Fortis Supersizes the Plan and Quietly Rewrites Its Own Risk Language
A C$32.2B capital program, a bottom-of-range dividend raise and a smaller credit buffer — the vocabulary rotated from rate relief to financing
FTS · Earnings Call · 2026-11-03
The plan got bigger; the language got more careful
Fortis added C$3.4 billion to its five-year capital program, taking it to C$32.2 billion, lifting five-year rate base CAGR to 7.5% (up 50bp from the prior plan) and extending 4-6% dividend growth guidance out to 2031. Consolidated rate base goes from C$45 billion in 2026 to roughly C$64 billion in 2031, 100% regulated, with 11 major projects. On the surface it is the cleanest growth story in the company's history. “Our new 32.2 billion 5 year capital plan is $3.4 billion higher than our previous plan.” — David Gerard Hutchens, President and CEO · 2026-11-03But look at what the company's own language did. A quarter ago the top of the Fortis keyword list was Tilbury 1B, Tilbury 2, Project Blue, data center customers and rate benefit — the where-and-why of growth. This quarter the list is led by storage tank, credit metric, large load, credit profile and a brand-new high growth scenario. Rate benefit actually shows up as one of the quarter's biggest keyword decliners. The story management is telling itself has shifted from where the growth is to how it gets financed.Funding is now the plot, not the footnote
Fortis prefunded part of the increase in Q3 — US$1 billion of hybrids plus roughly C$260 million of at-the-market equity — and now flags about C$250 million of ATM equity over the next twelve months, on top of a Regulated utility funding mix built primarily on cash from operations and utility-level debt. “our capital plan is expected to be funded primarily through cash from operations and debt issued at our regulated utilities.” — Jocelyn H. Perry, Executive Vice President and CFO · 2026-11-03What is genuinely new is how much airtime the cap structure gets. Hybrids are about 6% of capital today against DBRS and S&P ceilings of 10% and 15%; management volunteered that pushing to 10% is worth over C$2.5 billion of capacity. “If we were to push it to 10%, you know, we definitely have over 2.5 billion that we could do in hybrid capital.” — Jocelyn H. Perry, Executive Vice President and CFO · 2026-11-03 That is a financing story dressed as a growth story — and it is the tell that the incremental C$3.4 billion needed a bigger toolkit than the dividend reinvestment plan alone.Watch the buffer language, too. On the November 2025 call the CFO described a 75-100bp cushion above the 12% FFO-to-debt threshold as the comfort zone. Twelve months and one larger capital plan later, the same question got a different answer: “we have said that we would like to have, you know, a 50 to 75 basis point buffer above those, those metric thresholds.” — Jocelyn H. Perry, Executive Vice President and CFO · 2026-11-03 Compare that to “100 basis points is actually a lot of cushion... I feel comfortable really having like 75 to 100 bps above the threshold of 12%.” — Jocelyn Perry, Executive Vice President and Chief Financial Officer · 2025-11-04 Nothing broke — the plan still averages above 12% S&P FFO-to-debt and roughly 5.9x Fitch leverage — but the target itself quietly moved in the direction you would expect from a company spending harder.The dividend is the quiet tell
A 4% raise marks 53 consecutive years of increases, and the guidance range is now locked through 2031. But this is the second consecutive year at the very bottom of a 4-6% band, while rate base compounds at 7.5%. Management is deliberately letting the payout ratio drift down to fund the build: “We have not got to the point where we are putting out a targeted payout ratio... we would like to, you know, keep nudging that a bit lower.” — David Gerard Hutchens, President and CEO · 2026-11-03 Investors buying Fortis for income should hear this as a growth-company funding choice, not an income upgrade. Customer affordability — a theme that has run through every Fortis call since 2024 — is now the official justification for both the conservative dividend and the LNG rate benefits.Large load: real, but consensus — and the tape has cooled
ITC's interconnection queue has grown to over 10,000 MW of potential load from roughly 8,000 MW last quarter, and management reiterated the guardrail laid out in July: “we're just sticking to that approximately 8 gigawatts of additional load in our queue.” — Krista Tanner · 2026-07-31 The critical clarification on the call was that none of the new Arizona generation dollars are data-center dollars yet: “there is no additional, capital in our plan related to, any data center growth in Arizona.” — David Gerard Hutchens, President and CEO · 2026-11-03 The US$1.5 billion high-growth scenario in TEP's newly filed IRP — roughly 800 MW of new generation — is explicitly outside the base plan.That matters because large load is now sector boilerplate rather than a Fortis edge: Xcel, Talen, Pinnacle West, Portland General and Entergy all leaned on the same phrase this week. And the market's own read on the power-for-AI complex has turned — the global tape shows demand-for-power and data-center-adjacent clusters among the heaviest 30-day decliners, with one broad "AI data center" basket showing far more names down than up. Fortis's cleanest differentiator is not the queue; it is Tilbury LNG, where an order in council for Phase 1B plus a September environmental certificate covering the storage tank and a Phase 2 expansion of up to 2.5 mtpa represents a C$2-4 billion opportunity that is largely post-2031 and has almost no read-through from any other reporter. That is a utility building export-adjacent infrastructure, not a utility renting out substations.Regulatory catalysts worth dating
The TEP general rate application got an ALJ recommendation of a 9.65% allowed ROE on a 55% equity ratio — better than the 9.55%/54% in place, and with a formulaic adjustment mechanism banded at plus or minus 50bp. Rates are targeted for December 1, but the first actual adjuster lands in April 2028, leaving roughly eighteen months of regulatory lag. Asked whether that reopens EPS guidance, the CEO did not close the door: “We still are considering that.” — David Gerard Hutchens, President and CEO · 2026-11-03 In Iowa, the MISO Tranche 2.1 award of the Mark project — about 300 miles of 345kV and 765kV line, roughly US$1 billion total with half in the plan — converts a 2025-era hope into signed scope, and it is exactly the kind of award David Hutchens said the company only books when it is real: “we don't drop those things into our capital plan until we have signatures on the dotted line.” — David Hutchens, President and Chief Executive Officer · 2025-11-04 M&A remains a considered non-priority; pressed on the sector's consolidation wave, the answer was that organic deployment is simply the better return on a dollar.The pitch is coherent. The rotation in the company's own vocabulary — from rate relief and project names toward credit metrics, cap structure and prefunding — is the part that deserves a second look. Fortis is asking shareholders to underwrite a 7.5% rate base compounder while accepting the low end of its dividend range and a thinner credit cushion. That trade can work, but it works for a different kind of owner than the one Fortis has historically attracted.We have strong rate base growth, a robust growth pipeline, and a transparent funding plan.