IDA note 11 02 12.pdf

Sidoti & Company, LLC
Member FINRA & SIPC
Required disclosures appear in the Appendix.
Morning Meeting Note

New York, NY 10017
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Sidoti & Company, LLC © Copyright 2012
IDACORP Inc. (IDA-$44.80) NEUTRAL
Raise Price Target; Adjust Earnings Estimates Target: $47
Michael Klein [phone] ([e-mail]) November 2, 2012

Price to Book Value 1.4x
Return on Equity (2014E) 8.9%
LT Debt to Total Capital 47%
5-Year EPS Growth Rate Projection 4%
52-Week Range (NYSE) 45-38
Russell 2000 828
Short Interest (Mil) 1.157
2011 2012E 2013E 2014E
OLD NEW OLD NEW
Mar. $0.60 $0.50A $0.52 $0.50 $0.58 $0.51
June 0.42 0.71A 0.60 0.63 0.62
Sep. 1.15 1.84A 1.51 1.81 1.54 1.87
Dec. 0.18 0.30 0.60 0.32 0.63 0.34

EPS (Cal.) $2.35 $3.34 $3.23 $3.38 $3.32

P/E (Cal.) 13.4x 13.9x 13.5x

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 2012E 2013E 2014E
Rev.(Mil.) $842.9 $926.3 $879.4 $960.4 $1049.8 $1036.0 $1026.8 $1083.0 $1135.2 $1159.7
GAAP EPS $2.02 $2.33 $1.86 $2.17 $2.64 $2.95 $3.36 $3.34 $3.23 $3.32
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.
Raise Target To $47 (From $45) On Improving Local Economy And Growing Dividend, But
Valuation Keeps Us NEUTRAL
• Following Thursday’s 3Q:12 conference call, we have more conviction that the local economy is showing signs of a
sustained pickup as unemployment and the real estate market are improving and the customer base is growing.
• This type of local growth is key to our investment thesis as IDA does not have any significant growth projects on the
horizon aside from two transmission projects that are not expected to be in-service before 2018.
• We also think 3Q:12 results highlight the strong and growing relationship IDA has with the Idaho Public Utilities
Commission (IPUC) as increased rates and other regulatory mechanisms contributed $32.1 million to earnings.
• Thus, we raise our price target to $47 (from $45), which is based on about 14x our revised 2014 EPS estimate of
$3.32. (Our previous $45 target was based on about 13x our prior 2014 EPS estimate of $3.38.)
• However, we remain NEUTRAL and await a better entry point as our target and 3.4% dividend yield imply just 8%
total return from the current levels.

‰ An improving local economy is a positive indicator for IDA, we contend. We identify several positive trends within the
Boise, Idaho economy that should contribute to Idaho Power’s earnings. This improvement is key to our investment thesis as
the utility does not have any significant growth projects planned in the next several years. Unemployment in the Boise region
was 6.9% at the end of September, down from 8.4% at the end of 2011 and 10.0% in early 2011. Furthermore, the National
Association of Home Builders identifies several positive trends in the region including 4.2% growth in housing permits since
bottoming in 2009 and 10.6% increase in home prices since its trough in 2011. Moreover, management’s commentary was
upbeat when discussing business growth in the area. An increase in customer count also should lead to more electricity
Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45

IDACORP INC.
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usage and grow earnings. As seen in Exhibit 1 below, the customer count has steadily grown since 2010, a trend that
management expects to continue. The company expects load growth to remain at or slightly below 1% in 2012 and climb to
about 1% to 1.3% in 2014 and beyond. We still eye IDA’s 2013 integrated resource plan (IRP) as a potential catalyst to the
shares as we think this updated 20-year outlook may identify a faster-than-expected economic pickup and/or the need for
additional base load opportunities.

