Stephen D’Ambrisi

Stephen D'Ambrisi asked about the company's sales growth trend, noting nine consecutive quarters exceeding guidance and 4Q acceleration, and how this compares to the 4%-6% 2026 sales growth and long-term guidance. He also inquired about the EPS sensitivity if residential customer growth outperforms the guidance by 50 to 100 basis points.

Answer

CFO Andrew Cooper explained that sales growth has been diversified and consistent, with residential growth at the top end of forecasts, driven by nearly 2.5% customer growth. He anticipates 2026 will see a reversion to normal dynamics where Extra High Load Factor customers dominate sales mix, with distributed generation providing small offsets to residential sales. He provided a rule of thumb: 1% residential growth translates to over $25 million in gross margin, while 1% Extra High Load Factor growth is $5 million-$10 million, due to residential hours clustering around peak versus XHLF's 90%+ load factors.

Stephen D'Ambrisi of Ladenburg Thalmann asked for clarity on the decline in residential usage per customer and the timing of a potential first formula rate adjustment following the general rate case.

Answer

CFO Andrew Cooper explained the reported residential sales were impacted by a one-time procedural change in accounting for unbilled revenues, and underlying trends remain consistent with guidance. CEO Ted Geisler stated the intent of the formula rate plan is to allow for an annual adjustment, meaning the first adjustment could theoretically occur in 2027 after the case concludes in 2026, though details depend on the case outcome.

Stephen D'Ambrisi asked about the positive drivers enabling 6% EPS growth in 2026, despite the Millstone double outage, and why these positives might not recur in 2027. He also sought clarification on the reason for the projected decrease in Section 45Z credits in outer years, given the $0.09 booked in 2025.

Answer

Steven Ridge explained that 2026 benefits from the full impact of the biennial rate increase in Virginia and a half-year impact from the South Carolina rate case, acting as a 'catch-up year' for prior under-earning. He noted that the cadence shifts in 2027 as the company gears up for the next rate case. For Section 45Z credits, the decrease is due to a change in the CI score based on a new GREET model published for 2026 and beyond, suggesting a degradation in CI relative to what was booked in 2025.

Stephen D'Ambrisi asked about the positive factors enabling 6% EPS growth in 2026 despite the Millstone double outage and why these factors might not recur in 2027. He also sought clarification on why Section 45Z credits are projected to fall in outer years, given the $0.09 booked in 2025.

Answer

CFO Steven Ridge explained that 2026 benefits from the full impact of Virginia's biennial rate increase and a half-year impact from the South Carolina rate case, acting as a 'catch-up year' for prior under-earning. The lag in 2027 is due to gearing up for the next rate case. He attributed the projected fall in Section 45Z credits to a change in the Carbon Intensity (CI) score based on a new GREET model published for 2026 and beyond, which suggests a degradation in CI relative to the 2025 rules.

Stephen D'Ambrisi asked about the timeline for updating the street on potential other large load customers beyond 'Customer X,' given the substantial load opportunities in the service territory.

Answer

CEO Sean Trauschke stated that OGE will announce large load customers as they materialize and have a clear line of sight to the finish line, similar to how 'Customer X' was handled. He highlighted the substantial 2.3 GW added by the end of the decade and another 1.9 GW from the RFP process, acknowledging ongoing opportunities.

Stephen D’Ambrisi inquired about OGE Energy's strategy to meet the 850 MW capacity shortfall by 2030, specifically asking if material capacity could be secured from prior RFPs or if new RFPs would be necessary. He also asked about the timing for new RFP announcements and how delayed customer load growth might impact 2026 sales growth.

Answer

Sean Trauschke, Chairman, President, and CEO, confirmed that OGE Energy expects to secure some capacity from the last RFP and will also file a new RFP, anticipating a quicker pace for the latter. He noted the 800 MW figure is dependent on the ramp rate of a specific customer. Chuck Walworth, CFO, acknowledged that chunky growth and customer delays could impact future years' sales growth and promised a full discussion on the next call.

Stephen D’Ambrisi of Ladenburg Thalmann inquired about the durability of the strong 3% residential load growth and asked if the company could provide an EPS sensitivity for this growth.

Answer

CFO and Treasurer Charles Walworth described the 3% growth as a 'fantastic number' and noted that while it may not be sustained at that exact level, the underlying trend is clearly positive, supported by consistent customer growth and a strong regional economy. He stated that the company has not provided a specific EPS sensitivity for residential growth due to the variability of customer mix.

Stephen D'Ambrisi asked about the amount of data center load growth embedded in the 3-4% enterprise load growth and 4-5% Carolinas load growth, and how incremental ESA signings would layer into future load growth projections. He also sought clarity on the rate-based CAGR of 9.6% and its net basis impact considering the DEF minority interest transaction.

Answer

EVP and CFO Brian Savoy stated that data centers comprise about 75% of the economic development profile by 2030, with residential and existing customers accounting for roughly one-third of the 3-4% enterprise load growth. He explained that new ESA signings would be a tailwind, extending the load ramp well into the 2030s due to timing. Brian Savoy clarified that the 9.6% rate-based CAGR includes minority interests, and on a net basis (excluding the Florida minority investment), the CAGR would be 8.8%, with Brookfield proceeds offsetting holding company interest expense.

Stephen D’Ambrisi of Ladenburg Thalmann sought confirmation that the revised guidance implies the utility's core earnings power is intact, pending a weather mechanism fix, while the marketing and midstream segments are seeing a structural uplift. He also asked about the regulatory process for implementing Senate Bill 4.

Answer

CFO Adam Woodard affirmed this interpretation was fair, expecting a constructive outcome on the weather mechanism and seeing some structural uplift in Midstream. CEO Scott Doyle added that momentum is building from cost management, capital pull-through, and the upcoming rate case resolution. Regarding SB4, Doyle noted the bill allows for a filing in July 2026 and mentions a rulemaking process, in which Spire will be an active participant.

Stephen D’Ambrisi asked if the updated utility net income CAGR guidance includes any impact from the pending SIM mechanism or a future formula rate filing, and questioned how the company expects to improve its earned ROE given that the net income and rate base CAGRs are aligned.

Answer

CFO Rob Stefani clarified that the guidance range does not include potential impacts from the SIM tracker or a formula rate plan. He also explained that favorable regulatory outcomes, such as the approval of a tracker or formula rate, would be the primary drivers for improving the ROE and achieving a higher implied growth rate. Justin Brown, President of Southwest Gas Corporation, noted that a formula rate filing would be considered in the next rate case.