Cleco Corporate Holdings LLC

The stable outlook reflects Cleco Corp.'s mostly vertically integrated, regulated, lower-risk utility operations and the strength of its mostly contracted nonutility generation assets. The stable outlook also reflects S&P Global Ratings' expectation that 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 modestly improved financial measures over the next three years. We could downgrade Cleco Corp. over the next 12-24 months if its consolidated financial measures weaken, such that consolidated FFO to debt is consistently lower than 13%. This could occur with adverse regulatory outcomes or a significant loss of contracted customers. Although we consider an upgrade unlikely, we could

...Higher-risk nonutility generation offsets its lower-risk regulated utility operations. 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, reducing the benefit from utility operations. Cleco Corp.'s established contracted nonutility generation assets and lease agreements reduce both market and operational merchant generation risks. Through acquisitions and lease agreements with NRG Energy Inc., Cleco Corp. has reduced operational and market risk through strong contracted merchant assets, representing about 35% of purchased assets. Weaker financials keep the company at the lower end of the financial risk profile compared to peers. Cleco Corp.'s credit measures are at the lower end of the benchmark ratios for a significant...

Full Report