Idacorp Inc (IDA) 2024 Q2 法說會逐字稿

Welcome to IDACORP's second quarter 2024 earnings conference call. Today's call is being recorded, and our webcast is live. A replay will be available later today and for the next 12 months on the IDACORP's website. (Operator Instructions) I would now like to turn the call over to Amy Shaw, Vice President of Finance, Compliance and Risk

Thank you. Good afternoon, everyone. We appreciate you joining our call. This morning, we issued and posted IDACORP's website our second quarter 2024 earnings release and Form 10-Q. The slides we will reference during today's call are available on our IDACORP's website.

As noted on slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecasts and regulatory plans that reflect our current views on what the future holds, and those are all subject to risks and uncertainties.

These risks and uncertainties may cause actual results to differ materially from statements made today, and we caution against placing undue reliance on any forward looking statements. A cautionary note on forward-looking statements and various risk factors are included in more detail for your review in our filings with the Securities and Exchange Commission.

As shown on slide 3, we have Lisa Grow, IDACORP's President and CEO; and Brian Buckham, Senior Vice President, CFO and Treasurer presenting today. We also have other members of our management team available for a Q&A session following our prepared remarks.

Slide 4 shows a summary of our financial results. IDACORP's second quarter 2024 diluted earnings per share were $1.71 compared with $1.35 for last year's second quarter. In the second quarter of this year, we recorded $7.5 million of additional tax credit amortization under the Idaho regulatory stipulation compared to $3.75 million in the second quarter of last year.

For the first half of the year, earnings per diluted share were $2.67 compared to $2.46 during the first half of last year. Those results include additional tax credit amortization of $20 million for the first half of 2024 compared to $7.5 million during the first half of last year. Today, we updated certain key metrics and guidance for 2024.

We raised the lower end of our previously reported full year 2024 earnings guidance by $0.05 to the range of $5.30 to $5.45 per diluted share. We also includes the top end of our expectation of additional tax credits Idaho Power will use to support earnings at the 9.12% return on equity in the Idaho jurisdiction to a range of $35 million to $50 million.

Previously, the top end of that range of $60 million were pleased to see our strong operating performance reduce our estimate on tax credit usage. These estimates assume historically normal weather conditions and normal power supply expenses for the remainder of the year.

Now I'll turn the call over to Lisa.

Thank you, Amy, and thanks to everyone joining us today. I'll start off with some highlights. We had strong financial results during the second quarter, driven by continued customer growth, higher than expected customer usage and the revenue benefits of our January 1 rate changes in our Idaho jurisdiction. We had an exceptionally hot summer so far, especially during the last part of June and most of July, setting us up for a strong third quarter.

As Amy mentioned this allowed us to raise the lower end of our earnings guidance range and improved the top end of our ADITC guidance range for this year. I'm also excited to announce that we hit a record peak load of 3,793 megawatts on July 22, and in fact broke the prior record for three consecutive hours that day.

Next, I want to talk about four things. Customer growth, our regulatory filings, the status of major projects and how we're serving new record peak loads. We continue to see robust customer growth and economic expansion across Idaho Power's service area, as shown on slide 5, our customer base has grown 2.6% since last year's second quarter and [2.8%] for residential customers.

Moody's is forecasting robust GDP growth in our area of 4.3% in 2024 and 3.8% in 2025 outperforming national trends. We see increasing interest from projects evaluating Idaho Power's service area. Actual and prospective projects are coming from a variety of industries, including manufacturing, food processing and of course, data centers, and they are exploring both rural and urban sites for energy intensive projects, Idaho Power has or has its potential customers invest in studies to ensure we can provide an accurate cost estimate and time line to serve their needs.

So we have a couple of those studies in process now. Serving a growing load requires infrastructure and we continue to be ahead of our construction schedules to support two of our largest customer projects, the mega data center in [Kuna] and the Micron expansion in Boise. Of note, the first transformer for the new 15 acre chip substation being built for Micron arrived at the end of June.

We also recently joined Lamb Weston and celebrating their successful completion of a $415 million expansion at its facility in American Falls, which made it one of the largest frozen potato processing facilities in the world.

As noted on slide 6, our regulatory filings in Idaho and Oregon continued to move forward. In our Oregon general rate case, we reached a settlement that, if approved would result in an overall rate increase of $6.7 million or around 12% effective this October.

