Idacorp Inc (IDA) 2005 Q4 法說會逐字稿

Good day, and welcome everyone to the IDACORP fourth quarter 2005 conference call. Today's call is being recorded and is being web cast live. A complete replay will also be available from the end of the day for a period of 12 months on the Company's website at www.IDACORPinc.com. If you need assistance at any time during the presentation, please dial star zero. At this time, I would like to turn the call over to the Director of Investor Relations, Mr. Lawrence Spencer. Please go ahead, sir.

Thank you, Adrian. And good afternoon, everyone, and welcome to our February 9th fourth quarter earnings release conference call. We issued our earnings release before the markets opened today, and that document is now posted to our corporate web site. The Form 10K is expected to be filed on March 7th and will also be posted to our corporate web site.

Included on the call today are LaMont Keen, Idaho Power President and CEO, and Darrel Anderson, IDACORP and Idaho Power SVP of Administrative Services and CFO. Jan Packwood, IDACORP President and CEO, is not here with us today in Boise, but is participating on the call remotely and will be available for Q&A. We also have other officers here to help answer your questions during the Q&A period.

Our presentation today may contain forward-looking statements and it is important to note that the corporation's future results could differ materially from those discussed. A full discussion of factors that could cause future results to differ materially can be found in our filings with the Securities and Exchange Commission. Before turning the presentation over to LaMont, I would like to tell you about a new service we offer on our corporate web site. We call it Direct LINK. IDACORP news and information can now be sent directly to your e-mail inbox simply by registering for this service. To register, go to the Newsroom area of www.idacorpinc.com and select Direct LINK Sign Up. Now I'd like to turn the presentation over to LaMont.

Thank you, Larry, and good afternoon everyone. This morning before the markets opened, we reported 2005 net income of $63.7 million or $1.50 per diluted share. That's down from our 2004 earnings of $73 million of $1.90 per share. Fourth quarter net income was $7.5 million or $0.18 per share and that's down from $14.3 million or $0.37 per share in the fourth quarter of 2004.

The fourth quarters of both 2005 and 2004 contain items that Darrel will review with you a little later. I will spend the majority of my time focusing on activities at the utility and Darrel will address the non-regulated results.

Idaho Power recorded earnings of $1.70 per share while the holding company and non regulated companies registered a net loss of $0.20 per share. Idaho Power experienced a solid financial performance in 2005, the result of retail price increases and the customer growth we have experienced over the last few years and expect to extend into 2006. Utility operating income increased from $109 million in 2004 to nearly $152 million in 2005. Income before income taxes increased from $77 million to $116 million, about a 50% increases year over year.

The increase in operating income is due to the effects of a full year of the 5.2% general business rate increase granted by the Idaho Public Utilities Commission in 2004, and the 1.8% increase in Idaho rates in 2005 for the addition of our Bennett Mountain Power Plant. These rate increases combined with small increases in energy usage and a reduction in operating expenses provided the lift in operating income.

In 2004, we announced a record growth year in which we connected 13,809 new customers. In 2005, we shattered that record by adding 16,737 new customers. That represents a 3.8% increase year over year, a pace of adding 12 100-unit subdivisions and 150 new businesses each month. And while customer additions do contribute to stronger financial performance, there is a short term pain, long term gain element to them. Idaho Power makes significant investments in property, plant and equipment and incurs additional operating costs to serve new customers currently but investment returns and expense recovery are not fully realized until completion of a general rate case.

The Company has shortened the timeframe between rate case filings in order to reduce this regulatory lag, but cannot eliminate it. But even with this regulatory lag, we are optimistic about 2006. After six consecutive years of below normal water conditions, it appears that the water may be back. We are just over halfway through our normal snow accumulation season and snow is piling up in drainages across the Snake that feed the Snake River and stream flow projections are up. As of February 7, snow pack levels were 135% of long term average. The most recent Northwest River Forecast Center projection for inflows into Brownlee Reservoir during the critical April through July time period is 8.0 million acre feet. This is based on normal precipitation for the balance of the year.

Their 30 year average measured inflow into Brownlee Reservoir over this period is 6.3 million acre feet for comparison purposes. In 2005, inflows were 3.6 million acre feet over the April through July period, only 57% of median flows. There are also areas that pose challenges for us as we begin 2006 however. We are experiencing increasing non power supply operation and maintenance expense increases and the year started off unusually warm. We ended 2005 with utility O&M of just over $241 million, but are projecting 2006 O&M to be in the range of $250 to $260 million.

This projected increase is needed to provide safe and reliable service to our growing customer base, to fairly compensate our skilled and dedicated employees, and to keep the company compliant with an ever expanding array of rules, regulations and oversight.

In January Boise heating degree days were nearly 20% below normal and 11% less than last year. Above normal winter temperatures reduce retail energy sales and lower revenues, particularly for the weather sensitive residential and small commercial customer classes. Reduced sales have a negative impact on financial performance.

Shifting gears and moving over to the regulatory front, as you all probably know, we filed a general rate case with the Idaho Public Utilities Commission last October asking for an additional $44 million in annual revenue or an overall average increase of 7.85 to customer base rates. This morning's press release has a list of the key dates for settlement conferences, for filing of testimony, technical hearings, and when we would expect to receive an order from the commission. We are currently involved in confidential settlement discussions with the other parties in the case We are not able today to predict the outcome of those settlement discussions, but we will advise you if an agreement is reached and, of course, the company is prepared to proceed to formal hearings if necessary.

The company is also involved in another regulatory process with the Idaho Public Utilities Commission to determine the accounting treatment and allocation of proceeds between customers and shareholders resulting from the sales of excess sulphur dioxide SO2 emission allowances. During the fourth quarter of 2005 and January of 2006, Idaho Power sold 74,500 excess emission allowances for approximately $78.5 million. These sales provide the prospect of rate relief for customers following 5 years of severe drought and soaring costs in other energy sectors, as well as the potential of an earnings lift for shareholders. The settlement process started last year but has been on hold the last couple of months as the time and attention of the interested parties has been devoted to the company's general rate case filing. The settlement process is anticipated to restart again in the first quarter this year.

Another important and active area this year is hydro project re-licensing and specifically I'm referring to the re-licensing of our Hells Canyon complex and it makes up roughly 2/3 of our hydro electric generating capacity. And settlement discussions ended in October 2005 without an agreement on the terms and conditions for a new Hells Canyon operating license. Preliminary terms and conditions were filed under [the FERC] process by numerous federal and state agencies, Native American tribes, and other parties on January 26. The Company is still in the process of reviewing those comments and proposed conditions, some of which are hundreds of pages long. Idaho Power is required to file responses to some comments by February 20 through 27th and to other comments by April 11th.

The comments and the company's responses will likely result in administrative proceedings before some of the federal agencies and the FERC this summer. There may also be opportunities for renewed settlement discussions this spring after all the filings have been completed. And it is still too soon to predict what terms and conditions will ultimately be required by the FERC in re-licensing those projects. And with that, Darrel will now give you some details about our financial situation.

Thanks, LaMont. Good afternoon, everyone. I will spend a few minutes reviewing certain items in the fourth quarter including our non regulated activities, I'll talk about cash flow, liquidity, and then discuss some of the 2006 key operating metrics. After the conclusion of that then, we'll respond to your questions.

The earnings per share for each subsidiary has been included in our earnings press release so I will not repeat them. I'll instead start with a discussion of our non-regulated operations We are disappointed in the overall results for the non-regulated operations in 2005. The almost $0.40 per share decrease in performance from these entities as compared to 2004 is largely a result of increased losses at IdaComm and IdaTech offset by benefits recorded at IDACORP Energy. As discussed in an 8K we filed with the Securities and Exchange Commission on January 25th, we have revised the strategic focus at IdaComm, our communications subsidiary, to emphasize the local exchange carrier business we own in the fast growing markets of Las Vegas, Reno and Boise.

As a result of the decision to phase out the broadband over power line business, IdaComm took a charge of $10 million or $0.24 per share at IDACORP that represented the remaining goodwill on its balance sheet. We believe that concentrating on our home markets and core products of voice and fiber optic transport will allow the company to achieve profitability more quickly.

Also in the same 8K, we discussed the reduction in the allowance for bad debt at IDACORP Energy as a result of the settlement negotiations wit the California entities. This was a 9.5 million pretax adjustment which had the affect of increasing earnings per share by $0.13. IdaTech losses increased over 2004 levels due to increased commercial product development costs combined with reduced sales due to transitioning from development projects to commercial product lines. We believe 2006 will be a pivotal year for IdaTech as we continue to review our business strategy and alternatives for the fuel cell business. We will seek to take advantage of commercialization prospects of telecom backup and portable fuel cell applications while also considering ongoing funding requirements as well as profitability timelines.

In short, we are considering a number of alternatives for the business in an effort to maintain progress while minimizing the financial impact on IDACORP.

