IDACORP, Inc (IDA) Q3 2024 Earnings Call Transcript
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Overview
The earnings call reflects positive financial performance with EPS and net income growth, increased cash flow, and raised guidance. There are strategic investments in infrastructure and renewable energy, alongside regulatory rate increases. The Q&A indicates a focus on growth, with potential for double-digit earnings growth and a positive trajectory for tax credit usage. Despite some unclear responses, the overall sentiment is positive, with a raised earnings guidance and substantial capital projects. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
Earnings per Share (EPS) $2.12 (up from $2.07), a year-over-year increase of 2.4%. This increase was attributed to $2.5 million of additional tax credit amortization under the Idaho regulatory stipulation, compared to no additional ADITC amortization during the same period last year.
Year-to-Date Earnings per Share (EPS) $4.82 (up from $4.53), a year-over-year increase of 6.4%. This includes additional tax credit amortization of $22.5 million through Q3 of 2024, compared to $7.5 million for the same period last year.
Net Income Increased by $8.3 million in Q3 2024 compared to Q3 2023, driven by higher net income at Idaho Power from the increase in Idaho base rates and customer growth of 2.6%.
Total Other O&M Expenses Increased by $20.3 million in Q3 2024, attributed to $4 million of increased pension-related expenses and $6 million of increased wildfire mitigation and related insurance expenses, partially offset by increases in retail revenues.
Depreciation Expense Increased by $5.6 million in Q3 2024, expected due to system investments made to meet growing customer needs and maintain system reliability.
Cash Flow from Operations Improved substantially, with a net increase of close to $300 million compared to last year, attributed to the June 2023 power cost rate change, revenue benefits from the January 2024 rate changes, and moderation in power supply costs.
Capital Expenditure (CapEx) Increased by 46% from previous estimates, totaling about $1.8 billion in incremental capital, driven by significant projects including 200 megawatts of company-owned batteries and a 300-megawatt wind project.
Rate-Based CAGR Updated to 16.9% based on the latest CapEx forecast, indicating an expectation to double the net rate base in a five-year period.
External Financing Needs Estimated at about $1.3 billion in equity and $2 billion in debt for 2025 through 2028, with plans to update this forecast in February.
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Operating Highlights
New Wind Generation Facility: Idaho Power is under contract to purchase and own a 300 megawatt wind generation facility, marking its first company-owned wind project.
Battery Storage Project: Plans for 200 megawatts of company-owned batteries are set for 2026.
Customer Growth: IDACORP's customer base has grown 2.6% since last year's third quarter, with residential customers increasing by 2.9%. They now serve over 640,000 customers.
Retail Sales Growth Rate: The preliminary five-year forecast for retail sales growth rate is updated to 7.7% annually, up from 5.5% in the previous forecast.
Operational Efficiency: Cash flow from operations improved significantly, with a net increase of close to $300 million compared to last year.
Cost Management: Total O&M expenses increased by $20.3 million, but were offset by increases in retail revenues.
Regulatory Cases: Oregon Commission approved a general rate case settlement resulting in a $6.7 million revenue increase, while Idaho has requested a $99 million increase.
Capital Expenditure Plans: Total CapEx increase from February estimates is about 46%, amounting to $1.8 billion in incremental capital through 2028.
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Risk or Challenges
Regulatory Risks: IDACORP is navigating regulatory cases in Idaho and Oregon, including a $99 million rate increase request in Idaho and a $6.7 million increase approved in Oregon. The outcomes of these cases could significantly impact revenue and operational costs.
Supply Chain Challenges: The company faces inflationary pressures on labor-related costs and increased expenses related to wildfire mitigation, which could affect operational efficiency and profitability.
Economic Factors: The company is experiencing strong customer growth and energy demand, but this growth necessitates substantial capital expenditures (CapEx) estimated at $1.8 billion, which could strain financial resources and require careful management of debt and equity financing.
Competitive Pressures: IDACORP is under pressure to maintain reliable service amidst increasing energy demand and competition for large-load customers, which necessitates ongoing investment in infrastructure and resources.
Wildfire Risks: The active wildfire season poses a risk to operations, necessitating the implementation of public safety power shutoff events and ongoing wildfire mitigation efforts.
Financing Risks: The company anticipates needing approximately $1.3 billion in equity and $2 billion in debt for capital expenditures from 2025 to 2028, which could be influenced by market conditions and regulatory recovery timing.
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Guidance & Outlook
Customer Growth: IDACORP's customer base has grown 2.6% since last year's third quarter, including 2.9% for residential customers.
CapEx Increase: Total CapEx increase from February estimate to current estimate is about 46%, amounting to $1.8 billion in incremental capital.
Renewable Energy Projects: Selected several wind, solar, and battery projects to meet projected low deficit through 2027, including a 300 MW wind generation facility.
Wildfire Mitigation: Continued implementation of wildfire mitigation plans, including public safety power shutoff events.
