Welcome to IDACORP's Fourth Quarter and Year-End 2019 Earnings Conference Call. Today's call is being recorded and webcast live. A complete replay will be available later today and for a period of 12 months on the company's website at idacorpinc.com. [Operator Instructions] I will now turn the call over to Justin Forsberg, Director of Investor Relations and Treasury. Please go ahead.

Thanks, Gary, and good afternoon, everyone. Before the markets opened this morning, we issued and posted at IDACORP's website both our fourth quarter and full year 2019 earnings release and annual report on Form 10-K. The slides that accompany today's call are also available on our website. We'll refer to those slides by number throughout the call. As noted on slide 2, our discussion today includes forward-looking statements, including earnings guidance, which reflect our current views on what the future holds, but are subject to several risks and uncertainties. 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 Darrel Anderson, IDACORP's President and Chief Executive Officer; Lisa Grow, President of Idaho Power Company; and Steve Keen, Senior Vice President and Chief Financial Officer. We also have other company representatives available to help answer any questions you may have after Steve, Lisa and Darrel provide updates. On slide 4, we present our quarterly and annual financial results. IDACORP's 2019 fourth quarter earnings per diluted share were $0.93, an increase of $0.41 per share over last year's fourth quarter. IDACORP's earnings per diluted share for the full year 2019 were $4.61, an increase of $0.12 per share over 2018. These full year results represent the 12th straight year of earnings growth for IDACORP and are the highest achieved in its history. IDACORP's cumulative average growth rate in diluted earnings per share is 7.9%, since 2007. Today, we also initiated our full year 2020 IDACORP earnings guidance estimate to be in the range of $4.45 to $4.65 per diluted share, with our expectation that Idaho Power will not need to utilize any of the tax credits in 2020 that are available to support earnings in Idaho under its settlement stipulation with the Idaho Public Utilities Commission. I will now turn the call over to Darrel.

Hey, thanks Justin, and thanks everyone for joining us on today's call. Last week, we announced that after 24 years with the company that, I would retire effective June 1st of this year. In connection with this decision our Board of Directors, selected Lisa Grow to succeed me as President and CEO of IDACORP and Idaho Power effective June 1st and also appointed her to the Boards of Directors of both companies effective last week. She's an electrical engineer by training and she's got over 32 years of experience at Idaho Power. Not only does she have a long tenure at the company, she also has a long history with Idaho Power as her grandfather was a lineman with the company for 30 years prior to Lisa joining the company. She has contributed significantly to the operational and financial success of Idaho Power, since becoming an officer in 2005. She has earned the opportunity to take over the reins as we move forward into 2020 and beyond. Many of you have met Lisa and I welcome you to join me in congratulating her in her new roles. I look forward to continuing to serve as a member of the Board of Directors, once I step away from my executive roles. With that short introduction, I will now turn the time over to Lisa for some updates on the company as well as ongoing economic activities.

Thank you, Darrel. I am honored by the opportunity to succeed you, and I look forward to the exciting times ahead. In addition to the financial success noted by Justin, Idaho Power set records across several of our important metrics: safety, customer satisfaction and reliability. On slide 5, we see details of the company's record employee safety results in 2019. We are very excited and proud to see injuries at an all-time low, as we continue to spend significant time on our safety culture and to emphasize the importance of safety at work and at home. Our record-setting results in residential and business customer satisfaction are shown on Slide 6. As the population within our service area continues to grow, Idaho Power is working hard to meet our customers' evolving needs. Most Idaho Power customers experienced – most Idaho customers experienced an overall price decrease for the second consecutive year in 2019 with business customers' rates going down by at least 5%. Idaho Power's efforts to keep prices affordable provide personal service and improve the customer experience are paying off, as overall customer satisfaction metrics continue to rank near the top of the list among our peer utilities. Reliability is a key piece of the customer satisfaction puzzle and is also included on Slide 6, which shows another outstanding year. Idaho Power kept customers' lights on 99.975% of the time in 2019 and overall system reliability was among the best in company history finishing very close to 2018's record results. As noted on Slide 7, Idaho Power service area continues to experience substantial customer growth. For the third year in a row Idaho remains the fastest-growing state in the nation and Idaho Power's customer base grew 2.5% in 2019, including a 2.7% growth rate for our residential customer segment. Idaho…

