Good day, and thank you for standing by. Welcome to the OGE Energy Corp First Quarter 2023 Earnings Conference Call [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Bailey, Director of Investor Relations. Please go ahead, Jason.

Thank you, Hope and good morning, everyone. And welcome to the call. With me today, I have Sean Trauschke, our Chairman, President and CEO; and Bryan Buckler, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Bryan of financial results. And finally, as always, we will answer your questions. I'd like to remind you that this conference is being webcast and you may follow along 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'd 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 will now turn the call over to Sean for his opening remarks. Sean?

Thank you, Jason. Good morning, everyone. Thank you for joining us on today's call. We're off to a really strong start for the year. As you know, the first quarter typically represents less than 10% of the electric company's earnings. However, this quarter does provide momentum for the year and I really like what I see. Earlier this morning we reported consolidated earnings for the quarter of $0.19 per share with $0.20 per share from OG&E and holding company loss of a penny. I'm pleased with the overall performance of electric company with results up year-over-year, and Bryan will discuss our financial results in more detail shortly. Our plan for the future is strong when you consider increased demand for electricity to support our growing communities. Business expansion is broad, representing many sectors, including manufacturing, defense, tribal enterprises and healthcare, in both Arkansas and Oklahoma. Some of these expansions include significant job growth, including 900 new military personnel who will be stationed at Ebbing Air National Guard Base in Fort Smith, Arkansas, along with Pratt and Whitney's announcement last month of the new sustainment center associated with its operations near Tinker Air Force Base in Oklahoma. Our customer initiatives have gained steam, particularly in the digital experience. One quarter after launching our new mobile app, more than 10% of our customer base has downloaded the app and more importantly, they're using it from bill payment to outage reporting. We're making it easier for customers to self serve online and rolling programs and rolling in services that help them manage their energy usage and monthly bill. These efforts pay off in a multitude of ways from improving our customer experience to driving cost out of our business. Our grid and weather hardening investments are also paying off for customers and helping…

Thank you, Sean. Thank you, Jason. And good morning, everyone. Let's start on Slide 5 and discuss first quarter 2023 results. On a consolidated basis, first quarter net income was $38 million or $0.19 per diluted share compared to $280 million or $1.39 per share in the same period 2022. Earnings for the first quarter of last year included $1.15 per share from natural gas midstream operations, which we fully exited in 2022 through the sell of our energy transfer units. The Electric Company achieved net income of $40 million or $0.20 per diluted share in the first quarter compared to $39 million or $0.19 per share in the same period 2022. The increase in electric company net income was primarily due to increased recoveries of capital investments and strong load growth, partially offset by higher O&M and favorable weather and increased appreciation on a growing asset base. Other operations, including our holding company, reported a loss of $1.5 million or a penny loss per diluted share in the first quarter compared to net income of $10 million or $0.05 per share in the same period 2022. The decrease in net income was primarily due to a consolidating interim tax benefit of $12 million in the first quarter 2022 related to OG&E's investment in energy transfer that reversed over the course of the year. Turning to customer growth and load results on Slide 6. Our customers grew at a rate of approximately 1% and weather normalized load grew at a rate of 3.9% compared to first quarter 2022. This trend of strong growth and customers and load is a testament to the vibrancy of the economies in Oklahoma and Arkansas and our sustainable business model of economic and business development enabled by OG&E's low customer rates. While residential load was…

[Operator Instructions] Our first question comes from the line of Shahriar Pourreza with Guggenheim Partners.

Hi, good morning Jason and team. Congrats and great quarters. It’s actually Constantine here for Shahriar. Starting off on the quarter, obviously, weather was unfavorable. Can you talk about some of the offsets that you're embedding in the reiterated guidance? I think the slides are showing some strong normalized load growth. So how much is that contributing to the expectations for the remainder of the year or any other offsetting factors?

You're right, the quarter had about a $0.01 to $0.02 negative impact compared to normal when it comes to margins and the mild weather. Constantine, I would just point you to the fact we have so many tailwinds for this company this year sprinkled all throughout, I guess, the revenue areas when you think about load growth, sales mix and various items. So we're really bullish on 2023 and we're in a position where we can [indiscernible] the weather, the mild weather. So we're in really good shape for 2023.

And on the financing side, as you mentioned, you have a very strong balance sheet and financing for this year is effectively done. So just for the near term, maybe some thoughts around kind of using cash convertible debt that some peers have been using for some near term benefits and kind of locking in against your five year funding needs? And maybe prospectively just interest rates have come down a bit this year. So at the -- especially at the tail end of the curve, is that giving you some headroom versus your long term guidance?

