 25 (APB 25), the Company has not
recognized any compensation expense for stock options granted.
Changes in incentive shares for the three-year period ended December
31, 1999, were as follows:
<TABLE>
<CAPTION>
Incentive Share
----------------------------------------------------
Option Price Unexercised Available for
per Share Option Shares Future Grants
<S> <C> <C> <C>
Balance, January 1, 1997................................ 18,400 731,851
Options exercised....................................... $16.780 (2,600)
Restricted stock granted................................ (20,904)
Restricted stock forfeited.............................. 793
Incentive stock awarded................................. (3,701)
Balance, December 31, 1997.............................. 15,800 708,039
Options exercised....................................... $16.780 (5,000)
Options granted (directors)............................. $31.875 12,503 (12,503)
Restricted stock granted................................ (21,362)
Restricted stock forfeited.............................. 2,543
Balance, December 31, 1998.............................. 23,303 676,717
Options exercised....................................... $16.780 (10,800)
Options granted (directors)............................. $31.875 7,778 (7,778)
Options granted - basic (employees)..................... $32.250 166,300 (166,300)
Options granted - premium (employees)................... $38.41 to
$43.16 371,400 (371,400)
Restricted stock granted................................ (50,074)
Restricted stock forfeited.............................. 552
Balance, December 31, 1999.............................. 557,981 81,717
</TABLE>
42
<PAGE>
Had the compensation cost for the Company's stock-based
compensation plans been determined consistent with SFAS 123, the Company's net
income and net income per common share would approximate the pro forma amounts
below:
<TABLE>
<CAPTION>
For the year ended December 31,
(In thousands except per share amounts)
1999 1998 1997
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
<S> <C> <C> <C> <C> <C> <C>
SFAS 123 expense $ $ 1,036 $ $ 525 $ $ 382
Estimated reduction in income
tax for SFAS 123 expense (342) (173) (126)
Net income applicable to
common stock $54,756 $54,062 $ 51,664 $ 51,312 $ 50,402 $ 50,146
Net income per basic common
share $ 2.43 $ 2.40 $ 2.30 $ 2.28 $ 2.24 $ 2.23
</TABLE>
The assumptions used to calculate the additional compensation expense are as
follows:
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected term (in years) 6.31 5.00 N/A
Volatility 12.94% 12.29% N/A
Expected dividend yield 5.11% 5.05% N/A
Risk-free interest rate 5.94% 5.79% N/A
Weighted average fair value (Black Scholes value) $2.15 $3.13 N/A
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of future amounts. SFAS 123 does not apply to awards
prior to 1995, and the Company anticipates making awards in the future under its
stock-based compensation plans.
The following table summarizes information about employee and director
stock options outstanding at December 31, 1999:
Options Outstanding
Weighted Weighted
Average Average
Range of Number Exercise Remaining
Exercise Price Outstanding Price Contr. Life
- --------------------- ---------------- -------------- ---------------
$31.88 20,281 $31.88 8.71
$32.25 166,300 $32.25 9.50
$38.41 to $43.16 371,400 $40.76 9.50
At December 31, 1999, no outstanding stock options were exercisable
Various debt agreements contain covenants that restrict the amount of
retained earnings that may be distributed as dividends to common shareholders.
The most restrictive covenant requires that common shareholders' equity be not
less than 30% of total capitalization, including short-term debt. At December
31, 1999, approximately $111.8 million of retained earnings was not restricted.
Note G -- Assets Held for Sale
Oil and gas properties held by Energy, a subsidiary of Midstream, have
been identified as "Assets Held for Sale" and are accounted for in accordance
with the provisions of EITF Consensus No. 87-11, "Allocation of Purchase Price
to Assets to Be Sold." Oil and gas properties held for sale are reflected net of
working capital and debt specifically identified with the purchase of the oil
and gas properties. These properties are periodically reviewed to determine if
they have been impaired. In accordance with EITF No. 87-11, a net loss relative
to the operations of these assets of approximately $0.3 million has been
excluded from the Consolidated Statements of Income and capitalized as a
component of assets held for sale for the seven month period ended July 31,
1999. The components of the assets available for sale consist of assets with a
book value of approximately $8.9 million offset by capitalized losses of $0.3
million and long-term debt of approximately $6.1 million for a net of $2.5
million, which is reported in other current assets. A net loss of approximately
$0.2 million has been included in the Consolidated Statements of Income for the
five month period ended December 31, 1999.
43
<PAGE>
Note H -- Preferred Stock
All shares of the 4.5% Series 1955, 4.65% Series 1964, and 4.75% Series
1965 of preferred stock of Utility Group were redeemed at a cost of $5.7 million
in June 1999. The shareholders of these series of preferred stock voted "no" on
the formation of the holding company in May 1999. As part of the share exchange
agreement, preferred shareholders of these series had their shares redeemed.
