OGE Energy Corp. (OGE) Q1 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to OGE Energy Corporation 2026 First Quarter Earnings and Business Call Update. [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, Casey Strange, Investor Relations Senior Manager.

Thank you, Stephanie, and good morning, everyone, and welcome to our call. With me today, I have Sean Trauschke, our Chairman, President and CEO; and Chuck Walworth, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Chuck 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 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 will now turn the call over to Sean for his opening remarks. Sean?

Thank you, Casey. Good morning, everyone. Thank you for joining us on today's call. This morning, we reported consolidated earnings of $0.24 per share, and the first quarter typically represents approximately 10% of our company's earnings for the year. Even with milder weather in the first quarter, we remain confident in our 2026 guidance and in the foundation we are building for 2027 and beyond. Chuck will discuss the first quarter financial results in more detail shortly. Looking forward, our planned actions for the remainder of 2026 are setting the course for the rest of this decade. I'm pleased to let you know in the coming days, we will file long-term special contracts with Google to serve multiple previously announced data centers in Oklahoma with the Oklahoma Corporation Commission. Google is the customer previously referred to as customer X and their expected load and ramp rate is consistent with our 2026 IRP. We work closely with Google to ensure broad customer protections, including minimum charges. Google will also pay 100% of the cost to connect to the grid and its fair share to power the data center sites. We've also secured capacity from 2 solar facilities currently under construction. We look forward to creating similar opportunity for communities in the future as we leverage our low electric rates to drive investment and foster economic growth for many years to come. As discussed last quarter, we are continuing to add generation through a thoughtful, measured approach. We commissioned the 98-megawatt tinker power plant in February and expect 450 megawatts of new CTs at Horseshoe Lake to come online in the fourth quarter. While also breaking ground on 2 additional 450-megawatt units. And we're still advancing the 300-megawatt Frontier Energy storage project. So including the aforementioned capacity agreements, this 1.7 gigawatts of capacity strengthens our system today and positions us well for continued growth ahead. These investments reflect a disciplined strategy to support customer growth while maintaining reliability and competitive rates. Continuing on the regulatory front, 2026 remains an active year. In Oklahoma, we are finalizing a stand-alone large load tariff and expect to file it with the Oklahoma Corporation Commission no later than July 1, providing a clear, durable regulatory path for future large load activity. We continue to prepare for a rate review filing later this year with new rates anticipated in '27. In August, we expect preapproval of the Frontier Energy Storage project. And as projects emerging from the RFP process we are -- process are selected and negotiated, we also expect to seek pre-approvals on a rolling basis rather than waiting for the full portfolio of projects to be complete, and we anticipate filing for these preapprovals throughout the balance of this year. In October, we expect to complete the acceptance of the notices to construct on directly assigned SPP transmission projects. So taken together, these investments underscore a deliberate forward-looking strategy to support customer growth and demand. The actions we are taking this year establish a clear foundation for the remainder of the decade while leveraging our low rates as a significant competitive advantage. With respect to competitive dynamics, we continue to believe our in-state pricing is a meaningful advantage in driving new business that we will protect. Importantly, we have not seen the type of price escalation some have pointed to in other markets, and we have the customer protections, oversight and regulatory framework in place to ensure it does not develop that way here. 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 the National Top Workplace by USA TODAY. We operate in a highly competitive labor market, and it's fulfilling to see our people, our culture, drive results, innovation and belonging. I couldn't be more proud to work alongside my outstanding colleagues. Their commitment to our purpose is evident every day and continues to drive excellence. and our commitment to making Oklahoma and Arkansas better places to live, work and play drives us to our North Star of delivering reliable electricity at low cost. Again, the steps we are taking in '26 will set the stage that drives our future success. So with that, thank you. I'll now turn the call over to Chuck. Chuck?

