{"url_path":"/sec/cik-0001089819/10-q/2026/item-3","section_key":"item-3","section_title":"Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-12","source_url":"https://www.sec.gov/Archives/edgar/data/1089819/0001089819-26-000010-index.html","accession_number":"0001089819-26-000010","cik":"0001089819","ticker":null,"issuer_name":"Cleco Corporate Holdings LLC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1089819/0001089819-26-000010-index.html","primary_entity_key":"0001089819","primary_entity_name":"Cleco Corporate Holdings LLC"},"word_count":1045,"has_tables":true,"body_markdown":"ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK\n\nRISK OVERVIEW\n\nCleco is exposed to counterparty credit risk, liquidity risk, interest rate risk, and commodity price risk. Cleco has implemented a governance framework, inclusive of risk policies and procedures to help manage these and other risks.\n\nFor more information, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — General Considerations and Credit-Related Risks.”\n\nCounterparty Credit Risk\n\nCleco is exposed to counterparty credit risk due to the potential that a counterparty may fail to meet its financial obligations causing Cleco to incur replacement cost losses. Cleco may be exposed when it enters certain transactions such as commodity derivative or physical commodity transactions directly with market participants and contracts with retail electric customers that require Cleco to construct grid facilities for the purpose of serving those customers. Cleco enters into long-form contracts and master agreements with counterparties that govern the risk of counterparty credit default and allow for collateralization above prenegotiated\n\nthresholds to help mitigate potential losses. Alternatively, Cleco may be required to provide credit support with respect to bilateral transactions and contracts that Cleco has entered into or may enter into in the future. The amount of credit support required may change based on margining formulas, changes in credit agency ratings, or liquidity ratios.\n\nCleco monitors and manages its credit risk exposure through credit risk management policies and procedures that require retail customer and counterparty credit quality review and monitoring, establishment of credit and default terms in bilateral contracts and master agreements, monitoring changing credit exposure as compared to fair value, and collateralization and other methods of counterparty credit assurance.\n\nLiquidity Risk\n\nAccess to capital markets is a significant source of funding for both short- and long-term capital requirements not satisfied by operating cash flows. Disruption in the capital and credit markets may potentially increase the costs of capital and limit the ability to access the capital markets. The inability to raise capital on favorable terms could negatively affect Cleco’s ability to maintain and expand its business. After assessing the\n\n48\n\nCLECO\n\nCLECO POWER\n2026 1ST QUARTER FORM 10-Q\n\ncurrent operating performance, liquidity, and credit ratings of Cleco Holdings and Cleco Power, management believes that Cleco will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.\n\nInterest Rate Risk\n\nCleco monitors its mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix, for example, refinancing balances outstanding under its variable-rate bank facilities with fixed-rate debt or vice versa. Calculations of the changes in fair market value and interest expense of the debt securities are made over a one-year period. For information regarding Cleco Holdings’ and Cleco Power’s revolving credit facilities, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Liquidity and Capital Resources — Cash Generation and Cash Requirements — Credit Facilities.”\n\nSensitivity to changes in interest rates for variable-rate obligations is computed by assuming a 1% change in the current interest rate applicable to such debt.\n\nAt March 31, 2026, Cleco Holdings had $10.0 million of short‑term debt outstanding under its revolving credit facility at an all‑in rate of 5.3966%. Each 1% increase in short‑term variable interest rate at Cleco Holdings would result in an increase in annualized pretax interest expense of approximately $0.1 million. Cleco Power had no amounts outstanding, and accordingly, a 1% increase in short‑term variable interest rates would have had no impact on pretax earnings on an annualized basis.\n\nCleco may enter into contracts to mitigate the volatility in interest rate risk. These contracts include, but are not limited to, interest rate swaps and treasury rate locks. For each reporting period presented, the Registrants did not enter into any contracts to mitigate the volatility in interest rate risk.\n\nCommodity Price Risk\n\nCleco Power’s financial performance can be adversely impacted by the volatility in future fuel and power prices, which may impact customer costs passed through Cleco Power’s FAC; therefore, Cleco Power has implemented a natural gas hedging program to partially mitigate the volatility of customer costs. The program includes transacting in financially settled\n\nswaps and options contracts and physical fixed price supply agreements. Cleco Power executes this program within a risk management framework inclusive of risk management policies, procedures, and guidelines, set forth by its Board of Managers and management. Cleco Power may be exposed to transmission congestion price risk as a result of physical transmission constraints present between MISO LMP nodes when serving customer load. Cleco Power is awarded and/or purchases FTRs in auctions facilitated by MISO. FTRs are accounted for as derivatives not designated as hedging instruments for accounting purposes.\n\nDuring the three months ended March 31, 2026, Cleco Power had natural gas derivative contracts consisting of fixed price physical forwards and financially settled swap and/or options contract transactions. Cleco Power monitors the Value at Risk (VaR) of its natural gas derivative contracts requiring derivative accounting treatment. VaR is defined as the maximum expected loss over a given holding period at a given confidence level based on observable market prices and volatilities. Cleco Power uses a parametric risk modeling approach to estimate VaR using a combination of implied and historical volatilities within a five-day holding period at a 95% confidence interval. Given Cleco Power’s reliance on historical data, VaR is effective in estimating risk exposures in markets in which there are no sudden fundamental changes or abnormal shifts in market conditions. An inherent limitation of VaR is that past changes in market risk factors, even when weighted toward more recent observations, may not produce accurate predictions of future market risk. VaR should be evaluated in light of this and the methodology’s other limitations.\n\nThe following table presents the VaR of natural gas derivative contracts based on these assumptions:\n\nFOR THE THREE MONTHS ENDED MAR. 31, 2026\n\n(THOUSANDS)AT MAR. 31, 2026HIGHLOWAVERAGE\n\nCleco Power\n$9,515 $12,607 $4,060 $6,939 \n\nFor more information on the accounting treatment and fair value of FTRs and other commodity derivatives, see Item 1, “Notes to the Unaudited Condensed Consolidated Financial Statements — Note 5 — Fair Value Accounting Instruments” and “Note 6 — Derivative Instruments.”"}