COC IDA013109.pdf

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A publication of
WACHOVIA CAPITAL MARKETS, LLC

Equity Research
IDACORP, Inc.
IDA: Initial Thoughts on Rate Order; Maintaining Estimates
Cost Controls, Sales & Hydro Likely Key to 2009

• Rate Case Outcome. On 1/30 the Idaho Commission (IPUC) approved a $20.9mm
rate increase based on a 10.5% ROE, 49% equity ratio and rate base of $2.094B.
This compares to IDA's request for a $66.6mm rate increase based on an 11.25%
ROE, 49% equity ratio and $2.093B rate base. Roughly $24mm of the request
related to power supply expense and the remaining $44mm for a base rate increase.
• Quick Analysis. Overall we view the rate order to be in-line with expectations.
The cost of capital parameters and approved rate base appear constructive and are
largely consistent with our assumptions. We are somewhat concerned, however,
with the approved rate increase, which is just 31% of IDA's original request.
• We are maintaining our 2009 and 2010 EPS estimates of $2.40 and $2.45. Our
09E EPS is based on a rate base of $2,093 million, a 48% equity ratio, an earned
ROE of 10%, largely consistent with the order. The assumed earned ROE of 10%
is below the allowed ROE of 10.5% to reflect the impact of regulatory lag and the
load growth adjustment mechanism. With that being said, we are somewhat
concerned that IDA may not be able to earn a 10% ROE based on the approved rate
increase. While it is unclear how much of the $20.9mm rate increase relates to
power supply expense (of which IDA recovers 95% of excess costs) versus a base
rate increase, the IPUC made cuts to IDA’s O&M and compensation expense
projections, among other items, which will require IDA to either reduce or eat these
costs. Key factors impacting 09 results will likely be (1) IDA’s ability to control
costs, (2) sales growth (our model assumes 1.5% retail sales growth vs. roughly 3%
historically) and (3) hydro conditions. We expect to get greater clarity on these
items in conjunction with IDA’s fourth quarter earnings release and conference call
scheduled for 2/19, after which we will revisit our estimates. By our calculations,
every 50 basis point change in earned ROE has a $0.10-$0.12 impact on 09 EPS.
• Reiterate Market Perform Rating. We are encouraged by recent improvements
to key regulatory principles, such as the use of a 95/5 power cost sharing formula
(vs. 90/10 previously) and the use of forecasted data in ratemaking, among other
items. In addition, IDA operates in an attractive service territory with strong rate
base growth potential. Our enthusiasm is tempered, however, by a below-average,
albeit improving, regulatory environment in Idaho and valuation considerations.

Valuation Range: $30 to $32
We value IDA under P/E multiple (apply a 12x multiple to our 2009E EPS of $2.40)
and dividend discount analysis, which indicate a 12-18 month valuation range of $30-
32 per share. Risk to our valuation analysis include project delays or cancellations and
consistently below average hydroelectric conditions.

Investment Thesis:
We are attracted to Idaho's growing service territory and strong rate base growth
potential, and are encouraged by recent regulatory improvements. Our Market
Perform rating reflects (1) a below-average, though improving, regulatory
environment, (2) above average earnings volatility related to IDA's sensitivity to hydro
conditions, and (3) valuation considerations.

Market Perform
Sector: Regulated Electric Utilities, Market
Weight
February 2, 2009
Company Note

2007A 2008E 2009E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.56 $0.48 A NC $0.65 NC
Q2 (June) 0.41 0.39 A NC 0.50 NC
Q3 (Sep.) 0.65 1.14 A NC 0.93 NC
Q4 (Dec.) 0.23 0.24 NC 0.32 NC
FY $1.86 $2.25 NC $2.40 NC
CY $1.86 $2.25 $2.40
FY P/E 15.7x 12.9x 12.1x
Rev.(MM) $879.4 $928.5 $985.5
Source: Company Data, Wachovia Capital Markets, LLC estimates, and Reuters NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful

Ticker IDA
Price (01/30/2009) $29.11
52-Week Range: $21-34
Shares Outstanding: (MM) 45.6
Market Cap.: (MM) $1,327.4
S&P 500: 825.88
Dividend/Yield: $1.20/4.1%
LT Debt: (MM) $1,273.0
LT Debt/Total Cap.: 46.2%
ROE: 8.0%
3-5 Yr. Est. Growth Rate: 5.0%
CY 2009 Est. P/E-to-Growth: 2.4x
Last Reporting Date: 11/06/2008
Before Open
Source: Company Data, Wachovia Capital Markets, LLC estimates, and Reuters

Utilities
Neil Kalton, CFA, Senior Analyst
[phone] / [e-mail]
Sarah Akers, Associate Analyst
[phone] / [e-mail]
Jonathan Reeder, Associate Analyst
[phone] / [e-mail]

WACHOVIA CAPITAL MARKETS, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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Company Description:
IDACORP (IDA) is the holding company for Idaho Power Company (IPC), a regulated electric utility serving
more than 485,000 customers in southern Idaho, including Boise and surrounding areas, and eastern Oregon.
In addition, IDACORP Financial Services (IFS), a non-utility business, invests in affordable housing tax
credits.

Required Disclosures

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IDACORP, Inc. (IDA) 3-yr. Price PerformanceIDACORP, Inc. (IDA) 3-yr. Price Performance
Date
Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($)
1/31/2006 Hamlin
1/31/2006 NA 2 28.00 30.00 31.66
„ 2/14/2006 Brothwell
z 5/12/2006 NA 2 30.00 32.00 33.50
z 8/10/2006 NA 2 35.00 38.00 36.93
z 1/19/2007 NA 2 34.00 37.00 37.22
dz 2/16/2007 NA 3 31.00 33.00 35.60
z 5/10/2007 NA 3 30.00 33.00 32.84
z 6/11/2007 NA 3 30.00 32.00 31.78
z 8/9/2007 NA 3 32.00 34.00 34.77
c 8/30/2007 32.29 2 32.00 34.00 32.52
z 11/1/2007 34.89 2 33.00 35.00 33.70
„ 11/14/2007 Kalton
z 11/14/2007 33.79 2 34.00 35.00 33.85
z 2/15/2008 32.04 2 31.00 33.00 31.46
z 12/18/2008 29.19 2 30.00 32.00 29.24
Source: Wachovia Capital Markets, LLC estimates and Reuters data Symbol Key Rating Code Key d Rating Downgrade ‹ Initiation, Resumption, Drop or Suspend 1 Outperform/Buy SR Suspended c Rating Upgrade „ Analyst Change 2 Market Perform/Hold NR Not Rated z Valuation Range Change ˆ Split Adjustment 3 Underperform/Sell NE No Estimate

Additional Information Available Upon Request

WACHOVIA CAPITAL MARKETS, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

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I certify that:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed;
and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this
research report.

ƒ Wachovia Capital Markets, LLC or its affiliates managed or comanaged a public offering of securities for IDACORP, Inc. within the past 12
months.
ƒ Wachovia Capital Markets, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next
three months from IDACORP, Inc.
ƒ Wachovia Capital Markets, LLC or its affiliates received compensation for investment banking services from IDACORP, Inc. in the past 12
months.
ƒ IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wachovia
Capital Markets, LLC. Wachovia Capital Markets, LLC provided investment banking services to IDACORP, Inc.

Risk to our valuation analysis include project delays or cancellations and consistently below average hydroelectric conditions.

Wachovia Capital Markets, LLC does not compensate its research analysts based on specific investment banking transactions. WCM’s research
analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not
limited to investment banking revenue.

STOCK RATING
1 = Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12
months. BUY
2 = Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next
12 months. HOLD
3 = Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months.
SELL
SECTOR RATING
O = Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M = Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U = Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects
significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: February 2, 2009
41% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Outperform.
Wachovia Capital Markets, LLC has provided investment banking services
for 37% of its Equity Research Outperform-rated companies.
56% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Market Perform.
Wachovia Capital Markets, LLC has provided investment banking services
for 26% of its Equity Research Market Perform-rated companies.
4% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Underperform.
Wachovia Capital Markets, LLC has provided investment banking services
for 33% of its Equity Research Underperform-rated companies.

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WACHOVIA CAPITAL MARKETS, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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