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���������ֳ�-New York-20 November 2014: ���������ֳ� has assigned an 'A-' rating to OGE Energy Corp.'s (OGE) proposed $100 million issue of floating rate senior notes due 2017. The Rating Outlook is Stable.

KEY RATING DRIVERS

Stable Utility Operations

OGE's rating and Outlook reflect the stable cash flows and earnings primarily provided by its regulated utility, Oklahoma Gas and Electric (OG&E). In 2013, OG&E's EBITDA represented approximately 72% of OGE's total EBITDA. ���������ֳ� views that Oklahoma, OG&E's primary service territory, has relatively supportive regulations. OG&E in some cases receives pre-approval of construction projects and has riders in place that supports storm cost recovery, smart-grid and also a demand program rider that allows for recovery of lost revenue associated with energy and demand reduction. OG&E can recover electric fuel and gas commodity costs through Fuel Adjustment Clause (FAC) outside of base rate proceedings. OG&E currently has a 10.2% authorized return on equity (ROE) in Oklahoma (78% of total rate base), which is about the industry average.

Environmental Mandate a Constraint

OGE's rating and Outlook take into consideration the substantial environmental compliance requirements associated with OG&E's coal fired generation fleet. In 2013, OG&E produced 53% of energy from coal fired generating plants. In August 2014, OG&E submitted an environmental compliance plan with the Oklahoma Corporation Commission (OCC) related to regional haze and Mercury and Air Toxics Standards (MATS). The filing follows U.S. Supreme Court's decision to deny OG&E's petition to review a circuit court decision on regional haze regarding whether the Environmental Protection Agency (EPA) acted lawfully in rejecting portions of state of Oklahoma's plan and issuing its own plan to address regional haze. OG&E is required to comply with EPA's Federal Implementation Plan (FIP) for regional haze by January 2019 and with MATS by April 2016.

The plan includes installing dry scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas. Along with other projects including Activated Carbon Injection (ACI) and modernization of Mustang facility with quick start combustion turbines, total capital cost is estimated to be $1.1 billion. CWIP recovery is a preferred mechanism from a credit perspective and from a rate mitigation standpoint. An approval from the OCC is expected after the hearing in March 2015. OG&E will also seek related approvals from Arkansas Public Service Commission (APSC) in December 2014.

OGE and OG&E's rating stability depends on continued regulatory support for environmental capex. Oklahoma legislation allows utilities to recover environmental compliance costs incurred to meet state and Federal mandates.

Due to the environmental spending, ���������ֳ� expects the current level of parent debt to be maintained or slightly increase over the next several years. Currently, parent level debt represents approximately 19% of consolidated debt at OGE.

���������ֳ� believes that if environmental capex is fully recovered on a timely basis, the expected increase in customer rates, could potentially affect future recovery of OG&E's capital spending and earnings growth.

Enable Adds Value and Volatility:

OGE's rating also reflects the operating risks at its commodity sensitive midstream partnership, Enable Midstream Partners (Enable) as it is an important part of OGE's operating strategy and income source.

Enable's gathering and processing volume growth is driven primarily by crude oil and natural gas liquids drilling activities in the Williston and Anadarko basins, offset by decline in the lean gas Ark-La-Tex and Arkoma basins which are less economic to produce at current commodity prices. The impact of the decline in these basins is partially offset by minimum volume commitment contracts. The earnings in the transportation and storage segment are primarily driven by producer activities around the pipeline systems and natural gas end-user demand. Some areas of the systems have contracts with higher rates than current market rates and face re-contracting risks.

���������ֳ� proportionally consolidates Enable's financials when assessing OGE's credit risks due to ���������ֳ�'s belief that OGE will continue to exercise significant indirect operational and financial control at Enable as a general partner and will likely provide equity support under time of stress. ���������ֳ� believes that Enable's formation and the public offering enhance operating scale and provide equity funding source. However, it will also subject OGE to greater earnings volatility as Enable will likely aggressively pursue bigger and sometimes riskier projects to drive up shareholder value and increase distributions to public unit-holders and general partners.

Credit Metrics Expected to Decline:

OGE's credit metrics historically have been well positioned for its rating and risk profile. For the last three years, funds from operations (FFO) adjusted leverage averaged 3.1x and the FFO fixed charge cover averaged 5.9x. Going forward, incorporating the environmental capex, the FFO adjusted leverage is expected to reach 4.5x in 2017 and decline to 3.9x by end of 2018 and the FFO fixed charge cover will decrease to 4.5x by 2017 and return to above 5x in 2018. These ratios remain consistent with its rating category.


Contact:

Primary Analyst
Julie Jiang
Director
+1-212-908-0708
���������ֳ�, Inc.
33 Whitehall Street
New York, NY 10004

Secondary Analyst
Glen Grabelsky
Managing Director
+1-212-908-0977

Committee Chairperson
Michael Weaver
Managing Director
+1-312-368-3156



Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.

Additional information is available at ''.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'Recovery Ratings and Notching Criteria for Utilities' (Nov. 19, 2013);
--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);
--'Rating U.S. Utilities, Power and Gas Companies, (March 11, 2014).

Applicable Criteria and Related Research:





Additional Disclosure