The main driver in that case is the significant investment we've made in the grid to serve our customers' growing energy needs since our last Oregon general rate case in 2011. In Idaho, we've requested an increase of $99 million or 7.3% through a limited scope case that focuses on recovering only the infrastructure investments and labor expenses not included in our last general rate case.

The limited scope cases in the early stages, and we're awaiting the procedural schedule. We suspect settlement procedures or proceedings could start in late September or early October. We're working hard to acquire new resources to meet current and future demand.

Turning to slide 7, as part of our RFP process. We selected a 200 megawatt battery storage system to be owned by Idaho Power. We're also negotiating for additional resources to come online in summer 2026. For 2027 capacity and energy deficits we're still working through the shortlist and negotiating with bidders. As we look beyond 2027, we've initiated an all-source RFP for resource needs in 2028 or later. We believe we'll need more dispatchable resources in the future.

It continues to be an all hands on deck effort. Transmission remains key to meeting demand, improving reliability and optimizing the movement of energy in the West. As I mentioned during our last call, delays in the final stages of permitting on the Boardman to Hemingway project have likely pushed it -- pushed the in-service date to no earlier than 2027.

We're disappointed in the delays of course, but we're working through the process. On Gateway West, our second major transmission line project we're continuing to work with our partner [PacifiCorp] on the timing and configuration of that line and hope to get started on our segment soon. We're also in discussions with the developer of the Southwest Intertie Project, a third major transmission line, which would add capacity to the Desert Southwest.

In addition to these transmission projects, we plan to convert our remaining coal-fired units to natural gas, which reduces the carbon emissions of those units by about half, but maintains their generating capacity. We've already successfully converted two units at the Jim Bridger Plant, which have been helping us serve peak load during the summer heat wave. This is a low-cost solution that reduces carbon emissions while keeping dispatchable energy resources available, and we plan to convert our remaining coal-fired units at Bridger [involved] over the next few years.

In June, we signed an agreement with Nevada Energy and the energy to convert the two units at the North Valmy plant to natural gas by the end of 2025. Our hydropower outlook remains strong, thanks to a good water supply. We have almost all of our hydro units available because of the multiyear efforts we've made to refurbish our hydro fleet.

Another growing piece of our resource portfolio is battery storage. The 100 megawatt Franklin Solar project in Southern Idaho came online in June, accompanied by 60 megawatts of company-owned batteries that came online in July. We also have 36 megawatts of batteries at the Hemingway station that are scheduled to come online in August.

These batteries are instrumental in improving the reliability and resilience of our system and meeting increasing load demand. Wildfire season has been very active in the West, including within our own service area. Fires are not a new phenomenon and for many years, we focused on increased investments in system resiliency and mitigation efforts. We've done a lot to harden our system. However, fires can still cause outages and require infrastructure replacement.

Working with first responders we've been able to keep our communities safe. I'm still impressed by our employees across our company for their dedication and ability to work through the many challenges that accompany wildfires.

They've been quick to safely replace poles and restore service to our customers. In addition, I want to thank the firefighters and our Public Safety partners for the hard work they are doing to contain these fires. We've had a public safety power shutoff plan for several years now. We use it for the first time this year when rare 60 mile per hour winds briefly came across the Boise Front Range and a few other areas.

We proactively reenergized our lines in certain areas following public communications and patrolled them as quickly as possible after the storm passed through. Our protocols with this plan and most customer comments were supportive of our proactive approach.

I'll close with another look at the weather, which has been some of the hottest on record for much of Idaho Power service area. Temperatures in and around Boise have been above 100 degrees for most of July, and they are continuing into August. Our system reliability has been strong despite the heat wave and peak loads. I again want to express how much I appreciate our amazing employees for the work they are doing to safely serve our customers in these challenging conditions.

And with that, I will turn the time over to Brian.

Thanks, Lisa. Hi, everyone. Thanks for joining in today and glad you're here. Going to start on slide 8 with our reconciliation of the second quarter's results. IDACORP's net income increased almost $21 million for the second quarter compared with the second quarter of last year. I'll attribute that increase primarily to three different things. One was higher than expected usage per customer across all of our customer classes.

