Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Earnings and Business Update Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Jason Bailey, Director of Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning everyone, and welcome to OGE Energy Corp.'s Fourth Quarter 2020 Earnings Call. I'm Jason Bailey, Director of Investor Relations. And with me today, I have Sean Trauschke, Chairman, President and CEO of OGE Energy Corp.; and Bryan Buckler, CFO of OGE Energy Corp. In terms of the call today, we will first hear from Sean, followed by an explanation from Bryan of financial results. And finally, as always, we will answer your questions. I'd like to remind you that this conference is being webcast and you may follow along on our website at ogeenergy.com. In addition, the conference call and accompanying slides will be archived following the call on that same website. Before we begin the presentation, I'd like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date. I'd also like to remind you that there is a Reg G reconciliation for gross margin and a reconciliation of ongoing earnings to GAAP earnings in the appendix. I will now turn the call over to Sean for his opening comments. Sean?

Thank you, Jason. Good morning everyone. I hope all of you are well and thank you for joining us on today's call. It's certainly great to be with you this morning, and I'd like to start off today by welcoming Bryan to the call this morning. Bryan started with us on January 1, and we couldn't be happier to have him with us. So, turning to the business. Over the course of a couple of weeks, the region, including our service territory, experienced an unprecedented prolonged cold spell that disrupted natural gas supplies, resulting in extreme natural gas prices. The cold spell also resulted in a record winter peak demand for electricity. While our service territory experienced record snowfall and record temperatures, our customers experienced minimal disruptions. Through the efforts of our employees, our generation fleet performed admirably over the course of the week. And so did our customers, heeding the call to conserve natural gas and electricity, so that more serious shortages could be avoided. Every day, we had generation online at each of our power plants. Our fuel and purchase power costs for this event alone were more than all of our fuel and purchase power costs in 2020. We anticipate the regulatory asset that will be created as a result of the storm to be in the range of approximately $800 million to $1 billion. We have secured $1 billion of additional bank financing or liquidity to cover these costs. We certainly understand the pressure that this event will have on our customers, and we will work with our commissions to help mitigate the impact to our customers' bills. To that end, yesterday, we filed an application at the Oklahoma Corporation Commission, requesting an intra-year fuel adjustment for a portion of the weather events cost. To help mitigate the impact on OG&E customers, we are requesting alternative regulatory treatment to avoid our customers having to bear the entire cost of the 2021 weather event over the balance of the calendar year. We proposed to continue to carry the remaining balance on our books and defer the cost to a regulatory asset to be amortized over a 10-year period, and collect it through our fuel adjustment clause, beginning in January 2022. We requested that the regulatory asset include a carrying charge at a weighted average cost of capital, and we believe this approach will significantly lessen the monthly impact of the weather events cost to our customers. We expect to quickly make a similar filing in Arkansas as well. Bryan will discuss the financial effects of the February 2021 weather event in a moment. Turning to Enable. We made an announcement last week with our support of the proposed merger between Enable and Energy Transfer, which is an important step in our repositioning as a pure-play utility. From an investment return perspective, Enable has been very successful for our shareholders. Since Enable's formation in 2013, we returned a modest investment into over $1 billion after-tax benefit to shareholders, which is equivalent to a 2.5 times after-tax return. When the merger closes, we will own approximately 3% of the much more liquid limited partnership units of Energy Transfer. Energy Transfer will acquire the general partner interest from us at some point for $10 million in aggregate cash consideration, and also CenterPoint will pay us $30 million. We expect the transaction to close later this year. The strength of our balance sheet allows us to be thoughtful on how and when we exit taking into consideration taxes, distributions, and market considerations. But let me be clear, we will exit our midstream investment, and we will do so in a responsible way that does not create overhang to the Energy Transfer units, allowing us to achieve our goal of lower credit downgrade thresholds from the rating agencies. Turning to our financial results, earlier this morning we reported 2020 ongoing earnings of $2.08 per share. We also reported earnings of $1.70 at the high end of our revised guidance and ongoing earnings from OGE holdings of $0.37 per share. Our 2021 utility guidance range is $1.76 to $1.86 per share. The midpoint of this guidance is $1.81 per share and is based off 2.4% normalized load growth from 2020 and is equivalent to a 5% EPS growth rate. Additionally, we are announcing this morning that our long-term earnings growth rate is 5% based off the midpoint of 2021 guidance of $0.81. So let me take a moment to discuss an item from the February weather event that does impact 2021. Obviously, due to the extreme temperatures, kilowatt-hour sales were higher. However, offsetting this is one of our customer programs, the Guaranteed Flat Bill program, which is a