Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019 OGE Energy Earnings Conference call. At this time, all participants are in a listen-only mode. [Operator Instructions] I will now like to hand the conference over to your speaker today Todd Tidwell. You may begin.

Thank you, Tuwana, and good morning everyone and welcome to OGE Energy Corp's third quarter 2019 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 Web site at ogeenergy.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 Regulation G reconciliation for gross margin and projected capital expenditures in the appendix. I will now turn the call over to Sean Trauschke for his opening comments. Sean?

Thank you, Todd. Good morning everyone and thank you for joining us on today's call. Earlier this morning, we reported third quarter consolidated earnings of $1.25 per share compared to a $1.02 per share in 2018. The utility reported earnings of $1.13 per share and our portion of enables earnings were $0.14 per share. Steve will discuss the details in a moment, but right now I want to highlight our third quarter achievements. Our service territory is growing. During the quarter, new customer growth was 1.1% as we added a record, 9,100 customers compared to third quarter last year. We're also continuing to see higher sales growth. Our load rates and economic development efforts are paying dividends. All of this comes together in terms of load growth. As I've previously mentioned, we are closely watching these positive trends which could increase load growth above our historical 1%. The latest economic statistics put Oklahoma's unemployment rate at 3.2% which is on par with the national average and then our largest loads in Oklahoma City unemployment rate is 3.1%. Since 2001, we've invested more than $6 billion in our system and customer rates are lower today than they were eight years ago. This year an S&P global article highlighted OG&E is having the lowest rates in the nation. This level of performance requires a continuous improvement culture throughout the company and a positive partnership with our customers and regulators alike. One example is the stewardship we're excited to share is how we're lowering the operational costs at the newly acquired River Valley facility. This plant previously had a 65% minimum requirement under the terms of the PURPA contract. Today we operate the unit when it is most economical for our customers without constraints or maximizing the fuel savings by introducing natural gas…

Thank you, Sean, and good morning everyone. For the third quarter, we reported net income of $251 million or $1.25 per share as compared to net income of $205 million or $1.02 per share in 2018. The contribution by business unit on a comparative basis is listed on the slide. Turning to gross margin; gross margin at the utility was $67 million higher for the quarter due to the following; weather contributed approximately $36 million of margin as cooling degree days increased 17% compared to the third quarter of 2018. Compared to normal weather, increased margin approximately $15 million for the quarter. Year-to-date, weather has contributed $10 million of margin compared to normal and approximately $16 million compared to last year. Higher average prices contributed $26 million of margin compared to the third quarter of 2018; this was primarily due to the recovery of the Sooner scrubbers, Muskogee natural gas conversion offset by the exploration of Oklahoma's cogeneration credit rider. And finally, new customer growth contributed approximately $4 million. We added over 9,000 new customers to the system as compared to the third quarter of 2018 supported by our commercial and oil field sectors. At OG&E, net income for the quarter was $227 million or a $1.13 per share in 2019 as compared to net income of $184 million or $0.92 per share in 2018. O&M increased approximately $9 million primarily due to the new expenses related to our plant purchases in primarily River Valley. Depreciation increased approximately $13 million, primarily due to additional plant being placed into service, including the Sooner scrubbers. AFUDC also decreased nearly $6 million as we are seeing lower construction work in progress balances with projects being completed. Finally, income tax expense decreased $9 million primarily due to the amortization of excess deferred taxes and higher tax credits, partially offset by additional taxes on higher income. Turning to our investment Enable, they made cash distributions to us of approximately $37 million compared to $35 million received in the third quarter of 2018. Enable also contributed earnings at $0.14 per share in both the third quarters of 2019 and 2018. They ended the quarter with a distribution coverage ratio of 1.4x. Turning to the 2019 outlook, we're increasing our utility guidance to between $1.74 and $1.78 per share. The earnings contribution from OGE holdings ownership and Enable mainstream is projected to be at the low-end of previously issued guidance between $0.52 and $0.58 per share. Consolidated guidance projection has increased between $2.24 and $2.30 per average diluted share. The increased guidance at the utility includes approximately $0.11 of weather and various rider adjustments. This concludes our prepared remarks and will now answer your questions.

[Operator Instructions] Our first question comes from the line of Julien Dumoulin-Smith with BoA Merrill Lynch. Your line is open.

