Fortis Inc.: Building a Grid for the Future

Fortis Inc. (FTS.TO) has long been a stalwart of North American regulated utilities, but its latest moves suggest it’s positioning itself to lead the energy transition. After reporting solid Q1 2025 results, analysts at RBC Capital Markets raised their price target to C$65 from C$64, citing the company’s progress on growth opportunities that extend far beyond its current five-year $26 billion capital plan. These initiatives—spanning transmission upgrades, renewable gas projects, and retail expansion—are not just about incremental growth but about reshaping the grid for a decarbonized future.

The Transmission Pivot
The most transformative opportunity is Fortis’ involvement in the ITC MISO LRTP Tranche 2.1 project, a $3.7–4.2 billion transmission initiative in the Midwest. This project, part of the Midcontinent Independent System Operator’s (MISO) long-range plan, aims to bolster grid reliability and capacity as renewables like wind and solar increasingly dominate the energy mix. Transmission projects are a sweet spot for utilities like Fortis: they’re capital-intensive, regulated, and typically offer steady returns. For investors, this means the project could add meaningfully to Fortis’ rate base—the asset value used to calculate allowed returns—which stood at $28.6 billion as of Q1 2025.
Beyond the Midwest: Diversifying the Portfolio
While ITC’s transmission work grabs headlines, Fortis is also expanding its regulated footprint in other regions. UNS Energy, its subsidiary in the U.S. Southwest, plans up to $5.0 billion in investments through 2038, targeting retail load growth and transmission upgrades. This aligns with the company’s strategy of capitalizing on population growth in states like Arizona and Nevada. Meanwhile, FortisBC is advancing its $1.1 billion Tilbury LNG expansion and renewable gas initiatives, which will blend conventional natural gas with biomethane, reducing emissions while maintaining energy security.
The Central Hudson subsidiary in New York, though less detailed in the Q1 report, is also eyeing transmission projects. These moves reflect Fortis’ focus on regulated assets, which account for over 90% of its operations. Such investments are low-risk, credit-friendly, and shielded from commodity price volatility—key factors in maintaining its investment-grade credit rating.
The Numbers Behind the Narrative
Fortis’ existing five-year plan (2025–2029) already earmarks $26 billion for growth, but the new opportunities could add another $6.2–9.2 billion in investments. Combined, this signals a decade-long growth runway. Management highlighted that these projects could lift annual dividend growth to 5–7%, up from its previous 5% target.
Why This Matters for Investors
The energy transition isn’t just about wind turbines and solar panels—it’s about the infrastructure that delivers energy to homes and industries. Transmission upgrades and gas modernization are foundational to a reliable grid, and Fortis’ regulated model ensures it gets paid to build them. With utilities underpinning much of North America’s energy infrastructure, Fortis’ focus on projects with guaranteed returns and regulatory tailwinds makes it a resilient play in a volatile market.
Conclusion: A Steady Hand in a Shifting Landscape
Fortis’ Q1 results and its post-2029 growth pipeline reinforce its status as a dividend stalwart with a clear path to long-term growth. The $3.7–4.2 billion ITC project alone represents a 15% increase over its current five-year plan, and the UNS and FortisBC initiatives add further scale. With a regulated model that prioritizes steady cash flows and a focus on projects aligned with climate goals, Fortis is well-positioned to capitalize on the $2.6 trillion in U.S. grid modernization expected through 2030 (per the Bipartisan Infrastructure Law).
Investors should note that the company’s 3.8% dividend yield, combined with its conservative balance sheet (debt-to-equity ratio of 0.7x), offers stability. While the stock has underperformed the S&P Utilities Index over the past year, the new projects and raised target suggest this undervaluation may not last. For those seeking a utility with both defensive traits and growth catalysts, Fortis is worth a closer look—and its shares could rise further as these projects gain regulatory approval and begin construction.
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