COC My Credit Profile.pdf

My Credit Profile
My Credit
Profile
Table of Contents
• Major Rating Factors
• Rationale
• Outlook
Idaho Power Co.
Publication date:12-Feb-2009
Primary Credit Analyst:Tony Bettinelli, San Francisco (1) 415-371-5067;
[e-mail]
Major Rating Factors
Corporate Credit Rating
BBB/Stable/A-2
Ratings Detail >>
Strengths:
l A strong power cost adjustment (PCA) mechanism that allows 95% of uncollected
power costs to be deferred for timely collection;
l A low-cost hydro- and coal-based generating fleet;
l A generally supportive state regulatory regime; and
l The absence of material, unregulated businesses.
Weaknesses:
l High exposure to hydroelectric generation volatility on the Snake River, resulting in unpredictable power supplies and
costs, although ultimate recovery is higher due to the company's PCA mechanism;
l Average cash flow to debt persistently at the lower range of current financial risk category; and
l Planning challenges related to generation and transmission needs due to the uncertainty of future growth and recovery.
Rationale
The 'BBB' corporate credit rating on IDACORP is based on the consolidated credit profile of the company, consisting primarily of
integrated electric utility Idaho Power Co. (IPC), which carries the same rating, and reflects a 'strong' business profile and
'aggressive' consolidated financial profile. IPC normally provides more than 90% of earnings and most of IDACORP's
consolidated cash from operations.
IPC's 'strong' business profile incorporates both its low-cost hydroelectric generation base, which exposes the company to
substantial replacement power price risk in the event of low water flows, and a credit-supportive regulatory environment in Idaho.
Under normal water conditions, hydrological generation provides about half of total generation needs, necessitating a robust cost
recovery mechanism.
The recently authorized improvements to Idaho Power Company's annual power cost adjustment (PCA) mechanism support
credit quality and are expected to reduce the under-collection of power costs and reduce cash flow volatility. The most significant
credit-supportive modifications to the PCA include a reduction in the sharing mechanism that halves power cost exposure to 5%
from 10%, a new forecasted cost methodology that is expected to result in smaller true-up balances, a beneficial change to the
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punitive load growth add-back adjustment, and the inclusion of third-party transmission costs that have become more onerous in
recent years. In exceptionally low water years, deferrals materially weaken cash flows and credit metrics, but we view this
primarily as a liquidity matter since 95% of costs above base rates are collected with a carrying charge over 12 months.
The 'aggressive' financial profile is marked by gradual deterioration of cash flow coverage and volatile cash flows. Over time,
average credit metrics have deteriorated, but the company has taken steps to stabilize returns and cash flow with new updated base rates and modified power cost mechanisms. Ratios are expected to improve in 2009. As of Sept. 30, 2008, IDACORP's
adjusted funds from operations (FFO) coverage of interest and FFO to total debt were 3.1x and 11.1%, respectively, on a 12-
month rolling basis. (Credit metrics are adjusted to include the debt equivalent of leases, purchased power obligations, and
postretirement benefit obligations.) Cash flow-based coverage ratios have improved slightly but steadily over the past two
quarters, based on the impact of multiple rate increases over the past 12 months. While leverage remains reasonable for the
rating, with an adjusted debt-to-total-capitalization ratio at 57.3% as of Sept. 30, 2008, it has increased slightly due to a higher
proportion of debt being used to fund capital expenditures. Management indicated in the August earnings call that additional
equity may be used to maintain a balanced capital structure, however.
Short-term credit factors
IDACORP's 'A-2' short-term rating reflects its adequate liquidity. Liquidity is provided by a $100 million, five-year credit
agreement at IDACORP and a $300 million, five-year credit facility at IPC, primarily used for deferred power costs. At Nov. 5,
2008, $146 million of commercial paper (CP) backed by the facility was outstanding at IPC and $58 million of CP and draws were
outstanding at IDACORP. Both facilities terminate on April 25, 2012. Cash flows are volatile and highly dependant on
hydrological conditions. Twelve-month rolling cash flows from operations as of Sept. 30, 2008, totaled $149 million, versus only
$39.8 million a year earlier. Cash and cash equivalents as of Sept. 30, 2008, were $57.7 million.
Debt maturities are moderate at $87 million in 2009, and $4 million in 2010. A temporary $170 million 12-month term loan was
recently renewed, as the company works to restructure some re-purchased tax-exempt debt.
