Fortis Q2 Earnings Call Highlights

Fortis (NYSE:FTS) reported second-quarter net earnings of C$396 million, or C$0.78 per common share, up C$0.02 per share from the same period a year earlier, as regulated capital investment and higher electricity sales supported results. The utility said it invested C$2.7 billion across its systems through the first half of 2026 and remains on track to invest C$5.6 billion for the full year.

President and CEO David Hutchens said the company’s utilities continued to provide safe and reliable service while advancing Fortis’ regulated growth strategy. Fortis continues to target average annual rate base growth of 7% through 2030 and annual dividend growth of 4% to 6% through that period.

The company also highlighted its sustainability progress, reporting a 38% reduction in Scope 1 greenhouse-gas emissions through 2025 compared with 2019 levels.

Second-Quarter Earnings Drivers

Executive Vice President and CFO Jocelyn Perry said earnings growth at ITC Holdings contributed C$0.02 per share in the quarter, primarily reflecting continued capital investment and related rate base growth. That contribution was partly offset by higher financing costs and stock-based compensation expense.

UNS Energy also added C$0.02 per share, driven by higher retail electricity sales, including the effects of warmer weather. Perry said that benefit was moderated by the timing of operating costs and regulatory lag, as some rate base growth has not yet been reflected in customer rates.

Fortis’ Western Canadian utilities added C$0.01 per share, largely because of capital investments. Central Hudson’s quarterly earnings were unchanged year over year, with rate base growth offset by the timing of quarterly revenue. Other electric operations were also comparable with the prior-year quarter, as segment earnings growth was offset by the impact of the FortisTCI disposition completed in the third quarter of 2025.

The corporate and other segment reflected unrealized foreign-exchange contract losses, higher financing costs and lower earnings following the sale of Fortis Belize in late 2025. Foreign exchange reduced quarterly earnings per share by C$0.01, while a higher weighted-average share count associated with the dividend reinvestment plan also reduced earnings per share by C$0.01.

For the first six months of 2026, Fortis reported earnings of C$897 million, or C$1.76 per common share. Central Hudson contributed C$0.03 per share of year-to-date growth, while UNS was down C$0.03 per share for the six-month period, as higher retail sales were offset by lower wholesale-sales margins, operating-cost timing and regulatory lag.

Tilbury LNG Expansion Advances

A major focus of the call was FortisBC’s Tilbury LNG expansion in British Columbia. The utility received an order-in-council from the provincial government supporting a larger Phase 1B expansion, allowing for approximately C$2 billion of regulated rate base investment. Fortis currently includes about C$350 million for the project in its existing five-year capital plan.

Hutchens said the expansion could begin construction as early as mid-2027 and enter service as early as 2031, subject to remaining regulatory approvals and permits. Fortis plans to provide updated project cost estimates in its next five-year capital plan, scheduled for release alongside third-quarter results.

Roger Dall’Antonia, president and CEO of FortisBC, said the Phase 1B project includes three principal components:

• A marine jetty;
• Expanded liquefaction capability; and
• A 230-kilovolt power line to supply electric-drive liquefaction equipment.

The provincial order also permits FortisBC to implement an equity partnership with the Musqueam Indian Band. Dall’Antonia said the parties are finalizing agreements, though the band’s ownership percentage remains confidential. The order includes regulatory mechanisms intended to smooth cost recovery during the project’s early years.

Fortis said the facility would support liquefied natural gas marine fueling and position the Port of Vancouver as an LNG fueling hub. The company said LNG sales associated with the existing Tilbury 1A facility have produced an approximately 1.5% rate benefit for FortisBC customers since 2024, and management expects the 1B expansion to build on that benefit.

FortisBC is also progressing Tilbury 2, which includes a replacement storage tank and potential additional liquefaction capacity of up to 2.5 million tonnes per year. Dall’Antonia said the storage component is primarily intended to improve system resiliency, while a future liquefaction project would be designed to provide customer rate benefits. He said it was too early to quantify those potential benefits.

The environmental assessment review period for Tilbury 2 is expected to conclude in the fourth quarter, followed by a provincial Cabinet review.

Data Centers, Transmission and Arizona Growth

Fortis outlined additional growth opportunities outside its current capital plan, including transmission projects at ITC and large-load development in Arizona.

ITC expects US$3.3 billion to US$3.8 billion in investment beyond 2030 for awarded Midcontinent Independent System Operator long-range transmission projects that are not subject to competitive bidding. For an Iowa Tranche 2.1 project subject to competition, ITC has submitted bids for two opportunities, with awards expected in the fourth quarter.

Krista Tanner, president and CEO of ITC Holdings, said the company has roughly 8 gigawatts of potential additional load in its queue, though not all of that pipeline is expected to materialize. She said ITC is directing prospective large-load customers toward locations requiring fewer grid upgrades because many customers seek service within two years or less.

At Tucson Electric Power, Fortis is negotiating with a data-center customer for an additional 300 megawatts of capacity, which could support a potential 600-megawatt buildout at the first site. The utility is also discussing 500 to 700 megawatts of capacity at a second site. If those subsequent phases are finalized, Fortis estimates they could require US$1.5 billion to US$2 billion of new generation investment.

Hutchens said Fortis and data-center developers are aligned on avoiding cost shifts to other customers, with large-load customers expected to cover the costs associated with serving them. Management said the scale of data-center demand can also help spread fixed system costs and provide rate benefits for other customers.

UNS Energy President and CEO Susan Gray said TEP continues to see 8 to 10 gigawatts of data-center demand in its queue, alongside growth opportunities from mining, manufacturing and existing customers.

Funding and Regulatory Outlook

Fortis’ utilities issued C$2.1 billion of long-term debt during the first half of 2026. Perry said the funding plan remains on track and is expected to rely primarily on cash from operations, utility debt and the company’s dividend reinvestment plan.

In May, S confirmed Fortis’ A- issuer rating and BBB+ unsecured debt rating, both with stable outlooks. Fitch also affirmed its BBB+ issuer and unsecured debt ratings with stable outlooks.

Management said the forthcoming five-year capital plan will also include a new funding plan. Perry said Fortis will assess all available funding options as it considers the timing and scale of Tilbury investments while seeking to maintain its credit metrics.

In Arizona, hearings have concluded in TEP’s general rate case. The administrative law judge extended the schedule, with a final decision now expected by Nov. 17. Gray said TEP expects a recommended opinion and order soon, followed by a potential decision in November and implementation in December.

About Fortis (NYSE:FTS)

Fortis Inc is a Canadian diversified electric and gas utility holding company headquartered in St. John's, Newfoundland and Labrador. Through a portfolio of regulated utility subsidiaries, the company develops, owns and operates electricity and natural gas transmission, distribution and generation assets. Fortis serves customers across multiple jurisdictions in Canada, the United States and the Caribbean, focusing on the delivery of safe, reliable energy to residential, commercial and industrial users.

The company's core activities include operation and maintenance of transmission and distribution networks, ownership of generation facilities, and investment in grid modernization and system resilience.

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