SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 3, 2004
Exact name of registrants as specified in
Commission their charters, address of principal executive IRS Employer
File Number offices and registrants' telephone number Identification Number
------------------- ----------------------------------------------- ----------------------
1-14465 IDACORP, Inc. 82-0505802
1-3198 Idaho Power Company 82-0130980
1221 W. Idaho Street
Boise, ID 83702-5627
(208) 388-2200
State or Other Jurisdiction of Incorporation: Idaho
None
-----------------------------------------------------------------------------------------------
Former name or former address, if changed since last report.
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
IDACORP, Inc.
IDAHO POWER COMPANY
Form 8-K
ITEM 8.01 OTHER EVENTS
Moody's Lowers Ratings of IDACORP and IPC
On December 3, 2004, Moody's Investors Service (Moody's) announced that it has
lowered the corporate credit ratings and long-term ratings of IDACORP, Inc.
(IDACORP) and the corporate credit ratings and long-term and short-term ratings
of Idaho Power Company (IPC). According to Moody's, the rating outlook for both
companies is stable. These downgrades are expected to increase the cost of new
debt and other issued securities going forward.
Moody's stated that the downgrade of IPC's ratings reflected: 1) expected weaker
cash flow coverage of interest and debt; 2) the likelihood for continued
negative free cash flow over the next few years, with internally generated funds
falling short of meeting the dividend requirements of IDACORP and significant
utility-related capital spending; 3) persistent drought conditions that are
likely to result in higher supply costs, not all of which are recoverable under
IPC's power cost adjustment mechanism; 4) the final resolution this fall of
IPC's rate case, which resulted in a revenue increase of a little more than half
of IPC's updated request; and 5) the likely need for additional support from the
Idaho Public Utilities Commission (IPUC) in future rate proceedings as IPC adds
new generation and transmission infrastructure to help meet customer and load
growth and ensure reliability of service.
According to Moody's, the downgrade of IDACORP's ratings reflected the weaker
credit profile of IPC, which is by far the largest source of cash flow in the
form of dividends to the parent company. Moody's stated that, with the
continuing negative free cash flow trend for IPC, IDACORP may need to depend
more on dividends from its riskier non-utility subsidiaries to meet its own
fixed obligations and common dividend to shareholders, even though management
has committed to a "back-to-basics" strategy of focusing on its regulated
business.
In addition, Moody's assigned a Baa2 rating to IDACORP's three-year $150 million
senior unsecured bank credit facility and assigned a Baa1 rating to IPC's
three-year $200 million senior unsecured bank credit facility. Both facilities
expire on March 16, 2007.
Moody's stated that the Baa2 rating assigned to IDACORP's bank credit facility
reflected the pari passu ranking of the facility with IDACORP's other senior
unsecured obligations. The facility serves as part of the alternate liquidity
for IDACORP's commercial paper program. The facility contains a maximum 65% debt
to total capitalization ratio covenant and has a material adverse change clause
as part of the representations and warranties relating to each credit extension.
In Moody's view, the existence of the material adverse change clause detracts
from the quality of the facility since it could preclude access to funds at
IDACORP's time of greatest need. The facility also contains a minimum required
Credit Agreement EBITDA, defined as consolidated net income plus interest
charges, income taxes, depreciation and all non-cash items
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that reduce such consolidated net income minus all non-cash items that increase
consolidated net income, to interest coverage covenant for the trailing four
quarters of 2.75 times.
Moody's indicated that the Baa1 rating assigned to IPC's bank credit facility
reflected the pari passu ranking of the facility with IPC's other senior
unsecured obligations. The facility serves as part of the alternate liquidity
for IPC's commercial paper program. The three-year facility represents an
enhancement in the quality of alternate liquidity over IPC's prior facility,
which was for a 364-day term. The current facility does not contain any rating
triggers that would cause default, accelerations or puts. It does, however,
contain a maximum 65% debt to total capitalization ratio covenant and has a
material adverse change clause as part of the representations and warranties for
each credit extension. In Moody's view, the existence of the material adverse
change clause detracts from the quality of IPC's credit facility since it could
limit access to funds during IPC's time of greatest need.
