Cleco Management Discusses Q1 2013 Results - Earnings Call Transcript

Apr.30.13 | About: Cleco Corporation (CNL)

Cleco (NYSE:CNL)

Q1 2013 Earnings Call

April 30, 2013 8:30 am ET

Executives

Thomas R. Miller - Vice President and Treasurer

Bruce A. Williamson - Chief Executive Officer, President, Director and Member of Executive Committee

Darren J. Olagues - Chief Financial Officer and Senior Vice President of Finance

Keith D. Crump - Senior Vice President - Commercial Operations

Analysts

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Michael Klein - Sidoti & Company, LLC

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Andrew Smith

Operator

Welcome to the Cleco Corporation First Quarter 2013 Earnings Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Tom Miller. Mr. Miller, you may begin.

Thomas R. Miller

Good morning, and welcome to Cleco Corporation's 2013 First Quarter Earnings Call Results. You can access this call and slide presentation via the Internet from Cleco's website at www.cleco.com/investors. Telephone and Internet replays can be accessed through our website. The dial-in number for the telephone replay is (888) 843-7419 or outside the U.S., (630) 652-3042. The conference ID is 34069807.

With me on the call today are Bruce Williamson, President and Chief Executive Officer of Cleco; and Darren Olagues, Senior Vice President and Chief Financial Officer; along with other members of Cleco management.

Before we begin, please keep in mind that during the conference call, we will make some forward-looking statements. These statements are subject to many risks and uncertainties. Actual results may differ materially from those contemplated in our forward-looking statements. Please refer to our cautionary note regarding forward-looking statements and risk factors in various reports filed with the U.S. SEC, including our 2012 annual report on Form 10-K and our 2010 -- or 2013 quarterly report on Form 10-Q.

In addition, please note that the date of this conference is April 30, and any forward-looking statements that we make today are based on assumptions as of this day.

And with that, I'll turn the call over to Bruce.

Bruce A. Williamson

Thank you, Tom. Good morning, and thank you for joining us. Let's start with the agenda for today's call, which is on Slide 3 of our presentation, for those of you following along via the webcast. I'll begin with some highlights from the first quarter. Darren will then discuss first quarter -- 2013 first quarter financial results and present a detailed financial update. After his financial review, I'll discuss key takeaways for the first quarter and our outlook for the future, and then we'll take your questions.

Please turn with me to Slide 4, where we'll discuss our first quarter earnings highlights. We had a solid first quarter, with consolidated operational earnings of $0.44 per share, up $0.02 per share from the first quarter of 2012. Darren will cover more detail on our earnings drivers later in the presentation. However, as an overview, the cost controls we put in place last year, coupled with somewhat more favorable weather and rate additions compared to this time last year, helped produce higher results quarter-over-quarter. We remain confident that we can deliver earnings for the full year as planned and, therefore, are affirming our current earnings guidance range of $2.45 to $2.55 per diluted share. Our ability to continue to deliver value to our stockholders is reflected by our stock's strong performance during the first quarter. Our stock price increased 18% during the quarter and closed to $48.77 yesterday, which is an all-time high closing price for Cleco Corporation.

Moving to Slide 5, you'll see a recap of our dividend increases since 2010. Last week, we announced that we raised our quarterly dividend of $36.25 per share. The dividend amount on an annualized basis totaled $1.45 per share. This is a $0.10 increase for the year and a 7% increase in dividend payments for shareholders. It also puts us near the top end of our payout ratio based on the midpoint of our current year earnings guidance range. This is the fifth time we've raised the dividend since 2010, which has resulted in a 61% increase in dividend payment.

Slide 6 reviews our first quarter operational highlights, which include 2 new regulatory filings made in April that continue our progress towards achieving strategic goals for the company. Last quarter, we stated that 2 of our goals for 2013 were to complete the transfer of Coughlin into Cleco Power and to successfully transition into the Midwest Independent System or MISO market. With regard to the first goal, we made 2 filings with the Louisiana Public Service Commission in April. First, we filed with the LPSC a request to transfer Coughlin Power Station to Cleco Power for approval of the Cleco Power selection of Coughlin as the winning resource in the 2012 RFP, which is -- which was run with oversight of LPSC staff and consultants and an independent monitor since an affiliate was involved in bidding. The transfer of Coughlin into Cleco Power will provide generation to meet future customer growth and provide valuable benefits to our current customer load.

Most notably, Coughlin will provide capacity to support our upcoming contract with Dixie Electric Membership Corporation, which will increase our load by about 20% when the contract goes into effect in April 2014. Coughlin adds an efficient natural gas facility to our regulated fleet that will provide low-cost power from today's low natural gas prices. The unit also strengthens our environmental position as we face new compliance mandates and affords the another dispatchable resource in the MISO. We anticipate the transfer of Coughlin into Cleco Power to occur by April 2014.

Our second filing with the LPSC requests an extension of Cleco Power's existing formula rate plan through June 2020 and includes the rate treatment of the Coughlin transfer. Because of our proactive management of the utility, our request actually reduces rates for customers by nearly $7 million annually after June 2015, which is contrary to the actions of other utilities. We anticipate that the settlement agreements covering both the Coughlin asset transfer and the FRP extension can be reached with the commission and interveners on or before April 2014. Once the LPSC and FERC rule on this dockets, we plan to exit our unregulated business completely, closing down Cleco Midstream and focusing our business completely to Cleco Power.

Our second goal for 2013 is to successfully transition into the MISO market. In December, Cleco Power filed an application with the LPSC indicating Cleco's intent to join MISO. The organization will coordinate regional transmission planning and create an efficient energy market for our diverse generation units to compete. Integration of our system is progressing well, and we're currently about 50% complete with the required steps needed to meet the December 19 market operations transition date. Beginning June 1 of this year, MISO will replace the Southwest Power Pool as our reliability coordinator. Also as of June 1, Cleco will begin participating in the MISO transmission planning process, where we'll plan projects with other MISO participants on a regional basis. These are the first operational steps for our full integration into the MISO market.

And with that, I'll turn the call over to Darren.

Darren J. Olagues

Thanks, Bruce, and good morning, everyone. Please turn to Slide 8 for a review of our first quarter operational results. GAAP earnings were $0.45 per diluted share for the first quarter of 2013, which is a decrease of $0.05 compared to the first quarter of 2012. This was mainly due to the absence of the benefits of unwinding the Acadia Unit 1 indemnification reserve. Operational earnings for the quarter increased $0.02 to $0.44 per diluted share compared to the first quarter of 2012. This excludes nonoperational items associated with life insurance policies and the Acadia Unit 1 indemnification reserve.

Now looking from left to right on the operational earnings reconciliation chart, Cleco Power's nonfuel base revenue, net of customer refunds, was up $0.07 from last year. Favorable weather, higher electric sales volume and the effect of the formula rate plan adjustments increased earnings $0.09 for the quarter. This was partially offset by the absence of a $0.02 benefit recorded in 2012 related to the reversal of a refund accrual. Other revenue increased earnings by $0.01 per share due primarily to higher transmission revenue. Other expenses decreased earnings by $0.03 per share compared to the first quarter of 2012 primarily due to $0.03 per share of higher property taxes, $0.02 per share of higher depreciation expense and $0.01 related to loss on disposal of assets related to the Coughlin outage. These decreases were partially offset by $0.03 per share related to the recognition of the recovery of payments made under the Coughlin tolling agreement.

Interest expense decreased earnings by $0.01 per share primarily due to the absence of a favorable tax settlement recorded in 2012. And finally, income taxes decreased earnings by $0.02 per share primarily due to lower tax credits.

Now please turn to Slide 9 for an update on a few additional items that reflect our commitment to prudent liability management and maintaining a strong balance sheet. In January, we made a $34 million contribution to our pension plan, bringing our projected benefit obligation funded status to approximately 94%. We anticipate no additional cash contributions will be required through 2017.

In January, as a result of federal income tax settlements made last year for tax years 2001 to 2009, the company received a refund of approximately $42 million from the deposits previously made with the IRS that further strengthened our liquidity.

In March, Cleco Power purchased $60 million of solid-waste disposal bonds, utilizing its revolving credit facility. Later in March, Cleco Power entered into a $60 million bank term loan agreement with an interest rate of 1.085%, with the proceeds used to pay down the credit facility. In May, there are $75 million in senior notes that mature, and it's our intent to refinance those on a long-term basis.

