Good day, ladies and gentlemen and welcome to the First Quarter 2016 OGE Energy Earnings Conference Call. At this time, all participants are in a listen-only mode. Later 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. I would like to introduce your host for today’s conference, Mr. Todd Tidwell. Sir, please begin.

Thank you, operator. Good morning, everyone and welcome to OGE Energy Corp’s first quarter 2016 earnings call. I am Todd Tidwell, Director of Investor Relations. And with me today I have Sean Trauschke, Chairman, President and CEO of OGE Energy Corp; and Steve Merrill, CFO of OGE Energy Corp. In terms of the call today, we will first hear from Sean followed by an explanation from Steve of first quarter 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 on our website 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 today. I would also like to remind you that there is Regulation G reconciliation for gross margin in the appendix along with projected capital expenditures. I will now turn the call over to Sean for his opening comments. Sean?

Thank you, Todd. Good morning, everyone and thank you for joining us on the call this morning. This morning, we reported first quarter consolidated earnings of $0.13 per share [Technical Difficulty]. We have received approximately $35 million in distributions from Enable year-to-date and I will speak more about Enable a bit later. And then Steve will provide a little more detail on our financial results for the quarter. Quickly turning to the utility, we continue to see our historical growth rate of 1% as we have added an additional 10,000 customers compared to the first quarter of 2015. The majority of these customers are in the residential and commercial sectors. As you know, Oklahoma has been impacted by the downturn in energy prices, which contributed to a moderate decrease in oilfield sales. The latest economic statistics put Oklahoma’s unemployment rate at 4.4% with Oklahoma City just under 4%. Both of these compare to 5% nationally. The new customer gross margin was just under $1 million for the quarter. It is consistent with our projections. We will continue to monitor the impact of low energy prices on the state economy and we will keep you updated if and when we begin to see a significant change in our sales growth. Our operations team continued a great job of maintaining the fleet and the grid this quarter and this quarter was no exception. We have already had two significant storms with tornadoes this year and the majority of outages were returned to service within 24 hours. Our combined cycle plants performed well and with the continued record low natural gas prices, our capacity factors were exceedingly high. In fact, our McClain power plant reached record production levels in the first quarter. It is really important I should say to note that these…

Thank you, Sean and good morning everyone. For the first quarter, we reported net income of $25 million or $0.13 per share as compared to net income of $43 million or $0.22 per share in 2015. The contribution by business unit on a comparative basis is listed on the slide. At OG&E, net income for the quarter was $6 million or $0.03 per share as compared to net income of $17 million or $0.09 per share in 2015. First quarter gross margin at the utility decreased approximately $13 million, which I will discuss on the next slide. Now, looking at other key drivers, first quarter O&M had a variance of – it was $2 million higher, just a modest increase over 2015 and is consistent with our focused efforts on controlling our costs. Depreciation increased $3 million primarily due to additional plant in service, including the low-NOx and ACI environmental compliance assets. Other income increased $2 million primarily due to increased margin from the Guaranteed Flat Bill program. Income tax expense decreased $4 million due to lower earnings. Turning to the first quarter gross margin, utility margins decreased approximately $13 million in the first quarter of 2016 compared to 2015. The primary drivers for the reduction in gross margin were as follows. The expiration of our wholesale contract last summer has reduced margin this quarter by approximately $5 million. As we have said before, this item has been included in the current Oklahoma general rate case. Weather translated into $2 million of lower gross margin as compared to the first quarter of 2015. Weather for the quarter was flat compared to normal. Finally, lower demand revenues and lower wholesale transmission revenues combined to reduce margin $3 million as compared to the first quarter of 2015. Partially offsetting those reductions was…

[Operator Instructions] Our first question will come from the line of Anthony Crowdell from Jefferies. Your line is open.

Hi good morning Sean.

Hi good morning. Anthony, how are you doing?

Not bad, never been better, how about yourself.

We are doing well, good to hear from you.

So I have – first question is just more on congratulations you finally or the commission in OGE finally got together on the scrubbers. What’s the rate case filing schedule look like for the next couple of years now?

Well, Steve, do you want to kind of run through the schedule there?

Sure. Anthony, what we are looking at, as you know we are currently in a rate case with Oklahoma. We will file sometime in August an Arkansas general rate case and that will take a little bit of time. And then we will time our next Oklahoma general rate case associated with when the Mustang plant goes into service the CTs. And we will use our six-month forward look to really minimize any impact of that going into service. So look for that towards the end of 2017. And then there would be a follow-on Oklahoma general rate case towards the end of ‘18 which would pick up the scrubbers when they finally go into service.

So in Oklahoma you currently have a case going on now and that should get you new rates I guess in 2016, then another filing for Mustang CT end of ‘17 and then another filing end of ’18?

That’s correct, Anthony.

Okay. And just – and I don’t want to take too much time on the call, I think there is an issue going on in the case right now of how the PTC, whether the PTC is putting base rates or the PTC gets put through the fuel adjustment clause, could you just walk us through, I am just struggling to understand the differences there like what’s one side versus the other?

Yes. I think Anthony, so the issue there is when we commissioned that first wind farm, we had PTCs and we flowed all that back to customers. And so now as the PTCs are expiring, there is an increase in the revenue requirement. And what we recommended was really flowing all those through the fuel clause, but if you want to put in base rates, that’s fine too. I don’t think there is an issue, I think the better issue was let’s capture all of the energy costs – the variable cost components around energy in the fuel clause. It just seems to make more sense that will be an annual review. I am not sure what the real distinction is.

