IDACORP, Inc.

Welcome to IDA Corp's third quarter 2022 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 IDA Corp website. If you need assistance at any time during the presentation, please press star zero on your telephone. I will now turn the call over to Justin Forsberg, Director of Investor Relations and Treasury.

Thanks Erica and good afternoon everyone. We appreciate you tuning in for our call this afternoon. This morning we issued and posted IDACorp's website our third quarter 2022 earnings release and form 10Q. The slides that accompany today's call are also available on IDACorp's website. We'll refer to those slides by number throughout the call today. As noted on slide two, our discussion today includes forward looking statements, including earnings guidance and spending forecasts which reflect our current views on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions. This cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission. 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. As shown on slide three, on today's call we have Lisa Groh, IDACorp's President and Chief Executive Officer, and Brian Buckham, IDACorp's Senior Vice President and Chief Financial Officer. In addition to Lisa and Brian, we have other members of our management team available for a Q&A session following our prepared remarks. Slide four shows our quarterly financial results. IDACorp's third quarter 2022 earnings per diluted share were $2.10, an increase of 17 cents per share from last year's third quarter, reflecting the impacts of customer growth, weather, a mid-year regulatory order, all partially offset by higher costs. Year-to-date, earnings per diluted share were $4.28, an increase of 8 cents per share from the first nine months of last year. Both revenues and earnings through September 2022 reflect Itacorp's highest first nine months in the history of the company. Today, we also raise our previously issued full year 2022 IDA Corp earnings guidance estimate by 10 cents to the range of $5.05 to $5.15 per diluted share, which would result in the 15th consecutive year of growth in earnings per share. We also affirm that we believe Idaho Power will not need to utilize any of the additional tax credits that are available to support earnings, And at this time, do not expect to share any excess earnings with Idaho customers under its Idaho regulatory settlement stipulation. These estimates assume historically normal weather conditions over the balance of the year. I'll now turn the call over to Lisa.

