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Executives

Ryan Gunter - Investor Relations

Mike Madison - President and Chief Executive Officer

Russell Davis - Vice President and Interim Chief Financial Officer

Darren Olagues - Senior Vice President, Cleco Midstream Resources LLC

Dilek Samil - President and Chief Operating Officer, Cleco Power LLC

Analysts

Paul Ridzon - KeyBanc

[Shaar Aruzia] - Calyon Securities

Michael Lapides - Goldman Sachs

[Philips Gray] - White Asset Management

Patrick McKinley - Citidon & Company

Oliver King - Zimmer Lucas

[Edu Marty] - Debt Capital Advisors

Bob Wilson

David Dickens - Davin Capital Management

Cleco Corporation (CNL) Q2 2008 Earnings Call August 6, 2008 11:00 AM ET

Ryan Gunter – Investors Relation

Good morning everyone, and welcome to the Cleco Corporation Second Quarter 2008 Earnings Conference Call. With me on the call today are Mike Madison, President and CEO of Cleco Corp, who will update you on current events and Russell Davis, our Vice President, Chief Accounting Officer and Interim Chief Financial Officer, who will cover financial results for the quarter and the year. We also have with us today other executives who will be available to answer your questions following the prepared remarks.

Before we begin, please keep in mind that during conference call today, we will make some forward-looking statements. These statements are subject to many risks and uncertainties. Actual results may differ materially. Please refer to the risk factors and cautionary notice regarding forward-looking statements and various reports filed with the Securities and Exchange Commission including our 2007 annual report on Form 10-K and our first and second quarter 2008 quarterly reports on Form 10-Q.

And with that, I will turn over to Mike.

Mike Madison – President and Chief Executive Officer

Thank you, Ryan and good morning everyone. I can’t tell you how pleased I am to report on the steady progress that we’ve made in executing our strategy, reaching some significant milestones and marking to identify new opportunities. Most significantly, in our regulated Cleco Power business, we filed a new rate plan with Louisiana Public Service Commission on July the 14th, of this year.

While the filing is the result of many months of hard work, it is only the beginning of a yearlong regulatory process with the LPSC. You may recall that after the LPSC granted its certificate of public convenience and necessity in May of 2006, which was the authorizing event for the construction of Rodemacher Unit 3, the Commission directed Cleco Power to file a full rate case 12 months prior to the expected commercial operation date. Now, in addition to this significant event, Cleco Power recently signed an amendment to our engineering procurement and construction contract with Shaw Contractors, Incorporated to move forward the substantial completion date of Rodemacher Unit 3, to June 30 of 2009, approximately three, four months ahead of the original schedule. Therefore, we expect to have our new rate plan in effect as Rodemacher Unit 3, becomes commercial operation in less than one year from now.

Let me remind everyone, the savings provided by the fuel diversity strategy of Rodemacher 3 is putting Cleco Power in a unique and enviable position. Under our proposed rate plan, we are lowering residential customers bill, bills that are covering the $1 billion capital cost of the new unit plus the rising cost of doing business. If approved the new rate plan also gives Cleco Power the opportunity to improve its allowed rate of return. We are requesting of a 11.25% return on equity as a part of the new rate plan, I’m sorry, that’s a 12.25% return on equity as part of the new rate plan compared to the capped return on equity of 11.65, which we are currently allowed.

I’m also very pleased to finally be able to report that in addition to this filing we have the opportunity to report a request for recovery of approximately a $140 million for a transmission upgrade project in the Acadia load pocket area. We finally have a very specific project, transmission project to pursue. This project will provide much needed reliability in this area and once complete will greatly reduce, if not eliminate that area’s dependence of Cleco Power’s Teche units. We continue to collaborate with all parties involved in the project to design and achieve approval for a solution that will be of great benefit to the region.

