Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OGE Energy Corp (OGE, Financial) reported consolidated earnings of $0.51 per share, up from $0.44 per share in the same period last year.
- The company experienced exceptional load growth of 5.8% year-to-date, prompting an increase in full-year load growth projection to 4% to 6%.
- OGE Energy Corp (OGE) has a strong balance sheet with no fixed rate maturities until 2027 and no need for external equity to maintain credit metrics.
- The company is seeing consistent customer growth exceeding 1%, driven by economic expansion in Oklahoma and Arkansas.
- OGE Energy Corp (OGE) is committed to driving economic expansion, with 10 new projects announced this year representing nearly 20,000 new jobs.
Negative Points
- The holding company reported a loss of $0.03 per share, primarily due to higher interest expense.
- The company faces challenges in forecasting and planning for significant load opportunities due to supply chain lead times and regulatory constructs.
- There is a need for consistent rate case activity to stay current with investments and recover costs, which may impact customer rates.
- OGE Energy Corp (OGE) has to manage the balance between making significant capital investments and maintaining affordability and reliability for customers.
- The company is reliant on favorable weather conditions to meet its load growth projections, which can be unpredictable.
Q & A Highlights
Q: Are you seeing any strong July-August weather component there? And does that imply a level of O&M contingency going back into the back half of the year, so potential tailwind for next year?
A: Here in Oklahoma and Arkansas, in July and August, it's hot. So there's not a ton of upside there, but it's hot. We're managing the business for the long term and have a lot of flexibility in our plan. Our confidence doesn't have anything to do with July and August.
Q: On the O&M side, are you pulling some O&M forward, given the strong start and how you're going to end the year? Should we be thinking about a tailwind on the O&M side as we're bridging from this year to '25?
A: For 2024, it is in excellent shape, primarily driven by exceptional load growth. There may be a little room to move some O&M around for 2025, but we're focused on the long term. We're in a great position for '24, allowing us to plan ahead across the board.
Q: How are higher load growth expectations changing the calculus for existing generation RFPs and near-term needs? Do you see an opportunity to shift between preferred techniques like CCGT versus simple GT?
A: We anticipated this load growth, and it doesn't change our direction. The backlog of potential growth is robust but not necessarily linear, making it difficult to forecast exactly.
Q: With higher load growth and CapEx run rate, do you need more frequent rate cases? Would you propose any incremental or interim mechanism to reduce lag, given accelerating CapEx needs?
A: It's important to stay current with our investments and recover those. We will have a consistent cadence in terms of rate activity in both states and pursue a more real-time tracking mechanism.
Q: Can you level set on where you stand in discussions with data centers? How real is it that we can see something come to your service territory by year-end?
A: We have more than half a dozen in various stages of development. The growth we're seeing doesn't include any data center work. We're working through transmission and generation availability and regulatory constructs to support these projects.
Q: What is the size of your current system versus the average request of the customers you're seeing today?
A: We're peaking in the mid-6,000s, and any of these requests could be between 250 and 500 megawatts.
Q: What are your thoughts on a formula rate or PBR framework for next year as you get out of this case?
A: We will continue to pursue some formula rate mechanism in both states and renew that in Arkansas as well.
Q: Given the strong weather tailwinds this year and constructive load growth backdrops, is it possible that the base of the 5% to 7% EPS CAGR eventually gets changed in the coming years?
A: We are planning to hit those numbers every year. With exceptional load growth, there is potential upside on the long-term EPS forecast, and we look forward to providing an update in February.
Q: Are there any factors that make your load growth unique compared to others in the industry?
A: It's not just manufacturing but also the multiplier effect for ancillary small businesses and residential customers. We're seeing real customer growth in our service territory, driven by our low rates and economic development efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
