OGE - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Earnings and Business Update Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to, Mr. Investor of Director Bailey, Relations. Jason sir. Please go ahead

Jason Bailey

me and Thank Energy Energy OGE Jason and Director And CEO everyone, Chairman Energy Sean Earnings Buckler, you, and good Bailey, CFO with Relations. Investor and operator of welcome of I Corp.'s President Corp. I'm have Trauschke, to Call. morning today, Corp.; Fourth Bryan OGE XXXX Quarter OGE of

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

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

now begin and to an we This states statements. attention presentation, direct regarding Harbor to estimate statements we is cannot Safe is forward-looking the results, like financial your simply statement for I'd but the to this financial our forward-looking best to guarantee also gross that SEC requirement opening Before date. for is the Sean? Reg the there a remind earnings ongoing I that over his to you, reconciliation in appendix. will to reconciliation call GAAP and G earnings Sean a margin for like of turn comments. I'd

Sean Trauschke

and morning, us. morning. happier joining with X on off this the call Thank for you to today's on us with great Bryan we today everyone. well hope him to I couldn't be have by started us Good It's with and you, call. like morning Bryan Jason. thank I'd all of you this be to January welcoming to are certainly and you start

So, business. turning to the

gas of resulted the peak an cold resulting demand electricity. our also couple The spell for supplies, a territory, natural in in spell cold region, course winter a experienced including that natural extreme prices. weeks, disrupted the gas Over unprecedented prolonged service of record

customers the course record employees, experienced temperatures, experienced fleet the efforts snowfall minimal disruptions. and generation territory the our of of our week. record Through over our service our While admirably performed

the gas of conserve day, could natural so our power generation electricity, each at plants. be heeding that customers, And serious did so call shortages online avoided. our Every we more to had and

costs range be Our and anticipate alone result fuel created, of $X billion. event a power purchase storm purchase in We regulatory than of for power were million $XXX as this asset fuel to our to approximately more costs will that the of in and XXXX. the be the all

continue XX-year included weather to events the be will liquidity proposed a a regulatory customer. to cost. asset bear the XXXX yesterday, of it customers, fuel cost requesting and our of we an event of will approach this cost To the bills. over $X XXXX. impact certainly for of to to balance calendar secured over that our avoid events at understand our Corporation mitigate help We work to year. this defer We treatment end, our the and and have we average a in the cost books to beginning entire January to capital, the clause, We that we customers requesting commissions the adjustment pressure will amortized to Commission, asset the of lessen that We to on billion help the an with weighted mitigate cover additional a financing at carrying or weather adjustment to are intra-year through alternative impact cost our our customers our the To the charge these bank collect the costs. weather requested a monthly fuel the we balance the event regulatory Oklahoma of have filed having remaining significantly carry on impact believe period, and application portion on customers' OG&E regulatory

We financial XXXX of the Bryan will filing in discuss moment. quickly as well. similar February make the weather a event effects Arkansas expect to in a

to of proposed an and merger which repositioning Transfer. times shareholders. Enable after-tax utility. over has with more important shareholders, between for will support CenterPoint a billion Energy made step for consideration and investment much in the Turning successful to we of announcement Energy to formed in at equivalent From investment $X Transfer, an $XX return our in merger a last partner million units into Enable's Enable. returned approximately of very week we our the been an Since is limited acquire interest perspective, will benefit the as Energy us Transfer closes, modest Enable million. own pure-play aggregate from is We our after-tax general will return. which X.X point the $XX pay also us liquid a When X% partnership some cash XXXX,

will a midstream Energy agencies. overhang us will We responsible units how this from the us allows let goal expect on Transfer taking and balance taxes to allows we and that of considerations. does in the the investment be we exit market do to The consideration when we to achieve transaction thoughtful But close to lower exit be thresholds clear, our distributions strength rating and into so downgrade create way credit sheet year. our our me of later not

