OGE Energy Corp. 2023 Form 10-K Summary
Business context and reporting period
For the fiscal year ended December 31, 2023. OGE Energy is a holding company whose principal business is Oklahoma Gas and Electric Company (OG&E), a regulated electric utility serving approximately 896,000 customers in Oklahoma and western Arkansas. This combined filing presents separate reports for OGE Energy and OG&E. OGE Energy no longer reports a natural gas midstream segment after selling its Energy Transfer units in 2022.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| OGE Energy operating revenue | $2.674 billion | $3.376 billion |
| OGE Energy operating income | $650.2 million | $649.5 million |
| OGE Energy net income | $416.8 million | $665.7 million |
| Diluted EPS | $2.07 | $3.32 |
| Operating cash flow | $1.232 billion | $952.4 million |
| Capital expenditures | $1.178 billion | $1.051 billion |
| Dividends declared per share | $1.6646 | $1.6482 |
At year-end, OGE Energy reported $12.791 billion in assets, $8.279 billion in total liabilities and $4.512 billion in equity. Long-term debt was $4.341 billion and short-term debt was $499.2 million; cash was $0.2 million. Available liquidity under revolving credit agreements, net of commercial paper borrowings and letters of credit, was $650.4 million. The current ratio was approximately 0.65.
OG&E reported $2.674 billion revenue and $426.4 million net income. Its operating income was $651.6 million. Total electric sales were 30.5 million MWh, down from 31.1 million MWh; customer count grew to 896,102 from 888,759.
Material changes versus the prior comparable period
- OGE Energy net income declined $248.9 million and diluted EPS fell $1.25. A major reason was the absence of the prior-year $282.1 million pre-tax gain on Energy Transfer securities; OGE had sold all those units by September 2022.
- OG&E net income declined $13.1 million. Higher depreciation and interest expense, including interest on $800 million of 2023 senior note issuances, and increased operations and maintenance costs more than offset lower fuel and purchased-power costs and other income benefits.
- Operating revenue fell 20.8%, while fuel, purchased-power and direct transmission expense fell 45.2%. These costs are generally recoverable through regulatory mechanisms, so the revenue and expense declines largely reflect lower fuel and power costs rather than a comparable change in underlying earnings.
- Operating cash flow increased 29.4%, supported by fuel recoveries and lower vendor payments. Investing cash outflow rose to $1.272 billion, largely reflecting capital spending and the absence of 2022 proceeds from the Energy Transfer unit sale. OGE Energy repaid $1.0 billion of notes that matured in May 2023 and increased short-term debt by $499.2 million.
- Natural gas represented 75% of the reported generation mix in 2023, compared with 60% in 2022; coal was 16%, compared with 30%. Weighted-average fuel and purchased-power cost fell to 2.837 cents/kWh from 5.096 cents/kWh.
Outlook, management commentary, risks and contingencies
- For 2024, management forecasts OGE Energy net income of approximately $415 million to $439 million, or $2.06 to $2.18 per diluted share. The outlook assumes normal weather, retail load growth of approximately 3% to 5%, operating expenses of $1.145 billion to $1.150 billion, and net interest expense of $250 million to $252 million.
- OGE Energy’s stated long-term targets include 5% to 7% annual consolidated EPS growth and a 65% to 70% dividend payout ratio. Planned capital expenditures total $6.0 billion for 2024–2028, including grid upgrades, reliability work and generation capacity projects.
- OG&E filed an Oklahoma general rate review in December 2023 seeking a $332.5 million increase and a 10.5% return on equity; a hearing was scheduled for June 2024. The filing states recovery depends on regulatory approval. An Arkansas rate adjustment of $3.5 million was agreed with staff, with an order expected in March 2024.
- OG&E’s Horseshoe Lake project comprises two combustion turbines totaling 448 MW, expected in service in late 2026. The project is estimated at approximately $331 million; Oklahoma approval allows recovery of jurisdictional expenses up to $275 million, plus financing costs and property taxes, through a recovery mechanism once the units enter service.
- Environmental compliance is a significant uncertainty. OG&E preliminarily estimated potential compliance with the EPA’s Good Neighbor Plan at approximately $2.7 billion in total, including $100 million to $300 million in the 12–18 months after the plan’s effectiveness. Litigation and regulatory actions create uncertainty over requirements, costs and timing; recovery of expenditures through rates is not assured.
- OG&E reserved $13.0 million plus estimated interest for a potential FERC-related refund concerning SPP transmission upgrade credits. The ultimate refund process and timing remain unresolved.
- A lawsuit related to a 2023 apartment-building fire seeks more than $60 million. OG&E disputes the claims, says insurance is expected to cover liability above a non-material retention, and cannot estimate a possible loss range.
- Other identified risks include weather and operational disruptions, fuel supply and commodity-price exposure, rising financing costs, supply-chain constraints, pension obligations, cybersecurity and potential changes to regulation or environmental requirements. Management reported substantial compliance with current environmental standards. Auditors issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether the Oklahoma rate case and Arkansas rate adjustment were approved, and the timing and amount of resulting revenue recovery.
- How the EPA Good Neighbor Plan litigation and final environmental rules affect OG&E’s compliance costs, generation fleet and customer-rate recovery.
- Whether the $13.0 million SPP-related reserve, plus interest, is sufficient and when any refund could be required.
- Execution, cost and regulatory recovery of the $6.0 billion 2024–2028 capital plan, including the Horseshoe Lake project and capacity needs.
- Whether 2024 earnings assumptions, retail load growth and financing plans are achieved, particularly given higher interest expense and minimal year-end cash.
- The status and insurance coverage of the apartment-fire litigation, and any material change in the estimated exposure.