Welcome to IDACORP's Fourth Quarter and Year-end 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 for a period of 12 months on the company's website at idacorpinc.com. [Operator instructions]. Now I will turn the call over to Justin Forsberg, Director of Investor Relations.

Thanks, Allison. Before the markets opened today, we issued and posted to IDACORP's website both our fourth quarter and year-end 2018 earnings release and our Form 10-K. The slides we'll be using to supplement today's call are also available on our website. We'll refer to those slides 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, some of which are listed on Slide 2 and are also laid out in more detail in our filings with the Securities and Exchange Commission, which you should review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution 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. We also have other individuals available to help answer any questions you may have after Darrel and Steve provide updates. On Slide 4, we present our quarterly and full year financial results. IDACORP's 2018 fourth quarter earnings per diluted share were $0.52, a decrease of $0.25 per share over last year's fourth quarter. For the full year 2018, earnings per diluted share were $4.49, $0.28 higher than the same period in 2017. We have initiated our full year 2019 earnings guidance estimate in the range of $4.30 and $4.45 per diluted share, which is roughly 4.8% above our opening guidance in 2018. I will now turn the call over to Steve.

Thanks, Justin, and welcome, everyone. Strong customer growth and return to more normal irrigation sales, higher transmission wheeling and tax-related benefits all contributed to our 11th consecutive year of earnings growth for IDACORP. Slide 5 shows this accomplishment, which is an unprecedented achievement for our company. I will now walk you through reconciliation of income from 2017 to 2018 using Slide 6. Customer growth of 2.3% added $10.3 million to operating income in 2018. Overall usage per customer, however, decreased operating income by $9.4 million. Residential usage per customer was lower by 6% as there were fewer cooling degree and heating degree days in 2018 than 2017's very hot summer and cold winter. Next on the table, you will note an increase of $17.7 million in fixed cost adjustment revenues related primarily to residential customers, which mostly offset the lower residential use. In addition, irrigation usage per customer was 9% higher as the drier year returned irrigation customer sales to a more normal level. Lower customer rates resulted in a $26.9 million decrease in retail revenues per megawatt hour. The reductions consisted primarily of $22 million in tax reform savings returned to customers as well as impacts from the differences in customer mix between the 2 years. An additional $4 million of noncash amortization of regulatory deferrals further down the table also relates to tax reform. Idaho customers began to see benefits from tax reform through lower bills starting in June of 2018. These decreases are expected to benefit Idaho customers over the power cost-adjustment cycle each year, which spans from June 1 through May 31. Variations to these reductions are explained in our Form 10-K, and we expect they will settle to approximately $26 million over each PCA cycle until the next general rate case. In addition to these…

Thanks Steve. I want to add my thanks to all of you for being on today's call. I know you guys have a lot going on. I want to begin my remarks once again with a nod to continued growth for Idaho Power. New customers are moving to our service area at a steady clip, which is driving higher sales and contributing to our increased loads. This trend, combined with progress on several major initiatives and execution on our business strategy, continues to benefit our company, our customers and our shareholders as we head into 2019. On Slide 9, you will see that customer growth remains strong and is up 2.3% over the past 12 months. This growth supports the assertion the City of Boise coming in at number 4 for job growth on the Milken Institute's 2018 list of best-performing cities. Boise moved up 14 places among cities on the list since last year's survey. According to Milken, low business cost and affordable cost of living, both of which have direct ties to fair price energy, are the 2 biggest assets driving Boise's growth. We also find that our clean, diverse energy portfolio is helping attract new business customers. Nearly 50% of our energy comes from hydroelectric plants, which help makes Idaho Power's prices among the lowest in the nation while reducing carbon emissions and providing a stable, reliable energy source for our customers. For the second year in a row, the United States Census Bureau published in December that the State of Idaho had the fastest growth rate in the nation. We believe most of that growth has occurred in Idaho Power service area. United Van Lines recently stated that Idaho had the third-highest percentage of inbound moves in the country. We have cited Moody's forecast in the…

[Operator Instructions] Our first question today will come from Julien Dumoulin-Smith of Bank of America.

This is Alex Morgan calling in for Julien. I just wanted to ask about rate cases. So it's clear that you've done a very good job at keeping cost structures flat, and you see a number of benefits through strong load growth and your commitment to managing operating costs, and you have a constructive regulatory environment. Given that you mentioned you're not going in for a rate case in the next 12 months, what would actually drive you back for one? And is there a sense of when this could possibly be?

