Cleco Corporation - Company Profile, Information, Business Description, History, Background Information on Cleco Corporation

2030 Donahue Ferry Road
Pineville, Louisiana 71360-5226

Company Perspectives:

Agile ... Innovative ... Dependable ... Responsible. All are watchwords of Cleco's past and its future. From its start as an ice and electric company, Cleco has seized opportunities to grow in new ways and new directions to better serve customers and increase shareholder value. That philosophy continues to serve us well as we work to stay ahead in a quickly evolving industry. We are transforming ourselves into an agile, dependable regional energy services company, and we are accomplishing it while maintaining a sincere respect for the environment. Cleco is aggressively moving into the midstream energy business by building new, efficient generation to meet the growing energy needs of the public. At the same time, we are honing our regulated utility operation and developing new businesses grounded in the expertise we've earned over the last 65 years to compete in a changing marketplace. Our mission: To become America's best energy value by profitably growing Cleco Corporation into an opportunistic regional energy services company using innovative leadership and technology to benefit our customers, employees, investors, and the environment.

History of Cleco Corporation

Cleco Corporation, which employs over 1,400 people, is a major provider of electricity and related services to customers in Louisiana. Structured as a holding company, it operates in three core businesses: the Cleco Utility Group, Cleco Midstream Resources LLC, and Utility Construction & Technology Solutions LLC (known as Utilitech Solutions). The Cleco Utility Group provides electrical services for about 246,000 residents and businesses. Cleco Midstream Resources, a regional energy services consortium, develops and operates power-generating plants and invests in and helps maintain natural gas pipelines, providing energy for other companies and agencies with their own electric utility systems. UtiliTech Solutions offers line construction and engineering services for various third-party distributors of electricity, including both private and publicly owned utility companies. With a partial ownership of four major electrical plants, Cleco can generate over 1,300 megawatts of power for consumption by its central Louisiana customers.

1914--25: An Independent Ice and Electrical Plant in Bunkie

Cleco's origin can be traced back to 1914, when, in Bunkie, Louisiana, a small group of businessmen built an ice plant using a 50-kilowatt generator both to light the facility and manufacture the ice. At the time, ice was an essential good because it was used in most households as the sole means of preserving perishable foods. It was a greater necessity than either indoor plumbing or electricity, conveniences still decades away from reaching much of rural America. Until local ice manufacturing became feasible, it had to be harvested from frozen lakes in the North, stored in insulated buildings, and shipped to the South by boat, a costly method that encouraged the proliferation of local, independent ice plants. Because the ice-making process required the use of gasoline or diesel generators and electric motors, in many areas of the country electric companies had their beginning in the ice business. Plants began using their excess power to provide electricity for nearby homes and businesses, and over time the demand for electricity began outstripping the demand for ice.

1926--40: Surviving the Depression

The plant in Bunkie remained private and independent for over a decade, providing ice and electrical power to customers only in that town. However, in 1926 businessman Wiley Corl started up the Louisiana Ice & Utilities Company and began buying small, south-central Louisiana ice and electric utility companies, including the Bunkie plant. The company also ran dairy operations and marketed its products under the Blu-Ribon name. Corl soon faced tough going because of the economic devastation ushered in by the stock market crash of 1929, and in that year he sold the company to Floyd Woodcock, a Philadelphia businessman. In 1933, unable to pay off its debts, Louisiana Ice & Utilities was forced into bankruptcy. Had it not been for Woodcock's business acumen, the insolvent company might have become extinct, but in 1934 he reorganized it as the Louisiana Ice & Electric Company and steered it through the difficult Depression years. Woodcock brought several years of experience to the task, having been involved in operating public utilities since the early 1920s. He also seemed to have an uncanny sense of how to build a successful utility system despite the hard times, and he played an important part in helping the industry grow and prosper. Under his tutelage, by 1935 Louisiana Ice & Electric was able to begin paying dividends on its capital stock.

At Bunkie, in 1938, the company completed building and placed in operation the Rea Station, its first power plant. Its main units were 1,000-kilowatt generators powered by natural gas, the fuel of choice because of large gas reserves available in the area. At the time, it was the largest gas-fueled electric producing plant in the country. In was also in 1938 that Frank Hugh Coughlin joined Louisiana Ice & Electric as vice president and general manager. Like Woodcock, he brought years of experience to the job, including a decade of service with the Southwest Utilities Corporation of Texas.

1941--50: Wartime and Postwar Demand Spurs Growth

Coughlin helped Woodcock guide the company through the challenging years of World War II, when, because of the sudden burgeoning of military camps in the area, the demand for electricity rapidly increased. Within 50 miles of Alexandria, eleven training camps were home to about a half million soldiers and airmen. These installations needed huge amounts of power, not all of which could be provided by Louisiana Ice & Electric. Even though by 1941 additional generators increased the capacity of the Rea Station to 5,700 kilowatts, which was supplemented by another 900 kilowatts produced by a small Pineville plant, the company had to tap into the reserves of other systems in order to meet the military's needs and those of the communities that grew as a result of the influx of workers. In 1945, reflecting the fact that Louisiana Ice & Electric had evolved into the major provider of electrical power in its area, the company changed its name to Central Louisiana Electric Company, Inc.