Infrastructure Investments: Requested a $99 million increase in Idaho rates to recover infrastructure investments and increased labor expenses.
Earnings Guidance: Full-year 2024 earnings guidance increased to a range of $5.35 to $5.45 per diluted share.
Tax Credit Usage: Expectation of additional tax credit usage improved to a range of $25 million to $35 million.
Retail Sales Growth Rate: Preliminary five-year forecast for retail sales growth rate is 7.7% annually.
Rate-Based CAGR: Updated rate-based CAGR forecast of 16.9% based on the latest CapEx forecast.
External Financing Needs: Estimated external financing needs for 2025-2028 are about $1.3 billion in equity and $2 billion in debt.
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Shareholder Return Plan
Shareholder Return Plan: IDACORP plans to maintain a balanced capital structure with a target of approximately 50% equity and 50% debt. They anticipate needing about $1.3 billion in equity and $2 billion in debt for external financing from 2025 through 2028. The company is focused on maintaining a strong balance sheet while managing capital expenditures and regulatory processes to support growth.
Dividend Program: None
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Key Q&A
Q:Do you expect to be earning around your support level in the coming years?
A:Yes, we do expect there to be an element of regulatory lag going forward, but it should be relatively consistent year-by-year. We could be earning at the base level set for the ADITC mechanism, but over time we expect the inclusion of rate base in rates to eliminate the need to rely on the mechanism.
Q:What are your thoughts on the trajectory of tax credit usage?
A:We have a tax credit appetite and expect to use $25 million to $35 million of the current $105 million in tax credits this year.
Q:How do you think about the scale of your future generation needs above and beyond the current plan?
A:We are adding a substantial amount of transmission along with generation assets. We will focus on dispatchable resources, particularly in the winter time, as we go out for RFPs.
Q:What does the residential billing increase look like in relation to inflation?
A:Residential rates are expected to track more along the rate of inflation, while industrial rates for special contract customers will generally be considerably higher.
Q:What is the tenure of rate cases from here?
A:We could be in front of the regulator on an annual basis or have a mechanism that requires us to not be in every single year.
Q:Can you provide clarity on the earnings growth guidance?
A:No, not at this point. We're focused on executing our various projects.
Q:Is there potential for double-digit earnings growth over time?
A:Yes, but the growth may not be linear and could be lumpy depending on rate case outcomes.
Q:What is the updated outlook on credit metrics?
A:It depends on the outcome of rate cases and our ability to remove regulatory lag.
Q:What are your thoughts on dividend growth going forward?
A:We have slowed the growth rate of the dividend to reinvest in the business, and once we have more cash flow, we can accelerate dividend growth.
Q:Why does your ADITC recognition imply a bigger recognition in the fourth quarter?
A:We expect to record a small amount in the fourth quarter based on our operating performance and the need to hit our year-end target.
Q:Why was irrigation sales only up 3.4% given the weather conditions?
A:The crops had a late start due to a cold spring, and the usage naturally drops in Q3.
Q:When will you know about the additional large load potential customers?
A:We deliver studies in October, and we hope to get a good feel for their direction in the next couple of months.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numbers regarding residential billing increases and earnings growth guidance, indicating a focus on execution rather than specific projections. Additionally, there was a lack of clarity on the lumpiness of earnings growth and the exact timeline for large load potential customers.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADITC recognition
ADITCs
Appicelli
Halloween
Hi
IRP
affordability
approach
aspect
asset
assumption
balance sheet
base level
base rate
cadence
contract
couple
credit usage
development
end rate
example
factor
framework
front regulator
improvement
lot
lumpiness
payment
period end
program
quip
rate pressure
ratio
record
resource RFPs
scale
scope
sense
study
thought
wildfire
wind
winter
IDA Transcript
IDACORP, Inc. (IDA) Q3 2025 Earnings Call Transcript
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IDACORP, Inc. (IDA) Q2 2025 Earnings Call Transcript
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IDACORP, Inc. (IDA) Q1 2025 Earnings Call Transcript
Positive5-1
The earnings call revealed strong financial performance with a 15.8% increase in EPS and significant net income growth. Despite increased expenses, retail revenue growth and customer expansion are promising. The Q&A highlighted management's proactive approach to challenges like wildfire mitigation and infrastructure funding. Although there were uncertainties in some responses, overall financial health and future growth prospects suggest a positive sentiment. Given the $4.7 billion market cap, the stock price is likely to rise by 2% to 8% over the next two weeks.
IDACORP, Inc (IDA) Q3 2024 Earnings Call Transcript
Positive10-31
The earnings call reflects positive financial performance with EPS and net income growth, increased cash flow, and raised guidance. There are strategic investments in infrastructure and renewable energy, alongside regulatory rate increases. The Q&A indicates a focus on growth, with potential for double-digit earnings growth and a positive trajectory for tax credit usage. Despite some unclear responses, the overall sentiment is positive, with a raised earnings guidance and substantial capital projects. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
IDA Slides
IDA Report
Frequently Asked Questions
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