OGE Energy Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
July 29, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter earnings increased to $0.56 per diluted share from $0.53 a year ago, driven by warmer weather and lower depreciation and interest expense. OGE reaffirmed its 2026 earnings guidance of $2.38–$2.48 per share.
  • Positive Sentiment: Demand remains strong, with customer growth of approximately 1% and a new all-time peak load above 6,800 megawatts. Two large customers delayed portions of their ramp schedules by a few hundred megawatts, but management said their commitments remain intact.
  • Positive Sentiment: OGE is advancing major growth initiatives, including 550 megawatts of additions in 2026, a planned 300-megawatt Frontier Energy Storage Project in 2027, potential generation filings, and the Seminole-to-Shreveport transmission project. These projects could expand the company’s long-term capital and earnings growth opportunity.
  • Positive Sentiment: The proposed Oklahoma large-load tariff is designed to protect existing customers while attracting data centers and other high-demand users, requiring upfront connection funding, long-term commitments, collateral, termination fees, and an affordability charge that could provide residential customers $25 million–$30 million annually for a typical 1-gigawatt data center.
  • Neutral Sentiment: Management said it has completed planned 2026 financing and is targeting funds from operations to debt of approximately 17%, using tools such as equity, CWIP financing, and other capital-structure measures as projects advance. However, the timing, scope, and financing needs of future investments remain subject to regulatory approvals and additional updates.
AI Generated. May Contain Errors.
Earnings Conference Call
OGE Energy Q2 2026
00:00 / 00:00

There are 11 speakers on the call.

Operator

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 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. Now it is my pleasure to hand the conference to Cassandra Strange, Investor Relations Senior Manager, for opening comments.

Speaker 1

Thank you, Carmen, and good morning, everyone, and welcome to our call. With me today, I have Sean Trauschke, our Chairman, President, and CEO, and Charles Walworth, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Chuck of financial results. 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.

Speaker 1

I will now turn the call over to Sean for his opening remarks. Sean?

Speaker 2

Thank you, Casey. Good morning, everyone. Thank you for joining us today. This morning, we reported consolidated earnings of $0.56 per share. Before Chuck discusses our second quarter financial results, I will 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 reflected the best of our company, a strong commitment to reliability and service to our customers. I am 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.

Speaker 2

We filed the Google special contract on May 1st in Oklahoma. That filing now has a procedural schedule, and we're pleased to have a defined path forward and expect this matter to move toward resolution before the end of the year. On June 17th, 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. 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.

Speaker 2

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 upfront 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. Lastly, our proposed customer affordability charge would benefit residential customers to the tune of $25 million-$30 million annually for a typical 1 gigawatt data center.

Speaker 2

Over time, we believe high energy demand customers like data centers can help bring down costs for all customers, only when they connect to the grid under the regulated electricity model, which has consistently proven time and time again to provide the lowest cost electricity for all customers. Our tariff proposal is one of 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 Energy Storage Project from Commissioner Bingman's office. 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.

Speaker 2

We will add another 300 megawatts next year from the Frontier Energy Storage Project. The Horseshoe Lake units 13, 14, and 29 will add another 450 megawatts. We've averaged the addition of roughly 300-400 megawatts of capacity per year. 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 evaluations and negotiations out of the RFP. You could possibly see a filing this quarter. We continue to prepare for an Oklahoma rate review this quarter as well. We are also monitoring SPP transmission notices to construct, currently expected in the fourth quarter.

Speaker 2

There's certainly a lot to be excited about. 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. Now I'll turn the call over to Chuck. Chuck?

Speaker 3

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 $0.58 per diluted share, compared to $108 million or $0.53 per share in the same period of 2025. The increase in net 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.

Speaker 3

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 headwind. 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 $2.38-$2.48 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%.

Speaker 3

Two current large customers have shifted portions of their ramp schedules, thereby pushing a couple hundred megawatts further into the year. While the timing has shifted, customer commitments remain firmly in place. 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're also building momentum across our business and reinforcing the foundation for future value creation.

Speaker 3

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 we'll 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.

Speaker 3

With that, I'll turn it back to Sean, and we'll be happy to take your questions.

Operator

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

Speaker 4

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

Speaker 2

Good morning.

Speaker 4

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

Speaker 2

Thank you. Thank you for the question, Whitney. The rate case that we will file this quarter 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. 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?

Speaker 3

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

Speaker 4

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

Speaker 3

Thanks for the question. We have filed a large load tariff, which we think really goes above and beyond the legislation that was passed here in Oklahoma, to protect customers from these large impacts of large loads. Also really above and beyond the recently White House Pledge in that area. 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 as well.

Operator

One moment for our next-

Speaker 4

Great. Sounds good. Thank you.

Operator

Thank you. Our next question comes from the line of Nicholas Campanella with Barclays.

Speaker 5

How are you doing? This is Michael Brown on for Nicholas Campanella.

Speaker 3

Good morning, Michael.

Speaker 5

Good morning. I know you're targeting to announce the NTC in the fourth quarter, would that be before or after EEI?

Speaker 3

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

Speaker 5

Thank you. My next question is, could you clarify the 200 MW that was shifted into the year, or is that correct? The ramp schedule of your two customers?

Speaker 3

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

Speaker 5

Thank you. That's it for my questions.

Operator

Thank you. Our next question is from Julien Dumoulin-Smith with Jefferies.

Speaker 6

Yeah. Hi, good morning. It's Brian Newson for Julien.

Speaker 3

Hey, good morning, Brian.

