IDA050312.pdf

Please see page 5 for rating definitions, important disclosures
and required analyst certifications
Wells Fargo Securities, LLC does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of the
report and investors should consider this report as only a single factor in
making their investment decision.

May 3, 2012

Equit Research
IDACORP, Inc.
IDA: EPS Outlook And Outperform Rating Intact Following Q1

• Summary. IDA reported Q1 EPS of $0.50 and affirmed 2012 guidance of
$3.00-3.15. The company also quantified the downside risk associated with
Hoku, which is minimal, and discussed favorable economic indicators in Idaho
Power’s footprint. We reiterate our Outperform rating and view the share price
weakness on May 3 (IDA -1.4% versus S&P Utilities -0.6%) as a buying
opportunity. No change to 2012-14E EPS of $3.05, $3.20 and $3.30,
respectively, or $44-45 per share valuation range.
• Q1 Report. IDA reported Q1 EPS of $0.50, which compares to our estimate of
$0.52, consensus of $0.60 and $0.60 last year. Lower year-over-year EPS
reflect lower ADITC amortizations, lower weather-related sales and higher O&M.
Separately, management noted that unemployment in Idaho is now below 8%
and customer growth is showing signs of improvement.
• 2012 Outlook. As Q1 results were in line with internal expectations, IDA is
affirming 2012 guidance and underlying assumptions. Most notably, in our
view, Idaho Power continues to expect accelerated ADITC amortizations will be
less than $5mm in order to achieve a 9.5% ROE on year-end Idaho-jurisdictional
equity. This speaks to the strength in underlying earnings and bodes well for the
preservation of the ADITC balance for future use.
• Hoku Comments. Under the current contract with Hoku, IDA expects to
recognize $5.4mm of full-year 2012 revenue not affected by the power cost
adjustment mechanism. This equates to roughly $0.07-0.08 per share after-tax and represents a bad case outcome (no payment – it is our understanding that
Hoku has made some level of payment this year and service remains active). We
view IDA’s new disclosure favorably as the earnings impact is fairly minimal (2%
of EPS). Further, if Hoku stopped making payments, we expect Idaho Power
would accelerate the amortization of ADITCs resulting in a de minimis impact on
EPS. While we prefer that Idaho Power preserves the ADITC balance, this
highlights the merits of IDA’s rate plan. Further, we note that Idaho Power is
not precluded from seeking base rate relief during the '12-14 settlement period.
• Reiterate Outperform. Shares trade at discounts of 11% and 8% on 2013E
and 2014E EPS relative to Small-Cap Regulated Electric Utility peers. We
believe this is excessive in light of above-average earnings visibility, a relatively
strong balance sheet, an attractive service territory, and longer-term rate base
growth opportunities. Reiterate Outperform.

Valuation Range: $44.00 to $45.00
We value IDA under P/E multiple (14.25X multiple on our 13E EPS of $3.20) and
dividend discount analysis. Risks to our valuation include project
delays/cancellations, negative regulatory developments and economic weakness.

Investment Thesis:
Our Outperform rating is largely predicated on valuation considerations. In
addition, we are attracted to IDA's increasingly constructive regulatory
environment, near-term earnings visibility, healthy balance sheet and attractive
service territory.

Outperform

Sector: Regulated Electric Utilities
Market Weight

Earnings Reported

2011A 2012E 2013E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.60 $0.50 0.52 NE
Q2 (June) 0.42 0.49 0.50 NE
Q3 (Sep.) 2.16 1.53 1.50 NE
Q4 (Dec.) 0.18 0.54 0.53 NE
FY $3.36 $3.05 NC $3.20 NC
CY $3.36 $3.05 $3.20
FY P/E 11.7x 12.9x 12.3x
Rev.(MM)$1,027 $1,136 $1,175
Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful V = Volatile, = Company is on the Priority Stock List

Ticker IDA
Price (05/03/2012) $39.35
52-Week Range: $33-43
Shares Outstanding: (MM) 49.9
Market Cap.: (MM) $1,963.6
S&P 500: 1,391.57
Avg. Daily Vol.: 253,096
Dividend/Yield: $1.32/3.4%
LT Debt: (MM) $1,487.6
LT Debt/Total Cap.: 46.1%
ROE: 10.0%
3-5 Yr. Est. Growth Rate: 4.0%
CY 2012 Est. P/E-to-Growth: 3.2x
Last Reporting Date: 05/03/2012
Before Open
Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters

Sarah Akers, CFA, Senior Analyst
[phone] / [e-mail]
Neil Kalton, CFA, Senior Analyst
[phone] / [e-mail]
Jonathan Reeder, Associate Analyst
[phone] /
[e-mail]

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

2

Company Description:
IDACORP (IDA) is the holding company for Idaho Power Company (IPC), a regulated electric utility serving
more than 485,000 customers in southern Idaho, including Boise and surrounding areas, and eastern Oregon.
In addition, IDACORP Financial Services (IFS), a non-utility business, invests in affordable housing tax
credits.

