Q2 2025 Fortis Inc Earnings Call
Thank you for standing by.
My name is Chuck and I'll be your conference operator.
Welcome to the Fortis Inc, second quarter 2025 earnings conference call and webcast.
As a reminder, all participants are in a listen-only mode. And the conference call is being recorded.
After the presentation, there will be an opportunity to ask questions.
Call you may signal an operator by pressing star then zero.
I would now like to turn the conference over to Miss Stephanie Amaimo, Vice President of Investor Relations. Please go ahead, Miss Amaimo.
Thanks, Chuck, and good morning, everyone. Welcome to Fortis' second quarter 2025 results conference call. I'm joined by David Hutchins, President and CEO; Jocelyn Perry, Executive VP and CFO; other members of the senior management team; as well as CEOs from certain subsidiaries.
Before we begin today's call, I want to remind you that the discussion will include forward-looking information which is subject to the cautionary statement. Contained in the supporting slideshow actual results can differ materially from the forecast, projections included in the forward-looking information. Presented, today non-gaap Financial measures referenced in our prepared, remarks are reconciled to the related US. Gaap Financial measures in our second quarter 2025 mdna.
Also, unless otherwise specified, all financial information reference is in Canadian dollars with that. I will turn the call over to David.
Thank you, and good morning, everyone. Today, we are pleased to report another great quarter, with capital expenditures of almost $3 billion during the first half of the year. We are executing on our core objective of delivering safe and reliable energy to our customers.
Financially we delivered second quarter earnings per share of 76 cents a 9 Cent increase over the same period last year.
During the quarter, we also made progress on the regulatory front.
Notably Tucson Electric Power filed as general rate application and Central Hudson, reached a multi-year rate, settlement agreement on its General rate application. Jocelyn will speak to these regulatory developments in more detail shortly.
In Arizona, teepees retail load growth opportunity, Advanced with an important Milestone reach for a planned data center development. And today, we released our 2025 sustainability update report highlighting our consistent progress to deliver cleaner energy to our customers through 2024. We have achieved a 34% reduction in scope 1. Greenhouse gas emissions when compared to 2019 levels
In July the first phase of the Road Runner. Reserve battery storage project was placed in service at te the 200 megawatt. Energy storage system will will facilitate the integration of renewable energy onto the electric grid. With the capability to store, 800 megawatt, hours of energy. This project was part of the 2.9 billion dollars that we invested in the first half of the year.
Given this progress both our annual and 5 year Capital plans are on track.
We are well positioned to deliver on our growth strategy with rate-based, expected to increase by approximately 14 billion dollars to 53 billion in 2029.
This supports average annual rate-based growth of 6.5%.
In Arizona, we announced that we plan to convert approximately 800 megawatts of coal-fired generation at the Springerville Generating Station to natural gas by 2030. This will allow us to be coal-free by our 2032 target.
The convergence supports customer affordability, local communities and reliability as well as our transition to cleaner energy.
This along with many other factors will impact our resource planning. At our Arizona, utilities
As a result, we will reassess our 2030 and 2035 interim greenhouse gas targets and share the results once complete.
We will provide the project details with the release of our 2026 to 2030 Capital plan later this year.
New retail load growth opportunities in Arizona, continue to advance TP, just reaching agreement with the data center. Customer to serve the demand of approximately 300 megawatts, that starts to ramp up in 2027 and we'll use existing and planned capacity.
This agreement was structured to benefit existing customers, maintain reliability and ensure the power supplied consistently with a consistent with the 2023 integrated resource plan, including solar and storage projects currently in development.
this agreement is subject to ACC approval as well as other contractual contingencies
Further negotiations are ongoing for additional capacity to support a full build out at that initial site of 600 megawatts in total.
The projects developer also shared that additional capacity may be required at a second site in the range of 500 to 700 megawatts.
If negoti negotiations are finalized for these subsequent phases new generation and transmission Investments would be required.
Beyond these opportunities in Arizona, our utilities continue to pursue various opportunities to support, load growth, improve grid, resilience and facilitate the interconnection of cleaner energy.
