COC IDA research note 05-07-10.pdf

Please refer to pages 3-4 of this report for detailed disclosure and certification information.
* D. A. Davidson & Co. makes a market in this security.
RESEARCH NOTE
Institutional Equity Research

IDACORP, INC.
May 7, 2010 IDA * – NYSE

Rating: Buy
Price: (5/6/10) $33.86
Price Targets: 12-18 month: $39.50
5-year: $48.00

Industry:
Utilities

James L. Bellessa, Jr., CFA
406.791.7230
[e-mail]

Michael Bates
Research Associate
406.791.7216
[e-mail]

Weak Quarter Buoyed by Tax Credit Amortizations

• IDACORP reported 1Q'10 EPS of $0.34, compared to $0.40 in 1Q'09, our
forecast of $0.42, and the $0.41 consensus. Although the utility’s results were
supported by rate relief, this benefit was more than offset by weak demand for
electricity and higher operational expenses than the year-ago period. A variance
model is attached.
• Utility reports weak demand. The company’s utility business, Idaho Power,
posted EPS of $0.38 for the quarter versus $0.41 last year and our forecast of
$0.41. Delivered volumes declined 5% compared to last year, due to the effects
of mild winter temperatures, weak economic conditions, and energy conservation
efforts. Compounding the issue, higher wages contributed to a $3.3 million (+5%)
increase in O&M expenses since last year.
• Tax issues help results, but convolute the story. Partially offsetting the utility’s
weakness was a $4.5 million (+$0.16 per share) benefit from the amortization of
accumulated deferred investment tax credits (ADITC), as allowed by a regulatory
decision in the utility’s Idaho jurisdiction. This decision is part of a recent
settlement agreement in Idaho that allows the utility to take up to $25 million in
ADITC amortization in each of 2010 and 2011, if its realized ROE falls below
9.5%. Due to the fact that these benefits are highly unpredictable from quarter to
quarter, and two project studies are underway that will likely have a bearing on
taxation, management has discontinued its practice of issuing guidance on the tax
rate of the utility and the parent company. (The two projects involve the use of
ADITC pursuant to the Idaho settlement agreement and the possible use of a tax
accounting method for repair-related expenditures.) Absence of such guidance is
likely to complicate earnings forecasts by the investment community.
• Management reiterated its 2010 EPS guidance of $2.65-$2.80, as the company
is “able to maintain [its] annual earnings guidance range because of the earnings
stabilization provisions of the settlement agreement.” If needed, the utility can use
as much as $20.5 million more in ADITC (for an allowed annual total of
$25 million) during the remainder of 2010 to hold up earnings in Idaho by as much
as ~$0.43 per share.
• Nonregulated activities come in weaker than expected. The company
reported a $0.05 per share loss from nonregulated activities (versus a loss of
$0.01 a year earlier), as earnings at the company’s coal business declined
$3.0 million, due to higher operating costs, and a $3.3 million in life insurance
benefit in 1Q’09 was not repeated this year.
• No model revisions at this time. We will publish an updated model following
our review of the company’s Form 10-Q.
• We are maintaining our 12-18 month target price of $37.50, which equates to
~13.4x the average of our 2010 and 2011 EPS estimates of $2.70 and $2.90,
respectively. Over the past decade, IDACORP has traded at a median multiple of
~16x price-to-year-forward EPS estimates. We are maintaining our BUY rating for
total return investors, including a 3.5% current yield.

D.A. Davidson & Co.
2
IDACORP, Inc. - Actual and Projected Operating Results
($ in thousands) -- Fiscal year ends 12/31 1Q'09 1Q'10E 1Q'10 $ chg % chg
Operating Revenues:
Electric Utility:
General Business $187,927 $199,552 $203,745 $15,818 8%
Off System Sales 28,530 26,447 34,406 5,876 21%
Other Revenues 11,572 12,500 14,309 2,737 24%
Total Electric Utility Revenues $228,029 $238,498 $252,460 $24,431 11%
Other 545 850 503 (42) -8%
Total Operating Revenues $228,574 $239,348 $252,963 $24,389 11%
Operating Expenses:
Electric Utility:
Purchased Power $33,701 $37,819 $21,174 ($12,527) -37%
Fuel Expense 39,133 39,352 37,187 (1,946) -5%
Power Cost Adjustment 15,859 8,000 48,324 32,465 205%
Total Power Supply Expense $88,693 $85,171 $106,685 $17,992 20%
Other Operations And Maintenance 68,769 73,934 72,094 3,325 5%
Demand-Side Management 4,058 5,000 5,034 976 24%
Gain On Sale Of Emission Allowances (229) - - 229 -100%
Depreciation 25,963 29,250 28,583 2,620 10%
Taxes Other Than Income Taxes 5,062 5,247 5,680 618 12%
Total Electric Utility Expenses $192,316 $198,603 $218,076 $25,760 13%
Other Expense 624 1,200 840 216 35%
Total Operating Expenses $192,940 $199,803 $218,916 $25,976 13%
Operating Income (Loss):
Electric Utility $35,713 $39,896 $34,384 ($1,329) -4%
Other (79) (350) (337) (258) 327%
Total Operating Income $35,634 $39,546 $34,047 ($1,587) -4%
Other Income 6,921 3,500 4,481 (2,440) -35%
Earnings of Unconsolidated Equity-Method Investments 402 (500) (2,378) (2,780) NM
Interest Expense:
Interest On Long-Term Debt $16,639 $19,750 $19,441 $2,802 17%
Other Interest 836 500 (453) (1,289) NM
Total Interest Expense $17,475 $20,250 $18,988 $1,513 9%
Income Before Income Taxes 25,482 22,296 17,162 (8,320) -33%
Accumulated Deferred Investment Tax Credits
Income Tax Expense 6,796 2,230 1,305 (5,491) -81%
Tax Rate 26.7% 10.0% 7.6%
Net Income $18,686 $20,066 $15,857 ($2,829) -15%
Adjustment for Loss Attributable to Noncontrolling Intere 198 50 206 8 4%
Net Income Attributable to IDACORP, Inc. $18,884 $20,116 $16,063 ($2,821) -15%
Weighted Average Shares (Diluted) 46,876 48,124 47,885 1,009 2%
Total Earnings Per Share (Diluted) $0.40 $0.42 $0.34 ($0.07) -17%
Dividends Paid Per Share Of Common Stock $0.30 $0.30 $0.30 $0.00 0%
EPS by Segment:
Idaho Power Company $0.41 $0.41 $0.38 ($0.03) -8%
Other (0.01) 0.01 (0.05) (0.04) 428%
Total EPS $0.40 $0.42 $0.34 ($0.07) -17%
D.A. Davidson & Co.
Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • [phone] • [phone] • www.dadavidson.com
Copyright D.A. Davidson & Co., 2010. All rights reserved.
3
Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from this company in the
next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L.
Bellessa, Jr., CFA and Michael Bates, the research analysts principally responsible for the preparation of this report, will receive
compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson
& Co.’s analysts are not directly compensated for involvement in specific investment banking transactions.
We, James L. Bellessa, Jr., CFA and Michael Bates, attest that (i) all the views expressed in this research report accurately reflect our
personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.

Ratings Information

D.A. Davidson & Co. Ratings Buy Neutral Underperform
Risk adjusted return potential azbycx Over 15% total return
expected on a risk adjusted
basis over next 12-18 months
>0-15% return potential
on a risk adjusted basis
over next 12-18 months
Likely to remain flat or lose
value on a risk adjusted basis
over next 12-18 months
Distribution of Ratings (as of 3/31/10) Buy Hold Sell
Corresponding Institutional Research Ratings Buy Neutral Underperform
and Distribution 52% 40% 8%
Corresponding Private Client Research Ratings Outperform Market Perform Underperform
and Distribution 78% 22% 0%
Distribution of Combined Ratings 55% 38% 7%
Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos.
Institutional Coverage 7% 5% 6%
Private Client Coverage 0% 0% 0%
Distribution of Combined Investment Banking 6% 5% 6%

D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform
D.A. Davidson & Co.
Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • [phone] • [phone] • www.dadavidson.com
Copyright D.A. Davidson & Co., 2010. All rights reserved.
4
Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based
upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria.
Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic
fluctuations and unforeseen changes in the subject company’s fundamentals or business trends.

Other Disclosures

Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any
action based upon it. Any opinions expressed are based on our interpretation of data available to us at the time of the original
publication of the report. These opinions are subject to change at any time without notice. Investors must bear in mind that inherent in
investments are the risks of fluctuating prices and the uncertainties of dividends, rates of return and yield. Investors should also
remember that past performance is not necessarily an indicator of future performance and D.A. Davidson & Co. makes no guarantee,
express or implied, as to future performance. Investors should note this report was prepared by D.A. Davidson & Co.’s Institutional
Research Department for distribution to D.A. Davidson & Co.’s institutional investor clients and assumes a certain level of investment
sophistication on the part of the recipient. Readers, who are not institutional investors or other market professionals, should seek the
advice of their individual investment advisor for an explanation of this report’s contents, and should always seek such advisor’s advice
before making any investment decisions. Further information and elaboration will be furnished upon request.