Fortis Inc. Delivers Strong Q1 Earnings Amid Regulatory and Capital Growth Momentum

Fortis Inc. (FTS.TO), Canada’s largest utility holding company, reported robust first-quarter 2025 financial results, posting net earnings of $499 million or $1.00 per common share, marking an 8.7% increase compared to the same period in -2024. The results reflect the company’s execution of its regulated growth strategy, supported by rate base expansion, regulatory approvals, and a favorable currency environment.

Key Financial Drivers

The earnings growth was driven by:
1. Rate Base Expansion: Investments in regulated utilities, including the completion of Central Hudson’s 2024 general rate application, which increased customer rates effective July 1, 2024.
2. Favorable Currency: A stronger U.S. dollar relative to the Canadian dollar boosted earnings, particularly for its U.S. operations.
3. Regulatory Wins: The British Columbia Utilities Commission’s approval of FortisBC’s 2025–2027 rate framework, providing three years of operational and financial stability.

Offsetting these positives were higher holding company finance costs, reduced wholesale margins at Tucson Electric Power (TEP), and the expiration of a regulatory incentive at FortisAlberta.

Capital Expenditures and Growth Pipeline

Fortis maintained its aggressive capital investment pace, spending $1.4 billion in Q1, on track to meet its $5.2 billion annual capital plan. The company’s $26 billion five-year capital plan (2025–2029) aims to grow its midyear rate base by 6.5% annually, from $39.0 billion in 2024 to $53.0 billion by 2029. Key projects include:
- MISO Long-Range Transmission Plan Tranche 2.1 ($3.7–$4.2 billion), enhancing grid reliability across the Midwest.
- Tilbury LNG Expansion in British Columbia, supporting clean energy transitions.
- Grid resilience initiatives, including battery storage at TEP and transmission upgrades in New York.

Regulatory and Environmental Progress

The BC Utilities Commission’s rate framework approval is a critical milestone. It establishes a structured approach to operating expenses, capital investments, and an innovation fund for cleaner energy projects while maintaining earnings-sharing mechanisms for customers. This decision aligns with Fortis’ environmental goals, including a 34% reduction in direct greenhouse gas (GHG) emissions since 2019. The company aims for 50% GHG reduction by 2030, 75% by 2035, and net-zero by 2050, contingent on supportive policies and technology advancements.

Dividend Growth and Financial Health

Fortis reaffirmed its 4–6% annual dividend growth through 2029, supported by its regulated utility model and capital plan execution. The company has delivered 51 consecutive years of dividend increases, a testament to its financial discipline. Credit ratings remain stable, with Moody’s at Baa3 (stable) and DBRS at A (low) (stable), enabling access to low-cost debt.

Risks and Challenges

• Currency Exposure: A 1 U.S. cent change in USD/CAD exchange rates could shift five-year capital expenditures by $600 million, highlighting sensitivity to foreign exchange fluctuations.
• Regulatory Uncertainty: Ongoing rate applications, such as TEP’s planned 2025 filing and Central Hudson’s pursuit of a 10% allowed ROE, carry execution risks.
• Supply Chain Costs: While Fortis expects minimal 2025 impact, global trade policies could affect long-term infrastructure projects.

Conclusion: A Resilient Utility Play with Long-Term Momentum

Fortis’ Q1 results underscore its ability to navigate macroeconomic headwinds while advancing its regulated growth strategy. With a $26 billion capital plan underpinning earnings visibility and a 6.5% CAGR in rate base, the company is well-positioned to sustain dividend growth and environmental progress.

The stock’s dividend yield of 4.2% (as of May 2025) and historical dividend growth provide a compelling risk-reward profile. While risks like currency swings and regulatory outcomes persist, Fortis’ diversified portfolio—spanning five Canadian provinces, ten U.S. states, and three Caribbean nations—buffers against regional volatility.

Investors seeking stable returns in regulated utilities should take note: Fortis’ execution of its capital plan, coupled with its 50-year dividend growth streak, positions it as a reliable income generator with long-term growth potential.

Data as of May 2025. Past performance does not guarantee future results.