WELLS FARGO SECURITIES, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

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Utilities EQUITY RESEARCH DEPARTMENT

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:

W
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s

F
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S
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c
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,

L
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c
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f
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g
s

WELLS FARGO SECURITIES, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

5

Required Disclosures

$19.00
$21.00
$23.00
$25.00
$27.00
$29.00
$31.00
$33.00
$35.00
$37.00
$39.00
$41.00
$43.00
$45.00
$47.00
$49.00
4/2
8
/
0
9
5/2
6
/
0
9
6/2
3
/
0
9
7/2
1
/
0
9
8/1
8
/
0
9
9/1
5
/
0
9
10
/
1
3
/
0
9
11
/
1
0
/
0
9
12
/
8
/
0
9
1/5
/
1
0
2/2
/
1
0
3/2
/
1
0
3/3
0
/
1
0
4/2
7
/
1
0
5/2
5
/
1
0
6/2
2
/
1
0
7/2
0
/
1
0
8/1
7
/
1
0
9/1
4
/
1
0
10
/
1
2
/
1
0
11
/
9
/
1
0
12
/
7
/
1
0
1/4
/
1
1
2/1
/
1
1
3/1
/
1
1
3/2
9
/
1
1
4/2
6
/
1
1
5/2
4
/
1
1
6/2
1
/
1
1
7/1
9
/
1
1
8/1
6
/
1
1
9/1
3
/
1
1
10
/
1
1
/
1
1
11
/
8
/
1
1
12
/
6
/
1
1
1/3
/
1
2
1/3
1
/
1
2
2/2
8
/
1
2
3/2
7
/
1
2
4/2
4
/
1
2
Se
c
u
r
i
t
y

P
r
i
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e

ID AC OR P, Inc. (ID A) 3-yr. Price PerformanceID AC OR P, Inc. (ID A) 3-yr. Price Performance
Date
Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($)
4/28/2009 Kalton
4/28/2009 NA 2 26.00 27.00 23.73
z 8/6/2009 27.79 2 27.00 29.00 27.79
z 9/10/2009 28.37 2 29.00 30.00 28.37
z 11/10/2009 29.52 2 30.00 31.00 29.52 z 12/14/2009 31.18 2 32.00 33.00 31.54 z 2/25/2010 33.94 2 35.00 36.00 33.89
z 8/6/2010 35.75 2 36.00 37.00 36.05
z 10/29/2010 37.00 2 38.00 39.00 36.80
cz 11/15/2010 36.34 1 40.00 41.00 36.52
z 2/9/2011 38.22 1 41.00 42.00 38.05
z 5/5/2011 38.91 1 42.00 43.00 38.91
z 7/19/2011 39.83 1 43.00 44.00 39.84 z 8/4/2011 36.47 1 41.00 42.00 36.47
dz 10/24/2011 40.51 2 42.00 43.00 40.43
z 11/4/2011 41.33 2 43.00 44.00 40.43
z 1/3/2012 42.41 2 44.00 45.00 41.80
„ 2/22/2012 Akers
c 4/27/2012 40.45 1 44.00 45.00 40.86 Source: Wells Fargo Securities, LLC estimates and Reuters data Symbol Key Rating Code Key d Rating Downgrade ‹ Initiation, Resumption, Drop or Suspend 1 Outperform/Buy SR Suspended c Rating Upgrade „ Analyst Change 2 Market Perform/Hold NR Not Rated
z Valuation Range Change ˆ Split Adjustment 3 Underperform/Sell NE No Estimate
Additional Information Available Upon Request

I certify that:
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issuers discussed; and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
by me in this research report.

ƒ Wells Fargo Securities, LLC maintains a market in the common stock of IDACORP, Inc.
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the next three months from IDACORP, Inc.
ƒ Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from IDACORP, Inc. in the
past 12 months.
ƒ IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client
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ƒ IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client
of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to
IDACORP, Inc.
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

6

ƒ IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client
of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to IDACORP, Inc.
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IDACORP, Inc. in the past 12 months.
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the next three months from an affiliate of IDACORP, Inc.
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Inc. within the past 12 months.
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Inc. in the past 12 months.

IDA: Risks to our valuation include project delays/cancellations, negative regulatory developments and economic weakness.

Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions.
Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability
and revenue of the firm, which includes, but is not limited to investment banking revenue.

STOCK RATING
1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the
next 12 months. BUY
2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market
over the next 12 months. HOLD
3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12
months. SELL

SECTOR RATING
O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the
analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: May 3, 2012
48% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Outperform.
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50% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Market Perform.
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3% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Underperform.
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Important Disclosure for International Clients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain
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clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for,
and should not be relied upon by, retail clients.
WELLS FARGO SECURITIES, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

7

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SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE