IDACORP, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed April 29, 2021. The combined filing covers IDACORP and its principal subsidiary, Idaho Power. Financial statements are unaudited and were reviewed by the independent accountants. Amounts below are in U.S. dollars; financial figures are in millions unless stated otherwise.
Business context and reporting period
IDACORP is a holding company whose principal business is regulated electric utility Idaho Power, serving southern Idaho and eastern Oregon. Q1 is seasonally less significant than the summer irrigation and cooling season, and management cautions that interim results are not necessarily indicative of full-year results.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Operating revenue | $316.1 | $291.0; up 8.6% |
| Operating income | $61.1 | $51.6; up 18.5% |
| Net income attributable to IDACORP | $44.8 | $37.5; up 19.6% |
| Diluted earnings per share | $0.89 | $0.74 |
| Operating margin | 19.3% | 17.7% |
| Net margin | 14.2% | 12.9% |
| Operating cash flow | $83.7 | $33.8 |
| Capital additions to property, plant and equipment | $77.3 | $73.6 |
Higher earnings mainly reflected customer growth, increased transmission wheeling revenue, and lower other operations and maintenance costs. Idaho Power net income was $44.4 million, compared with $36.8 million. Q1 cash flow from operations increased substantially, with management citing higher earnings, regulatory account movements, pension contribution timing, and working-capital changes. Investing cash outflow was $79.3 million and financing cash outflow was $39.4 million; IDACORP paid $36.4 million in common dividends.
At March 31, 2021, IDACORP had $240.0 million of cash and cash equivalents and $25.0 million of short-term investments. Long-term debt was $2.0 billion. Its covenant leverage ratio was 44%, versus a 65% limit; Idaho Power’s was 46%. Available short-term borrowing capacity was $100.0 million for IDACORP and $275.8 million for Idaho Power, with no commercial paper or credit-facility borrowings outstanding. The companies stated they expected to meet needs for at least the next 12 months through cash, operating cash flow, credit facilities, commercial paper, and debt-market access.
Material changes versus the prior comparable period
- Electric utility revenue rose to $315.6 million from $290.5 million. Retail sales volume increased 2%, with customer growth of 2.9% over the prior 12 months; total customers reached 591,548.
- Transmission wheeling revenue increased $4.1 million, primarily from higher volumes and OATT rates that were about 10% higher. Wholesale energy revenue rose $2.4 million despite lower wholesale sales volume, as average wholesale prices more than doubled.
- Purchased power expense increased $6.8 million and fuel expense increased $3.3 million. Lower hydropower output, more purchases, and elevated natural gas prices contributed; the February 2021 southwest winter storm affected market prices.
- Other O&M expense declined $4.2 million, partly due to cost savings, timing of cloud-seeding activities, COVID-related lower travel and training costs, and the October 2020 closure of the jointly owned Boardman coal plant.
- Hydropower generation fell 11% and total system generation fell 4%; purchased power volume rose 14%. Higher coal generation partly offset lower hydro output.
- Operating cash flow improved from $33.8 million to $83.7 million, but management identified material timing effects in working capital, regulatory balances, and pension contributions.
Outlook, management commentary, risks and unusual items
- Capital and growth: Management expects approximately $2.0 billion of capital expenditures over 2021–2025. Idaho Power’s estimated electric-plant additions are $320–$330 million for 2021, $340–$350 million for 2022, and $1.25–$1.35 billion for 2023–2025. Customer growth and infrastructure needs remain key drivers.
- Generation outlook: Idaho Power expects 2021 hydropower generation of 5.5–7.5 million MWh, below its approximately 7.7 million MWh 30-year average. Hydrology, weather, market prices, and resource availability may affect costs and operations.
- Rates and regulation: Idaho Power filed for a $39.1 million Idaho power-cost-adjustment revenue increase for June 2021–May 2022, citing lower forecast hydro generation, higher PURPA purchase costs, and a smaller customer credit. It also requested a $2.8 million fixed-cost-adjustment increase for the same period. Both were pending as of the report date. Management did not anticipate filing a general rate case in the next 12 months.
- Tax settlement: Based on its estimated full-year Idaho return on equity, Idaho Power recorded no additional ADITC amortization or customer earnings-sharing provision in Q1; $45 million of additional tax credits remained available for future use.
- Pandemic and receivables: Idaho Power reported higher aged receivables and late payments amid COVID-19 customer relief measures and increased its customer-receivable allowance to $5.1 million, or 6.5% of receivables, from 3.1% a year earlier. It expected higher write-offs, while the ultimate pandemic impact remained uncertain.
- Projects and contingencies: The Boardman-to-Hemingway transmission project remained subject to permitting and pending litigation, with a project in-service date expected no earlier than 2026. Hells Canyon relicensing costs were $365 million in construction work in progress; the timing and requirements of a new license remained uncertain, with issuance viewed as more likely in 2023 or later. Wildfire-related claims and other proceedings were disclosed, but the companies said existing claims were not expected to have a material adverse effect and loss-contingency accruals were not material.
- Other commitments and risks: New long-term transmission purchase agreements added about $16 million of obligations over five years, and a replacement PURPA hydropower contract added about $15 million over 20 years. A downgrade below investment grade could trigger additional collateral demands; estimated potential collateral was about $8.2 million under the described portfolio and market conditions.
- Guidance: The filing provides capital and hydropower estimates but no specific full-year earnings or EPS guidance. Management’s strategy and outlook were described as consistent with the 2020 annual report.
Most important facts for investors to verify
- Whether regulators approve the pending $39.1 million PCA and $2.8 million FCA rate requests, and how those adjustments affect customer bills, cash flow, and earnings.
- Hydrological conditions and actual 2021 hydro generation versus the 5.5–7.5 million MWh estimate, including any resulting purchased-power and fuel costs.
- Whether reported cash-flow improvement persists after the disclosed working-capital, regulatory, and pension-contribution timing effects.
- Progress, final cost allocation, permitting, and litigation outcomes for Boardman-to-Hemingway and Gateway West; and the timing, cost, and rate recovery of Hells Canyon relicensing.
- Customer delinquency and uncollectible-account trends, wildfire exposure and claims, and any material changes in environmental or regulatory obligations.
- Funding for the planned capital program and pension contributions, together with continued compliance with debt covenants and access to financing.