Hey. Morning. This is actually Richie here for Julien.

Hey, good morning, Richie. How are you today?

Hey, doing well. Just had a question around your capital refresh. You guys had a pretty sizable increase of about 150 million on average per year. I'm just curious how you think about the utility growth rate and executing within the 4% to 6% range given the increase in the CapEx?

Yes. Richie, this is Sean. We feel really good about the growth range and as we've done in the past, we'll continue to evaluate that and as we see opportunities to invest additional dollars for our customer's benefit we will do that. What we've tried to do here is keep it simple and adjust our growth rate based on last year's results and we're not picking the starting point or anything like that. I think the third point I'd say is, as we've done in the past we are going to deliver this growth rate.

Got it. That makes a ton of sense. And then, just curious, you alluded to discussions with the OCC around strengthening and automating the grid. Just curious how you think about the potential for a grid modernization rider given the one ported to PSO although commentary from the settlements seemed to be a bit opposed for a rider. Just curious how you're thinking about that?

Yes. Richie, great question. We've had a lot of constructive and very productive conversations with the commissioners and staff and customers. And that really what produced the staff wanting to have a public meeting next week for us to come forward and talk about all this. We're going to take that feedback and then we will be filing after discussions with the staff and the commissioners on what the actual mechanism would look like. I don't think the other riders that you were referencing they really have a whole lot of merit on what we're going to do.

Got it. That's very helpful. That's all I had. Thank you.

Thanks, Rick. Take care.

Thank you. Our next question comes from the line of Shar Pourreza with Guggenheim. Your line is open.

Hi. Good morning. It's actually Constantine here for Shar. Congratulations on a great quarter.

Hey, thank you. Good morning.

Yes. Morning. So, yes, the big story seems to be the CapEx update. Just a kind of follow on to some of those questions. Just in a high level view, are the programs that you're applying to expand into kind of understanding that they're driven by the success of the previous program? Is it going to be just more of the same and kind of incremental in Oklahoma? And to kind of rephrase it a little differently as on a longer term sense, how you plan around kind of the regulatory requirements and the lag kind of given the conversations are just starting with the OCC.

Yes. Good question. So, if your question was, are we going to do a lot of the similar activities we've done in Arkansas? Yes. And through that process, we're beginning the second round in Arkansas and we've learned a lot already and we're going to implement those learnings into what we do in Oklahoma. So this is something that I think just gets, that builds on previous success. As far as the recovery, we're going to work through that with the commission, do keep in mind that these are not large construction projects. So you're not going to have a lot of delay between the beginning and in service implementation. So, what we'd like to have is some sort of contemporaneous some recovery mechanism and we'll certainly work through that with the commission.

Wonderful. And just without kind of moving into kind of 2020 or anything beyond there, can you talk from a high level, how kind of these programs contribute to the long-term kind of view there? And just kind of thinking about the runway for a lot of these resiliency programs and what do you see there?

Constantine, I'm not sure I'm following. Are you -- is the question, what sort of runway beyond 2020, do we see as far as investment opportunities.

Right. And so far the resiliency programs and kind of what's the kind of system needs that you're seeing?

Yes. I would characterize it has system opportunities. We see a lot of opportunities to really enhance the value of the product we provide, but I'm also sensitive and what I liked the fact that our rates are lowest in the nation and that's really helped us increase demand on our system. And as I mentioned in my remarks, we're closely watching this load growth. There is some upward momentum there. But we've said before, we have a pretty big inventory of opportunities we see, and it's going to be a combination of kind of how the regulatory mechanism works and how successful we are implementing those. But, we're very confident that we have a long runway here.

Perfect. That sounds great. Thanks.

Thank you. Our next question comes from the line of Insoo Kim with Goldman Sachs. Your line is open.

Thank you, and good morning. Just one question, given the increased CapEx forecast in the outer years, do you have a rough sense of when we could expect the next rate case filing in Oklahoma?

Yes. We're going to have this public meeting next week and we'll take that feedback and input and you should expect us to be filing few months after that.

Got it. And then, in terms of the dividend growth again, I don't think you guys guide to a specific payout ratio target range. Is that something more on a growth basis with the 6% and 4% to 6% EPS you'll be somewhere within in line or close to the EPS growth range going forward for different growth?

