IDA Q4 2024: $350M-$450M 2025 Debt Raises Credit Downgrade Risk
- Regulatory Flexibility and Enhanced Rate Base Conversion: Management discussed exploring options to replenish the ADITC mechanism and the potential to shift to a period-end rate base framework, which could reduce regulatory lag and improve earnings outcomes.
- Robust Load Growth and Diverse Customer Base: The Q&A highlighted broad-based load growth with strong demand from large commercial and industrial customers, including data centers, mining, and dairy, which supports sustainable revenue expansion.
- Strong Pipeline and Strategic Capital Investments: Ongoing transmission projects like SWIP North and other infrastructure initiatives, along with upcoming RFPs for additional projects, position the company to convert capital investments into a growing rate base and future earnings.
- Increased External Financing Pressure: The company anticipates needing to issue roughly $350 million to $450 million in debt in 2025, which, combined with a decline in operating cash flow compared to 2024, could pressure credit metrics and push them closer to downgrade thresholds.
- Regulatory Uncertainty and Lag: Ongoing discussions about the appropriate rate base framework, including whether to shift to a period-end approach or continue with an averaging method, introduce uncertainty that may delay rate filings or affect future rate case outcomes.
- Project Execution and Construction Risks: Delays in critical transmission projects—such as potential setbacks on the Boardman to Hemingway line or SWIP North—could lead to capacity issues, forcing the company to rely on additional competitive RFPs in a tight market.
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Credit Metrics
Q: What are credit metrics ending 2024?
A: Management noted that IDACORP ended 2024 with Moody’s near 18% cash flow preworking capital over debt and S&P around 14.5% FFO to debt, though they expect a modest decline in 2025 due to lower cash flow and new debt issuance ( ). -
ADITC Filing
Q: How will ADITC replenishment be filed?
A: They indicated that replenishment of the additional tax credit mechanism might be addressed within the general rate case or via a separate filing, with details still being worked through ( ). -
Rate Base Methodology
Q: Will period-end rate base be used?
A: Management remains open to shifting to a period-end framework in broader rate cases, noting that all options are on the table to better capture cash benefits while managing risk ( ). -
SWIP North Commitment
Q: When is SWIP North funding needed?
A: They explained that the SWIP North project – roughly $1.23B – is set to begin construction late this year with financial commitments deferred until the project is in service, aligning with their CapEx forecast ( ). -
Load Growth Drivers
Q: What drives the new load growth?
A: The increased load growth is driven by large commercial and industrial projects, including data centers and mining, reflecting robust new business backed by highly certain signed agreements ( ). -
Executive Orders Impact
Q: Do executive orders change generation plans?
A: Management is monitoring various executive orders closely; however, the current generation mix remains determined by a least cost, least risk analysis, with potential easing of permitting noted for future projects ( ). -
Property Tax Refunds
Q: What was the property tax refund amount?
A: They recorded a one-time $10M pretax refund from litigation over historic tax valuation issues, a non-recurring item impacting 2024 results ( ). -
Rate Base Disclosures
Q: Are future rate bases calculated as averages?
A: Yes, management confirmed that the 2024 rate base was calculated using an average methodology and that this approach will continue for subsequent forecast years ( ).
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