QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Exact name of registrants as specified
I.R.S. Employer
Commission File
in their charters, address of principal
Identification
Number
executive offices, zip code and telephone number
Number
1-14465
IDACORP, Inc.
82-0505802
1-3198
Idaho Power Company
82-0130980
1221 W. Idaho Street
Boise, Idaho 83702-5627
(208) 388-2200
State of Incorporation: Idaho
None
Former name, former address and former fiscal year, if changed since last report.
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).
IDACORP, Inc.: Yes X No ___ Idaho Power Company: Yes X No ___
Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
IDACORP, Inc.:
Large accelerated filer
X
Accelerated filer
Non-accelerated filer
Smaller reporting company
Idaho Power Company:
Large accelerated filer
Accelerated filer
Non-accelerated filer
X
Smaller reporting company
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No X
Number of shares of common stock outstanding as of July 29, 2011:
IDACORP, Inc.:
49,711,638
Idaho Power Company:
39,150,812, all held by IDACORP, Inc.
This combined Form 10-Q represents separate filings by IDACORP, Inc. and Idaho Power Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Idaho Power Company makes no representations as to the information relating to IDACORP, Inc.’s other operations.
Idaho Power Company meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this report on Form 10-Q with the reduced disclosure format.
1
COMMONLY USED TERMS
The following select abbreviations or acronyms are commonly used in this report:
ADITC
-
Accumulated Deferred Investment Tax Credits
AFUDC
-
Allowance for Funds Used During Construction
AMI
-
Advanced Metering Infrastructure
APCU
-
Annual Power Cost Update
BCC
-
Bridger Coal Company, a joint venture of IERCo
CAA
-
Clean Air Act
Cal ISO
-
California Independent System Operator
CalPX
-
California Power Exchange
CAMP
-
Comprehensive Aquifer Management Plan
DSR
-
Demand-Side Resources
EGUs
-
Electric Utility Steam Generating Units
EPA
-
United States Environmental Protection Agency
EPS
-
Earnings per share
ESPA
-
Eastern Snake Plain Aquifer
FCA
-
Fixed Cost Adjustment Mechanism
FERC
-
Federal Energy Regulatory Commission
GHG
-
Greenhouse Gas
HAPs
-
Hazardous Air Pollutants
HCC
-
Hells Canyon Complex
Ida-West
-
Ida-West Energy, a subsidiary of IDACORP, Inc.
IE
-
IDACORP Energy, a subsidiary of IDACORP, Inc.
IERCo
-
Idaho Energy Resources Co., a subsidiary of Idaho Power Company
IFS
-
IDACORP Financial Services, a subsidiary of IDACORP, Inc.
IPUC
-
Idaho Public Utilities Commission
IRS
-
Internal Revenue Service
kW
-
Kilowatt
LCAR
-
Load Change Adjustment Rate
MD&A
-
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements should be read with the cautionary statements and important factors included in this Form 10-Q at Part I, Item 2 - “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - FORWARD-LOOKING STATEMENTS,” and in IDACORP, Inc.'s and Idaho Power Company's Annual Report on Form 10-K for the year ended December 31, 2010, at Part I, Item 1A - “RISK FACTORS” and Part II, Item 7 - “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.” Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those that are identified by the use of the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "may result," "may continue," or similar expressions.
3
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
IDACORP, Inc.
Condensed Consolidated Statements of Income
(unaudited)
Three months ended June 30,
Six months ended June 30,
2011
2010
2011
2010
(thousands of dollars except for per share amounts)
Operating Revenues:
Electric utility:
General business
$
194,296
$
204,277
$
397,568
$
408,022
Off-system sales
20,720
17,769
50,565
52,175
Other revenues
18,908
18,744
36,853
33,053
Total electric utility revenues
233,924
240,790
484,986
493,250
Other
1,059
963
1,491
1,466
Total operating revenues
234,983
241,753
486,477
494,716
Operating Expenses:
Electric utility:
Purchased power
36,423
30,349
61,517
51,523
Fuel expense
19,704
27,558
49,606
64,744
Power cost adjustment
15,501
28,071
46,807
76,395
Other operations and maintenance
85,472
75,125
156,133
147,219
Energy efficiency programs
5,796
8,765
12,507
13,799
Depreciation
29,693
28,726
59,157
57,309
Taxes other than income taxes
7,182
5,805
14,394
11,485
Total electric utility expenses
199,771
204,399
400,121
422,474
Other
913
749
1,966
1,590
Total operating expenses
200,684
205,148
402,087
424,064
Operating Income
34,299
36,605
84,390
70,652
Other Income, Net
5,041
3,012
9,579
7,493
(Losses) Earnings of Unconsolidated Equity-Method Investments
(4,447
)
380
(5,741
)
(1,998
)
Interest Expense:
Interest on long-term debt
19,504
19,427
40,351
38,868
Other interest, net of AFUDC
(1,936
)
(2,038
)
(3,823
)
(2,491
)
Total interest expense, net
17,568
17,389
36,528
36,377
Income Before Income Taxes
17,325
22,608
51,700
39,770
Income Tax (Benefit) Expense
(3,652
)
(16,629
)
1,235
(15,324
)
Net Income
20,977
39,237
50,465
55,094
Adjustment for (income) loss attributable to noncontrolling interests
(76
)
(28
)
176
178
Net Income Attributable to IDACORP, Inc.
$
20,901
$
39,209
$
50,641
$
55,272
Weighted Average Common Shares Outstanding - Basic (000’s)
49,420
47,888
49,355
47,831
Weighted Average Common Shares Outstanding - Diluted (000’s)
49,516
48,048
49,436
47,966
Earnings Per Share of Common Stock:
Earnings Attributable to IDACORP, Inc. - Basic
$
0.42
$
0.82
$
1.03
$
1.16
Earnings Attributable to IDACORP, Inc. - Diluted
$
0.42
$
0.82
$
1.02
$
1.15
Dividends Declared Per Share of Common Stock
$
0.30
$
0.30
$
0.60
$
0.60
The accompanying notes are an integral part of these statements.
4
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, 2011
December 31, 2010
Assets
(thousands of dollars)
Current Assets:
Cash and cash equivalents
$
58,316
$
228,677
Receivables:
Customer (net of allowance of $1,075 and $1,499, respectively)
61,691
62,114
Other (net of allowance of $168 and $1,471, respectively)
8,050
10,157
Income taxes receivable
—
12,130
Accrued unbilled revenues
49,779
47,964
Materials and supplies (at average cost)
45,650
45,601
Fuel stock (at average cost)
48,356
27,547
Prepayments
10,976
11,063
Deferred income taxes
7,411
10,715
Current regulatory assets
35,060
6,216
Other
1,284
1,854
Total current assets
326,573
464,038
Investments
198,305
202,944
Property, Plant and Equipment:
Utility plant in service
4,388,461
4,332,054
Accumulated provision for depreciation
(1,653,298
)
(1,614,013
)
Utility plant in service - net
2,735,163
2,718,041
Construction work in progress
545,649
416,950
Utility plant held for future use
7,081
7,076
Other property, net of accumulated depreciation
19,099
19,315
Property, plant and equipment - net
3,306,992
3,161,382
Other Assets:
American Falls and Milner water rights
20,536
22,120
Company-owned life insurance
26,689
26,672
Regulatory assets
717,401
753,172
Long-term receivables (net of allowance of $3,266 and $1,861, respectively)
5,041
3,965
Other
40,787
41,762
Total other assets
810,454
847,691
Total
$
4,642,324
$
4,676,055
The accompanying notes are an integral part of these statements.
5
IDACORP, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, 2011
December 31, 2010
Liabilities and Equity
(thousands of dollars)
Current Liabilities:
Current maturities of long-term debt
$
1,667
$
122,572
Notes payable
66,400
66,900
Accounts payable
87,014
103,100
Income taxes accrued
22,911
—
Interest accrued
22,277
23,937
Uncertain tax positions
56,898
74,436
Current regulatory liabilities
14,036
8,011
Other
68,496
50,103
Total current liabilities
339,699
449,059
Other Liabilities:
Deferred income taxes
586,856
566,473
Regulatory liabilities
307,724
298,094
Other
353,871
338,158
Total other liabilities
1,248,451
1,202,725
Long-Term Debt
1,487,387
1,488,287
Commitments and Contingencies
Equity:
IDACORP, Inc. shareholders’ equity:
Common stock, no par value (shares authorized 120,000,000;
49,715,327 and 49,419,452 shares issued, respectively)
816,891
807,842
Retained earnings
754,771
733,879
Accumulated other comprehensive loss
(8,541
)
(9,568
)
Treasury stock (10,455 and 14,302 shares at cost, respectively)
(29
)
(40
)
Total IDACORP, Inc. shareholders’ equity
1,563,092
1,532,113
Noncontrolling interests
3,695
3,871
Total equity
1,566,787
1,535,984
Total
$
4,642,324
$
4,676,055
The accompanying notes are an integral part of these statements.
6
IDACORP, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months ended
June 30,
2011
2010
Operating Activities:
(thousands of dollars)
Net income
$
50,465
$
55,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
61,390
61,023
Deferred income taxes and investment tax credits
(21,994
)
(19,726
)
Changes in regulatory assets and liabilities
52,068
78,974
Pension and postretirement benefit plan expense
9,897
6,032
Contributions to pension and postretirement benefit plans
(1,510
)
(3,080
)
Losses of unconsolidated equity-method investments
5,741
1,998
Allowance for equity funds used during construction
(11,694
)
(8,020
)
Other non-cash adjustments to net income, net
1,920
(148
)
Change in:
Accounts receivable and prepayments
(954
)
6,613
Accounts payable and other accrued liabilities
(13,843
)
(8,495
)
Taxes accrued/receivable
38,543
9,279
Other current assets
(22,365
)
(3,081
)
Other current liabilities
12,276
18,215
Other assets
546
(2,512
)
Other liabilities
(3,592
)
(4,951
)
Net cash provided by operating activities
156,894
187,215
Investing Activities:
Additions to property, plant and equipment
(186,043
)
(166,687
)
Proceeds from the sale of utility assets
—
19,230
Proceeds from the sale of emission allowances and RECs
3,497
3,497
Investments in affordable housing
(905
)
(6,147
)
Investments in unconsolidated affiliates
(1,100
)
(2,020
)
Other
1,689
3,468
Net cash used in investing activities
(182,862
)
(148,659
)
Financing Activities:
Retirement of long-term debt
(121,064
)
(1,064
)
Dividends on common stock
(29,962
)
(28,830
)
Net change in short-term borrowings
(500
)
(36,250
)
Issuance of common stock
8,254
5,299
Acquisition of treasury stock
(1,933
)
(846
)
Other
812
(364
)
Net cash used in financing activities
(144,393
)
(62,055
)
Net decrease in cash and cash equivalents
(170,361
)
(23,499
)
Cash and cash equivalents at beginning of the period
228,677
52,987
Cash and cash equivalents at end of the period
$
58,316
$
29,488
Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the period for:
Income taxes
$
(12,696
)
$
(3,387
)
Interest (net of amount capitalized)
$
36,848
$
33,662
Non-cash investing activities:
Additions to property, plant and equipment in accounts payable
$
32,681
$
21,435
Investments in affordable housing
$
—
$
3,168
The accompanying notes are an integral part of these statements.
7
IDACORP, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
Three months ended June 30,
Six months ended June 30,
2011
2010
2011
2010
(thousands of dollars)
Net Income
$
20,977
$
39,237
$
50,465
$
55,094
Other Comprehensive Income:
Net unrealized holding gains (losses) arising during the period,
net of tax of $4, ($758), $359, and ($492)
6
(1,181
)
560
(765
)
Unfunded pension liability adjustment, net of tax
of $150, $114, $300, and $227
234
177
467
354
Total Comprehensive Income
21,217
38,233
51,492
54,683
Comprehensive (income) loss attributable to noncontrolling interests
(76
)
(28
)
176
178
Comprehensive Income Attributable to IDACORP, Inc.
$
21,141
$
38,205
$
51,668
$
54,861
The accompanying notes are an integral part of these statements.
8
IDACORP, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
Six months ended
June 30,
2011
2010
(thousands of dollars)
Common Stock
Balance at beginning of period
$
807,842
$
756,475
Issued
8,254
5,299
Other
795
1,129
Balance at end of period
816,891
762,903
Retained Earnings
Balance at beginning of period
733,879
649,180
Net income attributable to IDACORP, Inc.
50,641
55,272
Common stock dividends ($0.60 per share)
(29,749
)
(28,851
)
Balance at end of period
754,771
675,601
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period
(9,568
)
(8,267
)
Unrealized gain (loss) on securities (net of tax)
560
(765
)
Unfunded pension liability adjustment (net of tax)
467
354
Balance at end of period
(8,541
)
(8,678
)
Treasury Stock
Balance at beginning of period
(40
)
(53
)
Issued
1,944
882
Acquired
(1,933
)
(846
)
Balance at end of period
(29
)
(17
)
Total IDACORP, Inc. shareholders’ equity at end of period
1,563,092
1,429,809
Noncontrolling Interests
Balance at beginning of period
3,871
4,209
Net loss attributable to noncontrolling interests
(176
)
(178
)
Balance at end of period
3,695
4,031
Total equity at end of period
$
1,566,787
$
1,433,840
The accompanying notes are an integral part of these statements.
9
Idaho Power Company
Condensed Consolidated Statements of Income
(unaudited)
Three months ended June 30,
Six months ended June 30,
2011
2010
2011
2010
(thousands of dollars)
Operating Revenues:
General business
$
194,296
$
204,277
$
397,568
$
408,022
Off-system sales
20,720
17,769
50,565
52,175
Other revenues
18,908
18,744
36,853
33,053
Total operating revenues
233,924
240,790
484,986
493,250
Operating Expenses:
Operation:
Purchased power
36,423
30,349
61,517
51,523
Fuel expense
19,704
27,558
49,606
64,744
Power cost adjustment
15,501
28,071
46,807
76,395
Other operations and maintenance
85,472
75,125
156,133
147,219
Energy efficiency programs
5,796
8,765
12,507
13,799
Depreciation
29,693
28,726
59,157
57,309
Taxes other than income taxes
7,182
5,805
14,394
11,485
Total operating expenses
199,771
204,399
400,121
422,474
Income from Operations
34,153
36,391
84,865
70,776
Other Income (Expense):
Allowance for equity funds used during construction
6,365
4,362
11,694
8,020
(Losses) earnings of unconsolidated equity-method investments
(3,428
)
1,987
(2,570
)
2,335
Other expense, net
(1,363
)
(1,410
)
(2,375
)
(1,171
)
Total other income
1,574
4,939
6,749
9,184
Interest Charges:
Interest on long-term debt
19,504
19,427
40,351
38,868
Other interest
1,311
1,178
2,525
2,031
Allowance for borrowed funds used during construction
(3,375
)
(3,287
)
(6,589
)
(5,478
)
Total interest charges
17,440
17,318
36,287
35,421
Income Before Income Taxes
18,287
24,012
55,327
44,539
Income Tax (Benefit) Expense
(2,414
)
(14,816
)
4,779
(12,510
)
Net Income
$
20,701
$
38,828
$
50,548
$
57,049
The accompanying notes are an integral part of these statements.
10
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
June 30, 2011
December 31, 2010
Assets
(thousands of dollars)
Electric Plant:
In service (at original cost)
$
4,388,461
$
4,332,054
Accumulated provision for depreciation
(1,653,298
)
(1,614,013
)
In service - net
2,735,163
2,718,041
Construction work in progress
545,649
416,950
Held for future use
7,081
7,076
Electric plant - net
3,287,893
3,142,067
Investments and Other Property
119,179
120,641
Current Assets:
Cash and cash equivalents
53,538
224,233
Receivables:
Customer (net of allowance of $1,075 and $1,499, respectively)
61,691
62,114
Other (net of allowance of $168 and $142, respectively)
7,699
8,835
Income taxes receivable
—
21,063
Accrued unbilled revenues
49,779
47,964
Materials and supplies (at average cost)
45,650
45,601
Fuel stock (at average cost)
48,356
27,547
Prepayments
10,794
10,910
Deferred income taxes
4,031
7,334
Current regulatory assets
35,060
6,216
Other
1,284
1,238
Total current assets
317,882
463,055
Deferred Debits:
American Falls and Milner water rights
20,536
22,120
Company-owned life insurance
26,689
26,672
Regulatory assets
717,401
753,172
Other
39,792
40,666
Total deferred debits
804,418
842,630
Total
$
4,529,372
$
4,568,393
The accompanying notes are an integral part of these statements.
11
Idaho Power Company
Condensed Consolidated Balance Sheets
(unaudited)
June 30, 2011
December 31, 2010
Capitalization and Liabilities
(thousands of dollars)
Capitalization:
Common stock equity:
Common stock, $2.50 par value (50,000,000 shares
authorized; 39,150,812 shares outstanding)
$
97,877
$
97,877
Premium on capital stock
688,758
688,758
Capital stock expense
(2,097
)
(2,097
)
Retained earnings
650,961
630,259
Accumulated other comprehensive loss
(8,541
)
(9,568
)
Total common stock equity
1,426,958
1,405,229
Long-term debt
1,487,387
1,488,287
Total capitalization
2,914,345
2,893,516
Current Liabilities:
Long-term debt due within one year
1,064
121,064
Accounts payable
86,246
102,474
Accounts payable to related parties
1,348
1,110
Income taxes accrued
21,690
—
Interest accrued
22,277
23,930
Uncertain tax positions
56,898
74,436
Current regulatory liabilities
14,036
8,011
Other
67,960
48,733
Total current liabilities
271,519
379,758
Deferred Credits:
Deferred income taxes
684,038
661,165
Regulatory liabilities
307,724
298,094
Other
351,746
335,860
Total deferred credits
1,343,508
1,295,119
Commitments and Contingencies
Total
$
4,529,372
$
4,568,393
The accompanying notes are an integral part of these statements.
12
Idaho Power Company
Condensed Consolidated Statements of Capitalization
(unaudited)
June 30, 2011
December 31, 2010
(thousands of dollars)
Common Stock Equity:
Common stock
$
97,877
$
97,877
Premium on capital stock
688,758
688,758
Capital stock expense
(2,097
)
(2,097
)
Retained earnings
650,961
630,259
Accumulated other comprehensive loss
(8,541
)
(9,568
)
Total common stock equity
1,426,958
1,405,229
Long-Term Debt:
First mortgage bonds:
6.60% Series due 2011
—
120,000
4.75% Series due 2012
100,000
100,000
4.25% Series due 2013
70,000
70,000
6.025% Series due 2018
120,000
120,000
6.15% Series due 2019
100,000
100,000
4.50 % Series due 2020
130,000
130,000
3.40% Series due 2020
100,000
100,000
6 % Series due 2032
100,000
100,000
5.50% Series due 2033
70,000
70,000
5.50% Series due 2034
50,000
50,000
5.875% Series due 2034
55,000
55,000
5.30% Series due 2035
60,000
60,000
6.30% Series due 2037
140,000
140,000
6.25% Series due 2037
100,000
100,000
4.85% Series due 2040
100,000
100,000
Total first mortgage bonds
1,295,000
1,415,000
Amount due within one year
—
(120,000
)
Net first mortgage bonds
1,295,000
1,295,000
Pollution control revenue bonds:
5.15% Series due 2024
49,800
49,800
5.25% Series due 2026
116,300
116,300
Variable Rate Series 2000 due 2027
4,360
4,360
Total pollution control revenue bonds
170,460
170,460
American Falls bond guarantee
19,885
19,885
Milner Dam note guarantee
6,382
7,446
Note guarantee due within one year
(1,064
)
(1,064
)
Unamortized premium/discount - net
(3,276
)
(3,440
)
Total long-term debt
1,487,387
1,488,287
Total Capitalization
$
2,914,345
$
2,893,516
The accompanying notes are an integral part of these statements.
13
Idaho Power Company
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months ended
June 30,
2011
2010
(thousands of dollars)
Operating Activities:
Net income
$
50,548
$
57,049
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
61,101
60,709
Deferred income taxes and investment tax credits
(19,504
)
(17,559
)
Changes in regulatory assets and liabilities
52,068
78,974
Pension and postretirement benefit plan expense
9,897
6,032
Contributions to pension and postretirement benefit plans
(1,510
)
(3,080
)
Losses (earnings) of unconsolidated equity-method investments
2,570
(2,335
)
Allowance for equity funds used during construction
(11,694
)
(8,020
)
Other non-cash adjustments to net income
778
(2,474
)
Change in:
Accounts receivables and prepayments
(1,282
)
6,250
Accounts payable
(13,984
)
(8,315
)
Taxes accrued/receivable
46,144
(8,791
)
Other current assets
(22,365
)
(3,081
)
Other current liabilities
12,276
18,211
Other assets
546
(2,512
)
Other liabilities
(2,798
)
(4,309
)
Net cash provided by operating activities
162,791
166,749
Investing Activities:
Additions to utility plant
(186,043
)
(166,687
)
Proceeds from the sale of utility assets
—
19,230
Proceeds from the sale of emission allowances and RECs
3,497
3,497
Investments in unconsolidated affiliates
(1,100
)
(2,020
)
Other
1,070
2,890
Net cash used in investing activities
(182,576
)
(143,090
)
Financing Activities:
Retirement of long-term debt
(121,064
)
(1,064
)
Dividends on common stock
(29,846
)
(28,869
)
Capital contribution from parent
—
10,000
Other
—
(233
)
Net cash used in financing activities
(150,910
)
(20,166
)
Net (decrease) increase in cash and cash equivalents
(170,695
)
3,493
Cash and cash equivalents at beginning of the period
224,233
21,625
Cash and cash equivalents at end of the period
$
53,538
$
25,118
Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the period for:
Income taxes
$
(19,244
)
$
15,335
Interest (net of amount capitalized)
$
36,599
$
32,706
Non-cash investing activities:
Additions to property, plant and equipment in accounts payable
$
32,681
$
21,435
The accompanying notes are an integral part of these statements.
14
Idaho Power Company
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
Three months ended June 30,
Six months ended
June 30,
2011
2010
2011
2010
(thousands of dollars)
Net Income
$
20,701
$
38,828
$
50,548
$
57,049
Other Comprehensive Income:
Net unrealized holding gains (losses) arising during the period, net of tax of $4, ($758), $359, and ($492)
6
(1,181
)
560
(765
)
Unfunded pension liability adjustment, net of tax of $150, $114, $300, and $227
234
177
467
354
Total Comprehensive Income
$
20,941
$
37,824
$
51,575
$
56,638
The accompanying notes are an integral part of these statements.
15
IDACORP, INC. AND IDAHO POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This Quarterly Report on Form 10-Q is a combined report of IDACORP, Inc. (IDACORP) and Idaho Power Company (Idaho Power). Therefore, these Notes to Condensed Consolidated Financial Statements apply to both IDACORP and Idaho Power. However, Idaho Power makes no representation as to the information relating to IDACORP’s other operations.
Nature of Business
IDACORP is a holding company formed in 1998 whose principal operating subsidiary is Idaho Power. Idaho Power is an electric utility with a service territory covering approximately 24,000 square miles in southern Idaho and eastern Oregon. Idaho Power is regulated by the Federal Energy Regulatory Commission (FERC) and the state regulatory commissions of Idaho and Oregon. Idaho Power is the parent of Idaho Energy Resources Co. (IERCo), a joint venturer in Bridger Coal Company (BCC), which mines and supplies coal to the Jim Bridger generating plant owned in part by Idaho Power.
IDACORP’s other subsidiaries include IDACORP Financial Services, Inc. (IFS), an investor in affordable housing and other real estate investments; Ida-West Energy Company (Ida-West), an operator of small hydroelectric generation projects that satisfy the requirements of the Public Utility Regulatory Policies Act of 1978; and IDACORP Energy (IE), a marketer of energy commodities, which wound down operations in 2003.
Principles of Consolidation
IDACORP’s and Idaho Power’s consolidated financial statements include the accounts of each company, the subsidiaries that the companies control, and any variable interest entities (VIEs) for which the companies are the primary beneficiaries. Intercompany balances have been eliminated in consolidation. Investments in subsidiaries that the companies do not control and investments in VIEs for which the companies are not the primary beneficiaries, but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method of accounting.
The entities that IDACORP and Idaho Power consolidate consist primarily of the wholly-owned subsidiaries discussed above. In addition, IDACORP consolidates one VIE, Marysville Hydro Partners (Marysville), which is a joint venture owned 50 percent by Ida-West and 50 percent by Environmental Energy Company (EEC). Marysville has approximately $20 million of assets, primarily a hydroelectric plant, and approximately $16 million of intercompany long-term debt, which is eliminated in consolidation. EEC has borrowed amounts from Ida-West to fund a portion of its required capital contributions to Marysville. The loans are payable from EEC’s share of distributions and are secured by the stock of EEC and EEC’s interest in Marysville. Ida-West is the primary beneficiary because the ownership of the intercompany note and the EEC note result in it controlling the entity. Creditors of Marysville have no recourse to the general credit of IDACORP and there are no other arrangements that could require IDACORP to provide financial support to Marysville or expose IDACORP to losses.
Through IERCo, Idaho Power holds a variable interest in BCC, a VIE for which it is not the primary beneficiary. IERCo is not the primary beneficiary because the power to direct the activities that most significantly impact the economic performance of BCC is shared with the joint venture partner. The carrying value of BCC is $89 million at June 30, 2011, and the maximum exposure to loss at BCC is the carrying value, plus any additional future contributions to BCC and the $63 million guarantee for reclamation costs at the mine that is discussed further in Note 8 – “Commitments.”
Through IFS, IDACORP also holds variable interests in VIEs for which it is not the primary beneficiary. These VIEs are affordable housing developments and other real estate investments in which IFS holds limited partnership interests ranging from 5 to 99 percent. As a limited partner, IFS does not control these entities and they are not consolidated. These investments were acquired between 1996 and 2010. IFS’s maximum exposure to loss in these developments is limited to its net carrying value, which was $69 million at June 30, 2011.
16
Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly their consolidated financial positions as of June 30, 2011, consolidated results of operations for the three and six months ended June 30, 2011 and 2010, and consolidated cash flows for the six months ended June 30, 2011 and 2010. These adjustments are of a normal and recurring nature. These financial statements do not contain the complete detail or footnote disclosure concerning accounting policies and other matters that would be included in full-year financial statements and should be read in conjunction with the audited consolidated financial statements included in IDACORP’s and Idaho Power’s Annual Report on Form 10-K for the year ended December 31, 2010. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities, as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results experienced could differ materially from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation, including amounts related to regulatory assets and liabilities in the condensed consolidated balance sheets. Net income, cash flows, and shareholders' equity were not affected by these reclassifications.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued the following accounting guidance, which is effective for periods beginning after December 15, 2011:
•
In May 2011, the FASB issued guidance to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between generally accepted accounting principles in the United States and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. IDACORP and Idaho Power are currently assessing the impact of the guidance but do not believe that the adoption of this guidance will have a material effect on their consolidated financial statements.
•
In June 2011, the FASB issued guidance on the presentation of comprehensive income in an entity's financial statements. The guidance requires that comprehensive income be presented either in one continuous statement or in two separate but consecutive statements presenting the components of net income and its total, the components of other comprehensive income and its total, and total comprehensive income. The guidance also requires that reclassification adjustments from other comprehensive income to net income be presented in both the components of net income and the components of other comprehensive income. IDACORP and Idaho Power do not expect the adoption of this guidance to have a material effect on their consolidated financial statements.
2. INCOME TAXES:
In accordance with interim reporting requirements, IDACORP and Idaho Power use an estimated annual effective tax rate for computing their provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, or method changes. Discrete events are recorded in the interim period in which they occur.
The estimated annual effective tax rate is applied to year-to-date pre-tax income to determine income tax expense (or benefit) for the interim period consistent with the annual estimate. In subsequent interim periods, income tax expense (or benefit) for the period is computed as the difference between the year-to-date amount reported for the previous interim period and the current period's year-to-date amount.
17
Income Tax Expense
An analysis of income tax expense (benefit) for the three and six months ended June 30 is as follows (in thousands of dollars):
IDACORP
Idaho Power
2011
2010
2011
2010
Three months ended June 30,
Income tax at statutory rates (federal and state)
$
6,744
$
8,829
$
7,150
$
9,389
Additional ADITC amortization
(2,895
)
4,512
(2,895
)
4,512
Accounting method change
—
(25,187
)
—
(25,187
)
Examination settlement
(3,428
)
—
(3,428
)
—
Other
(4,073
)
(4,783
)
(3,241
)
(3,530
)
Income tax benefit
$
(3,652
)
$
(16,629
)
$
(2,414
)
$
(14,816
)
Effective tax rate
(21.2
)%
(73.6
)%
(13.2
)%
(61.7
)%
Six months ended June 30,
Income tax at statutory rates (federal and state)
$
20,284
$
15,620
$
21,633
$
17,415
Additional ADITC amortization
(6,750
)
—
(6,750
)
—
Accounting method change
—
(25,187
)
—
(25,187
)
Examination settlement
(3,428
)
—
(3,428
)
—
Other
(8,871
)
(5,757
)
(6,676
)
(4,738
)
Income tax expense (benefit)
$
1,235
$
(15,324
)
$
4,779
$
(12,510
)
Effective tax rate
2.4
%
(38.4
)%
8.6
%
(28.1
)%
The changes in year-to-date 2011 income tax expense as compared to the same period in 2010 were primarily due to an income tax benefit in 2010 related to Idaho Power's tax accounting method change for capitalized repair expenditures that did not recur in 2011, additional amortization of accumulated deferred investment tax credits (ADITC), and higher pre-tax earnings. Net regulatory flow-through tax adjustments at Idaho Power and tax credits at IFS for the six months ended June 30, 2011 were comparable to the same period in 2010.
Idaho Power's January 2010 settlement agreement with the Idaho Public Utilities Commission (IPUC) and other parties provides for additional amortization of ADITC if Idaho Power's actual return on year-end equity in its Idaho jurisdiction is below 9.5 percent in any calendar year from 2009 to 2011. At the beginning of 2011, Idaho Power had up to $25 million of additional ADITC amortization available for use in 2011 under the settlement agreement. Idaho Power recorded $6.8 million of additional ADITC amortization for the six months ended June 30, 2011, based on its estimate of 2011 Idaho jurisdictional return on year-end equity.
Status of Audit Proceedings and Tax Method Changes
In September 2010, Idaho Power adopted a tax accounting method change for capitalized repair expenditures on utility assets concurrent with the filing of IDACORP's 2009 consolidated federal income tax return. Also in 2010, Idaho Power reached an agreement with the U.S. Internal Revenue Service (IRS), subject to subsequent review by the U.S. Congress Joint Committee on Taxation (Joint Committee), regarding the allocation of mixed service costs in its method of uniform capitalization. Both methods were subject to audit under IDACORP's 2009 IRS examination.
In April 2011, IDACORP and the IRS reached an agreement on Idaho Power's tax accounting method change for capitalized repairs. Accordingly, the IRS finalized the 2009 examination and submitted its report on the 2009 tax year to the Joint Committee for review. Idaho Power considers the capitalized repairs method effectively settled and believes that no material income tax uncertainties remain for the method. As such, Idaho Power recognized $3.4 million of its previously unrecognized tax benefits for this method in the second quarter of 2011. IDACORP and Idaho Power will pay previously accrued income tax liabilities of approximately $4 million and $7 million, respectively, as a result of this settlement. The difference in liabilities is due to IDACORP's utilization of previously deferred federal general business tax credits and Idaho investment tax credits.
With IDACORP's 2009 tax year submitted to the Joint Committee, Idaho Power's uniform capitalization method agreement
18
with the IRS is under review. If the Joint Committee approves the agreement, Idaho Power would consider the method effectively settled and will recognize approximately $60 million
