Oge Energy Corp. (OGE) Q2 2026 Earnings Call Transcript

Good day, everyone, and thank you for standing by. Welcome to OGE Energy Corp. 2026 Second Quarter Earnings and Business Update Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Casey Strange, Investor Relations Senior Manager, for opening comments.

Thank you, Carmen, and good morning, everyone, and welcome to our call. With me today, I have Sean Trotsky, our Chairman, President, and CEO, and Chuck Walworth, our 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 would 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 would 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 will now turn the call over to Sean for his opening remarks.

Thank you, Casey. Good morning, everyone. Thank you for joining us today. This morning, we reported consolidated earnings of 56 cents per share. Before Chuck discusses our second quarter financial results, I'll spend a few minutes on the actions and milestones that are shaping the remainder of 2026. To start, I want to recognize our team for their stellar work following severe weather in June and July. In each instance, their response was both safe and swift, and it reflected the best of our company, a strong commitment to reliability and service to our customers, and I'm grateful for our crews, operations and customer service teams, and everyone who is involved. We continue to make progress on several important filings that support our ability to serve growing customer needs while protecting affordability for our customers. We filed a Google special contract on May 1 in Oklahoma, and that filing now has a procedural schedule and we are pleased to have a defined path forward and expect this matter to move toward resolution before the end of the year. On June 17, we also filed our Oklahoma Large Load Tariff. This filing establishes a framework for serving loads greater than 75 megawatts that is aligned with recently passed state legislation. Importantly, the tariff is designed to support economic development and new load growth while protecting existing customers. It also reflects the spirit of the White House Ratepayer Protection Pledge, which we've recently signed. And I'll join the Oklahoma governor and legislative authors in a couple of weeks in support of Oklahoma's Data Center Consumer Ratepayer Protection Act. We're approaching consumer protections from all angles and leading the way with our tariff, which goes further than any of these other measures. We're putting words into action by doing everything within our power to protect customers from increased costs. The key components of the tariff include funding up front 100% of the cost to connect to the grid, a minimum 15-year commitment, minimum billing and collateral requirements, along with early termination and capacity reduction fees, a consumer protection charge, which provides a regulatory backstop if future impacts to existing customers emerge, And lastly, our proposed customer affordability charge would benefit residential customers to the tune of $25 to $30 million annually for a typical one-gigawatt data center. Over time, we believe high-energy demand customers like data centers can help bring down costs for all customers, but only when they connect to the grid under the regulated electricity model, which is consistently proven time and time again to provide the lowest cost electricity for all customers. Our tariff proposal has won the ways we balance growth, reliability, and affordability for the customers and communities we serve, while remaining aligned with the laws in Oklahoma and Oklahoma Corporation Commission policies. Looking ahead, we remain focused on executing the key regulatory milestones that support our long-term plan. There is a positive proposed order for the Frontier Storage Project from Commissioner Beamman's office, and we expect it to be adopted in short order. In 2026 alone, we will add 550 megawatts to the grid with Horseshoe Lake and Tinker. We will add another 300 megawatts next year from the Frontier Storage Project. The Horseshoe Lake units 13, 14, and 29 will add another 450 megawatts. We've averaged the addition of roughly 300 to 400 MW of capacity per year, and we will need to increase that to meet the growing demand on our system. We intend to make multiple filings throughout the balance of this year as we finalize the valuations and negotiations out of the RFP, and you could possibly see a filing this quarter. We continue to prepare for an Oklahoma rate review this quarter as well, and we are also monitoring SPP transmission notices to construct currently expected in the fourth quarter. There's certainly a lot to be excited about, and our regulatory filings and policy efforts are designed to position the company for long-term success while making sure customers continue to benefit from a reliable, affordable system. That foundation supports the next phase of investments needed to serve increasing demand across our service area. Thank you. I'll turn the call over to Chuck. Chuck?

Thank you, Sean, and thank you, Casey, and good morning, everyone. I'm pleased to review 2026's second quarter results with you today. Let's start on slide five. Consolidated net income was approximately $116 million, or $0.56 per diluted share, compared to $108 million, or $0.53 per share, in the same period of 2025. In our core business, the electric company achieved net income of approximately $120 million, or 58 cents per diluted share, compared to $108 million, or 53 cents per share, in the same period of 2025. The increase in that income was primarily driven by warm second quarter weather and lower depreciation and interest expense on assets placed in service, partially offset by higher O&M expense. The holding company reported a loss of approximately $4 million, or $0.02 per diluted share, compared to a loss of less than $1 million in the same period of 2025. The increased loss was primarily due to higher interest expense and a one-time benefit related to legacy midstream operations that was recognized in 2025, which was partially offset by increased other income. Stronger weather in the second quarter has offset a portion of the first quarter with nearly 70% of our expected annual earnings still ahead of us. We remain confident in our outlook and are reaffirming our 2026 consolidated earnings guidance range of $238 to $248 per share with a midpoint of $2.43. We continue to see strong demand across our service area along with steady customer growth of approximately 1%. Two current large customers have shifted portions of the RANT schedules, thereby pushing a couple hundred megawatts further into the year. While the timing has shifted, customer commitments remain firmly in place. And just last week, we set a new all-time peak of over 6,800 megawatts, exceeding the prior record set in August 2024 by roughly 180 megawatts. We're clearly excited about the opportunities ahead. Turning to the capital plan, the initiatives Sean outlined continue to advance, providing greater clarity around future capital requirements. Together, they represent the next phase of our infrastructure investment needed to support increasing customer demand across our service area. By expanding system capacity and capability, these investments extend our growth runway and strengthen our long-term growth profile. They are also building momentum across our business and reinforcing the foundation for future value creation. Over the balance of the year, we expect to further refine project scope, timing, and capital needs as these initiatives move through the approval process. As projects advance and key approvals are received, we will expect to provide multiple capital updates and will update our financing strategy accordingly. Turning to financing, we have completed all planned financing activities for 2026 and continue to target credit-supportive metrics, including maintaining FFO to debt, of approximately 17% over the planning horizon. In closing, we continue to execute from a position of strength. We've reaffirmed our 2026 guidance and are advancing the regulatory and capital initiatives that will help shape the next phase of growth. We remain focused on balancing customer affordability with disciplined investment and believe we are well-positioned to deliver sustainable value for our customers and shareholders for many years to come. With that, I'll turn it back to Sean, and we'll be happy to take your questions.

Thank you. As a reminder, if you do have a question, please press star 11 and wait for your name to be announced. To withdraw your question, simply press star 11 again. Our first question is from Char Puresa with Wells Fargo.

Good morning, team. This is Whitney Matalamar dialing in for Char.

Good morning.

Fantastic. So, on the rate review now in the third quarter, can you frame the scope for us specifically whether the QIP request for Hoshu Lake 13 and 14 could possibly fit inside that case, and if the Supreme Court rules while that case is pending, does QIP get picked up there or does it need its own docket, and if you could provide any other update on the procedure.

Yes. Thank you. Thank you for the question, Wendy. The rate case that we will file this corridor in Oklahoma will be generally distribution additions to our system and normal expansion. It does not include any generation capacity that was in there. We go through a pre-approval process for those, and 13 and 14 is captured in that process. So there will not be, in the rate case, any generation. It'll just be the normal course of business, run-of-the-mill distribution, substation additions, things like that. Chuck, you got anything to add to that?

No, I think that sums it up. It's really a separate issue.

Great. Thank you. Obviously, on the tariff, the protections are clearly built around the minimum billing demand over a long term. But how are you thinking about a large customer that wants to self-supply some of its load? And does the tariff as filed hold up in that case? That's it for me.

So thanks for the question. We have filed a large load tariff, which we think, you know, really goes above and beyond the legislation that was passed here in Oklahoma to protect customers from these large impacts of large loads and also, you know, really above and beyond the recently White House pledge in that area. So, you know, again, as Sean stated in his remarks, we believe that due to the network benefits of the fully regulated utility model, that that is the way to achieve the best outcome for all customer types, large data centers and traditional customers.

One moment for our next question. Thank you. Our next question comes from the line of Nick Campanella with Bargays.

How are you doing? This is Michael Brown from Nicholas Campanella. Good morning, Michael. Good morning. I know you're targeting to announce NTC in the fourth quarter. Would that be before or after EI?

Well, we'd hope it'd be before EI, but we're not necessarily in control of the award of the NTC. So we'll certainly announce it when we receive it.

My next question is clarify the 200 megawatts that was shifted into the year or the ramp schedule of your adjustments.

Yeah, Michael. So, you know, it's really like we've said all along with, you know, some of these large loads, it's difficult to pinpoint, you know, the exact quarter, the exact day that they start and to the extent that they, that shift, that obviously can have a, you know, have a little bit of an impact on the near term. But, you know, what I can say if it wasn't clear in my comments was that these customers are currently online. They just, you know, started the ramp a little bit later in the year than we originally anticipated, you know, really due to some issues on their side. So, but definitely they're ramping up, and we have whole confidence that that load will come on shortly.

Our next question is from Julian DeMolen-Smith to Jeffrey's.

You're someone for Julian.

Hey, good morning, Brian.

Hey, good morning, John. Hey, just to follow up on the Seminole to Shreveport line, you know, assuming you get the notice to construct as early as October, what are the next steps in terms of rights of way, you know, construction timing and commercial operation date? I know it's preliminary. And then any updated cost estimates on that?

Yeah, I think in the notice construct, there's a process there where we would respond back to the SVP with the confirmation of the cost and the routing and the in-service timeline for final approval. And then, you know, once that's kind of ratified, we're off and running. And I think you should expect us to be able to deliver to you kind of what the cost or the investment schedule is by year, the timing, and, you know, just kind of any financing needs that would be associated with that. So I think there's – So, Brian, just to clarify that, there'll be some – a lot more clarity when we get the NTC, but it's really going to be incumbent upon us to kind of ratify that with routing schedule. Okay, got it.

Any thoughts on the upcoming SPP ITP for 2026? There's indication that it could be much larger than the 2025 ITP, which Seminole-Treeport line was a part of, which was arguably lower than many of us expected. I'm just wondering where, you know, OG and ESETs, you know, in Oklahoma to participate in the upcoming ITP.

Yeah, I think there's certainly a lot of discussion about, you know, potential opportunities. The ultimate, you know, decision there, you know, hasn't been made, and whether it's going to be 26 is going to be greater or smaller than 25. There's a lot of different thoughts, a lot of different discussions going on. So we're certainly engaged in those discussions, and we would expect to be a very active participant in the construction of transmission in Oklahoma.

Okay, one last question.

I don't know, Brian. We can't forecast that for you at this point.

Okay, and then just one last thing. On the SVP, you know, the accreditations for new renewables, you know, seem to be becoming more stringent. Does that, like, bias you towards gas generation in these pending 2026 RFPs?

I think so. I think directionally that is a big criteria in terms of the dollar cost of accredited capacity. But, you know, we do focus on the price of the product, but I think it does kind of lend you towards more thermal assets.

Great. Thank you very much.

Thanks, Brian.

Thank you so much. Our next question comes from David Arcaro with Morgan Stanley.

Hey, thanks, Mory. Good morning. What is the check-in? And has there been any progress on large load negotiations with new customers and potentially, you know, working toward converting those into contracts?

Yes. I think the short answer is yes. I think we continue to have those discussions. We're moving forward. And I think the submittal and the finalization of our large load tariff provides that clarity for those large loads to, you know, understand how things are going to work in Oklahoma. So they are progressing, and we're not backing off of the six or seven active negotiations we're in the middle of right now.

Got it. That makes sense. And any surprises just around what you're seeing in low growth or new customer interest in your service territory that would cause you to, you know, reassess, relook at the low growth outlook?

Not – nothing's coming to mind right now. Sitting here, Chuck and I are looking at each other, and nothing came to mind. We're – it's all systems go and full steam ahead. Gotcha, gotcha.

And then could you maybe just refresh on your latest thinking on when the right time frame would be for revisiting the CapEx and the earnings outlook just as you chip away at some of the upcoming milestones?

Yeah, I think you're – the way you said it there is we chipped away at it. I think we would – Chuck and I would – it'd be neat if we could tidy all this up in one big release. But the opportunities and the growth, quite frankly, are just going to be continual. So we're going to continually update this. If we receive the approval from here, you should expect an update there. on the NTCs from the SPP, you should expect an update there. Approvals of these filings we're going to make over the balance of 26 for a generation, you should expect updates there. And obviously, just like we did last year, we'll lay that out for you in terms of the earnings impact and the financing plan. We'll make it easy.

Awesome. Understood. That makes sense. Thanks so much.

Thanks. thank you so much our next question comes from adam kelly with jp morgan hi good morning thanks for thanks for the time today just want to pick up again on that growth outlook front um you know clearly you have a lot of upside opportunities as you outlined and it's got many thinking about kind of upside bias to the prevailing cager i guess my question is how do you intend to kind of message that outlook moving forward do you see any possibility of rebasing or you know a plus mark after growth just just what makes the most sense in this kind of dispatch offer you and thanks for the question you know I think you know we're

obviously going to take it you know one step at a time as these is these opportunities continue to roll in and as Shawn mentioned you know we see you know really a long conveyor belt of opportunities so some multiple chances for that you know you mentioned rebasing that's that's something that we have done you know already in the past where we've grown you know off of the higher trend line from previous year's guidance so you know I think we're we'll we'll take a look at all those things but I think what's paramount is that you know we effectively communicate to you the opportunity set that we have in front of us and how we're going to finance that and that's you know I think that's probably the more clarity that you all need. So we'll definitely work on that front.

Great. Thanks, Chuck. And do you expect both the CapEx and equities to be increased piecemeal, or do you kind of try and have more chunky updates in future years?

Well, you know, we'll look at it as it comes through. But again, as Sean said, we're not going to be able to tie it all up in one big package. So, yeah, we'll look at it in chunks and discuss it as such. as they come across.

Okay, great. Appreciate the time today.

Thank you.

Thank you so much. Our next question comes from Paul Fremont with Ladenberg-Dalman. Hey, congratulations.

I'm really glad. Good morning, Paul. I just want to understand sort of you've got an FFO to debt target of 17%. In the past, what we've seen in order for you to maintain sort of the very strong credit metrics that you're targeting, you've essentially used PPAs on some of the new construction to spread out some of the timing of new construction in order, I guess in part, to maintain a strong balance sheet. Should we continue to expect that that would occur sort of on future spending, or are you willing to sort of allow FFO to debt metrics, at least for a temporary period of time, to go to lower levels until the projects are online and producing, you know, significant contribution?

Yeah, Paul, maybe Chuck and I will tag-team this one a bit. You know, as it relates to our capacity planning, we've utilized some short-term bridge PPAs to get us through the construction cycle. And so that's what we use the PPAs for, and it's not a mechanism we've been using to manage FFO or anything like that. And, Chuck, maybe you could talk a little bit about your projection for FFO.

So, you know, Paul, as we indicate, you know, in our remarks, we do target 17%. Now, obviously, as you know well, you know, there's going to be some ebb and flow to that number. But, you know, that being said, it's important for us to maintain, you know, basically in that zip code. And, you know, we showed it with the equity deal we did, you know, last November. And, you know, we've also acknowledged that there's a whole host of tools out there to help with our capital stack. And, you know, we'll look at all of those to maintain that as well as taking advantage of, you know, items like CWIP financing for, you know, for the large transmission project that we've been talking about earlier this morning. So, you know, we've got a lot of tools at our disposal in order to meet that commitment.

And then I guess in terms of turbine resources, do you see any issues for any of the RFPs that you're currently involved in in terms of procuring the generation resources that are necessary in terms of the RFPs?

Yeah, we're going through that evaluation right now, and we're doing it as quickly as we can, but we feel like we're in pretty good shape.

And then maybe last question for me, for Shreveport to Seminole, is there any sort of determination on the split in miles for construction between you and NAEP?

Yeah, we're still working through that. so that would be known when they provide the MTC we would sort of have the answer to that by then oh absolutely absolutely you know because because part and parcel that is kind of the the ultimate resolution of the routing yeah great that's it for me thank you thanks Paul have a great day thank you so much and as a reminder if you do have a question, simply press star 1-1 to get in the queue.

We have a question from Steve D'Ambrisi with RBC Capital Markets.

Please proceed. Hey, Chuck. Thanks for taking the time this morning. Appreciate it.

Hey, good morning, Steve.

Good morning. Just had a quick one, kind of a follow-up on Brian's question about 2026 SPP, ITP process. Obviously, it's early, and I understand there's a lot of options that are being thrown around but can you just remind us um what in Oklahoma if they're uh if you have a rofer on uh transmission that ends up in your substations or or in your service territory or how that works i think there was some legislation but maybe it went to the FERC because you know just looking at the map that some of these maps that um are in these ITP presentations it looks like a lot of these potential 765 lines and terminate at your substations yes so I'm familiar with that map so in general terms to the

extent that it is determined by the SPP that these are reliability projects meaning we need to add transmission to support the reliability of the system then the general rule is that is directed to the owners of the originating and terminating substation and hence that's the Seminole Street port line to the extent that there are lines that may be more economic or forward-looking those would be a competitive opportunity and so to the extent that a particular state has a rofer then that would probably trump the competitive direction that the

SPP had that help yeah did that get clarified in Oklahoma yet whether or not you have a rope I think yeah okay not yet stay tuned stay tuned yeah okay yeah all right that's all I had appreciate it all right thanks have a great day thanks you too thank you so much and this will conclude our Q&A session for today and I will pass it back to Shawn Trotsky for final remarks well thank you Carmen and thank you all for joining us today thank you for your support and I hope everyone has a great day and with that we will conclude today's conference thank you for participating and you may now disconnect