Thank you, Sean. Thank you, Casey. Good morning, everyone. I'm pleased to review 2026's first quarter results with you and provide an update on our 2026 financial plan. Let's start on Slide 7 and discuss first quarter results. Consolidated net income was approximately $50 million or $0.24 per diluted share compared to $63 million or $0.31 per share in the same period of 2025. In our core business, the electric company achieved net income of approximately $58 million or $0.28 per diluted share compared to $71 million or $0.35 per share in the same period of 2025. The decrease in net income was primarily driven by mild first quarter weather and the timing of O&M year-over-year, partially offset by lower depreciation and interest expense on assets placed in service. The holding company reported a loss of approximately $8 million or $0.04 per diluted share, consistent with the prior year. Although first quarter weather was soft, there is plenty of runway left in 2026. We expect to achieve our consolidated earnings guidance of $2.43 per share with a range of $2.38 to $2.48, assuming normal weather for the balance of the year. Our service area continues to perform well with customer growth just under 1%. Weather-normalized load was stable year-over-year, reflecting temporary outages at a few large customers, particularly offset by strength in the public authority and oilfield sectors. Looking ahead, today's announcement reinforces a meaningful growth tailwind, building on a historically strong trajectory with approximately 24% load growth over the past 5 years. Underlying demand remains healthy, supported by strong local economies and our low-cost reliable business model. Against that backdrop, we continue to see strong momentum across our service area. As Sean mentioned, we will file energy service agreements with Google to serve its previously announced data center facilities in Muskogee and Stillwater. This is an important milestone and the result of a disciplined approach to structure, terms and risk allocation. The addition of a large high load factor customer allows OG&E to spread fixed system costs over a significantly larger customer base, creating downward pressure on rates for existing customers. Equally important, agreements like these include robust long-term customer protections, including multiyear commitments with minimum charges and exit provisions to mitigate stranded cost risk and strong credit support to fully back customer obligations. Working with Google, we've secured generation capacity from 2 solar facilities that Google had previously announced and that are currently under construction. These facilities will provide 600 megawatts of nameplate capacity, and we will request preapproval from both Oklahoma and Arkansas commissions for these CPAs. Turning to financing. In April, we completed a debt issuance at the electric utility, which satisfies our financing needs for 2026 under the current plan. As a reminder, we issued equity late last year to support incremental capital added to our long-term plan. And together, these actions position us well from a balance sheet perspective. We have flexibility between now and May 2027 to exercise the approximately 4.6 million shares in the forward equity agreements. We continue to target credit supportive metrics and expect to maintain FFO to debt around 17% over the planning horizon. Turning briefly to credit. Last week, Moody's revised the outlooks for both OGE Energy and OG&E to stable from negative and affirmed all ratings. Moody's cited a generally constructive regulatory framework in Oklahoma and Arkansas, including improvements to cost recovery mechanisms. They also pointed to balance sheet actions, including the 2025 equity issuance as supportive amid a growing capital program. Notably and consistent with our planning outlook, Moody's lowered the parent level downgrade threshold to 17%. Later this year, we also expect additional clarity on several important projects. In August, we anticipate an order in our Frontier battery storage pre-approval case. And this October, we plan to accept final notices to construct from SVP for our direct assigned transmission projects. As these projects are approved, we will roll them into our capital plan and communicate our financing strategy just like we did last year. In closing, we remain confident in our financial plan and our ability to execute through 2026. The actions we're taking this year are setting the foundation for the next 5 years of results. We are advancing a disciplined strategy that balances customer affordability and prudent investment, supported by a balance sheet that remains a key strength. With our financing plan for the year complete, important regulatory filings moving forward and guidance affirmed, we believe the company is well positioned to deliver results consistent with our commitments. With that, I'll turn back to Sean, and we'll be happy to take your questions.

[Operator Instructions] Our first question comes from the line of Shar Pourreza.

This is Whitney Mutalemwa on for Shar. So just to start off with the legislature process. Since the last update, HB 2992 has moved further along in Oklahoma and now it explicitly requires separate large load tariffs and cost causation protections. Does that legislation materially improve like your negotiating position with large load customers? Or were you already headed towards that substantially the same framework on your own?

