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Institutional Equity Research
INDUSTRY UPDATE
UTILITY MONTHLY
May 6, 2008
Prices: (5/5/08)
Industry:
Utilities
James L. Bellessa, Jr., CFA
406.791.7230
jbellessa@dadco.com
Bryan H. Nicholls
Research Associate
406.791.7240
bnicholls@dadco.com
Wind Energy Announcements Pick Up Pace
• Our BUY-rated utility picks include ALLETE, Inc., Avista Corp., Black Hills
Corporation, MDU Resources Group, and Portland General Electric Co.
• Avista Corp. filed a rate case with Idaho state regulators requesting an increase
in both electric and gas rates of $32.2 million and $4.7 million, respectively.
• ALLETE’s utility subsidiary filed its first rate case in 14 years with Minnesota
state regulators requesting an increase in electric rates of $45 million.
• Wind power announcements were made in the past month by Avista Corp.,
Otter Tail Corporation, Portland General Electric, and Puget Energy.
• Streamflow forecasts continue to show near-to-above normal levels for Avista
Corp., Portland General Electric and Puget Energy.
In April, the American Wind Energy Association (AWEA) released its annual
industry rankings of wind energy development in the United States. The report
indicates that the wind energy industry installed over 5,000-MW of capacity in 2007,
or over $9 billion of new investment and represented nearly 30% of all new electric
generating capacity installed in the U.S. The 2007 additions increased cumulative
U.S. installed wind power by approximately 45%, to a generating capacity of over
16,800-MW, or enough capacity to serve approximately 4.5 million average
households.
Leading manufacturers of installed capacity during 2007 include GE Energy (GE -
$33.18) (2,340-MW), Vestas (953-MW), Siemens (863-MW), Gamesa (574-MW),
and Mitsubishi (356-MW). Table 1 lists the states with the most wind energy
installed by capacity through 2007, while Illustration 1 details the “slice of the pie”
that wind energy generation contributes to each state’s total generation portfolio.
Table 1: Top ten states with most wind energy installed, by capacity (MW)
Ranking State Capacity (MW)Ranking State Capacity (MW)
1 Texas 4,446 6 Colorado 1,067
2 California 2,439 7 Oregon 885
3 Minnesota 1,299 8 Illinois 699
4 Iowa 1,271 9 Oklahoma 689
5 Washington 1,163 10 New Mexico 496
Source: American Wind Energy Association
Please refer to page 13 of this report for detailed disclosure and certification information.
D.A. Davidson & Co.
Illustration 1: Percentage of Wind Generation by State
Source: American Wind Energy Association
* * * * *
Avista Corp. announced during its 1Q’08 earnings conference call that it was close to
completing the acquisition of land located in central Washington that will be the future
location of a wind generating facility. According to the company, the wind farm will have
approximately 50-MW of output and cost approximately $120 million. The utility had
previously expected to add wind generation to its portfolio of resources later in the next
decade, but, due to increasing costs and limited site availability that is strategically located
near its transmission system, it will now move up construction of the project so it is
operational by late 2011 or early 2012. Avista expects to finalize the purchase of the site this
year and is continuing to look at other locally-diversified wind sites in its service territory.
* * * * *
Portland General Electric Co. announced in April that it has entered into an agreement with
wind turbine manufacturer, Siemens Power Generation, Inc., to purchase 141 turbines for the
next phases of its Biglow Canyon wind farm. Phase II of the project will consist of 65
turbines to be built in 2009 and Phase III will consist of 76 turbines, which will be installed in
2010. Phases II and III are estimated to cost a total of $740-$780 million. Total install
capacity of the Biglow project, when finalized, will be approximately 450-MW, or enough
power to supply electricity to over 100,000 households. Phase I of the project, which was
fully operational in December 2007, consists of 76 turbines with 125-MW of capacity, and
cost approximately $255 million (including AFDC).
