IDA-20120613.pdf

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June 13, 2012
ENERGY: Electric Utilities
Company Update
KeyBanc
Capital￿Markets

IDACORP, Inc.:
IDA: Notes from Investor Meetings; Story Remains Intact
KeyBanc Capital Markets Inc.
Member NYSE/FINRA/SIPC
Paul T. Ridzon: [phone] Ð [e-mail]
Timothy Yee: [phone] Ð [e-mail]

Rating BUY
Price $40.52
12-Mo. Price Target $44.00
Dividend $1.33
Yield 3.3%
52-Wk. Range $34 - $43
Trading Volume (000)226
Market Cap. (mm)$2,021.9
Shares Out. (mm)49.90
Book Value/Share $33.35
EPS (Net) Summary
FY Dec 2011A 2012E 2013E
1Q $0.60 $0.50A --
2Q $0.42 $0.49 --
3Q $2.16 ----
4Q $0.18 ----
YEAR $3.36 $3.10 $3.20
First Call --$3.08E $3.21E
P/E 12.1x 13.1x 12.7x
ACTION STATEMENT
After hosting investor meetings with IDACORP, Inc. (IDA-NYSE) management, we
remain positive on the story, particularly given recent underperformance. Topics
of discussion were recent constructive regulatory developments, dividend outlook,
recovering Idaho economy, outlook for two sizable transmission projects andoverstated (in our view) investor concerns around the HOKU solar plant ceasingconstruction activity. We maintain our BUY rating and $44 price target.
KEY INVESTMENT POINTS
We recently traveled with IDA management to meet with investors. We remain positive
on the name, and believe recent underperformance provides a compelling opportunity.
We expect a constructive Idaho order to put the Langley Gulch natural gas plant in
rates in the near future. The staff recommendation was, in our view, positive in that the
revenue requirement was slightly below IDA's request.
Management indicated that the Idaho economy was showing ªgreen shoots,º including
recent declines in unemployment and new construction.
We expect another sizable dividend increase after the last 10% hike, potentially around
the September board meeting, although we note the last increase was in January 2012.
We are maintaining our 2012 and 2013 estimates of $3.10 and $3.20, respectively.
These assume that IDA earns its floor ROE of 9.5%. After our recent meetings, any
changes to our estimates would tend toward an upward bias.
VALUATION
Based upon our 2013 estimate, shares of IDA sell at a P/E multiple of 12.7x,
representing a 10% discount to the small cap utility average multiple of 14.0x.
We believe shares warrant a modest discount valuation given attractive investment
opportunities balanced against a below average (4.2%) yield of 3.3%. Our $44.00 price
target represents a P/E ratio of 13.8x based on our 2013 estimate.
RISKS
We believe the primary risk that could impede the shares from achieving our price target
is any negative regulatory development in Idaho or Oregon that could adversely impact
earnings and cash flows.
DISCUSSION
We recently hosted meetings with IDA's Steve Keen, VP of Finance and Treasurer, and
Larry Spencer, Director of Investor Relations. Key takeaways from the meetings are
summarized below:
FOR IMPORTANT DISCLOSURES AND CERTIFICATIONS, PLEASE REFER TO PAGES 3 - 4 OF THIS NOTE.
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Dividend outlook ± IDA reiterated its intent to achieve a 50- 60% payout ratio of sustainable earnings. In our view, IDA has been
somewhat conservative around the dividend until it had certainty around recovery of its Langley Gulch combined cycle plant investment.
With a final decision around the plant expected shortly, we believe IDA will be in a better position to assess a higher dividend in the
context of this final decision. We note IDA has a September board meeting when we expect the dividend to be a topic. IDA last raised
its dividend in January 2012.
Langley Gulch update ± The Idaho commission staff recently issued its recommended decision about IDA's $59.9 million rate request
around the $400 million 300 MW Langley Gulch plant. The staff recommended all but approximately $1.5 million, which was primarily
related to transmission for a second potential plant at the site and some development costs. Since the transmission for a second plant
is not yet in use, the staff declined to include it in current rate base. Given preapproval of the plant and the relatively straight forward
nature of the single issue ratemaking, we did not expect much contention. We view the staff position as fair to constructive. We believe
the price decline in natural gas makes the plant even more attractive.
Idaho economy ± Southern Idaho, IDA's primary service territory, is seeing a decent recovery. Ada County (where Boise is located)
has seen unemployment drop 130 basis points (April 2012 vs April 2011). IDA indicated that residential construction has started again.
Chobani yogurt recently located a plant in its territory. IDA believes low power pricing and quality of life could drive a rebound in usage
and customer count above the national average.
HOKU plant ceasing construction ± IDA did not appear overly concerned about the HOKU solar plant stalling. We believe the
announcement did not take IDA by surprise given other issues in the solar sector. With regard as to whether this would force IDA to
amortize more ADITC's than the $0-$5 million IDA expected (before HOKU's announcement), we get the sense that among the puts
and takes in that estimate, there were net positives to offset the HOKU impact, including the economic recovery discussed above.
Transmission update ± Investors were interested in the timing of the Boardman to Hemingway (B to H) and Gateway West transmission
projects. The B to H line is slated to be in service in 2016, although transmission projects tend to slip given permitting and right-of-way
difficulties. IDA indicated that if B to H were to slip, then it may need to consider additional generation to maintain reliability. Gateway
West is slated for service in 2020 and remains less of a development focus.
Other capital opportunities ± Aside from Langley Gulch and the large transmission projects, IDA has other capex opportunities. The
Shoshone hydro plant will be uprated to be in service by 2014. We estimate this project will be in excess of $100 million. IDA also has
environmental capex to cover its share of the Jim Bridger, Boardman and Valmy coal plants. Much of this capital will be spent by 2015.
Integrated Resource Plan (IRP) ± IDA must file a biennial IRP to assess its supply needs for the coming 20-year period. IDA is in the
midst of starting this report for release in summer 2013. We expect that, relative to the last plan, economic recovery could pull forward
some of the supply needs. IDA uses Moody's analytics as an input, and Moody's outlook has grown more optimistic since IDA's last IRP.
Balance sheet ± The western power crisis left IDA with a weakened balance sheet, which IDA has slowly rebuilt. The Company has
generally been allowed to earn on a 50% equity capital structure in Idaho, despite being slightly below this. IDA now expects to have
a slightly stronger equity ratio, leaving it over-equitized relative to its regulatory capital structure.
ADITC balance ± As discussed, IDA last expected to use $0-$5 million of ADITC's to achieve a 2012 ROE of 9.5%. It is permitted
to use in 2012 up to $25 million of the $45 million balance ($45 million is eligible in the settlement; the total balance is $70 million).
There is no limit on how much can be used in 2013 and 2014, the last years of the settlement. We believe with some customer growth
IDA is likely to have a portion of the balance left at the end of the settlement, which could set the stage for another extension of the
settlement (which has already been extended once).
Company NoteJune 13, 2012
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KeyBanc Capital Markets Inc. Disclosures and Certifications
IDACORP, Inc. - IDA
IDACORP, Inc. is an investment banking client of ours.
We have received compensation for investment banking services from IDACORP, Inc. during the past 12 months
We expect to receive or intend to seek compensation for investment banking services from IDACORP, Inc. within the next
three months.
During the past 12 months, IDACORP, Inc. has been a client of the firm or its affiliates for non-securities related services.
We have managed or co-managed a public offering of securities for IDACORP, Inc. within the past 12 months.
Reg A/C Certification
The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed in
this research report accurately reflect the research analyst©s personal views about any and all of the subject securities or
issuers; and (2) no part of the research analyst©s compensation was, is, or will be directly or indirectly related to the specific
recommendations or views expressed by the research analyst(s) in this research report.
Three-Year Rating and Price Target History
Rating Disclosures
Distribution of Ratings/IB Services Firmwide and by Sector
KeyBanc Capital Markets
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY]228 44.53 43 18.86
HOLD [HOLD]273 53.32 51 18.68
SELL [UND]11 2.15 4 36.36

