Ladenburg-11-7-2011.pdf

Brian Russo 646.432.6312 IDACORP (IDA)
Year Ending 31 December 2008 2009 2010 2011E 2012E 2013E
FINANCIAL SUMMARY
EPS 2.17 2.64 2.95 3.40 3.02 3.10
P/E ratio 19.06 15.68 13.99 12.16 13.69 13.35
EBITDAPS 6.45 6.66 6.51 6.14 7.61 7.87
P/EBITDAPS 6.41 6.21 6.35 6.74 5.43 5.25
Free CFPS -2.36 0.69 -0.68 -1.27 0.09 1.66
P/Free CFPS -17.52 60.02 -60.81 -32.45 450.14 24.97
DPS 1.20 1.20 1.20 1.20 1.50 1.73
Dividend yield 2.9% 2.9% 2.9% 2.9% 3.6% 4.2%
Dividend payout ratio 55.3% 45.5% 40.6% 35.3% 49.7% 55.7%
BVPS 28.80 29.71 31.77 33.72 35.33 36.70
P/BV PS 1.44 1.39 1.30 1.23 1.17 1.13
Dilluted Shares Out 45,379 47,182 48,340 48,940 49,540 49,540
Enterprise value 3,050, 137 3,306,775 3,257,502 3,476,323 3,521,283 3,524,738
EV/Sales 3.18 3.15 3.14 3.10 2.89 2.82
EV/EBITDA 10.42 10.52 10.35 11.58 9.34 9.04
EV/EBIT 16.01 15.06 15.02 17.16 13.22 12.99
INCOME STATEMENT (USDm)
Revenues 960,414 1,049,800 1,036,029 1,120,689 1,217,712 1,251,210
Gross margin 190,667 203,583 198,670 180,851 254,224 263,048
Operating EBITDA 292,753 314,209 314,591 300,250 377,204 389,718
Depreciation & Amortization 102,086 110,626 115,921 119,399 122,981 126,670
EBIT 190,501 219,547 216,843 202,595 266,417 271,241
Interest expense 73,056 72,810 75,114 67,978 74,653 74,653
Net income 98,414 124,350 142,798 166,286 149,576 153,339
Net income per share 2.17 2.64 2.95 3.40 3.02 3.10
CASH FLOW (USDm)
Cash flow from operations 136,513 284,425 305,400 262,677 269,549 277,001
Cash flow from investing (202,824) (242,405) (328,334) (325,000) (265,000) (195,000)
Capital expenditures 243,544 251,937 338,252 325,000 265,000 195,000
Cash flow from financing 67, 173 2,139 198,624 (129,128) (24,710) (85,457)
Common dividends (54,239) (56,820) (57,872) (58,728) (74,310) (85,457)
Free cash flow (107,031) 32,488 (32,852) (62,323) 4,549 82,001
BALANCE SHEET (USDm)
Cash and marketable sec 8,828 52,987 228,677 37,226 17,065 13,609
Total assets 4,022,845 4,238,727 4,676,055 4,608,388 4,668,246 4,661,121
Total debt/lease 1,183,451 1,409,730 1,488,287 1,490,859 1,490,859 1,490,859
Total liabilities 2,715,974 2,905,637 3,140,071 3,020,071 3,020,071 3,020,071
Shareholders' equity 1,306,871 1,401,544 1,535,984 1,650,250 1,750, 116 1,817,999
RA TIO ANALYSIS
Sales growth(%) 9.2% 9.3% -1.3% 8.2% 8.7% 2.8%
Gross margin/sales(%) 19.9% 19.4% 19.2% 16.1% 20.9% 21.0%
EB IT/Assets 4.7% 5.2% 4.6% 4.4% 5.7% 5.8%
CFO/Assets 3.4% 6.7% 6.5% 5.7% 5.8% 5.9%
ROA 2.4% 2.9% 3.1% 3.6% 3.2% 3.3%
ROE 7.5% 8.9% 9.3% 10.1% 8.5% 8.4%
Total debt/total capital 47.5% 50.1% 49.2% 47.5% 46.0% 45.1%
Total debt/EBITDA 4.0 4.5 4.7 5.0 4.0 3.8
EBITDA/interest expense 4.0 4.3 4.2 4.4 5.1 5.2
FFO/Debt 20.2% 20.5% 17.6% 18.1% 18.6%
RA TE BASE AND SEGMENT ANAL YSIS1
Implied Rate Base2 $ 2,700,403.03 $ 2,842,422.44
Implied Regulatory Equity Ratio2 51.0% 51.0%
Implied Earned ROE2· 3 10.0% 10.0%
Implied Utility EPS $2.79 $2.94
Financial, Ida-West, Holdco $0.03 $0.03
AFUDC/other $0.18 $0.11
Consolidated IDA EPS4 $3.00 $3.08
1 2010 and 2011 earnings based on previous settlement that enables ldapower to eam an ROE of at last 9.5% on year-end shareholderequity
1 2012 rate structure pending outcome of rrid-2011 general rate case filing
2 2012/2013 ROE and Equity ratio calculation based on ID and OR jurisdictional weighted average
3 2012 average rate based includes partial-year of $397m Langley Gluch with COD expected mid-year 2012.
