Good day, and thank you for standing by. Welcome to the OGE Energy Corp 2023 Fourth Quarter Earnings and Business Update Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Bailey, Director of Investor Relations. Please go ahead.

Thank you, Deedee, and good morning, everyone, and welcome to OGE Energy Corp.'s fourth quarter 2023 earnings and business call update. With me today, I have Sean Trauschke, our Chairman, President and CEO; and Bryan Buckler, our CFO. 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 at oge.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 today. I will now turn the call over to Sean for his opening remarks. Sean?

Thank you, Jason. Good morning, everyone. Thank you for joining us today. It's certainly great to be with you. I'm excited about our message to you this morning as our results for 2023 were at the top of guidance, and we are updating our 5-year plan, including a consolidated earnings growth rate based on the strong fundamentals of our business. It's truly a great time to be here at the company. Before we get into the plan, I do want to take a moment to talk about our people here at Big Orange. In '23, the team delivered results for our customers, our communities, and shareholders by providing reliable energy at some of the lowest rates in the nation every day. Once again, our safety results were very strong, with the last eight years being the safest in our 121-year history even as we continue to face some of the most extreme weather in the country, like Winter storms Jerry and Heather in January where our plants ran generating electricity to the grid to ensure our customers could continue to live their lives and run their businesses. Our team achieved recognition for our culture in 2023. I mentioned last quarter that we've been named the number one state employer in Oklahoma by Forbes Magazine. Later in the year, we were also named a top workplace in Oklahoma following the feedback from our employees in our annual workplace survey. Just last week, Forbes named OGE the 16th best midsized employer in the country, achieving the highest rank in our sector and the highest ranking of any company in Oklahoma. These results do not happen by accident. They come from a dedicated commitment to fostering a culture grounded in our values and beliefs, operationalized with a focus to deliver safe, reliable, and resilient electricity combined with outstanding customer experiences every single day. I'm so proud of everyone here at the company, and it's because of them that we are discussing great financial results. This morning, we reported consolidated earnings at the top end of our guidance of $2.07 per share for the year, including $2.12 per share for OG&E and a holding company loss of $0.05 per share. Our sustainable business model provides opportunities to drive loan growth while simultaneously investing in the grid and generation for many years to come in a way that is mindful of ensuring a smooth customer impact and delivering consistent financial returns. Last year, my message to you was we've got this. The plan we introduced to you this morning is an extension of that message and is consistent with the growth we've delivered in the past. Over the next five years, we expect to grow consolidated earnings per share at 5% to 7%. Looking back at the 10-year period before we exited our midstream natural gas segment, we delivered over 6% of consolidated earnings per share growth. The difference now is that we've simplified our business mix and removed the volatility that was associated with that business segment. Our plan going forward, which Bryan will detail, is based on a pure-play electric model with premium fundamentals, including a strong financial base and credit metrics, excellent load and customer growth, and a lower risk investment plan focused on delivering a safe, reliable, resilient electric service that our customers expect. Today, I want to talk to you a bit more about three key aspects of our work that drive our results: reliability, growth, and affordability. Our grid and weather hardening investments continue to deliver great results for our customers. Our grid reliability investments benefited customers in 2023, saving over 320 minutes of interruption for the average impact to customer. From a reliability perspective, automated restorations saved our customers more than 7.5 minutes of SAIDI or 6.2 million customer minutes of interruptions. We also built or upgraded 21 substations to serve our growing service area, and we will continue making these types of investments in the grid that directly benefit our customers. This foundation powers our growing communities and economic development engine that has delivered 11 new projects in our service area, projected to create thousands of jobs and garner billions of dollars in additional investment. This type of growth is not an accident. We set the stage for these results more than five years ago when we began investing in growing the local economy in cities and towns all across our service area. Our communities maintain strong unemployment rates and continue to attract expanding and new businesses that our low rates help secure. For example, just last month, Stardust Power announced its plans to build a new battery-grade lithium refinery in Oklahoma, bringing hundreds of jobs to the community as well as community infrastructure development. Oklahoma's central location, access to multiple transportation routes, highly skilled workforce, and low-cost energy were all reasons noted for the site selection, and we look forward to serving Stardust as they get up and running. Our load forecast for 2024 continues to keep pace with the outstanding growth we've experienced over the last three years, and our long-term load forecast remains as strong as our service area continues to grow. Turning to the regulatory front, constructive regulatory outcomes enable us to support growth, serve customers, and achieve results for our shareholders. We've released the draft IRP that will lead to RFPs later in the year for additional generation to meet the needs of our growing service area. We will be disciplined with regard to customer impact and expect the combination of gas, solar, along with energy efficiency and demand-side management programs to meet the identified needs. In Oklahoma, we have filed a rate review and expect new rates to be in place by July 1. In Arkansas, we've achieved a settlement under the formula rate plan for a 1.4% increase in rates effective April 1. Today's macroeconomic environment continues to create pressure on our customers, and we remain committed to affordability and keeping bills low. As I mentioned in our last call, we reduced the average fuel charge by $21 per month in November, which had an immediate impact on customer bills. We have doubled down on connecting customers to programs and services to help them manage their energy use and monthly bill, enrolling nearly 20% of our customers into new programs in 2023, including energy efficiency and home weatherization as well as connecting our customers to billing assistance when they need it. Additionally, our team continues to innovate energy efficiency programs that will help customers reduce their bill and increase reliability, including making low-cost repairs to qualify customer homes for weatherization, piloting solar and battery storage technology at schools, and piloting managed flexible load technology. As we celebrate the impact of those programs, I want to close with a few important thoughts. We are committed to growth for our communities, for our customers, and for financial growth for our shareholders and our employees. The case for OG&E is strong, and I'm bullish on our future. We're leveraging the economic development engine we built that drives load growth. Our excellent execution is driven by fully engaged employees. We are determined to reach our North Star of delivering safe, reliable, and affordable electricity to our customers. We operate and construct in regulatory jurisdictions, and we've created a competitive, credible, lower-risk financial plan backed by a strong balance sheet. All of which leads to a long-term plan where we address system growth and customer needs, which are at the center of our decisions. Next week, OG&E turns 122 years old. As we celebrate that milestone, we look ahead to the future, where our deep, diverse set of investment opportunities allows us to meet customer expectations and achieve investor commitments. Keeping customer bill impact in mind, we will invest alongside growth in our communities to keep the momentum going for many, many years to come. Thank you. I'll turn it over to Bryan.

