Stonepeak and Bernhard Partners Acquire Cleco for $4.9B

Stonepeak and Bernhard Capital Partners are acquiring Louisiana electric utility Cleco for $4.9 billion in cash, the firms announced Monday, in one of the largest utility deals to kick off 2025. The transaction values Cleco at $86 per share — a 19% premium to Friday's closing price — and will take the publicly traded company private for the second time in a decade.

The deal reunites Cleco with private equity ownership after a brief stint on the public markets. Macquarie Infrastructure Partners took the company private in 2014 for $3.6 billion, then flipped it back to public shareholders two years later. This time, the buyers say they're in it for the long haul — and they're betting heavily that utility infrastructure investments will generate steady returns as Louisiana modernizes its grid.

Cleco serves roughly 300,000 customers across central and northern Louisiana, making it the state's second-largest utility behind Entergy. The company operates about 3,000 megawatts of generation capacity and 15,000 miles of transmission and distribution lines. It's also in the middle of a major capital investment cycle: Cleco has committed $3.3 billion over the next five years to upgrade infrastructure, expand renewable energy capacity, and harden the grid against extreme weather.

That capital program is exactly what attracted the buyers. "Cleco is a high-quality utility with a clear path to investing in critical infrastructure," said Trent Kososki, managing director at Stonepeak, in a statement. Translation: predictable rate-base growth, regulatory support for capital deployment, and a favorable environment for earning returns on those investments.

Utility acquisitions have become a reliable play for infrastructure-focused private equity shops. The math is straightforward: utilities operate as regulated monopolies, which means their revenue and profits are largely insulated from competitive pressures. State regulators approve capital projects and allow the utility to earn a guaranteed return — typically 9-10% — on those investments. As long as the company can keep deploying capital into approved projects, earnings grow predictably.

For investors, that's a nearly bond-like cash flow profile with equity-like returns. And right now, there's no shortage of things utilities need to spend money on. Grid modernization, renewable energy interconnections, electric vehicle charging infrastructure, storm hardening — the capital backlog is enormous, and regulators are broadly supportive of investment.

Stonepeak has built its reputation on exactly these kinds of assets. The firm manages over $70 billion across infrastructure strategies, with major positions in data centers, fiber networks, and energy midstream assets. Bernhard Capital Partners, meanwhile, is a specialist in energy services and utility infrastructure — it owns Bernhard Energy, a major provider of engineering and construction services to utilities across the Southeast.

That operational expertise matters. Private equity ownership of utilities isn't just financial engineering — it's about operational improvement and accelerated capital deployment. Bernhard's existing relationships with utilities and its boots-on-the-ground energy services business give the partnership a strategic edge in executing Cleco's infrastructure buildout.

At $4.9 billion in enterprise value, the Cleco acquisition ranks among the largest utility transactions in the past two years. It's not quite in the stratosphere of Duke Energy's $14.3 billion purchase of Piedmont Natural Gas or Berkshire Hathaway's mega-deals, but it's significant — especially for a regional player with a 300,000-customer footprint.

For context, here's how the Cleco deal compares to other notable utility acquisitions since 2023:

The valuation multiple is in line with recent precedents. Utilities typically trade at 12-16x earnings, and this deal lands squarely in that range. The 19% premium is meaningful but not outlandish — it reflects confidence in the regulatory environment and Cleco's ability to hit its capital deployment targets.

What stands out is how consistently these deals are driven by the same thesis: regulated utilities with growth capex backlogs are attractive to patient capital. Private equity can own these assets for 7-10 years, fund the infrastructure buildout, and generate stable mid-teens IRRs through a combination of rate-base growth and operational improvements.

One factor that makes this deal work is Louisiana's regulatory track record. The Louisiana Public Service Commission has historically been supportive of utility capital investment — especially when it's tied to reliability improvements and renewable energy development. Cleco has successfully navigated rate cases in recent years, securing approval for its multi-billion-dollar capital plan without major pushback.

Cleco's five-year, $3.3 billion capital investment program is the centerpiece of the acquisition thesis. The company is spending heavily on transmission and distribution upgrades, renewable energy projects, and grid hardening — all of which are regulatory-approved and earn a return on invested capital.

The breakdown looks like this: about $1.8 billion for transmission and distribution upgrades, $800 million for renewable energy and storage projects, and the remainder for generation fleet improvements and storm hardening. That's a lot of capital to deploy, but it's also a lot of earnings growth if executed well. Every dollar invested into the rate base translates into roughly 9-10 cents of annual earnings at the regulated return on equity.

That math is attractive — especially when you consider that Cleco's customer base is growing modestly (0.5-1% annually) and the company has avoided the kind of regulatory blowback that's plagued utilities in other states. No major wildfire liability, no stranded asset controversies, no battles over coal plant retirements. It's a relatively clean story.

The renewable energy piece is particularly interesting. Cleco has committed to adding 1,000 megawatts of solar and battery storage capacity by 2029, which would more than double its renewable portfolio. Louisiana isn't California or Texas in terms of renewable penetration, but it's moving in that direction — and utilities that invest early in clean energy infrastructure stand to benefit from both regulatory goodwill and federal tax incentives.

Bernhard's operational expertise in energy services could accelerate that timeline. The firm owns engineering and construction businesses that have built similar projects across the Southeast, which means the new ownership group can self-perform much of the work rather than relying on third-party contractors. That's a cost advantage — and potentially a speed advantage.

Louisiana utilities learned hard lessons from Hurricane Ida in 2021, which knocked out power to more than a million customers and caused billions in damage. Cleco's territory was less impacted than Entergy's, but the storm underscored the need for grid resilience investments. Since then, the company has prioritized underground distribution lines, stronger poles, and automated switching technology that can isolate outages and restore power faster.

