IDACORP, Inc. 2015 Form 10-K Summary
Business context and reporting period. This combined annual filing covers IDACORP, Inc. and its principal operating subsidiary, Idaho Power Company, for the year ended December 31, 2015. Idaho Power is a regulated electric utility serving approximately 525,000 customers in southern Idaho and eastern Oregon; utility operations comprise nearly all of IDACORP’s business.
Financial performance and condition
| Metric | 2015 | 2014 |
|---|---|---|
| IDACORP operating revenue | $1.270 billion | $1.283 billion |
| Operating income | $282.1 million | $253.7 million |
| Net income attributable to IDACORP | $194.7 million | $193.5 million |
| Diluted earnings per share | $3.87 | $3.85 |
| Operating cash flow | $353.2 million | $364.3 million |
| Capital expenditures, excluding AFUDC | $284 million | $265 million |
| Long-term debt, including current portion | $1.726 billion | $1.600 billion |
| Cash and cash equivalents | $114.8 million | $56.8 million |
- Operating margin was approximately 22.2% in 2015, compared with 19.8% in 2014; net margin was approximately 15.3%, compared with 15.1%.
- IDACORP total assets were $6.023 billion and total equity was $2.062 billion at year-end. Its reported covenant capital structure was 46% debt and 54% equity; Idaho Power’s was 48% debt and 52% equity.
- Year-end short-term liquidity available under revolving facilities, net of specified usage, was $80 million for IDACORP and $275.8 million for Idaho Power. Both companies reported covenant compliance.
- 2015 operating cash flow was below capital expenditures by approximately $59 million. Idaho Power’s cash flow from operations was $346.4 million.
- The board raised the quarterly dividend to $0.51 per share in 2015; annual dividends declared were $1.92 per share, and the payout ratio was 50%.
Changes versus the prior comparable period
- Revenue declined approximately 1.0%, while operating income rose approximately 11.2%, net income attributable to IDACORP rose 0.6%, and diluted EPS increased from $3.85 to $3.87.
- General business revenue increased $28.8 million, supported by customer growth and higher FCA revenue. Customer count grew 1.8%; growth added an estimated $14.1 million to general business revenue. Lower usage per customer partly offset these gains.
- Off-system sales revenue fell $46.3 million, or 60%, as lower hydroelectric output reduced surplus power and wholesale prices and sales volumes were lower. Total energy sales declined 4.9%.
- Operating income benefited from lower purchased-power and fuel expense and reduced other O&M expense. Income tax expense increased to $45.8 million from $16.8 million, partly because 2014 included a $24.5 million tax benefit from a tax-method change. In 2015, a $7.2 million tax benefit related to the early debt redemption partially offset tax expense.
- Hydroelectric generation fell to 5.9 million MWh from 6.2 million MWh. Natural-gas generation increased as lower gas prices shifted dispatch away from coal.
- Fourth-quarter 2015 IDACORP revenue was $285.4 million, net income attributable to IDACORP was $31.8 million, and diluted EPS was $0.63, versus $289.8 million, $34.6 million, and $0.69, respectively, in fourth-quarter 2014.
Outlook, commentary, risks and unusual items
- Management estimated nearly $1.5 billion of Idaho Power capital expenditures over 2016–2020. It expected to fund 2016 needs through operating cash flows, existing cash, debt and credit facilities, while evaluating the timing of a new general rate case.
- The 2015 Integrated Resource Plan forecast average-load growth of 1.2% annually and summer-peak growth of 1.5% annually over 2015–2034. Its preferred portfolio included the Boardman-to-Hemingway transmission line and potential North Valmy retirement in 2025; timing and resource plans remain subject to substantial uncertainty.
- Management estimated 2016 hydroelectric generation of 6.0–8.0 million MWh. Drought, low snowpack, water-rights matters and Hells Canyon Complex relicensing could affect generation, costs and cash flows. The company could not estimate the eventual costs or conditions of a new Hells Canyon license.
- Major project and environmental exposures include the estimated $105 million Idaho Power share of Jim Bridger SCR upgrades; Boardman-to-Hemingway and Gateway West transmission projects; and potentially significant future environmental compliance and hydro relicensing costs. Recovery through rates is not assured or necessarily timely.
- Regulatory mechanisms recover or refund much, but not all, of power-cost variability and can defer cash recovery. At year-end, Idaho Power reported $47.2 million of deferred power-supply costs and $1.354 billion in regulatory assets, whose recovery depends on regulatory outcomes.
- A trustee’s Hoku Corporation bankruptcy complaint seeks recovery of payments to Idaho Power of up to approximately $36 million as alleged fraudulent transfers. The matter was preliminary; the company said it could not estimate a probable loss or range and intended to defend itself. Recorded loss-contingency accruals were not material overall.
- Other notable items: Idaho Power issued $250 million of 3.65% bonds due 2045 and redeemed $120 million of 6.025% notes early, paying a $17.9 million make-whole premium. A $73 million self-bonded mine-reclamation guarantee was supported by a $70 million trust fund.
- Key broader risks include regulatory cost recovery, weather and hydrology, fuel and power prices, PURPA contract obligations, environmental rules, large capital-project execution, financing and credit ratings, pension funding, cyber and operational security, and concentration in one region and industry.
Important facts for investors to verify
- Whether the growth in operating income and earnings is sustainable after considering lower off-system sales, tax-related comparability effects and regulatory sharing mechanisms.
- Regulatory decisions, timing and recovery of planned capital investments, deferred power costs, pension costs and Hells Canyon relicensing expenditures.
- Hydrological conditions and wholesale power prices, and their effects on generation mix, customer costs and cash flow.
- Permitting, cost and schedule assumptions for Boardman-to-Hemingway, Gateway West and environmental-control projects, including whether anticipated spending is recoverable in rates.
- Developments in the Hoku litigation, PURPA proceedings and environmental requirements, and any material change to estimated exposure or obligations.
- Liquidity and financing needs against the planned capital program, debt maturities, dividend policy and applicable covenant restrictions.
The financial statements received unqualified audit opinions, and management and the auditor reported effective internal control over financial reporting as of December 31, 2015.