* * * * *
Puget Sound Energy, the utility subsidiary of Puget Energy, Inc. announced in April that it
plans to add approximately 25 additional wind turbines to its Wild Horse Wind facility. The
facility currently produces up to 229-MW of electric generation, or enough power to supply
60,000 households. According to the company, the planned expansion will increase the
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output by a projected 40-MW-50-MW. Given regulatory approval, Puget expects to begin
construction in 2009 and have the expansion turbines on-line by 2010.
* * * * *
Otter Tail Power, the utility subsidiary of Otter Tail Corporation announced in late April that
it plans to build and own approximately 48-MW of wind energy generation at a proposed
wind energy facility located in North Dakota. The company expects to invest approximately
$121 million on the project, which would be part of a 200-MW wind farm operated by FPL
Energy, LLC and known as the Ashtabula Wind Center. Although various approvals still
need to be obtained, Otter Tail expects the wind farm to be operational by the end of 2008.
Avista Corp. filed a rate case in April with the Idaho Public Utilities Commission (IPUC)
requesting an increase in both electric and gas rates. The electric rate increase would amount
to an increase to residential customers of 15.9%, or approximately $32.2 million. The gas
portion of the rate increase requests an increase to residential customers of 6.5%, or
$4.7 million. Avista requested an 8.74% return on rate base, a common equity ratio of 47.9%,
and a 10.8% return on equity. According to the company, rate increases have been requested
due to increased costs associated with the company’s continued investment in its
infrastructure and significant increases in fuel and purchased power costs. The request to
increase natural gas rates stems from the company’s investment in upgrading the Jackson
Prairie Natural Gas Storage Project, in which it has an ownership interest. The request to
Idaho regulators follows a request made in March 2008 to increase electric and natural gas
rates in Washington for the same reasons as in Idaho. Avista anticipates that Idaho regulators
will take up to seven months to review the filing.
RATE DEVELOPMENTS
* * * * *
Due primarily to a string of 100 degree temperature days last summer and expected below-
average run off this spring, Idaho Power, the utility subsidiary of IDACORP, Inc., filed its
2008/2009 Power Cost Adjustment (PCA) in April requesting recovery of approximately
$87 million in power supply and fuel expenses incurred from April 15, 2007 through April 15,
2008. The filing essentially suggests electric bills needed to increase approximately 12.76%
on average for all customer classes effective June 1, 2008. Subsequent to its PCA filing, the
Idaho Public Utilities Commission ordered that the $16 million of proceeds from the sale of
SO2 credits in 2007 be used to reduce the impact of the PCA filing. According to the utility,
using the clean air emissions credits is estimated to reduce the overall increase to
approximately 8.15%.
* * * * *
In early May, Minnesota Power, the utility subsidiary of ALLETE, Inc. filed its first general
rate case in 14 years in the state of Minnesota. The electric rate hike would amount to an
increase to its retail customer base of 10%, or approximately $45 million. The company
anticipates interim rates to go into effect in July 2008 totaling approximately $36 million, or
approximately 8%. The rate filing seeks an overall ROE of 11.15% and a capital structure of
54.8% equity and 45.2% debt. Minnesota Power expects that state regulators will approve
final rates by mid-2009.
Idaho Power, the utility subsidiary of IDACORP, Inc. filed a Request For Proposal in April
to solicit bids for up to approximately 600-MW of new energy capacity by 2012. The
minimum proposal quantity that can be submitted is for 50-MW and the maximum potential
size is approximately 600-MW. The utility will pursue the development of a natural gas-fired
combined cycle combustion turbine, which would be located in its service territory due to
transmission constraints, and will forgo coal-fired generation resources. Idaho Power will
consider purchase power agreements or tolling agreements that include a 15-year proposal
INFRASTRUCTURE
DEVELOPMENTS
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D.A. Davidson & Co.
with at least one 5-year renewal option, but will not consider build and transfer agreements.