Thanks Lisa and good afternoon everyone. We had excellent 2019 results. Weather challenges through the year were more than offset by a very good final quarter. I'll walk you through the drivers year-over-year on slide 9. Strong net customer growth of 2.5% added $18.8 million to operating income in 2019. A decline in usage per customer mostly related to lower irrigation sales decreased operating income by $21.4 million. Greater precipitation and more moderate spring and summer temperatures led to 11% less use per customer for those in the agricultural irrigation class this year. Further down the table, net retail revenues per megawatt hour decreased operating income by $2.8 million. As anticipated, the settlement stipulations associated with income tax reform reduced revenues more significantly in 2019. Idaho Power's open access transmission tariff rates declined by 10% in October of 2018, and again, by 13% in October 2019, lowering transmission wheeling-related revenues by $5.3 million. These rates reset each year to align revenues with the cost of the transmission system. To a lesser extent, lower transmission volumes also contributed to an overall reduced wheeling revenue this year. Next on the table, other operating and maintenance expenses decreased $8.7 million, as our team's continued focus on cost management resulted in lower expenses across several areas. Contributing to this decrease was lower bad debt expense of $1.1 million due to a strong economy and the non-recurrence of a 2018 O&M expense of $4 million for a non-cash amortization of regulatory deferrals related to tax reform. Idaho Power's 2019 return on year-end equity in Idaho landed between the 9.5% tax credit support level and the 10% customer sharing line under the Idaho regulatory settlement stipulation. So we did not record any additional tax, credit amortization or provision against revenues for sharing with Idaho customers this…

Thank you Steve. There is much to be proud of as we look back on the outstanding results of 2019. I want to thank our investors for their continued support and our employees for their hard work and dedication throughout another record-setting year. While the energy industry is rapidly evolving, IDACORP continues to meet challenges and opportunities while delivering unparalleled results for customers and investors alike. From meeting financial targets to striving for a cleaner energy future, we believe that our employees and our ongoing business strategy will help sustain our success into the future. I will close with a look at weather on Slide 12. The latest projections from the National Oceanic and Atmospheric Administration suggests an equal chance of above or below normal precipitation levels and a 40% to 50% chance of above normal temperatures from March to May. We have seen a lot of snow and rain in recent weeks. The welcome precipitation along with snowpack currently showing slightly above normal levels and strong reservoir storage in the system, should continue to provide favorable conditions for generating low cost clean dispatchable hydropower throughout 2020. As a reminder our power cost adjustment mechanisms in Idaho and Oregon significantly reduced earnings volatility related to changes in our resource mix and associated power supply costs that can fluctuate greatly due to weather. With that Steve, Lisa, and I and others here today will be happy to answer questions you may have.

We're now ready to begin the question-and-answer session. [Operator Instructions] The first question is from Chris Ellinghaus with Siebert Williams. Please go ahead.

Hey, everybody. How are you?

Hey Chris, how are you?

Good. Steve I think you had mentioned that some of the vintage tax credits that benefited the fourth quarter helped to offset that $10 million net change in taxes. What was that number for the tax credit benefit?

No, let me just point you to the spot in the K and I think it will be the best way to get you there. If you go to Note 2 I don't know if you happen to have that with you. But under Note 2 there's a line item for investment tax credits.

Okay. You didn't book much about…

And what you'll see there is about a $3 million difference Chris.

Chris, it's around page 92 if you have it in front of you on the 10-K.

Okay.

Yes. And that's an item that you -- it's not that you won't see that change from time-to-time, but we wouldn't expect that same level of change to occur certainly in this next year we're looking at. That were a little larger than normal kind of came out after we got our tax return done and saw the amount of tax credits we actually consumed and what we could then be able to have the parent purchase from Idaho Power.

Okay. You guys didn't address business development very much. Have you got any color on what you're seeing for sizable new C&I customers?

Chris, this is Darrel. We actually have a -- still have a significant amount of activity that is taking place across our service territory. I mean if you would drive across you would see probably more cranes in the sky lines than I've seen in a lot of times. So, to say that there are some big announcements we definitely don't have some of those going on right now but there is a lot of activity. As Lisa had shared we continue to be the fastest-growing state in the country and that doesn't seem to be slowing down much as we look across. I mean you talk to anybody who's driving around these days they are always having to detour because of construction here and there and everywhere. So, just from that perspective, there's a lot. And then our as we look at what's coming online over the next couple years there's still pretty healthy level of activity. But -- and the good news is it's not necessarily driven by any one large entity right now which is a nice thing to see. And I don't know Adam Richins is here with us. I don't know if he wants to…

Yes, I would just add Chris that it's very diverse in what we're seeing. So, we're seeing manufacturing, food processing. We're seeing technology, dairies, mining. So, one of the things that I think is nice to see out there is not only the growth, but it's diverse growth in our service territory.

