Good day, everyone. Welcome to the IDACORP's Fourth Quarter and Year-End 2022 Earnings Conference Call. Today's call is being recorded and is on our webcast live. A replay will be available later today and for the next 12 months on the IDACORP website. [Operator Instructions]. I would now like to turn the call over to Mr. Justin Forsberg, Director of Investor Relations and Treasury. Please go ahead, sir.

Thanks, Gallienne, and good afternoon, everyone. We appreciate you tuning in for our call. This morning, we issued and posted to IDACORP's website our fourth quarter and year-end 2022 earnings release and the associated Form 10-K. The slides that accompany today's call are also available on IDACORP's website. We'll refer to those slides by number throughout the call today. As noted on Slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecasts and regulatory plans, which reflect our current views on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions. 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 Brian Buckham, IDACORP's Senior Vice President and Chief Financial Officer. In addition to Lisa and Brian, we have other members of our management team available for a Q&A session following our prepared remarks. Slide 4, shows our full year financial results. IDACORP's 2022 earnings per diluted share were $5.11, an increase of more than 5% or $0.26 per share from last year, reflecting the impacts of customer growth, weather and a mid-year regulatory order, partially offset by higher operating costs. Both 2022 revenues and earnings are IDACORP's highest in the history of the company, and the 2022 earnings results were the 15th consecutive year in growth of earnings per share. Today, we also initiated our full year 2023 IDACORP earnings guidance estimate in the range of $4.95 to $5.15 per diluted share, which includes our current expectation that Idaho Power will utilize approximately $15 million of additional tax credits that are available to support earnings at a 9.4% return on equity level in the Idaho jurisdiction under its Idaho regulatory settlement stipulation. These estimates assume historically normal weather conditions throughout the year and a return to more normal power supply expenses. I'll now turn the call over to Lisa.

Thank you, Justin, and thanks to everyone for joining us on the call today. I want to begin my remarks by underscoring what Justin just mentioned that IDACORP completed its 15th consecutive year of growth in earnings per share, that you can see on Slide 5. We believe this is a remarkable achievement among investor-owned utilities, and I want to thank our hard-working team of employees for their contributions to our sustained success. These financial results have translated into a growing dividend, and we are also proud of our high customer satisfaction scores and excellent service reliability throughout 2022. As noted on Slide 6, customer growth remains strong across Idaho Power service area. Our customer base grew 2.4% during 2022, and we now serve nearly 620,000 customers. Moody's most recent GDP calculation for our service area forecast strong growth of 3.9% in '23 and 4.5% in '24 as our local economy continues to outperform national trends. In addition to being a great place to live and do business, we believe the reliable, affordable, clean energy Idaho Power provides is a key driver for growth across our service area. Robust residential growth has been a theme for many years. And while single-family residential building permits have slowed in recent months as interest rates have increased, we expect overall economic activity to remain strong. Unemployment in Idaho Power service area during the fourth quarter was 2.3% compared to 3.5% at the national level and employment has increased by 5.8% since the fourth quarter of 2021. We are also seeing a major uptick in Idaho Power's low growth forecast as a result of several large load projects. And with the new meta data center coming to Idaho and Micron's major expansion of its Boise headquarters, including new microchip fabrication facilities, Idaho Power expects…

