IDA note 10 29 12.pdf.pdf

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Sidoti & Company, LLC © Copyright 2012
IDACORP Inc. (IDA-$44.49) NEUTRAL
Earnings Preview Target: $45
Michael Klein [phone] ([e-mail]) October 29, 2012
Market Cap (Mil) $2,230
Avg. Daily Trading Volume 201,000
Shares Out (Mil) 50.155
Float Shares (Mil) 49.528
Institutional Holdings 69%
Dividend $1.52
Dividend Yield 3.4%

Price to Book Value 1.4x
Return on Equity (2014E) 8.9%
LT Debt to Total Capital 47%
5-ear EPS Growth Rate Projection 4%
52-Week Range (NYSE) 45-38
Russell 2000 813
Short Interest (Mil) 1.157
2011 2012E 2013E 2014E
OLD NEW OLD NEW OLD NEW OLD NEW
Mar. $0.60 $0.50A $0.52 $0.58
June 0.42 0.71A 0.60 0.63
Sep. 1.15 2.16 1.51 1.51 1.54
Dec. 0.18 0.55 0.60 0.63

EPS
(Cal.) $2.35 $3.36 $3.27 $3.23 $3.38

P/E
(Cal.) 13.6x 13.8x 13.2x

Note: 2011 includes $1.01 benefit from a 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.
Yea 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E
Rev.(Mil.) $842.9 $926.3 $879.4 $960.4 $1049.8 $1036.0 $1026.8 $1097.4 $1117.4 $1144.2
GAAP EPS $2.02 $2.33 $1.86 $2.17 $2.64 $2.95 $3.36 $3.27 $3.23 $3.38
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.
Release Date Conference Call Time (Eastern) Contact Co. Guidance Consensus
November 1 November 1 4:30 p.m. 617-614-4072
ID: 87479675
2012 EPS:
$3.20-$3.35
3Q:12 EPS: $1.53
2012 EPS: $3.27
Tax Credits Provide Good Earnings Visibility Through 2014 But Valuation Dictates Our
NEUTRAL Rating As Growth Appears Priced Into Current Stock Price; Maintain $45 Target
• We project 3Q:12 EPS of $1.51 versus consensus $1.53 as we expect results to be driven by the inclusion of the
Langley Gulch plant into rates on July 1 and a 15% increase in cooling degree days year over year.
• We remain positive on IDA for the visibility into earnings through 2014 as the use of accumulated deferred
investment tax credits (ADITC) to maintain a 9.5% Idaho ROE provides a floor to earnings, in our view.
• Further, in November 2011 management presented a 50%-60% dividend payout target to the board, and we have
already seen progress in achieving this goal; two dividend hikes in 2012 represent a 27% quarterly jump from 2011.
• However, we maintain our NEUTRAL rating as we identify few growth drivers outside of a sustained improvement in
the local economy to grow earnings over the next few years.
• To the extent IDA can grow earnings and not have to utilize tax credits to maintain a 9.5% ROE in 2013 and 2014,
which we project, we would reconsider our rating.
• Our $45 target is based on about 13x our 2014 EPS estimate of $3.38.
• Lastly, we adjust our 3Q:11 EPS to the reported $2.16. In 3Q:11, a tax methodology change resulted in a $56.9
million benefit, prompting a $6.8 million ADITC reversal and $18.1 million utility customer refund.
Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45