In addition to this transmission project, Cleco Power continues to develop projects that will enhance our overall system performance. An example of this is a $31 million Black Start generating project located at Teche Power Station, if approved the project will be constructed during the 2008 through 2010 timeframe.

As we walk through the regulatory process for Rodemacher Unit 3 and other projects the construction of Rodemacher 3, as I’ve said continues to progress ahead of schedule and on budget. We are now in the 27 month of construction and through June 30, we have spent approximately $772 million on the project, also this fall we will cut the ribbon on our new port facility adjacent to the unit on the Red River. We will then start stock piling limestone and petroleum coke, the fuel for Rodemacher Unit 3, which is a byproduct of Louisiana’s refinery industry.

Now, in addition to the rate case on our Rodemacher Unit 3 project, we continue to move forward and on schedule with our 2007 long term request for proposals that we issued last October. Keeping with the current schedule, we’re still planning to notify winning bidders in mid August, hopefully by the end of this year or early in 2009, we will file our certification with the LPSC and announce the winning bid.

Turning our attention to Cleco Midstream resources, on May 30 of 2008, JP Morgan Chase and Company completed the acquisition of Bear Stearns Companies. JP Morgan Chase and Company has now guaranteed the obligations of Bear Stearns companies and its subsidiary including the obligations on the Evangeline Powers Station tolling agreement. This is the 20 year agreement we originally signed with Williams Energy Marketing in November of 1999 for all of the Evangeline’s capacity.

We also continue to look for opportunities to maximize the value of our Acadia Unit as regional load serving entities continue to issue RFPs for short term and long term gas-fired generation resources. These RFPs provide the primary sales opportunities for Acadia. We believe Acadia is well positioned in these RFPs given the slow heat rate and geographic position relative to the Acadia load pocket. In addition, Acadia is pursuing structured deals to hedge its market exposure over the next 18 months.

Now, before I turn the call over to Russell, I want to make a few comments about our strategy. For years we have sustained an undivided focus on building Rodemacher Unit 3. As we look beyond the completion of that project, we believe there are other regulating investments like the transmission upgrade project, as well as additional generation opportunities to various avenues including the current Cleco Power long term request for proposal. We also believe we may have environmental investment opportunities as new federal regulations are adopted that address power plant emissions.

As always our success depends largely on our regulatory relationships, we are successful because we work constructively in partnerships with the LPSC to identify positive investments for both our customers and our shareholders. Cleco Power is our core business, we also own two very efficient gas-fired power plants within our Midstream subsidiary that adds value to our company. We are focused on maximizing cash flows and earnings from these two plants through Evangeline’s existing tolling agreement and the power sales contracts we’re working to secure from Acadia.

Now, Russell will discuss our financial results for the second quarter and the year.

Russell Davis - Vice President and Interim Chief Financial Officer

Thanks, Mike and good morning everyone. For the second quarter of 2008, we recorded net income of $29.4 million with diluted earnings of $0.49 per share, this is up from the second quarter of 2007, where net income was $15.1 million and earnings of $0.25 per share excluding the $48.1 million or $0.80 per share related to the Calpine related claims in 2007. The result excluding those claims are primarily due to a $0.16 increase from Cleco Power’s allowance for funds used during construction or AFUDC from construction progress of our Rodemacher 3 projects and lower Cleco Midstream losses of $0.10. If we include the Calpine claims earnings for the second quarter of 2008 were down $0.56 per share from the second quarter of 2007.

Looking at our earnings on a subsidiary basis Cleco Power reported EPS of $0.54 for the second quarter up $0.23 from the same quarter a year ago, once again the major positive factor for Cleco Power for the quarter was AFUDC tied to the Rodemacher Unit 3 project. In addition the AFUDC, increased sales primarily due to warmer weather and higher mark-to-market gain on gas hedge as each contributed $0.04. Lower taxes other than income taxes and lower other operations and maintenance expenses primarily due to the absence of 2007 Dolet Hills outage each added $0.02 to the increase.