Thanks, Lisa. Good afternoon, everybody. Thanks for tuning in. I'll start on Slide 9, where you'll see a summary of our financial results in 2022 compared to our 2021 results. We saw continued strong customer growth. We had higher weather-related usage, and we had higher transmission wheeling revenues. Also, the Jim Bridger order from the Idaho Commission last summer notably impacted our year-over-year results. On the other hand, offsetting those benefits on a comparative basis were higher operating and maintenance expenses as well as the portion of net power supply expenses that were not preferred for future recovery under our power cost adjustment mechanisms. The Idaho fixed cost adjustment mechanism also had a negative impact on comparative results, with the FCA adjusting revenues based on usage from the hotter summer weather. In the table, you'll see customer growth of 2.4% added $12.1 million to operating income. Unsurprisingly, because it appears to be a national trend, higher mortgage rates and economic uncertainty have impacted single-family residential home sales in our service area. That said, looking at Moody's current positive GDP outlook for our service area, and the analysis and forecast we developed for the next IRP, the trend points to continued strong customer and load growth. And despite our expectation for moderation and residential growth in the near term, at least relative to the high percentages we've seen in recent years, a large part of our expectations for growth are driven by significant commercial and industrial customers. We currently project the 5-year forecasted annual retail sales load growth rate increase from 2.6% in the 2021 IRP to 5.5% in the 2023 IRP. So certainly a notable increase. We've seen some shifting in the ramp rate for some of those large industrial customers, actually in both directions. So our engineers are working…

[Operator Instructions] We'll hear first today from Brian Russo with Sidoti.

Hello. Good afternoon. Just on the rate case. I imagine it will be a 2022 historical test year?

It will be a '23 year.

Okay. We got 2023 test year for new rates in 2024?

Correct

Yes, Brian, the way that I would look at it is we'll take 2022 as somewhat of a financial base year. And then what we'll do is propose some known and measurable adjustments based on 2023 and submit that as our general rate case ask.

Okay. Got it. And do you think you're going to file with the 54% Idaho Power equity ratio that you had at year-end 2022? Or will that be updated also?

So I think, Brian, as we look at our financing plans going forward, we'll actually have some debt issuances that would be in advance of our general rate case. It will actually bring that debt-to-equity ratio down. So when we go in, we wouldn't expect to have necessarily a 54% equity rate. It will be something sub that, maybe looking at more of a 51%, 52% equity ratio going into the rate case.

Okay. Great. And even with the 2023 rate base. Obviously, Hells Canyon and Boardman to Hemingway would be outside of that. So you'll just continue to earn on the quip balances and then look to recover that in rates in a future rate case and/or maybe a single issue rate-making proceeding?

Yes.

Yes, Brian, that's exactly right. We'll continue to have AFUDC on that outstanding quip, but wouldn't include them necessarily in a general rate case. We would either include them in a future general rate case or there's the possibility of going to the commission for single issue rate case as associated with projects that are of that magnitude. Anything of a Boardman to Hemingway or a Hells Canyon magnitude might be appropriate for a one-off case. But -- we'll just have to see. If you look at our capital spending plans, there's a lot of other CapEx out there that might be folded into rate base at the same time. So that will be something we look at when we look at our regulatory strategy as to a general or a one-off case.

And Boardman to Hemingway, it's breaking ground in 2023. So are all the regulatory approvals behind you? And is the potential increase in ownership of buying BPA stake, is that included in the CapEx?

Adam, why don't you take that one?

Yes. The 45% ownership is included in the CapEx. In terms of next steps, we received our state permit with a unanimous 6-0 vote. We're just waiting for the Oregon Supreme Court rule on that in June. We do plan to break ground in the middle of this year. We have 2 CPCN filings with both Oregon and Idaho that we hope to conclude in June. So we're making great headway. In terms of the negotiated deal, BPA is out to the public right now with that deal. Pens are down. We've negotiated all the terms. We hope to hear back from BPA here with their process here in February, and then we'll be able to move forward with executing the agreements related to that deal.

Okay. And then the 2025 and 2026 RFPs, how can you benefit from the Inflation Reduction Act to maybe own more of that, but also manage customer rates given your rate base growth?

Yes, Brian, there's quite a bit outstanding on the Inflation Reduction Act in terms of exactly how that's going to work from both a tax credit perspective, a regulatory perspective and a GAAP perspective. So all of those 3 things have to interplay with one another before we could make some decisions. We do think that there are benefits out there in those years from the Inflation Reduction Act. Those are all ultimately going to flow through to our customers one way or the other. So customers will receive the benefit. We used to look at complicated structures like tax equity partnerships and things like that. We do -- as we look to the future, we also look at our own tax credit appetite. And how we use those tax credits to the benefit of our customers is something we're going to have to look at what the environment is at the time and find the best way for that to work for both our owners and our customers.

