Welcome to IDACORP's Fourth Quarter and Year-End 2020 Earnings Conference Call. Today's call is being recorded and our webcast is live. A complete replay will be available later today and next 12 months on the IDACORP website. [Operator Instructions] I will now turn the call over to Justin Forsberg, Director of Investor Relations and Treasury.

Thank you, Jason, and good afternoon, everyone. This morning, we issued and posted to IDACORP's website, our fourth quarter and full year 2020 earnings release and 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 today. As noted on Slide 2, our discussion includes forward-looking statements, including earnings guidance and spending forecast, which reflect our current views on what the future holds, but are subject to several risks and uncertainties, including those related to the COVID-19 pandemic. This cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission. These risks and uncertainties may cause actual results to differ materially from statements made today and we caution against placing undue reliance on any forward-looking statements. As shown on Slide 3, on today's call, we have Lisa Grow, IDACORP's President and Chief Executive Officer; and Steve Keen, IDACORP's Senior Vice President and Chief Financial Officer. We also have other Company representatives available for a Q&A session after Lisa and Steve provide updates. Slide 4 shows our quarterly and full-year financial results. IDACORP's 2020 fourth quarter earnings per diluted share were $0.74, a decrease of $0.19 per share over the last year's record fourth quarter. IDACORP's earnings per diluted share for the full year 2020 were $4.69, an increase of $0.08 per diluted share from 2019. Today, we also issued our full year 2021 IDACORP earnings guidance estimate to be in the range of $4.60 to $4.80 per diluted share with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation. These, of course, are our estimates as of today, and those estimates assume normal weather conditions over the balance of the year and includes customer usage returning closer to pre-COVID-19 levels as we progress through the year. However, as you would expect, it is difficult to predict the full impact of evolving economic conditions on Idaho Power's customers and suppliers and how that could affect the upper end of the earnings guidance range or the use of tax credits. I will now turn the call over to Lisa.

Thanks, Justin, and thanks to everyone joining us on today's call. As we look back on 2020, we acknowledge it has been a challenging year in so many ways. The COVID-19 pandemic created unforeseen difficulties for our customers and our employees. Economic uncertainty and interruptions to our daily lives became the norm. Our nearly 2,000 employees were challenged daily as we continued to carry out our mission as an essential service provider. And yet, through it all, IDACORP and Idaho Power continue to achieve tremendous results. As noted on Slide 5, 2019 through 2020 were our two safest years in company's history. I am so grateful for the continued focus of our employees on safety despite all the distractions surrounding their daily routine. Turning to Slide 6. We also saw some of our best third-party customer satisfaction rating being the top ranking utility among peers in the segments for overall customer satisfaction and fifth highest in the nation for business customer satisfaction. And our reliability numbers remained among the best in the industry as we capitalized on 99.96% of the time. The success we achieved in the continuation of our operations without significant interruption over the past year serve as testaments to our great people, whether they were adapting to remote or hybrid work, finding innovative ways to serve our customers, meeting company goals or implementing additional measures to keep themselves, our customers and our communities safe. Our dedicated employees rose to the occasion and powered through it together. I can't thank them enough for their contribution, their perseverance and the support they gave me as I transitioned into my new role last year. In addition to outstanding operating results, I am happy to report that IDACORP marked its 13th consecutive year of growth in earnings per share, as detailed…

Thank you, Lisa. Let's now move to Slide 13, where you'll see our full year 2020 financial results as compared to the same period in 2019. Overall, we had solid results during the challenging year driven by customer growth in our service area and continued successful efforts to control costs. First step on the table is our strengthening customer growth of 2.7%, which added $14 million to operating income. Higher usage per residential and irrigation customer of 1% and 11% respectively, more than offset the negative used impacts of the pandemic, it's contributed to decreased commercial and industrial sales volumes by our respective 4% and 1% during the year. Irrigation sales volumes benefited from a return to more normal spring precipitation levels over 2019. Residential customer usage was partly impacted by weather variations, but many customers also spent more time at home because of the public health crisis. And that result was a relatively modest $0.9 million increase in overall usage per customer. Also on the table, you will see that the increase in residential sales was offset by $1 million decrease in fixed cost adjustment revenues. Next, changes in net power supply expenses led to a $2.6 million decrease in retail revenues per megawatt hour, largely due to fewer opportunities for off-system sales than in the prior year. Transmission wheeling related revenues also decreased $2.2 million primarily due to a 13% decline in Idaho Power’s open access transmission tariff rate in October of 2019. This decrease was partially offset by an increase in volumes this past summer related to warmer weather in the Southwest U.S. and California, as well as roughly 10% increase in tariff rate beginning October 1 of 2020. Next on the table, other operating and maintenance expenses decreased by $3.7 million. The portion of this decrease…

[Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open.