$X.XX this earlier of financial earnings reported our to morning ongoing results, share. per we XXXX Turning

high from We of also $X.XX $X.XX our share. guidance of earnings reported per of OGE and holdings earnings revised ongoing at end the

from is per rate. load guidance X% this EPS utility a XXXX $X.XX growth is X.X% share. is of to per to XXXX is The Our guidance midpoint $X.XX $X.XX equivalent normalized and off and share range growth based

off our rate of earnings Additionally, the midpoint of are guidance long-term $X.XX. growth that XXXX is morning this X% announcing we based

February to a the impact me take discuss an let higher. So due does that sales moment temperatures, item from the to XXXX. extreme Obviously kilowatt-hour weather were event

by senior is provides their which citizens subscribed bill. one largely offsetting is and the and programs around Guaranteed monthly a Bill lower-income and However customer program households Flat annual our is this voluntary of uncertainty program

expense the this under program. fuel We will incremental incur

thankful and the with are these the had into fuel will certainly commissions unprecedented we've of and our the go XXXX guidance. XXXX he bills. when in of and more details results to customers Oklahoma program mitigate working to this benefit during Bryan are impact that been Arkansas discusses increased cost to event and We customer proactive

X.X% Turning reported Arkansas our Arkansas Bureau December to and our U.S. The strong. grew economy, had we In and impressive recoveries continued our an Fort base growth by Oklahoma remained Labor the Smith customer of Statistics at rate customer the and X.X%. economic and economies resilience and of in state across service while X.X%. territory. the of had unemployment at rate X.X% seventh metropolitan Oklahoma's of showing our areas strength lowest the rate the rate Oklahoma came at large City for unemployment unemployment

jobs off. our development $XXX service capital economic certainly Our and are investment by in businesses paying territory XXXX million additional efforts XXXX, XX projects of had our territory. we in service In

recording out in mild our securing last We role the resilient not Oklahoma we in continue customers safest accomplishments most teams customers. our the storm how a ice significant each accomplishments. for was Year's Eve to number including Turning challenges expecting recorded were crucial history company played system close enhancement kicked certainly unmistakable. weather company not unusually in snowstorm of miss more We its for anything our in five second the a New mechanism in The year employees. in effects as and of investments a beat, through destructive however we up years protect our weather year world but was making reliable provide of October and off year our did communities a the to set our of XXXX, projects the summer our excel of COVID to a life way support grid adjusted quickly which the last The in to safest late year and our customers. history XXXX for weather life recovery and to our ever. From the will to energize processes an this

in new case by are in constructive With negotiated filed April. a expect increase same that restoration successfully final in that for these seen these Oklahoma enhancements We fewer we a positive the outages commission awaiting In provide are rates allowed we've year. order including Arkansas, last grid much expected our and to and maximum third times. Arkansas results the faster settlement formula rate we plan the our customers and permitted that

to XXXX, grid Arkansas several and have exciting projects. and file Oklahoma Arkansas enhancement the our of Looking continuation items integrated we ahead the resource in year. later an works both We'll Oklahoma including this in plan

for formula will the Arkansas file our next and plan We plan filed of to which rate later than filing be our general has Oklahoma 'XX. first review fourth our quarter no we'll rate in

later Arkansas We are and expect it our summer. farm solar to this in first be operational constructing

really exciting are for finalized the working that around And of I you working and We our understand we sure been that certainly have and they're lot to want couple some have make a these months. next announce, lot we'll on we've time in communities. over a projects

proud system. our ahead I'm five we've accomplished And billion what in our in what So lies years. for last And invested the we've of $X.X company.

