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 2021 fourth quarter and
annual financial results1.
Highlights
- Reported annual net earnings of
$1,231 million, or $2.61 per common share in 2021
- Adjusted annual net earnings2 of
$1,219 million, or $2.59 per common share
- Deployed capital expenditures2 of $3.6 billion in 2021 with
$600 million invested in cleaner energy infrastructure
- Achieved 20% reduction in Scope 1
emissions through 2021, supporting 75% emissions reduction target
by 2035
"In 2021, Fortis delivered steady growth and
made significant progress on our long-term goals," said David
Hutchens, President and CEO, Fortis Inc. "We executed a $3.6
billion capital program, provided strong returns for our
shareholders, further reduced our carbon emissions, outperformed
industry averages for safety and reliability performance, and
achieved gender parity on our Board of Directors."
"We also advanced our business strategy and
adapted to the challenges and uncertainties caused by the COVID-19
pandemic," said Mr. Hutchens. "The health and safety of our people
and communities remains our top priority. Our people are the
backbone of our success, and we are immensely grateful for their
dedication and perseverance."
Net
Earnings
The Corporation reported net earnings
attributable to common equity shareholders ("Net Earnings") for
2021 of $1,231 million, or $2.61 per common share, compared to
$1,209 million, or $2.60 per common share for 2020. Earnings growth
was tempered by the unfavourable impact of foreign exchange of $48
million, and significant one-time items recognized in 2020 of $14
million related to ITC's base return on common equity ("ROE") and
U.S. tax reform. These impacts were partially offset by unrealized
mark-to-market gains of $12 million in 2021 on natural gas
derivatives at Aitken Creek.
The Corporation delivered earnings growth of $72
million, or $0.15 per common share, excluding the above-noted
items. Rate base growth, new customer rates effective January 1,
2021 at Tucson Electric Power ("TEP"), continued economic recovery
in the Caribbean, and higher sales at FortisAlberta favourably
impacted Net Earnings. This growth was partially offset by lower
sales and higher operating costs at TEP, lower hydroelectric
production in Belize, and lower earnings at Aitken Creek due to
realized losses on natural gas contracts. In addition, net earnings
per common share reflected an increase in the weighted average
number of common shares outstanding largely associated with the
Corporation's dividend reinvestment plan.
For the fourth quarter of 2021, Net Earnings
were $328 million, or $0.69 per common share, compared to $331
million or $0.71 per common share for the same period in 2020.
Results for the quarter reflected a reduction in sales due to
milder weather and lower investment gains in Arizona, the timing of
earnings at FortisAlberta, and higher non-recoverable costs at
Central Hudson and ITC. Lower hydroelectric production in Belize
and the impact of foreign exchange also unfavourably impacted Net
Earnings for the quarter. These factors were partially offset by
growth in rate base, the finalization of Central Hudson's rate
application, with retroactive application to July 1, 2021, and the
favourable impact of mark-to-market accounting at Aitken Creek. The
increase in the weighted average number of common shares also
unfavourably impacted net earnings per common share in comparison
to the fourth quarter of 2020.
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1 |
Financial information is presented in Canadian dollars unless
otherwise specified. |
2 |
Non-U.S. GAAP 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. |
Adjusted Net
Earnings2
Adjusted net earnings attributable to common
equity shareholders ("Adjusted Net Earnings") excludes one-time
items and the impact of mark-to-market accounting of natural gas
derivatives at Aitken Creek. Adjusted Net Earnings of
$1,219 million for 2021, or $2.59 per common share, increased
by $0.02 per common share compared to 2020. The increase reflected
growth, as described for Net Earnings, partially offset by the
impact of foreign exchange and higher weighted average shares
outstanding.
Adjusted Net Earnings for the fourth quarter of
2021 were $300 million, or $0.63 per common share, as compared to
$0.69 per common share for the fourth quarter of 2020. The decrease
largely reflects the factors discussed for Net Earnings, including
the impact of foreign exchange and higher weighted average shares
outstanding.
Capital
Expenditures2
Capital expenditures in 2021 were $3.6 billion,
broadly consistent with the 2021 capital plan, and included
investments in resiliency, modernization and sustainable energy
projects, with $600 million spent on cleaner energy
investments.
The Corporation's five-year capital plan for
2022 through 2026 is $20.0 billion. Driven by the Corporation's
purpose to deliver a cleaner energy future, Fortis expects to
invest $3.8 billion in cleaner energy infrastructure over the next
five-years while maintaining its focus on transmission and
distribution.
While the Corporation does not expect the
COVID-19 pandemic to materially impact its overall five-year
capital plan, the timing of forecast capital expenditures will
continue to be evaluated. Depending on the severity of the
pandemic, including any impacts of supply chain disruptions,
certain planned expenditures may shift within the 2022-2026 capital
plan. Funding of the capital plan is expected to be primarily
through cash from operations, debt issued at the regulated
utilities and common equity from the Corporation's dividend
reinvestment plan.
Non-U.S. GAAP Reconciliation |
Periods ended December
31 |
Quarter |
|
Annual |
($ millions, except earnings per share) |
2021 |
|
2020 |
|
Variance |
|
|
2021 |
|
2020 |
|
Variance |
|
Adjusted Net Earnings |
|
|
|
|
|
|
|
Net Earnings |
328 |
|
331 |
|
(3 |
) |
|
1,231 |
|
1,209 |
|
22 |
|
Adjusting items: |
|
|
|
|
|
|
|
Unrealized gain on mark-to-market of derivatives3 |
(28 |
) |
(11 |
) |
(17 |
) |
|
(12 |
) |
— |
|
(12 |
) |
May 2020 FERC decision4 |
— |
|
— |
|
— |
|
|
— |
|
(27 |
) |
27 |
|
U.S. tax reform5 |
— |
|
— |
|
— |
|
|
— |
|
13 |
|
(13 |
) |
Adjusted Net Earnings |
300 |
|
320 |
|
(20 |
) |
|
1,219 |
|
1,195 |
|
24 |
|
Adjusted Basic EPS ($) |
0.63 |
|
0.69 |
|
(0.06 |
) |
|
2.59 |
|
2.57 |
|
0.02 |
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
|
|
|
|
|
|
|
Additions to property, plant
and equipment |
897 |
|
1,204 |
|
(307 |
) |
|
3,189 |
|
3,857 |
|
(668 |
) |
Additions to intangible
assets |
77 |
|
37 |
|
40 |
|
|
197 |
|
182 |
|
15 |
|
Adjusting item: |
|
|
|
|
|
|
|
Wataynikaneyap Transmission Power Project6 |
35 |
|
44 |
|
(9 |
) |
|
178 |
|
138 |
|
40 |
|
Capital Expenditures |
1,009 |
|
1,285 |
|
(276 |
) |
|
3,564 |
|
4,177 |
|
(613 |
) |
|
|
|
3 |
Represents timing differences related to the accounting of natural
gas derivatives at Aitken Creek, net of income tax expense of $11
million and $5 million for the three and twelve months ended
December 31, 2021, respectively ($4 million and $nil for the
three months and twelve months ended December 31, 2020,
respectively) |
4 |
Represents prior period impacts of the May 2020 Federal Energy
Regulatory Commission ("FERC") base ROE decision, net of income tax
expense of $11 million |
5 |
Represents income tax expense resulting from the finalization of
U.S. tax reform and associated anti-hybrid regulations |
6 |
Represents Fortis' 39% share of capital spending for the
Wataynikaneyap Transmission Power Project |
Regulatory Proceedings
In November 2021, the New York Public Service
Commission approved Central Hudson’s joint proposal as filed in
relation to its general rate application providing a three-year
rate plan with retroactive application to July 1, 2021, an ROE of
9.0%, and a common equity component of capital structure of 50%
declining by 1% annually to 48% in the third-rate year.
In 2019, FERC issued an order accepting formula
transmission rates proposed by TEP, subject to refund following
hearing and settlement procedures. A settlement in principle was
reached in August 2021, and a settlement agreement including an ROE
of 9.79% was filed with FERC in December 2021. Until conclusion of
the proceeding, customer rates continue to be charged under the
2019 FERC order and remain subject to refund pending the final
order. The timing and outcome of this proceeding remains
unknown.
Focus on Sustainability
Fortis has targeted a reduction in carbon
emissions of 75% by 2035 from a 2019 base year. The Corporation
expects to achieve the majority of this target through delivering
on TEP's plan to exit coal generation and replace it with wind,
solar and energy storage. Clean energy initiatives across the
Corporation's other utilities will also contribute to achieving
this goal. This corporate-wide target builds on our existing low
emissions profile, aligns with the goals of the Paris Agreement and
exceeds the pace of reduction outlined in the two-degree Celsius
pathway.
In 2021, Fortis' Scope 1 emissions were 20%
lower relative to 2019 levels, equivalent to taking approximately
540,000 vehicles off the road in one year and marking significant
progress to our 75% target. Closure of the Navajo Coal Generation
Facility at TEP in late 2019 as well as recently commissioned
renewable projects, such as the 250-megawatt ("MW") Oso Grande Wind
Project, the 99-MW Borderlands Wind Project and the 100-MW Wilmot
Solar Project, have supported our carbon emissions reduction target
to date.
Outlook
The Corporation's long-term outlook remains
unchanged. Fortis continues to enhance shareholder value through
the execution of its capital plan, the balance and strength of its
diversified portfolio of utility businesses, and growth
opportunities within and proximate to its service territories.
While uncertainty exists due to the COVID-19 pandemic, the
Corporation does not currently expect it to have a material
financial impact in 2022.
Fortis is executing on the transition to a
cleaner energy future and is on plan to achieve its corporate-wide
target to reduce carbon emissions by 75% by 2035. Upon achieving
this target, 99% of the Corporation's assets will be focused on
energy delivery and renewable, carbon-free generation.
The Corporation's $20 billion five-year capital
plan is expected to increase midyear rate base from
$31.1 billion in 2021 to $41.6 billion by 2026,
translating into a five-year compound annual growth rate of
approximately 6%. Above and beyond the five-year capital plan,
Fortis continues to pursue additional energy infrastructure
opportunities.
Additional opportunities to expand and extend
growth include: further expansion of the electric transmission grid
in the United States to facilitate the interconnection of cleaner
energy including infrastructure investments associated with MISO's
long-range transmission plan; natural gas resiliency investments in
pipelines and liquefied natural gas infrastructure in British
Columbia; the fully permitted, cross-border, Lake Erie Connector
electric transmission project in Ontario; and the acceleration of
cleaner energy infrastructure investments across our
jurisdictions.
Fortis expects long-term growth in rate base
will support earnings and dividend growth. Fortis is targeting
average annual dividend growth of approximately 6% through 2025.
This dividend growth guidance is premised on the assumptions
listed under "Forward-Looking Information" below.
About Fortis
Fortis is a well-diversified leader in the North
American regulated electric and gas utility industry with 2021
revenue of $9.4 billion and total assets of $58 billion as at
December 31, 2021. The Corporation's 9,100 employees serve
utility customers in five Canadian provinces, nine U.S. states and
three Caribbean countries.Forward-Looking
Information
Fortis 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 2035 carbon emissions reduction target, how
the target is expected to be achieved and the projected asset mix
upon achieving the target; forecast capital expenditures for
2022-2026, including investments in cleaner energy infrastructure,
and expected funding sources; the expectation that the COVID-19
pandemic will not impact the five-year capital plan or have a
material financial impact on the Corporation in 2022; forecast rate
base and rate base growth through 2026; additional growth
opportunities beyond the capital plan; the expectation that
long-term growth in rate base will support earnings and dividend
growth; and targeted average annual dividend growth through
2025.
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 the COVID-19 pandemic; reasonable outcomes
for regulatory proceedings and the expectation of regulatory
stability; the successful execution of the five-year 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; the impact of
fluctuations in foreign exchange; no significant variability in
interest rates; 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 2021 Annual
Results
A teleconference and webcast will be held on
February 11 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 2021 annual results.
Shareholders, analysts, members of the media and
other interested parties in North America are invited
to participate by calling 1.833.968.2272. International
participants may participate by calling 236.714.2970. 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 conference will be available two
hours after the conclusion of the call until
March 11, 2022. Please call 1.800.585.8367 or
416.621.4642 and enter passcode 8563966.
Additional Information
This media release should be read in conjunction
with the Corporation's Management Discussion and Analysis and
Consolidated Financial Statements. This and additional information
can be accessed at www.fortisinc.com, www.sedar.com, or
www.sec.gov.
A .pdf version of this press release is
available
at: http://ml.globenewswire.com/Resource/Download/28445dc9-5556-489f-aaa9-679c2a43fca8
For more information, please contact:
Investor Enquiries: |
Media Enquiries: |
Ms. Stephanie Amaimo |
Ms. Karen McCarthy |
Vice President, Investor
Relations |
Vice President, Communications
& Corporate Affairs |
Fortis Inc. |
Fortis Inc. |
248.946.3572 |
709.737.5323 |
investorrelations@fortisinc.com |
media@fortisinc.com |
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