Hi, good afternoon, team. Congratulations on the outcomes here.

Thank you.

If I could – absolutely, it's a pleasure. I wanted to follow up on the 2021 guidance here, right? Obviously, very successful 2020. Can you walk through a little bit more of the thought process on the flat outcome effectively? I'm doing wrong, it's not entirely lost on me, but I want to hear it, as you guys describe it, the factors here year-over-year that are keeping you there? If you can sort of give the quick positives and negatives here.

Sure. I'll start, and then I'll have Steve jump in. So as we thought about this, you looked back over the last 13 years, and so we really do want to be able to achieve what we say we're going to do, and that's been our history that we've done that and many times exceeded it. And it's really been our relentless pursuit of looking for those opportunities to increase our earnings. And when you look back over 2020, honestly, nobody is more surprised than I am that we were able to achieve what we achieved when you look back at all the scary things that could have happened with the pandemic and social unrest and the economic situation. And certainly, they have turned out better than we thought, although I certainly don't want to downplay any of the tragic impacts that have happened because of those. And we really feel like we're still facing a great deal of uncertainty as we go into 2021. All of those things are certainly not over. So we try to balance that against our compelling growth story. As we've mentioned, people are still moving, we are still growing. And so it was – we believe that it is up from last year's guidance. And so we thought it was a good place to initiate our guidance.

Yes, Julien, I might just throw in. There's not a massive number of year-over-year items to think about, but we did talk about last – in our second quarter, I think we brought it up, that we had about a $3 million O&M savings last year that was really our partners at – I think, Jim Bridger plant with our coal plant. That was an unusual drop that we're not necessarily expecting a boomerang this year, but we do think this year goes back to a normal level. So we're not expecting that particular item there. And I think I look at the impacts of COVID and you see our growth jumped. It was above where we were thinking initially when we headed into the year. We're not sure whether that holds at that level or if there's some other reactions. So I think if you put the COVID spin on everything and you start to just have questions, we're not pessimistic. We're just not sure how much more optimistic we should be. And so we've set the numbers above what we had last year, pretty well above our opening plan last year. So it's clearly a step-up in performance. And something we talked about with our Board is we're not working off of a reset. We're 13 years of steady up. We don't have a bad year this year to jump up from and give you a high-growth number off of, or we don't have it in the last two or three years. So that does make it hard. I would just say we're setting realistic looks. And you know we'll aim to do as well as we can. If we can list it, we'll let you know about that as we move through the year.

Yes. Absolutely. Understood. And then obviously, great outcomes on the CapEx and rate base, frankly. Can I ask you guys to – Lisa, if you don't mind, you have this base – rate base growth that you guys talk about for the next five years. Can you talk about that additional 1.2 that really jumps the rate base growth and the time line? I know we've talked about these before more discretely. But if you think about it, when do you find out, as best you see it right now for Hells Canyon and B2H, to make that higher trajectory or to materialize that higher trajectory, if you will? I just want to put this together in terms of a time line to finding out about that more-elevated rate base?

Well, let me just start with what's in our numbers that we talked about with the step-up there. It's a very normal – not that it's 100% within our control, but things that really which we're driving and are part of our normal plan are what's contributing to this step up you're seeing in the current five years. It's our portion of the B2H line, it is probably a small reevaluation of things that might be coming that we haven't really been looking at it through the lens of what things should we be adding in there versus the very minimum things we ought to be doing. And this has a look of – we've kind of recalibrated there and that's all contributing to kind of the midpoint of this range. If you look at the little – the wider band of things going either not quite as good or better, and there are some opportunities we think to lift back to the upside, then you move beyond that is where the items you're talking about and that's really more – it's not a lot different story than what we had before and I do think the timing on Hells Canyon could be part of that, the timing of when we go into a rate case could impact some of that. So I don't know that we have a lot more clarity than what we have discussed. In our charts we'll be putting out, it really wasn't related to the 2020 year, so we didn't overload this chart with that, but those longer plans are still there in terms of what we see as opportunity. It's not like any of those are gone. And they are moving closer and closer, so I would expect that each year you'll see a new layer of that rolling in as we put out our five-year plan.