Response proposals are due in October 2008 with identification of the approved proposals
made in early 2009.
* * * * *
Black Hills Corporation announced late April that affiliates of Hastings Funds Management
Ltd. and a subsidiary of an investment entity advised by JP Morgan Asset Management were
the winning bidders of an auction process involving seven of Black Hills’ natural gas-fired
power plants. In October 2007 Black Hills engaged an investment banker to formally review
strategic options for its independent power production (IPP) unit, including the sale of some
or all of its wholesale power generating assets. The winning bid consisted of $840 million for
the assets, equating to $862/kw. The intended divestiture assets and the IPP assets to be
retained in the company’s portfolio are listed in Table 2.
Table 2: Snapshot of Black Hills’ IPP assets
Assets for Sale Remaining IPP Assets
Capacity Capacity
Power Plant State (net megawatts)Power Plant State (net megawatts)
Fountain Valley Colorado 240 Wygen I Wyoming 90
Las Vegas II Nevada 224 Gillete CT Wyoming 40
Valencia New Mexico 149 Ontario Cogen California 12
Arapahoe Colorado 130 Rupert & Glens Ferry Cogen Idaho 11
Harbor California 98 Energy Fund Invesments -5
Valmont Colorado 80 Total 158
Las Vegas I Nevada 53
Total 974
Source: Blacks Hills Corporation
Proceeds of the asset sale will be used to finance a portion of the $940 million purchase of
five utility properties in four states from Aquila Inc. (ILA - $3.69), which purchase is
conditional on the approval of the following transaction. The Missouri Public Service
Commission is currently conducting hearings regarding the merger of Aquila Inc.’s utility
operations in Missouri into Great Plains Energy (GXP - $26.16). A decision regarding the
acquisition is expected in late 2Q’08. According to Black Hills, if the Aquila deal falls
through, it will sell six of the power plants for $600 million and retain the $240 million
Fountain Valley generating station. The divestiture of the IPP assets, if granted approval from
various regulatory agencies, is expected in late 2Q’08 or early 3Q’08.
* * * * *
In April, Portland General Electric Co. issued a request for proposal (RFP) to third parities
to assist the utility in procuring additional renewable resources that will be utilized to meet
future load requirements. PGE is seeking to acquire up to 218-average megawatts (aMW) of
additional mid- to long-term renewable energy supply to come on-line in the 2009-2014
timeframe. The company will consider only resources that comply with the Oregon
Renewable Energy Act of 2007 (SB 838). SB 838 requires the state’s investor-owned, and
largest consumer-owned utilities, to serve at least 15% of its retail load with renewable
resources by 2015, and 25% by 2025. In the nearer term, the bill requires utilities to increase
their renewable energy generating resources serving retail loads to 5% by 2011. The RFP
along with the Biglow Canyon facility, which will have an installed capacity of 450-MW once
fully constructed by the end of 2010, will help PGE with its plans to satisfy Oregon's
renewable energy standard.
* * * * *
In April, Puget Energy’s shareholders approved more than the required two-thirds vote
regarding the merger agreement with a consortium of long-term infrastructure investors. The
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parent company of utility subsidiary Puget Sound Energy agreed to be acquired through a
definitive merger agreement in October 2007 at $30 per share. Along with the recent
shareholder approval, the transaction has been approved by the Boards of Directors of both
Puget and the consortium, however, it remains subject to Washington state and federal
regulatory approvals. Puget expects the merger to be completed in the second half of 2008.
PRECIPITATION Illustration 2 shows accumulated precipitation in the Pacific Northwest from October 1, 2007
– April 28, 2008. It should be noted that the “precipitation year” extends from October 1st to
September 30th. Although precipitation levels have slowly regressed over the past few
months, utilities in the region, including Avista Corp., IDACORP, Inc., Portland General
Electric, and Puget Energy, Inc., continue to be near historical average levels.
