Executive Summary / Key Takeaways

• Robust Growth Trajectory: OGE Energy Corp. is poised for sustained growth, targeting a 5% to 7% consolidated EPS CAGR through 2029, driven by exceptional weather-normalized load growth (projected 8.5% in 2025) and strategic capital investments in its electric utility infrastructure.
• Strategic Infrastructure Expansion: The company is undertaking significant capital projects, including 550 MW of natural gas generation under construction, an additional 450 MW filed for approval, and a $250 million transmission line, all supported by favorable regulatory mechanisms like Construction Work in Progress (CWIP) recovery.
• Competitive Cost Advantage: OGE maintains some of the nation's lowest electricity rates, a key differentiator that fuels economic development and customer growth in its Oklahoma and Western Arkansas service territories, enhancing its competitive position against larger peers.
• Strong Financial Health: With a commitment to a robust balance sheet, OGE targets an FFO to debt ratio of approximately 17% and has completed its planned 2025 external financing, minimizing refinancing risk and supporting its ambitious capital plan without significant external equity needs beyond its DRIP.
• Emerging Data Center Opportunity: OGE is in serious negotiations for multiple data center projects, each potentially adding 250-500 MW of load, which would be incremental to its already strong growth forecasts and further solidify its long-term demand outlook.

A Foundation of Growth: OGE's Strategic Blueprint

OGE Energy Corp., through its wholly-owned subsidiary Oklahoma Gas and Electric Company (OGE), has been a cornerstone of the Oklahoma and Western Arkansas energy landscape since its incorporation in 1902. The company's enduring strategy centers on providing safe, reliable, and affordable electric service, a mission that has cultivated a robust economic development engine within its franchised territories. This foundational approach has positioned OGE as a stable, growing utility, distinguishing it within the broader, often more diversified, utility sector.

OGE's business model is inherently tied to the prosperity of its region. By maintaining some of the lowest electricity rates in the nation, OGE fosters an attractive environment for businesses and residents alike. This competitive advantage is a critical differentiator when compared to larger, often more geographically dispersed, utility conglomerates such as Duke Energy (DUK), Southern Company (SO), American Electric Power (AEP), and Entergy (ETR). While these larger peers may benefit from greater scale and broader market reach, OGE's focused regional expertise and cost-effective service delivery cultivate strong customer loyalty and operational familiarity.

The company's operational technology strategy emphasizes the application of proven technologies to enhance grid reliability, meet growing capacity needs, and ensure environmental stewardship. OGE's grid strengthening investments have resulted in exceptional reliability, averaging 99.975%. This commitment extends to environmental technologies, such as the use of treated municipal effluent for cooling water at its Redbud and McClain facilities, which conserves fresh water resources. Furthermore, OGE leverages automation and artificial intelligence to drive efficiencies and reduce costs, continuously improving the customer experience. These technological applications, while not proprietary in a traditional sense, collectively contribute to OGE's operational excellence and cost-effectiveness, reinforcing its competitive standing.

Financial Performance Reflecting Strategic Execution

OGE Energy Corp. has consistently translated its strategic initiatives into strong financial results. For the three months ended September 30, 2025, consolidated net income rose to $1.14 per diluted share, up from $1.09 in the prior year period. This increase was primarily driven by the electric company segment, which contributed $1.20 per diluted share, reflecting the successful recovery of capital investments. Over the nine months ended September 30, 2025, consolidated net income increased by $61.90 million, or $0.30 per diluted share, reaching $401.50 million. This growth was largely attributable to higher operating revenues, which offset the impact of milder weather and increased expenses.

Operating revenues for OGE's electric company segment expanded by 8.20% to $1,045 million for the third quarter of 2025 and by 13.90% to $2,534.30 million for the nine-month period. These gains were fueled by new rates effective July 1, 2024, and the recovery of fuel, purchased power, and direct transmission expenses. Despite a decrease in cooling degree days, indicating milder weather, the underlying demand for electricity remained robust. Fuel, purchased power, and direct transmission expenses increased by 11% and 25.40% for the three and nine months, respectively, primarily due to higher fuel costs and increased MWHs purchased from the Southwest Power Pool (SPP).

While other operation and maintenance (O&M) expenses saw a 9.20% increase in the third quarter due to vegetation management and payroll, they decreased by 0.60% year-to-date, reflecting disciplined cost management and the timing of certain projects. Depreciation and amortization expenses rose by 1.90% and 3.90% for the respective periods, driven by new assets entering service, though partially offset by deferrals under Oklahoma's SB 998 legislation. Interest expense also increased due to recent senior notes issuances, but the deferral of certain interest expenses under SB 998 provided some mitigation.

Powering the Future: Capital Investments and Load Growth

OGE's investment thesis is significantly strengthened by its ambitious capital expenditure program and exceptional load growth. The company projects capital expenditures of $6.50 billion from 2025 through 2029, with $1.15 billion allocated for 2025 alone. These investments are strategically directed towards enhancing the safety, resiliency, and reliability of its distribution and transmission grid, upgrading its generation fleet, and expanding capacity to serve a rapidly growing customer base.

