Welcome to the OGE Energy Corp. Q3 2024 Earnings Conference Call. [Operator Instructions] 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…

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 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…

[Operator Instructions] 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?

Yes. So they've made some announcements here, and we're awaiting some notices to construct that we expect to see in December. And there's a process by which you go through and finalize your estimates. We will do that. And just like we do with all of our -- like the generation stuff, once we nail that down, we'll layer that into our plants. And as Chuck mentioned many times, we've got a lot of flexibility to kind of move things around and -- but that's just another lever we have to invest, and we'll pursue that. But yes, there's some opportunities there.

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 think you kind of help me answer the question there. Good question, Nathan. But I think what's really going to drive that for us is load growth. And we've been really blessed with what we've already experienced. And what we see in the pipeline for many years out, it's not waning. And so it's very difficult to kind of forecast with any specificity more than a year out of what we're going to see when it comes online. But as the growth materialize, we're going to deploy more capital. And it's -- I think it's intuitive to think about it in terms of as the system grows and we add more customers, just the number is going to continue to rise in terms of our investment capital. But as we think about it, our ability to deploy that capital and spread it over more customers, and that's what we refer to as that sustainable business model. And my drive here -- our intention is really to focus on to keep this going for many, many years. We're not focused on kind of a 2-year blip. We're focused on a very, very long runway as this continue to materialize.

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.

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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, Constantine, 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 time lines, 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 the -- I'm ready to commit to kind of a change in asset mix yet.

Okay. And then maybe a last one on load growth. You're kind of trending to exceeding your guidance -- or assumption range for 2024 just on a year-to-date basis? Do you envision any kind of incremental CapEx or pull-forwards in support of this higher near-term loan growth? Or is there more focus on executing the RFPs that we talked about?

Chuck, do you want to do that one?

Yes. Sure. Good morning, Constantine, so I think that the two are really related in that. And you take a step back, we've been experiencing this load growth now for -- this is not a new phenomenon for us for multiple years, really since coming out of 2020. So we've been planning for it all along, and there's definitely a component of that in the RFP that we're working through. But as Sean mentioned in his remarks, we remain in conversations with multiple large-load customers. And clearly, we'll address that as needed as the time comes.

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. Just on the load growth seems to be accelerating with each quarter. At what point are you going to put pressure on the projections in the IRP that the RFP is based on, meaning is there any scenario where you might need more -- you might have a greater capacity shortfall than what's identified and i.e., the more capacity and/or investment?

Yes. Brian, great question. And so this is -- we file the IRP every three years in both states. As we look at this in the last IRP, there were a lot of assumptions in there. Some were aggressive, some were too conservative. And so as it all washes out, we have to reevaluate that. I think it's -- and I think the big assumption chain in there is that there was an assumption for a capacity reserve margin in the SPP of 18%. It actually turned out to be 16%. So that changes some of the numbers there. Notwithstanding those assumptions, you're exactly right. Growth is developing as we expected. And we're considering right now evaluating whether we should file a new IRP just to update some of that and look at some of that. That's something we have the ability to do, looking at availability and all sorts of other factors. But it is increasing. I think the other point I would just share with you on the load growth is we've been bullish for a number of years about the growth, and we're still bullish for the future. And -- but the growth isn't linear either. It kind of moves around, but we know it's going to be outsized from historical levels. And so that's the other variable we're managing here is trying to really pinpoint exactly what year, what quarter some of these really large loads are going to come into service. But your thesis is right. We're considering that right now, and we're contemplating all of that as we make our final determination around the results of the RFP.

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 -- being incremental 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 accurate. So a large portion of that is allocated to others that would pay for that. So that -- you're exactly right. The project you're referring to, I think, is tentatively slated to be in service in '28. And so we'll wait, receive the NTC probably next month. And we'll work through refining our estimates and committing to that NTC, and then we'll update our numbers 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?

I think the way we're thinking about it is we want to make sure that this is low debt, is accretive to our existing asset base, to our customers. We want to make sure that, in particular, our residential customers aren't impacted by some of these large loads. And so you -- we're working with a lot of people to make sure you -- I think it really comes down to cost allocation, make sure you get the allocation of the cost right. That's how we're thinking about it. Whether that ends up being a special contract or a specific rate tariff, we'll work that through 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.

[Operator Instructions] One moment for our 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. Paul, I'm sorry. I just -- we're not allowed to talk much about it, okay?

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

Yes. As I mentioned in my prepared remarks, I think we still expect it this year. The issue that is out there has nothing to do with the settlement of the recovery and the rates or anything like that. The issue is around cost allocation of some larger loads that we serve -- that customers have come to us and want us to serve. And so I still expect that to be done this year, and we'll move on down the road. And as Chuck mentioned, we implemented the rates July 1, and so we've reserved all that, and we'll be ready to go.

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. I think -- good question. We haven't got there yet, right, Paul. And so I don't want to get ahead of ourselves here in terms of start thinking about financing. We're pretty intentional about making sure we have the regulatory compact down first before we put it in our plans, and then we'll explain the financing. But longer term, as we go forward, we recognize that our ratings are important to us. And so something that supports a 17% FFO-to-debt is probably the way you ought to think about it.

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.