On the Cleco Midstream side, Midstream recorded a loss of $0.05 per share for the quarter an improvement from the $0.15 per share reported in the second quarter of 2007, this of course excluding the settlement of Calpine claim. Including the Calpine claims, Midstream’s results were down $0.70 per share quarter-over-quarter. Evangeline added $0.04 to Midstream’s earnings much of it due to the absence of purchases of replacement power related to an outage at Evangeline during 2007. Now, compared to the same period in 2007 Acadia posted lower losses of $0.05 of which $0.04 were related to lower interest charges paid to the holding company. Results of the holding company were down $0.09 per share for the quarter compared to the second quarter of 2007 primarily due to lower interest income.

Moving to year-to-date, for the first six months of 2008 net income was $51.4 million and diluted earnings were $0.86 per share. This is up from the same period in 2007 when net income was $23.3 million and earnings of $0.39 per share excluding once again the $0.81 from the 2007 settlement of the Calpine claims. Again AFUDC is the primary driver with an increase of $0.33 year-over-year in addition to lower Midstream losses of $0.11. Including the settlement of the 2007 Calpine claims earnings per share for the first half of 2008 were down $0.34 from the same period in 2007.

Reviewing results on a subsidiary basis, Cleco Power finished the first six months of 2008 of $0.48 per share compared to the first half of 2007 of which $0.33 is higher AFUDC due to our growing investment in Rodemacher project. Lower other operation expenses added $0.07 per share while our energy hedging which includes mark-to-market gains contributed $0.04. Increased sales added $0.05 per share once again primarily related to our weather.

Cleco Midstream Resources was up $0.11 per share compared to the first six months of 2007, excluding the 2007 settlement of the Calpine claim. If we include those claims, earnings were down $0.70 per share. Year-over-year Acadia posted lower losses of $0.07 per share primarily due to the lower interest paid to the holding company. Evangeline’s results were up $0.03 primarily due to the absence of replacement power purchases related to an outage during 2007, which was partially offset by higher turbine maintenance expenses. And as the holding company results decreased $0.12 from the first six months of 2007, primarily due to lower affiliate interest received from Acadia.

In terms of earnings guidance, we are still targeting consolidated earnings in the $1.60 to $1.70 per share range. Our current guidance assumes normal weather for the remainder of the year, 2008 capital expenditures were about $265 million in the Rodemacher 3 project including AFUDC, continuation of our current rate plan, continued performance by the counter party under the Evangeline tolling agreement and certain assumptions about planned operations and market conditions with regard to Acadia. As always we will reevaluate our situation next quarter and make any necessary adjustments to our guidance.

At this time, I will open the lines up for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question and answer session. [Operator instructions]. Our first question comes from Paul Ridzon from KeyBanc. Please go ahead.

Paul Ridzon

What would be your share of the Acadia transmission project on the capital?

Russell Davis

The share was actually what market indicated that is the -- that was our share so its about $140 million is our share.

Paul Ridzon

Okay. Were there some partners on that?

Russell Davis

Yes.

Paul Ridzon

And then what are you seeing for the petcoke pricing and have you started to secure any contracts yet at coke sorry?

Dilek Samil

Good morning Paul, Its Dilek. Yes, we do have contracts for the petcokes that we anticipate meeting in the -- the contracts of anywhere from 3 to 5 years. The pricing is based on index for the petcokes and the prices of petcoke as with every energy commodity has been going up. The price of petcoke in fact was fairly consistent with the increase in pricing for coal. That said, as you know, our plan is to use petcoke to reduce our reliance on natural gas and of course the price of natural gas has risen more quickly than the price of coal. So, our decision and the impact on our customers are even more favorable to-date despite the increase in petcoke prices that we see.

Paul Ridzon

Is the petcoke market broad enough so you can put colors and other sophisticated kind of?

Dilek Samil

No, no there is very little ability to financially hedge that commodity right now. Our most effective hedge is our ability to switch fuel. That and our ability to store petcoke on site.

