Utility Monthly 10-3-11.pdf

Please refer to page 10 of this report for detailed disclosure and certification information.
INDUSTRY UPDATE
Institutional Equity Research

October 3, 2011 Utility Monthly

Prices: (9/30/11)

Industry:
Utilities

James L. Bellessa, Jr., CFA
406.791.7230
[e-mail]

Michael Bates
Research Associate
406.791.7216
[e-mail]

WECC’s Transmission Plan Points to Possible Long-Term Opportunities

• Our BUY-rated utilities are Alliant Energy Corp., IDACORP, Inc., NorthWestern
Corp., Portland General Electric, and Westar Energy.
• Since publishing our last Utility Monthly, we initiated coverage of Great Plains
Energy Inc. (GXP) with a NEUTRAL rating.
• IDACORP announced that it expects its 3Q’11 results to include ~$57 million of
previously unrecognized tax benefits.
• Regulators in Idaho approved Avista Corp.’s rate case settlement in Idaho, and
new settlements were filed in rate cases underway for Xcel Energy, IDACORP,
and Avista’s Washington jurisdiction. Integrys Energy Group updated its rate
request in Wisconsin.
• Otter Tail’s wind tower manufacturing business announced a ~30% headcount
reduction at its manufacturing facility in Ontario.

On September 23rd the Western Electricity Coordinating Council (WECC) issued its
first 10-year regional transmission plan, calling for an estimated $20 billion of new
investment to install 5,500 miles of new high voltage lines in the western United
States. Among the areas specifically highlighted in the plan is the expected highly
congested path from Montana to the Pacific Northwest, which will require significant
upgrades to support a forecasted increase of ~600 MW of generating resources
(primarily wind). Emphasis on the need for new investment to reduce congestion
along this path appears likely to boost the chances that the joint owners of the Colstrip
Transmission System (including Avista Corp., NorthWestern Corp., and Portland
General Electric) will be involved in the upgrades.

Importantly, WECC’s regional plan noted that the construction of either NorthWestern
Corp.’s ‘Mountain States Transmission Intertie (MSTI)’ project or TransCanada’s
(TRP - $40.49) competing ‘Chinook’ project would sharply reduce the need for other
lines to lessen congestion in the region over the next decade (both proposed
transmission lines were designed to enable to transfer of renewable energy out of
Montana toward California).

Unrelated to the 10-year plan but relevant to this topic, WECC also announced last
week that based on its technical planning study the MSTI project was approved to
carry up to 1,500 MW of electricity north-to-south and up to 1,100 MW south-to-north.
Although WECC’s project review and its newly-published transmission plan support
the project’s thesis that the $1 billion MSTI project would be a relatively efficient way to
accommodate additional renewable energy development and relieve congestion, we
continue to see the utility’s target in-service date of 2016 as highly unlikely in light the
siting, regulatory, and renewables-related headwinds MSTI continues to face.

Although the WECC plan provides further evidence that support for a coordinated
long-term transmission plan in the West continues to grow, it is our view that most
utilities in the region are unlikely to begin allocating significant capital or recording
earnings associated with these projects for several years due to the inherently long-
tailed nature of transmission development (compounded by the fact that the western
region lacks the benefits that would come with an independent regional transmission
operator, as well as the fact that much of the development in the region would need to
be coordinated with the planning/budget constraints of the Bonneville Power
Administration).
D.A. Davidson & Co.
2
On September 28th we initiated research coverage of Great Plains Energy, a pure-play
Midwestern electric utility based out of Kansas City, Missouri. The firm has rebranded itself
over the last five years by exiting the competitive energy market and other nonregulated
businesses, and subsequently acquired additional regulated utility operations from Aquila Inc.,
with Black Hills Corp. acting as the buyer of Aquila’s gas utility assets and Colorado-based
electric utility.

Great Plains’ current capital spending plans point to an average rate base and EPS growth of
~4% per year through 2015; the bulk of the utility’s $3.2 billion planned capital expenditures
are geared toward upgrades, maintenance, and the replacement of its existing assets.
Compliance with current EPA regulations will require extensive environmental retrofits at the
utility’s coal-fired plants, which is expected to equate to ~25% of planned capex. Although
these projects are required to meet federal regulations, we expect recovery of/on its
investments to be slower than average due to the relatively challenging regulatory environment
in Missouri.