In connection with the establishment of the ESOP, Utility Group sold
300,000 shares of 8.125% convertible preferred stock to the ESOP. As part of the
holding company reorganization, each share of Utility Group 8.125% convertible
preferred stock was exchanged for one share of Company 8.125% convertible
preferred stock. Each share of Company 8.125% preferred stock is convertible
into 4.8 shares of Company common stock. The amount of total capitalization
reflected in the consolidated financial statements has been reduced by an amount
of deferred compensation expense related to the shares of convertible preferred
stock which have not yet been allocated to ESOP participants. The amount shown
in the consolidated financial statements for preferred dividend requirements in
1999, 1998 and 1997 has been reduced by $435,000, $521,000 and $587,000,
respectively, to reflect the benefit of the income tax deduction for dividend
requirements on unallocated shares held by the ESOP.
Upon involuntary liquidation, preferred shareholders are entitled to
receive par value for shares held before any distribution is made to common
shareholders. Upon voluntary liquidation, preferred shareholders are entitled to
receive the redemption price per share applicable at the time such liquidation
occurs plus any accrued dividends.
Information about the components of preferred stock
capitalization is as follows:
<TABLE>
<CAPTION>
(In thousands, except share amounts)
Balance Balance Balance Balance
Jan. 1, Dec. 31, Dec. 31, Dec. 31,
1997 Change 1997 Change 1998 Change 1999
---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
CUMULATIVE PREFERRED STOCK,
$100 par value
NOT SUBJECT TO MANDATORY
REDEMPTION
4.50%....................... $ 1,029 $ 1,029 $ 1,029 $1,029
Convertible, Series of 1991,
Variable rate............... 29,251 $(178) 29,073 $(384) 28,689 $838 27,851
--------- ------ --------- ----- -------- --- ------
$30,280 $(178) $ 30,102 $(384) $ 29,718 $838 $28,880
========= ====== ========= ===== ========= === =======
SUBJECT TO MANDATORY
REDEMPTION
4.50%, Series of 1955......... $ 360 $ (40) $ 320 $ (40) $ 280 $(280)
4.65%, Series of 1964......... 3,080 (140) 2,940 (140) 2,800 (2,800)
4.75%, Series of 1965......... 2,932 (72) 2,860 (260) 2,600 (2,600)
$ 6,372 $ (252) $ 6,120 $(440) $ 5,680 $(5,680)
========= ======== ========= ===== ========== ========
Deferred compensation related to
convertible preferred stock held
Bby the ESOP.................. $(20,751) $1,985 $ (18,766) $1,843 $(16,923) $1,932 $(14,991)
========= ====== ========= ====== ======== ===== ========
CUMULATIVE PREFERRED STOCK,
$100 par value
Number of shares
Authorized.................. 1,412,125 (2,125) 1,410,000 (4,000) 1,406,000 (54,000) 1,352,000
Issued and outstanding...... 366,519 (4,301) 362,218 (8,240) 353,978 (65,174) 288,804
========= ====== ========= ====== ======== ====== ========
CUMULATIVE PREFERRED STOCK,
$25 par value
Number of shares authorized
(None outstanding).......... 3,000,000 3,000,000 3,000,000 3,000,000
========= ========= ========= =========
</TABLE>
44
<PAGE>
Preferred stock, other than the convertible preferred stock held by the
ESOP, is redeemable at the Company's option, subject to 30 days', prior written
notice to holders. The convertible preferred stock is redeemable at any time at
the Company's option. If the Company were to elect to redeem the convertible
preferred stock, shareholders may elect to receive the optional redemption price
or convert the preferred stock into common stock. The redemption provisions for
the various series of preferred stock are shown in the following table.
Optional Redemption
Price
per Share
Series
4.50%..................................... $101
Convertible, Series of 1991
Through March 31, 2000.................. $101.6250
Thereafter.............................. $100.8125 to $100
Note I -- Pension Plan and Employee Benefits
Substantially all employees are covered by a noncontributory, defined
benefit pension plan. Benefits under the plan reflect an employee's years of
service, age at retirement and highest total average compensation for any
consecutive five calendar years during the last ten years of employment with the
Company. The Company's policy is to fund contributions to the employee pension
plan based upon actuarial computations utilizing the projected unit credit
method, subject to the Internal Revenue Service's full funding limitation. No
contributions to the pension plan were required during the three-year period
ended December 31, 1999.
The Company's retirees and their dependents are eligible to receive
health, dental and life insurance benefits (other benefits). The Company
recognizes the expected cost of these benefits during the periods in which the
benefits are earned.
