BMO. Ben PhamMay 4, 2022 | 07:14 ET~ Fortis FTS-TSX Rating Market Perform Price: May-3 $61.47 Target $62.00 Total Rtn 4%
First Glance: Q1/22 in Line With Expectations and Announces Net Zero Target Bottom Line:
Fortis reported Q1/22 adj. EPS of $0.78 ($0.77 in Q1/21), in line with Street of $0.78 and a tad above our $0.77.
Results beat us mainly at UNS Energy and the Corporate segment, partially offset by Central Hudson.
Also, the five-year $20B capex program was reaffirmed (supporting 6% rate base CAGR through 2026 and 6% dividend growth through 2025) and a net zero target by 2050 was established.
Net, expect a neutral stock price reaction.
Key Points ITC. $109M of earnings was spot on with our $109M estimate, and up from $103M in Q1/21 due to continued rate base growth. Also, (1) In March, MISO announced the first tranche of projects estimated at US$10.4B, of which ITC estimates its share is US$1-1.5B through 2030 (firmer timing/costs expected in 2H, subject to MISO Board approval in July); (2)
In March 2022, the Ontario Government issued an Order in Council and Ministerial Directive instructing the IESO to negotiate on finalizing a transmission service agreement for the Lake Eric project on or before August 15, 2022; the $1.7B project is not in our model.
UNS Energy. $43M came in above our $36M ($45M in Q1/21) supported by favorable weather and customer growth.
On May 2, 2022, TEP submitted a notice of intent with the ACC to file a general rate application in June 2022, based on a 2021 test year and effective September 2023.
Central Hudson. $32M ($39M in Q1/21) fell short of our $42M estimate due to higher operating costs (new customer information system) and storm costs.
FortisBC Energy. Contributed $119M vs. our $117M (Q1/21 of $111M).
FortisAlberta. $36M ($35M in Q1/21) delivered to our $37M.
FortisBC Electric. $18M ($16M in Q1/21) was close to our estimate of $16M.
Other Electric. Other Electric reported earnings of $26M ($20M in Q1/21) vs. our $24M estimate supported by higher sales in both the Caribbean (+7%) and Eastern Canadian (+6%).
Non-regulated Energy Infrastructure. $13M ($19M in Q1/21), fell short of our $16M on lower rainfall in Belize.
Corporate. -$27M (-$28M in Q1/21) was a benefit compared to our -$31M estimate.