Good day ladies and gentlemen and welcome to the OGE Energy Corp. Fourth Quarter 2017 Earnings conference call. At this time, all participants are in a listen-only mode, so if anyone should require assistance during the call, please press star then zero on your touchtone telephone to reach an operator. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, today’s conference is being recorded. I’d now like to introduce your host for today’s conference, Mr. Rodd Tidwell. Sir, please go ahead.

Thank you, Liz, and good morning to everyone, and welcome to OGE Energy Corps’ fourth quarter 2017 earnings call. I’m Todd Tidwell, Director of Investor Relations, and with me today I have Sean Trauschke, 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 year-end and fourth quarter results. 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 cal and accompanying sides 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 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 this call over to Sean for his opening comments. Sean?

Thank you, Todd, and good morning everyone. Thank you for joining us on today’s call. Earlier this morning we reported 2017 consolidated earnings of $3.10 per share. Excluding the positive impacts of tax reform from our investment in Enable, OGE had consolidated earnings of $1.92 for 2017 compared to $1.69 per share in 2016. Steve will discuss the details of the full year earnings and the fourth quarter a bit later; however, the financial numbers are only part of the story for the year. We had a tremendous operational performance in 2017. It was another year of outstanding achievements and awards earned by our dedicated members. This was the second consecutive year of record safety performances. We managed through 10 significant storm restorations, assisted with the restoration efforts in Texas and Florida, and we currently have dozens of crews in Puerto Rico, all without injuries. Once again, the utility received the EEI Emergency Assistance Award for the 12th time since 1999. Market Strategies International Cogent Reports named OGE the Utility Customer Champion as well as the Utility Environmental Champion. We were recognized as one of Forbes 100 Most Trustworthy Companies, and locally from the Sector of Energy and Environment, we received the Water for Excellence Award for our low-volume wastewater project in Mustang. Finally, the company was named a top contributor to the 2017 United Way Pacesetter campaign. These are all a true testament to the hard work and commitment of our team. Not only are they making a difference where they live and work, they are performing exceedingly well on the job in building new infrastructure and demonstrating a focus on continuous improvement. Behind that dedication and focus, the utility is coming to the conclusion of the largest investment program in our history, and 2017 was the largest single…

Thank you, Sean, and good morning. For the fourth quarter, we reported net income of $295 million or $1.48 per share as compared to net income of $58 million or $0.29 per share in 2016. As a result of 2017 tax reform, the holding company includes a charge of $10.5 million or $0.05 per share due to the re-measurement of deferred taxes. This was related to deferred tax assets associated with benefit pulling costs. Enable also includes a gain of $245.2 million or $1.23 per share due to the re-measurement of deferred taxes at the lower rate. The contribution by business unit on a comparative basis is listed on the slide. For the full year 2017, we reported earnings of $619 million or $3.10 per share as compared to net income of $338 million or $1.69 per share in 2016. In total, tax reform accounts for $235 million or an additional $1.18 per share in 2017 resulting from our investment in Enable. At OG+E, net income for the quarter was $42 million or $0.21 per share as compared to net income of $46 million or $0.23 per share in 2016. For the quarter, gross margin increased $5 million in part due to more favorable weather. O&M increased $10 million for the quarter primarily due to higher vegetation management. Depreciation expense decreased by $4 million for the quarter due to lower depreciation rates approved in the Oklahoma rate order partially offset by additional plant and service. Other income increased by $11 million for the quarter due primarily to higher AFUDC and the tax gross-up related to the investment in the Mustang energy center and the Sooner scrubbers. Finally, income tax expense increased $13 million primarily due to fewer tax credits. Now turning to the full year, at OG+E net income for…

[Operator instructions] Our first question comes from the line of Shar Pourezza with Guggenheim Partners. Your line is now open.

Morning guys.

Hey, good morning, Shar.

Sean, a super healthy jump in capex, I guess the first question is what is giving you a sense that Oklahoma’s going to do the right thing? We’ve always thought you’d use the Mustang case as sort of that bogey on whether you would revisit capex or redirect capex, so you’ve got two big rate cases here, I guess the question is, is it a function of the fact that tax reform is minimal impacting the customer so it’s giving you that sense of confidence, or there’s indications from conversations you’re having with the commission that’s leading you to have this sense?

Good question. So I think first and foremost, we’ve been having extensive dialog with the commission. There was a number of cases over there, but there is some positive momentum there. We look at some of the recent cases have been 400, 500 days, and the most recent order was out in just over 200 days, so I think the commission has taken some steps to improve the efficiency of what’s going on over there and are really focused on getting orders out in a timely manner. And I think you’ve touched on it - we’ve always felt strongly about the Mustang case just because of where it is and what it’s doing, but now with the additional benefits of tax reform and being able to offset the investment there with the lower tax rate, for customers I think it’s a much smoother process going forward.

Okay, that’s helpful. Then just no need for incremental equity, so the higher capital program puts your FFO to debt metrics at what level now?

Right in that 22, 23% range, which would maintain our current ratings, so we come into that in a very strong position and able to support that capex.

Got it, that’s very helpful. Okay, great. Congrats guys on the results.

Thanks. Have a great day.

Our next question comes from the line of Julien Dumoulin-Smith with Bank of America Merrill Lynch. Your line is now open.

Hey, good morning.

Good morning, Julien.

Quick question here - obviously you’ve increased capex pretty meaningfully here on the resilience front. Can you talk a little bit about the allocation between Arkansas and Oklahoma, just to give us a little bit of sense of the breakdown?

Sure. So the first couple years, it’s going to be primarily in Arkansas. Our rate filings in Arkansas will be the Arkansas portion of both the Mustang and Sooner scrubber work, but thereafter it’s probably in the order of magnitude about $60 million a year.

Sixty million a year is--

To Arkansas. It’s Arkansas, and the rest would be Oklahoma.

Got it. All right, excellent. Can you comment a little bit, where is the governor’s task force in Oklahoma? Any progress there, any commentary?

Sure. I know the task force has met a few times. Their consultant has conducted some interviews with various people. The schedule lays out that they’ll make a preliminary report to the task force this summer, and I think the final recommendation is scheduled for November 8.

Excellent. Maybe to kind of summarize things a little bit, obviously raising capex but against the backdrop of a pretty strong balance sheet still net of tax reform, how much more could you possibly raise your capital spend should you get a more constructive outcome on the rate case? I mean, how are you thinking about the potential to reinvest or accelerate that investment?

Yes, I think we look at--you know, the investment thesis, we continue to be, I think, pretty prudent allocators of capital, and I think there has to be a value proposition, so we look at the investment to the extent that we can create some real value from a customer standpoint. We have a good list of opportunities under consideration to the extent that we have constructive regulation, and we have good line of sight to the benefits to customers certainly.

Got it. Anything in particular that you would be looking at potentially that is sort of incremental or not? I mean, I don’t know if there’s anything in particular you’re thinking about there.

No, I think it’s all going to be around on the grid.

Got it, okay. Excellent, well I’ll leave it there. Thank you very much.

Thanks.

Our next question comes from the line of Paul Ridzon with Keybanc. Your line is now open.

Good morning. You indicated no equity in ’18. I assume given your credit metrics, you can do this capex without meaningful equity?

That’s correct. We would not anticipate any equity in the planning horizon or in support of the capex plan that we’ve laid out through 2022.

When you say no equity, no DRIP or any employee programs, just we can assume a flat share count?

Absolutely.

Okay. Then have you had any discussions with Oklahoma around the depreciation issue? I know you’ve got a big ask in your current rate case, but just wondering what’s happening in the background there.

No, I think we’ve had discussions about the depreciation issue and I think it’s acknowledged that the actual useful lives of a lot of these assets are a lot shorter than what we’re recovering those assets in this most recent case, so that’s going to be an ongoing effort. I don’t anticipate an immediate fix to that, but I think we’re going to work on that over time.

All right. Apologize if this was in your presentation somewhere, but dividend beyond ’19, should we just kind of think of that as in line with the 4 to 6?

Yes, I think that’s certainly something we’re going to update next year, but that’s a consideration against other investment opportunities we have.