Yes. I would -- Whitney, this is Sean. I think it's clearly supportive of the direction we've been heading in our discussions with not just Google, but other large load providers. Protecting the existing customer base has been paramount to us from day 1. And I think what's important about the legislation is both of the authors of the legislation and the Senate and the House, we have and had for many years, good relationships with them. And we all want the same thing. We want the protection for customers, and we want the continued economic development and growth for the state. And so I think there's great alignment there.

Of course. And just like as a mini follow-up, on the regulation side, obviously, you've pointed to an Oklahoma rate case review. Midyear and then potentially some Arkansas activity later in the year. So how are you thinking about just sequencing these rate filings so that you're preserving that like constructive recovery, but you're also avoiding the perception that large load-driven investment is crowding too much on customer bills at once?

Yes. I think your use of the word sequencing is a good one. We're going to take these bids we're getting back from the RFPs. We're going to look at those and try to file those as quickly as we can. As we said in our remarks, we're not going to provide a full portfolio filing. We're going to file them as the negotiation is complete. And then we're going to have to sequence in there those rate filings in Oklahoma and Arkansas as well. So there's a full agenda for sure. But again, our intention around the large load tariff is to actually protect those customers.

Our next call is Nicholas Campanella of Barclays.

It's Michael Brown on for Nicholas Campanella. My first question is, since you haven't filed the large tariff yet, can you discuss what you're looking for in this tariff? And what type of upfront capital commitments would you be requiring for your customers? And how can that kind of change your financing needs?

Yes. Michael, I didn't get the middle part of that you [indiscernible] out there. You talked about capital commitments. Can you repeat that?

Okay. Since you haven't filed a large tariff yet, can you discuss what you're looking for in this tariff? And what type of upfront capital commitments would you be requiring for your customers? And how can that change your financing needs?

Yes. So I think we would fully expect any large load customer to pay all those [indiscernible] payments, make those in advance. I think our tariff is consistent with the legislation in terms of looking for contract terms and security, looking for pricing structures and charge allocations such that you do preserve or protect the existing customer base and really setting a threshold around service eligibility in terms of what is a large load. Is it 75 megawatts? Is it 100 megawatts, things like that. But that's how we're thinking about it. In terms of the initial upfront, the connection to our system, that wouldn't really change our financing plans. Obviously, as we begin adding additional resources to serve this load, that will change our financing plan. And as Chuck mentioned, once we get that approved, he'll share with you exactly how he's going to finance that.

My next question is when taking into account the multifaceted piece of the upside with Google, the transmission and the IRP, how are you thinking about the impacts to your EPS CAGR and when you would be ready to communicate the new plan to investors?

Yes, Michael, this is Chuck. It's going to be just like the playbook that we did last year. So these catalysts are -- some are coming this year and then some coming maybe early next year. But in terms of the transmission, we should have line of sight to that by Q4 of this year. And that's a pretty substantial opportunity and then coupled with the Frontier battery case as well. So as soon as that's buttoned up in terms of having an order on that, we'll be prepared to layer that into our plan and discuss financing and then how that impacts earnings as well. But again, it's not just a this year event, right? I mean, so those are two big opportunities, but then that will be shortly followed by the outcome of the generation RFP as well.

My last question is, can you provide the short-term and long-term load update?

Yes. So in terms of short term, we maintain our guidance for the year at 4% to 6%. And then longer term, that's going to be -- we haven't given guidance on that. But clearly, from this Google announcement and the knowledge that it was previously customer X, which was basically a gig in our plan by 2031 in relation to our system, we're somewhere just under a 7-gig system. And I think that can kind of give you an order of magnitude in terms of the size of this.

Our next call is from Julien Dumoulin-Smith of Jefferies.

I got to tell you, Stephanie is doing a great job with the name. She nailed yours. She named Shar. She's doing a great job.