Those investments aren't cheap, but they're defensible in rate cases. Regulators are highly motivated to approve projects that reduce outage durations and improve reliability — especially in a state where extreme weather is becoming more frequent. For Stonepeak and Bernhard, that means a reliable pipeline of capital projects with strong regulatory support.

Taking Cleco private removes the quarterly earnings pressure that comes with being a publicly traded company. That's a significant shift. Public utilities are constantly managing the tension between investing for the long term and delivering steady, predictable earnings growth to shareholders. Private ownership theoretically allows for a longer investment horizon and more flexibility to take on capital-intensive projects without worrying about short-term EPS impacts.

In practice, that often means accelerated capital deployment. Private equity-backed utilities tend to move faster on major projects because they're not navigating the bureaucracy of a large corporate parent or the scrutiny of public market analysts. If Stonepeak and Bernhard want to accelerate the renewable buildout or fast-track storm hardening investments, they can do it without needing to explain the quarterly earnings hit.

There's a flip side, though. Private ownership also means higher leverage. Private equity-backed utilities typically carry more debt than their publicly traded peers, which can constrain financial flexibility if things go wrong. If a major project goes over budget, if regulators deny a rate increase, or if the economy slows and demand weakens, that debt load becomes a problem.

For now, though, the risk profile looks manageable. Cleco's service territory is economically stable, the regulatory environment is supportive, and the capital plan is well-defined. The bigger question is what happens in five to seven years, when Stonepeak and Bernhard start thinking about an exit. Do they take the company public again? Sell to a strategic buyer? Flip it to another infrastructure fund? The playbook from Macquarie's ownership suggests another IPO is possible, but the market for utility IPOs has been choppy in recent years.

The announcement didn't disclose the debt-to-equity split, but typical utility LBOs run around 60-65% debt, 35-40% equity. At $4.9 billion in enterprise value, that would mean roughly $3 billion in debt and $1.9 billion in equity. Stonepeak and Bernhard are likely co-investing from their respective flagship funds, with potential co-investment from limited partners.

The debt markets are open for high-quality utility credits, and Cleco's investment-grade rating should make syndication relatively straightforward. Lenders like the predictable cash flows and the regulated monopoly structure. The bigger challenge is making sure the leverage doesn't constrain the capital plan — but if the buyers are putting up nearly $2 billion in equity, they have plenty of cushion.

This is speculative — the actual financing structure will be disclosed in SEC filings once the deal closes. But the rough math checks out based on comparable utility LBOs.

The deal is expected to close in the second half of 2025, subject to regulatory approvals from the Louisiana Public Service Commission and potentially FERC. Neither approval is expected to be contentious — this isn't a merger that raises competitive concerns, and Stonepeak and Bernhard don't have overlapping utility holdings in Louisiana. The more likely sticking point is customer protection: regulators will want assurances that rates won't spike and service quality won't decline under private ownership.

The Cleco deal is part of a broader trend: utilities are increasingly attractive to infrastructure investors, and small to mid-sized public utilities are particularly vulnerable to take-private offers. The public markets don't value these companies as highly as private buyers do — especially when the buyers can unlock value through operational improvements, accelerated capital deployment, and strategic partnerships.

There are roughly 30-40 publicly traded utilities in the U.S. with enterprise values under $10 billion. Many of them are regional players like Cleco — solid businesses, stable cash flows, but too small to compete for attention with the mega-cap utilities like Duke, Southern Company, or NextEra. Those companies are ripe for consolidation, either by strategic buyers or by private equity.

The question is whether the regulatory environment will stay friendly. State regulators are generally supportive of utility investment, but they're also increasingly skeptical of financial engineering and excessive leverage. If private equity-backed utilities start missing service quality benchmarks or pushing through aggressive rate increases, that regulatory goodwill could evaporate quickly.

For now, though, the market is open. Expect more deals like this — especially in the Southeast and Midwest, where regulatory environments are constructive and capital deployment opportunities are abundant.

Cleco's shareholders will vote on the transaction in the coming months. Approval is likely — at a 19% premium, the deal is hard to vote against. And once it closes, Stonepeak and Bernhard will have their work cut out for them: execute the capital plan, keep regulators happy, and position the company for an exit in five to seven years. If they can do that, the returns will be solid. If they can't, well — at least utilities are boring enough that the downside is limited.

The press release included the usual reassurances: no immediate layoffs, continued investment in customer service, commitment to the local community. Take that with a grain of salt — private equity isn't known for overstaffing — but utilities are labor-intensive businesses, and cutting too deep would undermine operational performance.

The bigger impact is likely on the customer side. If the new owners execute the capital plan as promised, customers should see improved reliability, faster outage restoration, and expanded renewable energy options. But they'll also see higher rates — because every dollar of capital investment flows into the rate base, and customers ultimately pay for it.

That's the fundamental bargain of regulated utilities: invest in infrastructure, earn a return, pass the costs to customers. As long as the Louisiana Public Service Commission signs off on the investments, customers don't have much say in the matter. Whether that results in meaningfully better service or just higher bills is the open question.

Cleco's leadership team is expected to remain in place post-close, which suggests continuity rather than upheaval. Bill Fontenot, who's been CEO since 2021, will likely stay on — at least for a while. Private equity owners typically give incumbent management a year or two to execute, then reassess if results aren't meeting targets. If the capital plan stays on track and the regulatory relationships stay strong, Fontenot's job is safe. If not, expect changes.