Illustration 2: Accumulated Precipitation – October 1, 2007 – April 28, 2008
Source: Northwest River Forecast Center
“Early bird” streamflow forecasts currently being made by the National Weather Service
Northwest River Forecast Center for periods in 2008 are depicted in Table 3. These
predictions forecast near and above normal levels for Avista Corp., Portland General
Electric and Puget Energy and improved over year ago comparisons, but below normal for
IDACORP, Inc. It should be noted that IDACORP’s hydrogenation position is significantly
ahead of year ago levels, when April through July 2007 streamflows for Brownlee Reservoir
were only 39% of normal.
Table 3: Streamflow Projections for Key Hydrogeneration Measurement Locations
Location of Forecasted % Forecasted %
Company Streamflow Forecast Period of Normal 5/1/2008 of Normal - 4/26/07
Avista Corp.Coeur d'Alene Lake Inflow, ID April-July 119%84%
Avista Corp.Whitehorse Rapids, ID April-Sept. 102%88%
IDACORP, Inc.Brownlee Reservoir Inflow April-July 78%50%
Portland General Electric Clackamas River, OR April-Sept. 130%88%
Portland General Electric Deschutes River, OR April-Sept. 97%92%
Portland General Electric The Dalles, OR April-Sept. 99%92%
Puget Energy, Inc.Grand Coulee, WA April-Sept. 100%103%
Source: National Weather Service Northwest River Forecast Center
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D.A. Davidson & Co.
SNOW WATER CONTENT Illustration 3 depicts that average river basin snow water content in much of the Pacific
Northwest is above average as of May 1, 2008. This indication suggests that hydrogenation in
2008 could be normal or above normal for Puget Energy, Portland General Electric Co,
IDACORP, and Avista Corp. The key factor now, is how the annual spring run off will flow
in the coming months as colder than normal weather during 1Q’08 delayed the snow melt.
Utilities are hoping that temperatures will rise slowly and not melt the snowpack too rapidly,
which would cause overflows at their respective hyrdroelectric generating facilities and not
allow them to capture all of the streamflow generation opportunities.
Illustration 3: River Basin Snow Water Content
Source: Western Regional Climate Center
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TEMPERATURES For the most part, utilities in our coverage universe experienced colder than normal
temperatures during the month of April. When comparing April temperatures to normal and
year ago levels, all of the utilities in our coverage universe experienced colder temperatures,
especially Pacific Northwest utilities, which had temperatures that were approximately 20%
colder than normal and year ago levels.
In terms of cooling-degree days, Hawaiian Electric Industries’ service territory experienced
significantly warmer than normal and warmer than the year ago comparison during the month
of April, a nice start to 2Q’08 utility results.
Table 4: Estimated Heating Degree Day* Data (HDD) – Monthly & 2QTD Data
Monthly
Total From Norm From LYR
2Q'08
QTD From Norm From LYR
ALLETE, Inc. (ALE)807 20 29 807 20 29
Avista Corp. (AVA)674 117 134 674 117 134
Black Hills Corporation (BKH) 680 85 57 680 85 57
IDACORP, Inc. (IDA)539 88 146 539 88 146
MDU Resources Group, Inc. (MDU) 686 26 6 686 26 6
Otter Tail Corp. (OTTR)714 62 56 714 62 56
Portland General Electric Co. (POR) 481 81 95 481 81 95
Puget Energy, Inc. (PSD)522 75 102 522 75 102
ALLETE, Inc. (ALE)807 3% 4% 807 3% 4%
Avista Corp. (AVA)674 21% 25% 674 21% 25%
Black Hills Corporation (BKH) 680 14% 9% 680 14% 9%
IDACORP, Inc. (IDA)539 20% 37% 539 20% 37%
MDU Resources Group, Inc. (MDU) 686 4% 1% 686 4% 1%
Otter Tail Corp. (OTTR)714 10% 9% 714 10% 9%
Portland General Electric Co. (POR) 481 20% 25% 481 20% 25%
Puget Energy, Inc. (PSD)522 17% 24% 522 17% 24%
April 2008
