OGE - Earnings call transcript Q2 2019

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Operator

Good morning and welcome to the Second Quarter 2019 OGE Energy's Earnings Conference call. At this time, all participants are in a listen-only mode. Latter we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to turn the conference call over to Mr. Tidwell. Todd

begin. may You

Todd Tidwell

have Good CFO quarter and Todd XXXX Relations; Corp; today of operator. CEO President Energy OGE OGE of Tidwell, to Energy Corp's Investor Energy I me with second earnings Steve and Trauschke, morning you, Chairman, welcome and Merrill, everyone and OGE Director Sean of Thank call. I'm Corp.

always, today, from we on from ogeenergy.com. Sean And an explanation Steve In I second to hear finally, answer would terms being follow at followed remind this will first and as of your questions. you along we will you may website the conference results. of call webcast quarter like our by is that

same and slides following conference be the call addition, In accompanying website. on will that archived the call

I estimate states to to like begin we Before an direct regarding statements. presentation, simply But we Safe a cannot I the requirement Regulation This the and results. is that in attention SEC statements, guarantee forward-looking for like forward-looking G is there would statement the Harbor financial our financial your reconciliation this gross for to would remind that also margin date. to you appendix. best is

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

Sean Trauschke

to in on Enable's Thank compared for a portion details and perform share on of $X.XX you, earnings for $X.XX per $X.XX quarter second morning will in are our per continue were Steve this thank discuss morning, reported the share joining and Both plan of to per $X.XX share today's earnings The well moment. and year. you the Todd. share. businesses Good everyone us we Earlier of utility call. consolidated per XXXX. earnings

to now, quarter second I right our highlight But want achievements.

the more new added we second than to X,XXX quarter, last year. the quarter compared customers During

the we've percent New quarter customer new X%. around additions two was fifth seen mark. customer this This is growth approximately sales

helps rates efforts paying our positive and offset It efficiency. is are this dividends. economic development and Obviously, energy does appear

know, you growth. comes in terms of together, All as of this load

increase above are these on historical rate City is growth with put center The our load which par load below X%. in I've mentioned is on unemployment which closely we statistics previous Oklahoma watching national calls, and our largest unemployment average, Oklahoma's As X.X%, at economic clearly X%. could positive trends, the latest

Overall, an our strong service is standpoint. from territory economic

& expansion For example, announced Air at Base. Pratt multi-million just Whitney the dollar Force operations Tinker

our are there have a addition, announced of other expansion over that or In in new companies service dozen the existing investment territory. facilities

high often in primary rates reliability decision-making are as cited factors their Our and process.

affected flooding in normal, the to mild reduced Operationally, we weather. and very the for historic The by earnings share has weather despite second to mild $X.XX perform continue per compared well quarter year to compared weather earnings normal, $X.XX. by

we our objectives. is on proud for to everyone financial continue here to continuing and news of good to XXXX deliver our The customers, are achieve these plan for deliver I'm results.

In per fact, for our has years. been customer five O&M flat cost

The record Arkansas service typically was in caused some Many rainfall second year severe this our quarter that historic by areas. in and of parts weather, and different. territory is impacted no flooding experienced Oklahoma

plant. power Muskogee including Muskogee city the was hit hard Particularly

also than more had floodwaters. in partially submerged substations We XX fully or

restore power worked quickly members to safely. Our tirelessly and

The XXth, with we winds third our was upgraded Arkansas, a there, XX circuits of about resiliency our dramatic. of firsthand We've technology. hit these investing on upgraded and service territory In in Arkansas of enhanced the grid saw May circuits major benefits approaching the mph. storm

we of damage, improved interaction this minutes performance, demonstrated less We of look Armed level saw making were the the footprint. structural similar investments XX% to our forward circuits. legacy across no than entire with customer

they fleet, testing Valley our and integrated June. megawatts are into Plant, our Sooner scrubbers have planned. newly our the operating the Plant River A as highlights we At Power and flowed for completed few successfully other first quarter, the we acquired on in the

