COC rbc-8-8-08.doc

06:17am EDT 8-Aug-08 RBC Capital Markets (US) (Lasan Johong) IDA IDA.N
RBC: IDA: Quarter miss reflects timing issues and weather Part 1

RBC CAPITAL MARKETS EQUITY RESEARCH
Price Target Revision | COMMENT
August 8, 2008

IDACORP, Inc.
NYSE:IDA
Sector Perform
Above Average Risk

Quarter miss reflects timing issues and weather

Priced as of prior trading day's market close, EST (unless otherwise stated).
For required disclosures, please see Required Disclosures section at the end
of this comment.

RBC Capital Markets Corp.
Lasan Johong (Analyst)
[phone]; [e-mail]
Emily Christy (Associate)
[phone]; [e-mail]
Ella Faynzilberg (Associate)
[phone]; [e-mail]

Price: 29.66 Price Target: 35.00(prev:38.00)
Shares O/S (MM): 44.1 Implied All-In Return: 22%
Dividend: 1.20 Market Cap (MM): 1,308
Yield: 4.0%

-----------------------------------------------------------------------------
All values in USD unless otherwise noted.

FY Dec 2007A 2008E 2009E
Adj EPS - FD 1.86 1.80 2.14
Prev. 2.01
P/AEPS 15.9x 16.5x 13.9x
Adj CFPS - FD 1.77 4.55 4.96
Prev. 4.84 5.08
P/ACFPS 16.8x 6.5x 6.0x
EBITDA/Share - FD 5.92 6.46 8.08
Prev. 6.97 8.36
FCFPS - FD (2.63) (1.08) (0.76)
Prev. (1.12) (0.51)
P/FCF NM NM NM
Adj EPS - FD Q1 Q2 Q3 Q4
2007 0.56A 0.42A 0.65A 0.23A
2008 0.48A 0.35A 0.71E 0.26E
Prev. 0.51E 0.31E
Adj CFPS - FD
2007 0.98A 0.30A 0.50A 0.00A
2008 1.02A 1.08A 1.45E 1.01E
Prev. 1.27E 1.47E 1.08E
EBITDA/Share - FD
2007 1.60A 1.41A 1.71A 1.21A
2008 1.57A 1.46A 2.00E 1.43E
Prev. 1.78E 2.06E 1.56E

-------------------------------------------------------------------------------

IDA reported 2Q08 adjusted-EPS of $0.35 vs. consensus of $0.42 and our $0.51
estimate

Maintaining CNAV of $38 and SP rating. Lowering Target Price to $35 from $38
to reflect recent market weakness.

Rate increase offsets lower demand at the utility

The implementation of higher retail rates and higher power cost adjustment
rates, which took respective effect in March and June 2008, increased year-
over-year revenues by $19MM. Usage by irrigation customers, however, was 16%
lower than 2Q07 due to weather. Customer growth continued, but at a slightly
slower rate of 1.8% compared to 2.0% in 1Q08.

Hydrology a relative bright spot compared to recent history

Although actual April to July reservoir inflows were still only 70% of the
30yr average at 4.4 million acre-feet (maf), weather and climate conditions
have been favorable year-over-year. Hydroelectric generation for the quarter,
at 2,077MWh was up year-over-year by 35%, Brownlee Reservoir storage was 113%
of average in July, and IDA may add at least 69,000 maf to peak summer flows
via water leases. Accordingly, IDA has increased the lower end and refined the
range of its expectations for hydro generation to 6.5-7.5MM MWh from 6.0-8.0MM
MWh.

Regulatory Environment at a Crossroads

IDA is working to mitigate the regulatory risk that has plagued the company.
Since 1Q08, IDA filed a general rate case requesting a $67MM revenue increase,
held its first regulatory workshop to discuss the PCA and LGAR mechanisms, and
filed an application for its proposed $71MM AMI deployment. IDA hopes to build
on its recent success in OR, where the reign of free power finally ended in
June with the approved PCAM rates. As proceedings begin, we expect to conduct
a more thorough analysis of the proposed changes and possible outcomes.

