Welcome to the OGE Energy Corp. Q3 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jason Bailey, Director of Investor Relations. Please go ahead.

Thank you, Corinne, and good morning, everyone, and welcome to our call. With me today I have Sean Trauschke, our Chairman, President and CEO; and Chuck Walworth, Interim CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Chuck 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. Today, I'll address our financial results as well as provide you an update on year-end guidance, regulatory items, and load growth. Before we get into the details of the quarter, I'd like to reflect on the most recent storms, including six confirmed and perhaps as many as 12 tornadoes, that impacted tens of thousands of people in Oklahoma and Western Arkansas over the last two days. Fortunately, no lives were lost, but many are left without homes and are dealing with damaged property and have countless hours ahead of them to recover. I'm incredibly proud of our team's response. Within 24 hours, 86% of the impacted customers were restored, and more than 90% of essential services were back up and running. One thing you may not have considered, our team has worked alongside state and county election officials to ensure all polling places are energized today for our citizens to vote. Our reliability investments, automated technology, and continuous improvement efforts are reducing outages before they happen and driving down outage time when they do. Now turning to our financial results. Earlier this morning, we reported third quarter consolidated earnings of $1.09 per share, including electric company earnings of $1.12 per share and a holding company loss of $0.03. Our solid performance this quarter is due to robust demand for energy across all sectors and continued customer growth, outpacing historical norms, combined with outstanding operational excellence and increased digital self-service technologies delivered by our team. As we noted last quarter, we are operating ahead of plan this year and now expect to be at the top of our original earnings guidance of $2.06 to $2.18 per share, and Chuck will share more about that in just a bit. On the regulatory front, we anticipate an order in our Oklahoma rate review by the end of the year. Additionally, we’ve reached an uncontested settlement with stakeholders on our 5-year energy efficiency portfolio, which includes demand response, and we expect that order by the end of the year. As we meet our growing capacity needs for the future, energy efficiency and demand response will play a critical role in reducing overall capacity requirements. As our team continues to work through the generation capacity RFPs, we plan to file for approval in the first half of 2025. Together with our system reliability investments, we will continue to invest in generation capacity through the IRP RFP process and transmission capacity through SPP's process. And we continue to expect constructive regulatory outcomes in both states. Demand growth remains strong with our forecast for the year now at the top of the revised range of 4% to 6% that we gave you in the second quarter. We are experiencing growth across all customer classes, led by commercial, followed by extraordinarily strong residential growth. We know our low rates drive broad-based business expansion, creating that future demand. Some of the most recent expansions announced include defense, manufacturing, and continued electrification across a number of sectors. We've been working on a project to solidify our supply chain and drive local business expansion that I look forward to sharing with you in the near future. We're working on a handful of data center projects, including a franchise election today in one community for OG&E to serve a new data center in the state. The economic picture in Oklahoma and Arkansas remains bright with unemployment rates well below the national average. In addition to top line growth, we continue to manage our costs, delivering some of the best O&M per megawatt hour cost in the industry. Our relentless focus on affordability results in increased self-service digital tools for our customers to do business with us 24/7. Before I close, I'd like to recognize two milestone anniversaries that our company celebrated last month: centennials for two of our power generation sites, Muskogee and Horseshoe Lake. A century ago, these plants began generating power for communities that were just beginning to electrify. While the original units are long since retired, today, we serve an increased demand for the electricity to power homes, businesses, transportation, workplaces, and lives that could not be imagined back then. And that demand has not subsided; it's only growing. And we've continued to invest in generation at these sites over the years and just broke ground on Horseshoe Lake for Units 11 to 12, another 450 megawatts of hydrogen-capable natural gas units. Investing in existing sites helps keep costs low for our customers as we serve growing demand and a growing customer base. These investments also drive the local economy with the expected economic impact of $536 million through the Horseshoe Lake investment. Recently, 110 of our employees returned from Florida. And before that, another similar-sized group returned from Georgia, where they helped rebuild after Hurricanes Milton and Helene knocked out power to millions of folks across the Southeast. Mutual assistance is one of the most incredible aspects of our industry, and I'm so proud of our purpose-driven team who readily volunteer to spend weeks away from family to help others. We're also happy to go because we have our share of extreme weather, as I just mentioned a few minutes ago. As I close my remarks, I want to leave you with a couple of thoughts on this election day. As Americans, we hold the incredible right and responsibility to elect leaders at the local, state, and national levels. I hope your voting plans are set for today if you haven't already voted, and we encourage our employees to vote and know they've made their voices heard. And with that sense of duty in mind, it's a good reminder that we serve all. Our obligation to equally serve customers without favor drives every person, every project, and every decision in our company. Second, stability. We do what we say we'll do, and we are driving economic prosperity for the future in Oklahoma and Western Arkansas. And as we celebrate Centennials at Muskogee and Horseshoe Lake, we're building business for the next century. And finally, our investment opportunities for reliability and system growth are numerous. Whether distribution, whether transmission, or generation capacity, we will remain nimble and flexible to manage for the long-term success of the company and our communities. Delivering safe, reliable, affordable, and resilient electricity to our customers is our North Star. And with these priorities in mind, I'm very pleased with how the company is positioned for the future. Our consistently solid execution lays a foundation for not only this year, but for '25, '26, and many years thereafter. So thank you very much, and now I'll turn the call over to Chuck.