The following outlines the former and current Moody's ratings of IPC's and
IDACORP's securities:
--------------------------------- -------------------- --------------------
IPC IDACORP
--------------------------------- -------------------- --------------------
Former Current Former Current
--------------------------------- ---------- --------- ---------- ---------
Corporate Credit Rating A3 Baa1 Baa1 Baa2
--------------------------------- ---------- --------- ---------- ---------
Senior Secured Debt A2 A3 None None
--------------------------------- ---------- --------- ---------- ---------
Senior Unsecured Debt A3 Baa1 Baa1 Baa2
--------------------------------- ---------- --------- ---------- ---------
Preferred Stock (P)Baa2 (P)Baa3 None None
--------------------------------- ---------- --------- ---------- ---------
Trust Preferred Stock None None (P)Baa2 (P)Baa3
--------------------------------- ---------- --------- ---------- ---------
Short-Term Tax-Exempt Debt A3/ Baa1/ None None
VMIG-1 VMIG-2
--------------------------------- ---------- --------- ---------- ---------
Commercial Paper P-1 P-2 P-2 P-2
--------------------------------- ---------- --------- ---------- ---------
Credit Facility None Baa1 None Baa2
--------------------------------- ---------- --------- ---------- ---------
Rating Outlook Negative Stable Negative Stable
--------------------------------- ---------- --------- ---------- ---------
The following outlines the current Standard & Poor's Ratings Services (Standard
& Poor's), Moody's and Fitch Inc. (Fitch) ratings of IPC's and IDACORP's
securities, with the ratings currently under review by Fitch marked with an
asterisk:
---------------- -------------------------- -------------------------- --------------------------
Standard & Poor's Moody's Fitch
---------------- -------------------------- -------------------------- --------------------------
IPC IDACORP IPC IDACORP IPC IDACORP
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Corporate BBB+ BBB+ Baa1 Baa2 None None
Credit Rating
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Senior Secured A- None A3 None A* None
Debt
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Senior BBB (prelim) BBB Baa1 Baa2 A-* BBB+*
Unsecured Debt (prelim)
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Subordinated None BBB- None None None None
Debt (prelim)
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Preferred Stock BBB- None (P)Baa3 None BBB+* None
(prelim)
---------------- ------------- ------------ ------------- ------------ ------------- ------------
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---------------- ------------- ------------ ------------- ------------ ------------- ------------
Trust None BBB- None (P)Baa3 None BBB*
Preferred Stock (prelim)
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Short-Term BBB/A-2 None Baa1/ None None None
Tax-Exempt Debt VMIG-2
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Commercial A-2 A-2 P-2 P-2 F-1* F-2
Paper
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Credit Facility None None Baa1 Baa2 None None
---------------- ------------- ------------ ------------- ------------ ------------- ------------
Rating Outlook Stable Stable Stable Stable Negative Negative
---------------- ------------- ------------ ------------- ------------ ------------- ------------
These security ratings reflect the views of the rating agencies. An explanation
of the significance of these ratings may be obtained from each rating agency.
Such ratings are not a recommendation to buy, sell or hold securities. Any
rating can be revised upward or downward or withdrawn at any time by a rating
agency if it decides that the circumstances warrant the change. Each rating
should be evaluated independently of any other rating.
Litigation Update
On May 26, 2004 and June 22, 2004, respectively, two shareholder lawsuits
were filed against IDACORP and certain of its directors and officers. The
lawsuits, captioned Powell, et al. v. IDACORP, Inc., et al. and Shorthouse, et
al. v. IDACORP, Inc., et al., raise largely similar allegations. The lawsuits
are putative class actions brought on behalf of purchasers of IDACORP's common
stock between February 1, 2002 and June 4, 2002, which is referred to as the
class period, and were filed in the United States District Court for the
District of Idaho. The named defendants in each suit, in addition to IDACORP,
are Jon H. Miller, Jan B. Packwood, J. LaMont Keen and Darrel T. Anderson.