voluntary annual program and is largely subscribed by senior citizens and lower-income households and provides uncertainty around their monthly bill. We will incur the incremental fuel expense under this program. We are certainly thankful that these customers had the benefit of the program during this unprecedented event, and we've been proactive and are working with the commissions in Oklahoma and Arkansas to mitigate the impact of increased fuel cost to customer bills. Bryan will go into more details when he discusses our 2020 results and 2021 guidance. Turning to our economy, we continued our impressive customer growth rate and our customer base grew by 1.1%. The Oklahoma and Arkansas economic recoveries remained strong. In December, the U.S. Bureau of Labor and Statistics reported that Fort Smith, Arkansas, had an unemployment rate of 4.4%. Oklahoma City had the seventh-lowest unemployment rate for large metropolitan areas at 4.8%, and while the state of Oklahoma's unemployment rate came in at 5.3%, showing the strength and resilience of the economies across our service territory. Our economic development efforts are certainly paying off. In 2020, we had 25 projects, created 8,000 additional jobs in our service territory, and saw $725 million of capital investment by businesses in our service territory. Turning to our accomplishments in 2020, COVID was certainly not something the world was expecting, but we adjusted our way of life and quickly set up processes to support our customers and communities while protecting our employees. The weather played a crucial role last year in how we energize life for customers. From an unusually mild summer to the most destructive ice storm in the company's history in late October, to the New Year's Eve snowstorm that closed out the year, the effects of weather this year were unmistakable. However, we did not miss a beat as our teams continued to excel through the challenges, recording a number of significant accomplishments. The company recorded its second safest year in history in 2020, making each of the last five years our safest ever. We kicked off our grid enhancement projects in Oklahoma, including securing a mechanism for recovery of our investments, which will provide a more resilient and reliable system for our customers. With these grid enhancements, we expect to provide our Oklahoma customers with the same positive results that we've seen in Arkansas, including fewer outages and much faster restoration times. In Arkansas, we filed our third formula rate plan last year. We successfully negotiated a constructive settlement in that case that allowed for the maximum increase permitted, and we are awaiting a final order by the commission; these new rates are expected in April. Looking ahead to 2021, we have several exciting items in the works, including the continuation of our Oklahoma and Arkansas grid enhancement projects. We'll file an integrated resource plan in both Oklahoma and Arkansas later this year. We will file our fourth formula rate plan in Arkansas and will plan our filing for our next Oklahoma general rate review, which has to be filed no later than the first quarter of '22. We are constructing our first solar farm in Arkansas and expect it to be operational later this summer. We have many exciting projects that we've been working on in and around our communities, and we'll certainly announce these as they're finalized over the next couple of months. I'm proud of what we've accomplished in the last five years and what lies ahead for our company. We've invested $3.3 billion in our system. Our O&M cost per customer is lower now than it was at the end of 2015. If you look at our 2021 guidance for O&M, it's approximately $29 million below our original guidance in 2020. That's real long-term structural savings that will benefit our customers. We returned $1.4 billion of cash for shareholders in the form of dividends and delivered a 5% compound annual growth rate at Utility. And on top of that, we have some of the lowest rates in the nation. They're lower now than they were in 2011. We've cut our CO2 emissions by greater than 40%. These are real, consistent results, delivering to our shareholders what we said we would deliver year-over-year. We're more active in advancing our ESG objectives and initiatives. We're deeply embedded in our communities and are a key driver of growth and economic development for the communities we serve. We've always been committed to being responsible stewards. We'll be sharing these stories more regularly going forward. We have a solid and compelling investment thesis backed by a track record of performance. When you look over the last five or 10 years, we've delivered compounding annual growth rates between 5% and 6%. We expect to continue to deliver on our earnings growth target of 5% by investing in lower-risk investments that improve our customers' experience. We have one of the strongest balance sheets in the industry which protects our dividend, and we operate in jurisdictions that are experiencing real load and customer growth, and have delivered increasingly supportive regulatory outcomes. You, our shareholders, should be confident in your decision to own and invest in OG&E. Before I close, OG&E is celebrating its 119th anniversary this month by honoring our frontline healthcare heroes. Our healthcare workers have earned the title 'Hero', especially throughout the last year, and we're proud to make a $100,000 donation this month to support their critical efforts. I can think of no better way to mark this occasion. We are proud of our accomplishments in 2020 and poised to continue to deliver those results in 2021. While COVID has impacted all of us, I want all of you to be confident that we're not focused on winning the downturn, but winning the recovery. Thank you. And now I'll turn the call over to Bryan. Bryan?