Paul Ridzon

Okay, thank you. And Russell just I had a question on Acadia improved $0.04 on lower intra company interest but Hodco lost $0.08 on lower intra company interest. I am trying to reconcile that?

Russell Davis

The reconciliation is there to, when we had to break our earnings per share down and allocate it to the individual subsidiaries and holding companies, the effective tax rates come in to effect out there and the effective tax rate at the holding company is much different than the effective tax rate at our subsidiaries, but holding companies has no revenue exception of that interest income yet it has some expenses and that’s the difference in the amounts right there. The dollar amount is the same. The EPS amounts are affected by the tax rate.

Paul Ridzon

Thank you. And Mike with the acceleration of Rodemacher and potential rate case outcome, what do you think will be the position to discuss the dividend with the board?

Mike Madison

Well, we will do anything with respect to the dividend and so we have the order in hand that specifically sets what the return on equity is. So, I don’t look to see a significant discussion to the board on dividend until the later part of next year.

Paul Ridzon

Okay. Thank you very much.

Operator

And our next question is from [Shaar Aruzia] from Calyon Securities. Please go ahead.

Shaar Aruzia

Good morning.

Russell Davis

Good morning.

Mike Madison

Good morning.

Shaar Aruzia

Is there any status on RFPs that Acadia has been into and when we last spoke Acadia was aggressively bidding for business including four long-term RFPs. Just want to maybe get some color on that or?

Darren Olagues

As you can tell long-term RFPs have a very long dated process with transmission studies and approval process as in the like. We are bound by confidentiality agreement in all the RFPs that we are participating and all I can say is that we are continuing to be involved in all of the RFPs. You probably -- you may have seen that Entergy recently came out with its long term RFP requesting anywhere from 1,500 to 2,000 megawatt of all kinds of different generation but it would be difficult to talk about specific RFP status so that its given how we are bound by confidentiality agreement.

Shaar Aruzia

Okay. Thank you.

Mike Madison

That was Darren Olagues by the way, Senior VP at Midstream.

Shaar Aruzia

Okay. Thank you.

Operator

Michael Lapides from Goldman Sachs is online with the questions. Please go ahead.

Michael Lapides

Hi, handful of questions. First of all Acadia and Evangeline for the quarter, how they performed versus expectation both in terms of output and in terms of general kind of condition of the wholesale market there?

Darren Olagues

Hi, Michael its Darren. From an earning standpoint we were at Acadia generally inline with our expectations as well as with the Evangeline generally speaking. But in terms of, I think where you are going with the market conditions, I will tell you that I think anybody you -- that is in the Louisiana market would tell you that transmission has been as bad as anyone has seen it this past summer. And so we have, we are clearly been affected by that fortunately walking into the third quarter we had put some structured deals in place to protect against some of the transmission constraints that we were seeing, I think you know, forward market heat rates are starting to compress a little bit, transmission outlook looks tough and therefore as Mike mentioned in this initial comments we are looking out to ‘09, the absorbable period of the next 18 months and trying to put as many structured deals in place as we can to mitigate the transmission risk well, at the same time in parallel working hard on the various RFP.

Michael Lapides

Also you mention that you reference the Entergy RFP can you talk a little bit just trying to get a lay of a landscape I know, you are half of Acadia and your ownership of Evangeline, what are the combined cycles can serve Southern and South Central Louisiana meaning how to transmission of service right now?

Darren Olagues

Well, here is what I would say, South Louisiana have the lot of excess generation as you heard us talk about in the past, part of that is because of Entergy and the local utilities have a lot of high heat grade units that still that are holding still maintained and used for reliability purposes and so forth, there is a lot of co-gen facilities which have their own unique characteristics and how they operate and there are units like Acadia and there are a lot of I would say not a long list really I think the only two in the area beyond I guess Acadia and Evangeline, well beyond the Acadia and Evangeline there is the Cottonwood facility which will be a good example of another similarly situated freestanding combined cycle unit that is in the region and is similarly situated in many ways in the Entergy RFP.

