Q3 2026 OGE Energy Corp. Earnings Conference Call - OGE ENERGY CORP

Financial Performance:

• Consolidated net income for Q3 2026 reached $316 million ($1.52 per diluted share), up from $231 million ($1.14 per share) in the prior year period.
• The electric utility segment contributed $321 million in net income ($1.54 per share), while the holding company reported a loss of $5 million ($0.02 per share).
• Revenue drivers included significantly warmer weather conditions compared to 2025, partially offset by increased income tax expenses.
• Residential electricity prices were 7% lower in August and September year-over-year, despite higher consumption due to triple-digit temperatures.

Guidance and Future Outlook:

• Management raised 2026 consolidated earnings per share (EPS) guidance to a range of $2.62 to $2.68, assuming normal weather for the remainder of the year.
• Demand growth remains healthy with customer growth and load growth estimated at approximately 1% annually.
• Future milestones include updates on SPP Notices to Construct (Q4), Oklahoma Rate Review updates (Q1 2027), and regulatory approvals for additional generation (Q2 2027).
• The company plans to re-evaluate its EPS CAGR guidance next year, considering the full impact of approved projects and capital plans.

Business Segments and Product Lines:

• Filed with the Oklahoma Corporation Commission for pre-approval to construct a new 755-megawatt combined cycle plant at the Horseshoe Lake site, with additional filings expected in Arkansas.
• Horseshoe Lake Units 11 and 12 were completed $12 million under budget and ahead of schedule, adding 448 megawatts and avoiding up to $16 million in capacity purchase costs.
• Units 13 and 14 are under construction to add another 440 megawatts; Unit 15 (selected from RFP) represents a $1.75 billion investment with an expected 2031 in-service date.
• Approved the Frontier Energy Storage Project ($395 million) and added $160 million in transmission investments to the five-year capital plan (2027-2030).
• Launched expanded customer assistance programs, including enhanced Senior Discounts, Low Income Assistance, a past-due balance pilot, and "Choose My Due Date" prepayment options.

Market and Competitive Landscape:

• Service area experienced an unusually hot summer with over 45 days of triple-digit temperatures, generating four new peak load records and 15 days exceeding 2024 peaks.
• The company maintains a strategic focus on utility ownership of generation resources (primarily gas with potential solar/storage combinations) rather than third-party PPAs for the remaining 1.1 gigawatt capacity need.
• Cryptocurrency load is showing signs of migration toward AI-related demand, which could influence future capacity planning and resource mix.
• Oklahoma legislation provides CWIP recovery (estimated $900 million in savings) and an 180-day regulatory review process to accelerate project approval.

Risks and Challenges:

• Execution risks regarding the regulatory approval timeline for new generation projects, specifically the 180-day pre-approval process for Horseshoe Lake 15.
• Regulatory lag between rate base growth (9.6% CAGR) and authorized return on equity (ROE), though management expects to smooth earnings through rate cases and natural load growth.
• Inflation and interest rate impacts on the cost of capital and project financing, managed through a disciplined capital allocation approach.
• Potential variability in load profiles due to shifting energy demands from crypto to AI mining.

Management Commentary and Tone:

• Management expressed high confidence in the company's operational resilience, citing zero public conservation calls during extreme heat.
• Tone was positive and forward-looking, emphasizing the company's track record of delivering projects on time and under budget.
• Leadership highlighted a balanced approach to maintaining low-cost service for customers while funding significant infrastructure investments for growth.
• CFO Chuck Walworth clarified that the new $750 million at-the-market (ATM) equity program is a strategic tool to ensure financing flexibility, not strictly tied to immediate project needs.

Analyst Questions and Answers:

• Ownership vs. Procurement: Confirmed intent to own and operate the majority of the remaining 1.1 GW capacity need, utilizing short-term bridge capacity only during construction.
• Financing Strategy: The $750 million ATM facility is not a direct read-through for specific project funding; the company will target credit metrics and may utilize various financing avenues.
• ROE and Regulatory Lag: Management expects earned ROE to remain smooth without step-function resets, bridging the gap between rate base growth and allowed returns through rate cases and accounting treatments.
• SPP ITP Process: Anticipated closure on Notice to Construct (NTC) for the 2025 Independent Transmission Project later this year, with the 2026 ITP process following a similar cadence.
• Cost Efficiency: Highlighted the economic benefits of reusing brownfield sites at Horseshoe Lake as a key factor in the project's viability and cost competitiveness.

Other Key Points:

• The company refreshed its lend-to-hand bill assistance program with nonprofit partners and a foundation donation match to support vulnerable customers.
• The 2026 IRP (Integrated Resource Plan) identified Horseshoe Lake 15 as the highest-ranked project, emphasizing efficient, dispatchable generation.
• The transmission investment addition of $160 million pertains to smaller SPP-assigned projects, distinct from the major Seminole-to-Shreveport (Longwood) line.