COC IDA_CreditOpn_JUne_4_2008.pdf

Global Credit Research
Credit Opinion
4 JUN 2008
Credit Opinion:IDACORP,Inc.
IDACORP,Inc.
Boise,Idaho,United States
[1]
[1]All ratios calculated in accordance with the Global Regulated Electric Utilities Rating Methodology using
Moody's standard adjustments
Note:For definitions of Moody's most common ratio terms please see the accompanying User's Guide.
Company Profile
IDACORP,Inc.(IDA)is a holding company based in Boise,Idaho.Its principal operating subsidiary is Idaho Power
Company (IPC),a fully integrated regulated electric utility.On a stand-alone basis,IPC represents the substantial
majority of IDA's consolidated revenues,net income,and assets.IDA's other subsidiaries include:IDACORP
Financial Services,Inc.,an investor in affordable housing projects and other real estate investments;and Ida-West
Energy,an operator of nine small hydro-electric generation projects that satisfy the requirements of the Public
Utility Regulatory Policies Act of 1978.
Ratings
Category Moody's Rating
Outlook Negative
Issuer Rating Baa2
Sr Unsec Bank Credit Facility Baa2
Senior Unsecured MTN Baa2
Commercial Paper P-2
Idaho Power Company
Outlook Negative
Issuer Rating Baa1
First Mortgage Bonds A3
Senior Secured A3
Sr Unsec Bank Credit Facility Baa1
Senior Unsecured Shelf (P)Baa1
Commercial Paper P-2
Contacts
Analyst Phone
Kevin G.Rose/New York 212.553.0389
William L.Hess/New York 212.553.3837
Key Indicators
IDACORP,Inc.
LTM 1Q 08 2007 2006 2005
(CFO Pre-W/C +Interest)/Interest Expense 2.1 2.2 3.5 3.4
(CFO Pre-W/C)/Debt 6%6%14%13%
(CFO Pre-W/C -Dividends)/Debt 2%3%10%9%
(CFO Pre-W/C -Dividends)/Capex 11%12%53%54%
Debt /Book Capitalization 46%45%43%44%
EBITA Margin %17%17%18%19%
Opinion
IPC is an investor-owned utility that serves a 24,000-square-mile service area.As an all-electric utility,IPC serves
approximately 483,000 residential,irrigation,commercial,and industrial customers,located in southwestern Idaho
and eastern Oregon.The company operates a system with 4,747 miles of transmission lines and 26,394 miles of
distribution lines.IPC relies heavily on hydro-electric power for its generating needs,normally generating nearly
half of the electricity it sells from 17 hydro-electric developments on the Snake River and its tributaries.IPC also
serves a portion of its electrical load from three coal-fired power plants in Wyoming,Nevada,and Oregon and from
the natural gas-fired Bennett Mountain Power Plant,Danskin 1 Plant,and Evander Andrews Power Complex in
Mountain Home,Idaho.IPC is the parent of Idaho Energy Resources Co.,a joint venture partner in Bridger Coal
Company,which supplies coal to the Jim Bridger generating plant owned in part by IPC.The utility also buys
electricity from the regional wholesale market to meet its customers'needs for electricity.
IPC is subject to the regulatory jurisdiction of the Idaho Public Utilities Commission (IPUC)and the Oregon Public
Utility Commission (OPUC)as it relates to rates charged to its retail customers and various financing activity.
Wholesale activities and interstate activities are subject to the jurisdiction of the Federal Energy Regulatory
Commission (FERC).
Recent Events
Effective June 3,2008,Moody's affirmed the ratings of IDACORP,Inc.(Baa2 Issuer Rating and Prime-2 short term
debt rating)and its regulated utility subsidiary,Idaho Power Company (IPC;Baa1 senior unsecured and Prime-2
short-term debt rating).At the same time,Moody's changed the rating outlook to negative from stable for both
companies.See Press Release of June 3,2008 for additional commentary.