Michael Lapides

Got it. And you have mentioned they were two, it’s only Cottonwood there is a not a fourth Unit?

Darren Olagues

Well, I was including just Acadia, Evangeline and Cottonwood I mean there are other units it’ll be difficult to go into each one in their pros and cons of the geographic position. But, I will tell you Evangeline even though we don’t control the output, Evangeline sit inside of Cleco Powers System and is not interconnected into the Entergy system where Acadia. So, I wouldn’t put Evangeline in a real good competitive position to participate in the Entergy RFP.

Michael Lapides

Okay, understood. And finally, one question on Acadia, your rate case filing I thought the CapEx for that was a $114 million I may have misread or may have misheard because I think you all said 140 on the call?

Dilek Samil

Mike this is Dilek, the 114 that you are thinking is excluding AFUDC.

Michael Lapides

Got it okay, so the 114 is cash cost, 140 is all in.

Darren Olagues

That’s correct.

Michael Lapides

Got it, okay. Thanks Dil, congrats on a good quarter.

Darren Olagues

Thanks.

Mike Madison

Thanks.

Operator

Paul Ridzon from Keybanc is on line with a follow up question. Please go ahead.

Paul Ridzon

You mentioned the black start unit at Teche is that the Teche operating that you have been talking about or is that another project?

Darren Olagues

It’s another project Paul, in 2005 the Federal Government passed a new power act that gave FERC authority to control or to regulate reliability. Because of that some of the standards that the utility industry has been voluntarily adhering to have become now mandatory and with FERCs now appointed ability to levy up to $1 million today in fine reliability projects have toughen up all over the country one of them that we have been studying for some time is the ability to be able to bring our system backup if we became totally isolated and knocked off from the grid. And that’s what the term black start capability does, in other words of a storm or hurricane knocks offline no load no generation we have to be able to demonstrate to FERC that we can bring our system back up with no help and this black start project allows us to do that.

Paul Ridzon

What was the other Teche project that what’s the stance of it?

Darren Olagues

One of the self built that we bid into the RFP while a conversion of Teche 3 from owned gas to a combined cycle and so it was a proposal that we’ve been into the RFP, one of our self built and all I can tell you again is that the process is moving forward to take that shortlist of project and create a winning bidder and I can’t give you that information until the latter part of this year.

Paul Ridzon

Can you talk about post Rodemacher capital and you have talked about incremental generation will that be within Cleco Power?

Darren Olagues

Yes that is primarily within Cleco Power as I think we have told people before even when Rodemacher 3 comes online we are still going to be somewhere between 300 and 600 megawatts short of capacity between now and 2017 and 2019 and so in order to stay ahead of that requirement to make sure we have capacity we’ve done this RFP and so that’s where that additional generation is coming from.

Paul Ridzon

And can you just not to bid on it too much but you feel good about the RFP process?

Dilek Samil

Let me, see if I can step into Paul, we were, clearly RFP process, we are very proud of the results we achieved with our last RFP, and of course, that was the one that where we chose go to acreage units, [3 yards] alternative that sets the data for our customers. It’s a very strict process, it’s overseen by a monitor, it’s overseen by consultant that the PSC appoints and will just lead to the other commentaries that is running on schedule, we’ll notify the winning bidder as Mike said, mid August and we hope to be able to go public with the end of this year and next year.

Paul Ridzon

Okay, great and I look forward to.

Operator

Our next question comes from [Philips Gray] from White Asset Management. Please go ahead.

Philips Gray

Good morning.

Darren Olagues

Good morning.

Mike Madison

Good morning.

Philips Gray

Could you expand a little bit on the improvement in the schedule with Shaw and other contract changes with them?