‰ The dividend, while below the peer group average in terms of yield and payout, is improving. In 2011, management
recommended the board institute a formal 50%-60% payout target. A 10% hike in the quarterly payout in January followed
by another 15% increase in September now indicates a 27% rise over the 2011 payout. We anticipate a 10% increase in
September 2013 and again in September 2014; this implies respective payout ratios of 48% and 52% based on our
estimates.
‰ Quarterly results can be lumpy, but we expect favorable trends to persist. We model revenue growth of 4.8% and 2.2%
in 2013 and 2014, respectively, about in line with our projections for operations and maintenance (O&M) expense growth of
4.6% and 2.4%, respectively. We expect quarterly results to remain lumpy due to several regulatory mechanisms, most of
which affect third-quarter results, as well various offsets to income tax expense. Despite this EPS volatility, we think overall
business trends will improve; we model the operating margin will widen 180 basis points to 24.9% in 2013 and another 30
basis points to 25.2% in 2014, while pre-tax income margin grows 50 basis points to 18.6% in 2014 and 40 basis points to
19.0% over this same time period.
‰ We raise our price target to $47 (from $45) but maintain a NEUTRAL rating. Our outlook balances the improving
environment Idaho Power operates in and the growing dividend with a lack of any significant growth projects. However, we
maintain our NEUTRAL rating and await a better entry point as our revised target and 3.4% dividend yield imply just 8%
upside from the current levels. Our new $47 target is based on about 14x our revised 2014 EPS estimate of $3.32. (Our
previous $45 target was based on about 13x our prior 2014 EPS estimate of $3.38.)

