IDA note 05 02 13.pdf

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Sidoti & Company, LLC © Copyright 2013
IDACORP Inc. (IDA-$47.99) NEUTRAL
Raise Price Target; Adjust Earnings Estimates Target: $51
Michael Klein [phone] ([e-mail]) May 2, 2013

Price to Book Value 1.5x
Return on Equity (2014E) 8.9%
LT Debt to Total Capital 47%
5-Year EPS Growth Rate Projection 4%
52-Week Range (NYSE) 49-38
Russell 2000 940
Short Interest (Mil) 0.842
2011 2012 2013E 2014E
OLD NEW OLD NEW
Mar. $0.60 $0.50 $0.50 $0.67A $0.51 $0.68
June 0.42 0.71 0.60 0.60 0.62
Sep. 1.15 1.84 1.81 1.72 1.87 1.76
Dec. 0.18 0.33 0.32 0.33 0.34 0.33

EPS (Cal.) $2.35 $3.37 $3.23 $3.32 $3.32 $3.39

P/E (Cal.) 14.5x 14.2x

Note: 2011 exclude $1.01 benefit from tax accounting method change and ADITC reversal. 2011-2014E include $0.08 in annual stock-based compensation
expense. The Russell 2000 Index includes IDACORP. Sum of quarterly EPS may not equal full year total due to rounding and/or changes in share count. NC =
Not covered by Sidoti & Company, LLC.
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
Rev.(Mil.) $842.9 $926.3 $879.4 $960.4 $1049.8 $1036.0 $1026.8 $1080.7 $1140.8 $1175.8
GAAP EPS $2.02 $2.33 $1.86 $2.17 $2.64 $2.95 $3.36 $3.37 $3.32 $3.39
Dividend $1.20 $1.20 $1.20 $1.20 $1.20 $1.20 $1.20 $1.37 $1.56 $1.71
Description: IDACORP Inc. (www.idacorpinc.com) is a holding company that operates through a regulated utility segment, Idaho Power
Company, and two unregulated arms: Ida-West Energy, which focuses on independent power production, and IDACORP Financial
Services (IFS), which manages tax-advantaged real estate investments. The utility serves 496,000 customers in Idaho and Oregon.
Headquarters are in Boise, ID.
Core Utility Operations Were Slightly Ahead Of Expectations; Tax Items Contributed To 1Q:13
EPS Beat; Raise Target To $51 (From $47), Maintain NEUTRAL
• IDA’s utility operations are improving slightly ahead of expectations as respective 1Q:13 sales and operating
income were 3% and 4% ahead of our estimates. Tax items largely contributed to the EPS beat of $0.67 versus the
$0.56 consensus projection.
• Management maintained 2013 EPS guidance of $3.20-$3.35 and does not include the use of any tax credits; initial
guidance after 4Q:12 included up to $5 million in tax credits, which we estimate would have aided EPS by $0.10.
• We tweak our assumptions fueling operating earnings, while revisions to expected tax benefits mostly support our
revised EPS of $3.32 (from $3.23) in 2013 and $3.39 (from $3.32) in 2014.
• The reduced unemployment rate (6.0%), improving housing market and rise of new businesses are encouraging, but
our enthusiasm is offset by the limited load growth, which puts added emphasis on a sustained economic pickup.
• We raise our price target to $51 (from $47) to reflect the continued improvement at Idaho Power and growing
dividend, but maintain our NEUTRAL rating as we think the shares, which trade at 14x our revised 2014 estimate,
mostly factor in the aforementioned positives.
• Our target is now based on 15x our revised 2014 EPS estimate of $3.39. (Our prior $47 target was based on about
14x our previous 2014 EPS estimate of $3.32.)

‰ EPS in 1Q:13 of $0.67 beat the $0.56 consensus estimate. Colder weather helped fuel a 5.3% increase in MWh sales
and translated into 9.9% consolidated sales increase compared with 1Q:12. Respective operating income and EBITDA were
3% and 2% better than we expected, coming in at $59.4 million and $91.3 million, respectively. This gives us confidence in
Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45
PT 11/2/12 44.8 47

IDACORP INC.
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our projects for the remainder of 2013 and 2014; however, the majority of our revised estimates are fueled by tax-related
items. In 1Q:13, IDA reported an effective tax rate of 24.9%, which was aided by higher levels of regulatory flow-through
adjustments.
‰ Management maintained 2013 EPS guidance of $3.20-$3.35. Initial guidance offered after 4Q:12 included the use of up to
$5 million in additional accumulated deferred investment tax credits (ADITCs), which we estimate translated into a $0.10 EPS
benefit. Today’s confirmed guidance range does not include the use of any tax credits and implies Idaho Power expects to
earn an Idaho-jurisdictional ROE greater than 9.5%.
‰ Our enthusiasm for IDA is tempered by the utility’s dependence on an improving local economy. We are encouraged
that core utility operating earnings are trending slightly better than we had projected, and even more so by the improvement
in the local economy. However, earnings are dependent on this continued economic resurgence as load growth remains
near 1% and the company’s 2013 Integrated Resource Plan (IRP) will include customer growth of about 1.1%. This
customer growth rate is up from the 0.8% seen in the past five years but down from the 20-year historical growth rate of
2.6%. Furthermore, we see a lack of rate base growth opportunities on the horizon and note that the Boardman-to-
Hemingway Line likely will not come online before 2018.
‰ We raise our price target to $51 (from $47) but maintain our NEUTRAL rating. Our new $51 target is based on 15x our
revised 2014 EPS estimate of $3.39 and factors in the continued improvement at Idaho Power and growing dividend (we
expect a 10% dividend increase in 4Q:13). However, we see limited upside to our new target and think shares mostly factor
in these positives as the stock trades at 14x our revised 2014 EPS estimate. Our prior $47 target was based on about 14x
our previous 2014 EPS estimate of $3.32.