Mike Madison

I think when we first laid out the project we told everybody that the original EPC contract that we had with Shaw had a contract delivery date of no later than I think it was 1st of October in other words that’s the date in which they had to deliver a 600 megawatt net plant at whatever performance it was ready to run and provide power if they didn’t hit that date and they would be obligated for penalty. So, that was the contract date, but even now that was the contract date we had been working with Shaw on an accelerated construction schedule to try to get the unit earlier. They and our team have done a great job in meeting that or hitting that accelerated schedule to the point that we feel comfortable and Shaw felt comfortable in amending the agreement to officially move forward that substantially completion day. And so, that’s really what happened, they contractually were obligated to hit the other date, we had always been working towards an accelerated date and we are now at a point where we believe we will hit it and so we amended the contract to reflect that.

Philips Gray

And are there other pricing changes within the contract?

Mike Madison

No.

Dilek Samil

Let me comment on that, which is the second. One of the changes that was incorporated within the amendment will probably remember that there was a $15 million labor contingency and that is that if Shaw had to spend an additional $15 million, up to an additional $15 million on labor and could demonstrate to us the system then we would be liable to that amount over the original EPC contract. With this amendment that contingency has gone away. And returns the moving up the substantial completion date on that October 1 date to the July date that as Mike mentioned there are additional incentives to Shaw, we were very pleased to be able to structure that in a way that benefit both our customers and the contractor and the way we did that is if you look at the (inaudible) charges with the AMC received that would otherwise be recorded to the project. Obviously the longer the construction goes, the longer we have AFUDC, if the construction is moved ahead by three months as is now contemplated what we were doing with previous mix savings and AFUDC gets half of this to the contractor and half of that would go to the benefit of our customers. So, that was the mechanism from moving us to substantial completion date.

Philips Gray

I see, okay. That’s very helpful. Thank you. It does appear that your construction contract is much more safer both than most recently negotiated owing to them?

Dilek Samil

Our timing was exceptional for many, many prospective.

Mike Madison

We are very pleased with what we did in the EPC contract that we signed and I give credit to Shaw, as Shaw have done a very good job of managing this project and our team has worked within the -- and we worked very well together to solve the issue of major construction project. And that’s why both sides felt uncomfortable of amending the completion date.

Philips Gray

And could you go over, once you reach the substantial completion date. How long is it before the plant is at full capacity?

Dilek Samil

There is certain performance as such as the contract to me, in order to for us to agree to substantial completion. So, they will have to prove that the plan can operate it at 600 net megawatts, this way substantial completion.

Philips Gray

I see.

Dilek Samil

Yes, this is a brand new unit that is going to be, that has to be worked out of it, I mentioned over the 12 months of operation.

Philips Gray

Very good. Thank you very much.

Mike Madison

Thank you.

Operator

Our next question comes from Patrick McKinley from Citidon & Company. Please go ahead.

Patrick McKinley

Good morning everybody.

Mike Madison

Good morning, Patrick.

Darren Olagues

Good morning, Patrick.

Patrick McKinley

It seems that you guys have had a really strong first half year. And my questions just regards to keeping guidance at the $1.60 to $1.70 level. Are you expecting any extraordinary maintenance cost or additional operating expenses here in the back half?

Russell Davis

Patrick, as far as looking at Cleco Power, which is our major contributor to earnings, we did move a major outage in our power plants from the spring cycle to the fall cycle and so what you may see about there is abnormally low, OEM expenses in Cleco Power for the first half of the year. And you might see slightly higher than average cost in the second half of the year. That’s a big part of it out there. The other part in our continuing to keep the earnings guidance here is we are just now entering the summer months, about a month or two ago. But our biggest earning quarter is our third quarter of the year. And so, therefore we really need to get that quarter behind us barring any unforeseen circumstances such as storms etcetera. And then we will revaluate our earnings guidance for the third quarter call.

Patrick McKinley

I see, great. Alright, thanks very much.

