Fortis(FTS) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Reported earnings for Q2 2022 were CAD284 million or CAD0.59 per common share, compared to CAD253 million or CAD0.54 per common share in Q2 2021, reflecting a year-over-year increase [21] - Year-to-date reported earnings were CAD634 million or CAD1.33 per common share, compared to CAD608 million or CAD1.30 per common share in the same period last year [21] - Adjusted net earnings for Q2 2022 were CAD272 million or CAD0.57 per common share, which is CAD0.02 higher than Q2 2021 [22] - Year-to-date adjusted net earnings were CAD641 million or CAD1.34 per common share, CAD0.02 higher than the same period in 2021 [24] Business Line Data and Key Metrics Changes - Rate base growth at regulated utilities positively impacted earnings, with contributions from Western Canadian utilities and ITC each adding CAD0.01 to EPS [25] - EPS for the Energy Infrastructure segment increased by CAD0.01 due to higher hydroelectric production in Belize [26] - EPS for US electric and gas utilities decreased by CAD0.01, with UNS down CAD0.02 and Central Hudson up CAD0.1, reflecting various operational factors [27] Market Data and Key Metrics Changes - The higher US dollar to Canadian dollar exchange rate positively impacted quarterly results by approximately CAD0.02 [26] - Central Hudson experienced robust double-digit increases in residential sales, attributed to strong housing development and demand for heat pumps and electric vehicles [116] Company Strategy and Development Direction - The company reaffirmed its CAD20 billion five-year capital plan through 2026, expecting to increase rate base by over CAD10 billion, supporting an average annual rate base growth of approximately 6% [16] - The company is focused on maintaining customer affordability through proactive management of energy prices and inflationary pressures [8] - Innovative technologies and partnerships, such as the carbon-neutral hydrogen pilot project, are seen as essential for accelerating the transition to clean energy [11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to deliver on growth and sustainability goals despite high inflation and energy prices [40] - The regulatory environment in Arizona is viewed positively, with expectations for support in upcoming rate cases [80] - The company is actively managing O&M expenses to offset inflationary pressures and maintain necessary investments [118] Other Important Information - The company has maintained strong investment-grade credit ratings, with recent debt issuances supporting its capital program [33] - The ongoing GCOC proceeding in British Columbia is expected to continue into early 2023, with a potential oral hearing in November [96] Q&A Session Summary Question: Follow-up on MISO spending timing - Management indicated that further details on project timing are needed and that they are working with other transmission owners to finalize plans [46] Question: Impact of the Inflation Reduction Act - Management noted it is early to assess the impact but expressed optimism about potential benefits from the climate investments included in the act [49] Question: Inflation impact on capital projects - Management acknowledged challenges in estimating inflation for future projects but emphasized the need to manage capital budgets effectively [55] Question: Initial feedback on Arizona rate filing - Initial conversations with stakeholders have been positive, with expectations for support for the new adjuster mechanism [60] Question: Status of Lake Erie Connector project - The project is currently suspended due to economic conditions, but management remains open to restarting negotiations in the future [63] Question: Trends in Central Hudson's residential sales - Strong housing development and demand for heat pumps and electric vehicles are driving robust residential sales growth [116] Question: O&M efficiencies - Management is actively seeking ways to reduce costs and will provide updates on expected efficiencies in future communications [118]