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Welcome to the IDACORP's Second Quarter 2023 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'll now turn the call over to Justin Forsberg, Director of Investor Relations and Treasurer.

Thank you, David, and good afternoon, everyone. We appreciate you tuning in for our call today. This morning, we issued and posted to IDACORP's website our second quarter 2023 earnings release and the associated Form 10-Q. 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 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecasts and regulatory plans which reflect our current views on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impact 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 3, on today's call, we have Lisa Grow, 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 4 shows our quarterly financial results. IDACORP's second quarter 2023 earnings per diluted share were $1.35 compared with $1.27 during last year's second quarter. Year-to-date, earnings per diluted share were $2.46 compared with $2.18 during the first half of 2022. Those year-to-date results include additional tax credit amortization of $7.5 million under the Idaho regulatory stipulation. Today, we also reaffirmed our full-year 2023 IDACORP earnings guidance estimate in the range of $4.95 to $5.15 per diluted share, which includes our reaffirmed current expectation that Idaho Power will utilize approximately $15 million of additional tax credits that are available to support earnings of the 9.4% return on equity level in the Idaho jurisdiction under its Idaho regulatory settlement stipulation. These estimates assume normal weather conditions through the remainder of the year. I'll now turn the call over to Lisa.

Thank you, Justin, and thanks to everyone for joining us today. Let me begin by expressing my profound appreciation to the entire Idaho Power team that continues to show up and deliver results for our customers, owners, and each other. I'm honored to share some of our accomplishments and future plans with all of you today. I'm going to talk about three key areas of focus: growth, rate cases, and infrastructure. I'll start with a headline of continued strong growth. We had a 2.1% customer growth since last year's second quarter, as you can see on Slide 5. It's a continuation of the trend we've seen over the past few years. On the large load customer front, the True West Beef plant in Southern Idaho went live in June and is ramping up to full operation. We're also continuing to work with Meta on its data center and Micron on its expansion project. Strong interest remains steady from customers across a range of industries, including food processing, manufacturing and data centers. And I continue to marvel at the number of tower cranes across the Treasure Valley and the amount of infrastructure being built. Supporting that, the economy within Idaho Power service area continues to outperform national trends. Moody's most recent GDP calculations for our service area forecasts strong growth of 5.5% in '23, and 3.9% in '24. Employment in our service area has increased 1.6%, since the second quarter of '22. Turning to Slide 6. I'll touch on the general rate case we filed in Idaho on June 1st. Our case requests a rate increase of $111 million or 8.61% on average for Idaho customers with our expectation that new rates will be effective January 1, 2024. This case was filed 12 years to the day of Idaho Power's last general rate case in Idaho, and it's focused primarily on the more than $3 billion of infrastructure investments our company has made to serve our growing customer base since then. In fact, our customer base has grown by about 120,000 or 23%, which has consumes the capacity length our system once has. Adding new generation, transmission and distribution assets to meet our existing and growing demand is a key driver behind our filing of the case. Since the filing, we have been responding to discovery requests and working through the regulatory process. The commission approved the schedule for the case this past Tuesday, showing public workshops scheduled for mid-August and technical hearing scheduled for late November. We are always mindful of the impact rate increases have on our customers, but we believe the rate case request is necessary to recover our costs, address growth, and maintain system reliability. We expect to file a general rate case in Oregon late this year or early next year. Staying with the theme of growth, the current 2023 IRP shows a five year forecasted annual growth rate of 5.5% on retail sales and 3.7% on annual peak. These projections are premised in part on numbers provided by large load customers and are subject to change, but the continued growth underscores the importance of our ongoing efforts to strengthen and expand our system. We are on track to file our 2023 IRP in September. There are lots of moving pieces in a long-term resource plan, including changing demand, developing technology, new laws and directives, and other items. We are committed to developing a plan that directs near-term decisions to keep the system reliable, while minimizing costs to customers. While planning is critical to our success, execution is what ultimately keeps the lights on. So let's turn our focus to our infrastructure project. Turning to Slide 7, I'll address some key updates to our large transmission project. The Boardman-to-Hemingway project recently hit major milestones when the Oregon and Idaho Public Utilities Commission granted certificates of public convenience and necessity. With those regulatory acknowledgments, we plan to break ground on B2H soon and hope to finish it in 2026. As I mentioned last quarter, our agreement with the Bonneville Power Administration to transfer its original 24% interest in B2H to Idaho Power brings our total interest to approximately 45%. Idaho Power will provide long-term transmission service to BPA as part of the agreement. The Gateway West transmission project is also moving forward, and we expect it to be a part of our resource stack in our 2023 IRP. Majority owner PacifiCorp has constructed portions of the line in Wyoming, while preconstruction, which includes siting, permitting, and engineering studies has begun in Idaho. We expect the portions of the line that are partly owned by Idaho Power to start coming online as early as 2028. Both of these transmission resources will be key to maintaining reliability across our system particularly as we move away from coal-fired resources and toward a clean energy future. We have RFP's out to meet 350 megawatts of peak capacity needs in 2026 and 2027, which may be met by 1,100 megawatts of variable resources. Some of that energy may be transmitted on B2H. Ultimately, these projects are subject to commission approval through a competitive bidding process, which is underway. Idaho Power's first bank of 80 megawatts of utility-scale batteries came online this summer at our Hemingway substation. The 40-megawatt Black Mesa solar project is now online, and the 100-megawatt Franklin Solar project is under development. The Franklin project will be paired with an additional 60 megawatts of company-owned battery storage. These projects and other planned battery and solar resources are expected to help us continue to meet peak demand during the hot summer months. This past month has brought consistently hot summer weather to our service area with temperatures in the 90s and 100. Thankfully, we haven't had any issues meeting peak demand, and it has also been a relatively quiet wildfire season thus far. We have implemented our wildfire mitigation plan that has been a tremendous amount of work in preparation for this fire season, and we are actively monitoring the weather in our system. With that, I will stop there and hand it over to Brian for an overview of our financial results.

