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OGE Energy Corp (Holding Co)  (NYSE:OGE)
Q4 2018 Earnings Conference Call
Feb. 21, 2019, 9:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 OGE Energy Earnings Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks, we will have a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded for replay purposes.

It is now my pleasure to turn the conference over to your host, Todd Tidwell. Please go ahead.

Todd Tidwell -- Director of Investor Relations

Thank you, Haley. Good morning everyone and welcome to OGE Energy Corp.'s Fourth Quarter 2018 Earnings Call. I'm Todd Tidwell, Director of Investor Relations. And with me today, I have Sean Trauschke, Chairman, President and CEO of OGE Energy Corp.; and Steve Merrill, CFO of OGE Energy Corp.

In terms of the call today, we will first hear from Sean, followed by an explanation from Steve of year-end and fourth quarter results and finally as always we will answer your questions. I would like to remind you that this conference is being webcast and you may follow along on our website at ogeenergy.com. In addition, the conference call and accompanying slides will be archived following the call on that same website.

Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results but this is our best estimate to date. I would also like to remind you that there is a Regulation G reconciliation for gross margin in the Appendix.

I will now turn the call over to Sean for his opening comments. Sean?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Thank you, Todd and good morning everyone and thank you for joining us on today's call. Earlier this morning, we reported 2018 consolidated earnings of $2.12 per share compared to $1.92 for 2017 net of tax reform. Steve will discuss the details of full year earnings and the fourth quarter in a moment but I'd like to discuss this year's accomplishments.

Looking back, I believe that 2018 will be regarded as one of the most accomplished years in our 117 year history. I am most proud of our safety performance finishing number one in the Southeast Electric Exchange and shattering our safety records set to previous two years. Our mission to deliver safe, reliable and affordable energy to our customers is in intact.

In March, we bought our 10-megawatt solar farm online in Covington. The completion of the Mustang Energy Center followed in April. We also installed scrubbers on two coal-fired units for Sooner and converted two units from coal to natural gas at Muskogee.

The Mustang and Sooner projects were both of substantial scale, requiring numerous contractors, hundreds of workers and millions of work hours that both projects were completed on-time significantly under budget and with no loss time injuries is a testament to the hard working commitment of all involved.

As we look at our entire fleet, our overall plant emissions are significantly lower from 2005 levels. Sulfur-dioxide emissions are nearly 90% lower nitrogen oxide emissions are 75% lower and CO2 is down by 40% and we are not done. We fully expect a CO2 reduction of 50% by 2030.

In December, we announced our intention to acquire the Shady Point plant in Southeast Oklahoma and the Oklahoma Cogen plant in Oklahoma City. The purchase price is approximately $53 million for over 500 megawatts of capacity. This will replace capacity currently provided by costly, federally mandated power purchase contracts. The acquisitions are expected to save customers tens of millions of dollars per year and will help mitigate the negative economic impact Shady Points closure would have had in one of the states more challenged regions.

In 2018, we drove continued improvement in customer reliability and added another year of strong performance from our fleet. Our assets continue to perform at high levels with improvements in both E4 and Shady and we see improvement in our already high-customer satisfaction scores continuing to move the needle in the right direction for our customers. Another enhancement to the customer alerts platform including billing notifications and payment confirmations by tax, email or voice and now we even a text-to-pay option.

In 2018, our crews were once again called to assist in restoration efforts in Puerto Rico and North Carolina and we were honored to receive two EEI Emergency Assistance Award for these efforts. The first phase of our grid modernization investment is nearing completion in Arkansas. This phase impacts more than 22,000 customers and includes 14 total circuits, 220 miles of distribution circuits, the replacement of 250 distribution transformers.

The completed circuits are already exceeding our performance expectations. The technology assets installed since midsummer have significantly improved the customer experience. Project construction on Arkansas' second phase of this grid modernization work is set to begin in April.

On the regulatory front, we reached a settlement mid-year that provided for full recovery of our Mustang investment while supporting regional energy grid reliability and resiliency. The agreement also insured Oklahoma customers receive the timely benefit of tax savings. In October, we made our first Arkansas Formula Rate filing and earlier this month reached a settlement of parties.

