The ratings on Cleco Corp. were lowered to 'BBB' from 'BBB+' in 2002, reflecting the response to revelations of energy-trading improprieties. That issue is no longer a concern, but continued uncertainties surrounding the company's unregulated merchant energy activities remain relevant. Cleco's involvement in unregulated electric generation raised its business-risk profile. The consequences of exposing itself to greater risk have materialized, as the creditworthiness of tolling counterparties has weakened and problems in the energy trading operations have been disclosed. Cleco's management must prove that it is capable of successfully managing these risks if ratings are to stabilize. Decreasing the emphasis of the trading operations and the curtailment of merchant energy investment activities are positive steps that will help support credit quality.