Okay. Thanks, Lisa, and hi, everybody. Before I get started, I wanted to give a big thank you to Justin, and congratulations. Justin is leaving IDACORP later this month to join one of our peer utilities in an officer role. And I know he'll do great things there just like he did here, and we'll certainly miss them. And with Justin's departure, obviously comes some change, I'm excited to announce that Amy Shaw, the company's current Director of Compliance Risk and Securities will be returning to her roots in finance and accounting, taking on the Investor Relations function. Amy's been with us for almost 20 years, and you'll find her to have an infectious enthusiasm that complements for a strong acumen and I look forward to introducing you to Amy in the coming weeks. We do plan to be out and about a considerable amount in the next few weeks and months, and we're, of course, happy to chat virtually or by phone at any time, and Amy's contact information is included at the end of our slides. Slide 8 has our summary reconciliation of the second quarter's results, and I'll run through that. Compared to the second quarter of last year, customer growth of 2.1% added $4.1 million to operating income. Our residential customer growth rate remains strong at 2.3% over that time period, and we just received July's number and we saw an uptick to 2.2% on overall customer growth through July. Lisa mentioned Moody's GDP outlook for our service area, and that points to continued strong customer growth. So we're planning our system for that activity. Overall, industrial sales volumes and revenues were higher for the quarter when you account for customer growth and usage, but industrial per customer usage was down 5%, that was partly related to slightly lower economic activity in a few industrial sectors. But also due to a cogeneration facility owned by a large industrial customer that was down for maintenance during much of the second quarter last year, but it was operational this year, and that offset that customer's usage on a comparative basis. And given that we didn't really see much of the increase in irrigation sales we were planning for after seeing low irrigation sales during the second quarter of last year, we feel pretty good about the comparative results in usage. Essentially irrigation sales were relatively consistent in the second quarter of this year and last year, but in both cases, below average and below our expectations due to precipitation and temperature conditions. Further down, you'll see a $2.4 million increase in operating income from the change in net per megawatt hour revenue, the Idaho order from the Jim Bridger plant, which increased retail rates on June 1 last year drove that increase. Next on the table, transmission wheeling-related revenues increased operating income by $1.7 million, resulting from elevated energy prices in the Western U.S. Also, customers paid around 1% more for transmission wheeling quarter-over-quarter after Idaho Power's transmission tariff rate increased in October of last year due to higher transmission costs. Despite continued inflation-related pressures on labor and other costs, O&M expenses were lower quarter-over-quarter and year-to-date compared to last year. The quarter-over-quarter difference was mostly due to lower expenses from scheduled cyclical plant maintenance and a continued focus on operating efficiently and that was offset partially by inflationary pressures on labor related and other costs that I mentioned. Depreciation expense was $12.3 million higher than during last year's second quarter. So that stands out. The comparable increase was from the notable impact last year of the Bridger-related order from the IPUC, remember that order authorized Idaho Power to accelerate depreciation on the coal-related assets at the Jim Bridger plant and it resulted from our recording the deferral of certain depreciation expense in the second quarter last year. This year's increase is also partially related to an increase in plant and service. A decrease in net power supply expenses that were not deferred for future recovery in rates through the power cost adjustment mechanisms was the primary driver of the $3 million benefit from other changes in operating revenue and expenses you see next on the table. We had power cost pressures through much of last year and in the first quarter this year, and fortunately, they moderated somewhat in the second quarter. At least for now, forward gas prices continue to look better than we saw last winter, but we'll see how the rest of the year plays out. Next on the table, the $2.8 million decrease in nonoperating expense was mostly due to higher AFUDC from higher average construction work in progress and from higher interest income due to higher market