Good morning and welcome to the Q3 2014 OGE Energy Earnings Conference Call. At this time, all participants are in listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session. The conference call will be recorded today, Wednesday, November 05, 2014. (Operator Instructions). I would now like to hand the call over to Todd Tidwell. Over to you.

Thank you, Gary, and good morning everyone, and welcome to OGE Energy Corp's third quarter 2014 earnings call. I'm Todd Tidwell, Director of Investor Relations and with me today I have Pete Delaney, Chairman, President and CEO of OGE Energy; Sean Trauschke, President of OGE Energy Corp; and Steve Merrill, CFO of OGE Energy Corp. In terms of the call today, we will first hear from Pete and Sean, followed by an explanation from Steve of third quarter results, and finally, as always, we will answer your questions. I would like to remind you that this conference is being web cast and you may follow along on our web site at oge.com. In addition, the conference call and accompanying slides will be archived following the call on that same web site. 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 would also like to remind you that there is a Reg-G reconciliation for gross margin in the Appendix, along with projected capital expenditures. I will now turn the call over to Pete Delaney for his opening remarks. Pete?

Thank you, Todd. Good morning everyone and thank you for joining us this morning. We are pleased to have Steve Merrill with us. You know Steve, he was recently appointed to be Chief Financial Officer of OG&E. Part of our recent leadership changes which included Sean Trauschke's move from President of Utility and CFO of OG Energy to President of OG Energy, the holding company, as well as OG&E Utility. These changes allow Sean to concentrate on as expanded duties. Steve is not new to our organization, having served in various senior management roles for both OG&E and Energex and having played an instrumental role in the formation of the Enable Midstream Partners. Many of you have already met Steve, and I am hopeful that others will get to meet him in the near future. I look forward to their contribution to the management of the company. Turning now to the quarter's results, we reported third quarter 2014 earnings of $0.94 a share compared to $1.08 in 2013. On an apples-to-apples comparison, the quarter was $0.94 versus $0.98 last year, as we had a $0.10 gain associated with the formation of Enable Partners in the third quarter of 2013. In addition, like many utilities, OG&E experienced cooler than normal summer weather, which pushed utility earnings lower. July in Oklahoma was the third coolest on record, as state-wide temperatures averaged four degrees below normal; because of the cool July weather, we are now projecting consolidated earnings for 2014 to be at the low end of our previously issued guidance of $1.94 to $2.06 per share. Utility guidance has been lowered slightly, and Enable's guidance remains unchanged. I am pleased with our operating results year-to-date on weather adjusted basis and our overall forward outlook. We continue to experience customer growth and positive economic activity in our service territory. Recent announcements by Boeing and Baker Hughes to bring 900 and 450 jobs to Oklahoma City respectively are indicative of the type of growth we are seeing in our territory. Unemployment remains very low, and our service territory in Oklahoma City was recently named as the 12th fastest growing in United States. The region appears to be poised for continued population gains. Meeting the infrastructure needs of our territory, stemming from either growth or from upgrades, in a manner that improves the value of our product to our customers remains a key objective. As you know, a major obstacle to that end, is the Regional Haze environmental compliance requirements. Sean will now spend a few moments to discuss the progress of our compliance plan, that seeks to mitigate the impact on our customers, while meeting our reliability objectives.

That's exactly right. You know, the intent of our filing is to mitigate the customer impact by recovering these investments along the way. The Commission has established the procedural schedule which sets the hearing for March 3rd, and we'd hope to receive an order shortly thereafter. But the important point is, we are proceeding on with the environment compliance, as we have a deadline. Just to recap, there is a lot going on here in not only for Regional Haze, but with MATS and I want to just summarize what all those activities are. We will install activated carbon injection systems on our five coal units, we will have that completed by 2016. We will install low NOx burners on seven units and have that completed by 2017. We will add scrubbers to the two Sooner coal units, and we will have that done by 2018, and we will convert two of the Muskogee coal units to gas and we will complete that by 2019. And lastly, we will replace the Mustang site with 400 megawatts of combustion turbines by 2018. I'd like to provide you a little brief update on where we are in the process of each one of those, regarding the ACI systems for MATS, we expect to finalize the contracts near the end of the first quarter of 2015 and construction will commence thereafter. Looking at Regional Haze compliance, we actually have completed three of the seven Low NOx burners already, and the remaining installations are on schedule. We expect to finalize the contracts for the scrubbers at Sooner in the first quarter of 2015. We have mentioned before with regard to the conversion of the Mustang units, that we anticipate running those units as coal units, right up until the end of the compliance timeline.…