Following commission approval new rates will begin in Arkansas April 1st. In December, we made a pre-approval filing in Oklahoma for the Shady Point and Oklahoma Cogen plant. We also filed a rate review in Oklahoma for the recovery of our investments in the Sooner and the Muskogee projects.

In those filings, we are seeking a 9.9% ROE and a change in depreciation rates along with additional dismantlement and accruals for aging assets. Fortunately, the termination of the costly Cogen capacity payments will help minimize the impact to customers. The total rate change is approximately $78 million and I'm optimistic the order will be timely as we have seen with recent rulings in the state.

All of these accomplishments were made while keeping our rates 31% below the national average. By any measure, 2018 was an outstanding year. On to Enable, Steve and I could not be more proud of the management team and employees, who continue to create value there. They exceeded guidance projections for EBITDA, DCF, net income and distribution coverage.

Gathered volumes have increased for 12 straight quarters and Enable currently has 54 rigs drilling on its system, highlighting their prime acreage dedications in the SCOOP and STACK areas. In 2018, Enable deployed capital which significantly expanded the business portfolio and announced the Gulf Run project with it's 20-year commitment with Golden Pass LNG. And finally, Enable distributions to OGE were $141 million for the year. By the end of this year, we will receive it over $1 billion in cash distributions from Enable since inception.

Before turning the call over to Steve, I want to reiterate that our priority is to invest in our service territories. Operating on the consistent model of investing with real customer benefits and widening the economic competitive advantage, our communities have with our rates 31% below the national average.

In fact, since 2011, we have invested approximately $5.5 billion in the Utility and our rates are actually lower today. We have consistently seen low growth in the 1% range even with the energy efficiency gains. We are watching and we continue to watch population growth, economic development successes and other positive trends, which could push load growth higher.

Obviously this is good for our communities and good for our company. Our plans this year are to complete the two Oklahoma filings, finalize approval of the Arkansas settlement in our Formula Rate filing and continue to receive distributions from Enable. As these outcomes are realized, we will further refine our investment in dividend plans.

We've built a strong company and a company for the long term. There'll be challenges along the way but let me be clear, we will continue to execute, we will continue to learn and we will continue to grow for the benefit of all of our stakeholders. The actions we've taken with our fleet, with our rates, debt portfolio and the positive outcomes we have delivered for our customers. They all point to a model of long-term success.

So thank you and now I'll turn the call over to Steve to review our financial results for the quarter and full year 2018. Steve?

Steve Merrill -- Chief Financial Officer

Thank you, Sean. Good morning, everyone. For the fourth quarter, we reported net income of $55 million or $0.27 per share as compared to net income of $295 million or $1.48 per share in 2018. You will recall in the fourth quarter of 2017 as a result of tax reform, there was a $1.18 per share gain due to the remeasurement of deferred taxes at the natural gas midstream business. The contribution by business unit on a comparative basis is listed on the slide.

For the full year 2018, we reported earnings of $426 million or $2.12 per share as compared to net income of $619 million or $3.10 per share in 2017. The 2018 results for the holding company are nearly flat with 2017. We anticipate in 2019 the loss to be between $0.00 and $0.02. In 2017, tax reform accounted for $235 million or an additional $1.18 per share resulting from our investment in Enable.

At OG&E, net income for the quarter was $21 million or $0.10 per share as compared to net income of $42 million or $0.21 per share in 2017. For the quarter, gross margin decreased approximately $18 million in part due to the impacts of tax reform on rates. O&M was essentially flat for the quarter. Depreciation expense increased by approximately $5 million for the quarter due to additional plant in service including the Mustang CTs, Covington solar farm and the Windspeed II line.

Net other income decreased approximately $12 million due to the lower AFUDC and tax gross-up related to the completion of the Mustang Energy Center and environmental projects. Finally, income tax expense decreased approximately $18 million primarily due to the decrease in the federal tax rate.

Now, turning to the full year at OG&E net income for the year was $328 million or $1.64 per share as compared to net income of $306 million or $1.53 per share in 2017. Gross margin for 2018 increased $14 million, which I'll discuss on the next slide.