Planned capital expenditures in 2008 had been reduced to $235 million-$250 million from $280 million-$300 million and further
refinement would not be surprising, as the customer growth outlook has been reduced. Slower growth will reduce borrowing
needs, although generated cash, debt, and equity may be needed as capital sources to maintain a balanced capital structure.
Outlook
The stable outlook reflects a requisite level of regulatory support and expected long-term financial metrics that are adequate for
the ratings -- above current levels. A downward rating action may occur if the company does not carefully manage costs and
investments to ensure full recovery, especially in light of a weakening economy. Improvement in credit ratings, although unlikely
in the near term, would require significantly stronger financial metrics over a longer-term horizon, in addition to solid regulatory
support.
Table 1 | Download Table
IDACORP Inc. -- Peer Comparison*
Industry Sector:
Electric
IDACORP Inc.Avista Corp.Puget Energy Inc.
Portland General Electric
Co.
NorthWestern
Corp.
Rating as of
Feb. 5, 2009
BBB/Stable/A-2 BBB-/Stable/A-3 BB+/Stable/--BBB+/Negative/A-2 BBB/Stable/--
--Average of past three fiscal years--
(Mil. $)
Revenues 882.8 1,427.9 2,899.7 1,569.7 1,159.0
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Net income
from cont.
oper.
89.4 52.3 166.1 93.3 50.7
Funds from
operations
(FFO)
159.2 187.4 442.5 281.2 176.9
Capital
expenditures
232.8 194.5 726.5 359.6 122.7
Debt 1,416.1 1,349.9 3,343.9 1,390.0 958.1
Equity 1,099.7 873.6 2,298.5 1,217.5 767.8
Adjusted ratios
Oper. income
(bef. D&A)/
revenues (%)
30.7 18.7 26.9 27.3 20.1
EBIT interest
coverage (x)
2.3 1.8 2.0 2.3 2.2
EBITDA
interest
coverage (x)
3.6 2.6 3.4 4.3 3.1
Return on
capital (%)
5.9 6.8 7.5 8.4 8.4
FFO/debt (%)11.2 13.9 13.2 20.2 18.5
Debt/EBITDA
(x)
5.3 5.1 4.3 3.2 4.3
*Fully adjusted (including postretirement obligations).
Table 2 | Download Table
IDACORP Inc. -- Financial Summary*
Industry Sector: Electric
--Fiscal year ended Dec. 31--
2007 2006 2005 2004 2003
Rating
history
BBB+/Negative/A-2 BBB+/Negative/A-2 BBB+/Stable/A-2 BBB+/Stable/A-2 A-/Stable/A-2
(Mil. $)
Revenues 879.4 926.3 842.9 827.9 823.0
Net income
from
continuing
operations
82.3 100.1 85.7 80.8 46.5
Funds from
operations
(FFO)
119.2 189.5 168.9 185.9 238.5
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Capital
expenditures
279.8 225.8 192.9 196.8 153.6
Cash and
short-term
investments
8.0 9.9 52.4 23.4 75.1
Debt 1,545.8 1,355.5 1,347.0 1,175.7 1,179.0
Preferred
stock
0.0 0.0 0.0 0.0 52.4
Equity 1,207.3 1,124.2 967.5 956.4 870.9
Debt and
equity
2,753.1 2,479.7 2,314.5 2,132.1 2,049.9
Adjusted ratios
EBIT
interest
coverage (x)
2.1 2.5 2.4 1.9 1.5
FFO int. cov.
(x)
2.4 3.5 3.3 3.6 4.7
FFO/debt (%)7.7 14.0 12.5 15.8 20.2
Discretionary
cash flow/
debt (%)
(14.7)(6.6)(4.9)(4.0)7.3
Net cash
flow/capex
(%)
23.7 61.2 61.2 71.2 113.1
Debt/debt
and equity
(%)
56.1 54.7 58.2 55.1 57.5
Return on
common
equity (%)
5.9 8.4 7.6 7.9 5.3
Common
dividend
payout ratio
(un-adj.) (%)
64.4 51.2 59.1 56.7 139.1
*Fully adjusted (including postretirement obligations).
