COC Wachovia-MAy-7-2009.pdf

Please see page 5 for rating definitions, important disclosures and required analyst certifications.
WCM does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest
that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

A publication of
WACHOVIA CAPITAL MARKETS, LLC

Equity Research
IDACORP, Inc.
IDA: 2009 Off To A Slow Start
But Positive Drivers Remain; Reiterate Market Perform

• Q1 Surface Miss. IDA reported Q1 EPS of $0.40, below our estimate of $0.65,
consensus of $0.55 and $0.48 last year. The large delta between our estimate and
actual Q1 EPS stems, in part, from our misunderstanding of the quarterly impact of
a change in the way power supply costs are distributed throughout the year. The
new methodology employs an even distribution rather than a normal seasonal
allocation which more closely tracks monthly loads. The result is a higher
recognition of costs in Q1 and Q2 (negative earnings impact) and lower realized
costs in Q3 (positive earnings impact). However, as the order was not approved
until May of 08, $6.4mm of additional PCA expense in Q1 was actually recognized
in Q2 instead, thereby artificially inflating 1Q08 EPS by roughly $0.10 per share.
This created a headwind for 1Q09 that was not properly accounted for in our Q1
EPS. Importantly the PCA allocation is a timing issue only and should not
materially impact full-year results. Lower Sales and two transmission related items
that increased costs round out the quarterly miss.
• We are maintaining our 09E-10E EPS of $2.45 and $2.50. Despite a slow start
to the year, IDA stands to benefit from a number of regulatory improvements
implemented in 09 and cost cutting efforts coupled with modest rate increases
(general and AMI-related). IDA maintained guidance on a number of key metrics,
such as operation and maintenance expense, CapEx and expected hydro generation.
• But We’re Keeping Our Eye On… Total retail sales were down 5% (residential
-3.5%, commercial -4.2% & industrial -8.2%) due to both weather- and economy-
related usage declines. While the negative impact is partially mitigated by the fixed
cost adjustment mechanism (FCAM), lower than expected sales continue to
pressure earnings on the margin. Additionally, the rate increase that became
effective in February was materially below the company’s request. While cost
containment efforts are underway to preserve earnings power, the burden lies with
Idaho Power to mitigate the impact of the light rate increase.
• Reiterate Market Perform. We are attracted to IDA’s rate base growth
opportunities largely related to major transmission projects and additional
generation capacity. In addition, we have been encouraged by regulatory
improvements that should make it easier for Idaho Power to earn its allowed ROE,
along with a recent legislative development, which allows pre-determination of
ratemaking principles for major projects. Our neutral rating reflects valuation
considerations and a below-average regulatory environment.

Valuation Range: $26 to $27
We value IDA under P/E multiple (apply a 10.5x multiple to our 10E EPS of $2.50)
and dividend discount analysis. Risks to our valuation include project delays or
cancellations and consistently below average hydroelectric conditions.

Investment Thesis:
We are attracted to Idaho's service territory and strong rate base growth potential, and
are encouraged by recent regulatory improvements. Our neutral rating reflects
lingering regulatory concerns.

Market Perform
Sector: Regulated Electric Utilities, Market
Weight
May 7, 2009
Earnings Reported

2008A 2009E 2010E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.48 $0.40 A 0.65 NE
Q2 (June) 0.39 0.53 NC NE
Q3 (Sep.) 1.14 1.15 0.94 NE
Q4 (Dec.) 0.16 0.37 0.33 NE
FY $2.17 $2.45 NC $2.50 NC
CY $2.17 $2.45 $2.50
FY P/E 10.9x 9.7x 9.5x
Rev.(MM) $960.4 $1,008.0 $1,024.1
Source: Company Data, Wachovia Capital Markets, LLC estimates, and Reuters NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful

Ticker IDA
Price (05/07/2009) $23.70
52-Week Range: $20-34
Shares Outstanding: (MM) 46.9
Market Cap.: (MM) $1,111.5
S&P 500: 907.39
Dividend/Yield: $1.20/5.1%
LT Debt: (MM) $1,279.5
LT Debt/Total Cap.: 45.3%
ROE: 9.0%
3-5 Yr. Est. Growth Rate: 5.0%
CY 2009 Est. P/E-to-Growth: 1.9x
Last Reporting Date: 05/07/2009
Before Open
Source: Company Data, Wachovia Capital Markets, LLC estimates, and Reuters