Key Risks Regulation Slowdown in local economy Interest rates

Exhibit 1. IDA Inc. Variance Table
1Q:13 A 1Q:13 E Variance % Change 1Q:12 A % Change
($ in thousands)
Revenue 264,928 257,135 7,793 3.0% 241,140 9.9%
Operating Income 59,433 57,371 2,062 3.6% 42,343 40.4%
EBITDA 91,343 89,603 1,740 1.9% 72,885 25.3%
Net Income 33,380 25,399 7,981 31.4% 24,817 34.5%
Diluted EPS $0.67 $0.50 $0.17 32.9% 0.50 34.1%
Source: Company reports; Sidoti & Company, LLC estimates
IDACORP INC.
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Table 1: IDACORP Income Statement
(in thousands, except where noted)
2011 Mar Jun Sep Dec 2012 Mar A Jun E Sep E Dec E 2013E Mar E Jun E Sep E Dec E 2014E
Total operating revenue 1,026,756 241,140 254,701 334,019 250,802 1,080,662 264,928 262,481 341,075 272,275 1,140,759 272,346 270,619 353,633 279,204 1,175,802
Purchased power 163,336 34,277 45,178 71,570 45,910 196,935 42,857 46,533 64,413 49,583 203,386 42,428 45,603 66,990 51,070 206,091
Fuel expense 131,542 32,751 21,285 55,978 49,399 159,413 49,166 21,924 57,098 52,857 181,044 49,658 22,143 59,952 54,443 186,196
Power cost adjustment 38,497 9,008 (3,211) (42,871) (24,016) (61,090) (14,711) (3,211) (47,158) (24,016) (89,096) (13,975) (3,211) (42,442) (24,016) (83,645)
Other O&M 338,640 78,515 86,005 89,968 94,545 349,033 79,785 90,305 91,767 103,055 364,913 83,774 93,917 95,438 107,177 380,307
Energy efficiency programs 37,663 4,477 8,084 8,410 6,329 27,300 4,470 8,327 8,662 6,645 28,104 4,649 8,410 8,749 6,712 28,519
Depreciation 119,789 30,542 29,879 31,607 31,913 123,941 31,910 32,229 32,551 32,877 129,567 33,206 33,538 33,873 34,212 134,828
Taxes other than income taxes 28,895 8,100 7,849 7,012 7,528 30,489 8,172 8,006 7,152 7,679 31,009 8,826 8,646 7,724 7,832 33,029
Other 13,042 1,127 832 1,002 9,078 12,039 3,846 800 800 800 6,246 800 800 800 800 3,200
Total Operating income- EBIT 155,352 42,343 58,800 111,343 30,116 242,602 59,433 57,569 125,789 42,795 285,586 62,981 60,773 122,549 40,974 287,277
EBITDA 275,141 72,885 88,679 142,950 62,029 366,543 91,343 89,798 158,340 75,672 415,153 96,186 94,311 156,422 75,186 422,105
Other income, net 30,105 6,593 6,571 2,928 10,550 26,642 4,441 2,263 1,870 2,214 10,789 2,166 2,175 1,760 2,132 8,232
Earnings (loss) of unconsolidated equity-method investments 798 1,419 (1,928) 1,304 (1,123) (328) 107 107 -
-
Total interest expense, net 71,526 17,205 17,436 19,401 19,827 73,869 19,490 19,986 19,879 19,707 79,063 19,926 20,393 20,296 20,116 80,730
Pre-tax income 114,729 33,150 46,007 96,174 19,716 195,047 44,491 39,845 107,781 25,302 217,419 45,221 42,555 104,012 22,990 214,778
Tax rate NM 25.1% 23.0% 4.1% 16.7% 13.4% 25.0% 23.9% 19.5% 35.0% 23.3% 23.5% 26.1% 13.0% 26.0% 19.2%
Income tax (benefit) expense (52,133) 8,333 10,569 3,910 3,301 26,113 11,111 9,540 21,034 8,868 50,553 10,636 11,097 13,565 5,966 41,264
Net Income 166,862 24,817 35,438 92,264 16,415 168,934 33,380 30,306 86,746 16,434 166,866 34,585 31,459 90,448 17,024 173,515
Adj. for (income) loss attributable to noncontrolling interests (169) 112 (137) (195) 47 (173) 153 153 -
Net income attributable to IDA 166,693 24,930 35,301 92,069 16,462 168,761 33,533 30,306 86,746 16,434 167,019 34,585 31,459 90,448 17,024 173,515
EPS, diluted 3.36 0.50 0.71 1.84 0.33 3.37 0.67 0.60 1.72 0.33 3.32 0.68 0.62 1.76 0.33 3.39