We rate the shares of Great Plains Energy NEUTRAL, and set a 12-18 month risk-adjusted
target price of $20, which equates to 14.3x our 2012 EPS estimate and roughly matches the
firm’s tangible book value per share. We expect the company’s dividend will be maintained for
the next two years, with the current 4.3% yield roughly matching the average under our
coverage.

On September 14th Xcel Energy’s electric utility subsidiary in New Mexico and Texas
(Southwestern Public Service) announced the filings of a settlement agreement in its current
general rate case in New Mexico. Assuming the settlement is approved by the New Mexico
Public Regulation Commission (NMPRC), the utility will be authorized a $13.5 million (+4.7%)
retail rate increase, which compares to the utility’s original request for a $19.9 million (+6.9%)
increase. The black-box settlement did not include a specific authorized ROE, capital
structure, or rate base. The new rates are expected to go into effect on January 1, 2012.

*****

On September 27th Integrys Energy Group’s Wisconsin Public Service Corporation (WPS)
subsidiary filed an amendment to its general rate case before the Public Service Commission
of Wisconsin (PSCW). The updated request is for an annual electric revenue increase of
$35.2 million and a gas rate decrease of $7.2 million, which compares to the firm’s original
request for a $33.7 million electric rate increase (which had been a limited fuel reopener),
which was increased to $65.5 million in August to reflect expected compliance costs with the
Cross State Air Pollution Rule (CSAPR), which was issued on July 11, 2011 by the EPA.

The recent adjustment to the rate request is driven primarily by reduced energy efficiency
expenditures and a proposal to net its 2010 electric revenue decoupling undercollection
against a forecasted 2011 decoupling overcollection in 2011, rather than recovering the 2010
undercollection as part of its revenue requirement in 2012. The WPSC is expected to issue its
decision in the case in 4Q’11, with new rates going into effect on January 1, 2012.

*****

On September 26th, parties to the general rate case underway for Idaho Power Co. (IDACORP
Inc.) filed a settlement agreement with the Idaho Public Utilities Commission (IPUC), resolving
most of the proceeding’s key contested issues. Under the settlement, the utility would be
allowed a $45.5 million (+4.1%) revenue increase, compared to its original request for a
$71.3 million (+8.5%) increase (these figures exclude net power supply expenses, as much of
the adjustment for these expenses was stripped out of the rate case to be recovered through
its power cost adjustment). The settlement also includes an authorized rate of return of 7.86%
on a rate base value of $2.4 billion, with no authorized capital structure and ROE being
explicitly stated. Some rate case issues (including whether the firm’s pilot decoupling program
(referred to as the Fixed Cost Adjustment) should be continued and the appropriate energy
efficiency rider amount will be addressed outside the settlement. Assuming the settlement is
approved by the IPUC, the new rates are expected to go into effect on January 1, 2012.

*****

GXP Initiation Recap
Regulatory Developments
D.A. Davidson & Co.
3
On September 30th Avista Corp. announced the filing of a multi-party settlement agreement in
its current general rate cases in Washington. Assuming the settlement is approved by the
Washington Utilities and Transportation Commission (WUTC), the utility will be authorized a
$20.0 million (+4.5%) electric rate increase and a $3.75 million (+2.6%) natural gas rate
increase, which compares to the utility’s original requests for increases of $38.3 million
(+8.7%) and $6.2 million (+4.0%), respectively. The settlement does not appear to directly
specify a specifically authorized ROE or capital structure, and as part of the settlement the
utility agreed not to file a new general rate case in Washington before April 1, 2012. The new
rates are expected to go into effect on January 1, 2012.

*****

On September 30th Avista Corp. received approval of the all-party settlement agreement filed
in late August for its current general rate cases in Idaho. The utility was granted a $2.8 million
(+1.1%) electric rate increase and a $1.1 million (+1.6%) natural gas rate increase, which
compares to the utility’s original requests for increases of $9.0 million (+3.5%) and $1.9 million
(+2.8%), respectively. The black-box settlement did not directly specify a specifically
authorized ROE or capital structure. The new rates went into effect on October 1, 2011.