Russell Davis

Thank you.

Operator

Our next question comes from Oliver King from Zimmer Lucas. Please go ahead.

Oliver King

Hi, everybody. Just a question on the Cleco RFP, Is there a reason why you can’t notify the public sooner about who the winning party is?

Mike Madison

The process that the Louisiana Public Service Commission is very structured and again that’s all I have to remind people it’s not our process. It’s the LPSC’s process and they have hired an independent monitor who basically orchestrates the whole schedule and tells us when we can and can’t make notification as much as we might like to, we really are at the -- for lack of better term at the mercy what they can allow us to do. And that’s really the answer to it, I’d love to be able to talk more specifics with it but it’s a very, very structured process and the LPSC and the independent monitor is protecting the market. And they want to make sure that no one party whether it’s the utility or any market participant is doing anything to gain or mess with the systems. So, they are very, very conservative of what we can, and can’t say.

Oliver King

Okay, thank you.

Operator

[Edu Marty] from Debt Capital Advisors is online with the questions. Please go ahead.

Edu Marty

Good morning.

Mike Madison

Good morning.

Edu Marty

Couple of things, one, I may have missed this, so I don’t recall is there any, if you are going to make currently have received any quip over the construction period now?

Russell Davis

We’ve not actually received a quip in rate base over the construction period. However, the Louisiana commission has allowed the company to recover a portion of our caring cost for the period in time. And, so we’ve been recovering that and now as part of our rate binding packages if I were will be refunding -- we are proposing to refund those collections at the interest over a five year period of time. So therefore, we have been booking the full amount of AFUDC against the quip balance on our balance sheet.

Edu Marty

Okay. And, can you help us, when the plant is completed, you talked about some of your other generation opportunities as well as transmission and perhaps environmental, can you discuss on it from a -- what you think about maintenance CapEx perspective, what type of cash flow outlook you have because at which period, you should be in a completely strong cash flow positive position, post maintenance CapEx and dividend that could then be applied towards any of these opportunities?

Russell Davis

That’s true. We’re looking at that and we are investigating that but a lot of that will depend upon the final outcome of the rate package, rate point package proceeding for the Louisiana Commission, as number of opportunities that we have discussed in this call that, we have put forth and those of your questions have put forth such as earlier the dividend increase perhaps purchase of buyback of stock we’ve looked at additional transmission opportunities perhaps there’s an additional generation opportunity out there in the future at other infrastructure need. And, so all of that is on the table right now, we would not -- we would anticipate that our CapEx expenditures are going forward would be fairly a similar to what they are today excluding the Rodemacher 3 project.

Edu Marty

Okay. I would also assume that there is until things are much more clearly defined or pretty far away from any potential equity to support any next level of CapEx, or have you evaluated whether you can probably, hand on the most of the next levels CapEx including any of the growth opportunities without any incremental equity?

Mike Madison

Items have been out (inaudible) handle them to our current equity structure.

Edu Marty

Terrific. Thank you very much.

Operator

Bob Wilson is on line with the question. please go ahead.

Bob Wilson

On the Acadia line can you talk how the $140 million is going to slow over what years and I think previously talked about it would be built in chunks so, you could kind of energize each piece and get them earning, is it so the plan?

Dilek Samil

That is still the plan for the timeframe, it’s basically since the bulk of the money is expected to be in $0.20 or $0.20, [$0.12] and as we noted, we break it down to pieces where we can energize and put in service, earning the return…

Bob Wilson

Could we say basically $40 million in each of the years 10, 11 and 12?

Dilek Samil

We, I think we have the break down of the cash flow in our rate plan, I don’t know at the top of my head have been the specific dollars by the years but it is in our filings.

Mike Madison

Paul, if you have access to our rate buying package in the 8K in the back of the testimony under exhibit 7 is the break down there’s a schedule there has an exhibit that has the break down by year roughly anticipated cash expenditures are correspond to that $114 million that was discussed earlier versus the 140 with AFUDC.