Yes. And I think what's more important to us is our FFO to debt ratio from a rate case perspective versus a payout ratio. But something in line with our earnings growth rate of 4% to 6% is a fair place to be.

Got it. Thank you very much. And congrats on earnings.

Thanks. Take care. See you next week.

Thank you. Our next question comes from the line of Anthony Crowdell with Mizuho. Your line is open.

Hey, good morning. Sean, are you okay there? You seem like you're having like battling a little winter cold.

Well, thank you, Anthony for your concern about me. I appreciate that. That's very kind. I think it just turned cold here, so I think it is starting to come on. So, but -- yes, I'm all right. Thank you for asking.

We're counting on you. Just remember that. Just is the CapEx increase rider dependent, if for some reason a writer doesn't get approved or something, does the level of CapEx change in your forecast?

Yes. Anthony, we've had very constructive and productive discussions and based on those discussions, that's why we felt comfortable adding this CapEx out there. Okay. I don't want to get ahead of myself in prejudicing, the future outcomes and things like that, but it's safe to say that I'm very encouraged by the discussions we're having and the outlook we have.

And, if I get tied on, and maybe a similar answer, if I followed up on Insoo's question on dividend growth, the growth rate of dividend change or is that driven at all by the approval of a rider?

Yes. I think again, we've kind of targeted the dividend growth rate to be in line with the earnings growth rate. And to your specific point, the FFO to debt from a credit rating perspective is an important metric for us. So, we'll watch both of those. Those are the big drivers more than it is the outcome of the mean individual rate activity.

Great. That's all I had. I hope you feel better and looking forward to seeing you in Orlando.

All right. Thanks Anthony. Take care. Appreciate your concern.

Thank you. Our next question comes from the line of Charles Fishman with Morningstar. Your line open.

Thank you. This public meeting next week, was that just a precursor to the rate filing or is that something special or what is your expectations for that and what was that? What drove that meeting to be scheduled?

Yes. Charles, this was just, in our discussions, I think it was the staff's idea that it would be good to have a public meeting. And so, that if you want to call it a precursor for filing, sure, it is, I think this is extremely positive. Encouraging others to communicate and make any suggestions or observations they may have. So, I think this is an entirely positive step initiated by the public utilities division and commissioners.

Okay. And then with the CapEx increase, still no equity in the three-year, five-year plan?

No. Charles, this is Steve. There is no equity needs in the planning horizon.

Okay. That's all I have. Thank you.

Thank you. And our next question comes from the line of Paul Patterson with Glenrock Associates. Your line is open.

Hey, how you're doing?

Hey, good morning, Paul.

Just, I apologize, I didn't fully get the increase in sales growth that you guys are now expecting.

Yes. We didn't indicate that, but it's North of -- this year we've had north of 2% in sales growth, which is really strong. We've had customer growth of 1.1% year-over-year. And as we've talked before, we're watching this to see how all of this translates into load growth. But, we do believe that there's some upward momentum there and when we're comfortable, we'll update that for you as well.

Okay. So, I apologize for being a little confused. So you guys are looking -- you guys see something north of the 1% as I heard on the call, correct? You haven't flushed out what that would be?

That's correct, Paul. Our [stock] [ph] rates been at 1% of load growth and we've been talking for the last four or five quarters that there is some upward momentum there. But, there's a lot of modeling that goes on to forecast load growth and we're zeroing in on something.

So, how should we think about this CapEx increase in relation to your forecast for sales growth or, I apologize for being a little bit off -- a little bit slow on this.

Well, I think that's a really good question. I think to the extent that, we have, we continue to see growth and we're able to continue to attract customers and new businesses and have increased sales growth. It gives you the opportunity to spread the cost over a larger base and therefore minimizing the customer impact. I think this is a huge positive.

Okay. Well, thanks so much.

All right. Take care.

Thank you, Paul.

Thank you. I'm not showing any further questions. I would now like to turn the call over to Sean Trauschke for closing remarks.

Thank you, Tuwana. Thank you all for your interest in OGE Energy Corp., and for being on the call today. Have a great day. Take care.

Ladies and gentlemen, that concludes today's call. Thank you for participating. You may now disconnect. Everyone have a wonderful day.