Fortis Inc. Q2 FY2026 earnings call

• Core Strategy & Capital Execution

  • The company continues to advance its regulated growth strategy, with $2.7 billion in capital investment completed through H1 2026, on pace to hit the full-year 2026 target of $5.6 billion
  • The 200 megawatt/800 megawatt-hour Roadrunner Reserve battery storage project was placed in service at TEP, supporting renewable energy integration to serve 42,000 homes for 4 hours at full deployment
  • Fortis maintains a 52-year consecutive dividend increase track record, with dividend growth as a core component of its investment thesis

• Major Project Milestones

  • FortisBC received a provincial order in council approving the larger Tilbury LNG Phase 1B expansion in British Columbia, allowing up to $2 billion in total regulated rate base investment (only $350 million is currently included in the existing five-year plan), plus approval for an equity partnership with the Musqueam Indian Band and cost recovery smoothing mechanisms
  • Construction on Tilbury 1B could start as early as mid-2027, with service entry as early as 2031; updated cost estimates will be included in the new five-year capital plan to be released with Q3 2026 results
  • At ITC, long-range transmission projects for MISO tranche 2.1 are advancing; 3.3 to 3.8 billion US dollars of awarded non-competitive investment is planned beyond 2030, with bids submitted for two competitive tranche 2.1 opportunities awaiting Q4 2026 awards
  • TEP is negotiating for 300 megawatts of incremental data center capacity at a first site, and 500 to 700 megawatts at a second site; finalized agreements would require 1.5 to 2 billion US dollars in new generation investment
  • TEP and UNS Electric plan to file integrated resource plans (IRP) with the Arizona Corporation Commission (ACC) in fall 2026, including a high-growth scenario for incremental data center load beyond the approved 300 megawatts and a clean energy build-out scenario

• Customer & Sustainability Focus

  • The company achieved a 38% reduction in Scope 1 greenhouse gas emissions through 2025 compared to 2019 levels, highlighted in the newly released 2026 Sustainability Report
  • Tilbury 1A LNG marine fuel sales have provided a 1.5% customer rate benefit since 2024, with additional benefits expected from the 1B expansion; the Eagle Mountain Pipeline project is expected to deliver an additional ~1.5% rate benefit once complete
  • Management prioritizes disciplined capital planning, operational efficiency, and customer affordability, with a focus on avoiding cost shifts to non-participating customers

• Financial Position

  • H1 2026 saw $2.1 billion in long-term debt issuance, with the full-year funding plan on track; S&P and Fitch confirmed Fortis' investment-grade credit ratings with a stable outlook, and liquidity remains supportive of ratings

For Q2 2026, Fortis reported net earnings of $396 million ($0.78 per common share), a $0.02 increase year-over-year. ITC: EPS increased $0.02, driven by continued capital investment and rate base growth, partially offset by higher finance costs and stock-based compensation expense. UNS Energy: EPS increased $0.02, driven by higher retail electricity sales from warmer weather, moderated by timing of operating costs and regulatory lag for unreflected rate base growth. Western Canadian utilities: EPS increased $0.01, driven by capital investment. Central Hudson: Q2 2026 earnings were consistent with Q2 2025, as rate base growth was offset by timing of quarterly revenue; year-to-date EPS was up 3 cents from rate base growth and timing of operating costs. Other electric segment: Earnings were comparable year-over-year, as segment earnings growth was offset by the 2025 Q3 disposition of Fortis TCI. Corporate and other: Reflects unrealized foreign exchange contract losses, higher finance costs, and lower earnings from the 2025 Q4 disposition of Fortis Belize, partially offset by timing of income tax recoveries. Foreign exchange and the dividend reinvestment plan each had a 1 cent unfavorable impact on Q2 EPS. Year-to-date (H1 2026) net earnings were $897 million ($1.76 per common share); for H1 2026, UNS EPS was down 3 cents as higher retail sales were offset by lower wholesale margins, timing of operating costs, and regulatory lag.

• Maintains expectation of 7% average annual rate base growth through 2030
• Maintains 4% to 6% annual dividend growth guidance through 2030, supported by the regulated growth strategy
• Confirms full-year 2026 capital investment guidance of $5.6 billion, with on-track execution through H1
• A new five-year capital plan and updated funding plan will be released alongside Q3 2026 earnings results

• The Tilbury 1B expansion remains subject to remaining regulatory approvals and permitting, with final cost estimates and capital spending profiles still under development
• Large data center development has faced public and political opposition across the U.S., which could impact negotiation timelines, project approval, and final agreement terms for TEP's Arizona growth opportunities
• Long-term transmission and LNG expansion projects have extended development timelines, with final investment decisions and customer load commitments still pending for many opportunities beyond the current five-year plan
• Regulatory lag for completed rate base growth temporarily suppresses near-term earnings, as cost adjustments are not yet reflected in customer rates
• Long-term project forecasts beyond the five-year window have high uncertainty and wide variability of potential outcomes

Q: What are the next steps and timing for the Tilbury 1B expansion and larger Tilbury Phase 2 project, and when can project sanctioning be expected? / A: Tilbury 1B's three core components (marine jetty, liquefaction expansion, 230 kV power line) are already approved via the provincial order in council. The team is currently addressing environmental assessment conditions and finalizing the Musqueam Indian Band equity partnership agreement, with construction targeted to start in 2027. For Tilbury Phase 2 (which includes end-of-life storage tank replacement and up to 2.5 million tons per annum of additional liquefaction capacity), an environmental assessment decision is expected in Q4 2026 after the mandated review period. The storage component provides system resiliency and gas supply cost management benefits, while the additional liquefaction is longer dated with rate benefits still to be determined.

Q: How has national data center opposition impacted TEP's customer negotiations for new capacity in Arizona? / A: While there has been general pushback on data centers across the U.S., all stakeholders (TEP, data center customers, government) are aligned on the core principle that data centers must cover their full share of system costs, with no cost shifting to existing residential and commercial customers. The incremental revenue and fixed cost coverage from data centers actually delivers rate benefits to other customers, which Fortis is working to communicate more broadly to policymakers and the public. Negotiations continue to progress with aligned terms on cost responsibility.

Q: Will Fortis extend its capital plan beyond the traditional five-year window, and how will Tilbury 1B impact balance sheet funding and potential use of an at-the-market offering? / A: While Fortis evaluates long-term opportunities that extend beyond five years, public forecasting beyond this window has too much uncertainty to be useful for investors, so the company will continue to release five-year plans with detailed color on longer-term pipeline opportunities. Tilbury 1B will be incorporated into the upcoming five-year plan refresh; the company will evaluate all available funding options this fall with the core goal of maintaining current credit metrics, with no final decisions made yet.

Q: What is the status of the TEP general rate case after the procedural schedule extension, and what is the current ask from the ACC? / A: The procedural extension was expected due to the November general election, and the case is progressing well with close alignment on most issues with ACC staff. TEP adjusted its requested ROE to 9.75%, bringing its total requested rate increase to 10.2%. Management expects the judge's recommended order soon, with a final ACC decision by mid-November and implementation in December, and is optimistic the approved formula rate (ARAM) design will be similar to the one approved for Unisource gas.