OGE Energy Q1 2025 Earnings Call Transcript

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Operator

Good day, and thank you for standing by. Welcome to the OGE Energy Corp twenty twenty five First Quarter Earnings and Business Update Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

Operator

You will then hear automated message advising your hand is raised. To withdraw your question, please press 11 again. 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.

Jason Bailey
Jason Bailey
Director of Investor Relations at OGE Energy

Thank you, Marvin, 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 and Treasurer. 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 on that same website.

Jason Bailey
Jason Bailey
Director of Investor Relations at OGE Energy

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 will now turn the call over

Jason Bailey
Jason Bailey
Director of Investor Relations at OGE Energy

to Sean for his opening remarks. Sean?

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thank you, Jason. Good morning, everyone. Thank you for joining us today.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

It's certainly great to be with you. The first quarter of the year continued our momentum from the last few years and we are firmly on plan. This morning, we reported consolidated earnings of $0.31 per diluted share, including $0.35 for OG and E and a holding company loss of $04 The fundamentals of our business are strong and the team is committed to our North Star, delivering safe, reliable and affordable electric service to our 900,000 plus customers twenty four hours a day, seven days a week and three sixty five days a year. Today, I want to touch on a few topics that build on this momentum for the future. First, the customer growth and increasing demand for electricity we are seeing, operational excellence and a look ahead for the rest of the year and how we view factors in the macro environment.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Demand for the quarter grew 8% year over year, led by residential and commercial sectors. Customer growth is right on target at 1% and we are excited about the pipeline for baseload growth, which represents diverse industries bringing job and economic growth to both Oklahoma and Arkansas, and the new residents needed for those industries to thrive. From defense to tribal development and hospitality, this sustainable growth is how we build an even brighter future for our company. You may have seen the announcement earlier this month that Oklahoma City will host seven events for the twenty twenty eight Olympics for softball and canoe saw. We've long supported these facilities and look forward to partnering with them, the city and the state to ensure our hometown delivers a wonderful experience for teams and visitors from around the world.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

We have lines of sight into new and expanding business that drive our baseload growth assumptions for the future from the industrial customer moving their on-site generation to us to our expanding military bases to a midstream customer building a new processing facility in our service area. While I can't tell you the exact month or quarter today within a given year, these expansions are all built into our long term growth projections. Looking at operations, our grid and weather strengthening investments continue to deliver great reliability results. Here we sit at the April, after experiencing tornadoes and fires, windstorms, freezes and thunderstorms in the last eight weeks, we're averaging 99.975% reliability. Then again last night and early this morning, another wave of tornadoes, high winds, rain, hail and flooding came through and the system held up very well and the small number of outages we did have will all be back this morning.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Between our teams, physical infrastructure and technology, OG and E customers experienced fewer outages and better reliability. We'll continue to strengthen the grid for today and tomorrow and at some of the lowest rates in the nation. Today, our rates are top desktop for overall retail, as noted in the most recent S and P report, and our rates are the lowest in both Oklahoma and Arkansas. We understand the importance of keeping rates low for our customers and also serving as the foundation for the economic development engine we've built over the years. Turning to generation.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Our power plants supply the grid with electricity that fuels economic growth. As a reminder, we have about five fifty megawatts under construction today at Horseshoe Lake and Tinker. And in the coming weeks, we expect to make regulatory filings on our most recent RFP. These filings will include a range of technology and contract types. And we're currently in discussions with a number of companies regarding data center projects, including the Google project in Stillwater, and we will file separately for those needs as those contracts are finalized.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

In addition to generation, we will also continue to invest in the reliability and resilience of the grid, including future transmission opportunities. Continuing on the regulatory front, as we've previously shared, we plan to request a rate review midyear in Oklahoma. In Arkansas, we'll file a general rate review and formula rate plan request toward the end of this year. Constructive regulatory outcomes enable us to drive the economy, serve customers and grow communities and achieve results for all of our stakeholders. We recognize the uncertainty and macroeconomic factors that may create questions about our operating environment, and I'd like to share with you how we approach changes in tariff policy.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

