Mr. David Hutchens reports

FORTIS INC. RELEASES FIRST QUARTER 2023 RESULTS

Fortis Inc. has released its first quarter 2023 financial results.

Highlights:

• First-quarter net earnings of $437-million, or 90 cents per common share, up from $350-million, or 74 cents per common share, in 2022;
• Adjusted net earnings per common share of 91 cents, up from 78 cents in the first quarter of 2022;
• Capital expenditures of $1-billion in the first quarter; $4.3-billion annual capital plan on track;
• Significant regulatory applications at Tucson Electric Power and FortisBC continue to progress;
• Announced the sale of the corporation's ownership interest in the Aitken Creek natural gas storage facility in British Columbia.

"Our strong first-quarter results reflect the diversified nature of our business and the continued delivery of our low-risk capital plan," said David Hutchens, president and chief executive officer, Fortis. "With capital expenditures of $1-billion in the quarter, we are on track to invest $4.3-billion in our systems this year.

"Our funding plan remains intact, and the sale of the Aitken Creek natural gas storage facility further strengthens our balance sheet and supports financing of our regulated utility investments. We remain confident in our growth strategy as we continue to provide value to shareholders while executing on the transition to a cleaner-energy future and delivering safe, reliable and affordable service to our customers."

Net earnings

The corporation reported net earnings attributable to common equity shareholders of $437-million for the first quarter, or 90 cents per common share, compared with $350-million, or 74 cents per common share, in the first quarter of 2022. The increase reflected rate base growth, mainly at ITC and the Western Canadian utilities, as well as higher earnings at UNS Energy. Market conditions resulted in wholesale electricity sales with favourable margin and higher transmission revenue at UNS Energy in the first quarter of 2023 compared with later quarters in 2022. Higher retail electricity sales, including the impact of favourable weather, and lower depreciation expense associated with the retirement of the San Juan generating station in June, 2022, also contributed to results in Arizona.

Results for the quarter also reflected higher earnings at Aitken Creek, an increase in the market value of investments that support retirement benefits at UNS Energy and ITC, and a higher United States-dollar-to-Canadian-dollar foreign exchange rate. Growth in earnings was partially offset by higher holding company finance costs.

An increase in the weighted average number of common shares outstanding, largely associated with the corporation's dividend reinvestment plan, also impacted earnings per share for the quarter.

Adjusted net earnings

Adjusted net earnings attributable to common equity shareholders excludes the impact of mark-to-market accounting of natural gas derivatives at Aitken Creek. Adjusted net earnings of $439-million for the first quarter, or 91 cents per common share, totalled $70-million, or 13 cents per common share, higher than the same period in 2022. The increase was driven by the same factors discussed for net earnings.

Capital expenditures

Fortis's $4.3-billion annual capital plan remains on track, with $1-billion invested through March, 2023.

The corporation's major capital projects continue to progress. In March, 2023, FortisBC Energy filed amended transportation rate schedules with the British Columbia Utilities Commission (BCUC) for the Eagle Mountain Woodfibre gas line project. Approval from the BCUC is anticipated in May, 2023, which will remove certain of FortisBC Energy's conditions for commencing construction and bring the project one step closer to construction.

The first tranche of approved projects associated with the Midcontinent Independent System Operator Inc. (MISO) long-range transmission plan (LRTP) is advancing at ITC, with stakeholder outreach, routing studies and design engineering under way. ITC estimates transmission investments of $1.4-billion (U.S.) to $1.8-billion (U.S.) through 2030 associated with six of the 18 LRTP projects.

Regulatory updates

In March, 2023, the Federal Energy Regulatory Commission confirmed its decision to deny the complaint filed by the Iowa Coalition for Affordable Transmission requesting that ITC Midwest's common equity component of capital structure be reduced.

In March, 2023, the Iowa Supreme Court granted standing to certain plaintiffs to challenge the right of first refusal (ROFR) available to incumbent electric transmission owners in Iowa. The court also issued a temporary injunction staying enforcement of the ROFR statute, and remanded the matter to the District Court to decide the merits of the claim. Management does not believe that this proceeding will impact projects at ITC that have already been approved and are under development, including tranche 1 projects associated with the MISO LRTP. The timing of this proceeding, and any impact on future projects, is unknown.