Turning now to liquidity and cash flow, at the end of 2005, IDACORP short term debt balance was $60.1, up $4.5 million from the end of September, 2005. Idaho Power had no short-term borrowings as of the end of the year. Cash flow from operations decreased 34 million from 2004, almost 20 million of the decrease is attributable to decrease, a reduction in distributions from the Bridger Coal Joint Venture, as cash has been retained to fund the underground mining conversion program. The balance of the decrease is due to timing of cash disbursements related to current liabilities and taxes.

I will now briefly review the key operating financial metrics for 2006 that are included in the table contained in our earnings release. The mid point of the operation and maintenance estimates of between 250 to $260 million represents an approximate 5% increase over our 2005 actuals. LaMont has previously discussed some of the reasons for these increases. Capital expenditures at Idaho Power for 2006 are estimated to be approximately $195 million of which $54 million is to be spent on generation assets, $121 million on transmission and distribution facilities, and $20 million for general plant.

Over the 3 year period, we are expecting to spend approximately $720 million of which 41%, or $297 million, will be for generating assets, 50%, or $358 million, will be for transmission and distribution facilities, and the balance spent on general plant.

Moving to a discussion about hydro generation. Our range of projected hydro electric generation of between 8.5 and 10.5 million megawatt hours illustrates how heavily dependent our generation forecast is on the final level of snow pack we receive and how the anticipated runoff will occur. The runoff will be impacted by a number of factors including the effects of the past years of below normal precipitation which left upstream reservoirs severely depleted, the timing and variability of temperatures during the runoff period, and the amount of precipitation we receive over the balance of the year to name a few.

The ultimate impact to our financial statements and our customers will be driven by how much water finds its way into the Snake River so that it can be used to generate electricity, how much, if any, of that water has to be spilled because it came off too quickly, and the eventual market price received from the sale of any surplus energy. The last year we saw hydro electric generating conditions like these was the year 1999 when we generated approximately 10.7 million megawatt hours.

Estimated earnings from continuing operations from our non regulated businesses will be dependent on a number of factors including the success and timing of the strategic developments at IdaTech, the success of the refocused business strategy at IdaComm, and the continued investment at IDACORP Financial. We are currently estimating that the non-regulated contribution from ongoing operations should be in the range of a $0.05 loss to breakeven. This is an estimated improvement over 2005 actuals of $0.15 to $0.20 per share. That now concludes our prepared remarks and we would now like to respond to your questions.

Thank you. [OPERATOR INSTRUCTIONS]. We go first to Paul Ridzon with KeyBanc. Go ahead, Sir.

Good afternoon, how are you guys? First question is, looking at the higher tax rate at the HoldCo for '06, is that a function of a finite amount of tax credits going against higher operating income or is that a diminution of the level of tax credits.

That is based on the assumption of a comparable amount of tax credits combined with what we would expect to be a higher level of earnings.

Tax credits being generated should be flat with last year?

We are expecting a comparable level of tax credits.

And then the 8 million acre feet - - it that giving some allowance for Aquifer Recharge or how should we be thinking about that?

That number is actually an external number coming out of the River Forecast Center. And I can, what we'll do is have Jim Miller, who heads up our power supply group address that.

All right. This is Jim Miller. It doesn’t include any assumptions for Aquifer Recharge in anything upstream. That is just their prediction of inflows into Brownlee based on existing snow pack and reservoir levels.

So just to clarify - - aquifer level would detract from that? Aquifer Recharge?

If there were Aquifer Recharge, it would detract from that, yes.

And then lastly, what - - have you estimated what below normal hydro did to EPS?

We have. The below normal hydro - - the way we estimate that number is the amount of excess power supply costs that is absorbed by the shareholder. And that number for 2005 is about $0.16 which is comparable to the number in 2004.

I'll get off and get back in line. Thanks.

We go next to Reza Hatefi with Zimmer Lucas Partners. Go ahead, please.

Good afternoon. Following up on one of Paul's questions, what was the total amount of tax credits in '05?

That number is about $20 million.

$20 million net. And I'm sorry if I missed this, but did you guys also give CapEx forecasts, 3 year forecasts and also '07 and '08?

We have a combined 3 year number.

What was it?

Okay, the 3 year number is $720 million over the 3 year period which includes approximately $195 million for 2006.

Great. And is normal hydro generation still considered to be about 8,500 gigawatt hours?

Yes it is.

Okay, and what was the total hydro generation in '05?

About 6.1 million megawatt hours.

6.1. And also, finally, I guess with the improved hydro, it's - - obviously it's going to probably improve your earnings and cash flow Will there even be a need for that $75 million drip that you guys instituted late in the year last year?