The only thing I might add to that in terms of the 25 RFPs, it looks this time it's going to be a mix of kind of potential ownership of Idaho Power and third parties. We're still negotiating those deals. So we haven't concluded that, but it looks like kind of like the last 2 RFPs, we're seeing a mix of potential ownership at PPAs.

The only other thing that I would add that we have a team that's really actively working at all of those opportunities from the IDA [ph] and IRA. And so those benefits may go beyond those years as we kind of look at where those opportunities are and as the rules are actually written.

Okay. And just real quickly and lastly, obviously, your full year guidance assumes normal weather. But have you seen incremental transmission revenues in this first quarter based on the extreme weather conditions and power price -- elevated power prices and maybe basis differentials north and west of you guys?

Yes, Brian, this is Adam. We continue to see that and saw that early on. The market has been very volatile, as you know. And when that occurs, folks tend to use our transmission line to trade in between the two markets, the mid-sea market and the Palo Verde market. And so we continue to see kind of a steady increase in volumes and revenues in that regard.

Great. Thank you very much.

[Operator Instructions] We'll hear next from Anthony Crowdell with Mizuho.

Good afternoon. Hopefully, two quick questions. One of them, I guess, a slide in the third quarter deck, you guys talked about dividend growth, I think, of roughly 5%. And I apologize if I had that number wrong. Just -- I didn't see that slide in this deck. Has that changed at all and also payout ratio guidance?

Yes, Anthony. So what I'll say on that is we're committed to that target payout ratio, that 60% to 70% of sustainable earnings that we've got out there. Given the CapEx spend that's in process and upcoming and both the expenses of growth and the rate base that results from that. I wouldn't call the trajectory necessarily linear. But with the growth coming, I'd say earnings to grow faster than our stated 5% targeted dividend growth rate if we execute well on the regulatory side. We're pretty mindful of our big CapEx spend and rating agency considerations, and we expect the rate case cycle to help with cash flow. So that can also be a benefit to dividends and certainly something we'll be watching. So I'd say we know that dividend is important to our investors, and its part of their thesis, and the Board is also aware of that. So that's front and center for us.

So if I could just sum that up, you did state that obviously, a lot of moving pieces there, but earnings growth may exceed dividend growth, but you do have to execute on some regulatory filings, but you can see earnings growth ahead of the dividend growth?

Yes. Again, I don't -- not necessarily think that that's a linear thing, but there is a possibility of that. If you look at things like our rate base CAGR, if we execute well on that, I think there are opportunities out there over the long term.

Great. And then when I look at your CapEx slide, is there any way you could quantify, in Slide 10, what's the load growth you're assuming on Slide 10? Like that CapEx reflects what assumed load growth?

Yes, that's just over 5% that we're using in our latest IRP analysis to 5.5%.

Okay. Did that retail sales growth -- and I apologize, I think I saw a slide of the EI where the 2023 IRP, the growth was maybe in the 6% range. And I know it's a very modest move down, but is that accurate?

Yes, I believe it is. And that was more timing of large-load projects.

Great. That’s all I had. Thanks so much for taking my questions.

[Operator Instructions] We'll hear next from Chris Ellinghaus with Siebert.

That's great. I was looking at the page and the 10-K with the load growth forecast. This 5-year outlook, can you sort of break down that 5.5% number into what's from customer growth? What's from sort of large new loads? And are you incorporating growth from electrification in there? Can you give us any sense of how that 5.5% breaks down?

Yes, sure. This is Adam. I think the largest portion of kind of the increase between the 2 IRPs is large load customers. We just mentioned that between the analysts discussions. And today, we had a slight decrease from 6% to 5.5%. Some of that is just a residential look, and that has gone down just slightly. But the large load in the C&I inquiries and load continue to be pretty significant, and that's what makes up kind of that increase to that 5.5%.