interest rates. These increases were partially offset by an increase in interest expense from bond issuances this past spring. We expect higher interest expense to continue to impact our results over the balance of the year. Finally, higher income tax expense, mostly resulting from greater pretax income was more than offset by our reporting of additional amortization of accumulated deferred investment income tax credit of $3.75 million. We recorded this additional amortization based on our current expectations for full-year results, which under the regulatory mechanism allows us to use a portion of the accumulated tax credit balance to help lift Idaho Power's return on year-end equities to 9.4% in the Idaho jurisdiction, $7.5 million of additional ADITC's recorded year-to-date is now one half of our expected total additional full-year amortization of $15 million. Combined with nominal impacts from other IDACORP subsidiaries, all of these items combined led to a $4.6 million increase in net income over last year's second quarter. Looking ahead, as we've mentioned before, we try to target a relatively even capital structure. Idaho Power's equity ratio has moved closer to that target compared to where we were at year-end, and now sitting at 52% at the end of Q2, given where we are on that ratio, we still don't see an equity issuance as imminent, but given the size of our capital plans and that we're approaching our target ratio, our financing strategy going forward includes a blend of both equity and debt to fund future growth. We've been spending some time determining in more detail how we might make those debt and equity issuances. And in doing that, we're, of course, keeping in mind the need to balance items like credit ratings, capital market conditions and interest rates and dilution impact as we work on our plans. Turning to Slide 9. Cash flows from operations during the first six months of the year returned to positive territory after starting the year seeing the effects of regulatory lag from abnormally high power and fuel costs. We received approval from the Idaho Commission to collect through the PCA $200 million for higher power and fuel costs over the past year from June 1 of this year through May of 2025. And that rate change has already begun to improve cash flows from operations. As you can see on Slide 10, we continue to expect IDACORP's 2023 earnings to be in the range of $4.95 to $5.15 per diluted share. With the assumption that Idaho Power will use around $15 million of additional investment tax credit amortization to realize the 9.4% return on year-end equity in Idaho. As I mentioned, we've now booked one half of that for the pro rata portion of the year, and this guidance assumes normal weather and more normal power supply expenses over the balance of the year. With our second quarter results, we've had a solid start to the year, and we're on track thus far for our EPS range. We expect results in the second half to benefit from continued customer growth and hopefully a sustained moderation in power supply costs. On the other hand, we expect to see higher interest and depreciation expense in the second half due to our CapEx investment, and potentially lower transmission wheeling-related revenues compared to the fourth quarter of last year when Western Energy prices were abnormally volatile. We continue to expect full-year O&M to be in the range of $385 million to $395 million, with much of the expected savings related to less scheduled plant maintenance compared to last year and our typical cost management efforts, along with some federal credits and grants we've received. With slightly lower O&M thus far this year, we're on track, and we're staying focused on it. We still expect this year's CapEx spending to be in the range of $650 million to $700 million, and we're trending at the higher end, we're working on capital budgeting for next year and expect 2024 CapEx could be larger than what we predicted for 2024 at the beginning of this year. Finally, we are affirming our hydropower generation forecast to be within the range of 6 million to 7.5 million megawatt hours for the year. This compares with actual generation of 5.3 million last year, yet still below our 30-year average of 7.7 million. The strong winter snowpack has filled reservoirs well, which is helping us cost effectively meet demand in our high summer usage season. Slide 11 shows the recent outlook for precipitation and temperature from Noah. Current weather projections for August through October suggest that forecasters see a decent chance for above-normal temperatures and are leaning towards normal precipitation over the balance of the summer. I'll stop there, and Lisa and I and others on the call are happy to answer your questions.

