OG&E 2009 Annual Report Download - page 24

term contracts. We have certain coal supply contracts in place; however, there can be no assurance that the counterparties to these
agreements will fulfill their obligations to supply coal to us. The suppliers under these agreements may experience financial or
technical problems that inhibit their ability to fulfill their obligations to us. In addition, the suppliers under these agreements may not
be required to supply coal to us under certain circumstances, such as in the event of a natural disaster. Coal delivery may be subject to
short-term interruptions or reductions due to various factors, including transportation problems, weather and availability of
equipment. Failure or delay by our suppliers of coal deliveries could disrupt our ability to deliver electricity and require us to incur
additional expenses to meet the needs of our customers. In addition, as agreements with our suppliers expire, we may not be able to
enter into new agreements for coal delivery on equivalent terms.
Also, because our generation and transmission systems are part of an interconnected regional grid, we face the risk of
possible loss of business due to a disruption or black-out caused by an event (severe storm, generator or transmission facility outage)
on a neighboring system or the actions of a neighboring utility. Any such disruption could result in a significant decrease in revenues
and significant additional costs to repair assets, which could have a material adverse impact on our financial position and results of
operations.
Economic conditions could negatively impact our business.
Our operations are affected by local, national and worldwide economic conditions. The consequences of a prolonged
recession could include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity
markets. A lower level of economic activity could result in a decline in energy consumption, which could adversely affect our
revenues and future growth. Instability in the financial markets, as a result of recession or otherwise, also could affect the cost of
capital and our ability to raise capital.
Current economic conditions may be exacerbated by insufficient financial sector liquidity leading to potential increased
unemployment, which could impact the ability of our customers to pay timely, increase customer bankruptcies, and could lead to
increased bad debt. If such circumstances occur, we expect that commercial and industrial customers would be impacted first, with
residential customers following.
We are subject to information security risks.
A security breach of our information systems could impact the reliability of the generation fleet and/or reliability of the
transmission and distribution system or subject us to financial harm associated with theft or inappropriate release of certain types of
operating or customer information. We cannot accurately assess the probability that a security breach may occur, despite the measures
we have taken to prevent such a breach, and we are unable to quantify the potential impact of such an event.
Terrorist attacks, and the threat of terrorist attacks, have resulted in increased costs to our business. Continued hostilities in the
Middle East or other sustained military campaigns may adversely impact our financial position, results of operations and cash
flows.
The long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the magnitude of the
threat of future terrorist attacks on the electric utility industry in general, and on us in particular, cannot be known. Increased security
measures taken by us as a precaution against possible terrorist attacks have resulted in increased costs to our business. Uncertainty
surrounding continued hostilities in the Middle East or other sustained military campaigns may affect our operations in unpredictable
ways, including disruptions of supplies and markets for our products, and the possibility that our infrastructure facilities could be
direct targets of, or indirect casualties of, an act of terror. Changes in the insurance markets attributable to terrorist attacks may make
certain types of insurance more difficult for us to obtain. Moreover, the insurance that may be available to us may be significantly
more expensive than existing insurance coverage.
Weather conditions such as tornadoes, thunderstorms, ice storms, wind storms, as well as seasonal temperature variations may
adversely affect our financial position, results of operations and cash flows.
Weather conditions directly influence the demand for electric power. In our service area, demand for power peaks during the
hot summer months, with market prices also typically peaking at that time. As a result, overall operating results may fluctuate on a
seasonal and quarterly basis. In addition, we have historically sold less power, and consequently received less revenue, when weather
conditions are milder. Unusually mild weather in the future could reduce our revenues, net income, available cash and borrowing
ability. Severe weather, such as tornadoes, thunderstorms, ice storms and wind
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