IDA note 06 13 13.pdf

Sidoti & Company, LLC
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Sidoti & Company, LLC © Copyright 2013
IDACORP Inc. (IDA-$47.63) NEUTRAL
Company Update Target: $51
Michael Klein [phone] ([e-mail]) June 13, 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) 50-40
Russell 2000 972
Short Interest (Mil) 0.904
2011 2012 2013E 2014E
OLD NEW OLD NEW
Mar. $0.60 $0.50 $0.67A $0.68
June 0.42 0.71 0.60 0.62
Sep. 1.15 1.84 1.72 1.76
Dec. 0.18 0.33 0.33 0.33

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

P/E (Cal.) 14.3x 14.1x

Note: 2011 exclude $1.01 benefit from tax accounting method change and ADITC reversal. 2011-2014E includes $0.08 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.
Find Stock Fairly Valued, Reflective Of Better Regional Economy; Maintain NEUTRAL Rating,
$51 Price Target
• As our investment thesis is predicated on an improving local economy, improvement in housing starts and tourism
augur well for IDA but are largely priced into IDA shares as we maintain a NEUTRAL rating.
• The Idaho Division of Financial Management projects 26% compound annual housing starts growth for 2012-2016,
compared to a decline of 13% over the previous five-year period.
• Meanwhile, hotel and motel receipts, an indicator of tourism in the area, increased 17% in 1Q:13 compared to 1Q:12
and followed a 7.7% increase in 2012 from 2011.
• However, management’s most recent updates to its Integrated Resource Plan (IRP) forecast 1.1% customer growth
and load growth near 1% over the 20-year planning period.
• We would turn more bullish if the economic pickup increases the customer and load forecasts more than
management anticipates.
• Our $51 price target is based on 15x our 2014 EPS estimate of $3.39.

‰ An improving local economy is a positive for IDA. Increasing rates of housing starts, personal income and tourism all will
increase electricity usage and prop up IDACORP earnings, as we see it. These figures bear watching, as management does
not expect to be in a near-term peak-hour capacity deficit until July 2016. IDA may be able to add more rate-base growth
opportunities before this time if customer growth and load continue to improve above management’s expected 1.1% and 1%
respective growth rates, but we are not counting on such a scenario.
Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45
PT 11/2/12 44.8 47
PT 5/2/13 48 51

IDACORP INC.
Sidoti & Company, LLC
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‰ We expect a 10% dividend increase in 4Q:13. IDA raised the quarterly dividend 10% in 4Q:12 and noted its intent to issue
another dividend increase of at least 10% in 4Q:13, implying an annualized payout of at least $1.67 per share.
‰ We maintain our NEUTRAL rating and $51 price target. While the local economic improvement is a positive for IDA, we
contend that most of this expected benefit is already factored into the stock price. IDA trades at 14x our 2014 EPS estimate
of $3.39, just a shade below our $51 price target based on a 15x multiple, and offers 8% total return potential after factoring
the 3% dividend yield.

Key Risks Regulation Slowdown in local economy Interest rates

Exhibit 1: Idaho Economic Improvement
-
5,000
10,000
15,000
20,000
25,000
19
9
9
20
0
0
20
0
1
20
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2
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3
20
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4
20
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5
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6
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7
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8
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1
20
1
2
20
1
3
E
20
1
4
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20
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6
E
Source: Idaho Division of Financial Management, U.S. Government Statistics
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IDACORP INC.
Sidoti & Company, LLC
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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

Sidoti & Company, LLC
4

IDACORP Inc. (IDA-$47.63) NEUTRAL Target: $51 June 13, 2013

Key Risks Regulation Slowdown in local economy Interest rates

Valuation:
‰ We maintain our NEUTRAL rating and $51 price target. While the local economic improvement is a positive for IDA, we
contend that most of this expected benefit is already factored into the current stock price. Shares trade at 14.4x our 2014
estimates and are close to being fairly valued, in our view. Our price target is based on 15x our 2014 EPS estimate of
$3.39 and offers 8% total return to the current stock price after factoring in the 3.1% dividend yield.

Required Disclosures

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Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45
PT 11/2/12 44.8 47
PT 5/2/13 48 51

Appendix Continued

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