*****

On September 29th, the Hawaii Public Utility Commission (HPUC) denied an application by the
electric utility subsidiaries of Hawaiian Electric Industries for a biodiesel supply contract with
Aina Koa Pono for approximately sixteen million gallons annually of locally-produced biodiesel.
The order stated: “In effect, from a real world, bill-paying perspective, the HECO Companies
seek the commission’s approval to consistently charge affected ratepayers a premium [to
predicted fuel oil prices] for HELCO’s purchase and use of AKP-produced biofuel under the
terms of the twenty-year contract. Such a result is unreasonable and not in the public interest.”
The commission’s denial rendered moot the utilities’ application to establish a biofuel
surcharge to help cover costs.

It appears that the HECO companies will need to go back to the drawing board to weigh how
they will satisfy Hawaii’s renewable portfolio standard (RPS), which calls for the intermediate
attainment of 15% of their generation to be derived from renewable resources by 2015. The
companies had previously testified that they would “not be able to meet the RPS requirements
without using biofuels in existing generating units.”

On September 15th Great Plains Energy issued $400 million of senior notes with a 4.80%
coupon and a 2041 maturity. The notes were issued to refinance $150 million of senior notes
yielding 6.50% maturing in November, as well as to pay down the firm’s short-term debt
balance.

*****

On September 12th Xcel Energy issued $250 million of senior long-term notes with a 4.80%
coupon and a 2041 maturity.

The firm later announced on September 29th that it would be redeeming all of its outstanding
preferred stock on October 31, 2011. Total redemption costs are expected to be $108 million,
which will be financed initially with a combination of cash on hand and short-term debt.

The redemption of the preferred securities appears unlikely to be material to earnings or
overall cap structure, as preferred stock only accounted for 0.6% of Xcel’s capitalization as of
mid-2011. The average yield on the securities was 4.04% per year, with annual dividend
payments totaling $4.2 million per year (equating to roughly $0.01 per share).

*****

Alliant Energy redeemed one series of preferred shares earlier this year, and it is our view
that additional utilities with strong balance sheets may move in this direction to take advantage
of the current low interest rate environment.

Capital Markets Activity
D.A. Davidson & Co.
4
On September 16th, IDACORP, Inc. announced that it expects its 3Q’11 results to include the
recognition of ~$57 million of tax benefits for tax years prior to and including 2009, following
approval from a joint committee of the U.S. Congress. Additionally, there should be 3Q’11 and
4Q’11 benefits for tax years after 2009. Changes to the firm’s uniform capitalization tax
deduction estimate going forward are also expected to produce an estimated $3 million of
additional tax benefit per year in 2012 and beyond. IDACORP expects to update its 2011
earnings guidance range at the time of its 3Q’11 earnings release.

*****

On September 16th Westar Energy, Inc. announced an update to its previously published
2011 earnings guidance range of $1.65-$1.80 per share. Although the increase in expected
ongoing earnings was somewhat clouded by the impact of nonrecurring items (including gains
on asset disposals and the reversal of reserves for legal matters), ongoing guidance increased
$0.10 per share to $1.75-$1.90.

*****

In mid-September Otter Tail Corp.’s wind tower manufacturing subsidiary (DMI Industries)
announced the elimination of 50 positions at its Ft. Erie, Ontario manufacturing plant (~30% of
the total workforce). The firm pointed to a cooling of political support for new wind farms as a
primary driver in the need for the layoffs. At this point it appears no layoffs were announced at
DMI’s plants in North Dakota and Oklahoma. Our current forecast for Otter Tail reflects tough
conditions at DMI, with the Wind Energy segment posting net losses in both 2011 and 2012
(detailed forecasts by segment can be reviewed in our most recent research reports).

Other Developments
D.A. Davidson & Co.
5

According to the National Weather Service (NWS) and as detailed in Table 1, the temperatures
in the third quarter were significantly warmer than average—approaching and in some cases
exceeding the record temperatures recorded in the summer of 2010 in many regions. The
persistently warm temperatures likely provided benefits to electric utilities’ demand, which
should translate to strong margins and earnings in 3Q’11 (other things being equal). As
displayed in Figure 1, the NWS continues to forecast warmer-than-normal temperatures for the
next three months in much of the continental United States, with coastal and northern regions
being the main exceptions. Assuming this forecast proves accurate, the unseasonably mild
temperatures could reduce demand for electricity or natural gas used for heating (other things
being equal) for utilities in these regions, including XEL, LNT, WR, TEG, BKH, and MGEE.