The employee pension plan and other benefits obligation plan assets and
funded status as determined by the actuary at December 31, 1999 and 1998, are
presented in the following table.
<TABLE>
<CAPTION>
(In thousands)
Pension Benefits Other Benefits
-------------------------------- -----------------------------------
1999 1998 1999 1998
-------------------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year....... $132,721 $123,082 $16,602 $15,379
Service cost.................................. 4,353 3,734 661 671
Interest cost................................. 9,198 8,326 1,099 1,062
Plan participants contributions............... 338 311
Actuarial (gain)/loss......................... (8,728) 4,591 (1,624) 176
Expenses paid................................. (1,254) (1,100)
Benefits paid................................. (6,320) (5,912) (882) (997)
------- ------ ------ --------
Benefit obligation at end of year............. 129,970 132,721 16,194 16,602
------- ------- ------ --------
Change in plan assets
Fair value of plan assets at beginning of year 181,698 163,574
Actual return on plan assets.................. 10,489 25,136
Expense paid.................................. (1,254) (1,100)
Benefits paid................................. (6,320) (5,912)
------- ------
Fair value of plan assets at end of year...... 184,613 181,698
------- -------
Funded status..................................... 54,643 48,977 (16,194) (16,602)
Unrecognized net actuarial (gain)............. (53,369) (48,421) (3,058) (1,434)
Unrecognized transition obligation/(asset).... (5,308) (6,625) 6,673 7,186
Prior service cost............................ 12,775 13,745 - -
------- ---------- ------ --------
Prepaid/(accrued) benefit cost................ $ 8,741 $ 7,676 $(12,579) $(10,850)
======= ========= ========= ========
</TABLE>
45
<PAGE>
Employee pension plan assets are invested in the Company's
common stock, other publicly traded domestic common stocks, U.S. government,
federal agency and corporate obligations, an international equity fund,
commercial real estate funds and pooled temporary investments.
Effective January 1, 1998, the Company changed the method of
calculating fair market value of assets to reflect the difference between actual
and projected appreciation for the current year ratably over five years. This
change has been reflected in the table above.
Effective January 1, 1998, the Company increased the crediting
rates for each year of service but limited the maximum number of years of
service credited to 35. This change has been reflected in the table above.
The components of net periodic pension and other benefits cost
(income) for 1999, 1998 and 1997 are as follows, along with assumptions used:
<TABLE>
<CAPTION>
(In thousands)
Pension Benefits Other Benefits
------------------------------------ -----------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Components of periodic benefit
costs
Service cost....................$. 4,353 $ 3,734 $ 2,984 $ 661 $ 671 $ 601
Interest cost .................... 9,198 8,326 7,288 1,099 1,062 1,034
Expected return on plan assets...(14,267) (12,797) (10,290)
Amortization of transition
obligation(asset)............... (1,317) (1,318) (1,317) 513 513 513
Prior period service cost
Amortization................ 969 347
969
Net (gain)loss.................... (142) (66) (82)
-------- -------- ------ ------- -------
Net periodic benefit $ (1,064) $(1,228) $ (988) $2,273 $2,180 $2,066
========== ======= ========= ====== ====== ======
cost/(income).........................
Weighted-average assumptions as of December 31:
Discount rate..................... 7.50% 6.75% 7.00% 7.50% 6.75% 7.00%
Expected return on plan assets.... 9.50% 9.50% 9.50% N/A N/A N/A
Rate of compensation increase..... 5.00% 5.00% 5.00% N/A N/A N/A
</TABLE>
The assumed health care cost trend rate used to measure the
expected cost of other benefits was 8.5% in 1999 and 9.5% in 1997 and 1998,
declining to 5.5% by 2009 and remaining at 5.5% thereafter. The initial health
care cost trend rate was reduced from 10% in 1996 to 9.5% in 1998 and to 8.5% in
1999, which resulted in an unrecognized gain. Assumed health care cost trend
rates have a significant effect on the amount reported for the health care
plans. A one-percentage point change in assumed health care cost trends rates
would have the following effects on other benefits:
<TABLE>
<CAPTION>
(In thousands)
1-percentage point
---------------------------
Increase Decrease
------------ ------------
<S> <C> <C>
Effect on total of service and interest cost components.......... $119 $(121)
Effect on postretirement benefit obligation...................... $912 $(943)
</TABLE>
Substantially all employees are eligible to participate in a savings
and investment plan (401(k) Plan). The Company makes matching contributions to
401(k) Plan participants by allocating shares of convertible preferred stock
held by the ESOP. Compensation expense related to the 401(k) Plan is based upon
the value of shares of preferred stock allocated to ESOP participants and the
amount of interest incurred by the ESOP, less dividends on unallocated shares
held by the ESOP. At December 31, 1999 and 1998, the ESOP had allocated to
employees 139,086 and 124,984 shares, respectively.