Yes, and that's – I would add just that exactly that we do have – we are – none of this stuff happens in a step function. It sort of ramps up over time, and we're just coming into that window where we're going to start seeing those expenses, whether it's looking toward electrification, decarbonization, digital investment, etc. So it still is very much the strategy that we've discussed with you before and again, we're starting to move on it. It's going to take a number of years to get there.

And final quick question, I apologize. Given the uptick in capital spending, we saw in the base play here, is there a designated year that we're thinking about for this – for a subsequent eventual case? I'm just curious on the timelines there and obviously great job otherwise thus far.

Yes, I guess, I would just say that I think there is a bit of a requirement. When Hells Canyon is done, I think it's highly likely there is the case that you wouldn't want to run long without that being certified and put in the rate base. Beyond and as you know that number, that date has moved, it – right now, we've got a possible 2022, more likely 2023, and we've been saying words like that for...

Decades.

A decade. So I'm not sure on that one. The way we do well or have done better than maybe what we would have is if we had taken the risks of – that are incumbent. And in any rate case is that the growth has been paying for itself and that one, it looks good now. If you believe where people are projecting, it looks strong and if that continues, there's no reason that we wouldn't continue with that. It's essentially paying for itself such that we don't have to pass costs onto anybody else. We don't have to go back to the other customers. But that can change and I think as we saw this year, there was definitely a bit of a response to what people were experiencing in the states around us, that some just picked up and came. They didn't really have a plan, they just showed up in Idaho and said, we're here. And does that keep going at the same rate? That I have no expectation it would drop way down but it could settle back to where it was last year and the year before. We'll just have to keep an eye on that. But I think that is still the answer in the near-term.

Excellent. Congrats guys, again. Talk to you soon.

Thank you.

Your next question comes from the line of Chris Ellinghaus from Siebert Williams. Your line is open.

Hey, everybody.

Hi, Chris.

Lisa, what's the next important date for us to really look for on B2H?

I would say, getting that – the permit finalized in 2022 is probably the next big – the big date for that. And Adam Richins, anything you would add to that?

No, I agree. The EFSC permitting process is scheduled to be done in the second half of 2022. So that is kind of the big date. It doesn't mean we're not doing activities in between now and then, but I think as you know, Chris, federal permitting is complete, but the state permitting is set to be complete at the end of – or kind of in second half of 2022 and we feel pretty good about the progress at this point.

Okay, great. Lisa, as far as your clean energy goal goes absent the Hells Canyon and other relicensing and the retirement of the two coal plants, what are your thoughts in other generation? I assume that includes things like new fuels and other generation types, but what's in the mix as far as you're thinking in achieving your goal?

Well, we're waiting – just getting started actually for our next generation of our IRP process and that's really where we explore all of that. I would say, just my own personal view, wind and solar tend to show up in those portfolios, storage is another one. I'm also very intrigued with some of the developments in hydrogen as well, I think that's a really natural replacement for natural gas. As we go forward, we certainly have a lot of infrastructure already built in the form of gas plants that we could put to work with the new fuel. So I just think that's interesting. I do think that small nuclear reactors, we're watching that carefully. We currently don't have any investment in those and – but we are watching. I still think if we're really going to get to 100% clean, as a nation, more research and development of these kinds of resources is going to be necessary. So I think as the Biden administration launches their plan, we'll be more – where the R&D dollars go, what kind of resources are explored there and you kind of look at what's happening down in Texas, for example, I think that's going to give everybody pause, and should, as how fast you go, in what resources you go to, although I'm not suggesting it with the clean resources that are the problem, it was all the resources that froze up in this circumstance. But we just have to be careful as we build those portfolios in the future. That's really why we get a 25-year plan, so we can let some of these resources be developed and we can make careful choices so that we can do it in a very pragmatic way that doesn't harm reliability or affordability.