Table 1: Cooling Degree Day Data (CDD) – September & 3Q’11 Totals
September % Dev % Dev 3Q'11 % Dev % Dev
Parent Co. & Utility Location Total v. Avg v. 2010 Total v. Avg v. 2010
ALE - ALLETE, Inc.
Minnesota Power Duluth, MN 32 167% n.m. 304 97% 9%
AVA - Avista Corp.
Avista Utilities Spokane, WA 105 304% 708% 406 21% 12%
BKH - Black Hills Corp.
Black Hills Energy - Colorado Colorado Springs, CO 50 56% -44% 660 104% 22%
Black Hills Power Rapid City, SD 46 -22% 130% 627 27% 36%
Cheyenne Light Fuel & Power Cheyenne, WY 17 -11% -26% 406 76% 29%
GXP - Great Plains Energy, Inc.
Kansas City Power & Light Kansas City, MO 97 -36% -38% 1082 16% -6%
HE - Hawaiian Electric Industries, Inc.
HECO Honolulu, HI 500 1% 5% 1503 0% 5%
HELCO Hilo, HI 340 1% 5% 999 -2% 0%
MECO Kahului, HI 364 -14% -13% 1218 -6% -9%
IDA - IDACORP, Inc.
Idaho Power Co. Boise, ID 215 191% 62% 974 51% 25%
Idaho Power Co. Pocatello, ID 2 -91% -67% 343 3% 18%
LNT - Alliant Energy, Inc.
Interstate Power & Light Cedar Rapids, IA 51 -25% -18% 657 9% 4%
Wisconsin Power & Light Madison, WI 44 -8% 22% 615 48% -1%
MDU - MDU Resources Group, Inc.
Montana-Dakota Utilities Co. Bismarck, ND 13 -57% n.m. 373 1% -7%
MGEE - MGE Energy, Inc.
Madison Gas & Electric Co. Madison, WI 44 -8% 22% 615 48% -1%
NWE - NorthWestern Corp.
NorthWestern Energy Billings, MT 80 82% 135% 668 41% 46%
NorthWestern Energy Sioux Falls, SD 46 -28% 820% 630 14% 10%
NWN - Northwest Natural Gas Co.
NW Natural Portland, OR 114 119% 153% 516 51% 23%
OTTR - Otter Tail Corp.
Otter Tail Power Co. Jamestown, ND 22 -15% n.m. 419 3% 34%
Otter Tail Power Co. Fergus Falls, MN 32 167% n.m. 304 97% 9%
POR - Portland General Electric Co.
Portland General Electric Portland, OR 114 119% 153% 516 51% 23%
STR - Questar Corp.
Questar Corp. Salt Lake City, UT 141 34% -5% 1018 21% 6%
TEG - Integrys Energy Group, Inc.
Wisconsin Public Service Corp. Green Bay, WI 34 -6% 70% 494 46% -4%
WR - Westar Energy, Inc.
Westar Energy, Inc. Topeka, KS 120 -28% -37% 1292 37% 4%
XEL - Xcel Energy, Inc.
PSCo Denver, CO 78 37% -25% 807 51% 17%
NSP-Minnesota Minneapolis, MN 94 68% 840% 803 59% 7%
SPS Clovis, NM 175 7% -34% 1251 42% 30% Source: National Weather Service’s Climate Prediction Center

Figure 1: Oct-Dec 2011 Temperature Forecast
33% to 40% Chance of Above Normal Temperature 33% to 40% Chance of Below Normal Temperature
40% to 50% Chance of Above Normal Temperature 40% or Greater for Below Normal Temperature
50% or Greater for Above Normal Temperature Means Equal Chances for Above, Normal, or Below Normal Temperature Source: National Weather Service Climate Prediction Center
Hot Temperatures Likely D ove
Strong Utility Demand
D.A. Davidson & Co.
6

The upper portion of Chart 1 depicts an overall ~50% advance in the price of FactSet’s market-
weighted index of 100 domestic investor-owned utilities since reaching a trough in early 2009.
The middle portion of the chart depicts the group’s 14.3x P/E ratio on forward year earnings
estimates, reaching above the 5-year average of 13.5x. The bottom panel shows utilities
trading at a 19% premium P/E valuation relative to the S&P 500. Although this contrasts with
the average relative valuation over the last five years (a 5% discount), it represents a return to
the premium accorded to the group prior to the 2009-2010 period and reflects a renewed
interest in yield-bearing securities due to recent market uncertainties.

