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 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 to IDACORP's website our second quarter 2024 earnings release and the Form 10-Q. The slides we will reference during today's call are available on IDACORP's website. As noted on Slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecast 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. Our 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, IDACORP's 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 with $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 improved the top end of our expectation of additional tax credit 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 was $60 million. We're 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've 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 improve 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 3 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 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 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 its potential customers invest in studies to ensure we can provide an accurate cost estimates and time line to serve their needs. So we have a couple of those studies in process now. Serving that growing load requires…

Thanks, Lisa, and hi, everyone. Thanks for tuning in today. We're glad you're here. I'm going to start on Slide 8 with a 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 of this year. Now it's 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 recovery is from volumetric rates. Typically, the third quarter is the more significant contributor in this area, given the outsized volume of sales that we usually see in the third quarter, but it was also a large contributor in this 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 per irrigation customer increased most significantly 17% higher year-to-date than last year, as higher temperatures and the timing of precipitation compared with last year's more moderate…

[Operator Instructions] Our first question is from the line of Shar Pourreza with Guggenheim Partners.

Just look like 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?

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. We are, again, thinking that would go into effect in October. And then for the Idaho rate case, thinking settlements as I've mentioned, 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, the regulatory lag, we're going to do as much as we can to reduce that as we go forward.

Got it. And so just on the timing of just the capital plan and the guidance around rate base as you guys are getting through these settlements.

That should be around the third quarter.

Okay. All right. Perfect. That was the question. And then just around the financing, the $300 million ATM, I couldn't get a sense from your prepareds, but are you planning on tapping it? Or are you sort of looking at other traditional means like straight equity or junior subordinates forwards, et cetera? Couldn't get a sense on which way you're leaning.

Yes. Shar, this is Brian. Thanks for the question. The equity financing we did last year was 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 could also use it as a great tool to match up payment obligations with the timing of that need. So the ATM is an important tool for us. It 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 outcomes. 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 markets doing 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.

Yes, Shar. Absolutely. There's two different ways. One is the magnitude of the CapEx. The other aspect of that is the timing of the payment obligations, and some of the projects could be relatively substantial. And depending on DTAs or self-builds, 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 obligations.

Okay. Perfect. And then just lastly for me on the O&M side, no change from the prior guide. I mean we've see a little bit of pressure with peers on that O&M side. I guess what's your ability to sustain 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, replacing things that have become very high in 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 Brian, what would you add?

Yes. So I'll add just a couple of points on that, reiterate what Lisa said about the mindset and the cultural approach we have to O&M. But when we set the budget each year, there's lots of people around the table, and we have -- we actually apply that culture. And there may be some groaning from time to time because we operate with a mindset of efficiency. And yes, you're 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. I've got 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 constraint, right? It's this idea that when the budget is set tight, people find a way within reasonable limits to do that. And some of that takes innovation. We don't shortchange things like maintenance and safety. Those always get priority, and they always get spent and performed. 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 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 COO, he's got a team that's focused on grant opportunities. And so we've been able to harvest some grant funding and 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. And I mentioned we operate efficiently, and that's on the back of our employees. And 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.

Shar, this is Adam. Just to give you an example, Brian and I were in a meeting earlier today, it was a 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 mention, to the chagrin of others in the meeting, but it's really important to us that continued focus.

Yes. And the final thing that I'll say, which is probably way more than you wanted to know, Shar, but when we pull the -- 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 building infrastructure, which we like to do. We're an infrastructure company, but we have to really be careful about the impacts to our customers in the affordability realm.

Congrats on the execution. It's pretty notable. I appreciate it.

Thank you.

Thanks, Shar.

Our next question is from the line of David Arcaro with Morgan Stanley.

Wondering if you could -- well, 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? Is that impacting your thinking at this point for the generation needs of the system going forward?

So I'll start, and I'll have Adam fill in some of the details. 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 a planning process where we really look at how we can serve them. Some have specific needs, others are sort of looking for just the best place to site where they can find any kind of power. So we do have a very robust process that -- as we are looking at and they're still coming. And some of them are very large, 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 try and 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'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 of 2023, but certainly at the same level we saw in 2021 and 2022. And there's just a variety of different companies that are looking to site in Idaho, everything from data centers to dairy to biodigesters to nonfood manufacturing. And so it's been extremely steady. And the companies that are already here, Micron and Meta, I was in a site visit on both those facilities in April and May. They are moving. There's a ton of construction work going on. Meta, it's going vertical. At Micron, I think there's up to 20 cranes now working on that project. So we're just seeing a lot of growth, not only in real time that we can see in terms of construction, but also in these inquiries that are coming in the door over the last 3, 4, 5 months.