We've limited our exposure to a diversified supply base, and one specific example is transformers. And since COVID, we've expanded our transformer sourcing strategies to include domestic and international suppliers. And for 2025, proactive planning and disciplined approach to inventory allows us to meet our planned projects for this year with little to no disruptions. In fact, key components like transformers as well as wire and cable are all secured through 2026. While we don't have a crystal ball and the situation is dynamic, we will continue to do what we say we will do and deliver on our stakeholders' needs and expectations.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

And as we plan for future investment, we'll keep all options in front of us, ensuring our business isn't predicated on a single rate filing, key supplier or particular path forward. As I close my remarks and hand off to Chuck, I hope you hear how bullish I am on our company and our future. The case for investment in OG Energy is persuasive, thanks to our growing sustainable business model. Our financial position is strong with a high quality balance sheet that we leverage appropriately. Our plan is designed to meet the needs of our growing customer base, keeping the macro environment in mind and continued success in running an economic development engine that drives jobs and local economies and all of that is supported by operational excellence delivered by an incredible team dedicated to reaching our North Star.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

So thank you. I'll turn

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

the call over to Chuck. Chuck?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Thank you, Sean, and thank you, Jason, good morning, everyone. I'm pleased to review twenty twenty five's first quarter results with you and provide an update on our 2025 financial plan. Let's start on Slide six and discuss first quarter results.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Consolidated net income was 63,000,000 or zero three one dollars per diluted share compared to $19,000,000 or $09 per share in the same period of 2024. In our core business, the electric company achieved net income of $71,000,000 or $0.35 per diluted share compared to $25,000,000 or $0.12 per share in the same period of '24. The main drivers of the year over year increase in net income were higher operating revenues driven by the recovery of capital investments and continued strong load growth as well as lower operation and maintenance expense, partially offset by higher income tax expense and higher depreciation and interest expense on a growing asset base. As expected, the holding company reported a loss of $8,000,000 or $04 per diluted share compared to a loss of $7,000,000 or $03 per share in the same period of 2024. Given our strong start to the year, we are affirming our 2025 earnings per share guidance.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We are firmly on a plan to deliver on our consolidated earnings commitment of $2.27 within a range of $2.21 to $2.33 per share. Let's review our load results by turning to slide seven. Customer growth and load growth continued its multi year momentum into the first quarter. The number of customers on our system expanded at a very healthy pace of 1% compared to the first quarter of twenty twenty four. Our weather normalized load growth turned in exceptional results, 8% compared to the first quarter of twenty twenty four.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Our two largest customer classes, residential and commercial, grew at three percent and twenty eight percent respectively. I continue to be excited about our residential growth, which is the cornerstone of the prosperous communities we serve. Residential results a strong 2024 when it grew greater than 2%. The combination of strong multi year customer growth led by our residential class and residential load growth underlies the robust nature of the economies in Oklahoma and Western Arkansas. We did see some softness in our industrial and oilfield classes, which can be partially explained by both planned and unplanned outages in the first quarter.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We are on track to meet our full year total load growth expectations. Sean discussed areas of future load growth led by our economic and business development efforts, which illustrate our excitement about the communities we serve and underlie the strength of our five year plan. Our sustainable business model is working by attracting new customers to our service area with our low rates and spreading costs across a larger customer load base. And as I've discussed, our intentional efforts to grow our communities benefit each one of our customers by keeping our rates low. In our last rate case in Oklahoma, we were able to pass on the benefits of load growth to our customers to the tune of more than $60,000,000 Let's turn our attention to our 2025 financing plan on slide eight.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Our financial plan objectives include maintaining our competitive low rate advantage by focusing on our cost structure, minimizing the time between investments and the return and recovery of the investments, and growing OGE by maintaining a highly credible total return proposition for our shareholders. On April 1, we successfully completed our planned external financing by issuing $350,000,000 of thirty year debt at the electric company, which contributes to our low refinancing risk. Our next refi isn't until 2027 and is a modest $125,000,000 and it's also our highest coupon debt. Our financial position is strong based on growing communities and load and a track record of constructive regulatory outcomes. We're also seeing credit constructive legislation being considered and a recent example of this is in Arkansas where the governor signed legislation into law which allows CWIP recovery during the construction phase of certain generation capacity projects.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Oklahoma legislators are currently contemplating similar and additional credit accretive actions. Our balance sheet, one of the strongest in the industry, is a competitive advantage and we are committed to keeping it that way. We continue to forecast FFO to debt of approximately 17% throughout the forecast period with no need for external equity issuances other than a modest annual drip under our current investment plan. Sean updated you on our progress towards a pre approval filing in Oklahoma for generation capacity required to meet the SPP's planning margin requirements. Sean also discussed the potential for incremental transmission investment associated with SPP's integrated transmission plan.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

