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 and
announced a 2050 net-zero target.
Highlights
- First quarter net earnings of
$350 million, or $0.74 per common share
- Adjusted net earnings2 of $0.78 per
common share, up from $0.77 in the first quarter of 2021
- Capital expenditures2 of $1.0
billion in the first quarter; $4.0 billion annual capital plan on
track
- 2050 net-zero direct GHG emissions
target announced, building on Fortis' commitment to a clean energy
future
- First TCFD and Climate Assessment
Report issued during the quarter
- Notice of intent submitted with
respect to Tucson Electric Power's next general rate application to
be filed in June 2022
"Our first quarter results reflect the stability
of our transmission and distribution business," said David
Hutchens, President and Chief Executive Officer, Fortis. "With
capital investments on track for 2022 and recent progress made on
incremental growth opportunities at ITC, we remain confident in our
growth outlook."
"We are pleased to take the next step on our ESG
journey by committing to a 2050 net-zero direct GHG emissions
target, which builds on our mid-term target to reduce GHG emissions
75% by 2035," said Mr. Hutchens. "The net-zero target and TCFD and
climate assessment report issued in March align with our focus on
operational excellence, sustainable growth and a clean energy
future."
Net EarningsThe Corporation
reported net earnings attributable to common equity shareholders
("Net Earnings") of $350 million for the first quarter, or
$0.74 per common share, compared to $355 million, or $0.76 per
common share in the first quarter of 2021. Results for the quarter
reflected higher unrealized losses of $14 million on the
mark-to-market accounting of natural gas derivatives at Aitken
Creek. Excluding this impact, the Corporation delivered earnings
growth driven by rate base growth at ITC and the western Canadian
utilities, and higher sales in the Caribbean. Growth was partially
offset by lower hydroelectric production in Belize, and lower
earnings at Central Hudson mainly due to the costs of implementing
a new customer information system.
Earnings in Arizona were broadly consistent with
the first quarter of 2021. The impact of higher electricity sales
and lower planned generation maintenance costs was offset by the
timing of earnings related to the Oso Grande wind generating
facility, as expected. Losses on retirement investments also
unfavourably impacted earnings at UNS Energy in the quarter.
Net earnings per common share also reflected an
increase in the weighted average number of common shares
outstanding largely associated with the Corporation's dividend
reinvestment plan.
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
$369 million for the first quarter, or $0.78 per common share, were
$9 million, or $0.01 per common share higher than the same
period in 2021. The increase reflected growth as described for Net
Earnings.
_____________________
1 Financial information is presented in
Canadian dollars unless otherwise specified.2 Non-U.S. GAAP
Measures - Fortis uses financial measures that do not have a
standardized meaning under generally accepted accounting principles
in the United States of America and may not be comparable to
similar measures presented by other entities. Fortis presents these
non-U.S. GAAP measures because management and external stakeholders
use them in evaluating the Corporation's financial performance and
prospects. Refer to the Non-U.S. GAAP Reconciliation provided
herein.
Non-U.S. GAAP
Reconciliation |
|
|
|
|
|
Quarter ended March 31 |
|
($ millions, except earnings per share) |
2022 |
|
2021 |
|
Variance |
|
Adjusted Net Earnings |
|
|
|
|
|
Net Earnings |
350 |
|
355 |
|
(5 |
) |
Adjusting item: |
|
|
|
|
|
Unrealized loss on mark-to-market of derivatives3 |
19 |
|
5 |
|
14 |
|
Adjusted Net Earnings |
369 |
|
360 |
|
9 |
|
Adjusted net earnings per share ($) |
0.78 |
|
0.77 |
|
0.01 |
|
|
|
|
|
|
|
Capital
Expenditures: |
|
|
|
|
|
Additions to property, plant
and equipment |
866 |
|
764 |
|
102 |
|
Additions to intangible
assets |
49 |
|
40 |
|
9 |
|
Adjusting item: |
|
|
|
|
|
Wataynikaneyap Transmission Power Project4 |
49 |
|
76 |
|
(27 |
) |
Capital Expenditures |
964 |
|
880 |
|
84 |
|
SustainabilityIn March 2022,
the Corporation made significant progress on its commitment as a
Task Force for Climate-Related Financial Disclosures ("TCFD")
supporter, with the release of its first TCFD and Climate
Assessment Report.
Today Fortis further demonstrated its commitment
to build a clean energy future by announcing a 2050 net-zero direct
greenhouse gas ("GHG") emissions target. With a clear path to
achieve the Corporation’s mid-term target of reducing GHG emissions
75% by 2035 compared to 2019 levels without the use of carbon
offsets, the Corporation has established this additional target to
reinforce its commitment to decarbonize over the long-term, while
preserving customer reliability and affordability.
Capital ExpendituresFortis'
$4.0 billion annual capital plan remains on track with
approximately $1.0 billion invested during the first quarter.
In April 2022, Woodfibre LNG Limited ("Woodfibre
LNG") issued a Notice to Proceed to its prime contractor for the
proposed liquefied natural gas site in Squamish, British Columbia.
This announcement brings FortisBC’s Eagle Mountain Woodfibre Gas
Line project one step closer to construction, though the project
remains contingent on Woodfibre LNG making a final investment
decision.