Bob Wilson

Great, I’ll be able to find that. Thanks.

Operator

Our next question comes from [Shaar Aruzia] from Calyon Securities. Please go ahead.

Shaar Aruzia

If Rodemacher is brought online 3 months ahead of schedule, how did that effect your rate filings both the new rates to come effective sooner since its designed to coincide inside with the launch of the unit?

Mike Madison

That’s correct, in fact, I hope people had figured out the schedule is if I said earlier the requirement is to file 12 months from the day you believe that the rates will be needed and since we believe that we can have Rodemacher commercial July or end of June of 2009 that’s one of the reasons why we filed the rate plan first part of July of this year so, we have that full 12 months. And if everything works correctly we will have the rates ready to go in effect so when the project is over and we make Rodemacher 3 commercial the new rate plan will take effect that very same day.

Shaar Aruzia

Perfect, thank you. That’s all, my question.

Operator

[Operator Instructions]. Our next question comes from Michael Lapides from Goldman Sachs. Please go ahead.

Michael Lapides

Hi, guys last question here your commitment CapEx is generally been in I don’t know roughly to 80 to 90, 80 to $100 million range is the Acadiana project in the $30 million Black start project are those incremental to that level or with those be kind of included within that level?

Mike Madison

That’s incremental.

Michael Lapides

Okay, thank you.

Operator

Our next question comes from David Dickens from Davin Capital Management. Please go ahead.

David Dickens

Hi, can you remind me there is I do remember that with the return the AFUDC return you are getting on Rodemacher there is a tax benefit associated with that, that goes away once that goes into rates, can you remind me of how that works?

Mike Madison

Yes, tax benefit doesn’t have anything that do with (inaudible) of the construction caring cost to our customers, the tax benefit is if we look on the income statement the line items is allowances for other funds is there in construction we’ve referenced that really referred to that at AFUDC equity and AFUDC equity is not taxable by the IRF and so therefore that’s also what causes a lower effective tax rate and when you are looking Cleco Power and our consolidated results. That turns around over the life of the power plant over the 30/40 whatever years that LPFC determines that (inaudible) and as we depreciate that power plant there is AFUDC equity cost or part of that depreciation expense. And at that particular point in time that depreciation expense, a portion of that pertaining to the AFUDC equity will not be allowed as a income tax deduction since it was not taxed as revenue when we received it. And so, that’s what we turnaround becomes. And so the AFUDC equity non-taxable proportion is accumulated over short period of time during the construction and then flows back over that much a longer period time over the lot of the asset which it incurred.

David Dickens

Okay. But, this then will result in a the fact that your Rodemacher completion is going to be moved up in ‘09 and if we assume that the return you get I mean for argument sake if we assume that the return post completion is equivalent to the AFUDC return you are getting this would result in lower reported earnings in ‘09 would it not?

Dilek Samil

Everything else seeing equal that’s right, but remember part of that the rate filings is to make us hope on all of the other aspect of that business to the extent where earnings less than our currently allowed to 11.25 return on equity we are asking for a step up in rate ever after that with that decision.

David Dickens

I do understand that which of the two do you feel us is anticipate would be bigger?

Dilek Samil

Which of the two do I anticipate?

David Dickens

Would it step up to your requested ROE to offset your under earnings?

Dilek Samil

Yeah, that would ….

David Dickens

Earnings it could have larger than the negative impact you would see from having the tax benefit go away?

Mike Madison

Yes, it would.

David Dickens

Okay. That answers my question, thank you.

Operator

[Operator Instructions]. And at this time, I show no questions.

Mike Madison

Thanks everyone for your interest today, if you have any additional questions, please feel free to contact us at 1800-235-2652. Thank you. Have a nice day.

Operator

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

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Source: Cleco Corporation Q2 2008 Earnings Call Transcript
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