Looking at the key drivers for the year, they are very similar to the quarter increased depreciation and lower AFUDC and net other income are result of new assets being placed into service and income tax expense decreased due in part to the decrease in the federal tax rate.

Turning to 2018 gross margin. Utility margins increased approximately $14 million in 2018 compared to 2017. Margin was higher due to the following: warmer summer weather translated into an increase of $43 million as compared to 2017. Compared to normal weather increased margin by nearly $18 million.

New customer growth contributed approximately $8 million. We added 7,500 customers over the past year growing near our historical 1%. Demand revenues and industrial Northville sales combined increased margin by nearly $13 million for the year. Partially offsetting these increases was the impact of tax reform on customer rates, which were offset by lower income tax expense. OGE Energy Holdings received cash distributions from Enable midstream of approximately $141 million and contributed earnings of $109 million or $0.54 per share compared to $324 million or $1.62 per share in 2017.

The Enable board approved a limited partner distribution of $0.318 per unit that will be paid February 26. 2018 was another exceptional year for Enable. Record operational performance with the highest natural gas gathered, natural gas processed and crude oil and condensate gathered volumes.

On the financial side, they achieved higher revenues, net income, gross margin, adjusted EBITDA and distributable cash flow for the year compared to 2017. They also recently announced they have entered into a $1 billion three-year term loan facility that significantly enhances their liquidity and financial flexibility. The Enable management team continues to grow the business with cost discipline and capital efficiency. They ended the year with a strong balance sheet and a distribution coverage of 1.38x. The distribution coverage funded approximately 34% of the year's organic expansion capital. They have reaffirmed their 2019 outlook.

Turning to 2019 guidance at the Utility and assuming normal weather, we project earnings per share to be between $1.55 and $1.62 per share. For the midstream business, we are projecting earnings contribution to be between $0.52 and $0.58 per share. We are projecting consolidated earnings between $2.05 and $2.20 per share.

Looking further into the utility outlook, you can see the detailed assumptions on the slide. Few key points I want to make relative to 2019 guidance are that we anticipate new rates in Arkansas by April 1st and in Oklahoma by July 1st. We assume our historical growth rate of 1% and expect O&M to increase less than 1% from 2018 actual results. It is also important to remember that OG&E has significant seasonality in its earnings and typically shows the majority of earnings in the second and third quarters due to the seasonal nature of air conditioning demand.

This concludes our prepared remarks. We will now open the call to your questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from Julien Dumoulin-Smith of Bank of America Merrill Lynch. Your line is now open.

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

Hi. Good morning. This is actually Richie Ciciarelli here for Julien.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Hey, Richie. Good morning. How are you today?

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

Doing well. Just wanted to touch base on your grid modernization program in Oklahoma. I mean it seems like stakeholders might be open to perform space rates given some of the feedback to your instate peers rate case. But it is less clear about actual writers or trackers will be granted. Just wondering, how the education process is going around the grid modern quest?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. I think the -- so good question. A couple of things going on there. We have a great program under way in Arkansas that's achieving I mean really exceeding our expectations. So we are going to conclude that first phase here next month and we are going to share that with Oklahoma kind of the real customer benefits that we're seeing. So that will be a real good example of what we are going to do there.

But at that the same time, we don't want to get out in front of our skis. We want to make sure that we get these two Oklahoma filings resolved. We are making a concerted effort to keep our filings very simple and straightforward and really around singular issues. And so while we'll begin some education process, we are not going to begin making any filings until we get the existing ones resolved. That help?

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

That helps. That makes a lot of sense. And then just in terms of, it looks like some of the capital in your plan shifted from '21 to some of the arrears. What's some of the moving pieces going on there and how do you execute kind of, within the plan?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Sure. That's really just true-up as we have more granularity into our actual plans and how we'll spend specialty grid mod and do maintenance on our distribution system. What you can really expect is a pretty consistent around $600 million a year in each of the years. But each year that's going to true-up a little bit as to we just have more clarity.

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

Got it. And I mean assuming, I mean not trying to put the cart before the horse but assuming you could be successful in the grid mod request is $600 million still kind of the full run rate level?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Sure. That's a very comfortable rate. No, the question is could it be higher or lower, yeah. But I think it's up to us to balance that and make sure that we achieve all the benefits.

