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.
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I would now like to turn the conference over to miss Stephanie ammo, vice president investor relations. Please go ahead Mr. MO
Thank You, Chuck and good morning everyone. Welcome to Fours. 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 reference Center. Prepared remarks are reconciled to the related US gaap Financial measures in our second quarter 2025 mdna.
All phones must, unless otherwise specified. All financial information referenced is in Canadian dollars. With that, I will turn the call over to David.
Morning everyone. Today, we are pleased to report. Another great quarter with capital expenditures of almost 3 billion dollars 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 files, 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 tep. 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, te announced that it plans to convert approximately 800 megawatts of coal fire generation at a Springerville Generating Station to Natural Gas by 2030. This will allow us to be coal free by 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 a 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 and 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 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.
Work is underway at ITC to prepare 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 everyone for the quarter. We reported net earnings of 384 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 Cent increase over the same period last year
And higher earnings at Central Hudson and Ford's BC, which I'll discuss in 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 increased largely reflects rate based growth as well as the rebasing of cost and a higher allowed Roe effective July 1st 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 2 cents 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 holding company, Finance costs
Foreign exchange gains associated with the revaluation of US dollar-denominated liabilities contributed to a 2-cent EPS increase for the quarter.
For the corporate and other segments. The decrease reflects the timing of income tax recoveries and higher Finance costs. Partially offset by Mark to market gains on Foreign Exchange contracts.
Higher weighted average shares lowered, 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 to fund our Capital programs, as we discussed last quarter of 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 is required.
During the quarter Fitch assigned for us, the first time, Triple B Plus credit rating, this new rating, underscores 4, 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, shut off or PSPs plan at fortisbc for high-risk areas within its service territory.
This bill 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,
The application includes a rate base of $4.3 billion, representing an increase of approximately $750 million 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 tepes allowed return.
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 our OE 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 be 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 the 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 adding the generation and transmission interconnections we need for the next 300 at that initial site. Sure. Good morning, Rob.
Um, thanks for the question.
300 megawatts or capacity that we're already building, and then the second 300 will be. Um, we'll go through our all sorts 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.
Yeah, I I think you're you hit the nail right on the head. There, 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 their 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, except
Etc. So, um, and then across the rest of our footprint, we're looking at opportunities, uh, as well. So, um, those are the two 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.
Impact your 5 year plan.
From these statements, is it fair to assume that the cost of conversion which I assume 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.
Um, 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 any potential for Four Corners to also be converted to gas, just as Springville is going to?
Oh yeah, yeah, that's not. I don't think we've uh, We've looked at that. Um, but uh, you know, there's always I guess potentials. This is 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 1 of our uh Partners both of 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 turn that over to Roger, but before I do just for, uh, full disclosure, I'm 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 Murray, 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 LNG bunkering opportunity. Uh and we have our LG storage tank uh regulatory process ongoing. So uh directly we see that as positive as far as gas connections and 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, I mean, municipalities are using to, uh, constrain uh, new gas connections and new buildings. That's, uh, in the midst of a review. Uh, and that, uh, will come out later this year. So, I think that'll be the first, uh, key sign post to understand how the, uh, focus on export of LG translates into a domestic, uh, gas agenda. Uh, so more to come on that.
Great. Thank you very much everyone.
Thanks Boris.
The next question will come from Ben Fam 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 additional, uh, second site that you you've flagged did this uh,
Materialize, uh, with you potentially just during the last couple of months for was always in, in the cards, we had discussions and then maybe on a broader level.
Of of announcements going forward.
Yeah, sure. I'll turn that over to Susan to answer.
good morning been, uh,
yeah, so the data center that we've been reporting on is, um, we were just
lumping it all into to 1. Um, total number for capacity and now there's as we bring forth more detail on the project. We're just representing that it will be broken into SE separate sites. So, first building out, um, the first 300 that we send the contract for, um, in July, and then up to 600 megawatts at that first sight. And then the second site is another 5 to 700 megawatts. So it's it's all the same project, um, that we've been talking about for a while.
And that was the second half of your question there, been. What's up?
Yeah. And and maybe you can expect that to a broader, a broader thought process. And the, the the pace of discussion is the the customer needs have they have they changed materially over the last 3 months?
