IDACORP INC (IDA) stock intrinsic value fair value estimate & owner earnings analysis

IDACORP is the parent of Idaho Power, a regulated electric utility serving southern Idaho and eastern Oregon, including the fast-growing Boise metro area. Its earnings come from a regulated rate of return on the infrastructure (generation, transmission, distribution) it builds to serve customers, recovered through rates set by state utility regulators, with a mechanism that passes through swings in fuel and purchased-power costs so profits are relatively insulated from commodity price volatility. A meaningful share of its generation is hydroelectric, so results can move with snowpack and drought conditions. We value the company on owner earnings: the cash the business throws off after the capital spending genuinely required to keep the existing system running, separate from spending that expands it. Over the last decade, this figure has run mostly in the $1.60-$2.20 per share range, dipping to roughly $0.70-$1.40 in 2022-2024. That dip was driven by two things: a 2022 spike in fuel and purchased-power costs combined with weaker hydro output, and a sharp, deliberate increase in capital spending beginning in 2022-2023 to serve new large customers, most notably a special contract (approved by regulators in May 2023) to serve a large new data center for a subsidiary of Meta Platforms, alongside broader population and industrial growth in the service territory. Capital spending roughly quadrupled from about $280 million in 2019 to nearly $1.2 billion in 2025. Because this spending expands the regulated asset base on which the company earns a return, rather than simply replacing worn-out equipment, we did not count all of it as a cost of staying in business; we estimated an ongoing, sustaining level of capital spending based on the company's more typical spending intensity in 2016-2021 and treated the amount above that as growth investment tied to the new large-load contracts. Because rate increases to recover this spending lag the spending itself by roughly a year or two under normal regulatory procedure, current cash flow understates the earning power this investment should eventually produce. Our base case uses the median of the last ten years of owner earnings, about $2.06 per share, as the normalized starting point, and assumes modest earnings-per-share growth (roughly 4-4.5% in the near term, tapering toward 2.5% by year ten) as new large-load revenue and rate cases catch up with the recent capital spending, tempered by the dilution from issuing new shares to help fund that spending. Beyond the ten-year forecast, we treat Idaho Power's regulated asset base as self-renewing rather than assuming it winds down, since the capital spending needed to sustain it is already charged against earnings; we capped the assumed long-run growth rate at about 1% a year, near the ceiling our valuation approach supports without over-crediting future growth we cannot verify today. That long-run assumption still accounts for a majority of the estimated value, which is typical for a utility earning a return on a large, growing asset base, but means the valuation leans heavily on the rate base continuing to earn its allowed return indefinitely. Our bear case (roughly a one-in-ten outcome) assumes a materially weaker path: continued regulatory lag on cost recovery, a recurrence of the 2022-style combination of high power-supply costs and weak hydro output, slower-than-hoped realization of new large-load revenue, and a moderate, only partially insured wildfire-related liability. Idaho Power operates in fire-prone terrain and, like other Western utilities, discloses that its wildfire insurance coverage may not be sufficient to cover a severe event; we built a specific allowance for this into the bear case rather than ignoring it. In this scenario, we assume flat underlying growth and no further long-run growth beyond the ten-year forecast. Our bull case (roughly a one-in-ten upside outcome) assumes the new large-load and regulatory recovery play out efficiently: the data-center and industrial growth contracts ramp as contracted, rate cases are resolved constructively and with less lag, and hydro conditions are favorable, producing faster near-term growth before settling into the same long-run growth ceiling used in the base case. Putting these together, our bear case is worth roughly $27 a share, our base case roughly $50, and our bull case roughly $62. Given the meaningful but not extreme gap between the bear and base cases, the margin-of-safety price is around $34. One judgment worth flagging: because the cash-flow statement's reconciling items (regulatory cost deferrals, pension funding, and similar timing effects) matched net cash from operations exactly in every year we checked, we did not need to override any reported figures, and stock-based compensation was subtracted in full as a real, recurring cost.