If those actions result in incremental investment opportunities, we will communicate our plans, including prospective financing, with you after we receive the appropriate approvals. As we've consistently said, we expect to include equity in our financing plan to support any incremental investments while producing accretive results and supporting our strong financial position. I'll close by summarizing our progress this quarter and expressing my confidence in our plan. Our system and our employees performed very well during extreme weather events. We plan to make generation capacity pre approval filing in Oklahoma in the coming weeks.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We are on track for a mid year rate review filing in Oklahoma. Our load growth momentum carried forward into the first quarter and is on track to meet our expectations for the year. We've completed our planned external financing and we're on plan to meet our earnings per share guidance. Our strong first quarter performance positions us well to meet our commitments for 2025. We're confident in our ability to achieve our consolidated earnings growth rate of 5% to 7% based on the midpoint of our 2025 guidance.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

The strength of our plan allows us to focus on the future and address our customers' expectations of a safe and reliable system and to deliver power at some of the lowest rates in the nation. As always, our confidence remains based on the dedication of our employees and their ability to get the job done. That concludes our prepared remarks and we'll now open the line for your questions.

Operator

Thank you. At this time, we'll conduct a question and answer session. And our first question comes from the line of Shar Pourreza of Guggenheim Partners. Your line is now open.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

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

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Hey, good morning Constantine.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

Maybe starting off on the tariff side, kind of all the news since last quarter, especially as it relates to the new generation in the RFP. Are you seeing any disruptive or inflationary impact? And more broadly, do you have regulatory mechanisms to address any tariff headwinds across the current CapEx plan?

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Yes. So I think for the current CapEx plan, Constantine, we feel pretty good. As I mentioned in my comments there, we have line of sight to those materials and assets and we feel pretty good that we'll see little to no disruption over the coming years for that. As it relates to generation, I think obviously that created a bit of a pause in the marketplace when those were announced and we were in the middle of negotiating, evaluating all those bids that came in. So we certainly took our time to go through that.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

We've not filed anything yet, so we're not too concerned about regulatory actions.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

Excellent. That's helpful. And then maybe a quick follow-up on the load backdrop. The industrial backdrop posted some lower growth in that segment versus the overall strong resi and commercial. Are there any key changes on the industrial side

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yes, Constantine. Think in our remarks, we really covered it. It's within that class, you've got a variety of customers, but largely what we've seen are transitory events in terms of outages, maintenance outages, things of that nature. That's kind of what we see that noise being. Nothing.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We don't have any indications that there's anything external, like from a tariff or anything perspective that's impacting that class.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

Okay. And so I guess no change on the annual expectation that's been reiterated?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

No, no, no, no. We're clear that we're confident in our annual number.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

And just a last quick one, kind of high level. We've seen some jurisdictions take on utility regulatory construct improvement amidst all of the load growth and support for economic development. Are there any conversations in Oklahoma, whether it's legislature or OCC around the need for any improvements? Do you see any increasing likelihood of something like a formula rate in the current regulatory cycle or is that more long dated at this point?

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Yes, I think in terms of the formula rate discussions, we're going to be we're going to continue to pursue that. But I think that's going to as we've said before, that's to take a while, but again that's more for the future. We don't necessarily think it's going to occur this year, but we're going to continue to push that.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

Okay, understood. Really appreciate it. Appreciate taking the questions. Thanks.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thanks, Constantine. Have a great day.