lower of XXXX. cost was end O&M is per customer the Our it than now at

XXXX for And not O&M, shareholders will that, deeply real said, savings by to year-over-year. serve. and objectives form in forward. driver below XXXX. cash we $X.X compound more shareholders billion the our we rate top structural real, And guidance active in you of the rates sharing long-term If look responsible at some in emissions Utility. and been cut our more of That's the original committed approximately annual XXXX. in our stewards. regularly we would than guidance be nation. at We'll are are And to X% growth were economic initiatives. We've development benefit those ESG of our they're going key customers. lower And that communities. we our for of they be advancing We're now of our dividends, delivered growth our for it's communities greater a XX%. returned what We million a if these COX We've deliver always on in in lowest the stories and embedded consistent have delivering We're results, than $XX

target compelling solid a earnings of our and a expect look between of XX growth thesis, have growth experience. or last delivered backed compounding annual our by our customers' you rates And in deliver to X% improve we record true five X% and the investing lower-risk investments to X%. track years to by keep performance. commitment When over that We on investment we've

jurisdictions in industry and which We delivered balance in increasingly of regulatory growth. real we operate dividend have supportive protects load outcomes. have strongest our one the And the that customer are experiencing sheets and

our should shareholders OG&E. and decision to in own You your confident invest be in

to proud anniversary is earned care better throughout health a Hero, occasion. Before way donation our celebrating close, to last heroes, their no care year. health efforts. And to By this OG&E we're especially I support workers mark frontline critical its XXXth title of our can make month. this I have honoring the $XXX,XXX month this the think

accomplishments XXXX results We those are of continue to deliver and our poised to proud in in XXXX.

has Thank winning the on I COVID you I'll all we're to winning the Bryan? downturn not the While but And over that confident, impacted to want all call us, of of be turn focused recovery. you. now Bryan.

Bryan Buckler

Great. will and Thank results current XXXX slide outlook, likely everyone. good weather impact on earnings. year to a XXXX discuss like and our and Starting to morning February the negative events, Sean, XX financial extraordinary you which effects I'd this on you, from the year's have update before we

and temperatures our company were mentioned, when fuel million $X Sean XX in on $XXX range degrees power between costs. life-sustaining below and XX for the average, keep in the the incurred purchase to of to power customers in billion As days degrees order XX during

or week Southwest coming place. estimates obtain $XXX the With be the Pool credit these We up funding to will a credit we important from will we firm an weeks. in on once Power requesting under agreement portion to commitment week, respect this funding standpoint to file that have felt Thus, recovery collections Sean fuel tracker incremental this events for in source. a allow mechanisms the In costs we over million intra-year Arkansas. intra-year adjustments are a Oklahoma, mentioned, fuel the year. purchase Oklahoma we the exceed as Oklahoma adjustment weather in and application settlement while We for to receive $X From it for power billion fueled able of cost in filed an cost facility closed allowed And both, once fuel liquidity. to company already and cost. ample a in we an and a million $XX statements has

spring, revised effective rates expect We this our to tariff credit to become in providing this metrics. support

accruing the place approval remaining regulatory Oklahoma the our our at in For asset in a to cost, seeks of capital. deferred weighted filing cost cost commission average

for of XXXX summer quarter results employees work as loss in you of to mild possible. per year XXXX. mitigate lowered the investment our also XXXX Switching share Oklahoma that year was headwinds an by income of the relentless the of million year $XXX net ongoing XXXX can per million or earnings or compared XXXX. of savings to the were than were a unfavorable recorded as net results. and cost July $XXX On implemented we slide first Corp. XXXX, or deferrals, compared rates were Midstream reductions We reflecting compared obtain in as To full achieved a of quickly see gears weather with in that reported will from review favorably impairment and share the per commission the OG&E's plan. On and our to to pursuing affected in $X.XX late income work XX charge O&M order ongoing basis our lower the XXXX, original OGE Enable share full significant GAAP Results new of economy, $XXX a by $X.XX $X.XX weather the XXXX. prior rate $X.XX on as in Energy resulting $X.XX. to million

top We also Formula quarter our plan of able which XXXX. of narrowed that a earnings management Rate to our hit fourth $X.XX in steady utility our the earnings call, share. XXXX per And growth were continued $X.XX we range to see the revised from through OG&E due third strong end we contributed to range. to O&M of On quarter, guidance in Arkansas $X.XX

up Our sets us XXXX strong beyond. finish and XXXX to nicely for

expectation at level. indicated Turning declines slide an year we of to that On load XX. year full about load the third on call, our and we of X.X% quarter finished

the continue in class, Over of profitable, we residential customer to XXXX, classes. resilient we've throughout our pandemic. improvements all the most at last levels remained month-over-month four see The months seen

forecast providing a for XXXX X.X% was load to XXXX Residential and early in forecasted as XXXX above growth but and return growth ahead customer XXXX, residential the to is customers to is load be look XXXX. to customer X.X% to XX, the then levels XXXX XXXX above Importantly, On be expected year, full Slide in solid X.X% expectations foundation below workplace. in for XXXX about more levels. exceed levels we levels year, below load -- the load

