IDACORP, Inc. — Q3 2023 Form 10-Q
Business and period: IDACORP is a holding company whose principal subsidiary, Idaho Power, is a regulated electric utility serving southern Idaho and eastern Oregon. This unaudited report covers the quarter and nine months ended September 30, 2023; comparisons are with the same 2022 periods. Results are seasonal, and interim performance is not necessarily indicative of full-year results.
Financial performance
Amounts below are in millions of dollars except per-share data. IDACORP consolidated results are shown unless otherwise noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $510.9 | $518.0 | $1,354.4 | $1,221.0 |
| Operating income | $126.3 | $128.2 | $276.7 | $270.4 |
| Net income attributable to IDACORP | $105.3 | $106.4 | $229.9 | $216.9 |
| Diluted earnings per share | $2.07 | $2.10 | $4.53 | $4.28 |
| Operating margin | 24.7% | 24.8% | 20.4% | 22.1% |
Operating margins are calculated as operating income divided by operating revenue. Q3 net income declined about 1%; nine-month net income rose about 6%. Idaho Power reported net income of $103.0 million for Q3 and $225.8 million for the nine months.
- Cash flow: Nine-month operating cash flow was $162.0 million, down from $269.0 million. Capital additions were $427.2 million, making operating cash flow less capital additions approximately negative $265.2 million. Financing cash flow was positive $517.8 million.
- Cash and liquidity: Cash and equivalents were $445.5 million at September 30, versus $177.6 million at year-end 2022. IDACORP had $100 million and Idaho Power $280.1 million available under revolving facilities; neither had commercial paper outstanding at quarter-end. Management said it expects available cash, operating cash flow, credit facilities, debt markets and potential equity issuance to meet needs for at least the next 12 months.
- Debt and capital: Long-term debt was $2.826 billion, up from $2.194 billion at December 31, 2022. Covenant-calculated capital structures were 49% debt/51% equity for IDACORP and 50%/50% for Idaho Power. Both were in compliance with debt covenants.
- Capital spending: Idaho Power’s expected accrual-basis capital additions, excluding AFUDC, were $675–$725 million for 2023, $850–$950 million for 2024, and $2.0–$2.5 billion for 2025–2027. Actual timing and amounts may vary materially.
Changes versus prior periods
- Nine-month revenue increased 10.9%, while Q3 revenue decreased 1.4%. Retail revenues rose $82.9 million year to date, led by rate-related increases and customer growth, partly offset by lower usage per customer. Customer count grew 2.3% year over year.
- Nine-month purchased power expense increased $35.4 million and fuel expense increased $48.2 million. Q3 purchased power expense fell $50.0 million, largely due to lower market prices; fuel expense rose $8.1 million, reflecting higher natural gas and coal costs.
- Nine-month depreciation increased $18.1 million, primarily reflecting the Jim Bridger plant depreciation and recovery order and additional plant in service. Other O&M expense decreased $8.3 million year to date, mainly due to lower scheduled maintenance, partly offset by inflationary labor costs.
- Lower customer usage and wholesale market prices weighed on Q3 results. More moderate temperatures and greater precipitation reduced irrigation, residential and commercial usage; the Idaho FCA partly offset the revenue effect for residential and small commercial customers.
- Operating cash flow declined chiefly because of working-capital timing, including lower accounts payable, increased materials and fuel inventories, and pension contributions. Nine-month pension contributions were $48 million.
Outlook, regulation and risks
- Pending Idaho rate case settlement: Filed October 27, 2023, after quarter-end, the proposed settlement would provide $54.7 million of additional annual Idaho-jurisdiction revenue, a 4.25% average increase, effective January 1, 2024. It includes a 9.6% authorized ROE and a 7.247% overall authorized return on approximately $3.8 billion of rate base. The IPUC’s approval was pending as of the report date; approval is not assured. The requested case initially sought an 8.61% average net increase.
- Resource plan and demand: Idaho Power’s 2023 IRP forecasts 5-year annual growth of 5.5% in retail sales and 3.7% in peak demand, and 20-year growth of 2.1% and 1.8%, respectively. Its preferred portfolio adds 6,888 MW over 20 years, mainly solar, wind and storage, and plans a complete exit from coal-fired generation by 2030. The plan is subject to substantial resource, timing, fuel-price and transmission uncertainty. Management expects 2023 hydropower generation of 6.4–6.8 million MWh.
- Infrastructure: The Boardman-to-Hemingway line is expected to enter service no earlier than 2026; Idaho Power’s estimated share of remaining project costs included in the capital plan is about $640 million, excluding AFUDC. The company also estimates its Gateway West share at $900–$1.1 billion including AFUDC. Cost escalation, permitting, labor, supply-chain and regulatory delays could affect projects and recovery in rates.
- Other proceedings: Idaho Power expected to file an Oregon general rate case in December 2023. Its Hells Canyon Complex relicensing costs were $450 million including AFUDC at quarter-end; annual pre-license costs are estimated at $30–$40 million, and timing and ultimate license requirements remain uncertain. The company deferred $45.4 million of Idaho wildfire-mitigation costs for potential future rate recovery.
- Risks and contingencies: Key risks include regulatory cost recovery, high capital needs and financing costs, load growth, weather and hydrology, commodity prices, wildfire exposure, environmental compliance, hydropower relicensing, and project execution. Existing loss-contingency accruals were not material overall, but future accruals could be material; recovery of utility-related costs through rates is not assured. A quagga mussel detection in the Snake River prompted treatment in October 2023; treatment efficacy and potential operating costs were unclear.
- Dividend: In September, the board raised IDACORP’s quarterly dividend 5.1%, from $0.79 to $0.83 per share. Dividend capacity remains subject to financial performance, capital needs, covenants and regulatory restrictions.
The filing provides no specific full-year IDACORP earnings or EPS guidance. The interim financial statements were reviewed by Deloitte & Touche, not audited; the firm reported no material modifications needed for GAAP conformity.
Important facts for investors to verify
- Whether the IPUC approved the proposed Idaho rate-case settlement and its effective rates and regulatory mechanisms.
- Actual load growth, customer usage, power costs and hydropower generation relative to management’s forecasts.
- Capital expenditure timing, project budgets and financing needs, particularly for Boardman-to-Hemingway, Gateway West and new generation/storage.
- How higher debt and interest costs, working-capital swings and rate-recovery timing affect cash flow and credit metrics.
- Developments in wildfire claims and mitigation, hydropower relicensing, environmental rules and quagga mussel treatment.