Northwest Hydro Update 070113.pdf

Disclosures and Analyst Certifications can be found in Appendix A.
NEW YORK, NY MELVILLE, NY BOSTON, MA MIAMI, FL NAPLES, FL BOCA RATON, FL HOUSTON, TX

520 Madison Avenue y New York, New York 10022 y Telephone: [phone] 800-LAD-THAL

Member: NYSE, NYSE MKT, FINRA, all other principal exchanges and SIPC

NNOOAAAA WWaatteerr SSuuppppllyy UUppddaattee
Industry Update
• In general, water supply levels are near normal in most regions except for Idaho where water supply levels are
below normal. See Table 1 for Water Supply Levels and Table 2 for Run-Off Data.
• Within the Ladenburg Thalmann utility universe (and in order of sensitivity to changes in hydro conditions),
Portland General Electric (POR-$30.59-BUY), Avista Corp (AVA-$27.02-NEUTRAL), and IDACORP (IDA-
$47.76-NEUTRAL) are the companies primarily affected by water supply and run-off as their generation
portfolios all contain substantial hydroelectric assets.
• For POR, the Power Cost Adjustment Mechanism (PCAM) is adjusted to reflect differences between forecast
and actual power costs. The PCAM deadband range is from $15m below to $30m above the baseline of net
variable power costs. Amounts above or below the deadband are shared with customers/shareholders 90/10. An earnings test is also conducted that further mitigates cost pressures with customer surcharge if actual ROE
is no greater than 9.0% and customer refund if actual ROE is no less than 11.0%. We currently assume POR is
near break-even relative to the baseline year-to-date.
• For AVA, under the Energy Recovery Mechanism (ERM), there is a 50% customer sharing when actual power
supply expenses are higher than the amount between $4-$10m, there is a 75% customer sharing when actual
power supply expenses are lower (rebate to customer) than the amount included in base rates between $4-
$10m, AVA receives 100% of the cost or benefit within the $4m “deadband”, and 10% of the cost variance when power supply costs exceed $10m. We currently assume AVA is in the 75/25 company/customer benefit
sharing band due to portfolio optimization year-to-date.
• For IDA, any shortfall (as compared with the median) is generally replaced with purchase power from the open
markets and 95% of those costs are recovered through the PCA mechanism in Idaho. IDA was authorized by the Idaho Public Utility Commission (IPUC) in January 2009 to change its sharing mechanism to 95/5
(previously 90/10 sharing with customers), as well as, the implementation of a forward-looking model forecasting
fuel costs. The below normal hydro conditions for IDA and impact to fuel costs are captured in the recent
filed/approved PCA. Specifically, the $140m PCA increase includes: $42.5m for PCA forecast (captures below
normal hydro conditions), $77.8m for PCA true-up and $20m for revenue sharing. In our opinion, IDA
possesses the least margin sensitivity to changes in hydro conditions relative to other northwest utility peers
considering the PCA mechanics.

Brian J. Russo, CFA 646-432-6312 [e-mail]
Ira Reibeisen
212-409-2051
[e-mail]
Power and Utilities Sector
Industry Update

July 1, 2013
Brian Russo 646.432.6312 INDUSTRY UPDATE

Ladenburg Thalmann & Co. Inc. PAGE - 2 -

NOAA June 2013 Official Forecast

Table 1: NOAA Water Supply Updates –2012/2013
NOAA Water Supply Updates (% of 30-year avg)
Jan Feb Mar pr May Jun Jul
Clark Fork
St Regis 95% 86% 81% 78% 80% 82%
2012 92% 99% 101% 112% 111% 111% 112%
Near Plains 96% 86% 88% 91% 93% 98%
2012 82% 92% 96% 110% 110% 114% 122%
Cabinet Gorge Dam 98% 90% 89% 92% 94% 97%
2012 83% 93% 96% 112% 112% 115% 121%
Spokane
At Spokane 101% 91% 94% 93% 95% 91%
2012 90% 94% 105% 136% 146% 148% 160%
Coeur D'Alene Lake 93% 85% 89% 93% 95% 90%
2012 85% 89% 99% 121% 130% 136% 150%
Clackamas
Estacada 103% 101% 99% 90% 92% 97%
2012 88% 94% 94% 111% 132% 130% 133%
Snake
Brownlee Dam 82% 79% 72% 65% 59% 54%
2012 82% 82% 85% 103% 92% 84% 87%
Hells Canyon 78% 74% 71% 62% 58% 58%
201 79% 80% 79% 100% 91% 92% 94%
April - September

