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Related Companies Cleco Corp. (CNL) Cleco Power LLC

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Related Power Plants Rodemacher 3

Moody's on Nov. 4 downgraded the ratings of Cleco Corp. subsidiary Cleco Power LLC, citing the prospect of limited improvement in Cleco Power's credit metrics once its 660-MW Rodemacher 3 power plant is complete and its new rate settlement is implemented.

Cleco has said it expects to start commercial operation of the plant by the end of the year.

Moody's downgraded Cleco Power's issuer rating to Baa2 from Baa1, its preferred stock to Ba1 from Baa3, its preferred stock shelf to (P)Ba1 from (P)Baa3, its senior unsecured bank credit facility to Baa2 from Baa1, its senior unsecured medium-term note program to Baa2 from Baa1, its senior unsecured regular bond/debenture to Baa2 from Baa1 and its senior unsecured shelf to (P)Baa2 from (P)Baa1.

The rating agency also downgraded the company's DeSoto Parish, La., senior unsecured revenue bonds to Baa2 from Baa1; its Louisiana Public Facilities Authority senior unsecured revenue bond to Baa2 from Baa1; its Rapides Parish, La., senior unsecured revenue bonds to Baa2 from Baa1; and its Rapides Finance Authority senior unsecured revenue bonds to Baa2 from Baa1.

"The completion of its large Rodemacher 3 project and its recent rate settlement will relieve much of the stress on Cleco Power's credit metrics," said Moody's Vice President Mihoko Manabe. "The terms of the rate settlement and ongoing expenditures on smaller projects over the next couple of years should position the company weakly within the Baa3 rating category temporarily; however, further improvement in the metrics is expected thereafter in support of the current Baa2 rating."

After Rodemacher is completed, the Moody's statement continued, capital expenditures will ease but are expected to remain higher than normal for at least the next two years as the company accelerates investments of roughly $200 million in additional generation, transmission and reliability projects.

With the pending $300 million acquisition of a combined-cycle gas facility from its Acadia affiliate accomplished through an equity contribution from the parent, Moody's noted that the ratings look beyond the near-term period of temporary softness in Cleco Power's credit metrics since the debt incurred to finance these additional projects is also expected to outpace the initial cash flows generated by them.

The downgrade concludes a rating review initiated June 16. Moody's said the outlook is now stable.

The rating of Cleco Corp. is not under review and is affirmed, Moody's said.