And finally, we are nearing completion of refunding the customers the construction financing cost for Madison Unit 3. As of March 31, Cleco Power has credited the customers approximately $163 million since 2010, when the plant began commercial operation. We anticipate that we will credit the remaining $3.3 million to customers by the end of July. The completion of refunding these credits will further improve our cash flow going forward.

With that, I'll turn the call back over to Bruce.

Bruce A. Williamson

Thanks, Darren. Please turn with me to Slide 10 to review key takeaways based on our first quarter performance, and then we'll take your questions. The first key takeaway for the first quarter is that we continue to execute on our plan and meet our goals. Underpinning our success is both our strong financial position and our strong core utility assets. Both our customers and our shareholders benefit from our success, which allows us to reward shareholders for their confidence and gives us the flexibility to fund future growth options. We also continue to look for ways to strengthen these core utility assets.

By the end of the year, we plan to complete a large portion of the environmental spend to be in compliance with the EPA Mercury and Air Toxics Standards, and at the same time, we're tracking development of other federal rules that focus on air and water quality and solid waste management to maintain our environmental compliance advantage. We have also proven expertise in utility management and are constantly monitoring ways to maximize benefits for our customers and the utilities. Our attention to maintaining our generation, transmission and distribution assets have positioned us to take advantage of wholesale opportunities. The transition into MISO could provide additional wholesale growth opportunities going forward. MISO's strict operating guidelines ensure that viable generation is available for dispatch. The resource adequacy testing that they will do will add pressure to certain wholesale loads in our area that have plants which will likely not meet the requirements of resource adequacy and therefore, will need to be replaced with reliable and deliverable capacity and transmission.

Our long-term growth strategy has been to target these wholesale opportunities and grow our load and subsequently, our investment opportunities and our earnings using the DEMCO contract as our model. Cleco will optimize wholesale growth opportunities by balancing resource availability against wholesale demand. Our goal is to secure long-term wholesale contract opportunities, but we will supplement our strategy with shorter-term contracts that makes -- also could make sense for our business. At the end of the first quarter, we're right where we need to be, on track to complete projects that will support wholesale growth for the utility.

At this time, operator, we'll open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Michael Lapides from Goldman Sachs.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

One question. Thinking long term, meaning after you get through the dockets this year, the CPCN and the formula rate plan docket, how do you guys think about, kind of back of the envelope math, kind of what the driver for more normal earnings power are 2015 or beyond, meaning kind of where your rate base or where the net asset base of the core utility would be once you get through these dockets, which typically is what drives normalized earnings?

Darren J. Olagues

Michael, I think that goes to the strategy that we have indicated on prior calls, which is once we get Coughlin and DEMCO into the fold early next year, we said we are roughly 150 megawatts long. So our capital investment aspirations in the utility are largely going to come from, hopefully, eating up -- being successful in our wholesale market endeavors and eating up that length and being in a position to have to add new capacity. I mean, as you know, the region is heading towards an inflection point, where some new build is going to be needed. And we think we are well positioned to serve in that role as adding new generation not just for retail customers, for retail business, but also for wholesale customers. So that's the primary outlet for capital investment and arguably, rate base growth as we go forward.

Bruce A. Williamson

I would amplify what Darren said with kind of the model I've talked with investors about, which is right now, 2013 is focused on getting these regulatory approvals and comparing things to be ready to serve DEMCO starting next year and getting into MISO. At the same time, Keith's teams are out pursuing wholesale opportunities that probably largely have start dates around 2015, 2016, around in there. So we'll be pursuing those wholesale opportunities through 2013 into 2014 and probably through 2014. And depending on success and what market share of those opportunities we can capture, then you'll either see us, to use more of a financial analogy, either seeking to then grow the left-hand side of the balance sheet, building new capacity, as Darren mentioned. And if we're -- that's if we're successful at a certain level and enough to justify a new build. And if we're not, then we'll be meeting to take a look at the cash situation, and we'd be looking -- needing to look to shrink the right-hand side of the balance sheet if we're unsuccessful.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Okay. But what do you think of, kind of post adding Coughlin into the Cleco Power organization, what kind of a starting point for the earnings power, meaning starting point for, I guess, for rate base that you are on?