XXXX expect For the our earnings commercial, vaccinations industrial second slide. the XXXX a believe be the next on become load commonplace we as and positive have load public Overall, authority to growth strong, illustrated as economy in to in customers, of half will XXXX, contribution we comparison and continues its recovery. to

to previous XXXX at As share annually February, OG&E, line we $X.XX is in our which X% of deliver a great of into had of our ability with $X.XX. confidence earnings per guidance we our of in headed off growth baseline

with the $X.XX. the midpoint of our in line in XXXX EPS to of XXXX be ability and growth have to X% guidance confidence X% our continue at expect We long to term grow from

for $X.XX contributions in grid along growth from recovery XXXX load just discussed, EPS mechanisms our with assumes normal weather, guidance earnings Our as Oklahoma. solid and enhancement initial I other

also revised expect to Arkansas. steady rates from contribution We formula the earnings see in

Lastly, build achievements O&M our we cost will on in reduction XXXX.

finalized February did earnings evaluating. impacts event. are not plan, Now, unprecedented are weather There when that we we our foresee we initial three primary XXXX this

margins is be of unfavorable up. power costs to expected to offset those $X.XX fuel month, in whereby of contribute Flat earnings the with February with not by X% will associated effect load volumes but this retail trued higher The Approximately Guaranteed expect net and associated are be Bill EPS. on will the variabilities month is an for our more we of program. program, than First, purchase during costs the fuel

we of Lastly, incur to $X approximately to expect the $X.XX with financing billion aforementioned $X.XX debt incremental costs associated facility.

quarter during in the We also EPS and weeks, XXXX provide mitigate will $X.XX on an these our exploring estimates this guidance of ways update first refine coming headwind while we'll call. to

For appending given not this year, we not guidance the guidance the issued Enable merger. has will Therefore, be midstream consolidated time. the providing earnings for business, at

resiliency XXXX. will see while XXXX of plan expect we communities our technology importance only grid storm but count investment opportunities the additional And for driven investment on. our grow. investing a October and our Turning capital to absolutely needs XX% needs the continue and not planning growth. see reliability we to to period. capital plan infrastructure shared And is through ice by you five-year updated with our than the ago, one over the our of you of evolve the system in our grid communities, enhancing higher year XX, slide On future for The communications, highlighted

customer base our rate X% in confidence Our growing a to regulatory achieve provide through OG&E us ability XXXX. framework constructive and growth EPS

the financing provide to Before I I'd update an on to our like call turn plan. back over Sean,

be in we that Our there plan. investment our fund one and balance sheet of five-year is continues strongest needed the to the industry no remain to equity confident

Our we between and three recently constructive purchase XX% treatment and costs that over and will believe result credit credit to fuel XX.X% regulatory years metrics strong. estimated remain and we will next incurred the the the metrics are be receive power of on

from which remain maintaining committed risk-adjusted we earnings our shareholders. Utility an the growth total prudently for return growing current drive will attractive proposition dividend, to Finally, and alongside

up your let's the for line Now open questions.

Operator

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

Your line now is open.

