IDACORP, Inc. — Q3 2021 Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. This combined filing covers IDACORP, Inc., a holding company, and its principal operating subsidiary, regulated electric utility Idaho Power. Unless specified, financial amounts below are for IDACORP and are unaudited.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $446.9 million | $425.3 million | $1,123.1 million | $1,035.0 million |
| Operating income | $124.2 million | $124.8 million | $277.7 million | $255.8 million |
| Net income attributable to IDACORP | $97.9 million | $102.0 million | $212.8 million | $199.9 million |
| Diluted EPS | $1.93 | $2.02 | $4.20 | $3.95 |
| Operating margin (operating income/revenue) | 27.8% | 29.3% | 24.7% | 24.7% |
For Q3, revenue rose about 5.1%, while IDACORP-attributable net income fell about 4.1%. For the first nine months, revenue increased about 8.5%, net income about 6.4%, and diluted EPS about 6.3%. Idaho Power reported net income of $98.2 million for Q3 versus $100.4 million, and $211.4 million for nine months versus $196.1 million.
- Cash flow: Nine-month operating cash flow was $303.4 million, compared with $284.0 million a year earlier. Capital additions were $196.9 million; net investing cash outflow was $167.6 million. Dividends paid were $108.2 million, and net financing cash outflow was $111.2 million.
- Liquidity: September 30 cash and cash equivalents were $299.7 million, up from $275.1 million at year-end 2020. IDACORP had $100 million available under its revolving facility; Idaho Power had $275.8 million available after amounts identified for other use. Neither had commercial paper outstanding as of the reported dates.
- Debt and capitalization: Long-term debt was approximately $2.00 billion. Covenant-based debt ratios were 43% for IDACORP and 45% for Idaho Power, below the 65% maximum. Moody’s changed both companies’ rating outlooks to negative in June 2021; the filing reports no rating changes and says ratings remained investment grade.
- Dividend: IDACORP’s Q3 dividend was $0.71 per share; management reported increasing the quarterly dividend to $0.75 per share. Nine-month dividends were $2.13 per share.
Material changes and drivers
- Retail revenue increased $18.2 million in Q3 and $78.4 million year to date, supported by customer growth and higher usage. Customer count grew 2.9% over the twelve months to September 30, 2021; retail sales volumes increased 2% in Q3 and 6% year to date.
- Q3 earnings declined as higher transmission wheeling revenue and customer growth were offset by lower FCA revenues, higher net power-supply costs, higher operations and maintenance expense, and increased income tax expense. Year-to-date earnings improved primarily on customer growth, usage, and transmission revenue.
- Lower hydropower and coal generation increased reliance on purchased power and natural gas. Hydropower generation fell 23% in Q3 and 25% year to date; purchased-power volume rose 35% and 34%, respectively. Purchased-power expense increased 32% in Q3 and 33% year to date.
- Transmission wheeling revenue increased $4.7 million in Q3 and $12.8 million year to date, reflecting higher volumes, new long-term agreements, and OATT rates about 10% above prior-year levels.
Outlook, risks, and notable matters
- Outlook and investment: Management maintained its previously stated strategic outlook and expects continued customer growth. It anticipates approximately $2.0 billion of capital expenditures over 2021–2025; estimated 2021 additions to electric plant were $320–$330 million. The company expects 2021 hydropower generation of 5.4–5.7 million MWh, below its 30-year average of approximately 7.7 million MWh.
- Resource needs: Idaho Power issued a request for proposals for up to 80 MW to address projected 2023 peak needs and said this could add roughly $100 million of capital spending over the next couple of years. It expected a further resource solicitation in late 2021 or 2022. The 2021 Integrated Resource Plan was due December 30, 2021.
- Regulatory matters: Idaho approved a $39.1 million net PCA revenue increase for June 2021–May 2022 and a $2.8 million FCA increase. Reviews of both mechanisms were underway. Requests for revised depreciation rates, including an aggregate $3.9 million base-rate increase, were pending. A proposed $30.8 million annualized Idaho rate adjustment related to Jim Bridger depreciation and operations was suspended pending review of possible coal-to-gas conversion and other developments.
- Generation transition and wildfire: The IPUC acknowledged a December 31, 2025 exit date from Valmy Unit 2. Idaho Power sought recovery and tracking mechanisms for Jim Bridger costs. The utility projected five-year incremental wildfire mitigation spending of about $47 million in O&M and $35 million in system-hardening capital; recovery remains subject to regulatory review.
- Key risks: Drought and low hydro output, extreme heat and wholesale power prices, wildfire exposure and related claims, regulatory cost-recovery decisions, environmental rules, project permitting and relicensing, supply-chain and workforce effects of COVID-19 requirements, and financing or credit-rating changes. Idaho Power reported no material derivative credit exposure; a downgrade below investment grade could prompt approximately $17.1 million of collateral demands under current market conditions.
- Commitments and contingencies: New power purchase agreements increased contractual obligations by approximately $218 million over 3–20 years; new transmission purchase agreements added about $16 million over five years. Idaho Power’s share of the Bridger Coal reclamation guarantee was $51.6 million, supported by a $198.8 million trust fund. Reported loss-contingency accruals were not material, though future accruals could be material. The Hells Canyon relicensing outcome, timing, costs, and recovery remain uncertain; $380 million of related costs, including AFUDC, was in construction work in progress.
The interim financial statements received a review by Deloitte & Touche, not an audit. The reviewers reported that they were not aware of material modifications needed for GAAP conformity.
Most important facts for investors to verify
- Whether higher power-purchase costs, low hydropower output, and extreme-weather conditions persist, and how much cost is ultimately recovered through PCA mechanisms.
- Outcomes and timing of PCA/FCA reviews, depreciation-rate requests, and the suspended Jim Bridger rate case.
- Capital spending, new resource procurement, and transmission-project costs and schedules relative to customer growth and financing capacity.
- Credit-rating outlook developments, available liquidity, covenant compliance, and the company’s ability to sustain capital investment and dividends.
- Hells Canyon relicensing requirements and recoverability, wildfire claims and mitigation costs, and exposure to evolving environmental and permitting rules.