Thanks Sean. Apart from compliance, we are further positioning for our future by improving service in a cost effective manner, by leveraging our smart grid technology, to enhance the value proposition to the customer. With over 800,000 of our smart meters to pull another devices now on our system, we are able to improve service at lower cost, and in addition to transition more and more to a proactive management of grid services as opposed to reactive. One such initiative is to implement processes and deploy technology, allowing us to significantly reduce outage duration times, through more accurate fault locating and more timely service outage verifications, at a capital cost much less than with historical approach. This initiative also reduced this lost revenue from outages, and saves O&M expenses to greater productivity from reducing truck rolls and an overhaul, a more effective deployment of resources. Remember, our smart hours program with 120,000 customers now enrolled, also provides an avenue for customers to control their energy usage, and reduce their monthly electric bills, in amounts that will mostly offset the monthly bill impact of the price increases from the environmental compliance plan. We also have initiatives under that way, that will improve the customer experience and our productivity. Ultimately, increasing the value of our product, bodes well for OG&E, our customers, and our shareholders. We continue to compete for transmission projects at the Southwest Power Pool under FERC Order 1000 and we expect to continue to build transmission lines below 300 KV, under the Right of First Refusal state laws. Looking briefly in Enable, the reported strong third quarter results yesterday, and have once again increased their distribution rate for the second straight quarter, in line with a 10% outlook. As a whole, we have almost 111 million LP units, this…

Thank you, Pete, and good morning. For the third quarter, we reported net income of $187 million or $0.94 per share, as compared to net income of $215 million or $1.08 per share in 2013. Year-to-date consolidated earnings per share were $1.69 in 2014 compared to $1.66 last year. The contribution by business units on a comparative basis is listed on the slide. At OG&E, net income for the quarter was $157 million or $0.79 per share, as compared to net income of $172 million or $0.86 per share in 2013. Third quarter gross margin at the utility decreased approximately $1 million, which I will discuss on the next slide. O&M was $5 million higher for the quarter, compared to the third quarter of 2013. The increase was driven in part by the timing of ongoing maintenance at the power plants, the company is on plan for the year. Depreciation and amortization increased $7 million compared to the third quarter of 2014, due to additional assets being placed in service, including two new transmission lines that Sean mentioned earlier. Finally, the increase in interest expense of $4 million was primarily due to the $250 million of long term debt issued in March of this year. Turning to the third quarter gross margin, utility margins were flat for the third quarter, as compared to 2013, primarily due to the mild summer weather, partially offsetting the impact of weather was an increase of wholesale transmission revenues and growth renewed from new customers contributing $11 million and $5 million respectively. We added over 8,000 new customers to the system, compared to the third quarter of 2013. Oilfield sales were up nearly 4% for the quarter. Looking closer at weather, cooling degree days were well below normal, and the third quarter of 2013 as…

(Operator Instructions). We have a first question from the line of Brian Russo of Ladenburg Thalmann.

Thank you. Good morning.

Good morning Brian.

Good morning guys. You mentioned the procedural schedules posted for the environmental track [ph] you're filing, do you know when the staff recommendation's due?

The hearing is scheduled for the third, and we'd expect the recommendations to be prior to that.

Okay. And is the settlement possible at any time between now and the staff recommendation or hearings?

Well Brian, this is a bit of a unique situation, because we have a compliance requirement, and so we are proceeding down that path. So I am not sure what there is to settle. But that's where -- I don't want to take that off the table, but we have spent six years fighting this, and we have spent a great deal of time working through this and came up with what we believe is the best plan for our customers, and that's what we are prepared to move forward with, and that's what we are moving forward with.