In 1947, when Woodcock vacated the presidency of Cleco to become chairman of the board, Coughlin succeeded him in that office. One of the main challenges facing Coughlin was to meet the growing demand for rural electrification, something that had been promoted under Franklin D. Roosevelt's Rural Electrification Administration (REA) in the 1930s. Although the war slowed the progress of rural electrification somewhat, by 1945 Cleco was serving 5,432 rural customers. In 1948, to help the expansion, the company formed its first subsidiary, Louisiana Rural Electric Company. Its function was to use REA funds to provide electrical lines and service for sparsely populated, rural areas. Under its aegis, Cleco's rural customer base grew to 35,000 by 1960. It was also in 1948 that the company put the first two 7,500-kilowatt electrical generators on line at its new Coughlin Power Station, the first plant in the nation to place its turbine generators outside, exposed to the elements. Construction would continue at the site until 1966, when the older units went offline, replaced by two new units that could generate up to 334,000 kilowatts of electrical power.

1951--65: Expansion and Consolidation

In 1951, in a major expansion, Cleco merged with Gulf Public Service Company, Inc. (GPS), a company that had been formed and incorporated in 1944 and, through a 1946 merger with Louisiana Public Utilities, had grown much larger than Cleco. The GPS-Cleco merger, joining the properties and management of both companies, more than doubled the size of Cleco and increased its operating revenues by 70 percent. The move required the interconnection of their power lines and ambitious new construction. Steps taken included increasing the capacity of the Coughlin Station and the building of a new plant, the Teche Station, which first went on line in 1953. Moreover, because GPS had also produced and distributed natural gas and water, Cleco entered new markets. The company formed two subsidiaries to handle the demand for gas--South Louisiana Production Company, Inc., started up in 1955 and Louisiana Intrastate Gas Corporation, followed the next year. As its gas customer base expanded, eventually producing almost 30 percent of Cleco's annual sales, the company sold off its ice, dairy, and other nonutility businesses.

Besides tremendous growth, the 1950s saw Cleco's involvement in important initiatives. For example, it participated in studies of atomic energy as a potential source of electrical power and helped begin a program of selling and interchanging reserve energy with the Tennessee Valley Authority. In the next decade, the company undertook a major marketing campaign that stressed the tremendous value and convenience of electricity. In addition to selling power that was rapidly dropping in cost, Cleco advertised and sold home appliances. Although it also marketed natural gas, the company's stress was on electricity, and one of its major themes was total electric living as evidenced in Gold Medallion Homes, which were entirely powered by electricity. The campaign brought a steady increase in sales, even as electric rates continued to decline. It was a relatively tranquil period for Cleco, despite some violent reminders that nature could and would periodically disrupt the calm. In 1964, Hurricane Hilda roared into Louisiana, just as Hurricane Audrey had done in 1957, causing both loss of life and power outages that in some places lasted several days. However, the company's emergency response time and equipment had improved by the 1960s and Hilda proved far less disruptive than Audrey.

1966--84: Going Public and Reorganizing

In 1966 Coughlin advanced to the chairmanship of Cleco's board, and W. Donner Rodemacher assumed the company's presidency. Rodemacher had come to Cleco through its merger with Gulf Public Service. As treasurer and then president, he helped prepare Cleco for going public, which it did in 1968. Through his 12-year tenure as president, Rodemacher also oversaw the company's continued expansion, especially its growth in the industrial power sector and the development of its relatively small subsidiaries into major companies. There were problems, however, especially during the 1970s when the industry was adversely impacted by double-digit interest rates and the Arab Oil Embargo, which quickly drove Cleco's fuel costs up, as much as 73 percent in a single year. The company had no choice but to increase its rates. Although not as cheap as it had been, electricity was still a good bargain, even if, as the company's new philosophy stressed, it needed to be conserved and used as effectively as possible. Despite the increased cost, the demand for electricity continued to grow, and Cleco continued to grow with it. In 1975, it put Rodemacher Unit 1 on line near Boyce, Louisiana. The 455,000-kilowatt unit, costing $75 million, became the largest gas-fired unit in Cleco's system and was designed to meet customer demands while the company sought alternative fuel solutions to the problem of the increasing cost of oil and gas.

During the 1970s Cleco cycled through some reorganizing moves that were the result of rapid growth of its subsidiaries involved in the oil and natural gas businesses. In 1978, in order to accommodate the operations of both its utility and nonutility businesses, the company formed Central Louisiana Energy Corporation (ENERGY), a holding company for both Cleco and its various subsidiaries. Three years later, Cleco separated from ENERGY to become an independent electric utility, headed by James M. Henderson, who had been elected Cleco's president in 1978. He oversaw the start-up of important new programs designed to help the utility increase its efficiency, including some streamlining of billing and service procedures. While Henderson held the office, Cleco put on line its first major alternative-fuel generator, Rodemacher Power Station Unit 2. Jointly owned by Cleco and two other companies, this 523,000-kilowatt unit, which began operating in 1982, was fueled by coal mined in Gillette, Wyoming, and shipped to Louisiana by rail. Coal proved more economical to use than natural gas, and during the first three years of the unit's operation, it saved Cleco's customers over $55 million.