You're correct, we are completed with our debt issuance plans for this year. We definitely are monitoring what other utilities and holding companies have issued. I think it's the latest term maybe for this hybrid interest instrument you're mentioning is cash convertible debt and that's something we'll study. We don't have a holding company debt issuance need in the near term, but we'll continue to evaluate it. As far as interest rates, we do plan conservatively as we look out to future years on interest rates and we're certainly optimistic that short term rates, especially will turn down in years ahead, which will just be overall beneficial to our company.

So is that something that's already embedded in the kind of five to seven…

No, we're using you know that 5% plus expectation on short term rates this year and into the future. So that's not embedded yet.

[Operator Instructions] Our next question comes from Julien Dumoulin-Smith with Bank of America.

This is Heidi Hauch,on for Julian. So just first question is can you provide more details on your commentary on the latest round of solar RFPs and why the RFP fell short of your expectations, or your watermarks moved forward there? And then also what changes or developments will you need to see the move forward more meaningfully on utility scale solar procurements?

As you know, we had a number of different RFPs. We had three out there, three distinct RFP processes going on. And so we're in the middle of a lot of negotiations and it's active, it's very fluid right now and so we're rounding those out. I would think we didn't say that we do not have bids out of a particular RFP. We're going to continue to add generation to our fleet, we do want to make sure it's -- smooth those out, make sure we don't have the big blips. I've said previously that I would expect, as we fill this capacity need in the future, it’s going to be a combination of gas and solar, maybe if batteries get more economic, we'll look at those as well. But that's where we see it going. Obviously, these negotiations, obviously, cost is a big factor. You've also got timing and deliverability, availability is a big factor. And then you've just got the normal terms around risk, risk transfer and what you're accepting is in terms of a risk and what you're not willing to accept as a risk. And so it is taking a little longer than I anticipated but we do intend to file this summer our results, and then we will -- as I said, we're going to go through another integrated resource planning process really to make sure we incorporate the benefits of IIJA and IRA opportunities. And hopefully, we see a little more relief from some of the inflationary pressures and the timeframes that are out there.

And then just a quick follow-up. So given that kind of summer timeframe for filing the new RFPs, I believe you mentioned. Can you confirm what solar CapEx is included are embedded in the near term plan, if any? That would be helpful.

We do not have any solar specific planned CapEx in our plans or gas.

And then secondly, the latest 4% to 5% load growth forecast is very strong. How do you perceive the sustainability of that 4% to 5% load growth trajectory into 2024 and beyond?

I think that's a great question and obviously, 4% to 5% is robust. And we've been talking about this for a while and that's on top of what we did the prior year. The challenge is it's very difficult to really pinpoint whether growth is in the subsequent years are going to be 4.5%, 3.5%, 6.5%, it's very difficult once you get beyond 12 months, because it depends a whole lot on what happens in the current year and then the timing of in service dates for some of those developments. So we will lay that out as we move forward, but we are very bullish. And I think you've heard it from Brian, you've heard it from me that we've built something here that this engine is really moving down the track. And we intend to keep it going for many, many years. And it's really the foundation of our company that we're going to continue to see logos and customers come to us, we're going to continue to increase the capital to support them, we're going to spread that over more customers and thereby widening that competitive advantage we have and economic development. So again, we think this engine is going to go for many, many years.

And then kind of lastly here. Can you provide an update on your efforts in terms of complying with the latest iteration of EPA’s good neighbor rule, and maybe just an update overall on how this policy should impact your portfolio prospectively?

I think, between the good neighbor rule and we've seen that, and we certainly expect the GHG rules to be out here shortly. We've been through this before and this will go through many iterations, it'll probably get litigated. I think that's always been factored into our longer term planning and how we think about our generation mix. And none of that is in our plans today because the rules aren't necessarily fun and so we'll evaluate those and make the right decision for our customers.

Our next question comes from Alex Mortimer with Mizuho.

I was hoping, can you provide any color on if there's any timeline or internal thoughts on when we make get the EPS CAGR on a consolidated basis and not just at the utility?

Yes, I think it's our intention to do that in February. The logic there was, we are very bullish on our utility. And as we were exiting the midstream business and Bryan mentioned the retirement of some debt there from winter storm Uri where we're letting all that work itself out and then we're going to provide a consolidated growth rate when we get to February.

And then I know you're obviously very bullish on load growth, but a lot of it is tied to commercial as well as it looks like some oilfield. With oil prices kind of declining in recent weeks, potential economic slowdown, people are predicting second half of this year. How do you think of your exposure to kind of both of these factors?

Certainly, we've seen the tailwind from oilfield. But if you go back a year ago, it wasn't a tailwind and load growth was still robust. And Bryan alluded to this and I referenced it in my remarks, the growth is pretty diverse and not just in oilfield but you look at a lot of what we're seeing around the defense industry, it's really growing. And what sneaks up on you really quickly there are the residential numbers. There's just a lot of residential customers. But as you see these new industries come in and you're adding 90, 100 people at a time that adds residential accounts too. So I think there's a lot of solid base there for that continued growth and we're not necessarily tied to a particular industry.

And then to just round out load growth. Is there any good way that you quantify your impact of load growth on earnings for like, for example, every 10 basis points of load growth is worth a cent of EPS or sort of something along those lines that we should be thinking about?

I think, we're all smiling here, because we'd love to be able to do that. It really has a lot to do with the segment itself, they have a margin contribution that's different based on the segment. The other thing that's important too is when those new load serving entities come on the system, so whether it's at the end of the year, the middle of the year, the beginning of the year. And so that has a different impact from year to year as well. So we're keenly focused on the sensitivity there but we haven't come up with a good 10 basis point sensitivity that we could really crisply give you.

[Operator Instructions] Our next question comes from Aditya Gandhi with Wolfe Research.

My first question just on the outstanding RFPs. Could you just clarify the timeline? So you're going to file for approval sometime in the summer and then what -- after you do that, what milestones should we be watching or looking at? And to the extent that you can address, can you give us some sense of what percentage of your generation need would be fulfilled from this current round of RFPs versus sort of like your next IRP or RFPs?

So we're going to file this summer in both states. And Oklahoma, under the provisions there, you have up to 240 days to receive approval for that. So that would be one milestone. I also mentioned that we are going to start the integrated resource plan, we're going to reissue that again to incorporate the IIJA and IRA opportunities. But also, Bryan spent a lot of time talking about the load growth. So our load growth projections are changing as well. In terms of what percentages and what we're going to file for, while we're still in negotiations, we're probably not in a position to kind of comment on that right now.

And then just moving on to sort of the timing for your next rate review, you mentioned that it could potentially be filed in the latter half of this year. But just when we're thinking about the level of the rate increase, just given the high fuel costs last year, how are you thinking about the level of the rate increase? And then could you also comment on the next trade review could potentially include recovery for the generation investments, or is that going to be through a separate process?

So we're going to file in Oklahoma through a separate process. For approval mechanism we have in statute here, we're going to go through that for the generation. And then in terms of the rate review, your point is spot on. I mean, we are focused on affordability, that's the key pillar of our of our growth engine. We've got to keep our rates attractive so we can continue this growth story. So we are since that -- this is not a large rate case and we have a goal of staying current and making sure that everything is timely. Our customers have communicated us, they like the smoothing effect that we're trying to ensure and no one wants to see any big spikes and we don't intend to see that going forward.

Just one last question, if I may. Bryan, I just wanted to clarify, so after you pay off the billion dollars of Uri related debt, $500 million each at the utility and holdco, you mentioned that that’d be your short term debt balance at the holdco and that would be sort of around the $300 million range by the end of the year, that's consistent with your messaging from the prior quarter?

Yes, that's right. I just want to reiterate, when you think about our company in totality, as Sean mentioned in the fourth quarter call and we both discussed today, we're really bullish on utilities, growth prospects with a lot of tailwinds from load growth, emerging investments in the grid and generation. So we feel really good about utility over the next five years. And as utility grows that means the holding company has to pay less and less of the dividend going forward. So when you think about that that should give you some comfort that our holding company interest cost as that grows each year we’ll grow less and less, and so just to add a little more color to my comments from the last call.

Our last question comes from Shahriar Pourreza with Guggenheim Partners.

I just had a couple of quick follow-up, just to kind of confirm on the RFPs. You mentioned that there's no near term CapEx that's affected by just thinking about if there's some delays in kind of the magnitude versus the original thinking. Are you planning to kind of offset or flex somewhere else in the CapEx plan?

Constantine is your question -- make sure I understand it correctly. But is your question where is the capital expenditures associated with these RFPs?

Yes. And if the delays and the refiling of the IRP would impact the existing capital plan at all?

No. I think what we said is we have a lot of opportunities, this is opportunity rich and we're allocating capital and just really fueling this growth engine we have. And so the timing of these RFPs and the results and that sort of thing doesn't really impact or change our plans, because we have tremendous opportunities to invest and continue to grow our company.

And you mentioned that some of the outcomes and the economics that you've seen weren't necessarily palatable to your original request. Just curious if you can share how has the commodity volatility in both directions, especially on the positive side this year, in fact in your thinking on preferred mix?

So we're certainly pleased that we've seen a pullback in natural gas prices that certainly helped in relieve some of the pressure from fuel costs to our customers, so we like that. When we're evaluating this and look -- making our decisions, while we're cognizant of the current commodity price environment, we're taking a long term view and we're factoring in a long term view of prices and taking a long term view of what we think potential regulations could be as well from the EPA. So it's a very thorough analysis.

At this time, I would now like to turn it back to Sean for closing remarks.

Thank you, Hope. And thank everybody for joining us this morning. Thank you for your interest in the company, and I hope everyone has a wonderful day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.