The table below contains information about the 401(k) Plan and the
ESOP:
<TABLE>
<CAPTION>
For the year ended December 31,
(In thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
401(k) Plan expense.................................................... $1,108 $1,107 $1,453
Dividend requirements to ESOP on convertible preferred stock........... $2,283 $2,341 $2,367
Interest incurred by ESOP on its indebtedness.......................... $1,296 $1,683 $1,604
Company contributions to ESOP.......................................... $1,513 $1,075 $1,235
</TABLE>
46
<PAGE>
Note J -- Income Tax Expense
Federal income tax expense is less than the amount computed by applying
the statutory federal rate to book income before tax as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In thousands, except for %)
1999 1998 1997
---- ---- ----
Amount % Amount % Amount %
------ -- ------ --- ------ -
<S> <C> <C> <C> <C> <C> <C>
Book income before tax................................ $83,990 100.0 $80,467 100.0 $80,248 100.0
Tax at statutory rate on book income before tax.... 29,397 35.0 28,163 35.0 28,087 35.0
Increase (decrease):
Tax effect of AFUDC................................. (261) (0.3) (601) (0.8) (276) (0.3)
Amortization of investment tax credits. (1,790) (2.1) (1,790) (2.2) (1,790) (2.2)
Tax effect of prior-year tax benefits not deferred.. 1,119 1.3 2,175 2.7 978 1.2
AFUDC gross up - FASB 109........................... (1,548) (1.8) (1,009) (1.3) (1,123) (1.3)
------ -------- ------
Other, net.......................................... (2,727) (3.2) (2,443) (3.0) (1,522) (1.9)
------ ------- ------
Total federal income tax expense..................... 24,190 28.8 24,495 30.4 24,354 30.4
------ ------- ------
Current state income tax expense..................... 3,034 3.6 2,171 2.7 3,375 4.2
------ ------- ------
Total federal and state income tax expense........... $27,224 32.4 $26,666 33.1 $27,729 34.6
======= ==== ======= ==== ======= ====
</TABLE>
Information about current and deferred income tax expense is as follows:
<TABLE>
<CAPTION>
(In thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current federal income tax expense.................... $17,523 $17,582 $23,236
Deferred federal income tax expense................... 8,457 8,703 2,908
Amortization of accumulated deferred investment tax credits (1,790) (1,790) (1,790)
------ ------ ------
Total federal income tax expense...................... 24,190 24,495 24,354
Current state income tax expense...................... 3,034 2,171 3,375
------ ------ -----
Total federal and state income tax expense............ $27,224 $26,666 $27,729
======= ======= =======
Deferred federal income tax expense attributable to:
Depreciation........................................ $8,524 $11,748 $ 2,733
Storm damages....................................... 912 492 (332)
Asset basis differences............................. (2,797) (571) (1,707)
Employee benefits................................... 197 (419) 321
Fuel costs.......................................... 660 (612) 790
Reacquired debt..................................... (269) (249) 1,037
Other............................................... 1,230 (1,686) 66
----- ------ ------
Total deferred federal income tax expense........... $ 8,457 $ 8,703 $ 2,908
======= ======= =======
</TABLE>
The balance of accumulated deferred federal and state income tax assets
and liabilities at December 31, 1999 and 1998, was comprised of the tax effect
of the following:
<TABLE>
<CAPTION>
(In thousands)
1999 1998
------------------ -------------
Asset Liability Asset Liability
<S> <C> <C> <C> <C>
Depreciation and property basis differences................... $ 6,894 $153,090 $ 6,584 $143,975
Allowance for funds used during construction.................. ......... 42,974 39,270
Investment tax credits........................................ 15,979 17,378
FASB 109 adjustments.......................................... 92,416 110,315 62,235 92,513
Postretirement benefits other than pension.................... 4,731 3,700
Other......................................................... 5,619 14,818 7,448 10,861
-------- -------- -------- --------
Accumulated deferred federal and state income taxes........... $125,639 $321,197 $97,345 $286,619
======= ======== ======= ========
</TABLE>
Regulatory assets recorded for deferred taxes at December 31, 1999 and
1998, were $115.9 million and $95.2 million, respectively. Regulatory
liabilities recorded for deferred taxes at December 31, 1999 and 1998, were
$97.1 million and $81.0 million, respectively. Regulatory assets and liabilities
will be realized over the accounting lives of the related properties to the
extent past ratemaking practices are continued by regulators.