IDACORP INC.
Sidoti & Company, LLC
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‰ Our long-term view of IDA balances visibility into stable earnings through 2014 with a lack of perceived growth
drivers. Idaho represents about 95% of Idaho Power’s overall rate base. From a reported EPS standpoint, we contend the
company’s ability to accelerate the use of the ADITC to maintain a year-end 9.5% Idaho ROE provides a backstop to
earnings. IDA has never had to take advantage of these tax credits as utilizing this benefit early in the year has always been
reversed before year-end. Such was the case this year as management entered 2012 planning to use no more than $5
million of tax credits until strong 2Q:12 results removed the need to tap into this resource to maintain a 9.5% ROE. However,
our model assumes Idaho Power must accelerate the use of the ADITC as a lack of growth drivers will otherwise have the
company fall short of a 9.5% ROE in 2013 and 2014. The local economy is improving and the inclusion of the Langley Gulch
plant into rates will contribute to earnings, but we think these positives are already priced into the stock’s current quote. We
point to the 2013 Integrated Resource Plan (IRP) as a potential catalyst for the shares if the updated 20-year outlook
identifies a greater-than-expected pickup in the economy or the need for additional rate base opportunities. We would
become more bullish on IDA if the company can demonstrate sustained earnings growth without the need for the ADITC.
‰ Two dividend increases in 2012 are encouraging. IDA had maintained a flat $1.20 per share dividend since 2004 until
increasing the quarterly payout 10% in 1Q:12. This hike was followed by another 15% increase in September, which
effectively raised the annualized dividend 27% over 2011. Management anticipates another increase of at least 10% next
September and has identified a long-term payout target of 50%-60%. Based on our estimates, we expect IDA to enter this
payout range in 2014.
‰ We model 3Q:12 EPS of $1.51. Our model assumes a 10% increase in revenue is driven by the inclusion of the Langley
Gulch plant into rates at the beginning of July and an approximate 15% increase in cooling degree days during the quarter.
Offsetting these benefits will be higher levels of depreciation and higher income tax expense from not using any ADITC in the
quarter. We note the year-ago period included a $56.9 million ($0.69 per share) benefit from a uniform capitalization tax
methodology change, which put earnings well above the baseline 9.5% Idaho ROE and prompted a $6.8 million ADITC
reversal. The strong results also put IDA into an earnings sharing band with customers and resulted in an $18.1 million
refund.
‰ We maintain our NEUTRAL rating and $45 target. In our view, IDA is close to being fairly valued as we perceive a lack of
growth drivers going forward. We think the board has the financial flexibility to continue growing the dividend now that the
Langley Gulch plant is complete, and we are focused on Idaho Power’s ability to grow earnings without having to use the
ADITC backstop. We would reconsider our rating on a sustained improvement in the economy, a demonstrated pickup in
load growth, or a pullback to the $37 range with no change to fundamentals. Our target is based on about 13x our 2014 EPS
estimate of $3.38.

