Fortis Inc. reported second-quarter 2026 net earnings of CAD 396 million, or CAD 0.78 per common share, up CAD 0.02 year-over-year, with first-half EPS of CAD 1.76. The company invested CAD 2.7 billion through June, on pace to meet its CAD 5.6 billion 2026 capital plan. Management reaffirmed its 7% average annual rate base growth target through 2030 and 4%-6% dividend growth guidance, supported by a 52-year dividend increase streak. The results were driven primarily by continued capital investment at ITC, stronger retail electricity sales at UNS Energy reflecting warmer weather, and regulated growth at Western Canadian utilities. These gains were partly offset by unrealized foreign exchange losses on corporate contracts, higher finance costs, the disposition of Fortis Belize, and regulatory lag at UNS. Central Hudson earnings were flat, as rate base growth offset revenue timing.

A major highlight was the British Columbia government's order-in-council approving FortisBC's Tilbury LNG Phase 1B expansion, enabling approximately CAD 2 billion in regulated rate base investment—CAD 350 million of which is already in the current five-year plan. The project includes a marine jetty, liquefaction expansion, and a 230 kV power line, and is expected to begin construction as early as mid-2027 with in-service by 2031. Management also provided updates on above-plan growth opportunities: ITC is advancing MISO long-range transmission projects with CAD 3.3-3.8 billion of non-competitive investment beyond 2030, and TEP is negotiating incremental data center capacity of 300 MW and a second site of 500-700 MW, potentially requiring CAD 1.5-2.0 billion of new generation investment.

Operationally, Fortis completed the second Roadrunner Reserve battery storage project at TEP in June, adding 200 MW of capacity and 800 MWh of energy storage. The company also released its 2026 sustainability report, highlighting a 38% reduction in Scope 1 greenhouse gas emissions through 2025 versus 2019. LNG marine fueling sales from Tilbury 1A have provided a roughly 1.5% customer rate benefit since 2024, and the Eagle Mountain Pipeline Project is expected to add an additional 1.5% once in service. Management emphasized affordability through operational efficiency and cost discipline.

Looking ahead, Fortis will release its updated five-year capital plan and funding strategy with third-quarter results. The TEP general rate application is progressing, with a final decision expected by November 17. ITC expects MISO awards for the Iowa Tranche 2.1 competitive project in the fourth quarter. While data center growth faces some political pushback, management stressed that customer rate benefits are a key positive narrative. Risks include regulatory delays, foreign exchange volatility, and the need to balance large capital projects with credit rating stability. Overall, Fortis remains confident in its ability to deliver on its regulated growth strategy through 2030.

Quarterly Operations Analysis

Financial Performance

• Q2 2026 net earnings: CAD 396 million, EPS CAD 0.78 (up CAD 0.02 YoY).
• H1 2026 EPS: CAD 1.76.
• Segment EPS contributions: ITC +CAD 0.02, UNS +CAD 0.02, Western Canadian utilities +CAD 0.01; partially offset by corporate/other, FX (CAD 0.01 unfavorable) and DRIP share dilution (CAD 0.01).

Business Segment Highlights

• ITC: Stronger earnings from continued capital investment and rate base growth, partly offset by higher finance costs and stock-based compensation.
• UNS Energy: Higher retail electricity sales (warmer weather) were moderated by operating cost timing and regulatory lag on rate base not yet in rates. H1 EPS declined CAD 0.03 due to lower wholesale margins and cost timing.
• Western Canadian Utilities: EPS increased CAD 0.01 from capital investment.
• Central Hudson: Flat Q2; H1 up CAD 0.03 on rate base growth and cost timing.
• Other Electric: Comparable YoY, as growth offset the FortisTCI disposition.

Key Operational Metrics

• Capital invested: CAD 2.7 billion through June; full-year target CAD 5.6 billion.
• Rate base growth: On track for 7% average annual growth through 2030.
• Tilbury LNG Phase 1B: OIC approved; CAD 2 billion rate base investment, construction as early as 2027.
• Battery storage: 200 MW Roadrunner Reserve in service (800 MWh).
• Customer benefits: LNG marine fueling rate benefit ~1.5%; Eagle Mountain expected ~1.5% once complete.
• Sustainability: 38% Scope 1 GHG emissions reduction vs 2019.

Regulatory Updates

• TEP rate case hearings concluded; decision expected by Nov 17.
• TEP/UNS IRPs to be filed in fall with high-growth scenario.