Okay. Steve you talked about the 4% EPS growth that's sort of implied by the guidance range. Can we assume -- or correct me if I'm wrong, I'm making this assumption out of the gate here. Is that sort of slightly below trend as a function of the step down in the stipulation ROE causing sort of a onetime slowdown in the growth for this year?

Chris, it's only modest if anything that it's down. I looked back -- going back to 2016, we had one year at 4% this year at 4% one year was under 3% was about 2.6% and then we had a couple that were up closer to 5%. So, it's a fairly steady march up. And because the guidance ranges don't move by pennies, they tend -- we tend to move on nickels that it's not a perfect science, but in that $0.15 to $0.20 range is what it's moved most years. And as we sit here today, this is a $0.20 move granted off of a larger number than it was a couple of years ago. So, the percentage is probably coming down slightly. But we do view that as really the positive trend continuing for accounting. You can look at actuals against actuals and get even a little better number because we have tended to over-perform sometimes. And that always gives us a little -- as we come out of the gate with a number that we beat the prior year, that trend of the earnings projections maybe doesn't look as good against that one number. But interesting our actual to actual is up even a little bit more. Those ranges have been above 7% a few times and be it the two low years, one was just under 3% and one was over 5%. So they're both moving along together, a little ebb and flow in how we do against plan whether we beat it by a lot or a little bit.

Okay. Lisa you talked about the solar decision. Can you elaborate a little bit about what got you to the conclusion on that asset or that PPA that led you to where you are?

I would say just generally, it was the risk and the economics of the plan just didn't really fit with our investments.

Okay, all right. Well, thanks for the color guys. Appreciate it.

Thanks, Chris

Thanks, Chris

The next question is from Brian Russo with Sidoti. Please go ahead.

Hi, good afternoon.

Hi Brian.

Hi Brian.

Obviously you guys have done an excellent job of managing O&M et cetera. And when I look at the coal plant shutdown plan on slide 8, you had quite a bit of ownership interest in these plants that are going to retire or the units that will retire over the next -- through the end of the decade. And I'm curious there's got to be O&M expense savings related to these facilities that could help support your ongoing O&M management trends?

Brian, I would just -- this is Steve. I would say there's -- it's a little bit of a mixed bag in the Valmy plant particularly. There it's more of a -- it's a give and take. So we are giving back the -- some of the O&M savings will trickle back in and that's part of it. It balances out also with what we spend. So then the trade-off as you're getting rate base as we go through the process can grow but you may have some O&M that gets offset against it and disappears. Boardman is a little different. It doesn't have that same mechanism. And so there are some costs there that once they're gone will likely be absorbed by some other costs that -- as you still have to serve the same load that you had with it. So those costs would be available to reallocate somewhere else. So they're not exactly the same.

Okay, got it. Remind me what percentage ownership do you have in Boardman?

10%.

10% is Boardman.

Okay, great. And any comments on your participation in the EIM?

It -- Brian it continued to do what we thought it would do even it's somewhat better. And those benefits flow back to our customers via the power cost adjustment mechanism. So it's been working as advertised and a little bit better. And so as more participants joined, I think that just sort of spreads it out over a bigger footprint and allows for what I would argue in a lot of ways as this -- as the renewables and the clean energy starts coming online it allows us to the area to better utilize that energy.

Okay, I got it. And the Boardman to Hemingway line I know what's your preferred scenario in the IRP. But what happens if there's further delays that are out of your control in terms of permitting et cetera? I mean, how does that play into any net short position you might have in 2026 and/or criteria to be a member of the EIM?

This is Lisa. First of all, we do our IRP every two years. So we are constantly running scenarios to figure out what would be that next portfolio. We look at both with and without Boardman to Hemingway throughout that process. If something happened where it was going to delay it too far and we couldn't serve our load in -- as we're looking down into the future, we would -- more than likely it would be a gas plant. I don't know Mitch do you have anything you'd add to that?

I would add...

This is Mitch Colburn here who kind of runs our IRP processes is on the line with us today also.

I would echo Lisa's comment that we are looking every two years we produce IRP. We look at alternate futures with and without B2H. Also that Bridger unit the second unit that we have in our IRP exit that's connected with B2H. So we do need replacement resource when we get out of that second unit. So that's identified to B2H so the time of that is associated. So we would look at that second unit as well.