Great. Thank you, Sean, and good morning everyone. Starting on slide 10 and before we discuss 2020 results and this year's outlook, I'd like to update you on the financial effects from the extraordinary February 2021 weather events, which will likely have a negative impact on our current year earnings. As Sean mentioned, in order to keep life-sustaining power on for our customers during the 11 days when temperatures were between 23 degrees and 45 degrees below average, the company incurred in the range of $800 million to $1 billion in fuel and purchase power costs. We will be able to firm up these estimates once we receive settlement statements from the Southwest Power Pool in the coming weeks. From a funding standpoint, while we already have a $900 million credit facility in place, we felt it important to obtain an incremental funding source. This week we closed on a $1 billion credit commitment agreement that will allow for ample liquidity. With respect to cost recovery, the company has fuel tracker mechanisms in both Oklahoma and Arkansas. In Oklahoma, we are allowed to file for intra-year adjustments to the cost once fuel and purchase power costs exceed $50 million and under or over collections in a year. Thus, this week, as Sean mentioned, we filed an application in Oklahoma requesting an intra-year fuel adjustment for a portion of the weather events fuel cost. We expect this revised tariff to become effective in rates this spring, providing support to our credit metrics. For the remaining cost, our filing in Oklahoma seeks commission approval to place the deferred cost in a regulatory asset accruing at our weighted average cost of capital. We will work with the commission to obtain an order as quickly as possible. Switching gears to 2020 results. On slide 11 you can see that for the full year 2020, we achieved ongoing net income of $416 million or $2.08 per share as compared to net income of $434 million or $2.16 per share in 2019. On a GAAP basis, OGE Energy Corp. reported a loss of $174 million or $0.87 per share reflecting the impairment charge recorded on our Enable Midstream investment in the first quarter of 2020. OG&E's ongoing 2020 results were $0.04 lower than 2019, as unfavorable late summer weather lowered earnings compared to the prior year by $0.11. To mitigate the headwinds of mild weather and the economy, our employees were relentless in pursuing cost reductions and work deferrals, resulting in significant O&M savings compared to 2019, and our original plan. Results were also favorably affected by a full year of new rates from the Oklahoma rate review that was implemented in July of 2019. We also continued to see steady earnings growth from our Arkansas Formula Rate plan which contributed $0.02 of earnings in 2020. On our third quarter call, we revised our 2020 OG&E utility guidance through a narrowed range of $1.68 to $1.70 per share, and due to strong O&M management in the fourth quarter, we were able to hit the top end of that range. Our strong finish to 2020 sets us up nicely for 2021 and beyond. Turning to load on slide 12. On our third quarter call, we indicated an expectation of full year load declines of 1.6%, and we finished the year at about that level. Over the last four months of 2020, we continued to see month-over-month improvements in all customer classes. The residential class, our most profitable, remained resilient at levels we've seen throughout the pandemic. Importantly, customer growth was 1.1% in 2020, providing a solid foundation for load growth in 2021. On Slide 13, we look ahead to 2021 load expectations and forecast customer load to be 2.4% above 2020 levels and about 0.5% above 2019 levels. Residential load is expected to exceed 2020 levels early in the year, but is then forecasted to be below 2021 levels for the full year, as more residential customers return to the workplace. For our commercial, industrial and public authority customers, we expect load growth in the second half of 2021 to be strong, as vaccinations become commonplace and the economy continues its recovery. Overall, we believe load will have a positive contribution to 2021 earnings in comparison to 2020, as illustrated on the next slide. As we headed into February, we had great confidence in our ability to deliver $1.81 of earnings per share at OG&E, which is in line with our previous guidance of a 5% growth annually off of our 2019 baseline of $1.65. We continue to have confidence in our ability to grow at 5% long term and expect 2022 EPS to be in line with the 5% growth from the midpoint of our 2021 guidance of $1.81. Our initial $1.81 EPS guidance for 2021 assumes normal weather, solid load growth as I just discussed, along with earnings contributions from our grid enhancement and other recovery mechanisms in Oklahoma. We also expect to see the steady earnings contribution from revised formula rates in Arkansas. Lastly, we will build on our O&M cost reduction achievements in 2020. Now, when we finalized our initial 2021 plan, we did not foresee this unprecedented February weather event. There are three primary earnings impacts that we are evaluating. First, we expect higher retail volumes will contribute to earnings during the month, but those will be more than offset by fuel costs associated with the Guaranteed Flat Bill program. Approximately 3% of our load is associated with this program, whereby variabilities in fuel and purchase power costs are not true-up. The net effect on margins for the month of February is expected to be an unfavorable $0.06 of EPS. Lastly, we expect to incur approximately $0.03 to $0.04 of incremental financing costs associated with the aforementioned $1 billion debt facility. We will refine these estimates in the coming weeks, while also exploring ways to mitigate this $0.10 of EPS headwind and we'll provide an update on 2021 guidance during our first-quarter call. For the midstream business, Enable has not issued earnings guidance for the year, given the impending merger. Therefore, we will not be providing consolidated guidance at this time. Turning to future growth. On slide 15, you will see our updated capital plan through 2025. The investment needs of our system continue to grow. The October 2020 ice storm highlighted the importance of investing in our grid for not only enhancing technology and communications, but for the grid resiliency and reliability our communities absolutely count on. While our five-year capital plan is 15% higher than one we shared with you a year ago, driven by the infrastructure needs of our communities, we expect to see additional investment opportunities evolve over the planning period. Our growing customer base and constructive regulatory framework provide us confidence in our ability to achieve a 5% OG&E EPS growth rate through 2025. Before I turn the call back over to Sean, I'd like to provide an update on our financing plan. Our balance sheet continues to be one of the strongest in the industry, and we remain confident that there is no equity needed to fund our five-year investment plan. Our credit metrics are estimated to be between 18.5% and 20% over the next three years, and we believe we will receive constructive regulatory treatment on the fuel and purchase power costs recently incurred, and that the result of credit metrics will remain strong. Finally, we remain committed to maintaining and prudently growing the current dividend, which alongside earnings growth from our Utility will drive an attractive risk-adjusted total return proposition for shareholders. Now let's open the line up for your questions.

