OGE Energy Corp. (NYSE:OGE) Q2 2017 Earnings Conference Call - Preliminary Transcript

Aug 03, 2017 • 09:00 am ET

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OGE Energy Corp. (NYSE:OGE) Q2 2017 Earnings Conference Call - Preliminary Transcript

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Q & A
Operator
Operator

(Operator Instructions) Our first question or comment comes from the line of Paul Ridzon from KeyBanc Capital. Your line is open.

Analyst
Paul Ridzon

Good morning.

Executive
Sean Trauschke

Hi, good morning, Paul.

Analyst
Paul Ridzon

Can you give a highlight of maybe some of the discussions you've had with Oklahoma Commission ahead of the rate filing, in particular issues around depreciation?

Executive
Sean Trauschke

Sure. So when you said depreciation, are you referring to the depreciation result out of the last rate case?

Analyst
Paul Ridzon

Yes, sorry.

Executive
Sean Trauschke

Yes. So we have had ongoing discussions with the commissioners and staff about the depreciation schedule. We provided some documentation about kind of what the actual life of these assets was, historically has been. And I think there's a better understanding about the actual useful life of a number of these property assets. And so we're working with them to kind of work on a gradual plan to get that back in line.

Analyst
Paul Ridzon

Thank you. And on Mustang, you said that the cost came down. You said $355 million; later in the presentation I heard $390 million.

Executive
Sean Trauschke

Yes, so the $390 million includes AFUDC, and then the Ad Valorem taxes with it.

Analyst
Paul Ridzon

So $355 million is the cash cost?

Executive
Sean Trauschke

Yes.

Analyst
Paul Ridzon

Okay, thank you very much.

Executive
Sean Trauschke

Paul, just to be clear, it's $355 million, did you say $255 million?

Analyst
Paul Ridzon

Three.

Executive
Sean Trauschke

Yes, three. Just to make -- thanks, Paul --

Analyst
Paul Ridzon

Thank you. You're doing really well there. You're doing great there, yes.

Executive
Sean Trauschke

Thanks, Paul.

Analyst
Paul Ridzon

Thank you.

Operator
Operator

Thank you. (Operator Instructions) Our next question or comment comes from the line of Shar Pourreza from Guggenheim Partners. Your line is open.

Analyst
Shar Pourreza

Good morning, guys.

Executive
Sean Trauschke

Hi, good morning, Shar.

Analyst
Shar Pourreza

Hi. So I think, Sean, you answered my question around the -- on why you seem a little bit more constructive on the upcoming rate filing for Mustang. Can you just remind us, assuming that you don't get a constructive outcome, and the last rate case wasn't an anomaly, how you're sort of thinking about how you deploy capital within the state on a go-forward basis, and more importantly how you're thinking about the fourth quarter 2018 rate filing?

Executive
Sean Trauschke

Sure. So a good question, and again I appreciate you asking it. We are optimistic. I do believe this is going to be a positive turning point in Oklahoma regulation. It's been really constructive in the past, and I think it's going to be really constructive in the future. So I am optimistic about that. But, Shar, as we've said, we have many opportunities under consideration, primarily around our distribution system, from low-voltage transmission to a lot of customer-focused technology in both states.

And we prioritize on investments really around the opportunity that we can take cost out of the business, and provide some value to customers going forward. But the return is important, and it's a key criteria. And we have to have a clear line of sight to how we're going to recover these investments. We have that in Arkansas. We're very comfortable there. And we are going to begin investing in