Bruce A. Williamson

Well, I mean, you can take our current rate base, add Coughlin in, and I mean, at that point, I think as Darren was basically implying, except for about 100 and 150 megawatts or so, we're effectively fully commercialized at this point.

Darren J. Olagues

What's the full earning power if we had every piece of excess capacity optimized, I mean, really, the simple math without getting all the details is we will roughly be close to a $3 billion rate base density with no unregulated operations. The math from there is just simply the equity layer, the ROE targets.

Bruce A. Williamson

Minus debt expense. Go on.

Darren J. Olagues

Right. The math from there will get you to a number before any further growth of additional capital.

Operator

And our next question comes from Paul Ridzon from KeyBanc.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Have you had any preliminary discussions with the LPSC around an extension of the FRP? And what are the odds that this could go fully litigated?

Bruce A. Williamson

Well, Keith Crump's here. I'll let Keith answer that one.

Keith D. Crump

Paul, I mean, with the following just going on, we'll start moving more directly into interacting with the commission in the next month or so. But typically, I don't think we've litigated an LPSC case since early 80s, and that's really not our strategy, and we don't expect to go that route again. But it's always an option if we feel like we're in the wrong position.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Okay. And as a second question, unrelated, just given where the EPA is now, how are you viewing the competitive position of Big Cajun?

Darren J. Olagues

Well, look, I mean, I think the Big Cajun environmental outlook, I think, was largely set forth in their new source review settlement. So not to rehash what that was, but I think that pretty much set the course for the capital spend required on that plant, at least, in the near term. As you may recall, part of that settlement said that by 2025, they would have to have, on one of the 600-megawatt units there, they'd have to have full-scale wet scrubbers put on if they were to proceed. So I think when you look at the terms of that settlement, it puts, in some way, a finite life on the plant.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

And just -- I want to make sure I heard you right. You don't expect any pension contributions through '17?

Darren J. Olagues

That's correct.

Operator

Your next question comes from Michael Klein from Sidoti.

Michael Klein - Sidoti & Company, LLC

Can you just talk about sort of the risks associated with the $5.75 per kW amount that you came up with and kind of what's involved with the discussions with the regulators throughout this process?

Bruce A. Williamson

Well, basically, the way that RFP worked -- I mean, I'll cover it and see if Darren or Keith want to amplify anything. I mean, it was basically run by an independent monitor with LPSC staff and a consultant. And then analytics were performed to support their efforts, I think I would almost say, basically by Cleco Power in order to support their efforts. Cleco Midstream, obviously, was completely separate in bidding into that RFP. The staff and the independent monitor then worked together and evaluated the bids and selected Coughlin as the low-priced option. So at this point, I think the parallel or the analog, I guess, for you to consider would be I think it was basically very much the same process as what happened with the Acadia plant 3 years, 4 years ago, when that process was run. And I think at this time, we anticipate that the regulatory approval process will be a parallel to that.

Darren J. Olagues

Yes. I mean, the only thing I'd add, Michael, is that one element of this that was different than Acadia is that the DEMCO demand revenue is the large portion of what's paying for the return on -- return of adding that plant into the utility. The retail customer, we have requested that they continue to sort of bear some burden but certainly not the bulk of it. In fact, when you look at what they pay now under the toll, as Bruce mentioned in his prepared remarks, there's actually, we think, a net benefit or net reduction of approximately $7 million to the retail customer in terms of what we've asked for in the FRP filing.

Operator

And our next question comes from Brian Russo from Ladenburg.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

I don't think the FRP rate filing is posted on the commission's website yet. And I was just curious, is it comparable to your existing plan in terms of ROE ranges, et cetera?

Bruce A. Williamson

Yes, it is. Keith is -- it will be posted per the process with the LPSC probably tomorrow.

Keith D. Crump

Probably tomorrow is what we hear.

Bruce A. Williamson

But yes, what we filed for is pretty much the same as what we currently have.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Okay. And just the $7 million decrease that the retail customer can expect, I know you mentioned the competitiveness of Coughlin is part of that. Is the Madison 3 bonus depreciation and just lower fuel cost also a contributor to that?