Percentage Difference
Table 5: Estimated Cooling Degree Day* Data (CDD) – Monthly & 2QTD Data
Monthly 2Q'08
Total From Norm From LYR QTD From Norm From LYR
Hawaiian Electric Industries, Inc. (HE) 379 60 22 379 60 22
Hawaiian Electric Industries, Inc. (HE) 379 19% 6% 379 19% 6%
April 2008
Percentage Difference
Source: National Weather Service’s Climate Prediction Center
*A degree day is a quantitative index demonstrated to reflect demand for energy to heat or cool houses and
businesses. This index is derived from daily temperature observations at nearly 200 major weather stations in
the contiguous United States. The "heating year" during which heating degree days are accumulated extends
from July 1st to June 30th and the "cooling year" during which cooling degree data are accumulated extends
from January 1st to December 31st. A mean daily temperature (average of the daily maximum and minimum
temperatures) of 65°F is the base for both heating and cooling degree day computations. Heating degree days
are summations of negative differences between the mean daily temperature and the 65°F base; cooling degree
days are summations of positive differences from the same base. For example, cooling degree days for a
station with daily mean temperatures during a seven-day period of 67, 65, 70, 74, 78, 65 and 68, are 2, 0, 5, 9,
13, 0 and 3, for a total for the week of 32 cooling degree days.
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D.A. Davidson & Co.
ELECTRIC UTILITY
VALUATION METRICS
After reaching all-time highs on an absolute and relative basis in May 2007, valuations within
the electric utility sector retreated until the end of July. A rebound in the August to December
timeframe was offset by a nosedive in January and February, with prices breaking below the
July lows. With a modest price recovery experienced in March and April 2008, utility
valuations as measured by P/E ratios are moderately above their 10-year norm.
The upper portion of Chart 1 depicts a 10-year equal-weighted index of over 60 electric
utilities. It paints a picture of an overall 10% decline in the index since the mid-May high.
The lower portion of Chart 1 also depicts the group’s 14.8x P/E ratio on year-forward
earnings estimates. After reaching an all-time record of 17.7x in May 2007, the group’s PE
ratio is moderately above the 10-year range median of 13.6x.
Chart 2 provides two additional measurements of value involving ratios of earnings before
interest, taxes, depreciation and amortization (EBITDA). These measurements reflect
valuations that have subsided to slightly above their 10-year medians.
While dividends have been ascending for the past four years, as depicted in the top panel of
Chart 3, the sector’s current average dividend yield of 3.6% remains below the 10-year norm
of 4.2%. Yields in the electric group relative to 10-year Treasury Bonds, as depicted in the
lower panel of Chart 3, have sharply improved since May to 96% of the yields on T-bonds,
due to the flight to quality during the subprime mortgage crisis, but has sharply contracted
from 116% since the middle of March. The 96% relative yield exceeds the 10-year median of
88%.
Relative to non-utility stocks, a proxy for which is the S&P 400 Index, and as depicted in
Chart 4, the yield on electric utility stocks remains toward the lower end of a 15-year range.
Chart 1: Electric Utility Index and
Price-Earnings Ratio
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
UTILITY: ELECTRIC POWER E-Wtd (153A)
PRICE 35.66 DATE 05-02-2008PRICE 35.66 DATE 05-02-2008
StockVal®
1414
1616
1818
2020
2222
2424
2626
2828
3232
3636
40
44
48
D.A. DAVIDSONRESEARCH
PRICE / YR-FORWARD EPS ESTS
8
10
12
14
16
18
HI 17.7
LO 9.2
ME 13.6
CU 14.8
05-01-1998
05-02-2008
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D.A. Davidson & Co.