I'd add to that. We do include some electrification in there. But I think one thing we've taken a conservative view on residential just in light of macroeconomic conditions that are out there. And what we've seen in slowing housing sales right, from mortgage rates and kind of some economic uncertainty that's out there. So -- but that is all built into our forecast. Some of that is further out. So we're not saying that it's 5.5% every year, that is over that 5-year period of time, with potentially higher growth over the later years in that 5-year period as customers ramp up.

I was going to say that 5.5, 5 years with a lot of C&I loads. Do you see an extension of this beyond the 5 years with, say, EV adoption rates and economic recovery, maybe goosing the residential side? So do you see this kind of elevated level being a longer term than the 5-year horizon as well?

I mean it certainly could be. I think the IRA is going to put a lot of opportunity out there for that, but we'll have to wait and see if consumers make the shifts that those programs are intending. But yes, we do see that there is opportunity for sure.

Just to give you an idea, Chris, on electrification. Our year-over-year growth for electric vehicles increased about 70% in one year. So I anticipate we're going to continue to see that. We actually just anecdotally have gotten our first lightings for Ford Lightings at Idaho Power, and I've been piloting it over the last week. And I have to say it's a pretty impressive vehicle. So you start to see these new models come out. Certainly, I think electrification will continue. And then as Lisa said, with these large loads, these are pretty big projects from Micron and Meta. And they have indicated that they could continue into the future. Who knows whether that's going to happen or not, but it's something that certainly could happen and increased load growth then.

Okay. Great. In the guidance, last year was not a super irrigation year. So how are you reflecting irrigation in '23? Is there some recovery there? Or are you assuming similar results? What's the irrigation outlook.

Yes, we kind of looked at sort of going back to normal patterns where, again, as Brian mentioned, it was very wet and cool last spring, which was an anomaly. So we're really kind of going back to normal weather patterns and forecasting based on that.

Okay. Great. Have you got any updated sort of time lines for Boardman to Hemingway or Gateway West in terms of completions?

This is Adam. For Boardman to Hemingway, we're still looking at 2026 in that year. In terms of Gateway West, we're right in the middle of modeling what that looks like in our IRP. Certainly, some of the models have seen Gateway West move forward before the end of the decade. Some show it move back. What we're going to have to look at? What is the most cost-effective approach for our customers. But certainly, the idea of Gateway West moving forward is a possibility.

And Chris, I'll just add that in that CapEx stack that we have in the materials that are in the slides, we do have a small incremental amount for some of the early stages of Gateway West at the end of that 5-year period.

Okay. That's helpful. Brian, you talked about sort of increasing expectations for equity, which is no great surprise given the CapEx. But you do have a pretty significant increase in 2024, should we be thinking that, that's kind of the horizon for your first equity need?

Yes, I'd say that it's not imminent, but we do watch things like market conditions and debt capital markets and things like that, and they all influence what our financing plans are. Our goal is when we get to that point where we have an equity need, we want to blend debt and equity, we do understand the issues associated with equity issuances on dilution and things like that. So we've got to watch market conditions. We've got to watch credit ratios and those types of things can impact our timing, I would say, less likely in 2023, but 2024 starts to come into the window, certainly just based on that large CapEx that's out there. But again, it depends on a number of factors.

Okay, great. That makes sense. All right, thanks for the color. Appreciate it guys.

And that does conclude the question-and-answer session for today. Ms. Grow, I would like to turn things back to you.

Thank you, everyone, for joining us this afternoon and for your continued interest in IDACORP. I hope you all enjoy this wonderful long President's weekend. And you get to spend some time with your families, and I hope that while you're out recreating or doing whatever you're doing, you do it safely. So thank you very much.

And that will conclude today's conference. Again, thank you for joining us, and you may now disconnect.