Then lastly, Steve, you indicated that ’17 benefitted from some ’16 interim rates. What was that amount?

It was $0.06, so if you recall, we didn’t get the order in time to book those earnings into 2016, so those flowed over. The six months related to 2016, the back half actually got recorded in 2017, and that was $0.06.

And then you also discussed some other issues that are pointing to a down year at OG+E versus ’17. Can you just review those again?

Yes, it’s really--you know, if you think about it, in 2017 we were recording AFUDC on both Mustang and Sooner, and that will--now that the Mustang units are in service, we are unable to record AFUDC until we get rate relief, but we’ve had to start depreciating those assets and we’re having to expense [indiscernible] taxes, and the same thing will happen with the first unit at Sooner, which will be in service by July 1, so we’ll lose that AFUDC and begin depreciating and expensing [indiscernible] or property taxes on that first unit.

So Mustang should be fixed by the end of the year, then Sooner will bleed a little bit into next year?

That’s correct, and you’ll also have--the second unit won’t begin--won’t get rate relief until mid-2019 because that unit will go into service at the end of 2018 and we’ll file a rate case, and we won’t get rate relief until midyear on that second unit.

Got it. I think that’s all my questions. Thank you.

Thank you.

Our next question comes from the line of Joe Zhou with Avon Capital Advisors. Your line is now open.

Hey guys, it’s Andy Levy. How are you?

Hey, good Andy. How are you doing this morning?

I’m doing pretty good, thank you for asking.

Andy, I’m telling you - we’ve got some ice and cold weather here, so it’s coming your way.

Okay, I’m looking forward to it.

Be ready.

We can ski here, so. Just on the incremental capex, I guess it’s really all grid mod; and I apologize if you discussed this already because I was on another call, but grid mod, reliability, resiliency, technology and other. Is that all what you have to go through a rate case to recover that, or is there any type of track or anything like that, that you can recover in Oklahoma?

Well in Oklahoma, there would--right now, we don’t have a rider or a tracker for that, so there would require some type of regulatory action in Oklahoma, and then obviously in Arkansas we have the formula rate mechanism.

Okay, and then I don’t know if you do somewhere in the handout, but what’s the breakdown on that between Arkansas and Oklahoma?

Yes, so the first couple years, Andy, we will allocate some of those capital dollars from the Mustang and Sooner scrubbers to Arkansas, but thereafter probably about $60 million of the incremental capital will go to Arkansas.

Okay.

And Andy, we broke all that out in our capex table. It’s in the 10-K and it’s also in the presentation.

Oh yes, I was just talking about on the resiliency, the grid mod.

Okay.

Because that’s not broken out, is it?

Not on the grid modernization, that’s correct.

Right, right, so that’s what I was wondering on, how much is Arkansas and--so should we just kind of base that on your earnings breakdown on those jurisdictions?

Yes, I think you ought to assume that if you were looking at the total capital expenditures in Arkansas, it’s been increased to about $60 million.

Okay. Again just sticking on that same subject, the grid mod and all that, should that be less controversial than what you’ve been--you know, the big chunks like with Mustang and Sooner?

Yes, I think it’s a lot easier to articulate the real customer benefits, and we’re hoping to mitigate the bill impact significantly with these investments. Recall what we were dealing with was a federal mandate - I mean, with the Sooner scrubbers, we fought that for many, many years. Generation, as you well know, is quite frankly the toughest decision we have to make because you’re making long-term investments and you’re making a--taking a view on technology and commodity prices and policy, and there’s always going to be people that have different views. In this business, you’re making long term investments and you have to take the long term view of things, and so I think your thesis is exactly right - I think these grid investments will be a lot less controversial. We’ll be able to articulate and demonstrate the real customer benefits not just on the bill but in the resiliency and reliability of the system.

Okay, that’s great. I think I’m all set for now. Thank you very much.

All right, thanks Andy. Take care.

Our next question comes from the line of Stephen D’Ambrisi with Castleton Investment. Your line is now open. Stephen D’Ambrisi: Hey guys, thanks for taking my question.

Good morning. Stephen D’Ambrisi: I just had a quick clarification. The new long term growth rate, is that an earnings growth rate or is that a rate base CAGR? Can you just tell me what that is?