As you know, we put that up at the end of the year in anticipation of future funding requirements and we will continue to monitor our financial position to determine the appropriate amount of financing And there are a number of things up in the air. As you know, LaMont mentioned a number of those uncertainties that will be playing out over the next 3 to 4 months that will have a big impact on how much financing, if any, we will need in 2006. And so right now it's really, we are monitoring that as we go.

And is the plan still to file a rate case? I mean I know this one is ongoing, but then file again at the end of next year to be effective sometime in '07, I guess?

As you know, as LaMont mentioned, we are right in the middle of settlement discussions on the current rate case. And so while we have indicated an active rate strategy, we would like to complete this one before we make any commitments as to when the next one is But we are committed to timely filings based on our capital program and the growth we are currently incurring.

Great. Thank you very much.

We move next to David Thiken with Steed Haven. Go ahead please.

Good afternoon. This just follows up a little bit on that last question and if you covered this earlier, forgive me, and I'll follow up with Larry on line but can you talk at all about whether this current rate case has anything in the rate design designed to eliminate some of the regulatory lag that you're facing on a going forward basis? I know you're trying to close the gap, but it's a continually moving gap. Is there anything, or any hope in your minds of getting some kind of new mechanism in there that could prevent this from being an ongoing problem?

This is LaMont. I'll take a shot at that, then we have one of our rate experts here with us. Obviously the way we file the case is intended to reduce the gap somewhat and it was filed on a partially actual, partially estimated basis. It's 6 actual and 6 estimated. And we're in settlement discussions today for 2005 costs, so in Idaho standards, that's moving very rapidly from filing the case, incurring the costs, and getting to the point either through settlement or going to hearing if we get an answer. Are there possibly ways to accelerate that? I guess we would consider those. Some jurisdictions accept a forecast [test year] . I don't believe the state of Idaho has ever done that and that's why we've come up with this hybrid methodology where we have actual numbers before the commissioner would have to issue a ruling. But beyond that, there is nothing in this case that I'm aware of that would provide for that lag. And what we're trying to manage, as I indicated in my remarks, is by keeping our filings timely. As costs go up and investments are made, we will be in on a regular basis to try to get our costs recovery from (technical difficulty) commensurate with our expenditures and investments.

Okay, thank you.

We go next to [Steve Gambuzza] with Longbow Capital. Go ahead, Sir.

Good afternoon, gentlemen. The guidance that you gave for the non-regulated businesses of flat to a $0.05 loss - - does that include basically everything outside the utility? So the holding company and the effect of the tax credits (indiscernible)?

That includes everything other than the utility, including the hold co and all the other entities.

Okay great. And then, the CapEx forecast that you provided, that was a utility CapEx forecast, correct?

That's correct.

In thinking about your ability to generate tax credits and IFS prospectively, will you continue to need to invest capital in that business? And could you give us a sense of how much capital that will be over the net couple of years?

We are continuing to analyze that on an ongoing basis to maximize the efficiency of that program. And we are currently anticipating approximately around $20 to $25 million a year in continued investment at IDACORP Financial.

Okay, and so to the extent that you are able to spend that capital, you'll be able to reap the benefits of those tax credits. If you don’t find those investment opportunities, are there any tax credits you have banked up you can continue to realize without even having to invest the capital prospectively?

We realize the benefits of those tax credits on an ongoing basis each year and in accordance with FAS109. So we recognize those currently. You do have the ability, depending on the types of credits you might invest in, whether they be historical or affordable housing, to kind of swing that somewhat. But our focus right now is on affordable housing credit.

Okay, but I guess what you're saying is that to the extent you invest less there's still a possibility to realize the same amount of tax credits because of prior investments. Is that a fair statement?

We recognize our credits currently that we earn at IDACORP Financial. So we don’t have any - - if I think what you're saying, banked credits, so to speak, from an income statement recognition standpoint.

Okay, and then finally, one last accounting question on the tax credits. You also have like a -- the way I understand it, kind of an equity income loss that flows through the income statement. And then you have obviously tax credits that are higher than that amount. Would you expect, given you're expecting a similar level of tax credits going forward at least in 2006, for that equity loss to also be similar going forward?

We expect that, at least going into 2006 to see contributions from IDACORP Financial comparable to where they have been in 2005.

Okay. Thank you very much.

We move next to James Bellessa with D.A. Davidson & Company. Go ahead, Sir.

Good afternoon. If we were providing 2006 guidance 3 months ago, what would you have said the tax rate for 2006 would have been?

You know, Jim, back on the third quarter call, I believe, we had, I think, that question had come up on the call. And that rate was a little bit lower than what we are including in here today.