Rating Rationale
IDA's Baa2 senior unsecured debt rating primarily reflects our assessment of key factors affecting the credit quality
of IPC,which is its single largest subsidiary.These factors include a relatively low business risk profile and low
cost structure relative to national peers with a usually generally supportive regulatory environment combined with
an increasing level of capital expenditures to add generation capacity,transmission infrastructure,and address
other asset maintenance to ensure meeting service safety and reliability standards.The company's recent financial
metrics,including its coverage of interest and debt by cash flow from operations exclusive of working capital
changes (CFO Pre-W/C),have been pressured toward a level more typically seen for the Ba rating category for
holding companies with very limited unregulated business investments.These recent metrics are the result of
unfavorable hydro conditions and the adverse effects the recent increase to the load growth adjustment rate
(LGAR)has had on net power supply cost recovery under the power cost adjustment (PCA)mechanism.With
respect to the latter concern,we note that the LGAR subtracts the cost of serving additional Idaho retail load from
the net power supply costs that Idaho Power is allowed to include in its annual PCA filing.We address the LGAR in
more detail below;however,as IPC continues to diversify its resource portfolio and works with the IPUC to adjust
or replace the current LGAR,as called for as part of the settlement of the utility's last general rate case,we are
concerned about whether recent revenue increases approved by the IPUC and the OPUC,when combined with
the likely implementation of further general rate increases associated with future rate filings,will be sufficient to
allow IPC's cash flow coverage metrics to revert back to levels more consistent with the current rating over the next
12 to 18 months.The Integrated Resource Plan for IDA's primary subsidiary,IPC,and the consolidated access to
sufficient liquidity are also in line with the Baa rating category.The rating also takes into account the structural
subordination of IDA's obligations in right of payment to those of IPC and other subsidiaries.
The key drivers of IDA's current rating and outlook are as follows:
DETERIORATION IN HYDRO CONDITIONS RAISES OPERATING CHALLENGES AND PRESSURES
MARGINS
During 2007,there was a return to the drought conditions that have persisted in Idaho in all but one of the last
seven years.The one exception was in 2006,when there was a brief normalization of water levels.Inflows into the
company's largest storage reservoir,the Brownlee Reservoir,were only 2.8 million acre feet (maf)during the
critical April through July 2007 runoff period,which was about 44%of average.Although hydro conditions are
somewhat better to date in 2008,they still remain below normal.The current expectations for runoff during the
critical April through July period in 2008 of about 4.8 maf is still only about 76%of average.Based on this data,
IPC is currently expecting to generate between 6.0 and 8.0 million megawatt hours (MWh)from its hydroelectric
facilities during 2008,compared to 6.2 million MWh in 2007.The water conditions in the Snake River Basin this
year have enabled IPC's hydro-electric generation to contribute about 46%of total system generation during the
first quarter,compared to about 51%for the same period in 2007.When IPC experiences poor hydro-electric
generating conditions,it results in a heavier dependence on typically more expensive thermal generation and
purchased power,and reduces wholesale sales while increasing operations and maintenance expenses and
pressuring margins.
It remains to be seen whether the drought conditions that have persisted for six out of the last seven years in the
U.S.Pacific northwest region may be viewed as an anomaly or as part of a larger more permanent or semi-
permanent climate shift that signals the need for reduced reliance upon hydro-electric generation for a company
such as IPC that has relied fairly extensively upon hydro as the primary component of its generation portfolio.
Moody's ratings and negative outlook for IDA and IPC take into account these increased operating challenges.
PARTIAL OFFSETS FROM POWER COST ADJUSTMENT (PCA)MECHANISM
Our ratings also take into consideration the long-standing existence of a PCA mechanism in Idaho and the
generally supportive outcomes in annual filings made before the IPUC.Under the terms of the PCA,IPC annually
adjusts its rates charged to Idaho retail customers for 90%of the difference (with interest)between the actual and
forecasted costs of fuel and purchased power less off-system sales,and the true-up of the prior year's forecast.