As shown in the top panel of Chart 2, the sector’s current average dividend yield of 4.0%
remains above the 5-year average of 3.7%. The bottom panel depicts the yield of the utility
group relative to the yield of the S&P 500 is currently at ~1.9x. After a prolonged relative
downtrend, utilities’ relative yields trended upward through 2009 and have continued to trend
sideways at around 2.0x since early 2010.

As depicted in Chart 3, global financial/economic concerns have prompted investors to take a
more defensive stance since mid-2011. The flight to quality has resulted in significant
strengthening of utility dividend yields relative to 10-year Treasuries. Interestingly, the group’s
current yield relative to treasuries matches the peak level of 2.0x seen in December 2008, at
the height of the financial crisis.

150
200
250
300
350
400
FDSAGG United States / Utilities -SEC (FS4700US)
29-Sep-2006 to 30-Sep-2011 (Weekly) High: 388.51 Low: 203.66 Latest: 308.97
Price (USD)
8
10
12
14
16
18 Average: 13.5 High: 17.0 Low: 8.7 Latest: 14.3
Price to Earnings - FY2
'07 '08 '09 '10 '110.6
0.8
1
1.2
1.4
©FactSet Research SystemsData Source: FactSet Aggregates, FactSet Aggregates,
Average: 0.95 High: 1.20 Low: 0.76 Latest: 1.19
Price to Earnings - Relative to S&P 500
Source: FactSet
Current Sector Valuation
Chart 1: Utility Price Index,
Forward P/E Ratios, and P/E
Relative to the S&P 500
D.A. Davidson & Co.
7

2
2.5
3
3.5
4
4.5
5
5.5
6
FDSAGG United States / Utilities -SEC (FS4700US)
29-Sep-2006 to 30-Sep-2011 (Weekly) Average: 3.7 High: 5.5 Low: 2.4 Latest: 4.0
Dividend Yield
'07 '08 '09 '10 '111.2
1.4
1.6
1.8
2
2.2
2.4
2.6
©FactSet Research SystemsData Source: FactSet Aggregates,
Average: 1.85 High: 2.40 Low: 1.29 Latest: 1.92
Dividend Yield - Relative to S&P Composite 1500
Source: FactSet

'07 '08 '09 '10 '110%
50%
100%
150%
200%
250%Utility Yields Relative to 10-Y Treasuries Launch full data release
FDSAGG United States / Utilities -SEC - Dividend Yield / US Treasury Constant Maturity - 10 Year - Yield * 100 [Max: 238.61, Min: 50.50, Last: 201.19]
Source: FactSet
Chart 2: Utility Dividend Yields and
ield Relative to Yield on S&P 500

Chart 3: Utility Dividend Yield
Relative to 10-Year Treasury Bonds
D.A. Davidson & Co.
8