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

All right. Great. Thank you. That's all I had.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Thank you. Have a good day.

Operator

Thank you. Our next question comes from Paul Ridzon of KeyBanc. Your line is now open.

Paul Ridzon -- KeyBanc -- Analyst

Good morning, Sean and Steve.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Good morning.

Steve Merrill -- Chief Financial Officer

Hey, good morning.

Paul Ridzon -- KeyBanc -- Analyst

It looks like midstream did a little better than the top end of guidance kind of, what drove that?

Steve Merrill -- Chief Financial Officer

Part of that is, they did have mark-to-market gains on their hedging. I think that was around $26 million or so. So that drove it up just a bit.

Paul Ridzon -- KeyBanc -- Analyst

Okay. And then what was the impact of weather in the quarter versus normal?

Steve Merrill -- Chief Financial Officer

Weather for the quarter versus normal was about $0.02 higher about $6 million.

Paul Ridzon -- KeyBanc -- Analyst

And do you have it versus '17?

Steve Merrill -- Chief Financial Officer

It was about $0.01. Just under $3 million.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Positive, yes.

Paul Ridzon -- KeyBanc -- Analyst

And what's driving the outlook for lower-holding company losses for '19?

Steve Merrill -- Chief Financial Officer

We just had some noise associated with tax reform. We also as our -- so our deferred comp program expenses actually go there and we can't invest in OGE stock in that. So we have to invest in an index. And when our stock overperforms that creates a loss at the holding company. So it was actually a good news situation that we have those expenses, our stock actually outperformed the index.

Paul Ridzon -- KeyBanc -- Analyst

Got it. And then lastly, how is your outreach with the parties going regarding, what I thought was a punitive depreciation outcome in the last rate case? Or two rate cases ago?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. I mean if you saw that there was a much more support for correcting that in the last case. But it didn't make its way through the settlement. But there were parties in particular the staff that was supportive of our depreciation position. In my view on that is, I think everyone recognizes what needs to happen there. And Paul, I'm not anticipating that we are going to flip it all back all-in-one case but I think we are going to make progress on that and incrementally get that -- get those depreciation rates back to where they need to be.

Paul Ridzon -- KeyBanc -- Analyst

Okay. Thank you very much.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from Charles Fishman of Morningstar Research. Your line is now open.

Charles Fishman -- Morningstar Research -- Analyst

Thank you. Good morning.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Hey, good morning.

Charles Fishman -- Morningstar Research -- Analyst

I have lost track of what happened to the committee formed in Oklahoma that I think was a select committee, special committee to evaluate the structure of the OCC. Did that ever issue its final report?

Sean Trauschke -- Chairman, President and Chief Executive Officer

They did. They issued their final report in middle of November and there were number of recommendations really around but nothing I would characterize it is like we anticipated that there were opportunities for how everyone could kind of, work together and streamline the operations and become more efficient. There weren't any strong recommendations on the structure of the commission in terms of whether they are ought to be more or fewer commissioners whether they ought to be appointed or elected.

They didn't go down that path. The one interesting point that came out of there though that there was recommendation as it relates to allowing the commissioners to talk to one another outside of a called meeting, where they fell under the open meetings request. So the ability for the commissioners to engage one another and build relationship was one of the recommendations and we certainly support that.

Charles Fishman -- Morningstar Research -- Analyst

Okay. But with respect to -- what you call streamline riders whatever you want to call it. They really didn't address that which would have helped the visibility of how you're going to do the grid modernization, correct?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Right. There was no linkage there. That's correct.

Charles Fishman -- Morningstar Research -- Analyst

Okay. And so as I understood.

Sean Trauschke -- Chairman, President and Chief Executive Officer

But Charles, just so we're clear -- there was no statutory restriction for them to grant riders or anything like that. That they -- the commission has done that in the past. We have riders today. There's no issue there and with regards to their ability to grant riders.

Charles Fishman -- Morningstar Research -- Analyst

And then so based on the answer to a previous question your strategy is to the Sooner rate case, the other rate case let those get settled mid-year and then really hit this hard of how you're going to address recovery on grid modernization. Is that the -- do I understand that correctly?