Turning order reached review Sooner to Muskogee our settlement also recommended provides investments for most recovery law of plants. environmental This final journey the compliance investment approval in judge and in work this issued once be our rate environmental and only to millions regulatory, Oklahoma journey we complete. dollars, also that will full the The of many is investments decade-long required of a hundreds recent SEC, pleased administrative hours. millions but of the of not

accomplished the behalf diversity. that on to customers have settlement. I generation I fuel of goal advocate cost our to continually accomplished, believe low with maintain we reliable We have

were since and invested XXXX our rates than more years today billion we've fact, system, eight they $X in In lower than ago. customer are

Poor's surprise no Standard as rates lowest & nation. the OG&E a is recent comes highlighted it So article that in having the

many have the of no hard but of working they company. goes greater performance achievement, make share level to that Make women and We no credit partners this men mistake, in our this possible.

and to forward, will develop Moving the to we parties, key continue with Commissioner mechanism work for our staff distribution investments. recovery a

many investment included have capital are projects, the update in we not And customer-enhancing forward, As move continue stated as forecast. I investment will that in past, plans. we we to the our

they and of rigs Compared operating earlier them. Turning second in quarter the to Enable increased to this their and by distribution last of holders across the up the SCOOP the board. rate currently on dedicated operational to has financial are Enable, STACK reported results, solid unit their measures year, X%. week, XX% and call to

XXXX, the have distributions of in than more OGE received billion end partnership. the $X formation By the since will of

important. and we heard You've me is lot solid, is say momentum, a core most before to that of me have our that

way just We your success. a in invest assets, few have we a your good and long what communities, come were drives customers, years of care is where manage ago. people, your from take We've that

reliability sheet lowest system. added strong. upgraded We've We've and with generation. higher industry-leading the the the are new nation. rates We've our reductions, along and enjoying are in metrics Customers emissions financial achieved balance

So to I of closing, the I how pleased businesses. in with want both performance am reiterate

value. long-term to to creating growing We continue committed our communities, shareholder are on our growing business, and executing strategy our

to call Steve? second I'll Thank for turn now review Steve the and financial you, quarter. over results to the the

Stephen Merrill

morning good everyone. and Sean, Thanks,

quarter, or in share $XXX second income net of XXXX. to of per $X.XX we share per the compared reported as $X.XX million or $XXX net income For million

on contribution a $XX business or is OG&E, to the listed income million net $X.XX or per as $XX XXXX. of slide. At income on net The the share for share compared unit basis $X.XX in quarter by was million comparative XXXX per in

on margin decreased Second I $XX discuss approximately the quarter gross at will next Utility million, slide. which the

the second expense when plan. expense Looking the year. work other million for approximately key is performed increased O&M at to compared of on due to drivers, O&M primarily last year $X timing the quarter

were assets were and expense approximately and $X placed decreased $X costs. lower million, AFUDC certain service. million Interest $X debt into expense increased Depreciation Equity projects due decreased to million, primarily as completed average

Finally, expense pre-tax income million income. lower to $X decreased tax due

decreased million, were utility margin, quarter, gross mild due to XX% for second to Turning gross $XX for XXXX, $X weather weather, approximately largely $XX margin cooling mild weather. lower, reduced Compared degree growth by margin million. the normal of the new quarter quarter $XX million second by days to margins customer by reducing to million Partially offsetting increased margins compared mild approximately the the quarter. the

to I to regulatory on touch schedule. Enable, the move on want we Before

of discovery review rate is acquisition Act the report this approval on the we ALJ mentioned, received conditional the expect For approval We July as order the recommended week, XXX held XX. that in In Oklahoma of was on our filing, we ongoing. Arkansas, an and capacity exceptions soon. stipulation. made received The filing hearing we Sean May