Your first question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is now open.

Hey, good morning, guys. It's actually Richie here for Julien. Surprise, surprise.

Good morning, Richie. Surprise to surprise, that was Richie Dumoulin-Smith. How's that?

Yes, that works for me. Just a quick question. I'm interested in how you plan to address the treatment of these fuel costs. Could the financing cost also be deferred as a regulatory asset, and how does that align with your long-term EPS growth target of 5%, especially since you've increased CapEx by 15%? Is this issue mainly due to the financing impact from the storm, or are there other factors we should consider?

Yes. There are a few different aspects to address, so I will try to clarify. We do anticipate all those financing costs and wanted to share what we are observing from the February results. We will collaborate with our commissions to recover these events as Bryan mentioned. Our proposal includes a 10-year amortization program that encompasses a weighted average cost of capital. Regarding the capital plan, I didn't fully grasp your question about the five-year plan. Could you please restate it?

Yes, sorry. I was just saying you raised your CapEx by a pretty good amount, 15%, but it looks like the EPS growth was largely unchanged at 5%. I was just curious if there's financing drag from the storm embedded in that or is there incremental regulatory lag that we should be assuming that offsets the rate base growth relative to EPS?

Yes. I think there's certainly the timing of regulatory recovery that's in there as well. But I think the other thing, Richie, that we don't lose sight of is we have a higher expectation. So Bryan talked about the load growth. We're only expecting a 0.5% increase in load growth from 2019 levels. Recall, we were well above 1% pre-COVID, so we haven't quite returned to that pre-COVID load growth state. So that's got something to do with this as well. Does that help?

Yes, that's very helpful. And then just a question around the midstream with Enable and how you guys are thinking about the timeline for the exit there? And then I guess around the eventual use of proceeds given you do have such a strong balance sheet, would it be for incremental CapEx opportunities especially with this upcoming IRP filing, or would you consider other forms of capital allocation such as share repurchases, etc.?

Yes. No, great question. So first things first, we want this to close, right? And we'll certainly get across that bridge first. And then the way we're thinking about it is certainly we want to be very prudent and thoughtful about how we transact here. We've got the balance sheet to make sure that we really optimize execution, and Bryan and his team are going to be keenly focused on that. But the other thing that's important to us is we're having those discussions with the agencies now. Obviously, with the winter storm, that's been kind of pushed back to second chair. But we were having that discussion in terms of at what point would we receive a lower credit threshold in terms of FFO today. So that's a discussion that we're going to have, and that's going to be a key determinant for the timing and the amount that we do. Does that help, Richie? And as far as proceeds, I believe we're going to be reinvesting back into our utility business. We are not constrained or limited in any way in terms of the opportunities we see in our growing service territory. We will do what we're focused on; that is making sure that we continue to take costs out of our business to minimize that impact to customers at the same time.