Key Risks Regulation Slowdown in local economy Interest rates

Exhibit 1. IDA Inc. Variance Table
3Q:12 E 3Q:11 A Variance % Change
($ in thousands)
Revenue 340,783 309,630 31,153 10.1%
Cost of Sales 92,048 107,336 (15,288) -14.2%
Gross Profit 248,735 202,294 46,441 23.0%
Operating Income 127,350 71,393 55,957 78.4%
Net Income 75,848 107,414 (31,566) -29.4%
Diluted EPS $1.51 $2.16 ($0.65) 0.0%
Source: Company reports; Sidoti & Company, LLC estimates
3Q:11 includes a $56.9 million benefit from uniform capitalization tax methodolo
change, $6.8 million ADITC reversal and $18.1 million customer refund.
IDACORP INC.
Sidoti & Company, LLC
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Table 1: IDACORP Income Statement
(in thousands, except where noted)
2010 Mar Jun Sep Dec 2011 Mar A Jun A Sep E Dec E 2012E Mar E Jun E Sep E Dec E 2013E 2014E
Total operating revenue 1,036,029 251,494 234,983 309,630 230,649 1,026,756 241,140 254,701 340,783 260,786 1,097,410 251,257 254,970 346,194 264,938 1,117,359 1,144,237
Purchased power 143,769 25,094 36,423 66,141 35,678 163,336 34,277 45,178 52,913 28,542 160,910 34,963 46,082 53,971 29,113 164,128 167,411
Fuel expense 159,673 29,902 19,704 41,195 40,741 131,542 32,751 21,285 39,135 41,148 134,320 33,406 21,711 39,918 41,971 137,006 139,746
Third-party transmission expense - - - -
Power cost adjustment 51,226 31,306 15,501 (10,189) 1,879 38,497 9,008 (3,211) (17,831) 1,917 (10,117) 9,008 (3,211) (17,831) 1,917 (10,117) (10,117)
Other O&M 293,925 70,661 85,472 84,562 97,945 338,640 78,515 86,005 81,180 88,151 333,850 80,084 87,725 82,803 89,914 340,526 347,337
Energy efficiency programs 44,184 6,711 5,796 18,504 6,652 37,663 4,477 8,084 18,874 6,785 38,220 4,611 8,327 19,440 6,989 39,367 40,548 Gain on sale of emission allowances - - - - Depreciation 115,921 29,464 29,693 30,115 30,517 119,789 30,542 29,879 30,477 30,781 121,679 31,089 31,400 31,714 32,031 126,234 131,360
Taxes other than income taxes 24,046 7,211 7,182 7,302 7,200 28,895 8,100 7,849 7,886 7,776 31,611 8,748 8,477 8,517 8,398 34,140 36,871
Other 4,615 1,054 913 607 1,572 4,146 1,127 832 800 800 3,559 800 800 800 800 3,200 3,200
Total Operating income- EBIT 198,670 50,091 34,299 71,393 8,465 164,248 42,343 58,800 127,350 54,886 283,378 48,548 53,660 126,861 53,805 282,874 287,881
EBITDA 314,591 79,555 63,992 101,508 38,982 284,037 72,885 88,679 157,826 85,667 405,057 79,637 85,060 158,575 85,837 409,109 419,242
Other income, net 15,165 4,538 5,041 6,010 5,620 21,209 6,593 6,571 10,814 5,811 29,789 5,588 5,663 7,487 5,862 24,600 24,946
Earnings (loss) of unconsolidated equity-method investments 3,008 (1,294) (4,447) 2,085 4,454 798 1,419 (1,928) (509) - -
Total interest expense, net 75,114 18,959 17,568 17,446 17,553 71,526 17,205 17,436 15,462 17,325 67,428 20,293 18,933 17,730 18,534 75,491 75,024
Pre-tax income 141,729 34,376 17,325 62,042 986 114,729 33,150 46,007 122,702 43,372 245,231 33,842 40,390 116,618 41,133 231,984 237,804
Tax rate -0.5% 14.2% NM NM NM NM 25.1% 23.0% 38.2% 36.7% 33.3% 22.7% 25.4% 34.3% 25.6% 29.5% 26.7%
Income tax (benefit) expense (731) 4,888 (3,652) (45,372) (7,997) (52,133) 8,333 10,569 46,854 15,915 81,671 7,699 10,252 39,981 10,542 68,474 63,543
Net Income 142,460 29,488 20,977 107,414 8,983 166,862 24,817 35,438 75,848 27,457 163,560 26,144 30,138 76,637 30,591 163,510 174,260
Adj. for (income) loss attributable to noncontrolling interests 338 252 (76) (347) 2 (169) 112 (137) (25) - - Net income attributable to IDA 142,798 29,740 20,901 107,067 8,985 166,693 24,930 35,301 75,848 27,457 163,535 26,144 30,138 76,637 30,591 163,510 174,260
EPS, diluted 2.95 0.60 0.42 2.16 0.18 3.36 0.50 0.71 1.51 0.55 3.27 0.52 0.60 1.51 0.60 3.23 3.38
Dividend per share 1.20 0.30 0.30 0.30 0.30 1.20 0.33 0.33 0.33 0.38 1.37 0.38 0.38 0.38 0.42 1.56 1.71
Payout ratio 40.6% 35.7% 42.0% 48.3% 50.7%
Shares outstanding, diluted 48,340 49,356 49,516 49,622 49,734 49,558 49,905 49,984 50,134 50,284 50,077 50,435 50,587 50,738 50,890 50,663 51,530
Margin AnalysisO&M as % of Sales 28.4% 28.1% 36.4% 27.3% 42.5% 33.0%32.6% 33.8% 23.8% 33.8% 30.4% 31.9% 34.4% 23.9% 33.9% 30.5% 30.4%
Operating Margin 19.2% 19.9% 14.6% 23.1% 3.7% 16.0% 17.6% 23.1% 37.4% 21.0% 25.8% 19.3% 21.0% 36.6% 20.3% 25.3% 25.2%
EBITDA Margin 30.4% 31.6% 27.2% 32.8% 16.9% 27.7% 30.2%34.8% 46.3% 32.8% 36.9% 31.7% 33.4% 45.8% 32.4% 36.6% 36.6%
Pretax Margin 13.7% 13.7% 7.4% 20.0% 0.4% 11.2% 13.7%18.1% 36.0% 16.6% 22.3% 13.5% 15.8% 33.7% 15.5% 20.8% 20.8%
Net Margin 13.8% 11.7% 8.9% 34.7% 3.9% 16.3% 10.3% 13.9% 22.3% 10.5% 14.9% 10.4% 11.8% 22.1% 11.5% 14.6% 15.2%
YoY ChangeRevenue -1.3% -0.6% -2.8% 0.1% -0.6% -0.9% -4.1% 8.4% 10.1% 13.1% 6.9% 4.2% 0.1% 1.6% 1.6% 1.8% 2.4%
O&M 0.4% -2.0% 13.8% 17.5% 31.0% 15.2% 11.1% 0.6% -4.0% -10.0% -1.4% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Operating profit -2.4% 47.1% -6.3% -19.8% -78.3% -17.3% -15.5% 71.4% 78.4% 548.4% 72.5% 14.7% -8.7% -0.4% -2.0% -0.2% 1.8%
EBITDA 0.1% 27.0% -2.0% -14.1% -43.1% -9.7% -8.4% 38.6% 55.5% 119.8% 42.6% 9.3% -4.1% 0.5% 0.2% 1.0% 2.5%
Pretax profit -3.4% 100.3% -23.4% -19.7% -96.0% -19.1% -3.6% 165.6% 97.8% 4298.8% 113.7% 2.1% -12.2% -5.0% -5.2% -5.4% 2.5%
Net income 14.5% 86.0% -46.5% 60.0% -55.6% 17.1% -15.8% 68.9% -29.4% 205.7% -2.0% 5.3% -15.0% 1.0% 11.4% 0.0% 6.6%
Pro forma EPS, diluted 12.1% 79.6% -48.3% 55.1% -56.4% 13.9% -17.1% 67.3% -29.9% 202.2% -2.9% 3.8% -15.6% -0.2% 10.1% -1.2% 4.8%
2011 EPS includes $56.9 million benefit from tax accounting method change, $6.8 million ADITC reversal and $18.1 million customer refundSource: Company reports, Sidoti & Company, LLC estimates
Appendix
Required Disclosures