Underweight ITC to prepared to bid on projects within the MSO LRT, tranche, 2.1 portfolio subject to a competitive bidding process.
these projects, if awarded to ITC, would be incremental to itc's estimate of 3.7 to 4.2 billion US dollars of capital expenditures for the tranche 2.1 projects,
With a long track record of increasing dividends in our sustainable growth. Runway, we remain committed to our annual dividend growth, guidance of 4 to 6% through 2029.
Now, I will turn the call over to Jocelyn for an update. On our second quarter Financial results.
Thank you, David, and good morning.
At earnings of.
84 million or 76 cents per common share 9 cents higher than the second quarter of 2024 3 years. At 8 June EPS was a $1.76 reflecting a 16% increase over the same period last year.
EPS growth was mainly driven by rate based Investments across our utilities and higher earnings at Central Hudson and Fortis BC, which I'll discuss on the next slide.
On slide 11, you'll see the highlighted EPS drivers for the quarter by segment.
within our US, Electric and Gas, Utilities Central Hudson contributed a 4 Cent increase in eps
This increase largely reflects weight-based growth, as well as the rebasing of cost and a higher allowed ROE effective July 1, 2024. The impact of a contribution to a customer benefit fund in the second quarter of 2024 and the timing of operating costs also supported the increase quarter over quarter.
At UNS energy. The EPS contribution was unchanged from the second quarter of last year, an increase in transmission Revenue was offset by regulatory lag.
For our Western Canadian utilities EPS increased 3 cents, largely driven by rate based growth including earnings associated with the Eagle Mountain pipeline project,
At Fortis Alberta timing of operating costs, the expiration of a PBR, efficiency mechanism, and a lower allowed Roe of 8.97%, effective, July January, 1st, 2025, tempered growth, quarter over quarter.
At our other electric segment, EPS increased $0.02 due to rate-based growth, higher electricity sales, as well as the timing of quarterly earnings at Newfoundland Power related to regulatory approvals.
And while not shown on the slide Financial results at ITC were largely consistent with the second quarter of 2024 as rate base growth was offset by higher stock, based compensation, and higher folding company. Finance costs
Foreign exchange gains associated with the revaluation of US dollar denominated liabilities contributed a 2-cent EPS increase for the quarter.
For the corporate and other segments. The decrease reflects the timing of income tax recovery and higher Finance costs, partially offset by Mark tomarket, gains on Foreign Exchange contracts.
EPS by 1, cent driven by shares issued under our dividend. Reinvestment plan.
While most of the factors discussed for the quarter are the same for the year to date, period, lower margin and wholesale sales, due to market conditions tempered earnings at ins on the year to date basis.
All in all a very strong first half of 2025.
Through June, we raised over $1 billion of debt to repay borrowings and fund our capital programs. As we discussed last quarter, our 5-year capital funding plan remains intact with a healthy participation from our dividend reinvestment plan. Our $500 million ATM program has not been utilized to date and remains available for funding flexibility as required.
During the quarter Fitch assigned for us, the first time, Triple B Plus credit rating, this new rating underscores for us a strong overall credit profile and will support cost effective. Capital Market funding options.
With SNP, we remain focused on highlighting our key initiatives around addressing physical and climate risk. In July, we implemented a Public Safety Power Shutoff (PSPS) plan at FortisBC for high-risk areas within its service territory.
This Builds on the PSPs plans. Already implemented earlier this year in Alberta and Arizona as well as the Wildfire legislation passed in Arizona.
Turning now to recent regulatory activity in June te filed its General rate application, with the ACC seeking new, retail rates effective, September 1st, 2026,
150 million us since the last rate case.
The increase is largely driven by investments in Grid up upgrades and new energy resources to maintain reliability, improve resilience and serve expanding energy needs.
the application proposes to phase out or eliminate certain adjuster mechanisms and request an annual formula rate adjustment consistent with the acc's formula rate policy statement issued in 2024
If approved by the ACC, the formula rate plan is expected to improve rate stability for our customers, reduce regulatory and administrative burden, as well as simplify the number of adjuster mechanisms. The formula is also expected to allow for timely recovery of prudent investments and costs within plus or minus 20 basis points of the allowed return.
A walnut shown on the slide ins gas's rate case continues to progress in July, the ACC staff filed, testimony, recommending and allowed Roe of 9.75% and use of an annual formula rate adjustment with an Roe deadband within plus or minus 50 basis points.