Yeah. That's very helpful. Appreciate all the color. That's all I have for today.

All right. See you, Richard.

Your next question comes from the line of Insoo Kim with Goldman Sachs. Your line is now open.

Hey. Thank you. My first question is on back to the storm. So just clarify for this year out of that $0.10, you do have about the $0.03 to $0.04 drag from the short-term financing that you do. But the expectation is that I guess starting next year, any replacement of that with the permanent financing will be trued up over that proposed 10-year amortization program through rates?

Yeah. Hey, Insoo, it's Bryan. We believe the financing cost for the storm will ultimately be deferrable. You’ve seen our filing. We've requested a WACC, so depending on the recovery period of the regulatory asset if it ends up being a multi-year regulatory recovery, we certainly believe a WACC return is appropriate. But that should cover our financing costs too in the short term.

Got it. And then when we think about that recovery over time from all of this – the timeline needed to, I guess, balance the potential impact of customer bills while still allowing you to continue with the CapEx plan, have you done that initial analysis? And do you think that'll have the support of the regulator so you'll get to continue to invest in the system at the rate that you're proposing?

Yeah. Insoo, I think that's a great question, and the answer for us is yes. That's why we're proposing this program to kind of minimize the impact to customers and smooth this out. We've got the balance sheet to kind of manage that, and that's what we're trying to do. The real catalyst to our business is economic development, and we believe it's driven by our low rates. So we're starting from a position where our rates are already some of the lowest in the country. The other thing, and don't lose sight of this – we've structurally removed a lot of O&M out of the business, so we're already going to make sure that customers get that benefit as well. And then I think the last point I would make is, from our perspective, this is going to be less and less of an impact going forward because we're in a load growth and customer growth area.

Got it. And maybe one more question, if I may. I guess, when we think about the updates to the long-term generation plan, whether it's you guys or just other utilities in the state, do you think there have been any initial conversations with regulators and legislators about what the right generation mix is given what just transpired in Oklahoma?

Yes. No, I think – no discussions at this point on generation fleet. But I'll tell you from my seat, a lot of credit goes to our commissions. It's our responsibility to design and plan and operate and maintain that generation fleet. We made a number of winterization efforts on our combined cycle plants three or four years ago, and the commission supported what we were doing. They supported what we were doing with the conversion of our coal units. They supported what we did with the scrubbers at Sooner. They supported what we did with the new combustion turbines at Mustang. And I'll tell you, during this event, those Mustang units, in terms of controlling and managing voltage across the largest load center around Oklahoma City were critical, and that's why there were minimal disruptions across our service territory. All of our units did very, very well through the storm. So from my perspective, there haven't been a lot of discussions about what we ought to be doing going forward. I think this is really a validation of the planning that we've done and the support we received from the commission and really the faith and confidence they had in us in making the right decisions. It was just validated right here.

Yeah. That definitely makes sense. That's all I had. Thank you so much, and congrats on getting through this crazy event.

All right. Thank you, Insoo. Take care.

Your next question comes from the line of Brandon Lee with Mizuho. Your line is now open.

Hey, Sean, hey, Brian.

Hey, good morning, Brandon.

Hope everyone is fine?

Hope you are?

Yeah. Just got a quick question around the payout ratio. If I look at your current annual dividend and I look at your 2021 Utility EPS, your payout ratio is around 90%, which is above the average of 60% to 70% for the industry. Is there a payout ratio that you guys are targeting, or are you comfortable with that one?

Yeah. And that's on a Utility-only basis. When you look at it on a consolidated basis, it's significantly lower. Obviously, with the transaction we've announced or supported with Enable, we are going to, as that approaches closing, we are going to transition there and we will be monitoring that. But the dividend is absolutely safe. You should expect utility earnings to clearly outpace dividend increases going forward. But we're in very good shape here, and we're committed to the dividend.

Great. Yeah. That’s all I had. Thanks.

All right. Thanks, Brandon. Take care. Have a good day.

And presenters, we have no further questions at this time. You may continue.

Okay. Well, thank you all for your interest in OGE Energy Corp. and for being on the call today. I wish you all well. Take care of yourselves and take care of those around you. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.