Okay. Can you give us a little more color on what you're seeing in the acceleration in customer growth? Is it exited, is it just the good economic climate? What are you seeing qualitatively there?

We're seeing a little bit of everything, to be honest. We are seeing people – just because you can work anywhere, there – a lot of people that have decided to make Idaho their home, some people have second homes and they just came here and stayed here, others are buying up homes here de facto, I mean, that's – It's mind boggling how the market is just gone kind of crazy. But we do see some that's – I think they call themselves political refugees, they're sort of getting away from something and coming here. And so, it's just really a mix. And then, of course, there's businesses that are parked in here as well. So it's – I think it's really the quality of life of Idaho that's drawing people in, people that like the outdoors, people that like a little less density. Although the irony of that is when a bunch of people show up because they want not the population density and then they make the population dense, it's a little ironic. But the people that I've talked to, there's a whole lot of new license plates from all over, and their stories are all a little bit different.

Okay. One last thing. Relative to your slide with the list of the large new customers. Can you give us any color on what you might have in the backlog for next year's slide?

Well, a lot of those are very confidential. In fact, a lot of the time, we don't even know who they are, but there is still a lot of interest in data centers, food processing and agricultural products continue to be strong, manufacturing as well. So it's kind of a nice balance. I like seeing a balance so that it isn't any one particular industry that is – could be impacted and have a significant impact to the economy of Idaho, but I'd say overall. Is there any – any of the big sectors I've forgotten?

No, I think it's – there's a story that I was just thinking might add to this, though, is you heard us talk about Chobani when it first came to Idaho, and they talked up certainly, in a huge way, how quickly they were able to start the process and end the process. It was faster than they ever dreamed in terms of start to finish, they were open and running. And that same story is kind of popping out of the Amazon facility that it went up really quickly. And I think those stories are migrating around that people with expansion ideas like that. They liked it. People here are going to help and moving along. So I think that contributes…

Yes.

Certainly on the business side. And on the housing, the residential side, while prices have risen significantly, I think we still look very affordable to a lot of the places that are looking to coming in. So on that side, it's a bargain.

Okay, thanks of the details. I appreciate it.

Thank you.

Your next question comes from the line of Brian Russo from Sidoti. Your line is open.

Hi, Brian.

Hi, good afternoon. Hey, just following up on the guidance question. You tightened the guidance in October, which I think was a midpoint of $4.60. And you reported actual $4.69, which was above the high end of the updated guidance range. So what happened that you were able to exceed the end of the range? And are those drivers possible, again, in 2021, that's not captured in your initial guidance from today?

No, I think that's a good question, Brian. I do think there's some possibility for it to be better, but we were able to really hold the line on a lot of expenses. As you saw, our O&M came in really good. The – and I alluded to just briefly in my words that I put out earlier that growth is also a pressure. And while we're setting hard targets, we're feeling probably a little different pressure today than maybe we had at the start of last year. And the pandemic certainly did allow some things to be less. And maybe that will stay that way the whole year. Maybe we won't resume travel, maybe we won't have all the expenses that you typically do in a year. We captured that and did our very best to make costs as low as we could. We'll aim at all of that again. We're just not sure how quickly we resume normal operations versus not. And I'm not sure the timing of do expenses rise first and revenues follow later. Do revenues kick in early and then the expenses come? Those are just enough variables that we've gone up kind of in a cautious way. Our upper end is higher than it was. We're acknowledging what's – what we're going to be aiming at as trying to hit our midpoint or higher. That's what we always do. And we'll just have to see, Brian. I think it's our nature more than showing up of not wanting to overstate in a year that there's this much uncertainty. It's certainly more than a normal year.

Got it. And then just to follow up on the O&M expense line. You mentioned a wildfire capital cost and operating cost, deferral filing. Are there any wildfire costs embedded in your O&M 2021 guidance assumption?

Not substantially different. I mean, the normal amounts are there.

Yes.

But not a big step-up in this O&M side for this year.

Okay. All right. And then to follow up quickly on the trailing 12 months customer growth was 2.7%, and that was basically during the entire pandemic of 2020. And you mentioned of two new big business facilities opening up like Amazon, NextEra. Are you forecasting 2.7% customer growth in 2021? And is there a possibility for that to accelerate, especially given Moody's GDP's forecast of six-plus percent growth year-over-year?

