3, 2026 CALL PARTICIPANTS Vice President, Investor Relations - Stephanie A.
AmaimoPresident and Chief Executive Officer - David Gerard HutchensExecutive Vice President and Chief Financial Officer - Jocelyn H.
PerryPresident and Chief Executive Officer, FortisBC - Roger Dall’AntoniaPresident and Chief Executive Officer, UNS Energy - Susan GrayPresident and Chief Executive Officer, FortisAlberta - Janine SullivanPresident and Chief Executive Officer, ITC Holdings Corp.
- Linda Apsey Net Earnings -- $474 million or $0.92 per common share, representing an increase from $409 million or $0.81 per common share in the third quarter of 2025.Adjusted EPS -- $0.92, increasing $0.05 from the third quarter of 2025 primarily driven by rate base growth across all utilities.Five-Year Capital Plan -- $32.2 billion for the 2027 to 2031 period, which is $3.4 billion higher than the previous outlook.Rate Base CAGR -- 7.5% over the five-year period, representing an increase of 50 basis points compared to the prior five-year plan.Common Share Dividend -- $0.665 per share, reflecting a 4% increase and marking 53 consecutive years of dividend growth.2026 Capital Investment -- $6 billion expected for the full year, representing a $400 million increase from the prior plan driven by accelerated major projects.ITC Capital Outlook -- $11.6 billion over five years, supporting 8.6% rate base growth through transmission and reliability investments.Mark Project Investment -- US$1 billion total estimated cost for a competitive Iowa transmission project, with US$500 million included in the 2027 to 2031 capital plan.ITC Load Growth Potential -- 10,000 MW in the project pipeline, an increase from 8,000 MW reported in the previous quarter.UNS Energy Capital Plan -- $5.6 billion over five years, supporting a rate base compound annual growth rate of 7.4%.TEP Sales Growth -- 5.7% average annual sales growth projected through 2031, prioritizing customer affordability in the base case scenario.TEP High Growth Scenario -- US$1.5 billion in potential incremental investment beyond the base plan, which would require 800 MW of new generation.FortisBC Capital Outlook -- $6 billion over five years, supporting a 7.9% rate base compound annual growth rate.Tilbury Phase 1B Expansion -- $1.7 billion for liquefaction expansion and a marine jetty to support LNG fueling in the Port of Vancouver.Tilbury LNG Storage Tank -- $1.1 billion for a 3 billion cubic feet storage facility intended to improve system resilience.ATM Equity Issuance -- $260 million of equity issued in the third quarter, with an additional $250 million planned over the next 12 months.Hybrid Debt Issuance -- US$1 billion of junior subordinated notes issued during the third quarter to fund capital requirements.FFO to Debt Ratio -- 12% target average over the five-year plan period, which management stated supports current investment grade credit ratings.TEP Recommended ROE -- 9.65% recommended by an administrative law judge, an increase from the currently allowed 9.55%.TEP Recommended Equity Ratio -- 55.5% common equity component recommended, compared to the current 54% allowed level.
Need a quote from a Motley Fool analyst? Email [email protected] Perry noted that the company experienced regulatory lag associated with rate base growth not yet reflected in customer rates, which moderated earnings at UNS Energy.Perry stated, "thresholds just change at the rating agency level and not anything to do with Fortis," noting that external adjustments to credit metric requirements could impact the company's profile despite stable internal performance.Hutchens noted that consolidated results were unfavorably impacted by the 2025 disposition of assets in Turks and Caicos and Belize, which lowered earnings per share by $0.02 in the quarter.
(FTS +1.11%) reported net earnings of $474 million for the third quarter of 2026, while unveiling a record $32.2 billion five-year capital plan focused on transmission and liquefied natural gas infrastructure.
Management reported that consolidated rate base is projected to reach $64 billion by 2031, supported by a 7.5% compound annual growth rate and major projects at ITC and FortisBC.
The company increased its fourth quarter dividend by 4% to $0.665 per share and extended its 4% to 6% annual dividend growth guidance through 2031.
Financing for the expanded capital outlook is expected to be primarily sourced from cash from operations and regulated utility debt, supplemented by the dividend reinvestment plan and an at-the-market equity program.
