OGE Energy Corp. (OGE) Earnings Call Transcript & Summary

Good day, everyone, and thank you for standing by. Welcome to OGE Energy Corp. 2026 Second Quarter Earnings and Business Update Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Casey Strange, Investor Relations Senior Manager, for opening comments.

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 Chuck Walworth, our 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 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. I will now turn the call over to Sean for his opening remarks. Sean?

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'll 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, and I'm 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. We filed the Google special contract on May 1 in Oklahoma and 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 17, 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 recently signed. And 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. 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 in 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. And lastly, our proposed customer affordability charge would benefit residential customers to the tune of $25 million to $30 million annually for a typical 1 gigawatt data center. Over time, we believe high energy demand customers like data centers can help bring down costs for all customers, but 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 way 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 storage project from Commissioner Bingman's office and 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. We will add another 300 megawatts next year from the Frontier Storage project. The Horseshoe Lake units 13, 14 and 29 will add another 450 megawatts. We've averaged the addition of roughly 300 to 400 megawatts of capacity per year and 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 and you could possibly see a filing this quarter. We continue to prepare for an Oklahoma rate review this quarter as well, and we are also monitoring SPP transmission notices to construct currently expected in the fourth quarter. And there's certainly a lot to be excited about, and 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. And now I'll turn the call over to Chuck. Chuck?

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 5. 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. 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 onetime 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 to $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%. Two current large customers have shifted portions of the ramp schedules thereby pushing a couple of hundred megawatts further into the year. While the timing has shifted, customer commitments remain firmly in place. And 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. 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. With that, I'll turn it back to Sean, and we'll be happy to take your questions.

[Operator Instructions] Our first question is from Shar Pourreza with Wells Fargo.

This is Whitney Mutalemwa dialing in for Shar. So 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? And if the Supreme Court rules while that case is pending, does CWIP get picked up there? Or does it need its own docket and if you could provide any other like update on the procedure?

Thank you for the question, Wendy. 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 that's we go through a pre-approval process for those and 13 and 14 is captured in that process. So there will not be in the rate case, any generation. It will just be the normal course of business, run of the mill at distribution, substation additions, things like that. Chuck, you got anything to add to that?

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

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

So 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 and it's also really above and beyond the recently White House pledge in that area. So 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.

Our next question comes from the line of Nick Campanella with Barclays.

This is Michael Brown on for Nicholas Campanella. I know you're targeting to announce the NTC in the fourth quarter. Would that be before or after EI?

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

My next question is, could you clarify the 200 megawatts that was shifted into the year? Or is that correct, the ramp schedule of your customers?

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

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

It's Brian Russo on for Julien. Just to follow up on the Seminole to Shreveport line. Assuming you 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. And then any updated cost estimates on that?

Yes. I think in the notice to construct, there's a process there where we would respond back to the SPP with the confirmation of the costs and the routing and the in-service timeline for final approval. And then once that's kind of ratified, we're off and running. And I think you should expect us to be able to deliver to you, kind of, what the cost or the investment schedule is by year, the timing and just kind of any financing needs that would be associated with that. So I think there's -- so Brian, just to clarify that, there'll be some -- a lot more clarity when we get the NTC, but it's really going to be incumbent upon us to kind of ratify that with routing, schedule and costs.

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 OG&E sits in Oklahoma to participate in the upcoming ITP?

Yes. I think there's certainly a lot of discussion about potential opportunities. The ultimate decision there hasn't been made and whether it's going to be '26, can be greater or smaller than '25. There's a lot of different thoughts, a lot of different discussions going on. So we're certainly engaged in those discussions, and we would expect to be a very active participant in the construction of transmission in Oklahoma.

Okay. One last question...

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

Okay. And then just one last thing. On the SPP, the accreditations for renewables seem to be becoming more stringent. Does that like bias you towards gas generation in these pending 2026 RFPs?

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

Our next question comes from David Arcaro with Morgan Stanley.

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

Yes. I think the short answer is yes. I think we continue to have those discussions. We're moving forward. And I think the submittal and the finalization of our large load tariff provides that clarity for those large loads to understand the -- how things are going to work in Oklahoma. So they are progressing, and we're not backing off of the 6 or 7 active negotiations we're in the middle of right now.