Mr. Barry Perry reports

FORTIS REPORTS STRONG THIRD QUARTER EARNINGS OF $151 MILLION; $1.7 BILLION IN CAPITAL INVESTED YEAR TO DATE

Fortis Inc. has released its third quarter results. Driven by its U.S. utility acquisitions, completion of the Waneta expansion and strong results from its other utilities, Fortis's net earnings attributable to common equity shareholders were $151-million, or 54 cents per common share, and $145-million, or 52 cents per common share, on an adjusted basis.

"All of our businesses contributed to our strong third quarter earnings," said Barry Perry, president and chief executive officer of Fortis. "With our exit from the commercial real estate and hotel business, we have tightened our focus on the growth of our core utility business."

Strong earnings and cash flow; capital expenditure plan on track:

• Net earnings attributable to common equity shareholders for the third quarter were $151-million, or 54 cents per common share, compared with $14-million, or six cents per common share, for the third quarter of 2014.
• On an adjusted basis, net earnings attributable to common equity shareholders for the third quarter were $145-million, or 52 cents per common share, an increase of $78-million, or 21 cents per common share, over the third quarter of 2014.
• Factors that resulted in earnings growth included:
  • A full quarter's contribution from UNS Energy, which was acquired in mid-August, 2014. UNS Energy's earnings are highly seasonal, with the second and third quarter representing approximately 75 per cent of annual earnings, due to the use of air conditioning and other cooling equipment;
  • A $5-million contribution from the Waneta expansion hydroelectric generating facility, which came on-line in early April, 2015;
  • Higher capital tracker revenue and customer growth at FortisAlberta;
  • The resetting of customer rates at Central Hudson, effective July 1, 2015;
  • The continued strength of the U.S. dollar relative to the Canadian dollar. Approximately 41 per cent of Fortis's assets is in the United States. On an annual basis, earnings per common share are affected by approximately one cent for each one-cent change in the U.S.-dollar exchange rate;
  • Lower operating expenses and a higher equity component of allowance for funds used during construction at FortisBC Energy.
• Earnings growth was tempered by timing of regulatory deferral mechanisms at FortisBC Energy, that are expected to reverse in the fourth quarter.
• Cash flow from operating activities for the first nine months of 2015 totalled $1.3-billion, almost double compared with the same period last year. The increase was driven by the acquisition of UNS Energy.
• Pro forma unused credit facilities totalled approximately $2.3-billion as at Sept. 30, 2015, after considering the closing of the sale of hotels in October, 2015.
• Almost $400-million in debt was raised at the regulated utilities in the quarter, and $1.0-billion was raised year to date, at attractive interest rates.
• Capital expenditures were $500-million in the quarter and $1.7-billion year to date. Consolidated capital expenditures for 2015 are forecast to be approximately $2.2-billion.

Increasing total shareholder return and sharpening focus on the core utility business

During the third quarter Fortis increased its dividend per common share over 10 per cent to 37.5 cents per quarter, or $1.50 on an annualized basis. This increase follows a 6.25-per-cent increase that was implemented in March, 2015. Fortis also announced dividend guidance in the quarter, targeting annual dividend per common share growth through 2020 of 6 per cent based on a 2016 dividend of $1.50.

After the sale of the commercial real estate and hotel assets, as well as the disposition of non-regulated generation assets in New York and Ontario, substantially all of Fortis's assets comprise regulated utilities and long-term contracted energy infrastructure. Net proceeds of almost $900-million from these sales were used by the corporation to repay credit facility borrowings, largely associated with the acquisition of UNS Energy and for other general corporate purposes. The sale of the hotel assets closed in mid-October.

"We remain committed to profitable growth, and we believe building on the strength of our core business and further diversifying our asset base in regulated utilities will achieve this," continued Mr. Perry. "Our confidence in our business, supported by investing in additional energy infrastructure opportunities and executing on a robust capital expenditure plan, supports our forecast rate base growth and our targeted annual dividend growth rate of 6 per cent through 2020."