We generally view the existence of PCA mechanisms to be beneficial to a utility's overall credit profile because
such a mechanism can help minimize the negative effects on earnings and cash flow when net power supply costs
unexpectedly exceed forecast levels in existing rates.This is especially so when the cash recovery period is
relatively short.We note that IPC's 2008-2009 PCA filing initially requested an increase of $87.2 million to the PCA
component of customers'rates.Subsequent to this request,the IPUC issued a ruling that required IPC to offset the
PCA request with $16.4 million of proceeds from an earlier sale of sulfur dioxide emission allowances.As a result,
it was expected that IPC's PCA rate increase,to be effective June 1,2008,would be about $70.7 million (10.4%)
for the 2008-2009 period.In a final PCA decision rendered May 30,2008,the IPUC made some positive
adjustments that brought the approved level of the PCA rate increase effective June 1,2008 to $73.3 million
(10.7%).
IPC HAS BEEN ACTIVE IN FILING GENERAL RATE CASES
On the heels of the 3.2%general rate case settlement increase to IPC's Idaho retail base rates implemented on
June 1,2006,which we generally viewed as a particularly encouraging sign of a more transparent working
relationship between the IPUC and IPC,the utility filed another general rate case on June 8,2007.In the June
2007 filing,IPC sought a 10.35%rate increase ($63.9 million annually),to address recovery of and return on
investments and to also compensate for higher operating costs.IPC also requested that the IPUC reduce the
LGAR to $29.16 per MWh from $29.41 per MWh.As described in public filings,the significance of the LGAR is that
it adjusts IPC's net power supply costs that it includes in the annual PCA filings for differences between actual load
and the load used in calculating existing base rates.During periods of modest load growth and/or when there is
little difference between assumed and actual load,the LGAR is a less material issue;however,in recent periods,
IPC's loads have grown considerably in excess of the assumed load in setting base rates.During such periods,the
marginal energy cost of serving new Idaho retail customers are subtracted from the PCA filings.In effect,IPC must
wait until its next general rate case to adjust the assumed load growth.From a credit perspective,Moody's
concerns increase when the IPUC increases the LGAR and/or there is a significant mismatch between the
assumed and actual load growth because of the potential negative effects on IPC's earnings and cash flow under
those circumstances.
As the June 2007 case proceeded,the parties settled in January 2008 on an average annual 5.2%rate increase
(about $32.1 million)and agreed to pursue good faith efforts to develop a mechanism to adjust or replace the
current LGAR.Meanwhile,the settlement provided for use of the IPUC staff recommended LGAR of $62.79 per
MWh,which would only be applied to half of the load growth in Idaho during each month within the April 2008 -
March 2009 PCA year.Another important aspect of the settlement called for good faith discussion among the
parties aimed at establishing acceptable terms for use of a forecast test year in future general rate cases which,if
approved,would address concerns about regulatory lag.The settlement was ultimately approved by the IPUC in
the form presented to them and new rates that were silent as to the allowed rate of return became effective March
1,2008.(See below for further background on future general rate case plans).
OTHER REGULATORY INITIATIVES
Aside from the recently concluded PCA filing and other general rate case activity in Idaho,IPC recently wrapped
up a series of other proceedings in Idaho and Oregon in May 2008,which collectively will provide an additional
$18.4 million of revenue under rates that took effect June 1,2008 and should contribute to a rebound in financial
results.First,the IPUC approved IPC's request for a 1.4%rate increase ($9 million)to address recovery of the
Danskin 1 natural gas fired plant that began commercial operation earlier this year.The IPUC also approved IPC's
requested increase in its Energy Efficiency Rider to 2.5%from 1.5%.This 1%increase translates into about a $7
million annual increase in revenue that will be collected from its Idaho customers to cover the costs of various
energy efficiency programs.Furthermore,IPC will make its first rate adjustment under the decoupling program in
Idaho aimed at de-linking revenues from volume.The net effects of IPUC approval of this filing results in a $2.4
million rate reduction.Lastly,the OPUC approved a $4.8 million rate increase (15.7%),representing the first rate
adjustment under the recently implemented power cost adjustment mechanism in Oregon.Approval of the rate
change is,however,subject to refund.We understand that the OPUC staff requested additional time to further
review data since this was the initial proceeding under this mechanism and the relative amount was quite large.
