Good day, and thank you for standing by. Welcome to the OGE Energy Corp. 2024 First Quarter Earnings and Business Update Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jason Bailey, Director of Investor Relations, for opening comments. Jason, please go ahead.

Thank you, Liz, and good morning, everyone, and welcome to our 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 would 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 website. 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 today. It's certainly great to be with you. The first quarter of the year delivered solid results, and we are firmly on plan for the year. This morning, we reported consolidated earnings of $0.09 per share, including $0.12 per share for OG&E and a holding company loss of $0.03 per share. The first quarter represents less than 5% of our company's expected earnings per share for the year, and we are on plan, even with the milder weather. I'm excited for this year and beyond, given the strong fundamentals of our business, our outstanding team and our commitment to reach our North Star, delivering safe, reliable and affordable electric service to our 900,000 customers. Last quarter, I updated you on recognition the company and our team received for our culture. And today, I can add another one to that list. In addition to being named a top workplace in Oklahoma, we were recently named a national top workplace by USA TODAY. We operate in a highly competitive labor market, and it is fulfilling to see our people and culture drive results, innovation and a sense of belong. I couldn't be more proud to work alongside my 2,300 colleagues. Their commitment to our purpose runs deep and together, we're driven to achieve excellence. Our people's dedication to the communities we support is unwavering. Last Saturday night, at least 25 tornadoes were spotted in Oklahoma, accompanied by high winds, lightning and hail. You've likely seen the news footage of the devastation and heard about the tragic loss of life in a number of towns in Southern Oklahoma. Since Saturday night, our team has worked around the clock to restore power to every customer who could take power. It will take months…

Thank you, Sean. Thank you, Jason, and good morning, everyone. Let's start on Slide 7 and discuss first quarter 2024 results. On a consolidated basis, first quarter net income was $19 million or $0.09 per diluted share compared to $38 million or $0.19 per share in the same period 2023. In our core business, the electric company achieved net income of $25 million or $0.12 per diluted share compared to $40 million or $0.20 per share in the same period 2023. As expected, electric company net income decreased primarily due to higher depreciation and interest expense related to our customer-centric capital investments made over the last 2 years. This significant regulatory lag is the primary area being addressed in our current rate relief filing in Oklahoma. The decrease in net income was partially offset by higher operating revenues from strong load growth. Stepping back a moment, the benefits to our customers from the investments we make to serve our growing service area are immense, ranging from reliability and resiliency improvements to increased capacity for economic development. In fact, the load growth we have seen since our last rate case allowed us to reduce the revenue request in our Oklahoma rate case by approximately $70 million. To round off our discussion of Q1 consolidated results, other operations, including our holding company, reported a loss of $7 million or $0.03 per diluted share in the first quarter compared to a loss of $2 million or $0.01 loss per share in the same period 2023. The increase in net loss was primarily due to higher interest expense on increased short-term debt. Regarding full year EPS expectations, our exceptional load trends have made up for the mild weather in Q1 that impacted results by approximately $0.03. Therefore, overall, our year-to-date results are right on…

[Operator Instructions] Our first question comes from Constantine Lednev with Guggenheim Partners.

Great quarter. Can you elaborate on the cadence of updates related to the RFPs kind of just the time frame that you're maybe looking at kind of -- and how those updates would be layed to the CapEx plan over time? Are we waiting kind of for next year? And would you kind of seek to prefund those in your financing plan once you get clarity from the outcome?

Great question, Constantine and it's going to mirror very similar to what happened the last time, the last RFP. We're intentionally making sure that we dot the i's and cross the t's and following all the commission processes. So we'll issue this draft RFP 30 days after, and we'll have some stakeholder discussions, 30 days after that, we'll issue the final one. Probably later in the year, we'll have all the bids back and have arrived at the decision probably in the fourth quarter. We will file that with the commission for approval just like we did last time. Once we get approval for our recommendations, then we'll layer that into our tables and discuss kind of timing and how we'll fund that, okay? This is -- look, we're anxious to get started, but this is a process, and we're going to follow the process.

No, absolutely. That's abundantly clear. And maybe quickly touching on your load growth and the expectations. You noted it's trailing towards high end. And do you have enough visibility to extend that strength into '25? And how do you think that impacts your planning assumptions beyond '24 in general?

Do you want to cover that, Bryan?