So this is Darrel. I'll start a little bit on that, and we've got Tim Tatum, who heads up our regulatory group this year, also with us. But first of all, let me, we look at this all the time. This is something that we constantly assess, and I said in my comments we look at a number of factors, what's going on with growth, number one, and as I said, we've had strong growth over the last number of years, which has been one of the key drivers right now as to why we don't feel the need to go in and have to file. We've also done a really good job of managing our expenses. We're on our, Steve talked about where our expenses were for 2018. The biggest part of that increase is associated with some variable labor costs that we don't expect to reoccur in 2019. And so if you look over the last 7 years from an expense perspective after adjusting for that, it's relatively flat. And so, and the other part of this is as we continue to manage our capital program, again we spend what we need to spend on and ensure that for a reliable and safe system and also in order to continue to meet our growth. So we look at all of those factors in totality and determine whether or not it makes sense to have to go in and file. And so as we said, we're not planning to do it for the next 12 months, but it's, and so we will continue to assess that, we will update you all on that at the end of the first quarter depending on and take a look at the landscape there. The other thing you have to, you can't lose sight of, too, though is the fact that, over the last couple of years, we've done some one-off regulatory filings where it had one off issues for instance in the Valmy settlement case. We did a one-off case there to address a specific issue and that has provided some recovery of cost and return in those cases. And so we sort of picked those one-off things where we can, and then we look at it holistically beyond that. So, I can't tell you right now. When that next one is going to be? But we will, we would be inclined, when we have the next call, we would update what I just told you now. And the fact that we are doing it, we're not planning one for the next 12 months. And Tim, if you had anything to add.

Nothing more to add.

Okay. Hopefully. That's helpful at least from a high level perspective.

Definitely. Thank you so much.

Our next question will come from Paul Ridzon of KeyBanc. Please go ahead.

Good afternoon. What drove the pickup in wheeling volumes? I know, prices were down, but we still had a benefit from that, what's the dynamic do you have in that? Is that, is that EIM?

There is, really, there's two things that picked up there, is the prior year, I guess we had a rate increase, but it was only for the last few months that came in October. It was a pretty large, I don't remember the number on top of my head, about 30%, about a 30% increase that, we weren't sure certainly at the start of the year, whether that would have an impact on volumes, but volumes stayed strong regardless, through the year. So that was a big lift. I do think that changing nature of the market where there's a lot more activity with renewables that is causing power to need to move from one place to another, lot has influenced that. And I think, I mentioned in my script, that we're watching that pretty close. The rate is now dropping down again. It went down about 10% this October. As the old rates balance out, they take into account what just happened in the prior year and it rolls forward, but it is a bit of a guessing game on what volumes are going to do relative to the rates. And as you mentioned, we did just get an EIM, so we don't have a full year of EIM under our belt, either. So that's another place that I think a little more time will give us some clarity is that, and maybe do a better job of what we should predict in the coming years. But it was certainly a strong year. And there was a few bizarre activities, too, that drove occasional peaks that other not in our system so much. But if things go on, of course we will have to move power that could impact us.

And what does guidance assume kind of flat revenues.

Well, I think, I use the word cautious that, yeah, I think we looked at it with pretty modest approach to it I would say around probably close. What we didn't do is take that and, take the prior low year in this current higher year and run way higher. I think it's kind of as you hold. I think we looked at volumes, we pulled the price down. We may have expected a slight increase in volumes with a lower price, but we didn't do a lot with it, to be truthful.

To the annual true-up kind of looks at last year's volumes and spreads out over more widgets or...

It's really a cost. I think I'm not the perfect one to explain this, but it's somewhat of a true-up of your cost against the amount of sales you consider happening related to the equipment that's doing that just to give you maybe a better...

Looked at the cost of maintaining the transition system, what those costs are and takes out a portion of it toward the load and then the remaining portion goes into a point-to-point rate. So as you get revenues back, they're credited back against that cost. So you have a really good year, 1 year. The following year, you may have a lower rate because of those revenues from the previous year that get reduced off that total cost.

And any guidance on what to look for for an effective tax rate in '19?

Gene, you have a...

Low teens.

Yes, low teens, Gene -- is what Gene's saying.

The next question will come from Ashar Khan of Verition.

Can I just ask you, I was just looking the -- and I know you mentioned this was a very good year on a cash flow perspective basis. But if I'm right, I was looking at the 10-K, you have a very huge cash balance now over like $260 million, $270 million. And if I'm right, if you do like $125 million of dividends and $280 million of CapEx, that gives you operating cash flow, and it's of about $405 million, $410 million. And I think so your normalized run rate is running around $420 million, $430 million. So it seems like you're in a very cash cow position, and you have this extra cash lying around. So can you just tell me what's the use of this cash? And why can't we get some kind of a special dividend or something like that?

Well, Ashar, if you -- you can kind of look back a few years, and what you'll see is we will tend to borrow in 1 year, and we will -- it's typically aligned with a refinancing of some type. But we will pull out additional cash that we then have typically use to fund the next 2 years of construction and O&M. And so we didn't -- we brought some in last year. We didn't use it all up by the end of the year. I believe we're not more than a year away from that being gone just from the normal operations. And there's some more adjustments to the ins and out. We refer to it in our liquidity discussion that, for instance, the tax reform started in April. Some of the benefits started in January. So there's cash that's come in that has been and continue to be paid back out over the PCA year. I believe it jumps actually the year following and then settles back down to around the 26. So the cash doesn't always line up with the earnings and that sort of thing. And it does tend to true-up. So I guess, as we sit and look at our cash balance, we don't see dollars there that we're not going to need for just basic operations. And it's -- I don't have all the flexibility to lay out right this minute, but we could probably walk you through that.