Table 2: D.A. Davidson Utility Coverage Relative Performance
Price Price Ex-Dividend Monthly YTD
12/31/10 9/30/11 in September TR TR
ALE ALLETE Inc. $35.26 $36.63 -6.2% 7.7%
AVA Avista Corp. 22.52 23.85 -6.0% 9.6%
BKH Black Hills Corp. 30.00 30.64 0.1% 5.8%
GXP Great Plains Energy, Inc. 19.39 19.30 -1.3% 2.8%
HE Hawaiian Electric Industries, Inc. 22.79 24.28 1.1% 10.6%
IDA IDACORP Inc. 36.98 37.78 -1.1% 4.6%
ITC ITC Holdings Corp. 61.98 77.43 2.3% 26.6%
LNT Alliant Energy Corp. 36.77 38.68 -4.7% 8.7%
MDU MDU Resources Group, Inc. 20.27 19.19 $0.163 -9.3% -2.9%
MGEE MGE Energy Inc. 42.76 40.67 -3.5% -2.2%
NWE NorthWestern Corp. 28.83 31.94 $0.360 -4.7% 14.5%
NWN Northwest Natural Gas Co. 46.47 44.10 -2.5% -2.3%
OTTR Otter Tail Corp. 22.54 18.30 -11.0% -14.8%
POR Portland General Electric Co. 21.70 23.69 $0.265 -0.7% 12.8%
STR Questar Corp. 17.41 17.71 -5.5% 4.4%
TEG Integrys Energy Group, Inc. 48.51 48.62 -2.9% 4.4%
WR Westar Energy, Inc. 25.16 26.42 $0.320 0.3% 8.8%
XEL Xcel Energy, Inc. 23.55 24.69 $0.260 1.1% 8.1%
Median -2.7% 6.7%
Mean -3.0% 5.9%
$11,577.51 $11,153.98 -4.0% -3.7%
1,257.64 1,131.42 -7.2% -10.0%
783.65 644.16 -11.4% -17.8%
404.99 438.56 0.8% 8.3%
1,158.70 1,262.76 -0.1% 9.0%
1,151.63 1,282.33 1.1% 11.3%
986.33 1,008.53 -4.4% 2.3%
Symbol Company Name
Dow Jones Industrial Average
FactSet U.S. Gas Utilities Index
FactSet U.S. Electric Utilities Index
FactSet U.S. Utilities Index
Dow Jones Utility Average
Russel 2000
Standard & Poors 500
Source: FactSet

As shown in Table 2, FactSet’s broad index of 100 utilities included in the Russell 2000
declined only 0.1% on a total return basis in September, compared to relatively steep declines
in the broad indices. Shares within our universe of mostly small to mid-cap utilities declined
3.0% on average, with the mean decline due in large part to sharp declines in the share prices
of Otter Tail Corp. (-11.0%) and MDU Resources Group (-9.3%), which both operate under
diversified business models and are more exposed to moves in the broader market than fully-
regulated utilities.

Leading our coverage universe from a year-to-date total return perspective are ITC Holdings
Corp., NorthWestern Corp., and Portland General Electric Co., which have risen 26.6%,
14.5%, and 12.8%, respectively, through September 30, 2011. Although each of these firms
carries a different strategic profile, it is our view that their outperformance is partially
attributable to their dividend growth prospects, as investors have sought to reduce risk by
placing more weight on yield-oriented names.

As depicted in Table 3, the mean 2012 price-earnings ratio has risen to 14.1x, up from 13.8x
on September 9th (the pricing date of our last utility monthly). The mean EV/EBITDA ratio
based on our 2012 forecast and the average current dividend yield in our coverage universe
are currently 7.6x and 4.3%, respectively. Otter Tail Corp. sports the highest yield in the
group (currently 6.5%) with a payout ratio of 170% of our 2011 earnings projection.