47
<PAGE>
Note K -- Disclosures about Segments
<TABLE>
<CAPTION>
Unallocated Items,
Reclassifications
Utility &
Group Midstream UtiliTech Others Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
1999
Revenues
Retail electric operations $ 508,790 $ $ $ $ $ 508,790
Energy marketing operations 237,731 18,698 256,429
Other operations 2,227 6,866 636 (3,972) 5,757
Customer credits (2,776) (2,776)
--------- --------- ------ --------- --------- ----------
Total operating revenue 743,745 20,925 6,866 636 (3,972) 768,200
Intersegment revenues 7,816 8,081 792 1,151 (17,840)
Depreciation expense 49,285 1,101 199 (566) 50,019
Interest charges 28,414 1,284 12 666 (773) 29,603
Segment profit (loss) (1) 83,955 1,306 (1,754) 968 (29,719) 54,756
Segment assets $1,414,579 $247,021 $2,848 $263,889 $(223,687) $1,704,650
(1) Reconciliation of segment profit to consolidated Unallocated items
profit
Income taxes $27,224
Preferred dividends 2,010
Other 485
---
$29,719
1998
Revenues
Retail electric operations $ 487,280 $ 487,280
Energy marketing operations 32,695 $10,118 $(10,118) 32,695
Other operations $214 $865 (1,079)
Customer credits (4,800) (4,800)
--------- -------- ----- ------- -------- ----------
Total operating revenues 515,175 10,118 214 865 (11,197) 515,175
Intersegment revenues 3,242 297 1,443 (4,982)
Depreciation expense 48,369 831 79 (910) 48,369
Interest charges 27,360 792 (792) 27,360
Segment profit (loss) (1) 79,383 (719) (176) 1,505 (28,329) 51,664
Segment assets $1,383,648 $67,322 $3,483 $27,443 $(52,896) $1,429,000
(1) Reconciliation of segment profit to consolidated Unallocated items
profit
Income taxes $26,666
Preferred dividends 2,137
Other (474)
-----------
$28,329
1997
Revenues
Retail electric operations $ 456,245 $ 456,245
Energy marketing operations
Other operations $164 $760 $ (924)
Customer credits
Total Operating revenues 456,245 164 760 (924) 456,245
Intersegment revenues 1,652 440 (2,092)
Depreciation expense 45,890 624 (624) 45,890
Interest charges 28,586 440 (440) 28,586
Segment profit/(loss) (1) 78,938 129 1,158 (29,823) 50,402
Segment assets $1,383,135 $8,642 $80 $19,869 $ (5,682) $1,361,044
(1) Reconciliation of segment profit to consolidated Unallocated items
profit
Income taxes $27,729
Preferred dividends 2,117
Other (23)
-----------
$29,823
</TABLE>
48
<PAGE>
The Company has determined that its reportable segments are
based on the Company's method of internal reporting, which disaggregates its
business units by first-tier subsidiary. The Company's reportable segments are
Utility Group, Midstream and UtiliTech. Reportable segments were determined by
applying SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Each reportable segment engages in business activities from which
it earns revenues and incurs expenses. Segment managers report at least monthly
to the Company's CEO (the chief decision maker) with discrete financial
information and present quarterly discrete financial information to the
Company's Board of Directors. Budgets were prepared by each reportable segment
for 2000, which were presented to, and approved by, Company's Board of
Directors.
The Other segment consists of costs within the parent company, costs
within a shared services subsidiary, start-up costs associated with a retail
services subsidiary, and revenue and expenses associated with an investment
subsidiary. These subsidiaries operate within Louisiana and Delaware.
The financial results of the Company's segments are presented on an
accrual basis. Significant differences among the accounting policies of the
segments as compared to the Company's consolidated financial statements
principally involve the classification of revenue and expense between operating
and other. Management evaluates the performance of its segments and allocates
resources to them based on segment profit(loss) before income taxes and
preferred stock dividends. In years 1997, 1998 and the first six months of 1999,
Midstream and UtiliTech reported profit (loss) as other income (expense) within
Utility Group. For purposes of this footnote, gross amounts of revenue and
expenses are reported on the appropriate line. The Unallocated Items,
Reclassifications & Eliminations column reclassifies the items of revenue and
expense recorded under the equity method to other income (expense). Material
intersegment transactions occur on a regular basis.
Note L -- Accrual of Estimated Customer Credits
The Company's reported earnings in the year ended December 31, 1999,
reflect a $2.8 million accrual within the Utility Group for estimated customer
credits that may be required under terms of an earnings review settlement
reached with the LPSC in 1996. The 1996 LPSC settlement, and a subsequent
amendment, set the Utility Group's rates until the year 2004 and also provided
for annual base rate tariff reductions of $3 million in 1997 and $2 million in
1998. As part of the settlement, Utility Group is allowed to retain all
regulated earnings up to a 12.25% return on equity, and to share equally with
customers as credits on their bills all regulated earnings between 12.25% and
13% return on equity. All regulated earnings above a 13% return on equity are
credited to customers. The amount of credits due customers, if any, is
determined by the LPSC annually based on 12-month-ending results as of September
30 of each year. The settlement provides for such credits to be made on
customers' bills the following summer.