Utilities
Neil Kalton, CFA, Senior Analyst
[phone] / [e-mail]
Sarah Akers, Associate Analyst
[phone] / [e-mail]
Jonathan Reeder, Associate Analyst
[phone] / [e-mail]

WACHOVIA CAPITAL MARKETS, LLC
Utilities EQUITY RESEARCH DEPARTMENT

2

Company Description:
IDACORP (IDA) is the holding company for Idaho Power Company (IPC), a regulated electric utility serving
more than 485,000 customers in southern Idaho, including Boise and surrounding areas, and eastern Oregon.
In addition, IDACORP Financial Services (IFS), a non-utility business, invests in affordable housing tax
credits.

WACHOVIA CAPITAL MARKETS, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

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WACHOVIA CAPITAL MARKETS, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

5

Required Disclosures

$18.00
$20.00
$22.00
$24.00
$26.00
$28.00
$30.00
$32.00
$34.00
$36.00
$38.00
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P
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IDACORP, Inc. (IDA) 3-yr. Price PerformanceIDACORP, Inc. (IDA) 3-yr. Price Performance
Date
Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($)
5/2/2006 Brothwell
5/2/2006 NA 2 28.00 30.00 34.19
z 5/12/2006 NA 2 30.00 32.00 33.50
z 8/10/2006 NA 2 35.00 38.00 36.93
z 1/19/2007 NA 2 34.00 37.00 37.22
dz 2/16/2007 NA 3 31.00 33.00 35.60
z 5/10/2007 NA 3 30.00 33.00 32.84
z 6/11/2007 NA 3 30.00 32.00 31.78
z 8/9/2007 NA 3 32.00 34.00 34.77
c 8/30/2007 32.29 2 32.00 34.00 32.52
z 11/1/2007 34.89 2 33.00 35.00 33.70
„ 11/14/2007 Kalton
z 11/14/2007 33.79 2 34.00 35.00 33.85
z 2/15/2008 32.04 2 31.00 33.00 31.46
z 12/18/2008 29.19 2 30.00 32.00 29.24
z 2/19/2009 24.39 2 26.00 27.00 24.39
Source: Wachovia Capital Markets, LLC estimates and Reuters data Symbol Key Rating Code Key d Rating Downgrade ‹ Initiation, Resumption, Drop or Suspend 1 Outperform/Buy SR Suspended c Rating Upgrade „ Analyst Change 2 Market Perform/Hold NR Not Rated z Valuation Range Change ˆ Split Adjustment 3 Underperform/Sell NE No Estimate
Additional Information Available Upon Request

I certify that:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed;
and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this
research report.

ƒ Wachovia Capital Markets, LLC or its affiliates managed or comanaged a public offering of securities for IDACORP, Inc. within the past 12
months.
ƒ Wachovia Capital Markets, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next
three months from IDACORP, Inc.
ƒ Wachovia Capital Markets, LLC or its affiliates received compensation for investment banking services from IDACORP, Inc. in the past 12
WACHOVIA CAPITAL MARKETS, LLC
Utilities EQUITY RESEARCH DEPARTMENT

6

months.
ƒ IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wachovia
Capital Markets, LLC. Wachovia Capital Markets, LLC provided investment banking services to IDACORP, Inc.

Risks to our valuation include project delays or cancellations and consistently below average hydroelectric conditions.

Wachovia Capital Markets, LLC does not compensate its research analysts based on specific investment banking transactions. WCM’s research
analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not
limited to investment banking revenue.

STOCK RATING
1 = Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12
months. BUY
2 = Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next
12 months. HOLD
3 = Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months.
SELL
SECTOR RATING
O = Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M = Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U = Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects
significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: May 7, 2009
36% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Outperform.
Wachovia Capital Markets, LLC has provided investment banking services
for 38% of its Equity Research Outperform-rated companies.
58% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Market Perform.
Wachovia Capital Markets, LLC has provided investment banking services
for 30% of its Equity Research Market Perform-rated companies.
6% of companies covered by Wachovia Capital Markets, LLC
Equity Research are rated Underperform.
Wachovia Capital Markets, LLC has provided investment banking services
for 29% of its Equity Research Underperform-rated companies.

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WACHOVIA CAPITAL MARKETS, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

7

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SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE