Fortis Inc. ("Fortis" or the "Corporation") (TSX/NYSE: FTS), a
well-diversified leader in the North American regulated electric
and gas utility industry, released its first quarter results1.
Highlights
- First quarter net earnings of
$437 million, or $0.90 per common share, up from $350 million,
or $0.74 per common share in 2022
- Adjusted net earnings per common
share2 of $0.91, up from $0.78 in the first quarter of 2022
- Capital expenditures2 of $1.0
billion in the first quarter; $4.3 billion annual capital plan on
track
- Significant regulatory applications
at Tucson Electric Power and FortisBC continue to progress
- Announced the sale of the
Corporation's ownership interest in the Aitken Creek Natural Gas
Storage Facility in British Columbia
"Our strong first quarter results reflect the
diversified nature of our business and the continued delivery of
our low-risk capital plan," said David Hutchens, President and
Chief Executive Officer, Fortis. "With capital expenditures of $1.0
billion in the quarter, we are on track to invest $4.3 billion in
our systems this year."
"Our funding plan remains intact, and the sale
of the Aitken Creek Natural Gas Storage Facility further
strengthens our balance sheet and supports financing of our
regulated utility investments," said Mr. Hutchens. "We remain
confident in our growth strategy as we continue to provide value to
shareholders while executing on the transition to a cleaner energy
future and delivering safe, reliable and affordable service to our
customers."
Net EarningsThe Corporation
reported net earnings attributable to common equity shareholders
("Net Earnings") of $437 million for the first quarter, or
$0.90 per common share, compared to $350 million, or $0.74 per
common share in the first quarter of 2022. The increase reflected
rate base growth, mainly at ITC and the western Canadian utilities,
as well as higher earnings at UNS Energy. Market conditions
resulted in wholesale electricity sales with favourable margin and
higher transmission revenue at UNS Energy in the first quarter of
2023 compared to later quarters in 2022. Higher retail electricity
sales, including the impact of favourable weather, and lower
depreciation expense associated with the retirement of the San Juan
generating station in June 2022, also contributed to results in
Arizona.
Results for the quarter also reflected higher
earnings at Aitken Creek, an increase in the market value of
investments that support retirement benefits at UNS Energy and ITC,
and a higher U.S.-to-Canadian dollar foreign exchange rate. Growth
in earnings was partially offset by higher holding company finance
costs.
An increase in the weighted average number of
common shares outstanding, largely associated with the
Corporation's dividend reinvestment plan, also impacted earnings
per share for the quarter.
Adjusted Net
Earnings2Adjusted net earnings
attributable to common equity shareholders ("Adjusted Net
Earnings") excludes the impact of mark-to-market accounting of
natural gas derivatives at Aitken Creek. Adjusted Net Earnings of
$439 million for the first quarter, or $0.91 per common share, were
$70 million, or $0.13 per common share higher than the same
period in 2022. The increase was driven by the same factors
discussed for Net Earnings.
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1 |
Financial information is presented in Canadian
dollars unless otherwise specified. |
2 |
Non-U.S. GAAP Financial Measures - Fortis uses
financial measures that do not have a standardized meaning under
generally accepted accounting principles in the United States of
America and may not be comparable to similar measures presented by
other entities. Fortis presents these non-U.S. GAAP measures
because management and external stakeholders use them in evaluating
the Corporation's financial performance and prospects. Refer to the
Non-U.S. GAAP Reconciliation provided herein. |
Non-U.S. GAAP
Reconciliation |
|
Quarter ended March 31 |
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($
millions, except as indicated) |
2023 |
|
2022 |
|
Variance |
Adjusted Net
Earnings: |
|
|
|
|
|
Net Earnings |
437 |
|
350 |
|
87 |
|
Adjusting item: |
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|
|
|
|
Unrealized loss on mark-to-market of derivatives3 |
2 |
|
19 |
|
(17 |
) |
Adjusted Net Earnings |
439 |
|
369 |
|
70 |
|
Adjusted net earnings per share ($) |
0.91 |
|
0.78 |
|
0.13 |
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|
|
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Capital
Expenditures: |
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|
|
|
|
Additions to property, plant
and equipment |
907 |
|
866 |
|
41 |
|
Additions to intangible
assets |
47 |
|
49 |
|
(2 |
) |
Adjusting item: |
|
|
|
|
|
Wataynikaneyap Transmission Power Project4 |
41 |
|
49 |
|
(8 |
) |
Capital Expenditures |
995 |
|
964 |
|
31 |
|
Capital Expenditures
Fortis' $4.3 billion annual capital plan remains
on track with $1.0 billion invested through March 2023.