Chart 2: Electric Utility Ratios of
EBITDA
StockVal®UTILITY: ELECTRIC POWER E-Wtd (153A) Price 35.66
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
PRICE / EBITDA
2.8
3.2
3.6
4.0
4.4
4.8
5.2
5.6
6.0
HI 5.8
LO 2.9
ME 4.2
CU 4.9
05-01-1998
05-02-2008
ENTERPRISE VALUE/EBITDA
6.0
6.4
6.8
7.2
7.6
8.0
8.4
8.8
9.2
9.6
HI 9.2
LO 6.3
ME 8.1
CU 8.2
05-01-1998
05-02-2008
Chart 3: Electric Utility Dividends,
Yields, and Relative Yield
StockVal®UTILITY: ELECTRIC POWER E-Wtd (153A) Price 35.66
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
DIVIDENDS-PER-SHARE
1.0
1.1
1.2
1.3
1.4
HI 1.33
LO 1.06
ME 1.21
CU 1.31
GR 0.4%
06-30-1998
03-31-2008
DIVIDEND YIELD %
3
4
5
6
7
HI 6.2
LO 3.3
ME 4.2
CU 3.6
05-01-1998
05-02-2008
DIVIDEND YIELD / 10-YEAR T-BOND YIELD
0.6
0.8
1.0
1.2
1.4
1.6
HI 1.42
LO 0.69
ME 0.88
CU 0.96
05-01-1998
05-02-2008
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D.A. Davidson & Co.
Chart 4: Electric Utility Dividend
Yield Relative to Yield on S&P 400
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D.A. Davidson & Co.
11
VALUATIONS, RISKS &
REWARDS
Table 6: D.A. Davidson Utility Coverage
Monthly Total Returns:
(12/31/07 - 4/30/08)
Price Price Ex-Dividend Monthly Year-to-Date
Stocks:12/31/2007 4/30/2008 in April 2008 Total Return Total Return
ALLETE, Inc. (ALE)39.58 41.77 8.2% 6.6%
Avista Corp. (AVA)21.54 20.53 5.0% -3.9%
Black Hills Corporation (BKH)44.10 39.01 9.0% -10.7%
Hawaiian Electric Industries (HE)22.77 24.65 3.3% 9.6%
IDACORP, Inc. (IDA)35.22 32.14 0.1% -7.9%
MDU Resources Group, Inc. (MDU)27.61 28.87 17.6% 5.1%
Otter Tail Corp. (OTTR)34.60 37.08 4.8% 8.0%
Portland General Electric Co. (POR)27.78 24.00 6.4% -12.8%
27.43 27.21 $0.250 6.1% 1.0%
Average 6.7% -0.6%
13,264.82 12,820.13 18.889 4.7% -2.5%
1,468.36 1,385.59 1.509 4.9% -5.0%
532.53 510.52 0.185 6.6% -3.0%
611.18 581.48 * 5.8% -4.9%
590.99 609.35 * 8.5% 3.1%
Puget Energy, Inc. (PSD)
Various Indices:
Dow Jones Industrial Average (.DJIA)
Standard & Poors 500 (.SPX)
Dow Jones Utility Average (.UTIL)
SNL Electric Companies Index
SNL Gas Companies Index
*Ex-Dividend amount incorporated in index.
Sources: Bloomberg, SNL Interactive
As shown in Table 6, monthly utility indices outperformed the results of broader indices
during April, with total returns (including dividends) ranging from 5.8%-8.5%.
Comparatively, the broader indices to include the Dow Jones Industrials and S&P 500 posted
positive total returns of 4.7% and 4.9%, respectively. The average monthly return in our
coverage universe posted similar results to utility based indices, posting a monthly total return
of approximately 6.7%. Leading our coverage universe was MDU Resources Group, Inc.,
which posted an impressive 17.6% increase during the month April, due primarily to a
favorable U.S. Geological survey releasing positive forecasts regarding oil prospects in the
Bakken Formation in North Dakota, in which MDU has acreage and a drilling activity.