The second one was continued customer growth, and the third was higher revenue from rate changes that went into effect at the start of this year. The net increase in retail revenues per megawatt hour that you see in the table increased operating income by nearly $20 million in the second quarter this year.

And that was due mostly to the increase in base rates from the Idaho general rate case settlement, which was effective at the beginning of this year. It was a notable improvement in this line over what we saw in the first quarter of this year, which makes sense when much of our revenue recoveries from volumetric rates. Typically, the third quarter is a more significant contributor in this area, given the outsized volumes of sales that we usually see in the third quarter. But it was also a large contributor in the second quarter's results this year.

Next up, Lisa already talked about customer growth and that growth increased operating income by $5.1 million in the second quarter this year. Usage per retail customer increased operating income by $6.2 million in the second quarter, while there was an increase in usage per customer for all retail customer classes. Usage for irrigation customer increased most significantly, 17% higher year to date than last year. At higher temperatures and the timing of precipitation compared with last year's more moderate second quarter led our irrigation customers to run irrigation pumps more frequently.

In the second quarter, we saw an increase in cooling degree days of about 45% compared to normal and mostly mild temperatures and lack of precipitation, we saw for much of June continued through almost the entire month of July. Transmission wheeling related revenues, net of power cost adjustment impacts decreased $2.5 million on a relative basis despite a volume increase.

We expected this change a result of the terms of the settlement stipulation from our 2023 Idaho general rate case. We now track revenue from the financial settlement of transmission line losses in the power cost adjustment mechanism, making it subject to sharing with our customers. And this resulted in a much smaller overall contribution of transmission revenues and net income compared with the second quarter of last year.

Total other O&M expenses increased $13.8 million in the second quarter this year, again, not a surprise because most of that increase related to amortization of around $4 million of increased pension related expenses and $8 million of increased wildfire mitigation program and related insurance expenses. Now all through the Idaho general rate case settlement both of these increases in expenses were mostly offset by increases in retail revenues because more costs are now recovered in base rates from the 2023 Idaho general rate case settlement.

Remember that our full year O&M guidance range is [$40 million to $50 million] higher than last year's actual O&M results and that includes O&M for this year, the pension and wildfire mitigation increases were now recovering and revenues. And as a reminder, the collection of those elements of O&M is based largely on volumetric rates, but we record the expenses straight-line during the year.

In the second quarter with higher volumes, we offset more of the expense amortization with revenues than we did in the first quarter. Aside from that, inflationary pressures on labor related costs also contributed to the increase in other O&M expenses. Depreciation expense increased $7.6 million for the quarter. This increase was from ongoing system investments we made last year and into this year to meet our continued customer and load growth.

Other net changes in operating revenues and expenses increased operating income by $13.9 million. That increase was due primarily to the timing of recording and adjusting regulatory accruals and deferrals and from power supply expenses.

The decrease in net power supply expenses that were not deferred for future recovery and rate to power cost adjustment mechanisms, increased operating revenues and expenses. And that's good news story more moderate wholesale natural gas and power market prices in the Western US, along with increased wholesale energy sales volumes, decreased Idaho Power's net power supply expenses, reducing both Idaho Power's and our customers share of those costs. And that also had a cash flow benefit that I'll talk about later today.

Nonoperating expense on a net basis was relatively flat. Interest expense on long-term debt was higher in the second quarter compared with the second quarter of last year, really the predictable result of an increase in long-term debt year over year. The interest expense increase was partially offset by an increase in AFUDC because our average construction work in progress balance was higher due to increased capital spending.

You can see a notable increase in quip on our balance sheet awaiting conversion to plant and service. Also, interest income increased due to higher interest rates and higher average cash and cash equivalent balances.

As I talked about last quarter, there's regulatory lag in recovery on our interest expense to finance our CapEx and in recovery of our higher depreciation expense on increased plant and service. The lag results largely from the historic averaging on rate base in our 2023, Idaho general rate case. We've proposed to mitigate that lag in part with our pending limited scope case in Idaho that focuses on year-end rate base.

The increase in income tax expense was mostly the result of higher income before income taxes, partially offset by an increase in additional ADITC amortization. Remember that there the timing component here, we record our additional investment tax credit amortization ratably per quarter based on our expectation for the full year.

And based on our current expectations for full year results this year, we recorded $7.5 million of additional ADITC amortization for Idaho Power during the second quarter. By contrast, we only recorded $3.75 million of additional ADITC amortization during the second quarter last year. Year to date, we have recorded $20 million of additional ADITCs based on our current estimate of $40 million of ADITC usage for the full year versus $7.5 million at the same time last year. Based on the then current full year estimate of $15 million of additional ADITC for that year.

On the capital side, we've seen some of the results from our 2026 to 2027 RFP process. We were hoping to have enough detail to provide a refreshed update on our CapEx forecast today. But as Lisa noted, we're still negotiating with bidders on the last few projects on the shortlist. For close, but we're not quite there yet. What I can say at this point, just reiterating what I noted last quarter, there's potential for a meaningful increase in our total five-year CapEx figure compared to what we forecasted in February of this year and shared on that call.

That, of course, depends on RFP results. It depends on the timing of starting and completing projects and on regulatory outcomes and all of those are moving targets. It's potentially a sizable increase on an already large CapEx spend. And we hope to have more details on a better quantification by our next quarterly call. If not earlier. So stay tuned for an update there.

On the financing side in May, we drew down around $230 million from the equity forward that IDACORP's did in November of last year, now leaving over [$60 million] to be drawn under that transaction before its anniversary. That issuance was to fund our growing CapEx and part of our goal of maintaining our capital structure and managing dilution.

While we fund our growth, we're still planning to use a blend of debt and equity to fund our growth, and we want to retain a debt equity ratio of at least 50-50 or slightly higher on the equity side, potentially in the past, we've had a higher equity percentage and right now Idaho Power is sitting at 52%. We have a strong balance sheet and we intend to keep it that way through this cycle.

And to fund our equity and debt needs all options are really on the table to maintain that flexibility in May, we've put an ATM program in place that we haven't issued any shares to date under the program. We think our load growth and rate base profile premised on a conservative view of only sign and committed loads and known projects, also a track record of 16 consecutive years of earnings growth and a track record of operating efficiently and keeping rates affordable.

For some of the factors that make IT corporate attractive company in the capital markets. And we want to really keep our options open on sources of debt and equity to fund our growth going forward. And our ATM is an important part of that.

Turning to slide 9, as we expected cash flow from operations improved substantially from last year. We saw close to a net $250 million comparative increase in operating cash flow in the first half of the year. The June 2023 power supply cost rate change that was included in customer rates for the first half of the year, along with the revenue benefit of the January 2024 rate changes from the Idaho general rate case and the notable moderation in power supply costs all combined to help in that regard.

Slide 10 shows our updated full-year earnings guidance and key operating metrics after a generally on plan start to the year in the first quarter, we saw notable improvement in our results in the second quarter. From that as Amy noted, we updated our expectation of IDACORP's earnings this year to be in the range of $5.30 to $5.45 per diluted share, which is an increase to the lower end of our guidance range.

This assumes that Idaho Power hydropower will use between $35 million and $50 million of additional investment tax credit amortization, an improvement from our initial estimate of $35 million to $60 million. Our forecast ranges for O&M and CapEx for this year are currently unchanged.

And then finally, another piece of good news. We've raised the lower end of our hydropower generation forecast. We now expect hydropower generation to be within the range of 7 to 8 million megawatt hours for the year. We have solid carryover from the prior year and we had a relatively strong snowpack this year and the right weather conditions to set us up for a good generation here through our hydro facilities.

And with that, we're happy to take your questions.

(Operator Instructions)

Shar Pourreza, Guggenheim Partners.

Hey, guys, good afternoon. Just real quick with sort of the settlement now working through the process. I guess, how are you sort of thinking about the timing of the next rate case and then just concurrently the timing of the capital plan and any guidance around rate base? Thanks.

Are you talking about the Oregon case or the Idaho case or both?

Both, please.

Okay. So we're hopeful that we will have the approval of the Oregon case soon. And we are again thinking that will go into effect in October. And then for the Idaho rate case thinking the settlements, as I mentioned, we could start. We don't have the procedural calendar yet, but we're hopeful that we could start settlement discussions sometime in September, October range.

And then as far as ongoing rate cases, we've been pretty clear that with the capital program that we have to meet the regulatory lag, we're going to do as much as we can to reduce that as we go forward.