Conclusion: Little has changed for IDA in the longer-term, but potential
catalysts are on the horizon

Hydrology conditions remain as the backbone of IDA's success or failure under
the existing regulatory framework, but regulatory acknowledgement of this risk
and resulting pressure on the company's financial health seems to be taking
hold. Formal discussions are certainly a step in the right direction, but of
course only positive results can tip the scale away from risk and towards
reward.

Details

Growing power gap remains a question, magnified by regulatory shortcomings

As customer and demand growth continue, IDA's reliance on purchased power
will increase. With current flaws in the PCA and LGAR mechanisms, this growth
could actually impair earnings. Construction and ownership of a new base load
power plant could turn this pressure on earnings into an accretive benefit.
Since scrapping preliminary plans for an IGCC plant (fortunately, in our
opinion), IDA has yet to announce a replacement project or alternative plan
to fill the expected power gap. We look for more clarity on this issue when
IDA files its updated Integrated Resource Plan in 2009.

Regulatory Updates:

IDA filed its General Rate Case to the IPUC

The company filed for a $67MM annual increase in revenues, an 11.25% ROE and
an equity ratio of approximately 50%. As the last rate case was settled
without singling out these metrics, relevant comparisons to existing rates
are somewhat murky. For the prior rate case, IDA received roughly half of its
requested $64MM revenue increase in its rate case, but uncertainty lingered
as to which costs were covered by the settlement, which costs were
disallowed, and which costs remain pending for the next rate case. Through
this rate case, IDA seeks to establish a solidified forecast test-year
methodology and an applicable ROE for a specific equity ratio. This filing
will base costs on forecasts for 2008 that are built from the last audited
year, 2007. As the forecasting methodology will be new to the commission,
this hearing may take some time. It is our hope that the details be examined
and the issues fully resolved, rather than reaching another cash settlement
agreement filled with loose-ends. If the timing of costs and projects can be
more favorably treated by this process, shareholder value would increase
accordingly.

Danskin added to rate base

The 166MW gas-fired Danskin peaking plant began commercial operations in
March, 2008. Effective as of June 1, 2008, $64.2MM was added to rate base for
this plant. The associated annual revenue increases are approximately $8.9MM.

PCA amount approved, allocation methodology changed

In May, the IPUC approved $73.3MM in purchased power cost recovery.
Additionally, the IPUC determined that cost recovery would be allocated
evenly on a monthly basis, rather than seasonally with MWh usage. The change
in distribution should not have an impact on longer term annual results, but
quarterly fluctuations are expected to diminish.

Certificate of Public Convenience and Necessity filed for AMI deployment
proposal

Under the deployment plan, IDA will install the new meters to nearly all of
its customers, beginning in 2008 and ending in 2011. Although IDA has begun
to contract for supplies and materials related to this initiative, it has
retained the option to cancel all obligations if regulatory approvals are not
in line with forecasts. If approved, IDA's AMI plan will have a $12.2MM
positive impact on 2009 earnings. We have not yet included this upside in our
current model and will wait for the regulatory process to conclude.

Regulatory progress in OR: Power Cost Adjustment Mechanism (PCAM) approved

Cost recovery from the PCAM in OR took effect in June 2008. In May the OPUC
approved IDA's updated forecast of its expected purchased power costs for
April 2008 through March 2009 in the amount of $4.8MM. Prior to the PCAM, in
the last OR general rate case regulators imposed a negative value to
purchased power expenses, assuming that the owned generation would be not
only sufficient to serve the load, but also enough for off-system sales.

VALUATION
Our calculated net-asset-value (CNAV) is $38 and our Target Price is $35. We
determine our CNAV based on a full discounted cash flow model using an
average of Free Cash Flow to the Firm and Free Cash Flow to Equity. We apply
a multistage growth rate with a terminal multiple of 11.0x based on a dynamic
WACC with an initial rate of 8.10%. The terminal value is calculated
approximately 25 years forward.
Our target price is set at a discount to our CNAV due to recent market
weakness and economic uncertainty in the near term. As a pure-play electric
utility with a significant hydroelectric generation fleet, IDA operates in a
heavily regulated environment. Considering the risk management policies of
IDA, the Idaho regulatory structure, solid operations and the above-average
population growth for the service territory, the company continues to perform
as expected.
PRICE TARGET IMPEDIMENT
Volatile hydrology, unfavorable regulatory decisions, poor growth project
selections, operational setbacks, changes in credit ratings, environmental
regulations, cost overruns with the capex projects and weather.