That's great to hear. Got it. Yes. Let me see. I appreciate the comments, too, on wildfire activity in just this season so far. I was just wondering like what -- how would you maybe talk about the status of your system? How has 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?

Yes. 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, while especially in the Eastern Oregon area, we had just some -- at one point, it was the largest fire in the nation, the Durkee Fire. You can hear the smoke in my voice. That -- we did burn through several of our lines. We lost hundreds of structures, but it didn't really impact the system as a whole. We were able to adapt and redeploy 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. 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 have mentioned, we have done just a tremendous amount of hardening, whether it is vegetation management, sectionalizing lines, fuses that don't emit sparks, et cetera. And so we have spent and will spend hundred millions of dollars in the next 5 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 times to make sure we're all working to keep our communities safe. Adam, anything you'd add?

Maybe I'd just add on the fires that our crews did a wonderful job. And in the span of about 2 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 a ton of credit and really the folks that look after our generation fleet. It's been pretty smooth from a generation standpoint. Every year, you wonder, is every facility is 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 go out 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 when it's 105 degrees straight for 5 days, which is exactly what happened here.

Our next question is from the line of Alex Mortimer with Mizuho Securities.

So Brian, you mentioned the finalization of the RFP short-list decisions, hopefully in the coming months. Can you give any color on your expectation for the cadence of that spend throughout the 5-year plan? Is it maybe more back-half skewed? Can you just -- just any additional detail on how things might be shaping up.

You mean in terms of the magnitude of the spend in any given year for the shaping of the spend?

Yes.

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. And one of the things I mentioned is if it's a build-transfer agreement, sometimes those 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 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. I don't necessarily want to stack a large CapEx amount in any one given year. So we do look to spread that, 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 and 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% 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? 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 in regards to the capital projects.

Yes, 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 those existing customers. And then we'll 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 paying attention to affordability. And Tim Tatum is in here. Anything that you would add, Tim? He's our VP of Regulatory.

Yes. Thanks, Lisa. This is Tim. Yes, I think Lisa said it well. The only thing I would add is we're working through our current case, and the outcome of that case will certainly influence the next ask and affordability, as Lisa mentioned, 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. I'll add a couple 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's coming in as the lowest cost provider of some of these lease costs, lease risk resources, and that benefit ultimately flows down to our customers. And finally, I've mentioned the tax credits that are generated from the projects. Those 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. Congrats on a great quarter.

Thank you.

[Operator Instructions] We have a next question here from the line of Julien Dumoulin with Jefferies.

Man, you talk about all hands on deck. It certainly feels that way from your comments. Look, I just want to try to get this straight, if I can here, 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 of perhaps earlier baselines. But I want to talk about the financing thesis, right? Because what strikes me here is the rating agencies put you to negative, you raised the equity still. 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 at hand given what you've seen in some of your other, should we say, broadly defined regional peers. Some are looking at all sorts of things here to try to address, as we say, this step function higher in capital needs for the load growth that you at least 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 your equity financing plans in the longer term and the rating agencies considering that they still have that negative [indiscernible].

Yes, Julien, great question. When we do our financing plans, we pay 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 were around 14%. We actually think this year, those could improve at IDACORP and at Idaho Power, both. We target 15% CFO pre working capital to debt at Moody's. At S&P, 2023's number, I think FFO to debt was around 14.5%. This year, it could be a little lower with the CapEx, as 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 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 these financing transactions that have come out. There's been -- we don't have any holdco 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 opco, we generally get a really good perception. And in our equity financing, we got a really good reception as well on IDACORP common stock. We really do like the forward 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 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 it's, 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 is strong. We don't have anything exotic on our balance sheet. We don't intend to necessarily. But we think a traditional financing model is something that would work really well for us. And we'll just 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 growth equity to 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 plan for that growth capital would look like.

Got it. But 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 CWIP 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 CWIP, 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.

Yes. I mean that's -- it's true. We're going to be going in for more frequent rate cases than we have. Certainly, it's 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 in for rate cases. And again, we are very, very aware of the possibility of sort of rate fatigue with our customers and regulators. So we do not take that for granted, and we make sure that we're communicating along the way. So they know what's happening, and we're doing our best.

And Julien, this is Brian. What I would add is you have to recognize that CWIP did increase pretty dramatically on the balance sheet. But note that a lot of that CWIP is actually part of the rate case that we have in Idaho filed now, the limited scope rate case because we're looking at a period-end plant in service. So some of that are projects that are nearing completion, that just haven't yet been closed, the plant. And that will decrease our CWIP balance fairly sizably as we move ahead. Now there are still some large projects in CWIP, you think about Hells Canyon and Boardman to Hemingway. Those are a couple of big ones there. But that number will be declining as we put plants in service.

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 to 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 evening.