Fortis Q1 Earnings Call Highlights

Key Points

• Fortis started 2026 in line with expectations, reporting first-quarter earnings per share of CAD 0.99 and net earnings of CAD 501 million while investing CAD 1.4 billion in its utility systems. Management said the company has completed about 25% of its planned 2026 capital spending and remains on track for its CAD 5.6 billion annual capital plan.
• Data center demand is emerging as a major growth driver, with projects in Iowa and Arizona supporting future load growth and transmission investment. Fortis said these opportunities could expand rate base growth while potentially lowering customer rates if the added infrastructure costs are borne by the data center customers.
• Regulatory progress and financing remain supportive, including Arizona rate case developments, approval for TEP’s Springerville coal-to-gas conversion, and continued access to debt and equity funding. Fortis also reaffirmed its long-term targets for 7% average annual rate base growth and 4% to 6% annual dividend growth through 2030.

Fortis NYSE: FTS said it opened 2026 with first-quarter results in line with management expectations, as the regulated utility operator continued to advance a multiyear capital program and highlighted growing data center-related demand across parts of its service territory.

President and CEO David Hutchens said Fortis invested CAD 1.4 billion in its utility systems during the quarter and reported earnings per share of CAD 0.99. He said the company has completed about 25% of its planned 2026 capital investments and remains positioned to execute its CAD 5.6 billion capital plan for the year.

“We are pleased with our start in 2026, building on the momentum from last year,” Hutchens said. “During the first quarter, we delivered safe and reliable service while advancing our long-term growth strategy.”

Quarterly Earnings Reflect Utility Investment and Timing Factors

Executive Vice President and CFO Jocelyn Perry said Fortis reported first-quarter net earnings of CAD 501 million, or CAD 0.99 per common share. She said results benefited from rate base growth and capital investment at several utilities, while other factors weighed on earnings.

Western Canadian utilities contributed a CAD 0.04 increase in EPS, driven largely by capital investments and the timing of operating costs. ITC contributed a CAD 0.02 EPS increase, primarily due to continued capital investment and related rate base growth.

Fortis’ U.S. electric and gas utilities posted a CAD 0.02 EPS decline. Perry said lower earnings at UNS Energy reflected wholesale market conditions, timing of planned generation maintenance costs, milder weather and regulatory lag for rate base not yet included in rates. Those impacts were partially offset by higher earnings at Central Hudson, where results benefited from a shift in quarterly revenue, timing of operating expenses and rate base growth.

The corporate and other segment reflected higher finance costs and unrealized losses on foreign exchange contracts. Perry said the 2025 disposition of FortisTCI had a CAD 0.02 dilutive impact on first-quarter results and is expected to have a CAD 0.05 dilutive impact for the full year. Foreign exchange had an unfavorable CAD 0.03 impact for the quarter, and higher weighted average shares issued under the dividend reinvestment plan reduced EPS by CAD 0.01.

Capital Plan and Dividend Outlook Remain Intact

Fortis reaffirmed expectations for average annual rate base growth of 7% through 2030, supported by its 2026 and five-year capital plans. Hutchens said the company’s regulated businesses support its commitment to deliver 4% to 6% annual dividend growth through 2030.

Major capital projects continued to move ahead in the quarter. At the Big Cedar Industrial Center, ITC completed a substation that will support 300 megawatts of load growth for the first data center. Hutchens said transmission upgrade work is underway for the Big Cedar load expansion project, which is expected to serve another 1,600 megawatts of new data center load by 2028.

At UNS, the Arizona Corporation Commission approved an amendment to the Springerville Generating Station’s Certificate of Environmental Compatibility to allow conversion from coal to natural gas generation. Hutchens said the approval advances Tucson Electric Power’s plan to extend the facility’s operational life while supporting affordability and reliability. He said the conversion is expected to cost about 10% of the capital cost of new gas generation.

Data Center Demand Central to Growth Discussion

Management repeatedly emphasized customer affordability in discussing data center-driven load growth. Hutchens said ITC Midwest network transmission rates are expected to decline by approximately 20% by the end of the decade as substantial data center load comes online in Iowa.

At TEP, Hutchens said 300 megawatts of load growth tied to an approved energy supply agreement is expected to save a typical residential customer approximately $13 per month once the data center reaches full production. In April, Fortis said key contractual contingencies tied to that agreement advanced, including credit support.

During the question-and-answer session, RBC Capital Markets analyst Maurice Choy asked about local stakeholder sentiment toward data centers. Hutchens said data center development can benefit customers if protections are in place for other retail customers and if the incremental infrastructure is paid for by the data center customer.

“It is really hard,” Hutchens said of communicating the affordability message. “You have to prove it.”

UNS Energy President and CEO Susan Gray said the first phase at TEP is moving forward after a CAD 40 million letter of credit was established and payment was made for a construction agreement tied to the substation and transmission interconnection. She said the site has been prepared and construction has begun. Fortis is also negotiating to expand the first site to a possible 600 megawatts and is in discussions for a second site in Marana, north of Tucson.

Hutchens said that if agreements are finalized for later phases, Fortis estimates new generation investment of approximately $1.5 billion to $2 billion would be required.

Regulatory Proceedings Advance in Arizona and at FERC

Perry said the Arizona Corporation Commission issued an order in February in the UNS Gas general rate application, authorizing an allowed return on equity of 9.61% and a 56% equity ratio. The order also approved a formula rate mechanism subject to a range of plus or minus 50 basis points around the allowed ROE, inclusive of post-test year adjustments. New rates took effect March 1, and the first adjustment under the formula is expected in April 2027.

For TEP’s general rate application, Perry said ACC staff filed testimony recommending a 9.75% ROE and a 55% equity ratio. Staff also recommended a formula rate framework similar to the approved UNS Gas approach. Hearings began in April, and Fortis continues to expect an order in the fall.

At the federal level, Hutchens said ITC and its Grid Acceleration Coalition partners filed a joint complaint at the Federal Energy Regulatory Commission in April challenging competitive bidding processes in MISO and SPP. The complaint asks FERC to exempt certain transmission projects from solicitation when they facilitate new generation or large load interconnection, or to suspend the solicitation process for five years.

ITC Holdings President and CEO Krista Tanner said the competitive solicitation process can take about 24 months, which she described as untenable when data centers want to connect in 24 months or less. The coalition has asked FERC to rule by July 16.

Financing and Other Growth Opportunities

Perry said Fortis utilities issued CAD 800 million of long-term debt during the quarter. In April, ITC Holdings issued $900 million of unsecured notes, with proceeds expected to repay maturing debt and short-term borrowings. Fortis’ CAD 500 million at-the-market equity program has not been used and remains available for funding flexibility, she said.

Morningstar DBRS recently confirmed Fortis’ A low issuer and unsecured debt credit ratings with a stable outlook. Perry said the company’s liquidity position and funding plan support its investment-grade credit ratings.

In response to analyst questions, management also discussed possible additional growth opportunities, including transmission projects tied to MISO’s long-range transmission planning, data center activity in Alberta and potential future pipeline expansion discussions in British Columbia related to LNG demand. Hutchens characterized the broader opportunity set as a “target-rich environment,” while noting that several items remain subject to negotiations, planning processes or regulatory outcomes.

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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