Sidoti & Company, LLC
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IDACORP Inc. (IDA-$44.49) NEUTRAL Target: $45 October 29, 2012

Key Risks Regulation Slowdown in local economy Interest rates

Valuation:
‰ We maintain our NEUTRAL rating and $45 target. In our view, IDA is close to being fairly valued as we perceive a lack
of growth drivers going forward. We think the board has the financial flexibility to continue growing the dividend now that
the Langley Gulch plant is complete, and we are focused on Idaho Power’s ability to grow earnings without having to use
the ADITC backstop. We would reconsider our rating on a sustained improvement in the economy, demonstrated pick up
in load growth, or a pullback to the $37 range with no change to fundamentals. Our target is based on about 13x our 2014
EPS estimate of $3.38.

Required Disclosures
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
stock is not likely to provide similar gains over a 12-month period. As of 10/31/12, Sidoti provides research on 512 companies, of
which 363 (70%) are rated BUY and 149 (30%) are rated NEUTRAL. Of the BUYS, Sidoti has received investment banking
income from 3 companies (0.83%). Of the NEUTRALS, Sidoti has received investment banking income from 1 company (0.67%).
Of the NEUTRALS, 46 trade above our price targets. Of the NEUTRALS, 44 trade above our price targets. A risk to our price
target is that the analyst’s estimates or forecasts may not be met. This report contains forward-looking statements, which involve
risks and uncertainties. Actual results may differ significantly from such forward-looking statements. Factors that may cause such
a difference include, but are not limited to, those discussed in the “Risk Factors” section in the SEC filings available in electronic
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Action Date Px Rating PTInitiation 9/21/12 42.7 Neutral 45

Appendix Continued

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