Cleco Corporate Holdings LLC

The stable outlook reflects Cleco Corp.'s mostly vertically integrated, regulated, lower-risk utility operations and the strength of the company's mostly contracted nonutility generation assets. The stable outlook also reflects S&P Global Ratings' expectation that the company's financial measures will consistently reflect funds from operations (FFO) to debt of about 13.5%, the lower end of the range for its financial risk profile category. However, we expect modest improvement in the company's financial measures over the next three years. We could downgrade Cleco Corp. over the next 12 to 24 months if its consolidated financial measures weaken, such that consolidated FFO to debt is consistently lower than 13%. This could occur if the company experiences adverse regulatory outcomes or a significant loss

... utility operations contributed by a FERC-regulated utility. We view Cleco Corporate Holdings LLC's (Cleco Corp.) majority lower-risk regulated electric utility operations (about 75% of consolidated EBITDA) as credit supportive. The remaining 25% is higher-risk nonutility generation that exposes the company to counterparty credit, volumetric, commodity, and additional operational risks that mitigates the benefit of lower-risk operations. Cleco Corp.'s established contracted nonutility generation assets and lease agreements reduce both market and operational merchant generation risks. Through recent acquisitions and lease agreements with NRG Energy Inc., Cleco Corp. enjoys reduced operational and market risk through strong contracted merchant assets, representing about 35% of the purchased assets. Consistently lower financials keeps the company at the lower end of the financial risk profile compared to peers. In 2019, Cleco Corp. closed...

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