4 Rate base analysis and segment EPS for presentation only and may differ from actual EPS forecasts
Ladenburg Thalmann & Co. Inc. PAGE - 2 -
Brian Russo 646.432.6312 IDACORP (IDA)
APPENDIX A: IMPORTANT RESEARCH DISCLOSURES
ANALYST CERTIFICATION
I, Brian Russo, attest that the views expressed in this research report accurately reflect my personal views about the subject security
and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or
views expressed in this research report.
The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon
various factors, including the firm's total revenues, a portion of which is generated by investment banking activities.
COMPANY BACKGROUND
Headquartered in Boise, Idaho, IDACORP, Inc., (IDA) is a holding company formed in 1998 that is primarily engaged in the
generation, transmission, distribution, sale and purchase of energy. IDA serves over 466,000 retail customers across its 24,000sq
mile service territory in both Idaho and Oregon, and owns approximately 3,267MW of generating capacity. IDA's principal operating
subsidiary is Idaho Power Company (IPC). The company's unregulated utilities include IDACORP Financial (IFS) that invests in
affordable housing and real estate and Ida-West Energy Company (Ida-West) that operates small hydroelectric generation projects.
VALUATION METHODOLOGY
We value equities utilizing a multi-faceted approach which includes; sum-of-the-parts, net asset value, discounted cash flow, leading
P/E, and EV/EBITDA.
RISKS
On top of normal economic and market risk factors that impact most all equities, Idacorp (IDA) is uniquely at risk to:
Because of IPC's predominantly hydroelectric generating base and heavy reliance on hydroelectric generation, which can be
adversely affected by weather, reduced hydroelectric generation can reduce revenues and increase costs.
Continuing declines in stream flows and over-appropriation of water in Idaho may reduce hydroelectric generation and revenues and
increase costs.
Load growth in IPC's service territory due to customer growth and demand for energy exposes it to greater market and operational risk
as increased reliance on purchased power to meet load requirements could increase costs and reduce earnings and cash flows.
IPC's reliance on coal and natural gas to fuel its generating facilities exposes it to risk of increased market prices, which could
increase costs and reduced earnings.
Changes in temperature and precipitation can reduce power sales and revenues.
Climate change could affect customer demand and hydroelectric generation and lead to restrictions on generation resources.
If Idaho Public Utility Commission (IPUC), the Oregon Public Utility Commission (OPUC) or the Federal Energy Regulatory
Commission (FERC) grant less rate recovery in rate case filings than IPC needs to cover the costs of providing services, financial
results could be adversely impacted and economic expansion may be limited.
Conditions that may be imposed in connection with hydroelectric license renewals may require large capital expenditures and reduce
earnings and cash flows.
The cost of complying with environmental regulations related to air quality, water quality, natural resources and health and safety can
increase capital expenditures and operating costs and reduce earnings and cash flows.
IDACORP and its subsidiaries are subject to costs and other effects of legal and regulatory proceedings, settlements, investigations
and claims, including those that have arisen out of the western energy situation.
IPC's business is subject to substantial governmental regulation and may be adversely affected by increased costs resulting from, or
liability under, existing or future regulations or requirements.
Increased capital expenditures can significantly affect liquidity.
As a holding company, IDACORP does not have its own operating income and must rely on the upstream cash flows from its
subsidiaries to pay dividends and make debt payments.
A downgrade in IDA's credit ratings could negatively affect the company's ability to access capital and increase their cost of
borrowing.
Adverse results of income tax audits could reduce earnings and cash flows.
Employee workforce factors, including the loss or retirement of key personnel, availability of qualified personnel and an aging
workforce, could increase costs and reduce earnings.
STOCK RATING DEFINITIONS
Ladenburg Thalmann & Co. Inc. PAGE - 3 -
Ladenbo'g Th;knarn & Co. Inc. ratings fer IDA (IDACORP INC)
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Brian Russo 646.432.6312 IDACORP (IDA)
COMPANY SPECIFIC DISCLOSURES:
Ladenburg Thalmann & Co. Inc. does not make a market in subject company. Ladenburg Thalmann & Co. Inc. has neither had an
investment banking relationship with, nor received investment banking fees from the subject company in the past 12 months. Neither
the Analyst, nor members of the Analyst's household own any securities issued by the subject Company.
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Information and opinions presented in this report have been obtained or derived from sources believed by Ladenburg Thalmann & Co.
Inc. to be reliable. The opinions, estimates and projections contained in this report are those of Ladenburg Thalmann as of the date of
this report and are subject to change without notice.
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