IDACORP INC Q3 FY2024 earnings call

• Employees performed exceptionally during a hot and busy third quarter, with Boise experiencing the second-hottest summer on record.
• Set new system peak records in July, August, and September.
• Noted strong customer growth (2.6% since Q3 2023) across Southern Idaho and Eastern Oregon.
• Conducted the first public safety power shutoff event in summer as part of wildfire mitigation efforts.
• The preliminary five-year forecast for 2025 IRP retail sales growth rate is 7.7% annually, with potential for more from prospective energy-intensive projects.
• Selected several wind, solar, and battery projects along with power purchase arrangements to meet needs through 2027, including a 300 MW wind generation facility.
• In Oregon, a general rate case settlement was approved in September with a $6.7 million or ~12% base revenue increase effective October 15. In Idaho, a limited scope case was filed seeking a $99 million or 7.3% increase, expected to go to hearing in December.
• Hydro outlook for winter is positive, with multiyear efforts to refurbish the hydro fleet crucial in summer.

IDACORP's third quarter 2024 diluted earnings per share were $2.12 compared to $2.07 for last year's third quarter. For the first nine months of 2024, diluted earnings per share were $4.82 versus $4.53 for the same period in 2023. The third quarter of 2024 saw $2.5 million of additional tax credit amortization under the Idaho regulatory stipulation, while the same period last year had no additional ADITC amortization. In terms of product segments, Idaho Power's customer base grew 2.6% since the third quarter of 2023, with 2.9% growth in residential customers. Commercial and industrial segments showed growth, such as 15% year-to-date growth in manufacturing, 12% in food processing, 8% in sugar production, and 5% in dairy.

• Increased the lower end of full-year 2024 earnings guidance to a range of $5.35 to $5.45 per diluted share.
• Expectation of additional tax credit Idaho Power will use to support earnings is revised to $25 million to $35 million.
• Estimates assume historically normal weather conditions and normal power supply expenses for the remainder of the year.

• Risks associated with forward-looking statements, where actual results may differ materially from projections, including regulatory approval outcomes impacting earnings.
• Capital expenditure plans carry financial risks if not properly converted to rate-based through the regulatory process.
• External factors like weather conditions (e.g., wildfires, snow pack) can impact operations and financial results.

Q: Just given the updated and I understand there are some puts and takes given pending regulatory outcomes. But generally, do you expect to be earning maybe around your support level in the coming years? And then maybe tied into that, any thoughts on how we should view the trajectory of tax credit usage?

A: Yes, we expect there to be regulatory lag going forward. The amount of depreciation and interest expense may cause lag in earnings, but over time, inclusion of rate base in rates should eliminate reliance on the tax credit mechanism. We have a tax credit appetite and expect to use $25 million to $35 million of the ~$105 million tax credit mechanism this year.

Q: And then, I guess you're continuing to add generation, but also continuing to raise your low-growth expectations. So, how do you think about the scale maybe of your future generation needs above and beyond the current plan? And then maybe also how to view the split between dispatchable and intermittent resources, going forward, just given the load profile of some of your customers, particularly the larger ones coming on to the system?

A: Transmission is also a significant part of meeting demand. We'll add wind, solar, batteries, and convert coal fleet to gas. Dispatchable resources are increasingly needed, especially in winter, and will be focused on in the 2029-2031 timeframe.

Q: Afternoon, guys. Happy Halloween. So, maybe just let me pull on a couple threads here that you talked about on the earnings call. So, the affordability one, right, let's talk through that a little bit, right, your rate base growth CAGR grew 17%, you're sort of doubling your rate base from where you were before. And you talked, Brian, about how you shouldn't think about a doubling of bills or rates because there's a lot of things that mitigate that back against that, right, so you have the depreciation that brings that in over time. Of course, you have all the industrials paying for what they're using on the grid. And that's really maybe the piece I want to explore, because that volume growth of that industrial load seems very high, right, for your service territory. So, what does that actually walk the residential billing increase back to in sort of a broad scope, is that within the scope of inflation, is it mid-single digits, is it higher than that, like, what are you guys seeing as you put this plan through the regulatory process around those bill increases and that rate pressure for customers?

A: For large industrial customers, the no-harm analysis ensures infrastructure costs are charged to them. Residential rates track inflation, while industrial rates for special contract customers are higher on a cost-conserved basis. A significant portion of CapEx is allocated to the customers driving growth, but some benefits all customers.

Q: Just a couple questions, maybe building on one of Ross's last questions there on the earnings growth. So, I mean right you're talking 17, nearly 17% rate-based growth and I guess, is this potentially moving higher when you include 29? I mean or is that do you think we sort of peaked out here at this level? I guess that's one question. And then, I mean, yes, I mean, 1.3 billion, even if it's not going to be ratable even sort of simplistically, that's 5% or 6% of the market cap, right? So, I mean, you can sort of, to your point there, we're back into a potential for double-digit earnings growth over time. But I mean, the second part of my question after the rate based part of it is how lumpy should we expect it to be? Is there going to be periods where the lag is worse than others and we'll be catching up, so it's not a linear growth, but it's going to be more sawtooth, depending on the rate case outcomes and the cadence of cases?

A: The rate-based growth may move higher when including 2029, and the growth is still robust. There will be lumpiness in earnings due to regulatory lag and project timing, but CapEx is necessary to serve customers.

Q: Hey, everybody. How are you? Congrats on the update. It's pretty exciting. Brian, you gave us a number in your financing slide for dividends. It sort of suggests that you're going to lag dividend growth based on sort of what I'm inferring on the earnings growth side. So, can you give us a little thought on what you're thinking about dividend growth going forward?

A: We slowed dividend growth in September to reinvest in the business. Once projects are in service and generating revenue, we can accelerate dividend growth, aiming for a 60%-70% payout ratio over the long term.

Q: Another thing that seems a little odd to me in the quarter, looks like irrigation sales were only up 3.4%. Given the weather conditions that you had, which seemed pretty extreme at least for agriculture purposes. Can you give us a little color there? It seems like a pretty small increase year-over-year?

A: Crops had a late start due to cold spring, causing disappointing results in the first part of the season. Once hay and earlier crops are harvested, irrigation usage naturally drops in Q3, but overall it's been a decent year for irrigation.

Q: These additional large load potential customers, do you have any sense of when you may know about them?

A: We deliver studies to them in October. We're waiting for responses, and we hope to get a good sense of their plans in the next couple of months.