COC Ladenburg-Nov-10-2009.pdf

Power and Utilities Sector
Company Update

November 10, 2009
NEUTRAL

IIDDAACCOORRPP ((IIDDAA))
Idaho Rate Settlement Viewed Favorably – Maintaining NEUTRAL Rating
Highlights
• We reiterate our NEUTRAL rating on IDA shares. Our revised price target of
$31 per share (previously $30 per share) is based on a 2010/2011/2012 P/E of
11.6x/11.3x/10.7x EPS of $2.67/$2.74/$2.90. Our 2009 EPS remains $2.44 per share following year-to-date results. 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, 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 (300 MW CCGT, estimated cost $427m, COD
in mid-2012).
• On November 9, 2009 IDA announced a formal settlement stipulation was
signed by parties and filed with supporting testimony with the IPUC on
November 6, 2009. In addition to a base rate moratorium until January 1, 2012,
the settlement provides for the sharing of expected 2010 Power Cost
Adjustment (PCA) cost reductions between customers and the company allowing IDA to earn at least a 9.5% ROE with a provision to share earnings
with customers if it earns more than its authorized rate of return of 10.5%
through 2011. Recall, the PCA is an annual filing of forecasted fuel costs
including expected fuel costs, power purchases and off-system sales. IDA
estimates that 2010 PCA to be filed on April 15 and effective June 1, 2010
would decrease approximately $160m. This settlement enables IDA to share in
the decreased fuel costs and earn a minimum 9.5% ROE while offsetting the
base rate increase, thereby, mitigating rate shock to customers. IDA also has the opportunity to amortize additional Accumulated Deferred Investment Tax
Credits (ADITC) of up to $45m over the 3-year period to allow it to achieve a
minimum ROE of 9.5% including a $15m limit in 2009 and $25m limit in both
2010/2011.
• We view the announced settlement stipulation (pending IPUC approval in late
December 2009 or early January 2010) as favorable. We note the following
positives: enables IDA to earn a minimum ROE of 9.5% (past volatile hydro
conditions and fluctuations in fuel costs/earnings, as well as, historical test year
often inhibited IDA from earnings its allowed ROE as illustrated in LTM ROE of
8.3%), equal sharing of earnings above the authorized 10.5% ROE, a public
relations “win” by mitigating rate shock and keeping customer rates low through
various sharing mechanisms under the expected PCA decrease, alleviates rate case risk and avoids potentially contentious rate case hearings with a rate
moratorium through January 1, 2012 (rate cases tend to become more
contentious during times of economic weakness). In our opinion, IDA has
made great strides in terms of more timely recovery of infrastructure
investments and energy efficiency initiatives, as well as, fuel cost
management/recovery. This most recent settlement is another example of the
improving Idaho operating environment, in our opinion. We also consider the
recently IPUC approved baseload power plant Langley Gulch and various transmission-related development projects as sources of meaningful long-term
earnings power.
COMPANY & MARKET DATA
Price $29.20
Price Target, Excl Dividends (YE09)$31.00
Prior Target $30.00
52 - Week Range $20.91-$30.66
Mkt. Capitalization (mill)$1,391
Enterprise Value (mill)$2,501
FD Shares Outstanding (mill)48
Avg. Daily Trading Vol. (000)259
Book Value per Share (3Q09A)$28.97
Dividend (FY09E) / Yield $1.20 4.1%
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
EPS $1.86 $2.22 $2.44
Prior EPS
Consensus EPS $2.38
P/E 15.7x 13.2x 12.0x
EV/EBITDA 9.8x 8.2x 7.7x
P/FCF -60.2x -60.2x -55.1x
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 11/01/09)
Buy 68% (11% are banking clients)
Neutral 30% (0% 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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