Okay. Understood. Now, in the '05 period, the tax rate in each of the first two quarters of the year were around 5%. And then in the second half of the year they are 25 or 33%. Is this the same pattern that you expect in 2006? Or is it going to be evenly spread out, the tax rate?

Jim, I'm going to have Gene Marcarrol, our tax director who is here with us, kind of comment on that question.

Yes, Jim, you know, in the interim periods we're required by accounting principals to project our effective rate for the year. And to the extent of that projection, that’s the tax expense and the tax rate you see. And as facts and circumstances change over the course of the year, you get more and more actual results till ultimately you get to where we are today and the final results for the year. So you know, those projections include tax adjustments as well as earnings.

What changed in the middle of ’05 for you, for the first half of the year to be looking at 5% tax rate and then the second half something closer to 30%? What is the principal that changed in your, or what was the dynamic thing that changed in your income statement that caused you to think you had to pay a higher tax rate?

Well it was a variation in the earnings forecast. If you’re talking about the tax rate at the consolidated level, the tax credits at IFS earns 30 million this year, those don’t move, they’re flat. And so if your taxes are higher or lower around that number you're going to see the variability in the rate because the tax credits are a flat number.

The information about the non regulated subsidiary earnings that you’ve given for guidance as a metric to look at of minus $0.05 to breakeven, if we were asking this question at the last call and you had been providing '06 information, what would you have been saying then? Is this a lower amount of expectations for the non-regulated subsidiaries?

Jim, this is Darrel. I think as we look at it from a standpoint of what we see ongoing operations out of those entities, I think that number would have been comparable as we see it here today. We, as we look at 2006, as we sit here in February, we don't see anomalies out there on it. We see managing those business going forward. And the things that obviously took place in 2005, some of those we had not anticipated with the impairment of goodwill at IdaComm for instance. And so based on what we know today, and if I was sitting here back in November, I would have said we would have been comparable.

Okay. And then you referred in the discussion about the cash flow statement that the cash flow from operations was down $34 million. And then you went on to explain that 20 million or something was from some other activity. Would you go over that again please?

We, as you know, we have a joint venture at Bridger Coal of which they distribute cash back to us. In lieu of distributions of some of that cash back to us, they retain some of that cash as a way to continue to pay for the conversion. You may not know this, but they are converting from an above ground mining to underground mining at the Bridger mine And so they, as part of the capital requirements there, they retained some of that cash to pay for some of the improvements to go into the underground. And Jim Miller can comment on that if you would like with respect to the direction we're headed on the underground mining at Bridger

Go ahead, please.

Well, as you're aware, we've got plenty of coal reserves over at Bridger. But as we mined through the surface line over there, we've started to get into weaker seams and poor quality coal. And we either were going to cut back on that production or change to an underground. So we’ve taken one of the richer parts of the seams and started to dig in to build an underground mine. We've got two drag lines still operating, one of those will cease operations this year, so we'll keep one drag line operating the surface mine in the reclamation as we go underground. It's supposed to be in full production by January of ’07. Long term coal quality will increase and coal cost will come down, but it did require capital investment. It started last year and through this year and next.

Is there any fear factor on the part of management about going underground given the accidents in the mining industry?

I don’t have any. It is different. We’ve gone through a hiring process to try to find qualified underground people. But again, it's moving forward well.

Jim, just as a reminder you may recall that that is a joint venture that we're in with Pacific Corp on that particular mine and so, in there we're 1/3, 2/3 - - we're the 1/3 piece of that.

Thank you very much.

We go back to Reza Hatefi with Zimmer Lucas Partners. Go ahead.

Thank you. I just had a follow up. When - - I can’t remember, but when you guys gave out parts of '05 guidance last year, what was the non-reg portion of guidance? I’m just trying to relate it to this year's minus $0.05 to zero.

Sure, let us dig that out. As you recall, we did revise that guidance throughout the year. As we are sitting - - Larry's got some information. Here is it.

Yeah, the second quarter was zero to a nickel positive, and then the third quarter went from minus $0.05 to minus $0.10.

Okay, so it seems like kind of year over year there's not much change as far as that guidance goes?

That’s correct. As it relates to the -- what we would say is the ongoing business of the subsidiary operations.

That’s kind of surprising because I would have though maybe with IdaComm kind of I guess, becoming a smaller part of your business, and potential improvements at IdaTech that that number would actually sort of improve year over year. It seems like it's kind of flattish.

Right, I think that’s correct and remember, IdaComm has never been a big part of the contribution to the business or a drag on the business. And IdaTech has continued as we had indicated, its losses have increased due to some of the acceleration of the product development activities there combined with reduced sales of some of their development products. So the combination of those two things with what we at least are thinking going into 2006 is something comparable to where we were for 2005.

