IDACORP, Inc. 2013 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2013; the filing also provides unaudited fourth-quarter results. This combined filing covers IDACORP, Inc. and its principal operating subsidiary, Idaho Power Company. Idaho Power is a regulated electric utility serving approximately 508,000 customers in southern Idaho and eastern Oregon.
Financial performance
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| IDACORP operating revenue | $1,246.2 million | $1,080.7 million | +15.3% |
| Operating income | $291.7 million | $242.6 million | +20.3% |
| Net income attributable to IDACORP | $182.4 million | $173.0 million | +5.4% |
| Diluted EPS | $3.64 | $3.46 | +5.2% |
| Operating margin | 23.4% | 22.4% | Higher |
| Net cash from operating activities | $305.5 million | $249.3 million | +22.6% |
| Capital expenditures | $235.3 million | $239.8 million | -1.9% |
| Long-term debt, including current portion | $1,616.3 million | $1,537.7 million | +5.1% |
Year-end cash and cash equivalents were $78.2 million, versus $26.5 million a year earlier. IDACORP and Idaho Power had debt-to-capitalization leverage ratios of 48% and 49%, respectively. Available revolving credit after commercial paper and other identified uses was $70.3 million for IDACORP and $275.8 million for Idaho Power. Credit facilities mature in 2018 after extensions; management reported covenant compliance.
2013 earnings benefited from higher rates, including a full year of Langley Gulch plant rate recovery, greater customer usage during unusually cold and hot weather, and customer growth. The $11.6 million gain on securities sales also contributed. Higher income tax expense and lower allowance for funds used during construction partly offset these benefits. IDACORP’s effective tax rate rose to 28.4% from 16.3% in 2012.
For the fourth quarter, IDACORP reported revenue of $296.2 million, operating income of $37.3 million, net income attributable to IDACORP of $27.6 million, and diluted EPS of $0.55. Comparable 2012 figures were $250.8 million, $37.0 million, $17.9 million, and $0.36, respectively. Quarterly results are seasonal and are not necessarily indicative of full-year performance.
Material changes and operating drivers
- General business electricity sales rose 3.8% to 14.619 million MWh; customer count increased 1.5% to 508,435. General business revenue increased to $1.102 billion from $937.8 million.
- Hydroelectric generation fell to 5.7 million MWh from 8.0 million MWh in 2012, well below the 8.4 million MWh median. Lower water availability increased reliance on thermal generation and purchased power; coal and gas generation rose.
- Purchased power expense increased 12% to $220.6 million and fuel expense increased 35% to $214.5 million. PURPA purchases reached 2.127 million MWh at an average $61.75/MWh.
- IDACORP retrospectively adopted ASU 2014-01 for affordable-housing investments. The change increased reported 2012 net income by $4.3 million and diluted EPS by $0.09; reported historical comparisons reflect the new method.
- IDACORP raised its quarterly dividend to $0.43 per share beginning with the December 2013 payment. The board’s long-term target payout ratio is 50%–60% of sustainable earnings, subject to discretion and restrictions.
Outlook, risks and contingencies
- Management estimated 2014 Idaho Power operating and maintenance expense of $335–$345 million, capital expenditures of $280–$295 million, hydroelectric generation of 5.0–7.0 million MWh, and less than $5 million of additional ADITC amortization. Planned 2014 pension contributions were at least $20 million.
- Estimated Idaho Power capital expenditures for 2014–2018 were $1.47–$1.56 billion. Major projects include the Boardman-to-Hemingway and Gateway West transmission lines, plant upgrades, and system replacements.
- Boardman-to-Hemingway permitting delays and environmental and routing issues push the expected in-service date to 2020 or later. The project’s estimated total cost is $890–$940 million, including AFUDC; Idaho Power’s construction share and final cost recovery remain uncertain. Gateway West estimates for Idaho Power’s share range from $150–$300 million.
- Idaho Power’s Hells Canyon Complex relicensing remains unresolved. Water-quality certifications and Endangered Species Act consultations could impose significant capital and operating costs or affect generation; the company cannot yet estimate the final requirements or costs.
- The IPUC approved a certificate for approximately $130 million of Idaho Power’s Jim Bridger emissions-control investment but declined to provide an early binding commitment to rate-base recovery. Costs for future environmental rules remain uncertain.
- Idaho Power recorded $24.1 million in 2013 under Idaho’s earnings-sharing settlement, including $7.6 million for future customer rate reductions and $16.5 million in additional pension expense. Power-cost adjustment mechanisms recover or refund most power-supply cost variances but can delay cash recovery.
- Other material risks include regulatory decisions and rate recovery, drought and water rights, fuel and wholesale power prices, mandated PURPA purchases and intermittent-resource integration, construction and permitting delays, pension funding, financing and credit ratings, and environmental compliance. The company reported $1.0 billion of regulatory assets, whose recovery depends on continued regulatory approval.
- Legal and regulatory proceedings remain, including unresolved western energy-market “ripple” claims and FERC/WECC compliance matters. Management said current accruals for loss contingencies were not material and did not expect currently alleged reliability violations to have a material adverse effect; outcomes and potential exposure for some matters cannot be estimated clearly.
Important facts for investors to verify
- Whether 2014 rate proceedings and the Idaho power-supply expense normalization application deliver timely recovery without weakening customer affordability or returns.
- Actual hydro conditions, generation mix, purchased-power costs, and the timing of recovery through PCA mechanisms.
- Updated costs, permits, schedules, funding commitments, and regulatory treatment for major transmission and environmental projects.
- The sustainability of earnings growth after excluding the securities-sale gain, unusual weather effects, and the retrospective accounting change.
- Future pension contributions, environmental obligations, and the availability of liquidity and capital while executing the projected investment program.
The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting for both IDACORP and Idaho Power.