Absolutely. I appreciate it very much. It's very kind. Well, look, let me take it from the top here. I mean let me ask you -- I mean, the 5% to 7% here, how are you thinking about that? You're already at the top end through '28 into the base plan. And right, you've got this incremental Frontier, you've got this SPP transmission. And then in theory, then you've got RFP participation, right? So -- and again, I suppose that's a little bit of an unknown in terms of how far that goes. But do you want to remind us here? I mean I didn't hear in your script any comment about 5% to 7%. So I don't mean to needle you here, but it seems like it might have been slightly omitted here.

Yes. Julien, this is Chuck. Thanks for the opportunity to address that. So you're right. I mean we didn't mention that because it's unchanged in the near term. So 5% to 7% and pointing to the upper end, upper half of that through the next few years. But really, the catalysts that we're talking about, those are going to take us beyond that period, right? So I think your observation is spot on that this really allows us to extend that runway. But again, keeping with our tone and philosophy, we're not really going to get into that until those projects are rolled into the capital plan. But clearly, those catalysts are out there to extend that expectation.

Right. Absolutely. And actually, Chuck, just sticking with the focus here on the financing plan. How do you think about this Moody's FFO to debt threshold, right? I mean kudos on finally getting that done. I know it's been in the cards for some time, getting that thing down to 17 from 18. You guys didn't blink. You held your line here. But how should we think about the common equity needed to fund the incremental CapEx above the base plan? I mean how do you think about that now and here? How do you think about JSNs at this point? But again, obviously, kudos on the move here in creating capacity?

Yes. Thanks for that comment, Julien. Yes, I mean, it is great confirmation of our plan. But again, I think it didn't just happen overnight. It's -- I think underlying that is our long-term track record. And so that means the onus is on us to extend that track record into the future and be prudent in that aspect. So it still means we got a lot to live up to, right? But clearly, I think coming at this point, when we've got these large opportunities in front of us, that coupled with our reaffirmed balance sheet strength, that's just -- it's like a multiplier effect, right? So yes, really, really, really pleased with that, and it's just great timing from that standpoint. In terms of your question about forms of equity, look, I mean, we've always maintained that we've got the full toolbox at our disposal. We thought it was very important to do common equity next year. When it comes time for the next round, we'll evaluate that in the context of the market at that time, and we'll do what's right.

Awesome. Excellent. And then if I can go back a little bit on what you were alluding to earlier, but I just want to clarify this, right? Obviously, kudos on translating Google into a formalized construct. I feel like that's been in the cards for a little bit here. How do you think about the total gigawatts that are incurred there and the opportunity here? I just want to make sure we're hearing this right here. And as much as what is the ramp in gigawatts relative to what you guys have discussed previously? Is there something incremental to this, call it, 1.9 gigawatts, if I'm adding it up right, I mean there's a few different ways to read it. Is there something incremental there that one should be considering that would be ownable? I heard the solar comment about the capacity contracts that would be a purchase agreement. But beyond the 1.9, is there something incremental here with Google that we should be cognizant of?

So with this announcement, this announcement is consistent with what's in our IRP, okay? So this one by itself is not incremental. It's just consistent with the plan. In terms of the solar contracts, if you recall, the 1.9 was a winter need. It was the winter of [ '31-'32 ]. And the rough math from the SPP is it's going to be somewhere around a 20% accreditation on solar in the winter. So our kind of high-level estimate is that's going to change that 1.9 to 1.8 for that time frame. But that's just with this contract, obviously, anything additional to this would be above and beyond that.

Got it. Okay. Excellent. Fair enough. And then just specific, I'd love to hear the cadence of conversations, whether that's expanding Google further or other data center contracts. We've heard from some of your peers in adjacent states. Obviously, we saw this ERCOT update recently. How would you characterize the state of conversations for whether it's a further Google expansion or other contracts in as much as you all have been on a roll?

I would characterize it as continuing and consistent.

Our next call is from Aidan Kelly of JPMorgan.

I just wanted to go back on like the large load kind of developments here. And maybe just see if whether you kind of plan to indicate new resources CapEx as they get preapproved even or if they wait for full approval to add to the plan?

I'm sorry, I'm not sure I totally follow your question there. Could you repeat that?