Nevertheless,there was a desire to implement a rate adjustment effective June 1,2008.
SIGNIFICANTLY HIGHER UTILITY CAPITAL EXPENDITURES REQUIRE EXTERNAL FUNDING
IPC faces significantly higher capital expenditure needs over the next few years for additions and upgrades to
existing generation,transmission,and distribution infrastructure,primarily to meet customer and demand growth.
IPC expects to continue financing its large utility construction program and other capital requirements (excluding
new base load plant and large transmission projects),which are estimated at $900 million over the three-year
period spanning 2008-2010,with internally generated funds and externally financed capital.Its internally generated
cash after dividends is only expected to provide slightly more than half of its $270-$290 million estimated 2008
capital requirements.In the face of external financing needs,it is anticipated that IPC will seek to maintain
capitalization ratios close to the level of March 31,2008,through periodic additional common equity infusions from
its parent company.
As originally articulated in IDA's 2006 Integrated Resource Plan (IRP)regulatory filing,IPC is looking to reduce its
reliance on hydro,while also making investments into new transmission assets to help meet growing load growth
and improve its operating performance/reliability.To that end,IPC signed a memorandum of understanding with
PacifiCorp on May 18,2007,under which the companies will pursue the possible development of new high voltage
transmission lines from Wyoming across southern Idaho,with target completion set between 2012 and 2014.
Another growing component of the IRP is the exploration of potential investments into geothermal power,as
evidenced by IPC's negotiations with U.S.Geothermal Inc.IPC named U.S.Geothermal as the successful bidder
for 45 MW of geothermal power from the future development of U.S.Geothermal's Raft River geothermal power
plant in southeastern Idaho and the initial phase of U.S.Geothermal's Neal Hot Springs project located in
southeast Oregon.
A notable shift in the 2006 IRP relates to a decision in April 2008 to not pursue a conventional pulverized coal-fired
plant to meet a targeted capacity need in 2013,given concerns about escalating construction costs,ability to
obtain requisite permits,and lingering uncertainty related to greenhouse gas laws and regulations.Instead,IPC
has issued requests for proposals (RFP)for 250 to 600 megawatts of dispatchable,physically delivered or unit
contingent energy to be acquired under power purchase contracts or tolling agreements.We understand that IPC
will use a self-build proposal for a combined cycle natural gas combustion turbine as the benchmark to compare
proposals against.Proposals are due by October 17,2008.Meanwhile,IPC plans to officially provide an update on
the status of its 2006 IRP to the IPUC and the OPUC in June 2008 and then file a new IRP in June 2009.
Given the magnitude of some of the aforementioned investment considerations,it is possible that IPC's capital
budget over 2008 -2010 could be substantially higher than the $900 million figure cited above.To the extent that
IPC moves ahead with investments into renewable and thermal energy resources,as well as transmission line
expansion,that provide greater diversification of electric power sources both as to type of generation and
geographic locale,Moody's would generally view those investments as a positive for IPC's credit profile,presuming
the investments are financed in a conservative manner and receive supportive treatment by the utility's regulators.
Non-utility related capital expenditures over the next few years are not expected to be material.
