Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 OGE Energy Earnings Conference Call. [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 go ahead.

Thank you, Michelle, and good morning, everyone, and welcome to OGE Energy Corp.'s third quarter 2018 earnings call. I'm 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 third 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 ogeenergy. 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 would also like to remind you that there is a Regulation G reconciliation for gross margin in the Appendix. I will now turn the call over to Sean Trauschke for his opening comments. Sean?

Thank you, Todd, and good morning, everyone, and thank you for joining us on today's call. Earlier this morning, we reported third quarter consolidated earnings of $1.02 per share compared to $0.92 per share in 2017. The utility, reported earnings of $0.92 per share and our portion of Enable earnings was $0.14 per share. I'm pleased with the operational and financial performance of both businesses. Steve will discuss the financial results in a moment, but first, I'd like to discuss the key events and accomplishments. You know, OG&E's has had a remarkable year. It seems each quarter we are achieving a new milestone on our journey to continually getting better to improve the customer experience with safe, reliable and low-cost energy. But then, again, it should be better. That's what good operating companies do, they get better, they grow. And that's clearly what we are doing. We continued our strong record-setting safety performance and year-to-date are the safest company in our industry and we expect the same of our contractors. Illustrative of this is the Sooner scrubber project that has seen 2.8 million hours work with no loss-time accidents. Speaking of the generating fleet. I'm pleased to announce that our fleet continues to build upon last year's performance. The Mustang Energy Centers have approximately 1,800 starts across the seven units since inception earlier this year, demonstrating their value to the market and our customers. Generation reliability has also improved by an additional 4% over 2017. Distribution reliability has improved approximately 10% over 2017, as our deployment of technology and the hardening of assets is showing real value for our customers. This year, we also completed and placed into service the Windspeed II transmission line, the Covington solar farm. We settled our last rate case in a constructive manner passing through…

Thank you, Sean, and good morning, everyone. For the third quarter, we reported net income of $205 million or $1.02 per share as compared to net income of $183 million or $0.92 per share in 2017. The contribution by business unit on a comparative basis is listed on the slide. As you know, we implemented rates in July that include tax reform. And this adds complexity to quarter-over-quarter comparisons. I'll do my best to simplify this in my remarks. Turning to gross margin. Gross margin at the utility was higher for the quarter excluding the impacts from tax reform that resulted in lower customer rates, which were offset by lower income tax expense. Margin was higher due to the following; weather contributed approximately $5 million of margin as cooling degree days increased 3% compared to the third quarter of 2017. However, compared to normal, weather reduced margin approximately $12 million for the quarter. New customer growth contributed approximately $3 million. We added nearly 6,300 new customers to the system as compared to the third quarter of 2017 supported by our commercial and industrial sectors. Higher demand revenue and industrial oilfield sales increased margin by approximately $6 million. Offsetting these increases were the impact of lower tax rates on margin as a result of the Tax Cuts and Jobs Act. At OG&E net income for the quarter was $184 million or $0.92 per share in 2018, as compared to net income of $162 million or $0.81 per share in 2017. O&M increased approximately $6 million due in part to the timing of plant maintenance and increased employee costs and we are on plan for the year. Depreciation increased approximately $5 million primarily due to the Mustang CT as being placed in the service. AFUDC also decreased $5 million as we are…

[Operator Instructions] Our first question comes from the line of Paul Ridzon with KeyBanc. Your line is open. Please go ahead.

A couple of questions. What drove the lower holdco results in the quarter? I think would stick at one at a time I guess?

Yes on the holding company, there's a little bit of interest expense that's there as we kind of manage short-term debt or cash. So that happens from time to time. And then there's also a little bit of a timing on taxes there that were reversed in the fourth quarter, but we do expect the holding company to be around $0.04 for the year. We also have a deferred compensation plan that when the stock over performs actually causes us to have a charge at the holding company and that's the remaining portion.

You mentioned 305 megawatt short by 2020. You've got an RFP out. I assume you bid into that?

Well, we're running an RFP and there are available options out there in the marketplace. We certainly will compare that to our own internal options and we'll see where that takes us. I think to your question I guess is how does this impact our capital expenditure sides or forecast for 2019. That's all the comp -- we incorporated that into those numbers.

Okay. And then in the quarter was tax reform neutral?

No, there was a little bit of a pickup. Well actually there was about $0.08 of a pickup due to tax reform. and that's really just a timing issue. When tax reform was put into base rates that gives money back to customers ratably throughout the year. And as you know, our margin is seasonal, our revenues are seasonal. So there's a pickup when our revenues were high and we'll be giving that back over the next two quarters where customers -- it is neutral overall, but just the timing of our revenue stream creates a bit of a disconnect.

Is it neutral within 2018 or does it get into multiple years?

It crosses over into the first quarter of 2019.