Thank you, Sean. Thank you, Jason, and good morning, everyone. I am pleased to review our 2023 results with you and provide our 2024 outlook as well as details on our long-term consolidated EPS guidance. Let's start on Slide 6 and discuss full year 2023 results. On a consolidated basis, 2023 net income was $417 million or $2.07 per diluted share compared to $666 million or $3.32 per share in 2022. Earnings for last year included $1.16 per share for natural gas midstream operations, which we fully exited in 2022 through the sale of our energy transfer units. We had a great year of execution. OG&E Energy's 2023 consolidated earnings reflect results at the high end of our original and revised guidance. In our core business, the electric company exceeded expectations, achieving net income of $426 million or $2.12 per diluted share compared to $440 million or $2.19 per share in 2022. The year-over-year decrease in electric company net income was primarily due to milder weather compared to the prior year. As you may recall, Oklahoma and Arkansas experienced an exceptionally hot summer in 2022. Milder weather in 2023 was partly offset by the benefits of strong load growth of 2.7% in the year. Other drivers of current year results compared to the prior year were depreciation and interest expense related to our capital investments, increased operation and maintenance expense, higher revenues from recovery of capital investments and allowance for equity funds used during construction related to our 2023 capital investments. Other operations, including our holding company, reported a loss of $10 million or $0.05 per diluted share in 2023 compared to a loss of $5 million or $0.03 per share in 2022. The increase in net loss was primarily due to higher interest expense related to increased short-term debt and Q4 results included an approximate $0.02 tax benefit related to our former natural gas midstream business. As I mentioned, 2023 weather normalized load growth came in at 2.7%, led by the commercial sector, which grew electricity usage by a remarkable 11%. We have now experienced back-to-back-to-back annual total retail load growth of 2.4% or greater. As you will see in a moment, we expect 2024 load to continue this enviable trend, which highlights the vibrancy of Oklahoma and Arkansas enhanced by our load rates. Please see the appendix for more information regarding fourth quarter 2023 results. Turning to Slide 7. For 2024 on a consolidated basis, we are forecasting earnings of $2.12 per share with a range of $2.06 to $2.18 per share. This represents a consolidated growth rate of 6% from our original 2023 guidance of $2 per share. As I'll discuss in a moment, we expect consolidated EPS to continue to grow 5% to 7% throughout our 5-year forecast period. 2024 consolidated EPS expectations incorporate electric company earnings of $2.22 per share. The electric company has consistently delivered results in line with our commitments. Its earnings growth profile has the foundation of strong load growth in 2024 that looks similar to the past three years, as well as an investment plan that is focused on our ability to serve our growing customer base with a reliable, resilient, and safe power system. At the holding company in 2024, we are forecasting a loss of $0.10 per share consistent with the expectations I shared with you on prior calls. Let's now move to Slide 8. As Sean mentioned, today we are introducing a long-term and annual consolidated EPS growth rate guidance of 5% to 7% based on our 2024 consolidated earnings midpoint estimate of $2.12 per share. We believe OG&E Energy has one of the most credible 5-year financial plans in the entire industry. It starts with the service area with favorable business prospects. In fact, we project load growth of 3% to 5% in 2024 and expect 2025 to be well above our historic 1% load growth with emerging trends that indicate continued strength in years beyond 2025. Our balance sheet is one of the strongest in the industry, supporting the $6 billion 5-year capital investment you see in today's materials. Consolidated funds from operations to debt is forecasted to remain strong throughout the 5-year forecast period with no big dips and instead a consistent performance of approximately 17% each year. We continue to target a dividend payout ratio of 65% to 70% and expect earnings per share growth to exceed dividend growth over the 5-year period. In short, we believe our 5-year plan is tremendous, and it will be implemented by a proven team with a track record of operational excellence. Now let me take a moment to discuss our future investment plans. Our growing operations will require a substantial level of infrastructure to support the reliability of our transmission and distribution system. Our future plans will be flexible; an annual level of capital spending in our transmission and distribution system could vary depending on the amount and timing of potential new generation capacity investments. Our deployed capital will address our customers' requirements for a safe and reliable power system while maintaining our competitive advantage of load rates and delivering on commitments to shareholders in a lower-risk fashion. In essence, this is all a continuation of the execution of our sustainable business model. Before I hand the call back to Sean, let me summarize today's message. Our team has once again delivered exceptional results in 2023 at the high end of our original and increased EPS guidance range. Looking ahead, we have developed an operational and financial plan spending 5 years, aiming to bring substantial value to customers and OG&E's power system, supporting economic development in our communities and providing a compelling investment thesis for our shareholders. Our future outlook is based on this lower risk investment strategy, backed by exceptional load growth, a solid financial position, constructive regulatory jurisdictions, and consistent execution from our employees. With that, we will open the line for your questions.

