IDA research note 06-06-12.pdf

Please refer to pages 2-3 of this report for detailed disclosure and certification information.
* D. A. Davidson & Co. makes a market in this security.
RESEARCH NOTE
Institutional Equity Research

IDACORP, INC.
June 6, 2012 IDA * – NYSE

Rating: Buy
Price: (6/5/12) $39.59
Price Targets: 12-18 month: $48.50
5-year: $56.00

Industry:
Utilities

James L. Bellessa, Jr., CFA
406.791.7230
[e-mail]

Michael Bates
503.603.3045
[e-mail]

Important Langley Gulch Power Plant Rate Case is Pending.

 $400 million gas-fired plant about to commence commercial generation. In
2009, Idaho Power Company (IPC) sought and received a Certificate of Public
Convenience and Necessity (CPCN) to construct the 330 MW Langley Gulch
Power Plant. At that time, and under a newly-enacted law in the state, the Idaho
Public Utilities Commission (IPUC) issued a certificate for the plant and authorized
cost recovery and ratemaking assurances to the utility, including the inclusion of
up to $396.6 million in rate base on a system basis. It is expected the new plant
will go into commercial operation on July 1, 2012.
 Pending rate case decision in Idaho expected in June. On March 2, 2012,
IPC filed an application with the IPUC for a single-issue rate case to increase its
system-wide rate base for Langley Gulch by $390.9 million and to increase its
electric rates in Idaho by 7%, or $59.9 million, effective July 1, 2012. On March 9,
2012, IPC filed an application with the Oregon Public Utility Commission
requesting inclusion of the Langley Gulch power plant in its Oregon-jurisdictional
rate base, with a corresponding annual revenue increase of $3.0 million. A
decision in that case is expected by January 2013.
 Intervenors have weighed in. Four parties in the case, including the IPUC Staff,
have provided comments. The Staff has performed a prudency audit and
recommended to the IPUC a rate base of $389.4 million and an annual revenue
requirement of $58.1 million. While the Staff believes certain expenditures for the
plant should be denied, moved into the next general case, or held for future use,
its recommendation generally coincides with the utility’s request. The other three
intervenors believe the new plant should not have received pre-approval and
should be subject to the general rate case process. Each believes the overall
market outlook for electricity in Idaho and the company’s costs relationships have
changed markedly since the CPCN decision in 2009; and, therefore, a rate
increase of 7% exceeds the percentage hike that would result from a general rate
case.
 Our favorable rating on IDA is premised on a reasonable decision. Before
the end of June, we expect the IPUC will reiterate it was appropriate to use a
single issue rate case approach in its Langley Gulch decision and that IPC is
entitled to a rate increase somewhere between $58 million and $60 million.
Accordingly, we are maintaining our 2012 and 2013 EPS estimates of $3.08 and
$3.20, respectively.
 BUY reiterated. We expect the IPUC’s demonstration of a continuation of its
reasonable approach to rate making will serve as catalyst for the stock price. Our
12-18 month target price of $48.50 equates to ~15.4x the average of our 2012
and 2013 EPS estimates. Over the past ten years, the shares of IDA have been
accorded an average ~14.9x multiple of forward year earnings.
D.A. Davidson & Co.
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Copyright D.A. Davidson & Co., 2012. All rights reserved.
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Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from this company in the
next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L.
Bellessa, Jr., CFA and Michael Bates, the research analysts principally responsible for the preparation of this report, will receive
compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson
& Co.’s analysts are not directly compensated for involvement in specific investment banking transactions.
We, James L. Bellessa, Jr., CFA and Michael Bates, attest that (i) all the views expressed in this research report accurately reflect our
personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.

Ratings Information

D.A. Davidson & Co. Institutional Research Ratings Buy Neutral Underperform
Risk adjusted return potential azbycx
Over 15% total return
expected on a risk adjusted
basis over next 12-18 months
>0-15% return potential
on a risk adjusted basis over next 12-18 months
Likely to remain flat or lose
value on a risk adjusted basis over next 12-18 months
Distribution of Ratings (as of 3/31/12) Buy Hold Sell
Corresponding Institutional Research Ratings Buy Neutral Underperform
and Distribution 58% 38% 4%
Corresponding Individual Investor Group Ratings Outperform Market Perform Underperform
and Distribution 42% 58% 0%
Distribution of Combined Ratings 56% 40% 4%
Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos.
Institutional Coverage 3% 2% 0%
Individual Investor Group Coverage 0% 7% 0%
Distribution of Combined Investment Banking 2% 3% 0%

D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform
D.A. Davidson & Co.
Two Centerpointe Drive, Suite 400  Lake Oswego, Oregon 97035  [phone]  [phone]  www.dadavidson.com
Copyright D.A. Davidson & Co., 2012. All rights reserved.
3
Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based
upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria.
Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic
fluctuations and unforeseen changes in the subject company’s fundamentals or business trends.

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