Fortis Inc. Earnings Call Highlights Growth and Challenges

Fortis ((TSE:FTS)) has held its Q3 earnings call. Read on for the main highlights of the call.

Fortis Inc. recently held its earnings call, presenting a generally positive outlook for the company. The call highlighted significant capital investments and growth in adjusted earnings, bolstered by a robust capital plan. The financial position was further strengthened by dividend increases and successful asset sales. However, the company also acknowledged challenges such as regulatory lag at UNS and higher finance costs.

Strong Capital Investment

Fortis has demonstrated a strong commitment to capital investment, having invested $4.2 billion through September, with expectations to reach $5.6 billion by the end of the year. This substantial investment underscores the company’s dedication to enhancing its infrastructure and expanding its capabilities.

Adjusted Earnings Growth

The company’s adjusted earnings per share (EPS) for the third quarter was $0.87, marking an increase of $0.02 from the previous year. Year-to-date adjusted EPS reached $2.63, up $0.18, reflecting Fortis’s steady financial growth.

Increase in Capital Plan

Fortis announced an increase in its 5-year capital plan by $2.8 billion, bringing the total to $28.8 billion. This plan is expected to support a 7% rate base growth, indicating a strong future trajectory for the company.

Dividend Increase

The Board declared a fourth-quarter dividend increase of approximately 4%, marking the 52nd consecutive year of dividend increases. This consistent growth in dividends highlights Fortis’s commitment to returning value to its shareholders.

ITC Growth

ITC’s capital plan, the largest in its history at $9.8 billion, is set to support an 8% rate base growth. This significant investment is poised to drive substantial growth in the company’s transmission capabilities.

Successful Asset Dispositions

Fortis successfully completed the sale of FortisTCI and its investments in Belize, which has strengthened its balance sheet and provided additional financial flexibility.

Funding Flexibility

The company raised over $2 billion in debt, including a $750 million hybrid issuance at 5.1%. This move provides Fortis with the flexibility needed to fund its ambitious capital plans.

Regulatory Lag at UNS

Earnings at UNS were tempered by regulatory lag, with over $700 million of rate base not yet reflected in rates. This challenge highlights the complexities of navigating regulatory environments.

Higher Finance Costs

Higher finance costs at the holding company level impacted EPS, particularly affecting the Corporate and Other segment. This issue underscores the importance of managing financial expenses effectively.

Dilutive Impact of Asset Sales

The sale of FortisTCI is expected to have a $0.02 impact on adjusted EPS for the full year, illustrating the financial implications of strategic asset dispositions.

Forward-Looking Guidance

Looking ahead, Fortis unveiled a new 5-year capital plan amounting to $28.8 billion, an increase of $2.8 billion from the previous plan. This plan is projected to support a 7% rate base growth and an annual dividend growth guidance of 4% to 6% through 2030. The company expects to invest approximately $5.6 billion for the full year 2025, with significant growth driven by higher transmission investments.

In summary, Fortis Inc.’s earnings call painted a positive picture of the company’s financial health and future prospects. With strong capital investments, consistent dividend growth, and strategic asset sales, Fortis is well-positioned for continued success. However, challenges such as regulatory lag and higher finance costs remain areas to watch as the company moves forward.