The complaints alleged that, during the class period, IDACORP and/or
certain of its officers and/or directors made materially false and misleading
statements or omissions about its financial outlook in violation of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule
10b-5, thereby causing investors to purchase its common stock at artificially
inflated prices. More specifically, the complaints alleged that IDACORP failed
to disclose and misrepresented the following material adverse facts which were
known to it or recklessly disregarded by it: (1) IDACORP failed to appreciate
the negative impact that lower volatility and reduced pricing spreads in the
western wholesale energy market would have on its marketing subsidiary, IDACORP
Energy; (2) IDACORP would be forced to limit its origination activities to
shorter-term transactions due to increasing regulatory uncertainty and continued
deterioration of creditworthy counterparties; (3) IDACORP failed to discount for
the fact that IPC might not recover from the lingering effects of the prior
year's regional drought; and (4) as a result of the foregoing, IDACORP lacked a
reasonable basis for positive statements about its earnings projections. The
Powell complaint also alleged that IDACORP's conduct artificially inflated the
price of its common stock. The actions seek an unspecified amount of damages, as
well as other forms of relief. By order dated August 31, 2004, the court
consolidated the Powell
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and Shorthouse cases for pretrial purposes and ordered the plaintiffs to file a
consolidated complaint within 60 days.
On November 1, 2004, IDACORP and the directors and officers named in the
Powell and Shorthouse complaints were served with a purported consolidated
complaint captioned Powell et al. v. IDACORP, Inc. et al., which was filed in
the United States District Court for the District of Idaho.
The new complaint alleges that during the class period IDACORP and/or
certain of its officers and/or directors made materially false and misleading
statements or omissions about its business operations, and specifically the
IDACORP Energy financial outlook, in violation of Rule 10b-5, thereby causing
investors to purchase IDACORP's common stock at artificially inflated prices.
The new complaint alleges that IDACORP failed to disclose and misrepresented the
following material adverse facts which were known to it or recklessly
disregarded by it: (1) IDACORP falsely inflated the value of energy contracts
held by IDACORP Energy in order to report higher revenues and profits; (2)
IDACORP permitted IPC to inappropriately grant native load priority for certain
energy transactions to IDACORP Energy; (3) IDACORP failed to file 13 ancillary
service agreements involving the sale of power for resale in interstate commerce
that it was required to file under Section 205 of the Federal Power Act; (4)
IDACORP failed to file 1,182 contracts that IPC assigned to IDACORP Energy for
the sale of power for resale in interstate commerce that IPC was required to
file under Section 203 of the Federal Power Act; (5) IDACORP failed to ensure
that IDACORP Energy provided appropriate compensation from IDACORP Energy to IPC
for certain affiliated energy transactions; and (6) IDACORP permitted
inappropriate sharing of certain energy pricing and transmission information
between IPC and IDACORP Energy. These activities allegedly allowed IDACORP
Energy to maintain a false perception of continued growth that inflated its
earnings. In addition, the new complaint alleges that those earnings press
releases, earnings release conference calls, analyst reports and revised
earnings guidance releases issued during the class period were false and
misleading. The action seeks an unspecified amount of damages, as well as other
forms of relief.
Although no assurance can be given as to the ultimate outcome of these
cases, IDACORP and the other named defendants intend to defend themselves
vigorously against these allegations.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
Dated: December 6, 2004
IDACORP, Inc.
By: /s/ Darrel T. Anderson
-----------------------
Darrel T. Anderson
Senior Vice President -
Administrative Services
and Chief Financial Officer
IDAHO POWER COMPANY
By: /s/ Darrel T. Anderson
-----------------------
Darrel T. Anderson
Senior Vice President -
Administrative Services
and Chief Financial Officer
6