Richard Ciciarelli

here Hey, Richie morning, Julien. Surprise, good actually surprise. for guys. It's

Sean Trauschke

surprise, How's was to Surprise that? Dumoulin-Smith. Richie. Richie morning, Good that

Richard Ciciarelli

works No that Yes. I guess.

by this due that how because on it I'm financing curious how well a guys was could color is cost fuel or largely lag assuming? other financing a kind the of storm, the regulatory as X%, you drag we to treatment long-term that you or fits Just but unchanged drag costs. is curious, raised with XX%. and EPS you be get asset to that be if lot deferred gave of one. -- potentially intend a from I'm there, that just of CapEx these given Is your as there quick should growth of

Sean Trauschke

Yes.

a this. take So at of couple I'll and pieces a shot different there in

with XX-year what to we cost share recover just upfront you. we mentioned. financing So all a weighted to We wanted basically also would those We're the from -- all that to we're capital. of those those work with all as average results to be expect What just going Bryan our and proposed wanted include a is program yes, events of amortization a would we today costs. February, seeing commissions

pick So there. would you up that

As as your question I far I'm there you Could repeat the plan, not the understood that? plan. capital -- five-year sure about

Richard Ciciarelli

of sorry. the was financing like Or amount I be that there's X%. Yes, rate I unchanged but storm the your embedded just you EPS? regulatory drag to should good EPS relative growth CapEx largely that. with incremental that there is XX%, just kind saying raised growth curious was base offsets from looks it the if pretty assuming we at was lag

Sean Trauschke

Yes.

that's think Richie higher that have certainly a other as of we I thing, think we the timing lose a well. there there's the expectation. But -- of sight there's regulatory I don't in recovery

load about well from We're above increase So Bryan were load the only growth. Recall, talked growth we expecting a pre-COVID. in levels. X% XXXX X.X%

that growth So pre-COVID quite returned we state. haven't to load

Does to that as do So with got that's well. something help? this

Richard Ciciarelli

share would or balance then for incremental And forms a allocation it around the capital question the be strong thinking line for around other repurchases Yes, I et filing, time proceeds just eventual helpful. such about you the upcoming then such sheet, that's CapEx IRP you given very exit are this there? consider especially of with use midstream the you cetera? with Enable of guess and as how would a opportunities guys And do have

Sean Trauschke

question. great No, Yes.

winter going that certainly We've across about are we Bryan then first the execution. thoughtful close, we'll discussions be FFO threshold here. the things we're Obviously, And balance get keenly receive to to of first, first. thinking pushed back with today. optimize about want this point transact team to that would and thing we're chair. prudent important the that's we right? terms that having been the now. how we certainly were in really it terms is his and very to sheet those we on of having is, And bridge focused storm that's agencies at way So second and other make And want of sure be we a what got credit kind to that. lower us discussion we But But the with in to

lower discussion interested that downgrade we're that's that's going – in we're to have going a a So to and threshold. having

up amount we're proceeds, that's a that So that will team back the timing his as we be agencies reinvesting help our the going I utility for the determinant Does business. be back that Bryan and key do. and going so as and believe to to pick Richie? And into far with

way are territory. in sure we We in out that limited focused of we minimize that do opportunities not same that terms of business the or our to service what making will we constrained any see continue impact And on costs time. growing the in we're our to take customers at was to

Richard Ciciarelli

color. That's helpful. today. for That's the all Yeah. Appreciate all I very have

Sean Trauschke

See right. you, Richard. All

Richard Ciciarelli

Okay.

Operator

comes the Goldman Sachs. of Your next Insoo from Kim with question line

Your now line open. is

Insoo Kim

Thank you. question – is on first My to storm. back the Hey.

expectation do will year amortization do. is starting from you with the just XX-year you to trued short-term for that $X.XX financing through But program over drag rates? next clarify the $X.XX that replacement the up guess of year that financing I proposed So permanent have about out that of $X.XX be that the this any

Bryan Buckler

will ultimately WACC. be deferrable. filing. requested We the Yeah. cost Hey, seen a you've for Insoo, financing Bryan. storm the – it's our believe We We've

too the the recovery, on in of term. being it regulatory that certainly we financing is So should short a cover WACC return regulatory believe our depending the if asset multiyear recovery appropriate. a ends costs But up period