Management Guidance & Qualitative Commentary

• Official guidance: 2026 capital plan of CAD 5.6 billion; 7% average annual rate base growth through 2030; 4%-6% annual dividend growth through 2030.
• Upcoming five-year plan: New capital plan and funding strategy to be released with Q3 2026 results.
• Tilbury LNG Phase 1B: Continue design and permitting; construction may begin mid-2027, in service as early as 2031. Tilbury 2 environmental assessment decision expected in Q4 2026; storage tank has no direct rate benefit, while liquefaction (2.5 MTPA) is further out.
• Data center opportunities: TEP negotiating 300 MW incremental load at first site (up to 600 MW total) and 500-700 MW at second site. Potential new generation investment of CAD 1.5-2.0 billion USD if agreements are finalized.
• ITC: MISO Tranche 2.1 non-competitive projects of CAD 3.3-3.8 billion USD beyond 2030; Iowa competitive project bids submitted, decision expected Q4 2026.
• TEP rate case: Expect judge's recommended opinion and order soon; final decision by November 17, implementation in December.

Funding and Credit

• H1 long-term debt issuance of CAD 2.1 billion; funding plan remains on track. Credit ratings reaffirmed by S&P and Fitch with stable outlook.

Q: Maurice Choy (RBC) – Ask about next steps for Tilbury 1B and status of Tilbury Phase 2.

A: Roger (FortisBC CEO) detailed that Tilbury 1B includes a marine jetty, liquefaction expansion, and a 230 kV power line. Next steps involve finalizing EA conditions, designing liquefaction and power needs, and completing the Musqueam equity partnership agreement. Construction could begin in 2027. For Tilbury 2, the storage tank (3 BCF) received BCUC approval in 2025 and is primarily for resiliency; the liquefaction component (2.5 MTPA) is further out and would be designed to provide rate benefits. Environmental assessment for Tilbury 2 is expected late this year, with a cabinet decision likely in Q4.

Q: Maurice Choy (follow-up) – Asked about timing for sanctioning these projects.

A: Tilbury 2 EA review ends in Q4, then referred to cabinet with a 30-day decision window. Assuming no additional process, decisions for both storage and liquefaction could come this fall.

Q: Maurice Choy (second follow-up) – Asked about changes in data center customer negotiations at TEP given U.S. pushback.

A: David Hutchens noted industry-wide pushback but emphasized the rate benefits to customers. Data center developers and utilities align on ensuring no cost shift to other customers. The 'then some' benefit helps lower rates for existing customers. Negotiations remain active.

Q: Ben Pham (BMO) – Asked whether Fortis might extend its capital plan beyond five years given long-dated opportunities like Tilbury and ITC.

A: David responded that beyond five years forecasts become uncertain; the company prefers a five-year plan with additional color on above-plan opportunities. Management will stick with five-year horizon.

Q: Ben Pham (follow-up) – Asked about balance sheet impact of Tilbury expansion and potential use of ATM.

A: Jocelyn Perry said Tilbury will be evaluated in the context of the full five-year plan and funding options. The aim is to keep credit metrics intact; deeper analysis will be provided in the fall.

Q: Mark Jarvi (CIBC) – Asked about the capital expenditure profile for Tilbury, specifically whether material amounts occur before 2030.

A: David stated that modeling is still ongoing; large projects typically ramp up slowly, and AFUDC impacts the shape. More details will be provided with the updated capital plan. Timing of spend matters, not just total size.

Q: Mark Jarvi (follow-up) – Asked about ITC conversations with LDCs (CMS, DTE, Alliant) regarding accelerated transmission investments.

A: Krista (ITC) said discussions are positive, with ~8 GW of additional load in the queue. ITC is working hand-in-hand with customers to direct loads to locations requiring fewer upgrades, as speed to power is critical. Upgrades can range from CAD 10-100 million per project.

Q: Michael Long (Barclays) – Asked about the TEP rate case procedural schedule change and outcome expectations.

A: David and Susan noted the decision was postponed due to elections. Hearings went well, with alignment with ACC staff on many issues. TEP requested a 9.75% ROE. They expect the judge's ROO soon, final decision in November, and implementation in December. They are optimistic about the ARAM formula rate.

Q: Michael Long (follow-up) – Asked about the data center pipeline in Arizona beyond Project Blue.

A: Susan reported 8-10 GW of data center pipeline, plus other loads such as Hermosa Mine and Copper World. Growth is diversified beyond data centers, including manufacturing and existing customers.

Q: Eli Josien (J.P. Morgan) – Asked about impact of recent primary election results on regulatory strategy.

A: David said the outcome wasn't a surprise; regulatory strategy doesn't change with elections. Fortis works with any commissioners and maintains focus on solid policy and customer benefits.

Q: Eli Josien (follow-up) – Asked about the IRP filing timeline and possible outcomes.

A: David explained the IRP will include scenarios including a high-growth data center case. The recommended portfolio will be filed with the ACC, and the plan will show NPV revenue requirements and investment timing. More details will be available after filing.