Thank you. We are now ready to begin the question-and-answer session. [Operator Instructions]. We'll take our first question from Paul

Hi, Paul.

Hey, Paul.

Hi, good afternoon team. And congratulations, Justin, we are sad to see you go. So congrats there.

Thanks, Paul.

First, thank you for the update on the customer growth through July. Just could you give a kind of a wholesome overview? I know you called it a little bit of slowing or slightly lower economic activity for some customers. You changed some of the customer mix on the -- at least the presentation slide, and there's just been noise around CHIPS Act. So you could just talk about overall what you're seeing on the ground there? That would be helpful.

Sure. I'll start. We are seeing growth across all the sectors, residential permits dropped off a little bit, but they're really starting to come back. There are some industries that just have a little bit of a cyclical sort of nature. But overall, we're not seeing any alarming trends, and Adam what would you add?

In terms of the commercial industrial side, I think the inquiries have been as steady in the last two or three years. They just really haven't slowed down much, we talk a lot about Meta and Micron, both those projects are moving forward. We're doing a lot of work on both projects and are pretty excited that they continue to make progress there. And we're getting a fair amount of inquiries from data centers and other manufacturers who are interested in coming to our service territory. So from our perspective on the economic development side, it's been steady.

And Paul, what I would add is we still see some spec building out there, which is a beneficial aspect for the outlook on manufacturing sector. Some stability in housing prices. And as Lisa mentioned, that uptick in permitting applications will help with the supply of housing for the influx of residential customers. And the other thing I would mention is the customer number growth rate is one thing. But as you look at our load growth projections, they're pretty significantly higher than the customer growth rate, and that's driven by the commercial and industrial area of our business, accelerating relatively rapidly.

Okay. Great. Thank you for all that. And then on the proposed new GHG rules, you disclosed at Valmy and Bridger could be potentially running at reduced run time. Is there a scenario where you could need to invest in those plants or just otherwise look to change the outlook on potential retirement timings for those?

We've actually had a development down in Nevada where that's been stayed, so it won't impact our use this year. It will work its way through the court system, but we are very focused on conversion in those units with our partners, converting from coal to gas. So we see those as important sort of bridge generators as we are working our way towards our clean energy goal.

And Paul, this is Adam. The integrated Resource Plan is set to come out in September. In that plan, we do evaluate reduced run rates in those units. And for the most part, it looks like the conversions are still showing up as economic. So at least we have to finalize the modeling. We have a couple of months to go, but it looks like it's leaning in that direction at least for now.

Okay. Great. And then last one related to Brian, if I heard right, I think you said that 2024 CapEx could be bigger than you thought originally. Just what's driving that? Kind of what categories? And if you have any sense of magnitude, that would be helpful.

Yes. I don't have a good sense of the magnitude at this point other than we're seeing some increases in costs across the board, inflationary costs associated with capital projects, not unanticipated. We're also seeing just an increase in the number of projects that we're working on, on transmission, distribution and generation. And then off of the 2024 batteries that we're installing in the system are included in that as well. So we're currently going through the capital budgeting cycle, and that's just an early indicator that we've seen of capital increasing relative to what you saw in February when we published our last outlook on CapEx through the next five years.