Source: Ladenburg Thalmann & Co, Inc., NOAA, as of June 27, 2013

Table 2: NOAA Monthly Runoff Summary (2012/2013)
Avista (AVA)
Spokane at Spokane JAN FEB MAR APR MAY JUNE JULY JAN FEB MAR APR MAY JUNE JULY
Adjusted Volumes 165 235 788 1,669 1,153 1,011 283 244 267 492 878 775 297
30 Year Avg 356 446 623 870 1,002 548 184 330 426 604 845 899 502
% Avg 46% 53% 126% 192% 115% 184% 154% 74% 63% 94% 111% 90% 68%
Clark Fork at St Regis
Observed Volumes 203 185 312 1,054 1,303 1,200 443 178 161 221 447 1,091 663
30 Year Avg 201 208 292 536 1,215 1,278 489 184 188 272 523 1,107 1,118
% Avg 101% 89% 107% 197% 112% 94% 91% 97% 85% 81% 86% 99% 68%
Portland General (POR)
Clackamas JAN FEB MAR APR MAY JUNE JULY JAN FEB MAR APR MAY JUNE JULY
Observed Volumes 406 239 358 348 280 163 87 173 153 209 271 170 91
30 Year Avg 281 249 238 222 208 136 74 263 234 229 220 199 134
% Avg 144% 96% 150% 157% 204% 120% 117% 66% 66% 91% 124% 86% 78%
IDACORP (IDA)
Snake at Hells Canyon JAN FEB MAR APR MAY JUNE JULY JAN FEB MAR APR MAY JUNE JULY
Adjusted Volumes 1,060 974 1,528 2,166 1,797 1,088 726 677 697 807 707 924 569
30 Year Avg 1,271 1,316 1,849 1,978 2,006 1,682 827 1,090 1,133 1,574 1,688 1,779 1,505
% Avg 83% 74% 83% 110% 109% 65% 88% 61% 62% 51% 42% 52% 44%
(Units: Thousands of Acre-feet)
*References 1971-2000 data for 30 year average
**30 Year average adjusted from 1971-2000 to 1981-2010
2013**
2013**
2013**2012*
2012*
2012*

Source: Ladenburg Thalmann & Co, Inc., NOAA, as of June 27, 2013

Brian Russo 646.432.6312 INDUSTRY UPDATE

Ladenburg Thalmann & Co. Inc. PAGE - 3 -

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, provided, however, that:
The research analyst primarily responsible for the preparation of this research report has or will receive compensation based upon
various factors, including the volume of trading at the firm in the subject security, as well as the firm’s total revenues, a portion of
which is generated by investment banking activities.

RISKS
On top of normal economic and market risk factors that impact most all equities, the utility industry is uniquely at risk to:
Political opposition to rate increases and demand elasticity. The rise in commodity prices and expectations of soaring customer utility
bills have manifested into a political issue in a number of states.
Rising fuel costs could adversely impact financial performance. High and volatile supply costs could negatively impact near-term
results.
Complex utility regulation which could adversely affect the Companies’ results of operations, financial position and cash flows.
The outcome of retail rate proceedings which could have a material impact on the business and is largely outside the Companies’
control.
Current and potential environmental requirements and the incurrence of environmental liabilities, any or all of which may adversely
affect the business and financial results.
Weather variations and demand fluctuations can directly impact results of operations.
STOCK RATING DEFINITIONS
Buy: The stock’s return is expected to exceed 12.5% over the next twelve months.
Neutral: The stock’s return is expected to be plus or minus 12.5% over the next twelve months.
Sell: The stock’s return is expected to be negative 12.5% or more over the next twelve months.