You'll mechanism environmental investments. for recall compliance the this is that rider used

our regulatory lot the And finally, of to year. proceedings of X will the been to for a of plan file we There's report conclusion. rate as formula work year, second activity this evaluation we October many a on bring this

to the segment, metrics investment the part strong. increased gathering Gathering a and volumes. solid processing solid Turning in Enable due their They and to in in are to acquisition quarter continue our growth see had Velocity Enable, which second Crude financial

amount distributions addition, million, Midstream in XXXX. second approximately of of In quarter same made Enable the received $XX cash the

utility dividend announced going This to and week increase to an basis supports that by investments the a total their distribution unencumbered annual million Enable on increase quarterly $XXX annual This approximately cash distribution. growth. will is million, This bringing forward. our $X.X X%

to the both utility outlook, XXXX Turning remain and guidance unchanged. consolidated

know, you the As will half third quarter. over in earnings our occur of

answer This will questions. concludes our now prepared remarks and your we

Operator

Bank the Our Instructions] America. from Julien of Dumoulin-Smith question of coming with [Operator first line

Your is open. line

Julien Dumoulin-Smith

Hey, good me? you hear morning. Can

Sean - Trauschke A

Julien, great, morning? you this are Hey, how

Julien Dumoulin-Smith

Thanks for time. the Hey, Great, listen. taking absolutely.

how So, budget year? late, that all well, first you off, think further front. curious the regulatory significant do refreshing about capital this evaluating progress seen great have prospects of be progress of I'd on especially just the and given investment, you the

Sean Trauschke

Yeah.

update come we're there. I we've to how about forward over continue going think And is the customers with plan. We're done an our the to as investment commission the up everyone in this there. and short we'll past, with working with answer outlook So staff proceed arrangement then to our

the and updates order But for want then our filings projects, Sooner to and that first follow in get things we'll we subsequent first, up the with hand expenditures. capital to

Julien Dumoulin-Smith

And would I on have a this suspect, grid month? principally focus

Sean Trauschke

Absolutely.

I environmental slowed think out We of a smart slowed this adopting. the of our to lot that down. going while through we we we that technology -- were there, and said leading before, probably compliance the were put we've meters plan, down we were there we've one first advancements out

there a actually kind things behind. So, can we're in is back good our benefit up, customers. ahead of I we're that to we my will of little lot mind, catch want probably bit think us we still while others, do And of a and

And government real to recognize making before be people that to here, terms that I were think These of we think filings, the in the are I'd able mandates. were their you make are I for these different just from federal large investments operational going things know, perspective, that regulatory point other the benefit with savings. are a to comply lumpy, were

Julien Dumoulin-Smith

renewable I that good are some some process at if of regional with talk thought your perhaps have at in success all, of brief, And where in these Excellent. follow all? tariff, and we've voluntary that if peers respect you could seen to

Sean Trauschke

in become where activities are a bad is we good now we're probably customer-facing than shape are word. more tariffs standpoint, on from and We're generation really focused a really right

Julien Dumoulin-Smith

opt but renewables for for No, I'm own those sorry their like voluntary program who pursue a merit? to

Sean Trauschke

take to it. those so building system a question. for That's it's can well, misunderstood solar We're we've community subscribe a program, our And to that pretty from arrangement and okay, basis have be they subscription them exactly access set farm. a your solar energy the well. their on distribution how customers seems farms Yeah, want I working where where to that on up solar

Julien Dumoulin-Smith

like Got the a not sounds it your But meaningful for outlook that's capital it. driver, of time...

Sean Trauschke

No, it's all It up incremental. now we be to but going customer in we will all as there be it'll I It's be build go. incremental incremental mean as not subscriptions.

Julien Dumoulin-Smith

of all best Excellent. the and luck. for time Hey, thank you

Sean Trauschke

Well, thanks, Julien.

Operator

the ISI. question Evercore next Our from with coming Gordon Greg line of

is line Your open.

Greg Gordon

Hey, good morning.

Sean Trauschke

good Greg. Hi, morning,

Greg Gordon

for guys guidance for be of the I the fact How -- know I at at low look it doing? the year, are that... range, you is and focus the Enable like guidance that empathy you earnings have to on that going cash So the flow more looking looks I'm end the

Sean Trauschke

Right.