Okay. Great. Thank you. And congrats again. I appreciate it.

Next, we'll go to Chris Ellinghaus with Siebert Williams. Your line is open.

Brian, you sort of talked about this. The irrigation seems kind of odd considering what the conditions were in the quarter, do you have any sense of why that might be?

A little bit of indication on that. What we saw early on in the irrigation season was mild temperatures, and then we saw a lot of precipitation. That reversed itself pretty heavily later on in the irrigation season. There were a lot of factors that influenced it even things like wind, which can dry out crops can result in additional irrigation. We also saw a slight increase in irrigation customers and then also the crops that were planted, given that we had a high water supply this year. Water-intensive crops were planted by some of the ag customers in the area, so additional irrigation there.

Okay. When you say in the guidance you're anticipating normal weather for the rest of the year, does that include the seemingly pretty hot and dry July?

That does include our relatively hot July, yes.

Okay. Have you seen any pickup in irrigation in July?

We don't yet have July irrigation numbers. So I'm not sure how they turned out. I would say based on hot temperatures, it should be beneficial. If you look year-over-year at irrigation, we had a pretty bad irrigation season last year, and that was met the same this year, almost exactly. Some of those July high temperatures and just lack of precipitation over the last month may actually benefit irrigation sales, but we do have that built into our plan going forward and into our guidance, just for July.

Okay. That 5% decline in industrial usage, do you know how much of that was that co-gen customer?

This is Brian again. I don't have an exact number, but it was a fairly significant driver of that 5% reduction. It's a sizable cogeneration at one of our industrial customers. So not an exact number, but significant. And that's a usage for a customer issue rather than a total industrial use perspective. Total industrial use wasn't down much. That was just use per customer. There's also a little bit of an economic slowdown for some of our customers and some of it may be cyclical that contributed to it as well.

Okay. And you didn't really add or at least I didn't catch you were talking about the headwinds and the tailwinds for the rest of the year. Did you include weather as a tailwind?

No. Weather is just one of those things that's so difficult to gauge. One thing that could influence that is transmission sales. So if we get really high temperatures or really cold temperatures that can influence our transmission wheeling volumes, and that can impact it. Really, the -- if you look at headwinds, it's depreciation and interest expense, any O&M pressures that are out there. The third quarter of last year was really hot and that might not repeat itself. It repeat itself in July so far, but we're only three days into August, and we have ways to go on what the impact of that will be for the rest of the year. The irrigation season does tend to slow down and effectively end near the end of September. So that's time limited at this point. But we also have some tailwinds for us as well, including customer growth that we just continue to see and it's driving a lot of our business and a lot of our rate base growth.

Did you get any sense of what that little uptick in July customer growth was from?

Some of it could be related to the permitting issue where we did see just a slowdown when there were some recessionary forces about people moving into the area. Housing prices did moderate a little bit after being very, very high, so that might contribute to the uptick. But again, that was mostly in residential.

Okay. Thanks for the details. Appreciate it.

Thanks Chris.

Next, we'll go to Brian Russo with Sidoti. Your line is now open.

Yes, good afternoon. Hey, just on Boardman-to-Hemingway, obviously, after the permits, right, the big milestone is actually breaking down. But how should we kind of track the development execution of that project? And do you need any landowner agreements? Or do you have a clear path of construction to meet that 2026 target, which I assume is incorporated as the preferred resource in this IRP.

It is, and thanks for the question. Yes, we've been working on this for 17 years, and finally getting past some of these milestones, is really exciting. And now it's time to go build it. Adam has much more detail, but we are working on securing the rights of way in Oregon, and a little bit in Idaho, but we're -- that process has kicked off, and they've been pursuing that with earnest.

Yes. There's really two things. This is Adam, Brian, that we're looking at. One is, of course, getting the right to way from landowners. We're negotiating those deals right now, a fair amount of when we had options on. So for the ones we didn't have options, yes, those negotiations are proceeding. And we also still do have a little bit of environmental and cultural type work each segment, you have to have a plan of development. And then as you go to the segments, the BLM, the Department of Energy approved the progress. So we're working on both those things, we bid out the projects. We're getting bids and right now, the design is all but complete, and we're looking to move forward with construction sometime in the fall, maybe the October time frame. And you are right, and I think Lisa mentioned that it still is continuing to be the least cost, least risk resource in terms of the IRP.

Okay. Great. And then just on Gateway West, I'm sorry if I missed this earlier, but how many megawatts of demand is that capacity kind of equivalent to that you need to service your territory?

Well, Brian, this is Adam. I can talk a little bit about our interest in it. As you know, it's a longer line that goes through Wyoming, our interest is 33% in two segments. One is from the midpoint to Hemingway part of the project, and the other is from Cedar Hill to Hemingway. So our goal is focusing on those two and using, again, 30% of the megawatts bidirectional, it's 1,000 bidirectional. So we would get our portion of it being that 30%.

Okay. Understood. And then just on the procedural schedule for the general rate case, are there dates earmarked for settlement discussions and/or staff testimony?

Tatum is here with us. I'll have Tim answer.

Yes. Sure, Brian. This is Tim Tatum, Vice President, Regulatory Affairs. The parties to the case, including staff have agreed -- informally agreed to settlement discussions September 18 through the 20th. Of course, the commission does not include those settlement dates in their order, but the parties have informally agreed to those dates.

Okay. Great. Got it. Thank you very much.

Thanks, Brian.

[Operator Instructions]. Next, we'll go to Alex Mortimer with Mizuho. Your line is open.

Hi, Alex.

Hi, good afternoon.

Good afternoon.

So you mentioned the future financing plans, including both a mix of debt and equity. Can you give us any additional detail on when we might get additional clarity on the timing of equity issuance is? Would it potentially be with the next capital plan update?

Yes. We're working on that right now. In fact, when we're working through the capital budgeting process and our forecast for 2024, looking at things like our credit ratings. And those are all going to be the factors that we evaluate to determine the timing of that capital markets conditions. We're watching things like treasury rates that continue to go up and that sort of thing. But remember, we still have quite a bit of headroom on our capital structure compared to what we filed and then our target capital structure of 50:50. So we have ways to go on that. We're doing things like design of the capital stack going forward, but we're not at the point where we have anything that we can share on that. We could have that ready towards the beginning of next year as we look at our capital stack and our CapEx plan. But we're also looking at things like the timing of our cash collection on our actual spend versus things like power and gas cost impact. So those are the liquidity items that we're looking at. So that will all impact our mix of debt and equity and the timing of those transactions.

Okay. Understood. And then flipping more back to the rate case. Given the length of time between cases, how frequently you've been meeting with regulators in lead up to this case? Maybe phrased a different way, can you speak to the state of your relationship with regulators, staff and other intervening parties given the duration between the cases?

We're very proud of the relationship that we have built over time with the regulators, and we speak to them frequently on a number of issues and really make sure that we don't surprise them that we keep them appraised to things that are coming up on the horizon. And so we really feel good about having a strong case and an open regulator that is going to work through it with us.

Understood. And then just finally, on the rate case, do you expect any key items of contention as you work through this process?

Well, there always is. I don't know if there's any in particular that we're worried about more than others, but there's always a look at what we spend, why we spend it. And again, we feel very confident that we've put case before the commission that really demonstrates this is largely driven by infrastructure that is fueled by growth, so there's nothing that's jumping out right now that we have concern. Is there anything, Tim, that you would add?

No.

Okay.

All right. Thank you so much. And congrats, Justin, and good luck in your new role.

Thanks Alex.

Thanks Alex.

That concludes the question-and-answer session for today. Ms. Grow, I'll turn the call back over to you.

Well, thank you again for everyone joining us this afternoon and for your continued interest in IDACORP, and I will also join in in thanking Justin and wishing him all our best. We certainly will miss having you here, but we are excited to see what happens next for you. So good luck, and I hope I wish you all a good evening. Thank you.