2013-08-02 IDAUS KeyBanc Capit IDA_ Strong 2Q Reported Raising 2013.pdf

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August 1, 2013
ENERGY: Electric Utilities
Company Update / Estimates Change / Price Target Change
KeyBanc
Capital￿Markets

IDACORP, Inc.:
IDA: Strong 2Q Reported; Raising 2013 Estimate
KeyBanc Capital Markets Inc.
Member NYSE/FINRA/SIPC
Paul T. Ridzon: [phone] Ð [e-mail]

Rating BUY
Price $52.87
12-Mo. Price Target $55.00
Dividend $1.52
Yield 2.9%
52-Wk. Range $40 - $53
Trading Volume (000)248
Market Cap. (mm)$2,647.7
Shares Out. (mm)50.08
Book Value/Share $35.29
EPS (Net) Summary
FY Dec 2012A 2013E 2014E
1Q $0.50 $0.67A --
2Q $0.71 $0.91A --
Prior $0.71 $0.80 --
3Q $1.84 $1.65 --
4Q $0.33 ----
YEAR $3.37 $3.50 $3.40
Prior $3.37 $3.30 $3.40
First Call --$3.31E $3.40E
P/E 15.7x 15.1x 15.6x
ACTION STATEMENT
IDACORP, Inc. (IDA-NYSE) reported strong 2Q13 results of $0.91 vs. $0.71 per share.
Favorable weather coupled with cost cutting and new rates drove the 2Q13 results
that exceeded views. Our research indicates that these hot and dry trends have
continued into August, and will continue to benefit the Company's earnings in 3Q13.Combining the cost-cutting efforts with these favorable trends, we have increased our2013 earnings estimate. Additionally, we are raising our price target to $55 from $53.
We remain BUY rated on shares of IDA.
· Price Target: $55.00 from $53.00
· 2013E: $3.50 from $3.30
KEY INVESTMENT POINTS
IDACORP, Inc. reported 2Q13 EPS results of $0.91 vs. $0.71 in the prior year; well
above both our and consensus estimates of $0.80 and $0.73. Due to the strong quarter
and continued trends seen into July, the Company raised 2013 guidance to $3.40-
$3.55 from $3.20-$3.35 per share.
Drivers of the strong results include higher operating income from increased rates
related to the Langley Gulch power plant, as well as from increased sales volumes
primarily from a 14.5% increase in sales to irrigation customers. A decrease in AFUDC
and increase in depreciation and operating expenses slightly offset the earnings drivers
in the quarter.
The Company anticipates exceeding the 10% return on year-end equity threshold for
2013, in which it will share a portion of the earnings with customers.
As a result of the strong 2Q13 results and indications that hot and dry weather will
continue into August, we are raising our 2013 EPS estimate to $3.50 from $3.30 per
share.
VALUATION
Based upon our 2014 estimate of $3.40 per share, shares of IDA stock trade at a P/
E ratio of 15.6x, representing a modest discount to the utility group average P/E ratio.
Given IDA is increasing its dividend payout over the coming years and the small cap
utility peer group is trading at 16.2x 2014 estimates, we maintain our BUY rating, and
are increasing our price target to $55 from $53.
RISKS
We believe the primary risk that could impede the shares from achieving our price target
is any negative regulatory development in Idaho or Oregon that could adversely impact
earnings and cash flows.
FOR IMPORTANT DISCLOSURES AND CERTIFICATIONS, PLEASE REFER TO PAGES 3 - 4 OF THIS NOTE.
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DISCUSSION
On August 1, IDA reported operating EPS of $0.91 vs. $0.71 per share in 2Q12. Results were well ahead of our estimate of $0.80 and
consensus of $0.73 per share. Relative to our estimate, strong sales to irrigation customers and seasonal rates drove results higher.
Primary drivers of the quarterly increase include: rate changes (+$0.20); volumes (+$0.11); other changes in operating revenue and
expense (+$0.01); offset by a decrease in AFUDC (-$0.08) and revenue sharing (-$0.03).
IDA expects 2013 hydro conditions to allow the generation of 5.5 million-6.0 million MWh; the prior view was 5 million-7 million MWh.
Given the strength of results year-to-date, the Company raised 2013 guidance to $3.40-$3.55 from $3.20-$3.35 per share.
IDA forecasts 2013 operation and maintenance expenses to be $335 million-$345 million from $340 million-$350 million. The 2013
capex forecast is $230 million-$240 million from $245 million-$255 million previously.
Given the strong weather trends to-date, as well as indications that 3Q13 has been hotter than normal, we are raising our 2013 EPS
estimate to $3.50 from $3.30 per share. IDA indicted that in July 2013, two new system peaks were experienced. Our research indicates
cooling degree days for July 2013 were 87% higher than normal and 7.5% above the prior year period©s hot weather.
Company NoteAugust 1, 2013
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KeyBanc Capital Markets Inc. Disclosures and Certifications
IDACORP, Inc. - IDA
IDACORP, Inc. is an investment banking client of ours.
We have received compensation for investment banking services from IDACORP, Inc. during the past 12 months
We expect to receive or intend to seek compensation for investment banking services from IDACORP, Inc. within the next
three months.
During the past 12 months, IDACORP, Inc. has been a client of the firm or its affiliates for non-securities related services.
We have managed or co-managed a public offering of securities for IDACORP, Inc. within the past 12 months.
Reg A/C Certification
The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed in
this research report accurately reflect the research analyst©s personal views about any and all of the subject securities or
issuers; and (2) no part of the research analyst©s compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed by the research analyst(s) in this research report.
Three-Year Rating and Price Target History
Rating Disclosures
Distribution of Ratings/IB Services Firmwide and by Sector
KeyBanc Capital Markets
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY]226 44.23 50 22.12
HOLD [HOLD]275 53.82 62 22.55
SELL [UND]10 1.96 4 40.00

ENERGY
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY]30 44.78 19 63.33
HOLD [HOLD]37 55.22 15 40.54
SELL [UND]0 0.00 0 0.00

Company NoteAugust 1, 2013
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Rating System
BUY - The security is expected to outperform the market over the next six to 12 months; investors should consider adding the
security to their holdings opportunistically, subject to their overall diversification requirements.
HOLD - The security is expected to perform in line with general market indices over the next six to 12 months; no buy or sell
action is recommended at this time.
UNDERWEIGHT - The security is expected to underperform the market over the next six to 12 months; investors should
reduce their holdings opportunistically.
The information contained in this report is based on sources considered to be reliable but is not represented to be
complete and its accuracy is not guaranteed. The opinions expressed reflect the judgment of the author as of the
date of publication and are subject to change without notice. This report does not constitute an offer to sell or a
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company described in this report.
Company NoteAugust 1, 2013