COMPANY DESCRIPTION
IDACORP is a holding company for the following subsidiaries: Idaho Power
Company, IDACORP Financial, and Ida-West Energy. Idaho Power Company (IPC) is
a regulated utility serving approximately 472,000 customers in Idaho and
western Oregon. Through its regulated operations, IPC generates, purchases,
transmits, distributes, and sells electric power. Through its 17
hydroelectric power plants, IPC is one of few utilities with a predominant
hydro generating base. The company also owns and operates coal and natural
gas-fired plants to round out its approximately 3,300MW power portfolio.
Additionally, IPC has 4,600 miles of transmission lines and 26,000 miles of
distribution lines. IDACORP Financial is an investment company with a focus
on affordable housing and historic preservation projects. Ida-West Energy is
an independent power project development company with 44.6MW of combined
interest in nine hydroelectric power plants in California and Idaho.

REQUIRED DISCLOSURES
EXPLANATION OF RBC CAPITAL MARKETS RATING SYSTEM
An analyst's 'sector' is the universe of companies for which the analyst
provides research coverage. Accordingly, the rating assigned to a particular
stock represents solely the analyst's view of how that stock will perform over
the next 12 months relative to the analyst's sector average.

Ratings
Top Pick (TP): Represents best in Outperform category; analyst's best ideas;
expected to significantly outperform the sector over 12 months; provides best
risk-reward ratio; approximately 10% of analyst's recommendations.
Outperform (O): Expected to materially outperform sector average over 12
months.
Sector Perform (SP): Returns expected to be in line with sector average over 12
months.
Underperform (U): Returns expected to be materially below sector average over
12 months.
Risk Qualifiers (any of the following criteria may be present):
Average Risk (Avg): Volatility and risk expected to be comparable to sector;
average revenue and earnings predictability; no significant cash flow/financing
concerns over coming 12-24 months; fairly liquid.
Above Average Risk (AA): Volatility and risk expected to be above sector; below
average revenue and earnings predictability; may not be suitable for a
significant class of individual equity investors; may have negative cash flow;
low market cap or float.
Speculative (Spec): Risk consistent with venture capital; low public float;
potential balance sheet concerns; risk of being delisted.

DISTRIBUTION OF RATINGS, FIRMWIDE

For the purpose of ratings distributions, regulatory rules require member
firms to assign ratings to one of three rating categories - Buy, Hold/
Neutral, or Sell - regardless of a firm's own rating categories. Although RBC
Capital Markets' ratings of Top Pick/Outperform, Sector Perform and
Underperform most closely correspond to Buy, Hold/Neutral and Sell,
respectively, the meanings are not the same because our ratings are
determined on a relative basis (as described above).

Distribution of Ratings, Firmwide
RBC Capital Markets

Investment
Banking
Serv./Past 12
Mos.
Rating Count Percent Count Percent
BUY(TP/O) 551 48.12 190 34.48
HOLD(SP) 512 44.72 120 23.44
SELL(U) 82 7.16 16 19.51

To view the relevant 2711 stock chart for the subject company(ies) of this
report, clients should refer to
http://www7.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?EntityID=1

ANALYST CERTIFICATION
All of the views expressed in this report accurately reflect the personal views
of the responsible analyst(s) about any and all of the subject securities or
issuers. No part of the compensation of the responsible analyst(s) named herein
is, or will be, directly or indirectly, related to the specific recommendations
or views expressed by the responsible analyst(s) in this report.