Got it. Is this just on the timing of that, the capital plan and the guidance around rate base, as you guys are getting through the settlements?

We would actually be around the third quarter.

Okay, perfect. That was the question. Then just around the financing, the [$300 million] ATM, I couldn't get sense from your prepares. But are you planning on tapping it or you sort of looking at other traditional means like straight equity or junior subordinate forwards et cetera? Couldn't get a sense on which way you're leaning?

Yes, this is Brian. Thanks for the question. On the equity financing we did last year is intended to finance 2024 and actually partially into '25 potentially. So as we look at the ATM program, we do have it in place as a financing tool. We don't really have an equity need that we see this year. But as we work our way through the RFP process, look at power supply costs, some of those things we do see the ATM as a tool that we could use as we see fluctuations, we can also use it as a great tool to match our payment obligations with the timing of that need.

So the ATM is an important tool for us that doesn't foreclose any other options that we have on the equity side. Some of it depends on the magnitude of the equity needs that will be out there, which again depends a lot on cash flow and the RFP outcome. But for right now, the ATM does offer us a great tool to keep our capital ratio where we need. But I would not suggest that it's an exclusive tool we could be out in the market doing our secondary offerings, block trades as well.

Got it. And the reason why I ask is the RFP outcomes could be a little bit lumpy, right, depending on the timing, et cetera, which is why I asked on the ATM data.

Yes, absolutely two different ways. One is the magnitude of the CapEx, the other aspect of that is the timing of the payment obligation in some of the projects could be relatively substantial. And depending on [ETAs] ourselves, build the timing sometimes matters on when those payment obligations come due. And we'll have to have a financing plan that matches the timing of those payment obligation.

Okay. Perfect. And then just lastly for me on the O&M side. No change from the prior guide. I mean, we've seen a little bit of pressure with peers on that O&M side. I guess what's your ability to sustain that with growth kind of accelerating there? Can you kind of maintain that 1% you guys guide forward?

That's certainly our intention that is something that's really kind of in our DNA. We work really hard at that and have for over a decade where we're really looking for ways to innovate, reduce waste automate things, deploy technology that is replacing things that I think have become very high and O&M costs and really being thoughtful about our workforce.

Obviously, as the system is growing so we're going to need more people to help us care for the system. But we're very, very thoughtful about how we spend those dollars and Brain, what would you add?

Yes, I'll add a couple of points on that. I reiterate what Lisa said about the mindset and the cultural approach we have on O&M. But when we set the budget each year, there's the people around the table. And we have we actually apply that culture and there may be some growing from time to time because we operate with a mindset of efficiency and the idea of looking at things differently each year when we sit down to look at our costs and some of that is to innovate where we can have on a panel.

A couple of weeks ago for an LP investment, we have at IDACORP where we talked about innovation in the utility space. And one of the things I talked about was this concept of innovation by constraints, right? Is this idea that when the budget is set tight, people find a way within reasonable limits to do that and some of them takes innovation.

We don't shortchange things like maintenance and safety. Those always get priority and they always get spent and performs. But we do look at things like automation, just as examples we were an early adopter of AMI meters. We've done some AI implementation at the company. We also put a lot of effort into our contract negotiations, RFPs, making sure we're getting good pricing from our vendors.

We also see O&M then that benefits from regulatory mechanisms where we see some escalating costs. I think the best example of that is the wildfire mitigation deferral that currently includes vegetation management and insurance costs. We did some averaging on facility maintenance in our last case. I think that helps out from an O&M perspective, taking out some of the volatility.

But I know Adam, our CEO, he's got a team that's focused on grant opportunities. And so we've been able to harvest some grant funding the cost-sharing opportunities out there. A lot of the pressure is on the labor side. At this point, we've got a really great workforce and we want to retain our people and make sure they're paid I mentioned, we operate efficiently and that's on the backs of our employees and that the success in that area has been thanks to the efforts of our strong people. So making sure that we keep our labor costs at the right level is important to us.

Sure, this is Adam. Just to give you an example, Brian and I were in a meeting earlier today with capital budgeting meeting. And we get absolutely into the details of everything we're spending in that company in the company. And I think people get surprised by that sometimes in these meetings, but every dollar matters for our customers and for our shareholders. And so we really do scrutinize every line item of everything that's spent. Sometimes Brian mentioned to the chagrin of others in the meeting, but it's really important to us that that continued focus.