I can't remember if it was your previous call or maybe it was the second quarter call, you guys mentioned a potential joint venture of some kind for IdaTech. What is the status of that?

We are continuing to evaluate strategic alternatives with respect to IdaTech. That's an ongoing process that we don't want to comment too much about, but it is an ongoing effort that is underway currently.

Thank you very much.

We move back to Steve Gambuzza with Longbow Capital. Go ahead Sir.

Thank you. I was wondering if you could provide some detail around the $297 million of generation CapEx you plan to spend over the next 3 years. What are you spending the money on?

Give us just a second here, we need to pull that out.

Perhaps in the context of the IRP that you filed in 2004 or have there been new resources that have been added to the mix?

Well, within that number there is an additional peaking facility that is included in there as well as upgrades to some of the hydro facilities as well as some level of spending in taking a look at coal facilities.

Okay, so basically it’s one new peaker and then the balance will go to existing hydro facilities and then - - when you say - -

Initial development costs related to looking at possible coal facilities. But what you have to look at - - these are estimates. We are gearing up for our 2006 IRP right now and before we make any major expenditures with respect to coal facilities, we will have flushed out our 2006 IRP which is at the request of the Idaho Commission. And so our current estimates, those things, when you get to those out years, have the potential to move depending on where the IRP ends up.

Okay, and the CapEx that you’re spending on hydro, does any of that relate to Hells Canyon re-licensing?

Yes.

Okay. And is it fair to say there's a significant variability in the amount that will actually be required depending on the outcome of the proceedings you're going through?

Yes. And we, in those estimates, do not include some of the major dollars that we have previously discussed in previous filings. So we have estimated in there what we believe based on our current licensing requirements are included in those estimates.

Okay. And then whatever you spend on Bridger Coal, whatever cash is required potentially for the Bridger improvements at the mine, that's included in this CapEx also?

No, those are not included in what we consider this construction forecast.

Will there be any cash outlays from IDACORP to Bridger?

It comes back through just reduced distributions from the joint venture.

Okay, great. Thank you very much.

This is LaMont Keen. Add one thing on the numbers you hear on the hydro re-licensing and don't automatically think those are all capital costs. The numbers that were usually made public by us and when we quantify the requests of others would include some capital additions, but some of those are increased operating costs, some of those are estimates of the effect on the company over the life of the new license of operating conditions that would limit our flexibility at those projects. So there is a capital component but there can also be a significant component of being a 30 year or 40 year number over what think the effect of some change would be operating differently going forward.

Thanks, that's very helpful.

Let me add one more, too. There is expansion of the Shoshone Falls hydro electric project that's included in that number.

And that is contemplated in the 2004 IRP as well.

We go now to John Hansen with Empirium. Go ahead, Sir.

Good afternoon. Just a clarification here on the allowance sales. Do you still have allowances, or allowance that you can still sell now or that are extra in some way? Or are you pretty well complete with that?

This is Jim. We estimated that there were approximately 107,000 excess allowances. Thus far we've sold 74,500 I believe. So we still do have excess allowances available.

Okay. And those pertain to what kind of vintage? Or in general are they near term or are they longer term ones?

Well they are excess allowances today We get allowances every year. Those are surpluses from previous years.

Okay, great. Thank you very much.

We go now to Paul Ridzon with KeyBanc. Go ahead, Sir.

As we look at January weather against a very wet backdrop, are wholesale prices - - where do wholesale prices stand relative to retail rates And how bad is this January actually?

I think - - I guess, Paul, this is Darrel. I'm not sure I follow you. I mean, how - - we actually haven’t closed the books on January, so we don't, we wouldn’t' be reporting on January results here today. I think LaMont’s comments were more just to provide some context around the January weather situation. I think at the end of the day we see heating degree days below normal and so we think it will have an effect. But I think there are about 20% below on a heating degree day basis.

As I understand it, it's been raining, so you probably have some hydro capacity, and what doesn’t go to retail, you can sell in the wholesale markets. What's kind of the margin difference between retail and wholesale?

This is LaMont, I’ll weigh in and then maybe Jim has better market information than I do. But first, retail sales to ultimate consumers from the company are revenues basically that once the sale is made, all go to the company and we pay expenses and the balance goes to the owners. Wholesale sales under our production cost adjustment clause, the majority of those, 90% of those allocable to Idaho, the benefit goes to the customers. That's the way our mechanism works. It's basically combines our purchase power and fuel costs less our surplus sales. So the company retains a component of the benefit of those surplus sales, but most of that benefit of increased surplus sales goes to customers through our production cost adjustment clause. So while the price levels may be relatively comparable, the economic effect on the company is greater with a retail sale than a wholesale sale.