Understood. And then, looking forward to the upcoming general rate case, it seems like the rate increase will be fairly manageable, since you're already collection transmission revenues through tracking mechanism, so that kind of mitigates the rate increase on that side, and then adding the contract to these base rates seems manageable as well. Is that how to look at it?

I think that's fair. Just point of clarification on the transmission. We have mechanisms to recover, basically the other members of the SPP, their portion of the transmission expense. This, what we are looking to recover is just our retail portion. So remember, we talked about the allocation of the cost there, and OG&E retailers paying roughly 15% of those costs. So that's what we are talking about. So I think directionally, you're correct.

Got you. Understood. Thanks. And then so I think you mentioned $15 million or $25 million weather impact versus normal, is that right?

That's correct.

Okay. So it's about $0.075 a share. So if we just look at where your utility midpoint was, and subtract that $0.075, that's kind of where you get to below the lower end of the range on the utility side?

That's the right bracket.

Okay. And then on the FERC 1000 project opportunities. Can you kind of give us a sense? Have you submitted projects, and how many maybe, the size the dollar amount of those projects might be?

We did propose a number of projects, and they are -- we haven't quantified the number, the total dollar amount, but I would direct you to, they are probably approaching the size of the previous five year transmission expenditure program.

Okay, great. And then with the updated dividend policy, and while still retaining quite a bit of financial flexibility to finance your capital budget, is there a potential upside to the 10% annual growth in the dividend, would this enable, accelerate, split by making an acquisition, or is this pretty much set, and you guys have done a lot of work and feel comfortable that this is the growth rate you should have over this time period?

Brian I am surprised that question, this is Pete. You know, we were -- as I said, looking at our -- the Enable distribution, and of course we target our 10% annual growth rate. We are relying on that distribution, and so we feel pretty good about their growth plan and their distribution growth plan, which allowed us to, I think publicly step forward on that guidance. And so, yeah, I mean, you I think correctly pointed out that in the future, if there is accretive acquisitions, if there is organic growth that exceeds our forecast or other issues that would accelerate the splits, and as you know, we had 60% of the IDRs, and that gives a lot of cash flow leverage to us. That under those circumstances, we would be receiving higher distributions than we had forecasted. And no different than what we have always done Brian, is if we look and see if we have good investments, with good returns that enhance the value for our shareholders, we will then have more flexibility to invest in those. But if we don't, what we think, in my opinion and what we would recommend to the board, who ultimately has the say on this, would be to pay out incremental cash to our shareholders. So we understand that's the way it needs to work, and that's what our commitment and focus is.

Okay, great. Thank you very much.

Yup. Thank you, Brian.

Next question is from the line of Matt Tucker. Over to you Matt.

Hey guys, good morning.

Good morning.

First question on the SPP transmission projects, if what you guys get awarded is as large as, you kind of indicated, it could be -- I guess that means maybe like a few hundred million a year in spending. Would you anticipate having to issue equity to finance those projects?

Yeah Matt, this is Sean. I think the -- remember those are competitive projects that were proposed. I think the SPP received a lot of projects, and a lot of ideas. I think its going to take them considerable amount of time to waive through that process. So we haven't been awarded any NTCs and so I think the best way to think about that is, we will certainly announce when we receive an NTC, and exactly tell you what the earnings impact will be, and how we would actually go about funding that. Something like a transmission project for a couple of hundred million dollars over a couple of years, that's -- I don't think that's of the magnitude that really changes our financing plans.

Great. Thank you. So my next question is just, how concerned are you, if at all, by the recent energy price volatility, with respect to the outlook for Enable?

You know, Enable covered a lot of this on their call yesterday. And I think one of the real strengths of that business is, the significant amount of fee-based business that we do have in that business, and the contractual make-up of their agreements with producers. So you would love to see oil higher, but nevertheless, I think the company is very well positioned.

Great, thanks guys. That's it for me.

Thanks Matt.

Thank you. And we have the next question from the line of Anthony Crowdell of Jefferies.

