OG&E 2010 Annual Report Download - page 28

projected retirements, have a significant impact on our results of operations and financial position. Those factors are outside of our
control.
In addition to the costs of our retirement plans, the costs of providing health care benefits to our employees and retirees have
increased substantially in recent years. We believe that our employee benefit costs, including costs related to health care plans for our
employees and former employees, will continue to rise. The increasing costs and funding requirements with our defined benefit
retirement plan, health care plans and other employee benefits may adversely affect our results of operations, financial position, or
liquidity.
We face certain human resource risks associated with the availability of trained and qualified labor to meet our future staffing
requirements.
Workforce demographic issues challenge employers nationwide and are of particular concern to the electric utility industry.
The median age of utility workers is significantly higher than the national average. Over the next three years, 37 percent of our
current employees will be eligible to retire with full pension benefits. Failure to hire and adequately train replacement employees,
including the transfer of significant internal historical knowledge and expertise to the new employees, may adversely affect our ability
to manage and operate our business.
We may be able to incur substantially more indebtedness, which may increase the risks created by our indebtedness.
The terms of the indentures governing our debt securities do not fully prohibit us from incurring additional indebtedness. If
we are in compliance with the financial covenants set forth in our revolving credit agreement and the indentures governing our debt
securities, we may be able to incur substantial additional indebtedness. If we incur additional indebtedness, the related risks that we
and they now face may intensify.
Any reductions in our credit ratings could increase our financing costs and the cost of maintaining certain contractual
relationships or limit our ability to obtain financing on favorable terms.
We cannot assure that any of our current ratings will remain in effect for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Our ability to access the commercial
paper market could be adversely impacted by a credit ratings downgrade or major market disruptions. Pricing grids associated with
our credit facility could cause annual fees and borrowing rates to increase if an adverse ratings impact occurs. The impact of any
future downgrade could include an increase in the cost of our short-term borrowings, but a reduction in our credit ratings would not
result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below
investment grade, would require us to post cash collateral or letters of credit.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.
We have a revolving credit agreement for working capital, capital expenditures, including acquisitions, and other corporate
purposes. The levels of our debt could have important consequences, including the following:
Ÿ the ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other
purposes may be impaired or the financing may not be available on favorable terms;
Ÿ a portion of cash flows will be required to make interest payments on the debt, reducing the funds that would
otherwise be available for operations and future business opportunities; and
Ÿ our debt levels may limit our flexibility in responding to changing business and economic conditions.
We are exposed to the credit risk of our key customers and counterparties, and any material nonpayment or nonperformance by
our key customers and counterparties could adversely affect our financial position, results of operations and cash flows.
We are exposed to credit risks in our generation and retail distribution operations. Credit risk includes the risk that
customers and counterparties that owe us money or energy will breach their obligations. If such parties to these arrangements fail to
perform, we may be forced to enter into alternative arrangements. In that event, our financial results could be adversely affected, and
we could incur losses.
Item 1B. Unresolved Staff Comments.
None.
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