ENERGY
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY]38 48.10 15 39.47
HOLD [HOLD]41 51.90 19 46.34
SELL [UND]0 0.00 0 0.00

Company NoteJune 13, 2012
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Rating System
BUY - The security is expected to outperform the market over the next six to 12 months; investors should consider adding the
security to their holdings opportunistically, subject to their overall diversification requirements.
HOLD - The security is expected to perform in line with general market indices over the next six to 12 months; no buy or sell
action is recommended at this time.
UNDERWEIGHT - The security is expected to underperform the market over the next six to 12 months; investors should
reduce their holdings opportunistically.
The information contained in this report is based on sources considered to be reliable but is not represented to be
complete and its accuracy is not guaranteed. The opinions expressed reflect the judgment of the author as of the
date of publication and are subject to change without notice. This report does not constitute an offer to sell or a
solicitation of an offer to buy any securities. Our company policy prohibits research analysts and members of their
families from owning securities of any company followed by that analyst, unless otherwise disclosed. Our officers,
directors, shareholders and other employees, and members of their families may have positions in these securities and
may, as principal or agent, buy and sell such securities before, after or concurrently with the publication of this report.
In some instances, such investments may be inconsistent with the opinions expressed herein. One or more of our
employees, other than the research analyst responsible for the preparation of this report, may be a member of the Board
of Directors of any company referred to in this report. The research analyst responsible for the preparation of this report is
compensated based on various factors, including the analyst©s productivity, the quality of the analyst©s research and stock
recommendations, ratings from investor clients, competitive factors and overall Firm revenues, which include revenues
derived from, among other business activities, the Firm©s performance of investment banking services. In accordance with
industry practices, our analysts are prohibited from soliciting investment banking business for our Firm.
Investors should assume that we are seeking or will seek investment banking or other business relationships with the
company described in this report.
Company NoteJune 13, 2012