Fortis(FTS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Reported earnings per common share for Q4 2025 were CAD 0.83, CAD 0.04 higher than Q4 2024, with adjusted EPS at CAD 3.53, a 25-cent increase from 2024 [11][12][13] - Reported EPS for 2025 was CAD 3.40, reflecting a 16-cent increase from 2024, despite losses from the disposition of investments in Belize and Turks and Caicos [13][16] - The company achieved a one-year total shareholder return of nearly 24% and average annual total shareholder returns of approximately 10% over the past 20 years [6][16] Business Line Data and Key Metrics Changes - Western Canadian utilities contributed a 10-cent increase in EPS, driven by rate-based growth, particularly from FortisBC's investment in the Eagle Mountain Pipeline Project [14] - U.S. electric and gas utilities delivered an eight-cent increase in EPS, with Central Hudson benefiting from rate-based growth and cost rebasing [14] - ITC's capital investments and related rate-based growth increased EPS by CAD 0.04, moderated by higher stock-based compensation and finance costs [15] Market Data and Key Metrics Changes - In Arizona, the Arizona Corporation Commission approved an energy supply agreement for approximately 300 MW to support a planned data center, with a 10-year contract including a 75% minimum billing requirement [8][9] - The company is negotiating for an additional 300 MW capacity at the same site and a second site in the range of 500-700 MW, with potential new generation investments estimated at CAD 1.5 billion to CAD 2 billion through 2030 [9][10] Company Strategy and Development Direction - The company rolled out a CAD 28.8 billion five-year capital plan, focusing on regulated investments primarily in transmission and distribution assets, expecting a 7% average annual rate base growth [6][7][20] - The strategy includes maintaining a commitment to 4%-6% annual dividend growth through 2030, supported by strong capital investments and operational efficiency [10][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the regulatory environment and ongoing projects, particularly in Arizona and ITC, highlighting the importance of affordability and customer service [23][30][65] - The company is focused on executing its capital plan while addressing cost pressures and maintaining reliability and safety in operations [5][20] Other Important Information - The company has maintained a strong liquidity position with CAD 2.7 billion of long-term debt issued in 2025 and nearly CAD 4 billion available on credit facilities [16][17] - S&P confirmed the company's A- issuer rating and revised the outlook from negative to stable, reflecting improving financial measures [17] Q&A Session Summary Question: Data center opportunity in Arizona - Management explained that the energy supply agreement is structured to ensure affordability and cost recovery, with the customer covering interconnection costs [22][23] Question: Updates from FERC - Management noted optimism regarding potential movement on ongoing FERC matters, emphasizing the new chair's focus on regulatory clarity [28][30] Question: UNS Gas rate case - Management indicated that the upcoming ACC open meeting could provide clarity on the formulaic rate structure, but advised waiting for the meeting for specific insights [69][70] Question: LNG projects in British Columbia - Management confirmed that while there are no new announcements, they are looking for additional investment opportunities in LNG projects [43] Question: Customer affordability feedback - Management acknowledged that affordability is a significant concern across jurisdictions, with ongoing efforts to address it consistently [62][65]