Good morning guys. I guess two quick questions, I mean, dividend boost was great in September, and gave us clarity out, until I believe 2019 of 10%, I guess, dividend increases. Just from my forecast, it seems like you guys have a lot more firepower there for dividend boost and what you did, and maybe you did touch it on Brian's question, I am just wondering -- am I looking at it wrong, or is that 10% really just you being conservative, and if the transmission stuff plays out, you will have this strong balance sheet? And I guess the second question I have is more related to Enable, and that -- it seems that investors can get very comfortable with the earnings growth at OG&E, 2016, 2017, 2018, but it seems that right now, maybe the market is not pricing in the value of the GP shares for enable. How do investors get great clarity on the distributions moving out, 2016, 2017, 2018?

Well I think, this is Pete. I guess you mentioned, based on your analytics -- the firepower, so I am not -- exactly know what your numbers and you're referring to. I just think the way we have managed this company, has been always with a long term focus, and I guess a belief that investing -- again our job is to find projects and investments with a good return for our shareholders, and we are successful doing that, and maintaining the financial strength of the company to fund those, where our shareholders are going to be better off than otherwise. And I think, our earnings growth rate has been 7% annually for the last, when you look at the compound annual growth rate for the last four or five months. And as we know, our consolidated payout ratio, historically which we have looked and tracked has been because of our earnings growth rate in the low end, yet we had several things ahead of us. The environmental compliance plan; we were -- as you know, Sean mentioned, we appealed that, and so we are looking for the resolution of that, as well as getting the Enable IPO and their distribution of growth known, before we stepped up and committed to -- distributed more cash out. And I just sort of -- perhaps to go back to the, how we talked about Brian's question is, those IDR provides some amount of leverage, where we need to maintain the financial flexibility to this company, and continue to grow shareholder value like we have done historically, which I think works very well. So yeah, from a firepower -- I guess, from a financial standpoint, we can always lever up more, I don't know if that's advisable. I think we are -- I don't know, probably sweet spot, but I think we are well positioned to continue to drive shareholder value. And they -- we sort of talked a little bit about that, but the valuation and I guess, your thought or notion that the IDR is not fully baked in the valuation f our stock price, and we believe that and we obviously talk a lot about that and think that that will become more into focus, as the IDR starts to pay, and hopefully Enable gives us indication that would be -- restart the splits towards the fourth quarter -- at the end of the fourth quarter 2015, and you know, a lot of that clarity is going to be coming from Enable, and their distribution growth rates, which your model will tell you how -- what kind of acceleration will get into distribution. So we really, from here we are going to rely on what Enable is telling us, from how they can grow their business of distribution. So I hope that answers your question.

No it doesn't. I guess just a quick follow-up, and you had mentioned, I guess, the earnings growth rate, and if my memory serves me correctly, I think earnings growth at OGE has presented -- it has been out there for maybe a couple of years, probably even before the creation of the MLP. I was wondering, is there going to be an update to that, or moving that to off a base share of say 2014 or a normalized weather 2014 or anything like that in the future?

It will, and again, we are changing our -- you are referring our five to seven, which we moved up over time, consolidated earnings growth rate. But again that, our consolidated earnings growth rate will not be really indicative of our dividend policy going forward. But in February, we will announce our outlook and really be focusing again on utility, earnings growth rate, longer term, and then our distribution, Enable distribution growth rate.

Great. Thanks for your time guys. I really appreciate it.

Thank you.

Thank you. And we have a question from the line of Sarah Akers of Wells Fargo. Over to you, Sarah.

Good morning.

Good morning.

Just one question on the wholesale contract. With losing the capacity contract on the wholesale side, but then adding it to rate case. Do you expect there will be a net income impact of that expiration, or do those two drivers kind of offset each other from a financial standpoint?

Sarah, good question. There will be some lag there, as the contract terminates in June, and until we get that through the rate case process, when that finalizes, there will be some lag there.

Okay, but that's just temporary.

Yes. But generally speaking, they ought to be close to offset. Its not exactly they will be closed.

Great. That's all I had. Appreciate it.

Okay. Thanks Sarah.

Thank you very much ladies and gentlemen. That now concludes the Q&A session for today. I would just like to turn the call back over to the management for closing remarks.

Thank you. I guess in closing, I'd just like to again recognize our members for their hard work, dedication and focus on safety. I'd like to thank you all for your continued interest in the company. Have a great day.