And with regard to prices in January on the wholesale side, Jim I think they've been what - $70 million?

Actually, they've come off a little bit as it's warmed up and there's a bit more water in the region. But they're probably in the $50 range or $40 to $50 range.

So you'd still rather sell to retail?

Yes.

And then, last year we had kind of a little bit of noise in the earnings through compensation. What happened year over year there? And kind of did you hit the bogies?

We, from the incentive targets from '04 to '05, the incentive payouts are about 50% of what they were in 2004. So the targets, some operating targets were hit, but the earnings targets were not hit.

And I think that's all my questions. Thank you.

We go now to Peter Hart with Talon Capital.

A couple of follow up questions here. Good afternoon, everybody. First, on the earnings impact of the excess hydro, is the right way to think about it is to under a good hydro condition get back the $0.16 of lost earnings from '05 and then to keep 10% of any benefit beyond the recovery of the PCA amount?

That is a difficult question to answer, but I think - - because there's a lot of variables in kind of getting to there. But, in a very simplistic view, you could take a look at it in that regard. As one way to look at it, I think there's a number of variables and we attempted to enumerate those a little bit earlier, is the effect of the market conditions on that surplus sales and the amount that comes back, but that’s one way to look at it.

Right, is there a PCA deferral balance that needs to be exhausted first before shareholders can start participating?

No. No. Ours is a - - in Idaho it's a 90/10 split.

Okay, got you. Secondly, on - - just to clarify the non regulated earnings guidance of breakeven to loss of a nickel. Could you break that out by business segment for us or do we have to kind of go through that ourselves?

We have not gone down that path in the past and really don’t want to start that today.

Okay, I just want to - - then let me make sure of what we do have. You said that IFS would be similar to '05 which was about $0.26. And then IDACORP Energy was a positive $0.12 but that included the $0.13 California gain. So if I were to back that out, it's like a loss of a penny Is that about right?

Okay.

And then if I backed out the $0.24 impairment charge at IdaComm, that would be a loss of $0.07 operating for '05 for IdaComm? And so if I net those together, I come out with something - - oh, and along with IdaWest Energy of $0.06, I come out with something higher than breakeven to loss of a nickel. So there must be some incremental loss, I guess, to some of James Bellessa's question on an incremental loss, would it be coming from IdaTech because of the additional investment there?

I think the only area that you, probably as you kind of walked through that, that I would comment on, is probably your assumptions at IdaComm. I think that we would not be expecting them to lose a nickel as you had indicated.

Okay. And the holding company losses, is that part of that as well?

Yes.

Right, okay, so that gets you there. Okay, thanks. And then for D&A expense, you’ve given some of the other components here for '06. What's your expectation for D&A for '06 versus the 101 million in '05?

I would think obviously given the continued growth in our capital program, we would see some slight increases in depreciation, amortization.

Okay. Ands then, would you happen to have the equity balance at Idaho Power? I think it was $920 million at the end of 3Q '05. I didn't know if that was reflective of all the equity that was done in December of '04 pushed down to the utility level. But I didn't know if you had a year end equity balance at Idaho Power.

Yeah, we can provide that. Let us look that up. Total common equity at December of '05, while we haven't obviously filed our statement yet, is right now expected to be at $937 million.

All right. And then you note in the release today that there was a settlement conference today on your rate case. I was wondering if there's any feedback from that proceeding today.

This is LaMont. No, there is no feedback. Those are confidential settlement discussions between the company, the staff of the commission and the parties to the case And they are just that, confidential. The process is begun. As you see from our release, there are at least two dates next week that can be used to further that process and then we will either reach a settlement with those parties or, the way the process works, then those are kept confidential going forward and we simply divert from that path to the technical hearing path and the staff and others will file their testimony in early March. So it really is outside of the process and would be improper for us to relay any information out of that. We're expecting the others to stay with that process and we will as well.

Okay, fair enough. Why would you consider the proceeds from the emission allowance sales?

Well as I said in my remarks, it’s really sort of been on a hiatus mainly because not only we, but the other parties, the production requests, the audit by the staff of the commission and other things simply had us busy trying to respond to all of their interrogatories, them reviewing them and getting in a position that they could sit down with us for the settlement discussions that started this week and continue to next week. So it’s not inconceivable that they could be discussed at the end of the settlement process. It also could be that they, or at a separate process that begins once we’ve reached the determination of whether or not we settle are we going to hearing and the parties have the time and energy to focus on that again.