Table 3 | Download Table
IDACORP Inc.--Quarterly Data*
Industry Sector: Electric
September 2008 June 2008 March 2008 December 2007 September 2007
(Mil. $)
Revenues 299.7 230.2 213.4 197.4 261.5
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Net income from continuing operations 51.7 17.5 21.7 10.3 28.9
Funds from operations (FFO)56.7 53.1 59.5 19.8 37.4
Capital expenditures 49.1 70.5 52.9 78.2 82.1
Cash and short-term investments 57.7 8.9 7.4 8.0 16.7
Debt 1,705.4 1,651.2 1,601.1 1,545.8 1,501.2
Preferred stock 0.0 0.0 0.0 0.0 0.0
Equity 1,270.7 1,224.6 1,217.5 1,207.3 1,208.1
Debt and equity 2,976.1 2,875.8 2,818.6 2,753.1 2,709.3
Adjusted ratios
EBIT interest coverage (x)2.3 2.0 2.1 2.1 2.2
FFO int. cov. (x)3.1 3.0 2.9 2.8 2.9
FFO/debt (%)11.1 10.3 9.7 9.5 10.0
Discretionary cash flow/debt (%)(7.2)(11.8)(12.1)(12.9)(15.2)
Net cash flow/capex (%)54.0 41.3 36.0 33.5 37.9
Debt/debt and equity (%)57.3 57.4 56.8 56.1 55.4
Return on common equity (%)6.6 5.2 5.6 5.9 7.0
Common dividend payout ratio (un-adj.)
(%)
53.2 68.4 67.2 64.4 57.4
Table 4 | Download Table
Reconciliation Of IDACORP Inc. Reported Amounts With Standard & Poor's Adjusted Amounts (Mil. $)*
--Fiscal year ended Dec. 31, 2007--
IDACORP Inc. reported amounts
Debt
Operating income
(before
D&A)
Operating income
(before
D&A)
Operating
income
(after D&A)
Interest
expense
Cash flow
from
operations
Cash flow
from
operations
Capital
expenditures
Reported 1,354.8 252.4 252.4 149.3 63.3 80.6 80.6 287.8
Standard & Poor's adjustments
Operating leases 15.3 3.8 1.0 1.0 1.0 2.8 2.8 --
Postretirement
benefit obligations
50.3 (2.5)(2.5)(2.5)--(4.3)(4.3)--
Capitalized
interest
--------8 (8)(8)(8)
Share-based
compensation
expense
----2.7 ----------
Power purchase
agreements
115.9 10.3 10.3 6.6 6.6 3.7 3.7 --
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Asset retirement
obligations
9.4 0.7 0.7 0.7 0.7 (0.7)(0.7)--
Reclassification
of nonoperating
income (expenses)
------10 --------
Reclassification
of working-capital
cash flow changes
------------13.2 --
Other ----------31.9 31.9 --
Total adjustments 191 12.3 12.2 15.8 16.3 25.4 38.6 (8)
Standard & Poor's adjusted
amounts
Debt
Operating
income
(before
D&A)EBITDA EBIT
Interest
expense
Cash flow
from
operations
Funds from
operations
Capital
expenditures
Adjusted 1,545.80 264.7 264.6 165.1 79.6 106 119.2 279.8
*IDACORP Inc. reported amounts shown are taken from the company’s financial statements but might include adjustments made by
data providers or reclassifications made by Standard & Poor's analysts. Please note that two reported amounts (operating income
before D&A and cash flow from operations) are used to derive more than one Standard & Poor's-adjusted amount (operating income
before D&A and EBITDA, and cash flow from operations and funds from operations, respectively). Consequently, the first section in
some tables may feature duplicate descriptions and amounts.
Ratings Detail (As Of 12-Feb-2009)*
Idaho Power Co.
Corporate Credit Rating BBB/Stable/A-2
Commercial Paper
Local Currency A-2
Senior Secured (11 Issues)A-Senior Secured (4 Issues)A/Negative
Senior Unsecured (2 Issues)BBB/A-2
Corporate Credit Ratings History
31-Jan-2008 BBB/Stable/A-227-Mar-2006 BBB+/Negative/A-2
29-Nov-2004 BBB+/Stable/A-2
15-Jun-2004 A-/Watch Neg/A-2
Related Entities
IDACORP Inc.
Issuer Credit Rating BBB/Stable/A-2
Commercial Paper
Local Currency A-2 *Unless otherwise noted, all ratings in this report are global scale ratings.
Standard & Poor's credit ratings on the global scale are comparable across
countries. Standard & Poor's credit ratings on a national scale are relative to
obligors or obligations within that specific country.

Copyright © 2009 Standard & Poor's. All rights reserved.
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