Of the $2.8 million, $2.2 million relates to the 12-month-ended September
30, 1998, cycle, and the remaining $0.6 million relates to the estimated refund
for the 12-month-ended September 30, 1999, cycle. The adjustment for the prior
year's estimate of the refund for the 1998 cycle was due to the LPSC's final
report on the 1998 cycle. The $2.8 million was recorded as a reduction in
revenue due to the nature of the customer credits. The amount of the credit for
the cycle ending September 30, 1999, if any, has not yet been determined by the
LPSC.
49
<PAGE>
Note M -- Repowering Project
In July 1998 the Utility Group's Board of Directors approved the
construction of a 750-megawatt repowering project (Project) by its then wholly
owned subsidiary, Evangeline, to be implemented at the Coughlin Power Station
(CPS). The Project will use three new natural gas-fueled combustion turbine
generators and related heat recovery system generators to repower two existing
steam turbines at CPS.
Evangeline, now a wholly owned subsidiary of Midstream, owns the
Project. Evangeline has an agreement with an affiliate, Cleco Generation
Services LLC, to operate the Project. As of December 31, 1999, the Company has
spent approximately $160.8 million on the Project.
Permanent financing for the Project was obtained on December 15, 1999.
The Project is being financed with $218.6 million, 8.82%, nonrecourse, senior
secured bonds of Cleco Evangeline, maturing in 2019 and an expected equity
infusion of $38.6 million by the Company. The bonds are collateralized by Cleco
Evangeline's assets. An additional equity infusion of up to $12.9 million will
be required of the Company if the cost of the Project exceeds $257 million.
Evangeline has received all necessary approvals from the LPSC and FERC.
In February 1999 the LPSC approved the transfer of the existing CPS assets out
of the LPSC- regulated rate base of Utility Group into Evangeline. The actual
transfer occurred in November 1999. In return for the approval of the asset
transfer, Utility Group agreed to extend the terms of its 1996 rate settlement
with the LPSC for an additional three years to 2004. The agreement also contains
specific provisions designed to hold harmless Utility Group's ratepayers from
negative impacts that might result from the removal of the generating assets
from the rate base. In return, the Utility Group was authorized to transfer the
generating and transmission assets to Evangeline at their net book value of
approximately $9.8 million.
On November 10, 1999, Evangeline executed the Capacity Sale and Tolling
Agreement with Williams. Under the terms of the agreement, for 20 years Williams
has the right to own and market the electricity produced by the Evangeline
facility and will supply the required natural gas to the facility. Evangeline
will collect a fee from Williams for operating and maintaining the Evangeline
facility. As a part of the agreement, the Company deposited $15 million into an
escrow account on behalf of Evangeline.
Note N - Significant Non-Cash Transactions
Effective August 3, 1999, Midstream purchased additional ownership in
Energy from the other members, bringing the Midstream total ownership interest
in Energy from 44% to 93.63%. The total purchase price of the additional
ownership interest included $688,000 in Company common stock issued, and to be
issued, to one member out of treasury shares held by the Company, and
cancellation of a note receivable of $930,000 due from another member. Effective
August 3, 1999, Midstream transferred the stock in its wholly owned subsidiary,
CLE Intrastate Pipeline Company, Inc., to Energy. This transaction brought
Midstream's ownership interest in Energy up to 98%.
On July 1, 1999, 246,684 shares of the Company's common stock held as
treasury stock, with a cost of approximately $5 million, were cancelled as a
part of the holding company restructuring.
50
<PAGE>
Note O -- Commitments and Contingencies
Construction expenditures for 2000 are estimated to be $291 million,
excluding AFUDC, and for the five-year period ending 2004 are expected to total
$1.3 billion, excluding AFUDC. Scheduled maturities of debt and preferred stock
will total approximately $27 million for 2000 and approximately $155 million for
the five-year period ending 2004.
Utility Group has entered into various long-term contracts for the
procurement of coal and lignite to fuel certain of its generating stations.
These contracts contain provisions for price changes, minimum purchase levels
and other financial commitments. Utility Group purchases, as an additional fuel
source for generation, natural gas under short-term contracts on the spot
market.
Utility Group and another utility filed suit against a joint venture
and its partners who mine lignite for one of Utility Group's jointly owned
electric generating units. The joint venture has filed counterclaims. The
counterclaims resulted in the filing of another suit by Utility Group and the
other utility against the joint venture's parent company. Management believes
the counterclaims, if successful, would not have a significant adverse effect on
Utility Group's financial position or results of operations. Normal day-to-day
operations continue at the mining facility and the jointly owned electric
generating unit.