Hutchens stated, "When you have these large loads come in, that makes your system more efficient and saves customers money," citing a 20% rate reduction benefit in Iowa from industrial development.Management reported that 75% of the five-year capital plan is directed toward transmission and distribution investments, which are classified as low-risk regulated infrastructure.The company received environmental approval for the Tilbury Phase 2 expansion, which offers a potential investment opportunity of $2 billion to $4 billion to serve export markets.Hutchens noted that data center load growth is a significant driver of the 10,000 MW pipeline at ITC, though capital for these projects is only included in the plan once they are publicly announced and approved.Perry indicated that the company aims to maintain a 50 to 75 basis point buffer above its 12% funds from operations to debt threshold to protect its credit rating.Management confirmed that the high growth scenario in Arizona, involving significant data center load, would result in the lowest rates for customers among all integrated resource plan scenarios.
INDUSTRY GLOSSARY ACC: Arizona Corporation Commission, the regulatory body governing utilities in Arizona.ATM: At-the-market equity program, a method for a company to sell shares into the secondary market at prevailing prices.AUC: Alberta Utilities Commission, the independent agency that regulates the utilities sector in Alberta.CAGR: Compound Annual Growth Rate, the mean annual growth rate of an investment over a specified period longer than one year.FID: Final Investment Decision, the stage in a project when a company commits to the full investment required for execution.IRP: Integrated Resource Plan, a roadmap developed by a utility to meet future energy needs over a long-term horizon.LNG: Liquefied Natural Gas, natural gas that has been cooled to a liquid state for ease of storage or transport.MISO: Midcontinent Independent System Operator, a regional transmission organization that manages the power grid in parts of the U.S.
and Canada.ROE: Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.Tranche 2.1: A specific set of long-range transmission projects planned within the MISO region to improve grid reliability and capacity.
Full Conference Call Transcript Operator: Thank you for standing by.
This is Betsy, the conference operator.
Welcome to the Fortis, Inc.
Third Quarter 26 Results and New 5 Year Capital Outlook Conference Call.
As a reminder, all participants are in a listen-only mode.
After the presentation, there will be an opportunity to ask questions.
I would now like to turn the conference over to Stephanie A.
Vice President, Investor Relations.
Please go ahead, Ms.
Stephanie A.
Amaimo: Thanks, Betsy, and good morning, everyone.
Welcome to Fortis' third Quarter 26 Results and New 5 Year Capital Outlook Conference Call.
I am joined by David Gerard Hutchens, President and CEO Jocelyn H.
Perry, Executive VP and CFO other members of the senior management team, as well as CEOs from certain subsidiaries.
Before we begin today's call, I want to remind everyone that the discussion will include forward looking information, which is subject to the cautionary language contained in the supporting slideshow.
Actual results can differ materially from the forecast projections included in the forward looking information presented today.
Non GAAP financial measures referenced in our prepared remarks are reconciled to the related U.
GAAP financial measures in our third quarter 26 MD and A.
Also, unless otherwise specified, all financial information referenced is in Canadian dollars.
With that, I will turn the call over to David.
David Gerard Hutchens: Thank you and good morning everyone.
This past quarter has been 1 of the busiest and most positive I can remember during my tenure as CEO.
Leading to meaningful progress and significant opportunities for our business going forward.
We are also happy to put another strong quarter behind us.
Operationally, we continue to provide safe and reliable service to our customers and invested $4.2 billion in our systems year to date.
For the full year, we expect to invest approximately $6 billion, up $400 million from our plan.
And we delivered earnings per share for the third quarter of $0.92 And today, we are unveiling our new 5 year capital plan, our largest to date.
Big news hit in the quarter with respect to our Tilbury site in British Columbia, and ITC being awarded a competitive bid project in Iowa.
And today, we announced that our Board of Directors declared fourth quarter dividend increase of 4% marking 53 years of dividend increases.
Before getting into the details of our new 5 year outlook, I will turn the call over to Jocelyn to speak to our third quarter results.
Perry: Thank you, David, and good morning, everyone.
For the quarter, reported earnings were $474 million or $0.92 per common share, and on a year to date basis, reported earnings were $1.4 billion or $2.69 per common share.
As you can see on the slide, reported earnings in 2025 included income taxes and closing costs of $0.06 per share associated with the disposition of Fortis TCI.
