KeyBanc-Aug-6-2012.pdf

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August 6, 2012
ENERGY: Electric Utilities
Company Update / Estimates Change / Price Target Change
KeyBanc
Capital￿Markets

IDACORP, Inc.:
IDA: Raising 2012 Estimate and Price Target
KeyBanc Capital Markets Inc.
Member NYSE/FINRA/SIPC
Paul T. Ridzon: [phone] Ð [e-mail]
Timothy Yee: [phone] Ð [e-mail]

Rating BUY
Price $42.67
12-Mo. Price Target $46.00
Dividend $1.32
Yield 3.1%
52-Wk. Range $34 - $44
Trading Volume (000)214
Market Cap. (mm)$2,129.2
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 $0.71A --
Prior $0.42 $0.54 --
3Q $2.16 $1.54 --
4Q $0.18 ----
YEAR $3.36 $3.25 $3.20
Prior $3.36 $3.10 $3.20
First Call --$3.23E $3.23E
P/E 12.7x 13.1x 13.3x
ACTION STATEMENT
IDACORP, Inc. (IDA-NYSE) reported strong 2Q12 earnings of $0.71 vs. $0.42 per share
and compared to our estimate of $0.54. 2012 guidance was raised $0.20 per share to
a range of $3.20-$3.35. Dividend commentary was more positive, with a meaningful
increase expected in the foreseeable future. We have raised our 2012 estimate to $3.25from $3.10 per share, and our price target to $46 from $44 per share.
· Price Target: $46.00 from $44.00
· 2012E: $3.25 from $3.10
KEY INVESTMENT POINTS
IDA reported strong 2Q12 earnings of $0.71 vs. $0.42 per share in the prior year
quarter. Earnings were well ahead of our $0.54 estimate and consensus of $0.51.
New rates, higher volume related to hotter weather and more irrigation load, and
improved Bridger Coal results drove the strength of the quarter.
IDA raised its 2012 guidance from $3.00-$3.15 to $3.20-$3.35 per share. Management
indicated that it no longer foresaw the need to amortize any deferred tax credits to
achieve a 9.5% ROE, as permitted under its ID settlement.
We believe dividend discussion on the call was constructive, reiterating the 50-60%
payout objective.
We have raised our 2012 estimate to $3.25 from $3.10 per share, given the quarter's
strength. We are also raising our price target on the shares to $46.00 from 44.00.
VALUATION
Based upon our 2013 estimate, shares of IDA (recently trading at $42.67) trade at a P/E
multiple of 13.3x, representing an 8% discount to the small cap utility average multiple
of 14.5x. We believe shares warrant a modest discount valuation given attractive long-
term investment opportunities and improved dividend outlook balanced against the
current below average (4.1%) yield of 3.1%. Our $46.00 price target represents a P/E
ratio of 14.4x 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.
FOR IMPORTANT DISCLOSURES AND CERTIFICATIONS, PLEASE REFER TO PAGES 3 - 4 OF THIS NOTE.
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DISCUSSION
2Q Earnings Review
As discussed, IDA reported 2Q12 earnings of $0.71 vs. $0.42, well ahead of expectations. Primary drivers of the quarterly decline
include: rate changes (+$0.07); volumes (+$0.25); higher pension (-$0.03); improved Bridger Coal results (+$0.04); higher AFUDC
(+$0.03); and lower utilization of (and reversal of 1Q12) ADITCs (-$0.07). Higher volumes were driven by warmer weather after a
mild 2Q11. Degree days rose 134% to 9% above normal. Additionally, the roll-off of a wet spring in 2Q11 and a dry 2Q12 drove
increased irrigation load.
Following the strong results, IDA raised 2012 earnings guidance to $3.20-$3.35, an increase of $0.20 per share. Management indicated
that it no longer expected to utilize the amortization of Accumulated Deferred Income Tax Credits to earn a 9.5% ROE as permitted
under its Idaho settlement. At the upper end of guidance, IDA would be sharing the upside with customers. Under the settlement IDA
retains all earnings between a 9.5% and 10.0% ROE, 50% between 10.0% and 10.5%, and 25% of earnings above a 10.5% ROE.
We have raised our 2012 estimate to $3.25 from $3.10 per share to reflect the positive 2Q12 results. We are maintaining our 2013
estimate, but note potential upside given the impact a strong 2012 would have on 2013 under the Idaho stipulation in which IDA can
earn a floor ROE of 9.5% based on year-end book equity of the utility.
Dividend Outlook
We view management's dividend discussion on the earnings call constructively. Management indicated that with the Langley Gulch
project completed and now in rates under favorable terms, the Board would be more comfortable in its approach to achieving
the targeted 50-60% payout ratio (based on sustainable earnings). The board meets in September, November and January (the
anniversary of the last 10% dividend increase). We expect that a meaningful dividend increase is likely out of one of these meetings.
Transmission Update
IDA is currently looking at participating as a 21% partner in the proposed Boardman to Hemingway (B2H) transmission line, a 300 mile,
$820 million project. IDA previously targeted a mid-2016 in-service date. Based on siting and permit issues, IDA does not expect the
line will be completed prior to 2018. We note that the delay could result in an earlier need for incremental generation capacity, as the
B2H line was to help import capacity after incremental load growth. We believe IDA's 2013 integrated resource plan bears watching
for a project not unlike the recently-completed Langley Gulch Plant.
Financing Plans
With the completion of Langley, IDA's larger capital needs have been met. IDA indicated that it foresaw no debt issuances for the balance
of the year (but could be opportunistic given the current low rate environment). Additionally, any shares for dividend reinvestment or
employee savings plans will be met with market purchases as of July 1, 2012 (previously IDA issued new shares).
Company NoteAugust 6, 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]230 43.48 45 19.57
HOLD [HOLD]287 54.25 47 16.38
SELL [UND]12 2.27 4 33.33

ENERGY
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY]38 48.10 14 36.84
HOLD [HOLD]41 51.90 17 41.46
SELL [UND]0 0.00 0 0.00

Company NoteAugust 6, 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
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company described in this report.
Company NoteAugust 6, 2012