Thank you, Sean, and thank you, Jason, and good morning, everyone. Let's start on Slide 7 and discuss third quarter 2024 results. On a consolidated basis, third quarter net income was approximately $219 million or $1.09 per diluted share compared to approximately $242 million or $1.20 per share in the same period 2023. In our core business, the electric company achieved net income of $225 million or $1.12 per diluted share compared to approximately $246 million or $1.22 per share in the same period 2023. The decrease was primarily driven by higher depreciation and interest expense related to our capital investments, higher operation and maintenance expense, and income tax expense. These drivers were partially offset by continued exceptional load growth, which offset the impact of milder weather compared to last year. We have reserved the earnings impact of the interim rates in Oklahoma that began on July 1, and we will recognize the earnings consistent with the final order we received from the commission. Other operations, including our holding company, reported a loss of approximately $6 million or $0.03 per diluted share in the third quarter compared to a loss of approximately $4 million or $0.02 per diluted share in the same period 2023. The increase in net loss was primarily due to higher interest expense, partially offset by a higher income tax benefit. I will discuss our expectations for full year 2024 consolidated earnings in a moment. Let's review our load results by turning to Slide 8. Our weather-normalized load growth was exceptional at 8.4%, which I believe is the largest quarter-over-quarter growth that I've ever seen during my 24 years with the company. Additionally, our customer count continued its strong year-over-year growth at 1.2%. We continue to attract new business and business expansions in our service area and deliver results for our communities, customers, and shareholders. As we've said in the past, we've got a great pipeline of development activities, and Sean highlighted some of those a moment ago. In addition to that, we are also seeing expansions in tribal enterprises, healthcare, and energy. Looking closer at weather-normalized load for this quarter, the strength was across all customer classes, with residential growing at an impressive 1.8%, commercial at an extraordinary 24.7%, and very strong showings for industrials at 3.7% and oilfield at 1.7%. Year-to-date, we've experienced weather-normalized load growth of 6.8% and expect to finish at the top of our 2024 load growth guidance of 4% to 6%. Now let's address our full year earnings expectations on Slide 9. Due to excellent load growth year-to-date as well as a warmer-than-normal summer, we expect to be at the top of 2024's consolidated earnings per share guidance range of $2.06 to $2.18 per average diluted share, assuming approval of the uncontested Oklahoma rate review settlement in 2024. Turning to Slide 10. We have completed our planned financings for the year. Our fundamentals are excellent with one of the strongest balance sheets in the industry, a forecasted FFO-to-debt of approximately 17% each year through '28, strong credit ratings, no fixed rate maturities until 2027, and no need for external equity issuances in the current plan. In closing, our third quarter results reflect continued operational excellence. Based on the strong load I described earlier and a warmer-than-normal summer, we believe we will achieve consolidated EPS at the top of the current guidance range. Our strong execution this year allows us to turn our focus on 2025 and beyond. We believe our bright future is based on what we call our sustainable business model, defined by low rates, excellent load growth, a constructive regulatory environment, and a customer-centric investment plan. Our plan provides flexibility to address investments that are required to meet the electric demand of our growing communities and our customers' expectations of a safe, reliable, and affordable system while at the same time keeping a keen eye on maintaining our low rates. This competitive advantage is the bedrock of our success in attracting new and expanding loads in our communities. We believe we will continue to deliver consistent yearly consolidated EPS growth of 5% to 7% based on 2024's original guidance and combined with an expected stable and growing dividend that offers a compelling total shareholder return proposition. Our confidence to deliver on the commitments we've made to our customers and our shareholders is based on our strong fundamentals and backed up by the dedication of our employees. That concludes our prepared remarks, and we'll now open the line for your questions.

Our first question comes from Nick Campanella from Barclays. Your line is now open.

Hi, everybody. It's Nathan Richardson on for Nick.

Hi, good morning, Nathan. How are you?

I'm doing all right. How are you?

Very well, very well.

Great. Just a couple of questions for you. So first, what is your opportunity set for SPP? And would that be incremental to the plan?

They have made some announcements, and we are waiting for some notices to construct that we expect to receive in December. There is a process to finalize our estimates, and we will follow that. Once we have everything confirmed, we will incorporate it into our plans. As Chuck has often stated, we have significant flexibility to adjust things, which is another way we can invest, and we will explore that. There are definitely some opportunities available.

Got it. Thank you. And then we've seen recently some other utilities raise rate base growth CapEx, earnings guidance materially, things like that, based off of load revisions. How are you thinking about the potential to increase these things in the future given the current 5% to 7% EPS CAGR, taking into account bill headroom and the growing load environment in Oklahoma?

Yes, I believe you partially answered your question, Nathan. Load growth is really what will drive us moving forward. We have been fortunate with our past experiences, and we see continued opportunities in the pipeline for many years. Forecasting with precision beyond a year is challenging when it comes to new projects coming online. However, as growth occurs, we will invest more capital. It is natural to think that as the system expands and we gain more customers, our investment capital will also increase. Our goal is to manage that capital effectively across a larger customer base, which supports our sustainable business model. We are committed to maintaining this growth for the long term, focusing on sustained progress rather than short-term fluctuations.

Got it. That makes a lot of sense. Thank you very much.

Thank you. One moment for your next question. Our next question comes from Shar Pourreza of Guggenheim Partners. Your line is now open.

Hi, good morning, team. It's actually Konstantin here for Shar. Congrats on a great quarter.

Great to hear from you as well. Thanks for the update. Maybe can you talk about the expectations for a CapEx update? Will you be in a position to update CapEx fully at year-end given the expectation for the generation RFP kind of time frame? Or does that remain an upside opportunity with kind of financing needs pushed out further kind of all those updates? Yes. I think that's exactly right. I think by the time we get to February, we will not have filed with the commission yet for approval of our decision around the generation RFP. Just like we did with Horseshoe Lake, Konstantin, what we will do is we'll file that and get that approval with the regulatory compact in order. We'll show you that on our CapEx table. And if there's any adjustments to financing, we'll tell you that as well.

Okay. Perfect. And then maybe a quick follow-up. As we're seeing some of the constraints around turbine availability and kind of more conventional generation in the near term, does that change your view on resource mix going forward? And maybe is there an opportunity for some near-term upgrade projects kind of in lieu of some of the constraints?

Yes. You're breaking up a little bit, but I think what I heard you say does some of the constraints around turbine availability create an opportunity for certain upgrades at our plants? I would share...

Yes. Any thoughts on resource mix?

Yes. I think certainly, availability is important, when these assets are available and can get into service. Your point about upgrades to our plants, that is a continuous effort we're always looking at. We've got a number of studies underway. We've done some upgrades already, where you pick up 20, 30, 40 megawatts per unit. We continually look at that. So that's not a new development. That's kind of just in our bucket of things that we're always looking at. In terms of resource mix, we're going to look at the best value for our customers. And as I've said many times, it's still our intention to own these assets for the long term. Depending on availability and construction timelines, there may be a scenario where we have to kind of bridge something with some short-term capacity, but we're going to do what's right and serves our customers. So I don't think I'm ready to commit to a change in asset mix yet.

Okay. And maybe a final question about load growth. Are you on track to surpass your guidance for 2024 based on the year-to-date results? Do you anticipate any additional capital expenditures or pull-forwards to support this increased near-term loan growth? Or is there a greater emphasis on executing the RFPs we discussed?

Chuck, do you want to do that one?

Yes, good morning, Constantine. I believe the two are interconnected. If we look back, we've been experiencing load growth for several years, particularly since 2020. We've been planning for this growth all along, and it's certainly a factor in the RFP we are currently addressing. As Sean mentioned, we are still in discussions with various large-load customers and will respond as necessary when the time is right.

Okay, perfect. Thanks so much for the time.

Have a great day.

Thank you. One moment for your next question. Our next question comes from Julien Dumoulin-Smith of Jefferies. Your line is now open.

Hi. Good morning. It's Brian Russo on for Julien.

Hi. Good morning, Brian.

Good morning. It seems that the load growth is accelerating with each quarter. At what point will you begin to adjust the projections in the Integrated Resource Plan that the Request for Proposals is based on? Is there any chance you might encounter a larger capacity shortfall than what has been identified, meaning more capacity or investment may be needed?

Yes, Brian, that’s a great question. We file the Integrated Resource Plan every three years in both states. In our last plan, there were many assumptions made. Some were quite optimistic, while others were overly cautious, so we need to reassess those. A significant change in the assumptions is regarding the capacity reserve margin in the Southwest Power Pool, which was estimated to be 18% but actually ended up being 16%. This has implications for our numbers. Nonetheless, you’re correct that growth is unfolding as we anticipated. We’re currently considering whether to file a new plan to update some of the assumptions and take a fresh look at various factors. Growth is indeed increasing. I want to mention that we’ve been optimistic about growth for several years and still remain confident for the future. However, the growth isn't linear; it fluctuates, but we expect it to exceed historical levels. One challenge we're managing is accurately predicting when these significant loads will become operational. Your insight is accurate; we are evaluating this now and taking everything into account as we finalize our conclusions about the RFP results.

Okay. Great. And then just a follow-up on the SPP ITP projects. Just preliminary, it looks as if OGE on its own has over $200 million of potential projects. I suppose this could be layered into your CapEx while also managing your retail customer rates because these are SPP transmission projects, right? So it's kind of spread out over the entire region in terms of cost and rate allocation. Is that accurate?

Yes, that is correct. A significant part of that is designated for others who will cover those costs. The project you are mentioning is expected to be operational in 2028. We anticipate receiving the NTC next month, and we will refine our estimates and confirm our commitment to that NTC, after which we will adjust our figures accordingly.

Okay, great. Thank you very much.

Thanks, Brian. Have a great day.

Thank you. One moment for your next question. Your next question comes from Travis Miller of Morningstar Inc. Your line is now open.

Good morning. Thank you.

Good morning.

Just wondering on the data centers' large load, you have a lot of experience with that. There's been a lot of debate across the industry about how to spread those costs, how to make contracts. What are you seeing around what are you thinking in terms of contract structure as you get more interest from large load, whether it's the data centers or other large loads in your area?

We want to ensure that we maintain low debt and that any new developments are beneficial to our existing asset base and our customers. It's important to us that our residential customers are not affected by the demands of large loads. We're collaborating with various stakeholders to ensure that we properly allocate costs. This is a key focus for us, and it may result in a special contract or a specific rate tariff, which we will discuss with our commission.

Okay. So that's something that has to go through the commission. It's not something you can do bilateral?

Well, we could do that with a special contract.

Yes. Okay, okay, okay. And then just real quick, the commercial side, is there any more detail you could give around what type of customers or what sector the most growth is you're seeing on that commercial customer class?

Yes. So it is pretty broad-based across the sector. But clearly, the driver within that has been the crypto mining load that we've had now for quite some time. But again, we're seeing growth across all sectors, including residential, industrial. And that really spurs a lot of the smaller commercial-type load as well. So we're seeing really quite a nice mix.

Okay. So you're still seeing growth in that crypto area then?

Yes, we are.

Okay. That's all I had. Thanks so much.

Thanks, Travis.

One moment for your next question. Our next question comes from Paul Fremont of Ladenburg Thalmann & Co. Inc. Your line is now open.

Congratulations on a great quarter.

Hi, good morning, Paul.

Good morning. I was wondering if you could size the amount of generation that would be required if the Stillwater data center were to move forward?

Paul, I wish I could, but we're not at liberty to disclose that right now. I'm sorry.

Okay. And can you give an indication of how many square feet is involved in the project?

Give us a little bit of time here, Paul. We're really kind of locked down on this one, okay? I'm sorry.

Got it. When do you expect the OCC to take up your settlement?

Yes. As I mentioned earlier, we still expect it to happen this year. The current issue has nothing to do with the settlement of the recovery or rates. It revolves around the cost allocation for some larger loads that customers want us to serve. I still anticipate that this will be resolved this year, and we'll proceed from there. As Chuck mentioned, we implemented the rates on July 1, and we've accounted for everything, so we'll be ready to move forward.

And then last question for me. If we think about the potential for additional CapEx, what percent of that CapEx should we think of as being financed with equity?

Yes, that's a good question. We haven't reached that point yet, Paul, so I don't want to jump ahead regarding financing. We're focused on ensuring we have the regulatory aspects in place before including it in our plans, and then we'll provide details on financing. Looking ahead, we understand that our ratings are important, and you should consider something that supports a 17% FFO-to-debt ratio as a guideline.

Great. Thank you so much.

Thanks, Paul. Have a great day.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Sean Trauschke for closing remarks.

Thank you, Corinne, and thank you all for your time today and your interest in OGE Energy Corp. Hope you all have a wonderful day. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.