Excluding this impact, adjusted EPS for the quarter was up $0.05 and year to date adjusted EPS was up $0.06 On the next slide, you will see the adjusted EPS drivers for the quarter by segment.
At ITC, EPS increased by $0.03 driven by rate base growth and lower stock based compensation expense, partially offset by higher finance costs.
Our US electric and gas segment contributed a $0.02 increase mainly driven by UNS Energy.
The growth in Arizona was due to higher electricity sales associated with residential and industrial usage, and customer growth.
The timing of operating costs and lower income taxes associated with the amortization of investment tax credits on the battery storage project also contributed to the increase.
Moderating this was the impact of milder weather quarter-over-quarter and regulatory lag associated with rate base growth not yet reflected in rates.
At Central Hudson, earnings were largely consistent quarter over quarter as rate base growth the timing of costs, and a contribution to a customer benefit fund in 2025 were offset by a favorable regulatory adjustment made in the third quarter of 2025 upon implementation of the most recent rate order.
Our Western Canadian utilities increased EPS by $0.02 in the quarter driven by rate base growth as well as lower income tax expense at Fortis Alberta.
And for our other electric segment, EPS decreased by $0.01 largely due to the disposition of Fortis TCI in September 2025.
The Corporate and Other segment reflects net unrealized losses on derivative contracts compared to unrealized gains in 2025.
The timing of income tax recoveries and the disposition of FortisBC in the fourth quarter of 25.
Foreign exchange had a $0.01 favorable impact for the quarter and higher weighted average shares issued under the dividend reinvestment plan and ATM program impacted EPS by $0.01 And as noted on the slide, the 2025 disposition of our assets in Turks and Caicos and Belize lowered EPS by $0.02 in the quarter net of finance cost savings.
Year to date results were mainly driven by the same factors discussed for the quarter with a few additional items to note.
For the 9 month period, Central Hudson was up $0.04 primarily due to rate base growth and the timing of costs, partially offset by the favorable regulatory adjustment in 2025 as discussed earlier.
At UNS, EPS was down $0.01 which reflects lower margin on wholesale sales and higher operating costs in addition to the other items noted for the quarter.
And lastly, the impact of foreign exchange was $0.03 and the impact of the 2025 dispositions net of finance cost savings was $0.05 year to date.
Turning next to our regulatory update, In October, the ACC administrative law judge issued a recommended opinion and order in TEP's general rate application.
Recommending an allowed ROE of 9.65% and a 55% common equity component of capital structure.
We currently have an allowed ROE of 9.55% and a 54% equity component of capital structure.
The order also recommended an annual formulaic rate adjustment mechanism with a range of plus or minus 50 basis points around the allowed ROE.
The inclusion of post test year adjustments, the elimination of certain adjuster mechanisms, and the deferral of certain costs associated with Roadrunner Reserve II for future recovery.
The ALJ's recommendation proposed implementation of new rates by December 1 and is subject to ACC approval, which is anticipated later this month.
I will now turn the call back to David to cover key elements of our new 5 year capital plan.
David Gerard Hutchens: Thank you, Jocelyn.
Our new 32.2 billion 5 year capital plan is $3.4 billion higher than our previous plan.
Our 5 year rate base CAGR is 7.5%, up 50 basis points compared to the prior plan.
We have also extended our annual dividend growth guidance of 4-6% through 2031.
This new plan builds on the growth momentum across our high quality footprint while keeping customer affordability top of mind.
The growth in our 5 year plan is largely driven by transmission and LNG investments.
At ITC, the $1.7 billion increase was primarily driven by projects associated with MISO's Tranche 2.1 long range transmission plan, along with higher baseline reliability projects and new interconnections.
At FortisBC, a $1 billion increase primarily reflects investments in LNG infrastructure including the Tilbury Phase 1B liquefaction expansion and the new Tilbury LNG storage tank.
The remaining increase is driven by customer growth and reliability investments across our footprint.
The new plan is highly executable with approximately 75% directed toward transmission and distribution investments critical infrastructure that supports stable and predictable returns.
The capital program is low risk and comprised of 100% regulated projects and includes 11 major capital projects.
Consolidated rate base is expected to increase from $45 billion in 2026 to approximately $56 billion in 2029 and $64 billion in 2031.
Yielding 3 and 5 year compound average growth rates of 7.7% and 7.5%.
Respectively.
Last month, we were pleased to see MISO award ITC the Tranche 2.1 competitive bid project in Iowa, known as the Mark project.
This allows ITC to design, build, own and operate the project which includes approximately 300 miles of new 345 and 765 kV transmission lines in ITC's service territory.
The project's total investment is estimated at US$1 billion, with approximately $500 million included in our new 5 year capital plan with the balance expected post 2031.
Now I will take a few minutes to speak in more detail on the capital plans in our 3 largest utilities.
ITC's capital plan of $11.6 billion is the largest in the company's history and supports 5 year rate base growth of 8.6%.
Up 50 basis points compared to the prior plan.
ITC's regulated assets currently represent about 1 third of our consolidated rate base, with that portion expected to trend upwards over the plan as ITC continues to deliver our strongest rate base growth.
Significant opportunities above and beyond the base plan exist at ITC, including approximately US$2.9 billion to $3.4 billion post 2031 for Tranche 2.1 projects assigned through rights of first refusal as well as approximately $500 million for the Mark project that I mentioned earlier.
ITC may also realize future opportunities associated with the.
with projects as part of the ongoing MISO and SPP transmission planning processes.
Other potential areas of growth include customer connections associated with over 10 thousand MW of load growth for proposed data centers, industrial customers, and economic development projects in various stages of development across their footprint.
This is up from 8 thousand MW last quarter.
With significant investments underway, a robust pipeline of future growth opportunities, ITC is well positioned to deliver sustained long term growth through this transformative period of transmission expansion.
Turning to UNS Energy.
Their capital plan of $5.6 billion supports 5 year rate base growth of 7.4%.
Like the prior plan, investments are spread across the value chain.
Notably, over 2 thirds of the capital plan is concentrated in transmission and distribution infrastructure, with the balance consisting of generation and other investments.
As for opportunities above and beyond the plan, we continue to see strong interest from both new and existing customers across our service territory.
At TEP, we have 1 approved energy supply agreement associated with approximately 300 MW of data center load that is expected to begin ramping in 2027.
And will be supported by existing and planned resources including renewable generation and energy storage already in service or under development.
Beyond this initial agreement and the subsequent phases under negotiations with the customer, our Arizona service territories are experiencing strong demand associated with mining, industrial development, electrification, and broader commercial and residential growth.
These opportunities have the potential to drive additional investments in generation, transmission and distribution infrastructure over time.
Last week, both TEP and UNS filed their 2026 integrated resource plans with the Arizona Corporation Commission, outlining their plans to meet customers' projected energy needs over the next 15 years.
TEP's base case scenario prioritizes affordability and assumes average annual sales growth of 5.7% through 2031.
It also includes up to US$1.3 billion of opportunity above the capital plan through 2031 subject to RFP processes.
Additionally, to evaluate the significant growth potential I previously mentioned, TEP included a high growth scenario in its integrated resource plan that would require approximately 800 MW of new generation and require up to $1.5 billion of incremental investments.
These opportunities are not currently reflected in our base capital plan, but represent meaningful long term growth potential for the business.
It is important to note that this high growth scenario is very beneficial to TEP's customers with the lowest rates of all scenarios as seen on the graph to the right.
In terms of the next steps, the stakeholder process will begin next year, and we expect ACC acknowledgment in the third quarter of 27.
Turning now to British Columbia, where investments in natural gas and LNG infrastructure are driving strong growth at FortisBC.
FortisBC's $6 billion capital plan includes investments to maintain system reliability and integrity alongside major LNG and advanced metering infrastructure projects.
The capital plan supports rate base growth of 7.9%, up from 6% in the prior plan.
There are a number of projects underway at our Tilbury site.
With additional opportunities for growth.
Back in July, we received an order in council for a larger Phase 1B liquefaction project as well as a marine jetty to support LNG marine fueling in the Port of Vancouver.
Total investments for this project are expected to be approximately $1.7 billion In September, FortisBC received environmental approvals for its Phase 2 expansion, including investing up to $1.1 billion in the Tilbury LNG storage tank expansion project, This 3 Bcf storage tank and associated regas improves resilience supports affordability for our customers.