CONTINUING NEED FOR FURTHER GENERAL RATE CASE INCREASES AT IPC
Given the forecasted capital expenditure program,in order to maintain a credit metrics profile commensurate with
its current rating,it is essential that the utility receive favorable rate case increases from the Idaho and Oregon
regulatory authorities in its regulatory filings.IDA's management remains focused on this objective,as evidenced
by its notice of IPC's intent to file with the IPUC a general rate case on or after June 1,2008.In addition to the level
of rate increase that IPC might seek,key points to focus on in the prospective case will be whether the IPUC fully
embraces the forecast test year concept that evolved from work shop discussions with the IPUC staff and other
interested parties earlier this year and accepts the concept of including construction work in progress,particularly
as it relates to hydro plant re-licensing and other utility investments,as part of the utility rate base.
Separately,we would view any progress toward reducing or eliminating the cost sharing approach under the PCA
so that IPC recovers 100%of any power cost under recoveries and development of a mechanism to adjust or
replace the current LGAR as credit positive steps (See above for more background on the LGAR solution as it was
incorporated into IPC's general rate case settlement approved February 28,2008).
RELATIVELY LOW BUSINESS RISK PROFILE ANCHORED BY ELECTRIC UTILITY
Regulatory support is all the more important as IDA has moved toward focusing on its core electric utility business.
IDA's rating considers management's strategy and actions to rationalize certain non-core unregulated businesses
and rely less on cash flows from riskier non-utility businesses.IDA has substantially completed the necessary
steps related to its past decision to wind down operations at IDACORP Energy,its former energy marketing and
trading business.With the exit from this inherently volatile and risky business,IDA no longer faces the potentially
significant calls on liquidity that can often be required when conducting energy marketing and trading activities.
After completing the sale of IdaTech,which develops integrated fuel cell systems,to IdaTech UK Limited,a wholly-
owned subsidiary of Investec Group Investments (UK)Limited,in July 2006,IDA completed the sale of all of the
outstanding common stock of IDACOMM to American Fiber Systems,Inc.on February 23,2007.The conclusion of
these divestitures has narrowed the scope of IDA's operations largely to its regulated utility,IPC,plus investments
in independent power production at Ida-West Energy and affordable housing at IDACORP Financial Services.
Going forward,the predominant source of cash flow in the form of dividends to IDA is expected to come from the
more stable and predictable regulated entity,IPC,with substantially less dependence on its unregulated
businesses.
RECENT PRESSURE ON CASH FLOW METRICS
IDA's CFO Pre-W/C for the 12-months ended March 31,2008 provided coverage of interest and debt by 2.1x and
5.9%,respectively,reflecting a continuation of weakness evidenced during fiscal 2007 and a marked decline from
the 3.5x and 14.1%,respectively,achieved for fiscal 2006.The decline since the start of 2007 reflects PCA rate
differences,less favorable hydro electric operating conditions,and the reduced sales of excess sulfur dioxide
emission allowances.Although our prospective view takes into account that key credit metrics,including CFO Pre
W/C to debt and interest,may rebound over the next 12 to18 months as the full benefits of recently approved rate
increases for IPC materialize,the improvement may not be sufficient to re-establish the metrics at levels consistent
with what we typically observe for Baa2 senior unsecured rated holding companies with substantial investments in
vertically integrated utilities.Although the sale of sulfur dioxide emission allowances had positive effects (to varying
degrees)on earnings and cash flow in 2005 -2007,we do not factor in similar effects on a prospective basis.
As noted above,IDA's metrics for the 12-months ended March 31,2008 are pressured relative to the current Baa2
rating and we expect the company's financial performance will remain subject to the vagaries of water flow
conditions and the effects that those conditions have on IDA's primary subsidiary,IPC.As a result,the adequacy
and timeliness of rate relief afforded to IPC by the IPUC in likely future PCA and general rate case proceedings
becomes increasingly more important,particularly in light of the higher than historical utility capital expenditures
planned for the near term.Our ratings and negative outlook are intended to convey the relative importance that
regulatory supportiveness plays in IPC's and IDA's future credit profile.A key consideration in order for IDA and
IPC to stabilize their rating outlook and maintain their Baa2 and Baa1 senior unsecured ratings,respectively,will
be the extent to which the IPUC is supportive in any future regulatory filings by IPC (i.e.whether they provide
supportive rate base treatment of planned utility capital spending and relatively timely recovery of net power supply
costs).