Yes. Our look for the year is sort of a starting a bit more modest and ending with a little more robust look. So it kind of transitions as we go through the year. So that's what – and I guess, from the COVID perspective, we would be expecting continual improvements as we get through the year and be back to maybe not a 100% normal but closer to normal by the time we close the year out. As the categories that got here is, of course, commercial and industrial, we're just not sure how quickly that translates for all of them because it is different reasons that maybe those two have their issues. So it's a question of how quickly they come back up. Residential in a way got a boost from everybody being home all the time. That could swing the other direction. But as you say, we've had a lot of people coming in, so I think the growth side of residential is still going to be there in terms of number of people. But it is a little different equation than we typically face and that probably is factored into a little bit of that caution of not being overly bold on the upside.

Okay, great. And then you mentioned a part of the 2021 guidance is the pre – customer growth should – I should say, should fall back to pre-COVID levels, is there anyway you could quantify what – or isolate what the impact of COVID-19 was on usage in 2020?

The usage lagged a little in terms of – particularly the commercial and industrial, they show up, and as you – it takes a few months to decide and get them in and construct and all that, but where we really saw it was I think the residential side had a growth impact, no question. And it's shown up in new housing starts and lack of inventory and everything. So I think we did see that – some of that residential uptick is – it's a blend of the people that stay home and the new homes that came online and started using more power. But it's a little harder to define in the other categories, I would say. And irrigation, for instance, was pretty much an improvement with the weather. It was more normal, it wasn't necessarily a banner irrigation year, it was just a more normal irrigation year where we didn't have a super wet spring that allowed them to not have to irrigate very much so...

Yes, and to add on to that, the costs were already committed to prior to the pandemic settling in, so the farmers, they're already in so...

Thanks for that, Lisa.

They continued on, so that was good. And this is a fun fact, Idaho had a record agricultural net income and surprisingly even though prices really flattened early in the year, then they recovered and they did very well even when you don't consider the federal support. So it turned out to be a really interesting year.

Okay. And then, last question just on the balance sheet and how it correlates with the increasing CapEx over the full-year period with a $2.75 million of cash that you have at year-end and a below 50% of debt-to-cap. It seems that you can finance your CapEx without incremental equity. I know you said no equity planned for this year, but maybe you could think about longer-term because after the next two years of $300 million of CapEx, it looks like 2024 and 2025 or 2023 to 2025 on average are going to be north of $400 million in CapEx, thoughts on the balance sheet capacity?

No, you're pointing out a really good point, Brian. I think that's an opportunity we have is that the near-term CapEx and maybe for quite some time, we will go to debt first, I don't know that we're going to need to – our success has shown up with higher equity amount there and we jumped ahead last year. Our approach – we got such good rates with what we actually issued, we were looking at some – we had some refinance opportunities that showed up that we could put a little more. We just grabbed a little extra capital lift and then we had a planned financing that we upsized a little. Really just going into the pandemic, we just wanted to be sure we didn't get another capital crunch like it happened in 2008 and 2009. But in – that really has us ahead of the game coming into 2021. So I think it's a good place to be and we got such good rates on it. It didn't overburden us in terms of – it didn't layer that much more expense on and we were able to get rid of a couple of higher cost debt instruments, refinance them at low rates as well. So that's really – that's what happened last year that set up this year well. And we'll be looking ahead those bigger – at those other projects that have been talked about whether it's Hells Canyon or B2H. Those will be the things that we'll have to keep our eye on, but we'll try to do that with low cost debt as much as we can as well.

All right. Thank you very much.

Thank you.

Thank you, Brian.

[Operator Instructions] There are no further questions. So that concludes the question-and-answer session for today. Ms. Grow, I will turn the conference back over to you.

Thank you all for participating on this call today. We appreciate your continued interest in IDACORP and we look forward to seeing and speaking with many of you over the next few weeks as we participate in a few investor conferences. I wish you all continued great health. Remember to keep your masks on, keep washing your hands, keep socially distanced, and I wish you all my best. Have a great evening.

Thank you everybody for joining today. That concludes today's conference call. You may now disconnect.