Darren J. Olagues

The bonus depreciation isn't, but the fuel component certainly is. When you combine it together, you look at what the retail customers are paying now for access to Coughlin through the current tolling arrangement, and you look at what we've requested from the retail customer post the transfer or post the end of the -- effectively post the transfer. When you consider the fuel savings that would occur, yes, that's approximately $7 million of reduced burden to the retail customer.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Okay, got it. And can you remind us what CapEx or projects are currently -- or will flow through the tracker mechanism this year and next year? Is it basically just the environmental spend now?

Darren J. Olagues

Well, I mean, there's lots of items running through the FRP riders, right? I mean, even Acadia, right, is being recovered through the FRP rider. The capital -- ALP is being run through the rider. The way that Coughlin is being requested is actually a rider mechanism. The MATS capital that we spend is actually going to be pursued with the recovery of it pursued through the rider mechanism. So there's lots of things. I think the total amount of base revenue requirement is about $73 million, but that's encompassing all of those items running through FRP rider adjustments.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Yes, I guess my question was, what's left to be recovered in the riders?

Darren J. Olagues

Well, MATS capital is the one that we haven't put in service, any piece of it in service, and therefore, no pieces we've made adjustments for. And I think the expectation is that's going to be next -- be 2014 before we'd see -- probably the July 2014 adjustment would be when we'd start to see an adjustment associated with that. Obviously, we'd be booking AFUDC before that. But in terms of a real base rate adjustment, that would be a 2014 component.

Bruce A. Williamson

And that's simply because that's when that goes in service. And we should spend the majority of that, Brian, this year, but there's a little bit that's going to lag over into 2014.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Okay. And any update on the city of Alexandria RFP process?

Bruce A. Williamson

No. We don't comment on transactions that are pending or that we're pursuing until they're done.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

How would you characterize the competitiveness of these RFPs? Are there multiple bidders, merchant generators in the region trying to secure that load?

Bruce A. Williamson

It is a competitive process on all the wholesale transactions. I mean, we can use DEMCO as an example, where, I mean, John and his team down at DEMCO, I mean, they talk to probably 8 or 10 different parties. So there are multiple people out there in the market. There are people that are looking to come in and build new generation and contract it up. There's parties with some excess capacity. There's parties like ourselves that can serve off of a slice of system, so it is a competitive process. But I think it's up to the customers to look at who is going to be able to deliver them a reliable capacity, energy services product to meet their needs across the board and over a long term.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Okay. And you've done an excellent job of controlling O&M, and I think it was flat to maybe down slightly in first quarter '13 versus comparable quarter in '12. What kind of trends should we expect through the remainder of the year?

Bruce A. Williamson

I would think the trend should be to keep our expense levels where they are and obviously look for opportunities, whenever we find them, to go ahead and take expenses down and make sure we're getting value for the expenses that we're spending. Part of the benefit of that, as we've talked about with investors, is that going forward, by lowering the expenses, we basically sort of shift to the fulcrum point or added some operating leverage as to when we'd have positive weather, when we have hot summers and things like that, you should see us be able to top up to the upside a lot quicker than maybe in years past, back in 2009, 2010, 2011.

Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division

Okay. And then just on the subject of weather, what was the impact of weather versus normal in the first quarter '13?

Darren J. Olagues

Slightly positive relative to normal.

Bruce A. Williamson

Not as warm as last year.

Operator

[Operator Instructions] And we have a question from Andy Smith from Drexel Hamilton.

Andrew Smith

A couple of questions. I guess one, following on Brian's question about the cost control, and you mentioned kind of maintaining the level, should we think about the year-over-year sort of quarter-over-quarter variances becoming 0 as we get through the year, in other words, cost control accelerated as 2012 progressed? Or can you give us a little guidance on shaping there?

Darren J. Olagues

Yes. You're right, Andy, that the cost benefits were progressive over 2012, right, as they -- we ratcheted down on the cost containment. But bear in mind, there are other costs that we've termed in the past as uncontrollable, and I'll call out property taxes for a good example, that are rising that we're not getting recovery for. So it's a little -- there's 2 aspects to this. No doubt, when you look at G&A, the things that we really took a hard look at last year, that Bruce is exactly right. The levels that we achieved at the end of -- by the end of 2012, we would expect to maintain that and hold firm on that through all of '13. But there are other costs, and some of them are as typical as nonroutine outages, so major outages that we have this year that we didn't have last year. That's one component. But there's other items like property taxes, for instance, that are rising that we don't have recovery of. I mean, we noted it a little bit in the earnings release and in the prepared remarks. Property taxes are rising. We get recovery of some of it, but some of it will hit the bottom line, if you will. And so our attention to expenses have been in part to basically mitigate the effect of these uncontrollable rising expenses.