Leading within our coverage universe from a year-to-date perspective continues to be
Hawaiian Electric Industries, Inc. (HEI), which has posted a year-to-date return through the
first four months of 2008 of approximately 10%, which can be largely attributed to the interim
rate relief granted for the company’s three utility subsidiaries, which virtually assures a 2008
EPS rebound. Portland General Electric Co. continues to be the year-to-date laggard in our
group, posting a loss of nearly 13% so far in 2008.
As depicted in Table 7, our coverage group’s average estimated 2008 price-earnings ratio is
15.8x, up from 15.0x a month ago. In addition, the average EV/EBITDA ratio of 7.8x, based
on forecasted 2008 results, is also up from 7.5x a month ago. As we have moderately
increased three of our 2008 EPS estimates in the past month, and lowered one of our 2008
EPS projections, we believe the bulk of the rise in valuations is a function of higher stock
prices. The 2008 EPS estimates that were recently changed are ALE (from $2.84 to $2.87),
AVA (from $1.45 to $1.48), Black Hills Corp. (from $2.50 to $2.15), and MDU ($1.96 to
$2.03).
The average yield using our 2007 dividend estimates for the group is 3.6%, down from 3.7% a
month earlier, with Hawaiian Electric Industries sporting the highest yield at 4.9%. The
stock ratings of IDACORP and Otter Tail Corporation have been lowered one notch since the
last Utility Monthly.
D.A. Davidson & Co.
12
Table 7: D. A. DAVIDSON UTILITY COVERAGE COMPARISON
Company Name Symbol Rating Stock
Price
5/5/08
Target
Price
(12-18
month)
Market
Value
($Millions)
2006
EPS
2007
EPS
2008E
EPS
2009E
EPS
PE '07 PE '08 PE '09 Price/
Book
Value
Dividend
Yield % on
2008E
Dividend
Estimated
2008
Payout
Ratio %
Estimated
2008E
EBITDA
($Millions)
Ratio of
EBITDA to
Interest/Pfd.
Expense
2008E
Price/
2008E
EBITDA
Ratio
Total Debt /
Total Capital
%
Enterprise
Value Less
Cash
($Millions)
EV/EBIT
(E
Val
Ca
i
ALLETE INCORPORATED ALE B $41.16 $49.00 $1,269 2.77 3.08 2.87 2.97 13.3 14.4 13.9 1.69 4.2% 60.0% $175 6.3 7.3 38.8% $1,686
AVISTA CORPORATION AVA B 20.51 25.00 $1,088 1.47 0.72 1.48 1.62 28.4 13.9 12.6 1.16 3.1% 43.4% $289 3.6 3.8 52.7% $2,121
BLACK HILLS CORPORATION BKH B 37.59 43.00 $1,443 2.21 2.68 2.15 2.65 14.0 17.5 14.2 1.49 3.7% 65.0% $278 6.1 5.2 43.3% $2,107
HAWAIIAN ELECTRIC INDUSTRIES HE N 25.30 23.00 $2,111 1.33 0.96 1.59 1.70 26.2 15.9 14.9 1.65 4.9% 78.0% $449 5.5 4.7 50.5% $3,269
IDACORP INCORPORATED IDA N 32.44 35.00 $1,453 2.34 1.86 2.13 2.29 17.4 15.2 14.2 1.20 3.7% 56.3% $332 4.8 4.4 52.9% $2,800
MDU RESOURCES GROUP INC MDU B 29.37 35.00 $5,368 1.69 1.76 2.03 2.26 16.7 14.5 13.0 2.13 2.0% 29.6% $1,003 13.1 5.4 37.1% $6,777
OTTER TAIL CORPORATION*OTTR U 38.56 35.00 $1,151 1.69 1.78 2.00 2.22 21.7 19.3 17.4 2.20 3.1% 59.6% $177 8.2 6.5 44.9% $1,569
PORTLAND GENERAL ELECTRIC POR B 23.59 30.00 $1,475 1.14 2.33 1.82 1.93 10.1 12.9 12.2 1.12 4.1% 52.6% $449 4.9 3.3 49.9% $2,715
PUGET ENERGY INCORPORATED PSD N 27.81 29.00 $3,606 1.52 1.61 1.50 1.70 17.3 18.6 16.4 1.47 3.6% 66.9% $815 3.6 4.4 56.9% $6,517
Median -- 9 Diversified Regional Utilities $1,453 1.60 1.77 1.91 2.08 17.3 15.2 14.2 1.49 3.7% 59.6%5.5 4.7 49.9% $2,715
Mean -- 9 Diversified Regional Utilities $2,107
1.69 1.78 2.00 2.22
18.4 15.8 14.3 1.57 3.6% 56.8%6.3 5.0 47.4% $3,284
*D.A. Davidson & Co. makes a market in this security.B = BUY; N = NEUTRAL; U = UNDERPERFORM
Sources: Estimates of all companies made by D.A. Davidson & Co.
