COC Ladenburg-12-29-2009.pdf

Power and Utilities Sector
Company Update

December 29, 2009
NEUTRAL

IIDDAACCOORRPP ((IIDDAA))
Company Update – Reiterating NEUTRAL Rating
Highlights
• We reiterate our NEUTRAL rating on IDA shares. Our revised price
target of $33 per share (previously $31 per share) is based on a
2010/2011/2012 P/E of 12.6x/12.3x/11.2x EPS of $2.61/$2.69/$2.95. Our
2009 EPS is $2.45 per share (previously $2.44 per share).
• Last week, IDA and OR PUC Staff filed a stipulation in the pending electric
rate case. Specifically, parties agree to a $5m (+15.4%) rate increase
(effective March 1, 2010) based on a 10.175% ROE, 49.8% equity ratio
and 8.061% ROR. This compares to the company’s request for a $7.3m
rate increase based on an 11.25% ROE, 49.796% equity ratio, 8.68%
ROR and rate base of $110.8m. Rate design is being contested by the
Citizen’s Utility Board and a service reliability provision is being contested
by the Oregon Industrial Customers of Idaho. All other issues have been
resolved, according to filings.
• While this rate case stipulation represents less than 10% of total company
rate base, this development, as well as, the important ID rate stipulation
(pending IPUC approval), highlights recent favorable regulatory outcomes,
in our opinion. In addition to diminished regulatory risk following recent ID
and OR rate stipulations, we note accelerating earnings growth post 2009 driven by IDA’s ability to earn a minimum 9.5% ROE in ID and incremental
rate base additions through 2012 (pre-approved $427m Langley Gulch
baseload power plant to be operational in mid-2012). Further, we see
continued earnings growth post-2012 as the company pursues various
transmission-related projects including the Boardman to Hemingway Line (500 kV, $600m cost, COD 2015) needed for reliability and Gateway West
Line (230-500 kV, $500-$600m cost, COD 2014) to support new
generation sources.
• The company’s compelling growth profile, manageable regulatory risk,
mitigated earnings sensitivity to volatile hydro conditions due to more
efficient cost recovery mechanisms, financial flexibility in terms of timing of
external capital needs, and solid fundamentals are partially offset by below
average dividend yield and payout, lack of forward-year earnings per
share guidance (operational assumptions provided) and longer-term equity
needs (assumed by 2012).
• Our near-term estimates are supported by the announced electric rate
settlement agreement filed with the IPUC which enhances IDA’s ability to
earn at least an ROE of 9.5% through 2011, total company rate base of
$2.4b, as well as, IDACORP Financial and Ida-West Energy contributions.
Our preliminary 2012 estimates include partial year contribution of the
previously approved Langley Gulch generating station.
COMPANY & MARKET DATA
Price $32.48
Price Target, Excl Dividends (YE09)$33.00
Prior Target $31.00
52 - Week Range $20.91-$32.78
Mkt. Capitalization (mill)$1,548
Enterprise Value (mill)$2,501
FD Shares Outstanding (mill)48
Avg. Daily Trading Vol. (000)217
Book Value per Share (3Q09A)$28.97
Dividend (FY09E) / Yield $1.20 3.7%
FY2007A FY2008A FY2009E
Revenue (mill)$879 $992 $1,059
1Q EPS $0.56 $0.48 $0.40
2Q EPS $0.42 $0.35 $0.58
3Q EPS $0.62 $1.14 $1.16
4Q EPS $0.23 $0.26 $0.41E
EPS $1.86 $2.22 $2.45
Prior EPS $2.44
Consensus EPS $2.39
P/E 17.5x 14.6x 13.3x
EV/EBITDA 9.8x 8.2x 7.7x
P/FCF -66.9x -66.9x -61.3x
ESTIMATES
Volume in Millions
0.0
1.0
2.0
3.0
$20
$25
$30
$35
$40
Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09
50-day average
200-day average
Chart data: Bloomberg Brian J. Russo, CFA
646-432-6312
[e-mail]
James Berry 212-409-2685
[e-mail]
Disclosures and Analyst Certifications can be found in Appendix A.
NEW YORK, NY MELVILLE, NY PRINCETON, NJ LOS ANGELES, CA MIAMI, FL LINCOLNSHIRE, IL BOCA RATON, FL

520 Madison Avenue y New York, New York 10022 y Telephone: [phone] 800-LAD-THAL

Member: NYSE, NYSE Amex, FINRA, all other principal exchanges and SIPC
Brian Russo 646.432.6312 IDACORP (IDA)

Ladenburg Thalmann & Co. Inc. Page - 2 -

APPENDIX A: IMPORTANT RESEARCH DISCLOSURES

ANALYST CERTIFICATION
I, Brian Russo, attest that the views expressed in this research report accurately reflect my personal views about the subject security
and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or
views expressed in this research report.
The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon
various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities.

