10-Q: OGE Energy Corp. and Oklahoma Gas and Electric Company Report First Quarter 2024 Results

• OGE Energy Corp. reported a net income of $18.6 million, or $0.09 per diluted share, for the first quarter of 2024, compared to $38.3 million, or $0.19 per diluted share, for the same period in 2023.
• The decrease in net income was primarily driven by a $14.6 million decrease at Oklahoma Gas and Electric Company (OG&E) and a $5.1 million increase in net loss for other operations.
• OG&E's decrease in net income was mainly due to lower net other income, higher depreciation and amortization, and increased interest expense, partially offset by higher operating revenues.
• Other operations, primarily the holding company, experienced a larger net loss due to higher interest expense and lower net other income.
• OGE Energy's 2024 consolidated earnings guidance remains unchanged, projected to be between $415 million to $439 million, or $2.06 to $2.18 per average diluted share.
• OG&E's operating revenues increased by $39.6 million, or 7.1 percent, primarily due to higher fuel and purchased power costs, non-residential demand, and new customer growth.
• Fuel, purchased power, and direct transmission expenses increased by $31.6 million, or 15.8 percent, mainly due to higher fuel expenses and increased purchased power costs from the Southwest Power Pool (SPP).
• Depreciation and amortization expenses increased by $8.0 million, or 6.6 percent, due to additional assets being placed into service.
• Interest expense increased by $5.7 million, or 12.5 percent, due to higher interest on long-term debt from a senior notes issuance in April 2023.
• OGE Energy expects to issue up to $350 million of long-term debt in the second quarter of 2024, and OG&E expects to issue $300 million to $350 million of long-term debt in the second half of 2024.

Score: 4

Explanation: The document presents a mixed picture with a significant decrease in net income offset by revenue growth and reaffirmed guidance. The increased expenses and regulatory uncertainties contribute to a negative sentiment, but the company's strategic initiatives and long-term planning provide some positive aspects.

• OG&E's operating revenues increased by 7.1 percent, indicating strong customer demand.
• OGE Energy reaffirmed its 2024 earnings guidance, suggesting confidence in future performance.
• OG&E is actively managing its fuel costs through fuel adjustment clauses, which are subject to regulatory review.
• OG&E is investing in its infrastructure, as evidenced by the increase in depreciation and amortization expenses.
• OG&E is planning to issue long-term debt to fund general operating needs, indicating a proactive approach to financial management.

• OGE Energy's net income decreased significantly, by $19.7 million, compared to the same period last year.
• OG&E's net income decreased by $14.6 million, primarily due to lower net other income and increased expenses.
• Other operations experienced a larger net loss of $5.1 million, driven by higher interest expense and lower net other income.
• Fuel, purchased power, and direct transmission expenses increased significantly, impacting profitability.
• Interest expense increased due to higher long-term debt costs, affecting the bottom line.

• OGE Energy's financial results are dependent on timely and constructive decisions by regulatory agencies.
• The company faces risks related to environmental regulations, including the EPA's Good Neighbor FIP, which could require significant capital expenditures.
• OG&E is subject to various legal proceedings, including a lawsuit seeking over $60 million in damages related to a fire.
• The company's ability to access the commercial paper market could be adversely impacted by credit rating downgrades or market disruptions.
• Changes in accounting standards could have a material impact on the company's financial statements.
• The company is exposed to risks related to weather conditions, which can impact demand for its services.
• OG&E faces potential risks related to the listing of the Tricolored Bat as endangered, which could impact operations and development projects.
• The company is subject to risks related to the SPP's resource capacity accreditation methodology, which could impact its capacity needs.

OGE Energy's 2024 consolidated earnings guidance remains unchanged and is projected to be between $415 million to $439 million, or $2.06 to $2.18 per average diluted share. OG&E is projected to earn approximately $447 million, or $2.22 per average diluted share. A loss of $20 million, or approximately $0.10 per average diluted share, is projected for other operations (primarily the holding company).

• OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities and encourage growth and a higher quality of life.
• OGE Energy's business model is centered around growth and sustainability for members, communities and customers and the owners of OGE Energy, its shareholders.
• OGE Energy is focused on creating long-term shareholder value by targeting the consistent growth of consolidated earnings per share of five to seven percent.

The report reflects the challenges faced by utility companies in managing fuel costs and capital expenditures while navigating regulatory and environmental requirements. The increase in fuel costs and the need for infrastructure upgrades are common themes in the utility sector, particularly with the ongoing transition to cleaner energy sources and the need to maintain grid reliability. The company's focus on renewable energy and grid modernization aligns with broader industry trends.

• OGE Energy's performance is comparable to other utilities facing similar challenges with rising fuel costs and regulatory pressures.
• The company's focus on grid modernization and renewable energy aligns with industry trends, similar to companies like NextEra Energy and Duke Energy.
• The planned long-term debt issuance is a common strategy for utilities to fund capital expenditures, similar to how Southern Company and Dominion Energy manage their finances.
• The company's efforts to comply with environmental regulations are consistent with the broader industry's focus on sustainability, similar to the actions of Xcel Energy and Pacific Gas and Electric.
• OGE Energy's reliance on regulatory approvals for rate increases is a standard practice in the utility sector, similar to the processes followed by American Electric Power and Consolidated Edison.

• Shareholders are impacted by the decrease in net income and earnings per share.
• Customers may see changes in their rates due to fuel cost adjustments and other regulatory proceedings.
• Employees are impacted by changes in compensation and benefits, as well as the company's overall performance.
• Suppliers and creditors are impacted by the company's financial performance and its ability to meet its obligations.
• Communities are impacted by the company's investments in infrastructure and its efforts to reduce its environmental impact.

• OGE Energy expects to issue up to $350 million of long-term debt in the second quarter of 2024.
• OG&E expects to issue $300 million to $350 million of long-term debt in the second half of 2024.
• OG&E will issue requests for proposals for resources to meet capacity needs identified in the 2024 IRP.
• OG&E will file for approval of generation capacity investments.
• OG&E will continue to evaluate various control strategies to reduce emissions at its generating units.
• OG&E will continue to monitor the EPA's actions regarding the Good Neighbor FIP and other environmental regulations.

• OG&E is a defendant in a lawsuit seeking in excess of $60 million in damages related to a fire at an apartment building under construction.
• OG&E is involved in ongoing litigation related to the SPP's sponsored transmission upgrades.
• OG&E is involved in ongoing litigation related to the Oklahoma Retail Electric Supplier Certified Territory Act.

• OGE Energy charges operating costs to OG&E based on several factors, and operating costs directly related to OG&E are assigned as such.
• Operating costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the 'Distrigas' method.

• 1902: OG&E was incorporated under the laws of the Oklahoma Territory.
• 1928: OG&E sold its retail natural gas business.
• January 1, 2023: OG&E's two-year period for short-term borrowing regulatory approvals began.
• April 2023: OG&E issued $350 million in senior notes.
• December 2023: OG&E filed a general rate review in Oklahoma.
• March 29, 2024: OG&E issued its final 2024 Integrated Resource Plan (IRP) to the OCC and APSC.
• April 1, 2024: New rates from the APSC settlement became effective.
• April 30, 2024: Date of the filing of the 10-Q report.
• June 17, 2024: Hearing on the merits for the 2023 Oklahoma General Rate Review is scheduled.
• June 25, 2024: Public hearing scheduled for OG&E's application to begin construction of combustion turbines at Tinker Air Force Base.
• August 2024: Decision expected on OG&E's application to begin construction of combustion turbines at Tinker Air Force Base.
• September 2024: A listing decision for the Tricolored Bat is expected.
• December 31, 2024: OG&E's two-year period for short-term borrowing regulatory approvals ends.
• January 1, 2025: OG&E Industrial Authority Bonds are due.
• December 15, 2025: EPA is required to propose action on the Oklahoma SIP.
• December 31, 2026: EPA is required to take final action on the Oklahoma SIP.
• June 1, 2027: Muskogee Industrial Authority Bonds are due.
• December 31, 2029: Compliance date for the EPA's proposed rule to prohibit any discharge from bottom ash transport water systems.