Investment Ratings are determined by the ranges described above at the time of initiation of coverage, a change in risk, or a change
in target price. At other times, the expected returns may fall outside of these ranges because of price movement and/or volatility. Such
interim deviations from specified ranges will be permitted but will become subject to review.

RATINGS DISPERSION AND BANKING RELATIONSHIPS (AS OF 6/30/13)
Buy: 78% (38% are banking clients)
Neutral: 22% (10% are banking clients)
Sell: 0% (0% are banking clients)

Brian Russo 646.432.6312 INDUSTRY UPDATE

Ladenburg Thalmann & Co. Inc. PAGE - 4 -

INVESTMENT RATING AND PRICE TARGET HISTORY

Brian Russo 646.432.6312 INDUSTRY UPDATE

Ladenburg Thalmann & Co. Inc. PAGE - 5 -

COMPANY SPECIFIC DISCLOSURES:
Avista Corp (AVA-$27.02-NEUTRAL)
IDACORP (IDA-$47.76-NEUTRAL)
Portland General Electric (POR-$30.59-BUY)
Ladenburg Thalmann & Co. Inc. does not make a market in Avista (AVA), IDACORP (IDA), Portland General Electric (POR).
Ladenburg Thalmann & Co. Inc. has not had an investment banking relationship with AVA, IDA, POR nor received compensation for
investment banking services in the past 12 months. Neither the Analyst, nor members of the Analyst’s household own any securities
issued by AVA, IDA, POR.

For Company-specific information, please write to Ladenburg Thalmann & Co., Inc, Attention: Research Department, 520 Madison
Ave, New York, NY 10022, or call 212-409-2000 or 800-LAD-THAL

GENERAL DISCLAIMERS
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 & Co. Inc. as of
the date of this report and are subject to change without notice.

Ladenburg Thalmann & Co. Inc. accepts no liability for loss arising from the use of the material presented in this report, except that
this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to
Ladenburg Thalmann & Co. Inc. This report is not to be relied upon in substitution for the exercise of independent judgment.
Ladenburg Thalmann & Co. Inc. may have issued, and may in the future issue, other reports that are inconsistent with, and reach
different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and
analytical methods of the analysts who prepared them and Ladenburg Thalmann & Co. Inc. is under no obligation to ensure that such
other reports are brought to the attention of any recipient of this report.

Some companies that Ladenburg Thalmann & Co. Inc. follows are emerging growth companies whose securities typically involve a
higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Ladenburg
Brian Russo 646.432.6312 INDUSTRY UPDATE

Ladenburg Thalmann & Co. Inc. PAGE - 6 -

Thalmann & Co. Inc. research reports may not be suitable for some investors. Investors must make their own determination as to the
appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status
and risk tolerance.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty,
express or implied, is made regarding future performance. The price, value of and income from any of the securities mentioned in this
report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect
on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency
volatility, effectively assume this risk. Securities recommended, offered or sold by Ladenburg Thalmann & Co. Inc. (1) are not insured
by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and (3) are
subject to investment risks, including the possible loss of some or all of principal invested. Indeed, in the case of some investments,
the potential losses may exceed the amount of initial investment and, in such circumstances; you may be required to pay more money
to support these losses.

The information and material presented in this report are provided to you for information purposes only and are not to be used or
considered as an offer or the solicitation of an offer to sell or to buy any securities mentioned herein. This publication is confidential for
the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party,
without the prior written consent of Ladenburg Thalmann & Co. Inc. Ratings and pricing reflected in this report constitute the current
ratings and pricing as of the date of this report. Ladenburg Thalmann & Co. Inc has no obligation to update, modify or amend this
information or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or
estimate set forth herein, changes or subsequently becomes inaccurate. This report provides general information only.
Member: NYSE, NYSE MKT, FINRA, all other principal exchanges and SIPC

Additional Information Available Upon Request
© 2013 - Ladenburg Thalmann & Co. Inc. All Rights Reserved.