OG&E 2012 Annual Report Download - page 30

28 OGE Energy Corp.
The amounts in Accumulated Other Comprehensive Loss and those
recorded as a regulatory asset represent a net periodic benefit cost to be
recognized in the Consolidated Statements of Income in future periods.
Restoration of Postretirement
Pension Plan Retirement Income Plan Benefit Plans
(In millions, year ended December 31) 2012 2011 2012 2011 2012 2011
Benefit obligations $(747.1) $(697.7) $(14.5) $(13.3) $(301.0) $(280.6)
Fair value of plan assets 626.0 589.8 ––59.6 61.0
Funded status at end of year $(121.1) $(107.9) $(14.5) $(13.3) $(241.4) $(219.6)
Common Stock Dividends
The Company’s dividend policy is reviewed by the Board of Directors
at least annually and is based on numerous factors, including manage-
ment’s estimation of the long-term earnings power of its businesses.
The Company’s financial objective includes increasing the dividend to
meet the Company’s dividend payout objectives. The Company’s target
payout ratio is to pay out dividends no more than 60 percent of its nor-
malized earnings on an annual basis. The target payout ratio has been
determined after consideration of numerous factors, including the largely
retail composition of the Company’s shareholder base, the Company’s
financial position, the Company’s growth targets, the composition of the
Company’s assets and investment opportunities. At the Company’s
November 2012 Board meeting, management, after considering esti-
mates of future earnings and numerous other factors, recommended
to the Board of Directors an increase in the current quarterly dividend
rate to $0.4175 per share from $0.3925 per share effective with the
Company’s first quarter 2013 dividend.
Security Ratings
Standard
Moody’s & Poor’s
Investor Ratings Fitch
Services Services Ratings
OG&E senior notes A2 BBB+ A+
Enogex LLC notes Baa3 BBB- BBB
OGE Energy senior notes Baa1 BBB A-
OGE Energy commercial paper P2 A2 F2
Access to reasonably priced capital is dependent in part on credit and
security ratings. Generally, lower ratings lead to higher financing costs.
Pricing grids associated with the Company’s credit facilities could cause
annual fees and borrowing rates to increase if an adverse rating impact
occurs. The impact of any future downgrade could include an increase
in the costs of the Company’s short-term borrowings, but a reduction
in the Company’s credit ratings would not result in any defaults or accel-
erations. Any future downgrade could also lead to higher long-term
borrowing costs and, if below investment grade, would require the
Company to post collateral or letters of credit. In the event Moody’s
Investors Services or Standard & Poor’s Ratings Services were to lower
the Company’s senior unsecured debt rating to a below investment
grade rating, at December 31, 2012, the Company would have been
required to post $0.2 million of cash collateral to satisfy its obligation
under its financial and physical contracts relating to derivative instruments
that are in a net liability position at December 31, 2012. In addition, the
Company could be required to provide additional credit assurances in
future dealings with third parties, which could include letters of credit
or cash collateral.
On June 20, 2012, Fitch Ratings downgraded OGE Energy Corp.’s
short-term debt rating from F1 to F2 and OGE Energy Corp.’s long-term
debt issuer default rating from A to A-. All other ratings (by Fitch Ratings)
at OG&E and Enogex remained unchanged and with a stable outlook.
Fitch Ratings indicated that the downgrade at OGE Energy Corp. was
primarily due to concerns related to the uncertainties associated with
the environmental mandates at OG&E as well as Enogex’s sensitivity to
commodity prices and growth strategy with the ArcLight group.
A security rating is not a recommendation to buy, sell or hold securities.
Such rating may be subject to revision or withdrawal at any time by the
credit rating agency and each rating should be evaluated independently
of any other rating.
Future financing requirements may be dependent, to varying degrees,
upon numerous factors such as general economic conditions, abnormal
weather, load growth, commodity prices, levels of drilling activity, acqui-
sitions of other businesses and/or development of projects, actions by
rating agencies, inflation, changes in environmental laws or regulations,
rate increases or decreases allowed by regulatory agencies, new legislation
and market entry of competing electric power generators.
2012 Capital Requirements, Sources of Financing,
Purchase of Treasury Stock and Financing Activities
Total capital requirements, consisting of capital expenditures and
maturities of long-term debt, were $1,351.8 million and contractual
obligations, net of recoveries through fuel adjustment clauses, were
$112.8 million resulting in total net capital requirements and contractual
obligations of $1,464.6 million in 2012, of which $12.9 million was to
comply with environmental regulations. This compares to net capital
requirements of $1,446.2 million and net contractual obligations of
$111.1 million totaling $1,557.3 million in 2011, of which $6.9 million
was to comply with environmental regulations.
In 2012, the Company’s sources of capital were cash generated from
operations, proceeds from the issuance of short-term debt, proceeds
from Enogex’s term loan agreement, proceeds from the sales of com-
mon stock to the public through the Company’s Automatic Dividend