Yeah. So we do have a a long uh queue of projects in Arizona that are behind this initial, uh, project. But um, you know, when we, when we only have so much capacity, you sort of got to give it to the first folks in line. Um, so, uh, that sort of, I would say puts the um,
Puts the rest of the, the, the negotiations on Ice until you can figure out how you can develop things, you know, additional resources after the, the first, 1 takes the this 300 megawatts. But, uh, to Susan's to Susan's point, I mean, there's there's a lot of details, um, and, and a lot of conversations that we have with folks in the, in the queue and particularly the 1 here at the top of the queue. Uh, it's just that uh, you know, we're and we're basically allowed now um because it's getting public information on how those different megawatts are broken out by site Etc. Uh prior to that of course, you know, when we still are under an NDA for any details if they're not uh,
Allowing us to release or that they haven't released. So, um, it's just filling in the gaps as we get, uh, along the on the, on the road a little bit further. Um, but also as, as their, uh, finalizing their plans as well.
Okay, that’s great. Uh, and met any of my second one on the, oh, Triple B legislation now that you had a bit more visibility on how things are shaking out. Can you comment on the impact? For us, I’m thinking more...
Renewables. And
And rate base, ITC, that impact. And then anything else that you may have found in the isolation.
Yeah. So uh, oh overall. There was, there's not a lot of uh impact from a um, 1 big beautiful, bill act that was passed, um, you know, corporate tax obviously didn't change. Um, you know, we have obviously, a few weeks ago, we were talking a lot about that 899 section, uh, which luckily, uh, didn't make it in. Um, obviously, the the Renewable Energy Credit, uh, reductions in phase out there, uh, we that doesn't really have much of a near impact, uh, near-term impact for, uh, ins, uh, given where they're at in their cycle of projects. However, you know, on a going forward basis, it just, you know, changes the calculus of of rfps and options as you go forward. It just, uh, you know, creates obviously different, you know, economic outcomes. Um, when those credits aren't in there for, uh,
Renewables and and storage. So, um, we I think we'll see a longer term impact, uh, related to that. It's just, you know, there's, there's nothing really that we can quantify. Um, obviously this, you know, the the tax credits don't necessarily that they make them, they make those projects more cost-effective for our customers um because of the the credit. So that's something we'll have to consider uh ITC really is an impacted again in the short term either. Remember those uh, LRT 2.1 projects that were allocated to
Utilities have started so you know longer term uh we'll we'll see how it um how it plays out but in this short run it's you know very very limited impact.
Okay, that's great. Thank you for the update.
Thanks Ben. Again, if you have a question, please press star. Then 1 our next question will come from Richard Sunderland with JP Morgan. Please go ahead.
Hey, good morning.
All right, J.
There's been discussion of new Interstate pipeline capacity in Arizona. I'm curious if you and S is involved in discussions here and if you have a need as you begin building, gas plants.
Well, for the Springerville repowering 1, that's the yeah. We we have had uh, those conversations and all that additional, um, public information about, you know, obviously, we got to, we got to get gas to Springerville and that's, uh, that that was the big kind of 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, uh, Salt River Project and, and, uh, being an off-taker for that as well. Um, that's the, that's the 1 that we've, we've gotten the queue now, or not in the queue, the discussions to get it in the queue. Uh, now,
Understood and then I guess just again, same topic, but looking into the 2030s, do you, do you see a growing need their? You know, it seems like the states probably in an okay position for the next 3 or 4 years, but the next decade is probably a little different.
Yeah, that's that's the calculus. We have to look at, right? We uh, when we look at our integrated resource plan, uh, next year, down in Arizona. Um, I mean, this, this this is not this is not static. Remember the 3 years ago is when we did the last integrated resource plan. So as we look going forward, um, it's it's going to be a, a very different, um, you know, load curve that we have to serve. Um, and so that's, that's what we'll look at and then, you know, stack up the resources that we need. Uh, I'm sure you know, natural gas will be a part of it, you know, obviously Renewables. Um, and 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. Um, so, uh, it's it's all a bit, uh, TBD at this point but at the end of the day, infrastructure is going to be needed across our sector and and frankly everyone that serves our sector, right? So if if there's additional gas needs, um, for Generation there's going to be likely additional uh, pipeline needs as well. Um, but that all goes into that, you know, long-term plan.
Process.
Appreciate the commentary. I'll leave it there. Thank you.
Yeah. 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 line, thank you for participating and have a pleasant day.