It's fair to say as well Brian that we're going to watch all the technologies. Battery technologies today maybe doesn't work as well but you're talking a few years out and things can change. So we will be looking at all of those resources. But the bottom line is we have to make the system work. So we'll do what we need to do in time and this plan will probably ship with time as well. That's typically what happened.

Okay. And I think you got the current long-term debt of $100 million. And I think you're -- we're expecting you to refinance that sometime in 2020. Could you just remind us what that is? And I assume there's going to be some interest rate savings.

Yes, it's $100 million...

There's a 10-year tranche.

Yes it was one of our -- let me flip back here a second. It's not one of our higher rate bonds to refinance. But I would expect we see some improvement. It's not going to be -- it's not going to have the tax deduction...

It's at 3.4%.

That we've seen some time.

Yes. It's at 3.4% today Brian that we owe $100 million.

$100 million yes.

So it's in there today to keep on rate.

Okay.

And then we also -- sometimes when we re-up those, we'll take a look and see if we need other capital for anything else going on. So it might not be exactly that size when it comes to pass. And we'll probably look at a full array of options on how we finance it.

Options in terms of what like first mortgage bonds or green bonds maybe?

Well, I think it's -- you got to remember, it's not -- it's probably not going to size up to be in the range that like green bonds I typically see those -- the people that are buying those the most are looking for the bigger tranches and that are in the market. We'd have to get above was it $350 million now to be there. But we can look at all tenors. We have a wide open counter. We could bring in things short. We can go as long as 30 years or longer. So we have everything available, we'll be looking at the rates and seeing what really works. We have had some people talk to us about getting our bond issuances into higher categories. So, layering bonds maybe you go short and then try to pull it with something else coming down the road such that in a few years you do have a market index eligible bond that people can -- that would bring other buyers in. So we're looking at all those options. We haven't made up our mind and we'll pick one that works.

Okay. And also, the new dividend policy. Looking at your balance sheet very strong liquidity. You got over $200 million of cash at year-end 2019. While the stated payout target is 60% to 70% you're going to recommend at least 5% increase. How should we kind of profile the payout increasing to the midpoint of your target? Is that going to be gradual, or for example you increased the dividend 6.3% in September, while only recommending 5% or more? Just trying to triangulate all that.

Yes. Brian we have had a pretty steady as she goes approach to the dividends. We have done more than the 5%. I think that's been a safer spot to say, but I wouldn't expect a really oversized amount. I would say, it's going to be in the range of what we've been doing. And we'll kind of gauge whether it's a little over 5% or we'll look at how the year is rolling out and how the future is playing as well. But our goal really has been to give a steady return out of that dividend increase just like we've been delivering through the growth in our earnings. So we want them both to be there and be something you can count on which actually sort of discourages you from overdoing in one year. You want a steady delivery over time.

Okay. So the next dividend increase we should expect to be announced in September of 2021?

That's what the board has been...

2020.

In 2020.

Yes we -- the September meeting has shaped up to be a good one to take it to the Board.

Okay great. And Darrel good luck to you in the future. It was a pleasure working with you.

Thank you, Brian. I appreciate that. Thank you very much.

Thanks.

The next question is from Ashar Khan with Verition. Please go ahead.

Good afternoon. Darrel I just wanted to congratulate you. Long association going back to I think to 2005 and...

Right. Thank you, Ashar.

And thanks a lot. I think -- so the company did a huge step forward under you. And Lisa congratulations on the new spot.

Thank you.

And I would just say that I don't know I think -- so we have some challenges, but the average CAGR is around 5% from UTS. So Lisa it would be my -- I think so my advice would be is as you start with this new step or split, if you can work towards getting us towards the 5% CAGR which everyone is these days around you that would be great as an investor.

Thank you for that advice. We will get to work.

Ashar I've been reminding everybody to be sure that CAGR is coming off of something you like because there aren't many that have gone up every year. In fact, I'm not sure there are any in our peers. And when you go down, it's a lot easier to have a better CAGR off a down here than it is off of a continual up. So be sure and do your math looking back too.

Okay. I will I will. We look forward, right? That's what people are going to compare you with. So I want to be -- I want us to be at least the average not below average.

Thanks, Ashar.

Thank you, Ashar.

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

Thank you, Gary and thank you all for participating on our call today. We appreciate your continued interest in IDACORP. We hope we have a great rest of the day. Thank you much.

That concludes today's conference. Thank you for your participation. You may now disconnect.