Sean Trauschke -- Chairman, President and Chief Executive Officer

I think that's a very fair assessment. Now, that being said, we are talking and educating people on what's coming up but as far as regulatory filings -- we are going to keep these very straightforward one at a time.

Charles Fishman -- Morningstar Research -- Analyst

And I think I suspect that your story would be look at our rates, look at what happened in Arkansas, when we had a Formula Rate mechanism. That is the message, you'll be sending?

Sean Trauschke -- Chairman, President and Chief Executive Officer

That's exactly right. We may call you to be a witness too Charles. That was well done.

Charles Fishman -- Morningstar Research -- Analyst

Okay. Well, thank you. That's the only I had.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Okay. Thanks. Have a good day.

Operator

Thank you. Our next question comes from Greg Reese(ph)of SunTrust(ph). Your line is now open.

Unidentified Participant -- -- Analyst

Hey, guys. Can you hear me.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Hey, Greg. Good morning.

Unidentified Participant -- -- Analyst

Good morning, And congrats on good report. Two quick questions. Just wanted to see the Utility tax rates ticking down a little bit in 2019. Just wanted to see, what was driving that?

Steve Merrill -- Chief Financial Officer

Sure. There is really three main drivers. The largest of which is just federal win tax credits. We have got some investment tax credits that impact that and then you just got the impact of tax reform as we are amortizing the ADIT(ph)giveback that brings down our net effective tax rate.

Unidentified Participant -- -- Analyst

And how much ADIT is going back? I know there's like a protected and unprotected piece, just wanted to see if you kind of have...

Steve Merrill -- Chief Financial Officer

Yeah. For 2019 that'll be about $38 million.

Unidentified Participant -- -- Analyst

For both protected and non-protected?

Steve Merrill -- Chief Financial Officer

Yes. That's all in at this point.

Unidentified Participant -- -- Analyst

Got you. And over how many years is that going to be going back?

Steve Merrill -- Chief Financial Officer

It's about 30 years.

Unidentified Participant -- -- Analyst

30 years.

Steve Merrill -- Chief Financial Officer

And it's all tied to the asset life so that number will change every year. That's where it is for 2019.

Unidentified Participant -- -- Analyst

Got you. So somewhere in like the $30 odd million per year is a good number to use for that?

Steve Merrill -- Chief Financial Officer

It ebbs and flows. It can be a little less than that at times. But that's not bad -- around $30 million is probably not a bad number.

Unidentified Participant -- -- Analyst

Okay. And what's the cash tax rate on Enable distributions?

Steve Merrill -- Chief Financial Officer

I mean, we don't really look at it that way because we're just a corporate tax payers, so it all just go into OGE's bucket.

Unidentified Participant -- -- Analyst

Okay. Got you. But the statutory book rates somewhere in like the 25% range?

Steve Merrill -- Chief Financial Officer

Yeah. That's right. That's correct.

Unidentified Participant -- -- Analyst

Got you. And one last one, what's 2018 year-end rate base across the company?

Steve Merrill -- Chief Financial Officer

That number is about $6.5 billion.

Unidentified Participant -- -- Analyst

Okay. Perfect. That is all I had. Appreciate it, guys. Thanks.

Steve Merrill -- Chief Financial Officer

Thanks, Greg.

Operator

Thank you. Our next question comes from Vedula Murti of Avon Capital. Your line is now open.

Vedula Murti -- Avon Capital -- Analyst

Hey. Good morning, Sean.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Hey. Good morning, Vedula. How have you been. I haven't talk to you in a while.

Vedula Murti -- Avon Capital -- Analyst

I am doing fine. Thank you very much.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Good.

Vedula Murti -- Avon Capital -- Analyst

A couple of things. One for 2018, what was the earned ROEs in the regulatory jurisdictions for Oklahoma and Arkansas?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Okay. So in Oklahoma, we are very close to our allowed return. Obviously, we had probably 9 in the 9% range. Obviously, we had two big assets coming into service. So we are a little bit below that but that will all get trued up and then Arkansas right there at the allowed.