Dividend per share 1.20 0.33 0.33 0.33 0.38 1.37 0.38 0.38 0.38 0.42 1.56 0.42 0.42 0.42 0.46 1.71
Payout ratio 35.7% 40.6% 46.9% 50.5%
Shares outstanding, diluted 49,558 49,905 49,984 50,080 50,230 50,010 50,064 50,214 50,365 50,516 50,290 50,769 51,022 51,277 51,534 51,151
Margin Analysis
O&M as % of Sales 33.0% 32.6% 33.8% 26.9% 37.7% 32.3% 30.1% 34.4% 26.9% 37.8% 32.0% 30.8% 34.7% 27.0% 38.4% 32.3%
Operating Margin 15.1% 17.6% 23.1% 33.3% 12.0% 22.4% 22.4% 21.9% 36.9% 15.7% 25.0% 23.1% 22.5% 34.7% 14.7% 24.4%
EBITDA Margin 26.8% 30.2% 34.8% 42.8% 24.7% 33.9% 34.5% 34.2% 46.4% 27.8% 36.4% 35.3% 34.9% 44.2% 26.9% 35.9%
Pretax Margin 11.2% 13.7% 18.1% 28.8% 7.9% 18.0% 16.8% 15.2% 31.6% 9.3% 19.1% 16.6% 15.7% 29.4% 8.2% 18.3%
Net Margin 16.3% 10.3% 13.9% 27.6% 6.5% 15.6% 12.6% 11.5% 25.4% 6.0% 14.6% 12.7% 11.6% 25.6% 6.1% 14.8%
YoY Change
Revenue -0.9% -4.1% 8.4% 7.9% 8.7% 5.3% 9.9% 3.1% 2.1% 8.6% 5.6% 2.8% 3.1% 3.7% 2.5% 3.1%
O&M 15.2% 11.1% 0.6% 6.4% -3.5% 3.1% 1.6% 5.0% 2.0% 9.0% 4.5% 5.0% 4.0% 4.0% 4.0% 4.2%
Operating profit -21.8% -15.5% 71.4% 56.0% -7087.5% 56.2% 40.4% -2.1% 13.0% 42.1% 17.7% 6.0% 5.6% -2.6% -4.3% 0.6%
EBITDA -12.5% -8.4% 38.6% 40.8% 106.2% 33.2% 25.3% 1.3% 10.8% 22.0% 13.3% 5.3% 5.0% -1.2% -0.6% 1.7%
Pretax profit -19.1% -3.6% 165.6% 55.0% -349.3% 70.0% 34.2% -13.4% 12.1% 28.3% 11.5% 1.6% 6.8% -3.5% -9.1% -1.2%
Net income 17.1% -15.8% 68.9% -14.1% 18767.8% 1.2% 34.5% -14.5% -6.0% 0.1% -1.2% 3.6% 3.8% 4.3% 3.6% 4.0%
Pro forma EPS, diluted 13.9% -17.1% 67.3% -14.8% 18213.9% 0.3% 34.1% -14.5% -6.3% -0.7% -1.6% 1.7% 2.2% 2.4% 1.5% 2.1%
2011 EPS includes $56.9 million benefit from tax accounting method change, $6.8 million ADITC reversal and $18.1 million customer refund
Source: Company reports, Sidoti & Company, LLC estimates
Appendix
Required Disclosures

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IDACORP Inc. (IDA-$47.99) NEUTRAL Target: $51 May 2, 2013

Key Risks Regulation Slowdown in local economy Interest rates

Valuation:
‰ We raise our price target to $51 (from $47) but maintain our NEUTRAL rating. Our new $51 target is based on 15x
our revised 2014 EPS estimate of $3.39 and factors in the continued improvement at Idaho Power and growing dividend
(we expect a 10% dividend increase in 4Q:13). However, we see limited upside to our new target and think shares mostly
factor in these positives as the stock trades at 14x our revised 2014 EPS estimate. Our prior $47 target was based on
about 14x our previous 2014 EPS estimate of $3.32.

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The Sidoti & Company, LLC (Sidoti) Equity Research rating system consists of BUY and NEUTRAL recommendations. BUY
suggests capital appreciation of at least 25% from initiation of coverage over the next 12 months, while NEUTRAL denotes that a
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which 358 (68%) are rated BUY and 166 (32%) are rated NEUTRAL. Of the BUYS, Sidoti has received investment banking
income from 2 companies (0.56%). Of the NEUTRALS, 50 trade above our price targets. A risk to our price target is that the
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Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45
PT 11/2/12 44.8 47

Appendix Continued

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