I see. Okay. And then lastly, I guess, is once the rate case proceedings are over, would the company then be in position to again consider raising the dividend? I know you haven’t done anything with it since you reduced it back in '03. Are we back on a path where we could start seeing some dividend increases again?

This is LaMont. Obviously the dividend policy is something the board considers on an ongoing basis. But if you look at the CapEx numbers that Darrel discussed earlier and our desire to maintain our credit quality, most of our cash generation for the next few years is going to be easily consumed plus at the utility. So I guess I wouldn’t put out hope for any near term adjustment to that. What we're doing at this phase is growing the business. But the dividend policy is reviewed periodically by the board, so I can't tell you anything that they might make a different decision upon sometime this year.

Okay, fair enough. Thanks for your time.

We go now to Lilly Wu with TGRA Capital. Go ahead please.

Yes, hi. Just a follow up on the breakdown of the non regulated businesses. For IdaTech, are there components of their revenue for example R&D grants which increased in the year? I was looking at the press release saying that the net loss increased by 3 million and that was due to a $3 million reduction in product sales and a 2 million increase in development costs. That sounds like a $5 million loss increase. So what was that?

Right. You have to take - - the $3 million is an after tax number.

I see.

And so you take the $5 million talked about there on an after tax basis, gets you to around $3 million.

Okay, so there wasn’t another component like R&D grants?

No, no. It's really a combination of the increased cost and the reduced sales.

Okay, Is IdaTech at the point of having commercial product sales at this point or is it still that lumpy period where it's mostly grants? Or how, I guess non commercial sale of development of prototype type products?

They are still pre commercial at this point in time. But their focus is obviously on the telecom backup side and they are working very diligently on their North American certifications. And so look to have that completed early this year.

Okay, they had received European certification, I guess, a couple of quarters ago. Has that led to increased progress at all in the European market?

They are in the process of working with European telcos to test their products as it stands now. So they’re still working on that in pre-commercial phase also.

Okay. And are we likely to be pretty committed to IdaTech in one form or another in the sense that, you know the focus change that went on at IdaComm, is that something that - - I mean, is that amongst the strategic options being considered or we're pretty much focused on, committed to IdaTech and so the options considered would not include say banding the business, but strictly how best to grow it?

Right. I think as we indicated in the prepared remarks at least is that we believe for IdaTech, 2006 is a pivotal year. As we had mentioned in previous calls, we are continuing to evaluate strategic alternatives with respect to IdaTech and I think the best thing I can tell you is that we do believe it is important to find a partner or partners that have the ability and the wherewithal and vision to work with us in the furthering of the fuel cell technology.

Okay. And are these partner or partners, are these things where there are already discussions ongoing and it's really just finding the right mix and the right match? Or is that something that you will embark on?

What I would prefer to do is not to comment on that at this point.

Okay, great. Thanks.

We go back to a follow up from Reza Hatefi with Zimmer Lucas Partners. Go ahead, please.

Just a quick question. What was the year ending book value at IFS?

We haven’t shared that information publicly.

Oh, okay, because I think the '04 is in your '04 count. I just wondered if - -

Are you talking IDACORP Financial?

IFS, yes. Exactly. I think it was 109 million at the end of ’04. I'm just wondering.

We don’t have that sitting with us here today, but we’ll be filing our 10K on March 7.

Okay. Great. Thank you.

We go now to a follow up from Paul Ridzon with KeyBanc. Go ahead, please.

I'm all set, thank you.

And our last question is from Steve Gambuzza of Longbow Capital.

Hi, I was wondering if you might just be able to comment on any developments with respect to capitalized overhead costs since you filed our last 10Q, if there's just any more certainty around potential balance sheet or cash flow implications associated with that issue?

There really hasn’t been any change. We are continuing to work with various parties on the issue and there really hasn't been any change to date.

Is there a process ongoing with the IRS or is it just kind of informal discussions? How should we think about that?

We’re actually working with a number of groups in concluding the service industry groups as well as our other advisors to not only look at that case, but also to look at alternative methods for capitalization of overhead.

But you have not accrued any liability for any cash flow that you might actually have to give out to the IRS? Is that a fair statement?

We believe our current provision is adequate based on what we know today.

Great, thank you very much.

That concludes the question and answer session for today. We have no further questions in queue. Mr. Spencer, I'll turn the conference back over to you.

Okay, I would like to thank everyone for your interest in IDACORP and (indiscernible) so good bye.

That concludes today's conference call. We appreciate your participation. You may now disconnect. Have a nice day.