COMPANY BACKGROUND
Headquartered in Boise, Idaho, IDACORP, Inc., (IDA) is a holding company formed in 1998 that is primarily engaged in the
generation, transmission, distribution, sale and purchase of energy. IDA serves over 466,000 retail customers across its 24,000sq
mile service territory in both Idaho and Oregon, and owns approximately 3,267MW of generating capacity. IDA’s principal operating
subsidiary is Idaho Power Company (IPC). The company’s unregulated utilities include IDACORP Financial (IFS) that invests in
affordable housing and real estate and Ida-West Energy Company (Ida-West) that operates small hydroelectric generation projects.
VALUATION METHODOLOGY
We value equities utilizing a multi-faceted approach which includes; sum-of-the-parts, net asset value, discounted cash flow, leading
P/E, EV/EBITDA.
RISKS
On top of normal economic and market risk factors that impact most all equities, Idacorp (IDA) is uniquely at risk to:
Because of IPC’s predominantly hydroelectric generating base and heavy reliance on hydroelectric generation, which can be
adversely affected by weather, reduced hydroelectric generation can reduce revenues and increase costs.
Continuing declines in stream flows and over-appropriation of water in Idaho may reduce hydroelectric generation and revenues and
increase costs.
Load growth in IPC’s service territory due to customer growth and demand for energy exposes it to greater market and operational risk
as increased reliance on purchased power to meet load requirements could increase costs and reduce earnings and cash flows.
IPC’s reliance on coal and natural gas to fuel its generating facilities exposes it to risk of increased market prices, which could
increase costs and reduced earnings.
Changes in temperature and precipitation can reduce power sales and revenues.
Climate change could affect customer demand and hydroelectric generation and lead to restrictions on generation resources.
If Idaho Public Utility Commission (IPUC), the Oregon Public Utility Commission (OPUC) or the Federal Energy Regulatory
Commission (FERC) grant less rate recovery in rate case filings than IPC needs to cover the costs of providing services, financial
results could be adversely impacted and economic expansion may be limited.
Conditions that may be imposed in connection with hydroelectric license renewals may require large capital expenditures and reduce
earnings and cash flows.
The cost of complying with environmental regulations related to air quality, water quality, natural resources and health and safety can
increase capital expenditures and operating costs and reduce earnings and cash flows.
IDACORP and its subsidiaries are subject to costs and other effects of legal and regulatory proceedings, settlements, investigations
and claims, including those that have arisen out of the western energy situation.
IPC’s business is subject to substantial governmental regulation and may be adversely affected by increased costs resulting from, or
liability under, existing or future regulations or requirements.
Increased capital expenditures can significantly affect liquidity.
As a holding company, IDACORP does not have its own operating income and must rely on the upstream cash flows from its
subsidiaries to pay dividends and make debt payments.
A downgrade in IDA’s credit ratings could negatively affect the company’s ability to access capital and increase their cost of
borrowing.
Adverse results of income tax audits could reduce earnings and cash flows.
Employee workforce factors, including the loss or retirement of key personnel, availability of qualified personnel and an aging
workforce, could increase costs and reduce earnings.
Brian Russo 646.432.6312 IDACORP (IDA)

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STOCK RATING DEFINITIONS
Buy: The stock’s return is expected to exceed 15% over the next twelve months.
Neutral: The stock’s return is expected to be plus or minus 15% over the next twelve months.
Sell: The stock’s return is expected to be negative 15% or more over the next twelve months.

Investment Ratings are determined by the ranges described above at the time of initiation of coverage, a change in risk, or a change
in target price. At other times, the expected returns may fall outside of these ranges because of price movement and/or volatility. Such
interim deviations from specified ranges will be permitted but will become subject to review.

RATINGS DISPERSION AND BANKING RELATIONSHIPS (as of 12/01/09)
Buy 69% (17% are banking clients)
Neutral 29% (3% are banking clients)
Sell 2% (0% are banking clients)

INVESTMENT RATING AND PRICE TARGET HISTORY

Brian Russo 646.432.6312 IDACORP (IDA)

Ladenburg Thalmann & Co. Inc. Page - 4 -
COMPANY SPECIFIC DISCLOSURES:
Ladenburg Thalmann & Co. Inc. does not make a market in subject company. Ladenburg Thalmann & Co. Inc. has neither had an
investment banking relationship with, nor received investment banking fees from the subject company in the past 12 months. Neither
the Analyst, nor members of the Analyst’s household own any securities issued by the subject Company.

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