Key Risks Regulation Slowdown in local economy Interest rates

Exhibit 1: September Year-Over-Year Customer Growth
6,407
2,875 2,548
3,201
5,228
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2008 2009 2010 2011 2012
Source: Company reports, Sidoti & Company, LLC
IDACORP INC.
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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 A 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 1,026,756 241,140 254,701 334,019 253,141 1,083,001 257,135 262,481 341,075 274,485 1,135,177 1,159,743
Purchased power 143,769 25,094 36,423 66,141 35,678 163,336 34,277 45,178 71,570 36,748 187,773 32,563 46,533 64,413 39,688 183,198 182,231
Fuel expense 159,673 29,902 19,704 41,195 40,741 131,542 32,751 21,285 55,978 41,148 151,162 33,079 21,924 57,098 44,029 156,128 158,261
Power cost adjustment 51,226 31,306 15,501 (10,189) 1,879 38,497 9,008 (3,211) (42,871) 1,917 (35,157) 9,008 (3,211) (47,158) 1,917 (39,445) (41,802)
Other O&M 293,925 70,661 85,472 84,562 97,945 338,640 78,515 86,005 89,968 88,151 342,639 79,299 90,305 91,767 96,966 358,337 367,090
Energy efficiency programs 44,184 6,711 5,796 18,504 6,652 37,663 4,477 8,084 8,410 6,785 27,756 4,522 8,327 8,662 7,124 28,635 29,057
Depreciation 115,921 29,464 29,693 30,115 30,517 119,789 30,542 29,879 31,607 31,923 123,951 32,242 32,565 32,890 33,219 130,917 136,232
Taxes other than income taxes 24,046 7,211 7,182 7,302 7,200 28,895 8,100 7,849 7,012 7,704 30,665 8,262 8,006 7,152 7,858 31,278 33,230
Other 4,615 1,054 913 607 1,572 4,146 1,127 832 1,002 800 3,761 800 800 800 800 3,200 3,200
Total Operating income- EBIT 198,670 50,091 34,299 71,393 8,465 164,248 42,343 58,800 111,343 37,965 250,451 57,361 57,233 125,450 42,884 282,928 292,244
EBITDA 314,591 79,555 63,992 101,508 38,982 284,037 72,885 88,679 142,950 69,888 374,402 89,603 89,798 158,340 76,104 413,845 428,477
Other income, net 15,165 4,538 5,041 6,010 5,620 21,209 6,593 6,571 2,928 2,342 18,434 2,290 2,263 1,870 2,203 8,627 8,312
Earnings (loss) of unconsolidated equity-method investments 3,008 (1,294) (4,447) 2,085 4,454 798 1,419 (1,928) 1,304 795 - -
Total interest expense, net 75,114 18,959 17,568 17,446 17,553 71,526 17,205 17,436 19,401 19,229 73,271 21,303 19,986 19,879 19,707 80,875 80,730
Pre-tax income 141,729 34,376 17,325 62,042 986 114,729 33,150 46,007 96,174 21,078 196,409 38,348 39,510 107,442 25,380 210,680 219,826
Tax rate -0.5% 14.2% NM NM NM NM 25.1% 23.0% 4.1% 29.5% 14.8% 33.8% 23.8% 14.8% 35.1% 22.4% 22.2%
Income tax (benefit) expense (731) 4,888 (3,652) (45,372) (7,997) (52,133) 8,333 10,569 3,910 6,221 29,033 12,956 9,409 15,902 8,898 47,165 48,732
Net Income 142,460 29,488 20,977 107,414 8,983 166,862 24,817 35,438 92,264 14,858 167,377 25,392 30,101 91,539 16,482 163,515 171,094
Adj. for (income) loss attributable to noncontrolling interests 338 252 (76) (347) 2 (169) 112 (137) (195) (220) - -
Net income attributable to IDA 142,798 29,740 20,901 107,067 8,985 166,693 24,930 35,301 92,069 14,858 167,157 25,392 30,101 91,539 16,482 163,515 171,094
EPS, diluted 2.95 0.60 0.42 2.16 0.18 3.36 0.50 0.71 1.84 0.30 3.34 0.50 0.60 1.81 0.32 3.23 3.32
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% 41.0% 48.2% 51.6%
Shares outstanding, diluted 48,340 49,356 49,516 49,622 49,734 49,558 49,905 49,984 50,080 50,230 50,050 50,381 50,532 50,684 50,836 50,608 51,474
Margin Analysis
O&M as % of Sales 28.4% 28.1% 36.4% 27.3% 42.5% 33.0%32.6% 33.8% 26.9% 34.8% 31.6% 30.8% 34.4% 26.9% 35.3% 31.6% 31.7%
Operating Margin 19.2% 19.9% 14.6% 23.1% 3.7% 16.0% 17.6% 23.1% 33.3% 15.0% 23.1% 22.3% 21.8% 36.8% 15.6% 24.9% 25.2%
EBITDA Margin 30.4% 31.6% 27.2% 32.8% 16.9% 27.7% 30.2%34.8% 42.8% 27.6% 34.6% 34.8% 34.2% 46.4% 27.7% 36.5% 36.9%
Pretax Margin 13.7% 13.7% 7.4% 20.0% 0.4% 11.2% 13.7%18.1% 28.8% 8.3% 18.1% 14.9% 15.1% 31.5% 9.2% 18.6% 19.0%
Net Margin 13.8% 11.7% 8.9% 34.7% 3.9% 16.3% 10.3% 13.9% 27.6% 5.9% 15.5% 9.9% 11.5% 26.8% 6.0% 14.4% 14.8%
YoY Change
Revenue -1.3% -0.6% -2.8% 0.1% -0.6% -0.9% -4.1%8.4% 7.9% 9.8% 5.5% 6.6% 3.1% 2.1% 8.4% 4.8% 2.2%
O&M 0.4% -2.0% 13.8% 17.5% 31.0% 15.2% 11.1% 0.6%6.4% -10.0% 1.2% 1.0% 5.0% 2.0% 10.0% 4.6% 2.4%
Operating profit -2.4% 47.1% -6.3% -19.8% -78.3% -17.3%-15.5% 71.4% 56.0% 348.5% 52.5% 35.5% -2.7% 12.7% 13.0% 13.0% 3.3%
EBITDA 0.1% 27.0% -2.0% -14.1% -43.1% -9.7% -8.4% 38.6% 40.8% 79.3% 31.8% 22.9% 1.3% 10.8% 8.9% 10.5% 3.5%
Pretax profit -3.4% 100.3% -23.4% -19.7% -96.0% -19.1% -3.6% 165.6% 55.0% 2037.8% 71.2% 15.7% -14.1% 11.7% 20.4% 7.3% 4.3%
Net income 14.5% 86.0% -46.5% 60.0% -55.6% 17.1% -15.8% 68.9% -14.1% 65.4% 0.3% 2.3% -15.1% -0.8% 10.9% -2.3% 4.6%
Pro forma EPS, diluted 12.1% 79.6% -48.3% 55.1% -56.4% 13.9% -17.1% 67.3% -14.8% 63.7% -0.7% 0.9% -15.7% -1.8% 9.6% -3.3% 2.9%
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
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IDACORP Inc. (IDA-$44.80) NEUTRAL Target: $47 November 2, 2012

Key Risks Regulation Slowdown in local economy Interest rates

Valuation:
‰ We raise our price target to $47 (from $45). Our outlook balances the improving environment Idaho Power operates in
and growing dividend with a lack of any significant growth projects. However, we maintain our NEUTRAL rating and await
a better entry point as our revised target and 3.4% dividend yield imply just 8% upside from current levels. Our target is
based on about 14x our new 2014 EPS estimate of $3.32 (from about 13x our prior 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 11/02/12, Sidoti provides research on 511 companies, of
which 362 (70%) are rated BUY and 148 (30%) are rated NEUTRAL. Of the BUYS, Sidoti has received investment banking
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Action Date Px Rating PT
Initiation 9/21/12 42.7 Neutral 45

Appendix Continued

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