IDACORP, Inc. (IDA) Earnings Call Transcript & Summary

Good morning, everyone. I'm Lisa Grow, President and Chief Executive Officer of IDACORP and Idaho Power and a Director of both companies. On behalf of the directors, officers and employees of IDACORP and Idaho Power, I want to welcome everyone to the 26th Annual Meeting of IDACORP share owners. If we were holding a meeting for Idaho Power, this would be our 109th annual meeting. We're proud that we've been serving our customers for more than a century. Thank you for being here with us today. This year, we're again hosting this meeting virtually since doing so provides a consistent convenient experience to all shareowners, regardless of location. Today's webcast is being recorded and a replay will be available on our website starting tomorrow for the next 12 months. As we get started, I'd like to recognize the other directors and director nominees of our companies. Odette Bolano, Annette Elg, Ron Jibson, Judi Johansen, Dennis Johnson, Nate Jorgensen, Susan Morris, Rick Navarro, and Dr. Mark Peters. All of our directors and nominees with the exception of myself qualify as outside independent directors. Information on each can be found in the proxy statement for the annual meeting, so I won't go through their biographies now. Ten of the existing directors have been nominated for reelection at today's annual meeting. I would also like to thank directors, Richard Dahl and Jeff Kinneeveauk for their service on the company's Board. Both rolled off the Board prior to today's meeting. Richard joined the Board in 2008 and has served as Chairman since 2019. Throughout his 16 years on our Board, Richard has provided invaluable service with his strong financial, operational and executive background. Richard's keen insights, strong leadership and experience as an executive and director across multiple industries will be missed. Jeff joined the Board in 2022 and provided a strong executive financial and operational background. We thank them both for their contributions to IDACORP and Idaho Power. Now before we move on, I would also like to recognize our officer team. Their leadership in service make us the strong organization we are today. Their impressive and diverse biographies are on the IDACORP website. We have an outstanding leadership team that is excited about our business and committed to serving our customers, employees and you, our owners. For today's meeting, we'll start with formal business, and then Brian Buckham and I will provide additional comments about our company. We'll end with a Q&A session and of course, our officer team welcomes questions from our shareowners outside of this meeting as well. Today's presentation contains forward-looking statements that relate to future events or expectations. I'd like to remind everyone that the company's future results could differ materially from those discussed at this meeting. Factors that could cause future results to differ materially can be found in our filings with the Securities and Exchange Commission, including our 10-K report. I encourage you to review that document and other documents we file with the SEC as well as our press releases. It is now my pleasure to officially call the 2024 Annual Meeting of IDACORP Shareowners to order. This annual meeting is being held to address 3 items: to elect 10 directors for a 1-year term; to address an advisory resolution to approve executive compensation; and to ratify the appointment of the independent registered public accounting firm for 2024, along with transacting any other business as may properly come before the meeting. IDACORP has approximately 187,000 shareowners located throughout the United States and internationally. The results of shareowner voting for the annual meeting are typically determined by the return of proxies from shareowners who are not present, and we have those results today. All shareowners or proxy holders who registered for this virtual meeting previously received a link to vote their shares for the annual meeting. Before moving on, there are a few administrative matters that need to be addressed. First, a majority of the shareowners' voting power outstanding is represented at this meeting by proxy. Therefore, we have a quorum for the transaction of business. Second, in accordance with the IDACORP bylaws, no matters other than those stated in the proxy statement or properly raised by a shareowner in accordance with the advanced notice provisions of the bylaws can be considered at this meeting. Finally, if you have not already voted your shares or if you previously voted and wish to revoke your proxy and vote now, you may do so by following the voting instructions provided in the virtual meeting e-mail sent to you this morning. If you previously voted your shares on the proxy card or online, you don't need to vote again today unless you want to change your vote. Revoting today will revoke your previous vote. Virtual voting will remain available until we complete the formal portion of this meeting. We will now proceed to the formal business of IDACORP's 2024 Annual Meeting. The first item is the election of directors. Ten director nominees are up for election at this meeting. All 10, which we named at the beginning of the meeting, have been nominated for 1-year terms to expire at the 2025 Annual Meeting. The company's Board of Directors has unanimously recommended a vote for the nominees. The second order of business is the advisory resolution to approve executive compensation, commonly referred to as the say-on-pay vote. The company's Board of Directors has unanimously recommended a vote for this proposal. The third order of business is ratification of the appointment of Deloitte & Touche LLP as IDACORP's independent registered public accounting firm for 2024. The company's Board of Directors has unanimously recommended a vote for this proposal. Again, if you haven't already voted or wish to revoke your prior vote, you may use the virtual meeting webcast portal to pass your vote now. The IDACORP proxy voters -- proxy holders have voted all shares represented by proxy in accordance with the instructions in each proxy on all 3 matters. Based on the proxies received prior to the start of this meeting, the preliminary results of the voting are as follows: first, each of the 10 director nominees named in the proxy statement have been elected to serve on the Board of Directors for a 1-year term; second, the advisory resolution on executive compensation has passed; third, the ratification of the appointment of the independent registered public accounting firm for 2024 has passed. At this time, I now declare the voting closed. This concludes all items scheduled for action at this meeting -- at this Annual Meeting of