8-K: IDACORP Reports Lower Q1 Earnings Despite Customer Growth, Reaffirms 2024 Guidance

IDACORP's first quarter 2024 earnings decreased compared to the same period last year due to lower customer usage and increased expenses, but the company reaffirmed its full-year earnings guidance.

Summary

• IDACORP reported a net income of $48.2 million, or $0.95 per diluted share, for the first quarter of 2024, down from $56.1 million, or $1.11 per diluted share, in the first quarter of 2023.
• The decrease in earnings was primarily due to lower usage per customer because of milder weather compared to the previous year, and higher depreciation and interest expenses.
• Customer growth increased operating income by $4.7 million, with approximately 15,800 new customers, a 2.5% increase, over the past year.
• However, usage per retail customer decreased by $9.1 million, particularly among residential customers due to reduced heating needs.
• Retail revenues per megawatt-hour increased by $4.5 million due to an overall increase in Idaho base rates effective January 1, 2024.
• Transmission wheeling-related revenues decreased by $2.8 million due to changes in financial settlement of transmission line losses.
• Other operations and maintenance expenses increased by $13.8 million, including $4 million in pension-related expenses and $8 million in wildfire mitigation program costs.
• Depreciation expense increased by $8.6 million due to an increase in plant-in-service.
• Non-operating expenses increased by $1.8 million due to higher interest expenses on long-term debt.
• IDACORP reaffirmed its full-year 2024 earnings guidance of $5.25 to $5.45 per diluted share.
• Idaho Power expects to use between $35 and $60 million of additional tax credits, with approximately $25 million related to battery storage projects.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company reaffirmed its guidance and saw customer growth, the decrease in earnings and increased expenses are concerning. The company is facing challenges with weather and increased costs, but is taking steps to address them.

Positives

• Customer growth contributed positively to operating income, increasing by $4.7 million.
• Retail revenues per megawatt-hour increased by $4.5 million due to rate increases.
• IDACORP reaffirmed its full-year 2024 earnings guidance, indicating confidence in future performance.
• The company is seeing the benefit of rate changes and continued strong customer growth.
• The company is working through the request for proposal process to ensure they have the resources needed to meet customer and load growth.

Negatives

• Net income decreased by $7.9 million compared to the first quarter of 2023.
• Usage per retail customer decreased by $9.1 million due to milder weather.
• Other operations and maintenance expenses increased by $13.8 million.
• Depreciation expense increased by $8.6 million.
• Transmission wheeling-related revenues decreased by $2.8 million.
• Non-operating expenses increased by $1.8 million due to higher interest expenses.

Risks

• The company faces risks related to weather conditions impacting customer usage.
• There are risks associated with increased operating and maintenance expenses, including pension and wildfire mitigation costs.
• The company is exposed to risks related to capital expenditures for utility infrastructure projects.
• There are risks associated with power demand exceeding supply and the need to acquire additional resources.
• The company is exposed to economic conditions, including inflation and increasing interest rates.
• There are risks associated with regulatory decisions impacting cost recovery and return on investment.
• The company faces risks related to the ability to acquire equipment, materials, fuel, power, and transmission capacity on reasonable terms and prices.
• There are risks associated with disruptions or outages of generation or transmission systems.
• The company is exposed to risks related to acts or threats of terrorism, cyber or physical security attacks.

Future Outlook

IDACORP reaffirms its full-year 2024 earnings guidance of $5.25 to $5.45 per diluted share, assuming normal weather conditions and power supply expenses for the remainder of the year. The company is also working through the request for proposal process to ensure they have the resources needed to meet customer and load growth.

Management Comments

• We ended the first quarter on plan, as we began to see the benefit of rate changes along with continued strong customer growth.
• These benefits were offset by lower usage per customer due to weather compared to last year's record first quarter, and by higher depreciation and interest expense from our system investments.
• We continue to work through the request for proposal process to ensure we have the resources we need to meet our rapid customer and load growth, which could lead to higher capital spending than previously projected.

Industry Context

The results reflect the challenges faced by utilities in balancing customer growth with weather-related fluctuations in demand and increasing operational costs. The company's focus on renewable energy and battery storage aligns with broader industry trends towards clean energy and grid modernization. The company is also working through the request for proposal process to ensure they have the resources needed to meet customer and load growth.

Comparison to Industry Standards

• The decrease in customer usage due to weather is a common challenge for utilities, particularly in regions with seasonal temperature variations. Companies like Xcel Energy and PG&E have also reported similar impacts.
• The increase in operating expenses, including pension and wildfire mitigation costs, is consistent with trends seen across the utility sector, with companies like Southern California Edison and Pacificorp facing similar pressures.
• The company's focus on battery storage and renewable energy aligns with the industry's move towards decarbonization, similar to initiatives by NextEra Energy and Duke Energy.
• The reaffirmed earnings guidance suggests a stable outlook, which is comparable to other regulated utilities that provide consistent financial projections.

Stakeholder Impact

• Shareholders may be concerned about the decrease in earnings but reassured by the reaffirmed guidance.
• Customers may see rate increases due to the approved settlement stipulation.
• Employees may be impacted by changes in pension plans and wildfire mitigation programs.
• Suppliers and contractors may see increased business opportunities due to the company's capital expenditure plans.

Next Steps

• The company will continue to work through the request for proposal process to secure resources for future growth.
• The company will continue to implement its wildfire mitigation plan.
• The company will continue to monitor weather conditions and their impact on customer usage.
• The company will continue to manage its operating expenses and capital expenditures.
• The company will continue to engage with regulatory bodies on rate cases and cost recovery mechanisms.

Key Dates

Keywords

IDACORP, Idaho Power, Earnings, Financial Results, Rate Case, Customer Growth, Operating Expenses, Depreciation, Tax Credits, Wildfire Mitigation, Battery Storage, Capital Expenditures, Hydropower, Regulatory