Lastly, in June, Central Hudson filed a constructive joint proposal with the New York Public Service Commission in relation to its general rate application.
The Joint proposal provides for a 3 year rate plan with retroactive application to July 1st 2025 and allowed Roe of 9.5% and a common equity ratio of 48%. An order is expected in the second half of 2025.
And with that, I'll now turn the call back to David.
Thank you, Jocelyn. In conclusion, strong results for the first half of the year progressed on the regulatory front and advancements of our growth opportunities. Beyond the plan positions us nicely for the remainder of 2025 and beyond.
As we finalize our next 5-year Capital plan to to to be released later. This year, we remain focused on continuing to deliver reliable and affordable service to our customers and compelling long-term returns to our shareholders.
That concludes my remarks. I will now turn the call back over to Stephanie.
Thank you, David, this concludes the presentation at this time, we'd like to open the call to address questions from the investment community.
Thank you. We will now begin the question and answer session.
To join the question queue. You may press star, then 1 on your telephone keypad, you will hear a tone acknowledging your request.
If you're using a speaker-phone, please pick up your handset before pressing any keys.
And withdraw your question, please press star. Then 2 and our first question will come from Rob hope with Scotia Bank. Please go ahead.
Uh, good morning, everyone. Regarding Arizona.
Excellent, uh, regarding the Arizona data center opportunity. When we look at the incremental 300 megawatts of the first sight in the 500 to 700 megawatts at the other site. You know how quickly could you uh develop generation to support these assets? And you know, is this a key gating Factor at this point?
Yeah, it's a that's a great question, Rob. Um, I've got Susan sitting here next to me to provide a little color. But uh, as you know, that first 300 megawatts is uh, is using existing and planned capacity. So that's always great to be able to serve them as quick as we can. And hopefully, uh, you know, they're they're on the the same timeline as, as we uh, have disclosed on the 2027 time period. So we have that first 300 uh, sort of under our belt to get them situated there. And then uh, Susan if you want to provide a little color on what we're thinking, timeline wise for uh, adding the generation and transmission interconnections. We'd need for the next 300 at that initial site. Sure, good morning, Rob.
Thanks for the question. Yeah, sure. The, as Dave said, the first 300 megawatts are capacity that we're already building and then the second 300 will be. Um, we'll go through our all Source RFP process. We also announced, uh, that we're looking at a green tariff with, um, with b and so, um, we'll, we'll it'll depend on what kind of generation we move forward with, but, um, the goal is to be in service with that second 300. Megawatts in that 2030 to 2031 time frame.
That's great. Um,
And then I guess more broadly when you take a look at your uh your your entire system and relative to the existing Capital plan, you know would it be fair to assume that we're seeing the greatest upside potential in Arizona and ITC? And then as we take a look at kind of the 26th plain later this year, you know, are there other key areas? We should be looking at where we're seeing probably uh some more performance.
We do see some and, and you'll see that in sort of our beyond the plan list. There's a lot of ITC quite a bit of Arizona as well. Uh, but we, you know, we continue to look across the entire footprint. We've got some additional opportunities, um, in BC related to, um, LNG, Etc. So, um, and then across the rest of our footprint, we're looking at opportunities, uh, as well. So, um, those are the 2 big ones, but we've got, uh, I think irons in the fire across the entire portfolio.
Thank you.
Thanks Rob.
The next question will come from Maurice Choy. With RBC Capital markets. Please go ahead.
Hey, good morning everyone. Um just wanted to touch uh on the Springerville position uh in your slides. You mentioned that you may take. Uh, it may take 4 to a longer time to achieve its entrance. Uh, she she targets and alongside the conversion of spring aval. You're not expecting a material impact to your 5 year plan.
From these statements, is it fair to assume that the cost of conversion, which I see him has elevated over the past few months. Um, roughly matches, some form of Renewables Plus Storage in your current IRP.
Uh, yeah. There there's a, there's a bunch of puts and takes that are going to be going on here and that's that's kind of why we're we're we're getting ready to do our uh, next integrated, uh, resource plan, in Arizona, um, next next year. Uh but in our 5 year Capital plan, we'll lay out um you know kind of all those puts and takes that we have in the capital plan. Um, obviously the you know this is this is a great affordability story for our customers to be able to use.