Finally, in that alternate, which is probably way more than you wanted to know, sharp but when you feel the cap we have Adam was talking about capital. Brian was talking about O&M, but it all kind of rolls up to just the reality of affordability as we go through these times of exciting on building infrastructure, which we like to do. We're an infrastructure company, but we have to really be careful about the impact to our customers in that in the affordability ramp.

Got it. Perfect. Thanks, guys. I appreciate it and congrats on the execution. That's pretty notable. I appreciate it.

David Arcaro, Morgan Stanley.

Hey David.

Hey David.

Thanks much for taking the question. If you could now -- could you touch on what you're seeing in terms of the pipeline of load looking to connect into your system. How is that trending that impacting your thinking at this point for the generation needs of the system going forward?

So I'll start now I'll have Adam. So in some of the details, and again, we continue to be very active in fielding inquiries from all kinds of companies that are looking to site here as well as expand here. We have of planning process where we really look at how we can serve them somehow specific needs and others are sort of looking for that just the best place to site where they can find any kind of power.

So we do have a very firm, robust processes as we were looking at them, were there still some and some of them are very large is that the likes of which we've never seen in our company history. And so we're very excited about that and working with them to trying to figure out how we can bring them on when we can bring them on. But again, doing it in a way that doesn't negatively impact the customers that are already here. What would you add?

Yes. We've mentioned this before. This is Adam. We track what we call large load inquiries that that's everything from a megawatt to frankly 1,000 megawatts. And in 2023, we had a record amount of those inquiries. When you look at 2024, it's still very robust, not quite at the level 2023, but certainly at the same level we saw in 2021 and 2022.

And there is just a variety of different companies that are looking to site. And I do everything from data centers to dairy to bio digesters to nonfood manufacturing. And so it's been extremely steady in the companies that are already here. Micron Meta. I was at a site visit on both those facilities in April and May. They are moving. There's a ton of construction work going on.

It's going vertical at Micron. I think there's up to 20 cranes now are working on that project. So we're just seeing a lot of growth, not only in real time that we could see in terms of construction, but also in these inquiries that are coming in the door overlap three, four, five months.

And it's great to hear. Got it. Thanks for that color. Let me see -- I appreciate the comments too on wildfire activity and just the season so far. I was just wondering like how would you maybe talk about that the status of your system? How is it performed so far this year? You had a PSPS event -- how have things operated so far and what's been more active fire season this time around?

Yeah. And it's been one of the most active in our history in terms of July. And if you look at a map, I think I don't know anyone that does not have the watch duty app on their phone these days that lives out in the West and it looks like most of the West is on fire. So we're not alone there, but I would say, well, especially in the eastern Oregon area, we had just simply go at one point, it was the largest buyer in the nation, the [durky] fire -- you can hear the smoke in my voice that we did burn through several of our lines.

We lost hundreds of structures. And but it didn't really impact the system as a whole. We were able to adapt and we were deploying resources, but our teams got those lines back up as soon as they were able to get into the areas when it was safe to do so. And we do have some other fires that are in burning in Idaho, but not really threatening our facilities at this point.

And so we watch it carefully. We have a team that is literally monitoring 24/7. It's just really the reality of the world we live in now and as I mentioned, we have done just a tremendous amount of hardening, whether it is a vegetation management and centralizing lines fuses that don't in it, Sparks et cetera.

And so we have spent we will spend hundreds of millions of dollars in the next five years to continue to harden that system. So we work carefully with our utility partners and learn from one another and are very active at EEI for example, we're active with the state agencies and partners there to really find a way so that we can navigate through these really critical time to make sure we're all working to keep our communities safe.

Adam, anything you'd add?

Maybe I'll just add on the fires that our crews did a wonderful job in the span of about two weeks. We've been able to replace almost 400 structures, 400 poles on the system side of things, I got to give our load-serving operations that tenant credit and really the folks that look after our generation fleet. It's been pretty smooth from a generation standpoint every year you wonder -- it's every facility going to run the way it should. And this year it has, and that's been a real positive for us.

So we've had some transmission lines gone outside of our system that can cause some issues with imports. But the team has been able to work around that. And it's been really successful in ensuring that our customers have air-conditioning going with 105 degrees straight for five days, which is exactly what happened here.

