Post by
Dibah420 on Oct 29, 2021 10:07am
BMO First glance. 6% CAGR new 5 yr prog.
October 29, 2021 | 07:19 ET | 07:19 ET~ Fortis FTS-TSX Rating Market Perform Price: Oct-28 $54.91 Target $58.00 Total Rtn 10% First Glance: Q3/21 EPS in Line; New Five-Year Program Still 6% Rate Base CAGR Bottom Line: Fortis reported Q3/21 adj. EPS (basic) of $0.64 ($0.65 in Q3/20), in-line with Street of $0.64 and above our $0.62. The positive variance to us was mainly due to ITC and FTSAlberta, partially offset by a loss in Energy Infrastructure and Central Hudson. A 2022-2026 capex program of ~$20B was introduced, +2% from $19.6B 2021-2025 and still implying a 6% CAGR and no need for external equity. Overall, expect neutral reaction to the results/new guidance. Key Points ITC. $117M of earnings came in well above our $106M estimate ($101M in Q3/20) as rate base growth and an adj. related to interest rate swaps more than offset the weakening of the USD. UNS Energy. $131M fell short of our $135M ($144M in Q3/20) mainly on cooler weather conditions (-8% lower retail sales). Central Hudson. $9M was also behind our $19M estimate, and down from $19M in Q3/20 on timing of the general rate application (i.e. delay in recovering opex and finance expenses; decision expected in Q4/21). FortisBC Energy. Contributed -$19M compared with our -$21M (Q3/20 of -$21M). FortisAlberta. $47M ($35M in Q3/20) topped our $35M projection on favorable weather (+14% increase in energy deliveries) and timing of capex. FortisBC Electric. $12M ($11M in Q3/20) was spot-on with our estimate of $12M. Other Electric. Other Electric's reported earnings of $35M was close to our $34M estimate ($33M in Q3/20), supported by +11% in sales in the Caribbean. Energy Infrastructure. -$6M ($10M in Q3/20) was a large miss to our +$5M reflecting realized losses on natural gas contracts at Aitken Creek. Corporate. -$26M was a benefit vs. our -$32M estimate. 2022-2026 capex guidance introduced. A 2022-2026 capex budget of $20B was introduced translating into a 6% rate base CAGR; this was +2% from 2021 to 2025 program of $19.6B (similar 6% CAGR). In turn, FTS reaffirmed its dividend growth guidance of 6% through 2025, but did not extend this guidance by one year as it has done in prior years. Funding is expected to come from CFO, regulated utility debt, and DRIP proceeds (i.e. no external equity in the base plan) and USD F/X assumption is 1.25. Conference call today at 8:30 a.m. ET. 1-877-223-4471 or 647-788-4922