Existing, uh, Steel in the ground. Um, also, you know, that's stealing the ground that's already there, so you don't have to get in line to to buy it from somebody else. Um, and also has the, you know, the the transmission assets to bring it in, so you don't need additional uh, interconnections and of course, probably 1 of the best benefits. Uh, you know, that we see around that is that overall affordability to our customers and just having those uh, additional jobs in a community, that's been so important to uh, TP over these, you know, several decades.
Maybe that's a quick follow up to that. Is there, is there any potential for Four Corners? Uh, to also be converted to guests to the Springville is going to
Oh yeah, I, yeah, that's not—I don't think we've, uh, looked at that. Um, but, uh, you know, there's always, I guess, potentials. This is a time, I think, where a lot of folks are looking at repowering, uh, existing, uh, coal plants. And the reason that we were able to do this at Springerville is we had one of our, uh, partners both.
Was a partner in Springerville but also has a a cold Generating Station down the road from Springerville Coronado that Salt River Project is, you know, being able to partner with someone to to make the make it economic to, to build a gas pipeline that gets down there. But once it gets down there, you know, hopefully other folks are using it as well.
Understood. And if I could just finish off with a quick question on my favorite province in Canada, which is BC. Um, I wonder if I could, I wonder if I could have your latest thoughts on the landscape and outlook for gas infrastructure in the province, particularly given the push for energy infrastructure in the country. And seemingly in alignment on gas, amongst Federal provincial and Indigenous theaters. And what this all means for, for the PC
Perfect. So I'll, I'll, I'll turn that over to Roger, but before I do, just for full disclosure Maurice, we are actually the teams here in Vancouver, so, um, we now recognize how early it is for you to get up for these calls. Go ahead, Roger Mari, Maurice. Uh, thanks for the question. Uh, I would say, uh, much like Canada BC is, uh, a bit of a pivot where they're embracing, uh, gas in particular the LNG opportunity. Um, as you know, we're pursuing uh, expansion of our LG bunkering opportunity, uh, and we have our LNG storage tank, uh, regulatory process ongoing. So, uh, directly we see that as positive as far as gas connects,
At our domestic infrastructure uh clean BC, which is the signature policy that is dictating uh issues like client standards, uh, building code standards, which is uh the policy that is uh municipalities are using to uh constrain uh new gas Connections in new buildings. That's uh in the midst of a review. Uh,
Uh, gas agenda. So more to come on that.
Great. Thank you very much everyone.
Thanks Boris.
The next question will come from Binh Pham with BMO. Please go ahead.
Hi thanks. Good morning, make going back to the the Arizona data center, uh update. Um and maybe maybe more more broadly on on the the industry. Overall uh, this is additional uh, second site that you you flagged did this uh,
Materialize, uh, with you, potentially just during the last couple months, where was always in, in the cards, we had discussions and then maybe on a broader level.
<unk> gone to maybe more jurisdictions than you had anticipated in and how do you think about the pace of of announcements going forward.
Yeah sure I'll turn it over to Susan answer.
And then Oh, so the data science that we've been reporting on <unk>.
We're just.
Lumping it all into one.
Total number for capacity and now there is as we bring forth more detail on the project for just representing that it won't be perfect answers that separate sites that first building out that.
That first 300 that we signed the contract part.
In July and then up to 600 megawatts at that first site and then the second part is another five to 700 megawatt. So it's all the same project and we've been talking about for a while.
And then what was the second half of your question there Ben.
Yeah, and maybe able to access.
Okay.
Broader a broader thought process on that.
The pace of discussions are the customer needs they have they changed materially over the last three months.
Yeah. So we do have a long queue of projects in Arizona.
Behind this initial project, but.
When we when we only have so much capacity you sort of got to give it the first folks in line.
So that's sort of the I.
I would say puts the.
Puts the rest of the the negotiations on ice until you can figure out how you can develop.
Additional resources after the the first one it takes the 300 megawatts to.
To Susan's to Susan's point I mean, there's there's a lot of details.
A lot of conversations that we have with folks in the queue and particularly the one here at the top of the queue.
Just that the basic.
