IDACORP, Inc. 10-Q Summary
Business context and period. This combined, unaudited Form 10-Q covers the quarter and six months ended June 30, 2023. IDACORP is a holding company whose principal operating subsidiary, Idaho Power, is a regulated electric utility serving southern Idaho and eastern Oregon. Utility sales are seasonal, with peak demand generally in summer. The interim financial statements were reviewed by Deloitte; the review is not an audit.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| IDACORP operating revenue | $413.8 million | $358.7 million | $843.5 million | $703.0 million |
| Operating income | $82.3 million | $81.5 million | $150.4 million | $142.2 million |
| Net income attributable to IDACORP | $68.6 million | $64.3 million | $124.7 million | $110.5 million |
| Diluted EPS | $1.35 | $1.27 | $2.46 | $2.18 |
| Idaho Power net income | $67.1 million | $62.4 million | $122.8 million | $108.6 million |
Year over year, IDACORP revenue rose about 15% in Q2 and 20% for the six-month period; attributable net income and diluted EPS each rose about 7% and 13%, respectively. Operating margin, calculated using reported total operating revenue, was approximately 19.9% in Q2 versus 22.7%, and 17.8% for the six months versus 20.2%. Revenue growth did not translate proportionately into operating income, in part because depreciation rose and first-half power supply costs were higher.
- Revenue drivers: Idaho Power electric utility revenue increased 15% in Q2 and 20% for the first half. Customer growth (2.1% over the prior 12 months), rate changes, and higher wholesale sales contributed. Retail sales volumes increased 1% in Q2 and 2% year to date.
- Costs and earnings drivers: Q2 depreciation expense increased $12.3 million year over year, mainly reflecting the comparison with 2022 Bridger-related depreciation deferrals and additions to plant. First-half purchased power expense rose $85.4 million and fuel expense rose $40.1 million, largely due to elevated first-quarter market prices and natural gas costs. The power cost adjustment mechanisms defer or recover most eligible power-cost variances from customers, but affect cash flow timing.
- Cash flow and investment: First-half operating cash flow was $6.8 million for IDACORP, versus $156.0 million in 2022; Idaho Power reported $0.6 million versus $144.7 million. Management attributed the decline largely to working-capital timing, including lower accounts payable and higher materials and fuel inventories, as well as regulatory deferrals. Capital expenditures were $274.2 million. Investing cash outflow was $263.8 million; financing cash inflow was $214.2 million.
- Debt and liquidity: Long-term debt was $2.48 billion at June 30, up from $2.19 billion at year-end 2022. Idaho Power issued $522 million of long-term debt, including $400 million of 5.50% notes due 2053, and repaid $225 million of debt. Cash was $134.8 million at IDACORP and $104.5 million at Idaho Power. Available revolving credit was $100 million at IDACORP and $280.1 million at Idaho Power; neither had commercial paper outstanding at period-end. Covenant debt ratios were 47% and 48%, respectively, and both were in compliance.
- Margins, taxes, and dividends: IDACORP’s effective tax rate for the first half was 10.9%, including $7.5 million of additional accumulated deferred investment tax credit (ADITC) amortization. IDACORP paid $1.58 per share in first-half dividends. Idaho Power equity was 52% of its total adjusted capital for the dividend-related regulatory test.
Material changes, outlook, and risks
- Pending Idaho rate case: Filed June 1, 2023, the application requests approximately $111 million in additional annual Idaho-jurisdiction revenue, net of a proposed $173.4 million power cost adjustment decrease and a $3.5 million energy-efficiency rider reduction. The requested overall average net base-rate increase is 8.61%; proposed rates could take effect on or after January 1, 2024. The outcome is uncertain. An Oregon general rate case may follow in late 2023 or 2024.
- Customer rates and cost recovery: New Idaho PCA rates took effect June 1, 2023, including a $105.1 million increase for the annual collection period; $95.1 million of the deferred balance was postponed to the following period. Oregon approved a $7.7 million annual power-cost update increase. Idaho also approved a $10.1 million decrease in FCA recovery. These rate mechanisms largely offset eligible power-cost changes in earnings, but timing differences can pressure liquidity.
- Capital plans and resource needs: Management estimates accrual-basis capital expenditures, excluding AFUDC, of $650–$700 million in 2023, $800–$850 million in 2024, and $1.5–$1.7 billion in 2025–2027. The company expects to spend more than $600 million on resource additions from 2023 through 2027. A preliminary 2023 IRP assumes five-year annual growth of 5.5% in retail sales and 3.7% in peak demand; these are planning assumptions, not guidance. Management says existing liquidity, operating cash flow, credit facilities, and access to debt and equity markets should fund needs for at least the next 12 months.
- Projects and commitments: Idaho Power increased its Boardman-to-Hemingway transmission project interest to about 45%; construction is expected to begin in the second half of 2023 and the line is not expected in service before 2026. Total project costs are trending toward the upper end of the $1.1–$1.3 billion estimate. The company also entered long-term battery-storage, solar, and gas-storage arrangements, including a 20-year agreement for 150 MW of battery capacity, subject to regulatory approval.
- Generation and regulation: Management expects 2023 hydropower generation of 6.0–7.5 million MWh, compared with 5.3 million MWh in 2022. The company plans to cease participation in coal-fired operations at Jim Bridger by 2028 and at Valmy’s remaining unit by year-end 2025. Hells Canyon relicensing costs in construction work in progress were $441 million at June 30; the timing, terms, and ultimate costs of relicensing remain uncertain.
- Key risks and contingencies: Exposure includes regulatory decisions and cost-recovery lag, load growth and resource adequacy, fuel and wholesale power prices, hydrology and weather, wildfire liability, project cost and schedule overruns, interest rates and financing access, environmental compliance, and hydropower relicensing. The filing says existing loss-contingency accruals are not material, but future accruals could be material. Idaho Power had posted $44 million of commodity-related collateral; a below-investment-grade downgrade could prompt additional collateral demands of approximately $19 million. Environmental compliance costs for certain matters could not be reasonably estimated.
No full-year earnings or EPS guidance is stated in the supplied filing text. Management’s outlook and strategy remain consistent with the 2022 annual report, as updated by the plans and assumptions described above.
Most important facts for investors to verify
- Whether regulators approve the Idaho rate-case request, and the final rates, allowed return, and effective date; monitor any Oregon rate filing.
- Whether operating cash flow rebounds as working-capital movements and regulatory recovery timing normalize, while capital spending remains elevated.
- Actual construction costs, financing needs, regulatory approvals, and in-service timing for Boardman-to-Hemingway and planned storage and generation resources.
- Actual power-market prices, hydrology, fuel availability, and customer load growth relative to management’s forecasts.
- Developments in wildfire claims, environmental rules, and Hells Canyon and American Falls relicensing, including recoverability of related costs.