IDA research note 05-24-12.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.
May 24, 2012 IDA * – NYSE

Rating: Buy
Price: (5/23/12) $38.73
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]

Maintaining Estimates as Potential Large Customer Restructures.

 Polysilicon plant construction stops. In the wake of the price collapse of solar-
grade polysilicon, the major input to photovoltaic panels, Hoku Materials, a
subsidiary of Hoku Corporation (HOKU - $0.15), announced it has laid off ~100
employees and ceased construction work on its nearly completed ~$700 million
manufacturing plant in Pocatello, Idaho. It also said that proceeds from a recently
received loan were insufficient to pay down current liabilities, resume construction,
or start commercial operations. Consequently, several contractors have begun
foreclosure proceedings and Hoku has hired a financial advisor to help it
restructure. IDACORP’s major utility business, Idaho Power, serves Hoku’s
electric load and is one of Hoku’s creditors.
 Utility has some exposure to Hoku. We believe Idaho Power has moderate
exposure to Hoku’s financial woes. However, a stipulated agreement in Idaho
allows the utility to draw on accumulated deferred investment tax credits (ADITC)
if earnings fall below a 9.5% return on year-end equity in that jurisdiction; hence,
ADITC should allow earnings to remain within management’s 2012 EPS guidance
range of $3.00-$3.15. That guidance was premised on using up to $5 million of
ADITC in 2012. Now, given the likelihood of lost revenues and unrecovered costs
from what we assume will be the utility’s termination of electric service to Hoku’s
plant, we assume ADITC may climb above $5 million in 2012, but remain below
the $20 million limit available to Idaho Power this year.
 Revised Hoku contract. In March, the Idaho Public Utilities Commission revised
Idaho Power’s electric supply contract with the plant. Instead of a monthly bill of
~$2 million, Hoku was to pay $0.8 million for the 18-month period of January 1,
2012 through June 30, 2013, to help meet expenses Idaho Power would incur to
be ready to meet Hoku’s eventual expected capacity demand of up to 82 MW.
Hoku also started making a stipulated payment of $3.8 million to IDA, comprised
of $2 million deposit (already provided) and the remaining $1.8 million to be paid
over 18 months at $100,000 per month.
 Maintaining 2012 and 2013 forecasts. As the pre-tax earnings impact of Hoku’s
possible failure for the remaining portion of 2012 (which we estimate to be
$4.3 million for the billing period of April through December) should be offset by
ADITC, our 2012 EPS estimate remains unchanged at $3.08. Similarly, as a
minimum amount of $25 million in ADITC will be available in 2013, our $3.20
estimate for next year also remains unchanged.
 BUY reiterated. 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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