Thanks, Justin, and thanks to everyone joining us on the call today. I'd like to begin by highlighting another quarter of strong customer growth, which will be a theme through today's discussion. As you can see on slide five, Idaho Power's year-over-year customer growth was 2.5% for the 12 months ending September 30th. And we believe our outstanding power reliability, affordable prices, and commitment to customer satisfaction continue to help attract customers to southern Idaho and eastern Oregon. As shown on the bottom of slide five, the economy in our service area continues to outperform national trends. Moody's predicts sustained economic growth for Idaho Power Service Area, calling for GDP growth of 1.9% in 2022 and 3.4% in 2023. Unemployment within our service area is at 3%, which is below the 3.5% national average. And employment in our region has grown 3.2% since Q3 of last year. And we are still seeing now hiring signs at businesses around our area. Our pipeline of future large customer projects remains strong, most notably this quarter, as seen on slide six. Micron announced a $15 billion investment to expand its Boise site that will bring the manufacturing of semiconductor chips back to the United States. Micron's press release stated that it is co-locating its new 600,000 square foot clean room space near its R&D center at the company's headquarters. It's also worth noting that while the new FAB has garnered significant attention, it is equally important that Micron is continuing to invest in its campus, solidifying Boise as the global corporate headquarters, from its humble beginnings in the basement of a local dentist office to becoming a global powerhouse in digital memory. Micron has publicly announced over 6.5 million square feet in new facilities, including a large-scale office building, expanded central utility building, a new cleanroom space, and wastewater treatment facility. Construction for the project has begun with the cleanroom space coming online in phases starting in 2025, according to the company. The project is expected to create over 17,000 jobs, including approximately 2,000 direct micron jobs by the end of the decade. Micron could have chosen other areas to locate this significant project. We are proud that Micron chose Idaho for the expansion and Idaho Power as its service provider and partner. You'll note that we recently published on our website and in today's Warrant 10Q, our updated load forecast projections for the Idaho Power's upcoming 2023 Integrated Resource Plan. We show these updated load growth projections on slide 7. We expect the 2023 IRP to include a sizable increase in load growth for commercial and industrial customers in particular, resulting from some recent announcements from those customers, including Meta and Micron, among others. Perhaps not surprisingly, we expect additional resource needs to result from this significantly enhanced load growth forecast. Recall that to help meet peak demand in 2023, Idaho Power entered into contracts to purchase, own, and operate 120 megawatts of battery storage assets, and also entered into a 20-year power purchase agreement for the output of a planned third-party 40-megawatt solar facility. Beyond those resources, to help address the previously identified capacity deficits projected for 2024 and 2025, Idaho Power has been pursuing multiple options and has issued requests for proposals. We are still working through those RFPs. We have a short list as of now, and we should have a determination near year end on our direction for the 2024 RFP. But I'd like to note that those prior RFPs were intended to address the low growth anticipated in our 2021 IRP. With that forecast, we estimated that we could invest over $400 million in capital expenditures from 2022 through 2025 for resource additions to help meet those projected capacity deficits. We believe the new energy and capacity requirements from commercial and industrial growth in the next few years could increase our investments substantially. We made a resource acquisition filing with the Oregon Commission recently to address the 2026 capacity deficit. So we're focusing on that time period as well. We are still working through the calculus of serving the accelerated rate of growth through the 2023 IOP process. But we may need to upside the RFPs and advance the timeline of some of our major infrastructure projects, such as the federally permitted Gateway West high voltage transmission line project. It's truly an engineer's dream to be able to build such historic projects. With these significant infrastructure investments, we believe it is likely that we'll file a general rate case in Idaho in the next 12 months. Several factors impact Idaho Power's timing and need to file general rate cases, including the expected increase in depreciation expense from rate-based eligible assets as they are placed into service, the significant amount of investments we have made in our infrastructure since our last general rate case filed in 2011, the expected financing costs of our CapEx in a higher interest rate environment, and inflationary pressures on O&M that we have discussed previously. As a reminder, the Idaho Commission requires Idaho Power to file a 60-day notice of its intent to file a general rate case, and we expect the processing of a general rate case in Idaho would stand at least seven months before new rates would be in effect. we anticipate that future rate cases will help us deliver the returns our shareholders expect from our company while recovering the cost to serve our growing customer base. We have successfully managed our cost over the past decade, and though inflationary pressures and interest rates are driving many costs higher, we believe we have a good track record of prudent spending to bring to the regulators. Balancing the impact on customers continues to be a very important component of our efforts to control costs and make prudent decisions. However, we'll need to continue to make significant investments throughout our system. Our growing customer base will help us structure rate requests that are affordable on a per-customer basis. With these objectives in mind, our list of ongoing projects is significant. In addition to the near-term capacity deficits we are working to address, we continue to pursue relicensing efforts for the Health Canyon Complex, our largest hydropower resource. In September, we reached an important milestone on the Boardman to Hemingway high-voltage transmission line as Oregon's Energy Facility Siting Council voted unanimously to approve the site certificate. This permit authorizes construction of the line in Oregon. We plan for B2H to go into service as early as 2026 and have begun pre-construction activities. Our negotiations with Bonneville Power and Pacificor to reach a definitive agreement for the ownership structure for the project during and after the construction phase of the line are ongoing. I'll close my remarks by highlighting the dividend growth IDACOR announced last month. As noted on slide 8, our board of directors approved a 5.3% increase in the regular quarterly cash dividend on IDACOR's common stock to 79 cents per share, or $3.16 on an annual basis. We have now approved a dividend increase for 12 consecutive years. with a cumulative dividend increase of 163% during that timeframe. We are proud that our strong financial and operational performance has allowed for these increases while Idaho Power customers continue to benefit from some of the lowest energy prices in the nation. Management expects to recommend future annual dividend increases of around 5%. with the intent to move toward the higher end of our target payout ratio of 60 to 70% of sustainable I-4 earnings. And with that, I will hand things over to Brian for a financial overview of the third quarter and our expectations for the rest of the year.