Yeah, got it. Okay. That's good to hear, and Thanks much. I appreciate.

Thank you.

Alex Mortimer, Mizuho Securities.

Hi. Good afternoon. So Brian, you mentioned the finalization of the RFP shortlist decisions, hopefully in the coming months. Can you give any color on your expectation for the cadence of that spend throughout the five year plan as it may be more back-half skewed. Can you just any additional detail on how things might be shaping up?

In terms of the magnitude of the spend in any given year are shaping up the spend?

Yeah.

So that's a little bit difficult in light of the fact that we're still negotiating the contracts and some of the terms of the contracts we haven't locked in what the timing of the spend would be. One of the things I mentioned is if it's a build transfer agreement sometime does provide for payment at the end. There are other types of arrangements that we might negotiate that provides for payment over time milestone payments.

So it makes the shape of the CapEx a little bit hard to determine at this point and that's one of the reasons why I noted in our in our prepared remarks that we just aren't quite ready yet to give a lot of guidance on our CapEx, either in terms of magnitude or shaping.

I think as you've seen now the numbers are large. You don't necessarily want to stack a large CapEx amount at any one given year. So we do it like we do look to spread that come in part from a financing perspective. But in any event, whatever that shape looks like, these are important reliability projects to serve our customers. So we will go out procure the financing to do it.

Understood. And turning to the regulatory side, I mean, you had a little over 4% revenue increase this year from the settlement last year, another around 7% or increase requested for this year, given the significant necessary investment you're anticipating undergoing in the coming years. How do you think about the trajectory of your rate requests going forward and keeping in mind, obviously, the robust load growth I would imagine allows for maybe some degree of bill headroom and then understanding that, obviously, there are some moving targets with regards to the capital projects?

Yeah, I'll start. We are -- we've used different mechanisms to help sort of smooth things. And you're right that when you have a growing load base, you've got a larger denominator that helps. We also have a regime that is based on growth paying for growth so that it doesn't have a negative impact on the existing customers. And then we will continue to work with our regulators in helping to navigate through this time.

So we can continue to serve our customers safely and reliably, but also on paying attention to affordability and Tim Tatum is here. Anything that you would add, Tim, who's our SVP of regulatory.

Yeah. Thanks, Lisa. This is Tim, hi, Alex. Yeah, I think we've said it well. The only thing I would add is -- we're working through our Oregon case and the outcome of that case will certainly and influence the next ask and that affordability, as Lisa mentions top of mind, I think with the revenue growth we may be able to keep things in single digit increases, but time will tell.

Alex. This is Brian, put more things on the financial side. One is that the assets that we're putting into service generally have long lives. So they're depreciated over a longer period of time. And therefore, the customer rate impact isn't necessarily as large and also the O&M sustainability that we've talked about really helps from a customer affordability perspective as well.

And then finally, we've actually been fairly successful in the RFP process that coming in as the lowest cost provider of some of these lease cost, lease risk resources and add benefit ultimately flows down to our customers.

And finally, I had mentioned the tax credits that are generated from the project does do ultimately belong to our customers and flow down to them. So to the extent those tax credits remain an option, they will be helpful to affordability going forward.

Understood. Thanks very much for your time and congrats on a great quarter.

Thank you.

(Operator Instructions)

Julien Dumoulin, Jefferies.

Hi, Juien.

Good afternoon. Yeah, likewise, pleasure to chat with you guys that as you talk about a all hands on deck as it certainly feels that way from your from your comments. Look, I just wanted to get this straight if I can here could. Because you talk about a meaningful increase in CapEx off of having increased CapEx several times over the years. So that's not a trivial percent increase, especially off earlier basis baselines. But I want to talk about the financing piece, right.

Because what strikes me here is the rating agencies put you the negative you raised, the equity is still on and now we're talking about another meaningful increase, admittedly not necessarily in the near term, but I'm just thinking through like the options that you have it at hand, given what you've seen some of your other say, broadly defined regional peers.

Some are looking at all sorts of things here to trying to address, as we say, this step function higher in capital needs for the low growth that you had can tangibly point to today, forget the fact that there's some further load growth ahead or revisions ahead.

So bottom line CapEx and how does that fit with them? Your equity financing plans, the longer-term and the rating agencies considering that they sell that negative?

