IDA102111.pdf

Please see page 4 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.

October 24, 2011

Equit Research
IDACORP, Inc.
IDA: Downgrading To Market Perform On Valuation
Fundamental Outlook and Regulatory Momentum Intact

• Summary. We are downgrading shares of IDA to Market Perform from
Outperform based primarily on valuation considerations--no change to our
fundamental outlook. We are maintaining our 11E-14E EPS of $2.87, $3.05,
$3.10 and $3.20, respectively, and increasing our valuation range to $42-43 per
share from $41-42 per share.
• Thesis. We continue to be attracted to IDA’s growing service territory, solid
balance sheet and cash flow outlook and improving regulatory environment. In
addition, we think the company is poised to raise the annual dividend rate of
$1.20 per share, which has been stagnant for roughly eight years. Our Market
Perform rating primarily reflects valuation considerations as shares trade
roughly in-line with Small-Cap Regulated Electric peers on 12E-14E EPS. We
believe an in-line valuation is reasonable given similar EPS growth prospects
and an average (albeit drastically improved) regulatory environment.
• Regulatory Update. On 9/26 IDA announced a settlement agreement on key
issues in Idaho Power’s pending electric rate case, which we view as another
positive data point on the Idaho regulatory environment. Subsequent to the
crafting of the stipulation, the IRS approved the company’s uniform
capitalization (UCAP) method settlement which provides a one-time $57 million
benefit recognition and approximately $3 million annually going forward. We
believe the UCAP approval opens the door for a more creative solution to the
pending rate case, such as an extension of the current 2009-2011 rate plan,
which we would view favorably. We estimate that extension of the existing rate
plan, which allows amortization of the ADITC balance to achieve a 9.5% ROE on
year-end book equity, could result in $0.05-0.10 EPS upside to our 13E & 14E
EPS.

Valuation Range: $42.00 to $43.00 from $41.00 to $42.00
We value IDA under P/E multiple (apply a 13.5X multiple to our 13E EPS of $3.10),
dividend discount and residual income analyses. Risks to our valuation include
project delays/cancellations, negative regulatory developments and economic
weakness.

Investment Thesis:
We are attracted to IDA's increasingly constructive regulatory environment and
attractive service territory. Our Market Perform rating primarily reflects valuation
considerations.

Market Perform

Sector: Regulated Electric Utilities
Market Weight

Rating Change

2010A 2011E 2012E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.34 $0.60 NC NE
Q2 (June) 0.82 0.42 A NC NE
Q3 (Sep.) 1.39 1.40 1.33 NE
Q4 (Dec.) 0.41 0.45 0.50 NE
FY $2.95 $2.87 NC $3.05 NC
CY $2.95 $2.87 $3.05
FY P/E 13.7x 14.1x 13.3x
Rev.(MM)$1,036 $1,070 $1,151
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 (10/21/2011) $40.51
52-Week Range: $33-41
Shares Outstanding: (MM) 49.6
Market Cap.: (MM) $2,009.3
S&P 500: 1,233.19
Avg. Daily Vol.: 295,500
Dividend/Yield: $1.20/3.0%
LT Debt: (MM) $1,487.4
LT Debt/Total Cap.: 47.6%
ROE: 10.0%
3-5 Yr. Est. Growth Rate: 4.0%
CY 2011 Est. P/E-to-Growth: 3.5x
Last Reporting Date: 08/04/2011
Before Open
Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters

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

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

3

Ca
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So
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c
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:

W
e
l
l
s

F
a
r
g
o

S
e
c
u
r
i
t
i
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s
,

L
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e
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a
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a
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d

c
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m
p
a
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y

f
i
l
i
n
g
s

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

4

Required Disclosures

$18.00
$20.00
$22.00
$24.00
$26.00
$28.00
$30.00
$32.00
$34.00
$36.00
$38.00
$40.00
$42.00
$44.00
$46.00
10
/
1
5
/
0
8
11
/
1
2
/
0
8
12
/
1
0
/
0
8
1/7
/
0
9
2/4
/
0
9
3/4
/
0
9
4/1
/
0
9
4/2
9
/
0
9
5/2
7
/
0
9
6/2
4
/
0
9
7/2
2
/
0
9
8/1
9
/
0
9
9/1
6
/
0
9
10
/
1
4
/
0
9
11
/
1
1
/
0
9
12
/
9
/
0
9
1/6
/
1
0
2/3
/
1
0
3/3
/
1
0
3/3
1
/
1
0
4/2
8
/
1
0
5/2
6
/
1
0
6/2
3
/
1
0
7/2
1
/
1
0
8/1
8
/
1
0
9/1
5
/
1
0
10
/
1
3
/
1
0
11
/
1
0
/
1
0
12
/
8
/
1
0
1/5
/
1
1
2/2
/
1
1
3/2
/
1
1
3/3
0
/
1
1
4/2
7
/
1
1
5/2
5
/
1
1
6/2
2
/
1
1
7/2
0
/
1
1
8/1
7
/
1
1
9/1
4
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1
1
10
/
1
2
/
1
1
Se
c
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i
t
y

P
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IDACORP, Inc. (IDA) 3-yr. Price PerformanceIDACORP, Inc. (IDA) 3-yr. Price Performance
Date
Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($)
10/15/2008 Kalton
10/15/2008 NA 2 31.00 33.00 24.63
z 12/18/2008 29.19 2 30.00 32.00 29.24
z 2/19/2009 24.39 2 26.00 27.00 24.39
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
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:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or
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 or its affiliates intends to seek or expects to receive compensation for investment banking services in
the next three months from IDACORP, Inc.
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.
ƒ Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from
IDACORP, Inc. in the past 12 months.
ƒ Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in IDACORP, Inc.
WELLS FARGO SECURITIES, LLC
IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

5

ƒ Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in
the next three months from an affiliate of IDACORP, Inc.
ƒ Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from an affiliate of IDACORP,
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: October 24, 2011
50% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. Wells Fargo Securities, LLC has provided investment banking services for 41% of its Equity Research Outperform-rated
companies.
47% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Market Perform.
Wells Fargo Securities, LLC has provided investment banking
services for 35% of its Equity Research Market Perform-rated
companies.
2% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Underperform.
Wells Fargo Securities, LLC has provided investment banking
services for 32% of its Equity Research Underperform-rated
companies.

Important Disclosure for International Clients
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WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

6

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About Wells Fargo Securities, LLC
Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of
the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments
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Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2011
Wells Fargo Securities, LLC.

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