Sure, sure. You can probably tell from our comments, Constantine, that we're really bullish on loan growth prospects. So certainly, I think there's some upside to our load projections here in 2024, but also in each year of our 5-year plan. For OG&E and really for Oklahoma, we bring several competitive advantages. First is our low rates. And we have pockets of ample transmission capacity. In our state, there's abundant and affordable land, tremendous access to renewables and natural gas. And those are all really the drivers that have kick-started load growth over the last 3 years. So we've got a great track record on that. And we think there's quite a bit of upside to the load numbers in 2025 and beyond. I think I mentioned in the last call, we expect it to be at least 2% in 2025 and out in some of those out years and there's certainly some upside to those as well.

Okay. And does that load growth potentially help you defer some of the future rate cases as you're thinking about them? Or I guess, new capital plan just require more material filing?

Yes. I think the benefit of that load growth and that customer growth Bryan was talking about is it's certainly going to create headroom and create a tailwind for us to make additional investments and maintain that competitive advantage we have with rates.

The next question comes from Durgesh Chopra with Evercore ISI.

Just maybe can you help us out with -- if there's a way to think about the EPS sensitivity from load growth. So obviously, this is a very strong trend, right? You're at the high end of the 2% to 5% this year, but how should we think about earnings implications for maybe a percentage change in load growth, something along those lines?

Durgesh, this is Bryan. It gets nuanced, I guess, between customer classes when you talk about these rules of thumb, but I'll tell you, for this year, we were expecting loan growth to benefit earnings by around $0.12 of EPS. That was around the midpoint of around 4% load growth. So you can maybe back into some high-level math with it. With our trends here in the first quarter, we think that's going to benefit us. What I mentioned in my comments is weather was negative $0.03 in the first quarter, and we think our load growth trends we're already seeing this year are going to make up for that. So I'll just tell you, we think we're going to be $0.03 to the good for that incremental load growth here in 2024.

That's excellent, Bryan. That's exactly what I was looking for. And then maybe just your strategy around, if you can, to the extent talk about the formula rate plan in Arkansas? Obviously, you have a settlement there, but as I understand, it's going to expire here soon. So maybe just what's the plan there? Is it a rate case? Or is it an extension or a combination of both?

Yes, Durgesh, that's exactly what we're required to do. We'll go back in for a rate filing a rate case in Arkansas and reinstitute the 5-year formula rate plan. And so we're putting that plan together right now, and we'll let you know when we get ready to file it.

Sean, thank you. Is it that you have to file a rate case? Or can you seek extension under a separate process?

No, you need to file the rate case. You need to file the rate case. There needs to be a rate review.

The next question comes from Paul Fremont at Ladenburg Thalmann & Co. Inc.

Congratulations on a strong start. I was wondering since testimony -- initial testimony has come in already, what your thoughts are on the possibility of a settlement. And in Oklahoma, do you need to have a unanimous settlement? Or do you think you can do partial settlements?

So Paul, this is Sean. Good to hear from you this morning. In Oklahoma, we've had nonunanimous settlements previously. And we've had some parties that just have agreed not to contest the settlement. You're asking me how I feel, I never like reading intervenor testimony, but nevertheless, we have a very solid case out there, and we feel good about it. We'll begin having discussions once we file our rebuttal testimony and we'll go from there. I think there are a number of parties that would like or be engaged in a settlement process. I think the commission would prefer to see a settlement. But if you can't get there and you need to go another way, we're prepared to do that as well.

And then I guess my other question has to do with sort of the commercial load growth that you guys experienced. How much of that is data center or AI driven?

Bryan, do you want to do that one?

Sure, sure. On the commercial front, what we've seen in the last couple of years is the majority of the load growth has come from kind of cryptocurrency data mining companies. We're seeing that shift a bit, Paul, to even those companies that have been doing cryptocurrency mining historically are now pivoting their business models prospectively. They're still going to do some of the data mining, but they're shifting their business models more to traditional, I guess, you would call it, traditional data center work around generative AI, for example, hosting those types of servers. A lot of our interest -- a lot of the interest in our service territory currently for future years is data centers. But as we've spoken to before, we're seeing broad industries being interested in our service area, whether it's the defense industry, food and beverage distribution, Western Arkansas is really more of your traditional manufacturing, some of the big names that you've been seeing in your whole life. So it's an exciting time. But to answer your question directly, we have seen quite a bit of cryptocurrency load growth. That's about 1.5% of our margins as we sit here today.