Relative Performance
D.A. Davidson & Co.
9
Table 3: D.A. Davidson & Co. Utilities Comparison
Price EPS EPS EPS P/E P/E P/E
9/30/11 2010 2011E 2012E 2010 2011E 2012E
ALE1,2,3 ALLETE Inc. N $36.63 $41.00 $1.3 $2.0 4.9% 68% $2.31 $2.60 $2.65 14.6 12.9 12.7 5.3 5.5 8.9 8.2 7.7 8.5% 3.3% 1.3 43.3% 37% 24% 80%
AVA1 Avista Corp. N $23.85 $26.00 $1.4 $2.5 4.6% 64% $1.66 $1.71 $1.92 14.4 13.9 12.4 4.8 5.0 7.3 7.0 6.4 9.1% 2.7% 1.2 49.7% 47% 27% 86%
BKH1,2 Black Hills Corp. N $30.64 $32.00 $1.2 $2.7 4.8% 81% $1.81 $1.80 $2.40 16.9 17.1 12.8 3.4 3.7 8.6 8.2 6.5 6.1% 1.9% 1.6 58.6% 98% 44% 63%
GXP Great Plains Energy Inc. N $19.30 $20.00 $2.6 $6.6 4.3% 66% $1.62 $1.25 $1.40 11.9 15.4 13.8 3.7 3.7 8.1 9.1 8.2 6.6% 2.1% 1.0 57.7% 69% 27% 75%
HE1 Hawaiian Electric Industries, Inc. N $24.28 $24.50 $2.3 $3.8 5.1% 89% $1.21 $1.39 $1.77 20.0 17.4 13.7 5.0 5.6 9.1 8.1 7.2 7.7% 1.3% 1.6 52.1% 36% 22% 68%
IDA1 IDACORP Inc. B $37.78 $44.50 $1.9 $3.4 3.2% 42% $2.95 $2.86 $3.00 12.8 13.2 12.6 4.9 5.2 10.1 9.3 8.0 9.2% 3.1% 1.2 49.9% 43% 24% 82%
ITC1,2 ITC Holdings Corp. N $77.43 $80.00 $4.0 $6.5 1.7% 41% $2.87 $3.31 $4.10 27.0 23.4 18.9 3.4 3.6 14.5 13.1 11.2 14.1% 3.6% 20.7 68.3% 48% 29% 50%
LNT1,2 Alliant Energy Corp. B $38.68 $44.00 $4.3 $7.1 4.4% 55% $2.75 $3.07 $3.13 14.0 12.6 12.3 4.8 4.8 8.2 8.1 7.8 11.5% 3.6% 1.5 46.3% 66% 40% 71%
MDU1,2 MDU Resources Group, Inc. N $19.19 $22.50 $3.6 $5.0 3.4% 51% $1.30 $1.27 $1.46 14.7 15.2 13.2 9.2 10.0 6.5 6.4 5.7 9.1% 3.9% 1.8 34.4% 53% 39% 77%
MGEE1,2 MGE Energy Inc. U $40.67 $37.00 $0.9 $1.3 3.8% 54% $2.43 $2.82 $2.70 16.8 14.4 15.1 8.4 8.2 8.9 7.7 7.9 11.7% 4.7% 1.7 40.4% 32% 24% 88%
NWE1,2 NorthWestern Corp. B $31.94 $36.00 $1.2 $2.1 4.5% 63% $2.03 $2.30 $2.45 15.8 13.9 13.0 4.0 4.4 8.3 7.9 7.4 9.6% 2.7% 2.4 53.0% 68% 37% 84%
NWN1,2 Northwest Natural Gas Co. N $44.10 $46.00 $1.2 $1.9 3.9% 65% $2.58 $2.66 $2.60 17.1 16.6 17.0 5.4 5.4 8.9 8.6 8.7 9.9% 2.8% 1.9 52.1% 26% 16% 134%
OTTR1,2 Otter Tail Corp. N $18.30 $19.00 $0.7 $1.1 6.5% 170% $0.40 $0.70 $0.97 46.0 26.1 18.9 3.7 4.1 8.0 7.9 7.1 3.3% 1.2% 1.2 42.0% 82% 47% 40%
POR1 Portland General Electric Co. B $23.69 $27.00 $1.8 $3.5 4.5% 53% $1.66 $2.01 $2.10 14.3 11.8 11.3 4.8 4.8 7.0 6.6 6.4 10.1% 2.9% 1.2 52.2% 73% 37% 86%
STR1,2 Questar Corp. N $17.71 $20.00 $3.2 $4.3 3.4% 53% $1.12 $1.14 $1.22 15.8 15.5 14.5 8.9 9.7 8.2 7.9 7.6 19.5% 6.4% 2.9 50.3% 25% 19% 128%
TEG1,2 Integrys Energy Group, Inc. N $48.62 $49.00 $3.8 $6.0 5.6% 84% $3.13 $3.23 $3.41 15.5 15.1 14.3 5.8 6.0 7.4 7.7 7.4 8.3% 2.6% 1.6 43.6% 23% 14% 149%
WR1,2 Westar Energy, Inc. B $26.42 $29.50 $3.1 $6.3 4.8% 73% $1.81 $1.75 $1.95 14.6 15.1 13.6 4.4 4.3 8.6 8.3 7.6 8.2% 2.4% 1.2 56.7% 77% 37% 51%
XEL1,2 Xcel Energy, Inc. N $24.69 $26.00 $12.0 $21.9 4.2% 60% $1.62 $1.74 $1.83 15.3 14.2 13.5 4.5 4.5 8.9 8.2 7.7 10.0% 2.9% 1.5 54.5% 61% 33% 72%
Median $2.1 $3.6 4.4% 63% 15.4 15.1 13.5 4.8 4.9 8.4 8.1 7.6 9.2% 2.9% 1.6 51.2% 50% 28% 78%
Mean $2.8 $4.9 4.3% 69% 17.6 15.8 14.1 5.2 5.5 8.6 8.2 7.6 9.6% 3.0% 2.6 50.3% 54% 30% 82%
1D.A. Davidson & Co. makes a market in this security.
2Results as shown exclude the impact of nonrecurrin items discontinued operations.
3For purposes of calculating P/E, P/EBITDA, and EV/EBITDA ratios, the stock price of ALE has been reduced by our $3.00/sh point estimate of the value of ALLETE Properties.
Source: Company reports and D.A. Davidson & Co. estimates
'11E-'13E
CapEx/
Mkt Cap
Debt /
Capital Company Name MC
($B)
Dividend
Yield
EV /
EBITDA
2012E
EV /
EBITDA
2010
ROAA
(ttm)
ROAE
(ttm)Symbol Rating EV
($B)
Price
Target
Payout
Ratio
2011E
EBITDA
/ Interest
2011E
EV /
EBITDA
2011E
P / TBV
EBITDA
Interest
2012E
RCF /
Capex
'11-'13
11E-'13E
CapEx/
EV

