Executive Summary / Key Takeaways

• IDACORP, through its principal subsidiary Idaho Power, is undergoing a period of unprecedented capital investment driven by robust customer and load growth, particularly from large commercial and industrial customers, positioning it for significant rate base expansion.
• The company's strategic focus is on building critical generation and transmission infrastructure, including owned wind and battery storage assets and major transmission lines (B2H, GWW, SWIP-N), to meet rapidly increasing demand and enhance system reliability.
• Financial performance in Q1 2025 showed strong net income growth driven by rate increases and customer additions, supported by the Idaho ADITC mechanism, though regulatory lag remains a factor influencing near-term earnings and credit metrics.
• Management is pursuing a strategy of more frequent regulatory filings, including a planned Idaho general rate case in 2025, and exploring mechanisms to mitigate regulatory lag and ensure timely cost recovery and a reasonable return on the substantial capital deployed.
• While facing significant capital requirements and potential near-term pressure on credit metrics, the company's strong balance sheet, access to capital markets (including its ATM program), and focus on cost efficiency and affordability for customers underpin its ability to finance this growth cycle and deliver long-term value.

The Powering of a Growing Region: IDACORP's Infrastructure-Led Expansion

IDACORP, Inc. (NYSE: IDA), a holding company whose core engine is the regulated electric utility Idaho Power, finds itself at the nexus of a transformative growth cycle. Rooted in a history stretching back to 1937 through its principal subsidiary, Idaho Power, the company has long been integral to the development of its service territory spanning southern Idaho and eastern Oregon. Today, that history is being written anew, marked by a surge in population and economic activity that is fundamentally reshaping the demands placed upon the grid and, consequently, the strategic direction and financial profile of the utility.

Idaho Power operates within a regulated framework overseen by the Idaho Public Utilities Commission (IPUC), the Oregon Public Utility Commission (OPUC), and the Federal Energy Regulatory Commission (FERC). This regulatory environment dictates the rates the company can charge, the costs it can recover, and the return it can earn on its investments, making regulatory outcomes a critical determinant of financial performance. The company's business model is vertically integrated, encompassing generation, transmission, and distribution, serving a diverse customer base ranging from residential and commercial to energy-intensive industrial and agricultural users. This mix contributes to seasonal peaks in demand, notably during the summer irrigation and cooling season.

The competitive landscape for a regulated utility like Idaho Power is primarily defined by its geographic service territory, where it operates as a natural monopoly for transmission and distribution. However, competition exists in resource procurement, attracting and retaining large industrial customers, managing costs effectively under regulatory scrutiny, and positioning itself against broader industry trends like distributed generation and energy efficiency. Compared to regional peers like Avista (AVA), Portland General Electric (POR), Black Hills Corporation (BKH), and Evergy (EVRG), Idaho Power often demonstrates strong operational efficiency and cash flow generation, partly attributable to its significant hydropower assets. For instance, based on available data, IDA's hydropower-focused assets can deliver higher energy output per unit of investment compared to peers with different generation mixes. The company's focus on cost leadership, as evidenced by efforts to manage O&M expenses and procure resources efficiently, contributes to competitive operating costs per megawatt-hour relative to some peers.

However, some competitors, particularly those in more urban or tech-centric service areas like POR, may exhibit faster innovation cycles in areas like smart grid technology. Larger, multi-state utilities like BKH and EVRG benefit from broader geographic footprints but may face more complex regulatory environments and higher debt levels compared to IDA's relatively lower debt-to-equity ratio (currently around 1.03 TTM).

Idaho Power's strategic positioning is heavily influenced by the unique dynamics of its service area. The region is experiencing robust customer growth, with the count increasing by 2.6% over the twelve months ended March 31, 2025. This growth is fueled by strong economic expansion, with Moody's forecasting GDP growth significantly outpacing national trends in 2025 and 2026. A key driver is the influx and expansion of large commercial and industrial customers across diverse sectors, including food processing, warehousing, manufacturing, and data centers. This includes significant projects like Chobani's $500 million expansion and Tractor Supply's $225 million distribution center, alongside ongoing work with major customers like Meta and Micron. The company's preliminary 2025 Integrated Resource Plan (IRP) forecasts a striking 8.3% annual retail sales growth rate over the next five years, a substantial increase from prior forecasts, with potential for further upside from prospective large energy-intensive projects currently in the pipeline. This unprecedented demand growth has already led to new all-time winter and summer peak loads in 2024.

Meeting this escalating demand and maintaining system reliability necessitates a massive undertaking in infrastructure development. Idaho Power is embarking on a capital expenditure cycle that is projected to see $5.6 billion invested over the 2025-2029 period, effectively doubling the average annual spend of the prior five years. This investment is directed towards a portfolio of projects designed to enhance generation capacity, strengthen the transmission network, and modernize the distribution system. Key generation additions include company-owned battery storage systems (330MW planned 2025-2027), a 300MW owned wind facility (part of the Jackalope Project), and various power purchase agreements (PPAs) for solar and wind resources. The company is also strategically converting its remaining coal-fired units at the Jim Bridger and North Valmy plants to natural gas, a move that reduces carbon emissions while preserving dispatchable capacity – a critical need highlighted by resource planning models, particularly for winter peaks. This conversion strategy is a tangible example of adapting its generation technology mix to meet evolving environmental and reliability requirements.

Transmission expansion is equally vital. Idaho Power is actively involved in three major high-voltage transmission line projects: the Boardman-to-Hemingway (B2H) line, the Gateway West (GWW) project, and the recently committed Southwest Intertie Project-North (SWIP-N). B2H, expected to begin construction in 2025 with an in-service date no earlier than 2027, is progressing through permitting despite delays, with the Oregon Supreme Court recently upholding a key site certificate amendment. GWW's Idaho segment is anticipated in 2028 or later, while SWIP-N, where Idaho Power will take an approximate 11% ownership stake, is expected to be completed within about two years from its anticipated 2025 construction start. These projects are crucial for importing and exporting power, enhancing grid stability, and integrating new resources across the Western interconnection.

Financial performance in the first quarter of 2025 reflected the impact of these dynamics. Net income attributable to IDACORP increased by $11.4 million year-over-year, primarily driven by higher net income at Idaho Power. This was largely due to the January 1, 2025 Idaho base rate increase stemming from the 2024 Idaho Limited-Issue Rate Case and the continued benefit of customer growth. These positive factors were partially offset by increased operating expenses, including higher wildfire mitigation and related insurance costs, inflationary pressures on labor, and increased depreciation expense from a growing plant-in-service balance. Higher interest expense from increased long-term debt also weighed on non-operating income, though partially mitigated by higher Allowance for Funds Used During Construction (AFUDC) from the elevated construction work in progress balance ($1.39 billion at March 31, 2025). The decrease in income tax expense was significantly influenced by the increased utilization of additional Accumulated Deferred Investment Tax Credits (ADITC) amortization ($19.3 million in Q1 2025 vs. $12.5 million in Q1 2024) under the Idaho regulatory settlement stipulation, a mechanism designed to support earnings and mitigate regulatory lag.

Financing this significant capital program is a core focus. Idaho Power relies on a combination of operating cash flows, debt issuances, and equity contributions from IDACORP. The company aims to maintain a capital structure of approximately 50% debt and 50% equity, a target that influences its financing decisions. Operating cash flow saw a substantial improvement in 2024 and remained strong in Q1 2025, benefiting from recent rate changes and more moderate power supply costs compared to prior periods. This improved cash generation helps offset some of the capital needs. However, the magnitude of the planned CapEx necessitates significant external financing. Idaho Power issued $400 million in first mortgage bonds in Q1 2025 and has access to revolving credit facilities and commercial paper programs. IDACORP utilizes its At-the-Market (ATM) offering program, including forward sale agreements (FSAs), as a cost-effective way to raise equity, with $155.5 million in shares remaining available under the program as of March 31, 2025, and approximately $144 million in potential cash proceeds from outstanding FSAs as of April 25, 2025.

Regulatory lag, the delay between investing in assets and recovering those costs and earning a return through rates, remains a pertinent challenge, particularly in this high-CapEx environment. The company's use of the ADITC mechanism in 2024 and Q1 2025 to reach its allowed return on equity floor highlights this lag. To address this, Idaho Power is pursuing a strategy of more frequent regulatory filings. The notice of intent to file a general rate case in Idaho on or after May 30, 2025, is a direct response to the need for timely recovery of substantial capital investments. This comprehensive filing is expected to take at least seven months, with new rates potentially effective in early 2026. The company is also exploring other mechanisms, such as focusing on period-end rate base in limited-scope cases and seeking increased cash collection of AFUDC related to the Hells Canyon Complex (HCC) relicensing, to narrow the gap between investment and recovery.

Managing customer affordability is a key consideration amidst rising capital costs. Idaho Power emphasizes that its rates remain significantly below the national average (20%-30% lower). The "growth pays for growth" regulatory approach in Idaho is crucial, requiring new large load customers to pay upfront for dedicated infrastructure and contribute a load ratio share to the cost of incremental system resources, thereby mitigating the impact on existing customers. Factors like the long-lived nature of utility assets (spreading depreciation over many years), a culture of O&M efficiency, and the flow-through of tax credits to customers also contribute to managing affordability.

Risks inherent in the utility business and this period of rapid expansion include adverse regulatory outcomes that could impact cost recovery or authorized returns. Delays or cost increases in major capital projects due to supply chain disruptions, labor availability, permitting issues, or tariffs could affect project timelines and financial performance. The rapid addition and volatility of new large loads present operational challenges in ensuring adequate supply and transmission capacity. Weather variability continues to impact sales volumes and hydropower generation, although PCA mechanisms mitigate much of the earnings volatility. Wildfire risk is an increasing concern in the Western U.S., prompting significant investment in mitigation efforts and the recent enactment of the Idaho Wildfire Standard of Care Act, which aims to provide a standard of care framework. While the company maintains insurance and is implementing mitigation plans, potential liability from wildfires remains a risk. Changes in environmental regulations, such as proposed EPA actions, could impose additional compliance costs or accelerate plant retirements. The ongoing HCC and American Falls hydropower relicensing processes involve substantial costs and uncertainty regarding future license terms and associated compliance expenditures.

Despite these challenges, the company's strategic response to the growth opportunity is clear: invest heavily in necessary infrastructure, pursue timely cost recovery through the regulatory process, maintain financial strength through prudent financing, and manage operational risks like wildfires and resource adequacy. The estimated 16.9% rate base CAGR over the coming years, effectively doubling the net rate base, underscores the scale of the opportunity and the potential for significant future earnings power, albeit with potential lumpiness depending on project in-service dates and regulatory timing.

Conclusion

IDACORP stands at a pivotal juncture, driven by the extraordinary growth in its service territory. The company's strategic commitment to substantial capital investment in generation, transmission, and distribution infrastructure is a direct response to this demand, positioning it for significant rate base expansion and future earnings potential. While navigating the complexities of regulatory lag, financing large-scale projects, and managing operational risks like wildfire, management's proactive approach to rate filings, cost efficiency, and customer affordability provides a framework for translating this growth into value. The successful execution of its capital plan and regulatory strategy, alongside its ability to integrate new resources and manage risks effectively, will be key determinants of IDACORP's ability to capitalize on this unique growth cycle and deliver on its long-term outlook in a competitive utility landscape.