IDA note 12 24 12.pdf

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Sidoti & Company, LLC © Copyright 2012

IDACORP Inc. (IDA-$44.23) NEUTRAL
Company Update Target: $47
Michael Klein [phone] ([e-mail]) December 24, 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) 46-38
Russell 2000 848
Short Interest (Mil) 1.301
2011 2012E 2013E 2014E
OLD NEW OLD NEW
Mar. $0.60 $0.50A $0.50 $0.51
June 0.42 0.71A 0.60 0.62
Sep. 1.15 1.84A 1.81 1.87
Dec. 0.18 0.30 0.32 0.34

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

P/E (Cal.) 13.2x 13.7x 13.3x

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.
Local Economy And Load Growth Are Improving But Initial 2013 Integrated Resource Plan Data
Sees No Peak-Hour Deficits Before 2016; Maintain NEUTRAL Rating, $47 Price Target
• We think the local economy continues to improve, fueling increased load growth for Idaho Power.
• This month, yogurt maker Chobani Inc (private) opened a nearly one million square foot plant in Twin Falls;
management expects the plant to employ 400-500 people and use about 4-5 million pounds of milk daily, further
spurring the economy.
• MWh sales increased 1.5% in 3Q:12, fueled largely by residential customer usage. This followed a 13.6% MWh sales
increase in 2Q:12 lead by irrigation sales.
• Even if we look past these near-record level irrigation sales, we note sales to commercial customers climbed 5.8%,
giving us confidence in our 5% revenue growth assumptions for 2013 and 2014 at Idaho Power.
• However, a regulatory filing on Friday indicating the recession and reduced projected load will keep the utility out of
a near-term peak-hour deficit until July 2016 tempers our enthusiasm.
• As such, we await a better entry point as the shares offer just about 10% total return upside to our current $47 price
target and 3.4% dividend yield.
• We maintain our NEUTRAL rating and $47 price target, which is based on about 14x our 2014 EPS estimate of $3.32.

‰ The local economy continues to improve, in our view. Our positive view on the economy is supported by strong
electricity sales growth the past two quarters, and by several businesses moving to the Boise region or expanding their
operations. In addition, through September, customer growth has grown at a 22% CAGR in the past three years, while the
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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unemployment rate stands at 6.5%. The Idaho seasonally adjusted unemployment rate in November fell to 6.8%, the first
time in more than three years this level fell below 7%.
‰ Initial 2013 Integrated Resource Plan (IRP) data indicates no near-term peak-hour capacity deficits until July 2016.
The generation forecast for the updated 20-year outlook found that the impact of the recession and reduced load growth
projections, combined with the previous demand response programs, will not put Idaho Power in a peak-hour capacity-short
position until July 2016. We still view the 2013 IRP as a potential catalyst to the shares if it highlights a faster-than-expected
economic pickup, but we do not expect to see the need for any rate base growth opportunities from adding new base load or
peak-hour generating assets.
‰ We model annual 14% dividend growth in 2013 and 2014. Management has focused on growing the dividend after
keeping it flat from 2004 through year-end 2011. We expect a 10% increase in the quarterly payout in 4Q:13 following by
another 10% increase in 4Q:14. This equates to 48% and 52% payout ratio based on calendar year-end earnings and falls
within management’s target payout ratio of 50%-60%.
‰ We maintain our NEUTRAL rating and $47 price target as we await a better entry point. We value shares of IDA based
on about 14x our 2014 EPS estimate of $3.32 to derive our price target. This multiple is about in line with the industry
average.

Key Risks Regulation Slowdown in local economy Interest rates

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-$44.23) NEUTRAL Target: $47 December 24, 2012

Key Risks Regulation Slowdown in local economy Interest rates

Valuation:
‰ We maintain our NEUTRAL rating and $47 price target as we await a better entry point. We value shares of IDA
based on about 14x our 2014 EPS estimate of $3.32 to derive our price target. This multiple is about in line with the
industry average.

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 12/24/12, Sidoti provides research on 504 companies, of
which 373 (74%) are rated BUY and 131 (26%) 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
PT 11/2/12 44.8 47

Appendix Continued

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