Investment in Unconsolidated Affiliates and Related Party Transactions

On March 14, 2013, the Company entered into a Master Formation Agreement with the ArcLight group and CenterPoint pursuant to which the Company, the ArcLight group and CenterPoint agreed to form Enable to own and operate the midstream businesses of the Company and CenterPoint that was initially structured as a private limited partnership. This transaction closed on May 1, 2013.

Pursuant to the Master Formation Agreement, the Company and the ArcLight group indirectly contributed 100 percent of the equity interests in Enogex LLC to Enable. The Company determined that its contribution of Enogex LLC to Enable met the requirements of being in substance real estate and was recorded at historical cost.

Enable completed an initial public offering resulting in Enable becoming a publicly traded Master Limited Partnership in April 2014. At September 30, 2018, the Company owned 111.0 million common units, or 25.6 percent, of Enable's outstanding common units. Distributions received from Enable were $35.3 million during both the three months ended September 30, 2018 and 2017 and $105.9 million during both the nine months ended September 30, 2018 and 2017.

On November 6, 2018, Enable announced a quarterly dividend distribution of $0.31800 per unit on its outstanding common units, which is unchanged from the previous quarter. If cash distributions to Enable's unitholders exceed $0.330625 per unit in any quarter, the general partner will receive increasing percentages, up to 50 percent, of the cash Enable distributes in excess of that amount. The Company is entitled to 60 percent of those "incentive distributions." In certain circumstances, the general partner has the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable's cash distributions at the time of the exercise of this reset election.

Related Party Transactions - the Company and Enable

The Company and Enable are currently parties to several agreements whereby the Company provides specified support services to Enable, such as certain information technology, payroll and benefits administration. Under these agreements, the Company charged operating costs to Enable of $0.2 million and $0.7 million for the three months ended September 30, 2018 and 2017, respectively, and $0.5 million and $2.2 million for the nine months ended September 30, 2018 and 2017, respectively. The Company charges operating costs to OG&E and Enable based on several factors, and operating costs directly related to OG&E and/or Enable are assigned as such. Operating costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the "Distrigas" method, which is a three-factor formula that uses an equal weighting of payroll, net operating revenues and gross property, plant and equipment.

Pursuant to a seconding agreement, the Company provides seconded employees to Enable to support Enable's operations. As of September 30, 2018, 132 employees that participate in the Company's defined benefit and retirement plans are seconded to Enable. The Company billed Enable for reimbursement of $5.3 million and $6.2 million during the three months ended September 30, 2018 and 2017, respectively, and $22.1 million and $23.5 million for the nine months ended September 30, 2018 and 2017, respectively, under the seconding agreement for employment costs. If the seconding agreement was terminated, and those employees were no longer employed by the Company, and lump sum payments were made to those employees, the Company would recognize a settlement or curtailment of the pension/retiree health care charges, which would increase expense at the Company by approximately $12.3 million. Settlement and curtailment charges associated with the seconded employees are not reimbursable to the Company by Enable. The seconding agreement can be terminated by mutual agreement of the Company and Enable or solely by the Company upon 120 days' notice.

The Company had accounts receivable from Enable for amounts billed for support services, including the cost of seconded employees, of $1.7 million as of September 30, 2018 and $2.0 million as of December 31, 2017.

Related Party Transactions - OG&E and Enable

Enable provides gas transportation services to OG&E pursuant to an agreement that expires in April 2019, if either party does not provide notice of termination to the other party at least 180 days prior to the expiration date in April 2019. In October 2018, OG&E and Enable agreed to waive the 180 days written notice and allow a 30 day extension so that the parties can negotiate the terms of a new agreement. This transportation agreement grants Enable the responsibility of delivering natural gas to OG&E's generating facilities and performing an imbalance service. With this imbalance service, in accordance with the cash-out provision of the contract, OG&E purchases gas from Enable when Enable's deliveries exceed OG&E's pipeline receipts. Enable purchases gas from OG&E when OG&E's pipeline receipts exceed Enable's deliveries. The following table summarizes related party transactions between OG&E and Enable during the three and nine months ended September 30, 2018 and 2017.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2018		2017		2018		2017
Operating revenues:
Electricity to power electric compression assets	$	4.7	$	4.5	$	12.2	$	10.0
Cost of sales:
Natural gas transportation services	$	8.8	$	8.8	$	26.3	$	26.3
Natural gas purchases (sales)	$	0.1	$	0.4	$	2.6	$	(0.4	)

Summarized Financial Information of Enable

Summarized unaudited financial information for 100 percent of Enable is presented below at September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017.



	September 30,		December 31,
Balance Sheet	2018		2017
(In millions)
Current assets	$	481	$	416
Non-current assets	$	11,454	$	11,177
Current liabilities	$	1,403	$	1,279
Non-current liabilities	$	2,964	$	2,660



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Income Statement	2018		2017		2018		2017
(In millions)
Total revenues	$	928	$	705	$	2,481	$	1,997
Cost of natural gas and NGLs	$	516	$	349	$	1,335	$	936
Operating income	$	171	$	137	$	436	$	399
Net income	$	129	$	104	$	320	$	301

The formation of Enable was considered a business combination, and CenterPoint was the acquirer of Enogex Holdings for accounting purposes. Under this method, the fair value of the consideration paid by CenterPoint for Enogex Holdings is allocated to the assets acquired and liabilities assumed on May 1, 2013 based on their fair value. Enogex Holdings' assets, liabilities and equity have accordingly been adjusted to estimated fair value as of May 1, 2013, resulting in an increase to equity of $2.2 billion. Due to the contribution of Enogex LLC to Enable meeting the requirements of being in substance real estate and thus recording the initial investment at historical cost, the effects of the amortization and depreciation expense associated with the fair value adjustments on Enable's results of operations have been eliminated in the Company's recording of its equity in earnings of Enable.

The Company recorded equity in earnings of unconsolidated affiliates of $40.1 million and $33.6 million for the three months ended September 30, 2018 and 2017, respectively, and $103.3 million and $98.6 million for the nine months ended September 30, 2018 and 2017, respectively. Equity in earnings of unconsolidated affiliates includes the Company's share of Enable's earnings adjusted for the amortization of the basis difference of the Company's original investment in Enogex LLC and its underlying equity in the net assets of Enable. The basis difference is being amortized over approximately 30 years, which is the average life of the assets to which the basis difference is attributed, beginning in May 2013. Equity in earnings of unconsolidated affiliates is also adjusted for the elimination of the Enogex Holdings fair value adjustments, as described below.

The following table reconciles the Company's equity in earnings of unconsolidated affiliates for the three and nine months ended September 30, 2018 and 2017.



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2018			2017			2018			2017
Enable net income	$	129.0		$	104.0		$	320.0		$	301.0
OGE Energy's percent ownership at period end	25.6		%	25.7		%	25.6		%	25.7		%
OGE Energy's portion of Enable net income	33.0			26.5			82.0			77.2
Amortization of basis difference	2.8			2.8			8.4			8.5
Elimination of Enable fair value step up	4.3			4.3			12.9			12.9
Equity in earnings of unconsolidated affiliates	$	40.1		$	33.6		$	103.3		$	98.6

The difference between OGE Energy's investment in Enable and its underlying equity in the net assets of Enable was $689.7 million as of September 30, 2018. The following table reconciles the basis difference in Enable from December 31, 2017 to September 30, 2018.



(In millions)
Basis difference at December 31, 2017	$	714.2
Change in Enable basis difference	(3.2		)
Amortization of basis difference	(8.4		)
Elimination of Enable fair value step up	(12.9		)
Basis difference at September 30, 2018	$	689.7