Vedula Murti -- Avon Capital -- Analyst

Okay. If I -- and can you remind me in terms of Enable beyond the distribution you get on your shares and the cash flow you get for your general partnership ownership. What else causes variability in terms of income recognition from Enable?

Sean Trauschke -- Chairman, President and Chief Executive Officer

I mean, we just recognize our proportional share of the net income to the common unit holders. So the variability would be just the variability in the business. Commodity exposure however, I'll mention 97% of their margin is either fee-based or hedged. You do have exposure to volume swings and then, what they do to help mitigate that is they have a hedging program but you will have mark-to-market adjustments associated with that. Those are the key variables.

Vedula Murti -- Avon Capital -- Analyst

Okay. Because I was taking a look at -- at least, what some of Wall Street has as an outlook, it's quite valuable but it seems based on -- I guess commodity forecast and things of that nature. But until that big pipeline I think you referenced in your script, actually comes in service -- it appears that underlying growth absent tailwinds of commodity and activity is fairly modest.

Sean Trauschke -- Chairman, President and Chief Executive Officer

They have done a good job there of balancing the business. And since we formed Enable, we've been focused on the cash distributions to our company and even in some very significant downturns in the commodity market the cash flow to our company has been stable. And I think that's a really good thing.

Vedula Murti -- Avon Capital -- Analyst

Now, its -- certainly appreciate that. And I guess in terms of the utilities going forward here, if we get to $600 million of CapEx, which is higher than what you have in the slide deck here on an ongoing basis. It appears that the rate-based growth and aggregates maybe about 4.5% negative DD&A. So usually the earnings growth is probably something close to that maybe modestly less than that over a period of time. Is that a fair characterization?

Sean Trauschke -- Chairman, President and Chief Executive Officer

But I think our -- our stated guidance around earnings growth rate utilities is 4% to 6%. And we're very comfortable with that.

Vedula Murti -- Avon Capital -- Analyst

Okay. And I guess in the past, you've talked about once you get through this rate case at the end of the year. Once you -- you've as I recall the 10% dividend growth for the year 2019. And then you will establish a dividend policy and basically just like a term capital allocation policy at some point toward the end of this year.

Can you remind me again, kind of what's kind of, how -- what you might be thinking about and you have in the past referenced a possibility of stock buybacks as part of capital allocation as well and also may be current thoughts in terms of M&A?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. So what we said is, we certainly want to get through the two Oklahoma filings. We want to see the finalization of the Arkansas Formula Rate implementation April 1. You mentioned Enable there where we're certainly monitoring Enable going forward to see if there is -- what's going on there in terms of future distributions. But you're exactly right, we've made a five year commitment to grow the dividends 10% year for five years through the end of '19.

We are going to watch those mile markers I just mentioned. We are going to go through that. And our focus is to grow. And our focus there is to kind of create a real return proposition for our shareholders and line of sight and regulatory recovery is important to us. And we will make sure we have that before we get too far out over our skis on commitments. And then certainly, we have the opportunity around the dividend. We do intend to grow the earnings of the company and the dividends of the company. And I think we're going to have a very good return proposition and II think 'll just leave at that.

Vedula Murti -- Avon Capital -- Analyst

One last thing, if you could, I guess when you think about, what would be kind of like the objective payout ratio over the extended period of time after you kind of come to your conclusions. Do you have like a range -- you're kind of working with to figure out how the pieces fit?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. No, we've not really. I'm not focused as much on payout ratio. We are unique in that. We have a source of cash flow coming out of Enable that's certainly we value tremendously. We think there's a lot of upside there because of our IDR ownership as well. But the way, we are thinking about it is in terms of a return proposition between dividends and earnings and we are certainly going to be cognizant of what the market is recognizing and paying for.

But no, we don't have a payout ratio guideline per se. I will tell you, we were not anticipating or not expecting and would not be interested in something that was 90-plus-percent payout even though. I mean it's kind of hard to grow when your payout ratio is that high. But nevertheless, we are focused on return proposition.

Vedula Murti -- Avon Capital -- Analyst

Okay. One last question, I apologize. You mentioned the IDR. What is the annual cash flow you received associated with your GP interest?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Well, today, they are not in the IDR splits. So we -- that is a zero today. And by going forward, we have 60% of the IDR's.