1985--2000: Fuel Diversification, Acquisitions, and Restructuring

Cleco continued its fuel diversification program through the petroleum industry's recession that hit the Gulf states very hard in the mid-1980s. Although the price of both natural gas and oil plummeted, the risk of future market volatility was great enough to encourage greater reliance on coal, including lignite, a low-grade type of coal found in northwest Louisiana. That was the fuel chosen for the company's jointly owned Dolet Hills Power Station, Units 1 and 2. Unit 1, a 640,000-kilowatt generator, went on line in 1986, the year after Henderson retired and Cleco's presidency passed to William F. Terbot. By then Cleco was servicing over 192,000 customers in 25 parishes in Louisiana. It had also reached a power generating capacity of 1,361 million kilowatts and had centralized its operations at new headquarters in Pineville, Louisiana.

Over the next 14 years Cleco maintained steady growth, expanding its customer base to about 246,000 by the end of the century. During the 1990s, its revenue increased from $334 million in 1990 to $768.2 million in 1999. Significantly, from 1998 to 1999, Cleco's revenue grew by $253 million, an increase of 48 percent. Acquisitions, additional power production, and restructuring spurred growth through the decade.

In 1992, the presidency of Cleco passed to Gregory L. Nesbitt, who had joined the company in 1980. During his tutelage, Cleco began reorganizing, streamlining its operations, and making preparations for anticipated deregulation of electric utilities by federal and state agencies. The streamlining began in 1993, with plans to improve operations and offer better, lower cost services to customers. In 1995, Cleco began operating a customer call center 24 hours a day, seven days a week and consolidated 25 customer service offices into ten regional offices. At the same time, the company was negotiating the purchase of Teche Electric Cooperative, Inc., a move that was finalized in 1997, significantly increasing Cleco's customer base.

In 1998, the company officially changed its name from Central Louisiana Electric Company to Cleco Corporation and began implementing its plans to reorganize as a holding company, a move completed in 1999, the year in which David Eppler succeeded Nesbitt as Cleco's president and CEO. The restructuring allowed Cleco to separate its regulated and nonregulated operations into distinct subsidiaries. Under its corporate umbrella, Cleco began managing its principal subsidiaries: Cleco Utility Group, Inc., a regulated utility company; Cleco Midstream Resources LLC, Cleco's wholesale power and natural gas production and sales business; UtiliTech Solutions, which provided engineering and line construction services; and Cleco Support Group LLC, which provided various services for the other subsidiaries.

The reorganization achieved a necessary flexibility, including the ability to create new or spin-off subsidiaries as technological advances made them feasible. Such is the case with Cleco ConnexUs, an Internet service provider, which Cleco established in 2000. Cleco also planned greater expansion through continued partnering with other companies, jointly undertaking additional, power plant building ventures. For example, in March of 2000, Cleco Midstream Resources entered into a partnership with Calpine, an independent power company. Under the agreement, the partners would build and operate a 1,000-megawatt, natural gas-fired power plant scheduled to commence commercial operation near Eunice, Louisiana, in June 2002. In the summer of 2000, Cleco Midstream also entered a 50 percent partnership agreement with Southern Energy Inc., with which it plans to build a 700-megawatt power plant at Perryville, in northeast Louisiana. Such moves were designed to meet the ever-increasing energy demands that Cleco faced at the close of the century and would continue to face thereafter.

Principal Subsidiaries: Utility Construction & Technology Solutions LLC (Utilitech); Cleco Utility Group Inc.; Cleco Midstream Resources LLC; ClecoConnexUs.

Principal Competitors: American Electric Power Company, Inc.; Entergy Corporation; Southern Company.


Additional Details

Further Reference

'Calpine, Cleco Enter Project,' Oil Daily, March 7, 2000.Campanella, Frank W., 'Spelling Relief: Rate Boost Helps Central Louisiana to a Smart Rebound in Earnings,' Barron's, August 3, 1987, p. 39.'Cleco Corporation Teams with Southern Energy Inc. to Develop Power Plant in Northeast Louisiana,' PR Newswire, July 31, 2000.Core, Gael, 'Open Markets? Open a Warehouse,' Computerworld, May 19, 1997, p. 63.Donaldson, Gary Alan, A History of Louisiana's Rural Electric Cooperatives, 1937-1983, Ann Arbor, Mich.: University Microfilms International, 1984.Springer, Neil, 'Mfr. Pressure Shapes Louisiana Rate Hike Plan,' Energy User News, June 10, 1985, p. 9.Troy, Alan A., Louisiana Electric Utilities, Baton Rouge, La.: Louisiana Department of Natural Resources, 1994.

User Contributions:

Comment about this article, ask questions, or add new information about this topic: