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 second quarter results1 and
2024 Sustainability Report.
Highlights
- Second quarter net earnings of
$331 million or $0.67 per common share, up from $294 million
or $0.61 per common share in 2023
- Adjusted net earnings per common
share2 of $0.67, up from $0.62 in the second quarter of 2023
- Capital expenditures2 of $2.3
billion in the first half of 2024; $4.8 billion annual capital plan
on track
- Tranche 2.1 of MISO’s long range
transmission plan continues to progress
- 2024 Sustainability Report released
highlighting the Corporation's progress on key sustainability
initiatives
"Our regulated utility businesses continued to
deliver on their financial and operational plans in the first half
of 2024," said David Hutchens, President and Chief Executive
Officer, Fortis. "We are executing our annual $4.8 billion capital
plan, and remain confident in our $25 billion five-year capital
plan. We also released our 2024 Sustainability Report today,
highlighting progress on our key sustainability initiatives. This
is an exciting time for our company as we pursue growth
opportunities and deliver a cleaner energy future."
Net Earnings
The Corporation reported net earnings
attributable to common equity shareholders ("Net Earnings") of
$331 million for the second quarter of 2024, or $0.67 per
common share, an increase of $37 million, or $0.06 per common share
compared to the second quarter of 2023. The increase was driven by
strong earnings in Arizona, reflecting new customer rates at Tucson
Electric Power effective September 1, 2023 and higher retail
electricity sales associated with warmer weather. Rate base growth
across our utilities and the timing of recognition of new cost of
capital parameters approved for FortisBC in 2023 also contributed
to earnings growth. The increase was partially offset by lower
earnings for Central Hudson and the Other Electric segment, largely
reflecting higher operating costs.
On a year-to-date basis, Net Earnings were $790
million, or $1.60 per common share, an increase of $59 million, or
$0.09 per common share compared to the same period in 2023. The
increase was due to higher earnings in Arizona, rate base growth,
and the new cost of capital parameters at FortisBC, as discussed
above. Growth was partially offset by higher operating costs at
Central Hudson, higher holding company costs, and the November
1, 2023 disposition of Aitken Creek. Although the disposition of
Aitken Creek was unfavourable to the change in earnings for the
first half of the year, the impact will be neutral for the annual
period.
The change in earnings per share for both the
second quarter and year-to-date periods also reflected an increase
in the weighted average number of common shares outstanding,
largely associated with the Corporation's dividend reinvestment
plan.
Adjusted Net
Earnings2
There were no adjustments to Net Earnings for
the three and six months ended June 30, 2024. For the three and six
months ended June 30, 2023, adjustments to Net Earnings of $8
million and $10 million, respectively, were recognized associated
with mark-to-market accounting of natural gas derivatives at Aitken
Creek
____________________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 ("U.S. GAAP") 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.
Capital Expenditures
Our $4.8 billion annual capital plan is on track
with $2.3 billion invested during the first half of 2024.
In June 2024, the Midcontinent Independent
System Operator, Inc. ("MISO") released a near-final map of the
long-range transmission plan ("LRTP") projects that it has now
identified as tranche 2.1, with transmission investments in the
MISO Midwest subregion estimated in the range of US$23 billion to
US$27 billion. MISO Board approval of the portfolio is expected in
late 2024. While certain projects are expected in ITC's footprint,
the potential capital investment at ITC for tranche 2.1 projects is
unknown at this time.
Following the provincial environmental
assessment certificate issued earlier this year, in June 2024, a
federal environmental assessment certificate was issued for the
Tilbury Marine Jetty project. The construction of the jetty
supports further expansion of FortisBC's Tilbury liquefied natural
gas ("LNG") facility, which is uniquely positioned to meet customer
demand for LNG. The site is scalable, can accommodate additional
storage and liquefaction equipment and is close to international
shipping lanes.
During the second quarter of 2024, construction
of the 1,800-kilometre Wataynikaneyap Power Transmission project
was completed. The project is majority-owned by 24 First Nations,
with Fortis having a 39% ownership interest. In addition to First
Nations ownership in the transmission line, the project will
continue to provide socio-economic benefits and reduce greenhouse
gas ("GHG") emissions associated with diesel-fired generation
previously used in these remote locations.
Regulatory Updates
In July 2024, the New York State Public Service
Commission approved a one-year rate plan for Central Hudson with
retroactive application to July 1, 2024, including an allowed rate
of return on common equity ("ROE") of 9.5%, an increase from the
previous allowed ROE of 9.0%.
In July 2024, a judge on the Iowa Supreme Court
granted a stay of the injunction issued by the Iowa District Court
with respect to the construction of the MISO LRTP tranche 1
projects in Iowa. With the stay of the injunction in place, ITC is
permitted to advance construction of all Iowa tranche 1 projects
originally awarded to the company in 2022. Certain complainants
have requested that the judge's order be reviewed by a full quorum
of the Iowa Supreme Court.
Regardless of any quorum review by the Iowa
Supreme Court, approximately 70% of the Iowa tranche 1 projects are
upgrades to ITC facilities along existing rights-of-way, which
under MISO's tariff grants ITC the option to construct the
upgrades. In addition, MISO is conducting a variance analysis for
the tranche 1 LRTP projects in Iowa, and we believe the process
should reaffirm the initial award of the projects.
Sustainability
The Corporation released its 2024 Sustainability
Report today, which includes key sustainability performance
indicators. The Corporation has reduced direct GHG emissions by 33%
through 2023 compared to 2019 levels, marking significant progress
towards its interim targets to reduce GHG emissions 50% by 2030 and
75% by 2035, as well as its 2050 net-zero direct GHG emissions
target. Also in 2023, GHG intensity factors related to energy
delivered to customers and electricity generated reached the lowest
levels in the last five years.