Like do you plan to like telegraph like the new resources CapEx as they get preapproved?

Yes, yes, 1.5%. Yes. No, clearly, we are in the middle of an RFP right now. So there's not really any detail -- I mean, the bids haven't even been opened on that yet, but they will be soon. But yes, once those do the evaluation, do the selection, then we'll make the filing. So really, you'll have some pretty good indication as to what the possibility is once we make those filings. And then once they're actually formally approved, that's when we'll layer that in. But you'll actually get some pretty good color on that before they're approved.

Great. Appreciate the input there. And then just kind of want to go back to the 600 megawatts of nameplate capacity with the solar facilities. Just like a simple question here. Like is that in the plan? Is it separate from the IRP filing? Just any color on how that kind of coalesces with the generation opportunities?

Yes. So that's where I was going with on that previous question. So it's -- it was not -- it was not included as a resource in the 2026 IRP that showed a need of 1.9. And so again, since that was a winter number, adjusting for that's going to be lower that to about a 1.8 need. So that's kind of the walk forward on that.

Our next question is from Paul Fremont of Ladenburg Thalmann & Company.

Congratulations. I guess my questions are sort of mostly focused on the Seminole to Shreveport line. The SPP write-up sort of that came out at the end of last year is suggesting an in-service of mid-2028. Is that sort of a realistic time frame that this can all be done in? Or should we look for some delay in that?

Paul, this is Chuck. That's part of what we're still going through. I mean, yes, that was the SPP's date, but that didn't really -- that was more of a -- from a modeling perspective, that didn't take into account any expectations on an actual construction time line. So that's part of the process we're going through right now is firming that up, and that's what we'll have clarity on by the early Q4 time line this year.

Great. And would that be built on existing right of way? Or would you need to sort of put into place new rights of way?

So it's new. And so that's part of the process also is just doing the line routing on that.

And my understanding is you're still negotiating certain things with AEP. Is that -- how much of the line is going to be sort of Arkansas versus Oklahoma? Or what exactly sort of remains to be negotiated with AEP?

So on this one, it's really Oklahoma and then probably Texas into Louisiana, but it's -- that's part of what we're working on is where exactly those -- where that crosses state boundary. So that's going to play into that. So still work in progress.

And then my last question, with respect to the battery, how -- have you determined whether there's an additional equity need that will go with the battery?

Again, we -- since it's not approved yet, it's not in our plan. So we'll do -- because again, we'll probably have timing clarity on that right around the same time as the transmission. So we'll probably take a holistic view of it at that time.

So then the CapEx update that we should expect is more likely going to be third quarter versus, let's say, second quarter?

Yes, I think that's fair.

And at this time, we're going to make a final call for question. [Operator Instructions] And our next question will come from Stephen D’Ambrisi of RBC Capital Markets. Stephen D’Ambrisi: I mean, Julian took like six of them. So I really only have one question left. And I guess what I would say is just given what's happened with some of, call it, the capacity contracts, how do you think you're positioned to effectively win or what percent -- what are you messaging to the commission and to stakeholders about the benefits of having the potential incremental generation as opposed to working with developers and securing capacity contracts and just the risks and benefits that come with that?

Yes. Thanks, Steve. I think we've been consistent. We've certainly had this discussion with the commissions about this. It's our intent to own and operate these assets. There's reasons from time to time to layer in some of these capacity type agreements to kind of bridge you during construction. But thinking about some of the severe weather events going back to Winter Storm Uri, there was no doubt that the assets that we owned and we operated ran and performed very well. And I think that's what everyone is looking for. So it'd be our expectation that we own and operate these assets, whether we build them ourselves or we were to purchase them from somebody, though, I'm not sure really -- we get too excited about the difference there. What we're focused on is making sure that we're the ones holding the ball, so to speak, when the severe weather comes in.

This concludes -- we don't see any additional questions. So this concludes the question-and-answer session. And I'd like to now turn it back to Sean Trauschke.

Thank you, Stephanie. Great job today, and thank you all for joining us today and for your continued support. Have a great day.

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