In April, 2023, hearings concluded on the Tucson Electric Power general-rate application, which seeks new customer rates effective Sept. 1, 2023, using a Dec. 31, 2021, test year. While the timing and outcome of this proceeding are unknown, a recommended order and opinion from the administrative law judge are expected midyear.

The generic cost of capital proceeding in British Columbia, which includes a review of the common equity component of capital structure and the rate of return on common equity for FortisBC, continues to progress as expected, with a decision expected by mid-2023.

Pending sale of unregulated asset

On May 1, 2023, the corporation announced that FortisBC Holdings Inc. had entered into a definitive share purchase and sale agreement with a subsidiary of Enbridge Inc. to sell its 93.8-per-cent ownership interest in the Aitken Creek natural gas storage facility for approximately $400-million, subject to customary closing conditions and adjustments. The purchase is subject to required approval, principally by the BCUC, and is expected to close by the end of the year with a March 31, 2023, effective date. Net proceeds from the transaction will further strengthen the balance sheet and support financing of the corporation's regulated utility growth strategy.

Outlook

Fortis continues to enhance shareholder value through the execution of its capital plan, the balance and strength of its diversified portfolio of regulated utility businesses, and growth opportunities within and proximate to its service territories. While energy price volatility, global supply chain constraints and persistent inflation are issues of potential concern that continue to evolve, the corporation does not currently expect there to be a material impact on its operations or financial results in 2023.

Fortis is executing on the transition to a cleaner-energy future and is on track to achieve its corporate-wide targets to reduce greenhouse gas emissions by 50 per cent by 2030, and 75 per cent by 2035. Upon achieving these targets, 99 per cent of the corporation's assets will support energy delivery and renewable, carbon-free generation. The corporation's additional 2050 net-zero direct GHG emissions target reinforces Fortis's commitment to further decarbonize over the long term, while preserving customer reliability and affordability.

The corporation's $22.3-billion, five-year capital plan is expected to increase the midyear rate base from $34.1-billion in 2022 to $46.1-billion by 2027, translating into a five-year compound annual growth rate of 6.2 per cent.

Beyond the five-year capital plan, additional opportunities to expand and extend growth include: further expansion of the electric transmission grid in the United States to facilitate the interconnection of cleaner energy, including infrastructure investments associated with the Inflation Reduction Act of 2022 and the MISO LRTP; climate adaptation and grid resiliency investments; renewable-gas solutions and liquefied natural gas infrastructure in British Columbia; and the acceleration of cleaner-energy infrastructure investments across the company's jurisdictions.

Fortis expects its long-term growth in rate base will drive earnings that support dividend growth guidance of 4 per cent to 6 per cent annually through 2027.

Teleconference to discuss first quarter 2023 results

A teleconference and webcast will be held on May 3, 2023, at 8:30 a.m. ET. David Hutchens, president and chief executive officer, and Jocelyn Perry, executive vice-president and chief financial officer, will discuss the corporation's first-quarter financial results.

Shareholders, analysts, members of the media and other interested parties in North America are invited to participate by calling 1-888-886-7786. International participants may participate by calling 1-416-764-8658. Please dial in 10 minutes prior to the start of the call. No passcode is required.

A live and archived audio webcast of the teleconference will be available on the corporation's website. A replay of the teleconference will be available two hours after the conclusion of the call until June 3, 2023. Please call 1-877-674-7070 or 1-416-764-8692 and enter passcode 430311 followed by the pound key.

About Fortis Inc.

Fortis is a well-diversified leader in the North American regulated electric and gas utility industry, with 2022 revenue of $11-billion and total assets of $65-billion as at March 31, 2023. The corporation's 9,200 employees serve utility customers in five Canadian provinces, 10 U.S. states and three Caribbean countries.

We seek Safe Harbor.