After considering Moody's standard adjustments,IDA has been able to maintain its overall debt leverage ratio at
46%as of March 31,2008,which is slightly above the 43.8%spanning the period of 2005 to 2007.The calculation
of this ratio includes deferred income taxes as part of capitalization.The adjusted debt ratio leaves IDA
comfortably positioned relative to the range typically expected for Baa-rated holding companies engaged primarily
in regulated business activity.Given the recent slight increase in IDA's debt ratio stemming from higher than
historical capital spending at IPC,we see the possibility that prospective debt leverage could still creep slightly
higher.
Liquidity
On balance,IDA has sufficient liquidity,including cash on hand,dividends periodically provided by IPC and its
other operating subsidiaries,plus ample unused capacity under bank facilities at the parent level and at IPC.IDA
maintains access to short-term funding and alternative liquidity for commercial paper outstanding through a
committed $100 million five-year facility,which terminates on April 25,2012.IDA has the right to request an
increase in the aggregate principal amount of the IDA facility to $150 million and to request one-year extensions of
the termination date,subject to certain conditions.At March 31,2008,there were no borrowings under IDA's facility
but $57 million of commercial paper was outstanding.Commercial paper outstanding has since increased slightly
to $59 million as of May 7,2008.
During 2007,management elected to downsize IDA's bank revolver to the current $100 million level from $150
million.At the same time,management negotiated an increase in the amount of IPC's revolver.These actions were
taken to better reflect the prospective liquidity needs of the two companies.The IPC facility is currently a $300
million five-year credit agreement that terminates on April 25,2012.Similarly,IPC has the right to request an
increase in the aggregate principal amount of the IPC facility to $450 million and to request one-year extensions of
the then existing termination date.At March 31,2008,no loans were outstanding on IPC's facility and $186 million
of commercial paper was outstanding.As of May 7,2008,IPC had $201 million of commercial paper outstanding.
It is worth noting that IPC currently has full availability under a $350 million secured medium-term note program,
Series H,which it recently put in place.This program provides flexibility for IPC to term out its short-term debt as
management has typically done when balances reach levels noted as of May 7,2008.
More recently,IPC also arranged for a $170 million term loan credit agreement as of April 1,2008,and loans
under the agreement are due March 31,2009.IPC used loans drawn under this facility for a mandatory purchase
of $166.1 million of pollution control revenue refunding bonds on April 3,2008.The company took this voluntary
step to effect an interest expense savings through conversion of the bonds from an auction interest rate mode to a
weekly interest rate mode.Although IPC is the current holder of the bonds,it expects to remarket the bonds to
investors before the March 31,2009 term loan due date.
Importantly,the IDA and IPC bank facilities contain less restrictive terms and conditions than historical
agreements,as they do not require a representation and warranty that no material adverse change has occurred
as a prerequisite to any funding beyond the initial closing date and there are no rating triggers in the agreements
that would cause default,acceleration,or puts.The only financial covenant in each facility limits the debt to total
capitalization ratio as defined to 65%.At March 31,2008,the leverage ratios for both IDA and IPC were 54%.The
terms and conditions of IPC's term loan credit agreement essentially mirror the bank revolvers in place for IDA and
IPC.
Moody's takes a certain amount of comfort from the relative size of IDA's and IPC's average outstanding
commercial paper balances over the past 12-month period to their respective credit facility limit amounts.For the
12-month period ended March 31,2008 IDA's commercial paper balances averaged around $41.5 million,with the
$69 million peak balance occurring in June 2007.In addition to routine cash management activities,this peak
balance was driven by a tax deposit that IDA made with the IRS in relation to the IRS disallowance of Idaho
Power's Capitalized Overhead Cost method.We note that the average commercial paper balances outstanding
during the 12-month period ended March 31,2008,were not materially different from the average balances
outstanding of $44.5 million during the comparable 12-month period ended March 31,2007.