Insoo Kim

to And bills, impact when guess to needed you'll analysis? that all you line allowing done in balance system still continue the the customer time it. the have And with of you're at do – the CapEx continue you so we have of get from the about rate proposing? initial recovery it's this of that to to potential the that'll plan, think regulator I then the while that over time support you invest Got think

Sean Trauschke

think for a that's – the is question yes. got great we're impact that's do. real to and this program proposing the and We've It's out. – us Insoo, that's Yeah. business kind our it's you of if economic catalyst to look to balance why we're we customers I to this to trying of the The answer smooth our what and rates. kind by sheet that development manage low driven and is believe minimize

a where some so starting not the the our And – we're from position rates country. are already lowest lowest some, the in if of

thing other of this, out The sight the O&M business. structurally a we've don't and removed lose lot of of

well. So already forward. that last going benefit the get make our and is, then of going we're think growth make I in we're load sure this to if --- that a impact customer and area growth and so less going point, – this from And be perspective going an less to customers would is I as is

Insoo Kim

the what the to the Oklahoma? I maybe it. you legislators I what you – if more or long-term and generation one whether other guys generation updates think there about question, given in it's about any think utilities conversations initial with in regulators right And guess, transpired have is state mix Got do been just the may. we when just plan

Sean Trauschke

what efforts we this ago what our into of at did combined the supported you the units, supported four commission commissions. We cycle our were It's And and plants of this managing of I'll and disruptions around They -- generation Mustang. and And those controlling combustion with largest winterization supported service we across all well at to my point a tell design on think number very minimal of responsibility with terms maintain our doing we a coal three were I that across what to – Mustang we They that's were discussions our what event our that lot Sooner. They no voltage tell years were I'll supported from at in our load seat, the generation fleet. were you City during why operate But units doing. and units. new scrubbers made did credit of doing with Yes. storm. fleet. the conversion on plan territory. goes No, critical through turbines and there center the Oklahoma the very, or

So been of a of to doing there haven't forward. from ought lot my be perspective going we discussions what

validation a right support is and planning really and I and of the It think us the just confidence this we've received the that making they we right the the validated at done decisions. in really here. commission faith in had was

Insoo Kim

That all so through getting event. I on Thank and That's much you congrats makes Yeah. crazy definitely sense. had. this

Sean Trauschke

you, All Insoo. right. Thank Take care.

Insoo Kim

Thank you.

Operator

Your Instructions] [Operator next Lee from Mizuho. with Brandon question comes the of line

Your now open. is line

Brandon Lee

hey, Sean, Brian. Hey,

Sean Trauschke

morning, good Brandon. Hey,

Brandon Lee

Hope everyone if fine?

Sean Trauschke

Hope you are?

Brandon Lee

Yeah.

above is with to current question a targeting, ratio payout Is the look Just that is ratio. If you your and around XX% of payout the comfortable XX% got or one? dividend -- that a I guys industry. XXXX XX% which at quick there are payout ratio look about annual around average the I at your for are you Utility your EPS,

Sean Trauschke

with basis. with significantly is the is at Utility-only the going supported And transaction closing, or basis, are to we Enable, that transition announced it that, - Obviously, dividend Yeah. And that's on monitoring you a but lower. on we are absolutely it's will consolidated safe. as we've be going a to approach we there when look and

out will here clearly committed the expect dividend You -- utility increases But to good shape we're in -- we're earnings dividend. and going very the outpace should to forward.

Brandon Lee

Thanks. had. all That’s Yeah. I Great.

Sean Trauschke

a All care. good Have day. Take right. Thanks, Brandon.

Brandon Lee

too. You

Operator

we time. questions me And no presenters, Instructions] [Operator have further at this pardon

You continue. may

Sean Trauschke

care I the you Okay. for Well you. care you take call being all today. Bye-bye. your thank yourselves of for and wish interest all Corp. those in around well. Energy and on OGE Take of

Operator

conference Ladies call. you Thank for and today's participating. gentlemen, this concludes

may now You disconnect.

OGE Energy (OGE) 25 Feb 212020 Q4 Earnings call transcript