Constantine Lednev
Vice President - Equity Research at Guggenheim Partners

You too.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Nicholas Campanella of Barclays. Your line is now open.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Hey, good morning, everyone. Thanks for the updates.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Hey, good morning, Nick.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Morning. Morning. Maybe you can kind of talk through, I think you brought up SB nine ninety eight. This is the generation rider and PISA recovery in your prepared remarks. Just you talked about it being kind of credit enhancing if you were to get it through.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

So can you just kind of confirm how that would impact the current plan? And then how it would impact how you'd finance incremental CapEx, especially if you start winning some of these RFPs here? Thanks.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yes. I think it's pretty straightforward, Nick. Got currently, we've got a couple of units under construction right now. And then as you alluded to, there may be additional following whatever comes out of the RFP. So like we've done on the transmission side in the past, this would provide cash flow during the construction phase, basically getting the what would normally be AFUDC in the form of a cash return on CWIP balance as it grows.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

So again, it's going to be dependent upon the mix of projects and the project length and all that kind of stuff in terms of how much their credit accretiveness turns out to be, but it's definitely marginally improvement and would help facilitate financing for it.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Okay, that's great. And then I also just noticed that when you kind of talked about these various data center projects, you talked about you're going to file separately for these opportunities. What would the timeline for those filings be? What should we be watching for? And then can you also just address in the queue, there was a Supreme Court decision about not being able to extend service from third party transmission facilities.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Does that impact in any way your ability to serve large load customers like a still water? Just wanted to clarify that. Thanks.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Yes. Thanks for questions, Nick. Let me kind of run through those really quickly here. As we mentioned in our remarks, we're going to file for the generation coming out of the RFP here in a few weeks. I mean that's coming and we need to kind of get that ball rolling.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

So that's why we're doing that. What we're trying to convey is these discussions we're having are ongoing and they're current to the extent that we have finalized something with one of these data center companies, we will include the generation needs into that filing. If we don't, we'll do it later. And that's all we were trying to convey that we don't really have a timeline for any of the data center announcements or anything like that. When they're when we get them done and we come to agreement and there's a commitment, we'll certainly make you aware of that.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

And then your question about the Oklahoma Supreme Court ruling, no, that doesn't have any effect on Stillwater or any of those data centers.

Operator

Thank you.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

All right, thanks. Have a great day.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Durgesh Chopra of Evercore ISI. Your line is now open.

Durgesh Chopra
Managing Director at Evercore ISI

Hey, team. Good morning. Thank you for giving me time.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Hey. Good morning, Rajesh.

Durgesh Chopra
Managing Director at Evercore ISI

Sean, good morning. Good morning, sir. Just, I wanted to sort of build on the discussion or or your just commentary, Sean. You know, with the Microsoft, Amazon pullback and and, you know, sort of several data center leases we're hearing across the country, How has the tone been in your customer exchanges? Are you seeing any pullback in the data center electricity demand narrative?

Durgesh Chopra
Managing Director at Evercore ISI

Or is it still guns blazing?

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Yeah, well, want to be careful how I describe that, but I think we've said we've got roughly a half a dozen or so discussions in various stages of development and they're not slowing down.

Durgesh Chopra
Managing Director at Evercore ISI

Got it. Okay. Seems like it's pretty strong, still remain pretty strong. Okay and then just on the balance sheet topic Chuck, So Moody's put you on negative recently. Their bill I believe their downgrade threshold is 18%.

Durgesh Chopra
Managing Director at Evercore ISI

You're targeting 17%. Sounds like there's gonna be a healthy capital upside here as you roll forward the capital plan that will have some equity, but you're still targeting 17%. So is it okay to assume that you'll take the downgrade from BAA1 to BAA2? Or are you trying to address that and perhaps keep the BAA1 rating? Maybe just any thoughts there.

Durgesh Chopra
Managing Director at Evercore ISI

Thank you.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yeah, so I think the main thing to take away is that this is a they put us on negative outlook and so it's not an imminent change, right. And I see several potential items occurring before the end of that timeframe. We talked about the credit accretive legislation, that's a new data point that I think would go into their calculus if that's approved. We'll have several other regulatory events to get through and to continue to prove the track record that we've had over many years now. And so I think, as they do, I can't obviously speak for Moody's, but I believe they'll take a measured approach and take all of that new information into account whenever they resolve that in whichever direction they do.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

But from our perspective, we think that 17% still gives us one of the strongest balance sheets in the industry. And we're very comfortable where we are there.

Durgesh Chopra
Managing Director at Evercore ISI

That's helpful, Chuck. Thank you again.

Operator

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

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Hey.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Good morning, team. Thank you guys very much for the time. I sincerely appreciate it

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

and nicely done here.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Hey. Good morning.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Good morning.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Hey.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

So Sean, team, maybe just to follow-up on the timeline here, right, with Google, right? I mean, you suggest earlier, you join that up with the existing RFP effort or it could take a separate route. Just given what seems like a fairly expedited timeline here for conceivably ramping up that site, would you expect that there to be some sort of like a short term PPA solution for them, something that would be like maybe a non self build, an acquisition or something to try to ramp up and meet that capacity need on a shorter term basis? How do you think about kind of the timeline issues if it isn't married into the current RFP and how that would fit into your planning process? And then I got a follow-up under Geshe's one on credit.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Okay. All right. Well, me try to unpack that. So obviously, there's a lot of moving pieces there and this is a high class problem we have with all of this opportunity coming before us. We've got a very robust response bids that we're evaluating.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

So think of it in terms of if we secure an agreement with anybody, we could just go to the next one down on the list so to speak. That being said, as you think about constructing things we've said previously, it makes a lot of sense. Maybe we have some short term bridge things and just bridges till we can get some things constructed. The second point I would make on that, Julien, is the data centers themselves have a ramp curve. They don't drop in just hundreds of megawatts overnight.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

And so there is a build out, a supply chain, a ramp curve for them too. So there is time to kind of grow into some of these loads. So I think that's the other point that I want to make sure we cover there. So I think I covered your questions. I'm looking at Jason and Chuck.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

All right. And then you've got a question for Chuck.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Yeah. Chuck, just coming back to the Moody's conversation, obviously credit accretive legislation you acknowledged a moment ago, but, you know, I I didn't hear you necessarily saying you're targeting anything higher than 17% despite, right, some of the benefits you might be getting there per se. Right? Again, obviously, a big CapEx program ahead of you. Your point was simply to say, look, relative to peers, your perception of what that downgrade threshold should be should be reduced.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

And, obviously, given the enhanced credit accretive nature of what you're seeing in Oklahoma and Arkansas for that matter, you're advocating for a lower downgrade threshold consistent with your own internal targets. That's what you meant to say, right?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yeah, I mean, I can't, I got to be careful about, I can't speak for Moody's, but yes, my position is that, some of these items that I discussed, they have both qualitative and quantitative benefits too, right. So a lot of that qualitative side goes into the calculus on where those thresholds are. So yeah, I would definitely argue relative to our peers that that would point in that favorable direction. But again, that's Moody's process and we'll just see, have to see how they determine that.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Excellent. Sorry, quick clarification. It seems like you did fairly well for the start of the year. Is that tracking ahead of expectations or was that contemplated here in the guide?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We're clearly on plan for the year. Again, reiterating our guidance where we put it out, but definitely there's a positive tone to the start of the year and we're quite pleased with that.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

Awesome, guys. We'll keep going. Right. Best of luck. Curious to see what happens in

Julien Dumoulin-Smith
Julien Dumoulin-Smith
II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies

the next few weeks. See you soon.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thanks, Julie. Stay good.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Steven Dempsey of Ladenburg Thalmann. Your line is now open.

Stephen D'Ambrisi
Stephen D'Ambrisi
Managing Director at Ladenburg Thalmann

Hey, guys. Thanks very much for taking my question.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Hey, good morning, Steve.

Stephen D'Ambrisi
Stephen D'Ambrisi
Managing Director at Ladenburg Thalmann

Good morning, Sean. How are you? Just quickly wanted to follow-up on the load growth discussion. I know we talked about it a little bit already. I'd like to focus more on the residential side.

Stephen D'Ambrisi
Stephen D'Ambrisi
Managing Director at Ladenburg Thalmann

I mean, clearly, the industrial sales growth being down sounds transitory, but I'd like to hear a little bit about the durability of the 3% residential growth. You were putting up something like that three percent growth last year. And I think that that's probably a lot more margin accretive. So just interested to hear some comments around sales mix.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yes. I mean, you're right. Residential, we view is extremely important and definitely has been beneficial for us. We've seen a lot of changes with residential coming out of 2020. So I do think that some of that is kind of a continued rebound.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

So I can't say it's going to stay at 3%. That's obviously a fantastic number. But I think stepping back, looking at from a broader perspective, the trend is clearly positive. And that's kind of underlined by the consistent customer growth that we have, don't see that changing. And then just the overall economic situation of Oklahoma and Western Arkansas, Don't see that changing either.