Speaker 6

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

Speaker 3

Yeah, I think in the notice construct, there's a process there where we would respond back to the SPP with the confirmation of the cost and the routing, and the in-service timeline for final approval. Then once that's kind of ratified, we're off and running. I think you should expect us to be able to deliver to you what the cost or the investment schedule is by year, the timing, and just any financing needs that would be associated with that. I think there's.

Speaker 6

Okay, understood.

Speaker 3

have a little bit. Brian, just to clarify that, there'll be a lot more clarity when we get the NTC, but it's really going to be incumbent upon us to ratify that with routing, schedule, and costs.

Speaker 6

Okay, got it. Any thoughts on the upcoming SPP ITP for 2026? There's indications that it could be much larger than the 2025 ITP, which Seminole-Shreveport line was a part of, which was arguably lower than many of us expected. Just wondering where OGE Energy sits in Oklahoma to participate in the upcoming ITP.

Speaker 3

I think there's certainly a lot of discussion about potential opportunities. The ultimate decision there hasn't been made in whether 2026 is going to be greater or smaller than 2025. There's a lot of different thoughts, a lot of different discussions going on. We're certainly engaged in those discussions, and we would expect to be a very active participant in the construction of transmission in Oklahoma.

Speaker 6

One last question.

Speaker 3

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

Speaker 6

Just one last thing on the SPP, the accreditations for new renewables seem to be becoming more stringent. Does that bias you towards gas generation in these pending 2026 RFPs?

Speaker 2

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

Speaker 6

Great. Thank you very much.

Speaker 2

Thanks, Brian.

Operator

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

Speaker 7

Hey, thanks. Morning.

Speaker 2

Good morning.

Speaker 7

Just to check in, has there been any progress on large load negotiations with new customers, and potentially, working toward converting those into contracts?

Speaker 2

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

Speaker 7

Got it. That makes sense. Any surprises just around what you're seeing in load growth or new customer interest in your service territory that would cause you to reassess, re-look at the load growth outlook?

Speaker 2

Nothing's coming to mind right now. Sitting here, Chuck and I are looking at each other and nothing came to mind. It's all systems go and full steam ahead.

Speaker 7

Yeah. Got you. Could you maybe just refresh on your latest thinking on when the right timeframe would be for revisiting the CapEx and the earnings outlook just as you chip away at some of the upcoming milestones?

Speaker 2

Yeah, the way you said it there is we chip away at it. I think Chuck and I, it'd be neat if we could tidy all this up in one big release, the opportunities and the growth, quite frankly, are just going to be continual. We're going to continually update this. If we receive the approval from Tier, 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 2026 for generation, you should expect updates there. 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.

Speaker 7

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

Speaker 2

Thanks.

Operator

Thank you so much. Our next question comes from Aidan Kelly with JP Morgan.

Speaker 8

Hi, good morning. Thanks for the time today. I want to pick up again on that growth outlook front. 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 CAGR. My question is, how do you intend to kind of message that outlook moving forward? Do you see any possibility of rebasing or a plus mark after growth? What makes the most sense in this backdrop for you?

Speaker 3

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

Speaker 8

Great. Thanks, Chuck. 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?

Speaker 3

Well, 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. Yeah, we'll look at it in chunks and discuss it as such as they come across.

Speaker 8

Okay, great. Appreciate the time today. Thanks.

Speaker 2

Thank you.

Speaker 3

Thank you.

Operator

Thank you so much. Our next question comes from Paul Fremont with Ladenburg Thalmann.

Speaker 9

Hey, congratulations on a really great.

Speaker 2

Hey, good morning, Paul. Good morning.

Speaker 9

Good morning. 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 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 significant contribution?

Speaker 2

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

Speaker 3

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

Speaker 9

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

Speaker 2

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.

Speaker 9

Maybe last question from me. For Shreveport to Seminole, is there any sort of determination on the split in miles for construction between you and AEP?

Speaker 2

We're still working through that.

Speaker 9

That would be known when they provide the NTC? We would sort of have the answer to that by then?

Speaker 2

Oh, absolutely. Part and parcel of that is kind of the ultimate resolution of the routing. Yeah.

Speaker 9

Great. That's it for me. Thank you.

Speaker 2

Thanks, Paul. Have a great day.

Operator

Thank you so much. As a reminder, if you do have a question, simply press star one to get in the queue. One moment. We have a question from Stephen D'Ambrisi with RBC Capital Markets. Please proceed.

Speaker 10

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

Speaker 2

Hey, good morning, Steve.

Speaker 10

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 what in Oklahoma, if you have a ROFR on transmission that ends up in your substations or in your service territory or how that works? I think there was some legislation, but maybe it went to the FERC, because just looking at the map, some of these maps that are in these ITP presentations, it looks like a lot of these potential 765 lines terminate at your substations.

Speaker 2

Yes. I'm familiar with that map. 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. Hence, that's the Seminole to Shreveport line. To the extent that there are lines that may be more economic or forward-looking, those would be a competitive opportunity. To the extent that a particular state has a ROFR, then that would probably trump the competitive direction that the SPP had. Does that help?

Speaker 10

Yeah. Did that get clarified in Oklahoma yet whether or not you have a ROFR?

Speaker 2

Not yet.

Speaker 10

Okay.

Speaker 2

Not yet.

Speaker 10

Stay tuned.

Speaker 2

Yeah.

Speaker 10

Okay.

Speaker 2

Yep.

Speaker 10

All right. That's all I had. Appreciate it.

Speaker 2

All right. Thanks. Have a great day.

Speaker 10

Thanks. You too.

Operator

Thank you so much. This will conclude our Q&A session for today, and I will pass it back to Sean Trauschke for final remarks.

Speaker 2

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.

Operator

With that, we will conclude today's conference. Thank you for participating, and you may now disconnect.

Powered by Quartr