IDACORP, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparative period is Q1 2022. IDACORP is a holding company whose principal operating subsidiary, Idaho Power, is a regulated electric utility serving southern Idaho and eastern Oregon. The interim financial statements are unaudited; Deloitte performed a review, not an audit. Results are seasonal and are not necessarily indicative of full-year performance.
Financial performance
- Revenue: Operating revenue was $429.7 million, up 24.8% from $344.3 million. Electric utility revenue was $429.3 million. Higher retail rates, customer growth, wholesale sales and transmission revenue contributed to the increase.
- Profit: Operating income was $68.1 million versus $60.7 million. Net income attributable to IDACORP was $56.1 million versus $46.3 million; diluted EPS was $1.11 versus $0.91.
- Costs and margins: Purchased power expense rose to $171.1 million from $85.4 million, and fuel expense to $89.1 million from $45.7 million, primarily reflecting elevated regional power and natural-gas prices. The power cost adjustment (PCA) mechanism defers or recovers most power-supply-cost differences through customer rates, but affects cash-flow timing.
- Cash flow: Operating cash flow was negative $90.4 million, compared with positive $93.0 million in Q1 2022. Investing cash outflow was $109.2 million, including $118.4 million of property, plant and equipment additions. Financing provided $379.8 million; cash ended the quarter at $357.8 million.
- Debt and liquidity: Long-term debt, including current maturities, totaled $2.608 billion at March 31, versus $2.194 billion at year-end 2022. IDACORP’s covenant debt/equity capitalization was 48%/52%; Idaho Power’s was 49%/51%. No borrowings were outstanding on revolving facilities at quarter-end; reported available capacity was $100 million for IDACORP and $280.1 million for Idaho Power.
- Balance sheet: Total assets were $7.879 billion and total equity was $2.830 billion at March 31. Current regulatory assets increased to $248.7 million from $80.0 million at year-end, principally reflecting timing of regulatory cost recovery.
Changes versus Q1 2022
- IDACORP attributable net income rose $9.8 million. Management cited customer growth of 2.2% over the prior 12 months, the June 2022 Idaho rate increase associated with the Jim Bridger order, higher transmission wheeling revenue and increased wholesale sales.
- Wholesale energy revenue increased to $30.2 million from $3.0 million; transmission wheeling revenue rose $5.1 million. Retail sales volume increased 2%.
- Higher purchased-power and fuel costs, including markedly higher natural-gas generation costs, partly offset revenue growth. Higher power-supply costs also contributed to a $183 million deterioration in operating cash flow year over year, alongside regulatory-account and working-capital timing.
- In March, Idaho Power issued $522 million of first mortgage bonds at rates of 5.06%, 5.20% and 5.50%, and repaid $100 million of term-loan principal. The company repaid $75 million of maturing bonds on April 1, after quarter-end.
Outlook, regulation and risks
- Management said its broader outlook and strategy remained consistent with the 2022 Annual Report; this filing does not provide a specific full-year earnings or EPS forecast. Idaho Power gave preliminary 2023 hydropower generation expectations of 6.0–7.5 million MWh, versus 5.3 million MWh in 2022 and a 7.7 million MWh 30-year average.
- Idaho Power notified regulators of its intent to file an Idaho general rate case on or after June 1, 2023; an Oregon rate case was considered likely to follow in 2024. The outcome and timing of regulatory recovery remain important to earnings and liquidity.
- Pending rate requests included a $200.2 million annual Idaho PCA revenue increase for June 2023–May 2024 and a $9.0 million Oregon power-cost increase; both reflect higher supply costs and remained subject to regulatory orders. Idaho Power also requested a $10.1 million FCA decrease. PCA rate collections largely offset related power costs and should not be read as equivalent earnings growth.
- For infrastructure and supply, the company reported expected capital expenditures of $650–700 million in 2023, $800–850 million in 2024 and $1.5–1.7 billion in 2025–2027. Preliminary 2023 IRP assumptions indicated five-year annual growth of 5.5% in retail sales and 3.7% in peak demand. These are planning estimates, not guaranteed outcomes.
- Projects and commitments include increasing Idaho Power’s Boardman-to-Hemingway transmission interest to approximately 45%, with the line expected no earlier than 2026; a 20-year agreement to purchase capacity from a 150-MW battery facility, subject to regulatory approval, adding approximately $430.9 million of contractual obligations; and planned solar, storage and resource procurements to address forecast capacity needs.
- Key risks include elevated and volatile power and fuel prices, hydrology and drought, load growth and resource availability, supply-chain and inflation pressures, regulatory cost-recovery decisions, wildfire exposure, environmental compliance and hydropower relicensing costs. A downgrade below investment grade could trigger additional collateral requirements; Idaho Power had posted $62.9 million and estimated up to $44.6 million of additional collateral could be requested in the scenario described.
- Management reported existing loss-contingency accruals were not material and believed existing claims would not materially adversely affect the companies’ financial statements, while noting outcomes remain uncertain. Environmental-rule impacts and some hydropower compliance costs could not be reasonably estimated. The filing reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Regulatory decisions and timing for the Idaho rate case, PCA, FCA and Oregon power-cost requests, including the timing of recovery of deferred costs.
- Whether forecast load growth and resource needs translate into approved, on-time projects within the stated capital-spending ranges.
- Actual power-supply costs, hydropower output and PCA balances, and the resulting effects on earnings and operating cash flow.
- Debt issuance, refinancing and interest costs, liquidity headroom, and any collateral needs under commodity contracts.
- Progress, costs and regulatory outcomes for transmission projects, battery and solar resources, wildfire mitigation, coal-plant transitions and hydropower relicensing.