DISSEMINATION OF RESEARCH
RBC Capital Markets endeavours to make all reasonable efforts to provide
research simultaneously to all eligible clients, having regard to local time
zones in overseas jurisdictions. RBC Capital Markets' research is posted to our
proprietary websites to ensure eligible clients receive coverage initiations
and changes in rating, targets and opinions in a timely manner. Additional
distribution may be done by the sales personnel via email, fax or regular mail.
Clients may also receive our research via third party vendors. Please contact
your investment advisor or institutional salesperson for more information
regarding RBC Capital Markets research.
RBC Capital Markets also provides eligible clients with access to a database
which may contain Short-Term trading calls on certain of the subject companies
for which it currently provides equity research coverage. The database may be
accessed via the following hyperlink https://www2.rbccm.com/cmonline/
index.html. The information regarding Short-Term trading calls accessible
through the database does not constitute a research report. These Short-Term
trading calls are not formal ratings and reflect the research analyst's views
with respect to market and trading events in the coming days or weeks and, as
such, may differ from the price targets and recommendations in our published
research reports reflecting the research analyst's views of the longer-term
(one year) prospects of the subject company. Thus, it is possible that a
subject company's common equity that is considered a long-term 'sector perform'
or even an 'underperform' might be a Short-Term buying opportunity as a result
of temporary selling pressure in the market; conversely, a subject company's
common equity rated a long-term 'outperform' could be considered susceptible to
a Short-Term downward price correction.

CONFLICTS DISCLOSURES
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to
Investment Research is available from us on request. To access our current
policy, clients should refer to
http://www.rbccm.com/cm/file/0,,63022,00.pdf
or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street,
Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. We reserve
the right to amend or supplement this policy at any time.

IMPORTANT DISCLOSURES
The analyst(s) responsible for preparing this research report received
compensation that is based upon various factors, including total revenues of
the member companies of RBC Capital Markets and its affiliates, a portion of
which are or have been generated by investment banking activities of the member
companies of RBC Capital Markets and its affiliates.
A member company of RBC Capital Markets or one of its affiliates received
compensation for products or services other than investment banking services
from IDACORP, Inc. during the past 12 months. During this time, a member
company of RBC Capital Markets or one of its affiliates provided non-securities
services to IDACORP, Inc.
RBC Capital Markets is currently providing IDACORP, Inc. with non-securities
services.
RBC Capital Markets has provided IDACORP, Inc. with non-securities services in
the past 12 months.

ADDITIONAL DISCLOSURES
RBC Capital Markets is the business name used by certain subsidiaries of Royal
Bank of Canada, including RBC Dominion Securities Inc., RBC Capital Markets
Corporation, Royal Bank of Canada Europe Limited and Royal Bank of Canada -
Sydney Branch. The information contained in this report has been compiled by
RBC Capital Markets from sources believed to be reliable, but no representation
or warranty, express or implied, is made by Royal Bank of Canada, RBC Capital
Markets, its affiliates or any other person as to its accuracy, completeness or
correctness. All opinions and estimates contained in this report constitute RBC
Capital Markets' judgement as of the date of this report, are subject to change
without notice and are provided in good faith but without legal responsibility.
Nothing in this report constitutes legal, accounting or tax advice or
individually tailored investment advice. This material is prepared for general
circulation to clients and has been prepared without regard to the individual
financial circumstances and objectives of persons who receive it. The
investments or services contained in this report may not be suitable for you
and it is recommended that you consult an independent investment advisor if you
are in doubt about the suitability of such investments or services. This report
is not an offer to sell or a solicitation of an offer to buy any securities.
Past performance is not a guide to future performance, future returns are not
guaranteed, and a loss of original capital may occur. RBC Capital Markets
research analyst compensation is based in part on the overall profitability of
RBC Capital Markets, which includes profits attributable to investment banking
revenues. Every province in Canada, state in the U.S., and most countries
throughout the world have their own laws regulating the types of securities and
other investment products which may be offered to their residents, as well as
the process for doing so. As a result, the securities discussed in this report
may not be eligible for sale in some jurisdictions. This report is not, and
under no circumstances should be construed as, a solicitation to act as
securities broker or dealer in any jurisdiction by any person or company that
is not legally permitted to carry on the business of a securities broker or
dealer in that jurisdiction. To the full extent permitted by law neither RBC
Capital Markets nor any of its affiliates, nor any other person, accepts any
liability whatsoever for any direct or consequential loss arising from any use
of this report or the information contained herein. No matter contained in this
document may be reproduced or copied by any means without the prior consent of
RBC Capital Markets.
Additional information is available on request.

Continued in part 2...
Thomson Financial
All rights reserved. 800.347.7822
]

EON