IDACORP, Inc. 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report. IDACORP is a holding company whose principal operating subsidiary, Idaho Power, is a regulated electric utility serving southern Idaho and eastern Oregon. Amounts below are in U.S. dollars; financial results are for IDACORP unless otherwise noted.
Financial results and position
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Operating revenue | $1.351 billion | $1.346 billion | Up 0.3% |
| Operating income | $309.5 million | $298.3 million | Up 3.8% |
| Net income attributable to IDACORP | $237.4 million | $232.9 million | Up 2.0% |
| Diluted earnings per share | $4.69 | $4.61 | Up 1.7% |
| Operating cash flow | $388.1 million | $366.6 million | Up $21.5 million |
| Capital additions to property, plant and equipment | $310.9 million | $278.7 million | Up $32.2 million |
| Long-term debt | $2.000 billion | $1.737 billion | Up $263.8 million |
Operating margin was approximately 22.9% of operating revenue; net income attributable to IDACORP was approximately 17.6%. Operating cash flow less reported property additions was approximately $77 million. At year-end, IDACORP had $275.1 million in cash and cash equivalents and $25 million in short-term investments. It had no commercial paper outstanding; available revolving credit was $100 million for IDACORP and $275.8 million net of identified uses for Idaho Power. Debt covenant capital structures were 44% debt for IDACORP and 46% for Idaho Power.
IDACORP’s quarterly dividend increased to $0.71 per share in 2020; dividends were 58.0% of actual 2020 earnings. Management’s long-term target payout ratio is 60%–70% of sustainable earnings.
Material changes versus 2019
- Customer growth of 2.7% and higher retail usage lifted Idaho Power retail revenue by $37.1 million. Retail energy sales rose 2%, while wholesale energy sales revenue fell $37.5 million, or 53%, as sales volumes declined 45% and average prices fell 14%.
- Lower water inflows reduced hydropower generation 16%, to 7.0 million MWh; coal generation increased 23% as the utility relied more on thermal generation. Total system generation fell 5%.
- Purchased-power expense rose $12.2 million and fuel expense rose $15.9 million. The power-cost adjustment mechanism largely offsets earnings effects of supply-cost fluctuations, but timing can affect cash flow.
- IDACORP’s net income growth was partly offset by lower income from IDACORP Financial Services. Customer receivables allowance increased to $4.8 million from $1.4 million, reflecting expected pandemic-related collection losses.
- Idaho Power issued $310 million of first mortgage bonds and redeemed $175 million of debt, including a $3.3 million make-whole premium. Cash dividends paid by IDACORP were approximately $138 million.
Outlook, commentary and key risks
- Management reported a thirteenth consecutive year of IDACORP net income growth and said electric service continued largely uninterrupted during the COVID-19 crisis. It noted continuing potential effects on commercial and industrial usage, late payments and uncollectible accounts. Regulators authorized deferral of certain pandemic-related costs; the recorded regulatory asset was immaterial at year-end.
- Management estimated approximately $2 billion of Idaho Power capital expenditures for 2021–2025, including expected accrual-basis additions of $320–$330 million in 2021. It expected to fund 2021 requirements through operating cash flow, cash, credit facilities and debt-market access, assuming pandemic impacts do not worsen.
- Idaho Power estimated 2021 hydropower generation of 6.0–8.0 million MWh. Drought, snowpack, water rights and changing hydrology may affect generation, purchased-power needs and liquidity.
- Major uncertainties include recovery of costs through regulated rates; Hells Canyon Complex relicensing costs and requirements; permitting, litigation, timing and cost of the Boardman-to-Hemingway and Gateway West transmission projects; wildfire exposure and insurance; environmental rules; and planned exits from coal operations. Idaho Power expects to end participation in North Valmy unit 2 by no later than 2025, subject to regulatory approval, and its resource plan anticipates coal exits at Jim Bridger by 2030.
- Hells Canyon relicensing costs in construction work in progress were approximately $357 million, including AFUDC. Management estimated annual relicensing costs of $30–$40 million until a new license is issued, with future compliance costs not yet clear. The filing says issuance could be as early as 2022 but is considered more likely in 2023 or later.
- Management did not anticipate filing a general rate case in the next 12 months. Idaho Power had approximately $1.6 billion of regulatory assets; recovery depends on future regulatory decisions. The auditor identified regulated-utility accounting and judgments about future cost recovery as a critical audit matter.
- The filing does not provide a clear numerical 2021 earnings or EPS forecast. Auditors issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether regulators permit timely recovery of large regulatory assets, pension costs, pandemic expenses and future wildfire-mitigation spending.
- Hells Canyon relicensing timing, final license conditions, total compliance costs and recoverability in rates.
- Actual 2021 hydropower output and the resulting mix and cost of thermal generation and purchased power.
- Capital-spending delivery, cost allocation and permitting or litigation milestones for major transmission projects.
- COVID-19 customer payment trends, bad-debt write-offs and any continued impact on commercial and industrial electricity demand.
- Coal-plant exit dates and replacement-resource plans, including associated costs and regulatory approvals.