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Cleco Corp. Ratings And Subsidiary Ratings Affirmed On NRG South Central Generating Acquisition; Outlooks Remain Stable

  • Cleco Corporate Holdings LLC (Cleco Corp.) completed its acquisition of NRG South Central Generating LLC, a mostly contracted merchant generation portfolio, for about $1 billion, consistent with our expectations at the announcement of the transaction in February 2018.
  • We expect that Cleco Corp. will finance the acquisition in a balanced manner and that its EBITDA contribution from its lower-risk regulated utilities business will consistently reflect about 75% of consolidated EBITDA.
  • S&P Global Ratings affirmed its 'BBB-' issuer credit rating on Cleco Corp. and 'BBB+' issuer credit rating on subsidiary Cleco Power LLC (Cleco Power). The rating outlooks remain stable.
  • The stable outlook reflects Cleco Corp.'s mostly regulated, lower-risk utility operations and the strength of the company's mostly contracted merchant assets. The stable outlook also reflects our expectation that the company's financial measures will consistently reflect 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.
NEW YORK (S&P Global Ratings) Feb. 5, 2019-- S&P Global Ratings today took the 
rating actions listed above. Our ratings affirmation and stable outlooks 
reflect Cleco Corp.'s acquisition of NRG South Central Generating LLC in a 
manner that is consistent with our expectations at the announcement of the 
transaction in February 2018. Furthermore, the ratings affirmation reflect our 
expectation that Cleco Corp. will finance the acquisition in a balanced manner 
and its EBITDA contribution from its lower-risk regulated utilities business 
will consistently reflect about 75% of consolidated EBITDA. 

The stable outlook reflects Cleco Corp.'s mostly regulated, lower-risk utility 
operations and the strength of the company's mostly contracted merchant 
assets. The stable outlook also reflects our expectation that the company's 
financial measures will consistently reflect 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 of some of its contracted 
customers.

Although we consider an upgrade unlikely, we could raise our ratings on Cleco 
Corp. over the next 12 to 24 months if the company significantly reduces its 
business risks through greater emphasis on decreasing the relative size of its 
contracted merchant assets and growing the regulated portion of the business. 
We could also raise the rating if the company's financial measures 
consistently reflect FFO to debt of above 23%.
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