The Corporation's major capital projects
continue to progress. In March 2023, FortisBC Energy filed amended
transportation rate schedules with the British Columbia Utilities
Commission ("BCUC") for the Eagle Mountain Woodfibre Gas Line
project. Approval from the BCUC is anticipated in May 2023, which
will remove certain of FortisBC Energy's conditions for commencing
construction and bring the project one step closer to
construction.
The first tranche of approved projects
associated with the Midcontinent Independent System Operator, Inc.
("MISO") long-range transmission plan ("LRTP") are advancing at ITC
with stakeholder outreach, routing studies and design engineering
underway. ITC estimates transmission investments of US$1.4 billion
to US$1.8 billion through 2030 associated with six of the 18 LRTP
projects.
Regulatory Updates
In March 2023, the Federal Energy Regulatory
Commission confirmed its decision to deny the complaint filed by
the Iowa Coalition for Affordable Transmission requesting that ITC
Midwest's common equity component of capital structure be
reduced.
In March 2023, the Iowa Supreme Court granted
standing to certain plaintiffs to challenge the right of first
refusal ("ROFR") available to incumbent electric transmission
owners in Iowa. The court also issued a temporary injunction
staying enforcement of the ROFR statute, and remanded the matter to
the District Court to decide the merits of the claim. Management
does not believe that this proceeding will impact projects at ITC
that have already been approved and are under development,
including Tranche 1 projects associated with the MISO LRTP. The
timing of this proceeding and any impact on future projects, is
unknown.
In April 2023, hearings concluded on the Tucson
Electric Power general rate application, which seeks new customer
rates effective September 1, 2023 using a December 31, 2021 test
year. While the timing and outcome of this proceeding is unknown, a
recommended order and opinion from the administrative law judge is
expected mid-year.
The generic cost of capital proceeding in
British Columbia, which includes a review of the common equity
component of capital structure and the rate of return on common
equity for FortisBC, continues to progress as expected with a
decision expected by mid-2023.
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3 |
Represents timing differences related to the
accounting of natural gas derivatives at Aitken Creek, net of
income tax recovery of $1 million for the three months ended March
31, 2023 ($7 million for the three months ended March 31,
2022) |
4 |
Represents Fortis' 39% share of capital spending
for the Wataynikaneyap Transmission Power Project |
Pending Sale of Unregulated
AssetOn May 1, 2023, the Corporation announced that
FortisBC Holdings Inc. had entered into a definitive share purchase
and sale agreement with a subsidiary of Enbridge Inc. to sell its
93.8% ownership interest in the Aitken Creek Natural Gas Storage
Facility for approximately $400 million, subject to customary
closing conditions and adjustments. The purchase is subject to
required approval, principally by the BCUC, and is expected to
close by the end of the year with a March 31, 2023 effective date.
Net proceeds from the transaction will further strengthen the
balance sheet and support financing of the Corporation's regulated
utility growth strategy.
OutlookFortis continues to
enhance shareholder value through the execution of its capital
plan, the balance and strength of its diversified portfolio of
regulated utility businesses, and growth opportunities within and
proximate to its service territories. While energy price
volatility, global supply chain constraints and persistent
inflation are issues of potential concern that continue to evolve,
the Corporation does not currently expect there to be a material
impact on its operations or financial results in 2023.
Fortis is executing on the transition to a
cleaner energy future and is on track to achieve its corporate-wide
targets to reduce greenhouse gas emissions ("GHG") by 50% by 2030
and 75% by 2035. Upon achieving these targets, 99% of the
Corporation's assets will support energy delivery and renewable,
carbon-free generation. The Corporation's additional 2050 net-zero
direct GHG emissions target reinforces Fortis' commitment to
further decarbonize over the long-term, while preserving customer
reliability and affordability.
The Corporation's $22.3 billion five-year
capital plan is expected to increase midyear rate base from
$34.1 billion in 2022 to $46.1 billion by 2027,
translating into a five-year compound annual growth rate of
6.2%5.
Beyond the five-year capital plan, additional
opportunities to expand and extend growth include: further
expansion of the electric transmission grid in the U.S. to
facilitate the interconnection of cleaner energy, including
infrastructure investments associated with the Inflation Reduction
Act of 2022 and the MISO LRTP; climate adaptation and grid
resiliency investments; renewable gas solutions and liquefied
natural gas infrastructure in British Columbia; and the
acceleration of cleaner energy infrastructure investments across
our jurisdictions.
Fortis expects its long-term growth in rate base
will drive earnings that support dividend growth guidance of 4-6%
annually through 2027, and is premised on the assumptions and
material factors listed under "Forward-Looking Information".
About FortisFortis is a
well-diversified leader in the North American regulated electric
and gas utility industry with 2022 revenue of $11 billion and total
assets of $65 billion as at March 31, 2023.
The Corporation's 9,200 employees serve utility customers in
five Canadian provinces, ten U.S. states and three Caribbean
countries.
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5 |
Calculated using a constant United States
dollar-to-Canadian dollar exchange rate |
Forward-Looking
InformationFortis includes forward-looking information in
this media release within the meaning of applicable Canadian
securities laws and forward-looking statements within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995
(collectively referred to as "forward-looking information").
Forward-looking information reflects expectations of Fortis
management regarding future growth, results of operations,
performance and business prospects and opportunities. Wherever
possible, words such as anticipates, believes, budgets, could,
estimates, expects, forecasts, intends, may, might, plans,
projects, schedule, should, target, will, would, and the negative
of these terms, and other similar terminology or expressions, have
been used to identify the forward-looking information, which
includes, without limitation: the expected timing and outcome of
the sale of Aitken Creek; forecast capital expenditures for
2023-2027; forecast rate base and rate base growth through 2027;
the nature, timing, benefits and expected costs of certain capital
projects, including FortisBC Energy's Eagle Mountain Woodfibre Gas
Line project and ITC's transmission projects associated with the
MISO LRTP, and additional opportunities beyond the capital plan,
including investments related to the Inflation Reduction Act of
2022, the MISO LRTP, climate adaptation and grid resiliency,
renewable gas solutions and liquefied natural gas infrastructure in
British Columbia, and the acceleration of cleaner energy
infrastructure; the expected timing, outcome and impact of
regulatory proceedings and decisions; the 2030 GHG emissions
reduction target; the 2035 GHG emissions reduction target and
projected asset mix; the 2050 net-zero direct GHG emissions target;
the expectation that volatility in energy prices, global supply
chain constraints and persistent inflation will not have a material
impact on operations or financial results in 2023; and the
expectation that long-term growth in rate base will drive earnings
that support dividend growth guidance of 4-6% annually through
2027.
Forward-looking information involves significant
risks, uncertainties and assumptions. Certain material factors or
assumptions have been applied in drawing the conclusions contained
in the forward-looking information, including, without limitation:
no material impact from volatility in energy prices, global supply
chain constraints and persistent inflation; reasonable outcomes for
regulatory proceedings and the expectation of regulatory stability;
the successful execution of the capital plan; no material capital
project and financing cost overrun; sufficient human resources to
deliver service and execute the capital plan; the realization of
additional opportunities beyond the capital plan; no significant
variability in interest rates; no material changes in the assumed
U.S. dollar to Canadian dollar exchange rate; and the Board
exercising its discretion to declare dividends, taking into account
the business performance and financial condition of the
Corporation. Fortis cautions readers that a number of factors could
cause actual results, performance or achievements to differ
materially from the results discussed or implied in the
forward-looking information. For additional information with
respect to certain risk factors, reference should be made to the
continuous disclosure materials filed from time to time by the
Corporation with Canadian securities regulatory authorities and the
Securities and Exchange Commission. All forward-looking information
herein is given as of the date of this media release. Fortis
disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise.
Teleconference to Discuss First Quarter
2023 ResultsA teleconference and webcast will be held on
May 3, 2023 at 8:30 a.m. (Eastern). David Hutchens, President
and Chief Executive Officer and Jocelyn Perry, Executive Vice
President and Chief Financial Officer, will discuss the
Corporation's first quarter financial results.
Shareholders, analysts, members of the media and
other interested parties in North America are invited
to participate by calling 1.888.886.7786. International
participants may participate by calling 1.416.764.8658. Please dial
in 10 minutes prior to the start of the call. No passcode is
required.
A live and archived audio webcast of the
teleconference will be available on the Corporation's website,
www.fortisinc.com. A replay of the teleconference will be available
two hours after the conclusion of the call until June 3, 2023.
Please call 1.877.674.7070 or 1.416.764.8692 and enter passcode
430311#.
Additional Information
This media release should be read in conjunction
with the Corporation's March 31, 2023 Interim Management Discussion
and Analysis and Condensed Consolidated Financial Statements. This
and additional information can be accessed at www.fortisinc.com,
www.sedar.com, or www.sec.gov.
For more information, please contact:
Investor Enquiries |
Media Enquiries |
Ms. Stephanie Amaimo |
Ms. Karen McCarthy |
Vice President, Investor
Relations |
Vice President, Communications
& Government Relations |
Fortis Inc. |
Fortis Inc. |
248.946.3572 |
709.737.5323 |
investorrelations@fortisinc.com |
media@fortisinc.com |
A .pdf version of this press release is available
at: http://ml.globenewswire.com/Resource/Download/02bd9162-601e-4e44-8298-caf27989eec8
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