So where are we year-to-date?

Will be a $0. 04 pickup this year.

And then you kind of gave some reasons for the increase guidance. Do any of these bleed into 2019 or are they all kind of one-timing -- well just one-timing issues?

Well, $0.08 is one-time. $0. 04 from the timing of tax reform and then $0.04 due to weather.

Thank you. And our next question comes from the line of Julien Dumoulin-Smith with Bank of America Merrill Lynch. Your line is open. Please go ahead.

Hey. Good morning. This is actually [indiscernible] here for Julian. Yes, I just had a question regarding your great modernization plan. Have you been deploying that in Arkansas? And when can we kind of expect you to display the benefits in Oklahoma for the regulators there?

I'm sorry, I didn't catch the last part of your question.

Yes, I was just wondering, if you started deploying grid mod in Arkansas. And if you have? When can we expect you to begin educating stakeholders in Oklahoma of the benefits there and potentially pursue a rider in Oklahoma?

So yes, we are under way in Arkansas. We're addressing about 1/3 of the circuits in Arkansas. We think we're expecting to see 10% improvement in saving in Arkansas. Some significant savings in terms of O&M expenses in Arkansas, but just by looking at this first wave of 1/3 of the circuits in Arkansas. The idea would be -- we want to get past the Sooner scrubber project, this RFP project. And then we will begin having dialogue with some sort of rider tracker for grid mod in Oklahoma. But first things first, we want to get the current regulatory calendar behind us. I think the other benefit that occurs there is because we have the Formula Rate in Arkansas, we will have a track record there of what investments we made and to realize customer benefits that have been achieved and I think we'll have a good story there to share that with Oklahoma.

And then just you alluded to having a large backlog of projects not in your forecast. I just want outside of grid mod, what other opportunities are you seeing?

Well, I think it's primarily around the grid mod and that's become a big word that encompasses a lot of elements. But we've said for a number of years, when -- before we had the Formula Rate structure in Arkansas, we didn't -- we did not invest as heavily as we had been in years past. We've got some catch up work to do in Arkansas. In addition to that, we are installing a lot of this new technology there in Arkansas. So we've got two components going on in Arkansas. And then quite frankly even in Oklahoma because we were forced to do these environmental compliance projects, we deferred some of the investments in grid modernization, some of those in emerging technologies to kind of ease the customer impacts. We've even got some catch up to do in Oklahoma too. So it's primarily going to be around the wireless side of the business. We've invested significantly on the generation side here in the last couple of years. But we're always looking for creative ways to make investments and really improve the reliability to customers and not impact their bills.

[Operator Instructions] Our next question comes from the line of Andrew Levi with ExodusPoint. Your line is open. Please go ahead.

Hey, guys. How are you?

Hey, good, Andy. How you doing?

I am doing really well.

Are you already out in California for EEI or?

No, actually I have a pot midst on Saturday. So I'm actually get the steaming.

Are you not coming out next week at all?

I am not, it will be kind of volatile too. But, whatever, I'll ask my question here and I'll see you in December I guess, when you come to the conference.

Okay. All right.

So anyway just two questions and I apologize because I did jump on like five minutes late and I kind of heard the tail end. Could you just repeat, I hate to make you repeat, but just what you were saying about the dividend longer term? And then the second question is also, what you were saying longer term about potential CapEx raises?

Yes, our intent is to continue to invest organically and grow the earnings of the Company and grow the dividends of the Company. And we're going to be prudent allocators of that. We've worked hard to create our balance sheet. We were fortunate to have that flexibility. What I was referring to is, I want to get there in particular in Oklahoma through these environmental projects. The one lesson we learned out of some of our previous cases is we've got to keep these simple stay focused on the task at hand and not get too far out in front. I do believe things are continuing to improve in Oklahoma and as things continue, we will begin highlighting more capital investment opportunities kind of as we go. I'm not sure that in particular in Oklahoma for us to announce a multi-year, multi-billion dollar investment program is productive to the regulatory outcome. So we're going to be very thoughtful about growing our dividend and making investments. But the ultimate goal is to really grow both and meeting the earnings of the Company and the dividends and we've done that over the last couple of years and we think that's going to continue. We expect it to continue.

And then as far as the dividend?

We're going to grow that too. We're going to grow at 10% this year like we...

I know, but then in the longer term when do we find out kind of that was like through this year and then after that we were going to do...

Yes, I think we're going to get through this regulatory cycle in Oklahoma and that will be a very good data point for us to identify a longer-term dividend growth rate.

Thank you. And I'm showing no further questions at this time. And I'd like to turn the conference back over to Sean Trauschke for any closing remarks.

Well, thank you, Michelle, and thank you all for joining us today and thank you for your interest in the Company. And I look forward to seeing many of you next week. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.