DA
nterprise
ue Excludes
sh; EBITDA
s 2008E)
9.6
7.3
7.6
7.3
8.4
6.8
8.9
6.0
8.0
7.6
7.8
D.A. Davidson & Co.
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Copyright D.A. Davidson & Co., 2008. All rights reserved.
13
Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from the companies
mentioned in this report in the next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L.
Bellessa, Jr., CFA and Bryan H. Nicholls, the research analysts principally responsible for the preparation of this report, will receive
compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A.
Davidson & Co.’s analysts are not directly compensated for involvement in specific investment banking transactions.
We, James L. Bellessa, Jr., CFA and Bryan H. Nicholls, attest that (i) all the views expressed in this research report accurately reflect
our personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly
or indirectly, related to the specific recommendations or views expressed in this report.
Ratings Information
D.A. Davidson & Co. Ratings Buy Neutral Underperform
Risk adjusted return potential Over 15% total return
expected on a risk adjusted
basis over next 12-18 months
>0-15% return potential
on a risk adjusted basis
over next 12-18 months
Likely to remain flat or lose
value on a risk adjusted basis
over next 12-18 months
Distribution of Ratings (as of 3/31/08) Buy Hold Sell
Corresponding Institutional Research Ratings Buy Neutral Underperform
and Distribution 44% 52% 4%
Corresponding Private Client Research Ratings Outperform Market Perform Underperform
and Distribution 83% 17% 0%
Distribution of Combined Ratings 48% 48% 4%
Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos.
Institutional Coverage 4% 4% 0%
Private Client Coverage 0% 0% 0%
Distribution of Combined Investment Banking 4% 4% 0%
Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based
upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria.
Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic
fluctuations and unforeseen changes in the subject company’s fundamentals or business trends.
Other Disclosures
Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any
action based upon it. Any opinions expressed are based on our interpretation of data available to us at the time of the original
publication of the report. These opinions are subject to change at any time without notice. Investors must bear in mind that inherent
in investments are the risks of fluctuating prices and the uncertainties of dividends, rates of return and yield. Investors should also
remember that past performance is not necessarily an indicator of future performance and D.A. Davidson & Co. makes no guarantee,
express or implied, as to future performance. Investors should note this report was prepared by D.A. Davidson & Co.’s Institutional
Research Department for distribution to D.A. Davidson & Co.’s institutional investor clients and assumes a certain level of investment
sophistication on the part of the recipient. Readers, who are not institutional investors or other market professionals, should seek the
advice of their individual investment advisor for an explanation of this report’s contents, and should always seek such advisor’s advice
before making any investment decisions. Further information and elaboration will be furnished upon request.
* For additional disclosure information on companies under coverage, please refer to recent reports, contact your D.A. Davidson &
Co. representative, or call 1-800-755-7848.