Yes. But can you give me -- what is your normalized cash flow from operations? You mentioned this year, it's very high, right? This year, you got $497 million. As I mentioned, your needs, your dividend and CapEx needs are $400 million. So you got $100 million of extra cash this year from your operations in 2018. So that's got nothing to do -- that's got nothing to do with borrowing or anything like that. That's just the business produced a huge amount of cash flow more than what it consumed this year. And so I'm trying to understand how that gets used up. And what is the normal run rate of CFO for a year? Can you elaborate on that?

We did borrow roughly $100 million of additional cash this year, which, as I said, is intended to fund the activities we have this year and in, or last year and in 2019. So it's really a matter of, in the old days, we used to wait until we actually were, we would even go into the negative on cash, and then we would finance. And 2008 and 2009 somewhat rang that out of all utilities because from a rating agency perspective, you're respected a lot of more if you keep your short-term lines fairly undrawn and you finance ahead rather than in arrears. And that's really where...

No, I understand that. But Steve, that's why your cash balance went up by not $100 million but like $200 million. Are you with me? Because...

I guess, Ashar, we wouldn't drive our dividend policy on a 1 year change. But I think if we get into the details, I wouldn't, what you're seeing is not really what we're seeing. I mean, it was a strong year, and I do think the timing of some of the PCA and the tax reform are playing into that. But they're not, we don't see the items that are there as permanent changes that would give us some bound money that doesn't have to go anywhere. It's all lined up to be gone, and I think we're only a year or so away from seeing that come back. And we'll have a new need to go out and borrow additional amounts.

Okay, okay, okay. I'll follow-up offline. I wanted to get a better sense of what an average CFO number is for a year. I would appreciate any feedback on that.

Well, it has been growing. I mean, that's our goal. It's not to keep it flat. It is to have it grow with the company. It's just this year was again mostly regulatory mechanism-related that we accumulated a little more cash. And you're going to see that drain down a bit over the next year.

Our next question will come from Chris Ellinghaus of Williams Capital.

Mr. Keen, can you give us some more detail on your O&M expectations? It looks like the midpoint's down about $10 million. Is part of that pension?

No. It was really, as Darrel mentioned, we had some costs that were higher that primarily related to payroll and benefits that we think are going to settle back down to a more kind of a levelized run rate. If you look at our number compared to last year, what we're projecting is really an uptake of about 1.4%. So, and I think that's consistent with what we said is that we don't know that we can hold completely flat into perpetuity, but we are aiming to be as close to flat as we can. So I think a modest rise in our O&M is what we're predicting for '19. And we'll be aiming for something like that on the go forward to the extent we can.

Okay. If I recall correctly, the IRP gets filed this year. When is that?

Chris, this is Darrel. We would expect to file that in June.

Okay. Darrel, you were talking about recent precipitation. Does the recent data lead you one direction or other in your hydro range at all?

So we looked long and hard on that range all the way up to yesterday just kind of given how things were moving around on, with the precip side and what the forecast showed. So the range that we gave you does give a pretty good indication of where we think we could land. Again, it is moving a fair amount right now. I mean, we're seeing, I mean, we went from below normal to above normal in the span of probably 10 days or so. So it was, it's been a lot of precip and all over across our key drainages. So like I said too, this is something that's pretty fluid right now, and so the range is pretty wide, but it's also the sort of the same kind of range that we've had at the beginning of every year because of some of the, how much it can move.

Okay. And can you give us a little color...

And the other thing, Chris, let me just mention too the other thing that is always hard and you know this because you've watched water a lot is a lot of this, we could have a lot of snow but a lot of it depends on when it comes off and how it comes off. I mean, if it heats up really quickly, you know that's not great for us necessarily. You have flush a lot of water that way versus if it's sort of a gradual warming trend. So as you saw in those charts from NOAA as of today, they're projecting a slightly higher chance of potentially warmer than normal. But, so you don't really know for sure. So a lot of it's timing on how that runs off. And again, probably if we come end of first quarter when we're having this call again, we'll likely have a little better perspective on how it sets up. But right now, the good news is if we get the midpoint of where that range is, it's a pretty healthy hydrogen number.

Right. Can you also talk a little bit about you mentioned some of the recent new customers that began operations. But can you talk about what's in the pipeline?

Actually we talked about that before the call. And we kind of thought we were not really in a good spot to talk about those right now. Sensitivity of customer info and all those sorts of things. So we're not going to talk about it. But as they come online and if we get in a position where we're okay from the customers to share it, we will.

[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 taking the time out to participate on our call this afternoon. We absolutely appreciate your continued interest in IDACORP. And as always, please feel free to call us with any further questions that you may have. And we hope that you have a great rest of the day. Thanks a lot.

That concludes today's conference, and thank you for your participation.