COC IDA061908.doc

IDACORP, Inc.
June 19, 2008 IDA – NYSE

Rating:
NEUTRAL

Price: (6/19/08) $31.28

Price Targets:
12-18 month: $34
5-year: $41

Industry:
Utilities

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

Bryan H. Nicholls
Research Associate
406.791.7240
[e-mail]

Company Description:
Boise, ID -- IDACORP, Inc. is the holding company for the Idaho Power Company, an electric public utility that serves an approximate 24,000 square mile area in Southern Idaho and Eastern Oregon. Non-regulated subsidiaries include an affordable housing project finance company and an operator of small hydroelectric generation projects.


FY (Dec) 2007A 2008E Y-O-Y Growth 2009E Y-O-Y Growth Revenue ($M) $879.4 $976.2 11% $1,127.5 16% Previous - $981.6 NC Price/Revenue ratio 1.6x 1.5x 1.3x EPS Revised $1.86 $2.09 13% $2.29 9% Previous - $2.04 NC Price/EPS ratio 16.8x 14.9x 13.7x EBITDA ($M) $293.0 $331.0 13% $354.9 7% EV/EBITDA ratio 9.6x 8.5x 7.9x
Quarterly Data: EPS EPS Revenue Revenue EBITDA Previous ($M) Previous ($M) 3/31/08A $0.48 - $213.4 - $80.0 6/30/08E $0.41 $0.53 $245.4 $250.7 $76.2 9/30/08E $0.79 $0.62 $282.7 NC $98.0 12/31/08E $0.41 NC $234.7 NC $76.8

Valuation Data Trading Data
Long-term growth rate (E) 5% Shares outstanding (M) 45.2 Total Debt/Cap (3/31/08) 53.7% Market Capitalization ($M) $1,415 Cash per share (3/31/08) $0.16 52-week range $28.74 - $36.72 Book value per share (3/31/08) $26.91 Average daily volume (3 mos.) (K) 404 Dividend (yield) $1.20 (3.8%) Float 97% Return on Equity (T-T-M) 7% Index Membership S&P 400 MidCap
Adjusting Estimates for New Power Cost Adjustment Algorithm.
Change in formula will alter quarterly pattern of earnings. Idaho Power has operated under an annual power cost adjustment (PCA) mechanism for 15 years. For the 2008-2009 PCA that became effective June 1, 2008, the regulatory-approved methodology for allocating base power supply costs has been changed. The historical method of allocating power expenses was based on expected levels of monthly electric generation. The new formula calls for an equal-weighted monthly expensing of annual base power supply costs. This means power supply costs allocated to the third quarter will be reduced relative to previous years and more will be allocated to the first and second quarters, with the fourth quarter’s allocation remaining essentially unchanged. Consequently, more earnings will occur in the quarter of the highest electric deliveries, which is the third quarter, and lower earnings will occur in the first and second quarters. Because the new formula became effective in June, there should only be one month to weigh down the expected 3Q’08 earnings benefit. Annual (2009) earnings should not change.
Cool spring may have reduced irrigation load. Because it has been a cool spring, we are now factoring in flat-to-down 2Q’08 irrigation load, which should moderately reduce utility results. An offset should be the gain on a rights-of-way sale that we previously factored in (see our Research Bulletin of June 5, 2008).
Earnings adjustments. As shown above, we are lowering our 2Q’08 EPS estimate by $0.12 and raising our 3Q’08 EPS forecast by $0.17. Our full year 2008 estimate moves up to $2.09 from $2.04, and our 2009 forecast remains unchanged. Consequently, we are maintaining our 12-18 month target price of $34, or 14.8x our 2009 EPS estimate, and reaffirming our NEUTRAL rating.
Price Chart

Source: Thomson One

Recent Rate Relief Decisions

Danskin 1 Power Plant Application
In March, Idaho Power filed with state regulators a request to increase customer rates by 1.39%, or $9 million in additional revenues in order to recover $60 million in the construction costs associated with the new natural gas power plant located near Mountain Home, ID. The 170-MW addition to the Danskin Generating Unit is primarily used as a peaking facility and began commercial operation on March 11, 2008. On May 30, 2008 state regulators authorized the utility to add to its base rates $56.7 million for the plant and $7.5 million for the associated transmission upgrades. As of June 1, 2009 new rates associated with Danskin filing will increase 1.37% or $8.9 million annually.

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Idaho Power Cost Adjustment Mechanism
Due primarily to a string of 100 degree temperature days last summer and expected below-average run off this spring Idaho Power filed its 2008/2009 Power Cost Adjustment (PCA) in April 2008 requesting recovery of approximately $87 million in power supply and fuel expenses incurred from April 15, 2007 through April 15, 2008. However, subsequent to its PCA filing, state regulators ordered that $16.5 million of proceeds, including interest, from the sale of SO2 credits in 2007 be used to reduce the impact of the PCA filing from $87.2 million to approximately $70.7 million. On May 30, 2008 state regulators approved a 10.7%, or $73.3 million, increase to existing revenues, effective June 1, 2008.

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Oregon Power Cost Adjustment Mechanism
In April 2008, state regulators in Oregon approved a stipulation agreement regarding Idaho Power’s August 2007 filing for a purchased cost adjustment mechanism (PCAM) in the state of Oregon. State regulators approved the first implementation of PCAM on May 20, 2008, which is similar to the Idaho PCA. As of June 1, 2008 Oregon revenues increased $4.8 million, or 15.69%.

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Idaho General Rate Case
In February 2008, state regulators approved a settlement agreement associated with Idaho Power’s June 2007 rate request. The order approves a general electric rate increase of $32.1 million, or 5.2%, effective March 1, 2008. The agreement did not identify a rate base, equity ratio, or an allowed ROE. Idaho Power had originally filed its rate case requesting an increase of approximately $64 million, or 10.35%, and a return on equity of 11.5%. The currently authorized rate of return remains at 8.1%.

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On Notice
Idaho Power’s regulatory strategy is to make frequent and timely filings in an effort to mitigate the regulatory lag in recovering its above average construction investment. In late March, Idaho Power notified Idaho state regulators of its intentions to file a general rate case on or after June 1, 2008. Once filed, we would expect the case would request new rates to become effective on or around February 1, 2009. As good faith discussions with the IPUC Staff and intervenors have taken place subsequent to the last rate case settlement regarding using an estimated test year, apparently without further discussions, we believe a 2008 test year will be used in the likely upcoming filing.

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 Bryan H. Nicholls, 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 Bryan H. Nicholls, 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 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 3/31/08) Buy Hold Sell Corresponding Institutional Research Ratings Buy Neutral Underperform and Distribution 44% 52% 4% Corresponding Private Client Research Ratings Outperform Market Perform Underperform and Distribution 83% 17% 0% Distribution of Combined Ratings 48% 48% 4% Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos. Institutional Coverage 4% 4% 0% Private Client Coverage 0% 0% 0% Distribution of Combined Investment Banking 4% 4% 0%

D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform

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.

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Please refer to pages 6-7 of this report for detailed disclosure and certification information.

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