Shareowners. The business portion of the meeting is now adjourned. Moving into the informal portion of the meeting. I'm proud to provide some highlights of another year of growth and success at IDACORP and Idaho Power. The excitement around building our future continues to drive the work we're doing to meet our customers' energy needs. As our service area grows and thrives, our talented employees are working hard to ensure we fulfill our mission of safely providing the reliable, affordable and increasingly clean energy our customers rely on. IDACORP also achieved strong financial results in 2023, recording our 16th consecutive year of earnings growth. I want to thank our entire team for the efforts that contributed to this success. Our service area continues to experience rapid growth. Our customer base grew by 2.4% in 2023, and we now serve more than 630,000 customers. We also established a new all-time winter peak load of 2,719 megawatts in January of 2024. As part of our efforts to keep up with growth, we brought Idaho's first utility-scale battery systems online in 2023. And we have more battery and solar installations in the pipeline for this year and beyond. In its recent Best States rankings, U.S. News & World Report ranked Idaho in the top 3 for growth and economic climate. We are projecting annual peak load growth of 3.7% from 2024 to 2028 based on our latest integrated resource plan. This growth includes several new and expanding large load growth customers, including the nearly 1 million square foot Meta data center and Micron's $15 billion expansion. Both of these sites are under construction, and both are building renewable energy facilities through our Clean Energy Your Way Program. This program received commission approval in 2023 and is garnering interest from other large customers. As our local economy continues to outperform national trends, we expect to invest more than $4 billion in capital expenditures over the next 5 years to keep up with our growing demand. Transmission is vital to helping us meet demand, improve reliability and optimize moving energy in the West. In 2023, we obtained certificates of public convenience and necessity for the Boardman to Hemingway project in Oregon and Idaho. We also finalized an agreement with Bonneville Power Administration and PacifiCorp that transfers VPA share of the project to Idaho Power. We plan to break ground late this year and finish in 2027. We also continue to work with our Gateway West partner on the timing and allocation of that project, and we're pursuing an arrangement with interested parties in the Southwest Intertie project, which would add transmission capacity to the deserts Southwest. Staying reliable during such rapid growth requires more than just building new infrastructure. We are also enhancing our existing grid. Initiatives like our wildfire mitigation plan now in its fourth year, are critical to protecting our resources and communities. Our wildfire mitigation efforts continue to ramp up as we prepare for the summer ahead. We have expanded our public safety power shutoff plan for 2024 and increased our outreach to customers and communities. We are also deploying new technologies to help inspect and maintain our equipment. And we continue to partner with federal state and local agencies to prevent and mitigate wildfire risk. On the generation side of our business, we recently converted 2 coal-fired units at the Jim Bridger Plant to natural gas. This low-cost solution reduces carbon emissions for those units by about half while keeping dispatchable energy resources available to serve our customers. We're working with our partners to convert Valmy and address the remaining Bridger units over the next several years. The work we are doing to expand and maintain our system comes at an additional cost. Grid investments were the main driver in the general rate cases we filed in Idaho and Oregon last year, the first time we had done so since 2011. Our Idaho rate case concluded in late 2023 with a settlement that resulted in an overall increase of $54.7 million or an average of 4.25% for Idaho customers. In Oregon, we recently reached a settlement in principle with PUC staff and stakeholders that we view as a positive outcome. The details of the settlement are not yet public, but we expect the resulting rate changes to go into effect this October. Later this month, we plan to file a limited scope rate case in Idaho that will focus on capital additions through the end of 2024, plus labor increases. Constructive regulatory outcomes will continue to help us balance affordability and reliability as we build new infrastructure. Despite the challenges that accompany growth, Idaho Power recorded our second-best reliability numbers in company history in 2023. Our average customer experienced slightly over 1 sustained outage over the entire year. These results are a testament to our hard-working team of innovators and problem solvers who are focused on providing energy when and where our customers need it. Our reliability record is also a direct result of our investments in the grid and our commitment to safely powering our communities. I am so proud to report that 2023 was also one of our best years for employee safety. Safety is always a top priority for our company, and I commend our employees for their ongoing commitment to keeping themselves, each other and our communities safe. In fact, every one of our employees went home safely every night to their friends and families last year. I'm always impressed by the strong connection our employees share with the communities where we live and work. In 2023, we donated more than $1.5 million to help our neighbors in need while employees spent thousands of hours volunteering for worthy causes across our service area. I encourage you to learn more about our company's efforts around community involvement by reading our 2023 corporate responsibility report available on the IDACORP website. That report also details our strong tradition in environmental stewardship. In 2023, we began a major renovation of the Oxbow Fish Hatchery, the cornerstone of our Anadromous Fish program. Working with the U.S. geological survey, we completed a 10-year study of mercury accumulation and processes in Brownlee Reservoir. The study enhanced our understanding of mercury issues in the Hells Canyon Complex and provides a solid scientific base for managing those issues in the future. Our company also supported the state of Idaho's effort to eradicate invasive quagga mussels from a stretch of the Snake River near Twin Falls. So as you can see from these highlights, we have had a very successful year. Now for some additional financial commentary, I'll turn the time over to Brian Buckham, our CFO and Treasurer.

Thanks, Lisa, and good morning, everyone. IDACORP had another strong year financially in 2023. It was its 16th consecutive year of earnings growth, as Lisa mentioned, and we're proud of that track record. As we look ahead, our CapEx plans continue to be an important area of focus because they're not what you've seen from our company in terms of magnitude in the past. Our expectation for this year's CapEx approaches $1 billion, which is a sizable increase even over last year and certainly compared to our historic annual level. If you tuned in for it, the CapEx forecast for the next 5 years that we shared on our year-end earnings call was a 21% increase compared to the 5-year forecast we shared on the prior year's earnings call. We have a healthy mix of capital projects that make up that spending plan. No one particular project makes up a majority of the expected spend, and it's oriented towards providing reliable service to our growing customer base. The update we provided earlier this year has refreshed cost assumptions for our major capital projects. But I think it's worth noting and pointing out that this update still doesn't include any projects related to the pending RFPs for energy and capacity resources. It also doesn't include possible additional CapEx that may result if we end up with new large loads in the pipeline that drive further infrastructure needs. We are only including in our forecast the infrastructure that we believe is known and executable. Also, we only count customers in our load growth forecast if they've made a major commitment to developing a project in our area. We hope to have some clarity around the RFPs later in the year and what that means for our CapEx, but I can say at this point that its bias is upwards. During the CapEx cycle, we're also focused on affordability for customers. We start with rates well below the national average. And combining that with an expanding customer denominator, a regulatory philosophy where growth pays for growth and the fact that the average life of the assets we're placing in service is relatively long. And we have a formula to maintain affordability for our customers. We had a relatively small single-digit percentage increase in our general rate case ask in Idaho last year despite having not filed a general rate case in over a decade, which I think is indicative of our ability to maintain low customer rates while our CapEx and rate base forecast is elevated. In terms of financing that CapEx, as I've mentioned before, our goal is still to maintain our investment-grade credit ratings as well as the capital structure near 50% or 51% equity to ensure we have a strong balance sheet as we go through the capital cycle. To do that, we're still planning to blend debt and equity issuances. We don't have any sizable debt maturities in any 1 year to address in the next few years, which helps on the debt side and with our credit ratings. We also did a forward equity offering last November, and those funds are intended to satisfy our equity needs this year. We plan to put an ATM in place to help satisfy future equity needs and to keep the balance sheet and debt equity ratio in a good spot near 50-50. As you've seen in the past, being thoughtful and prudent in our spending is an important part of Idaho Power's culture. We expect full year O&M to be in the range of $440 million to $450 million this year. While this looks and sounds like a notable increase over last year's spending of around $400 million, it's important to note that about $40 million of that expected increase relates to amortization of pension and wildfire mitigation plan regulatory assets. And those were approved for recovery through revenues in the general rate case settlement. So excluding the new amortizations that are now collected through retail rates, our O&M expense this year could be relatively comparable or just modestly up relative to our O&M expense last year. I'll close with a quick note on our dividend. It increased 5% last year. This was our 12th consecutive year with a dividend increase with cumulative growth of 177% during that span. Our company has paid a dividend every quarter since 1944, and we're proud of that history. And with that, I'm going to turn it back over to Lisa.

Thanks, Brian. Before we take questions, I want to reiterate my thanks to our employees and leadership team for all the great work they did to drive our success in 2023. As I reflect on the year, it's truly incredible how much we accomplished together. The challenges of growth, rising costs and increasing demand for energy while maintaining our focus on safety, reliability, affordability and clean energy are real. But it's clear to me that we have the right team in place to thrive in this fast-moving energy landscape. Our ability to deliver strong results for our customers and our shareowners is a credit to our dedicated workforce. On their behalf, I thank you for your investment in IDACORP. So I would like to open the time up for questions.

You should see a QA icon near the bottom of the webcast screen. You can click that to submit a question. We ask that each shareowner submit only 1 question so everyone has an opportunity to participate. And I will start, there were some questions that were submitted, a few of which are -- the information is readily available in our proxy and other SEC-filed documents, so I'll point you back to that -- those documents. But there was 1 question on as to whether or not IDACORP has insurance for natural disasters. And the answer to that is, yes, we certainly do. Appreciate the question. So with that, we don't see any additional questions. So I will thank you again for attending the annual meeting and for your interest. So we appreciate your investment in IDACORP, and we look forward to connecting again at future annual meetings. We hope you all have a great day.