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IDACORP (IDA) Gains From Regular Investments in Clean Assets

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IDACORP Inc.’s (IDA - Free Report) ongoing capital investments, improvement in economic conditions, customer growth, cost management and focus on producing more electricity from clean sources are driving its performance.

This Zacks Rank#3 (Hold) stock has a long-term (three to five years) earnings growth rate of 2.7%. Competition from alternate sources of energy and compilation costs in a stringent regulatory environment are headwinds.

Tailwinds

IDACORP’s regulated electric operations in Idaho generate a relatively stable and growing income stream. An expanding customer base, improvement in the economic conditions of its service territories and rising demand for clean energy are contributing to its stable performance.

IDACORP projects capital expenditure of $2.8 billion for the 2022-2026 period. Owing to systematic investments in strengthening the generation portfolio, Idaho Power Hydroelectric Generation will be able to cater to the rising demand of its expanding customer base. The systematic investment aims to provide 100% clean energy to Idaho Power’s customers by 2045. At 2021-end, of the energy mix, nearly 61% comprised clean energy sources.

A sustained focus on cost control has helped the company to keep its rates lower than other electricity providers. The average industrial and residential rates charged by Idaho Power are much lower than the national average. The low cost of energy makes it a favorable destination for investors setting up new businesses in the region, resulting in an increase in demand for electricity. The company attracts new customers as it provides clean energy, affordability and reliability.

Headwinds

IDACORP predominantly provides electricity from hydro-electric units. The development of new technology to generate electricity and the decline in the cost of generating clean electricity from other alternative energy sources could adversely impact demand for its services.

The company operates in a strict regulatory environment and its nature of business is subject to complex and comprehensive federal, state and other regulations. It operates several hydroelectric generation plants that require relicensing and certain other costs. The permitting process could impose a number of onerous conditions, which may lead to significant capital expenditures.

Price Performance

IDACORP has lost 1.9% compared with Zacks Utility - Electric Power industry's decline of 0.5% in the past 12 months.

 

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Stocks to Consider

Some better-ranked utilities in the same industry with well-chalked-out investment plans for strengthening their services are NextEra Energy (NEE - Free Report) , WEC Energy Group (WEC - Free Report) and PPL Corporation (PPL - Free Report) . All currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Energy aims to invest $85-$95 billion from 2022 through 2025 to strengthen its infrastructure. Courtesy of persistent renewable asset additions to its generation portfolio and execution across all business segments, NextEra Energy expects to witness a CAGR of more than 10% for earnings per share through 2025 from the 2021 adjusted EPS of $2.55. The long-term (three to five years) earnings growth of NextEra Energy is currently pegged at 9.66%.

WEC Energy is investing in cost-effective zero-carbon generation like solar and wind. In the 2022-2026 timeframe, it plans to invest $17.7 billion. WEC has plans to build 2,400 megawatt of solar, wind and battery storage in the 2022-2026 period to further strengthen its renewable portfolio. WEC expects earnings per share to improve 6-7% per year until 2026. The long-term earnings growth of WEC Energy is currently pegged at 6.08%.

PPL expects a five-year capital expenditure of $12 billion for the 2022 to 2026 time period and expects  capital expenditure of $2.3 billion for 2022. It targets to reduce carbon emissions and targets to become carbon-neutral by 2050. It is solely focused on developing its domestic operations and its current dividend yield is 3.38% better than the Zacks S&P 500 composite’s yield of 1.73%.

 

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