Phase 2 also provides an opportunity of up to 2.5 million tons per annum of additional liquefaction capacity to serve emerging domestic and export LNG markets.
We have the flexibility to develop this project in stages, and we estimate an investment opportunity in the range of $2-4 billion depending on market demand and the majority of this expenditure is expected beyond 2031.
We continue to work through permitting and our final investment decision.
Development at the Tilbury site has been many years in the making, and represents the exceptional work by our team in British Columbia to expand the use of their gas network to produce regulated LNG that lowers carbon emissions and improves customer affordability.
Bringing it all together, we are focused on executing our new 5 year plan, while working to advance our robust growth pipeline.
I will now turn the call back to Jocelyn.
Perry: As we prepared our new 5 year outlook, customer affordability remained front and center.
In addition to efficiently funding our capital plan, several of our key customer affordability initiatives include O&M savings targets, low growth projects like in Iowa and Arizona, least-cost capital projects like the Springerville repowering project, and the continued delivery of customer conservation programs.
And with increased sales of LNG through the expansion of our Tilbury facility, we expect to continue to provide rate benefits for our customers.
We continue to take a disciplined approach to funding the $3.4 billion increase in the new 5 year plan.
Together with the $400 million increase in our 2026 capital plan.
We advanced a portion of our funding requirements in 2026 through the issuance of US$1 billion of hybrids and approximately $260 million of ATM equity in the third quarter.
Over the next 5 years, as you can see on the funding pie chart, our capital plan is expected to be funded primarily through cash from operations and debt issued at our regulated utilities.
Our dividend reinvestment plan remains the foundation of our needs over the 5 year plan.
We do expect to issue approximately $250 million of ATM equity over the next 12 months subject to market conditions.
Overall, our funding plan is designed to support our strong investment grade credit ratings.
Our credit profile is underpinned by a diverse high quality portfolio of regulated utilities with 95% of our assets in transmission and distribution across regulatory jurisdictions, providing stable and predictable cash flows.
The plan supports average S&P FFO to debt metrics above 12% over the 5 year period with improving financial flexibility in the latter years.
As well as average Fitch FFO leverage of approximately 5.9x.
Taken together, our high quality regulated portfolio disciplined funding approach and improving credit metrics positions us to execute the capital plan while maintaining a strong credit profile.
Today, we announced the declaration by our Board of Directors of a fourth quarter dividend of $0.665 representing a 4% increase.
This brings us to 53 consecutive years of increases in dividends paid.
A track record that we are very proud of.
With our strong dividend history and regulated growth strategy, we are extending our 4-6% annual dividend growth guidance through 2031.
I will now turn the call back to David to wrap up.
David Gerard Hutchens: When we think about the Fortis investment proposition, it really comes down to sustainable growth supported by our high quality portfolio of regulated utilities.
We have strong rate base growth, a robust growth pipeline, and a transparent funding plan.
We are investing to strengthen the resiliency of our systems and ensure they can reliably and affordably meet customers' evolving energy needs.
We are doing that from a strong foundation.
100% regulated utilities, solid investment grade credit ratings, regulatory and geographic diversity, and a proven track record.
All the right pieces to provide long term value to our customers and shareholders.
That concludes my remarks.
I will now turn the call back over to Stephanie.
Stephanie A.
Amaimo: Thank you, David.
This concludes the presentation.
At this time, we would like to open the call to address questions from the investment community.
Operator: We will now begin the question and answer session.
If you are using a speakerphone, please pick up your handset before pressing any keys.
The first question today comes from Maurice Choy with RBC.
Please go ahead.
Maurice Choy: Thank you, and good morning, everyone.
Recognizing that there is a lot of good growth in ITC as well as Fortis BC, I do want to touch on the large load opportunity at UNS Energy.
In the past, you have highlighted a potential of incremental generation costing about $1.5-2 billion through 2030.
And as I look at the presentation today on Slide 14, I see that there is up to $1.5 billion of investment.
Assuming these numbers are apples to apples, is it fair to suggest that your new plan includes some but still not very much large load related CapEx.
And maybe as a quick follow-up, if that is true, in the spirit of today's U.
Elections, how do you see your outlook for this remaining growth CapEx being shaped? By the election....
