Yahoo Finance OGE Energy Corp. (NYSE:OGE) Q1 2024 Earnings Call Transcript
OGE Energy Corp. (NYSE:OGE) Q1 2024 Earnings Call Transcript May 1, 2024
OGE Energy Corp. misses on earnings expectations. Reported EPS is $0.09 EPS, expectations were $0.35. OGE isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the OGE Energy Corp. 2024 First Quarter Earnings and Business Update Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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.
Jason Bailey: 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?
Sean Trauschke: 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 and perhaps years for those communities to recover and we'll be right alongside our neighbors throughout the rebuilding process. As we keep these communities front of mind, let's transition to our business this morning. Today, I want to touch on three topics; operational excellence for customers, activity on the regulatory front, and a preview for the rest of the year. Looking at operations, our grid and weather hardening investments continue to deliver great reliability results. Customers are experiencing fewer and shorter outages as a result of technology platforms and applications that improve communication between devices and automatically reroute power in the event of an outage.
We continue to harden the grid by strengthening and replacing poles and restoring structures. And when we look at the circuits we've hardened through our grid enhancement program, SAIDI for those circuits has improved 28% since 2020. On the generation front, our power plant operations continue to home, supplying the grid with electricity to serve our customers. We completed our latest IRP at the end of March, identifying a five-year plan to address generation capacity needs through 2028. The IRP determined that a combination of solar and CTs are the best choice to meet the identified needs. Shortly, we will issue draft RFPs per the commission rules and then 30 days after that, we'll issue the final RFPs, and we'll keep you posted as we move along this process.
We are reviewing the final EPA rules released last Thursday to better understand how they may impact our current and future generation plans. Timing for full implementation is uncertain as the rules will likely be challenged in the courts. Together, the investments we make in generation and wires support the growing communities in our service area. Last month, the Wall Street Journal ranked our hometown of Oklahoma City as the 5th Hottest Job Market in the Country due in large part to our low cost of living, of which OG&E is a significant part. And just this week, Forbes ranked Oklahoma City the 2nd Best Place for Small Business in the Country. We see growth across a broad set of industries, including health care, tribal enterprises, military, housing, and data centers.
Speaking of data centers. We're excited about the high interest our service area garners for data center locations, given that our competitive rates make us an attractive option. We are in discussion with a half dozen or so projects in various stages of development and we will continue to update you as we make progress on that front. For the first quarter, both load growth and customer growth were exceptional and set a strong pace for the remainder of the year, and Bryan will share more of those details shortly. Yesterday, the U.S. Department of Energy's Office of Clean Energy Demonstrations awarded the Choctaw Nation of Oklahoma an ERA grant to improve resilience in Poteau, Oklahoma. OG&E will support the grant by creating a microgrid to serve 7 buildings on their campus, including a health clinic, child development center, and food distribution center.
We congratulate our partner, the Choctaw Nation of Oklahoma, for securing one of 19 grants in the U.S. that will benefit their members and the community at large. We are active in pursuing additional grants to further support affordability, and we were encouraged to apply for the two grant proposals currently under review. You'll recall that we've already won a grant for our smart grid project. Pursuing these grants means cost-effective grid reliability and resiliency improvements for our customers. The investments we make to improve the grid and deliver reliable electricity to our customers must be made with an eye on affordability. To that end, today, we are reducing the fuel factor again in Oklahoma. This reduction will result in lower customer bills this summer of approximately $25 per month for the average residential customer when compared to last summer.
In Oklahoma, our rate review is well underway. This review is straightforward and is driven by our request to recover investments we've made over the last two years in the grid, new customer connections and storm restorations. These investments, like the grid enhancement, are delivering improved reliability and resiliency for our customers. Earlier this year, as much of the country called for conservation, experienced outages during winter storms, Gerri and Heather, our systems ran and our generation fleet performed extremely well with no need to call for conservation. Late last week, we received responsive testimony in the Oklahoma rate review. As you know, this is one part of the overall rate review, and we appreciate the transparent public process the Oklahoma Corporation Commission provides.
We will file our rebuttal testimony later this month and the public hearing is scheduled for June, and we expect new rates to be effective July 1st. All of this is to say the net impact of this rate review, including our back-to-back fuel increases -- decreases, is that customer rates will be lower this year than they were last summer. And in Arkansas, the 1.4% increase we implemented on April 1st associated with our final formula rate plan update was more than offset by the reduction we made to our fuel factor on the same day, which resulted in a $23.51 reduction for the average Arkansas residential customers monthly bill when compared to last year. Constructive regulatory outcomes enable us to support community growth, serve customers, and achieve results for our shareholders.
In closing, I hope you hear how bullish we are on our company and our future. The case for investment in OGE Energy is strong, thanks to our sustainable business model, beginning with fantastic fundamentals with already low rates and now even lower rates, a thriving service area, a high-quality balance sheet and credit metrics, an economic development engine that drives customer and load growth, and operational excellence delivered by an incredible team dedicated to reaching our North Star. So, with that, I'll turn the call over to Bryan. Bryan?
Bryan Buckler: 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 two 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 line with our expectations, and we are firmly on plan to deliver our consolidated earnings commitment for 2024 of $2.12, within a range of $2.06 to $2.18 per share. Let's move to Slide 8 for a deeper look at load results. Our customer count grew at a rate of 1.1% and that coupled with strong economic expansion in Oklahoma and Arkansas, resulted in weather-normalized load growth of 4.8% compared to first quarter 2023. Residential loan growth for the quarter of 3.9% is the strongest quarterly expansion we have seen since the pandemic.
And commercial sector growth of 12% continues the trends we've seen in this customer class over the last couple of years. Certainly, the residential and commercial sectors benefited the most from the vibrant nature of the economies in Oklahoma and Arkansas, but it does not stop there. Our other three customer sectors of industrial, oilfield and public authority all achieved weather-normal load results better than what was budgeted for the first quarter. Sean mentioned Oklahoma City, our hometown, as having one of the hottest job markets in the country. Economic and business development efforts, enhanced by our load rates are facilitating new businesses locating to our service area and existing customers expanding their businesses. The potential for continued outstanding load growth for many more years, including from data centers, is compelling, underscoring the dynamic economic landscapes in which we operate.
All of this is our sustainable business model in action, attracting new customers with low rates and spreading costs across a larger customer and load base with an aim to maintain some of the lowest rates in the country. Let's wrap-up on Slide 9 with an update on our financing plan for the remainder of the year. As discussed during our last call, in the second quarter, we plan to issue up to $350 million at the Holdco to term out short-term debt and at the utility, we plan to issue $300 million to $350 million in the latter half of the year. Our current capital plan requires no external equity to maintain our estimated credit metric of 17% FFO to debt each year of the five-year plan. It is worth noting that Moody's recently reaffirmed our credit ratings and stable outlook as shown on Slide 14.
On a procedural note, it's hard to believe I've already been at OG&E for over three years now. And I recall telling you during my first year that we would be filing a routine S-3 update. Well, it's that time again, and this month, we will update our standard S-3 shelf registration with the SEC, which allows our continued access to the public capital markets. Before we turn the call over for Q&A, let me recap today's message. First quarter financial results are right on plan and set us up well to deliver on our earnings guidance for the full year. We remain confident in our ability to achieve our long-term earnings per share growth guidance of 5% to 7% and business fundamentals are strong, with a solid balance sheet, constructive regulatory environments, robust load growth, and the steadfast dedication of our team members.
That concludes our prepared remarks and we will now open the line for your questions.
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