Wells-Fargo-Aug-3-2012.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.

u ust 3, 2012

Equit Research
IDACORP, Inc.
IDA:Raising 2012E Following Guidance Update--Nudging Up 2013-14E

• Summary. On 8/2, IDA reported strong Q2 results (due, in large part, to
favorable weather impacts) and raised 2012 EPS guidance to $3.20-3.35 from
$3.00-3.15. We are increasing our 2012-14E EPS to $3.27, $3.23, and $3.35 from
$3.05, $3.20, and $3.30. Our 12-18 month valuation range is $45-47 per share
(from $45-46). Reiterate Outperform.
• 2012 Guidance. IDA increased 2012 EPS guidance to $3.20-3.35 from $3.00-3.15. The improved outlook reflects strong year-to-date results including the
effect of favorable weather conditions on irrigation sales. IDA does not plan to
amortize additional ADITCs in 2012 (previous guidance $0-5MM).
• EPS Outlook. We are increasing our 2012E EPS to $3.27 from $3.05 reflecting
higher (largely weather-related) sales. We are also nudging up our 2013-14E EPS
to $3.23 and $3.35 reflecting (1) slightly higher year-end equity levels at Idaho
Power and (2) the planned use of market purchases rather than stock issuances
to satisfy the dividend reinvestment, stock purchase, and employee plans (we
previously assumed $12.5MM annual equity issuances under the plans). Our
2013-14E are premised on Idaho Power’s 2012-14 rate plan and assume ADITC
usage of $14MM and $25MM, respectively. Our 2015E EPS, which assumes a
reversion to traditional rate parameters, remains $3.35 as the benefit of a lower
share count is offset by lower transmission-related AFUDC.
• Resource Update. IDA believes an in-service date for the Boardman-to-
Hemingway (B2H) transmission line prior to 2018 is unlikely. We view this as a net negative as transmission represented the next leg of rate base growth. That
said, the company could have other resource needs, such as a second unit at
Langley Gulch, to satisfy load growth in light of the B2H delay. Idaho Power will
determine if/when additional resources are needed and explore various
alternatives in the 2013 IRP. While we prefer that additional rate base growth
opportunities materialize in 2014-16, we highlight that a measured capex
outlook results in significant financial flexibility.
• Reiterate Outperform. IDA offers a relatively low-risk regulated strategy with
above-average earnings visibility, a growing service territory, constructive
regulatory relationships, and what we view as a strong balance sheet. We believe
the discounted valuation is an attractive entry point (shares trade at 10-12%
discount to peers on 2013-14E and 7-10% discount on underlying 2013-14E EPS
power). While IDA’s 3.15% dividend yield is below the 3.9% peer group median,
we project 10% annual DPS growth through 2016 and we think IDA could pursue
a more-aggressive dividend growth timeline (next board meeting in September).

Valuation Range: $45.00 to $47.00 from $45.00 to $46.00
We value IDA under P/E multiple (14.0X multiple on our 14E EPS of $3.35) and
dividend discount analysis. Risks to our valuation include project
delays/cancellations, negative regulatory developments and economic weakness.

Investment Thesis:
Our Outperform rating is largely predicated on valuation considerations. In
addition, we are attracted to IDA's increasingly constructive regulatory
environment, near-term earnings visibility, healthy balance sheet and attractive
service territory.

Outperform

Sector: Regulated Electric Utilities
Market Weight

Earnings Estimates Revised Up

2011A 2012E 2013E
EPS Curr. Prior Curr. Prior
Q1 (Mar.) $0.60 $0.50 NC NE
Q2 (June) 0.42 0.71 0.49 NE
Q3 (Sep.) 2.16 1.52 1.53 NE
Q4 (Dec.) 0.18 0.54 NC NE
FY $3.36 $3.27 3.05 $3.23 3.20
CY $3.36 $3.27 $3.23
FY P/E 12.7x 13.0x 13.2x
Rev.(MM)$1,027 $1,164 $1,167
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 (08/03/2012) $42.53
52-Week Range: $33-44
Shares Outstanding: (MM) 50.1
Market Cap.: (MM) $2,130.8
S&P 500: 1,389.62
Avg. Daily Vol.: 230,756
Dividend/Yield: $1.32/3.1%
LT Debt: (MM) $1,573.5
LT Debt/Total Cap.: 47.2%
ROE: 10.0%
3-5 Yr. Est. Growth Rate: 4.0%
CY 2012 Est. P/E-to-Growth: 3.3x
Last Reporting Date: 08/02/2012
Before Open
Source: Company Data, Wells Fargo Securities, LLC estimates, and Reuters

Sarah Akers, CFA, Senior Analyst
[phone] /
[e-mail]
Neil Kalton, CFA, Senior Analyst(314) 875-2051 / [e-mail] 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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IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

3

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W
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F
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,

L
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c
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f
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s

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

4

Required Disclosures

$24.00
$26.00
$28.00
$30.00
$32.00
$34.00
$36.00
$38.00
$40.00
$42.00
$44.00
$46.00
$48.00
7/2
8
/
0
9
8/2
5
/
0
9
9/2
2
/
0
9
10
/
2
0
/
0
9
11
/
1
7
/
0
9
12
/
1
5
/
0
9
1/1
2
/
1
0
2/9
/
1
0
3/9
/
1
0
4/6
/
1
0
5/4
/
1
0
6/1
/
1
0
6/2
9
/
1
0
7/2
7
/
1
0
8/2
4
/
1
0
9/2
1
/
1
0
10
/
1
9
/
1
0
11
/
1
6
/
1
0
12
/
1
4
/
1
0
1/1
1
/
1
1
2/8
/
1
1
3/8
/
1
1
4/5
/
1
1
5/3
/
1
1
5/3
1
/
1
1
6/2
8
/
1
1
7/2
6
/
1
1
8/2
3
/
1
1
9/2
0
/
1
1
10
/
1
8
/
1
1
11
/
1
5
/
1
1
12
/
1
3
/
1
1
1/1
0
/
1
2
2/7
/
1
2
3/6
/
1
2
4/3
/
1
2
5/1
/
1
2
5/2
9
/
1
2
6/2
6
/
1
2
7/2
4
/
1
2
Se
c
u
r
i
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ID AC OR P , Inc. (ID A) 3-yr. P rice P erform anceID AC OR P , Inc. (ID A) 3-yr. P rice P erform ance
Date
Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($) 7/28/2009 Kalton
7/28/2009 NA 2 26.00 27.00 27.37
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
dz 10/24/2011 40.51 2 42.00 43.00 40.43 z 11/4/2011 41.33 2 43.00 44.00 40.43
z 1/3/2012 42.41 2 44.00 45.00 41.80
„ 2/22/2012 Akers
c 4/27/2012 40.45 1 44.00 45.00 40.86 z 6/20/2012 41.00 1 45.00 46.00 41.00
Source: W ells 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
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IDACORP, Inc. EQUITY RESEARCH DEPARTMENT

5

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IDA: Risks to our valuation include project delays/cancellations, negative regulatory developments and economic weakness.

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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.

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Utilities EQUITY RESEARCH DEPARTMENT

6

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