Fortis Inc. Announces Results of Series H First Preference Share and Series I Preference Share Conversions

Fortis Inc. (TSX: FTS) announced the conversion of a portion of its Series H and Series I preference shares, resulting in 7,902,614 Series H Shares and 2,097,386 Series I Shares outstanding; the Series H Shares will pay a fixed quarterly dividend based on an annual rate of 4.183%, while the Series I Shares will pay a floating quarterly dividend initially set at an annual rate of 4.103% plus a spread based on the three-month Government of Canada Treasury Bill rate. The shares will continue to be listed on the TSX under the symbols FTS.PR.H and FTS.PR.I, respectively.

Analysis

Fortis Inc. has completed a preference share conversion, resulting in a net increase in its Cumulative Redeemable Five-Year Fixed Rate Reset First Preference Shares, Series H, and a corresponding decrease in its Cumulative Redeemable Floating Rate First Preference Shares, Series I. Specifically, 11,298 Series H shares were converted to Series I, while a significantly larger amount, 248,830 Series I shares, were converted to Series H. Consequently, Fortis now has 7,902,614 Series H shares and 2,097,386 Series I shares outstanding. The Series H shares will pay a fixed annual dividend rate of 4.183% for the five-year period commencing June 1, 2025, disbursed quarterly. In contrast, the Series I shares will offer a floating quarterly dividend; for the initial quarter from June 1, 2025, to August 31, 2025, this is based on an annual rate of 4.103%, and will subsequently be reset quarterly based on the three-month Government of Canada Treasury Bill rate plus 1.450%. The higher net conversion into the fixed-rate Series H shares suggests a preference among converting shareholders for the certainty of the 4.183% yield over the initially lower floating rate. Both share series will maintain their listings on the Toronto Stock Exchange. This capital structure adjustment is a routine financial activity for Fortis, a major North American regulated utility with $12 billion in 2024 revenue and $75 billion in total assets as of March 31, 2025.

Key Decisions for Investors

• Investors considering or holding Fortis preference shares should assess the 4.183% fixed dividend of Series H against the Series I floating rate, which starts at 4.103% and resets with Treasury Bill rates, based on their individual interest rate expectations and income stability requirements.
• The significant net conversion into Series H shares suggests a current market preference for fixed income certainty at the offered rate, a factor to consider when evaluating these securities.
• This preference share conversion is primarily an administrative adjustment to Fortis's capital structure and is unlikely to materially impact the investment outlook for Fortis's common stock (FTS), which remains driven by the company's regulated utility operations and broader financial performance.