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

So I think all the fundamentals are there for a directionally strong residential growth going forward.

Stephen D'Ambrisi
Stephen D'Ambrisi
Managing Director at Ladenburg Thalmann

Thanks. That's really helpful. Have you guys given an EPS sensitivity for what 1% residential growth does to numbers?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

We haven't just because kind of as you mentioned before, there's a big different types of customers have different sensitivities. We did give on our slides that we put out the first call, did show just kind of overall what our growth was. And obviously you can do the simple math there for something, but the caveat there is that's going to change from year to year depending on customer mix.

Stephen D'Ambrisi
Stephen D'Ambrisi
Managing Director at Ladenburg Thalmann

All right. That's all I had. Thanks very much. Congrats.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thanks, Steve.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Anthony Grudel of Mizuho. Your line is now open.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Hey, good morning team. Looking forward to seeing Sean go on that, what's that canoe slalom in the twenty twenty eight or twenty twenty six Olympic Games?

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

All right. Well, I'm going need a coach. So I know you've got coaching experience Anthony, so I'm ready.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

All right. You bet. Just a quick follow-up, think Durgesh, that train of thought on the FFO to debt downgrade threshold at 17. Chuck, you talked about a lot of items that you believe are credit enhancing. I just wanted to check all of the items you speak about that are credit enhancing are more external, meaning in the legislative or regulatory arena, they're not actions that OG and E is going to take, their actions get them to your action gets you to 17%.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Is that fair?

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Yes, think that's fair. But again, I think at a higher level though, I think it's just continuing to build on our track record of success. The agencies obviously have a very long term view and the longer you can prove that out and that's obviously up to us to continue to execute on, but that can only help us. But no, I disagree with you.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

When they issued, I think a recent report from Moody's, I want to say it was a month ago, I apologize on the timing, when they moved it to negative outlook. Have you spoken to the agency since then? Because typically, when they put a negative outlook, they try to resolve it within twelve months or twelve to eighteen Is that so

Charles Walworth
Charles Walworth
CFO & Treasurer at OGE Energy

Twelve to eighteen months is what they communicated to me.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Great. Thank you so much for taking the questions.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thanks, Anthony. Take care.

Operator

Thank you. I'm showing no further questions at this time. I'll now turn it back to Sean Trotsky for closing remarks.

Sean Trauschke
Sean Trauschke
Chairman, President & CEO at OGE Energy

Thank you Marvin and thank you everyone for joining us today and we appreciate your interest in OGE Energy. Please take care of yourselves and those around you.

Operator

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

Executives
    • Jason Bailey
      Jason Bailey
      Director of Investor Relations
    • Sean Trauschke
      Sean Trauschke
      Chairman, President & CEO
    • Charles Walworth
      Charles Walworth
      CFO & Treasurer
Analysts

Key Takeaways

  • OGE reported Q1 EPS of $0.31 (including OG&E’s $0.35 and a holding-company loss of $0.04) versus $0.09 in Q1 2024, and affirmed full-year guidance of $2.27 per share.
  • Customer count grew 1% and demand rose 8% year-over-year, led by residential (+3%) and commercial (+28%) sectors, while industrial softness was attributed to transitory outages.
  • The grid delivered 99.975% reliability through recent tornadoes, freezes and storms, as ongoing infrastructure and technology investments keep rates among the lowest in Oklahoma and Arkansas.
  • About 550 MW of generation is under construction at Horseshoe Lake and Tinker, with upcoming RFP filings and separate filings for data center projects (including Google Stillwater) and future transmission opportunities.
  • OGE completed a $350 million 30-year debt issue, targets FFO/debt of ~17% with no large equity needs, and plans a mid-year rate review in Oklahoma and an end-year general rate case in Arkansas, supported by new CWIP recovery legislation.
A.I. generated. May contain errors.
Earnings Conference Call
OGE Energy Q1 2025
00:00 / 00:00

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