Greg Gordon

generates it midpoint of would That math, higher for the guidance for than Enable said, this utility fiscal being seem like of year. to to any the That doing for business end get you to the earnings given the guidance have just the rather range year. you'd hit

So us given on are completely range utility is a the where the the not you'll think utility, What summer the that guidance for sense of range you year? can drivers guidance behind for be almost give us? you the and but within the

Stephen Merrill

our what mean, and half our I that affirming in the XX% second of year. guidance approximately Sure, we of earnings Keep said mind consolidated. the at is we're in occur Greg. utility the

happens not that of opinion So over, the of summer's in few XX% I'm months. next the

we a at ahead but of us, lot we and So where consolidated are a basis. we've utility good year on feel got about of really the

Greg Gordon

would Okay. is you've because end that, that bit the range. low a and that I Enable little at likely be given concerned of the just $X.XX consensus said

utility a guidance You'd of have for to lot to the to notwithstanding your range be right? the to of that end uncertainty, that towards get number high range the compensates fact the that

Sean Trauschke

where about just utility But consolidated we good I on will correct. the basis. feel are at That's we affirm very a

Greg Gordon

as question a done your over Oklahoma, obviously and pending place getting Okay. you've by decision. several last decision with evidenced good is, work the second in rate the the years, to last the a And yeoman's regulator

need in utility to generator, growth Julien's such a is for equity. rate And don't and robust to guidance X% the question, Enable cash earnings on to dovetail base X% part issue because flow you your

still that perhaps the of delivering X% as good technologies, have you grow benefits, Do these new with all very, a much any or than us there year, while some faster you capital can I is ability combination very for see given gives and spend limit to in it you which of think deployment the comfort longevity some or agree just, bill significant how about your customer spend the customers, a you outcomes it alternative practical both? and is is or just the to you of

Sean Trauschke

Yeah, to -- And spot a Greg. great your me of part latter we I last, and the We're think was of have let comfortable very the really so question, that's I objectives. mean list try was, kind a question of long on.

So short on we that we're not opportunities see. investment

the So them, everybody what issue these and opportunities. the with staff we're work customers, real with and have commission is we're and dealing to period going over our we

Okay.

mechanisms the or a lot years. the certainly over of we we is the to customer that. spread down recovery and benefits, going timing to that four It do five really sooner, So could more and could boil

there shortage opportunities, is of investment that don't very element. But we're I a on think bullish

working we I interested we're of how the the over spread is all through think with investment that now parties what horizon.

Greg Gordon

that before where the shaking think question What of to a for the conversations do we when get last us sort I spend having parties you size how and that sense the out, spend? relevant is you, get that cede and all the the floor. be timeline might to with other of milestones and in the And or might duration of the is the you're given an shake update the of, out as from we

Sean Trauschke

Muskogee final going forthcoming Right. begin plans, to for us more about And more more the talking you're get think and we're see we Sooner going what's next. order I to be after

Greg Gordon

Have guys. morning. a you, good Thank

Sean Trauschke

Thanks, see you.

Operator

[Operator next Goldman of with the from Instructions] line coming Our question Insoo Kim Sachs.

open. Your line is

Sean Trauschke

Insoo. Hello?

Operator

Partners. with question Our next Pourreza Guggenheim Shar line coming from the of

Shar Pourreza

Hey, good morning guys.

Sean Trauschke

Shar. morning, good Hi,

Shar Pourreza

think just my just if Oklahoma, Can CapEx Oklahoma and questions you in of placeholder that of and but six, to incremental you you any have guys Can about guys most sort remind mod. in you just growth rate four grid were answered, of mod there the is grid capital. in -- amount us around around

and forward, of guys you that that your plan when number? is you have So bring kind of sort guys already you sort amount reserved present of there in an it

Stephen Merrill

the CapEx is would that we Yeah, way on solving necessary that's customer maximum meet what the those so, bring that I to necessarily that Shar, answer benefit. rate, we're the focused aren't growth is for projects

our projects are adequate those I to than think more hit growth rate.

do is what that actually focus. just delta to have our on greater just can the that, you think that. know opportunities I We we our to And customers, math results in and that want ensure that's we're bringing

Shar Pourreza

But when guys, grid it. to that Got placeholder make just there you a mod already is in... sure for

Stephen Merrill

there mod grid plan some already. in is those yes, So, CapEx

Shar Pourreza

of your to I a so already whatever is there net make plan is, announced when What for... you in that included sort want sure, plan you've amount there

Sean Trauschke

That's correct.