And then that was sort of the second part of my question was going to be on margins. I mean should we think of margins on the data centers as being more like industrial or sort of traditional commercial type margins?

I would think of them as being some of your very largest loads tariffs, which feel more like some of your industrial groups you're thinking of, Paul. So typically, some of the lowest margin customers. And in fact, with some of these, they do improve over time as incentives roll off, but it's definitely a lot of load for at least initially some pretty low margins.

Sort of last question. You talked about sort of 2 categories. Can you give us like a percentage maybe idea? I mean is it like 80% data centers and 20% of the more sort of traditional? Or just within the commercial category, how much is being driven by sort of data centers and crypto-miners?

Yes. So I don't know if we've given that percentage, but it is the majority. Think of it maybe more like 2/3, maybe a bit more than that being your cryptocurrency. Again, it's shifting -- it will be shifting more and more to data centers as we move.

The next question comes from Nicholas Campanella with Barclays.

So I just wanted to follow up on one of Constantine's questions. And Bryan, I know you brought up in your prepared remarks, you just got your updated outlook from the agencies. Just as you kind of layer in these RFPs to your capital plan as a result of you winning some generation or some type of ownership opportunity, just how do we kind of think about the balance sheet capacity at this point relative to your FFO minimums and the incremental financing needs? Or is this just really -- is this capital going to replace other capital in the 5-year plan to the extent it materializes?

Nick, this is Sean. Like I mentioned, we're probably going to have a decision sometime next year from the commission in terms of approval for those generation items that we would own and then we'll layer that in there. And I think we'll see where things stand when we get there, right? I think it's the best way. I mean if load continues to grow like it is, obviously, you've got a little more room in your coverage ratios. We're protective of the balance sheet. That's very important to us. But how we fund it and what regulatory compact we arrive at to recover that, those all play into that. So I think it's a bit premature not knowing exactly what's going to come out of the RFPs and what that regulatory compact would look like.

I appreciate it. And then I guess just on the storm that you brought up also, just can you just remind us, I believe you have kind of deferrals for storms in place in your territories, but can you remind us there?

Nick, we sure do. There's a tracking mechanism for storm costs in Oklahoma. So the first $3 million of cost on an annual period go to expense. And then the remainder on O&M goes into that tracker.

[Operator Instructions] The next question comes from Anthony Crowdell at the Mizuho Group.

Bryan, congrats on a wonderful 3 years.

Good morning, Anthony. Basically, that kept me away from the phone.

I know, I know. You never know. Don't be so negative. The day is not over yet. Just 2 housekeeping items. On the financing side, you talked about an issuance at the holdco and an issuance at the OpCo. Just -- has the company -- will the company provide any clarity on what the interest rate you're assuming on those offerings?

Yes, Anthony, it's a good question. We had assumed kind of in that mid-5 area, for debt issuances. So at the holdco, it's -- as you've seen in the recent bond deals, it's probably a tick higher than that. But markets are dynamic. We'll see how they end up, but we're in a general area with our expectation sitting here today compared to where they were before, maybe a tick higher under the current market conditions. But I'd say our CP and our short-term debt rates have been kind of spot on. We've built some conservatism into the plan and thank goodness we did. We feel like we're in great shape. And let me just add to that, while interest expense may be a tick higher, we're seeing, as I mentioned before, some really exceptional load growth. And so we're right on plan and feel really good about the full year projection.

Great. And then just on load growth, just a quick question. More on the residential -- customer growth, 1.1%, residential load growth, much higher at 3.9%. Just I'm curious what the drivers are for that residential growth number?

Yes. It kind of ebbs and flows a bit, as you know, Anthony. Last year, we had flattish, maybe just ever so slightly negative on the residential growth despite having good customer growth numbers. And certainly, we had a very large rate reduction in November in our fuel filing, expect to have a maybe a slight reduction again to the fuel tracker again here in May and I think that just helps. When you have low rates and the economy is good locally, we have low unemployment, the job market is really good here in Oklahoma, I think that really helps the residential class do well. But this is one quarter. We'll see how second quarter looks, and hopefully, that trend continues for a bit.

I'm showing no further questions at this time. I would now like to turn the call over to Sean Trauschke, Chairman, President and CEO, for closing remarks.

Thank you, Liz, and thank you all for joining us today. Thank you for your interest in our company and for being on the call today. Please have a wonderful day. Take care.

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