IDA has attempted to minimize its reliance on short-term debt,especially in support of capital expenditures at IPC,
through the periodic issuance of common equity.We expect that this strategy will continue,including in part
through issuance of common stock under a continuous equity program and from dividend reinvestment program
(DRIP)common stock offerings.Over the next four quarters,we expect IDA's commercial paper amounts
outstanding to be in the range of $60 million to $80 million.This range assumes IDA's commercial paper balances
will continue to be driven primarily by the timing of tax payments and dividends to shareholders.IDA has no
standalone long-term debt outstanding and no plans to issue holding company long-term debt in the foreseeable
future.The completion of the sale of IDACORP Technologies,Inc.in July 2006 and of IDACOMM,Inc.in February
2007 precludes the need for any funding that may have been previously required for those subsidiaries through
commercial paper issuances.Management still may decide to further support IPC's capital program and bolster
consolidated capitalization and cash flow coverage of debt metrics by periodic issuances of additional common
equity.We believe future strategies will continue to focus on a back-to-basics core energy-related and largely
regulated utility business.
Rating Outlook
IDACORP's negative rating outlook mirrors the negative outlook for its principal subsidiary,IPC.The negative
rating outlook for IDACORP takes into account the fact that IPC provides the substantial majority of the parent's
earnings and cash flow.As a result,IPC substantially drives the credit rating and outlook of its parent.
What Could Change the Rating -Up
Because IDA is largely dependent on IPC for cash flow in the form of dividends,any improvement in the parent's
ratings will be considered largely in the context of our assessment of IPC's credit quality.The negative rating
outlook for IDA and IPC and challenges related to a large utility capital program and the vagaries of operating a
large hydroelectric system make an upgrade unlikely in the near term;however,IDA's outlook could be stabilized
over the near to medium term if consolidated capital spending declines and results in positive free cash flow being
used to significantly reduce consolidated debt.For example,improvement in CFO Pre-W/C to interest and debt
near 3.5x and 15%,respectively,on a sustainable basis,would help stabilize IDACORP's rating outlook.
What Could Change the Rating -Down
Lower than anticipated earnings and cash flow from IPC,perhaps due to the potential continuation of drought
conditions over the longer term or unanticipated lack of regulatory support in future PCA and/or general rate case
proceedings,which would limit the utility's ability to support IDA's stand-alone fixed obligations and dividend to
shareholders.For example,if IDA's CFO Pre W/C to interest and adjusted debt were to stay below 3.0x and 13%,
respectively,for an extended period of time,a negative rating action could be taken.Also,any unexpected shift by
IDA to material debt-financed investments in other non-utility businesses,or a material acceleration of the utility's
capital expenditure program wherein IDA's consolidated debt level is increased significantly above its current level
and inflates its adjusted debt/adjusted capitalization ratio to well above 50%on a sustainable basis,could lead to a
negative rating action.
[1]CFO pre-W/C,which is also referred to as FFO in the Global Regulated Electric Utilities Rating Methodology,is
equal to net cash flow from operations less net changes in working capital items
Rating Factors
IDACORP,Inc.
Select Key Ratios for Global Regulated Electric
Utilities
Rating Aa Aa A A Baa Baa Ba Ba
Level of Business Risk Medium Low Medium Low Medium Low Medium Low
CFO pre-W/C to Interest (x)[1]>6 >5 3.5-6.0 3.0-
5.7
2.7-5.0 2-4.0 <2.5 <2
CFO pre-W/C to Debt (%)[1]>30 >22 22-30 12-22 13-25 5-13 <13 <5
CFO pre-W/C -Dividends to Debt (%)[1]>25 >20 13-25 9-20 8-20 3-10 <10 <3
Total Debt to Book Capitalization (%)<40 <50 40-60 50-75 50-70 60-75 >60 >70
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and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist
between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the
heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."