Basically allowed now.
Because it's getting public information on how those different megawatts are broken out by sites et cetera. Prior to that of course, you know and we still are under an NDA for any details if theyre not.
Allowing us to release or that they havent released so it's just filling in the gaps as we get along.
On the road a little bit further.
But also as they are finalizing their plans as well.
Okay, that's great.
And my second one on the old Triple B E.
Legislation.
You had a bit more of it.
Adobe.
How things are shaking out can you comment a impact on Florida thinking more.
Renewables in and.
And rate base ITC that that impact and then and he also you may have.
Founding legislation.
Yeah. So.
Overall, there was there's not a lot of impact from a.
One big beautiful Bill.
That that was past Corp.
Corporate tax obviously didn't change.
Obviously, we're a few weeks ago or talk a lot about that 899 section, which luckily didn't make it in.
We see the.
Renewable energy credit reductions and phase out there.
It doesn't really have much of a near impact near term impact for U S given where they're at in their cycle of projects. However, you know on a going forward basis. It just changes the calculus of of Rfps and options as we go forward. It just creates obviously different.
Economic outcomes when those credits are and therefore.
Renewables and storage so.
I think we'll see a longer term impact related to that it's just the others. There is nothing really that we can quantify.
Obviously this.
The tax credit so that's just.
Certainly they make them they make those projects more cost effective for our customers.
The the credits so that's something we'll have to consider it.
See really isn't impacted again in the short term either remember those LRT P. Tranche, one projects that were allocated to ITC and they're done and done dusted and given the ITC to build.
So theres not theres not any impact there I would say.
Longer term when you think about the implications of reduce renewable energy and storage development it might change the mix of of generation.
Will it be less renewables, obviously fossil generation.
As a bit in Vogue again, particularly natural gas to a build to fill all of the data center needs and growth opportunities.
But that's just that's just different generation that ITC would be interconnecting writes always take gas or or a renewables, we still have to build the transmission to serve all this additional load that's being talked about whether it's data centers manufacturing or the continuation on the clean energy transition that somebody who uses all of these are started.
Longer term, we'll see how it how it plays out but in this short run it's very very limited impact.
Okay. That's great. Thank you for that update.
Thanks Pat.
Again, if you have a question. Please press Star then one our next question will come from Richard Sunderland with Jpmorgan. Please go ahead.
Hey, good morning.
Furniture.
There's been discussion of new Interstate pipeline capacity into Arizona I'm curious if you in essence involved in discussions here and if you have a need as you begin building gas plants.
Well for the Springerville Repowering one that's the yes, we have had those conversations and all that sort of additional.
Public information about you know obviously, we got it we got to get gas to Springfield, and that's a that was the big nut to crack to figure out how to do that economically and as I mentioned earlier, it's it's great to have a partner like Salt River project in and being an off taker for that as well.
That's the that's the one that we've always gotten the queue now.
Okay.
Discussions to get it in the queue now.
Understood and then I guess, just again same topic, but looking into the 20 <unk>.
See a growing need there.
Seems like the states probably in an okay position for the next three or four years, but the next decades, probably a little different.
Yeah. That's that's the calculus, we have to look at right.
When we look at our integrated resource plan next year down in Arizona.
This.
This is not this is not static remember that three years ago. When we did the last integrated resource plan. So as we look going forward, it's going to be a very different.
The load curve that we have to serve.
And so that's that's what we will look at and then stack up the resources that we need.
Sure natural gas will be a part of it obviously renewables and.
That storage will be a part of it so all of those things kind of go into that mix from a from a long term perspective.
So it's it's all a bit TBD at this point, but at the end of the day infrastructure is going to be needed across our sector and frankly, everyone that serves our sector right. So if there is additional gas needs.
Our generation theres going to be likely additional pipeline needs as well, but that also goes into that long term planning process.
I appreciate the commentary I'll leave it there thank you.
Thanks Richard.
This concludes the question and answer session I would like to turn the conference back over to Mr. Mimo for any closing remarks. Please go ahead.
Thank you Chuck we have nothing further at this time. Thank you everyone for participating in our second quarter results Conference call. Please contact IR should you need anything further and have a great day.
This brings today's conference call to a close you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yeah.
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