The 2024 Sustainability Report can be accessed
at
http://www.fortisinc.com/sustainability/sustainability-reporting.
Outlook
Fortis 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. The Corporation's $25 billion five-year capital plan
is expected to increase midyear rate base from $37.0 billion
in 2023 to $49.4 billion by 2028, translating into a five-year
CAGR of 6.3%.3
Beyond the five-year capital plan, additional
opportunities to expand and extend growth include: continued
electrification and load growth; climate adaptation and grid
resiliency investments; further expansion of the electric
transmission grid in the U.S. to facilitate the interconnection of
cleaner energy, including infrastructure investments associated
with the Inflation Reduction Act of 2022 and the MISO LRTP; and
renewable natural gas solutions and LNG infrastructure in British
Columbia.
Fortis expects its long-term growth in rate base
will drive earnings that support dividend growth guidance of 4-6%
annually through 2028, and is premised on the assumptions and
material factors listed under "Forward-Looking Information".
____________________3 Calculated using a constant United
States dollar-to-Canadian dollar exchange rate.
Non-U.S. GAAP
Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Periods ended June
30 |
Quarter |
|
Year-to-Date |
($ millions, except earnings per share) |
2024 |
|
2023 |
|
Variance |
|
|
2024 |
|
2023 |
|
Variance |
|
Adjusted Net Earnings |
|
|
|
|
|
|
|
|
|
|
|
Net Earnings |
331 |
|
294 |
|
37 |
|
|
790 |
|
731 |
|
59 |
|
Adjusting item: |
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on mark-to-market of derivatives at Aitken
Creek4 |
— |
|
8 |
|
(8 |
) |
|
— |
|
10 |
|
(10 |
) |
Adjusted Net Earnings |
331 |
|
302 |
|
29 |
|
|
790 |
|
741 |
|
49 |
|
Adjusted net earnings per share ($) |
0.67 |
|
0.62 |
|
0.05 |
|
|
1.60 |
|
1.53 |
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant
and equipment |
1,064 |
|
938 |
|
126 |
|
|
2,135 |
|
1,845 |
|
290 |
|
Additions to intangible
assets |
48 |
|
44 |
|
4 |
|
|
90 |
|
91 |
|
(1 |
) |
Adjusting item: |
|
|
|
|
|
|
|
|
|
|
|
Wataynikaneyap Transmission Power Project5 |
14 |
|
43 |
|
(29 |
) |
|
29 |
|
84 |
|
(55 |
) |
Capital Expenditures |
1,126 |
|
1,025 |
|
101 |
|
|
2,254 |
|
2,020 |
|
234 |
|
About Fortis
Fortis is a well-diversified leader in the North
American regulated electric and gas utility industry with 2023
revenue of $12 billion and total assets of $69 billion as at
June 30, 2024. The Corporation's 9,600 employees
serve utility customers in five Canadian provinces, ten U.S. states
and three Caribbean countries.
Forward-Looking Information
Fortis includes forward-looking information in
this news 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 impact of the
disposition of Aitken Creek on earnings for the annual period;
forecast capital expenditures for 2024 and 2024 through 2028; the
nature, timing, benefits and expected costs of certain capital
projects, including ITC's transmission projects associated with the
MISO LRTP and FortisBC's Tilbury LNG Storage Expansion project; the
expected timing, outcome and impact of legal and regulatory
proceedings and decisions; the 2030 and 2035 GHG emissions
reduction targets; the 2050 net-zero direct GHG emissions target;
additional opportunities beyond the capital plan, including
continued electrification and load growth, climate adaptation and
grid resiliency investments, 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, and
renewable natural gas solutions and LNG infrastructure in British
Columbia; forecast rate base and rate base growth through 2028; and
the expectation that long-term growth in rate base will drive
earnings that support dividend growth guidance of 4-6% annually
through 2028.
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:
reasonable outcomes for legal and 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 news 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.
____________________4 Represents the mark-to-market
accounting of natural gas derivatives at Aitken Creek, net of
income tax recovery of $3 million and $4 million, for the three and
six months ended June 30, 2023, respectively. The sale of Aitken
Creek closed on November 1, 2023.5 Represents Fortis' 39%
share of capital spending for the Wataynikaneyap Transmission Power
Project.
Teleconference and Webcast to Discuss
Second Quarter 2024 Results
A teleconference and webcast will be held on
July 31, 2024 at 8:30 a.m. (Eastern) during which David Hutchens,
President and Chief Executive Officer and Jocelyn Perry, Executive
Vice President and Chief Financial Officer will discuss the
Corporation's second quarter financial results.
Shareholders, analysts, members of the media and
other interested parties are invited to listen to the
teleconference via the live webcast on the Corporation's website,
https://www.fortisinc.com/investor-relations/events-and-presentations.
Those members of the financial community in
North America wishing to ask questions during the call are invited
to participate toll free by calling 1.800.717.1738 while those
outside of North America can participate by calling 1.289.514.5100.
Please dial in 10 minutes prior to the start of the call. No
passcode is required.
An archived audio webcast of the teleconference
will be available on the Corporation's website two hours after the
conclusion of the call until August 31, 2024. Please call
1.888.660.6264 or 1.289.819.1325 and enter passcode 93188#.
Additional Information
This news release should be read in conjunction
with the Corporation's June 30, 2024 Interim Management Discussion
and Analysis and Condensed Consolidated Financial Statements. This
and additional information can be accessed at www.fortisinc.com,
www.sedarplus.ca, or www.sec.gov.
A .pdf version of this press release is available
at: http://ml.globenewswire.com/Resource/Download/71cfac66-8fd5-4938-a2d5-0630f25993c4
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 |
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