So now these assets are – now that the PTC has expired, these assets are going to earn a regulated return off them and that regulated return because you were previously refunding customers through the fuel clause, the utility’s filing was to get this return via the fuel clause?

Yes. It’s just a – it’s a recovery. Just there is a return of that component. It’s more of an expense.

Okay, great. Thank you so much.

Alright. Thanks. Have a great day Anthony.

Thank you. Our next question will come from the line of Charles Fishman from Morningstar. Your line is open.

Thank you. The only question I had was I just wanted to confirm the movement in capital expenditures between ‘16 and ‘17 from the fourth quarter is just the Sooner, the delay in the Sooner project or more capital being pushed into ‘17 and ‘16, is that correct?

Yes, that’s correct. It’s really because we suspended that project for the first quarter while we tried to get this resolved at the commission. That effectively is going to push about $50 million out of ‘16 and into ’17.

Everything else stayed the same?

That’s correct.

Okay. And tell you what, can I ask the second question, I was looking at the CapEx chart when you were talking about guidance, you reaffirmed ‘16, now that the Sooner scrubber issue is behind you, did you give a long-term earnings growth for OG&E beyond ‘16, anything?

Yes, 3% to 5%.

Okay. I missed that. Thank you very much. That was it.

Thanks Charles. Have a great day.

Thank you.

Thank you. Our next question will come from the line of Sarah Akers of Wells Fargo. Your line is open.

Hi, good morning.

Hi, good morning Sarah.

So now that there is clarity on the CapEx outlook, can you just comment on the parent credit metrics and any opportunities you are seeing to utilize the balance sheet after the two big spending yeas here?

Sure, I mean obviously our credit metrics. We go into this very strong. We are in a good position with regard to free cash flow to debt. And it’s something that we certainly are always looking at as far as deploying capital. We will be firming those plans up over the coming months and we certainly have some work to do on the back half of our 5-year outlook. If you recall, our cash taxes will ultimately increase, not in the near-term with bonus appreciation, but we do become a full cash taxpayer in 2021 at this point.

Got it. And then on rate case, are there any formal settlement conferences scheduled or what are the next key milestones in the process there?

Yes. As part of the procedural schedule, there was a – there will be preliminary settlement discussions like I mentioned in my comments, Sarah. There is really not a lot of disagreement when you look at the intervener testimony on the plant service, kind of the two gating items really seem to be around ROE and kind of the depreciable life of assets. And so we will continue to have discussions, but there is no scheduled settlement proceeding from this point forward.

Got it. Thank you.

Okay. Thanks. Have a great day.

You too.

Thank you. Our next question will come from the line of Paul Griffin of KeyBanc. Your line is open.

Good morning. How are you?

Hi, good, Paul how are you doing?

I am fine. Thank you. Just I think you already answered this in Charles’ question, but did the delay at Sooner affect costs at all?

No, we don’t believe so. That was an important point that we made when we made this filing with the commission. We negotiated with all of our suppliers for a delay that would not impact schedule or cost. And so we don’t believe there will be any cost impact to this.

Okay. Thank you very much.

Thanks.

Thank you. Our next question will come from the line of Brian Russo of Ladenburg Thalmann. Your line is open.

Hi, good morning.

Hi, good morning Brian.

Just on the Sooner environmental CapEx just in terms of kind of the trend in quarter, should we just kind of assume that you will spend an equal amount in the next – in 2Qs through 4Q or is it – does this kind of ramp up as we move through the year?

It will ramp up a little bit, I would say the largest part would be third quarter and fourth quarter as we kind of get cranked back up and then the majority of our spend will be in 2017 associated with the scrubbers.

Okay, great. And then just on the 3% to 5% utility EPS, CAGR, are we now kind of at the high end of that range given the scrubber installation?

We are pretty comfortable with the 3% to 5%, Brian, and we have got a few years left to go, but we are very confident in both that and the dividend growth.

Okay, great. And then just lastly, you guys have witnessed some pretty good customer growth for the last several years despite the commodity cycle, what’s driving the residential and commercial customer growth?

Brian, could you repeat that, I didn’t get that?

The 1% customer growth that you have been experiencing in the last 3 years, what’s driving the residential compared to the commercial side?

I think it’s – there is a lot more to the Oklahoma economy than oilfield. That’s a big component. But there is a lot more to that. And we are seeing a lot of growth at the Tinker Air Force Base. And so Boeing has relocated a number of people here. And those are high paying jobs that have come into the service territory. I think we just announced these two other developments are going to bring multiples hundreds of jobs to the area. So I think it’s a combination probably of we have a workforce here that’s available and so it’s unfortunate that there has been a downturn in commodity cycles and there has been maybe a pullback in the oilfield sector, but it’s created an opportunity for others looking to relocate here because of our low energy rates to utilize that workforce, that skilled workforce. And so that’s really probably why we haven’t seen a decrease because while we have seen some companies pull back, unemployment hasn’t really changed. So people have been able to find jobs. And I think that’s been a real testament to the economy. And I think it’s prime for when the market does – commodity cycle does turn and we know it will. The state and the city are really primed for a lot of growth.

Okay, great. Thank you very much.

Thanks Brian. Have a great day.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Sean Trauschke for any closing remarks.

Thank you. Thank you, everyone for joining us today and for your continued support of the company. We appreciate it and we look forward to visiting with you soon. Have a great day.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone have a great day.