Yes, it’s an earnings growth rate. Stephen D’Ambrisi: Okay, and do you guys--and that’s just at the utility, and there’s no consolidated growth rate?

Yes. Stephen D’Ambrisi: Okay. All right, great. That was all I had. Thanks very much for clarifying.

Thank you.

Our next question comes from the line of Michael Lapides with Goldman Sachs. Your line is now open.

Hey guys, a couple of easy ones. First of all, are you assuming you get the deferral for the Sooner scrubber similar to how AEP did it for their environmental project on coal plants, and does that deferral--if you get it, does that cover both D&A and O&M?

We are assuming that we get regulatory asset treatment on the Sooner scrubbers, and you’re correct to point out PSO got similar treatment on their environmental assets. It doesn’t necessarily cover all of the D&A in the equity return, but it certainly softens the blow quite a bit.

Got it. Second, and I know you’ve gotten a lot of questions on capex and I hate to do this, but I’m actually looking at the K and I’m looking at the capex table in the K, and starting in 2019 you outline about $180 million to $280 million a year, and it varies by year from ’19 to ’22, in grid mod and reliability and resiliency spend. I just want to make sure, I want to focus only on that line, are you saying that in ’19 and maybe ’20, the bulk of that line is in Arkansas--that spend, so $200 million, $190 million is Arkansas, or is a lot of that Oklahoma?

No, a lot of that is Oklahoma, Michael. I think what we were saying, if you’re looking at the total capital expenditures that would be applied to Arkansas, it is now up to about $60 million.

Okay. Are you worried about jumping the gun a little bit in Oklahoma, because what you’re really rolling out here is a major uptick in capital spend, and I would argue if we just take some of the data points we’ve gotten from Oklahoma, your last rate case, the ALJ and the PSO rate case, which was a difficult ALJ recommendation according to the owner of PSO, the Windcatcher decision, are you concerned at all about kind of cart before the horse a little bit, about investing a lot of capital and yet still having significant regulatory lag on that capital?

You know, I think your points are well made. I think there have been some data points that were not constructive. I am encouraged by the momentum we’ve seen in the improvement in timeliness, and regulatory outcomes are very important to our investment decisions. So having a clear line of sight to the recovery is a very big criteria, so Michael, I think the way you ought to think about this is we’re going to have the opportunity to see how the Mustang case plays out, but it’s our expectation that’s going to go very well. To the extent that we have an event that changes that, we’ll adjust accordingly, but we are--I think it’s our job to manage this, and I’m confident it’s going to continue to get better. We haven’t deployed the capital yet, Michael, so I think that’s the point - we’ve teed it up for ’19.

Got it. Last question - Sean, if I remember correctly, there’s actually a history in Oklahoma of having trackers or having mechanisms that reduce regulatory lag. I think you may have had it on AMI, maybe something else over the years. Do you plan on or have you requested grid mod or resiliency-related trackers, or is that something in your regulatory plan for the next year or so?

I think that’s something that we’re seriously contemplating. You’re exactly right. Your memory is on top of things, as always, because we used to have a lot of riders and trackers and the like, and what that does, you’re right - the benefit to us is it minimized the regulatory lag and it kind of allows us to deploy the capital for the customer benefit much faster. The benefit to the commission is you do not have pancake rate cases all across, and so you don’t create that workload or backlog over there at the commission. So we’ve moved away from the riders and trackers, and so the result was we had a lot of rate cases, not just us but others, so it piles up over there. So I think that issue has been recognized and it probably is a good environment to begin having the discussion for riders and trackers again.

Is that a discussion you can do in this ongoing rate case, or is that something that requires a separate docket or even legislation?

A separate docket. Legislation is not required for that, and the commission has the full authority to do that. They’ve done that before, so that would just be a separate docket.

Got it, thank you, Sean. Much appreciated, guys.

Thanks, take care.

I’m showing no further questions in queue at this time. I’d like to turn the call back to Mr. Trauschke for any closing remarks.

Okay, thank you, Liz. Thank you all for your interest and your time this morning. I wish all of you a great day, and talk to you next quarter.