The coal for one of Utility Group's jointly owned generating units is
transported under a long-term contract with a railroad. The railroad experienced
operating problems beginning in 1997 which resulted in reduced volumes delivered
to the unit. Throughout 1998 the delivery problems persisted, and the coal
inventory fluctuated at or below the Utility Group's desired minimum level.
However, in 1999, the deliveries of coal by the railroad were back to the normal
schedule.
Utility Group has accrued for liabilities to third parties,
environmental claims, employee medical benefits, storm damages and deductibles
under insurance policies that it maintains on major properties, primarily
generating stations and transmission substations. Consistent with regulatory
treatment, annual charges to operating expense to provide a reserve for future
storm damages are based upon the average amount of noncapital, uninsured storm
damages experienced by Utility Group during the previous five years.
The Company has committed to provide up to $5 million per year to
Energy for asset development projects as they occur for the years 1998 through
2002. Amounts not advanced in any year are added to the amount available for the
remaining years. A total of $2.5 million was advanced to Energy in 1998 for the
acquisition of Sabine Texican Pipeline, Inc.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," establishes accounting standards for
determining if long-lived assets are impaired, and when and how losses, if any,
should be recognized. The Company believes that the net cash flows that will
result from the operation of its assets are sufficient to cover the carrying
value of the assets.
51
<PAGE>
Note P -- Miscellaneous Financial Information (Unaudited)
Quarterly information for the Company for 1999 and 1998 is
shown in the following table.
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
----------------------------------------------------
1999
----------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Operating revenues........................................... $ 121,719 $ 222,474 $ 285,032 $ 138,975
Operating income............................................. $ 19,481 $ 29,519 $ 47,291 $ 16,250
Net income applicable to common stock........................ $ 8,017 $ 13,716 $ 25,152 $ 7,871
Basic net income per average common share.................... $ 0.36 $ 0.61 $ 1.12 $ 0.35
Diluted net income per average common share.................. $ 0.35 $ 0.59 $ 1.07 $ 0.35
Dividends paid per common share.............................. $ 0.405 $ 0.415 $ 0.415 $ 0.415
Market price per share
High....................................................... $ 35.500 $ 33.563 $ 33.625 $ 35.188
Low........................................................ $ 28.250 $ 28.438 $ 30.063 $ 31.125
<CAPTION>
(In thousands, except per share amounts)
----------------------------------------------------
1998
----------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Operating revenues........................................... $ 97,210 $ 128,298 $ 172,553 $ 117,114
Operating income............................................. $ 13,833 $ 20,946 $ 28,902 $ 16,618
Net income applicable to common stock........................ $ 6,468 $ 14,491 $ 22,320 $ 8,385
Basic net income per average common share.................... $ 0.29 $ 0.64 $ 0.99 $ 0.38
Diluted net income per average common share.................. $ 0.29 $ 0.63 $ 0.95 $ 0.37
Dividends paid per common share.............................. $ 0.395 $ 0.405 $ 0.405 $ 0.405
Market price per share
High....................................................... $ 34.563 $ 34.750 $ 33.875 $ 36.125
Low........................................................ $ 30.250 $ 29.000 $ 28.625 $ 32.875
</TABLE>
The Company's common stock is listed for trading on the New York and
Pacific stock exchanges under the ticker symbol "CNL." The Company's preferred
stock is not listed on any stock exchange. On December 31, 1999, the Company had
10,075 common and 129 preferred shareholders, as determined from the records of
the transfer agent.
On January 28, 2000, the Company's Board of Directors declared a quarterly
dividend of 41.5 cents per share payable February 15, 2000, to common
shareholders of record on February 4, 2000. Preferred dividends were also
declared payable March 1, 2000, to preferred shareholders of record on February
15, 2000.