Yeah, Julien, great question. When we do our financing plans with a lot of attention to what the credit ratings look like. And I think if you've seen our metrics in recent years, Moody's 2023 metrics around 14%, we actually think this year those could improve that Idaho and Oregon both we target 15%, CFO pre-working capital to debt and Moody's. At [S&P] 2023's number. I think FFO-to-debt was around 14.5. You're going to be a little lower with the CapEx that you mentioned.

But we expect that to recover over time in part through rate cases and eliminating some of that regulatory lag that was out there and then hopefully moderation in some of our power supply costs will also help on the credit rating side.

But on it at S&P, we target 15% as well, it could be a little bit lower than that in the near term, but over time improving with the rate cases that we've been filing. And then there are a lot of different options out there. We've looked at all of the financing transactions that have come out. There's been we don't have any old code debt. We've seen hybrids and convertibles. We've seen combinations of hybrids and convertibles.

There's a lot of instruments out there. But when we go out for medium-term note offerings, for example, standard secured debt at the [IDACORP], we generally get a really good reception. And in our equity financing, we got a really good reception as well on IDACORP common stock.

We really do like the former feature. We like having an ATM in place because of the ability to match the timing of costs with when we actually issue equity and eliminating some of the earlier dilution that would otherwise result for our as shareholders.

But we're going to see here in the third quarter what that RFP, what the RFP results really look like and how to finance that. But at the end of the day going to be a blend of debt and equity, it will likely be a larger amount of debt and equity certainly.

But we do have lots of options on the table, our balance sheet strong. We don't have anything exotic on our balance sheet. I don't intend to necessarily, but we think traditional financing model is something that we worked really well for us, and we'll have to see what our cash flow does because cash flow will be one of the ways we finance this CapEx and we'll be looking for debt and then grow equity finance the part that we need going forward.

Hopefully by the third quarter, we'll have some more information we can share on what that specific financing plans for that growth capital would look like.

Got it. At the core of the fact that they have a negative here. You're saying, look, our metrics are where we want them to be they'll catch up one day in terms of our view on keeping the company. And there's no intention to further improve the metrics from that, call it 14% to 15% range.

Yes, Julien, over time, yes, we do. But when we're in this CapEx intensive period, we want to maintain our credit ratings where they are. But the improvement in the credit ratings will be later on in this capital cycle when the cash flow catches up from our regulatory cycle.

Got it. And then related here, if I can just to push rate case cycle, you've got a big quick balance standing here already over $1 billion. And I say this obviously with something in hand already in '24 on a rate case front. But how do you think about the next big round on the rate case front, considering the quit, considering the need for cash recovery? And then related, you've got a lot of spending ahead. So likely there's going to be some degree of pressure from the earlier days.

Yeah. I mean that's it's true. We're going to be going in for more frequent rate cases. Then we have certainly not going to be another 10 years or more. And so we're just being very thoughtful about how we are spending, how we're financing and how often we are going and in for rate cases. And again, we are very, very aware of the possibility of sort of reached the peak with our customers and regulators.

So we did not take that for granted and we make sure that we're communicating along the way. So they know what's happening and we were just doing our best.

And Julien, it's Brian what I would add is you have to recognize that quit did increase pretty dramatically on the balance sheet. But note that a lot of that quip is actually part of the rate case that we have in Idaho files now the limited scope rate case because we're looking at a period in plant and service. So some of that are projects that are nearing completion that just you haven't yet been closed plants and that will decrease our equip balance fairly sizably as we move ahead.

Now there are still some large projects in quip we think about Hells Canyon and Boardman to Hemingway because there are a couple of big ones there, but that number will be declining as we put plants in service.

Got it. Okay, excellent. Thanks for clarifying that last bit. That's certainly we've got my attention there. Good to hear coming down a little bit. All right guys, take care. We'll see you soon.

All right, thanks Julien.

Thanks for your question. And we have no further questions at this time. So this will that will conclude the question and answer session for today. Ms. Grow, I will turn the conference back over to you.

Great, thank you. Thanks, everyone, for joining us and for your continued interest in IDACORP. And I hope you all have a great evening. Thank you.

Thank you. And ladies and gentlemen, that will conclude today's conference. Thank you for your participation. Have a great day evening.