Shar Pourreza

...grid.

July? question, one the is That's then far so you. thank Okay, and how in weather

Sean Trauschke

heat index was Weather today, good, up. July basically and heating it for the is XXX August so is was normal about

Shar Pourreza

much. it, Thanks, so thanks Excellent. That really was guys.

Sean Trauschke

care. take Shar, Thanks,

Operator

next Peters Wolfe coming David from our question with Research. of And the line

Your is open. line

David Peters

good Hey, morning.

Sean Trauschke

good morning, David. Hey,

David Peters

starting some distribution some its in when now and guys to just CenterPoint maintain you of to to investment just kind And curious the IDRs. the see kind maybe I'm curious partnership? sustainable, just with in now the grow of think with again, value realization their if thoughts then that's might updated you any Enable of opting related, I'm expect

Sean Trauschke

Sure.

to headwinds had of done Enable significantly. the coverage overhangs cycle. gone. managing see say, two are pleased has were So distribution grown certainly difficult very I'd ratio of Their good that a has major, job we Enable the distribution a or And increase. through

ownership, that positive previously the was a the that's a Enable, headwind That's position. a lot out gone. for was for a concern I of bit about XXD Certainly, was exited mean CenterPoint there, they've Enable. That's positive ArcLight's of there development.

of So, this right distribution I'm that the to kind Enable about speak distribution leave going time the felt growth. like was excited that grow Enable [Indecipherable] We're growth. growth, to certainly distribution. future to to to

see pointed it's to like IDRs, not that's to We'd more real much step out, value. into and the to take as going more you

the value we realized see shareholders. of I As XX% IDRs, to the want for and have you that benefit know, those of OGE

the so, to of what direction speak that focused continue mean, that distributions really that's And right we're to better can't distributions grow. on. hopeful I future realized. Enable I see served Enable to for value We will that's we're now. but really That helps? want

David Peters

Thanks, yeah, absolutely. you. Thank

Sean Trauschke

Okay.

Operator

next Our question Kim Insoo line coming of Goldman from the with Sachs.

line open. is Your

Insoo Kim

Thank myself. you and apologies, up hung earlier I mute the while trying phone to actually

Sean Trauschke

that. can't done I never think I say I've

Insoo Kim

so a out of It's earnings season, bit there. the little end

of getting back that base will this just and/or Just, get maybe be in know forecast case, the updated what upcoming the post you rate this we but forecast growth I an of growth terms don't the rates covered while with out tandem if giving growth assumptions? payout on was was dividend, of the guys in dividend

Sean Trauschke

targeting should XX% to I that. outlook CapEx of well. dividend kind as coincides expect we Yeah, think a you with we're X% and kind We're, outlook an said the total as before, that with return, of

Insoo Kim

utility those then more business jurisdiction, gas customer less And to is the XX% in probably your industry I know limited, customer than and of the base. your exposure Understood. and oil in

But recent any area, and then or slowing the the you down headwinds just faced customers in moving some indications that of given of away? seeing by growth are more industry

Sean Trauschke

overall really of customer No, there, your I a component think assessment it's than haven't. mix once was. And of we less it our

movement but and So of diversified, economy actually like from in seen sector the that that. electrification nothing from more if compression positive only we've is much more things

that positive actually business. seeing of we're results out So

Insoo Kim

Understood. Thank you very much.

Sean Trauschke

Thank you. Take care.

Operator

further to showing closing would Mr Trauschke I conference like Sean to over back remarks. time I no at questions, this turn call the And for am

Sean Trauschke

today, of in the OGE a thank all for most to you Have importantly, call you day. being Energy. for Okay, interest thank great you. you And and your thank on

Operator

This program. you the in today's thank participation conference. for Ladies and concludes your gentlemen,

Everyone a disconnect. all may great have You day.

OGE Energy (OGE) 8 Aug 192019 Q2 Earnings call transcript