Bruce A. Williamson

But in general, you're right. You should see things more lined up as you go through the year with prior year.

Andrew Smith

Okay, great. And that's very helpful. Just on the property taxes, since you called that out there, I think it was $0.04 in the first quarter. Is that sort of a run rate for the year, or is there some timing that's going to sort of shape that quarter-to-quarter?

Darren J. Olagues

No, it's sort of -- it's run rate. I would say that property taxes, to give you a sense, Andy, property taxes year-over-year will go up by about $12 million, right? It would sound like a big number, but remember, a lot of that is Acadia, about half of it, a couple of million dollars related to ALP-related property taxes, right? Because obviously, as we add all these assets to rate base, there is a corresponding effect on property taxes. But we get recovery of those. So what you see happening in the FRP adjustment riders, we go out and we adjust base rates to collect that. So most of that $12 million increase will be covered by FRP adjustments. There were some further increases in property taxes or a sliver of that, I'll call it, $0.03 to $0.04 that are not covered, right, that are property tax calculations or involved process. And as we make more money, that's one of the considerations, and it pushes property taxes up that we don't get automatic recovery of. And so that would be an example where we have a few cents over the whole year that are unrecovered. That's why we're being vigilant on things we can control because this is something we can.

Andrew Smith

Okay, very good. The one last question is maybe a little bigger picture and maybe comes back to part of Michael's original question was you got about $50 million of cash on the balance sheet. Liquidity's in good position. You guys have talked about having a robust free cash flow position. You talked about potential need for capacity, but that's several years out, as sort of I understand it. What's the thought process around how do you balance that cash balance? You've got liquidity. Would you use your liquidity to redeploy capital, potential share buyback, however you may think about that, more in context of timing and how you think about keeping powder dry as you look out over the next several years to help us understand where we might see trigger points to start to expect you guys to address your liquidity and your cash position, how you might redeploy that?

Bruce A. Williamson

I think the trigger points, to use your analogy, I think those come out in 2014, where we go through -- as I said earlier, we kind of have Keith and his team go through 2013 into 2014. They're obviously handling the regulatory situation with the FRP extension with Coughlin. They're also out marketing on these wholesale opportunities. And as we go through '13 and '14, depending on our success level, we get out towards the end of 2014, that's when we'll have to make some decisions about have we had enough success and wholesale growth to now justify, in effect, growing the left-hand side of the balance sheet. Or conversely, have we not had success, in which case, at that point that everything fully commercialized, Coughlin's in, by that time, lever Coughlin up under the regulatory capital structure. That cash is here. Cash flow is building because our environmental spend drops off pretty much at the end of this year, and our operating cash flow goes up as we start serving DEMCO next year. And if we can't grow the left-hand side of the sheet, we'd be seeking to maybe to strengthen the right-hand side of the balance sheet.

Darren J. Olagues

Andy, I'll just mention one other thing about the cash on the balance sheet. I mean, we are, as Bruce mentioned earlier, we're in the throes of -- we're going to spend about $90 million or so on MATS capital this year. I mean, that cash that's sitting on Cleco Power's balance sheet is somewhat funding the equity component of that, if not, part of the debt component. And so that's not necessarily unallocated cash, but I mean, the long-run issue is where you indicated being -- what Bruce was saying is that we will hit that inflection point where cash starts to build on the balance sheet so to say. But that's not right now. We're still funding capital. That's more of a 2014 issue.

Operator

We have no further questions at this time.

Bruce A. Williamson

Okay. Then we thank everybody for your questions. For investors, we will be at the Citigroup conference May 15 through the 17, in the Midwest on an IR trip the 20th through the 22nd and back in New York City around May 28 and 29. So if you'd like to meet with us, please contact our Investor Relations team. We look forward to seeing you then.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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