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Consumer advocate seeks credit rating agency review of Cleco sale

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Essential Energy Insights - January 2021


Consumer advocate seeks credit rating agency review of Cleco sale

New Orleans-based consumer advocacy group Alliance for AffordableEnergy is urging credit rating agencies to review Cleco Power LLC's sale to a MacquarieInfrastructure & Real Assets Inc.-led investor group.

"A downgraded credit rating from Moody's or S&P wouldsignificantly impact Cleco's financial standing, especially in light of the factthat Cleco will already be taking on $2.8 billion of debt to $2.9 billion worthof assets. It is simply prudent to know what Cleco's future outlook will be whenwe're talking about billions of dollars of debt carried on the shoulders of Cleco'scustomers," Alliance for Affordable Energy CEO Casey DeMoss said in an April5 statement.

Moody's and Standard and Poor's issued their preliminary ratingsassessments for Cleco Corp.earlier this year — aheadof the acquisition. Moody's potential senior unsecured rating of Baa3/stable andS&P's potential corporate credit rating of BBB-/stable were the lowest investmentgrade rating the agencies could give.

The assessments reflected a number of factors, including therevised commitments made by the investor group and Cleco as a result of the LouisianaPublic Service Commission's regulatory process.

However, DeMoss argues that new stipulations, including $136 million in upfront ratecredits and a utilities rate freezethrough 2020, would further impact credit ratings.

"Furthermore, their latest promise is to return $0.50 onthe dollar for money charged customers for taxes the company never intend to pay— intended as a short term sweetener to the Commission and customers, it is expectedto directly result in the loss of any Cleco tax payments to the state of Louisianawhile the state is struggling with the worst budget crisis in its history. Whilethese schemes would directly enrich foreign investors, they will financially weakenthe company, increase risk for customers and further imperil Louisiana's crumblingstate budget," DeMoss said.