52
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of Cleco Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, cash flows and changes in common
shareholders' equity present fairly, in all material respects, the financial
position of Cleco Corporation and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers
New Orleans, Louisiana
January 31, 2000
53
<PAGE>
EXHIBIT 21
CLECO CORPORATION
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1999
State of Incorporation
Subsidiaries of Registrant or Organization
-------------------------- ---------------
Cleco Utility Group Inc. Louisiana
Utility Construction & Technology Solutions LLC
(Formerly Cleco Services LLC) d/b/a UtiliTech Solutions Louisiana
CLE Resources, Inc. Delaware
Cleco Support Group LLC Louisiana
Cleco ConnexUs LLC Louisiana
Cleco Columbian LLC Louisiana
Cleco Midstream Resources LLC Louisiana
Acadia Power Partners LLC Delaware
Cleco Generation Services LLC Louisiana
Cleco Trading & Marketing LLC Louisiana
Cleco Business Development LLC Louisiana
Cleco Evangeline LLC Louisiana
Cleco Energy LLC Texas
CLE Intrastate Pipeline Company, Inc. Louisiana
Sabine Texican Pipeline Company Texas
DeSoto Pipeline Company, Inc. Louisiana
DeSoto Services, Inc. Texas
Four Square Gas Company, Inc. Louisiana
Four Square Production, L.L.C. Texas
Hudson Capital Partners, L.L.C. Texas
Hudson SVD, L.L.C. Texas
Panola Exploration, Inc. Texas
Providence Partners, L.L.C. Texas
STP Marketing, Inc. Texas
The Kentucky Four Limited Partnership Texas
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 33-24895, 33-62950, 33-02895, and 33-33098) and S-8
(Nos. 2-79671, 33-10169, 33-38362 and 33-44663) of Cleco Corporation of our
report dated January 31, 2000 relating to the financial statements, which
appears in the Annual Report to Shareholders, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report dated January 31, 2000 relating to the financial statement schedule,
which appears in this Form 10-K.
/s/PricewaterhouseCoopers LLP
New Orleans, Louisiana
March 29, 2000
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/Sherian G. Cadoria
Sherian G. Cadoria
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ J. Patrick Garrett
J. Patrick Garrett
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ F. Ben James, Jr.
---------------------
F. Ben James, Jr.
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ William H. Walker, Jr.
--------------------------
William H. Walker, Jr.
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ A. DeLoach Martin, Jr.
--------------------------
A. DeLoach Martin, Jr.
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ Robert T. Ratcliff
Robert T. Ratcliff
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ Edward M. Simmons
Edward M. Simmons
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ Richard B. Crowell
Richard B. Crowell
<PAGE>
CLECO CORPORATION
POWER OF ATTORNEY
WHEREAS, Cleco Corporation, a Louisiana corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended
December 31, 1999, with any and all amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to the Form 10-K;
NOW, THEREFORE, the undersigned, in the capacity of a director or officer
or both a director and officer of the Company, as the case may be, does hereby
appoint Gregory L. Nesbitt and Michael P. Prudhomme, and each of them severally,
his true and lawful attorney(s)-in-fact and agent(s) with power to act without
the other, with full power of substitution and resubstitution, to execute in his
name, place and stead, in any and all capacities, the Form 10-K and any and all
amendments thereto and any and all instruments necessary or incidental in
connection therewith, to file the same with the Commission and to appear before
the Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact and agents shall have full power and authority to do and
perform in the name and on behalf of the undersigned, in any and all capacities,
every act whatsoever necessary or desirable to be done in the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
the undersigned hereby ratifying, approving and confirming the acts that said
attorneys-in-fact and agents and each of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 28th day of January, 2000.
/s/ Elton R. King
Elton R. King
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements and is qualified in its entirety by
reference to such consolidated financial statements.
</LEGEND>
<CIK> 0001089819
<NAME> Cleco Corporation
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,025,947
<OTHER-PROPERTY-AND-INVEST> 189,895
<TOTAL-CURRENT-ASSETS> 125,360
<TOTAL-DEFERRED-CHARGES> 279,770
<OTHER-ASSETS> 83,678
<TOTAL-ASSETS> 1,704,650
<COMMON> 45,064
<CAPITAL-SURPLUS-PAID-IN> 110,767
<RETAINED-EARNINGS> 282,825
<TOTAL-COMMON-STOCKHOLDERS-EQ> 438,656
0
13,889
<LONG-TERM-DEBT-NET> 339,595
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 240,000
<COMMERCIAL-PAPER-OBLIGATIONS> 25,989
<LONG-TERM-DEBT-CURRENT-PORT> 27,374
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 619,147
<TOT-CAPITALIZATION-AND-LIAB> 1,704,650
<GROSS-OPERATING-REVENUE> 768,200
<INCOME-TAX-EXPENSE> 27,224
<OTHER-OPERATING-EXPENSES> 655,659
<TOTAL-OPERATING-EXPENSES> 655,659
<OPERATING-INCOME-LOSS> 112,541
<OTHER-INCOME-NET> 1,052
<INCOME-BEFORE-INTEREST-EXPEN> 113,593
<TOTAL-INTEREST-EXPENSE> 29,603
<NET-INCOME> 56,766
2,010
<EARNINGS-AVAILABLE-FOR-COMM> 54,756
<COMMON-STOCK-DIVIDENDS> 37,136
<TOTAL-INTEREST-ON-BONDS> 9,651
<CASH-FLOW-OPERATIONS> 114,746
<EPS-BASIC> 2.43
<EPS-DILUTED> 2.37
</TABLE>
