Fortis Inc. (FTS) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance with EPS growth driven by rate base investments and subsidiary performance. The company's capital expenditures align with growth strategies, and there are promising opportunities in Arizona and BC. The Q&A section revealed management's positive outlook on energy infrastructure, despite some vague responses. The announcement of a dividend growth plan and EPS increase suggests investor confidence. Overall, the company's strategic investments and optimistic guidance contribute to a positive sentiment, likely leading to a stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Earnings Per Share (EPS) Second quarter EPS was $0.76, a $0.09 increase over the same period last year. The growth was mainly driven by rate-based investments across utilities and higher earnings at Central Hudson and FortisBC.
Net Earnings Net earnings for the quarter were $384 million, reflecting a $0.09 increase in EPS compared to the second quarter of 2024. This was driven by rate base growth and higher earnings at specific subsidiaries.
Year-to-Date EPS Year-to-date EPS through June was $1.76, a $0.16 increase over the same period last year. The increase was attributed to rate-based investments and higher earnings at Central Hudson and FortisBC.
Capital Expenditures Capital expenditures for the first half of the year were almost $3 billion. This investment supports the company's growth strategy and infrastructure development.
Rate Base Growth Rate base is expected to increase by approximately $14 billion to $53 billion by 2029, supporting an average annual rate base growth of 6.5%.
Central Hudson EPS Contribution Central Hudson contributed a $0.04 increase in EPS for the quarter, driven by rate base growth, rebasing of costs, and a higher allowed ROE effective July 1, 2024.
Western Canadian Utilities EPS Contribution EPS increased by $0.03, largely driven by rate base growth, including earnings associated with the Eagle Mountain Pipeline project.
Other Electric Segment EPS Contribution EPS increased by $0.02 due to rate base growth, higher electricity sales, and the timing of quarterly earnings at Newfoundland Power related to regulatory approvals.
Foreign Exchange Gains Foreign exchange gains associated with the revaluation of U.S. dollar-denominated liabilities contributed a $0.02 EPS increase for the quarter.
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Operating Highlights
Roadrunner Reserve Battery Storage Project: The first phase of the 200-megawatt energy storage system was placed in service at TEP, facilitating renewable energy integration with the capability to store 800-megawatt hours of energy.
Springerville Generating Station Conversion: Plans to convert approximately 800 megawatts of coal-fired generation to natural gas by 2030, supporting a coal-free target by 2032.
Arizona Data Center Agreement: TEP reached an agreement to serve a demand of approximately 300 megawatts starting in 2027, with potential expansion to 600 megawatts and additional capacity at a second site ranging from 500 to 700 megawatts.
ITC Competitive Bidding: ITC is preparing to bid on projects within the MISO LRTP tranche 2.1 portfolio, with potential capital expenditures of USD 3.7 billion to USD 4.2 billion.
Capital Expenditures: Invested $2.9 billion in the first half of 2025, with annual and 5-year capital plans on track.
Regulatory Developments: Progress on TEP's general rate application and Central Hudson's multiyear rate settlement agreement.
Greenhouse Gas Emissions Reduction: Achieved a 34% reduction in Scope 1 emissions compared to 2019 levels, with plans to reassess 2030 and 2035 interim targets.
Dividend Growth Guidance: Committed to annual dividend growth of 4% to 6% through 2029.
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Risk or Challenges
Regulatory Challenges: Tucson Electric Power (TEP) filed a general rate application, and Central Hudson reached a multiyear rate settlement agreement. These regulatory processes could impact the company's financials and operational flexibility, especially if outcomes are unfavorable.
Energy Transition Risks: TEP plans to convert 800 megawatts of coal-fired generation to natural gas by 2030 to meet its 2032 coal-free target. This transition involves reassessing interim greenhouse gas targets for 2030 and 2035, which could lead to increased costs and operational challenges.
Supply Chain and Investment Risks: New generation and transmission investments may be required to support additional capacity for data center projects in Arizona. These investments are subject to regulatory approvals and contractual contingencies, posing risks to project timelines and costs.
Climate and Physical Risks: Fortis implemented public safety power shut-off (PSPS) plans in high-risk areas to address wildfire risks. While necessary, these measures could disrupt service and impact customer satisfaction.
Market Conditions: Lower margins on wholesale sales due to market conditions tempered earnings at UNS Energy on a year-to-date basis, highlighting vulnerability to market fluctuations.
Financial Risks: Higher finance costs and foreign exchange risks were noted, which could impact overall profitability. Additionally, the company raised over $1 billion in debt to fund its capital program, increasing leverage.
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Guidance & Outlook
Capital Expenditures: Fortis plans to invest $2.9 billion in the first half of 2025, with annual and 5-year capital plans on track. The company expects its rate base to increase by approximately $14 billion to $53 billion by 2029, supporting an average annual rate base growth of 6.5%.
Coal-to-Natural Gas Conversion: TEP plans to convert approximately 800 megawatts of coal-fired generation at the Springerville generating station to natural gas by 2030, aiming to be coal-free by 2032. This transition supports customer affordability, local communities, and reliability.
Retail Load Growth in Arizona: TEP has reached an agreement with a data center customer to serve a demand of approximately 300 megawatts starting in 2027, with potential expansion to 600 megawatts. Additional capacity of 500 to 700 megawatts may be required at a second site, necessitating new generation and transmission investments.
Dividend Growth Guidance: Fortis remains committed to its annual dividend growth guidance of 4% to 6% through 2029.
MISO LRTP Tranche 2.1 Projects: ITC is preparing to bid on projects within the MISO LRTP tranche 2.1 portfolio, which could add to its estimated $3.7 billion to $4.2 billion of capital expenditures for these projects.