Vedula Murti -- Avon Capital -- Analyst

Okay. Thank you very much.

Sean Trauschke -- Chairman, President and Chief Executive Officer

All right. Thank you.

Operator

Thank you. Our next question comes from Shar Pourreza of Guggenheim Partners. Your line is now open.

Constantine Lednev -- Guggenheim Partners -- Analyst

Hi, guys. Its actually Constantine here for Shar. A lot of questions have been answered. I just wanted to kind of take and tie couple of numbers. But I saw that the actual sales stats have been pretty robust for this year, due to weather and kind of the heating degree days and whatnot. Can you comment on, kind of the underlining normalized load growth that you're seeing in the area?

Sean Trauschke -- Chairman, President and Chief Executive Officer

We are -- we continue to see 1%. And that's really overcoming a lot of what we see on the residential side in terms of energy efficiency pickups that we've been helping to promote. So the economy is robust. And we are watching very closely, some of the local economic forecast around population growth and things like that we've had a number of economic development successes that we are very involved in. And so we are watching these indicators in terms of whether low growth actually could be higher in the future.

Constantine Lednev -- Guggenheim Partners -- Analyst

Okay. That answers that. And another one around kind of, looking at some of the operating stats for kind of, fuel costs per kilowatt hour. I've seen that the trends have been

coming down but kind of including purchase power of the number seems like it could further kind of mitigate some of the rate increases.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. I think that's -- I think that is right on point.

Constantine Lednev -- Guggenheim Partners -- Analyst

Do you see a timeline for kind of, how that goes? Is there any specific kind of purchase power contracts that are rolling off except for the ones that's obviously here in the process of the acquisition?

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah. I mean, so that one you mention about that's going to reduce cost customers significantly. We are seeing that benefit to customers because of our fuel expense certainly not having as many purchased obligations helps to. And that's a fixed obligation. And so that certainly helps us. The other thing that I think is really important and you here this phrase a lot about fuel diversity but our fleet being position the way it is, we're able to satisfy our customers and keep our rates low and remove that volatility, where we are not totally led to particular weather -- the weather environment or gas prices or anything like that.

Constantine Lednev -- Guggenheim Partners -- Analyst

Right. And I guess just one short follow-up to that. Is there any more kind of contracts in the 2019 -- 2020 timeframe that you kind of see rolling off or?

Sean Trauschke -- Chairman, President and Chief Executive Officer

None that have a roll-off date defined in the near term.

Constantine Lednev -- Guggenheim Partners -- Analyst

Okay. Yeah. Thanks. That answers for me.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Yeah.

Operator

Thank you. And we do have a follow-up question from Paul Ridzon of KeyBanc. Your line is now open.

Paul Ridzon -- KeyBanc -- Analyst

I think Enable had some capacity additions that kind of help the back end of the year. When do those come online?

Sean Trauschke -- Chairman, President and Chief Executive Officer

I think you're talking about Wildcat. And I don't remember the exact date when that came online but they did come on in 2019. The case project Wildcat they did the Velocity acquisitions, they added to their crude oil system. But off the top of my head I do not remember the exact in-service dates of those.

Paul Ridzon -- KeyBanc -- Analyst

Okay. I will circle back. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the call back to Sean Trauschke for any closing remarks.

Sean Trauschke -- Chairman, President and Chief Executive Officer

Thank you, Haley. And thank you all for your answers and participation today. Should you have any follow-up questions on Todd, in case, you're certainly available to answer those and have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may now disconnect. Everyone have a great day.

Duration: 40 minutes

Call participants:

Todd Tidwell -- Director of Investor Relations

Sean Trauschke -- Chairman, President and Chief Executive Officer

Steve Merrill -- Chief Financial Officer

Richie Ciciarelli -- Bank of America Merrill Lynch -- Analyst

Paul Ridzon -- KeyBanc -- Analyst

Charles Fishman -- Morningstar Research -- Analyst

Unidentified Participant -- -- Analyst

Vedula Murti -- Avon Capital -- Analyst

Constantine Lednev -- Guggenheim Partners -- Analyst

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