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ST. JOHN'S, Newfoundland and Labrador - Fortis Inc. (TSX/NYSE: NYSE:FTS), a leader in the North American regulated electric and gas utility industry, has disclosed an ambitious five-year capital plan. The company plans to invest $26 billion by 2029, which is $1 billion more than the previous forecast. This capital plan aims to support a 6.5% average annual growth in rate base over the period.
The increased investment is primarily driven by transmission projects at ITC and customer growth in Alberta. The plan includes significant commitments to energy transition, with investments intended for renewable energy integration, storage, and cleaner fuel solutions.
The corporation's rate base is projected to grow from $38.8 billion in 2024 to $53 billion by 2029. Funding for the capital plan is expected to come mainly from cash flow from operations and regulated debt, with additional equity through a dividend reinvestment plan.
Fortis has also announced a 4.2% increase in its quarterly common share dividend, which marks the 51st consecutive year of dividend rises. The dividend growth guidance of 4-6% per year has been extended through 2029.
In addition to the five-year plan, Fortis foresees further growth opportunities in the U.S. for transmission grid expansion to accommodate cleaner energy, as well as investments in climate adaptation and grid resiliency.
The MISO long-range transmission plan, which includes ITC's investment projects, is expected to see at least $3 billion in capital expenditures for Tranche 2.1 projects located in Michigan and Minnesota, with a majority of this investment anticipated post-2029.
The company's forward-looking statements are based on various assumptions and are subject to risks and uncertainties. The actual results could differ materially due to factors such as regulatory proceedings, execution of the capital plan, interest rate fluctuations, and changes in the U.S. dollar to Canadian dollar exchange rate.
This report is based on a press release statement issued by Fortis Inc. on Thursday, September 26, 2024.
In other recent news, Fortis Inc. reported strong second-quarter results for 2024, with an increase in adjusted earnings per share (EPS) year-over-year to $0.67. The company also displayed its commitment to a $4.8 billion annual capital plan, investing $2.3 billion in capital projects to enhance system reliability and support clean energy initiatives. Fortis' rate base is projected to rise to over $49 billion by 2028, while maintaining its 4% to 6% annual dividend growth guidance through the same year.
However, BofA Securities reinstated coverage on shares of Fortis with an Underperform rating, citing concerns about the company's growth prospects and balance sheet strength. The firm noted a projected below-average EPS compound annual growth rate (CAGR) of 4.6% based on its current capital plan.
On the regulatory front, the Iowa Supreme Court's decision allows ITC Midwest, the company's largest asset, to proceed with the Tranche 1 projects. This development is part of Fortis' growth strategy that includes expanding into clean energy and electrification. Lastly, Fortis is advocating for regulatory changes in Arizona to reduce lag, as part of its ongoing efforts to explore further growth opportunities.
InvestingPro Insights
Fortis Inc. (TSX/NYSE: FTS) has made headlines with its robust five-year capital plan, highlighting the company's commitment to growth and sustainability. Investors monitoring FTS through InvestingPro have noted several key metrics and insights that underscore the company's strategic moves. With a market capitalization of 22.29 billion USD, Fortis stands out as a significant player in the utility sector.
The company's dedication to increasing shareholder value is evident, having raised its dividend for 37 consecutive years, a testament to its financial stability and reliability for income-focused investors. This aligns with the recent announcement of a 4.2% increase in its quarterly common share dividend, reinforcing the company's track record of consistent dividend growth.
InvestingPro data indicates a Price/Earnings (P/E) ratio of 19.09, which suggests that the stock is trading at a premium relative to its earnings. While this may raise questions about valuation, it's crucial to consider that analysts predict the company will be profitable this year, as indicated by the positive earnings per share (EPS) of 2.33 USD in the last twelve months as of Q2 2024. Moreover, the stock's low price volatility could appeal to investors seeking stability in their portfolios.
InvestingPro Tips further reveal that Fortis operates with a significant debt burden and that its short-term obligations exceed liquid assets. These factors are crucial for investors to consider when evaluating the company's financial health, particularly as it embarks on its ambitious capital investment plan. For those looking for a more comprehensive analysis, InvestingPro offers additional tips on Fortis Inc., which can be accessed at https://www.investing.com/pro/FTS.
With a strong return of 17.44% over the last three months and trading near its 52-week high, Fortis exhibits a bullish trend that may catch the eye of growth-oriented investors. The company's strategic investments in renewable energy and grid resiliency further position it favorably within the evolving energy landscape.
To gain further insights and access even more InvestingPro Tips on Fortis Inc., investors are encouraged to explore the full list available on the InvestingPro platform.
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