1021635--2/28/2008--OGE_ENERGY

related topics

{gas, price, oil}

{operation, natural, condition}

{cost, contract, operation}

{debt, indebtedness, cash}

{competitive, industry, competition}

{cost, operation, labor}

{cost, regulation, environmental}

{financial, litigation, operation}

{capital, credit, financial}

{interest, director, officer}

{regulation, change, law}

{loss, insurance, financial}

{provision, law, control}

In the discussion of risk factors set forth below, unless the context otherwise requires, the terms OGE Energy , we , our and us refer to OGE Energy Corp., OG E refers to our subsidiary Oklahoma Gas and Electric Company and Enogex refers to our subsidiary Enogex Inc. and its subsidiaries. In addition to the other information in this Annual Report on Form 10-K and other documents filed by us and/or our subsidiaries with the SEC from time to time, the following factors should be carefully considered in evaluating OGE Energy and its subsidiaries. Such factors could affect actual results and cause results to differ materially from those expressed in any forward-looking statements made by or on behalf of us or our subsidiaries. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also impair our business operations. Our profitability depends to a large extent on the ability of OG E to fully recover its costs from its customers and there may be changes in the regulatory environment that impair its ability to recover costs from its customers. OG E s rates are subject to regulation by the states of Oklahoma and Arkansas, as well as by a federal agency, whose regulatory paradigms and goals may not be consistent. Costs of compliance with environmental laws and regulations are significant and the cost of compliance with future environmental laws and regulations may adversely affect our results of operations, financial position, or liquidity. We have incurred costs in connection with the Red Rock power plant project that has been terminated and we may not be able to fully recover those costs. We may not be able to recover the costs of our substantial planned investment in capital improvements and additions. The regional power market in which OG E operates has changing transmission regulatory structures, which may affect the transmission assets and related revenues and expenses. Increased competition resulting from restructuring efforts could have a significant financial impact on us and OG E and consequently decrease our revenue. A change in the jurisdictional characterization of some of Enogex s assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its revenues to decline and operating expenses to increase. Enogex s natural gas transportation and storage operations are subject to regulation by the FERC pursuant to Section 311 of the NGPA, which could have an adverse impact on its ability to establish transportation and storage rates that would allow it to recover the full cost of operating its transportation and storage facilities, including a reasonable return, and an adverse impact on its consolidated financial position, results of operations or cash flows. Enogex s natural gas transportation, storage and gathering operations are subject to regulation by agencies in Oklahoma and Texas, and that regulation could have an adverse impact on its ability to establish rates that would allow it to recover the full cost of operating its facilities, including a reasonable return, and its consolidated financial position, results of operations or cash flows. Enogex may incur significant costs and liabilities resulting from pipeline integrity programs and related repairs. Events that are beyond our control have increased the level of public and regulatory scrutiny of our industry. Governmental and market reactions to these events may have negative impacts on our business, financial position, cash flows and access to capital. We are subject to substantial utility and energy regulation by governmental agencies. Compliance with current and future utility and energy regulatory requirements and procurement of necessary approvals, permits and certifications may result in significant costs to us. Our results of operations may be impacted by disruptions beyond our control. 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 consolidated financial position, results of operations and cash flows. Enogex does not own all of the land on which its pipelines and facilities are located, which could disrupt its operations. Weather conditions such as tornadoes, thunderstorms, ice storms, wind storms, as well as seasonal temperature variations may adversely affect our consolidated financial position, results of operations and cash flows. Natural gas and NGL prices are volatile, and changes in these prices could adversely affect Enogex s results of operations and cash flows. Some factors that affect prices of natural gas and NGLs are beyond our control and changes in these prices could adversely affect Enogex s revenue and cash flows. Enogex s keep-whole natural gas processing arrangements and percent-of-proceeds and percent-of-liquids natural gas processing agreements expose it to risks associated with fluctuations associated with the price of natural gas and NGLs, which could adversely affect Enogex s revenue and cash flows. Because of the natural decline in production from existing wells connected to Enogex s systems, Enogex s success depends on its ability to gather new sources of natural gas, which depends on certain factors beyond its control. Any decrease in supplies of natural gas could adversely affect our and Enogex s business and results of operations and cash flows. Enogex s businesses are dependent, in part, on the drilling decisions of others. Enogex engages in commodity hedging activities to minimize the impact of commodity price risk, which may have a volatile effect on its earnings and cash flows. Enogex s results of operations and cash flows may be adversely affected by risks associated with its hedging activities. Enogex depends on certain key natural gas producer customers for a significant portion of its supply of natural gas and NGLs. The loss of, or reduction in volumes from, any of these customers could result in a decline in its consolidated financial position, results of operations or cash flows. Enogex depends on two customers for a significant portion of its firm intrastate transportation and storage services. The loss of, or reduction in volumes from, either of these customers could result in a decline in Enogex s transportation and storage services and its consolidated financial position, results of operations or cash flows. Enogex may not be successful in balancing its purchases and sales of natural gas and NGLs, which would increase its exposure to commodity price risk. If third-party pipelines and other facilities interconnected to Enogex s gathering or transportation facilities become partially or fully unavailable, Enogex s revenues and cash flows could be adversely affected. Enogex s industry is highly competitive, and increased competitive pressure could adversely affect its consolidated financial position, results of operations or cash flows. Gathering, processing, transporting and storing natural gas involves many hazards and operational risks, some of which may not be fully covered by insurance. If a significant accident or event occurs that is not fully insured, Enogex s operations and financial results could be adversely affected. Increasing costs associated with our defined benefit retirement plans, health care plans and other employee-related 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. We are a holding company with our primary assets being investments in our subsidiaries. Certain provisions in our charter documents and rights plan have anti-takeover effects. We and our subsidiaries may be able to incur substantially more indebtedness, which may increase the risks created by our indebtedness. 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. Any negative change in OERI s creditworthiness could adversely affect Enogex s ability to engage in hedging transactions or adversely affect the prices and terms upon which hedging transactions occur. Enogex s debt levels may limit its flexibility in obtaining additional financing and in pursuing other business opportunities. 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 consolidated financial position, results of operations and cash flows.

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1021635--2/28/2008--OGE_ENERGY_CORP