And our first question comes from Shahriar Pourreza of Guggenheim Partners.

Congrats, Sean, on the results.

Thank you. And congrats on the pronunciation of your name.

Maybe just starting off on the recently filed IRP update, there's obviously over a gigawatt capacity that's within the 5-year timeframe. It's not in plan. I guess how quickly would you look to update that portion of the CapEx after the IRP? So what's the cadence of updates? And could that incremental spending kind of crowd out some of the base spending as you manage customer rates?

Yes. I think that's a great question. We will handle this process just like we did with the last one. We will finalize that IRP, go through the RFP process where we conduct extensive reviews, have a lot of stakeholder discussions, follow all of the commission rules, negotiate agreements, and file that at the commissions. Once we get approval, then we'll layer that into our forecast. Regarding your point about crowding out, I might use a different word than crowd. We have a lot of flexibility around our investments, and we can move some things. So yes, we will be very flexible, and we can really smooth that impact out for customers as much as we can. And my very strong preference is to smooth these generation additions out over a number of years and not create a situation where we have a very large asset coming online over a couple of years. Does that help?

Yes, totally. And then just lastly, a balance sheet question. I mean, obviously, there's incremental spending, just one of the key things on the call today. Right? As you're getting to that 17% FFO to debt metric, would you look at further equity support in line with the operational authorized cap structure of roughly 50-50 or something different or not at all, actually?

Yes. Thanks for that. I think Bryan was very clear that there are really no equity needs in our plan. We are managing this business for the long term. And when we have the opportunity with our investments and growth down the road, and we need to issue equity, we will.

So yes, thanks for the increase in the CapEx plan and all the details there. I guess, simplistically, what is rate base growth on this new plan as you see it?

Bryan, you want to cover that one?

Sure. Sure. Nick. In the appendix, we've given our best current estimate of our 5-year capital expenditures, and we've also provided our starting rate base number as filed in our recent rate case filing as well as an annual depreciation expense trend line during the 5 years. From a 5-year CAGR perspective, it's roughly 7.5%.

And then, I guess just holding company was $0.05 in '23. You have another $0.05 of drag in '24, probably just from new debt issuances. Just how do you kind of see your holding company drag progressing through the plan here? Does it remain consistent at that $0.10? Or does it still grow through '25 and beyond?