Regulatory Developments: TEP filed a general rate application with the ACC, seeking new retail rates effective September 1, 2026, and proposing an annual formula rate adjustment. Central Hudson filed a joint proposal for a 3-year rate plan with retroactive application to July 1, 2025.
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Shareholder Return Plan
Annual Dividend Growth Guidance: The company remains committed to its annual dividend growth guidance of 4% to 6% through 2029.
Dividend Reinvestment Plan: The company highlighted healthy participation in its dividend reinvestment plan, which supports funding flexibility for its capital program.
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Key Q&A
Q:Regarding the Arizona data center opportunity, how quickly could you develop generation to support these assets? Is this a key gating factor?
A:The first 300 megawatts will use existing and planned capacity, aiming for the 2027 timeline. The second 300 megawatts will go through an all-source RFP process, with a goal to be in service by 2030-2031.
Q:When looking at your entire system and relative to the existing capital plan, where is the greatest upside potential? Are there other key areas to watch for outperformance?
A:The greatest upside potential is in Arizona and ITC. There are also additional opportunities in BC related to LNG and across the entire portfolio.
Q:Regarding the Springerville position, does the cost of conversion roughly match renewables or storage in your current IRP?
A:The cost of conversion involves various factors, but it is seen as an affordability story for customers, leveraging existing infrastructure and transmission assets without needing additional interconnections.
Q:Is there any potential for Four Corners to also be converted to gas like Springerville?
A:There is no current plan to convert Four Corners to gas, but it is a possibility depending on economic and partnership factors.
Q:What are your latest thoughts on the landscape and outlook for gas infrastructure in BC, particularly with the push for energy infrastructure in Canada?
A:BC is embracing gas, particularly LNG opportunities. There is ongoing expansion of LNG bunkering and storage tank regulatory processes. CleanBC policies are under review, which will provide more clarity later this year.
Q:Regarding the Arizona data center update, did the additional second site materialize recently? How have customer needs changed over the last few months?
A:The second site is part of the same project previously discussed, now broken into separate sites. Customer needs have not materially changed, but negotiations are on hold until capacity for the first project is finalized.
Q:What is the impact of the OBBBA legislation on Fortis, particularly regarding renewables and ITC?
A:The legislation has limited short-term impact. It may affect the economics of renewables and storage in the long term, but ITC projects are not impacted in the short term. The mix of generation may shift, but transmission needs will remain.
Q:Is UNS involved in discussions about new interstate pipeline capacity into Arizona?
A:Yes, UNS is involved in discussions, particularly for the Springerville repowering project, which requires a gas pipeline.
Q:Looking into the 2030s, do you see a growing need for pipeline capacity in Arizona?
A:Yes, there may be a growing need for pipeline capacity as the load curve evolves. This will be addressed in the next integrated resource plan, considering natural gas, renewables, and storage.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers or lacked clarity on the following: 1. The potential for Four Corners to be converted to gas was addressed vaguely, with no concrete plans mentioned. 2. The impact of the OBBBA legislation on long-term renewable energy and storage development was discussed in general terms without specific details. 3. Customer needs for the Arizona data center project were described as not materially changed, but details were limited due to NDAs and ongoing negotiations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACC formula
Arizona TEP
Arizona utility
CEO Director
Capital Markets
Central Hudson
Fortis credit
Markets Research
PSPS plan
Power
Research Division
TEP megawatt
USD
agreement
basis point
capital expenditure
contribution
detail
formula rate
funding
greenhouse gas
grid
increase period
load opportunity
mechanism formula
opportunity Arizona
progress front
proposal
rate adjustment
rate plan
reliability
resilience
site megawatt
slide
storage
utility Central
FTS Transcript
Fortis Inc. (FTS:CA) Q1 2026 Earnings Call Transcript
Positive5-6
Despite the absence of operational and strategic updates, the financial performance shows solid growth in revenue, net earnings, operating cash flow, and EPS, all indicating a positive outlook. The increase in capital expenditures suggests continued investment in growth. The commitment to dividend growth further supports a positive sentiment. However, the cautionary note on forward-looking information introduces some risk, but the overall financial health and growth potential outweigh these concerns, leading to a positive sentiment.
Fortis Inc. (FTS:CA) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call summary highlights strong financial performance with EPS growth, a significant capital plan, and consistent dividend increases. The Q&A section addresses potential risks but shows management's confidence in handling them. Positive factors include a new energy supply agreement and strong shareholder returns. Some concerns arise from unclear management responses on regulatory matters, but overall, the sentiment is positive due to robust financial metrics and strategic growth plans.
Fortis Inc. (FTS:CA) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call presents a mixed outlook. Positive aspects include the capital plan execution and potential growth in Arizona and BC. However, concerns arise from decreased EPS, higher finance costs, and vague management responses regarding project timelines and growth opportunities. The Q&A section reveals uncertainties about key projects and funding, tempering overall sentiment. Without a market cap, a neutral prediction accounts for both growth potential and current financial challenges.
Fortis Inc. (FTS) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call summary and Q&A indicate strong financial performance with EPS growth driven by rate base investments and subsidiary performance. The company's capital expenditures align with growth strategies, and there are promising opportunities in Arizona and BC. The Q&A section revealed management's positive outlook on energy infrastructure, despite some vague responses. The announcement of a dividend growth plan and EPS increase suggests investor confidence. Overall, the company's strategic investments and optimistic guidance contribute to a positive sentiment, likely leading to a stock price increase of 2% to 8% over the next two weeks.
FTS Slides
FTS Report
Frequently Asked Questions
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