A cornerstone of this growth is the company's generation capacity expansion. OGE currently has approximately 550 megawatts (MW) of natural gas combustion turbines under construction at Tinker Air Force Base and Horseshoe Lake (Units 11 and 12), slated for operation within the next year. Furthermore, OGE has filed for regulatory approval to construct an additional 450 MW at Horseshoe Lake (Units 13 and 14), expected to be operational by 2029. These additions are part of a broader plan to add approximately 2,000 MW over an 11-year period, with more capacity anticipated.

The company's commitment to grid modernization is exemplified by the $250 million Fort Smith to Muskogee Transmission Project, which received FERC approval for Construction Work in Progress (CWIP) recovery. This project, with phases coming online between 2027 and 2029, will address critical reliability and capacity issues in the Fort Smith, Arkansas area. The ability to utilize CWIP recovery for such strategic investments, facilitated by recent legislation in Oklahoma (SB 998) and Arkansas (Act 373), is a significant financial advantage. These legislative changes are projected to save customers $190 million on the proposed Horseshoe Lake Units 13 and 14 over their lifetime, while simultaneously supporting OGE's balance sheet during construction.

OGE's service territory is experiencing robust economic expansion, contributing to exceptional load growth. Customer growth was just under 1% year-over-year in Q3 2025, and weather-normalized load growth reached 6.5% through Q3 2025, building on a remarkable 7.6% in 2024. This growth is diversified, with commercial load increasing by 21.4% and residential load by 2.4% in 2024. The company forecasts an exceptional 8.5% weather-normalized load growth for 2025. This strong demand backdrop is further amplified by significant interest from data centers, with OGE engaged in serious negotiations for approximately half a dozen projects, each potentially adding 250-500 MW of load. These opportunities are incremental to current forecasts and represent a substantial long-term growth driver.

Regulatory Environment and Risk Mitigation

OGE operates within a generally constructive regulatory environment that supports its investment and growth strategies. The Oklahoma Corporation Commission (OCC) finalized the 2023 Oklahoma General Rate Review, approving an annual revenue requirement increase of $126.70 million. New legislation, such as Oklahoma's SB 998 and Arkansas's Act 373, provides mechanisms for CWIP recovery and deferred expense accounting, which are credit-accretive and help minimize regulatory lag. OGE plans to file its next Oklahoma rate review in the second half of 2026 and will continue to assess the timing for Arkansas.

Despite a generally supportive environment, OGE faces inherent risks common to the utility sector. Environmental regulations, particularly the Cross State Air Pollution Rule (Good Neighbor FIP) and evolving Greenhouse Gas rules, pose significant compliance costs, estimated between $2.40 billion and $2.80 billion for the Good Neighbor FIP alone. While OGE plans to seek recovery of these costs, timely approval is not guaranteed. Legal proceedings, such as a $60 million lawsuit related to an apartment fire, also present potential liabilities, though OGE expects insurance coverage to mitigate the financial impact.

Credit ratings are a key consideration for financing OGE's capital-intensive operations. Moody's Investors Service revised OGE's outlook from stable to negative in April 2025, citing pressure from the capital expenditure plan and higher holding company debt. However, OGE maintains a strong balance sheet, targeting an FFO to debt ratio of approximately 17%, which management believes is robust for the industry. The company has also proactively managed supply chain risks, securing key components like transformers, wire, and cable through 2026.

Competitive Positioning and Outlook

OGE's competitive positioning is anchored by its low rates, regional economic development prowess, and a commitment to operational excellence. Compared to larger, more diversified utilities, OGE's focused approach allows for deep regional expertise and tailored customer service. While direct quantitative comparisons of all operational aspects are challenging, OGE's P/E ratio of 17.67 is competitive within the utility sector, sitting below some peers like Southern Company (23.20) and Entergy (23.52), and comparable to American Electric Power (17.56). This suggests a reasonable valuation for a company with strong, regulated growth prospects.

The company's strategic investments in generation and transmission, coupled with supportive regulatory frameworks, are designed to maintain its competitive edge in service reliability and cost-effectiveness. The ongoing discussions with data center operators highlight OGE's attractive service territory and its ability to meet significant new demand, which could further differentiate its growth profile. OGE's management remains confident in its ability to achieve its 2025 consolidated earnings guidance in the top half of the $2.21 to $2.33 per diluted share range, assuming approximately 202.10 million average diluted shares outstanding and normal weather. This confidence is rooted in a proven track record and a clear strategic roadmap for future growth.

Conclusion

OGE Energy Corp. presents a compelling investment narrative, characterized by a powerful synergy of regional economic vitality, strategic infrastructure investment, and a supportive regulatory landscape. The company's historical commitment to low rates and reliable service has fostered an environment of exceptional load and customer growth, providing a strong foundation for its ambitious capital plan. OGE's proactive approach to expanding generation capacity and modernizing its grid, bolstered by credit-accretive regulatory mechanisms, positions it to capitalize on burgeoning demand, including the significant opportunities presented by the data center industry.

While the utility sector faces inherent environmental and regulatory complexities, OGE's robust financial health, disciplined capital allocation, and proactive risk management strategies provide resilience. The company's ability to consistently deliver on its 5% to 7% EPS growth target, underpinned by its competitive cost structure and operational excellence, underscores its potential for long-term shareholder value creation. Investors seeking a stable, growing utility with a clear path to expansion and a strong regional competitive advantage should find OGE Energy Corp. an attractive proposition.