During the quarter, progress continued on
incremental opportunities not included in the Corporation's $20.0
billion 2022-2026 capital plan. In March 2022, the Province of
Ontario issued an Order in Council and Ministerial Directive from
the Minister of Energy, instructing the Independent Electricity
System Operator ("IESO") to negotiate and, if certain conditions
are met, enter into a procurement contract on or before August 15,
2022, for the transmission capabilities of the Lake Erie Connector
project. The proposed 1,000 megawatt, bi-directional, high-voltage
direct current underwater transmission line will provide the first
direct interconnection between the wholesale electricity markets
operated by the IESO in Ontario and the PJM Interconnection in the
United States.
Also during the quarter, the Midwest Independent
System Operator ("MISO”) advanced its long-range transmission plan
("LRTP"), announcing the first tranche of projects across the MISO
Midwest subregion comprised of 18 transmission projects with total
associated costs estimated at US$10 billion. These projects require
MISO board approval which is currently anticipated in July 2022.
Six of these projects run through ITC’s MISO operating companies’
service territories, including Michigan and Iowa, where right of
first refusal provisions exist for incumbent transmission owners.
Other projects within this portfolio may be subject to competitive
bidding, depending on the state in which they are located. Based on
this preliminary information, ITC estimates transmission
investments of US$1 billion to US$1.5 billion through 2030
associated with these projects. Given the preliminary analysis
around the transmission investment, at this time Fortis cannot
state with certainty the impact of the estimated capital
expenditures in connection with the LRTP on the Corporation's
five-year capital plan. _______________________
3 Represents timing differences related to
the accounting of natural gas derivatives at Aitken Creek, net of
income tax recovery of $7 million for the three months ended March
31, 2022 (net of income tax recovery of $2 million for the three
months ended March 31, 2021) 4 Represents Fortis' 39% share of
capital spending for the Wataynikaneyap Transmission Power
ProjectCredit RatingsIn March 2022, Standard &
Poor's Financial Services confirmed the Corporation's 'A-' issuer
and 'BBB+' senior unsecured debt credit ratings and stable
outlook.
Regulatory UpdatesIn March
2022, the Alberta Utilities Commission issued a decision extending
the existing allowed rate of return on common equity ("ROE") of
8.5% using a 37% equity component of capital structure through
2023.
In March 2022, the Federal Energy Regulatory
Commission approved the settlement agreement for formula
transmission rates at Tucson Electric Power ("TEP"), including an
ROE of 9.79%.
On May 2, 2022, TEP submitted a notice of intent
with the Arizona Corporation Commission to file a general rate
application in June 2022. TEP will request that new rates become
effective no later than September 1, 2023. TEP's proposed rates
will be based on a 2021 test year and will include infrastructure
investments made since the last rate case, as well as changes in
fuel and non-fuel operating expenses. The filing will also include
proposals to eliminate certain adjustor mechanisms, as well as
modify an existing adjustor to provide more timely recovery of
clean energy investments.
OutlookThe 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 energy price volatility, global supply
chain constraints and rising inflation are issues of potential
concern that continue to evolve, including from the effects of the
COVID-19 pandemic, war in Eastern Europe, economic sanctions and
geopolitical tensions, the Corporation does not currently expect
there to be a material impact on operations or financial results in
2022.
Fortis is executing on the transition to a clean
energy future and is on track to achieve its corporate-wide target
to reduce GHG 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 additional
2050 net-zero direct GHG emissions target reinforces Fortis'
commitment to decarbonize over the long-term, while preserving
customer reliability and affordability.
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
LRTP; 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".
About FortisFortis 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 March 31, 2022.
The Corporation's 9,100 employees serve utility customers in
five Canadian provinces, nine U.S. states and three Caribbean
countries.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: forecast capital
expenditures for 2022 and 2022-2026; targeted average annual
dividend growth through 2025; the 2050 net-zero direct GHG
emissions target; the 2035 GHG emissions reduction target and
projected asset mix; the expected timing, outcomes and impacts of
regulatory proceedings; the nature, timing, benefits and expected
costs of certain capital projects, including FortisBC's Eagle
Mountain Woodfibre Gas Line project, and additional opportunities
beyond the capital plan, including the Lake Erie Connector Project
and the MISO LRTP; the expected sources of funding for the
2022-2026 capital plan; the expectation that volatility in energy
prices, global supply chain constraints and rising inflation will
not have a material impact on operations or financial results in
2022; forecast rate base and rate base growth rate; additional
growth and expansion opportunities beyond the capital plan; and the
expectation that long-term growth in rate base will support
earnings and dividend growth.
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 rising inflation; 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 First Quarter
2022 ResultsA teleconference and webcast will be held on
May 4, 2022 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 results.
Shareholders, analysts, members of the media and
other interested parties in North America are invited
to participate by calling 1.877.223.4471. International
participants may participate by calling 647.788.4922. 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 5, 2022.
Please call 1.800.585.8367 or 416.621.4642 and enter passcode
3996811.
Additional Information
This media release should be read in conjunction
with the Corporation's March 31, 2022 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.
A .pdf version of this press release is available
at: http://ml.globenewswire.com/Resource/Download/c20f4199-99fb-4da0-92a6-063f96d7c65e
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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