Welcome to IDACORP’s First Quarter 2018 Earnings Conference Call. Today’s call is being recorded and webcast live. A complete replay will be available from the end of the day through a period of 12 months on the company’s website at idacorpinc.com [Operator Instructions]. Now, I would turn the call over to Justin Forsberg, Director of Investor Relations.

Thanks, Allison. Before the markets opened today, we issued and posted to the IDACORP website, both our first quarter 2018 earnings release, and our quarterly report on Form 10-Q. The slides we’ll be using to supplement today’s call are also available on our website. We’ll refer to those slides by number during the call. As noted on Slide 2, our presentation today will include forward-looking statements, which represent our current views on what the future holds. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today, some of which, are listed on Slide 2, and are supplemented by information in our filings with the Securities and Exchange Commission, which we encourage you to review. We caution you against placing undue reliance on any forward-looking statements. As shown on Slide 3, on today’s call, we have Darrel Anderson, IDACORP’s President and Chief Executive Officer; and Steve Keen, Senior Vice President, Chief Financial Officer and Treasurer along with other individuals available to help answer any questions you may have during the Q&A period. On Slide 4, we present our quarterly financial results. IDACORP’s 2018 first quarter earnings per diluted share were $0.72, an increase of $0.06 per share over last year’s first quarter. We affirm our original 2018 earnings guidance estimate of between $4.10 and $4.25 per diluted share. I will now turn the presentation over to Steve.

Thanks, Justin. Good afternoon, everyone. On Slide 5, you’ll see a reconciliation of income from the first quarter of 2017 to the first quarter of 2018. Continued solid customer growth of 2.1% increased operating income by $2.4 million. Usage per customer, however, decreased operating income by $10.4 million due to moderate weather. Largely offsetting this was an $8.7 million increase in fixed costs adjustment revenues as much as the decrease usage occurred in the residential and small commercial customer classes. Increased rates related to the North Valmy plant settlement, which were first recorded in the second quarter of 2017, were partially offset by a lower proportion of residential customer sales in higher-rate tiers resulting in a net increase of $1.2 million. The North Valmy plant settlement accounted for most of the $3.3 million increase in depreciation expense further down the table. The settlement stipulations related to North Valmy that were approved by the Idaho and Oregon Commissions in 2017, are expected to add about $5 million of net income annually, though the amount will gradually decline through 2028. Recall that last year, the impacts of the first quarter and second quarter 2017 benefits related to the settlement were all recorded during the second quarter last year. In addition to these changes in retail revenues, Idaho Power’s operating income benefited from a $2.7 million increase in transmission wheeling due to an increase in the transmission wheeling rate that has been in effect since last October as well as weather-related increases in wheeling volumes. The transmission rate is now closely aligned with the costs of providing transmission service – more closely aligned, excuse me. Finally, due to the regulatory orders received from the commissions earlier this year, Idaho Power recorded a $5 million reduction to revenue and corresponding regulatory liability for its…

Thanks, Steve, and thanks, everyone, for taking the time to participate on our call today. It sounds like you guys have been pretty busy today. I will update you on economic drivers in our service area, some key accomplishments during the first quarter and a little look at the weather. As shown on Slide 10, customer growth continues to trend upwards, Idaho Power’s customer base increased 2.1% over this time last year, and National Publications continued to highlight our service area as one of America’s fastest growing regions. In addition to the United States Census Bureau identifying Idaho as the fastest-growing state in the nation in 2017, Forbes named Boise #1 on its list of America’s fastest growing cities for 2018. This ranking includes population growth as well as additional factors like wage growth, employment, real gross metro product and home values. In addition, Bloomberg named Idaho as the top performer economy in the country in its latest survey. The good news for it beyond Boise, as we are seeing positive growth trends throughout our service area. According to Atlas Van Lines 2017 Migration Pattern statistics, Idaho has the highest percentage of inbound moves in the nation. These publications are from what we are seeing across our service area in the form of growth and new business. Looking forward, according to Moody’s latest forecast, Idaho’s GDP is predicted to grow 4.4% in 2018 and 3.9% in 2019. In our last call, we also referenced growth in the area of cryptocurrency and blockchain in our service area. We continue to see a strong level of interest from this sector and expect to see new business from this segment beginning in the second quarter of this year. Employment within our region also continues to thrive. The first quarter unemployment in Idaho Power…

[Operator Instructions] And our first question will come from Paul Ridzon of KeyBanc. Please go ahead.

Paul?

Mr. Ridzon?

Sorry, I was on mute there.

Hi, Paul.

Hi, Paul.

Hi. Steve, can you run through the accounting on that pension change? You said O&M will be lower, but net income won’t change. Where is the offset? What are the line items there on?

So if you’re looking at the pin, let me flip here. If you go to Idaho Power’s income statement, basically, the amounts are coming out of the other operations and maintenance expense line, and they’re moving down to if you go to the – it says other income and then impairment expense there is another expense line underneath that, it’s just a shift between those two lines. And it’s – again, it’s a net 0 in terms of net income it’s just a reclass, but it will make the operating or the O&M expense have a reset of some – of an amount once it out of both years the difference would be the same as well it’s pretty close to the same.

And assuming, you get improvement of your settlement on the ADITCs, I mean, do you think you can stay out of rate case another year through 2019 in Idaho at least?

Paul, this is Darrel. I think we’re going to do everything we can to do that, we will continue to look at it and see where the business is, but one hope is that we continue to see the growth materialize and we continue to – that would allow us to also to continue to stay out along with support from the ADITC, so we will continue to look at all those factors. But we won’t go in unless we believe it’s the right thing to do and we will just continue to assess that.

Paul, I think one of the – Paul, a real win from our side is that I think the way we can look at that mechanism now that it doesn’t sunset is that as we preserved credits as we can do things initiated to how – truly does transfer to a later year, but there was always a cliff there before and to have that gone, not have to worry about whether you got an extension is a pretty big thing in our minds, and I think it allows us to just keep our focus and stay on this track.

Thank you, Paul.

Thank you, Paul. Thanks for that.

And our next question will come from Claire Zeng of Bank of America Merrill Lynch. Please go ahead.

Hey. Good afternoon.

Hi Claire.

Hi Claire.

Thanks for taking the time with me here. Just wanted to ask a quick question on strategy in terms of load growth. I mean if this is the second quarter – I mean this is the latest in the series of quarter where you’ve seen just rapidly accelerating load growth. How are you guys thinking about it still? The last earnings call you said it was still a bit of a wait and see situation. Are you still thinking that, that’s the strategy? Would we expect any updates on CapEx, for instance, or additional generation needed, just any color there would be great.

Okay, Claire, I’ll start, maybe Steve will jump in a little bit too. So first of all as you know, runnings we do, we do on IRP every two years. And so we are – we have just recently had our last one acknowledged and so we’re actually interested and that’s already starting to gear up for the next one. And that does help set the – help set our direction as it relates to resource needs and, obviously, we update low growth and all those sorts of things. But in the near term, as we see a lot of very positive economic activity, we still have capacity in the system in which to absorb that growth. So in the near-term, we think our – the CapEx numbers that we have been providing, which over the next three years, average is around $300 million plus or minus, is probably still where we are, but we are continuing to work with various constituents in our service area on the whole economic development side of things. And I mentioned – the one area I mentioned that is something that we’re trying to assess as to how it could impact, this is the cryptocurrency, blockchain sector, because if you follow that at all, they are a very big energy users, and they go out and seek energy – competitively priced energy, and so we have competitively priced energy and so that’s one area that they are looking at, and with that, we have a harder time projecting. But we are seeing a lot of positive activity in that arena, so as I said in my comments, we expect that we will see some of that this quarter already, as we go to the balance of the year we potentially see more of that but we’re also seeing growth coming out of existing business is expanding, as well and that’s in particular food processing in dairy, and then we are also seeing another entity is looking to locate here new businesses that are looking to locate here. So there is a lot of positive vibe around that side of it, but all of that will on the longer-term, look, we’ll get factored into our IRP for – as we gear up for our 2019 IRP. So within the near term, I think, we feel we are – we have adequate resources to meet the needs that we may see on the horizon. That’s a long waited answer to your question, but then Steve may have something to add on it.

I think you covered it pretty well.

Got it. Yes, I think The 2019 IRP will be something for us to watch then.

For sure. And Clarie, just to focus on that though, as you know in the 2017 IRP, our key resource there was Boardman to Hemingway and as we mentioned in my comment, one of the key milestones we just achieved was the acknowledgment by the Oregon Commission, which helps smooth that process forward in Oregon. So that is again, as we work on a lot of things in parallel, that is a key accomplishment for us as it allows us keep moving that forward with our partners.

Yes, that was definitely a good milestone here on. I had another question if that’s all right, with actually, your equity layer. So your equity layer continues to trend pretty high. I know while you guys stay out of rate case that it’s not really a key concern, but I’m wondering if you have any color on what you will do to potentially bring down that equity layer?

I think our strategy right this moment is that higher equity layer allows us to use our debt and future debt on the balance sheet, in order to deal with anything that does come our way, and as you saw we just borrowed some money to both re-price some outstanding debt at a little bit of rate and then also give us a little bit of operating room in the near term. I would say that’s the primary plan with these that we bring that we’ll be able to access the debt markets without driving us directly to capital the way you’re hearing a lot of companies are having to hit both at the same time. We’ll have the ability to grow the debt side of things without really any impact on equity. And I think that gives us a bit of an advantage, and a further line is that you saw that we just did a 30-year bond, most of what we have done in the last few years has been pretty long and tenured. So we also have opportunities that should the rate start not going up, we have ability to move across the spectrum in terms of how long our debt is. So we think we’re poised pretty well. If we do need to bring capital, well, we can do it in a pretty cheap way.

Got it. So I should consider it as dry powder?

That’s a good way to categorize it. I like that.

Got it. All right. Well, thank you so much. That was all from me.

Thanks, Claire.

Thanks, Claire.

And our next question will come from Chris Ellinghaus with Williams Capital. Please go ahead.

Hey. good afternoon, gentlemen.

Hi, Chris.

Hi, Chris. It may feel morning to you, huh? You’ve been pretty busy today.

It’s like tomorrow morning already. Let me follow up on the equity question. Obviously, you just finished a settlement, where the ROE was reduced again sort of your – you’ve been in a somewhat of a step-down function through the ADITC mechanism processes over the years. The staff must be pretty comfortable with your equity layer continuing to thicken, but they’ve been getting a little bit more stingy on the ROE. Is that how they have approached, sort of, adjusting for the equity layer? And you must have had some discussions with them about where you stand on the equity side. So were they comfortable with where you sit today in terms of your equity layer?

Chris, I’ll take a stab, and there are others in the room that can probably comment. But I think it was more a function of as we move to – and I’ll start out by saying that this is isn’t done yet. It’s not approved at this point. We’ve got a settlement agreement, but we’ll need the commission to rule on it. But the discussions were more around the side that as you went to an indefinite type of mechanism that wasn’t going to be looked at regularly, is that really – locking that in with a rate that was maybe it’s okay today, but it was really set a few years ago, with some consideration for the fact that it could continue on for a period of time was something they were looking for. And this, I think, was introduced a bit in our arrangement. I believe it was the North Valmy settlement that has – one of our recent one has an element of – and the look ahead the rate that covers the deferred cost is a little bit different as well. So it was more of a theory that as you put things out into time and you’re not continually addressing it through a general that maybe some slight adjustment is appropriate. But as you can see, they put it back that if you do have a rate case, it reverts right back to the old plan. So it was more in that spirit that the indefinite nature of it made it stay out of while and maybe a slight reduction in – for the lower risk and that sort of thing was appropriate.

Sure. But they didn’t have any concerns about the continuing growing equity layer at all?

That wasn’t part of the discussions from the parties that were involved.

Now really – Chris, this Darrel. It was really kind of focused on kind of what had been granted in with others. And so given the fact that we haven’t been in for a while so there’s an opportunity to kind of reset based on what other had done, and recognizing too that with the taking the time frame off of the extension, the potential for us to stay out too. So I think it was just an – I don’t think necessarily equity layers was necessary a component of the discussion. It was really more about what would be the appropriate equity number if you were going in today, and that’s what we based it on.

Okay. The sort of unusual level of Bridger earnings this quarter, was that – what was that related to? And did it have anything to do with having good weather?

You could argue it’s probably somewhat impacted by that because what happens is they are solving to an annual number, but they are solving it with actual operations of the plant. And so as the plant maybe doesn’t work exactly like a plant that was said a few months earlier because we have a lot of water and we run things differently, you get different answers. So it’s a perennial issue that we’ve actually considered whether there was accounting approaches that we could somehow smooth it. But it’s – it happens year to year. And so that’s why we – when it does move off of a number we’ve seen in a prior year, we try to explain it, and we try to say don’t necessarily bank that because the way the things will work is it should correct itself in one of the later quarters of the year. And if you look back the last few years, the annual numbers have all been very close. So you just have to keep that in mind as you’re looking at what numbers you’ve got in second, third, fourth quarter.

Sure. Okay, one last question. Looking at Slide 12, it’s got me thinking that is this about the best set of circumstances that you could have for your agricultural customers? For your – to have good water storage but maybe below normal participation, but expecting warm temperatures. Is this like the perfect storm for you?

If you’re talking from the utilities perspective or the farmer perspective, I think you’re right. I mean, in – given the weather forecast, it allows – first of all, it allows them to get in the field a little bit earlier, that’s good news. We do – and I think the farmers know that we’ve got, I think, a heads-up generally early on that we’re going to have good water going into this year, that were sort of the message that were out there. And so with the weather the way it is shaping up, it should allow for a long growing season. And then at the same time, with adequate water, so if you’re a utility selling energy to pumper, yes, from that standpoint the potential there is to sell energy early to these guys. So yes, from our standpoint that could set up that way, but we’ve also seen these charts go against us so too. It’s our current – it’s a current look at what the weather appears to look like. But yes, it could be a good irrigation season, which could then translate into a good farming situation too. So...

And Chris, for the last couple of years, we’ve – that’s been a part of our equation that hasn’t been quite as good as we’d hoped. It hasn’t really hit plan I think for a couple of years in terms of the irrigation load. And so we like how this looks, and we would be happy with normal if it came out that way. But we’ll see how it plays.

Right. Yes, I’m just thinking that this might be an improvement over your irrigation situation in the last couple of years.

Yes. No, it looks good. It’s just having been a hydro company for a long, long time, we know that weather is fickle at times. So we’ll keep an eye on it, let’s put it that way. Call us in – when the next call happens, if it’s 110 degrees then it will have played out like this. We’ve had some hot Junes and Julys here.

Okay. Well, thanks for the color. I appreciate it.

Okay. Thanks, Chris.

[Operator Instructions] That concludes the question-and-answer session for today. Mr. Anderson, I will turn the conference back over to you.

Thanks, Allison. And thank you all for participating in our call this afternoon. We appreciate your continued interest in IDACORP. And just as a reminder, we will be hosting our 2018 Annual Meeting of Shareholders on May 17th at IDACORP’s Headquarters. We hope that you all have a great rest of the day and get a catch-up on some sleep maybe with all these call today. Thanks, guys.

That concludes today’s conference. Thank you for your participation.