IDACORP, Inc. Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. The combined filing covers IDACORP, Inc. and its principal operating subsidiary, regulated electric utility Idaho Power Company. Financial statements are unaudited; Deloitte & Touche reviewed the interim statements and reported no material modifications needed for GAAP conformity.
Financial performance
Amounts below are in millions of dollars except per-share data. IDACORP consolidated results include Idaho Power and other operations.
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Operating revenues | $358.7 | $360.1 | $703.0 | $676.1 |
| Operating income | $81.5 | $92.4 | $142.2 | $153.5 |
| Net income attributable to IDACORP | $64.3 | $70.0 | $110.5 | $114.9 |
| Diluted earnings per share | $1.27 | $1.38 | $2.18 | $2.27 |
| Operating margin | 22.7% | 25.7% | 20.2% | 22.7% |
- For the six months ended June 30, operating cash flow was $156.0 million, down from $167.2 million. Investing cash outflow was $203.9 million, including $194.1 million of property additions, compared with $128.3 million of additions in the prior-year period. Financing cash inflow was $70.6 million.
- At June 30, IDACORP had $237.9 million of cash and cash equivalents and $25.0 million of short-term investments. Long-term debt was $2.076 billion, with $75 million classified as current maturities; total debt including that current portion was approximately $2.151 billion.
- Under applicable debt covenants, leverage ratios were 44% for IDACORP and 46% for Idaho Power, below the 65% limit. Revolving credit availability was $100 million at IDACORP and $275.8 million at Idaho Power; neither had commercial paper outstanding at June 30.
Changes and operating drivers
- Q2 IDACORP net income fell $5.7 million year over year, and first-half net income fell $4.3 million. Lower usage per customer reduced operating income by $25.9 million in Q2 and $15.8 million in the first half, chiefly reflecting wetter, milder weather and sharply lower irrigation use.
- Customer growth of 2.6% over the 12 months ended June 30 supported earnings; Idaho Power added more than 7,600 customers during the first half. Transmission wheeling revenue also increased, while O&M rose $12.0 million in Q2 and $18.5 million in the first half, reflecting scheduled plant maintenance, compensation accruals, and inflationary costs.
- Lower reported depreciation in 2022 primarily reflected the June 2022 Idaho regulatory order concerning Jim Bridger coal-related assets. The order’s accounting impact increased first-half net income by approximately $9 million, all recorded in Q2.
- Retail sales volumes fell 11% in Q2 and 3% in the first half. For the first half, higher fuel expense and purchased-power expense reflected higher natural gas prices and changes in generation mix; power-cost adjustment mechanisms mitigate much of the earnings impact of power-supply cost volatility.
Outlook, material matters and risks
- Management said its outlook and strategy remained consistent with its 2021 annual report. The filing provides no specific full-year 2022 earnings or EPS guidance. Management expects up to $2.8 billion of capital expenditures over 2022–2026; estimated accrual-basis electric-plant additions are $500–$520 million in 2022, $690–$715 million in 2023, and $1.45–$1.55 billion in 2024–2026.
- Idaho Power expects hydropower generation of 5.0–6.0 million MWh in 2022, below the approximately 7.7 million MWh 30-year average, given reservoir carryover, snowpack, precipitation, and runoff conditions. The company cited elevated and volatile natural-gas prices, capacity needs, supply-chain constraints, inflation, and customer growth as important operating considerations.
- The Idaho Public Utilities Commission approved a $94.9 million increase in Idaho power-cost-adjustment revenues for June 2022–May 2023, reflecting forecast lower-cost hydropower and higher market energy and gas costs. Separately, the approved Jim Bridger rate increase is $18.8 million annually. Idaho Power expects the Bridger order to add approximately $10 million to after-tax net income in 2023; the benefit is expected to decline through 2030.
- Idaho Power plans to cease participation in coal-fired operations at Jim Bridger by 2028 and expects the related coal assets to be fully depreciated and recovered by the end of 2030. It also targets 100% clean energy by 2045. Resource planning identifies potential capacity deficits in 2023–2025; 120 MW of battery storage and a planned 40 MW solar purchase are among the measures described.
- In July 2022, Moody’s downgraded IDACORP’s and Idaho Power’s issuer ratings, while keeping them investment grade and assigning stable outlooks. Management did not expect a material effect on liquidity or debt-market access. A below-investment-grade downgrade could trigger collateral demands; the filing estimates approximately $14.5 million of potential additional collateral under June 30 portfolio conditions.
- Other material matters include a $1.1 million fine and permit-related compliance requirements for 15 hydropower projects; ongoing Hells Canyon Complex relicensing, with $406 million of costs in construction work in progress and annual pre-license costs estimated at $30–$40 million; wildfire claims and mitigation spending; and environmental and permitting uncertainty. Existing loss-contingency accruals were not material, but future accruals could be material.
- Management believes available cash, operating cash flow, credit facilities, and debt-market access will meet capital and debt-service requirements for at least the next 12 months. That assessment depends on assumptions and is subject to regulatory, weather, market, construction, and financing risks.
Important facts for investors to verify
- Whether customer growth, weather-normalized demand, and irrigation usage support earnings recovery after first-half EPS declined year over year.
- How actual hydropower output, fuel and purchased-power costs, and PCA rate recovery compare with management’s 2022 expectations.
- Whether capital spending, capacity procurement, and major transmission projects remain on schedule and within estimates, and how quickly investments can be included in regulated rate base.
- The realized earnings and recovery effects of the Jim Bridger order, and the timing and cost of coal exits and hydropower relicensing.
- Effects of the Moody’s downgrade on borrowing costs, credit access, and collateral requirements, as well as Idaho Power’s ability to maintain covenant headroom.
- Developments in wildfire exposure, environmental permits, customer-owned generation, and other regulatory proceedings that could affect cost recovery or project timing.