D.A. Davidson & Co.
Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • [phone] • [phone] • www.dadavidson.com
Copyright D.A. Davidson & Co., 2011. All rights reserved.
10
Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from the companies
mentioned in this report in the next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L.
Bellessa, Jr., CFA and Michael Bates the research analysts principally responsible for the preparation of this report, will receive
compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson
& Co.’s analysts are not directly compensated for involvement in specific investment banking transactions.
We, James L. Bellessa, Jr., CFA and Michael Bates, attest that (i) all the views expressed in this research report accurately reflect our
personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.

Ratings Information
D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform

D.A. Davidson & Co. Institutional Research Ratings Buy Neutral Underperform
Risk adjusted return potential azbycx Over 15% total return
expected on a risk adjusted
basis over next 12-18 months
>0-15% return potential
on a risk adjusted basis
over next 12-18 months
Likely to remain flat or lose
value on a risk adjusted basis
over next 12-18 months
Distribution of Ratings (as of 6/30/11) Buy Hold Sell
Corresponding Institutional Research Ratings Buy Neutral Underperform
and Distribution 56% 40% 4%
Corresponding Individual Investor Group Ratings Outperform Market Perform Underperform
and Distribution 62% 38% 0%
Distribution of Combined Ratings 56% 40% 4%
Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos.
Institutional Coverage 4% 2% 10%
Individual Investor Group Coverage 0% 10% 0%
Distribution of Combined Investment Banking 4% 3% 10%

Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based
upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria.
Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic
fluctuations and unforeseen changes in the subject company’s fundamentals or business trends.

For a copy of the most recent reports containing all required disclosure information for covered companies referenced in this report,
please contact your D.A. Davidson & Co. representative or call 1-800-755-7848.

Other Disclosures

Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any
action based upon it. Any opinions expressed are based on our interpretation of data available to us at the time of the original
publication of the report. These opinions are subject to change at any time without notice. Investors must bear in mind that inherent in
investments are the risks of fluctuating prices and the uncertainties of dividends, rates of return and yield. Investors should also
remember that past performance is not necessarily an indicator of future performance and D.A. Davidson & Co. makes no guarantee,
express or implied, as to future performance. Investors should note this report was prepared by D.A. Davidson & Co.’s Institutional
Research Department for distribution to D.A. Davidson & Co.’s institutional investor clients and assumes a certain level of investment
sophistication on the part of the recipient. Readers, who are not institutional investors or other market professionals, should seek the
advice of their individual investment advisor for an explanation of this report’s contents, and should always seek such advisor’s advice
before making any investment decisions. Further information and elaboration will be furnished upon request.