Yes. Nick, it's Bryan again. The utility and holding company are lining up very well for 2024 and beyond. You've heard us speak to the many tailwinds at utility we spoke about today, namely the very strong load growth and a host of incremental infrastructure investment needs. We're expecting the utility to grow significantly during the 5-year period. The holding company is there to finance the business as we go along the way. You have the capital plan numbers, and today we're providing this consolidated view of OGE Energy Corp., and we have a lot of confidence in achieving that 5% to 7% consolidated EPS growth rate throughout the 5-year period. You'll see the holding company tick up a little bit each year, but in total, when you look at the whole package, we feel very confident about our ability to deliver that 5% to 7% consolidated CAGR and annual growth rate.

Happy 122nd birthday in advance.

Thank you. That will be a big day.

Just maybe can you help us bridge, obviously, a very steep increase in the capital plan. And it's nice to see load growth supporting a lot of that. Can you help us bridge what big projects, big generation projects are in the plan now? Obviously, I think Horseshoe Lake is a part of the plan now, but any big projects that you can call out which help us bridge going from $4.75 billion to $6 billion, please?

Yes. Really, Horseshoe Lake is the single big project in the 5-year capital plan. What is driving a lot of that is load growth. We are investing a lot in connecting new customers and building infrastructure to support them all the while improving the reliability and resiliency of our assets. Other than Horseshoe Lake, there's not a big project in there that's really driving that.

And then maybe just any updates on the Oklahoma rate case here and feedback or initial feedback from stakeholders or discussions with regulators and others that you can share with us?

Not at this time. It's still early in the process, and testimony has yet to be filed. We'll continue executing on our business.

Very nicely done on holding the line on that 5 to 7. Kudos to the whole team on that front. Appreciate it.

Thanks, Julien. Good to hear from you.

Yes, absolutely. Let me start with this. You mentioned the possibility of issuing equity and the potential for various additional generation projects. How do you assess the parameters for increasing that capital expenditure? You noted that it's not necessarily about crowding out but developing a program that suits both the customers and your balance sheet. Are there specific metrics you would like to discuss? Is there a particular funds from operations metric or one related to inflation? How do you approach this?

All of the points you've raised are important for us to consider. The credit metrics and the FFO to debt are very important to us, and we're going to manage our balance sheet that way. As we think about customer impact, inflation, that is a key indicator that we would look at, but more importantly, we forecast this load growth to continue for many years. We play a big role in facilitating that growth. We want to ensure that our service area does not see large increases in rates, thereby mitigating or slowing down that growth. Does that help?

Fair enough. Indeed. If I can follow up a little on some of the specifics there. Just from an authorized equity ratio perspective, to the extent that would deviate here in the rate case, could that drive equity needs? I know that there's a 17% target here.

Yes. Julien, just to be perfectly clear, we have no needs and no plans to issue equity over this 5-year horizon.

It's not in the different parameters of equity ratio. All right. Wonderful. Just moving on, if I can pivot back to Durgesh's point from earlier. Given the protracted nature of the process last year, wouldn't it be appropriate to think about pursuing settlement at the right time in place in as much as that could help expedite what is otherwise a busy schedule this year?

We have pursued settlements in the past, as we did during our Horseshoe Lake proceedings, and we hope to do that again this time.

If I could follow up on Julien's question about the 17% FFO to debt target, I thought your Moody's downgrade threshold was 18%. If that is accurate, are you comfortable operating below that threshold?

Yes. Let Bryan tackle that.

Sure. Sure. Anthony, previously, we were projecting more in the neighborhood of 18%. Now that we've updated the capital investment plan and made other updates to the plan, including this load growth, we see our FFO numbers coming in around 17% each year from 2024 through 2028. We've discussed these plans with Moody's. They appreciate our track record, the lower-risk way we deploy capital, and the constructive regulatory environment in Oklahoma and Arkansas. My hope and belief is that our financial plans will continue to support our current credit ratings.

And then if I could just ask a high-level question about the 5% to 7% EPS growth rate. Does the company have a bias toward the midpoint? And is it going to be linear the whole forecast period?

Yes. Thanks, Anthony. You should expect it to be linear. We have every expectation to do what we say we're going to do. There's not a particular bias to the upside or the low side, but the focus is to achieve the 5% to 7% consistently on an annual basis.

Congratulations on a great quarter. I'm just trying to reconcile some of your comments. So I'm assuming that the current CapEx plan equity sort of gets you to that 17% FFO to debt level? Or can you do more CapEx and still get 7%?

Bryan, do you want to tackle that one?

Sure. And Paul, our FFO estimates of 17% throughout the forecast period are predicated on all the assumptions we've outlined in today's materials. The $6 billion capital investment plan, the load growth we expect in 2024, and we anticipate that strong load results will continue throughout the 5-year period, with regulatory recovery for investments happening regularly. Those are what is embedded in the estimate.

Right. So then when Sean says that he doesn't expect equity in the 5-year plan, does that imply that the planned capital spending is likely to remain roughly where it is today as opposed to some of these new projects being additive?

Yes. Paul, this is Sean. I think that's accurate where we sit today. We have a lot of latitude and flexibility to adjust our investment profile, and we're going to be very cognizant of the previous question in managing our balance sheet and credit metrics and minimizing impacts to customers, ensuring we don't slow down this tremendous load growth we see continuing.

Great. Last question for me. Can you provide more specificity in terms of your 5% to 7% EPS growth plan and tell us what load growth is embedded in that 5% to 7%? You've indicated above 1%, but that's a pretty wide potential range.

Yes, that's right, Paul. Our draft IRP, which is public, has some energy usage numbers based on our conversations with customers. We stay very close with our large customers to understand their needs and expected usage. To be more conservative in our financial planning, we see load growth expectations for 2024, 2025, and beyond. The IRP projects some significant growth numbers. We are more conservative in our forecasts, but it’s in the 2%-plus area.

Answered most of my questions, but one clarification around how you're bucketing the load growth. Obviously, commercial is the big driver in the data. How does that relate to some of these larger projects you've talked about, the manufacturing projects on the commodity production, excluding oil and gas projects? Would those go into or are they in that bucket? Or would they then switch over to the industrial by your expectation for more industrial growth?

It's Bryan. We're seeing nice load growth prospects across various industries. Western Arkansas is very manufacturing-heavy, so that's going to show up in the industrial sector over the next five years. In Oklahoma, you'll see growth in sectors like the defense industry, food and beverage distribution, and data centers. Data center load is coming on fast; it’s trending toward generative AI data centers rather than the older Bitcoin mining structure. So does that give you a feel for what we're looking at?

Yes. Are those figures flowing through those commercial numbers?

Yes, and that's going through the commercial sector, that's right.

Okay. So we shouldn't see a huge shift from commercial to industrial; it's just continued commercial growth and also some industrial growth?

Yes, you're going to see our biggest increases in the commercial sector over the next five years. We do believe there's going to be a nice pickup in the industrial sector compared to what we've seen in the last couple of years, but it will be modest compared to commercial growth.

Can you hear me?

Yes, we can.

Bryan, I just wanted to return to the question on holdco leverage. Could you give a bit more color around holdco debt issuance needs beyond 2024? You've reiterated your confidence in achieving the 5%-7% consolidated EPS growth. How should we think about tracking within that range beyond 2024?

Aditya, I'll reference some of my messaging in previous quarters. The one thing that's changed is our capital investment plan has been updated. We've been speaking to all the investments mentioned earlier. When you think about our consolidated entity and maintaining the cap structure at the utility while keeping our dividend payout ratio, I believe what I've referenced before is considering holding company debt increasing somewhere in the neighborhood of $200 million to $300 million per year. That number may decline as we progress through the 5-year period. The $0.05 increase you're seeing this year may not be consistently $0.05 each year.

And then just on the Oklahoma rate case. I know it's early and testimonies yet to be filed, but can you speak about how you feel regarding the case given that the lower fuel factors were passed through to customers late last year? What would the timeline for a potential settlement be?

Aditya, it will be an ongoing discussion. The first step is the testimony must be filed, which should begin discussions in the second quarter.

Congratulations. The only thing I have left is just guidance on the tax rate for '24 through the plan.

Bryan?

Well, Greg, we're estimating the effective tax rate for 2024 at 16%. As you consider our effective tax rate reconciliation, one of the larger items is the flowback of excess deferred income taxes, which lowers that effective tax rate compared to the statutory rate. While you may see the ETR rise a bit over time, that’s primarily due to state ITCs and federal excess deferred income taxes. The net income impact should be negligible over time from an ETR changing perspective.

I'm showing no further questions at this time. I would now like to turn it back to Sean Trauschke for closing remarks.

Thank you, Deedee, and thank you, everyone, for joining us today. Thank you for your interest in OGE Energy and for being on the call, and have a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.