Fitch: OGE Energy Plans for Master Limited Partnership Won't Affect Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings said Friday that OGE Energy Corp.'s (OGE Energy) plans to form a master limited partnership (MLP) will not have an immediate impact on the ratings of OGE Energy or its subsidiaries. OGE Energy, currently rated 'A' by Fitch with a Stable Rating Outlook, filed a registration statement relating to a proposed initial public offering (IPO) of common units of a new subsidiary, OGE Enogex Partners L.P. (OGP). Following the IPO, OGE Energy will own a 63.9% limited partner interest in OGP as well as the 2% general partner interest.

OGE Energy is creating OGP to further develop its natural gas midstream assets and operations currently operated by OGE Energy's subsidiary, Enogex Inc. (currently rated 'BBB' with a Stable Outlook by Fitch). The initial plans call for OGE Energy to drop down a 25% interest in Enogex to OGP with OGE Energy retaining the remaining 75% interest. OGP will also take over control of the operations of Enogex. Enogex will be recapitalized as part of the transaction, with a portion of the proceeds from the IPO (currently estimated to be $130 million) and a new $300 million debt offering being used to retire Enogex's outstanding $400 million in long-term debt plus $30 million in make-whole premiums. Additionally, Enogex will be converted to an LLC prior to the IPO.

Fitch notes that Enogex has recorded significant improvements in its operating performance in recent years. Enogex has also focused on reducing debt levels and its current credit metrics remain appropriate for the ratings category. There is concern, as with any MLP, that the sponsor may be motivated to make more aggressive moves by engaging in transactions that could weaken the credit quality of the sponsor, the MLP, or the operating entity. However, Fitch notes that OGE and Enogex have historically managed their growth prudently and we anticipate this approach to continue.

Enogex is engaged in natural gas gathering, processing, transportation, storage and marketing. The system includes about 7,800 miles of pipe, six processing plants, and 23 billion cubic feet of storage capacity with operations based in Oklahoma City. OGE Energy also is the parent company of Oklahoma Gas and Electric Company (OG&E), a regulated electric utility serving more than 758,000 customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas.

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