Regulatory and legal proceedings

In November, 2015, Tucson Electric Power Company (TEP), UNS Energy's largest utility, filed a general rate application with the Arizona Corporation Commission requesting new retail rates to be effective Jan. 1, 2017, using June 30, 2015, as a historical test year. Since its last approved rate order in 2013, which used a 2011 historical test year, TEP's total rate base has increased by approximately $600-million (U.S.) and the common equity component of capital structure increased from approximately 43.5 per cent to approximately 50 per cent.

The corporation's regulatory calendar for its utilities in Canada continues to be extensive. Newfoundland Power and Maritime Electric recently filed general rate applications for 2016 and FortisBC Energy, the benchmark utility in British Columbia, filed its application to review cost of capital for 2016. The regulator in Alberta has also initiated a generic cost of capital proceeding for 2016 and 2017, which will impact FortisAlberta.

In August, 2015, the corporation agreed to terms of a settlement with the government of Belize (GOB) regarding the GOB's expropriation of the corporation's approximate 70-per-cent interest in Belize Electricity Ltd. in June, 2011. The terms of the settlement included a one-time $35-million (U.S.) cash payment to Fortis from the GOB and an approximate 33-per-cent equity investment in Belize Electricity.

Outlook

Fortis's focus, and virtually all of the corporation's assets, are low-risk, regulated utility businesses and long-term contracted energy infrastructure. No single regulatory jurisdiction comprises more than one-third of total assets.

Over the five-year period through 2020, the corporation's capital program is expected to be approximately $9-billion. This investment in energy infrastructure is expected to increase rate base to approximately $20-billion in 2020 and produce a five-year compound annual growth rate of approximately 4.5 per cent. In addition to the base capital expenditure program, Fortis is pursuing additional investment opportunities in existing and new franchise areas, including further investment in natural-gas-related infrastructure. Fortis expects this capital investment to support growth in earnings and dividends.

During the third quarter of 2015, Fortis initiated dividend guidance. Fortis is targeting annual dividend growth of 6 per cent through 2020. This guidance takes into account many factors, including the expectation of reasonable outcomes for regulatory proceedings at its utilities, the successful execution of its $9-billion five-year capital plan, and management's continued confidence in the strength of its diversified portfolio of assets and record of operational excellence.

                      CONSOLIDATED STATEMENTS OF EARNINGS 
                        (In millions, except per share)

                                         Quarter ended     Nine months ended
                                              Sept. 30,             Sept. 30,
                                        2015      2014        2015      2014

Revenue                             $  1,566  $  1,197    $  5,019  $  3,708
Expenses
Energy supply costs                      533       406       1,897     1,488
Operating                                461       384       1,392     1,010
Depreciation and amortization            217       181         652       478
                                       1,211       971       3,941     2,976
Operating income                         355       226       1,078       732
Other income (expenses), net               5       (43)        188       (37)
Finance charges                          141       159         416       406
Earnings before income taxes and
discontinued operations                  219        24         850       289
Income tax expense (recovery)             40        (8)        173        40
Earnings from continuing
operations                               179        32         677       249
Earnings from discontinued
operations, net of tax                     -         -           -         5
Net earnings                       $     179  $     32   $     677  $    254
Net earnings attributable to
Non-controlling interests          $       9  $      3   $      26  $      8
Preference equity shareholders            19        15          58        42
Common equity shareholders               151        14         593       204
                                   $     179  $     32   $     677  $    254
Earnings per common share from
continuing operations
Basic                              $    0.54  $   0.06   $    2.13  $   0.93
Diluted                            $    0.54  $   0.06   $    2.11  $   0.93
Earnings per common share
Basic                              $    0.54  $   0.06   $    2.13  $   0.95
Diluted                            $    0.54  $   0.06   $    2.11  $   0.95

We seek Safe Harbor.